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Company x

2016 AT A GLANCE

Internal price on carbon:
100 USD/metric tons

Sector:
Health Care

Annual Net Sales: 49,414.00 (US$M)

Emissions reduction target Absolute target – By 2020, 30% reduction and by 2030, 50% reduction of Scope 1 and 2 emissions from 2010 baseline.
Reported emissions (2015)
Scope 1 533,736 CO2e
Scope 2 (location-based) 1,085,252 CO2e
Scope 2 (market-based) 829,375 CO2e
Baseline emissions (2010)
Scope 1 617, 909 CO2e
Scope 2 (location-based) 1,062,041 CO2e
Scope 2 (market-based) 962,836 CO2e
Novartis reports that climate change could result in increased prices for key inputs such as water and energy, and extreme weather events could significantly impact supply chains or damage facilities. They are also at risk of increasing costs linked to the carbon emissions associated with their manufacturing facilities. Recognising this, Novartis discloses that it has decided to embed climate change into its corporate strategy and has set itself the targets of reducing combined Scope 1 and Scope 2 GHG emissions by 30% by 2020, and 50% by 2030 from its 2010 baseline. These targets have been set “based on the belief that governmental schemes can only be successful if private sector companies actively contribute with targets for their own global... Read More

2016 AT A GLANCE

Internal price on carbon:
Depending on countries of activities and type of services, levels not disclosed

Sector:
Utilities

Annual Net Sales: 16,799.98 (US$M)

Emissions reduction target Absolute target – By 2030, 30% reduction of S1 and 2 emissions from 2014 baseline.
Reported emissions (2015)
Scope 1 6,364,728 CO2e
Scope 2 1,790,762 CO2e
Baseline emissions (2014)
Scope 1 6,086,997 CO2e
Scope 2 1,796,765 CO2e
Within its 2015-2030 climate roadmap, SUEZ announced a new business strategy that prioritizes actions that will enable the business to mitigate the causes and adapt to the consequences of climate disruption. SUEZ has set a target of 30% reduction of Scope 1 and Scope 2 combined emissions by 2030, using its 2014 emissions as a baseline, as well as an objective to reach 60 million metric tons of CO2 avoided for its customers on the 2015-2020 period through waste and wastewater recovery. This global waste treatment and water management company, with nearly 8 million tons CO2e in 2015, has made a commitment to adopt a science-based emissions reduction target. Read More

2016 AT A GLANCE

Internal price on carbon:
Two prices, price levels not disclosed

Sector:
Industrials

Annual Net Sales: 43,981.86 (US$M)

Emissions reduction target Intensity target – By 2025, 20% reduction of S1 and 2 emissions from 2010 baseline at iso-production.
Reported emissions (2015)
Scope 1 9,528,115 CO2e
Scope 2 (location-based) 3,619,635 CO2e
Baseline emissions (2010)
Scope 1 12,976,886 CO2e
Scope 2 (location-based) 4,461,638CO2e
Saint-Gobain, a French multinational building materials manufacturer, discloses that an internal price on carbon will be used as a decision support tool to prioritize and manage CO2 action plans. The company discloses that its CO2 approach features a set of group-wide climate goals, including its current intensity target of cutting 20% of GHG emissions by 2025 from a 2010 baseline, and a new set of science-based emissions reduction targets that are currently under development. Read More

2016 AT A GLANCE

Internal price on carbon:
Price level not disclosed

Sector:
Consumer Discretionary

Annual Net Sales: 101,619.32 (US$M)

Emissions reduction target Absolute Target – By 2050, 24% reduction of S1,S2 and S3 emissions from 2000 baseline.
Product Target – By 2050, new-vehicle emissions reduction by 90% from 2000 baseline.
Reported emissions (2015)
Scope 1 928,236 CO2e
Scope 2 (location-based) 3,111,678 CO2e
Scope 2 (market-based) 2,547,951 CO2e
Baseline emissions (2000)
Scope 1+2 (market-based) +3 (downstream) 135,000,000 CO2e
Nissan is developing low to zero carbon motor vehicles as part of its response to the risks and opportunities presented by climate change. It discloses that its vehicle‘the LEAF’ is the ‘first mass-market, pure-electric vehicle launched globally, and is now the best-selling EV in history.’ Read More

