Corporate Carbon Footprint

Passion for Sustainability Corporate Carbon Footprint Report 2013 VIYELLATEX group 10 th April 2014

TABLE OF CONTENT 1 INTRODUCTION 3 2 OBJECTIVES OF THE PROJECT 3 3 SCOPE, DATA AND METHODOLOGY 4 4 DATA COLLECTION AND QUALITY OF DATA 4 5 RESULTS 5 5.1 Viyellatex Spinning Ltd (VSL) 5 5.1.1 Total Carbon Footprint 5 5.1.2 Output- related Carbon Footprint 6 5.1.3 Energy Costs 7 5.2 Interfab Shirt Manufacturing Ltd (ISML) 7 5.2.1 Total Carbon Footprint 7 5.2.2 Output- related Carbon Footprint 8 5.2.3 Energy Consumption and Costs 9 5.3 Viyellatex Limited 9 5.3.1 Total Carbon Footprint 9 5.3.2 Output- related Carbon Footprint 11 5.3.3 Energy Consumption and Costs 12 5.4 Overall Carbon Footprint of Viyellatex Group 13 6 SAVING MEASURES 2013 13 7 EMISSIONS SCOPE 3 15 Systain Consulting Germany 2014 2 16

1 Introduction The effect of global warming causes significant disturbances of the global climate such as floods, droughts, cyclones, rising sea- level, scarcity of water and crop losses. The Intergovernmental Panel on Climate Change (IPCC) has revealed the scientific significance and proven evidence that the increasing level of carbon emissions by human activity is the major driver of climate change. The IPCC is the nominated United Nations body for research on this issue. Consuming fossil fuels such as oil, coal and natural gas has dramatically risen in the past century with releasing carbon emissions (CO 2 ) into the atmosphere. The global consumption of energy is continually rising. Therefore, it is necessary to reduce CO 2 - emissions globally in order to avoid major threats to ecosystems and human health. Consumers increasingly ask retailers and brands, what they do to reduce CO 2 - emissions. Several initiatives address carbon emissions of companies and products, e.g the Carbon Performance Improvement Initiative (CPI 2 ) a global initiative to improve energy efficiency in textile and shoe production. Textile producers have started to take an active role as well by providing transparency about their carbon emissions and by implementing improvement measures systematically. Their benefits from a pro- active carbon management have become a benchmark for producers and retailers as well towards a sustainable textile industry. 2 Objectives of the project Systain Consulting has been assigned to evaluate the carbon emissions of different units of Viyellatex Group in Bangladesh. This includes the following 6 units: 1. Viyellatex Spinning Ltd (VSL) 2. Interfab Shirt Manufacturing Co. Ltd (ISML) 3. Viyellatex Ltd - Knit Garments Unit 4. Viyellatex Ltd - Knitting Unit 5. Viyellatex Ltd - Dyeing Unit 6. Viyellatex Ltd - Washing Unit Objective of this project is to provide transparency about greenhouse gas emissions according to international accounting methodology towards clients, stakeholders and other textile producers. Systain Consulting Germany 2014 3 16

3 Scope, Data and Methodology The Carbon Footprint indicated in this report has been evaluated according to GHG- Protocol A Corporate Accounting and Reporting Standard (revised version). The Greenhouse Gas (GHG)- Protocol is the global standard for accounting and quantifying company related carbon emissions. It has been developed by the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD). The GHG- Protocol is based on ISO 14,040/44 norms. The report covers all Scope 1 and Scope 2 emissions of Viyellatex and its units according to the categorization of the GHG- Protocol. Scope 1 includes all direct emissions at the premises of the company (boiler, generator etc.). Scope 2 emissions include consumed electricity by grid suppliers. According to the GHG- Protocol requirements, results indicate all greenhouse gas emissions which means carbon emissions (CO 2 ) as well as further greenhouse gases such as methane. For that reason, the carbon footprint is provided in kilogram/metric tons CO 2 equivalents (CO 2 e). The data and results cover the period of 12 months from January 2013 to December 2013. Data for January 2014 have been considered in indication of monthly emission data. 4 Data Collection and Quality of Data Viyellatex incorporates three separate system boundaries: 1. Viyellatex Spinning Ltd (VSL) 2. Interfab Shirt Manufacturing Co. Ltd (ISML) 3. Viyellatex Ltd with 4 units: Garments Unit, Knitting Unit, Dyeing Unit and Washing Unit Systain has provided a questionnaire for each unit. The data were specified on a monthly basis, regarding the different energy sources and their quantities. Data have been given for a period of 13 months from January 2013 to January 2014. The management clarified any question that emerged during the data collection. The data have been reviewed in order to assure data quality. The quality of the data is very good; all data is consistent and plausible. There have not been any data gaps or incomplete information. Systain Consulting Germany 2014 4 16

