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Carbon Footprinting


    Competitive Advantage ?


Hugh Jones
Managing Director
Carbon Trust Advisory
Our mission is to
                              accelerate the move to
                              a low carbon economy

Advice                     Footprinting              Technology
  We advise businesses,      We measure and            We help develop and
  governments and the        certify the               deploy low carbon
  public sector on their     environmental             technologies and
  opportunities in a         footprint of              solutions, from
  sustainable, low           organisations,            energy efficiency to
  carbon world               products and services     renewable power



                                                                              2
We live in a resource-constrained
   world…

     ›      The economic impact - Rising commodity prices, population
            growth, economic growth will put a strain on business
            resource procurement
             › 80% projected rise in
                    steel demand from 2010
                    to 20301
             ›      147% increase in
                    commodity prices since
                    20002
             ›      Up to 3 billion more
                    middle-class consumers
                    will emerge in the next
                    20 years3                                                  Source: Food & Agricultural Organisation of the United Nations



[1], [2] & [3] McKinsey Global Institute, “Resource Revolution: Meeting the world’s energy, materials, food, and water
needs.” November 2011



                                                                                                                                                3
…we live in a resource-constrained
world
› The environmental impact – August 22 was Earth Overshoot
  Day. This marked the date when humanity exhausted
  nature’s budget for the year.
  › We are now
      operating in
      overdraft.
  ›   For the rest of the
      year, we will
      maintain our
      ecological deficit by
      drawing down local
      resource stocks…
  ›   …and accumulating
      carbon dioxide in
      the atmosphere

      Source: Global Footprint Network - see http://www.footprintnetwork.org



                                                                               4
The low carbon agenda presents strategic
opportunities for companies…
             GROW REVENUE & VALUE               HARNESS INTANGIBLES

                      Low carbon design
                      Build brand value &               Corporate reputation
                      differentiation through           Staff retention
                      communication of
Maximise              environmental
the                   credentials
upside                New business models



    Short term                                          Long term


Mitigate              Direct energy costs               Exposure to volatility
the                   Supply chain energy               in energy &
downside              costs                             commodity prices
                      Regulatory pressure               Security of supply of
                      (e.g. UK mandatory                energy and materials
                      reporting                         Physical damage to
                                                        premise / stock

                 REDUCE COSTS                       MANAGE RISKS


                                                                                 5
…and the majority are still in the relatively early
stages of the journey to sustainability, their
progress slowed by difficult economic times
   Low Carbon        Laggards                Players              Pioneers
    Maturity

                                                                  Revenue
                                                  Reputation
                                        Cost
     Primary                         Efficiency
     Drivers
                  Regulation


                                       Risk Management

                  Focuses mainly        Participates in         Group level low
                  on compliance         voluntary initiatives   carbon business
                  with regulatory       Level of ambition is    model
                  requirements
     Example                            considered ‘average’    Innovates across
    Attributes    Minimal/no            vs. industry peers      whole value chain
                  actions beyond        Processes in place to   to exploit
                  what is required      deliver operational     opportunities and
                  Ad-hoc staff led      carbon management       gain strategic
                  initiatives           performance             advantage
Many leaders have undertaken footprinting and
     Certification at the Product and Service level…

We have certified more than 600 organisations with a combined reduction in carbon emissions of 5.5Mt ─ equivalent to
£252million in cost savings. More than 27,000 products carry our certification and our Carbon Reduction Label appears
on goods worth £3.3billion in annual sales.
We facilitate product footprinting through our Footprint Expert TM software tool, with its framework, calculators and
database.

                PepsiCo                                                            LG Electronics
  Products:         Assorted single-packet crisps                Products:         47LW5500-ZE LED TV
  Outcome:          Identified that 59% of carbon emissions                        47LW550T-ZE CINEMA 3D LED TV
                    were outside their operations and 41%
                                                                 Outcome:          gCO2e per hour use in all
                    inside
                                                                                   EU countries
  Reduction:        Recertified footprint shows 7% reduction
                                                                 Highlights:       Focusing heavily on reducing the power
                    on 2007 footprint
                                                                                   consumption
  Highlights:       Saved £400,000; reinvested in further
                    carbon-saving initiatives                                      Use over 30% less energy compared
                                                                                   to conventional models in the same class




                                                                                                                            7
…while footprinting has also help a number of organisations
understand their full environmental impact, and how tackling
this can create a better business




