11266 Walmart GHG Innovation Guidance Document

8/9/2019 11266 Walmart GHG Innovation Guidance Document

1/59

Walmart Supplier GHGInnovation Program:Guidance Document

Version 1.0August 3, 2010

This document summarizes the Walmart supplier GHG reduction goal and the guidance tosubmitting projects to contribute to this goal. For questions about this document, please contactJames Stanway: [email protected] or (479) 204-0334.


2/59

Contents

Contents ............................................................................................................................... ........................ i

Acknowledgements ............................................................................................................................... ..... 1

Part 1: The Program ..................................................................................................................................4

Walmarts Impact on the Environment ................................................................................................ 4

Walmarts Supplier GHG Reduction Goal .......................................................................................... 5

Selection of Projects .............................................................................................................................. 5

Project Teams ............................................................................................................................... .......... 7

Carbon Reduction Claims ..................................................................................................................... 9

Assessing Claims .................................................................................................................................10

Program Timeline .................................................................................................................................10

Unintended Consequences ................................................................................................................11

Part 2: Project Accounting Guidance ....................................................................................................11

Qualification of Emissions Reduction Projects ................................................................................11

Types of Projects that Qualify ........................................................................................................11

Qualification Criteria .............................................................................................................................12

Timing ................................................................................................................................................12

Additionality .......................................................................................................................................14

Beyond BAU ......................................................................................................................................14

Quantification of Emissions Reduction Projects ..............................................................................15

Uncertainty ........................................................................................................................................15

Product Quantification (Track 1) ....................................................................................................15

Facility/Process Quantification (Track 2) ...................................................................................... 22

Financial Values of Projects ...............................................................................................................24

Part 3: Submission How-To ....................................................................................................................25

General Questions ............................................................................................................................... 25

Who Submits the Documentation? ................................................................................................25

How Do I Submit A Project? ...........................................................................................................25

Qualification ...........................................................................................................................................25

If my project does not fit the two tracks, does it qualify? ............................................................25

Does a Walmart store reduction count? ....................................................................................... 25

Does a reduction at a Sams Club or an international store count? .........................................25

Page i


3/59

What are the dates for a project to count toward the goal? .................................................... 25

What does it mean to start a project? ......................................................................................... 26

Would a project that focuses on reductions from consumers (Walmart customers) count? 26

(Track 1) Product Quantification .......................................................................................................26

How do I select a methodology? ....................................................................................................26

What do I need to include in my methodology documentation? ...............................................26

What is a Product Life Cycle Assessment? .................................................................................27

How do I determine boundary conditions? ...................................................................................27

How do I account for loss rates? ....................................................................................................28

(Track 2) Facility/Process Quantification .........................................................................................28

What is the type of footprint? .......................................................................................................28

What methodology should I follow for facilities or processes? ..................................................28 What are the boundaries to consider in a facility/process quantification calculation? ...........28

Why do I need to show the baseline calculation per emission source? ..................................29

Part 4: Post-Submission .......................................................................................................................... 30

Step 1. Project Application Package Submitted .............................................................................30

Step 2. Package Stored in Database ...............................................................................................30

Step 3. Quality Assurance (QA) of Application ...............................................................................30

Step 4. QA Report Generated ...........................................................................................................30

Step 4a. Feedback Provided to Project Champion ....................................................................30

Step 4b. Application Package Resubmitted ................................................................................31

Step 5. Assessment of Completeness and Accuracy of Claims ..................................................31

Step 5a. Feedback Provided to Project Champion & Team ..................................................... 31

Step 5b. Close Project ....................................................................................................................31

Step 6. Project Accounted in Database ...........................................................................................31

Step 7. 12-Month Adjustment ............................................................................................................31

Step 8. Review (QA) of Application ..................................................................................................32 Step 8a. Feedback Provided to Project Champion ....................................................................32

Step 8b. Application Resubmitted ................................................................................................32

Step 9. 12-Month Assessment ..........................................................................................................32

Step 10. Adjustment at Program Conclusion ..................................................................................32

Step 10a. Review (QA) of Application ..........................................................................................32

Page ii


4/59

Step 10b. Feedback Provided to Project Champion ..................................................................33

Step 10c. Application Package Resubmitted ..............................................................................33

Step 11. Final Assessment ................................................................................................................33

Step 12. Close Project ........................................................................................................................ 33

Part 5. Glossary and Reference Materials ..........................................................................................35

Glossary .................................................................................................................................................35

Reference Materials .............................................................................................................................39

Attachment A. Product Carbon Reduction Worksheet ......................................................................... 1

Walmart Information ............................................................................................................................... 1

Supplier Information ............................................................................................................................... 1

Project Information .................................................................................................................................1

Qualification of Project ............................................................................................................................... 3 Step 1. Qualification (Track 1) .............................................................................................................3

Step 1a. Influenced Product Design ............................................................................................... 3

Step 1b. Influenced Sales ................................................................................................................ 3

Quantifying Carbon Reductions ...............................................................................................................4

Step 2. Describe Life Cycle Assessment .......................................................................................... 4

Step 3. Carbon Reduction effect .........................................................................................................5

Step 4. Carbon Footprint Calculation: Continual Effect Carbon Reduction From Products ......5

Step 5. Carbon Footprint Calculation: One-Time Effect Carbon Reduction From Products .....6

Step 6. Sales of the Product ................................................................................................................ 7

Step 7. Financial Value of Project ......................................................................................................7

Step 8. Product Trends ........................................................................................................................ 7

Step 8a. Raw Materials .................................................................................................................... 7

Step 8b. Manufacturing .................................................................................................................... 7

Step 8c. Consumer Use ................................................................................................................... 8

Step 8d. End-of-Life .......................................................................................................................... 8 Step 9. Statements ............................................................................................................................... 8

Step 9a. Uncertainty ......................................................................................................................... 8

Step 9b. Validity .................................................................................................................................8

Step 9c. Claims .................................................................................................................................9

Attachment B. Facility/Process Carbon Reduction Worksheet ........................................................... 1

Page iii


5/59

Walmart Information ............................................................................................................................... 1

Supplier Information ............................................................................................................................... 1

Project Information .................................................................................................................................1

Qualification of Project ............................................................................................................................... 3

Step 1. Describe Facility or Process Carbon Reduction Project ...................................................3

Step 1a. Facility/Process Improvement ............................................................................................. 3

Step 1b. Energy Management ............................................................................................................3

Quantification of Reductions ..................................................................................................................... 4

Step 2. Carbon Emissions Calculations Methodology ..................................................................... 4

Step 3. Carbon Footprint Calculation ................................................................................................. 4

Step 4. Financial Value of Project ......................................................................................................5

Step 5. Technology Trends ................................................................................................................. 5 Step 6. Statements ............................................................................................................................... 6

Step 6a. Uncertainty ......................................................................................................................... 6

Step 6b. Validity .................................................................................................................................6

Step 6c. Claims .................................................................................................................................6

Page iv


6/59

Walmart Supplier GHG Innovation Program Guidance Document

AcknowledgementsWalmart would like to acknowledge the significant contributions the following organizations andindividuals who were instrumental to this guidance documents creation:

ClearCarbon Consulting

ClearCarbon is a full-service consulting firm dedicated to creatingcompetitive advantage and improving profitability through carbonmeasurement, management and monetization. Our solutions helpclients of all sizes understand their climate impacts and developstrategies to reduce their carbon footprint, enabling long-term pand growth in a carbon-constrained world.

rosperity

ClearCarbon staff who contributed to this document include: J. Renee Morin, Kyle Tanger,Sarah Matheson, and Anna Nicholson.

