walmart supply chain innovation program: greenhouse gas

Walmart Supplier GHG Innovation Program: Guidance Document

Version 1.0 August 3, 2010

This document summarizes the Walmart supplier GHG reduction goal and the guidance to submitting projects to contribute to this goal. For questions about this document, please contact James Stanway: [email protected] or (479) 204-0334.

Contents

Contents ....................................................................................................................................................... i

Acknowledgements .................................................................................................................................... 1

Part 1: The Program .................................................................................................................................. 4

Walmart’s Impact on the Environment ................................................................................................ 4

Walmart’s Supplier GHG Reduction Goal .......................................................................................... 5

Selection of Projects .............................................................................................................................. 5

Project Teams......................................................................................................................................... 7

Carbon Reduction Claims ..................................................................................................................... 9

Assessing Claims .................................................................................................................................10

Program Timeline .................................................................................................................................10

Unintended Consequences ................................................................................................................11

Part 2: Project Accounting Guidance ....................................................................................................11

Qualification of Emissions Reduction Projects ................................................................................11

Types of Projects that Qualify ........................................................................................................11

Qualification Criteria.............................................................................................................................12

Timing ................................................................................................................................................12

Additionality .......................................................................................................................................14

Beyond BAU......................................................................................................................................14

Quantification of Emissions Reduction Projects ..............................................................................15

Uncertainty ........................................................................................................................................15

Product Quantification (Track 1) ....................................................................................................15

Facility/Process Quantification (Track 2) ......................................................................................22

Financial Values of Projects ...............................................................................................................24

Part 3: Submission How-To ....................................................................................................................25

General Questions ............................................................................................................................... 25

Who Submits the Documentation? ................................................................................................25

How Do I Submit A Project? ...........................................................................................................25

Qualification...........................................................................................................................................25

If my project does not fit the two tracks, does it qualify?............................................................25

Does a Walmart store reduction count? .......................................................................................25

Does a reduction at a Sam’s Club or an international store count? .........................................25

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What are the dates for a project to “count” toward the goal? ....................................................25

What does it mean to “start” a project?.........................................................................................26

Would a project that focuses on reductions from consumers (Walmart customers) count? 26

(Track 1) Product Quantification .......................................................................................................26

How do I select a methodology?....................................................................................................26

What do I need to include in my methodology documentation? ...............................................26

What is a Product Life Cycle Assessment? .................................................................................27

How do I determine boundary conditions? ...................................................................................27

How do I account for loss rates?....................................................................................................28

(Track 2) Facility/Process Quantification .........................................................................................28

What is the “type of footprint?” .......................................................................................................28

What methodology should I follow for facilities or processes?..................................................28

What are the boundaries to consider in a facility/process quantification calculation?...........28

Why do I need to show the baseline calculation per emission source? ..................................29

Part 4: Post-Submission..........................................................................................................................30

Step 1. Project Application Package Submitted .............................................................................30

Step 2. Package Stored in Database ...............................................................................................30

Step 3. Quality Assurance (QA) of Application...............................................................................30

Step 4. QA Report Generated...........................................................................................................30

Step 4a. Feedback Provided to Project Champion ....................................................................30

Step 4b. Application Package Resubmitted................................................................................31

Step 5. Assessment of Completeness and Accuracy of Claims ..................................................31

Step 5a. Feedback Provided to Project Champion & Team.....................................................31

Step 5b. Close Project....................................................................................................................31

Step 6. Project Accounted in Database ...........................................................................................31

Step 7. 12-Month Adjustment............................................................................................................31

Step 8. Review (QA) of Application ..................................................................................................32

Step 8a. Feedback Provided to Project Champion ....................................................................32

Step 8b. Application Resubmitted ................................................................................................32

Step 9. 12-Month Assessment ..........................................................................................................32

Step 10. Adjustment at Program Conclusion..................................................................................32

Step 10a. Review (QA) of Application..........................................................................................32

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Step 10b. Feedback Provided to Project Champion..................................................................33

Step 10c. Application Package Resubmitted ..............................................................................33

Step 11. Final Assessment ................................................................................................................33

Step 12. Close Project........................................................................................................................33

Part 5. Glossary and Reference Materials ..........................................................................................35

Glossary.................................................................................................................................................35

Reference Materials.............................................................................................................................39

Attachment A. Product Carbon Reduction Worksheet ......................................................................... 1

Walmart Information............................................................................................................................... 1

Supplier Information............................................................................................................................... 1

Project Information ................................................................................................................................. 1

Qualification of Project............................................................................................................................... 3

Step 1. Qualification (Track 1)............................................................................................................. 3

Step 1a. Influenced Product Design............................................................................................... 3

Step 1b. Influenced Sales ................................................................................................................ 3

Quantifying Carbon Reductions ............................................................................................................... 4

Step 2. Describe Life Cycle Assessment .......................................................................................... 4

Step 3. Carbon Reduction effect......................................................................................................... 5

Step 4. Carbon Footprint Calculation: Continual Effect Carbon Reduction From Products ...... 5

Step 5. Carbon Footprint Calculation: One-Time Effect Carbon Reduction From Products ..... 6

Step 6. Sales of the Product................................................................................................................ 7

Step 7. Financial Value of Project ...................................................................................................... 7

Step 8. Product Trends ........................................................................................................................ 7

Step 8a. Raw Materials .................................................................................................................... 7

Step 8b. Manufacturing .................................................................................................................... 7

Step 8c. Consumer Use ................................................................................................................... 8

Step 8d. End-of-Life .......................................................................................................................... 8

Step 9. Statements ............................................................................................................................... 8

Step 9a. Uncertainty ......................................................................................................................... 8

Step 9b. Validity................................................................................................................................. 8

Step 9c. Claims ................................................................................................................................. 9

Attachment B. Facility/Process Carbon Reduction Worksheet ........................................................... 1

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Walmart Information............................................................................................................................... 1

Supplier Information............................................................................................................................... 1

Project Information ................................................................................................................................. 1

Qualification of Project............................................................................................................................... 3

Step 1. Describe Facility or Process Carbon Reduction Project ................................................... 3

Step 1a. Facility/Process Improvement ............................................................................................. 3

Step 1b. Energy Management ............................................................................................................ 3

Quantification of Reductions..................................................................................................................... 4

Step 2. Carbon Emissions Calculations Methodology..................................................................... 4

Step 3. Carbon Footprint Calculation ................................................................................................. 4

Step 4. Financial Value of Project ...................................................................................................... 5

Step 5. Technology Trends ................................................................................................................. 5

Step 6. Statements ............................................................................................................................... 6

Step 6a. Uncertainty ......................................................................................................................... 6

Step 6b. Validity................................................................................................................................. 6

Step 6c. Claims ................................................................................................................................. 6

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Walmart Supplier GHG Innovation Program Guidance Document

Acknowledgements Walmart would like to acknowledge the significant contributions the following organizations and individuals who were instrumental to this guidance document’s creation:

ClearCarbon Consulting

ClearCarbon is a full-service consulting firm dedicated to creating competitive advantage and improving profitability through carbon measurement, management and monetization. Our solutions help clients of all sizes understand their climate impacts and develop strategies to reduce their carbon footprint, enabling long-term pand growth in a carbon-constrained world.

rosperity

ClearCarbon staff who contributed to this document include: J. Renee Morin, Kyle Tanger, Sarah Matheson, and Anna Nicholson.

For more information about ClearCarbon, please visit: http://www.clearcarboninc.com.

Environmental Defense Fund

Environmental Defense Fund (EDF), a leading national nonprofit organization, represents more than 700,000 members. Since 1967, EDF has linked science, economics, law and innovative private-sector partnerships to create breakthrough solutions to the most serious environmental problems. EDF has a 20 year track record of success in partnering with business. To maintain its independence and credibility, EDF accepts no money from corporate partners; generous individuals and foundations fund its work.

In 2005, EDF partnered with Walmart to measurably reduce its environmental impacts. Environmental Defense Fund experts, Elizabeth Sturcken, Andrew Hutson, Maria Harris and Andy Wunder were key contributors to the development of this document.

For more information on EDF’s work with Walmart, visit www.edf.org/walmart.

PricewaterhouseCoopers

PricewaterhouseCoopers provides industry-focused services for public and private clients. Our experienced staff, combined with our global network, allow us to provide the support you need—wherever you need it, at home and abroad, whatever the size of your organization. The following PricewaterhouseCoopers staff contributed to this document: Barbara Kipp, Christine Schuh, Nick Shufro, Alexandre Rossin, Sachin Mandal, and Kathy Nieland.

For more information about Pricewaterhouse Coopers, please visit: http://www.pwc.com.

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http://www.clearcarboninc.com/

http://www.edf.org/walmart

http://www.pwc.com/


Introduction

Walmart believes that much more can be done to reduce the greenhouse gas emissions (GHG) associated with the materials, manufacture, shipment, and use of the products we sell. We believe that both cost-saving and revenue-generating GHG reductions can be captured by reviewing and acting on cradle-to-grave lifecycle analyses of the products on our shelves.

Walmart has several initiatives underway to reduce the emissions from direct sources such as its fleet and refrigeration units (scope 1) and from its purchased electricity (scope 2), but the majority of emissions associated with the retail sector are embedded up and down the value chain within the raw material extraction, manufacture, use, and disposal of the products sold (scope 3).

To achieve reductions throughout the value chain and our products’ lifecycles, Walmart funded the Walmart Supplier GHG Innovation Program and Walmart CEO Mike Duke subsequently announced a GHG reduction goal for value chain emissions. The Program is intended to find, achieve, and account for GHG reductions by working with suppliers throughout Walmart’s product categories and departments.

This document describes the Walmart Supplier GHG Innovation Program, the GHG reduction goal, the accounting guidance for projects as well as the due diligence process for reviewing these projects. This document is intended for use by Walmart Project Champions, the Walmart Supplier GHG Innovation Program team, and others within Walmart. In addition, this version of the Guidance (version 1.0) is likely to evolve as it is road-tested with real projects.

This document is organized into five sections:

• Part 1: The Program Part 1 focuses on the background of the Walmart Supplier GHG Innovation Program. It explains the supplier GHG reduction goal and how the goal will be achieved by Walmart. This part provides background information that will help the reader to understand what the program entails and who is involved.

• Part 2: Project Accounting Guidance The goal will be achieved by implementing a series of GHG reduction projects. The “rules” that apply to these projects are described in Part 2. This guidance includes a description of what projects will qualify for the Program and count towards the GHG reduction goal. It also includes a description of how to account for the reductions achieved.

• Part 3: Submission of Project Instructions Part 3 walks through the process of submitting a project and gives more detailed instructions for completing the submittal package, including step by step instructions for completing worksheets. The worksheet templates are attached to this document as Attachments A and B.

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• Part 4: Post-Submission A description of what happens after an individual project is submitted to the Program is included in Part 4. The project will undergo a review and assessment to ensure that it fits the qualification criteria. In addition, the carbon reduction calculations will be reviewed.

• Part 5: Glossary and Reference Materials Part 5 includes a glossary of terms that are commonly referred to in greenhouse gas accounting and life cycle assessment (LCA) literature along with terms that are specific to this Program. In addition to term definitions, Part 5 includes a list of commonly used reference materials to help the Project Champion and other team members navigate through emissions reduction projects.

