DHL Neutral Services January 2008

1. DHL Neutral Services January 2008

2. The IPCC • Intergovernmental Panel on Climate Change (IPCC) was established in 1988 as part of the United Nations. The IPCC shared the 2007 Nobel Peace Prize with Al Gore : “for their efforts to build up and disseminate greater knowledge about man-made climate change, and to lay the foundations for the measures that are needed to counteract such change” • Summary for Policy Makers Feb 2007 stated : • Warming of the climate system is unequivocal • Most of the observed increase in globally averaged temperatures since the mid-20th century is very likely due to the observed increase in anthropogenic (human) greenhouse gas concentrations. • The probability that this is caused by natural climatic processes alone is less than 5%. • World temperatures could rise by between 1.1 and 6.4 °C (2.0 and 11.5 °F) during the 21st century and sea levels will probably rise by 18 to 59 cm (7.08 to 23.22 in) • There is a confidence level >90% that there will be more frequent warm spells, heat waves and heavy rainfall • There is a confidence level >66% that there will be an increase in droughts, tropical cyclones and extreme high tides • Global atmospheric concentrations of carbon dioxide, methane, and nitrous oxide have increased markedly as a result of human activities since 1750 and now far exceed pre-industrial values over the past 650,000 years

3. IPCC Climate change predictions Florida 2006 Shanghai 2006 Florida 2050 Shanghai 2050

4. Focused strategy • Since the start of 2007 , a new unit has acted as the focal point for all DHL Logistics carbon abatement effort. From January 2008 it is called • HQ in Bracknell, reporting in to Bonn (level 3) with quarterly Advisory Committee spanning Logistics, Express, and Mail • Advisory Committee agree strategy for DHL Neutral Services and The Neutral Group • Mission : “the creation and execution of Greenhouse Gas reduction strategies for DHL and our customers” • Scope : Global - over 50% activities outside UK, more than 30% outside DHL Logistics • Activities : four main areas with full time dedicated staff in each

5. The greenhouse gas (GHG) reporting protocol • The globally agreed standard • Protocol developed by World Resources Institute, an independent US think tank • Preferred by institutional investors representing $41 trillion in funds • Used by most of DHL’s large customers • The GHG Protocol defines three “scopes” for GHG accounting to distinguish between “direct” and “indirect” emissions, promoting transparency and preventing “double counting” Scope 2 Emissions from the generation by another party of electricity that is purchased and consumed by the company. Scope 1 Emissions occur from sources that are owned or controlled by a company, such as combustion of fuels in transportation (e.g.: trucks, aircraft, ships, trains), and physical or chemical processes Scope 3 All indirect emissions (other than from purchased electricity) that occur from sources that are not owned or controlled by the company. For example sub-contracted air freight, haulage, business travel and employee commuting in vehicles not owned or controlled by the company . Source : Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard (Revised Edition) developed by the World Resources Institute (WRI) and the World Business Council for Sustainable Development

6. Our three step approach • Assess • Accurately assess our carbon footprint and emissions from all operations, assets, and vehicles • Assign each one to Scope 1, 2, or 3 • Reduce • Reduce our energy consumption and associated carbon emissions wherever possible • Replace • Replace our brown technologies with less polluting green technologies wherever economically viable

7. How are we assessing Scope 1 ? • Scope 1 emissions include : • Transport • Goods On-site (non electric) • Goods Off-site • People Business travel and Company run commuting • Property • Warehouse Heating (non electric) • Warehouse Water • Offices Heating (non electric) • Offices Water • Canteen Cooking (non electric) • Canteen Waste • Operations • Process Packaging • Process Waste – organic to landfill • Process Waste - liquids • People Operational decisions • Since 2006, we have been measuring all of our facilities larger than 500m2 in a two year global programme called the Carbon Footprint Assessment • All DHL owned road, rail, sea, and air vehicles are assessed and the fuel used is centrally collated • Operational energy efficiency and operational CO2 and CO2e emissions are collected, analysed and reported back to stakeholders

8. How are we reducing our Scope 1 road emissions ? • Engine choice - conventional or hybrid ? • The main engine configurations are conventional combustion engines, hybrids, hybrids with hub motors and ultracapacitors, full electrics, and full electrics with hub motors and ultracapacitors. • As the word ‘Hybrid’ suggests, this kind of engine configuration uses both an electric motor and the internal combustion engine to power the vehicle. The main advantages are the use of regenerative braking to recover a part of the kinetic energy back into the battery and the downsizing of the combustion engine while keeping the overall performance the same. There are two different types of hybrid configurations. Parallel hybrids have the electric motor do some of the work in place of the conventional engine. Series hybrids, in contrast use the combustion only to charge the battery which feeds the electric motor. The vehicle is therefore only powered by the electric motor. This has the advantage that the engine acts like a generator and can therefore be operated at constant load close to its most efficient point, enabling greater efficiency. Furthermore, a series hybrid can also drive on electric power only, allowing zero emissions in urban areas.

