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The Business Case for Low
Carbon Companies in Asia SASIN CENTRE FOR SUSTAINABILITY MANAGEMENT Liam Salter, CEO, RESET Carbon
September 2016
Agenda
Climate change update and introduction to a Low Carbon Company.
Cost savings
Customers
Regulation
Case study and conclusions
© 2016 RESET Carbon Ltd.
2
RESET – Your One-Stop Service Provider 3
2 offices and 20 staff in Hong Kong
and Bangkok. We
have customers
from 14 countries in Asia
and trusted
partners across
the region.
Conducted
environmental
strategy and
carbon
footprinting
projects for over
20 international
corporations
Implemented 10
energy and
environmental
assessment or
improvement
projects in 11
Asian countries in
commercial
property, retail
and light industrial
facilities.
Conducted
implementation
projects saving
clients between
125,000
and
1,000,000
USD/year.
We can already see impacts from climate
change today 6
© 2016 RESET Carbon Ltd.
Sources: IPCC, NASA/GISS, EM-DAT International Disaster Database, UN, WWF
Global warming 2015: warmest year on record
10 warmest years occurred since 1998 April 2016: 12th consecutive warmest
month on record
Rising sea level Average annual rise roughly
doubled from 1993 to 2010
vs. 1901 to 2010
Natural disasters Occurrences tripled from
2000 to 2009 vs. 1980 to 1989
Water scarcity More than 1.2 billion people lack
access to clean drinking water ~20% of world population
Coral reef damage ~25% of coral reefs worldwide considered damaged beyond repair
66% under serious threat
Climate change is
happening now
Four potential global warming scenarios 7
© 2016 RESET Carbon Ltd.
Source: Intergovernmental Panel on Climate Change (IPCC)
Note: The four Representative Concentration Pathways (RCPs) are named after a possible range of radiative forcing values in the year 2100 relative to pre-industrial values (+2.6, +4.5, +6.0, and +8.5 W/m2, respectively).
RPC 8.5 RPC 6.0 RPC 4.5 RPC 2.6
Goal of science-based targets
Estimated 2.7-3.7 °C with INDCs
Countries who submitted INDCs during COP21
account for 98.8% of global carbon emissions 8
© 2016 RESET Carbon Ltd.
Source: World Resource Institute
No INDC submitted
INDC submitted
NDC submitted
China Peak CO2 emissions by 2030 60-65% intensity reduction by 2030 vs. 2005
United States 26-28% GHG emissions reduction by 2020 vs. 2005
European Union At least 40% GHG emissions reduction by 2030 vs. 1990
India 33-35% intensity reduction by 2030 vs. 2005
Japan 26% GHG emissions reduction by 2030 vs. 2013
Hong Kong 50-60% intensity reduction by 2020 vs. 2005 Upcoming carbon target
Vietnam 20% intensity reduction by 2030 vs. 2010
Cambodia 27% GHG emissions reduction by 2030 vs. BAU
Bangladesh 5% GHG emissions reduction by 2030 vs. BAU
Thailand 20% GHG emissions reduction by 2030 vs. BAU
What is a low carbon company?
For the purpose of our analysis and discussion today:
Low carbon companies aim to contribute to societal carbon goals by measuring and reducing carbon emissions
Annual carbon emissions footprint report
Carbon reduction target
Often integrated into a broader environmental/social sustainability program
9
© 2016 RESET Carbon Ltd.
Cost savings – energy efficiency
Business Annual spend (USD) Savings Typical ROI
Hypermarket 1m 20% 4 – 5 years
Hotel 500 000 to 1.2m 20% 3 – 5 years
Dye mill 3m to 10m 15% 1 – 2 years
Electrical products 2m 15% 2 – 4 years
Food and beverage 10m 10% 3 – 5 years
Large airport 30m+ 15% 4 – 6 years
Large university 20m+ 20% 4 – 7 years
Commercial building 1m 15% 3 – 5 years
Large Office 20 000 15% 2 – 3 years
12
© 2016 RESET Carbon Ltd.
Turning savings into cashflow Large city hotel – energy savings cashflow model
• Energy efficiency projects in 3 sub-systems
• Net savings of nearly 10m THB over 5 years in single site
• Break even < 3 years
Consider impact at portfolio level Hotel portfolio – energy saving program projection
14
© 2016 RESET Carbon Ltd.
