The Clorox Company (Clorox), founded in 1913 and headquartered in Oakland, California, is a leading multinational manufacturer and marketer of consumer and professional products. With trusted brands like Clorox, Brita, Burt's Bees, Glad, Hidden Valley, Fresh Step, and Pine-Sol, Clorox products can be found in about 90% of U.S. households and more than 100 countries globally. All of this makes them a stalwart in the consumer and professional products space, and a household name globally with 9,000 employees worldwide and sales of $7.3 billion in 2021.
Journey To Renewable Electricity Procurement
The company's commitment to sustainability is evident in its integrated approach to environmental, social, and governance (ESG) goals, which are woven into its strategic business choices through the IGNITE strategy. Cloroox’s current goals are to: achieve science-based targets to reduce greenhouse gas emissions by 2030 versus a 2020 baseline; achieve net-zero emissions across scopes 1, 2 and 3 by 2050; and use 100% renewable electricity in our U.S. and Canada operations, which they achieved in 2021. All of this has earned them many accolades including being listed number 1 on Barron’s Top 100 list of Most Sustainable Companies list flipping spots with Intel, now number 2. To their credit Clorox is clearly making large strides in its goal to achieve its net zero goal, starting with its commitment to using all green energy and increasing its energy efficiency.
Along with renewable energy, all of their ESG initiatives are reflected in the IGNITE strategy, which also aims to tackle the issue of waste, particularly the use of virgin packaging. We can see the motivation of IGNITE's holistic premise in a 2022 statement from Clorox CEO Linda Rendle - “we believe ESG drives growth and our impact leads to long-term value creation.” She added that “we have strong aspirations for decarbonizing our business as we accelerate our growth agenda for long-term value creation for all stakeholders.”
Clorox's Renewable Electricity Procurement
Clorox reached the goal of 100% renewable electricity for its U.S. and Canada operations through two virtual power purchase agreements (VPPAs) and additional renewable energy certificate (REC) purchases. This goal, which was reached four years ahead of its original 2025 target, supports the company's science-based targets to reduce absolute scopes 1 and 2 greenhouse gas (GHG) emissions by 50% by 2030.
"We feel a sense of urgency to address climate change given current warming trends," said Chief Sustainability Officer Ed Huber when they announced reaching their goal for 100% renewable electricity in 2021. "As a society, we're at a pivotal point, with the health and well-being of future generations at stake. We recognize businesses play an important role in driving needed progress, and Clorox is committed to doing our part." This first project was signed in 2019 as a 12 year, 70 MW Texas solar VPPA and began generating in 2021.
Michael Ott, Clorox’s Senior Vice President and Chief Research & Development Officer added in 2022 after signing another 12 year, 47MW wind farm VPPA project at 25 Mile Creek, Oklahoma that "we know taking action on the climate crisis is necessary to ensure the well-being of our stakeholders, our planet and our long-term success as a company.
As we live up to our purpose to champion people to be well and thrive every single day, contributing to a clean world is a must. We also know change needs to happen urgently and at scale. That's why we are committing to large, multi-year renewable energy projects to help drive the transition to a more sustainable energy system." The latest project started generating in 2023. In a recent letter to stakeholders Rendle added that “our renewable electricity goal builds upon our past progress exceeding previous GHG emissions reduction targets. We’re proud that we ￼cumulatively reduced our emissions by 52% per case of product sold and 40% on an absolute basis between 2008 and 2018, and we’re motivated to do more. We published a climate action plan that outlines our approach to achieving net-zero emissions by 2050, which includes collaborating with others and leveraging new technologies and innovations as they become available to deliver on our goals.”
Combined, Clorox's two VPPAs are expected to supply nearly all the renewable electricity needed for its U.S. and Canada operations going forward. However, at least through its 2023 reporting for 2022, Clorox continues to include traditional unbundled RECs purchases in their strategy to meet their 100% renewable electricity claim. In that report the company purchased 279,239 MWh of RECs from the open market to support their claim and address any remaining gaps.
