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UK Power NetworksSession 1 SustainabilitySHE Management Conference2022 presentationsHosted byThe Safety, Health and Environment Management Conference is an ENA event

2022 ENA SHE MANAGEMENT CONFERENCESustainability & UKbusiness approachAleyn Smith-GillespieDirector, Carbon Trustaleyn.smith-gillespie@carbontrust.com

OUR MISSIONTo accelerate the move toa decarbonised future.

THE CARBON TRUSTWe bring our customers on a journey towards climate leadershipOrganisational footprintingStart to understand your carbon footprint, measureyour Scope 1 and 2 emissions and build awarenessof your organisation’s impacts.Value chain footprintingAssess the wider emissions in your upstream anddownstream activities, calculate your Scope 3 emissionsand increase your understanding of the broader impactsof your business.Science-based target settingSet ambitious and climate-science aligned targets to reduceyour carbon emissions and to demonstrate yourorganisation’s commitment to sustainability.Certification and disclosureStrategic sustainability adviceDevelop a long-term plan on how you will achieve yourtargets. Assess the feasibility of your strategy: modelexisting initiatives, identify new ones, define the mostrelevant KPIs.Communicate your efforts to the public with a robustthird party validation. Build a strong message around theadoption of international standards and frameworks.3

Context4

Context to science-based targets Global temperatures have risen by more than 1 C since pre-industrial times. Paris Climate Agreement approved by 197 nations at COP21 came into force on 4thNovember 2016. Agreed to hold the increase in global average temperatures well below 2 C and pursueefforts to limit the increase to 1.5 C. Emissions should peak as soon as possible, and rapidly reduce thereafter.5

Global commitments are accelerating the adoption ofambitious objectives to tackle climate change2018: Intergovernmental Panel on ClimateChange (IPCC) report showed that we need toalign to a 1.5 C trajectory. The world needs toreach Net Zero CO2 emissions (emissionsbalanced with removals) by 2050.The Paris Agreementwith a goal to limit globalwarming to well below2 C and to pursue effortsto limit to 1.5 CJune 2021: G7reconfirmed theircommitment to limitingwarming to 1.5 C.May 2021: EU climatelaw – Net Zeroemissions are now abinding target for 2050.6

However, under current policies we are heading towards a 2.7Ctemperature increaseTransition risks will depend on the level of decarbonisation and our preparedness to adapt to a low-carbon economyAs we strive to reach the ParisAgreement’s goal of 1.5 Ctemperature increase, we canonly mitigate growingexposure to transition risksthrough early action and anorderly decarbonisation.Source: Climate Action Tracker7

The difference between global warming of 1.5 C and 2 C isvastA 1.5 C world is one that is more economically stable, in which supply chains are less susceptible to flood and extremeweather risks; workforces are less exposed to extreme heat, water scarcity and food shortages; and company operationsare less at risk from dramatic changes to water supplies.1.5 CGlobal populationexposed to severe heat atleast once every 5 yearsNumber of ice-free articsummersFurther decline in coralreefsDecline in marine fisheriesSBTi net zero launch webinar2.0 C2 C14%37%2.6x worseAt least 1 every 100yearsAt least 1 every 10years10x worse70-90%99%Up to 29% worse1.5M tonnes3M tonnes2x worse8

Drivers for action towards a Net Zero transition are strong andgrowingBuyersPolicies ®ulationsTechnologyEmployeesInvestorsSupply chain

Is it just about risks?Those than can adapt and implement early action will benefit from the opportunities of a just transition to a net-zero world10

The road to Net Zero: Science-based andlong-term targets11

The Science Based Targets Initiative (SBTi) has translated theglobal goals into decarbonisation pathways for companies Majority of all science-based targetsvalidated by the SBTi in 2021 havebeen 1.5C-aligned for Scope 1&2 (themost ambitious pathway forreduction). Growing number of companies havenow committed to achieving net-zeroemissions by 2050.Source: Science Based Targets Initiatives (Figures as of 26 June 2022)12

The SBTi describes the end goal of Net Zero and the journeytowards achievement1. Near-term sciencebased target2. Long-term sciencebased target3. Beyond value-chainmitigation4. NeutralisationSource: Science Based Targets initiative13

Companies need to address both their Scope 1&2 emissions(own operations) as well as Scope 3 emissions (value chain)Scope 3 (Upstream)Supply chainOwn operationsScope 1 & 2Scope 3 (Downstream)Distribution, use anddisposal of sold products14

What does Net Zero mean for the PowerSector?15

Why is setting a net zero target in the utilities/energy sectorimportant? Net zero includes all scope 1, 2 and 3 emissions to be accounted when settingreduction and neutralisation targets. The world has a viable pathway to building a global energy sector with net-zeroemissions in 2050, but it is narrow and requires an unprecedented transformation ofhow energy is produced, transported and used globally (IEA 2021)IEA 2021World Resources Institute 202016

SBTi Net-Zero Standard for power companiesSector-specific intensity pathwaysNet-Zero Standard for long-term targetsfor power companies:Long-term targetfor powergeneration:0.009 kgCO2/kWh97% reduction Must achieve Net Zero by 2040 and usethe intensity convergence method(SDA). If scope 3 emissions 40% of total:companies must set an intensity targetcovering all sold electricity (includingpurchased and resold electricity inscope 3 category 3).17Source: Science Based Targets Initiative

