Quick Guide: Meet July CDP Deadline Without Breaking the Bank

1

Countdown to Disclosure: CDP Submission Best Practices Guide

TABLE OF CONTENTS

Renewable Choice :: www.renewablechoice.com

The Ten Steps to Conducting a GHG Inventory ....................................................................... 3

CDP Scoring ................................................................................................................................................... 5

How to Set Greenhouse Gas Reduction Targets ...................................................................... 6

An Overview of GHG Verification .................................................................................................... 9

Three Simple Rules for Suppliers ........................................................................................................ 11

2

Know your business goalsA GHG inventory can help you achieve a variety of business goals such as increased brand recognition, participation in a voluntary reporting

program, or setting and achieving GHG reduction targets. How you conduct your inventory will be defined by these goals. Outlining your goals early on will help ensure your final product meets your organization’s specific needs.

Choose an accounting methodologyThe GHG accounting methodology you choose will dictate how your inventory should be completed and

what should be included. The most widely used accounting methodology is the GHG Protocol created by the World Resources Institute. The GHG Protocol provides the basic framework for any GHG inventory. In addition to the GHG Protocol, numerous other standards have been created by various reporting programs such as the Environmental Protection Agencies’ Climate Leaders and The Climate Registry.

Define organizational boundariesOne of the most common questions we receive from our Choice Inventories clients is “what do we include in the

inventory?” Defining your organizational boundaries is the first step in answering this question. When establishing organizational boundaries, a company

chooses financial control, operational control, or equity share for the purpose of defining their organization. The approach you choose can dramatically influence the results of your inventory so it is important to understand which selection will work best with your goals. Once you’ve selected a method for defining your organization’s boundaries, the method should be applied consistently throughout the inventory process.

Define operational boundariesYour operational boundary will dictate which sources of emissions you include in your inventory as well as the specific

greenhouse gases you’ll account for. At a minimum, your operational boundary should be drawn to include all assets that fall within your organizational boundary. To achieve a more complete emissions picture however, many organizations choose to include sources outside their direct organizational boundary such as purchased electricity, business travel, and supply chain emissions.

Select a base yearGHG accounting is an ongoing process. The first inventory you conduct is known as your base year. The base year is used as a point of reference to

track changes in your inventory as well as progress toward reduction goals. Before selecting a base year, be sure to take in to account data availability, program requirements, and existing reduction efforts.

4775 Walnut Street, Ste. 230 . Boulder, CO 80301 . 877.810.8670 . www.renewablechoice.com

Corporations that measure their greenhouse gas (GHG) emissions are better situated to manage them strategically. Whether reporting a GHG inventory to the Carbon Disclosure Project (CDP) on behalf of a purchasing organization’s request, or for other stakeholders, it’s become increasingly important to disclose a high quality inventory that is wholly completed, follows internationally accepted standards, and provides a high level of transparency.

High quality inventories lead to the best CDP submissions as approximately 50% of the CDP Response Questionnaire is comprised of inventory-related questions. If successful GHG reductions are accomplished, the quality of the inventory becomes even more valuable as purchasing organizations work to claim the reductions on their behalf and to further publicize. Well documented proof of reductions through inventory transparency becomes imperative. Here are 10 best practices to consider when conducting your inventory.

1.

2.

3.

4.

5.

The Ten Steps to Conducting a GHG Inventory

3

Identify emissions sourcesYou’ve set the stage for your inventory with the previous steps–now it’s time to start looking at the specifics of your organization. To complete

this step, you will need to compile a comprehensive list of the emissions sources that fall within your operational and organizational boundaries. It is never wise to undertake this task on your own. When we work through this step with our Choice Inventories clients, we often create a team of individuals that span numerous departments within the organization. Including employees from as many different departments as possible will help avoid missing emissions sources and set the stage for efficient data collection down the road.

Collect data and calculate emissionsFor each emission source you’ve identified, the data you’ll need to collect will be dictated by data

availability. Most protocols outline optimal data and calculations as well as alternative methods to be used when data is missing. Organizations completing an inventory for the first time will rarely have all of the data necessary to follow all of the optimal calculation methods and will need to use alternative estimation methods. To increase the accuracy of future inventories, you should work to implement record keeping changes to facilitate the use of optimal calculation methods. Often simple changes such as tracking gallons of fuel purchased along with financial data can increase the accuracy of your inventories dramatically.

