Smart Facilities Management with Oracle Applications. Statement of Direction August 2011

Smart Facilities Management with Oracle Applications Statement of Direction August 2011

Smart Facilities Management with Oracle Applications Introduction... 3 Basics of Carbon Accounting... 4 Carbon Accounting Process Steps... 4 Setting Operational Boundaries... 5 Identifying and Calculating GHG Emissions... 7 Accounting and Reporting of GHG Emissions... 10 Oracle Environmental Accounting and Reporting... 12 Summary and Conclusion... 14 Glossary... 15 References... 18 Smart Facilities Management with Oracle E-Business Suite Page 2

Smart Facilities Management with Oracle Applications As with financial accounting and reporting, generally accepted Green House Gas (GHG) accounting principles are intended to underpin and guide GHG accounting and reporting The integration of emissions and operational data into the general business model will be key in developing standardsbased approach to emissions reporting INTRODUCTION Commercial office space (schools, office buildings, and shopping malls) emits a total of 1.0 billion metric tons CO2e of energy-related carbon dioxide, with almost 80% of it coming from the power plants providing the electricity used in the buildings. Office space emissions have grown the fastest since 1990, at an average annual rate of 1.8%. Facilities management organizations will face growing pressure both internally and externally to demonstrate specific initiatives that contribute to corporate sustainability and governance by reducing energy consumption. From a legislative perspective, the Environmental Protection Agency (EPA) requires mandatory reporting for facilities emitting over 25,000 metrics tons of Greenhouse Gas (GHG) emissions; see EPA 40 CFR Part 98. 1 Internally, an increasing number of S&P 500 companies have begun building environmental responsibility and climate awareness into executive incentives. 2 Facility managers are responsible for a wide variety of capital assets including manufacturing equipment, fleet assets, and physical plant infrastructure, such as buildings, roads, and utility distribution. These assets consume a significant share of operating expense. The goals of the Oracle s Figure 1 Oracle Corporate Campus 1 Environmental Protection Agency, Greenhouse Gas Reporting Program, http://www.epa.gov/, accessed Tuesday, May 17, 2011 2 businessgreen, Executive bonuses for making the CO2 cut, Anne Moore Odell, http://www.businessgreen.com/, accessed Monday, June 01, 2009 Smart Facilities Management with Oracle E-Business Suite Page 3

Smart Facilities Management program is to provide a solution set for sustainability tracking, analysis and optimization, taking complete advantage of existing sensor infrastructure and integrating this in a consistent way with other business functions and with financial reporting. Oracle provides a number of applications programs that can assist in meeting these goals including; Enterprise Asset Management, Sustainability Data Management (SSDM), and Sustainability Analytics. This statement of direction is based on the GHG Protocol Corporate Accounting and Reporting Standard. Measuring the carbon footprint across your facilities is a powerful way for businesses to collect and analyze the information to reduce GHG emissions, identify cost saving opportunities, meet regulatory requirements and demonstrate environmental responsibility BASICS OF CARBON ACCOUNTING Carbon Footprint is a term to describe the amount of greenhouse gas emissions caused by an activity or entity, and provides a basis for companies to evaluate their contribution to climate change. Carbon reporting is likely to become an additional dimension of corporate reporting within the near future and this will be a difficult task for many organizations. Fortunately there are some measurement guidelines in place that can help. The most prevalent and widely supported mechanism for GHG reporting is the GHG Protocol 3. The Greenhouse Gas Protocol Corporate Accounting and Reporting Standard provides guidance for companies and other organizations preparing a GHG emissions inventory. CARBON ACCOUNTING PROCESS STEPS Figure 2 provides a consolidated view of the Greenhouse Gas Protocol Process Steps. This paper will focus on setting operational boundaries, tracking emissions over time, identifying and calculating GHG emissions and accounting and reporting of GHG emissions. Figure 2 Greenhouse Gas Protocol Process 3 businessgreen, Carbon reporting standards: a beginners guide, Andrew Donoghue, http://www.businessgreen.com/, accessed Tuesday, June 02, 2009 Smart Facilities Management with Oracle E-Business Suite Page 4