UK Power sector emissions trajectory to 2037Indicative power emissions pathway to2037 in the UK Net Zero StrategyKey emission reduction milestones(vs. 2019 base year)(1) 2030: 71-76% reduction 2035: 80-85% reduction 2050: 95-98% reduction18Source: UK Net Zero Strategy: Build Back Greener (BEIS, 2021)

By 2050, the economy will need to be powered by zero-carbonelectricity and hydrogen; residual fossil fuel usage will be minorUK energy generation and end uses in 2050(High electrification scenario)Net Zero Strategy Commitments to deliver adecarbonised power system by 2035 (selected) By 2035, all electricity will come from lowcarbon sources (mainly wind and solar). Maximise system flexibility throughdelivering smart and digitalised energysystem. Create a whole energy system governanceto achieve both Net Zero and consumerneeds (e.g. proposal for ‘Future SystemsOperator’ with responsibilities across bothelectricity and gas systems).19Source: UK Net Zero Strategy: Build Back Greener (BEIS, 2021)

The role and value of smart technologies in a 2050 net zero systemA portfolio of flexibility acrossthe energy system managesuncertainties and reducescostsInvesting in flexibility is ano-regrets decision as itdelivers material netsavings of up to 16.7bn/year in 2050Embedding flexibility in zerocarbon heat & transportsolutions will help to reducetheir system impact & costsDemand side flexibility, enabled bysmart technologies, reduce systemcosts by up to 4.6bn/yr in 2050Source: Flexibility in Great Britain (Carbon Trust; Imperial College)20

Key elements of a transition plan21

Net Zero targets still bring a lot of uncertainties and questionsRobustness of thetargetValidation of achievedreduction over timeFeasibility of theimplementation planTracking andcommunicationHow do I ensure thatthe level of ambition,baseline, boundaries,offsetting andremovals strategiesare appropriate?How can I verify theprogress achieved overtime, to make sure Iwill meet myobjectives?Do I have the correctfinancial andoperational planningto achieve mytargets?How can Icommunicateinternally and to thewider public theprogress on myambition?*Source: Accenture (2021)22

What does leadership look like?Targets*Climate risks andopportunitiesMonitoringReporting*Data collection& accountingResponsibility*Supply oducts onalcontrolCapitalexpenditure &investments23

Presence of a qualifying Net ZerotargetTargetsAppropriate public reporting of GHGEmissionsClimate risks andopportunitiesMonitoringFully accessibility of GHG emissionreporting on public communicationReportingData collection& accountingResponsibilitySupply chainengagementPolicyDemonstrated senior executive(s)leadership in carbon managementPresence of accountabilityframeworks and accountablepersonnel for carbon reportingTop management actively involved inthe creation of the policyCustomerengagementStrategyProducts onalcontrolCapitalexpenditure &investmentsEnvironmental policy communicatedboth internally and externallyGroup strategy should recognise theuse of GGRs for achievement of NetZero targetAppropriate and detailed investmentplan to achieve carbon reductiontargets24

Conducting a transition risk assessmentIdentifyAnalyseMitigate2.1.Identify transition risks based on your business strategy,sectoral developments, and climate science & policyDefine business context4.3.Detailed assessment of the mostmaterial risksAssess the external drivers of andinternal exposures to risk5.6.Integrate findings with board levelbusiness planning and strategyDevelop metrics & targetsfor material transition risks25

Companies need to forward plan investments and actionsIllustrative decarbonisation pathwayReduce carbonintensity of growth160140120100Carbonemissions Scope 1&2 Scope 38060- 90% ear-termtargetGrowthDecarbonisationLong-termNet Zerotarget5-10 yearsfrombaseline26

Focus: Scope 3 decarbonisationScope 3 (Upstream)Supply chainOwn operationsScope 1 & 2Scope 3 (Downstream)Distribution, use anddisposal of sold products27

Key levers for decarbonising Scope 3 emissionsPurchasedgoods andservices Product designCircular products andbusiness modelsUpstreamtransport anddistribution Supply chain optimisationCollaboration More energy efficientproducts in-useEnd-user behaviourCircular products andbusiness modelsUseof soldproductsDownstreamtransport anddistributionEnd of lifetreatmentSource: Carbon Trust Logistics optimisation RecyclingCircular economy /regenerative resource useLandfill vs waste-to-energy 28

To drive change at scale, three key aspects will need to work insynergyMeasurement,Verification, assuranceand reportingCarbon reduction actionsand innovationGreen financing29

Key insights and learnings from over 150 SBT projects deliveredCompanies face similar challenges Receiving buy-in from across thebusinessUnderstanding evolving SBTirequirementsMeasuring value chain emissionsValue chain target-setting but there are ways to address theseEarly and continuous engagement withkey stakeholdersGood data collection processes thatimprove with timeClear business case and long-terminvestment planHow to achieve the targetGetting the target approvedExternal support to ensure best practice30

Thanks forlisteningAleyn Smith-GillespieDirector, Business Servicesaleyn.smith-gillespie@carbontrust.com31

ENA SHEconference 2022How we are innovating toachieve Net ZeroIan Cameron & Shira Lappin

Our corporate Vision is evolvingEnabling Net Zero has two key components:1. Achieving Net Zero as a business through our own operations and supply chain2. Facilitating Net Zero through our network by accelerating the decarbonisation ofelectricity, transport and heat.2

Our Customers’ Top 3 PrioritiesCostClimate ChangeCustomerVulnerabilityOur key areas of innovation are where these priorities overlap3