By Arjan Mallik

Case Summary

In 2020 Microsoft made a bold announcement, claiming to go Carbon Negative by 2030 and removing all CO2 emissions that the company has caused from 1975. The commitment was made by Microsoft President Brad Smith. He laid out the Ethical and Moral Obligation for such a Large Corporation as Microsoft and addressed the importance of Carbon Negativity. He also mentions how much damage the world has already faced and he wishes not to reach a catastrophic conclusion.

The current state of Microsoft

• Microsoft has been Carbon neutral from 2012
• Microsoft has Purchased Offsets which finance projects to absorb CO2 from the atmosphere. Example: Forest preservation.
• Revealing Sustainability calculator to show Azure customers the emission level associated with the service.
• A growing number of Stakeholders want Microsoft to take action over emissions and to see changes.

Future Plans in place to be Carbon Negative

• Transition to 100% renewable energy by 2025
• Electrify its entire vehicle fleet by 2030
• Making their Large Server Farms Electric
• Invest 1 Billion Dollars to innovation funds to develop technologies
• Planting more Forests
• Improving soil’s ability to take in carbon from the atmosphere

Microsoft’s initiative created a trend among major tech companies to address their carbon footprint. Rivals like Amazon, Apple, and Google have also pledged to achieve carbon neutrality, with Amazon aiming for carbon neutrality by 2040.

However, some critics argue that Microsoft’s relation to the oil and gas industry undermine its sustainability efforts. The company had recent deals with companies like ExxonMobil and Chevron. The critics believe that the company should not do business with industries that are not committed to the cause as well. Dickon Pinner, global head of McKinsey & Co.’s sustainability practice made a comment where he mentioned, this was supposed to happen sooner or later. Microsoft is just ahead in this. He believes sooner or later regulations and capital would get all the businesses to take a similar step.

Overall, Microsoft’s carbon-negative initiative represents a significant step towards corporate sustainability leadership, but it also highlights the complexities and challenges of balancing environmental commitments with business interests

Is Microsoft’s decision to go carbon negative by 2030 in the best interests of Microsoft’s stockholders? What about other stakeholders such as the company’s customers, employees, suppliers, and the communities in which it does business?

Going carbon neutral is a very popular statement by the information mentioned in the case. As we can see Large companies such as Amazon, apple, and Google are also keen to take this pledge. Till now 137 countries have tried to go Carbon Neutral, and only 2 have succeeded. They are Bhutan and Suriname (Wallach, 2021). In this case, it is also mentioned “A growing number of investors want to see changes, as do many consumers and employees”. That gives us a hint of it having a direction toward the best interest of its stakeholders. We will check the point of view of all the stakeholders who can be affected by this change.

Stockholders

From General knowledge, a stockholder’s main concern is towards ROI or return on investment. The corporation going carbon-negative can benefit from that concern.

1. Brand Value: Brand value is highly important for stakeholder, as this assures their investment’s worth. Taking this responsibility a company gains a reputation in the market, thus gaining Brand value. This increases customer loyalty and Attracting new customers who care for the environment (Xie et al., 2023)
2. Competitive advantage: As not many companies claim to go carbon neutral, this creates an upper-hand advantage for Microsoft. They are the only corporations that are attempting 100% by 2030.
3. Long-term benefits: Taking a step towards environmental friendliness can be a high expense but rewarding in the long run. The expenses the company will carry might cause profit to decrease for the time being, but they are long-lasting habits that create benefits in the long run. (Xie et al., 2023)
4. Regulatory Compliance: Environmental regulations are getting strict around the world. The sudden shift in regulation can cause businesses a lot of trouble. As Dickon Pinner, global head of McKinsey & Co.’s sustainability practice commented on this case that is inevitable to happen, Microsoft is keeping itself risk-free for future changes in regulations.

