Scope 2 Emissions Accounting & Reporting

1. Scope 2 Emissions Accounting & Reporting 15th May 2014 • respond@cdp.net

2. About CDP Climate change 4,350 Reported in 2013 • CDP’s mission • To transform the global economic system to prevent dangerous climate change and value our natural resources by putting relevant information at the heart of business, investment and policy decisions • CDP collects information on: • Climate Change • Water • Forests • From: • Publicly listed companies • Their suppliers • World’s largest cities Water 380 Reported in 2013 Forests 138 Reported in 2013

3. CDP worldwide

4. Market-based method for Scope 2 accounting • In 2013, CDP introduced new recommendations for accounting and reporting of Scope 2 emissions, preceding the final GHG Protocol Scope 2 Guidance • New recommendations allow for the use of a market-based method of accounting for Scope 2 emissions • Factors that favour the use of the new approach: • Unresolved double counting and quality issues in company reporting • Existence of effective systems to avoid double counting of properties sold separately from physical electricity • Potential role of consumer choice in changing markets by shifting demand

5. Scope 2 accounting recommendations • CDP recommends that responding companies follow a hierarchy of guidelines when selecting emissions factors for Scope 2 accounting, and use: • 1. Source specific emissions factors, based on renewable energy tracking systems • 2. Supplier specific emission factors, particularly when this is established country practice, and robust methodologies and regulation require supplier disclosure • 3. If 1 and 2 are not possible, companies should use, in order of preference: • Corrected grid average factors (residual mix); or • Grid emission factors that reflect import and export of electricity; or • Production based grid emission factors

6. Scope 2 reporting in CDP questionnaire • CDP asks companies to: • Clarify whether they plan to achieve their Scope 2 targets through reduction of energy consumption or through the purchase of low carbon energy • Report one Scope 2 figure, with emission factors determined following the hierarchy of guidelines and breakdown by country or region (tCO2) • Disclose purchased and consumed electricity used for Scope 2 calculation (activity data), by country or region (MWh); this is optional in the GHG Protocol Guidance • Disclose the amount of purchased and consumed electricity accounted as green power, by country or region (MWh) • Disclose information related with electricity accounted for at zero emissions factor

7. Scope 2 reporting in CDP questionnaire

8. Future evolution of CDP’s guidelines • Reporting system is designed to maximise transparency while minimising complexity • Quality of reporting would increase if information was provided for each sub region of the grid, as opposed to countries or regions; our assessment is that this is still too advanced to demand of reporting companies • CDP and GHG Protocol team have worked together for many years in order to reach maximum alignment between the two initiatives, and this effort will continue after the publication of the final version of the Scope 2 Guidance • We expect full compatibility between CDP guidelines and GHG Protocol Guidance, with only minor changes required to accommodate dual Scope 2 reporting

9. Thank you