Telefónica says its internal carbon pricing strategy provides a holistic perspective on the efficiency of its operations while also considering its "exposure to the risks arising from the transition to a decarbonized economy," Maya Ormazabal, Telefónica's director of environment and human rights, explained in a blog. The Spain-based telecom giant presented its model at the World Bank's climate change conference.

There are various types of voluntary carbon pricing tools that identify how much a company's carbon emissions will cost them in capex and opex. These tools set an internal price for carbon emissions that's not already budgeted for so it can be integrated into risk and opportunity management and improve decision making related to net-zero goals.

The aim of these internal tools is to connect a company's negative environmental impacts to what those cost the planet, adding environmental responsibility into a company's broader economic analysis and decision making.

Telefónica describes its carbon pricing strategy as "a key tool that allows us to make better informed decisions on capital expenditure and procurement," Ormazabal explained.

And with corporate moves based on environmental, social, and governance (ESG) principles becoming increasingly prevalent, Ormazabal says "introducing carbon pricing helps us make better investment and equipment procurement decisions."

The operator is also banking on this strategy to reach net-zero scope 1, 2, and 3 emissions by 2040, with interim targets of 80% reduction in scope 1 and 2 by 2030, and neutralizing scope 1 and 2 in its main markets by 2025.

Telefónica uses carbon pricing in different ways. In its Brazil operations, the company uses an implicit carbon price that requires, for example, its suppliers to offset emissions resulting from the use of rental vehicles through certified carbon absorption projects.

According to Ormazabal, this reduces fleet pollution, and suppliers who sign on agree to comply at the time a contract is awarded, encouraging extended supply chain transparency.

The operator also includes a shadow price within total cost of ownership in purchasing decisions for hardware with negative environmental impacts related to fossil fuel or non-renewable electricity consumption, which reduces the company's scope 1 and 2 emissions.

"This allows us to guide procurement processes towards more efficient equipment and technologies, with a lower carbon footprint," Ormazabal said.

Lastly, Telefónica employs an internal carbon fee, and those proceeds will be used to finance carbon removal projects that will help meet its 2025 scope 1 and 2 target.