For more information about ClearCarbon, please visit: http://www.clearcarboninc.com .

Environmental Defense Fund

Environmental Defense Fund (EDF), a leading nationalnonprofit organization, represents more than 700,000members. Since 1967, EDF has linked science, economics,law and innovative private-sector partnerships to createbreakthrough solutions to the most serious environmentalproblems. EDF has a 20 year track record of success inpartnering with business. To maintain its independence and credibility, EDF accepts no moneyfrom corporate partners; generous individuals and foundations fund its work.

In 2005, EDF partnered with Walmart to measurably reduce its environmental impacts.Environmental Defense Fund experts, Elizabeth Sturcken, Andrew Hutson, Maria Harris andAndy Wunder were key contributors to the development of this document.

For more information on EDFs work with Walmart, visit www.edf.org/walmart .

PricewaterhouseCoopers

PricewaterhouseCoopers providesindustry-focused services for publicand private clients. Our experiencedstaff, combined with our global network, allow us to provide the support you needwhereveryou need it, at home and abroad, whatever the size of your organization.

The following PricewaterhouseCoopers staff contributed to this document: Barbara Kipp,Christine Schuh, Nick Shufro, Alexandre Rossin, Sachin Mandal, and Kathy Nieland.

For more information about Pricewaterhouse Coopers, please visit: http://www.pwc.com .

Page 1
http://www.clearcarboninc.com/http://www.edf.org/walmarthttp://www.pwc.com/http://www.pwc.com/http://www.edf.org/walmarthttp://www.clearcarboninc.com/


7/59


Introduction

Walmart believes that much more can be done to reduce the greenhouse gas emissions (GHG)associated with the materials, manufacture, shipment, and use of the products we sell. Webelieve that both cost-saving and revenue-generating GHG reductions can be captured by

reviewing and acting on cradle-to-grave lifecycle analyses of the products on our shelves.

Walmart has several initiatives underway to reduce the emissions from direct sources such asits fleet and refrigeration units (scope 1) and from its purchased electricity (scope 2), but themajority of emissions associated with the retail sector are embedded up and down the valuechain within the raw material extraction, manufacture, use, and disposal of the products sold(scope 3).

To achieve reductions throughout the value chain and our products lifecycles, Walmart fundedthe Walmart Supplier GHG Innovation Program and Walmart CEO Mike Duke subsequentlyannounced a GHG reduction goal for value chain emissions. The Program is intended to find,

achieve, and account for GHG reductions by working with suppliers throughout Walmartsproduct categories and departments.

This document describes the Walmart Supplier GHG Innovation Program, the GHG reductiongoal, the accounting guidance for projects as well as the due diligence process for reviewingthese projects. This document is intended for use by Walmart Project Champions, the WalmartSupplier GHG Innovation Program team, and others within Walmart. In addition, this version ofthe Guidance (version 1.0) is likely to evolve as it is road-tested with real projects.

This document is organized into five sections:

Part 1: The ProgramPart 1 focuses on the background of the Walmart Supplier GHG Innovation Program. Itexplains the supplier GHG reduction goal and how the goal will be achieved by Walmart.This part provides background information that will help the reader to understand whatthe program entails and who is involved.

Part 2: Project Accounting GuidanceThe goal will be achieved by implementing a series of GHG reduction projects. Therules that apply to these projects are described in Part 2. This guidance includes adescription of what projects will qualify for the Program and count towards the GHGreduction goal. It also includes a description of how to account for the reductions

achieved.

Part 3: Submission of Project InstructionsPart 3 walks through the process of submitting a project and gives more detailedinstructions for completing the submittal package, including step by step instructions forcompleting worksheets. The worksheet templates are attached to this document asAttachments A and B.

Page 2


8/59


Part 4: Post-SubmissionA description of what happens after an individual project is submitted to the Program isincluded in Part 4. The project will undergo a review and assessment to ensure that itfits the qualification criteria. In addition, the carbon reduction calculations will bereviewed.

Part 5: Glossary and Reference MaterialsPart 5 includes a glossary of terms that are commonly referred to in greenhouse gasaccounting and life cycle assessment (LCA) literature along with terms that are specificto this Program. In addition to term definitions, Part 5 includes a list of commonly usedreference materials to help the Project Champion and other team members navigatethrough emissions reduction projects.

Walmart is committed to this Program and to the continual improvement and streamlining of theprocess described within. As part of this commitment, Walmart will review and update thisguidance document periodically and issue new versions as appropriate. Please check EDFswebsite ( http://edf.org/walmartghg ) for the most current version of the Guidance Document.

If you have questions about the contents of this document, please contact:

James Stanwayemail: [email protected]

phone: (479) 204-0334

Page 3
http://edf.org/walmartghgmailto:[email protected]:[email protected]://edf.org/walmartghg


9/59


Part 1: The ProgramThe Walmart Supplier GHG Innovation Program (the Program) was launched in September2009 to allow the Walmart Sustainability and Walmart Energy groups to work with suppliers toachieve carbon reductions throughout Walmarts value chain. Through the Program, Walmartformed a team that includes several groups: the Applied Sustainability Center (ASC), BluSkyeConsulting, Environmental Defense Fund (EDF), ClearCarbon Inc., Pricewaterhouse Coopers,and the Carbon Disclosure Project (CDP).

This team works with Walmart to identify projects, quantify reductions, engage suppliers toimplement reductions, and assess claims of reductions.

Walmarts Impact on the EnvironmentWalmart has an impact on the environment through the stores it operates and the products itsells. The impacts that these products have both upstream and downstream from Walmartsoperations are referred to as the value chain. Upstream emissions are those related topurchased goods and services. Downstream emissions are related to sold goods andservices. 1

Rough estimates by carbon emissions experts suggest that Walmarts value chain (part ofscope 3, discussed below) emits orders of magnitude more carbon dioxide equivalents (CO 2e)during the life cycle of products than Walmart emits selling them. Therefore, Walmarts largestpotential impact on GHG emissions is to engage suppliers and help them reduce product andvalue chain GHG impacts. Walmart has decided to expand its suite of programs intended toreduce carbon emissions beyond its corporate carbon inventory to emissions reductions in itsvalue chain.

Value chain emissions are categorized as scope 3, indirect emissions. Scope 3 is a category of

carbon emissions defined by the Greenhouse Gas Protocol (GHG Protocol ). The three scopecategories include the following sources of emissions:

Scope 1: Direct emissions from on-site fuel combustion, refrigerants, and ownedvehicles.

Scope 2: Indirect emissions from purchased electricity, steam, and chilled water. Scope 3: Indirect emissions from commuting, waste disposal, business travel, leased

and franchised operations, and the use of products and services along with upstreamsupply chain emissions.

There are programs and projects dedicated to reducing Walmarts carbon impact in scopes 1

and 2 already in place that continue to evolve such as those listed in the Walmart 2009 GlobalSustainability Report ( http://walmartstores.com/Sustainability/7951.aspx ). The Program focusessolely on scope 3 emissions; particularly on those from the use of products and services andthose created upstream in the supply chain.

1 This definition aligns with that from the Scope 3 Accounting and Reporting Standard Draft (January2010) developed as part of The Greenhouse Gas Protocol Initiative, a project of the World BusinessCouncil for Sustainable Development and the World Resources Institute.

