In the ever-evolving landscape of sustainability, Microsoft has taken an important step towards redefining how carbon emissions are calculated in the supply chain. As pioneers in the carbon accounting software realm, Greenplaces is excited to shed light on Microsoft’s innovative approach, especially considering the shortcomings of previous methodologies.

Traditionally, emissions from purchased goods were calculated using basic, unspecific intensity ratios—total company emissions divided by total company revenue. While seemingly more specific, this method, known as spend-based allocation, could lead to significant misallocations. To illustrate, consider Microsoft engaging with a legal firm specializing in various branches. If emissions were allocated based on the total company revenue method, Microsoft might inadvertently claim responsibility for emissions unrelated to their operations. This flaw prompted Microsoft to transition towards service-level emissions accounting.

Service-level accounting, a hallmark of Microsoft’s Procurement Sustainability program launched in 2020, decouples emissions from spend. It identifies services and goods specific to Microsoft, allowing for more accurate calculations based on appropriate reference units, such as full-time employees or gigabytes of data. This move ensures a more granular understanding of emissions, fostering transparency and precision.

So, why does Microsoft collect this data? Aligned with their broader sustainability goals, Microsoft aims to gain visibility into their scope 3 emissions—the often elusive and challenging sector for most businesses to quantify and reduce. Service-level emissions, defined as those directly resulting from a supplier’s work with Microsoft, play a pivotal role in achieving this visibility.

The introduction of Microsoft Cloud for Sustainability (MCfS), their proprietary disclosure platform, signals a shift away from using external platforms like CDP. This strategic move streamlines the disclosure process, allowing Microsoft to better guide suppliers through submissions, offer training and webinars, and ensure a comprehensive understanding of service-level emissions.

However, compliance is not optional. According to Microsoft’s Supplier Code of Conduct (SCoC), suppliers must complete sustainability requirements via MCfS by 2024, with non-compliance jeopardizing future business relationships. Microsoft’s internal Sustainability Scorecard for suppliers highlights non-compliance, ultimately impacting  future business decisions, partnerships, and overall supplier strategy. 

The disclosure process involves providing data on scopes 1, 2, and 3 emissions, including purchased goods and services, business travel, and employee commuting. Additionally, suppliers are required to outline an emissions reduction plan, aligning with Microsoft’s ambitious goal of reducing service-level emissions by 55% by 2030.

For Greenplaces and other businesses navigating this transition, understanding the timeline is crucial. The 2024 MCfS disclosure cycle spans from May 1 to July 31, with specific submission requirements, including total-company and service-level emissions data, and the 2030 emissions reduction plan.

While MCfS itself incurs no costs for suppliers, there might be additional associated preparation and disclosure costs. This can include external emissions calculations support, or even additional employee work-hours.

In conclusion, Microsoft’s commitment to sustainability and their revamped supplier requirements showcase a transformative journey toward accurate, transparent, and actionable carbon accounting. Greenplaces is poised to support businesses in navigating this new era, providing the expertise needed to embrace sustainability with confidence.