Oracle Enterprise Asset Management Provides the following features that provide the framework for setting operational boundaries Definition of multiple asset hierarchies Integration to Google Maps to provide an out-of-the-box integration for visualization of operational boundaries SETTING OPERATIONAL BOUNDARIES Setting operational boundaries involves identifying emissions associated with its operations, categorizing them as direct and indirect emissions, and choosing the scope of accounting and reporting for indirect emissions. The GHG protocol introduces the concept of scope which defines the operational boundaries in relation to direct and indirect GHG emissions. The GHG protocol consists of three scopes associated with activities that generate direct and indirect emissions across the length of a company s supply chain. These are illustrated in Figure 3. Ability to associate an unlimited number of meters for the collection of electrical, water, gas, and steam usage Provide the basis for a bottom-up reporting structure consistent with GHG Protocol Figure 3 Overview of Scopes and Emissions across a Supply Chain Scope 1 emissions are direct emissions, defined as emissions which occur from sources that are owned or controlled by the company. For example, emissions from combustion in owned or controlled boilers, furnaces, vehicles, etc.; and emissions from chemical production in owned or controlled process equipment. 4 Scope 2 accounts for GHG emissions from the generation of purchased electricity consumed by the company. Scope 3 is an optional reporting category. Though Scope 3 emissions are a consequence of the company s activities, they occur from sources not owned or controlled by the company. Examples include; employee business travel, waste disposal, and use of sold products and services. From a facilities management perspective, purchased electricity represents one of the largest sources of GHG emissions and will provide the best opportunity to reduce emissions. Oracle Enterprise Asset Management (eam) allows the user to define asset network relationships both hierarchically and graphically that can model the operational boundaries. In this example, the Oracle Redwood Shores Campus has 4 WRI (2004), A Corporate Accounting and Reporting Standard, Greenhouse Gas Protocol, Page 25 Smart Facilities Management with Oracle E-Business Suite Page 5

been defined as an asset; with the buildings defined as child assets. Additional assets can be defined for HVAC equipment, elevators and other assets. Figure 4 Modeling the Operational Boundaries The GHG Protocol Corporate Standard calculates GHG emissions using a bottom-up approach. This involves calculating emissions at the level of an individual source or facility and then rolling this up to the corporate level. This approach enables companies to report GHG emissions information at different scales, e.g., by individual sources or facilities or by a collection of facilities within a given country. 5 Once the operational boundaries are defined, a base year for emissions is defined providing the foundation to measure future emissions. 5 WRI (2004), A Corporate Accounting and Reporting Standard, Greenhouse Gas Protocol, Page 59 Smart Facilities Management with Oracle E-Business Suite Page 6

Oracle Sustainability Data Management Oracle SSDM provides innovative core capabilities to monitor energy usage, reduce waste and reach Greenhouse Gas (GHG) emission reduction goals Comparisons of actual energy usage to target goals and previous periods and highlighting underperforming facilities, areas and assets for corrective action Correlation of energy consumption to operating conditions and production output to understand not only your GHG emissions, but your "return on carbon" Directly integrates with smart meters, environmental management systems, and building automation systems and collects energy consumption and emissions data, which is presented via energy monitoring dashboards IDENTIFYING AND CALCULATING GHG EMISSIONS The process steps associated with identifying and calculating GHG Emissions are defined in Figure 5. The first step is to identify direct emission sources (Scope 1), which can include the following; stationary combustion, mobile combustion, process Figure 5 Identifying and Calculating GHG Emissions emissions and fugitive emissions(e.g., equipment leaks from joints, seals, packing, and gaskets). The next step is to identify indirect emission (Scope 2) sources from the purchase of electricity, heat or steam. The identification of other indirect emissions from a company s upstream and downstream activities (Scope 3) is optional. The next step in the process is the selection of a calculation approach; the most common method for calculating GHG emissions is through the application of emission factors. Scope 1 emissions can be calculated based on purchased quantities of fuels like natural gas and then using associated published emission factors. Scope 2 GHG emissions can be calculated from metered electricity consumption and published emission factors associated with the supplier or local grid. The next step in the process is the collection of activity data, which will be a focal point in establishing an effective long-term sustainability program. Smart Facilities Management with Oracle E-Business Suite Page 7

