Podcast: Roberto Reichard on Reducing the Carbon Footprint of Capital Projects

Highlights from the Conversation

I’m super excited that we have Roberto Reichard here today. And in keeping with tradition I like to open by asking, Roberto, who are you and how did you get to where you are now?

• I’m an engineer by training. I graduated as an industrial engineer from the University of Nottingham in the United Kingdom.
• The energy business presented the best opportunities so that is where I headed after school.
• I joined up with a company called Schlumberger, who provides oilfield services around the world. I had the opportunity to work in Turkey, Egypt and in Venezuela.
• I then decided to go back to school. I took a Master’s in science from Imperial College in London.
• I then moved to San Francisco and joined Bechtel.
• I spent a long time with Bechtel doing large projects all around the world including Mexico, Thailand, Egypt, and India.
• In India I led a project doing the first deep sea / offshore gas development in the Bay of Bengal with a company called Reliance, owned by one of the richest people in the world.
• I was then recruited by BP and I thought it would be a good change.
• I joined their global projects group and went to Alaska to lead a project. I had never been to the Arctic so I learned what it took to complete a project in that part of the world.
• After that, I became vice president of projects in Southeast Asia. The biggest one was liquified natural gas (LNG) development in Indonesia on the island of Papua. It was a very remote and an environmentally sensitive area.
• The pristineness of the area got me thinking about what we were doing to the environment and the population.
• Although BP is a very sensitive and careful company in the area of environmental and social concerns, it’s nearly impossible to have zero impact in the places where work is done.
• As an example of how careful BP was, even though the project location was extremely remote, we never built a road to it or an airport because we knew that would start to bring in people. And we all know what happens when people gain access to a pristine area.
• It would take a whole day to get to the site, a trip consisting of multiple plane rides and a long boat ride. We did that on purpose to minimize access to the area although it increased costs
• BP then asked me to come back to the USA and be their vice president of project management for their major upstream projects. A project was considered major when BP has at least $250M equity in the project.
• After doing this for a few years I began to feel that I wasn’t really having the impact upon the world that I wanted to have. So I decided to step away and see if I was able to put my project management skills toward something that is more sustainable and greener for the world.
• So this is where I am now. I joined Zero Emissions Advisors, a consulting firm in the new energy field. Now I can use my skills and experience to bring forth a more sustainable world.

Wow, so going from Schlumberger, to Bechtel, to BP… these are some of the biggest companies in the world undertaking some of the biggest projects in the world.

When you were doing projects at BP, how many per year were you working on?

• When you’re leading a project, it’s actually many years per project.
• During my time at BP and Bechtel I was working on many different projects.
• In Southeast Asia there were four or five projects going on in the billion-dollar range. Not all were operated by BP, some were operated by different companies, and since we were equity partners we had an oversight into those.
• In the role of vice president of global management I had dozens of active projects at any one time.
• One of the things I did as VP of project management was to determine project readiness over a wide range of environments: onshore, offshore, arctic, subsea, and more.

Throughout all of that the common theme seems to be the experience you’ve had to witness the impact that these projects had on the environment.

On the one hand we still need energy to run the world, on the other hand we’re waking up to the effects these operations have upon our planet.

Can you describe the catalyst that led to the epiphany concerning the protection of our planet and its resources? Also, can you tell us how BP also shifted its concern to the wellness of the planet?

• I joined BP a year before the Deepwater Horizon incident in the Gulf of Mexico. That was a big, impactful event for the company, and they spent a tremendous amount of effort to discover how that happened.
• This prompted a laser-like focus on operational and process safety and readiness, and led BP to contemplate their role in the world.
• BP actually became considerably smaller as a result of that incident. They had to pay an enormous amount of money to the US government.
• A new CEO was brought in recently, Bernard Looney, who was an experienced driller. When I met him he was already on track to becoming a leader in the company. Upon meeting him you could tell he was a thoughtful leader with some very modern ideas.
• Part of what drives companies like BP to make the change to sustainable practices is the people in the company. People like myself and many of the younger people too. They don’t want to put their life efforts into something that is destructive to our world.
• The pressure to be more sustainable also comes from outside sources like governments, banks and customers. People want their investments to be cleaner.
• Everybody is realizing the world’s carbon budget is finite. We’ve taken a very significant chunk of it already and now we have to be careful with how we continue to use the world’s resources.