9. How are we replacing our Scope 1 road emissions ? • Full electric trucks ? • The full electric vehicle can be regarded as a logical step from the series hybrid. This configuration comes without any combustion engine at all. All the energy is stored in a large battery which can be charged from grid electricity. Although electric vehicles have a long track record dating back over 100 years, battery development is a key issue to improve range, reduce costs, and achieve greater energy and power densities to allow higher payload for electric trucks. Additional technologies, e.g .nano-polymers, are being developed with the potential to reduce charging times to minutes and extend battery life to over 10,000 cycles. The carbon emissions in this case depend on the CO2 emission factor of the electricity provided. Which is why we recharge our electric vehicles from renewable resources such as wind and hydro power. Our Smiths Industries 7 tonne full electric truck services retailers at Heathrow Airport in the UK. The pilot project was so successful, we have now ordered more.

10. How are we replacing our property emissions ? • Heating and cooling demands can be significantly reduced effectively through making properties more airtight and thermally insulated • The remaining demands can be satisfied using Ground Source Heat Pumps (GSHP). A GSHP is a heat pump that uses the Earth as either a heat source or a heat sink. GSHP need very significant loops of tubing in order to heat up the ground circuit. Laying loops horizontally is lower cost but may be impractical for warehousing due to the surface area required. Many industrial applications require 100m boreholes each 5m apart. • GSHPs have another major advantage – they require electricity to run and their efficiency is measured by a coefficient of performance (COP, usually between 3 and 4) – the ratio of kWh of heating output per kWh of electricity input. A typical gas heater will have a COP of 0.8 • GSHPs produce warmed water, which can be used for heating and (via a heat exchange unit) cooling. However they must be connected to an efficient delivery system. We have found that using air handling units which are able to destratify the thermal layers within a facility is an efficient method to delivery warm or cool air.

11. How are we assessing our Scope 2 emissions ? • Scope 2 emissions result from the use of various fuels to generate electricity. When these fuels are burned or otherwise used, they create a mixture of GHGs which are released into the atmosphere • In many countries this generation is distributed around the country and connected by a “grid” • For example in 2004, the UK generated electricity from • gas – 39.93% (0.05% in 1990) • coal – 33.08% (67.22% in 1990) • nuclear – 19.26% (18.97% in 1990) • renewables – 3.55% (0% in 1990) target 10% by 2010 • hydroelectric – 1.10% (2.55% in 1990) • Imported electricity – 1.96% (3.85% in 1990) • oil – 1.12% (6.82% in 1990) • For each country, there is an annual number which uses this blend of sources to provide a kWh to tonnes CO2e figure for grid electricity • By monitoring all of our electricity usage on a site by site basis, we are able to produce detailed half hourly reports and CO2e assessments • Further detailed analysis on a site by site basis is underway to examine electricity usage within each site, with initial results showing that lighting is the single largest contributor to our Scope 2 carbon footprint Battersea Power Station in London was the first in a series of large coal-fired electrical generating facilities. The first part of the structure was built in 1939, and the station stopped generating in 1983. It has been used by many TV and film companies, as a backdrop for Doctor Who, Lost, and Monty Python, but is probably most famous as the cover for Pink Floyd's 1977 album Animals, with the group's inflatable pink pig floating above the powerstation.

12. How are we reducing our Scope 2 emissions ? • Half hourly measurement of electricity usage is automatically collected in the UK, and centralized web based monitoring is being deployed to all sites of over 10,000 m2 • This allows us to spot unusual usage • It has already produced operational savings • For example, we found one site was using similar amounts of electricity at weekends, despite being a 5 day operation – they had forgotten to install weekend timers on the lights • Lighting accounts for up to 60% of some sites’ electricity usage • Switching lights off really does make a difference • We have measured some sites provided with different amounts of natural daylight by roof lights. Combined with photo-sensors to dim or switch the lights off when possible, we have seen costs savings of up to 35% during the summer and 15% in winter • Recharging our indoor electric vehicles is the second largest consumer of electricity – correct maintenance and modern vehicles can reduce consumption

13. Reducing Scope 2 : New lighting solutions • In the last decade, huge improvements have been made in the efficiency of industrial lighting with the old T12 fittings being replaced by T5 units • Inefficient old lights and dirty lighting reflectors combine to waste significant amounts of energy as heat – adding to overheating of facilities and reducing the operational life of the light fittings • T5 units may be combined with motion sensors, and photosensors to provide variable levels of light only when required, which can save up to 50% of the operational lighting electricity costs and associated carbon footprint • Next generation LED based lighting is set to decrease energy consumption by nearly one order of magnitude, but technology is still emergent • We have found that a significant factor in redesigning lighting solutions is the disruption caused - it is better to install energy efficient lighting during holiday periods, or at the start of occupation of a facility *Note: 55% of sun’s heat is reflected **Equates to 6 degree temperature rise during hottest periods of the summer ***Assuming summer temperature rise can be accommodated or mitigated through opening vents Source: TNG estimates