Report emissionsDocumenting your findings and methodology is a critical, yet often overlooked, step in the inventory process. GHG inventories can be an

incredibly valuable tool and are increasingly being used to make business decisions. An inventory report should include all raw data and sources, emissions factors, calculation methodology, assumptions, and boundaries. Thorough documentation will ensure inventories conducted in subsequent years always use the same standards enabling accurate year-over-year data comparisons.

Establish reduction targetsNow that you’ve completed your inventory it’s time to put it to work. A GHG inventory can help you identify low hanging reduction opportunities or

activities that are highly carbon intensive. Establishing reduction targets also provide a great opportunity to communicate your organization’s environmental commitment. Emissions tracking can be an arduous process. More and more organizations are turning toward carbon accounting software like MosaicTM to help them manage this complex and tedious job

Verify the inventory (optional)Hiring a third-party to audit or verify your inventory can lend credibility to your findings. However, the high cost

of verification generally leads smaller organizations to forgo verification. The verification process will generally include site visits, a methodology and data review, as well as inventory error estimation. Large organizations that anticipate falling under GHG regulations or those participating in voluntary reporting programs may need to consider verification.

By following these best practices, your organization can successfully measure your GHG emissions, report to the CDP, and begin to manage your organization’s carbon footprint.

The Ten Steps to Conducting a GHG Inventory

6.

7.

9.

8.

10.


4

http://www.renewablechoice.com/mosaic-enterprise-carbon-accounting-software.html

CDP Scoring

What is a CDP Disclosure Score? Each company that reports to the Carbon Disclosure Project (CDP)

receives a Disclosure Score within a few months following the submission of their completed CDP Questionnaire. The Disclosure Score is a summation of the extent of a company’s response to the Questionnaire based on a 100-point scale. The Disclosure Score evaluates both the depth and breadth of the company’s response in several areas including measurement of carbon emissions, communications about climate-related behavior, and third-party verification. The score is based solely on the information provided in the Questionnaire and does not include any judgment by the CDP about a company’s mitigation efforts.

A Disclosure Score is an important benchmarking metric as it is often reviewed by stakeholders. For those companies responding to the CDP Supply Chain Program, Disclosure Scores may be viewed by your requesting purchasing organization and, if the submission is public, it is also posted on the CDP’s website. For publically traded companies, the score is also posted on Bloomberg and Google Finance with a direct link to the submission.

Scores within a particular range on the 100-point scale suggest that companies have specific levels of experience or a commitment to emissions disclosure. Here’s a description of each level, as stated by the CDP.

How do I increase the quality of my Questionnaire and my Disclosure Score?

aAnswer as many questions as you can – think progress not perfection

aBest responses touch on all points of the question

aBe specific and include details or references within responses

aAttach relevant information

a Identify multiple risks and opportunities

a In addition to Scope 1 and 2, disclose Scope 3 emissions even if only from a single source

aSet and disclose a carbon emissions reduction target

aBudget time for GHG inventory and Questionnaire completion

How can Renewable Choice help?It’s become increasingly important for organizations to not only submit a CDP Questionnaire for their stakeholders but to submit a quality Questionnaire they can be proud of. As an official, accredited consultancy

partner to the CDP, Renewable Choice can help your company prepare your questionnaire or measure your greenhouse gas emissions with our easy-to-use carbon accounting software, Mosaic™. Contact us today for more information on our CDP services or check out our new CDP Essentials Briefcase to download important CDP reporting and deadline documents.

“Limited or restricted ability to measure and disclose climate

related risks, opportunities and

overall carbon emissions”

LOW < 50

“Increased understanding and measurement of

company-specific risks and opportunities related to climate

change”

MID 50 - 70

“Senior management understand the

business issues related to climate change and are building climate

related risks and opportunities into core

business”

HIGH > 70

Disclosure score max (100)

4775 Walnut Street, Ste. 230 . Boulder, CO 80301 . 877.810.8670 . www.renewablechoice.com 5

http://www.renewablechoice.com/cdp-countdown-to-disclosure-1.html

A growing number of companies have adopted greenhouse gas (GHG) reduction targets - a numeric performance objective related to corporate climate change mitigation. The motivations for adopting climate-related targets are varied. Most view targets as a means of improving competitive positioning by reducing costs, increasing sales, motivating employees and enhancing corporate reputation. Others do so in response to regulatory and market environments such as

international laws, anticipated US Federal or State programs (e.g. Executive Order 13514), supply sustainability chain programs, and investor pressure.