-1500000
-1000000
-500000
0
500000
1000000
1500000
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59
Ca
shflo
w (
USD
)
Months
Hotel 1 Hotel 2 Hotel 3 Hotel 4 Hotel 5 Hotel 6 Hotel 7
• Projections based on results of single site extrapolated to portfolio of 7 hotels (mixed portfolio)
• Net savings of over 1m USD in 5 years
Renewable energy: PV Rooftop 15
-
0.05
0.10
0.15
0.20
0.25
0.30
0 5 10 15
Ele
ctric
ity P
rice
(US
$/kW
h)
Payback Period (years)
Thailand
Cambodia
Supply chain carbon targets 17
Company Supply Chain Carbon Reduction Targets
Wal-Mart Stores, Inc Supply Chain reduction target of 20 MMT CO2e
Hewlett-Packard Supply chain reduction target of 20% by 2020
Kellogg Company Engage with suppliers to reduce emissions 20% by 2030 and 50% by 2050 from 2015.
GlaxoSmithKline 25% reduction in value chain footprint by 2020, compared to 2010, carbon neutral value chain by 2050.
Coca Cola Enterprises Reduce the GHG emissions from drinks by 33% by 2020. This will deliver carbon reductions throughout their value chain (upstream supply chain ingredients and packaging as well as core business operations).
Tesco Reduce the emissions of products in their supply chain by 30% by 2020 compared to 2008.
SABMiller Achieve a 25% reduction in packaging CO2e by 2020 from a 2010 baseline.
Sodexo Reduce carbon emissions by 34% from operations and supply chain between 2011 and 2020.
Diageo Reduce its own carbon emissions by 50 per cent and those from across its supply chain by 30 per cent by 2020.
Toyota Completely eliminating all CO2 emissions, including materials, parts and manufacturing, from the vehicle lifecycle by 2050.
Asian governments have made commitments
that must inevitably result in regulation 19
© 2016 RESET Carbon Ltd.
Source: World Resource Institute
No INDC submitted
INDC submitted
NDC submitted
China Peak CO2 emissions by 2030 60-65% intensity reduction by 2030 vs. 2005
United States 26-28% GHG emissions reduction by 2020 vs. 2005
European Union At least 40% GHG emissions reduction by 2030 vs. 1990
India 33-35% intensity reduction by 2030 vs. 2005
Japan 26% GHG emissions reduction by 2030 vs. 2013
Hong Kong 50-60% intensity reduction by 2020 vs. 2005 Upcoming carbon target
Vietnam 20% intensity reduction by 2030 vs. 2010
Cambodia 27% GHG emissions reduction by 2030 vs. BAU
Bangladesh 5% GHG emissions reduction by 2030 vs. BAU
Thailand 20% GHG emissions reduction by 2030 vs. BAU
Markets are already moving 20
https://www.iea.org/newsroomandevents/pressreleases/2016/march/decoupling-of-global-emissions-and-economic-growth-confirmed.html
Worked case study Tale of two supermarkets
Note this case study is derived from publically available information only using RESET’s assumed energy spend of USD 1m per hypermarket per year
22
Tesco Lotus Big C
#hypermarkets 87 105
Estimated hypermarket energy spend @ US1m per store
$87m/yr $105m/yr
Carbon reductions - 40% 0
Annual energy savings Assume 50% of target = 20% x $87m
= $17m
±570m THB per year
0
Missed savings opportunity - THB 690m per year
Savings as % of annual pre-tax profit - 690m/9b THB = 7.5%
Customer engagement First carbon neutral store in Asia -
https://en.wikipedia.org/wiki/Big_C http://bigc.listedcompany.com/financials.html "At the end of 2014/15, our emissions per sq. ft. of our stores and distribution centres were 40.9% lower than in our 2006/7 baseline.” TESCO, CDP report.
Conclusions
Business case is stronger for some companies than others – particularly in Asia.
Carbon targets drive reductions in energy spend which can make a material difference to profitability and cashflow
Reducing carbon emissions provide tangible ‘green’ credentials and is becoming a customer requirement in some supply chains
Low carbon regulation will increase for example increased costs due to introduction of carbon pricing
Therefore a low carbon strategy makes sense for companies with:
Valuable brands
High energy costs
High brand-value B2B customers
Planned investments in long lived energy consuming capital stock such buildings or manufacturing facilities
23
© 2016 RESET Carbon Ltd.
For more information:
Liam Salter CEO e: liam.salter@resetcarbon.com
RESET Carbon Ltd. www.resetcarbon.com
25
Turning savings potential to cashflow Dye mill - generic energy savings model
26
-600000
-400000
-200000
0
200000
400000
600000
800000
1000000
1200000
1400000
1 2 3 4 5 6 7 8 9 101112131415161718192021222324252627282930313233343536373839404142434445464748495051525354555657585960
C
a
s
h
f
l
o
w
(
U
S
D)
Months
Phase II
Phase I
Program
Outcomes: Savings per year USD 375 000 Capex of approx. USD 590 000 Real world payback = 26 months 5 year simple NPV = 1.2m USD
We Mean Business Coalition Focused on driving and rewarding corporate leadership
27
© 2016 RESET Carbon Ltd.
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