How Apple made its first ‘carbon neutral’ product

In September, Apple announced its next-generation smartwatch models would all have a “carbon neutral” option, at the same price as the non-carbon neutral options, starting at $249.

For Apple, making a product “carbon neutral” means that it changed its operations — including manufacturing, packaging and shipping — to reduce the greenhouse gas emissions associated with making and selling its watches. It was able to drive emissions associated with a single watch down from 36.7 kg to 8.1 kg with these actions.

In order to call its watches “carbon neutral” without being able to eliminate all of the emissions associated with making the watches, Apple bought carbon credits to compensate for the remaining 8.1 kg of emissions, or about 22% of the total footprint of making a watch.

Apple is transparent about all of this carbon accounting in its environmental report for the watch.

Carbon credits are certificates that individuals, businesses and corporations can purchase that represent a certain amount of greenhouse gases reduced, avoided, or removed from the atmosphere. They are a way for consumers to compensate for their greenhouse gas emissions while also providing a financing mechanism to support sustainable development projects, according to a description from the United Nations.

Depending on who you talk to, dubbing a product “carbon neutral” when the accounting requires buying carbon credits is either Apple acting responsibly and doing the best it can to contribute to climate mitigation strategies that are available right now, or an irresponsible misrepresentation of what “carbon neutral” should mean.

The distance between those two analyses is substantial and virtually irreconcilable. It’s also a poignant indication of the distance between where climate mitigation ambitions and climate mitigation realities are right now.

The relative effectiveness of nature-based carbon credits is contentious because some forestry carbon credits have been shown to be nullified when, for example, the forests set aside for carbon credits burn in wildfire season. But Apple and other stakeholders in the debate argue that not all carbon credits are created, monitored and stewarded with the same diligence. Apple says the quality of the carbon credits it is investing in are reputable, and that buying carbon credits for the emissions it cannot reduce is better than doing nothing.

“If you want to be highest ambition, taking that 22% and buying high-quality, high-integrity carbon credits is the highest ambition,” Elizabeth Sturcken, managing director of the nonprofit climate advocacy organization Environmental Defense Fund, or EDF, told CNBC in a phone conversation at the end of September.

Barbara Haya, director of the Berkeley Carbon Trading Project at the Goldman School of Public Policy at University of California at Berkeley, said Apple deserves to be celebrated for the significant emissions reductions it achieved in changing its operations, but Haya also said she wishes Apple had avoided the term “carbon neutral” in its communications about its work.

She argues consumers would be better served by Apple publicly bragging about its 78% emissions reductions instead of trying to tell consumers that their product is actually “carbon neutral.” Even if the carbon credits Apple buys are of the highest quality, carbon credits are, by their very nature, an accounting strategy. There are 22% of emissions that Apple could not abate, and Haya commends Apple on that transparency.

“If you buy an Apple Watch, your emissions are not zero,” Haya told CNBC, a fact that Apple acknowledges. The way to have no environmental impact is to not generate those emissions in the first place.

“Fossil fuels are permanently in the ground if you don’t draw them out and burn them,” Haya told CNBC.

The most important work Apple did in launching its “carbon neutral” watch is to drive down the emissions that are associated with making its watch, according to everyone CNBC talked to for this story.

Here are some specific examples of how Apple has worked to reduce actual emissions associated with making its “carbon neutral” watch:

• 30% of the materials used in making the carbon neutral watch are recycled or renewable (not including packaging or in-box accessories)
• 100% of the suppliers that Apple buys parts and components from for the “carbon neutral” watch have agreed to Apple’s Supplier Clean Energy Program, which means suppliers have to power the production of their Apple parts with renewable energy and invest in new renewable energy projects in the areas in which they operate. To be part of the program, qualified suppliers are not permitted to take credit for the renewable energy that already exists on the electric grid in which they operate, but must instead purchase new renewable energy on the grid in which they operate for the production of Apple-related products — a requirement called “additionality.” Apple is transparent and specific about the sources of clean electricity its suppliers use in its environmental progress report: In 2022, 2% of suppliers were using onsite renewable electricity, 24% were buying renewable energy certificates, 66% were making renewable power purchases, and 9% were making direct investments in renewable energy projects.
• 100% of the electricity used in manufacturing of the watch is matched with 100% clean electricity, which means that Apple and its manufacturers have invested in enough renewable energy to cover the electricity footprint of what is used to make the Apple “carbon neutral” watch. In some cases, if the manufacturer has not yet reached 100% renewable energy, Apple will fill the gap by making enough investment in renewable energy projects to cover the total electricity footprint of what is used to make the “carbon neutral” watch. This kind of corporate clean electricity procurement math is its own complicated accounting framework, but is standard and has significantly improved the pace of renewable energy getting on the grid.
• More than half of the shipping of products by weight is scheduled to be done with methods other than by airplane. Traveling by plane is currently one of the most carbon intensive methods of transportation.
• The packaging for the watch is made with 100% recycled or “responsibly sourced” wood fibers.
• Apple is also matching the expected electricity that customers use to charge their carbon neutral watches with investments in clean energy projects. Also, Apple advises users of when the energy on the grid they are using is the most clean so they can opt to charge their device when the electric grid is being charged with the most renewable energy.