14. How are we replacing our Scope 2 emissions ? • Using detailed assessment and energy efficiency we have found that it is often possible to reduce electricity usage by up to 25% • However, as grid electricity is not carbon neutral we have to find other ways to reach our goal of eliminating Scope 2 emissions • In the UK we have moved 109 of our largest sites onto Climate Change Levy exempt carbon neutral electricity • This saved us nearly €2 million annually • Our electricity comes from wind and hydro sources • In Germany we have moved to a 68% carbon neutral electricity supply • We will build 100MW of local wind power in the UK • We will offer carbon neutral electricity using offsite wind power for other worldwide DHL sites

15. How do we assess our Scope 3 emissions ? • As the world’s number 1 air, sea, and road freight forwarder, DHL’s Scope 3 emissions are by far the largest component of our carbon footprint • It would be easy to claim that we can not directly influence these emissions – we choose to work with our freight partners to help them assess, reduce, and replace their emissions • Working with the US Environmental Protection Agency, we have created a scorecard for our road freight carriers, which allows us to rank them based on CO2 emission factors • We have been collecting and calculating our third party air freight CO2e footprint since 2004, increasing in detail each year • We have commenced a five year project to collect and analyse detailed data for sea based CO2e emissions • We have found that sea freight typically produces 40 times less CO2e emissions per tonne km than air freight

16. Airfreight – general problems CO2 and CO2e figures are very different for aircraft emissions • Furious arguments concerning Radiative Forcing Index • Values used vary from 1 (British Airways) to 2 (Climate Care) to 3.4 (IPCC) • IPCC 1992 Model for Aircraft Emissions : • CO2 +0.018 W m-2 • NOx +0.023 W m-2 (via ozone changes) and -0.014 W m-2 (via methane changes) • Contrails +0.02 W m-2 • stratospheric H2O +0.002 W m-2 • sulfate aerosol (direct effect) -0.003 W m-2 • black carbon aerosol (soot) +0.003 W m-2 Range of “magic numbers“ is too great : • 530g/tkm: avg. Singapore Cargo • 570g/tkm: Maersk / DEFRA Long Haul Air Freight, July 2005 • 583g/tkm: avg. Lufthansa Cargo • 630g of CO2 per ftkm Long Lufthansa 2001/2 Environmental Report • 945g of CO2 per ftkm Short Lufthansa 2001/2 Environmental Report • 630-890g/tkm: McKinsey (for DPWN) • 1580g/tkm: DEFRA, Short Haul Air Freight (< 500km), July 2005 12/19/2019

17. How can we reduce our Scope 3 emissions ? • Working with our third party carriers, we have commenced a 5 year plan to present carbon reduced choices for our customers • At the simplest level, our customers will soon be able to choose to use air, sea or road carriers who have taken active steps to reduce their carbon footprint • For those customers who would like to proactively reduce their Scope 3 emissions, we are working with the US EPA to create a global scorecard for all freight options • Every freight transportation mode has significant levers which can reduce emissions • Age of vehicles • Fuel type and efficiency • Routing • Optimal loading and utilisation • Working with one of our Fashion customers we optimised their global freight operations, improving backhaul, changing consolidation points, and improving tracking which resulted in a 42% reduction in air freight, saving them over 15% on inbound costs As climate change is now reducing the amount of arctic sea ice, new shipping options are becoming viable – perhaps even opening up a new Northern shipping route Radical new sea freighter designs may reduce transatlantic shipping times, making sea freight a more attractive option than air freight

18. How can we reduce our Scope 3 emissions ? • The US government’s Environmental Protection Agency has been operating a scheme known as Smartway for nearly 5 years aimed at reducing fuel consumption in road freight • Smartway has identified many technology solutions and now provides financing solutions to encourage road freight companies to adopt fuel efficiency options • Key to the Smartway programme are Smartway points – a simple scorecard which allows the customer to directly compare road freight providers based upon their commitment to fuel efficiency DHL’s in house carbon consultancy, The Neutral Group, is working closely with the US EPA on extending the scope of Smartway, both geographically and across all forms of freight transportation