The collection of high quality activity data will often be the most significant requirement but also the most significant challenge. Therefore, establishing robust data collection procedures needs to be a priority in the design of any company s GHG program. 6 Oracle s Sustainability Data Management (SSDM) allows the user to connect to an asset s existing sensor infrastructure, to gather activity data on electrical, water, gas or steam usage, and to store this data in a standard data model which facilitates reporting and analytics. Figure 6 Sustainability Data Management 6 6 WRI (2004), A Corporate Accounting and Reporting Standard, Greenhouse Gas Protocol, Page 53 Smart Facilities Management with Oracle E-Business Suite Page 8

This bottom-up approach will allow a company to report emission at the source if metering is available at the facility level. If meters are not available, a user could input spreadsheet data into the same repository. Figure 7 displays a sample spreadsheet for the reporting of indirect CO2 emissions from the consumption of purchased electricity, heat, and / or steam. 7 Figure 7 WRI / WBCSD GHG Protocol Initiative Calculation Tool SSDM can accept feeds from multiple sources, directly from meters, spreadsheets, invoices, and production data. 7 The intellectual property rights of this calculation tool belong to the WRI/WBCSD GHG Protocol Initiative Smart Facilities Management with Oracle E-Business Suite Page 9

Oracle Sustainability Solutions From technology infrastructure to database, middleware and applications, Oracle provides the software that helps companies achieve their environmental initiatives 30+ out-of-box Sustainability KPIs Planned vs. actual energy usage, cost and CO 2 emissions Normalized Energy Usage, Emissions and Cost by Area, Headcount and Production Value Energy consumption by usage category Value added, non-value added consumption, Direct and Indirect Energy Consumption for Energy-Aware Manufacturing ACCOUNTING AND REPORTING OF GHG EMISSIONS A public GHG emissions report in line with the GHG Protocol Corporate Standard will include the following; a description of the company and inventory boundary, and information on emissions (Scopes 1 & 2). Optional information can include the following: emission data from scope 3 activities; a Figure 8- Public GHG Emissions Report description of performance measured against internal and external benchmarks; relevant ratio performance indicators (e.g. emissions per kilowatt-hour generated, per employee, per square foot of space) and a listing of facilities included in the inventory. Of the optional information suggested for reporting, the ratio indicators provide information on performance that will provide comparison across facilities and provide a benchmark for future reporting. Productivity / efficiency ratios express the value or achievement of a business divided by its GHG impact. Increasing efficiency ratios reflect a positive performance improvement. Examples of productivity / efficiency ratios include resource productivity (e.g., sales per GHG) and process eco-efficiency (e.g., production volume per amount of GHG). 8 For further guidance on ratio indicators refer to CCAR, 2003; GRI, 2002; Verfaillie and Bidwell, 2000. Industry faces an ongoing challenge to provide a standard reporting technology that will cross geographical areas and technology platforms; this will require a tight integration to business systems and a move away from spreadsheets reporting of emissions. The following provides an analytics prototype that allows the user to report by geographical area, 8 WRI (2004), A Corporate Accounting and Reporting Standard, Greenhouse Gas Protocol, Page 66 Smart Facilities Management with Oracle E-Business Suite Page 10

providing comparison by period and square footage. Additional ratios can be developed by employee, units of production, or occupancy rates. Figure 8 Facilities Manager Dashboard Smart Facilities Management with Oracle E-Business Suite Page 11