Several challenges are associated with setting GHG corporate reduction targets including:

1. Choice of target type 2. Plan to achieve and monitor results3. Communications with the public and other stakeholders

This paper specifically focuses on how to choose a reduction target and will highlight two types of reduction targets, their respective benefits, and other considerations.

OVERVIEW OF REDUCTION TARGET TYPES: ABSOLUTE V. INTENSITY BASED

At a minimum, a quality goal must quantify an emissions reduction target, specify a baseline or starting point, and include a timeframe. An example of a quality goal would be: “By 2015, our organization will reduce greenhouse gas emissions by 15% relative to a base year of 2011.” For an emissions reduction target, there are two categories of reduction targets: an absolute reduction target and an intensity reduction target. In both cases, all measurement and reporting of emissions is stated in metric tons of carbon dioxide equivalent (MTCO2e).

HOW TO SET GREENHOUSE GAS REDUCTION TARGETS


An absolute reduction target requires a specific reduction in a company's overall emissions, measured in MTCO2e. Examples of absolute reduction targets are as follows:

Reduce GHG emissions by:

• 10% compared to 2009 baseline emissions

• 100 MTCO2e from 2009 baseline emissions

Absolute reduction targets are fairly easy to set and work well for having an unambiguous reduction in emissions across operations. However, absolute reduction targets do not take business growth or decline into consideration and are not used for comparing performance against other industries or companies.

ABSOLUTE TARGETS

An intensity target reduction is normalized against a business metric. Examples of intensity reduction

targets are as follows:

• MTCO2e per unit of product produced

• MTCO2e per million USD in annual revenue

• MTCO2e per thousand square feet

Intensity targets have been a common approach to goal setting because they normalize rising emissions associated with business growth. This type of target measures greenhouse gas emissions based on unit of product, facilities, employees and other such metrics that take into consideration the changing dynamics of a business and its growth. With the recent trend in carbon management looking at absolute emissions reduction targets, this type of target has received some criticism since reducing intensity does not guarantee absolute GHG reductions.

INTENSITY TARGETS

6

http://www.renewablechoice.com/eo-13514.html



OTHER CONSIDERATIONS

Many external and internal conditions can influence the target-setting process and change over time. External factors may include regulations affecting the baseline year or mandated reduction targets. For example, new regulations could move a baseline to a later start date negating progress towards an existing goal or targets could be accelerated with a more aggressive legislative agenda.

Internal factors may include natural growth, acquisitions and divestitures, and uncontrollable factors related to energy use or the availability of cost-effective reduction opportunities. When setting targets, each organization needs to consider these factors relative to their overall business goals and market environment.

CORPORATE EXAMPLES: PUBLIC REDUCTION TARGETS

Hewlett-Packard | Type: Absolute

Reduce the greenhouse gas emissions from HP-owned and HP-leased facilities by 20% relative to 2005 levels by the end of 2013 on an absolute basis.

Ranked #2 as America’s Greenest Companies by Newsweek, 2011

Walmart | Type: Absolute

Reduce greenhouse gases at our existing store, club and distribution center base around the world by 20 percent by 2012 (2005 Baseline).

One of the first members of the CDP Supply Chain Program

Dell | Type: Intensity

Tracking greenhouse gas (GHG) emissions and setting a high bar for improvement shows that Dell takes the responsibility to help address climate change very seriously. Reflecting that commitment, in 2007, we announced a goal to reduce our total direct and indirect emissions intensity by 15 percent by 2012, using FY08 as the base year. Intensity measures emissions against revenue.

