Salesforce, a San Francisco, California, USA-based enterprise with a global workforce exceeding 54,000, offers a broad range of cloud software and services, including customer relationship, customer service, marketing automation, analytics and application development. Salesforce reported US$17.1 billion revenue in fiscal year 2020 (FY20).1
Salesforce has articulated a strong commitment to advancing global sustainability through aggressive climate action. Access to trusted data is critical to meeting its goals and to communicating its progress to stakeholders.
In its fiscal 2020 10-K filing with the US Securities and Exchange Commission (SEC), Salesforce claimed to deliver a carbon-neutral cloud to its customers. It also claimed to have offset all the emissions under its direct control and a portion of the indirect emissions related to its cloud operations and employee travel.2
Salesforce was able to support those claims with accurate data, thanks to a new set of carbon accounting tools it developed internally to replace the cumbersome spreadsheet-based system it had used in the past.
It soon became evident that the new system would provide benefits that extended beyond more efficient and effective reporting. The flexible methods of data visualization it enabled would contribute importantly to furthering its enterprise climate action strategies.
The business benefits and co-benefits resulting from use of the new set of tools led Salesforce to develop a product that its customers could use for their own carbon accounting purposes, thus advancing their own sustainability strategies. Salesforce Sustainability Cloud, designed to help enterprises and governments track and manage greenhouse gas emissions, became generally available in January 2020.3 The journey from laborious spreadsheet system to efficient software application began in 2015, when Max Scher, currently the head of clean energy and carbon programs at Salesforce, was at the helm. The focus then was on collecting, analyzing and auditing data on the enterprise’s use of electricity—the main source of its carbon emissions. In addition to maintaining dozens of office spaces across the globe,4 Salesforce managed physical data centers in France, Germany, Japan, the United Kingdom and the United States. It also provided cloud infrastructure services hosted by Amazon Web Services (AWS) in Australia, Canada and the United States.5
Carbon accounting for all those facilities was a laborious six-month process that was hamstrung by the lack of standardization. Nonfinancial data, such as climate disclosures, are not as easily comparable as financial data. Although there were several accepted protocols and standards for reporting greenhouse gas emissions, there were few regulations that governed their calculation.
Like other enterprises with complex operations, Salesforce had to rely on providers of disparate services for collection, extrapolation and estimation of data. It was challenging to develop apples-to-apples comparisons with enough confidence in data accuracy and management to enable third-party auditors to conduct assurance and provide a stamp of approval for sound methodology.
Because there was no guiding set of calculations to follow, staff found themselves repeating the same conversations at every office, Scher recalled. At the time, he also was enmeshed in development plans for Salesforce’s renewable energy program. There was too much going on to undertake changes in the carbon accounting system while simultaneously running it.
ANOTHER PROBLEM WAS THAT PERSONNEL CHARGED WITH CARRYING OUT THE TASKS RELATED TO CARBON ACCOUNTING OFTEN DID NOT HAVE THE REQUISITE SKILL SETS.
Patrick Flynn, a mechanical engineer whose background includes designing commercial high-rise buildings and optimizing efficiencies at a data center company, joined Salesforce in 2015 with a personal mission in mind. Flynn has described his role at Salesforce, where he currently serves as vice president, sustainability, as “working for Planet Earth,” and the tools he brings to the job each day are “a company called Salesforce, and the various tools and levers that are available to somebody inside this company with my sort of responsibilities.”
Carbon accounting was one of the responsibilities with which he was tasked. The accounting system relied heavily on gathering data from numerous third parties and then weaving together multiple spreadsheets to create a big-picture view. “We were mining the data from the data centers, from the network, from the utility, from the structured contract data, customer feedback—all trying to improve the quality of our services and the environmental impact of our services,” Flynn said.
In a previous role leading sustainability for a large North American data center provider, Flynn had “singlehandedly dragged one of those carbon accounting projects across the finish line—full of errors I’m sure.” He had seen the process play out repeatedly with others in the field, and it was all too familiar.