Walmart is committed to this Program and to the continual improvement and streamlining of the process described within. As part of this commitment, Walmart will review and update this guidance document periodically and issue new versions as appropriate. Please check EDF’s website (http://edf.org/walmartghg) for the most current version of the Guidance Document.

If you have questions about the contents of this document, please contact:

James Stanway email: [email protected]

phone: (479) 204-0334

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http://edf.org/walmartghg

mailto:[email protected]


Part 1: The Program The Walmart Supplier GHG Innovation Program (the Program) was launched in September 2009 to allow the Walmart Sustainability and Walmart Energy groups to work with suppliers to achieve carbon reductions throughout Walmart’s value chain. Through the Program, Walmart formed a team that includes several groups: the Applied Sustainability Center (ASC), BluSkye Consulting, Environmental Defense Fund (EDF), ClearCarbon Inc., Pricewaterhouse Coopers, and the Carbon Disclosure Project (CDP).

This team works with Walmart to identify projects, quantify reductions, engage suppliers to implement reductions, and assess claims of reductions.

Walmart’s Impact on the Environment Walmart has an impact on the environment through the stores it operates and the products it sells. The impacts that these products have both upstream and downstream from Walmart’s operations are referred to as the value chain. Upstream emissions are those related to purchased goods and services. Downstream emissions are related to sold goods and services.1

Rough estimates by carbon emissions experts suggest that Walmart’s value chain (part of scope 3, discussed below) emits orders of magnitude more carbon dioxide equivalents (CO2e) during the life cycle of products than Walmart emits selling them. Therefore, Walmart’s largest potential impact on GHG emissions is to engage suppliers and help them reduce product and value chain GHG impacts. Walmart has decided to expand its suite of programs intended to reduce carbon emissions beyond its corporate carbon inventory to emissions reductions in its value chain.

Value chain emissions are categorized as scope 3, indirect emissions. Scope 3 is a category of carbon emissions defined by the Greenhouse Gas Protocol (GHG Protocol). The three scope categories include the following sources of emissions:

• Scope 1: Direct emissions from on-site fuel combustion, refrigerants, and owned vehicles.

• Scope 2: Indirect emissions from purchased electricity, steam, and chilled water. • Scope 3: Indirect emissions from commuting, waste disposal, business travel, leased

and franchised operations, and the use of products and services along with upstream supply chain emissions.

There are programs and projects dedicated to reducing Walmart’s carbon impact in scopes 1 and 2 already in place that continue to evolve such as those listed in the Walmart 2009 Global Sustainability Report (http://walmartstores.com/Sustainability/7951.aspx). The Program focuses solely on scope 3 emissions; particularly on those from the use of products and services and those created upstream in the supply chain.

1 This definition aligns with that from the Scope 3 Accounting and Reporting Standard Draft (January 2010) developed as part of The Greenhouse Gas Protocol Initiative, a project of the World Business Council for Sustainable Development and the World Resources Institute.

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http://www.ghgprotocol.org/

http://walmartstores.com/Sustainability/7951.aspx


Walmart’s Supplier GHG Reduction Goal Walmart recognizes its impact on the environment and has committed to reduce it. On February 25, 2010, Walmart CEO Mike Duke announced Walmart’s supplier GHG reduction goal: to reduce the carbon footprint from its supply chain and products’ lifecycles by 20 million metric tons of carbon dioxide equivalents (CO2e) between calendar year 2010 and 20152.

As part of this commitment, Walmart will work with suppliers to reduce their emissions – which they otherwise may not do – in some cases resulting in additional positive ripple effects. Walmart will work to reduce emissions that result in GHG effects from the six primary Kyoto Protocol gasses:

• Carbon dioxide (C02) • Methane (CH4) • Nitrous oxide (N20) • Hydrofluorocarbons (HFCs) • Perfluorocarbons (PFCs) • Sulphur hexafluoride (SF6).3

To achieve the supplier GHG reduction goal, Walmart will identify opportunities to reduce carbon impacts in coordination with select suppliers. Reductions may be identified in any phase of a product’s life cycle. A product’s life cycle includes the following primary stages:

• Raw material extraction • Manufacturing • Packaging • Distribution • Usage • Disposal

In each phase of a product’s life cycle there may be an opportunity to engage with suppliers to implement carbon reduction efforts. In some cases, Walmart will also have to develop consumer education materials to affect the way that consumers use a particular product.

Selection of Projects The carbon reduction goal of 20 million metric tons4 of CO2e from 2010 to 2015 will be achieved through the implementation of multiple reduction projects. Walmart will engage suppliers to achieve this goal.

2 This goal will be referred to as the “supplier GHG reduction goal,” or “the goal,” in this document. The terms GHG and carbon will be used throughout the document somewhat interchangeably. Since the goal is in carbon dioxide equivalents (CO2e), it includes the standard six GHGs as defined by the Kyoto Protocol.

3 For the full text of the Kyoto Protocol, please see: http://unfccc.int/resource/docs/convkp/kpeng.pdf

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To ensure that Walmart is selecting the most impactful projects for carbon reductions, Walmart commissioned the Applied Sustainability Center (ASC) from the University of Arkansas to review the carbon emissions intensity of all of the categories of products that Walmart sells. ASC quantified the upstream life cycle impacts of Walmart products and scaled the categories to sales data. The carbon intensity is the result of the upstream carbon impacts of a group of products multiplied by the sales volume of that category.

Carbon intensity = carbon impact per unit

x units sold

The carbon intensity calculation was aggregated at a very high level of Walmart product categories to understand the top 20 most impactful categories. The study revealed that carbon intensity is greatest in the following product categories (listed alphabetically): animal feed, apparel, candy, cheese, frozen food, fruit, grains, household detergents, meat, media, milk, motor oil, pharmaceuticals, produce, sanitary paper products, snacks, soap & shampoo, soft drinks & beverages, televisions, and vegetables.

The study specifically looked at the carbon impacts from three phases of the life cycle:

• Raw Materials • Materials Manufacturing & Transportation • Product Manufacturing & Transportation

While consumer use and end-of-life are not included in the ASC study, there are significant impacts for some products in those phases. Walmart will also consider impacts in these two downstream phases when seeking specific reduction opportunities.

The resulting carbon intensity is a starting point to identify priority categories. These categories will be a first focus to achieve carbon reductions projects. The carbon intensity ensures that the team focuses on the categories that have the biggest impact and therefore the greatest opportunity for reductions.

Once a category has been identified as being “high carbon intensity”, the project team will (described in the next section) conduct preliminary research to understand specifically where the impacts are the greatest and what opportunities for reductions exist. In addition to the carbon intensity research, the team captures the status of Walmart carbon-related initiatives and identifies new opportunities by meeting with Walmart’s Sustainable Value Network (SVN) captains, private brands (PB) champions, and others.

After understanding the carbon opportunities within a category, the team begins to identify potential projects through industry and technology reviews and works with Walmart to understand the feasibility of the projects. Feasibility includes (1) understanding the carbon impact potential (magnitude), (2) identifying a Walmart lead, (3) determining activity in that supplier category, and (4) estimating the practicality of implementation possibilities. Armed with

4 For this document and for all calculations related to this program, carbon measurements will be in metric tons of CO2e. A metric ton = 2,205 pounds. From this point forward, the term “tons” will mean metric tons.

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this information, the Program team then makes recommendations on which projects can begin implementation.

The process of finding and selecting projects is outlined in Figure 1, Opportunities Identification, Prioritization, and Engagement Process.

Project Teams For each project, a team will be identified to lead implementation of the carbon reduction. The roles will include:

• Walmart Champion: The Walmart Champion (Champion) will be responsible for taking the lead for the project, including documenting the project and quantifying the carbon reductions.

• Supplier contact: The Walmart Champion will work with one or several suppliers to achieve the carbon reduction. This supplier contact(s) will be involved in implementation of the project and providing data to help to quantify the reductions. Such data may include energy use for a facility, material weights and dimensions of the product, etc.

• Research Team & Program Management: Walmart is supported by ClearCarbon on this project through identification of carbon reduction opportunities and review of all carbon reduction claims for completeness and soundness of methodology. In addition, Environmental Defense Fund (EDF) assists with research, guidance, and support for the projects.

• Assessors: After paperwork is completed, PricewaterhouseCoopers (PwC)5 will perform certain specified consulting procedures related to the assessment of the process and methodology surrounding the measurement of the carbon emissions reduction claims for use by Walmart management (see Part 3). PwC is performing these procedures under consulting standards and will not be providing an opinion or any other form of assurance relating to the claims.

5 “PricewaterhouseCoopers" and "PwC" refer to the network of member firms of PricewaterhouseCoopers International Limited (PwCIL). Each member firm is a separate legal entity and does not act as agent of PwCIL or any other member firm. PwCIL does not provide any services to clients. PwCIL is not responsible or liable for the acts or omissions of any of its member firms nor can it control the exercise of their professional judgment or bind them in any way. No member firm is responsible or liable for the acts or omissions of any other member firm nor can it control the exercise of another member firm's professional judgment or bind another member firm or PwCIL in any way.


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Research internal business drivers and ongoing projects and initiatives.

Walmart, ClearCarbon

Research state of industry, science, and opportunities for improvement

ClearCarbon

Discuss with business leaders, SVN Captains, buyers

Walmart, EDF

Prioritize high carbon, high value (cost, trust, quality) reductions

Walmart, ClearCarbon, EDF

Set goals, develop action plan, and implement project

Walmart, ClearCarbon, Suppliers

Measure carbon reductions and assess measurements

Walmart, ClearCarbon, PwC

Activities:

Opportunities Identification, Prioritization, and Engagement Process

Capture Opportunities

Research Opportunity

Research Internal Feasibility

Recommend Innovations

Engage & Implement

Demonstrate & Measure Results

Actors:

Figure 1. Selection of Product


Accounting for Carbon Reductions from Projects

For Walmart to understand the impact of the projects and progress towards the goal, the team has developed guidance to understand what types of projects count and don’t count as well as how to account for them. This guidance is described in Part 2 in detail. Generally, for a project to count towards Walmart’s reduction goal, it can either be a carbon reduction for a product that Walmart sells or a reduction at a facility/process that supplies Walmart.

For each of these two primary categories of projects, the reduction achieved must also be “additional” and beyond business as usual (BAU) in terms of emissions accounting. Specifically, the activity must:

1. Demonstrate that the initiative is truly additional, meaning that the action would not have otherwise happened without Walmart’s influence, and

2. That the initiative represents performance beyond BAU, indicating that the improvement is well beyond existing business trends and has the overall impact of emissions reductions within a product category.

Walmart is accounting for carbon reductions that occur by comparing a new product, or change to a facility, to a baseline. The baseline is determined by an assessment of the “business as usual” (BAU) case. BAU is defining what would have been the carbon emissions of a product or a facility if Walmart had not encouraged, introduced, or catalyzed the implementation of an innovation. From this baseline, Walmart will then project the savings from the implementation of facility-level carbon efficiency, or from the time that a product first is sold from Walmart’s stores, until December 2015.