Page 4
http://www.ghgprotocol.org/http://walmartstores.com/Sustainability/7951.aspxhttp://walmartstores.com/Sustainability/7951.aspxhttp://www.ghgprotocol.org/


10/59


Walmarts Supplier GHG Reduction GoalWalmart recognizes its impact on the environment and has committed to reduce it. OnFebruary 25, 2010, Walmart CEO Mike Duke announced Walmarts supplier GHG reductiongoal: to reduce the carbon footprint from its supply chain and products lifecycles by 20 millionmetric tons of carbon dioxide equivalents (CO 2e) between calendar year 2010 and 2015 2 .

As part of this commitment, Walmart will work with suppliers to reduce their emissions whichthey otherwise may not do in some cases resulting in additional positive ripple effects.Walmart will work to reduce emissions that result in GHG effects from the six primary KyotoProtocol gasses:

Carbon dioxide (C02) Methane (CH4) Nitrous oxide (N20) Hydrofluorocarbons (HFCs) Perfluorocarbons (PFCs) Sulphur hexafluoride (SF6). 3

To achieve the supplier GHG reduction goal, Walmart will identify opportunities to reducecarbon impacts in coordination with select suppliers. Reductions may be identified in any phaseof a products life cycle. A products life cycle includes the following primary stages:

Raw material extraction Manufacturing Packaging Distribution Usage Disposal

In each phase of a products life cycle there may be an opportunity to engage with suppliers toimplement carbon reduction efforts. In some cases, Walmart will also have to develop consumereducation materials to affect the way that consumers use a particular product.

Selection of ProjectsThe carbon reduction goal of 20 million metric tons 4 of CO 2e from 2010 to 2015 will be achievedthrough the implementation of multiple reduction projects. Walmart will engage suppliers toachieve this goal.

2 This goal will be referred to as the supplier GHG reduction goal, or the goal, in this document. Theterms GHG and carbon will be used throughout the document somewhat interchangeably. Since the goalis in carbon dioxide equivalents (CO 2e), it includes the standard six GHGs as defined by the KyotoProtocol.

3 For the full text of the Kyoto Protoco l, please see: http://unfccc.int/resource/docs/convkp/kpeng.pdf

Page 5


11/59


To ensure that Walmart is selecting the most impactful projects for carbon reductions, Walmartcommissioned the Applied Sustainability Center (ASC) from the University of Arkansas toreview the carbon emissions intensity of all of the categories of products that Walmart sells.ASC quantified the upstream life cycle impacts ofWalmart products and scaled the categories to sales

data. The carbon intensity is the result of the upstreamcarbon impacts of a group of products multiplied by thesales volume of that category.

Carbon intensity =

carbon impact per unitx units sold

The carbon intensity calculation was aggregated at a very high level of Walmart productcategories to understand the top 20 most impactful categories. The study revealed that carbonintensity is greatest in the following product categories (listed alphabetically): animal feed,apparel, candy, cheese, frozen food, fruit, grains, household detergents, meat, media, milk,motor oil, pharmaceuticals, produce, sanitary paper products, snacks, soap & shampoo, softdrinks & beverages, televisions, and vegetables.

The study specifically looked at the carbon impacts from three phases of the life cycle: Raw Materials Materials Manufacturing & Transportation Product Manufacturing & Transportation

While consumer use and end-of-life are not included in the ASC study, there are significantimpacts for some products in those phases. Walmart will also consider impacts in these twodownstream phases when seeking specific reduction opportunities.

The resulting carbon intensity is a starting point to identify priority categories. These categories

will be a first focus to achieve carbon reductions projects. The carbon intensity ensures that theteam focuses on the categories that have the biggest impact and therefore the greatestopportunity for reductions.

Once a category has been identified as being high carbon intensity, the project team will(described in the next section) conduct preliminary research to understand specifically wherethe impacts are the greatest and what opportunities for reductions exist. In addition to thecarbon intensity research, the team captures the status of Walmart carbon-related initiatives andidentifies new opportunities by meeting with Walmarts Sustainable Value Network (SVN)captains, private brands (PB) champions, and others.

After understanding the carbon opportunities within a category, the team begins to identifypotential projects through industry and technology reviews and works with Walmart tounderstand the feasibility of the projects. Feasibility includes (1) understanding the carbonimpact potential (magnitude), (2) identifying a Walmart lead, (3) determining activity in thatsupplier category, and (4) estimating the practicality of implementation possibilities. Armed with

4 For this document and for all calculations related to this program, carbon measurements will be in metrictons of CO 2e. A metric ton = 2,205 pounds. From this point forward, the term tons will mean metrictons.

Page 6


12/59


Page 7

this information, the Program team then makes recommendations on which projects can beginimplementation.

The process of finding and selecting projects is outlined in Figure 1 , Opportunities Identification,Prioritization, and Engagement Process.

Project TeamsFor each project, a team will be identified to lead implementation of the carbon reduction. Theroles will include:

Walmart Champion: The Walmart Champion (Champion) will be responsible for takingthe lead for the project, including documenting the project and quantifying the carbonreductions.

Supplier contact: The Walmart Champion will work with one or several suppliers toachieve the carbon reduction. This supplier contact(s) will be involved in implementationof the project and providing data to help to quantify the reductions. Such data may

include energy use for a facility, material weights and dimensions of the product, etc. Research Team & Program Management: Walmart is supported by ClearCarbon on

this project through identification of carbon reduction opportunities and review of allcarbon reduction claims for completeness and soundness of methodology. In addition,Environmental Defense Fund (EDF) assists with research, guidance, and support for theprojects.

Assessors: After paperwork is completed, PricewaterhouseCoopers (PwC) 5 willperform certain specified consulting procedures related to the assessment of theprocess and methodology surrounding the measurement of the carbon emissionsreduction claims for use by Walmart management (see Part 3). PwC is performing theseprocedures under consulting standards and will not be providing an opinion or any otherform of assurance relating to the claims.

5 PricewaterhouseCoopers" and "PwC" refer to the network of member firms of PricewaterhouseCoopersInternational Limited (PwCIL). Each member firm is a separate legal entity and does not act as agent ofPwCIL or any other member firm. PwCIL does not provide any services to clients. PwCIL is notresponsible or liable for the acts or omissions of any of its member firms nor can it control the exercise oftheir professional judgment or bind them in any way. No member firm is responsible or liable for the actsor omissions of any other member firm nor can it control the exercise of another member firm'sprofessional judgment or bind another member firm or PwCIL in any way.


13/59


Research internal businessdrivers and ongoing projectsand initiatives.

Walm

Research state of industry,science, and opportunities forimprovement

Discuss with businessleaders, SVN Captains,buyers

W

Prioritize high carbon, highvalue (cost, trust, quality)reductions

Walm

Set goals, develop actionplan, and implement project

Walm

Measure carbon reductionsand assess measurements

Walm

Activities:

Opportunities Identification, Prioritization, and Engagement Proce

Capture Opportunities

Research Opportunity

Research Internal Feasibility

Recommend Innovations

Engage & Implement

Demonstrate &Measure Results

Figure 1. Selection of Product


14/59


Accounting for Carbon Reductions from Projects

For Walmart to understand the impact of the projects and progress towards the goal, the teamhas developed guidance to understand what types of projects count and dont count as well ashow to account for them. This guidance is described in Part 2 in detail. Generally, for a project

to count towards Walmarts reduction goal, it can either be a carbon reduction for a product thatWalmart sells or a reduction at a facility/process that supplies Walmart.