5 Results 5.1 Viyellatex Spinning Ltd (VSL) 5.1.1 Total Carbon Footprint The total carbon footprint of VSL in 2013 has been 24,214 tons CO 2 e (from January 2013 to December 2013). The total amount in 2013 is equivalent to the yearly per capita emissions of 64,125 citizens in Bangladesh (0.4 tons per year), according to per capita emissions data provided by the United Nations (UN Millennium Development Goals Indicators). The emissions result from three sources: natural gas and diesel, both used for producing electricity on- site as well as electricity from the grid. Natural gas makes up more than 99% (23,974 tons). Respectively, less than 1% of the total CO 2 e- emissions are caused by diesel (189 tons) and electricity from the grid (51 tons). Due to the characteristics of the spinning processes, there is no process- heat required. Diesel 189 Tons 0,78% Electricity from grid 54 Tons 0,21% Natural gas 23,974 Tons 99,01% Share of CO 2 e- emissions VSL in 2013 The chart below indicates the emissions and the production on a monthly basis. Compared to the produced yarns it shows a peak in May, August and October 2013. In these months, electricity generation through natural gas generators was supported by diesel backup generator and electricity from grid. Systain Consulting Germany 2014 5 16

Produced Yarns (in tons) Carbon emissions (in tons CO 2 e) 2.500 2.000 1.500 1.000 500 0 Jan 13 Feb 13 Mar 13 Apr 13 May 13 Jun 13 Jul 13 Aug 13 Sep 13 Oct 13 Nov 13 Dec 13 Jan 14 1.000 900 800 700 600 500 400 300 200 100 0 CO2 Produced Yarn Monthly CO 2 e- emissions and production r ate VSL from January 2013 to January 2014 In the period of 13 months from January 2013 to January 2014, emissions accumulated to an amount of 26,197 tons CO 2 e. The consumption of natural gas caused 25,954 tons CO 2 e (99.1%), Diesel 189 tons CO 2 e (0.7%) and electricity from the grid 54 tons CO 2 e (0.2%). 5.1.2 Output- related Carbon Footprint In 2013 (Jan 13 to Dec 13), the carbon footprint has been 2.467 kg CO 2 e. Compared to 2009, with output related emissions of 3.139 kg CO 2 e per kg yarn, VSL has reduced its footprint by 21.4%. This means an annual reduction of almost 6%. Emissions per kg Yarn at VSL (in kg CO 2 e) 2009 2013 Total Percentage change in % Annual percentage change % 3.139 2.467-21.4% - 5,8% Comparison of output- related CO 2 e emissions Compared with other spinning units, VSL performs among the top level. This demonstrates the advanced level of VSL among its peers and the striving of the management for continuous improvement of the efficiency. Systain Consulting Germany 2014 6 16

5.1.3 Energy Costs Carbon emissions result from the use of fossil fuels which is also a cost factor. Reducing CO 2 e- emissions means reducing energy costs as well. VSL paid an amount of 47,195,706 Tk. for energy consumption in 2013. The energy costs per kg yarn accumulate to 5.24 Tk. Despite rising energy prices, VSL has reduced energy costs per kg yarn by 7.7 % in 2013 compared to 2009. In the period of 13 months from January 2013 to January 2014, VSL paid an amount of 51,057,429 Tk. for energy consumption. The energy costs per kg yarn in this period accumulate to 5.20 Tk. 5.2 Interfab Shirt Manufacturing Ltd (ISML) 5.2.1 Total Carbon Footprint Total carbon footprint of Viyellatex Interfab Shirt Manufacturing Ltd (ISML) in 2013 accumulated to an amount of 2,667 tons CO 2 e. The total amount is equivalent to the yearly per capita emissions of 7,062 citizens in Bangladesh (0.38 tons per year). Most of the emissions result from natural gas. Generating electricity by natural gas generators make up almost two thirds of total emissions (1,725 tons). 35% of total emissions are linked to the natural gas- fired boiler whereas diesel generator and electricity from grid supply have only minor impact. Electricity (from grid) 101 tons 3.8% Diesel (Backup Generator) 74 tons 2.8% Natural Gas (Boiler) 767 tons 28.7% Natural Gas (Generator) 1,725 tons 64.7% Share of CO 2 e- emissions ISML in 2013 Systain Consulting Germany 2014 7 16

