Climate Change, Reduction of GHG Emissions, Secondary Environmental Impacts of Energy Sources such as Extraction

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1 1 Quantifying the Environmental Impact of Energy Sources in the B Impact Assessment Summary: The B Impact Assessment rewards companies that provide energy-related products or services that intentionally produce less greenhouse gas (GHG) emissions than conventional market alternatives, which in turn mitigate the threats of climate change and pollution. Impact credit is earned on two different levels: (1) low-impact renewable energy receives full credit up to 30 points; (2) energy that is cleaner burning than market alternatives or is renewable receives partial credit up to 15 points. Conventional forms of energy do not receive any impact credit. 1 Impact/Outcome: Climate Change, Reduction of GHG Emissions, Secondary Environmental Impacts of Energy Sources such as Extraction B Impact Assessment Question/ Impact Business Model: Environmental Business Model Products/Services Provides or is Powered by Cleaner Burning or Energy IBM21.2 Which of the following product or service descriptions apply? Product/service is self-powered by fossil fuel-based energy that is cleaner-burning than market alternatives (e.g. LPG-powered car; natural gas burning heater) Product/service is self-powered by non-fossil fuel renewable energy (e.g. solar-power lantern) Product/service provides or contributes to the provision of fossil fuel-based energy that is cleaner-burning than market alternatives (e.g. LPG distribution) Product/service provides or contributes to the provision of non-fossil fuel renewable energy (e.g. solar panel installation or manufacturing; wind turbine manufacturing) These descriptions do not apply to our company's product/service (Skip the remainder of this section) Interpretation: The environmental impact of energy provision occurs at many different stages of the product cycle and in many different ways, both positive and negative. The B Impact Assessment (BIA) considers the carbon 1 Energy classifications as defined below apply to IBM21.2 in the assessment only, meaning those companies that are involved in the sale or production of energy (not just the use of energy), or a product that requires input energy to function (such as an automobile or a radio), not the energy that is used to produce a product. All businesses are asked about the source of the energy used in their operations, and for the purposes of the assessment credit is only granted for low impact renewable energy as determined by Green E. See below for more information.

2 2 intensity, social/environmental risks, and other non-ghg related environmental impacts in order to ascertain the degree to which an energy source is an environmentally beneficial product. The degree to which energy sources outperform conventional energy alternatives as a baseline in environmental impact determines the amount of credit earned in the assessment. The BIA focuses on the positive impact an energy source has by displacing more heavily polluting energy alternatives, and simultaneously factors in the significance of other additional negative environmental impacts of a particular energy source. Relying on third party resources including the EPA, IRIS, and GRI, and aligning these definitions with the principles and methodology of the B Impact Assessment, energy sources can be defined in the following categories and BIA credit will be allocated based on these classifications. Definitions: With the above considerations in mind, it is possible to classify energy products into two different categories, both of which in turn can be divided into two separate categories. They are: Energy Types Lower< Overall Environmental Benefit >Higher Non- Conventional Cleaner Burning Non-Low Impact Green Energy (Low Impact ) No Credit (0 points) Partial Credit (up to 15 points) Full Credit (up to 30 points) Non- and Conventional Energy: Conventional energy represents those energy sources that have been traditionally available through the market and are generated from non-renewable resources. According to the EPA, conventional energy includes the combustion of fossil fuels (coal, natural gas, and oil) and the nuclear fission of uranium. Non-renewable energy can be classified as either conventional or cleaner burning (see below for definition of cleaner burning). Examples: Coal Oil