For each of these two primary categories of projects, the reduction achieved must also beadditional and beyond business as usual (BAU) in terms of emissions accounting.Specifically, the activity must:

1. Demonstrate that the initiative is truly additional, meaning that the action would not haveotherwise happened without Walmarts influence, and

2. That the initiative represents performance beyond BAU, indicating that the improvementis well beyond existing business trends and has the overall impact of emissions

reductions within a product category.Walmart is accounting for carbon reductions that occur by comparing a new product, or changeto a facility, to a baseline. The baseline is determined by an assessment of the business asusual (BAU) case. BAU is defining what would have been the carbon emissions of a product ora facility if Walmart had not encouraged, introduced, or catalyzed the implementation of aninnovation. From this baseline, Walmart will then project the savings from the implementation offacility-level carbon efficiency, or from the time that a product first is sold from Walmarts stores,until December 2015.

Carbon reductions on a per-product or per-facility level are then scaled to account for thevolume of sales or production. In a simplified example, if each t-shirt that Walmart sells were tosave 1 pound of carbon emissions when compared to a baseline product and 2,000 t-shirts aresold in one year, then the savings for one year would be 2,000 pounds of carbon. If sales wereto remain consistent for five years, then over five years 10,000 pounds of carbon would besaved.

Carbon Reduction ClaimsClaiming carbon reductions for this project is purely to meet the carbon reduction goal. WhileWalmart will make certain public claims about carbon reductions, the intent is not, nor will it everbe under this project, to monetize carbon reduction claims. Walmart will not resell, retire, ortrade carbon reduction claims under this Program.

Additionally, the carbon reduction claims may not be exclusive to Walmart. It may be the casethat Walmart will help a supplier, through this Program, to achieve a carbon reduction projectthat the supplier also wants to report publicly. In this case, both parties (Walmart and thesupplier) may state a claim of reduction. Since the reduction is not being sold or traded there isno legal claim over the reduction that would make it exclusive to Walmart or to the supplier. The

Page 9


15/59


supplier may monetize (sell, trade, etc) carbon reductions at their discretion, though Walmartwill not be involved in these transactions. 6

Assessing Claims Carbon reductions are accounted for by the Walmart Champion with the help of the supplier(s)

involved in the project. The completeness of the claims and the soundness of the methodologyare reviewed by ClearCarbon Consulting through a formal quality assurance (QA) process.ClearCarbon will review the submittal for appropriateness of methodology, completeness, andcalculations. If the claims that are stated meet the QA check, they will then be assessed by thethird party assessors (PwC) for consistency with the standards.

After a project is initially submitted, it will be re-assessed and adjusted as needed after twelvemonths and, the reductions claims will be reviewed by ClearCarbon and the assessors (PwC).Project claims will again be adjusted and re-assessed at the conclusion of the project orDecember 31, 2015, whichever comes first. The full description of the assessment of projectclaims is described in Part 4: Post-Submission.

Program TimelineIn addition to reviewing each individual project, the portfolio (collective of all projects) will beassessed by the third-party assessor (PwC) in January 2011, in October 2013, and again at the2015 conclusion, assessing the reported results against these guidelines and standards. Theresults from this assessment of the portfolio will be reported to the Walmart executive team. TheProgram timeline is shown in Figure 2, Program Timeline.

Walmart Carbon Reduction Portfolio of Projects Accounting & Assessment Process

2010 2015

Goal Set

(01/25/10)Project Started

(01/01/10)

Carbon Reduction Projects Implemented (Continuous)

Portfolio Accoun ting(January 2011)

Portfolio Accoun ting(October 2013)

Goal Ends(12/31/15)

Figure 2. Program Timeline

6 It is important to note that the carbon reduction claims, rules for quantifying reductions, and monetizationwithin this document are written under current regulatory standards in the U.S. If Federal or other lawschange that effects the guidance prescribed in this document, they will be re-assessed at that time. Thisincludes, but is not limited to: public reporting on carbon emissions regulated by the SEC, regulations setby FTC for marketing claims, carbon tax or cap and trade legislation or regulation by EPA, or carbonreporting by EPA.

Page 10


16/59


Unintended ConsequencesThe possibility exists that a product or process that is intended to have a carbon reduction on aper-unit, or per-production output basis, elicits a net impact that overall increases total carbonemissions. This would likely be due to increased sales or production that exceeds the expectedcarbon savings from prior sales growth. Walmart has put in place a sales trigger to indicate

that an additional analysis needs to be conducted. The trigger for a study is a 10% increase insales growth year over year. The next step in evaluating the triggered project is to assess thecarbon efficiency gain. If the increased efficiency (or carbon reduction) is greater than theincreased sales percentage, then a further market analysis is not warranted. If, however, theconverse is true, as is described fully in Part 4, the team would conduct a market analysis of thechanges in sales to determine if there is indeed a net increase in carbon emissions due to theproject itself.

Part 2: Project Accounting GuidanceThis part of the document clarifies the qualification and quantification of emission reductions. Itdescribes the methodology and decision-making process to determine when emissionsreductions can be attributed to Walmart to contribute to the supplier GHG reduction goal. It alsodescribes how to quantify the emission reductions achieved. This methodology is intended tobe rigorous, credible, and practical.

This document lays out both the types of emissions reduction opportunities that exist within thelife cycle of products sold by Walmart (and/or product categories) and the criteria used toaccount for the reductions as part of Walmarts product life cycle and supplier GHG reductiongoal. It outlines:

1. The qualifying criteria to determine if the carbon reduction applies; and2. The quantification and accounting requirements to assure that the reductions in cost and

GHG emissions are real.

Instructions for submitting a project in conformance with this guidance are provided in Part 3 ofthe document.

Qualification of Emissions Reduction ProjectsFor a project to qualify toward the goal, it must qualify according to the rules set forth in thisguidance. Generally speaking, Walmart can reduce product life cycle emissions by eitherinfluencing the development or design of the products themselves and/or by improving thefacilities and processes used to make and transport products. The types of projects and criteriafor it to qualify are described below.

Types of Projects that QualifyTo evaluate Walmarts role and contribution to reducing value chain carbon emissions, Walmarthas identified three project types. Walmart, through supplier engagement, will either:

1. Inspire the creation of and/or increase the sales of new lower-carbon products,2. Improve existing products and/or sell more of improved-version products, or

Page 11


17/59


Page 12

3. Make improvement to facilities or processes for a supplier. 7

As seen in the qualification decision tree in Figure 3, the three project types align either with aproduct reduction (Track 1) or a facility/process reduction (Track 2). Figure 3 shows these twoseparate tracks and the qualifying questions used to determine if a project qualifies for the goal.

Qualification CriteriaQualification criteria must be met specific to each project type (product or facility/process).Walmart has created the qualification decision tree to show each of the project types (illustratedas decision tracks) and the questions and measurements that are used to validate Walmartsinvolvement. In addition to the questions posed in the decision tree, a project must meet thefollowing criteria to fully qualify under this program:

1. Have start and end dates within the goal period (see Timing)2. Demonstrate the project is due to Walmarts influence (see Additionality)3. Demonstrate that the reductions are above and beyond normal trends in the market (see

Beyond BAU).TimingFor a project to count toward this goal, the implementation start date must be within January 1,2010 and December 31, 2015. The end date for all projects for carbon accounting purposes isDecember 31, 2015. Therefore, a project that starts on December 31, 2015 will only have oneday of savings that can contribute toward this goal.

Though many carbon reduction projects may be underway and will continue to be developedand encouraged, projects that begin before 2010 or after 2015 will not be included in this goal.

The start date for products coincides with the products point of sale or initial sale date. A startdate for a process or facility reduction is the same date that the process change is in effect andis implemented, defined as, point of implementation.

7 A facility or process improvement may include transportation, logistics, or actual changes to a facility.


18/59


Track 1

PRODUCT FACILITY / PROCESS

Is the carbonreduction at the

product orfacility/process

level?