Over the years the topic of “retained carbon”, carbon taxes, and other calls to action concerning the health of our planet have been examined by both industry and consumers.

How are you making the goal of sustainability for companies more practical?

• We start at the end, by examining the total carbon footprint of a final product or project. This presents a competitive advantage for a company.
• When we were doing projects we would look at how we could make the project more energy efficient once it was in operation. This would help us to lower our costs for the operation in addition to making it more sustainable.
• We look at how we could help the project consume less fuel, use less consumables, recycle the heat from various processes, etc. But we rarely looked at the carbon it took to implement the project.
• After I left BP. I wanted to discover where I could put my skills and experience to make a positive impact on the environment of the world. This is how I learned about the concept of “retained carbon”, or embodied carbon, which is essentially the carbon that is used in the extraction and manufacture of materials used in a project. And this is a significant amount.
• For example, in an office building, up to about forty percent of the carbon consumed by that office building in its life cycle is embodied carbon. It’s a huge number that wasn’t tackled until recently.
• The movement for embodied carbon began in the civil industry with buildings and infrastructure. They are the people that started looking at this issue, who then began to push this idea the most: that we have to reduce our embodied carbon footprint.
• Now it is becoming a regulatory policy around the world.
• What I’m trying to do now is to bring the progress that the civil industry has made to the rest of the industrial endeavors of the world.
• Sustainability should impact procurement choices, such as favoring lower embodied carbon products over higher embodied carbon products.

So, of all the greenhouse gases out there, why focus on carbon instead of another gas or material?

• Carbon is just one of the greenhouse gases contributing to global warming.
• We focus on carbon because it’s ubiquitous. Methane, for example, is another greenhouse gas but it’s not present in every process the way carbon is.
• One way to quantify the global warming potential of embodied carbon is a document called an “environmental product declaration”, which is a way to provide transparency on a product’s total carbon footprint.

So to use your previous example concerning the office building: if an office building is at 40% embodied carbon, what is the other 60% comprised of? What do these percentages mean?

• 40% of the carbon is embodied in the materials. The other 60% is mostly comprised of the building’s “operational carbon”: what it takes to run the building, such as heating, lights, maintenance, etc. There is also some carbon released at the end-of-life. There is carbon present at all stages of the building, from producing the steel, to transporting the steel (and other materials), to erecting the building, and to operate the building, and eventually to the decommission stage.
• During that whole life cycle, 40% of the carbon is the material extraction and manufacturing phases. It’s a huge and significant percentage.
• In the civil industry one can now take that percentage down by about 10% to 12% for no cost, just by careful choice of design and materials.
• About 39% of emissions worldwide is due to buildings and infrastructure. This is a huge area that is being tackled.
• But there is also another significant area within embodied carbon that needs to be dealt with, such as industrial plants and projects.
• I think the next step is to not only look at the embodied carbon of individual materials but to look at the embodied carbon within complex engineered equipment within an industrial plant such as a pump or a compressor, which have dozens of parts sourced from many places. What is the carbon footprint of such a device? This is the evolution of embodied carbon tracking.
• We have to make this carbon tracking more widespread, so it’s not only in the civil and infrastructure industry.

So how are you bringing this to companies now? How are you convincing these large companies to start examining their embodied carbon footprint?

• One thing I’m doing is going back and having conversations with my colleagues.. One of them is VP of project concepts, and this is a good place to begin examining these issues: at the early design phase.
• I am showing them how they can reduce the carbon, or global warming impact, in the materials and processes they choose to use.
• Our discussions referred to how the industry dealt with safety and quality. Safety and quality became key buying factors during procurement. It got to the point where we would make procurement decisions based on safety.
• We can take a similar approach and make procurement decisions based on the environmental impact of a material or product. This should begin to steer the industry down the road of sustainability.
• We worked with suppliers to help them improve their safety programs and training programs, while at the same time helping them to shift their company culture to one based on safety.
• Now we have to help suppliers shift to a culture based on sustainability, which can also direct their own procurement processes.

How do we get suppliers to focus on sustainability and ethical practices?