ICT Sector                           JCB                                 Bord Bia Irish Food Board
Developing the world’s first         Footprinting of their machines      We worked with Bord Bia to
sector guidance for the GHG          uncovered the potential for         develop detailed carbon footprint
Protocol Product Standard,           product innovation focussed on      models for beef and milk which
working with 12 leading global ICT   increased fuel efficiency, giving   were deployed across 30,000
companies (including BT, Cisco,      JCB an improved customer            farms
Fujitsu, HP, Microsoft) and the      proposition                         › The resulting carbon
WRI, WBCSD and GeSI                  › Reduced cost of ownership             footprints are being used to
› Enables a consistent approach          for customer as a result of         provide the farmers with
    to measuring lifecycle carbon        increased fuel efficiency           valuable advice on where to
    impacts of ICT products and      › Increased re-sale value               capture cost and carbon
    services                         › Superior environmental                savings
› Provides a practical method            credentials
    to identify and reduce carbon
    and costs related to ICT
Footprinting the impact of a company’s
   value chain can help unlock value

                                     Robust environmental claims
   Brand Equity
                                     Comparability with companies in the same sector

                                      A fact base for cost reduction and revenue enhancement
   Bottom Line
                                      A means to change internal and consumer behaviours

                                     A view of your current and future value chain impacts
  Risk Mitigation
                                     A fact base for business prioritisation decisions


Over 100 product and value chain footprinting customer engagements have identified
business benefits which will in some cases will save over £50 million by 2020, and will reduce
value chain resource dependency by up to 20% through resource efficiency, and potentially
more through profitable substitution

                                                                                                 9
A value chain perspective is essential to understand
    the complex risks, opportunities and trade offs

                       Illustrative priorities for a snack food & beverage company

                                       Water           Food       Climate
                    Health                                                        Biodiversity
                                      security        security    security

 Quantifying Supply Chain                                                Impact assessment of
  Emissions and Resource                         Raw materials           Supply Chain Climate
       Consumption                                                          Change Risks
                                              Product
› Water, carbon, biodiversity               manufacturing         › Potato supply security
   footprints                                                     › Vegetable oil supply
                                                 Distribution &
                                                      retail
› Healthier product (baked                                        › Transport options
   crisps) vs increased energy                                       and renewable fuel requirement
   consumption (baking process)             Consumer use
                                                                  › Liability for packaging recycling
Avoid unintended consequences:                                    › Perceived brand responsibility
› E.g. Optimised packaging - too little           Disposal &
   packaging can increase wastage                  recycling
   rates, which can dramatically
   increase the footprint                                                                               10
Footprinting requires a judicious balance of the
accuracy required and investment to support it

 There is a minimal level of primary data
 to support your objective:
                                            Primary   Secondary
  – Quantity                                  data      data
  – Quality

 Always balancing cost and benefits

 Better data, allows better decisions:
  – What is available?
  – How expensive is it to collect more?
  – What is optimal point


 How do you bring down cost?
Contact

Hugh Jones
Managing Director, Carbon Trust Advisory Services
Email: hugh.jones@carbontrust.com
Mobile: (+44) (0)7714-447648

www.carbontrust.com/advice




                                                    12

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Hugh Jones. Carbon Footprinting Competitive Advantage?