Was facility orprocess improve-

ment a direct resultof Walmart activity?

Is product newlydesigned orimproved?

QUALIFIED

Did Walmart directlyinfluence the

development ordesign or redesign?

Did Walmartinfluence increased

sales?QUALIFIQUALIFIED

QUALIFIED NOTQUALIFIED

YES NO

NOTQUALIFIED

YES NO

YES

YES NO

YES

Figure 3. Qualification Decision Tree


19/59


AdditionalityGHG reduction protocols cite two core criteria for proving that the activity is additional andbeyond business as usual (BAU) in terms of achieving emissions reductions.

For a project to qualify, it must have happened because of Walmarts influence, showingadditionality. This does not exclude projects that were also influenced by other entities,programs, incentives, etc.

However, the Walmart Project Champion must be able to prove that the project would not havehappened at the time it did without Walmarts involvement. In this project, Walmarts influenceon the project is deemed as additionality. Additionality for products means that for a lower-carbon product:

Walmart directly influenced the development or redesign of the products, or Walmart influenced the increased sales of the product.

Influencing the product directly means that Walmart engaged with a supplier to design orinfluence the design of a new product that is more carbon efficient. For instance, if Walmartencouraged a supplier to re-design laundry detergent to have a lighter-weight package than iscurrently offered, this would be influencing the redesign. If Walmart sought out a new detergentthat was concentrated or eliminated specific raw materials that are more carbon intensive toextract, then this would also be an influence of the redesign.

For facilities and processes, additionality means that:

Walmart directly contributed to the improvement of a facility or process, or Walmart influenced energy management.

Beyond BAUFor both product and facility-based reduction projects, proving that the project is beyondbusiness as usual (BAU) is part of the qualification criteria.

Beyond BAU for Products To claim a reduction for products, the improvements must be additional and go beyond BAU.For example, if Energy Star requirements mean that products will improve energy efficiency by5% each year, then the product that is being improved through this Program must exceed thisEnergy Star requirement.

Beyond BAU for Facilities/Processes To claim a reduction, facility-level improvements must be additional and go beyond BAU. Forexample, it must not be solely complying with Federal Regulations. Initiatives such as low-carbon energy, energy efficiency and transportation must be beyond typical business practices.For example:

A facility achieving energy efficiency reductions must be beyond projected improvementsin that industry sector (likely needs to be beyond the 1-2% expected U.S. annual

Page 14


20/59


efficiency improvement). The facility may have had an energy audit which revealedsignificant energy management opportunities and it implemented those changes.

Walmarts Supplier Energy Efficiency Program (SEEP) initiatives can meet a beyondBAU test if the technologies used are improvements over typical operations within thatindustry.

For transportation gains, there must be documented fuel efficiency improvementsbeyond industry average. Similarly, changes to alternative fuels and mode oftransportation must be clear improvements from the industry average baseline.

Quantification of Emissions Reduction ProjectsOnce a project has been deemed qualified for Walmart reduction claims through the decisiontree and additional criteria, the reduction in GHG emissions achieved by that product orcompany project must be quantified. Guidance on measuring the emissions reductions issupplied in Part 3 with the supporting worksheets in Attachments A and B.

In all cases, the submitted documentation, including life cycle assessments (LCAs) and facility

footprints, will be considered. At several points in time during the project's life, the assessors(PwC) will perform consulting procedures, for the benefit of Walmart management, to assessWalmart's process and methodology surrounding the measurement of carbon emissionreductions and related financial benefits against these guidelines.

Below is guidance on factors that need to be considered during the quantification of theproposed reduction projects for products and facilities.

UncertaintyFor all data submitted, the Champion must disclose the uncertainty associated with the data.Specifically, the Champion must describe the range of uncertainty in the data and the main

sources of uncertainty. This will be used as part of the project assessment.

Product Quantification (Track 1)Quantification of product emission reductions from a project has several key elements:

Describe product and identify reference product; Identify a GHG Calculation Methodology; Describe if the product has a one-time climate change effect, or continual effect. Calculate the carbon reductions achieved on a per functional unit basis including losses

of the product. Describe the product trends. Describe sales (historical and forecasted) of the product.

Product-based reductions require that a complete LCA be executed by either the supplier or aspart of an industry effort. To claim a reduction, the LCA must be compared against a definedbaseline of a reference product. The difference between the reference products GHG footprint,adjusted to reflect trends in energy efficiency, and the new products GHG footprint representthe potential carbon reduction for the implemented project. Part 3 includes guidance on LCAaccounting in addition to parameters to consider when defining the baseline for the reduction.

Page 15


21/59


Some guidelines and frequently asked questions that will help to complete the Product CarbonReduction Worksheet (Attachment A) are included in Part 3.

Describe Product and Identify a Reference Product After selecting and describing the product that is eligible for the carbon reduction potential, theChampion must identify a reference product against which to benchmark this product. Thereference product may be another product that serves a similar function. As a reference productmay vary significantly from the product in question in terms of technology, materials, or size, it isimportant to compare them on this basic level of function, also known as a functional unit.This is particularly crucial for products whose impacts greatly depend on how they are used atthe consumer level.

Part of the functional unit includes losses of the product for the supplier and for Walmart. Thisshould be embedded in the functional unit definition. Losses occur regularly from new productsand existing products due to take-back, lack of sales, damage or breakage, etc.

For example, a project that is based on a concentrated detergent might consider a cleanser thatis not concentrated as a reference product. Although the products may come in bottles ofdifferent sizes, they provide the same function the cleansing provided during a wash. In thiscase, the functional unit could be one load of laundry (which would be defined as well).Because less concentrated cleanser would be needed to provide one wash than the referenceproduct, its carbon impacts would potentially be lower on a per-wash basis. Carbon impacts willbe calculated on the basis of this functional unit, so it is important to keep this in mind whenselecting the reference product.

Other example functional units include:

Wall paint: A 10 ft 2 surface area when comparing the amount of paint needed to providefull coverage on a wall,

Lighting: A compact fluorescent light bulb (CFL) could be compared to an incandescentlight bulb. Though different products, they serve the same function; delivering a certainamount of light over a certain time period. Assume one CFL bulb will provide light for8000 hours and an incandescent bulb will provide light for 1000 hours, a comparisonwould be made between one CFL bulb and eight incandescent bulbs for the functionalunit of X lumens of light for 8000 hours of use.

Selection of an appropriate functional unit is critical to insure an accurate comparison of carbonimpacts between the product and reference product.

The Champion must explain the start and end of the project. A project claim can be made fromthe start of a project until the completion of the project or December 31, 2015, whichever comesfirst. The start of the project is defined as the point of sale. The end of a project would be theend of sales of that product. Emissions reduction accounting begins at the point of sale of thenew or improved product, or at the point of implementation of the facility project.

Page 16


22/59


As shown in Figure 4 , the projections of carbon reductions achieved on a per project basis startat the point of sale for products or the point of implementation for facility-level innovations andextend to 12/31/2015, the end date of the goal.

2010 2015Point of SalePoint of Implementation

Reduction Projections

Figure 4. Timing of Reduction Projections

Identify a GHG Calculation Methodology For each product, the Champion must define and describe the methodology used to calculatethe baseline and forecasted reduction potentials. The Champion may use a methodology that isbest suited for the calculation, but documentation and an explanation is required. Suggestedlife cycle and corporate accounting methodologies include ISO14040 and ISO14064 standards,WRI/WBCSDs GHG Protocol Corporate and Product Life Cycle Reporting and AccountingStandards (currently in draft form), and British Standards Institutions PAS2050 (see Part 5 foradditional information).