The chart below reveals the monthly amount of the emissions related to the production output. Produced Pieces Carbon emissions (in tons CO 2 e) 300 250 200 150 100 50 1.000.000 800.000 600.000 400.000 200.000 0 Jan 13 Feb 13 Mar 13 Apr 13 May 13 Jun 13 Jul 13 Aug 13 Sep 13 Oct 13 Nov 13 Dec 13 Jan 14 0 CO2 Produced Pieces Monthly CO 2 e- emissions and production rate ISML from January 2013 to January 2014 In the period of 13 months from January 2013 to January 2014, emissions accumulated to an amount of 2,872 tons CO 2 e. The consumption of natural gas for generators caused 1,853 tons CO 2 e (64.5%), natural gas for boilers 834 tons (29.0%), electricity from grid 111 tons CO 2 e (3.9%) and diesel 74 tons CO 2 e (2.6%). 5.2.2 Output- related Carbon Footprint In 2013 (Jan 13 to Dec 13), the output carbon footprint at Interfab Shirt Manufacturing Ltd (ISML) has been 0.322 kg CO 2 e per piece. Compared to 2009 with a footprint of 0.411 kg CO 2 e per piece, a reduction by 21.5% has been achieved. This means an annual reduction by almost 6% per year. Emissions per piece at ISML (in kg CO 2 e) 2009 2013 Total Percentage change in % Annual percentage change % 0.411 0.322-21.6% - 5,9% Comparison of output- related CO 2 e emissions Compared with other garment units, ISML has a good carbon footprint per piece. It should be noted that ISML produces high quality products which includes additional processes. Moreover, production steps are carried out in- house. Both aspects require additional energy compared to other garment manufacturers of woven shirts. Even though, ISML has achieved a good performance result. This fact demonstrates the efficient processing and adoption of energy efficiency measures at ISML such as heat recovery, advanced lighting, zoning of lights, use of daylight, servo- motors for sewing machines, advanced control of compressor and steam pressure etc. Systain Consulting Germany 2014 8 16

5.2.3 Energy Consumption and Costs The energy costs for Interfab Shirt Manufacturing Ltd accumulated to an amount of 8,770,369 Tk. in 2013. That means a quantity of energy costs per piece of 1.16 Tk. Compared to 2009 the energy costs per piece raised by 141.1%. The natural gas for the generator is the largest cost factor with 39% of total costs. The diagram reveals that electricity from grid supply and diesel are highly costly: despite their small amount of use they both have a notable cost- amount. Diesel (Backup Generator) 1.9 Mio Tk. 21.7% Electricity (from grid) 1.3 Mio Tk. 15.2% Natural Gas (Generator) 3.4 Mio Tk. 39.2% Natural Gas (Boiler) 2.1 Mio Tk. 23.9% Share of energy costs ISML in 2013 In the period of 13 months from January 2013 to January 2014, ISML paid an amount of 9,320,555 Tk. for energy consumption. The energy costs per piece in this period accumulate to 1.13 Tk. 5.3 Viyellatex Limited 5.3.1 Total Carbon Footprint From January 2013 to December 2013, total carbon footprint of Viyellatex Limited (garments unit, knitting unit, dyeing unit and washing unit) accumulated to an amount of 15,197 tons CO 2 e. Systain Consulting Germany 2014 9 16

The total amount is equivalent to the yearly per capita emissions of 40,246 citizens in Bangladesh (0.38 tons per year) according to per capita emissions data provided by the United Nations (UN Millennium Development Goals Indicators). Kni`ng 564 tons 3,7% Washing 348 tons 2,3% Garments 2.169 tons 14,3% Dyeing 12.116 tons 79,7% CO 2 e- emissions unit- wise in 2013 About 80% of the total CO 2 e- emissions in 2013 result from dyeing unit. 15% are linked to the garment unit while knitting and washing have only minor impact. Boilers made up 7,469 tons and natural gas generators 7,364 tons of total CO 2 e- emissions. Electricity (from grid) 330 tons 2.2% Diesel (Backup Generator) 34 tons 0.2% Natural Gas (Generator) 7,364 tons 48.5% Natural Gas (Boiler) 7,469 tons 49.1% CO 2 e- emissions source- wise in 2013 Systain Consulting Germany 2014 10 16