• You want your suppliers to adopt a common ethos. You want them to share your perspective on sustainability and ethics. We can help them to get there.
• If customers are pulling for ethical practices and sustainability, suppliers will have no choice but to move their operations into this direction.
• The emissions of upstream suppliers can be six times the emissions of a company. These upstream suppliers are a prime candidate for lowering emissions worldwide.
• If you can reduce the emissions for upstream suppliers, who are responsible for up to six times your own emissions, that is a good target to focus on.
• You have to show the suppliers that sustainable products usage is a competitive advantage. But it takes work for them to make their carbon footprint transparent. They need to be willing to put the work in.
• However, when they do sit down and analyze the carbon in their own supply chain, they will also discover inefficiencies within their operations. This is the beginning of their transformation into a more sustainable company.
• When customers work with suppliers to introduce and follow sustainable practices, it forces the entire supply chain to adapt end-to-end.

How do we get the mindset of sustainability into companies? How do we show them that even though they may pay a little more for sustainable materials, it will pay off in the long run both in their finances and in how they are perceived by their customers as being sustainable?

Let’s face it, companies don’t usually get up and move unless there’s a dollar for them somewhere.

• When you’re looking at a supplier or a contractor for a project you can incentivize them: show them that sustainability is very profitable.
• If you’re a private company you don’t have to buy the lowest cost. If you’re a government entity doing public procurement then you probably have to find the lowest cost, but private companies don’t necessarily have to buy the lowest cost.
• So you evaluate the products and contractors on other issues. You tell them up front what the evaluation criteria is. For example, we would uphold safety as the number one criterion.
• You incentivize them to align with your ethos. For example, if somebody is producing materials or products with child labor, you go and find a supplier that doesn’t do this.
• If they are producing materials with little regard for sustainability, you just go elsewhere or help them change. Eventually they will change their ways to stay relevant and competitive.
• Currently, most suppliers don’t know what their carbon impact is because they haven’t been asked by their clients to measure it. So that’s the first step. We want to help them get to the point where they are able to measure their effect upon the planet.
• We then help them to put together their environmental product declarations. This helps them to see where their procurement and operations can be developed into sustainability.
• Another way to get the companies of the world to join the sustainability train through regulations put into place by their governments.
• Many authorities all across the world are making sustainability a key priority for the companies that operate within their boundaries. This is helping to push sustainable practices globally.
• For example, where I live, in Marin County, California, there is now a regulation concerning embodied carbon for cement used in commercial buildings. And elsewhere in California they have a policy on the embodied carbon present in steel from extraction to production.
• This is also happening in European countries. Finland, for example, has policy requirements concerning embodied carbon, and this is happening in Canada too. In Vancouver, BC, they have policies to drive the supply chains toward low embodied carbon and sustainable procurement practices.
• In our capitalist society money talks. But with government regulations we can also make public money talk.

Let me use an example concerning cement. How is the embodied carbon calculated on the end-to-end production of cement?

• There are various international bodies that would certify the calculation as part of the environmental product declaration, which can be several pages long, and lists the details of your product, such as how it was manufactured, etc.
• You can hire a consultancy to do this for you. It will cost $10,000 to $30,000 per product, or you can learn to do it in-house.
• Once the environmental declaration is done the regulators and buyers can review it.
• In California the regulators have taken the existing average of the embodied carbon across a product and used that in the regulation. They will then drop the amount of permissible embodied carbon across supply chains as the years go on so there is a steady decrease.

Are the environmental declarations a United Nations (UN) guided sort of thing? Who sets the standard for the carbon calculations?

• There are international bodies who set out what the standard is. There is the ISO standard and there is also a European entity.
• And there are consultancy groups who can do this according to the industrial standards in their respective parts of the world. And they can provide third-party verification.
• To develop the environmental product declaration a life cycle assessment completed on the materials. It examines the embodied carbon throughout the whole process from material extraction, to finished product and to end-of-life.
• There is a free tool called the EC3 Calculator which is very useful for life-cycle assessments And the same group has a free database where you can see the environmental product declarations of thousands of items.

So if I were to do a query on this database—say I was looking for cement suppliers—how do I frame the query? What should I be looking for? 

• It’s largely a comparison tool. So if you’re a designer and you need cement with certain specs: like a certain compression strength, composition, etc, you first sort by those characteristics. Then you will get a list of products that match your criteria. From there you can search out which products have the lowest embodied carbon values. Now you can choose to make your procurement choices based on sustainability.

