The case for resource efficiency Why business needs to act, and how it can do so

Alessandro Casoli, Strategy Associate 16 September 2014

› The Carbon Trust

› The business case for resource efficiency

› What can businesses do?

› Case studies

Agenda

2

Carbon Trust

3

Our mission is to accelerate the move to a sustainable, low carbon economy We are independent experts on carbon reduction and resource efficiency, who reinvest surpluses from group commercial activities into our mission

?

We have offices in the UK, China, Mexico, the USA and South Africa and are considering Brazil next

Done projects in/with

In country office

Considering an office

We are also working with international

organisations

Carbon Trust International Presence

Country Key

We employ our integrated service offering to support clients around the world Our 160 employees work around the world from offices in the UK and China We fully reinvest our profits into advancing our mission to accelerate the move to a sustainable,

low carbon economy

Carbon Trust has accelerated sustainable, low carbon development for more than 10 years

What we do

Advice We advise businesses, governments and the public sector on their opportunities in a sustainable, low carbon economy

Footprinting We measure and certify the environmental footprint of organisations, products and services

Technology We help develop and deploy low carbon technologies and solutions, from energy efficiency to renewable power

What we have achieved

Customer cost savings Carbon savings

Helped customers save £5bn

Helped customers save 53.5m tons of C02

› The Carbon Trust

› The business case for resource efficiency

› What can businesses do?

› Case studies

Agenda

6

7 Source: Grilli and Yang; Pfaffenzeller; World Bank; International Monetary Fund; Organisation for Economic Co-operation and Development statistics; UN Food and Agriculture Organization; UN Comtrade; Ellen MacArthur Foundation circular economy team

Commodity price index, 1900 - 2011

Resource costs and volatility are increasing, eclipsing 20th century productivity gains

8 Source: Chatham House (2012)

Price increases and supply growth for various commodities, 2000-10

Supply response is not keeping up with rising prices

This could impact costs and quality… …leading to changes in product/service offerings, processes and location

Source: Carbon Trust Research 9

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

None of them

Rare earth metals

Natural resources

Waste

Oil and Gas

Grid Energy

Water

Carbon emissions

What are the priority environmental areas you believe your business needs to be focussed on in order to compete

effectively, from the list below?

Companies believe carbon, energy, water and waste will be serious business issues

Source: 475 telephone interviews with C-Suite executives, conducted in October 2012, from the UK, the USA, Brazil, China and South Korea. Research carried out by VansonBourne.

› The Carbon Trust

› The business case for resource efficiency

› What can businesses do?

› Case studies

Agenda

11

› A ‘carbon footprint’ measures the total greenhouse gas (GHG) emissions caused directly and indirectly by a person, organisation, event or product.

› The footprint considers all six of the Kyoto Protocol GHGs: › Carbon dioxide (CO2), Methane (CH4), Nitrous oxide (N2O), Hydrofluorocarbons (HFCs)

Perfluorocarbons (PFCs), Sulphur hexafluoride (SF6)

Carbon/resource footprinting is an effective way of identifying “hotspot” areas in the value chain on which to act

› A ‘carbon footprint’ is measured in units (tonnes) of carbon dioxide equivalent (CO2e)

› The carbon dioxide equivalent (CO2e) allows the different GHGs to be compared on a like-for-like basis relative to one unit of CO2.

› CO2e is calculated by multiplying the emissions of each of the six GHGs by its 100 year global warming potential (GWP).

› A ‘resource footprint’ may also quote values for the amount of water (m3) and waste (tonnes) associated with that person, organisation, event or product

12

Business Benefits of Footprinting

Branding/Reputation Disclosure Efficiency

Buyer demands

Industry leadership CSR reporting

Positive PR Boost

environmental credentials

Engaging customers

Product differentiation

CDP Supply Chain Program

Identify areas for eco-design

Waste reduction

Cost savings Carbon savings

Energy savings

Optimise supply chain

Robust data to consumers

What is needed for a product footprint?