Ranked #5 as America’s Greenest Companies by Newsweek, 2011

BMW | Type: Intensity

The BMW Group has set the target to reduce energy and resource consumption (incl. VOC, water, wastewater and waste) and the CO2 emissions related to that per vehicle produced by 30% from 2006 to 2012. The target refers to the whole production network of the BMW Group.

Recognized on the Carbon Disclosure Leadership Index

A base year is the year against which emissions reduction goals are measured. A company can choose to keep a base year fixed indefinitely or have a rolling base year that is updated on a regular interval.

BASE YEAR:

7

Company Scope % Reduction from Base Year

Intensity Metric Base Year Target Year

Hewlett-Packard

Scope 1 & 2 20% N/A 2005 2013

Walmart Scope 1 & 2 20% N/A 2005 2012

Absolute Targets


Company Scope % Reduction from Base Year

Intensity Metric Base Year Target Year

Dell Scope 1,2 & 3 15%MTCO2e per unit of revenue

2007 2012

BMW Scope 1 & 2 30%MTCO2e per vehicle produced

2006 2012

Intensity Targets


ABSOLUTE & INTENSITY TARGET CHART

NEED MORE INFORMATION?

Publically available resources can be found online to help companies with setting reduction targets. Here are a few places to start:

Renewable Choice has also helped hundreds of clients set and achieve their organization's reduction targets through our Carbon Disclosure Project reporting services and consulting engagements. As a partner to CDP, Renewable Choice attends CDP workshops, receives monthly briefings from senior CDP staff, and has been actively involved in shaping the questionnaire and scoring methodology. Learn more.

8

http://www.renewablechoice.com/business-sustainability-professional-services-consulting.html



http://www.epa.gov/

http://www.pewclimate.org/

http://www.wri.org/

https://www.cdproject.net/en-US/Pages/HomePage.aspx

Greenhouse gas (GHG) inventory verification is a systematic, independent, and documented audit of emissions calculations and the related data collection processes, boundaries, and information management systems in place during the inventory.

Under the Carbon Disclosure Project (CDP), there are accepted verification standards that are suitable for inventory assessment. Other standards are still under review or have been deemed unsuitable for verification purposes.

AN OVERVIEW OF GHG VERIFICATION


• AA1000

• ASAE3000

• ASO14064-3

• AT101

• Australia National Greenhouse and Energy Regulations

• California Mandatory GHG Reporting Regulations

• Chicago Climate Exchange verification standard

• Corporate GHG Verification Guidelines from ERT

• EUETS

• ISAE3000

• JVETS Guideline for verification

• The Climate Registry verification standard

• Verification under the EU Emissions Trading Scheme Directive

ACCEPTED STANDARDS

• 1SO/EC 17021

• EN 45011

• EPA Climate Leaders Review

• EPA Part 75

• ISO 14001

• ISO 14040-49

• ISO 14064-1

• ISO 14065

• ISO 19011

• OFWAT

• PAS 2050

• SGS Sustainability Report Assurance

• The GHG Protocol Corporate Reporting & Accounting Standard

• TN-CC-003:2009-01

• VFU

UNACCEPTED STANDARDS

• Alberta Specified Gas Emitters Regulations

• Australian Government's National Carbon Offset Standard

• California Climate Action Registry Protocol for Verification

• Canadian Institute of Chartered Accountants (CICA) Handbook: Assurance Section 5025

• Carbon Trust Standard

• CEMARS

• CNCC

• ISAE 3410

• Korean GHG and energy target management system

• NIVRA 3401N

• RevR6 Produce for assurance of sustainability report from Far

• Spanish Institute of Registered Auditors (ICJCE)

• Swedish EPA, NFS 2007: 5 Annex 15

• Tokyo Emissions Trading Scheme

STANDARDS UNDER REVIEW

9


The value of having a GHG inventory verified varies significantly from company to company. If your company is considering having your emissions verified, it is important to understand the verification process and its associated benefits. Figure 1 below depicts the four stage process of verification, while Table 1 provides a list of the benefits that can be achieved.

