GREEN AND LOW CARBON SUPPLY CHAINS The pressures and opportunities Teresa Hitchcock Partner, UK Head of Safety Health and Environment 29 June 2009

June Introduction  Propose to discuss the growing supply chain pressures for green products, the background to them and how they are likely to impact on business here in the UK  Will seek to argue that while the pressures present a challenge they also present an opportunity for businesses to meet their own goals

June Introduction Background  The growing appreciation in recent decades of the challenge of climate change  The growth of legal frameworks to address climate change in sustainability issues  The move away from the "quick-fix" solution to broaden legal frameworks  The challenge of the recession

June Introduction  New international framework:  Copenhagen COPMOP in December  EU climate and energy package  Broader legal framework being introduced in the UK through the Climate Change Act with other countries following

June UK Climate Change Act  Key features  National Targets to reduce GHG emissions (80% by 2050, at least 26% by 2020)  Five-year carbon budgets (three to be set in advance to assist with business planning)  Independent Committee on Climate Change to advise on progress on targets and budgets  Adaptation Sub-Committee  Provision for limits to be set on purchase of international credits by UK  Provision for inclusion of international shipping and aviation emissions  Power to set up further emissions trading schemes to be used to set up Carbon Reduction Commitment

June The importance of the Indirect Footprint  Focus now moving away from the big emitters, which in the EU are subject to the EU ETS, and towards consumption by public authorities and smaller businesses and also by households and individuals. Ultimately it is the choices of consumers which drive large-scale emissions of greenhouse gases and other unsustainable uses of resources  Growing realisation that public policy needs to focus not only on regulation of the big emitters, but also on behaviour change by society as a whole

June The importance of the Indirect Footprint The Direct Footprint:

June The importance of the Indirect Footprint The Indirect Footprint:

June Three Planets Consumption and Indirect Emissions  World Wildlife Fund "Living Planet" Report 2004 estimated that average UK resident's consumption, if replicated globally, would require three planets, not one, to support consumption  This has led to idea that production and consumption patterns need to be changed to be on a "One Planet", not a "Three Planet" basis  World Wildlife Fund Ecological Budget UK Report 2006 found total carbon emissions embedded in imports amounts to 10-30% of total UK emissions  This reflects the fact that countries like the UK have "exported" their emissions to countries like China which have taken over manufacturing operations

June Supply chain pressures: legal drivers  Move to encourage more sustainable consumption and production is international  "Marrakech Process" aims to carry forward commitments made at World Summit on Sustainable Development  This is being translated into legal drivers  In the UK, because of the Single European Market, many of the important measures are at EU level

June Supply chain pressures: legal drivers  Direct Regulatory measures at EU level eg  Labelling requirements for household appliances (Directive 92/75/EEC)  RoHS Directive restricts use of hazardous substances in electrical and electronic goods  Move towards more general regulatory frameworks eg  Energy-Using Products Directive provides for mandatory standards for non-transport products (introduces CE marking)  First proposal for implementing measure under this Directive put forward by EU Commission on 8 July Will set maximum power consumption standards for standby mode in a range of products  Moves towards carbon efficiency standards for cars

June Supply chain pressures: legal drivers Indirect Regulatory pressures eg REACH Regulation will impede use of more environmentally damaging substances  Eco - labelling scheme  This is intended to set credibility standards for environmental claims, to distinguish truly "green" products from competitors  Current proposal to revise the scheme through a new Regulation. Aim is to increase awareness, reduce costs of compliance and increase number of Ecolabel products on the shelves. However, this is a voluntary scheme, which will only apply to certain products which meet the highest standards

June Supply chain pressures: policy pressures  For this reason government policy pressures perhaps even more important  eg UK Government's "One Planet Economy" policy. The Government is leading by example through public procurement, with effects on contractual provisions and tendering procedures  Public authority procurement is an important part of total economic activity

June The private sector  The move towards sustainability by the private sector  Activities of regulated utilities and banking eg through sustainability webpage  Wider moves towards educating employees and hence the consumer (our own example at DLA Piper)  Inevitable impact on consumer demand  Consequential impact on producers/importers of consumer goods

June What are the opportunities for business?  Misconception that a time of recession is a time to relax environmental goals: the low carbon economy is even more important at a time of recession  Pressures on other businesses and on the public sector will provide opportunities for low-carbon products  Increasingly consumers will also demand such products

June What are the opportunities for business?  Competitive pressures will favour producers/importers with green supply chains  Those with green supply chains will become the market leaders

GREEN AND LOW CARBON SUPPLY CHAINS The pressures and opportunities Teresa Hitchcock Partner, UK Head of Safety Health and Environment 29 June 2009