Both Australia and New Zealand are signatories to the Kyoto Protocol. Net greenhouse gas emissions across all sectors totalled 576.0 Mt CO2-e in Australia (2006) and 77.2 Mt CO2-e in New Zealand (2005). This is equal to 28.1 tonnes CO2-e per capita in Australia, making us the fifth largest per capita emitter in the world, and 18.8 tonnes CO2-e per capita in New Zealand for the corresponding reporting years. While these quantities are not significant in the total global context – Australia contributes 1.5% and New Zealand 0.2% of global total emissions – the effect of climate change in the region would be significant if an international agreement is not reached to reduce global levels of greenhouse gas emissions.

Climate change and its impact on food production is the most critical environmental issue facing Woolworths and the sustainability of our business. The effects of drought and severe weather events on the availability and pricing of staple food items are becoming more common, making a compelling case for minimising our carbon footprint, and through that reducing our contribution to global warming.

The main carbon emissions from our business arise from facilities (existing and new stores, Distribution Centres and offices) and transport. Electricity and fuel costs are rising and the advent of carbon pricing in the near future could add significantly to these costs, so there is a strong business case to find ways to reduce our electricity and fuel use and support the development of renewable energy and alternative fuels.

Supermarket operations are the most energy intensive of all our businesses due to refrigeration, which accounts for around 50% of the greenhouse gas emissions from our stores. The refrigerants used in conventional refrigeration systems have a very high global warming impact compared with other gases. Refrigerant losses that occur when these gases escape into the atmosphere account for a significant proportion of these emissions. Air conditioning and lighting are the other major consumers of electricity in supermarkets.

Supermarkets in Australia and New Zealand contribute around 68% of the total group carbon emissions, with BIG W, consumer electronics, hotels, liquor, transport and corporate making up the other 32%.

Regulatory framework

There have been a number of recent regulatory developments in energy and greenhouse emissions management and reporting that are relevant to our business operations in Australia and New Zealand.

Both Australian and New Zealand governments are introducing mandatory “cap and trade” emissions trading schemes. The New Zealand Emissions Trading Scheme (NZ ETS) draft legislation is scheduled to commence in 2008. The Australian emissions trading scheme is called Carbon Pollution Reduction Scheme (CPRS). Public release of the exposure draft legislative package is expected by December 2008 with the CPRS expected to commence in 2010.

The Australian Federal Government has already introduced two related acts; the Energy Efficiency Opportunities Act 2006 (EEO Act) and the National Greenhouse and Energy Reporting Act 2007 (NGER Act), in preparation for the commencement of CPRS. Woolworths has compliance requirements under both EEO and NGER.

Our Assessment Plan required under the EEO Act was submitted in December 2007 to the Department of Resources Energy and Tourism (DRET) and was approved by the DRET under section 16 of the EEO Act 2006 on 18 April 2008. We also participated in a trial compliance verification assisting DRET in developing its industry verification tools.

The first reporting period for NGER is the 2008–09 financial year. We have evaluated the issues of materiality and the gaps in our emissions data capture and are well placed to meet our reporting requirements under the NGER Act.

Our operations will not trigger the caps set under either NZ ETS or Australian CPRS and therefore we will not need to buy permits for compliance. However, our business will still be impacted through increased costs of electricity, fuel and services (such as waste disposal) as the cost of carbon is passed on through the supply chain.

Woolworths is supportive of well balanced and compatible emissions trading schemes for Australia and New Zealand and recognises that emissions reporting regulations such as the NGER are essential for an emissions trading scheme. However, the role of the EEO Act post CPRS introduction is unclear. In future, a price on carbon will be incorporated into pricing for energy services, providing an incentive for large energy users to manage their energy use more effectively.

The higher costs of energy represent more opportunities for driving energy efficiency in all aspects of our business to reduce/minimise energy input costs. Our Sustainability Strategy targets were developed in anticipation of these emerging price signals.

Performance status – facilities

In our Sustainability Strategy 2007–15, we committed to an overall 40% CO2-e reduction by 2015 (on projected growth levels), bringing our emissions back to 2006 level. Our total emissions have increased from the baseline year. Our total carbon emissions from facilities (stores, Distribution Centres and offices) in 2007–08 was almost 3.7 million tonnes CO2-e.

The graph above shows the variation in CO2-e emissions (tCO2-e) between the 2006 baseline figures and the actual figures for 2007–08.