“What happens is the person in charge of sustainability ends up asking questions of all these different stakeholders around the business, many of whom do not speak to each other. And so, operating in the data center context, I needed to know from the legal team what the contract was for the customer in terms of energy consumption, for example,” Flynn recalled. “And from the finance team, I needed to know much more detail about our utility bills than anybody had cared to ask about...And I needed to know from our customers what sort of things they would be willing to pay a premium for if we were to offer green services.”
Another problem was that personnel charged with carrying out the tasks related to carbon accounting often did not have the requisite skill sets. In the past, the job usually was assigned to the most junior person on the sustainability team, Flynn said, because nobody wanted to do it. “Everybody who does it once, the thing they really want to do that year is hire somebody else so they can offload it.”
Within months of joining Salesforce, Flynn found himself once again thwarted by the unwieldy carbon accounting process. He and his small team had spent weeks preparing a PowerPoint presentation for a quarterly business review with the chief financial officer (CFO) and other senior leaders to make their case for what would be needed to advance the enterprise’s sustainability program.
It was an all-encompassing effort, he recalled. “And then you show up and you show the first slide, and the CFO says, ‘That is interesting, but actually I wanted to see that year over year.’ And you say, ‘OK, I love the engagement, but it will take us two weeks to rerun those numbers, remake that slide, and come back to you and give you the answer you need for you to support us.’”
Building a Better Process
It was clear to everyone involved that the system was not conducive to the kinds of executive-level conversations needed to form strategies and move them forward. That was one problem. What became a more immediate concern for Flynn and his team was the deadline-driven need to prepare supporting documentation for the sustainability claims Salesforce planned to include in its FY2020 10-K filing with the SEC.
The SEC does not require any climate change-related disclosures in 10-K filings. Instead, it asks enterprises to take a “principles-based approach”— that is, to determine the extent to which information on climate change would be material to investors’ decision-making.
Approximately 10 years ago—the last time the commission took action regarding the subject—the SEC issued a document setting forth suggestions and considerations but not requirements. The SEC guidance states:
This interpretive release is intended to remind companies of their obligations under existing federal securities laws and regulations to consider climate change and its consequences because they prepare disclosure documents to be filed with us and provided to investors.6
The commission debated expanding its guidance on climate change disclosure in 2020 but took no action. In her dissent, Commissioner Allison Herren Lee noted that:
Investors are overwhelmingly telling us, through comment letters and petitions for rulemaking, that they need consistent, reliable, and comparable disclosures of the risks and opportunities related to sustainability measures, particularly climate risk. Investors have been clear that this information is material to their decision-making process, and a growing body of research confirms that.7
ACCURATELY ACCOUNTING FOR THE CARBON EMISSIONS ASSOCIATED WITH THE USE OF ELECTRICITY AND OTHER TYPES OF ENERGY IS A KEY COMPONENT OF AN ENTERPRISE’S SUSTAINABILITY STRATEGY.
Salesforce was aware of the growing interest in climate change disclosure among major investment managers and increased interest in regulating climate change disclosures in Europe and the UK. Salesforce’s voluntary disclosures reflect a combination of its enterprise values and adherence to third-party standards. It decided to report its progress in achieving net-zero emissions and a carbon-neutral cloud in the FY2020 Environmental, Social, Governance (ESG) component of its 10-K filing.
Accurate data was needed to support those claims, and Flynn had to assemble it. However, he did not want to employ the time-worn, problematic process of manually cobbling together data from multiple overlapping sources and assigning burdensome calculations to personnel who might not be wired for accounting.
Instead, he recruited Shengyuan Su, whom he had hired in 2017 as a sustainability analyst. Su had both a master’s in environmental management and science and experience in software development. “She is the trailblazer of this story,” said Flynn.
Su was tasked with figuring out how to make the process better—more trusted, more reliable and more automated. And she had to do it fast so Salesforce could incorporate the necessary environmental metrics into its 10-K financial disclosure as the filing deadline loomed.
Prior to joining Salesforce, Su was responsible for business intelligence and analytics at a renewable energy company. When called upon to reimagine Salesforce’s carbon accounting system, she welcomed the opportunity. Su is a self-described numbers-and-data enthusiast who was fascinated by the challenge of leveraging technology for business transformation.