The diagram below illustrates the CO 2 e- emissions on monthly basis. Peaks in May and July, in fall and in January 2014 result from peak production at dyeing unit. 1.800 1.600 Carbon emissions (in tons CO 2 e) 1.400 1.200 1.000 800 600 400 200 0 Jan 13 Feb 13 Mar 13 Apr 13 May 13 Jun 13 Jul 13 Aug 13 Sep 13 Oct 13 Nov 13 Dec 13 Jan 14 Natural Gas (Boiler) Natural Gas (Generator) Electricity (from grid) Diesel (Backup Generator) Monthly CO 2 e- emissions from January 2013 to January 2014 In the period of 13 months from January 2013 to January 2014, the carbon footprint of the 4 VTL- units has accumulated to a total of 16,936 tons CO 2 e. In this period the boiler made up 8,564 tons and the natural gas generator 7,983 tons of the total CO 2 e- emissions. 5.3.2 Output- related Carbon Footprint Viyellatex was able reduce the emissions per output notably. In 2013 three of the 4 units reduced emissions by more than 50% compared to 2009. The fourth unit had a reduction of 29%, which still is quite a considerable reduction performance. Unit Emissions per produced per output at Viyellatex units [in kg CO 2 e] 2009 2013 Total Percentage change in % Annual percentage change % Garments Unit 0.266 0.128-52.0% - 16.8% Knitting Unit 0.322 0.111-65.6% - 23.4% Dyeing Unit 2.376 1.696-28.6% - 8.1% Washing Unit 1.776 0.230-87.0% - 40.0% Systain Consulting Germany 2014 11 16

Comparison of output- related CO 2 e emissions Comparing the output- related results, Viyellatex demonstrates again its strong position as in the previous report. VTL improved again its top- performance. All units rank at the leading level compared to other textile manufacturers. Especially the carbon footprint of dyeing and garment unit is remarkably low. Natural gas consumption for boilers has significantly dropped due to adoption of heat recovery. In general the annual saving rate is quite remarkable. Usually manufacturers achieve savings of output related emissions by 5% in a year. This reflects the professional management approach and the continuous improvement process at Viyellatex. 5.3.3 Energy Consumption and Costs Regarding energy costs from January to December 2013, the natural gas consumption for the boiler (43%) and the generator (42%) have the largest portion. Costs for electricity consumption from grid supply are 12% and from diesel use 3%. The share of costs for electricity from grid and for diesel shows the high price level compared to the costs for natural gas. Compared to 2009 the share of energy costs for natural gas has fallen from 67% to 43% of total energy costs which demonstrates the rising price level for diesel and electricity supply. Electricity (from grid) 4.4 Mio Tk. 12% Diesel (Backup Generator) 1.0 Mio Tk. 3% Natural Gas (Generator) 15.8 Mio Tk. 42% Natural Gas (Boiler) 16.1 Mio Tk. 43% Share of energy costs in 2013 In the period of 13 months from January 2013 to January 2014, the total energy costs of the four units of Viyellatex Limited accumulated to an amount of 41.5 Mio Tk. Systain Consulting Germany 2014 12 16

5.4 Overall Carbon Footprint of Viyellatex Group From January 2013 to December 2013, the total carbon footprint for ISML, VSL, and VTL of Viyellatex Group is accumulated to 42,078 tons CO 2 e (according to the scope defined in chapter 2). The total amount is equivalent to the yearly per capita emissions of 111,435 citizens in Bangladesh (0.38 tons per year). Viyellatex Spinning Ltd causes more than half of total CO 2 e- emissions. Slightly more than 36% are related to Viyellatex Textile Ltd. Interfab Shirt Manufacturing Ltd makes up 6% of the total CO 2 e- emissions. ISML 2.667 tons 6.4% Yiyellatex Ltd. 15.197 tons 36.1% VSL 24,214 tons 57.5% Viyellatex consolidated companies share of the absolute carbon footprint in 2013 (in tons CO 2 e) In the period of 13 months from January 2013 to January 2014, emissions accumulated to an amount of 46,005 tons CO 2 e. 6 Saving Measures 2013 Viyellatex is highly committed for sustainable textile production. The management has put major focus on improving energy efficiency and reducing carbon emissions. Viyellatex was one of the first textile producers to publish a carbon footprint report at all. Awareness raising, strict maintenance, application of advanced technologies, purchase of energy efficient equipment, research and investments to reduce energy use are well established at Viyellatex. Systain Consulting Germany 2014 13 16

