Scope 3 Emission Mangement in Value Chain-V2.pptx

Scope 3 Emission Mangement in Value Chain

1. 1 Scope 3 GHG Emissions Management for Value Chain Presented by Mr. Zhou Lu CTI Group August 17 th , 2021

2. 2 WELCOME Mr. Zhou Lu – Vice President, CTI Group

3. 3 CONTENTS Background What are the Scopes of emissions? Why Scope 3 emissions matter? How we account scope 3 emissions? How can CTI Group help?

4. 4 BACKGROUND—— NET-ZERO TARGETS

5. Targets 5 In response, various targets have been set both internationally and domestically: Kyoto Protocol 2005 - (UK 12.5% reduction in first target period 2008-2012 from 1990 baseline) Paris Climate Agreement 2016 - limit global warming to well below 2°C and pursuing efforts to limit it to 1.5°C EU - to be climate-neutral by 2050 (net-zero greenhouse gas emissions) UK - All greenhouse gas emissions to ‘Net-zero’ by 2050– The Climate Change Act 2008 (2050 Target Amendment) Order 2019 China – CO 2 emission peaking by 2030 and carbon-neutral by 2060

6. 6 RACE TO NET ZERO 137 countries have committed to carbon neutrality. Most of the commitments are centered around 2050.

7. 7 What are the Scopes of Emissions?

8. GHG Protocol 8 Under GHG Protocol Methodology – GHG emissions categorized by Scope: – Scope 1 – Direct e.g., Natural gas, diesel, Refrigerant gases – Scope 2 – Indirect from purchased energy e.g., electricity, heat – Scope 3 – Indirect (all other) e.g., from waste, water, commuting etc. Image from GHG Protocol Corporate Reporting Standard

9. 9 ISO 14064-1:2018 Category 1: Direct GHG emissions and removals Direct GHG emissions and removals occur from GHG sources or sinks inside organizational boundaries and that are owned or controlled by the organization. Category 2 ： Indirect GHG emissions from imported energy This category includes only GHG emissions due to the fuel combustion associated with the production of final energy and utilities, such as electricity, heat, steam, cooling and compressed air. Category 3 ： Indirect GHG emissions from transportation GHG emissions occur from sources located outside the organizational boundaries. Those sources are mobile and are mostly due to fuel burnt in transport equipment. Category 4 ： Indirect GHG emissions from products used by an organization GHG emissions occur from sources located outside the organizational boundaries associated with goods used by the organization. Under ISO 14064-1:2018– 6 categories GHG emissions

10. 10 ISO 14064-1:2018 Category 5 ： Indirect GHG emissions associated with the use of products from the organization GHG emissions or removals associated with the use of products from the organization result from products sold by the organization during life stages occurring after the organization's production process. Those emissions or removals might cover a very wide range of services and associated processes. Category 6 ： Indirect GHG emissions from other sources The purpose of this category is to capture any organization specific emission （ or removal ） that cannot be reported in any other category. In consequence, it is the organization's responsibility to define the content of this particular category. Under ISO 14064-1:2018– 6 categories GHG emissions

11. Standards comparison 11 Scope 1 Scope 2 Scope 3 GHG Protocol Corporate Value Chain (Scope 3) Accounting and Reporting Standard GHG Protocol Corporate Accounting and Reporting Standard ISO 14064-1:2018 Indirect GHG emissions: Category 3-6 Category 1: Direct Emissions Category 2: Indirect GHG emissions from imported energy SBTi Science Based Targets Sector Decarbonization Approach (SDA) Reporting Disclosure through reporting initiatives

12. 12 Apple And BestBuy Apple’s 2020 carbon print Verified by BestBuy's carbon data CY19 and CY20 Scope 3 Emissions are calculated for the lifetime of the product when the product was purchased.

13. 13 Why Scope 3 emissions matter?

14. Why Scope 3 emissions important? 14 Quantifying and managing Scope 3 is key for the following reasons: Managing risks and opportunities related to the value chain emissions; Setting reduction targets and tracking performance; Giving the company opportunities to engage with its value chain on all sustainability issues; Enhancing the GHG inventory and improving completeness in the public reporting process, and; Enhancing stakeholder information and corporate reputation through public reporting Treat GHG issues from a life cycle perspective

15. 15 Identify risks and opportunities RISKS Regulatory - GHG emissions-reduction laws or regulations introduced or pending in local regions Supply chain costs and reliability - Suppliers passing higher energy- or emissions-related costs to customers; supply chain business interruption risk Product and technology - Decreased demand for products with high GHG emissions; Litigation - GHG-related lawsuits directed at the company or an entity in the value chain; Reputation - Consumer backlash, stakeholder backlash, or negative media based on GHG management practices, emissions in the value chain, etc. OPPORTUNITIES Efficiency and cost savings - A reduction in GHG emissions often corresponds to decreased costs and an increased efficiency Drive innovation - A comprehensive approach to GHG management provides new incentives for innovation in supply chain management and product design Increase sales and customer loyalty - Low-emissions goods and services are increasingly more valuable to consumers Improve stakeholder relations - Through proactive disclosure and demonstration of environmental stewardship. Company differentiation - Scope 3 inventory is a best practice differentiate companies in an environmentally-conscious marketplace

16. 16 How We Manage Scope 3 Emissions ？

17. 17 Scope 3 accounting and reporting steps GHG Protocol – Corporate Value Chain (Scope 3) Accounting Reporting Standard

18. 18 GHG Protocol Value Chain (Scope 3) Standard Upstream scope 3 emissions: 1. Purchased goods and services 2. Capital goods 3. Fuel- and energy-related activities (not included in scope 1 or scope 2) 4. Upstream transportation and distribution 5. Waste generated in operations 6. Business travel 7. Employee commuting 8. Upstream leased assets Downstream scope 3 emissions: 9. Downstream transportation and distribution 10. Processing of sold products 11. Use of sold products 12. End-of-life treatment of sold products 13. Downstream leased assets 14. Franchises 15. Investments The standard categorizes scope 3 emissions into 15 distinct categories Not all of them should be reported

19. 19 GHG Protocol Value Chain (Scope 3) Standard According to the ET Global 800 Carbon Ranking Report developed by the Environmental Investment Organization (EIO), out of the 800 companies examined in the report, 267 of them, or 33%, report one or more Scope 3 emissions source categories. As for those that report more Scope 3 categories, only 15 companies, or a mere 2%, do so. Don’t Panic!