The Champion should include the life cycle phases appropriate for the methodology. All phasesof the life cycle of the product must be addressed (unless sufficiently justified for exclusion) andan appropriate methodology used for the assessment. Either an individual supplier or anindustry effort could produce the LCA documentation. In all cases it should be fully transparent.

The life cycle phases are:

Raw material extraction: The raw material product phase relates to the GHGsembodied within the raw material inputs that compose a product, the emissionsassociated with their extraction, and transportation to a processing plant.

Manufacturing: The manufacturing phase relates to the emissions released whiletransforming raw materials and other inputs into a finished product, such as thoseresulting from electricity generation and fuel use.

Distribution: The distribution and retail phase details emissions from transportingfinished goods to distribution centers and final retail locations and captures theemissions from fuel combustion, truck and in-store refrigeration, store electricityconsumption, etc.

Consumer Use: Any emissions resulting from using the product, such as electricityconsumption, should be taken into account in the consumer use phase.

End-of-life / new life (recycle or other): The end-of-life product phase capturesproduct disposal and accounts for emissions from landfilling, incineration, composting,and recycling.

Page 17


23/59


Note: Transportation must also be included in each stage, such as raw materials that require transportation to a processing facility and transportation at end-of-life to a municipal solid waste processing facility.

Projects Focused on Downstream ReductionsWhen a product change affects either the consumer use or end-of-life phases of a products lifecycle, further analysis is needed to understand the actual impacts of this project. Thedownstream effects are lesser known as products reach many households and individuals, all ofwhich have different behaviors associated with the product.

For example, if a product sold in US Walmart stores was redesigned to be made with acompostable material, Walmart could work with a supplier to label the product compostable.However, it is essential to understand how the consumer actually follows the label. There islimited composting at a commercial level throughout the US and while it is becoming morepopular, it is also limited on a per-household level. Therefore, to understand how the product isbeing disposed of at its end-of-life phase, Walmart would need to conduct a market analysis.

The market analysis would examine the behaviors before and after the product label waschanged. This analysis is essential for supporting a claim of a carbon reduction.

When changing products for the consumer use and end-of-life phases, Walmart must work toeducate customers when appropriate to impact the behavioral changes needed.

As part of the Program, Walmart will fund these studies when other resources are not available.It is essential that a Walmart Champion contact James Stanway early into the project if theproject has downstream effects (consumer use or end of life) so that a baseline can beestablished.

Carbon Reduction Effect The results from changing a product can be a one-time or continual effect depending on thechange. For example, if a product change effects the consumer use phase (as covered in theprevious section), there is a possibility that carbon reductions will be achieved for each use ofthe product. Here are some examples to explain:

Energy Efficient Appliance: If Walmart sells an appliance, such as a toaster, that is 20%more energy efficient than the reference product, it is demonstrating a continual effectfor each time the consumer uses the product. While calculating the emissions, it isimportant to note the use phase considerations beyond a single use. This is a continualeffect change.

Concentrated laundry detergent: If Walmart creates a concentrated form of a liquid, thenthe benefits are realized throughout the products life, and during the use phase thebenefits are multiple for each use. In this case, the use phase would need to considerthe reductions from each use of the detergent. This is a continual effect change.

Page 18


24/59


Reduced packaging for tissues: If Walmart works with a supplier to significantly reducethe packaging for tissues; this would be a one-time effect change since there are nosavings in the use of the product itself.

The effect will need to be calculated appropriately when submitting the calculations for carbon

reductions achieved in Steps 3 and 4 of the Product Worksheet.Calculate the Carbon Emissions from Products The next critical step in quantifying the level of carbon reduction is to calculate the carbonemissions from the product and the reference product on a per functional unit basis, asdescribed previously. The functional unit will ensure that a valid comparison is being madebetween products.

Establish BAU Case The reference product will be compared to a baseline that includes a BAU case. Onlyreductions beyond those expected to occur in a BAU case will qualify to be counted towards thevalue chain carbon reduction goal. While the Champion will be responsible for submittingresponses to specific questions which will inform the baseline, the actual BAU baselineadjustment will be evaluated by ClearCarbon for this project. This is to ensure that there is nobias in the Champion calculations and to also allow for additional research on an industry-widebasis.

The BAU is established on a per product or per facility basis (for Track 2). For example, ifWalmart works to change the energy efficiency of a microwave (Track 1), then the Championmust include baseline accounting for technology of a microwave. This would include projectionsof how the microwave energy efficiency is improving compared to the projections withoutWalmarts influence through this project.

ClearCarbon will quantify the difference between a BAU case and the impact of the projectfrom a product improvement perspective solely. The difference between the two, or the delta,will be calculated at the initial submittal based on projected trends for five years or untilDecember 31, 2015, whichever comes first. An example of product emissions reductionaccounting with the BAU baseline in place follows (and demonstrated in Figure 5 ):

Page 19


25/59


60

80

100

120

2010 2011 2012 2013 2014 2015

t o n s

C O

2 e

Projected Emissions Reduction

Product A

Prod uct A (BAU)

Product B

Figure 5. Emissions Reductions Calculated from the Business as Usual Case

Product A is the original (reference) product against which the new or improved productis compared.

Product B is the new or improved product.

Product A (BAU) represents a predicted change in a products carbon efficiency overtime based on industry and market influences on the technology.

The BAU baseline adjustment is NOT sales dependent; it is the measurement of the originalproducts likely increases in energy efficiency or other changes that decrease the amount ofGHGs produced per unit over time based on business as usual.

If technological improvements are expected for a typical product that affects energy or carbonefficiency, then the baseline will need to be adjusted. The resulting five-year reduction isrepresented by the shaded area under the BAU baseline (assumes 2010 start date in Figure 5).

To assess if BAU trends exist for a given product, the Walmart Champion, in coordination withthe supplier, will supply the following information in their submittal for the reduction period (pointof sale to December 31, 2015):

Are there any existing trends in material light-weighting expected for a typical product?Explain.

Are there any trends in material switching (e.g., more or less carbon intensive plastics)?

Explain. Describe any trends in recycled content or recycling rates of the comparison product. Describe any use phase energy efficiency trends (e.g., more energy efficient hair

dryers). Are any changes in waste handling or disposal that are carbon related expected?

Explain. Where feasible, please supply expected percent changes for the given product category.

Page 20


26/59


Here are some examples that would provide evidence of a trend. Note that this is not acomplete list.

Industry/Market surveys conducted by third parties, Government statistics (e.g., energy consumption patterns), or

Economic indicators that are linked to the product.This information would need to be tracked over a minimum of a year, with ideally three years ofdata that will help to establish a trend. If the product is new and no trend information exists,then trends for a similar product category might be used.

These questions may be adapted to suit a particular project in advance of submission, or follow-up questions may be posed after the project package is received to gain further claritysurrounding the specific projects BAU trends.

ClearCarbon will review responses to the BAU baseline trend questions and evaluate theexpected changes to typical products based on external research conducted by ClearCarbon orWalmart, but not by the supplier. The following issues will be considered:

If a product assumes more than 10% of the marketplace, it will be considered as thebaseline scenario and therefore no additional reduction claims can be made.

Baselines will only be adjusted at the initial submission of the project, at the 12-monthreview, and at Program completion (2015).

Baseline adjustments will be documented by ClearCarbon and will include references toany resources used to determine the new baseline. This information will be included aspart of the project package and will be heavily reliant on third-party sources.

In the event that the BAU baseline changes, ClearCarbon and Walmart will adjust the BAUbaseline.