On the other side of the coin, a great number of scholars also believe taking this major step might bring a reputation, but won’t bring in money. The main points where these scholars are mostly concerned are

1. Return on Investment: During this process, a company takes in a lot of expenses which are directed to installing recycling filters and procedures. That increases the operating cost of a firm causing the firm’s earning to decrease.  That hampers the main concern of the Stockholders. (Matsumura, Prakash and Vera-Muñoz, 2014)
2. Resource management: A lot of scholars also believe that these responsibilities will occupy a lot of capital creating difficulty in properly allocating resources. If resources are not properly allocated or some sectors are allocated that will create great problems for the firm. (Xie et al., 2023)

Customers

Zhang et al. (2023) experimented with 424 subjects where they tested different factors that influence customer’s efforts toward environmental friendliness. The interesting that they observed was guilt. Do the consumers feel guilty about taking the harmful step towards the environment, do they want to put in the effort to the eco-friendly way? On a segment, the research shows a lot of the consumers will take a step to do the right thing for the environment. The guilt influences consumers towards pro-social decisions.

Except for the guilt, in low-income countries, the price carries great importance. In my point of view, affordability comes first for the customer over everything else. In low-income countries consumers mostly go for the cheaper option while the carbon-negative option is present. It’s mainly because an eco-friendly option is usually more expensive. So these factors might have an effect over a customer’s interest.

Employees

Employees, especially younger generations, increasingly value working for companies that prioritize sustainability and social responsibility. Brewdog, a famous Scottish beer production company announced that they are steeping towards making all their employees carbon negative after the company goes carbon negative itself. (Carmichael, Hannah 2020) Just like that Employees at Microsoft are surely going to face a lot of changes. These changes will influence the employees to make more eco-friendly[AM1]  choices in their daily lives.

Suppliers

Suppliers may face pressure to reduce their carbon footprints to align with Microsoft’s sustainability goals. This can lead to increased costs for suppliers in the short term as they invest in greener technologies and practices. However, it can also drive innovation and efficiency in the supply chain, potentially leading to long-term benefits for both suppliers and Microsoft.

Communities

Communities in which Microsoft operates will likely benefit from the company’s sustainability initiatives. Reduced carbon emissions can lead to better air quality and a healthier environment. Additionally, Microsoft’s leadership in sustainability can encourage other companies to adopt similar practices, amplifying the positive impact on communities.

Viewed through the lens of “rights theories,” is Microsoft’s decision to go carbon-negative by 2030 ethical?

From the viewpoint of the right theories, Microsoft’s decisions do not create much objection. The right theories fundamentally revolve around Human rights, moral obligation, and ethical decision-making. However, some activities and decisions can lead this plan towards unethicality.

The scholars who claim and criticize Carbon negativity mostly raise a point of it being inefficient and causing harm elsewhere. There has been research done by John Hopkins University(2023) on multiple companies like Apple, google along Microsoft on their claim of going carbon-negative. The research mentions multiple comments from critics.

Criticism of Carbon-Negative Offsetting

Critics argue that offsetting allows companies and countries to continue emitting greenhouse gases while paying for reductions elsewhere. The underdeveloped or developed countries that depend on fossil fuels will continue to emit carbon to the atmosphere. (Blake, 2023; Stapczynski, Rathi, & Marawanyika, 2021).

Measuring the carbon savings from offset projects, for example, forest protection, is difficult. It’s hard to prove that a protected forest would have been destroyed without the project. (Stapczynski, Rathi, & Marawanyika, 2021)

Efforts to protect one area might lead to deforestation or increased emissions in another area. For example, if deforestation is halted in one city, logging activities might simply move to another one. The critics call this “Leakage” (ISO, 2023).

Entities like Verra, which certify carbon credits, allow multiple methods for calculating credits. This flexibility can lead to inflated credit claims. Cases of fraud, such as the significant tax fraud in France and issues with Danish carbon-trading firms, have damaged trust in the system. The Danish authorities Admitted that 80% of the carbon-neutral firms Contributed to this fraud. (Blake, 2023).

Studies have shown that a significant portion of forest carbon credits, particularly those certified by entities like Verra, are ineffective. These projects may not reduce the amount of carbon in the atmosphere as claimed (Greenfield, 2023).

My Judgement

These criticisms mainly point towards greenwashing where they question how much welfare are the companies doing through these bold activities. These activities also create pressure on underdeveloped and developing countries which are mainly dependent on fossil fuels. As the carbon-negative companies walk toward keeping business relations with other carbon-negative suppliers, it creates great problems for the fossil fuel-dependent businesses. Microsoft still hasn’t completely stepped towards offsetting, meaning they haven’t rejected their suppliers who are using fossil fuels, but this case mentions the corporation is being criticized by people who are pro-activists in this topic.