Finding the appropriate technologies, testing, verifying the benefits and costs and then rolling them out across such a large number of sites takes time to achieve. Once new technologies have been approved to be rolled out across individual stores, it takes time for the savings to accumulate to a level where they can be seen as a reduction in the aggregate total emissions from our business. We are still in the testing phase for most of the technologies we have identified. Once these technologies have proven successful and commercially viable, we will roll them out to more stores. We are optimistic about reaching the targets we have set.

EMISSIONS FROM FACILITIES		TONNES OF CO2-e EQUIVALENT
Australia	Scope 1	Scope 2	Scope 3	Total
Woolworths Supermarkets	515,937	1,702,518	500,559	2,719,014
BIG W	8,773	178,663	26,378	213,814
Dan Murphy ’s liquor	–	33,667	4,204	37,872
Petrol stations	286	35,183	4,356	39,825
BWS & other liquor stores	25	37,334	5,827	43,185
ALH	11,166	176,605	20,996	208,767
Dick Smith Electronics	64	29,288	4,090	33,442
Logistics – Distribution Centres	39	140,203	18,530	158,772
Administration/Data Centres/Fabcot	549	38,666	6,996	46,211
Australian sub-total	536,839	2,372,127	591,937	3,500,902
New Zealand
Supermarkets	85,402	58,711	24,743	168,856
Dick Smith Electronics	–	1,890	178	2,068
New Zealand sub-total	85,402	60,601	24,921	170,924
Total	622,241	2,432,728	616,858	3,671,827

 

Green stores
We expect almost half of our carbon emission reduction target to be met through energy efficiency, fuel substitution and refrigerant transition in both existing and new stores. With 3,030 existing facilities, retrofitting will play a significant role. While we are working on efficiency measures for existing stores, we don’t want to miss the opportunity to ensure that all our new stores are as resource efficient as possible, taking advantage of currently available and tested technologies.

We plan to open more supermarkets over coming years in order to meet growth in demand. New supermarkets are generally larger than existing stores and use more refrigeration, therefore their energy requirements are higher. That is why we have invested in innovative technology solutions that will allow us to grow while reducing the environmental impacts of each store.

In our Sustainability Strategy, we set a target of 25% reduction in CO2-e emissions per square metre in our new stores, to be met through sustainable store designs compared with our 2006 business as usual design. We also said that all our supermarkets opening after September 2008 will meet this reduction target.

We have opened two stores to these new specifications: Rouse Hill in Sydney’s north west and Victoria Harbour in Melbourne’s Dockland. Geelong West in Victoria will open in November 2008.

Our Rouse Hill store has achieved a 36% reduction in CO2-e emissions per square metre, exceeding our target of 25% reduction in CO2-e emissions per square metre.

Of the 24 supermarkets scheduled to open after September 2008, three stores – Glen Innes in New South Wales, St Georges Terrace in Western Australia and Campbelltown Mall in New South Wales will use conventional refrigeration because the equipment had been ordered before we released the new refrigeration specifications, and the scheduled store openings were delayed due to building works. These three stores will still have some of the green store specifications, such as T5 lighting and automated after hours lighting controls.

Six of the stores will have variants of Rouse Hill cascade refrigeration systems and all key features of our green store specifications. Fifteen stores will use a hybrid refrigeration system that operated with comparable energy efficiency to the cascade, but has slightly higher overall CO2-e emissions due to the higher global warming potential of the refrigerants. This means we have to work harder at gas leak prevention from our refrigeration systems so that we can still meet our target.

The key features incorporated in our supermarket design and construction toolkit relate to refrigeration, space heating and cooling, lighting, appliances, fuel substitution and choice of flooring materials. Some of the key features include use of refrigerant types with lower global warming potential (GWP), efficient refrigeration cases, automated night blinds on multi-deck fridges, automated lighting controls for after hours switching, optimised heat reclaim, economy cycles in air conditioning, LED lighting in store and emergency signage and in freezer doors, T5 fluorescent lighting with electronic ballasts in trading areas, recycling services for cardboard and plastics and green/organic waste where possible, and switching to gas for water heating, cookers and oven where gas is available and connection is cost effective. We continuously investigate new technologies or improve old technologies, and test and pilot on a limited scale to evaluate suitability before incorporating these technologies into our standard specifications for application across all stores.

Some recent trials include:

• Retractable lids on the island freezers in our Kellyville supermarket in Sydney. The trial commenced in the middle of June 2008 and will run until the middle of September 2008. The results will be monitored and evaluated. If the trial is successful we will then develop a business case and a rollout plan for all stores.
• LED lighting for canopy lighting in the petrol station forecourt in our Glenrose petrol site. LEDs (light emitting diodes) use around 67% less electricity than existing fluorescent canopy lighting and have a significantly longer life. In addition, LEDs generate light without producing a lot of heat.