Walmart will provide feedback to the supplier on findings. Any increase in carbon efficiency willthen be documented and adjusted accordingly. ClearCarbon will then re-calculate the submittedemissions reduction based on the approved baseline.

One year after initial submittal of the project, the emissions reduction projections and BAUassumptions will be adjusted to reflect any historical data available at that point, as shown inFigure 6 . Any new information on the reference BAU baseline (e.g., all air conditioners now fallunder mandatory Energy Star rule) for the product or facility against which the reduction iscompared will need to be incorporated at this time.

Page 21


27/59


2010 2015Year 1 re-submittal

ForecastedHistorical

Figure 6. Reduction Projections Resubmitted

Sales of the Product As part of the Program, the Walmart Champion must submit information projecting the sales ofa product that impact the scale of the GHG reduction. The exact information submitted as partof the overall project Package will depend on timing of Package submittal and financialmeasurability.

Timing

Financial accounting begins at the point of sale for the new or improved product or at the pointof implementation for the facility or scope 3 project. Financial projections include any potentialfinancial impact until December 2015. When the project Package is resubmitted (at 12 monthsand at the 2015 project close out), the financial projections will be adjusted to reflect anyhistorical data available at that point. This is illustrated in Figure 7.

2010 2015Point of SalePoint of Implementation

Financial Projections

2010 2015Year 1 re-submittal

ForecastedHistorical

Figure 7. Financial Projection Timing

Facility/Process Quantification (Track 2)Quantification of facility or process emissions reductions from a project has several key steps:

Define the Carbon Emissions Calculation Methodology Calculate the Carbon Footprint Describe the savings from the project

Page 22


28/59


Describe technology trends

Facility or company level emissions reductions will require a facility or process GHG inventorythat quantifies energy efficiency and carbon-related improvement efforts and the resultingemissions. Facility- and process-based inventorying guidance for completing the

Facility/Process Worksheet is provided in Part 3. Just as with product-based reductions, facilityand process reductions require documentation of an appropriate baseline to calculate theresulting emissions reduction. A baseline may be a publically reported facility footprint for aparticular base year, for example.

Define the Carbon Emissions Calculation Methodology The Champion needs to be explicit about the methodology applied to the calculation.Referencing methodologies such as the GHG Protocol Corporate Standard (WRI/WBCSD) isacceptable.

Calculate the Carbon Footprint For the carbon footprint calculation from the project to be calculated, it must be compared to atime interval before and after the project was implemented. The Champion should choose atime that would be accurate for comparison. This will be the reference period (the time beforethe implementation of a process/facility change) and the improvement period.

The Champion must transparently show all emissions on a per source level. Scope 1 emissionsshould be broken into each emission source as well as for scope 2. A suppliers scope 3emissions will as a general rule not be included in this project. The supplier should work with theWalmart champion to ensure that data are able to be assessed by a third party. Theseemissions reductions will be considered, but are not encouraged since the data availabilitypresents a challenge for assessing and updating.

Describe Technology Trends To understand the BAU baseline adjustments for Track 2 projects, the Champion must followthe same methodology as described for products. In most cases, however, a facility ormanufacturing category will be the focus of the Track 2 reduction.

While the Champion will be responsible for submitting responses to inform the baseline, theactual BAU baseline adjustment will be calculated by ClearCarbon for this project. This is toensure that there is no bias in the Champions calculations and to also allow for additionalresearch on an industry-wide basis.

Questions specific to a facility carbon reduction that will be answered by the Walmart Championinclude the following:

Are manufacturing energy efficiency gains expected in your industry? If so, explain andsupply expected percent improvements over time and provide evidence.

Are transportation efficiency trends related to the submitted project expected for yourindustry? Explain and provide evidence.

Page 23


29/59


Are organic wastes handling methods expected to change for your industry (e.g.,movement toward composting, biodigestion)? Explain and provide evidence.

Are facility recycling percentages expected to improve in your industry? Explain andprovide evidence.

Timing As part of the baseline setting, the Champion must explain the start and end of the project. Aproject claim can be made from the start of a project until the completion of the project orDecember 31, 2015, whichever comes first. Emissions reduction accounting begins at the pointof implementation of the process or facility improvement.

The start of the project is defined as the point of implementation. This is when theprocess or facility improvement comes on line and is first measurable.

The end is defined as when a process or facility improvement ends, the facilities arenot in operation, the relationship between the supplier and Walmart no longer exists, orDecember 31, 2015, whichever happens first.

As shown previously in Figure 5, the projections of carbon reductions achieved on a per projectbasis start at the point of sale for products or the point of implementation for facility-levelinnovations and extend to December 31, 2015, the end date of the goal.

Financial Values of ProjectsThrough this guidance, Walmart intends to track carbon reductions and supplier-demonstratedcost savings or increased value to customers. This will be calculated and included in theworksheet submissions when possible.

GHG reductions that come from facility or process based projects require different financial

value accounting than product GHG reductions. Quantifiable financial value to customers mayinclude the following:

Savings to the customer on energy or resource consumption during use of the product,resulting in lower energy bills and lower carbon emissions.

Financial value to the Walmart supplier might include the following:

Fuel or electricity savings at a factory or facility level translated into cost savings throughindustry averages (e.g., average price of kWh x total kWh saved), or

Material savings from reduced input purchases or a switch to cheaper materials/inputs.

In some instances either product or project based initiatives will result in a savings to thecustomer or a benefit to Walmart that are not financially measureable. In these cases, aqualitative description of the positive impact should be included in the worksheets. Benefits tosuppliers and businesses may include:

Improved business conditions, Public relations opportunities, or Increased positive stakeholder engagement.

Page 24


30/59


Part 3: Submission How-ToThis section details how to complete the worksheets and submit documentation to Walmart aspart of achieving the goal.

General Questions

Who Submits the Documentation? Under this guidance, the submitter of the reduction package is termed the Champion. TheChampion will submit completed worksheets to Walmart for review. The Champion is expectedto be the Walmart Champion of the project, though the Champion may receive assistance andinput from the supplier contact as necessary. As described in Part 1, each project will have aWalmart Champion along with a primary supplier contact or industry group representative whereapplicable.

How Do I Submit A Project? For each project submitted, the Walmart Champion will need to complete the worksheet

(Attachment A) to determine under which track the reduction project is qualified and thencomplete the corresponding Track 1 or Track 2 Worksheet (Attachments B and C).

During the first half of 2010, submissions will be handled primarily via email correspondence.However, a centralized database and webforms are under consideration and may be launchunder this Program. When the submission process changes, this section will be updated toreflect the current status.

QualificationIf my project does not fit the two tracks, does it qualify? A project must fit one of the two tracks on the decision tree and meet the criteria spelled out inthis guidance document. If the project does not fit these two tracks then it may be best suitedfor an internal Walmart goal or another initiative.

Does a Walmart store reduction count? Only emission reductions that apply to Walmarts scope 3 corporate footprint count for thisproject. In addition the project must meet the decision tree qualification guidelines. Emissionreductions that occur at Walmart stores would not count.

Does a reduction at a Sams Club or an international store count? This goal is global in nature and covers all Walmart, Sams Club, and international stores thatWal-Mart Stores, Inc operates.

What are the dates for a project to count toward the goal? The project must have been started after January 1, 2010 and before December 31, 2015. Anyreductions achieved after December 31, 2015 will not count towards this goal.

Page 25


31/59


What does it mean to start a project? For this goal, the start of a project is defined as the first time a product is sold (Point of Sale) orthe start of a process or facility change (Point of Implementation).