VIYELLATEX Corporate Carbon Footprint 2013 Also in 2013 several measures have been taken: Energy Saving Measures in 2012 / 2013 at Viyellatex ISML Replacement of all conventional lights by efficient one (T5 and LED). Replacement of all conventional motors of sewing machines by servo- motors which require only half of electricity use. VTL Installation of heat recovery for condensate from steam. The waste heat of condensate is used to pre- heat feed water for boiler. Adaption of heat recovery from generators to make use of the waste heat. Replacement of conventional fluorescent tubes by efficient ones throughout all floors. Use of evaporative cooling instead of conventional AC. Systematic replacement of conventional motors by motors with electronic control (servo- unit) to minimize part load running and provide exact supply of electricity according to actual need of motor s operation. VSL Also VSL has been part of the program to replace conventional lights by more efficient ones. Use of evaporative cooling instead of conventional AC. Adoption of heat recovery for absorption chillers from waste heat from generators. Significant savings of 4.5 million m3 natural gas have been achieved by these measures. All measures have been implemented successfully. Viyellatex has taken a systematic approach to roll- out energy- efficient technologies in all areas and processes. Viyellatex reports, that there were no problems in implementing these issues. It just takes management commitment and willingness to move forward - which has been proven an important success- factor for Viyellatex to achieve a front runner position in sustainable business at all. Heat recovery for condensate steam at VTL Co- generation boiler at VTL Servo- motor at ISML Systain Consulting Germany 2014 14 16

After focus on advanced heat recovery, lighting, cooling and motors for sewing machines it is recommended to continue with reducing energy use and carbon emissions in the following areas: Recommendations for further reductions of carbon footprint Motors Systematic evaluation of motors that are operated with variable speed or torque, such as water pumps, dyeing machines, washing machines, combustion fans of boiler etc. Installation of Variable Speed Drive (VSD; inverter) for those motors that are operated under considerable changes in speed or torque with a. A VSD provides optimum of electricity supply according to actual need of motor. It saves about 20-60% per motor. Compressed Air Ensuring frequent leakage control and immediate fixing of any leak. Minimizing leakage rate to optimum of only 10%. Using low loss equipment, e.g. tubes made from PU / PUR, coupling from copper, corrosion resistance pipework. Minimize use of flexible hoses. Optimizing pressure level by checking whether pressure can be reduced to minimum level (1 bar reduction saves 6% of energy use of compressor). Process Heat Installation of a water reclamation for washing / dyeing machines which re- uses waste water from last rinse for the next rinse. First rinse of a wash does not necessarily need clean water. Adoption of airflow dyeing machines 7 Emissions Scope 3 Carbon Accounting within this project includes direct emissions (Scope 1) and indirect emissions from purchased energy, esp. electricity (Scope 2) resulting from business of Viyellatex. In general, there are significant quantities of indirect emissions outside of any company that are related to its business, but not covered under Scope 1 and 2. According to the Greenhouse Gas Protocol so- called Scope 3 emissions include all upstream and downstream activities of a company. Upstream activities cover such as purchased services and goods, raw materials, packaging materials, external transports, business travel etc. Whereas downstream activities include, for example, processing, use and end- of- life treatment of sold products (GHG Protocol Corporate Value Chain (Scope3) Accounting and Reporting Standard). Due to their high impact, Scope 3 emissions have become a major issue in carbon footprinting in the past years. A few front- running textile brands, e.g. PUMA have already evaluated their Scope 3 emissions, to learn about their impact in the supply chain. According to PUMA s Environmental Profit and Loss Account for year 2010 only 15% of the total emissions throughout the value chain are PUMA Scope 1 and 2 emissions. Respectively, 85% of total emissions are caused by upstream activities of direct and indirect suppliers of PUMA (PUMA s Scope 3 emissions). Systain Consulting Germany 2014 15 16

Within this project Scope 3 upstream emissions have been estimated for Viyellatex. Calculation has been carried out on basis of financial data provided by Viyellatex for calendar year 2013 and average values in textile and apparel industry in Asia (industrial input- output data). The estell methodology from Systain uses a full and detailed multi- regional environmental input output database based on EXIOBASE data (Multi- regional Environmentally Extended Supply and Use / Input Output database - MR EE SUT/IOT). As far as public data are available, Viyellatex is the first textile producer worldwide that calculates Scope 3 upstream emissions of its own business. This emphasizes the pioneer role, Viyellatex has taken in environmental protection in textile industry. The result is presented in the following figure. Carbon emissions by Scopes 48,000 tons 42,078 tons Scope 3 Scope 1 & 2 Viyellatex Scope 3 upstream emissions account for about 48,000 tons CO 2 e. Comparing Scope 1, 2, and 3, estimated upstream emissions (Scope 3) are slightly higher than direct emissions (Scope 1 and 2). Nevertheless, direct emissions play a much bigger role for Viyellatex than for brands such as PUMA. This can be explained by the fact that producing textiles is much more energy intense than business of a brand company. Viyellatex is thus part of the energy intense supply chain of brands. Hamburg, Berlin & Dhaka, April 2014 Norbert Jungmichel, Mahbub Khan, Christoph Niebuhr, Kordula Wick Systain Consulting Germany 2014 16 16