Oracle Environmental Accounting and Reporting Capture of energy usage and other environmental data directly in Oracle E-Business ERP Suite Facility-based tracking of energy consumption and other consumables as they are issued Capture and report data at both the facility and asset level Calculation of greenhouse gas emissions in accordance with the Greenhouse Gas Protocol Classification of scope 1, 2 and 3 emissions Store date effective emission factors for recalculation usage Pre-built analytics and dashboards ORACLE ENVIRONMENTAL ACCOUNTING AND REPORTING Environmental Accounting & Reporting extends the capabilities of Oracle s E-Business Suite to track their GHG emissions and other environmental data against reduction targets. The solution manages this function from within the existing ERP system and utilizes Oracle Business Intelligence to provide immediate insight into an organization s environmental data to identify and manage CO2. As previously described, an ideal solution is to embed environmental related data acquisition and reporting into the mainstream of business operations and associated IT infrastructure. Oracle Environmental Accounting and Reporting enables organizations to capture environmental data either electronically or manually; convert that to greenhouse gas emissions; comply with mandatory and voluntary greenhouse gas reporting schemes; and to identify opportunities for CO2 emissions and cost reductions. The solution supports flexible organizational structures native to the ERP application, including separate facilities, combined facilities, by legal structure, or by management structure. This allows an organization to view and report the data as needed. Similarly the data can also be associated with a particular asset to enable more detailed analysis of usage patterns. As an add-on module to Oracle E-Business Suite Financials, Oracle Environmental Accounting and Reporting extends the invoice, purchasing and inventory process to enable the capture the necessary data, automatically matching with emission factors. The following illustrates the data capture for emission calculations during the processing of an invoice. Smart Facilities Management with Oracle E-Business Suite Page 12

Figure 9 Data capture for emissions calculations during the processing of an invoice Smart Facilities Management with Oracle E-Business Suite Page 13

SUMMARY AND CONCLUSION It is only a matter of time before companies will be required to report on carbon emissions. Most business use spreadsheets today to collect and report on emissions within their operations. However, with time, these spreadsheets will become unmanageable when attempting to implement a standards-based approached to emissions tracking across multiple geographical locations. In addition, it is likely that such reporting will be subject to similar external controls as current financial reporting. This will require systems that are both auditable and integrated with those currently subject to Sarbanes Oxley. The goals of Oracle s Smart Facilities Management is to provide the leading solution set that integrates sustainability reporting into the general business structure, taking full advantage of existing sensor infrastructure for collecting activity data, and providing sustainability metrics and reporting consistent with financial reporting. The GHG Protocol Standard provides an excellent model for collecting and reporting on on-site emissions (Scope 1), purchased power (Scope 2) and miscellaneous emissions (Scope 3). Smart Facilities Management with Oracle E-Business Suite Page 14

GLOSSARY 9 Capital goods Carbon dioxide equivalent (CO2e) Carbon footprint Cap and trade system Co-generation unit / combined heat and power Direct GHG emissions Emission factor Emissions Fugitive Emissions Greenhouse gases (GHGs) Machinery, equipment and buildings used in the life cycle of products Unit for comparing the radiative forcing (global warming impact) of a greenhouse gas expressed in terms of the amount of carbon dioxide that would have an equivalent impact The level of greenhouse gas emissions produced by a particular activity or entity A system that sets an overall emissions limit, allocates emissions allowances to participants, and allows them to trade allowances and emission credits with each other A facility producing both electricity and steam / heat using the same fuel supply Emissions from sources that are owned or controlled by the reporting company Amount of greenhouse gases emitted, expressed as carbon dioxide equivalent and relative to a unit of activity (e.g. kg CO2e per unit input). NOTE: Emission factor data is obtained from secondary data sources Release to air and discharges to water and land that result in greenhouse gases entering the atmosphere These emissions result from intentional or unintentional releases, e.g., equipment leaks from joints, seals, packing, and gaskets; methane emissions from coal mines and venting; hydrofluorocarbon (HFC) emissions during the use of refrigeration and air conditioning equipment; and methane leakages from gas transport Gaseous constituents of the atmosphere, both natural and anthropogenic, that absorb and emit radiation at specific wavelengths within the spectrum of infrared radiation emitted by the Earth s surface, the atmosphere, and clouds. NOTE: GHGs include carbon dioxide 9 The Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard, World Resource Institute, Revised Edition (March, 2004) Smart Facilities Management with Oracle E-Business Suite Page 15