Is the embodied carbon value represented as a number? How is this information presented? What form does this information take?

• It’s the carbon dioxide (CO2) equivalent per unit of material. And the unit is either kilograms or cubic meters, depending on what you’re looking at.

Back when I was working in data centers we invented a metric that we used to calculate the efficiency of that data center. It caught on and now everybody does it and this gives them the ability to compare efficiency with each other, which has encouraged people to outdo each other, which in turn benefits the whole industry.

Do you see this happening with what you are doing? How do you see this playing out in the next five years?

• I think it will unfold the same way it did in the data center industry. Once proper sustainability metrics are developed they will eventually catch on until everybody is trying to outperform each other. Then we all win.
• So first companies have to meet the minimum requirements set out in the policies. Then the minimum requirements become normalized. Then the competition will begin. Companies will try to outdo each other by being more sustainable and thus more attractive to procurement specialists who are seeking this quality. This will drive all industry into the same direction by the power of the buyer.
• When companies realize the greater emissions of their suppliers upstream they will focus on that too, by demanding greater sustainability upstream of themselves. So the sustainability is met both by the pull of buyers and the regulatory organizations.

The CEO of Nike, John Donahoe, is transforming a sportswear company into a technology company. He just released an announcement that part of his executive compensation package for all of his executives is going to be something involving sustainability. I don’t know what that is, but now we’ve got their entire C-suite with financial incentive to move toward sustainable metrics.

This will have a huge impact on the world as others follow suit.

What are you seeing that companies are doing to make sustainability more front and center?

• It’s definitely becoming more and more widespread, to see senior executives rewarded for their efforts to produce results in making their companies more sustainable.
• When I was at BP we had goals of reducing methane emissions year over year, we were rewarded for delivering the goals.
• So that’s been growing now for several years across the industry.
• Next up will be financial institutions who will be incentivizing sustainable low carbon practices. They will put their investments only toward those who have sustainability at the forefront.
• Positive change is inevitable.

We’re seeing massive change over the last decade or so. People use sustainability to guide them in everything they do: where they work, the products they buy, the technology they use…

What else do you see contributing to this going forward within the culture, technology, etc?

• If you look at Bill Gates’ book, How To Avoid a Climate Disaster, one of the things he points out is that wind and solar energy are already very competitive with fossil fuels, and in some cases, more cost effective.
• However, there are some industrial processes that are not yet competitive as a green process. He says the technology should be focused on the “green premium”, where even though a process may be more expensive, if it is more sustainable, it will eventually win against the other less sustainable processes.
• For example, how do we make steel with hydrogen energy instead of steel made with fossil fuel energy?
• This is an area to really watch. There are many startups whose main focus is this “green premium”.
• Then I think there is also a non-technology based ways of moving forward and that is the philosophy of circularity: reduce, recycle and reuse.

How does recycling play into the embodied carbon calculations?

• When you do the life cycle assessment for your product, if at the end of the life cycle the product is reused or recyclable, you can get carbon credits.
  Products that can be reused and/or recycled gain carbon credits in the calculation.

What about metals? For example, I am curious about copper. I met one of the last remaining smelters who operate here in the USA. He showed me that recycled copper is metallurgically identical to virgin copper extracted from the earth.

How do you compare the embodied carbon footprint between recycled copper and copper pulled from the ground?

• Copper is one of those metals that are infinitely recyclable.
• If you look at the environmental declaration of recycled copper versus freshly mined copper the embodied carbon footprint is lower in the recycled copper.
• With recycled copper, the carbon used for mining and transportation to refinement facilities, is cut out of the equation.
• Another example is steel made with recycled inputs. It possesses lower embodied carbon compared to steel made with virgin ore.

It is ironic that the smelter who I met didn’t have a problem selling his recycled copper. His problem was that he didn’t have enough to meet the demand. It’s the same in the steel industry.

Any last thoughts?

• My consultancy is Zero Emissions Advisors. We’re technology agnostic, whether you want to take energy from wind or solar or hydrogen we can help you make and implement the right choice…
• I think a good parting thought is this question: where are we going to find a good use for hydrogen? We know it’s very clean but it currently has some disadvantages for personal mobility but advantages in other areas.
• We need to find the right use for hydrogen in the green economy.

Connect with Roberto Reichard

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