2016 AT A GLANCE

Internal price on carbon:
price level not disclosed

Sector:
Consumer Discretionary

Annual Net Sales: 5,225.27 (US$M)

Emissions reduction target Absolute target – By 2020, 60% reduction and by 2040, 100% reduction of S1 and 2 emissions from 2010 baseline.
Reported emissions (2014)
Scope 1 64,888CO2e
Scope 2 22,091CO2e
Baseline emissions (2010)
Scope 1 77,038 CO2e
Scope 2 80,687CO2e
Arçelik discloses that it sees climate change as both a key risk and opportunity for its business and has embedded climate change into the heart of its strategy. The companyhighlights that they focus on having a product line of household appliances that are as energy efficient as possible. It reports that it has set a ‘net zero emissions’ target for its domestic production plants by 2040, with an interim goal of a 60% reduction by 2020; additionally, it notes that it anticipates setting a ‘science-based target’ in the next 2 years.The companyreports that it aims to meet its targets through projects in energy efficiency and energy generated from renewable sources, as well as through carbon offsets to meet its 2040 goal. The company discloses that itplans to purchase 100% renewable electricity by 2020. Read More

2016 AT A GLANCE

Internal price on carbon:
R48 per metric ton of CO2e, escalating by 10% per year up to 2020

Sector:
Materials

Annual Net Sales: 1,272.39 (US$M)

Emissions reduction target Absolute targets – By 2025, 22% reduction of S2 emissions from a 2015 baseline. By 2045, 90% reduction of S1 and 2 emissions from 2015 baseline.
Reported emissions (2015)
Scope 1 66,902 metric tons CO2e
Scope 2 (location-based) 2,686,401 metric tons CO2e
Baseline emissions (2015)
As above
Harmony is a gold mining and exploration company with operations in South Africa and Papua New Guinea. The company highlights that it aims to set a precedent for the South African mining industry in renewable energy investment and greenhouse gas emissions reduction and plans to obtain at least 50% of its future electricity from renewable sources. It discloses that it anticipates setting a science based target within the next 2 years. Read More

2016 AT A GLANCE

Internal price on carbon:
€50/metric ton

Sector:
Materials

Annual Net Sales: 8,571.49 (US&M)

Emissions reduction target GHG efficiency target – By 2025, 45% reduction of S1 and 2 emissions from 2008 baseline.
Reported emissions (2015)
Scope 1 608,762 CO2e
Scope 2 458,643 CO2e
Baseline emissions (2008)
Scope 1 3,218,000 CO2e
Scope 2 1,076,000CO2e
Royal DSM, a Dutch multinational company active in health, nutrition and materials, reports that it has “recognized climate change as a societal megatrend for over a decade”. Reflecting this, it highlights that it has embedded in the core of its business strategy the objectives of reducingits own carbon footprint and creating an enabling environment for its low-carbon products.In 2016, Royal DSM reported a new target to improve its greenhouse gas efficiency by 45% by 2025 from 2008 levels. Read More

Company Name x

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Case Studies

Company Name x

Novartis reports that climate change could result in increased prices for key inputs such as water and energy, and extreme weather events could significantly impact supply chains or damage facilities. They are also at risk of increasing costs linked to the carbon emissions associated with their manufacturing facilities. Recognising this, Novartis discloses that it has decided to embed climate change into its corporate strategy and has set itself the targets of reducing combined Scope 1 and Scope 2 GHG emissions by 30% by 2020, and 50% by 2030 from its 2010 baseline. These targets have been set “based on the belief that governmental schemes can only be successful if private sector companies actively contribute with targets for their own global operations and products."

Novartis is included in the European Union Emissions Trading Scheme (EU ETS) with several production sites located in EU Member States. The company notes that so far this has not driven up operating costs and Novartis has been able to sell surplus allowances thanks to the successful energy efficiency programs implemented at these sites. Yet they highlight that this is likely to change as the system undergoes reform and as other countries follow suit.

The company discloses that they ‘support the true cost of carbon being embedded within the economy’, whether through carbon taxes or cap and trade schemes, as a tool ‘that will be effective in mitigating climate change’. For this reason and to help achieve their climate goals, Novartis decided in 2015 to set an internal carbon price of USD 100 per metric ton of CO2e. They report that they based the amount on the World Bank's ‘cost of climate change to society’ calculations.