3 3 Impact: Natural gas 2 Nuclear power 3 Conventional energy creates negative environmental impacts in its lifecycle from initial extraction to the greenhouse gases that are emitted during combustion. 4 The burning of fossil fuel based energy creates significant greenhouse gas emissions, with conventional fossil fuels having the greatest level of carbon intensity amongst energy sources. 5 Nuclear power requires mining and extracting uranium, which is also a non-renewable resource. Unlike fossil fuel based conventional energy, however, it does not create significant as it undergoes conversion to energy, and therefore is not a cause of climate change. There are significant risks associated with nuclear power, including the risk of nuclear accidents and the storage and disposal of hazardous waste. B Impact Assessment Credit: No credit is earned in the B Impact Assessment for the provision of conventional energy sources utilizing traditional methods. As the prevailing and historically dominant market option for energy, conventional energy serves as the baseline by which the positive alternatives are judged in the B Impact Assessment. Because of the significant challenges and risks associated with nuclear waste and accidents in the generation of nuclear power, it is classified as a conventional energy source and does not receive credit in the BIA. This definition is in accordance with classifications provided by the Environmental Protection Agency. 6 Some non-renewable energy sources, however, can be generated using methods that are designed to significantly reduce the greenhouse gas commonly emitted. These options are considered cleaner burning alternative energy sources. See below for more information. Businesses engaged in the provision of conventional energy are required to disclose their involvement in the B Impact Disclosure Questionnaire (DQ),which does not get calculated in a company s score. Relevant Disclosure Questionnaire items that a company must identify and report are involvement in: Fossil fuel-based oil or coal utility Nuclear Power 2 Natural gas is considered the cleanest fossil fuel based energy source, releasing approximately 29% less GHGs than oil and 44% less than coal ( Because natural gas is fossil fuel based, has significant extraction impacts and in its product lifecycle, it is nonetheless considered a conventional energy source and does not receive credit despite being a slightly cleaner fossil fuel. 3 Source: 4 Source EPA Further consideration would be made to classify it as cleaner burning.???

4 4 Cleaner Burning Energy: Cleaner burning energy comes from conventional non-renewable energy sources, but does so in a method that is verified to be highly efficient. 7 Efficiency is determined by a comparison to conventional fossil fuel based energy, and is determined by the market alternatives to the particular use of the energy and specific, verifiable methods to reduce emissions. Examples: Liquefied petroleum gas (propane), as in an LPG powered car alternative to gasoline Fossil fuels sourced from methods utilizing carbon capture/sequestration Other cleaner burning methods* 8 Impact: Cleaner burning energy sources take a pro-active step towards producing less greenhouse gas emissions either by introducing alternative energy sources in areas/industries where they traditionally did not exist, or by taking designed steps to reduce the emissions released from conventional energy sources. Cleaner burning energy still emits greenhouse gas, albeit at a reduced rate. Furthermore, cleaner burning fossil fuels still require extraction of the resource from the ground, potentially causing ecosystem degradation and contamination. B Impact Assessment Credit: Because cleaner burning energy is a preferable alternative to conventional energy sources produced through conventional means, but does not constitute the highest level of overall environmentally beneficial impact, partial credit (up to 15 points) is earned in the B Impact Assessment. In order to qualify as a cleaner burning energy source, a product must have a demonstrated rate of greenhouse gas emissions significantly less than conventional fossil fuels. Furthermore, it must be demonstrated that the product is a relevant alternative to those energy sources in whatever form it is distributed thereby reducing the greenhouse gas emissions by displacing a less environmentally beneficial energy source. For example, a propane powered grill in the United States would not qualify as a cleaner burning energy source, because it does not displace an otherwise greater polluting product. A propane powered car, on the other hand, would, because it displaces a car powered by petroleum gas. Energy: 7 Source EPA ( 8 For the purposes of the B Impact Assessment, nuclear energy is currently not classified as a cleaner burning energy because of the high risk potential of accidents, and the negative impacts of the creation and disposal of radioactive waste. In compliance with definitions provided by the EPA, it is classified as a conventional energy source (see above).