THE GREENEST POSSIBLE OFFICE IS ONE THAT IS NOT BUILT… BECAUSE THE ENTERPRISE IMPLEMENTS SHARED SEATING OR ALLOWS STAFF TO WORK FROM HOME.
Calculating Carbon Equivalents
Accurately accounting for the carbon emissions associated with the use of electricity and other types of energy is a key component of an enterprise’s sustainability strategy. That accounting begins with converting collected data, because greenhouse gas emissions are not limited to carbon dioxide.
If a process releases methane, for example, “What we do is we convert the methane emissions into a carbon dioxide equivalent,” said Flynn. Carbon dioxide equivalent (CO2e) is a standard unit for measuring carbon footprints. To turn energy usage data into CO2e, the emissions factors framework helps automate the transformation of energy data into reportable carbon numbers. It is similar to turning everything into US dollars in order to close your financial books. We turn everything into CO2 equivalents [CO2e].”
To calculate the CO2e for use of a diesel-powered company shuttle, for example, it is necessary to know how much CO2e is associated with burning a specific amount of diesel fuel. This emission factor enables the conversion of diesel fuel used into a CO2e value—the amount of CO2 that would result in equivalent atmospheric warming.8
Another requirement of carbon accounting is to determine the scope of the emissions being measured. Scope 1 are those under an enterprise’s direct control, noted Flynn, such as emissions from burning fuel in a Salesforce Tower’s boiler. Scope 2 are emissions from purchased energy-related things like electricity, heating and cooling. Scope 3 is everything else, including emissions generated from air travel, employee commuting, purchased services and product use.
Converting emissions data into carbon equivalents and creating a way to visually show Salesforce’s degree of control over the emissions it generates were critical to acquiring third-party validation of its environmental claims in its FY20 10-K report. Figure 1 shows that Salesforce achieved two milestones: net-zero greenhouse gas emissions and a carbon neutral cloud for all customers. The carbon-neutral cloud claim applies to anything related to use of the Salesforce platform. It encompasses not only the electricity generated at data centers, but also carbon offsets. By definition, “net zero” means offsetting all scope 1 and 2 emissions. Salesforce follows an established hierarchy of climate actions to achieve its offsets:
- Avoid emissions
- Reduce emissions
- Use renewable energy
- Invest in projects that earn carbon credits
Source: Salesforce, “FY20 Salesforce Stakeholder Impact Report,” 30 April 2020, www.salesforce.com/news/wp-content/uploads/sites/3/2020/08/sustainability-FY20-stakeholder-impact-report.pdf
Foremost is avoiding emissions in the first place. The greenest possible office is one that is not built, Flynn said, because the enterprise implements shared seating or allows staff to work from home. Reduction comes next, in the form of energy-efficiency strategies or green building designs, for example. Entering contracts and projects that create new renewable energy on the grid is central to Salesforce’s 100 percent renewable strategy.9
“After that, last but not least, is carbon credits—investing in projects that generate carbon credits, like protecting and conserving forests,” he said.
These practices have obvious benefits in terms of reducing Salesforce’s carbon footprint and contributing to the health of the planet, but there are many co-benefits that are not as readily apparent. “Typically, fossil fuel-burning power plants are closer to vulnerable communities,” Flynn pointed out. “So, the move to clean energy is good for the atmosphere, but it is also good because it improves air quality and does so typically for the most disadvantaged communities.”
Flynn described one carbon credit project that has produced many co-benefits in addition to offsetting emissions: the deployment of clean cook stoves in Honduras.10 “These stoves are actually on the Salesforce platform—they are GPS-tagged,” he said. “All of the operations data is coming to the cloud to make sure the usage is tracked.” It is the fact that they are so much more wood-efficient than traditional open-fire cook stoves that generates the carbon credits during their use, he added.
In addition to being an environmental story, it is an equality and human health story, Flynn continued. The clean cook stoves reduce respiratory illnesses by keeping emissions out of the home. The stoves also improve the lives of women, who do not have to spend as much time gathering firewood.