Carbon reductions on a per-product or per-facility level are then scaled to account for the volume of sales or production. In a simplified example, if each t-shirt that Walmart sells were to save 1 pound of carbon emissions when compared to a baseline product and 2,000 t-shirts are sold in one year, then the savings for one year would be 2,000 pounds of carbon. If sales were to remain consistent for five years, then over five years 10,000 pounds of carbon would be saved.

Carbon Reduction Claims Claiming carbon reductions for this project is purely to meet the carbon reduction goal. While Walmart will make certain public claims about carbon reductions, the intent is not, nor will it ever be under this project, to monetize carbon reduction claims. Walmart will not resell, retire, or trade carbon reduction claims under this Program. Additionally, the carbon reduction claims may not be “exclusive” to Walmart. It may be the case that Walmart will help a supplier, through this Program, to achieve a carbon reduction project that the supplier also wants to report publicly. In this case, both parties (Walmart and the supplier) may state a claim of reduction. Since the reduction is not being sold or traded there is no legal claim over the reduction that would make it exclusive to Walmart or to the supplier. The

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supplier may monetize (sell, trade, etc) carbon reductions at their discretion, though Walmart will not be involved in these transactions.6

Assessing Claims Carbon reductions are accounted for by the Walmart Champion with the help of the supplier(s) involved in the project. The completeness of the claims and the soundness of the methodology are reviewed by ClearCarbon Consulting through a formal quality assurance (QA) process. ClearCarbon will review the submittal for appropriateness of methodology, completeness, and calculations. If the claims that are stated meet the QA check, they will then be assessed by the third party assessors (PwC) for consistency with the standards.

After a project is initially submitted, it will be re-assessed and adjusted as needed after twelve months and, the reductions claims will be reviewed by ClearCarbon and the assessors (PwC). Project claims will again be adjusted and re-assessed at the conclusion of the project or December 31, 2015, whichever comes first. The full description of the assessment of project claims is described in Part 4: Post-Submission.

Program Timeline In addition to reviewing each individual project, the portfolio (collective of all projects) will be assessed by the third-party assessor (PwC) in January 2011, in October 2013, and again at the 2015 conclusion, assessing the reported results against these guidelines and standards. The results from this assessment of the portfolio will be reported to the Walmart executive team. The Program timeline is shown in Figure 2, Program Timeline.

Walmart Carbon Reduction Portfolio of Projects Accounting & Assessment Process

2010 2015

Goal Set (01/25/10)

Project Started(01/01/10)

Carbon Reduction Projects Implemented (Continuous)

Portfolio Accounting(January 2011)

Portfolio Accounting(October 2013)

Goal Ends(12/31/15)

Figure 2. Program Timeline

6 It is important to note that the carbon reduction claims, rules for quantifying reductions, and monetization within this document are written under current regulatory standards in the U.S. If Federal or other laws change that effects the guidance prescribed in this document, they will be re-assessed at that time. This includes, but is not limited to: public reporting on carbon emissions regulated by the SEC, regulations set by FTC for marketing claims, carbon tax or cap and trade legislation or regulation by EPA, or carbon reporting by EPA.

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Unintended Consequences The possibility exists that a product or process that is intended to have a carbon reduction on a per-unit, or per-production output basis, elicits a net impact that overall increases total carbon emissions. This would likely be due to increased sales or production that exceeds the expected carbon savings from prior sales growth. Walmart has put in place a “sales trigger” to indicate that an additional analysis needs to be conducted. The trigger for a study is a 10% increase in sales growth year over year. The next step in evaluating the triggered project is to assess the carbon efficiency gain. If the increased efficiency (or carbon reduction) is greater than the increased sales percentage, then a further market analysis is not warranted. If, however, the converse is true, as is described fully in Part 4, the team would conduct a market analysis of the changes in sales to determine if there is indeed a net increase in carbon emissions due to the project itself.

Part 2: Project Accounting Guidance This part of the document clarifies the qualification and quantification of emission reductions. It describes the methodology and decision-making process to determine when emissions reductions can be attributed to Walmart to contribute to the supplier GHG reduction goal. It also describes how to quantify the emission reductions achieved. This methodology is intended to be rigorous, credible, and practical.

This document lays out both the types of emissions reduction opportunities that exist within the life cycle of products sold by Walmart (and/or product categories) and the criteria used to account for the reductions as part of Walmart’s product life cycle and supplier GHG reduction goal. It outlines:

1. The qualifying criteria to determine if the carbon reduction applies; and 2. The quantification and accounting requirements to assure that the reductions in cost and

GHG emissions are real.

Instructions for submitting a project in conformance with this guidance are provided in Part 3 of the document.

Qualification of Emissions Reduction Projects For a project to qualify toward the goal, it must qualify according to the rules set forth in this guidance. Generally speaking, Walmart can reduce product life cycle emissions by either influencing the development or design of the products themselves and/or by improving the facilities and processes used to make and transport products. The types of projects and criteria for it to qualify are described below.

Types of Projects that Qualify To evaluate Walmart’s role and contribution to reducing value chain carbon emissions, Walmart has identified three project types. Walmart, through supplier engagement, will either:

1. Inspire the creation of and/or increase the sales of new “lower-carbon” products, 2. Improve existing products and/or sell more of improved-version products, or

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3. Make improvement to facilities or processes for a supplier.7

As seen in the qualification decision tree in Figure 3, the three project types align either with a product reduction (Track 1) or a facility/process reduction (Track 2). Figure 3 shows these two separate tracks and the qualifying questions used to determine if a project qualifies for the goal.

Qualification Criteria Qualification criteria must be met specific to each project type (product or facility/process). Walmart has created the qualification decision tree to show each of the project types (illustrated as decision tracks) and the questions and measurements that are used to validate Walmart’s involvement. In addition to the questions posed in the decision tree, a project must meet the following criteria to fully qualify under this program:

1. Have start and end dates within the goal period (see Timing) 2. Demonstrate the project is due to Walmart’s influence (see Additionality) 3. Demonstrate that the reductions are above and beyond normal trends in the market (see

Beyond BAU).

Timing For a project to count toward this goal, the implementation start date must be within January 1, 2010 and December 31, 2015. The end date for all projects for carbon accounting purposes is December 31, 2015. Therefore, a project that starts on December 31, 2015 will only have one day of savings that can contribute toward this goal.

Though many carbon reduction projects may be underway and will continue to be developed and encouraged, projects that begin before 2010 or after 2015 will not be included in this goal.

The “start date” for products coincides with the product’s point of sale or initial sale date. A start date for a process or facility reduction is the same date that the process change is in effect and is implemented, defined as, point of implementation.

7 A facility or process improvement may include transportation, logistics, or actual changes to a facility.


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Track 1

PRODUCT FACILITY / PROCESS

Is the carbon reduction at the

product or facility/process

level?

Was facility or process improve-

ment a direct result of Walmart activity?

Is product newly designed or improved?

Did Walmart influence energy

management?QUALIFIED

Did Walmart directly influence the

development or design or redesign?

Did Walmart influence increased

sales?QUALIFIEDQUALIFIED

QUALIFIED NOTQUALIFIED

NOTQUALIFIED

YES NO

NOTQUALIFIED

YES NO

YES NO

YES NO

YES NO

Track 2

Figure 3. Qualification Decision Tree


Additionality GHG reduction protocols cite two core criteria for proving that the activity is “additional” and beyond business as usual (BAU) in terms of achieving emissions reductions.

For a project to qualify, it must have happened because of Walmart’s influence, showing additionality. This does not exclude projects that were also influenced by other entities, programs, incentives, etc.

However, the Walmart Project Champion must be able to prove that the project would not have happened at the time it did without Walmart’s involvement. In this project, Walmart’s influence on the project is deemed as “additionality.” Additionality for products means that for a lower-carbon product:

• Walmart directly influenced the development or redesign of the products, or • Walmart influenced the increased sales of the product.

Influencing the product directly means that Walmart engaged with a supplier to design or influence the design of a new product that is more carbon efficient. For instance, if Walmart encouraged a supplier to re-design laundry detergent to have a lighter-weight package than is currently offered, this would be influencing the redesign. If Walmart sought out a new detergent that was concentrated or eliminated specific raw materials that are more carbon intensive to extract, then this would also be an influence of the redesign.

For facilities and processes, additionality means that:

• Walmart directly contributed to the improvement of a facility or process, or • Walmart influenced energy management.

Beyond BAU For both product and facility-based reduction projects, proving that the project is beyond “business as usual (BAU)” is part of the qualification criteria.

Beyond BAU for Products To claim a reduction for products, the improvements must be additional and go beyond BAU. For example, if Energy Star requirements mean that products will improve energy efficiency by 5% each year, then the product that is being improved through this Program must exceed this Energy Star requirement.

Beyond BAU for Facilities/Processes To claim a reduction, facility-level improvements must be additional and go beyond BAU. For example, it must not be solely complying with Federal Regulations. Initiatives such as low-carbon energy, energy efficiency and transportation must be beyond typical business practices. For example:

• A facility achieving energy efficiency reductions must be beyond projected improvements in that industry sector (likely needs to be beyond the 1-2% expected U.S. annual

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efficiency improvement). The facility may have had an energy audit which revealed significant energy management opportunities and it implemented those changes.

• Walmart’s Supplier Energy Efficiency Program (SEEP) initiatives can meet a beyond BAU test if the technologies used are improvements over typical operations within that industry.

• For transportation gains, there must be documented fuel efficiency improvements beyond industry average. Similarly, changes to alternative fuels and mode of transportation must be clear improvements from the industry average baseline.

Quantification of Emissions Reduction Projects Once a project has been deemed “qualified” for Walmart reduction claims through the decision tree and additional criteria, the reduction in GHG emissions achieved by that product or company project must be quantified. Guidance on measuring the emissions reductions is supplied in Part 3 with the supporting worksheets in Attachments A and B.

In all cases, the submitted documentation, including life cycle assessments (LCAs) and facility footprints, will be considered. At several points in time during the project's life, the assessors (PwC) will perform consulting procedures, for the benefit of Walmart management, to assess Walmart's process and methodology surrounding the measurement of carbon emission reductions and related financial benefits against these guidelines.

Below is guidance on factors that need to be considered during the quantification of the proposed reduction projects for products and facilities.

Uncertainty For all data submitted, the Champion must disclose the uncertainty associated with the data. Specifically, the Champion must describe the range of uncertainty in the data and the main sources of uncertainty. This will be used as part of the project assessment.

Product Quantification (Track 1) Quantification of product emission reductions from a project has several key elements:

• Describe product and identify reference product; • Identify a GHG Calculation Methodology; • Describe if the product has a one-time climate change effect, or continual effect. • Calculate the carbon reductions achieved on a per functional unit basis including losses

of the product. • Describe the product trends. • Describe sales (historical and forecasted) of the product.

Product-based reductions require that a complete LCA be executed by either the supplier or as part of an industry effort. To claim a reduction, the LCA must be compared against a defined baseline of a reference product. The difference between the reference product’s GHG footprint, adjusted to reflect trends in energy efficiency, and the new product’s GHG footprint represent the potential carbon reduction for the implemented project. Part 3 includes guidance on LCA accounting in addition to parameters to consider when defining the baseline for the reduction.

