Dramatically reducing the corporate carbon footprint

1. Dramatically reducing the corporate carbon footprint World Environment Center & Environment Science Center Euan Murray 25th October 2007

2. Agenda • Introduction to the Carbon Trust • How we support companies to drive change • Working in supply chain & product footprinting

3. Introduction to the Carbon Trust Who we are: • Independent company, funded by UK Government Our role: • Help organisations reduce their carbon emissions and develop commercial low carbon technologies Last year we: • Worked with >5,000 companies across UK • Identified savings of 4.6 million tCO2 worth £0.5 Billion in cost savings per year

4. Introduction to the Carbon Trust • We align private sector interests with public sector objectives: • Our funding comes mostly from government, but • Most of our board members are from the private sector • In 2006/7 we had a budget of ~£110m and a staff of ~150 • We are a company driven by our mission: to speed the transition to a low-carbon economy • We are focussed on cost effectiveness - £/tonne CO2 saved now or in future through new technologies • We design and manage public sector-funded programmes, leverage in private sector funds where possible and re-invest our own returns • As a Company Limited by Guarantee we can make profits but do not issue dividends

5. Agenda • Introduction to the Carbon Trust • How we support companies to drive change • Our 5 business areas • Working in supply chain & product footprinting

6. We are reducing the technology and market risks of investing in a low carbon economy • Aim: To increase awareness of climate change and the risks and opportunities it presents • Published 6 reports in 2006, e.g. • Allocation & Competitiveness in EU Emissions Trading Scheme • Brand Value at Risk • Aim: To overcome technical barriers and lower investment risk • 114 R&D projects • Technology acceleration projects: marine, microCHP, smart-metering, biomass for heat, low-carbon buildings • 36 companies in business incubator

7. And we are creating the business case for the low carbon economy • Aim: To demonstrate good financial returns from low-carbon investments • Portfolio of 6 investments with a value of £13.0m* against acquisition cost of £6.7m (31% IRR**) • Launching £75m clean-tech fund • Aim: To fill gaps in the market and make commercial returns • Launched “Connective Energy” • 2 new low carbon businesses under development: • Partnerships for Renewables • Insource Energy * Made up of a combination of listed and unlisted equity and cash received from sales awaiting re-investment before tax as at March 2006** Gross portfolio IRR from date of first investment (July 2002) to 31st March 2006, based on BVCA guidelines and including cash returned

8. #5: Solutions works with companies to manage their carbon footprint Through Carbon Management, we help organisations identify current threats and future opportunities Current threats… …lead to opportunities to.. Increase Profits • Reduce costs through energy management • Improve operational effectiveness • Develop new products or grow market share • Manage risks to fixed assets & supply chains Comply with Regulation • Ensure compliance with legislation e.g. EU Emissions Trading, Climate Change Levy, Buildings Directives etc. Enhance Reputation • Maximise brand & reputational impact of reducing carbon emissions • Engage consumers and other stakeholders Regulation Company Profits Reputation

9. #5: Our Solutions business worked with >5,000 companies last year

10. We help companies save energy costs and reduce their carbon footprint NPV of Solutions Programme 2005/6 £m 245 417 (32) (140) Carbon Trust costs Capital investment by companies PV of lifetime energy savings NPV of total cost saving Source: Carbon Trust Impact Assessment 2006; PIU report Feb 2002; Energy White Paper

11. What is good carbon management? Stage 1: Direct Company Emissions Reduction Stage 2: Supply Chain Emissions Reduction Stage 3 (Optional): Offsetting

12. Agenda • Introduction to the Carbon Trust • How we support companies to drive change • Working in supply chain & product footprinting

13. What is the footprint of a product? Supply chain / value chain of a can of cola • Aluminium Production • Sugar farming • Cola production • Packaging • Transportation • Chilled storage • Refrigeration • Can collection • Recycling or disposal Total carbon footprint of the can of cola (illustrative) Disposal & recycling Raw material Product manufacturing Consumer use Distribution & retail

14. Why the “product view” is key • Targets >50% of emissions • Individual carbon footprint of 11 tonnes CO2 p.a. • The UN/IPCC, Kyoto Protocol and China • The market – consumers and brands

15. March launch of our work Launch focussed on 4 key things: Product Carbon Footprinting Methodology Product Label Standard development & international consultation Defra & BSI British Standards Pilot Development Projects

16. Carbon reduction label • Independent measurement • “Reduce or lose” commitment

17. New Pilot Projects • CT testing the draft BSI standard with different products and in different sectors • The partners will work with us to reduce their emissions and explore the best way to communicate the results 9 new projects: • Aggregate IndustriesHard landscaping products • Cadbury SchweppesDairy Milk bars • Coca-Cola A still and a sparkling beverage • The Co-operative GroupStrawberries • Halifax Halifax Web Saver Account • Kimberly-ClarkAndrex and Huggies nappies • MarshallsHard landscaping products • Mϋller Dairy Yoghurts • Scottish & Newcastle Fosters lager & Bulmer’s cider We will do further pilots throughout the year

18. Standard Development • BSI are leading the work to develop the PAS Standard • Appointed a Steering Group from business, NGO, academics and government • First draft prepared, using the CT methodology as base • First of two consultations commencing shortly • Details on the BSI website: www.bsi-global.com/PAS2050 • International engagement in consultation is key • Single standard for multi-national companies to use • International expertise • New markets & partners for the Carbon Trust

19. Making Business Sense of Climate ChangeQUESTIONS

20. Backup

21. Supply chain emissions reductions • Supplier energy efficiency – encouraging them directly • Calculating product carbon footprints – identifying hotspots • Trinity Mirror example

22. Food miles as a proxy for climate change • Cutting food miles is important to reduce transport impacts BUT • Food miles is a poor indicator of the overall impact • Local sourcing may increase the footprint of a product Innocent 250ml Mango & Passion Fruit Walkers 34.5g Cheese & Onion Total = 75g CO2e Total = 294g CO2e Potato distribution: <1% Disposal: 2% Distribution: 10% Smoothie-making: 21% Making nitrogen fertiliser: >15% Making the packaging: 30% Raw materials transport: 14% Growing & Packing: 23% Source: Carbon Trust Low Carbon Supply Chain Pilot, March 2007

23. The business need is growing Historical cost-saving strategy • Further energy cost savings • e.g. 20% reduction on Boots Shampoo project New market strategy • Consumer demand for companies to take action on climate change • CarbonTrust (Oct 2006): 60% of consumers want to buy from companies doing the right thing on climate change • Consumer desire for low-carbon products • Globescan for LRQA (March 2007): 60% of UK consumers want companies to provide more PoS information on climate change impacts • 77% want independent assurance of company claims on climate change

24. Standard Development • BSI are leading the work to develop the PAS Standard • Appointed a Steering Group from business, NGO, academics and government • First draft prepared, using the CT methodology as base • First of two consultations commencing shortly • Details on the BSI website: www.bsi-global.com/PAS2050 • Food & Grocery sector heavily involved: • 2 representatives on the BSI Steering Group • Support from IGD, FDF, BRC and NFU • Lots of members of those organisations • Engagement, support and efforts invaluable