Climate change/greenhouse gas emissions

The earth’s climate has always been affected by natural changes in the atmosphere. More recent changes are now widely thought to have been caused as the result of human behaviour. The greenhouse gases that make up the atmosphere and carbon dioxide (CO₂) in particular are also released through activities such as the generation of electricity or the use of fuel. It is the release of these gases that are thought to be causing a thickening of the atmosphere which is affecting the global climate.

It is widely accepted that climate change is happening and has the potential of causing some of the greatest and most far reaching market failures ever seen. The influential Stern Report concluded that the benefits from robust and co-ordinated action to contain the potential threats from climate change far outweigh the costs involved.

In light of this, it is clear that all businesses, regardless of their business sector have a role to play in combating climate change. As a first step, Richemont has sought to comprehensively measure its global carbon footprint for the year ended 31 March 2007 for the first time. Based on this work, we estimate our carbon footprint as being 63 000 tCO₂. We are working on improving data gathering in this area with a view to having more exact data, analysed by operating entity and geography. Given the nature of our business, we do not believe that climate change is currently a significant area of direct risk or opportunity for the company.

The issue of climate change and the findings of the carbon audit were presented to the Richemont Board. Although our own carbon footprint is relatively small compared to say a power generator, the Board concluded that a programme of activity should be put in place in this area.

This figure was calculated using a template based on the Greenhouse Gas (GHG) Protocol of the World Business Council for Sustainable Development (WBCSD). This protocol is the internationally accepted template for accounting and reporting on GHG emissions:

Scope 1: Direct GHG emissions from sources that are owned or controlled by the company
Scope 2: Indirect emissions associated with purchased electricity
Scope 3: All other indirect emissions that are a consequence of the activities of the reporting company but occur from sources owned or controlled by another company.

Richemont has estimated its global carbon footprint at 63 ktCO₂ made up from:

Scope 1: 16kt CO₂ (Company owned or operated vehicles, gas and fuel oil in buildings)
Scope 2: 33kt CO₂ (Purchased Electricity)

We also measured emissions resulting from business travel.

Scope 3: 14kt CO₂

Our scope 3 emissions cover both air travel and the use by our employees of private owned vehicles for business trips.

This is the first year that this data has been fully collected and collated at group level. The process has helped us identify both data gaps and opportunities for improving the process. We expect the process to mature.

Consolidated data covers our subsidiary companies where we have management control (defined as a shareholding of greater than 50%). Our principal activities are manufacturing, distribution and retail. Data was collected through our financial control function as an integral part of our approach to business reporting. We believe that integrating environmental reporting into our normal business reporting requirements will help focus attention and effort on environmental improvement within the group and this is a model that we intend to continue. In preparing our carbon footprint, we were supported by consultancy from a “Big 4” accountancy practice through a survey review, helpdesk assistance, a high level sense check and a report on opportunities to improve the process. Data is not always available for some smaller retail outlets, so our approach to calculating our carbon footprint will require further refinement and development this year. We also expect the quality of this type of reporting to improve and mature over time. We are committed to continue and improve this data collection process.

Case Study: IWC Schaffhausen

IWC has a long and proud tradition of innovation in energy management and reduction.

In 2005, IWC completed a 3 000m² five storey expansion of its site with the construction of a single integrated production department. An integral part of the design process was to adopt market leading energy efficiency technology such as an insulated double-skin glass façade and an up to date ventilation system. Most notably, this benefited from a ground-breaking heating and cooling system that exploits the natural differences in temperature inherent in waste water. Waste water which flows through the city

sewerage pipes does so at a temperature of 12^o to 14^oCelsius. IWC has installed a combined heat and power pump which can extract heat from the waste water as well as discharge excess heat generated by the production process. At the same time, IWC collects groundwater which can be used for cooling. This innovative system is among the first in

Switzerland

and attracted public sector investment so that it could be used as a demonstration project. These innovations have helped IWC reduce its CO₂ emissions by around 200 tonnes so that its overall site carbon footprint has remained static at around 750 tonnes, despite the substantial expansion of its business and premises.

IWC is planning to go further. In 2007, the factory aims to source its electricity needs from hydro-electric power which as a source of renewable power is zero rated for carbon purposes. Further use of solar panels is planned. The company is also committed to review its company car policy with a view to focusing on hybrid and diesel vehicles. Existing and planned investments will reduce the IWC CO₂ emission profile by a further 50%. Further expansion of the company is planned with the construction of a new 3 900m² offices and distribution centre at the site. IWC is looking at the feasibility of introducing a bio-mass plant using surplus wood pallets. This would reduce the IWC CO₂ profile by a further 30%.

Case Study: Chloé, North America

The scope for innovation and environmental improvement at our manufacturing sites is much greater than at our retail stores. However, in contrast to IWC, this case study from a small distribution business demonstrates how the commitment by Richemont to carbon neutrality by 2009 is stimulating interest and activity across the group in reducing our environmental impact. Chloé products are sold in 15 boutiques across nine centres in the

USA

. The team has been enthused by the commitment and fully reviewed its environmental impact. Its key environmental impact is business travel and the plans are to:

Review store manager travel commitments
Investigate purchasing web or video conferencing for client and other meetings
Alternate video with actual store visits for clinic presentations
Use the “Ozo” hybrid car service in New York for transport to business meetings
Invest in energy saving technology, particularly lighting
Engage all employees through a range of initiatives from save energy campaigns through to introducing more plants in offices and in non-public areas in stores to help soak up carbon dioxide