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Some guidelines and frequently asked questions that will help to complete the Product Carbon Reduction Worksheet (Attachment A) are included in Part 3.

Describe Product and Identify a Reference Product After selecting and describing the product that is eligible for the carbon reduction potential, the Champion must identify a reference product against which to benchmark this product. The reference product may be another product that serves a similar function. As a reference product may vary significantly from the product in question in terms of technology, materials, or size, it is important to compare them on this basic level of function, also known as a “functional unit”. This is particularly crucial for products whose impacts greatly depend on how they are used at the consumer level.

Part of the functional unit includes losses of the product for the supplier and for Walmart. This should be embedded in the functional unit definition. Losses occur regularly from new products and existing products due to take-back, lack of sales, damage or breakage, etc.

For example, a project that is based on a concentrated detergent might consider a cleanser that is not concentrated as a reference product. Although the products may come in bottles of different sizes, they provide the same function – the cleansing provided during a wash. In this case, the functional unit could be one load of laundry (which would be defined as well). Because less concentrated cleanser would be needed to provide one wash than the reference product, its carbon impacts would potentially be lower on a per-wash basis. Carbon impacts will be calculated on the basis of this functional unit, so it is important to keep this in mind when selecting the reference product.

Other example functional units include:

• Wall paint: A 10 ft2 surface area when comparing the amount of paint needed to provide full coverage on a wall,

• Lighting: A compact fluorescent light bulb (CFL) could be compared to an incandescent light bulb. Though different products, they serve the same function; delivering a certain amount of light over a certain time period. Assume one CFL bulb will provide light for 8000 hours and an incandescent bulb will provide light for 1000 hours, a comparison would be made between one CFL bulb and eight incandescent bulbs for the functional unit of X lumens of light for 8000 hours of use.

Selection of an appropriate functional unit is critical to insure an accurate comparison of carbon impacts between the product and reference product.

The Champion must explain the start and end of the project. A project claim can be made from the start of a project until the completion of the project or December 31, 2015, whichever comes first. The start of the project is defined as the “point of sale”. The end of a project would be the end of sales of that product. Emissions reduction accounting begins at the point of sale of the new or improved product, or at the point of implementation of the facility project.

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As shown in Figure 4, the projections of carbon reductions achieved on a per project basis start at the point of sale for products or the point of implementation for facility-level innovations and extend to 12/31/2015, the end date of the goal.

2010 2015Point of SalePoint of Implementation

Reduction Projections

Figure 4. Timing of Reduction Projections

Identify a GHG Calculation Methodology For each product, the Champion must define and describe the methodology used to calculate the baseline and forecasted reduction potentials. The Champion may use a methodology that is best suited for the calculation, but documentation and an explanation is required. Suggested life cycle and corporate accounting methodologies include ISO14040 and ISO14064 standards, WRI/WBCSD’s GHG Protocol Corporate and Product Life Cycle Reporting and Accounting Standards (currently in draft form), and British Standards Institution’s PAS2050 (see Part 5 for additional information).

The Champion should include the life cycle phases appropriate for the methodology. All phases of the life cycle of the product must be addressed (unless sufficiently justified for exclusion) and an appropriate methodology used for the assessment. Either an individual supplier or an industry effort could produce the LCA documentation. In all cases it should be fully transparent.

The life cycle phases are:

• Raw material extraction: The raw material product phase relates to the GHGs embodied within the raw material inputs that compose a product, the emissions associated with their extraction, and transportation to a processing plant.

• Manufacturing: The manufacturing phase relates to the emissions released while transforming raw materials and other inputs into a finished product, such as those resulting from electricity generation and fuel use.

• Distribution: The distribution and retail phase details emissions from transporting finished goods to distribution centers and final retail locations and captures the emissions from fuel combustion, truck and in-store refrigeration, store electricity consumption, etc.

• Consumer Use: Any emissions resulting from using the product, such as electricity consumption, should be taken into account in the consumer use phase.

• End-of-life / new life (recycle or other): The end-of-life product phase captures product disposal and accounts for emissions from landfilling, incineration, composting, and recycling.

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Note: Transportation must also be included in each stage, such as raw materials that require transportation to a processing facility and transportation at end-of-life to a municipal solid waste processing facility.

Projects Focused on Downstream Reductions When a product change affects either the consumer use or end-of-life phases of a product’s life cycle, further analysis is needed to understand the actual impacts of this project. The downstream effects are lesser known as products reach many households and individuals, all of which have different behaviors associated with the product.

For example, if a product sold in US Walmart stores was redesigned to be made with a compostable material, Walmart could work with a supplier to label the product “compostable.” However, it is essential to understand how the consumer actually follows the label. There is limited composting at a commercial level throughout the US and while it is becoming more popular, it is also limited on a per-household level. Therefore, to understand how the product is being disposed of at its “end-of-life” phase, Walmart would need to conduct a market analysis.

The market analysis would examine the behaviors before and after the product label was changed. This analysis is essential for supporting a claim of a carbon reduction.

When changing products for the consumer use and end-of-life phases, Walmart must work to educate customers when appropriate to impact the behavioral changes needed.

As part of the Program, Walmart will fund these studies when other resources are not available. It is essential that a Walmart Champion contact James Stanway early into the project if the project has downstream effects (consumer use or end of life) so that a baseline can be established.

Carbon Reduction Effect The results from changing a product can be a one-time or continual effect depending on the change. For example, if a product change effects the consumer use phase (as covered in the previous section), there is a possibility that carbon reductions will be achieved for each use of the product. Here are some examples to explain:

• Energy Efficient Appliance: If Walmart sells an appliance, such as a toaster, that is 20% more energy efficient than the reference product, it is demonstrating a continual effect for each time the consumer uses the product. While calculating the emissions, it is important to note the use phase considerations beyond a single use. This is a continual effect change.

• Concentrated laundry detergent: If Walmart creates a concentrated form of a liquid, then the benefits are realized throughout the product’s life, and during the use phase the benefits are multiple for each use. In this case, the use phase would need to consider the reductions from each use of the detergent. This is a continual effect change.

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• Reduced packaging for tissues: If Walmart works with a supplier to significantly reduce the packaging for tissues; this would be a one-time effect change since there are no savings in the use of the product itself.

The effect will need to be calculated appropriately when submitting the calculations for carbon reductions achieved in Steps 3 and 4 of the Product Worksheet.

Calculate the Carbon Emissions from Products The next critical step in quantifying the level of carbon reduction is to calculate the carbon emissions from the product and the reference product on a per functional unit basis, as described previously. The functional unit will ensure that a valid comparison is being made between products.

Establish BAU Case The reference product will be compared to a baseline that includes a BAU case. Only reductions beyond those expected to occur in a BAU case will qualify to be counted towards the value chain carbon reduction goal. While the Champion will be responsible for submitting responses to specific questions which will inform the baseline, the actual BAU baseline adjustment will be evaluated by ClearCarbon for this project. This is to ensure that there is no bias in the Champion calculations and to also allow for additional research on an industry-wide basis.

The BAU is established on a per product or per facility basis (for Track 2). For example, if Walmart works to change the energy efficiency of a microwave (Track 1), then the Champion must include baseline accounting for technology of a microwave. This would include projections of how the microwave energy efficiency is improving compared to the projections without Walmart’s influence through this project.

ClearCarbon will quantify the difference between a “BAU” case and the impact of the project from a product improvement perspective solely. The difference between the two, or the delta, will be calculated at the initial submittal based on projected trends for five years or until December 31, 2015, whichever comes first. An example of product emissions reduction accounting with the BAU baseline in place follows (and demonstrated in Figure 5):

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60

80

100

120

2010 2011 2012 2013 2014 2015

tons

CO

2e

Projected Emissions Reduction

Product A

Product A (BAU)

Product B

Figure 5. Emissions Reductions Calculated from the Business as Usual Case

• Product A is the original (reference) product against which the new or improved product is compared.

• Product B is the new or improved product.

• Product A (BAU) represents a predicted change in a product’s carbon efficiency over time based on industry and market influences on the technology.

The BAU baseline adjustment is NOT sales dependent; it is the measurement of the original product’s likely increases in energy efficiency or other changes that decrease the amount of GHG’s produced per unit over time based on business as usual.

If technological improvements are expected for a typical product that affects energy or carbon efficiency, then the baseline will need to be adjusted. The resulting five-year reduction is represented by the shaded area under the BAU baseline (assumes 2010 start date in Figure 5).

To assess if BAU trends exist for a given product, the Walmart Champion, in coordination with the supplier, will supply the following information in their submittal for the reduction period (point of sale to December 31, 2015):

• Are there any existing trends in material light-weighting expected for a typical product? Explain.

• Are there any trends in material switching (e.g., more or less carbon intensive plastics)? Explain.

• Describe any trends in recycled content or recycling rates of the comparison product. • Describe any use phase energy efficiency trends (e.g., more energy efficient hair

dryers). • Are any changes in waste handling or disposal that are carbon related expected?

Explain. • Where feasible, please supply expected percent changes for the given product category.

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Here are some examples that would provide evidence of a trend. Note that this is not a complete list.

• Industry/Market surveys conducted by third parties, • Government statistics (e.g., energy consumption patterns), or • Economic indicators that are linked to the product.

This information would need to be tracked over a minimum of a year, with ideally three years of data that will help to establish a trend. If the product is new and no trend information exists, then trends for a similar product category might be used.

These questions may be adapted to suit a particular project in advance of submission, or follow-up questions may be posed after the project package is received to gain further clarity surrounding the specific project’s BAU trends.

ClearCarbon will review responses to the BAU baseline trend questions and evaluate the expected changes to typical products based on external research conducted by ClearCarbon or Walmart, but not by the supplier. The following issues will be considered:

• If a product assumes more than 10% of the marketplace, it will be considered as the baseline scenario and therefore no additional reduction claims can be made.

• Baselines will only be adjusted at the initial submission of the project, at the 12-month review, and at Program completion (2015).

• Baseline adjustments will be documented by ClearCarbon and will include references to any resources used to determine the new baseline. This information will be included as part of the project package and will be heavily reliant on third-party sources.

In the event that the BAU baseline changes, ClearCarbon and Walmart will adjust the BAU baseline.

Walmart will provide feedback to the supplier on findings. Any increase in carbon efficiency will then be documented and adjusted accordingly. ClearCarbon will then re-calculate the submitted emissions reduction based on the approved baseline.

One year after initial submittal of the project, the emissions reduction projections and BAU assumptions will be adjusted to reflect any historical data available at that point, as shown in Figure 6. Any new information on the reference BAU baseline (e.g., all air conditioners now fall under mandatory Energy Star rule) for the product or facility against which the reduction is compared will need to be incorporated at this time.

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2010 2015Year 1 re-submittal

Forecasted Historical

Figure 6. Reduction Projections Resubmitted

Sales of the Product As part of the Program, the Walmart Champion must submit information projecting the sales of a product that impact the scale of the GHG reduction. The exact information submitted as part of the overall project Package will depend on timing of Package submittal and financial measurability.