All stages of supply chain from raw materials to finished goods, plus use and end-of-life/disposal

14

Aluminium Production

Sugar farming

drink production

Packaging

Transportation Chilled storage Refrigeration

Can collection Recycling or

disposal

Data collection includes a variety of metrics: • CO2e • Water • Materials • Waste

Raw Materials Product Manufacturing

Distribution & retail Consumer use Disposal and

recycling

E.g. For a CocaCola can:

› The Carbon Trust

› The business case for resource efficiency

› What can businesses do?

› Case studies

Agenda

15

JCB

Case Study: Product design innovation

The Carbon Trust worked with JCB to carry out a whole life cycle analysis of JCB’s ‘backhoe loader’.

> Carbon Trust developed a lifecycle footprint model that established the carbon and cost impact of detailed engineering component-based design.

> This resulted in significant redesign to extend the product life and reduce the use stage impact. Advice was provided on changing of the business model to focus on selling based on total life cycle cost of ownership.

> The results of this assessment for the backhoe loader enabled identification of opportunities that are applicable across JCB’s full product portfolio.

> The project delivered 20% carbon reduction and annual operational cost savings of £2m. Additionally, 10-30% energy cost savings were identified within key suppliers, worth £10,000 – £120,000 per supplier.

DFDS Seaways Case Study: Environmental resource reduction strategy

We identified opportunities with a 19% IRR to reduce DFDS’ environmental impact, in response to the cost, regulation and reputational risks associated environmental issues.

Technical opportunities were identified and extensive financial modelling was undertaken to calculate the business case for efficiency action against a baseline footprint in the following areas:

› Energy › Transport › Waste › Water

› We were able to identify measures which

could; › Provide a cost reduction of 35%

compared to business as usual projections

› Delivering an IRR of 19% and a payback of 4.2 years.

Whitbread PLC

Case Study: Financial and strategic evaluation

Whitbread engaged the Carbon Trust to help create a Group-level environmental strategy and implementation programme, to include energy, carbon, and water targets up to 2020.

> We enabled the client to take the decisive

action at Board level to commit the investment (>£4m in 2012 alone) required to bring forward their original 2020 target, (26% relative carbon reduction)

> Commit to delivering a 25% relative carbon intensity reduction by 2017.

> We also helped the client to develop new targets water targets for 25% reduction by 2017

“We see our sustainability strategy as an opportunity, not a compliance exercise, both in terms of future revenue growth and protecting existing value. The consumer of 2014 is as likely to identify water, waste and depleting resources as carbon when talking about sustainability.” Chris George, Head of Energy and Environment, Whitbread

BT

Case Study: Product footprinting

> Carried out a ‘hot spot’ analysis to identify major emissions in the life cycles of the three products.

> Developed process maps for each product, > Gained understanding the full supply chain > Collected the supplier data needed to build a

detailed list of components of materials used.

> Developed a climate change procurement standard that applies to all of BT’s suppliers, encouraging suppliers to use energy efficiently and reduce carbon during the production, delivery, use and disposal of products and services

> BT has seen a 44% reduction in operational emissions and a 15% reduction in supply chain emissions, along with a 40% reduction in waste to landfill .

> BT has decreased operating costs by 14% and boosted EBITDA by 6%.

Working with the Carbon Trust, BT set its sights on measuring the full life cycle carbon emissions of three flagship consumer products: BT Home Hub, BT DECT Digital cordless phone and BT Vision set-top box.

Companies that make resource efficiency a core part of their business will reap great rewards

› Businesses that adapt their business models through assessing their exposure to resource constraints can identify how to manage the risks and exploit commercial opportunities.

› This will improve efficiency, strengthen long-term resilience, and drive business returns.

› In our experience of working with clients, resource cost reductions of at least 15% can be achieved while generating attractive returns within compelling payback periods.

20

Alessandro Casoli: Alessandro.Casoli@carbontrust.com The Carbon Trust 4th Floor, Dorset House, 27-45 Stamford Street, London, SE1 9NT Tel: +44 20 7170 7000

21

Thank you!