Novartisnotes that they believe setting an internal price on carbon will help identify projects that can cost-effectively reduce GHG emissions, and will drive investments into areas such as energy efficiency and using renewable energy sources to power their operations. The Real Estate and Facilities Services teams will prioritize projects that will help Novartis meet its 2020 GHG emissions reduction targets, and the projects will be approved by top management.Currently, Novartis is investigating projects that could help reduce GHG emissions by up to 185,000 metric tons CO2e. A major off-site wind and several on-site solar power purchase agreement optionsare part of this evaluation. The company notes that an internal price on carbon is helping Novartis identify projects that reduce GHG emissions, and generate a return on investment.

Within its 2015-2030 climate roadmap, SUEZ announced a new business strategy that prioritizes actions that will enable the business to mitigate the causes and adapt to the consequences of climate disruption. SUEZ has set a target of 30% reduction of Scope 1 and Scope 2 combined emissions by 2030, using its 2014 emissions as a baseline, as well as an objective to reach 60 million metric tons of CO2 avoided for its customers on the 2015-2020 period through waste and wastewater recovery. This global waste treatment and water management company, with nearly 8 million tons CO2e in 2015, has made a commitment to adopt a science-based emissions reduction target.

The company notes that a central component of its environmental commitments is support for a reliable external price on carbon, which it says will “reinforce the market of recycled products and accelerate the development of waste treatment activities in developing countries”. Additionally, SUEZ has adopted an internal price on carbon this year.

According to their CEO, Jean-Louis Chaussade: “From now on, SUEZ committed to take into account carbon pricing signals within its investment decisions and its research and development programs to accelerate the implementation of circular economy, the only model of growth which can structurally reduce greenhouse gases emissions.”

SUEZ reports that it will use a price on carbon in three ways. One price will apply to capital investment decisions to “bring GHG emissions performance as a concrete criterion in project investments, increasing long-term profitability of low-carbon solutions.” Another (significantly higher) price will help orient research and development towards less carbon-intensive technologies. A third approach will consist of systematically measuring the performance of the company’s low-carbon products and services and calculating the associated “carbon goodwill”, in order to demonstrate their benefits compared to alternatives. This way, SUEZ believes that it can incentivize clients to choose low-carbon options by revealing cost savings and GHG emissions avoided or reduced and thus help them to achieve helping them achieving their mandatory or voluntary carbon commitments.

While at the group-level the internal price on carbon will be a new innovation, some parts of SUEZ’s businesses have employed this tool for some time. It notes that in the case of Bristol Water, it has helped the company to navigate the United Kingdom's Carbon Reduction Commitment, which applies a carbon tax of £16 per metric ton CO2e. Using an internal carbon price has helped Bristol Water to manage and reduce its carbon tax bill by prioritizing investments that reduce energy use. SUEZ says that the price is also linked to Bristol Water’sgoal to reduce its emissions by 75%% by 2040. To meet this target, the company uses a shadow price of carbon to drive investments in low-carbon technologies. For example, it led to the decision to install new water pumps that offer superior energy performance. The price improved the return on investment that could be realized as a result of making the investment.

Saint-Gobain, a French multinational building materials manufacturer, discloses that an internal price on carbon will be used as a decision support tool to prioritize and manage CO2 action plans. The company discloses that its CO2 approach features a set of group-wide climate goals, including its current intensity target of cutting 20% of GHG emissions by 2025 from a 2010 baseline, and a new set of science-based emissions reduction targets that are currently under development.

Introduced in early 2016, Saint-Gobain highlights that it expects an internal price on carbon will impact its CO2 reduction targets through the use of it in: • Measuring and incorporating the current and anticipated future impacts of regulatory carbon prices into the company’s risk management strategy; • Identifying growth opportunities in low-carbon innovations, and redirecting capital expenditure and R&D in line with new opportunities; and • Managing priority actions to reduce CO2 emissions.

“Setting ambitious carbon pricing levels that are in line with Saint-Gobain’s objectives contributes to reinforce our commitment to fight for the climate.” says Pierre-André de Chalendar,Chairman and CEO of Saint-Gobain.