Timing Financial accounting begins at the point of sale for the new or improved product or at the point of implementation for the facility or scope 3 project. Financial projections include any potential financial impact until December 2015. When the project Package is resubmitted (at 12 months and at the 2015 project close out), the financial projections will be adjusted to reflect any “historical” data available at that point. This is illustrated in Figure 7.

2010 2015Point of SalePoint of Implementation

Financial Projections

2010 2015Year 1 re-submittal

Forecasted Historical

Figure 7. Financial Projection Timing

Facility/Process Quantification (Track 2) Quantification of facility or process emissions reductions from a project has several key steps:

• Define the Carbon Emissions Calculation Methodology • Calculate the Carbon Footprint • Describe the savings from the project

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• Describe technology trends

Facility or company level emissions reductions will require a facility or process GHG inventory that quantifies energy efficiency and carbon-related improvement efforts and the resulting emissions. Facility- and process-based inventorying guidance for completing the Facility/Process Worksheet is provided in Part 3. Just as with product-based reductions, facility and process reductions require documentation of an appropriate baseline to calculate the resulting emissions reduction. A baseline may be a publically reported facility footprint for a particular base year, for example.

Define the Carbon Emissions Calculation Methodology The Champion needs to be explicit about the methodology applied to the calculation. Referencing methodologies such as the GHG Protocol Corporate Standard (WRI/WBCSD) is acceptable.

Calculate the Carbon Footprint For the carbon footprint calculation from the project to be calculated, it must be compared to a time interval before and after the project was implemented. The Champion should choose a time that would be accurate for comparison. This will be the reference period (the time before the implementation of a process/facility change) and the improvement period.

The Champion must transparently show all emissions on a per source level. Scope 1 emissions should be broken into each emission source as well as for scope 2. A supplier’s scope 3 emissions will as a general rule not be included in this project. The supplier should work with the Walmart champion to ensure that data are able to be assessed by a third party. These emissions reductions will be considered, but are not encouraged since the data availability presents a challenge for assessing and updating.

Describe Technology Trends To understand the BAU baseline adjustments for Track 2 projects, the Champion must follow the same methodology as described for products. In most cases, however, a facility or manufacturing category will be the focus of the Track 2 reduction.

While the Champion will be responsible for submitting responses to inform the baseline, the actual BAU baseline adjustment will be calculated by ClearCarbon for this project. This is to ensure that there is no bias in the Champion’s calculations and to also allow for additional research on an industry-wide basis.

Questions specific to a facility carbon reduction that will be answered by the Walmart Champion include the following:

• Are manufacturing energy efficiency gains expected in your industry? If so, explain and supply expected percent improvements over time and provide evidence.

• Are transportation efficiency trends related to the submitted project expected for your industry? Explain and provide evidence.

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• Are organic wastes handling methods expected to change for your industry (e.g., movement toward composting, biodigestion)? Explain and provide evidence.

• Are facility recycling percentages expected to improve in your industry? Explain and provide evidence.

Timing As part of the baseline setting, the Champion must explain the start and end of the project. A project claim can be made from the start of a project until the completion of the project or December 31, 2015, whichever comes first. Emissions reduction accounting begins at the point of implementation of the process or facility improvement.

• The start of the project is defined as the “point of implementation”. This is when the process or facility improvement comes on line and is first measurable.

• The “end” is defined as when a process or facility improvement ends, the facilities are not in operation, the relationship between the supplier and Walmart no longer exists, or December 31, 2015, whichever happens first.

As shown previously in Figure 5, the projections of carbon reductions achieved on a per project basis start at the point of sale for products or the point of implementation for facility-level innovations and extend to December 31, 2015, the end date of the goal.

Financial Values of Projects Through this guidance, Walmart intends to track carbon reductions and supplier-demonstrated cost savings or increased value to customers. This will be calculated and included in the worksheet submissions when possible.

GHG reductions that come from facility or process based projects require different financial value accounting than product GHG reductions. Quantifiable financial value to customers may include the following:

• Savings to the customer on energy or resource consumption during use of the product, resulting in lower energy bills and lower carbon emissions.

Financial value to the Walmart supplier might include the following:

• Fuel or electricity savings at a factory or facility level translated into cost savings through industry averages (e.g., average price of kWh x total kWh saved), or

• Material savings from reduced input purchases or a switch to cheaper materials/inputs.

In some instances either product or project based initiatives will result in a savings to the customer or a benefit to Walmart that are not financially measureable. In these cases, a qualitative description of the positive impact should be included in the worksheets. Benefits to suppliers and businesses may include:

• Improved business conditions, • Public relations opportunities, or • Increased positive stakeholder engagement.

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Part 3: Submission How-To This section details how to complete the worksheets and submit documentation to Walmart as part of achieving the goal.

General Questions

Who Submits the Documentation? Under this guidance, the submitter of the reduction package is termed the “Champion.” The Champion will submit completed worksheets to Walmart for review. The Champion is expected to be the Walmart Champion of the project, though the Champion may receive assistance and input from the supplier contact as necessary. As described in Part 1, each project will have a Walmart Champion along with a primary supplier contact or industry group representative where applicable.

How Do I Submit A Project? For each project submitted, the Walmart Champion will need to complete the worksheet (Attachment A) to determine under which track the reduction project is qualified and then complete the corresponding Track 1 or Track 2 Worksheet (Attachments B and C).

During the first half of 2010, submissions will be handled primarily via email correspondence. However, a centralized database and webforms are under consideration and may be launch under this Program. When the submission process changes, this section will be updated to reflect the current status.

<Future guidance will include database location and instructions to assist in answering worksheet question.>

Qualification

If my project does not fit the two tracks, does it qualify? A project must fit one of the two tracks on the decision tree and meet the criteria spelled out in this guidance document. If the project does not fit these two tracks then it may be best suited for an internal Walmart goal or another initiative.

Does a Walmart store reduction count? Only emission reductions that apply to Walmart’s scope 3 corporate footprint count for this project. In addition the project must meet the decision tree qualification guidelines. Emission reductions that occur at Walmart stores would not count.

Does a reduction at a Sam’s Club or an international store count? This goal is global in nature and covers all Walmart, Sam’s Club, and international stores that Wal-Mart Stores, Inc operates.

What are the dates for a project to “count” toward the goal? The project must have been started after January 1, 2010 and before December 31, 2015. Any reductions achieved after December 31, 2015 will not count towards this goal.

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What does it mean to “start” a project? For this goal, the start of a project is defined as the first time a product is sold (Point of Sale) or the start of a process or facility change (Point of Implementation).

Would a project that focuses on reductions from consumers (Walmart customers) count? Yes. All projects that affect the carbon emissions associated with Walmart’s upstream and downstream impacts would count. A consumer’s behavior change is difficult to quantify without market research. If a product change is going to happen at the consumer use phase, then Walmart will commission a study to understand behavior changes before and after implementation of a project. For these projects, it is essential to get in touch with James Stanway (contact information on front page) as early as possible to establish this study.

(Track 1) Product Quantification

How do I select a methodology? Prominent methodologies to use for the analysis of products include: the UK’s PAS 2050 product carbon footprinting guidance, WRI/WBCSD’s Product Life Cycle Accounting and Reporting Standard that is under development and ISO 14064 guidelines. If an internal methodology is chosen, the methodology must be transparent and documented as part of the quantification submission. General guidelines include:

• Determine the boundaries of the analysis according to the primary phases of a supply chain: raw materials, manufacturing, distribution & retail, consumer use, and end-of-life.

• Determine the types of greenhouse gas (GHG) emissions to be included in addition to carbon dioxide.

• Determine if a full life cycle analysis is warranted: It may not be necessary to include emissions from all phases. For example, the consumer use phase for a napkin would not have any associated emissions and therefore could be omitted from the analysis. Additionally, if the new or improved product does not have any change in emissions from the baseline product in a particular phase, these emissions could be omitted.

• Determine emissions sources: in general, emissions should be captured from raw material inputs, facility operations and transportation links between facilities. All facility footprints and the product emissions attributions must be documented. Where primary data collection is not feasible, secondary sources such as LCI database modules may be used. However, in order to differentiate between a baseline product and the new or improved product, including some portion of primary data collection is critical, especially if the manufacturing phase is integral to the emissions reduction claim.

• Where gaps in primary data exist, LCI databases such EcoInvent, Earthster, USLCI, can be used to generate estimates. Transparency in the emissions factor sources is critical.

What do I need to include in my methodology documentation? Include in your submission a description and discuss the following issues:

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1. Determine a functional unit (how is the product ultimately consumed? e.g. # of cans, # of cases, etc.)

2. Product bill of materials: types and quantity of materials used to manufacture product (e.g. raw materials, packaging materials, etc.)

3. Identify activities and processes involved in producing and consuming product 4. Types and quantities of all inputs and outputs (raw materials and energy sources) used

in processing, distribution/retail, consumer use) 5. Identify and quantify all transportation links throughout product life cycle 6. Identify and quantify energy and raw materials consumed during consumer use phase. 7. Discuss any by-products created during product manufacturing (e.g. other products,

direct gas emissions from manufacturing) 8. Discuss accounting for waste streams and their emissions 9. Describe data and emission sources used (e.g. company-specific data versus industry

proxy data, IPCC 2007 GWP 100a)

What is a Product Life Cycle Assessment? When evaluating product GHG emissions, all phases of the life cycle of the product must be addressed. A carbon product Life Cycle Assessment (LCA) is an assessment of the sum of a product’s effects (e.g. GHG emissions) at each step in its life including extraction of raw materials, manufacturing, distribution and retail, consumer use, and the end-of-life disposal. Either the individual supplier or an industry effort could produce the LCA documentation. In all cases it should be fully transparent and capable of being assessed.

How do I determine boundary conditions? Describe the impact and relevance of each life cycle phase. While all products do not necessarily have carbon emissions for the five life cycle phases listed below, all categories should be addressed to ensure a full life cycle can be considered for any given product. In cases where a life cycle phase is not applicable (e.g., a napkin has no meaningful emissions from consumer use), the responder need only state the rationale for why it is not relevant.

Raw Materials

ManufacturingDistribution

& RetailConsumer

UseEnd of Life

Resulting Carbon Emissions in kg CO2e for each phase for a SINGLE Product:

Phase kg CO2e / product Raw Material Extraction Manufacturing Distribution / Retail Consumer Use End-of-Life Total Emissions (kg CO2e)

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How do I account for loss rates? While sales are a good gauge of number of items put into use in the market, there are several examples of product loss that need to be considered for any individual product line. Items may break, not be put in use (stored), stolen, or returned to store. Loss rates need to be incorporated into the overall accounting of number of items put into the market in the functional unit of the product’s LCA.

For example, Sam’s Club launched a milk jug redesign in 2008 that resulted in significantly less plastic in jugs. However, there was an increased loss rate due to breakage. The loss rate must be incorporated into the analysis to ensure the net benefit is understood and real.

In addition to the basic reduction derived from the emissions difference between the baseline product versus new product, the supplier must identify whether the new product affects the product loss rates. For example, a new “low-carbon” packaging solution could reduce the carbon footprint of a product by 50%, but the product loss rate may increase due to reduced structural integrity. This loss rate would need to be integrated into the carbon measurement for the product. Therefore, if the loss rate increased from 1% to 11%, the analysis would have to show it takes 111 units to successfully deliver 100 units to retail customers. The same issue is true for packaging or product alternatives that lead to increased thefts.