Apple ought to be respected for these accomplishments, Sturcken at EDF told CNBC.

Sturcken has been at EDF for almost 27 years, leading partnerships with companies such as Airbnb, FedEx, Lyft, UPS and Walmart to reduce the emissions of their supply chains. EDF does not take money from the companies it works with, and Sturcken has not worked with Apple on its “carbon neutral” watch. Broadly speaking, though, Sturcken said, Apple is doing good work in its sustainability efforts. “They’re a leader,” Sturcken said. “They have a whole team. They get it. They’re focusing on the right things, in general.”

To compensate for the 22% of unabated residual emissions, Apple invests in what it deems to be high-quality carbon credits that restore grasslands, wetlands and forests.

Apple does this via its Restore Fund, an initiative that Apple launched with Conservation International and Goldman Sachs in 2021 that invests in protecting and restoring working native forests, grasslands and wetlands. Current projects are in Brazil and Paraguay and will restore 150,000 acres of forests and protect another 100,000 acres of forests, grasslands and wetlands.

The criticism of these kinds of forestry projects is that their climate mitigation impact is less permanent than the climate impact of releasing greenhouse gas emissions into the atmosphere to begin with.

“Apple relies on credits from carbon dioxide removal projects that restore forest, wetlands, and grasslands. Due to natural or human-induced disturbances such as forest fires, land degradation or land-use change, carbon storage in forestry and land-use projects is likely to only be temporary, and therefore in no way comparable with not having emitted greenhouse gases in the first place,” Reena Skribbe, a sustainable development expert at the nonprofit organization NewClimate Institute, told CNBC.

“The environmental integrity of carbon credits from carbon dioxide removals cannot be assured, thus carbon credits cannot be seen as a substitute to emission reductions,” Skribbe told CNBC.

Apple says the carbon credits it is investing in are carefully monitored, measured and tracked.

“We’re here to do the right work, not that easy work,” Sarah Chandler, Apple’s vice president of environment and supply chain innovation, told CNBC. “There are certainly wonderful nature-based carbon removal projects, and there are ones that are not as wonderful. And it is important to draw distinctions between the two and be very clear about the projects.”

What makes this debate more nuanced is that carbon credits can combat deforestation, and stopping deforestation is mission critical to meeting global climate goals, Sturcken told CNBC.

“Stopping deforestation is blaringly urgent right now,” Sturcken said. Planting new trees is helpful, “but more urgent than anything is stopping deforestation, because it takes so long for new trees to grow. And if we don’t do that, in the near term, we have a much harder road to get to a climate-stable future. So anything we can do to incentivize in a robust and high integrity way, that kind of investment by companies we should be doing.”

So, too, says Michael Ackerman, CEO of EcoForests Asset Management, a company that coordinated forestry investment in Latin America. He said carbon markets are right now “the wild, wild west,” as other disruptive industries such as bitcoin and social media have been. And from his perspective, combating deforestation should be an ultimate priority.

“Protecting one tree in one place does not stop another tree from being chopped down elsewhere,” Ackerman told CNBC. “However, protecting and managing swaths of forests prevents those sections of forests from being degraded and improves global carbon sequestration, enhances biodiversity, and mitigates the risk of wildfires.”

Forestry protection programs in low-income countries are particularly meaningful.

“Forest projects in areas such as South America, Southeast Asia, and Africa have greater impact on communities than projects in North America would. Communities in these countries tend to be impoverished and have high levels of unemployment,” Ackerman told CNBC. “Successful managed forest projects will provide economic stimulus to neighboring communities, by way of job creation and social assistance.”

But the forest-preservation registries are not effectively ensuring the quality of the carbon offsets, Haya told CNBC.

“My perspective is coming from a deep study of carbon offset quality over the last 20 years,” Haya told CNBC. “If the offset market was reliable, I might be saying something very different to you right now. But the background is that there’s excessive over-crediting throughout the offset market over so many project types over the last 20 years.”

Haya said she wishes Apple’s marketing team had stuck with advertising the very respectable 78% emissions reductions they have achieved and left out the “carbon neutral” verbiage altogether.

In fact, it may eventually become a legal vulnerability to call a product “carbon neutral.”

“The evidence against the impact of carbon credits is now so overwhelmingly clear that companies and crediting intermediaries — whose business models depend on these carbon credit markets — are reluctantly starting to move away from carbon neutrality labels,” Thomas Day, who analyzes carbon market mechanisms at the NewClimate Institute, told CNBC.

“An exodus from carbon neutrality claims has started, and companies that stay behind are increasingly exposed to legal peril and heightened consumer awareness that this is a dishonest approach,” Day told CNBC.

For now, Apple is holding fast.

“We do believe that there are ways to make good investments in nature-based carbon removal. And we believe that it is important to start doing that work today,” Chandler told CNBC.