It was easy to see the value of these practices case by case, but being able to calculate the benefits through a rigorous accounting that would validate their overall impact was far from easy.
Different Goal, Similar Journey
Salesforce had a by-the-book system in place that could support its carbon-neutral cloud and net-zero emissions claims—one that was similar to its financial accounting approach. “You could read it, and you could follow it, but it was painful,” Flynn said. “It took six months—it took a bunch of spreadsheets. And so, essentially, it was a process of trying to codify that and give a platform view for somebody to keep things organized.”
THE ABILITY TO STORE AND ANALYZE ORIGINAL DATA POINTS ON OFFICE, DATA CENTER, EMPLOYEE COMMUTING AND BUSINESS TRAVEL EMISSIONS IN ONE PLACE…WAS KEY TO OPTIMIZING THE AUDIT PROCESS.
When Su started, she did not know Salesforce technology. She approached the carbon accounting challenge with a beginner’s mindset: What technology could she leverage to create a better process?
Flynn wanted to keep all options open. “I didn’t want to end up saying in a prescriptive way, ‘this has to be on the Salesforce platform,’ so we looked at other third-party software. We were using other software to help us at the time,” he recalled.
Su was able to quickly teach herself to develop within Salesforce, and she made some useful discoveries. The Salesforce platform lent itself to detailed and granular analysis of environmental data. At the same time, it could streamline interactions with stakeholders and auditors.
For a financial disclosure such as the 10-K, the Salesforce team would need to work with third-party auditors to validate the enterprise’s net-zero greenhouse gas emissions and carbon-neutral cloud claims. The ability to store and analyze original data points on office, data center, employee commuting and business travel emissions in one place—essentially a single source of truth—was key to optimizing the audit process.
Su also realized that linking emissions data to a powerful analytics engine, such as Salesforce’s Einstein, would go far beyond collaboration and auditability, enabling meaningful responses to virtually unlimited queries.
“No one said, ‘You have to use Salesforce’s technology’—but our own technology naturally became our best option. So, she pulled those building blocks together, and in hindsight it is a great match,” said Flynn.
“The same way that a carbon emissions record makes its way through the accounting process is very similar to the way a sales deal would make it through the sales pipeline in the Salesforce Sales Cloud,” he explained.
The team was able to pull a lot of the elements involved in the sales pipeline journey into the greenhouse gas economy context. For example, Chatter—a networking tool that enables collaboration on sales deals—could be used in the context of a given carbon record (figure 2). It could support development of a climate strategy in a way that echoed development of a sales strategy.
Source: Salesforce
“That was a really big feature,” said Flynn.
10-K and Beyond
Salesforce included the following statement in its FY20 SEC 10-K filing:
Protecting Our Planet: We are committed to creating a sustainable, low-carbon future. Salesforce delivers all customers a carbon neutral cloud and we are committed to achieving 100 percent renewable energy for our global operations by the end of fiscal 2022. In fiscal 2020, we procured electricity from renewable energy resources equivalent to 63 percent of what we used globally. We have set an internal price on carbon by offsetting all of our Scope 1 and 2 emissions, as well as the parts of our Scope 3 (indirect emissions) related to delivering a carbon neutral cloud and all employee commuting and business travel emissions. In addition, we had our 1.5 degree science-based target approved by the Science-Based Targets Initiative. This included a supply chain engagement commitment whereby suppliers representing 60 percent of Salesforce’s Scope 3 emissions, covering all upstream emission categories, will set science-based targets by 2024.
Salesforce Sustainability Cloud: We believe that our technology can play an important role in helping to drive climate action that will accelerate the world’s efforts towards carbon neutrality and, in fiscal 2020, we launched Salesforce Sustainability Cloud, a carbon accounting product for businesses and governments to track and manage their greenhouse gas emissions.11
One of the main payoffs of retooling the enterprise’s carbon accounting process (figure 3) was the time savings.
“The very first time we used the tool, it reduced our footprinting process from six months to less than six weeks,” Flynn said. “We closed our environmental books faster than the financial team closed the financial books of the company that year, and we were ready for the 10-K before the financial data was ready for the 10-K.”