(Track 2) Facility/Process Quantification

What is the “type of footprint?” Indication of the type of footprint being conducted such as single facility or individual technology should be included as part of Step 1 with a justification for that footprint category. For example, if multiple initiatives have improved energy efficiency at a facility which supplies products to Walmart, then a facility footprint would be most appropriate. If, however, only one piece of equipment has been installed and the increased energy efficiency is directly measurable from that installation, data would only need to be supplied for that individual technology.

What methodology should I follow for facilities or processes? Walmart recommends that submitters of GHG emissions data follow the WRI/WBCSD GHG Protocol when conducting a facility or company footprint for this reduction accounting exercise. Acceptable emissions factors are indicated in this protocol and their use should be clearly documented in the footprint calculations. The recommended emissions factors should also be employed if either a process or technology footprint is conducted. A secondary document may be submitted (such as an Inventory Management Plan or a Corporate GHG Accounting Methodology) in addition to completing the corresponding worksheet.

What are the boundaries to consider in a facility/process quantification calculation? The boundary conditions (emission sources included in the study) determined for the reduction assessment should be clearly defined. For facility or company footprints, both scope 1 and scope 2 emissions should be included. Depending on the process or technology improvement

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either scope 1 or 2 or both may apply. The Champion should strive to be as complete as possible in either case. The GHG Protocol offers some guidance on this subject.

Facility/Technology

Scope 2

Scope 1

Refrigerant Leakage

Onsite fuel emissions

Mobile emissions

Purchased electricity

Indication of what type of reduction initiative is being conducted needs to be included as part of Step 2 along with justification for that reduction initiative category. For example, if multiple initiatives have improved energy efficiency at a facility that supplies products to Walmart then a facility reduction initiative would be most appropriate. If, however, only one piece of equipment was installed and the increased energy efficiency is directly measurable from that installation, data would only need to be supplied for that individual technology.

Why do I need to show the baseline calculation per emission source? The Champion must describe the type of reduction effort achieved and indicate if it is for a single facility, multiple facilities, the entire company, or an individual technology. In addition to reporting emission values, an explanation should detail how emissions are converted into tons of CO2e. The supplier should only include emissions values for those sources that are pertinent to the reduction. Documentation supporting the resulting GHG emissions accounting may be requested by Walmart if further information is required.

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Part 4: Post-Submission After the Champion submits the application package, which includes the Product and Process/Facility worksheets and any required supplemental data/documentation, the project will go through review to ensure that it is complete. This part describes the process of post-submission.

A flow chart that describes this process is provided at the end of Part 4, Figure 8.

Step 1. Project Application Package Submitted For each project, a supplier and Walmart Project Champion are involved in gathering the appropriate paperwork. The Walmart Champion is ultimately responsible for submitting the application package. In Step 1, the Walmart Champion submits historical and forecasted carbon reduction and financial savings data from the point of sale of a product or point of implementation of a project.

Carbon reduction information should be submitted following the format of the Qualification and Quantification worksheets attached.

Step 2. Package Stored in Database The submitted Package for each project/product is stored in a database managed by ClearCarbon. The database will alert the Champion of a successful submittal and will notify ClearCarbon and Walmart project managers of submittal of the project.

Step 3. Quality Assurance (QA) of Application ClearCarbon will do a QA review of the application package for the following:

• Qualification section of worksheet complete • Quantification section of worksheet complete & calculations are attached • Financial data submitted • Development of BAU case based on responses provided by Champion (see Part 2 for

more information)

If the project submittal package is complete, ClearCarbon will then update the package with the BAU case and generate a QA report. While completeness is one part of the QA review, ClearCarbon will also review the package to determine if the methodology, boundaries, loss rates and other assumptions were properly executed.

Step 4. QA Report Generated ClearCarbon will generate a report of completeness and appropriateness. This will be added to the Package.

Step 4a. Feedback Provided to Project Champion If there is missing or incomplete information or the assumptions are incorrect, ClearCarbon will communicate this directly to the Project Champion and ask for resubmittal (step 4b).

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Step 4b. Application Package Resubmitted If a project goes through resubmittal, it will be reviewed again under Step 3.

Step 5. Assessment of Completeness and Accuracy of Claims When all data is deemed complete and BAU adjustments have been made, the package will be forwarded to the assessment team for review. If the assessment procedures are successfully completed, then the Project moves forward to Step 6.

If the assessment identifies shortfalls in the quantification and there is an opportunity for resubmission through clarifying the application, the Application is returned back to the Champion through step 4a.

If the assessment process determines that the reduction project is ineligible for this program (e.g., evidence of a reduction cannot be produced) then the following steps apply:

Step 5a. Feedback Provided to Project Champion & Team If a project is deemed ineligible to be counted as part of the Walmart Supplier GHG Innovation Program, then it will be deemed “invalid”. An ineligible project would be one that does not qualify for this program. In this case, information will be provided to the Champion and the team to ensure that the reasons are understood.

Step 5b. Close Project If the project is “invalid”, it will be closed in the database and reasons for closure will be documented.

Step 6. Project Accounted in Database If the assessment procedures determine that the Project information has been completed consistent with the guidelines, then the Project gets accounted in the database as a carbon reduction.

Step 7. 12-Month Adjustment Twelve months after Point of Sale or Point of Implementation of a project, the Champion will be asked for a resubmission of the project package to reflect historical data.8 This will allow for the review of the assumptions underlying the projected baseline of the project and the initial projections of emissions reductions.

At the 12-month mark for products, the sales of the product must be reported. Because the goal of this project is to reduce GHG emissions, the volume of products produced and sold must also be tracked. Though each product will have a different sales growth/decline, it is generally expected that most products will have a sales increase. Given this, if a product’s sales from year to year (point of sale to 12-month adjustment) grow more than 10%, then an additional

8 The Point of Sale or Implementation will rarely coincide with the submission date of a project package. Because the data of interest are the historical emissions and sales data, the 12-month adjustment is tied to the start of the project, not the submissions date. If the initial submission already includes 12 months of historical data then a resubmission is not required and the project will only be re-adjusted at the close of the program.

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investigation must be conducted to ensure that there is a net decrease in carbon. This is known as the “sales trigger”.

The next component of the analysis will be to conduct a quick comparison of the emissions reduction percentage per product and compare it against the sales increase. If the reduction percentage is higher than the sales increase, no further study is warranted. If the converse is true, then a more in-depth market study will be performed. The analysis will include evaluation of change in price, population growth, elasticity, market trends and market share. It will evaluate projected increases of the product category year to year. If this is less than the actual growth of the product sales, then further investigation is required to quantify the net impacts. There are two expected scenarios from a growth in sales: either Walmart captures market share or demand increases. Here are the governing rules for these two scenarios:

1. If the sales increase exceeds growth projections, but Walmart has captured market share from a competitor or competing product within Walmart stores, then this is not considered a net increase.

2. However, if through this project Walmart creates new demand for a product, then a full

analysis is required to understand the net impact.

Step 8. Review (QA) of Application At the 12-month adjustment mark, ClearCarbon will review the resubmitted application and either provide feedback to the Champion if additional changes are needed (step 8a), or notify the assessment team for the 12-month assessment (step 9).

Step 8a. Feedback Provided to Project Champion If the assessment or the QA review reveals additional information is needed, then feedback will be provided to the Champion.

Step 8b. Application Resubmitted The Champion will be responsible for resubmitting a complete package.

Step 9. 12-Month Assessment The assessment team will review the updated information and, if necessary, either verify or ask the Champion for more information (step 8a), and will report on its assessment to Walmart management.

Step 10. Adjustment at Program Conclusion At the conclusion of the project accounting or at December 31, 2015, whichever comes first, another baseline adjustment will be made by the Champion. The Champion will provide additional carbon and financial data, as appropriate to review the assumptions underlying the historical data against the forecasted data.

Step 10a. Review (QA) of Application At the Program Conclusion, ClearCarbon will review the resubmitted application and either provide feedback to the Champion if additional changes are needed (Step 8a), or notify the assessment team for the final assessment (Step 9).

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Step 10b. Feedback Provided to Project Champion If further adjustments are needed, the assessors will provide the Project Champion with feedback about adjustments needed.

Step 10c. Application Package Resubmitted As needed, the Champion will need to resubmit the application package to ensure completeness as described by the assessors and QA review findings.

Step 11. Final Assessment The assessment team will conduct a final assessment on the updated information and will report on its assessment to Walmart management.

Step 12. Close Project At the conclusion of a project, it will be accounted for and closed in the database.


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Project Accepted

Package Complete

4. QA Report Generated

3. Review Application

2. PackageStored in Database

1. Project Application

Package Submitted

5b. Close Project

5a. Feedback to Project Champion

Project Invalid

5. Assess Complete-ness and Accuracy

Package Incomplete

4a. Feedback to Project Champion

4b. Application

Package Resubmitted

12. Close Project

11. Final Assessment

10a. Review Application

10. Year 5 or 2015

Adjustment

9. 12-Month Assessment

8. Review Application

7. 12-Month Adjustment

6. Project Accounted in

Database

10b. Feedback to

Project Champion

10c. Application

Package Resubmitted

8a. Feedback to

Project Champion

8b. Application

Package Resubmitted

Capture & Review

Assess & Update

ClearCarbon“Owner” Legend

WalmartPrice-

waterhouseCoopers

Figure 8. Project Post-Submission Process


Part 5. Glossary and Reference Materials

Glossary Term Definition

Additionality A criterion for assessing whether a project has resulted in GHG emission reductions or removals in addition to what would have occurred in its absence.

Assessor In this program, the assessors are a third-party firm who is providing review of projects for completeness and accuracy of carbon reduction claims.

Baseline A hypothetical scenario for what GHG emissions, reductions, removals or storage would have been in the absence of the GHG project or project activity.

Base year A historic datum (a specific year or an average over multiple years) against which a company’s emissions are tracked over time.

Business-As-Usual (BAU)

This is the case that defines what the carbon emissions of a product or a facility would have been if a company was not encouraged, introduced, or catalyzed to implement an innovation.

Carbon Dioxide Equivalents (CO2e)

Standard GHG emissions reporting metric. Each gas has a different global warming potential. For simplicity of reporting, the mass of each gas emitted is commonly translated into a carbon dioxide equivalent (CO2e) amount so that the total impact from all sources can be summed to one figure.

Carbon Footprint A measure of the amount of carbon dioxide emitted into the atmosphere by an individual, organization, event or product. Typically measured in tons of CO2 equivalent emitted annually, a carbon footprint is directly related to consumption of fossil fuels, land use changes, and of electricity from non-renewable energy sources as well as from emissions of refrigerants.

Carbon Intensity

This measurement takes into account the carbon impact of a single unit of product and multiplies that by the number of units sold.

Climate Change Refers to any significant change in measures of climate (such as temperature, precipitation, or wind) lasting for an extended period (decades or longer). Climate change may result from natural factors (changes in the sun's intensity, or slow changes in the Earth's orbit), natural processes (changes in ocean circulation), and human activities (burning fossil fuels, and changing land surfaces – deforestation, or urbanization)

Cradle-to-Gate An assessment of a partial product life cycle from raw material extract (‘cradle’) to the factory gate (i.e., before it is transported to the consumer) also defined as upstream emissions.