Define goals, including scope of verification process and standard to be used

GHG inventory is audited, using an independent third party

A verification statement with included assurance opinion is provided

Verification is communicated to intended users of GHG data and reporting

FIGURE 1 - VERIFICATION PROCESS

AN OVERVIEW OF GHG VERIFICATION

Companies Benefitting from Verification

Explanation of Benefit

Supplier companies

Emissions from supply chain can represent as much as 86% of a company's total carbon footprint. For those purchasing organizations that measure their supplier's emissions (Scope 3) it is very important to know that the data being used is accurate. Verification provides this level of accuracy that pleases suppliers of larger purchasing organizations.

Companies reporting to the Carbon Disclosure Project (CDP)

The CDP is the largest sustainability reporting platform and significantly rewards responders who have Scope 1 and 2 emissions verified. By verifying emissions, companies can earn between 9-13% of the total points that make up CDP's Disclosure Score and 15-17% of the points that make up the Performance Score.

Companies with Institutional Investors

Verification has become increasingly important as Institutional Investors are wanting proof of performance claims.

Companies whose management board monitors emissions

Verification is becoming crucial for management boards that make big decisions based on Inventory data. Whether looking at benchmarking analytics, GHG reduction initiatives, or creating a sutainability strategy it is very important to know that the data being viewed is accurate.

TABLE 1 - BENEFITS OF VERIFICATION

1 2 3 4

“Increasingly, verification will become an important factor in our assessment of supplier responses to future CDP requests.” – PepsiCo Inc.

“The analysis of companies for Socially Responsible Investment purposes is getting more and more fact-based…verification of such data will gain importance…”– Bank Sarasin & Co. Ltd

10


The way a company approaches CDP Questionnaire requests and the strategy it employs to improve its score has a dramatic impact on the long-term value derived from the exercise. Over the past several years, Renewable Choice Energy has worked with hundreds of companies on issues related to CDP Supply Chain Program participation. Some of these companies use the CDP Questionnaire request as a jumping off point for complete shifts in organizational culture while others respond reluctantly and purely for the sake of compliance. Through our experience a few best practices have emerged that, when implemented, can help companies achieve long-term value and high scores.

1. Understand Your Buyers’ MotivationsLarge buying organizations implement supply chain sustainability programs because they believe the program will result in some business value such as cost-reduction, improved customer loyalty, or risk mitigation. Companies that work with their customers and industry experts as they respond to CDP Questionnaire requests will ensure their actions provide value to both buyer and supplier. Tom Holcomb, Chief Operations Officer of Renewable Choice Energy, points out: “Buyers and sustainability directors at even the largest companies in the world are happy to engage with suppliers on sustainability issues. I have seen several suppliers build stronger relationships with their customers simply by asking for help and guidance when responding to scorecard requests.”

2. Consider Values Beyond ComplianceSuppliers that respond to CDP Questionnaire requests generally fall somewhere on the sustainability spectrum between leader and reluctant complier. Reluctant compliers generally perform a simple calculation involving customer/

buyer pressure and cost when deciding to participate in the CDP request. This approach, while often effective at producing acceptable scores, leaves suppliers with little to no long-term benefit from their time and money.

In contrast, the sustainability leader understands that sustainability programs will only succeed if they provide lasting value for the company. These companies will analyze requests in the context of their specific business environment to identify actions that can save money while simultaneously improving customer satisfaction. In many instances they will work with their buyers to modify requirements that don’t provide potential for long-term value. Sustainability leaders might not start out with the highest score on paper, but in the long run they will find the greatest value from their efforts in the form of reduced costs and risks and increased customer spend and loyalty.

3. Build Support From the Top DownImplementing any kind of new business strategy requires strong support from senior leadership, and sustainability is no different. Executives don’t need to commit to recreating their business overnight to succeed at sustainability, but they do need to believe in the business case behind it and support its champions over the long-term. Nearly all sustainability projects will require participation from many, if not all, company departments. Lack of support from one key area in a company can cause a highly valued sustainability project to fail before it gets off the ground. Building internal support from senior leadership will ensure teams understand the larger story behind sustainability projects and facilitate efficient project execution.

Suppliers that keep these simple rules in mind when responding to CDP Questionnaire requests will avoid many potential costly pitfalls associated with a compliance mentality and ultimately find significant value from their sustainability investments.

11

http://www.renewablechoice.com

Education

Quick Guide: Meet July CDP Deadline Without Breaking the Bank