Saint-Gobain discloses that it will use two prices to denote the two ways in which a price on carbon will be applied in the business.

One carbon price will be applied to capital expenditure projects above a certain threshold, to energy source investments, and to energy-related investments at the company’s current sites that consume more than 10GWh annually. In its disclosure to CDP, Saint-Gobain reportsthat a carbon price will be used in the strategy and plans of its plants that are included in the EU ETS- in order to incentivize investment in energy efficiency equipment so as to manage a worst case scenario that, after 2020, it no longer receives fewer free allowancesunder the EU ETS, which would lead to higher operational costs.

Another carbon price, markedly higher, will be used to drive investments in R&D that will accelerate the delivery of “breakthrough” technologies. Saint-Gobain reports that the use of a price on carbon in this manner will be instrumental in its business plan to increase market share in energy-saving products for existing-building and new-building markets.

Saint-Gobain reports that its internal price on carbon will be applied to all corporate activities across 66 countries (many of which are not presently subject to regulatory pricing) and will impact the company’s scope 1, 2 and 3 emissions.

Nissan is developing low to zero carbon motor vehicles as part of its response to the risks and opportunities presented by climate change. It discloses that its vehicle‘the LEAF’ is the ‘first mass-market, pure-electric vehicle launched globally, and is now the best-selling EV in history.’

It notes that its approach is supported by customers, who have told this global auto maker that fuel consumption and vehicle CO2 emissions are priority issues. This long term business strategy is reflected in a goal to reducenew-vehicle GHG emissions by 90% by 2050 compared to 2000 levels. Across all aspects of the company’s operations in over 20 countries, Nissan discloses an absolute target of a 24% reduction in scopes 1, 2 and 3 GHG emissions by 2050. It also discloses that it anticipates setting a science-based target within the next 2 years.

Nissan’s strategy is also evident in the investments it has made in low to zero carbon technologies, such as vehicle electrification and lithium-ion batteries. Seventy percent of Nissan’s annual research and engineering budget will be allocated to environmental technologies during 2016. While investing in electric vehicles involves considerable costs, Nissan sees the potential for big returns on investment in the future – at the same time, they are supporting the achievement of what they call a ‘zero emission society.’

An internal price on carbon is used in the capital allocation process:

“GHG emissions reduction is one of the most crucial parameters in Nissan’s investment plan selection process. Proposals are compared and selected based on carbon emissions reduction per unit cost of investment, as well as the energy reduction potential, measured with an internal price of carbon.”

While Nissan did not disclose its price level, the company did share that the process involved setting a GHG reduction target first, with the price level linked to the costs and returns that investments undertaken in order to meet the target.

Arçelik discloses that it sees climate change as both a key risk and opportunity for its business and has embedded climate change into the heart of its strategy. The companyhighlights that they focus on having a product line of household appliances that are as energy efficient as possible. It reports that it has set a ‘net zero emissions’ target for its domestic production plants by 2040, with an interim goal of a 60% reduction by 2020; additionally, it notes that it anticipates setting a ‘science-based target’ in the next 2 years.The companyreports that it aims to meet its targets through projects in energy efficiency and energy generated from renewable sources, as well as through carbon offsets to meet its 2040 goal. The company discloses that itplans to purchase 100% renewable electricity by 2020.

Despite there not being any immediate risks of a carbon price in Turkey, Arçelik has decided to use an internal price to help it achieve its aims. The company reports that it will introduce a ‘carbon fee’ based on the GHG emissions of each of its departments. Each corporate division will be required to contribute a sum of money to a company-wide carbon fund, their contribution will be proportional towhat each is responsible for emitting. Using the revenue that the carbon fee generates, the fund will “invest in carbon reduction projects, such as energy efficiency, renewable energy, and similar environmental initiatives”.

Arçelikdid not disclose the value it uses to price carbon. The company’s Sustainability Committee, headed by Arçelik’s Chief Financial Officer, is ultimately responsible for the coordination of the carbon price and fund.