  • 1. Carbon Footprinting Competitive Advantage ? Hugh Jones Managing Director Carbon Trust Advisory
  • 2. Our mission is to accelerate the move to a low carbon economy Advice Footprinting Technology We advise businesses, We measure and We help develop and governments and the certify the deploy low carbon public sector on their environmental technologies and opportunities in a footprint of solutions, from sustainable, low organisations, energy efficiency to carbon world products and services renewable power 2
  • 3. We live in a resource-constrained world… › The economic impact - Rising commodity prices, population growth, economic growth will put a strain on business resource procurement › 80% projected rise in steel demand from 2010 to 20301 › 147% increase in commodity prices since 20002 › Up to 3 billion more middle-class consumers will emerge in the next 20 years3 Source: Food & Agricultural Organisation of the United Nations [1], [2] & [3] McKinsey Global Institute, “Resource Revolution: Meeting the world’s energy, materials, food, and water needs.” November 2011 3
  • 4. …we live in a resource-constrained world › The environmental impact – August 22 was Earth Overshoot Day. This marked the date when humanity exhausted nature’s budget for the year. › We are now operating in overdraft. › For the rest of the year, we will maintain our ecological deficit by drawing down local resource stocks… › …and accumulating carbon dioxide in the atmosphere Source: Global Footprint Network - see http://www.footprintnetwork.org 4
  • 5. The low carbon agenda presents strategic opportunities for companies… GROW REVENUE & VALUE HARNESS INTANGIBLES Low carbon design Build brand value & Corporate reputation differentiation through Staff retention communication of Maximise environmental the credentials upside New business models Short term Long term Mitigate Direct energy costs Exposure to volatility the Supply chain energy in energy & downside costs commodity prices Regulatory pressure Security of supply of (e.g. UK mandatory energy and materials reporting Physical damage to premise / stock REDUCE COSTS MANAGE RISKS 5
  • 6. …and the majority are still in the relatively early stages of the journey to sustainability, their progress slowed by difficult economic times Low Carbon Laggards Players Pioneers Maturity Revenue Reputation Cost Primary Efficiency Drivers Regulation Risk Management Focuses mainly Participates in Group level low on compliance voluntary initiatives carbon business with regulatory Level of ambition is model requirements Example considered ‘average’ Innovates across Attributes Minimal/no vs. industry peers whole value chain actions beyond Processes in place to to exploit what is required deliver operational opportunities and Ad-hoc staff led carbon management gain strategic initiatives performance advantage
  • 7. Many leaders have undertaken footprinting and Certification at the Product and Service level… We have certified more than 600 organisations with a combined reduction in carbon emissions of 5.5Mt ─ equivalent to £252million in cost savings. More than 27,000 products carry our certification and our Carbon Reduction Label appears on goods worth £3.3billion in annual sales. We facilitate product footprinting through our Footprint Expert TM software tool, with its framework, calculators and database. PepsiCo LG Electronics Products: Assorted single-packet crisps Products: 47LW5500-ZE LED TV Outcome: Identified that 59% of carbon emissions 47LW550T-ZE CINEMA 3D LED TV were outside their operations and 41% Outcome: gCO2e per hour use in all inside EU countries Reduction: Recertified footprint shows 7% reduction Highlights: Focusing heavily on reducing the power on 2007 footprint consumption Highlights: Saved £400,000; reinvested in further carbon-saving initiatives Use over 30% less energy compared to conventional models in the same class 7
  • 8. …while footprinting has also help a number of organisations understand their full environmental impact, and how tackling this can create a better business ICT Sector JCB Bord Bia Irish Food Board Developing the world’s first Footprinting of their machines We worked with Bord Bia to sector guidance for the GHG uncovered the potential for develop detailed carbon footprint Protocol Product Standard, product innovation focussed on models for beef and milk which working with 12 leading global ICT increased fuel efficiency, giving were deployed across 30,000 companies (including BT, Cisco, JCB an improved customer farms Fujitsu, HP, Microsoft) and the proposition › The resulting carbon WRI, WBCSD and GeSI › Reduced cost of ownership footprints are being used to › Enables a consistent approach for customer as a result of provide the farmers with to measuring lifecycle carbon increased fuel efficiency valuable advice on where to impacts of ICT products and › Increased re-sale value capture cost and carbon services › Superior environmental savings › Provides a practical method credentials to identify and reduce carbon and costs related to ICT
  • 9. Footprinting the impact of a company’s value chain can help unlock value Robust environmental claims Brand Equity Comparability with companies in the same sector A fact base for cost reduction and revenue enhancement Bottom Line A means to change internal and consumer behaviours A view of your current and future value chain impacts Risk Mitigation A fact base for business prioritisation decisions Over 100 product and value chain footprinting customer engagements have identified business benefits which will in some cases will save over £50 million by 2020, and will reduce value chain resource dependency by up to 20% through resource efficiency, and potentially more through profitable substitution 9
  • 10. A value chain perspective is essential to understand the complex risks, opportunities and trade offs Illustrative priorities for a snack food & beverage company Water Food Climate Health Biodiversity security security security Quantifying Supply Chain Impact assessment of Emissions and Resource Raw materials Supply Chain Climate Consumption Change Risks Product › Water, carbon, biodiversity manufacturing › Potato supply security footprints › Vegetable oil supply Distribution & retail › Healthier product (baked › Transport options crisps) vs increased energy and renewable fuel requirement consumption (baking process) Consumer use › Liability for packaging recycling Avoid unintended consequences: › Perceived brand responsibility › E.g. Optimised packaging - too little Disposal & packaging can increase wastage recycling rates, which can dramatically increase the footprint 10
  • 11. Footprinting requires a judicious balance of the accuracy required and investment to support it There is a minimal level of primary data to support your objective: Primary Secondary – Quantity data data – Quality Always balancing cost and benefits Better data, allows better decisions: – What is available? – How expensive is it to collect more? – What is optimal point How do you bring down cost?
  • 12. Contact Hugh Jones Managing Director, Carbon Trust Advisory Services Email: hugh.jones@carbontrust.com Mobile: (+44) (0)7714-447648 www.carbontrust.com/advice 12