Dramatically reducing the corporate carbon footprint

World Environment Center & Environment Science Center

Euan Murray

25th October 2007

Agenda

Introduction to the Carbon Trust

How we support companies to drive change

Working in supply chain & product footprinting

Introduction to the Carbon Trust

Who we are:

Independent company, funded by UK Government

Our role:

Help organisations reduce their carbon emissions and develop commercial low carbon technologies

Last year we:

Worked with >5,000 companies across UK

Identified savings of 4.6 million tCO2 worth £0.5 Billion in cost savings per year

Introduction to the Carbon Trust

We align private sector interests with public sector objectives:

– Our funding comes mostly from government, but

– Most of our board members are from the private sector

– In 2006/7 we had a budget of ~£110m and a staff of ~150

We are a company driven by our mission: to speed the transition to a low-carbon economy

We are focussed on cost effectiveness - £/tonne CO2 saved now or in future through new technologies

– We design and manage public sector-funded programmes, leverage in private sector funds where possible and re-invest our own returns

– As a Company Limited by Guarantee we can make profits but do not issue dividends

Agenda

Introduction to the Carbon Trust

How we support companies to drive change

– Our 5 business areas

Working in supply chain & product footprinting

We are reducing the technology and market risks of investing in a low carbon economy

#1: Insights

Aim: To increase awareness of climate change and the risks and opportunities it presents

Published 6 reports in 2006, e.g.Allocation & Competitiveness in

EU Emissions Trading SchemeBrand Value at Risk

Aim: To overcome technical barriers and lower investment risk

114 R&D projectsTechnology acceleration projects:

marine, microCHP, smart-metering, biomass for heat, low-carbon buildings

36 companies in business incubator

#2: Innovations

* Made up of a combination of listed and unlisted equity and cash received from sales awaiting re-investment before tax as at March 2006** Gross portfolio IRR from date of first investment (July 2002) to 31st March 2006, based on BVCA guidelines and including cash returned

Aim: To fill gaps in the market and make commercial returns

Launched “Connective Energy”2 new low carbon businesses

under development:Partnerships for RenewablesInsource Energy

Aim: To demonstrate good financial returns from low-carbon investments

Portfolio of 6 investments with a value of £13.0m* against acquisition cost of £6.7m (31% IRR**)

Launching £75m clean-tech fund

And we are creating the business case for the low carbon economy

#3: Enterprises #4: Investments

#5: Solutions works with companies to manage their carbon footprint

Company

Regulation

Profits

Reputation

Current threats…

Increase Profits

Reduce costs through energy management

Improve operational effectiveness

Develop new products or grow market share

Manage risks to fixed assets & supply chains

Comply with Regulation

Ensure compliance with legislation e.g. EU Emissions Trading, Climate Change Levy, Buildings Directives etc.

Enhance Reputation

Maximise brand & reputational impact of reducing carbon emissions

Engage consumers and other stakeholders

…lead to opportunities to..

Through Carbon Management, we help organisations identify current threats and future opportunities

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

We help companies save energy costs and reduce their carbon footprint

NPV of Solutions Programme 2005/6£m

Carbon Trust costs

Capital investment

by companies

PV of lifetime energy savings

NPV of total cost

saving

(32)

(140)

417 245

Source: Carbon Trust Impact Assessment 2006; PIU report Feb 2002; Energy White Paper

What is good carbon management?

Stage 1:

Direct CompanyEmissions Reduction

Stage 2:

Supply Chain

Emissions Reduction

Stage 3 (Optional):

Offsetting

Agenda

Introduction to the Carbon Trust

How we support companies to drive change

Working in supply chain & product footprinting

What is the footprint of a product?

Aluminium Production

Sugar farming

Cola production

Packaging

Transportation Chilled storage

Refrigeration Can collection

Recycling or disposal

Disposal & recycling

Consumer use

Raw material

Product manufacturing

Total carbon footprint of the can of cola (illustrative)

Supply chain / value chain of a can of cola

Distribution & retail

Why the “product view” is key

Targets >50% of emissions

– Individual carbon

footprint of 11 tonnes

CO2 p.a.

The UN/IPCC, Kyoto

Protocol and China

The market – consumers

and brands

March launch of our work

Product Carbon Footprinting Methodology

Product Label

Standard development & international consultation

Defra & BSI British Standards

Pilot Development Projects

Launch focussed on 4 key things:

Carbon reduction label

Independent measurement

“Reduce or lose” commitment

New Pilot ProjectsCT testing the draft BSI standard with different products and in different sectors The partners will work with us to reduce their emissions and explore the best way to communicate the results

9 new projects:Aggregate Industries Hard landscaping productsCadbury Schweppes Dairy Milk bars Coca-Cola A still and a sparkling beverageThe Co-operative Group StrawberriesHalifax Halifax Web Saver AccountKimberly-Clark Andrex and Huggies nappies Marshalls Hard landscaping products Mϋller Dairy YoghurtsScottish & Newcastle Fosters lager & Bulmer’s cider

We will do further pilots throughout the year

Standard Development

BSI are leading the work to develop the PAS Standard

– Appointed a Steering Group from business, NGO, academics and government

– First draft prepared, using the CT methodology as base– First of two consultations commencing shortly– Details on the BSI website: www.bsi-global.com/PAS2050

International engagement in consultation is key– Single standard for multi-national companies to use– International expertise– New markets & partners for the Carbon Trust

Making Business Sense of Climate Change

QUESTIONS

Backup

Supply chain emissions reductions

Supplier energy

efficiency –

encouraging them

directly

Calculating product

carbon footprints –

identifying hotspots

Trinity Mirror example

Food miles as a proxy for climate change

Walkers34.5g Cheese & Onion

Innocent250ml Mango & Passion Fruit

Total = 75g CO2e Total = 294g CO2ePotato distribution: <1%

Making nitrogen fertiliser: >15%

Source: Carbon Trust Low Carbon Supply Chain Pilot, March 2007

Cutting food miles is important to reduce transport impactsBUT

Food miles is a poor indicator of the overall impactLocal sourcing may increase the footprint of a product

Growing & Packing: 23%Raw materials transport: 14%

Making the packaging: 30%

Smoothie-making: 21%

Distribution: 10%Disposal: 2%

The business need is growing

Further energy cost savings– e.g. 20% reduction on Boots Shampoo project

Historicalcost-saving

strategy

Consumer demand for companies to take action on climate change– Carbon Trust (Oct 2006): 60% of consumers

want to buy from companies doing the right thing on climate change

Consumer desire for low-carbon products– Globescan for LRQA (March 2007): 60% of UK

consumers want companies to provide more PoS information on climate change impacts

– 77% want independent assurance of company claims on climate change

New marketstrategy

Standard Development

BSI are leading the work to develop the PAS Standard

– Appointed a Steering Group from business, NGO, academics and government

– First draft prepared, using the CT methodology as base– First of two consultations commencing shortly– Details on the BSI website: www.bsi-global.com/PAS2050

Food & Grocery sector heavily involved:

– 2 representatives on the BSI Steering Group– Support from IGD, FDF, BRC and NFU– Lots of members of those organisations

Engagement, support and efforts invaluable