Cradle-to-Grave The full Life Cycle Assessment from raw material extraction (‘cradle’) to use phase and disposal phase (‘grave’). This assessment would include both upstream and downstream emissions sources.

Energy Efficiency Refers to products or systems using less energy to do the same or a better job than conventional products or systems. Energy efficiency saves energy, saves money on utility bills, and helps protect the environment by reducing the demand for electricity.

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Term Definition Functional Unit The functional unit is the quantified performance of a product system for

use as a reference unit (ISO 14044:2006, 3.20), and establishes the basis for which the GHG inventory is calculated and reported. Some examples of functional units include drying 1000 pairs of hands; delivery of 1000 liters of fruit drink; provision of 890 lumens over 1 year; transport of 6 people and cargo by a vehicle over 100,000 miles; and many others. (see WRI/WBCSD’s Product Life Cycle Accounting and Reporting Standard).

Greenhouse Effect Long-wave radiation is prevented from leaving the Earth’s atmosphere due to greenhouse gases, which contributes to higher temperatures on the surface of the Earth.

Greenhouse Gases (GHGs)

Atmospheric gases that contribute to the greenhouse effect and thus to global warming. Human activities (particularly burning fossil fuels) are responsible for the buildup of excessive and fast-increasing levels of greenhouse gases Carbon Dioxide (CO2) – The most important and common greenhouse gas. CO2 emissions result from the combustion of fuel, from land use changes, and from some industrial processes. Methane (CH4) – Simplest type of hydrocarbon is the primary component in biogas and natural gas. Nitrous Oxide (N2O) – Nitrogen oxides are produced in the emissions of vehicle exhausts and from power stations. Hydrofluorocarbons (HFC) – HFCs are emitted as by-products of industrial processes and are also used in manufacturing. (R-134a) Perfluorocarbons (PFC) – PFCs are used in refrigerating units and fire extinguishers. Primary aluminum production and semiconductor manufacture are the largest known human-related sources. Sulphur Hexafluoride (SF6) – Mainly used as an insulating medium in the electrical industry or as an inert gas filling in windows.

GHG Innovation Carbon Reduction Project

A specific project or activity carried out by a supplier of Walmart focusing on either the product or facility/process resulting in a reduction of the amount of GHG emissions. The individual “projects” will collectively add to achieve the goal.

GHG Inventory A list of greenhouse gas emission sources and associated quantities calculated for or by an organization.

GHG Protocol Initiative

A multi-stakeholder collaboration convened by the World Resources Institute (WRI) and World Business Council for Sustainable Development (WBCSD) to design, develop, and promote the use of GHG accounting and reporting standards for business. It comprises of two separate but linked standards—the GHG Protocol Corporate Accounting and Reporting Standard and the GHG Protocol Project Quantification Standard.

Ineligible Project An ineligible project would be one that does not qualify for this program. It can be ineligible because it does not meet the criteria of being focused on a supplier, does not fit into the timeline, does not demonstrate additionality, or is not beyond BAU. Ineligible projects will not be quantified.

ISO14040 ISO 14040 provides a set of standards for life cycle assessments (LCAs).

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Term Definition standards These standards include: definition of the goal and scope of the LCA, the

life cycle inventory analysis (LCI) phase, the life cycle impact assessment (LCIA) phase, the life cycle interpretation phase, reporting and critical review of the LCA, limitations of the LCA, the relationship between the LCA phases, and conditions for use of value choices and optional elements.

Kg CO2e / product Kilogram of carbon dioxide equivalents per product. A unit of measure of the carbon embedded in a product for each life cycle phase or the summed life cycle phases.

Life Cycle Assessment (LCA)

An assessment of the sum of a product’s effects (e.g. GHG emissions) at each step in its life including extraction of raw materials, manufacturing, distribution and retail, consumer use, and the end-of-life disposal.

Operational Boundary

The parameters that determine the direct and indirect emissions associated with operations owned and controlled by the reporting company.

Organizational Boundary

The parameters that determine the operations owned or controlled by the reporting company.

PAS2050 A Publicly Available Specification (PAS) methodology developed by the British Standards Institution (BSI) for measuring the embodied greenhouse gas (GHG) emissions from goods and services.

Point of Sale The start date that a product is sold at Walmart. Point of Implementation

The start date for a process change to be implemented at a supplier facility.

Project Champion

An internal lead responsible for setting up appropriate meetings and identifying suppliers who would be best suited to implement a carbon reduction project.

Research Team The Research Team helps to identify carbon reduction calculations and review all carbon reduction claims for completeness and soundness of methodology.

Scope 1 (Direct Emissions)

GHG emissions that result from sources owned or controlled by the company. Direct emissions include; on-site fuel combustion, refrigerants, or fugitive emissions.

Scope 2 (Indirect Emissions)

GHG emissions that result from the generation of purchased electricity. Indirect emissions include electricity or steam purchases.

Scope 3 (Other Indirect Emissions)

GHG emissions that result from sources not owned or controlled by the company, but are a consequence of company activity. Other emissions include use or disposal of products or services, supply chain or distribution/logistic emissions, and business travel emissions

Supplier Contact This supplier contact will be involved in implementation of the project and providing data to help to quantify the reductions from the project.

Sustainability A state or process that can be maintained indefinitely. Quality Assurance (QA)

This is a process of reviewing project submittals for appropriateness of methodology, completeness, and calculations.

Qualification Decision Tree

The methodology created by Walmart to show the project types (illustrated as decision tracks) and the questions and measurements that address whether or not project proposals qualify toward the Walmart Supplier GHG Innovation Program.

Supplier A company that sells merchandise to Walmart.

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Term Definition Supplier Energy Efficiency Program (SEEP)

This Walmart initiative conducts energy efficiency audits and retrofits of participating supplier buildings. The program helps suppliers learn from Walmart’s experience with energy efficiency and forms the basis of an energy efficiency model that can be adopted by any private or public sector organization that manages a supply chain.

Walmart Supplier GHG Innovation Program

This program seeks to find, achieve, and account for emission reductions by working with suppliers throughout Walmart’s product categories and departments. The initial timeline of this program is between January 1, 2010 and December 31, 2015.

Supply Chain

The upstream sequence of events that suppliers undertake such as the extraction of raw materials, manufacturing of products, and distribution to retail outlets. The resulting emissions from these processes are categorized as scope 3, indirect, as defined by the GHG Protocol.

Supplier GHG Reduction Goal

This commitment by Walmart is to reduce the carbon footprint of its supply chain by 20 million metric tons of CO2e between January 1, 2010 to December 31, 2015.

Sustainable Value Networks (SVNs)

Strategic networks that bring together internal company leaders, supplier companies, academia, government, and non-governmental organizations (NGOs) to help integrate sustainable practices into all parts of Walmart’s business.

Value Chain

In the context of carbon emissions, this term refers to the impact that goods and services purchased upstream from suppliers and sold downstream to consumers have on the environment.

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Reference Materials Applied Sustainability Center (ASC) Lifecycle Assessment Overview: http://asc.uark.edu/LCA_summary_ver2b.ppt

Carbon Disclosure Project (CDP) Supply Chain Report: www.cdproject.net/CDPResults/CDP-Supply-Chain-Report_2010.pdf

Carbon Trust –Carbon Footprints in the Supply Chain Report: www.carbontrust.co.uk/Publications/pages/publicationdetail.aspx?id=CTC616

EcoInvent Centre: www.ecoinvent.org

Earthster: www.earthster.org

Greenhouse Gas Protocol Corporate Standard: www.ghgprotocol.org/files/ghg-protocol-revised.pdf

ISO 14064 Guidelines: www.techstreet.com/cgi-bin/detail?doc_no=ISO%7C14064_1_2006&product_id=1259126

National Renewable Energy Laboratory—Lifecycle Inventory: http://www.nrel.gov/lci/

PAS 2050 Product and Services Carbon Footprint Guidance: www.bsigroup.com/upload/Standards%20&%20Publications/Energy/PAS2050-Guide.pdf

Project Accounting and Reporting Standard: www.ghgprotocol.org/files/ghg_project_protocol.pdf

Product Life Cycle Accounting and Reporting Standard: www.ghgprotocol.org/files/ghg-protocol-product-life-cycle-standard-draft-for-stakeholder-review-nov-2009.pdf

U.S. Life Cycle Inventory Database Roadmap: www.nrel.gov/docs/fy09osti/45153.pdf

Walmart Global Sustainability Report 2009: www.walmartstores.com/download/3722.pdf

Walmart Supplier Sustainability Assessment: http://walmartstores.com/Sustainability/9292.aspx

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Page A-1

Attachment A. Product Carbon Reduction Worksheet Instructions to Walmart Champion:

This worksheet is intended to be completed by the Walmart Champion who is working with a supplier (or suppliers) to achieve carbon reductions from either improving a product or offering more sales of an improved product. Additional instructions and background on this document can be found in the Walmart Supplier GHG Innovation Program Guidance Document. If you have questions while completing this worksheet, please contact Jim Stanway at Walmart Energy Team.

If your project does not pertain to a product change, but relates to a carbon reduction from a facility or process from a supplier, complete the Facility/Process Worksheet, not this worksheet. Please see the attached decision tree to see if your project qualifies before answering quantification questions.

Fill in all sections that are in gray. Instructions are provided in red throughout.

Walmart Information For the person completing this worksheet, please fill in your contact below. You are the “Walmart Champion.”

Walmart Champion Name:

Email: Phone:

Supplier Information If multiple suppliers are involved, please add additional contacts below.

Company Name: Contact Person Name: Email: Phone:

Project Information Tell us about the project and what product is being affected by the project.

Project Name: Product Name: Date Submitted:

Date of Sale Anticipated Actual Date of First Sale of Product: (check if actual or anticipated)


Page A-2

Track 1




level?











NOTQUALIFIED

YES NO

NOTQUALIFIED

YES NO

YES NO

YES NO

YES NO

Track 2

Figure A. Project Qualification Decision Tree


Qualification of Project

Step 1. Qualification (Track 1) 1.1 Provide a brief description of the product. Briefly describe in box below including size, SKU (store keeping unit) or UPC, fine line description and prime item9, and manufacturer’s specifications.

For a project to qualify, it must either meet the criteria of step 1a or step 1b. Please read step 1a and 1b and answer the questions.

Step 1a. Influenced Product Design Yes No 1a. Did Walmart directly influence the product’s development or design to

become lower-carbon? Check relevant answer. If yes, explain how in box below and move to step 2. Project qualifies. If no, go to step 1b.

Step 1b. Influenced Sales Yes No 1b. Did or will Walmart influence increased sales of the lower-carbon

product? Check relevant answer. If yes, explain how in box below and move to step 2. Project qualifies. If no, project does not qualify. Proceed no further.

9 “Fine line” and “prime item” are terms that describe fields in Walmart’s Retail Link.