20. 20 Principals same as Scope 1 and Scope 2 emissions accounting Relevance Completeness Consistency Transparency Accuracy ACCOUNTING AND REPORTING PRINCIPLES SETTING BOUNDARY Account for all Scope 3 emissions and disclose and justify any exclusions. Account for all GHGs, including CO 2 , CH 4 , N 2 O, HFCs, PFCs and SF 6 Biogenic CO 2 emissions that occur in the value chain shall not be included in the scope but shall be included and separately reported CALCULATION

21. 21 Supporting resources • Some basic factors https://www.gov.uk/government/publications/greenhouse-gas-reporting-conversion-factors-2020 • Scope 3 - Upstream Transportation and Distribution, Business Travel, and Employee Commuting https://ghgprotocol.org/ghg-emissions-calculation-tool Life cycle databases available (over 50) https://ghgprotocol.org/life-cycle-databases • CEDA – Comprehensive Environmental Data Archive https://www.vitalmetricsgroup.com/environmental-databases • Commercial database https://carbonchain.com/products/producers • Scope 3 – High level Scope 3 assessment https://quantis-suite.com/Scope-3-Evaluator/ • IPCC guidance https://www.ipcc-nggip.iges.or.jp/public/2019rf/vol4.html

22. 22 How can CTI Group help?

23. About CTI Group 23 Centre Testing International Co., Ltd. (CTI) is the pioneer and leader in the TIC Industry which provides one-stop solutions on testing, inspection, certification, calibration, audit, training & technical services. CTI is committed to deliver trust between Government, enterprise and customers. Our mission “Build Trust for Better Life” is to ensure healthier, safer, environmentally-friendly and higher-quality development.

24. 24 CTI Certification Founded in 1993, CTI Certification was approved by Certification and Accreditation of People’s Republic of the China (CNCA) and recognized by China National Accreditation Service for Conformity Assessment (CNAS) as a professional independent certification entity. Since 2010, CTI Certification has been focusing on sustainability and carbon emissions related services. Multiple international and domestic qualifications acquired. Tracked records: Performed 1500+ CDM/CCER/VCS/GS validation and verification projects; Performed GHG verification for 2000+ companies in energy, cement, glass, chemical, steelmaking, non-ferrous, papermaking, ceramic, power grid, machinery, electronics, food, public construction, transportation and other industries. As a registered third-party to assess projects of China’s National Green Manufacturing Scheme, performed for 40+ assessment for factories, products and industrial parks.

25. 25 Work with renowned partner After validation, CTI Certification awarded “Carbon Neutrality” tag for BP’s Charging station --August 9 th , 2021

26. 26 Keeping up with international trends CTI Certification help Shanying International (SH:600567) set Science Based Target of 1.5 ℃ --July 12 th , 2021

27. 27 Deep understanding of climate change Part of CDM Renewable projects: Project 9851 : Inner Mongolia Hangjinqi Balagong 10MWp Solar Power Plant Project Project 1623 : Yulong Tongli WHR Project Project 6481 : Guohua Jiaonan Wind Power Generation First Phase Project Project 5514 : Henan Dengzhou Biomass cogeneration Project Project 5909 : Inner Mongolia China Water Group Huade Cheliwusu Wind Farm 49.5MW Project Project 7177 : Inner Mongolia Tianrun Danaobao Wind Farm 49.5MW Project And more… Validation and verification reports available at https://cdm.unfccc.int

28. 28 GHG related qualifications Accredited GHG(ISO 14064-1) Validation and Verification Body CDM Designated Operational Entity (DOE) Registered China CCER Validation and Verification Body Validation/verification body (VVB) ISO 9001, 14000, 18000, 50000,etc Certification Body Registered GHG validation body in 20+ provinces in China Author of SZDB/Z 70-2018 Guidance for verification of the organization’s greenhouse gas emissions and SZDB/Z 69-2018 Guidance for quantification and reporting of the organization’s greenhouse gas emissions

29. 29 ISO 14064-1 accounting and verification We perform GHG accounting and verification according to ISO 14064-1 for enterprises that manufacture export products in order to meet disclosure requirements of carbon emissions from big brands.

30. 30 Highly customized consulting services Help fill GHG emissions survey questionaries from clients according to GHG Protocol series standards; Product carbon footprint assessment; Supply chain and life cycle assessment; GHG emission reductions analysis according to ISO 14064-2; CDM/CCER/VCS Methodology development; Help set and submit Science Based Target to SBTi; Prepare GHG inventories reports for governments; Develop regional policies to address climate change as a think tank And …. Due to the latest China’s 30/60 policy, variety needs concerning GHGs have been surging. We perform highly customized consulting services for companies and governments that want to improve their GHG performance.

31. 31 For Dixons’ supply chain members, CTI could provide: 31 5 4 3 2 1

32. 32 Q&A

33. 33 Thanks!