Challenges in implementation

New technology introduction
We have investigated a number of technologies to reduce energy use and emissions from refrigeration and air conditioning systems, and many of these innovations have been put into practice at our Rouse Hill supermarket.

An issue with meeting our commitment in terms of the Rouse Hill benchmark is with refrigeration type. Rouse Hill uses a cascade refrigeration system which uses CO2 gas. CO2 has a much lower global warming potential than the conventional refrigerant gases. We have installed these cascade refrigeration systems in four supermarkets in Australia since 2006. However, as more stores are investigated for the suitability of installing the CO2 cascade system, we are finding that the service industry has limited capacity to provide timely installation and service support for this new technology, particularly in regional and remote areas. The cascade systems are also more complex and more expensive due to the need for high pressure copper pipes, liquid pumps and more high tech electronic controls.

Changing consumer preferences
New stores tend to be larger and require more refrigeration to meet consumer preference for convenience meals that require refrigeration. The average energy use per square metre in our existing stores is 920 KWh/m2. New stores with increased refrigeration have a higher energy demand of approximately 1,200 KWh/m2 (based on 2006 business as usual design standards).

Performance status – transport

In our Sustainability Strategy 2007–15, we set a target of 25% reduction in CO2-e emissions per carton delivered by Woolworths owned trucks (our Victorian truck fleet) by 2012.

Year	CO2-e emissions (grams per carton delivered)
2006–07	117
2007–08	116

 

In 2007–08 we reduced our CO2-e emissions per carton delivered by 0.7%. This is only a small reduction, however this was a result of our decision to postpone biodiesel conversion of our trucks due to growing concerns about the impact of biofuel production on food security. We are now investigating biodiesel made from waste oil, liquefied natural gas (LNG) and compressed natural gas (CNG) to see whether the use of these alternatives will still enable us to meet our target.

Woolworths owned Logistics trucks account for 3% of the total CO2-e emissions from transport related activities.

Primary freight covers delivery of all products from suppliers to our Distribution Centres, and Woolworths controls about 23% of this activity. During the reporting period, primary freight accounted for a total of 54 million kilometres of road travel and almost 27 million kilometres of rail travel.

In our Sustainability Strategy we committed to a 30% reduction on 2006 levels of CO2-e emissions from our Company car fleet (dependant on mix of car size and fuels chosen) by 2010. During 2007–08 the level of CO2-e emissions rose by 9.2% due to an increase in the number of cars in the fleet and a delay in converting to more fuel efficient cars. The company fleet size grew by 122 cars in Australia and New Zealand and only 598 cars were changed over to more fuel efficient models. The changeover program commenced in early 2008 and will take time to roll out. New Zealand has cars on order expected to be filled by early 2009. Once the entire fleet has been changed over to the new cars, we will be able to compare emissions to the baseline year.

Challenges in implementation

Biofuels and food security
Global warming and rising petroleum costs have created an urgent need to find renewable fuel sources. There has been much debate in recent years about the merits of using “biofuels” such as ethanol from maize and sugarcane as an alternative fuel source. However, there is growing concern, driven by organisations such as the Food and Agriculture Organisation (FAO) of the United Nations and Oxfam, that biofuel production is consuming large areas of farmland that could be cultivated for food production, driving up the price of food.

A study by the FAO found that the demand created by first generation biofuel production has changed the market dynamics for food production, triggering food price inflation. The global food price index rose by 9% in 2006 and by 23% in 2007. An Oxfam report released in 2008 claimed that the price of food had increased by 83% in the past three years, with almost one third of that increase attributable to biofuels.

In our Sustainability Strategy 2007–15, we committed to aim for a 25% reduction in CO2-e emissions per carton delivered by 2012 through a combination of the following measures related to Woolworths owned trucks:

• Alternate fuels (13% = 10% through B20 biodiesel −−and 3% through LNG).
• Vehicle design (8%).
• Reducing distance travelled through improved efficiency (4%).

In response to growing local and international concerns over the impact of biofuels on food security, we have reviewed our measures for alternate fuel conversion and hope to achieve these reductions through conversion to CNG and greater efficiencies from transport planning, vehicle design and driver behaviour.

We believe that the right biofuels, namely, second generation cellulosic biofuels (produced from wood, grasses or the non-edible parts of plants) have the potential to contribute significantly in reducing our dependency on fossil fuels. More research and development grants and government policies are needed to help their development and commercialisation. However, we are concerned about promotion of biofuels that are generated from food crops or result in farming land being diverted from food crops to fuel crops.