19. Transport efficiency levers • The combination of driver training and fuel monitoring has already proved successful across DHL up to 10% fuel efficiency increase – but drivers soon forget • DiamondDriver™ is in pilot in the UK and US • DiamondDriver™ improves sustained fuel efficiency • Data collected 10 times per second • 3 dimensional acceleration / braking data • Heavy braking and accelerating is the greatest variable in truck fuel economy • Data is collected when truck returns to base via WIFI and then via Internet to a database • Data is analysed centrally and then calculated into DDPoints™ • DDPoints are communicated back to base per driver per month • Highest DDPoints per month wins an award

20. How could we replace our Scope 3 emissions ? • Optimised and well managed global freight operations can reduce CO2 emissions, but replacing such transportation options with better ones is the most difficult challenge • DHL has been testing such replacement technologies for over 5 years, investing in alternative fuel vehicles, electric vehicles, and next generation fuels • The simplest reduction strategy today, is to accurately calculate our Scope 3 emissions and then purchase accredited carbon offsets which will reduce CO2 emissions elsewhere in the world • By continuing to evaluate, test, and pilot new technologies, DHL will provide our customers with robust and carbon efficient freight options coupled with our carbon offset management products In the future, we may see the increased use of airships or the reintroduction pf wind propelled sea freight. DHL continues to monitor these advances, and to evaluate their possible commercial feasibility

21. Example : Carbon based network design Today’s customer network €91.4m 233 tonnes CO2 Traditional LEAST COST option €83.0m (10% down) 252t CO2 (9% up) Carbon minimised option €92.8m (1% up) 144t CO2 (38% down)

22. Example : our process for existing properties CFA Carbon Footprint Assessment CAP Carbon Action Plan CRIP Carbon Reduction Implementation Programme CRMS Carbon Reduction Managed Service PROPOSITION CFRT Carbon Footprint Reduction Training • Service Management • Web based Management Tool • Training Need Analysis • Training • Technology Updates • Web based data collection tool • Linked to DHL Systems • Site level data • Mandated globally from 2008 Managed reviews of: • Wind & Solar Power • Lighting Systems • Insulation • Transportation • Heating & Cooling Neutral Services Neutral Finance Neutral Power Neutral Light Neutral Heat INPUTS Neutral Supporting Services • Board of directors • Site Manager • Account Team • Financial Controller • Site Manager & Engineer • Account Team • Client • Site Manager & Engineer • Account Team • Site Employees • Client • Site Manager • Site Employees • Account Team 12/19/2019 STAKEHOLDER • Assessment Report by site for all DHL global locations • CAP Opportunities • Site Carbon Reduction (various technologies) • Green Electricity (where possible) • New site behaviours (from CFRT) • CRMS Opportunities • On-going support for Carbon Reduction • Service Level Agreement including annual CAP • Report & Plan by site • Presentation • Financing Options with payback periods • CRIP Opportunities OUTCOMES

23. 2008 Propositions 12/19/2019 Neutral Services is an organisation delivering benefit based value propositions to clients. The benefit case is based on a Return On Investment from two elements: • Carbon Footprint (CF) Reduction • Operating cost reduction where possible Neutral Services offerings are to recommend and deliver the following services to assess and reduce Carbon Footprint: Carbon Footprint Assessment (CFA) - An internet software based capability to assess the client’s CF with the outcome of a definition and evaluation of the client’s current Carbon footprint (in CO2e tonnes)for its facility/organisation/supply chain etc. depending upon the scope of the CFA. Carbon Action Plan (CAP) - A process to target and plan for the client’s CF reduction, tailored to the client's specific needs and focus areas with the key outcome of identifying and evaluating the dual level ROI-based business benefit case. Carbon Reduction Implementation Service (CRIS) - The methodology, capability and skilled resources to manage and deliver the CAP, together with the client, with the key outcome of realising the ROI-based dual level business case. Carbon Reduction Managed Service (CRMS) - A long-term relationship & capability to ensure the client is able to maintain its CF reduction targets and continuously improve its carbon usage over time. The CRMS can be offered as a layered service with reactive, planned maintenance and pro-active levels of offering depending on the client’s requirement and demand. Carbon Footprint Reduction Training (CFRT) - As part of or as a separate element to the CRMS, the capability and skilled resources to train the client’s operational staff on the active behaviours, processes and skills required to minimise carbon footprint and to continuously improve carbon footprint reduction outcomes. 11/10/07 Neutral Services – Realising The Vision

24. Next steps • Visit www.theneutralgroup.com • Arrange initial conversation with customer for DHL Neutral Services to brief customer on our activities • Bus dev contact : Philippa Beadle philippa.beadle@dhl.com • Commercial : Karl W Feilder kwf@theneutralgroup.com • Strategy contact : Jon Bumstead jon.bumstead@dhl.com • Green products : Gunther Krell gunther.krell@dhl.com • Our goal : full carbon reporting worldwide by end 2008 • Our goal : 10 paid GCS customer engagements during 2008

25. DHL Neutral Services January 2008