What’s unclear is whether the latest VPPA addresses Clorox’s entire purchased electricity load. According to their 2023 Annual Report, total energy consumption was 703,893 MWh. For US and Canada operations, renewable electricity consumption was 369,940 MWh for this accounted for 100% of total electricity for those same regional operations. However, the footnote indicates that “Clorox’s renewable electricity consumption data for the U.S. and Canada includes various contractual instruments, including RECs associated with VPPAs and RECs purchased on the open market. RECs from the U.S. and Canada have been or are being certified through the Green-e certification program.” It appears Clorox will continue to use traditional unbundled RECs as gap filler for 100% renewable electricity claim. This is where an alternative solution to finding another VPPA project can provide serious and comprehensive help. Particularly as their business operations are expected to continue growing. This is evident from their own expectation that in the “longer term, we are committed to maintaining this goal through VPPAs and other market purchases of RECs as necessary. U.S. and Canada electricity consumption represented 85% of global electricity consumption and 53% of global energy consumption — including electricity and fuels — in calendar year 2022.” By our calculations the two projects are expected to generate roughly 205,600 MW of renewable electricity annually. This leaves at least 160,000 MWh gap covered by traditional unbundled RECs that are not supporting new renewable energy projects and could use an upgrade.
The Benefits of Procuring RECs with Additionality
This upgrade is where RECs with additionality could help Clorox’s efforts to maintain it’s 100% renewable electricity claim while bringing the unbundled REC portion up to parity with their VPPA RECs.
RECs with additionality, just like RECs from VPPAs, will help accelerate renewable energy expansion beyond business as usual. They provide environmental attributes from new projects that would not have been built without the additional revenue from REC sales. If Clorox supplemented its renewable electricity strategy that’s currently using the unbundled RECs and substituted them with additionality RECs the company could:
Accelerate the renewable energy transition: Additionality RECs provide the financial incentive for new renewable energy projects to be built faster, helping advance the broader grid transition. Using RECs with additionality would allow Clorox to match their efforts to procure renewable electricity via VPPAs, but without the complexity of searching for and negotiating another VPPA. The latter takes time, effort and organizational commitment that’s actually a distraction to Clorox’s core business. They’re in the consumer and professional products business, not renewable energy procurement.
Mitigate future renewable energy costs: As more companies commit to 100% renewable targets, REC prices on the voluntary market could rise. Locking in lower-cost additionality RECs now through long-term contracts can avoid future price increases. Moreover, RECs with additionality are forward contracts procured at a fixed price. Clorox would add more predictability to their renewable energy procurement including them in their IGNITE strategy.
Strengthen climate messaging: Marketing claims about using 100% renewable electricity hold more weight and credibility when backed by additionality RECs rather than traditional RECs. Since these are just like the RECs they get from their VPPAs, RECs with additionality would allow Clorox to make a stronger claim that their entire renewable electricity procurement supports bringing on new generation, instead of just a portion covered by the VPPAs.
Match rising demand: Additionality RECs offer a flexible way to scale renewable electricity procurement as operational needs grow, maintaining a 100% match. Since Clorox expects their business to grow, they face an uncertain future in terms of the purchased electricity they’re expected to consume based on this growth. RECs with additionality would add clarity since they can be easily purchased to closely match any increased consumption.
By incorporating RECs with additionality, Clorox could accelerate the transition of the grid to renewable energy sources, potentially mitigate costs over time associated with renewable energy procurement, and make more impactful marketing claims for sustainability purposes. Moreover, RECs with additionality could provide the necessary scale to Clorox's emission reduction strategies to accommodate increased electricity consumption as the business grows, ensuring that their sustainability efforts keep pace with their operational expansion.
In summary, Clorox's achievement in sourcing 100% renewable electricity is a testament to its commitment to sustainability and its proactive approach to ESG goals. More importantly, the company has already made significant strides using VPPAs to support new renewable energy. The inclusion of RECs with additionality would ensure that this support continues in a holistic manner consistent with its IGNITE strategy. This approach would show that they’re committed to continuing to promote their support for developing new renewable energy capacity rather than relying on support for existing projects. In the end, offering a path to even greater environmental impact.