GHG Protocol Corporate Standard Indirect GHG emissions Operational boundaries Organizational boundaries Primary activity data Productivity/efficiency rations Ratio indicator Scope (CO2), methane (CH4), nitrous oxide (N2O), hydrofluoro-carbons (HFCs), perfluorocarbons (PFCs) and sulfur hexafluoride (SF) Provides standards and guidance for companies and other types of organizations preparing a GHG emissions inventory. It covers the accounting and reporting of the six greenhouse gases covered by the KyotoProtocol carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydro fluorocarbons (HFCs), perfluorocarbons (PFCs),and sulphur hexafluoride (SF6) Emissions that are a consequence of the operations of the reporting company, but occur at sources owned or controlled by another company The boundaries that determine the direct and indirect emissions associated with operations owned or controlled by the reporting company. This assessment allows a company to establish which operations and sources cause direct and indirect emissions, and to decide which indirect emissions to include that are a consequence of its operations The boundaries that determine the operations owned or controlled by the reporting company, depending on the consolidation approach taken (equity or control approach) Quantitative measurement of activity from a product s life cycle that, when multiplied by an emission factor, determines the GHG emissions arising from a process. NOTE: Examples include the amount of energy used, material produced, service provided or area of land affected Ratios that express the value or achievement of a business divided by its GHG impact. Increasing efficiency ratios reflect a positive performance improvement. e.g. resource productivity(sales per tone GHG). Productivity / efficiency ratios are the inverse of intensity ratios Indicators providing information on relative performance such as intensity ratios or productivity / efficiency ratios Defines the operational boundaries in relation Smart Facilities Management with Oracle E-Business Suite Page 16

Scope 1 Inventory Scope 2 Inventory Scope 3 Inventory to indirect and direct GHG emissions A reporting organization s direct GHG emissions A reporting organization s emissions associated with the generation of electricity, heating / cooling, or steam purchased for own consumption Reporting organization s indirect emissions other than those covered in Scope 2 Smart Facilities Management with Oracle E-Business Suite Page 17

REFERENCES CCAR (2003), General Reporting Guidelines, California Climate Action Registry EPA (1999), Emission Inventory Improvement Program, Volume VI: Quality Assurance/Quality Control, U.S. Environmental Protection Agency ISO (1999), International Standard on Environmental Performance Evaluation, (ISO 14031), International Standard Organization, Geneva Oracle Enterprise Asset Management, User's Guide, Release 12, September 2006. World Resource Institute (March, 2004), The Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard, World Resource Institute Smart Facilities Management with Oracle E-Business Suite Page 18

Smart Facilities Management with Oracle Applications April, 2011 Author: Tom Sichko For further information Contac Tom Sichko Thomas.Sichko@Oracle.com (720) 308-1498 Oracle Corporation World Headquarters 500 Oracle Parkway Redwood Shores, CA 94065 U.S.A. Worldwide Inquiries: Phone: +1.650.506.7000 Fax: +1.650.506.7200 oracle.com Copyright 2007, Oracle. All rights reserved. This document is provided for information purposes only and the contents hereof are subject to change without notice. This document is not warranted to be error-free, nor subject to any other warranties or conditions, whether expressed orally or implied in law, including implied warranties and conditions of merchantability or fitness for a particular purpose. We specifically disclaim any liability with respect to this document and no contractual obligations are formed either directly or indirectly by this document. This document may not be reproduced or transmitted in any form or by any means, electronic or mechanical, for any purpose, without our prior written permission. Oracle is a registered trademark of Oracle Corporation and/or its affiliates. Other names may be trademarks of their respective owners.