Page A-3


Quantifying Carbon Reductions

Step 2. Describe Life Cycle Assessment For each project submitted, Walmart must compare the emissions reductions from the product to a reference product using the life cycle assessment (LCA) approach. Attach your LCA calculations to your submission. In the attachment, include all of the following:

1. The standard under which the LCA was conducted (i.e., PAS 2050)

2. Product bill of materials

3. Activities and processes in the production and consumption associated with the product

4. Transportation links

5. Energy and raw materials consumed during consumer use

6. By products created during product manufacturing

7. Waste streams and their emissions

8. Data and emission sources used in the calculations (for example primary versus secondary data).

2.1 What is the best reference product? Instructions: Please describe a reference product that is comparable to the low-carbon product in the box below. The reference product may be another product that serves a similar function.

2.2 Why is this product the most appropriate reference product? Instructions: Please describe in the box below.

2.3 What is the product’s functional unit of comparison? Instructions: Please describe in the box below.

New Product Reference Product

(From 1.1) 2.5 What is the number of products needed to fill the functional unit (this includes losses)?

2.4 Describe how the functional unit was developed including time parameters and packaging units.

Page A-4


Step 3. Carbon Reduction effect Describe below the effect of the carbon reduction in detail. Explain where the reduction occurs in the life cycle of the product and if the effect is a single instance or ongoing. For examples, see the Guidance Document.

One-Time Effect Continual Effect Carbon Reduction Effect: (Explain in box below)

Step 4. Carbon Footprint Calculation: Continual Effect Carbon Reduction From Products Please complete Step 4 only if your product has a continual carbon reduction effect. If the product has a one-time effect, skip to Step 5.

For the new product and the reference product to be compared, each must follow the same approach and include emissions calculations for the same life phases. Complete Step 5 if you have a product that’s carbon impact has a one-time effect.

4.1 Describe the boundaries of the carbon footprint calculation. Instructions: Check all boxes yes or no

Yes No Transportation

Included?

Are raw materials and their extraction included? Are the product manufacturing/processing steps included?

Are distribution and retail included? Is consumer use included? Is end-of-life included? 4.2 Why was a life phase excluded? Instructions: For all “No” responses in 4.1, please explain why this was excluded.

4.3 What were the carbon emissions from the functional unit of each product per phase? Life Phase of Product: New Product

(kg CO2e/functional unit) Reference Product

(kg CO2e/functional unit) Raw Materials

Manufacturing Distribution/Retail (manufacturer to DC) Consumer Use (for life of product use)

Page A-5


End-of-Life

Total Emissions (lbs CO2e)

Total Carbon Reduction/functional unit = Reference Product Total Emissions – New Product Total Emissions

What is the expected life of the product in years (use fraction if necessary)?

Expected Use of the Product/Year

Step 5. Carbon Footprint Calculation: One-Time Effect Carbon Reduction From Products Please complete step 5 ONLY IF you have a product that has a one‐time effect from carbon reduction.

5.1 Describe the boundaries of the carbon footprint calculation. Instructions: Check all boxes yes or no

Yes No Transportation

Included?

Are raw materials and their extraction included? Are the product manufacturing/processing steps included?

Are distribution and retail included? Is consumer use included? Is end-of-life included? 5.2 Why was a life phase excluded? Instructions: For all “No” responses in 5.1, please explain why this was excluded.

5.3 What were the carbon emissions from the functional unit of each product per phase? Life Phase of Product: New Product

(lbs CO2e/functional unit) Reference Product

(lbs CO2e/functional unit)Raw Materials Manufacturing Distribution/Retail (manufacturer to DC) Consumer Use End-of-Life Total Emissions (lbs CO2e) Total Carbon Reduction/functional unit = Reference Product Total Emissions – New Product Total Emissions

Page A-6


Step 6. Sales of the Product To scale the reductions on a per unit basis, we need to understand product sales or savings to the customer.

If sales information is available (dependent on when the project is submitted and when the product is first sold), then please provide data here. If sales data is not available, please include forecasted sales.

Note that this will be updated twelve months after initial submission and again before project completion.

6.1 What are the sales (by unit and revenues) of the new product and reference product? New Product Reference Product Dates

Start/End (after 1/1/2010) Units

Sold Revenues

(USD) Units Sold

Revenues (USD)

Historical Sales Forecasted Sales

Step 7. Financial Value of Project GHG reductions that come from Walmart product changes offer financial value to projects. Please list these below.

7.0 What financial value does this product offer and who do they apply to? (i.e., Walmart, customer, supplier, etc).

Step 8. Product Trends For Walmart to assess how a product improvement compares to trends in the market towards carbon efficiency, please answer the following questions and provide any additional evidence available that indicates that this product is improving beyond “business as usual.”

Answer the questions that apply to the life cycle phases that were affected by the low-carbon product. Where feasible, please supply expected percent changes for the given carbon category.

Step 8a. Raw Materials 8a.1 Are there any trends in material switching (e.g., more or less carbon intensive plastics) for the product? Explain in the box below.

Step 8b. Manufacturing 8b.1 Are there any existing trends in material light-weighting expected for the product? Explain in the box below.

Page A-7


Step 8c. Consumer Use 8c.1 Are there any consumer use phase energy efficiency trends (e.g., more energy efficient hair dryers) for the product? Explain in the box below.

Step 8d. End-of-Life 8d.1 Describe any trends in recycling rates of the reference product. Explain in the box below.

8d.2 Are any changes in waste handling or disposal that is carbon related expected? Explain in the box below.

Step 9. Statements

Step 9a. Uncertainty Please estimate the level of uncertainty of the carbon reduction calculation that you have supplied in answer to in this worksheet. Specify the sources of uncertainty in your data gathering, handling, and calculations.

Uncertainty range

Main sources of uncertainty in data (sales data, LCA data, etc)

Explain sources of uncertainty in the box below.

Step 9b. Validity All information contained in this quantification accounting is accurate to my knowledge. I understand that the data will be assessed by a third party and will give them access to my data as needed.

Page A-8


Step 9c. Claims I understand that Walmart may make public claims about the carbon reductions achieved through this project. I also understand that Walmart will not sell, trade, retire, or otherwise generate value from these claims beyond public announcement.

Name: Signed: Date:

Page A-9


Page B-1

Attachment B. Facility/Process Carbon Reduction Worksheet Instructions: If you are submitting a project that relates to a carbon reduction from a Walmart supplier facility or supplier process, please complete this worksheet. If your project relates to a carbon reduction from a product, then please complete the Product Worksheet. Please see the attached decision tree to see if your project qualifies before answering quantification questions.

Fill in all sections that are in gray. Instructions are provided in red throughout.

Walmart Information Walmart Champion Name: Email: Phone:

Supplier Information If multiple, please add additional contacts below.

Company Name: Contact Name: Email: Phone:

Project Information Project Name: Walmart Supplier Category:

Facility Name: Facility Address: Date Submitted: Date of Implementation of Project:


Page B-2

Track 1




level?











NOTQUALIFIED

YES NO

NOTQUALIFIED

YES NO

YES NO

YES NO

YES NO

Track 2

Figure B. Project Qualification Decision Tree


Qualification of Project

Step 1. Describe Facility or Process Carbon Reduction Project

1.1 Describe the facility/process carbon reduction project that was implemented. Include a list of processes that were included, technologies that were employed, etc.

Step 1a. Facility/Process Improvement Yes No 1a. Did Walmart directly influence the facility or process improvement?

If yes, explain how in box below. Include dates of meetings, type of influence, etc. Project qualifies. Please quantify reduction starting in step 2. If no, move to step 1b.

Step 1b. Energy Management Yes No 1b. Did Walmart influence the energy management of the facility?

If yes, explain how in the box below. Include the type of influence. Project qualifies. Please quantify reduction starting in step 2. If no, project does not qualify.

Page B-3


Quantification of Reductions

Step 2. Carbon Emissions Calculations Methodology For each facility or process change, please explain the methodology employed.

2.1 What methodology was used to calculate the carbon emissions from the facility or process? Please briefly describe the methodology and attach documentation

Step 3. Carbon Footprint Calculation To calculate the reduction in the carbon emissions due to the process or facility project, Walmart needs to understand the emissions BEFORE the project was implemented. In this section, please identify carbon emissions from the facility or process before the project was implemented, also called the reference point.

Start End 3.1 What time period is most appropriate to measure the carbon emissions BEFORE the project was implemented? List the start and end dates.

3.2 Why was this time selected? Explain rationale for choosing the start and end dates in the box below.

Start End 3.3 What time period is most appropriate to measure the carbon emissions AFTER the project was implemented. List the start and end dates.

3.4 Why was this time selected? Explain rationale for choosing the start and end dates in the box below. 3.5 What boundaries are included in the carbon footprint calculation for the reference point and the improved process/facility? Check all boxes yes or no Yes No Scope 1 (Direct emissions) Scope 2 (e.g., electricity) 3.6 Why was a scope excluded from your calculation? For all “No” responses in 3.5, please explain why this was excluded.

Page B-4


3.7 What are the carbon emissions per source?

Emissions Source Reference Period Metric tons CO2e

Improvement Period Metric tons CO2e

Onsite Fuels Mobile Fuels Refrigerants Other Direct/Process Emissions Purchased Electricity or Steam Total Total Carbon Reduction for all phases = total reference period – total improvement period

Step 4. Financial Value of Project GHG reductions that come from Walmart scope 3-focused projects (not associated with a product supplier) or from supplier facility-based projects require different financial accounting than product GHG reductions. For this project, answer the following questions:

4.1 Were there fuel, electricity, or material savings at a factory or facility level translated into cost savings through industry averages? List savings (e.g., average price of kWh x total kWh saved).

4.2 Were there other financial savings? Use historical cost and procurement data whenever available.

Step 5. Technology Trends For Walmart to assess how a facility or process improvement compares to trends in the industry towards carbon efficiency, we must assess your response to several questions.

Please answer the following questions and provide any additional evidence available that indicates that this project is improving beyond “business as usual.”

5.1 Are facilities recycling percentages expected to improve in your industry? Explain and provide evidence.

5.2 Are transportation efficiency trends related to the submitted project expected for your industry? Explain and provide evidence.

5.3 Is organic waste handling expected to change for your industry (e.g., movement toward composting, biodigestion)? Explain and provide evidence.

Page B-5


5.4 Are manufacturing energy efficiency gains expected in your industry? If so, explain and supply expected percent improvements over time and evidence.

5.5 Describe what general advances in material handling are occurring across the industry. Explain and provide evidence.

Step 6. Statements

Step 6a. Uncertainty Please estimate the level of uncertainty of the carbon reduction calculation that you have supplied in answer to in this worksheet. Specify the sources of uncertainty in your data gathering, handling, and calculations.

Uncertainty range

Main sources of uncertainty in data

Explain sources of uncertainty in the box below.

Step 6b. Validity All information contained in this quantification accounting is accurate to my knowledge. I understand that the data will be assessed by a third party and will give them access to my data as needed.

Step 6c. Claims I understand that Walmart may make public claims about the carbon reductions achieved through this project. I also understand that Walmart will not sell, trade, retire, or otherwise generate value from these claims beyond public announcement.

Name: Signed: Date:

Page B-6

walmart supply chain innovation program: greenhouse gas

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