Another major payoff resulted from the integration of Einstein analytics in streamlined dashboards that took data visualization and climate action strategizing to a new level. Sustainability team members were empowered by the ability to answer an open-ended universe of questions at executive-level meetings, rather than being limited by a laboriously created set of PowerPoint slides.
With embedded analytics, the system offered a complete single source of truth, Flynn said, “And when the question comes up to look at year-over-year, or EMEA-only, you click a couple times, and the charts all refresh, and you can have an executive-caliber conversation at the pace that is needed to actually develop the strategy in real time—get the buy-in before you leave that meeting—and then go on your journey.”
The journey was not over once the process was improved for internal use. Salesforce President and Chief Financial Officer (CFO) Mark Hawkins quickly saw the system’s broader potential. As he prepared to travel to Davos, Switzerland, for the annual World Economic Forum meeting held in January 2020, he asked if he could have the carbon accounting dashboards on his phone, Flynn recalled. Other internal Salesforce teams got involved, helping to develop a mobile version of the tool for the CFO’s use.
“I remember hearing from somebody else that Mark Hawkins was out there, unsolicited, showing off this capability to other CFOs, CEOs, world leaders, right from his pocket—you know, without me there trying to kick him under the table to mention it,” Flynn said.
THE IN-HOUSE TOOLS BECAME THE FOUNDATION FOR A NEW PRODUCT, DUBBED “SUSTAINABILITY CLOUD,” WHICH COULD SERVE AS A SINGLE HUB FOR AN ENTERPRISE’S ENVIRONMENTAL IMPACT ASSESSMENTS.
Single Source of Truth
“For me, the destiny of Salesforce as an environmental leader was to figure out how to do what it does best for climate action,” said Flynn.
The greenhouse gas accounting process appeared to be a good fit for that ambition. It was clear that exponential value might be gained through effective use of the Salesforce technology platform by its base of customers worldwide.
Flynn’s personal passion aligned well with Salesforce’s articulated mission:
We believe the business of business is to make the world a better place for all of our stakeholders, including our stockholders, customers, employees, partners, the planet and the communities in which we work and live. Delivering innovative solutions to our customers is core to our mission and, as a technology company, we have developed solutions on the Salesforce Platform that enable our customers and stakeholders to manage and affect environmental, social and governance (ESG) matters that are meaningful to them.12
What Salesforce had created for its own internal use could be made generally available, with its benefits and co-benefits creating a planetwide ripple effect. The in-house tools became the foundation for a new product, dubbed “Sustainability Cloud,” which could serve as a single hub for an enterprise’s environmental impact assessments.
Sustainability Cloud creates data visualizations that help arm practitioners for both audit purposes and executive engagement. Data visualization is the first step in assessing environmental impact. It transforms complex carbon emissions from invisible to visible—and in so doing, it provides a meaningful way to engage the C-suite.
Good Business
Doing the right thing is good for business—that is intrinsic to Salesforce’s corporate culture. “Our CFO Mark Hawkins would say ‘our values create value,’” Flynn said.
“A healthy society and environment must underpin our economies,” noted Hawkins, who also serves as chair of the USA Chapter of the A4S CFO Leadership Network. “The future of business, and our planet, depends on our ability to rethink and evolve our business models. Simply put, investing in sustainability makes good business sense.”13
Another consideration is the reputational value to the enterprise. “In and of itself, a smaller footprint is a way that a company does the right thing and improves the state of the world,” said Flynn. “That gets recognized, right? It helps us attract and retain top talent. We know that employees would rather work for a company with a mission for good than one without one.”
It also helps with the investor community, he continued. There is a “huge, growing movement for environmental, social and governance-related investing—investing with purpose.”
Further, studies have shown14, 15 that an organization that focuses on the environment outperforms, Flynn noted. “So, it’s not just about morals.” Reducing emissions makes business sense because it improves resource efficiency. Sustainability programs that begin with an effort to save on energy costs often pay for themselves. Many industries recognize that short-term cost savings are far from enough, however.
