Microsoft President on the company's investments in carbon removal
Brad Smith, Microsoft President, joined Yahoo Finance to discuss Microsoft's environmental sustainability efforts.
Video Transcript
[MUSIC PLAYING]
ADAM SHAPIRO: We're keeping an eye on Earth Day, and so is Akiko Fujita, who joins us now with a special guest.
AKIKO FUJITA: That's right, Adam. We've been committing this entire week to this series, Planet Earth in Crisis, really examining the issue of climate change from all angles, number one, to see what the future holds, but also, more importantly, to take a look at what can be done to curb greenhouse gas emissions. One of those companies that's been active in trying to take a larger role is Microsoft. The company announced last year that they would aim to go carbon-negative by 2030. And for much more on that, let's bring in Microsoft president Brad Smith, who joins us today.
Brad, it's always good to talk to you. You're a year into this. This Climate Framework you announced last year, certainly a very ambitious one, not just to go carbon-negative by 2030, but to remove all carbon that Microsoft has emitted since the company was founded. One year-- and how much progress have you made?
BRAD SMITH: Well, I think we're off to a good start. I've been pleased with it. It's like everything in business and in the world. You start with high ambition. You have to have a plan. And then it's all about execution.
And one year in, I think that's where we are. Last year, we reduced our emissions by about 700,000 metric tons. It's about 7%. And we purchased the removal of 1.3 million metric tons of carbon. That's the equivalent of the amount of carbon generated by, say, a million passenger cars.
It is the biggest carbon removal purchase in the history of business. It was a giant leap. And yet I'll say a decade from now, we'll all look back at it and say it was the tiniest step ever because it's just a drop in the bucket. But it gets us moving in the right direction.
AKIKO FUJITA: I want to get much more into the specifics of what Microsoft has done over this last year. But I wonder if we take a step back here because we have seen so many companies put forward sustainability goals in part because there is increasingly shareholder pressure to calculate the climate risk. What was the business case for Microsoft to go in this direction?
BRAD SMITH: I think we actually started with a very broad business case or just-- almost say societal case. And I think it comes in part from the fact that we have worked so closely with Bill Gates on all of this. So it was actually months of conversation with him and his team, as well as our environmental science team, that really, you know, converged on our initial plan.
I'll say the first business case was basically, you know, we're not going to survive as a business if the company doesn't survive-- if the planet doesn't survive as a habitable place. So we better get our act together. But I think it's actually changed a lot, Akiko, over the last year. This is now something that increasingly investors are paying attention to, governments are focused on.
And I think as we look to the decade ahead, we will see that the companies that perform the best on, say, sustainability-- I think they're going to do better with their customers and the market growth. I think they're going to be doing better with shareholders. And they're going to be getting ahead of where governments are going to require that they go, anyway.
AKIKO FUJITA: You mentioned the removal or the purchase of the removal of 1.3 million metric tons of carbon. You also established a $1 billion climate innovation fund. How much of that capital has already been deployed? And what particular technologies are you focusing on right now?
BRAD SMITH: Well, we're still in the relatively early stages of spending that billion dollars. We, you know, have been-- you know, we're in the lower hundreds of millions of dollars. And I would say principally, so far, we are focused on two things.
The first is investing in projects that will create new technology that will enable us and others either to reduce emissions or remove carbon. A good example is a company that I think you all have showcased in the past, Climeworks. It's really at the forefront of developing the technology to remove carbon from the air.
The other area where we're very focused is in accelerating the adoption of existing technology and business practices in-- let's call it underserved markets. It may be a market that would serve a community of color in the United States. We know from our data that people of color are exposed to more carbon, more air pollution than others. It may be projects in emerging markets where you just don't have the plentiful access to new technologies the way we do in, say, the US and Europe and other places.
AKIKO FUJITA: When you laid out that Climate Framework last year, you talked about the need for transparency as well. You know, Microsoft, like so many multinational companies, certainly has a very complicated supply chain. How do you account for the carbon emitted from your suppliers? And what incentives do you give them to come on board with this vision?
BRAD SMITH: Well, the first thing I would say is you just hit the nail on the head. You know, all of this work I think is going to be, you know, frankly, a little more talk than action without very strong measurement systems and, frankly, measurement systems that become increasingly standardized and automated over time.
So we definitely, I think, been really leaning into that. We do it across Microsoft with an internal carbon tax on each part of our company that is paid based on the amount of carbon that's emitted. We're extending that to our suppliers because our internal divisions have to pay for the emissions by their supplier-- by those suppliers. We've rolled out a comprehensive reporting system for all of our suppliers. We're partnering with them so that we can all agree on how to measure this.
It's clear where we're going longer term will create more financial incentives over time for people not only to measure and report, but then reduce their emissions. And ultimately, I think we need the kind of transparency that holds all of us accountable, including at the senior executive level, so that-- we've announced, effective July 1, part of our executive compensation will be based on our progress in this area.
AKIKO FUJITA: You talked about the lack of standards here. To what extent has the lack of regulation made it more difficult for you to measure the progress? You've said that carbon accounting is ambiguous. Some would argue there's no real universal definition of net zero. To what extent is there a universal standard that's needed to hold companies accountable?
BRAD SMITH: Well, I do think we need a universal standard. And I would say, look, all progress is incremental. You start by identifying a problem, creating measurement systems, forging agreement on the measurement approach, creating a standard. Then, ultimately, that is sort of the foundation for regulatory requirements.
If you ask do I think we've made, as a planet, as a company, as an industry, 12 months of progress over the last year, absolutely. Things are actually moving very quickly. And I think that's good. And we see ourselves playing a particular role there not just because of our large supply chain, but because we are and increasingly will-- and create the technology tools that any customer can use as part of the system it will need to measure, monitor, reduce, and report on its own carbon emissions.
So it's a big set of things that need to come together. But I've seen very few things move this broadly and this quickly, you know, if I think about what has happened in the last year.
AKIKO FUJITA: You've got an administration now that is squarely focused on this issue. Of course, we're talking about this on the eve of that two-day summit over at the White House. The president's made this transition to a green economy the real focus of his infrastructure bill. But he's also said that should be paid for by raising corporate taxes. Microsoft would certainly be in that range. I mean, should companies like Microsoft have to foot the bill for the transition?
BRAD SMITH: Well, I'd say two things. First, we need an infrastructure investment as a country. Part of it-- it needs to focus on our sustainability challenges. But that's just part of the infrastructure investment that we need. And we've endorsed that as a company, both remodeling 20th century infrastructure and creating 21st century infrastructure, including broadband and digital skills and other things that are just essential for the country's ongoing economic growth.
And second, yes, this is expensive. We've acknowledged that. And yes, it will need to be paid for. What we've said is this is going to require a conversation. I think we need to be sensitive to the international competitiveness of different sectors of the US economy. Frankly, those of us in tech that obviously enjoy higher profit margins, I think, need to be especially sensitive to the potential international competitive impact on industries that operate on lower profit margins.
What encourages me is that we have a president who says he wants to talk, he wants to work together, and he's prepared to compromise. That is the fundamental recipe that I think will be required to get something that I just think is actually one of the great priorities of the entire decade across the finish line.
AKIKO FUJITA: Microsoft president Brad Smith, always good to talk to you-- appreciate your time today.