I agree with the critics that the solution to a better world should not be taken so strictly that a lot of us stay behind. The solution should be Adaption, not Mitigation. As carbon Negativity is highly important We should be prepared to cope with the current situation instead of rejecting all current situations. This is the point where the corporations exercise their moral obligation and safeguard the rights of others. A transition to clean energy should be fair and inclusive.

Now coming back to Microsoft’s position currently, it has to be said that the decision to go carbon-neutral is appreciated and highly important. Microsoft currently has business connections with oil firms and such businesses. I support that. And the corporation is taking a steady pace toward its carbon-negative phase. From my point of view, even though being criticized, Microsoft is upholding the rights theories by also safeguarding other corporations’ interests. I believe Microsoft is ethical in this case.

 

Apply John Rawls’ concept of the veil of ignorance to Microsoft’s decision. What conclusion do you reach about Microsoft’s decision?

Utilizing John Rawls’ veil of ignorance concept for Microsoft’s pledge to become carbon negative by 2030 would mean picturing a situation where the decision-makers do not know their position or role in society— be it their wealth, status, interests, or any other characteristic. Instead, decisions are made from behind a symbolic veil that shields them from knowing the personal implications of their choices. From this perspective, Microsoft’s commitment can be assessed based on whether it is seen as equitable and fair without any information on how it might affect them personally. An evaluation devoid of bias regarding their stake in the outcome might look something like this:

In fairness to the environmental impact: Being unaware of the position in society, the company would place environmental concerns first without any bias toward personal interests. Most likely the company would realize the significance of climate change that needs to be dealt with to save the planet for future generations irrespective of their economic or corporate interests.

Taking vulnerable communities into account: This will help the decision makers to consider the impact carbon emissions might have on these communities all over the world and in their local areas. The disproportionate burden that climate change places on marginalized populations would be acknowledged by them and hence they may prioritize actions that mitigate these effects.

Sustainability without compromise: In the absence of information on the stakes in the decision, decision-makers would ensure the long-term sustainability of their choices. They would understand that fighting climate change is not only a moral duty but also vital to ensure future wealth and well-being for all citizens.

Balancing economy and ethics: Even though decision-makers could recognize the financial concerns of shifting towards carbon negativity, they would consider these concerns against an ethical responsibility to preserve the environment and uphold social justice. Their focus would be on finding ways that do not pit economic prosperity against environmental conservation— seeking a way to keep both ends up is indeed walking a tightrope.

Keeping Developing countries into consideration: It is hard to cope with nations that are heavily dependent on fossil fuels. The decision-makers should be careful aboutnot making offsetting the main goal and harming the developing country’s economies. That’s a moral duty they have to follow.

Conclusion of Microsoft’s decision: As per the rules Microsoft has to see from a perspective where they forget their stance and identity. They cannot be selfish. In the end, the goal of carbon negativity is a step towards a healthy peaceful world. If these factors are kept in mind while the decision comes to life the conclusion would be a Carbon negative Microsoft working with other companies from developing countries helping them fulfil Zero Carbon as well. 

Conclusion

In this case, we have taken a very close look over very minor decisions over Microsoft’s journey towards carbon negativity. We have questioned and judged Microsoft’s ethics, morality, decision process, and effect over other economies of different countries. And that helped us to get an understanding that no matter how criticized and audacious the decision may be, it is highly important. The decision may lead Microsoft’s stakeholders to face less profit, it may not be completely acceptable by all scholars but still it’s highly important in this time and condition of the world. Microsoft’s step has already encouraged other giants such as Amazon, apple, and Google to join in, and it will inspire many more. As we discussed in the Theory of “Vail of Ignorance”, Microsoft and other corporations must not leave the striving countries and their economies behind. Or else we will face a situation where the carbon would still be emitted from the less resourceful countries and the reduction will be happening elsewhere. The biggest danger for the world to face now is climate destruction and we must all put in the effort for a safe future with clean energy.

Bibliography

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Wallach, Omri. 2021. “Race to Net Zero: Carbon Neutral Goals by Country.” Visual Capitalist. June 8, 2021. https://www.visualcapitalist.com/race-to-net-zero-carbon-neutral-goals-by-country/.

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