Reducing an enterprise’s footprint is a start, but there is much more at stake on a business level. “It is also about giving your business the climate context to make sure that you don’t turn into the Kodak or the Blockbuster video. Those companies were the fallout from digitization,” Flynn recalled.
“The decarbonization-driven industrial transformation is going to be even bigger than the digital transformation and the dinosauring of enterprises,” he predicted. “Those who will thrive in this context are going to have the tools around them to have a single source of truth for their climate impact, and a single source of truth for their climate strategy.”
For IT professionals, pursuing a career in sustainability is a no-brainer, in Flynn’s view. “Climate change is going to play out with greater and greater severity, with scientific certainty,” he said. “This trend is unlike any other. We can measure it—we know it. It is guaranteed to become more and more of a thing. And so, defining what you do best plus sustainability is a career decision that is really valuable, independent of all the morality and impact and other things. It is a very logical career decision.”
Considering how complex climate change is, just based on the number of different data sets that need to be stitched together to produce a complete carbon footprint, the IT function is the perfect connector to lead to business benefits and environmental impact, Flynn suggested. “All of a sudden you have a new business model, and you have new products, and you have new ways of marketing. The insight that comes from overlaying these data sets together is tremendous.”
Endnotes
1 Salesforce, “Financial Update Q2 FY21,”
http://s23.q4cdn.com/574569502/files/doc_financials/2021/q2/CRM-Q2-FY21-Earnings-Presentation.pdf
2 US Securities and Exchange Commission,
Salesforce.com, Inc., Form 10-K for
the Fiscal Year Ended 31 January 2020,
www.sec.gov/ix?doc=/Archives/edgar/data/1108524/000110852420000014/crm-20200131.htm
3 Salesforce, “Salesforce Sustainability Cloud
Becomes Generally Available,” 6 January 2020,
www.salesforce.com/news/stories/salesforce-sustainability-cloud-becomes-generally-available/
4 Salesforce, “Global Offices,” www.salesforce.com/uk/company/locations/
5 Salesforce, “Where Is My Salesforce Instance
Located?” http://help.salesforce.com/articleView?siteLang=en_us&id=000314281&language=en_us&type=1&mode=1
6 US Securities and Exchange Commission,
“Commission Guidance Regarding Disclosure
Related to Climate Change,” 2 February 2010,
www.sec.gov/rules/interp/2010/33-9106.pdf
7 Lee, A. H.; “’Modernizing’ Regulation S-K:
Ignoring the Elephant in the Room,”
US Securities and Exchange Commission,
30 January 2020, www.sec.gov/news/public-statement/lee-mda-2020-01-30
8 Salesforce, “Report and Reduce Your Carbon
Footprint: Load Reference Data,” help.salesforce.com/articleView?id=sustainability_manager_reference_data.htm&type=5
9 Salesforce, “Renewable Energy Project List,”
April 2019, www.salesforce.com/news/wp-content/uploads/sites/3/2020/08/sustainability-renewable-energy-project-list.pdf
10 Proyecto Mirador, “One Stove Is Equal to Five
Years of Smoke-Free Cooking,” www.proyectomirador.org
11 Op cit US Securities and Exchange Commission,
Salesforce.com, Inc., Form 10-K
12 Op cit US Securities and Exchange Commission,
Salesforce.com, Inc., Form 10-K
13 Accounting for Sustainability, “Why
Sustainability and Finance?” www.accountingforsustainability.org/en/about-us/why-sustainability.html
14 Cher, A.; “Sustainable Funds Are Outperforming
Their Peers During the Pandemic, BNP Paribas
Says,” CNBC, 2 June 2020, www.cnbc.com/2020/06/02/esg-funds-outperforming-peers-during-coronavirus-pandemic-bnp-paribas.html
15 Rotonti, J.; A. Lomax; “Does ESG Investing
Produce Better Stock Returns?” The Motley
Fool, 22 May 2019, www.fool.com/investing/2019/05/22/does-esg-investing-produce-better-stock-returns.aspx
Mick Brady
Is a freelance technology communicator with more than 20 years of experience editing and writing for technology-focused publications.