Our Logistics team participated in CSIRO’s Future Fuels Forum and we were one of the sponsors of a recent CSIRO research titled “Fuel for thought – the future of transport fuels in Australia: challenges and opportunities”.

In terms of biofuels in our retail petrol business, while we provide E10 in our petrol retail sites in line with government requirements, we remain concerned about the impact on global food security and the rising prices of basic food commodities both nationally and globally.

E10 is sold from 21 of our 107 fuel outlets within New South Wales. A further 40 or more sites have been identified for inclusion of E10 in future. Biodiesel (2% blend) is sold at 20 sites in Newcastle and northern New South Wales. In Queensland, E10 is sold from 24 of our 89 fuel outlets. On average, E10 accounts for 13% of gasoline sales at sites where it is sold and customer acceptance is low. More customer awareness and education are needed from third party motorist advocacy groups to foster customer confidence in using ethanol-blended fuels.

Food miles and carbon labelling
Food miles describes the distance that food travels from its point of production to the consumer. We believe that food miles are only part of the picture as the carbon footprint of a product involves more than just its transport component.

Food miles advocates urge consumers to buy locally and avoid out of season and air freighted produce to minimise the greenhouse emissions associated with food purchasing. Many experts believe that the real impact of food choices takes into account the environmental impacts of food production and packaging as well a how far food has travelled.

Woolworths has followed the public debate both here and globally and has partnered with the Australian Food and Grocery Council (AFGC) to jointly fund a study into ways of measuring the climate change impact of food, beverage and grocery products. The study aims to explore the costs and benefits of carbon labelling and examine the options to provide a consistent, transparent and easily understood measure of climate impact across different products. This will help the industry to work collaboratively to determine what is appropriate for Australian business and consumers rather than simply adopting international models. The study is expected to be completed by August 2008.

In addition to our joint study with AFGC, we awarded our 2007 Fresh Food Grant of $100,000 to a carbon footprinting case study by Houston’s Farm which supplies prepared salads. The project is also supported by Horticulture Australia.

These two pieces of work will provide Woolworths, our suppliers, the broader industry and policy makers with valuable information, experience and foundations for sound policy going forward.

Consumer views on climate change

In 2007 AccountAbility and Consumers International undertook a survey of 2,734 people in the UK and the US on “What Assures Consumers on Climate Change?”. The study found that while most consumers are already taking some actions to reduce their environmental impact and are willing to embrace a low carbon lifestyle, few feel empowered to take anything but the most easy and convenient changes. Lack of information, expense, confusion, inconvenience and lack of trust in eco-claims were given as the key obstacles to taking more action.

In 2008 AccountAbility, Lloyd’s Register Quality Assurance Ltd (LRQA) Australia and the Net Balance Foundation repeated the survey with 1,000 consumers in Australia, sponsored by Woolworths, Transurban, the Victorian Environmental Protection Authority, Fosters Group and the Australian Food and Grocery Council. The results showed that Australian consumers are even more ready to act, but are held back by the same obstacles and dilemmas as consumers around the world. The research found:

• 81% of Australian consumers agree everyone needs to take more responsibility for their personal contribution to global warming.
• 63% understand that there needs to be a significant change in lifestyle, including personal sacrifices to prevent global warming.
• 58% have actively sought out information about global warming in a book, film or on the web.
• 51% are unable to judge how environmentally friendly their lifestyle is.
• Nearly 80% are unsure about business or government claims on climate change.
• 78% wish that green claims were backed up by proof from independent third parties.

Australians appear to be relatively well informed about climate change and the majority agree that a significant change in lifestyle is needed to prevent global warming. Only 13% of respondents could not come up with an answer on what consumers could do about it, compared with 24% of respondents in the U UK and 58% in the US.

The vast majority of consumers in Australia say they have already made some easy changes, such as switching off lights, buying energy saving bulbs and other products. But few have translated this into broader purchasing choices or more difficult behavioural changes.

Compared with the UK and US, a greater proportion of Australian consumers say that they are willing to take more challenging steps. For example 88% of Australians say they are trying to conserve energy at home, compared to 85% of UK and US consumers.

Woolworths’ sales data reflects the gap between consumer attitudes and behaviour. Consumers make purchasing choices based on a number of factors such as utility, quality, value and health, and not just environmental attributes, so more information on environmental characteristics does not necessarily translate to buying behaviour change. More details are available in the full report that can be found at www.netbalancefoundation.org.

Consumer concern mapped against consumer action

Source: What Assures Consumers in Australia on Climate Change? August 2008.

Designate Reporting © 2008