5 5 According to the Impact Reporting Investment Standards and the Global Reporting Initiative, renewable energy is derived from natural processes that are constantly replenished. energy can be classified as low impact or green energy, or non-low impact renewable (see below). Examples: Solar Wind Hydropower Biomass Geothermal resources Impact: energy generally does not involve a combustion process which emits greenhouse gases, therefore reducing GHGs and mitigating the effects of climate change. One exception of this is biomass based energy, which involves a combustion process which releases greenhouse gases. 9 Biomass energy may also involve deforestation, although some sources of biomass make use of agricultural waste products. Certain sources of renewable energy have negative environmental effects separate from their ability to reduce greenhouse gas emissions and solve climate change issues. For instance, large scale hydroelectric power plants require the construction of dams and creation of reservoirs, which in turn disrupts land, wildlife, and local eco-systems. 10 B Impact Assessment Credit: energy sources that do not qualify as low impact (see below) are eligible for partial credit up to 15 points in the assessment, equivalent to credit earned for cleaner burning energy. As an energy source that does not produce significant amounts of greenhouse gas emissions in their lifecycle, renewable energy has a positive environmental impact by providing an alternative to other energy sources that have high carbon intensity. Because of the corresponding negative impacts of non-low impact renewable energy, they do not receive full credit in the assessment. This includes large scale hydro power. Businesses involved in the provision of large scale hydro electric energy are also required to disclose information about potential negative impacts in the B Impact Assessment Disclosure Questionnaire. Companies are required to identify and report on the following items: 9 Green E on Biomass 10 As more research is conducted, similar results could be found about other sources of renewable energy (such as large scale wind projects or solar installations).

6 6 Company facilities are not located adjacent to or in sensitive ecosystems No construction or operation of company and Significant Suppliers involved the construction or refurbishment of dams No construction or operation of company and Significant Suppliers' facilities resulted in physical resettlement or economic displacement involving 5,000 or more people near your facility Businesses would also be required to demonstrate that they are managing these negative impacts responsibly so as to reduce the potential for environmental damage. Green Energy: The EPA defines green energy as a subset of renewable energy that represents those renewable energy resources and technologies that provide the highest environmental benefit (EPA.gov) meaning they do not emit any significant greenhouse gas emissions and also do not cause other significant nonclimate focused negative environmental impacts. This can also be referred to as low-impact renewable energy. B Impact Assessment Credit: As the best in class most positive environmental impact energy source available, green energy receives full credit in the B Impact Assessment. The B Impact Assessment relies on certified Green-E eligibility requirements to determine qualification as best in class green energy. More information on Green-E eligibility can be found here.

7 Energy Type 11 Description Positive Impacts Negative Impacts Coal Conventional -- Extraction, Fossil fuel Natural Gas Oil LPG Conventional Fossil fuel Conventional Fossil Fuel Cleaner Burning--Fossil Fuel Based Nuclear Conventional Significant reductions in GHG Non Low Impact Hydro Electric Low Impact (LIHI Certified) Hydroelectric Solar Wind Geothermal Low Impact Low Impact Low Impact Low Impact Most efficient fossil fuel Extraction, GHG Emissions -- Extraction, GHG Emissions Significant GHG reductions in Emissions, Extraction Extraction, Hazardous Waste, Risk of Accident Ecosystem Damage, Wildlife Damage, Displacement Net Credit in Notes 7 BIA -- **Fossil fuel based energy utilizing carbon capture or sequestration is eligible for partial credit % **LPG receives credit when displacing a traditional fossil fuel based product. -- **Despite reduced emissions, significant risks classify as conventional 50% % % % % Other energy sources are reviewed to determine appropriate classification based upon the above definitions.

8 8 Opportunities for Feedback: In order to continually improve and advance its impact measurement framework, the B Impact Assessment is updated every two years through a multi-stakeholder feedback process and governed by our independent Standards Advisory Council. The considerations and criteria outlined in this document apply as of Version 4 of the assessment, launched in January of 2014, and are subject to change. Understanding and measuring positive impact is a never ending process, and we look forward to improving our thinking with the help of B Corporations, users of the B Impact Assessment, and the broader public. For any questions, comments, or concerns, and to provide feedback that can improve our positions and our assessment, please reach out to thelab@bcorporation.net. 11/26/2014