Arçelik’s reported that its scope 1 and 2 emissions dropped 38% in 2014 from 2013 levels. Arçelikinvested in several energy efficiency projectsthat cut 3,812 metric tons CO2e in 2014, accounting for about 7% of reductions achieved that year. The remaining 93% was due to the purchase of electricity generated by renewable energy sources. In 2014, 78% of the electricity Arçelik used came from renewable energy sources – compared with 28% in 2013 and 1% in 2012. It has done this through purchasing from renewable energy suppliers is considering possible renewable energy production investments.

Harmony is a gold mining and exploration company with operations in South Africa and Papua New Guinea. The company highlights that it aims to set a precedent for the South African mining industry in renewable energy investment and greenhouse gas emissions reduction and plans to obtain at least 50% of its future electricity from renewable sources. It discloses that it anticipates setting a science based target within the next 2 years.

Harmony reports that it uses an internal price on carbon based on the carbon tax due to be implemented in South Africa in 2017. According to its disclosure, it will not be exposed to the tax directly until 2020, but has assumed an internal price into the planning of its operations’ from 2016 nevertheless. Internalizing a price on carbon has shown the company that some of its “more marginal assets will no longer be profitable”in the future once carbon taxation begins. It notes that this is one of the reasons it has decided to shift its business strategy to reducing its emissions and energy intensive assets.

The company highlights that it uses the price to: • “Understand the influence of carbon pricing on the economies and viability of Harmony’s business • Adapt to the effects of a changing climate • Drive investment in emission reduction projects • Reduce risks and identify opportunities • Ensure the long term sustainability of the business in the green economy • Position itself for the potential impacts of climate change”

Additionally, Harmony discloses that the effects of climate change pose potential risks for Harmony's operations, particularly in terms of potential water shortages. This has also influenced the company's strategy in this area, leading to investments and technical changes that maximize recovery of water for re-use in some of it major mines, for example. In 2015, Harmony invested in 12 energy and water management projects, and has 19 ongoing projects that it reports will help save 64,040 MWh per year. It further reports that the 17 energy efficiency projects planned for 2016 will save 82,301 MWh per year. It plans to utilize the internal price on carbon to help create the investment case for these projects and will be able to report on the success of this strategy in future disclosures.

Royal DSM, a Dutch multinational company active in health, nutrition and materials, reports that it has “recognized climate change as a societal megatrend for over a decade”. Reflecting this, it highlights that it has embedded in the core of its business strategy the objectives of reducingits own carbon footprint and creating an enabling environment for its low-carbon products.In 2016, Royal DSM reported a new target to improve its greenhouse gas efficiency by 45% by 2025 from 2008 levels.

Royal DSM uses an internal price of carbon with a value of 50 euros per metric ton, exceeding the price in the European Union Emissions Trading Scheme (EU ETS), which it trades in. The company reported that it set this price for use in the valuation of large investment projects so the financial impact of GHG emissions could be accounted for:

“In order to encourage investments in low-carbon or carbon free technologies, the Executive Committee decided to include the financial impact of GHG emissions (scopes 1 and 2) through internal carbon pricing in the valuations of large investment projects from 2016 onwards. This also serves to prepare Royal DSM for the financial impact of an external carbon price, which is one of the elements of the comprehensive climate deal that was struck in Paris in December 2015 during COP21. For each large investment proposal, two business cases have to be presented. One without and one with an internal carbon price of 50 €/t CO2e.”

According to Geraldine Matchett, Royal DSM’s Chief Financial Officer and Member of the Managing Board,"the main benefit is to embed the consideration of a price on carbon into the general conversation in a very systematic way within the company; that it becomes a part of our language in the same way we would talk about any other embedded costs within our projects."

The company notes that in the early phase of using the price,it was added to projects already underway to reveal how decisions could have been impacted by an internal price. Since the full implementation of this corporate directive in 2016, Royal DSM has observed the advantage of being able to embed sustainability considerations more effectively at an early point in the design stage of projects, when fundamental decisions that positively contribute to the company’s climate change objectives can be readily made. The company’s preliminary observation is that the internal carbon price is being used during conceptual engineering to evaluate and select different engineering options.In coming years, Royal DSM discloses that it will undertake an evaluation of the impact of its internal price on carbon on the company’s low-carbon investment decisions, and its climate change and business objectives.