Would a project that focuses on reductions from consumers (Walmart customers)

count? Yes. All projects that affect the carbon emissions associated with Walmarts upstream anddownstream impacts would count. A consumers behavior change is difficult to quantify withoutmarket research. If a product change is going to happen at the consumer use phase, thenWalmart will commission a study to understand behavior changes before and afterimplementation of a project. For these projects, it is essential to get in touch with JamesStanway (contact information on front page) as early as possible to establish this study.

(Track 1) Product Quantification

How do I select a methodology?

Prominent methodologies to use for the analysis of products include: the UKs PAS 2050product carbon footprinting guidance, WRI/WBCSDs Product Life Cycle Accounting andReporting Standard that is under development and ISO 14064 guidelines. If an internalmethodology is chosen, the methodology must be transparent and documented as part of thequantification submission. General guidelines include:

Determine the boundaries of the analysis according to the primary phases of a supplychain: raw materials, manufacturing, distribution & retail, consumer use, and end-of-life.

Determine the types of greenhouse gas (GHG) emissions to be included in addition tocarbon dioxide.

Determine if a full life cycle analysis is warranted: It may not be necessary to includeemissions from all phases. For example, the consumer use phase for a napkin wouldnot have any associated emissions and therefore could be omitted from the analysis.Additionally, if the new or improved product does not have any change in emissions fromthe baseline product in a particular phase, these emissions could be omitted.

Determine emissions sources: in general, emissions should be captured from rawmaterial inputs, facility operations and transportation links between facilities. All facilityfootprints and the product emissions attributions must be documented. Where primarydata collection is not feasible, secondary sources such as LCI database modules maybe used. However, in order to differentiate between a baseline product and the new or

improved product, including some portion of primary data collection is critical, especiallyif the manufacturing phase is integral to the emissions reduction claim.

Where gaps in primary data exist, LCI databases such EcoInvent, Earthster, USLCI, canbe used to generate estimates. Transparency in the emissions factor sources is critical.

What do I need to include in my methodology documentation? Include in your submission a description and discuss the following issues:

Page 26


32/59


1. Determine a functional unit (how is the product ultimately consumed? e.g. # of cans, # ofcases, etc.)

2. Product bill of materials: types and quantity of materials used to manufacture product(e.g. raw materials, packaging materials, etc.)

3. Identify activities and processes involved in producing and consuming product

4. Types and quantities of all inputs and outputs (raw materials and energy sources) usedin processing, distribution/retail, consumer use)

5. Identify and quantify all transportation links throughout product life cycle6. Identify and quantify energy and raw materials consumed during consumer use phase.7. Discuss any by-products created during product manufacturing (e.g. other products,

direct gas emissions from manufacturing)8. Discuss accounting for waste streams and their emissions9. Describe data and emission sources used (e.g. company-specific data versus industry

proxy data, IPCC 2007 GWP 100a)

What is a Product Life Cycle Assessment? When evaluating product GHG emissions, all phases of the life cycle of the product must beaddressed. A carbon product Life Cycle Assessment (LCA) is an assessment of the sum of aproducts effects (e.g. GHG emissions) at each step in its life including extraction of rawmaterials, manufacturing, distribution and retail, consumer use, and the end-of-life disposal.Either the individual supplier or an industry effort could produce the LCA documentation. In allcases it should be fully transparent and capable of being assessed.

How do I determine boundary conditions? Describe the impact and relevance of each life cycle phase. While all products do notnecessarily have carbon emissions for the five life cycle phases listed below, all categoriesshould be addressed to ensure a full life cycle can be considered for any given product. Incases where a life cycle phase is not applicable (e.g., a napkin has no meaningful emissionsfrom consumer use), the responder need only state the rationale for why it is not relevant.

RawMaterials

ManufacturingDistribution

& RetailConsumer

UseEnd of Life

Resulting Carbon Emissions in kg CO 2e for each phase for a SINGLE Product:

Phase kg CO 2e / productRaw Material Extraction

ManufacturingDistribution / RetailConsumer UseEnd-of-LifeTotal Emissions (kg CO 2e)

Page 27


33/59


How do I account for loss rates? While sales are a good gauge of number of items put into use in the market, there are severalexamples of product loss that need to be considered for any individual product line. Items maybreak, not be put in use (stored), stolen, or returned to store. Loss rates need to be incorporatedinto the overall accounting of number of items put into the market in the functional unit of the

products LCA.

For example, Sams Club launched a milk jug redesign in 2008 that resulted in significantly lessplastic in jugs. However, there was an increased loss rate due to breakage. The loss rate mustbe incorporated into the analysis to ensure the net benefit is understood and real.

In addition to the basic reduction derived from the emissions difference between the baselineproduct versus new product, the supplier must identify whether the new product affects theproduct loss rates. For example, a new low-carbon packaging solution could reduce thecarbon footprint of a product by 50%, but the product loss rate may increase due to reducedstructural integrity. This loss rate would need to be integrated into the carbon measurement for

the product. Therefore, if the loss rate increased from 1% to 11%, the analysis would have toshow it takes 111 units to successfully deliver 100 units to retail customers. The same issue istrue for packaging or product alternatives that lead to increased thefts.

(Track 2) Facility/Process Quantification

What is the type of footprint? Indication of the type of footprint being conducted such as single facility or individual technologyshould be included as part of Step 1 with a justification for that footprint category. For example,if multiple initiatives have improved energy efficiency at a facility which supplies products toWalmart, then a facility footprint would be most appropriate. If, however, only one piece of

equipment has been installed and the increased energy efficiency is directly measurable fromthat installation, data would only need to be supplied for that individual technology.

What methodology should I follow for facilities or processes? Walmart recommends that submitters of GHG emissions data follow the WRI/WBCSD GHGProtocol when conducting a facility or company footprint for this reduction accounting exercise.Acceptable emissions factors are indicated in this protocol and their use should be clearlydocumented in the footprint calculations. The recommended emissions factors should also beemployed if either a process or technology footprint is conducted. A secondary document maybe submitted (such as an Inventory Management Plan or a Corporate GHG AccountingMethodology) in addition to completing the corresponding worksheet.

What are the boundaries to consider in a facility/process quantification calculation? The boundary conditions (emission sources included in the study) determined for the reductionassessment should be clearly defined. For facility or company footprints, both scope 1 andscope 2 emissions should be included. Depending on the process or technology improvement

Page 28


34/59


either scope 1 or 2 or both may apply. The Champion should strive to be as complete aspossible in either case. The GHG Protocol offers some guidance on this subject.

Facility/Technology

Scope2

Scope1

RefrigerantLeakage

Onsite fuelemissions

Mobileemissions

Purchasedelectricity

Indication of what type of reduction initiative is being conducted needs to be included as part ofStep 2 along with justification for that reduction initiative category. For example, if multipleinitiatives have improved energy efficiency at a facility that supplies products to Walmart then afacility reduction initiative would be most appropriate. If, however, only one piece of equipmentwas installed and the increased energy efficiency is directly measurable from that installation,data would only need to be supplied for that individual technology.

Why do I need to show the baseline calculation per emission source? The Champion must describe the type of reduction effort achieved and indicate if it is for asingle facility, multiple facilities, the entire company, or an individual technology. In addition toreporting emission values, an explanation should detail how emissions are converted into tons

of CO 2e. The supplier should only include emissions values for those sources that are pertinentto the reduction. Documentation supporting the resulting GHG emissions accounting may berequested by Walmart if further information is required.

Page 29


35/59


Part 4: Post-Subm

Documents

11266 Walmart GHG Innovation Guidance Document