Step-by-Step: The Higg FEM Verification Trail

Section 3: Energy & GHG

March 10th, 2021

Karin Ekberg
Agenda 5

1. Verification Trail & Purpose

2. Section 3: Energy and GHG
3. Science based targets
4. Energy Examples
5. Questions and Discussion
6. Added value & FEM training offer
7. About Leadership & Sustainability
The Verification Trail and its Purpose
Verification Trail – Purpose 7

• Gaining better understanding of Higg Index and Higg

FEM in particular and its meaning for your company
• Section-wise guidance through all processes
• Becoming acquainted with the requirements
• Prepare for your verification
Higg FEM Verification Process – Overview 8

Complete
Make self- Verifier sends Reporting,
self-assessment, assessment, vFEM, posting results
agenda ahead of
FEM available to verifier on Higg.org
verification

1 2 3 4 5 6 7

Engage verifier Verifier to review On-site/

Provide information on documents & inform off-site
• Type of factory about issues beforehand Verification
• No. of employees
• Use of chemicals in
production
• Chemical level
reached Please click below for a guidance from SAC about:
• Wastewater treatment • on-site verification
• Address of factory
• off-site verification
 General Advice 9

• Appoint a person who is responsible

• Read the “How to Higg” and the Verification Preparation guidance
• Respond accurately to the questions
• Documentation
• Targets and baselines
• Be aware of the time needed
• Ultimate goal is to improve every year
Start Week 1 Week 2 Week 3

Understand Build Higg FEM Collect data Enter data through Completed
Higg FEM team and assign and documents online Higg FEM Higg FEM
Content & roles &
Requirements responsibilities
Verification Trail – Next Step 10

1 • Facility Information & Permits

2 • Environmental Management System

3 • Energy & GHG

4 • Water Use

5 • Wastewater

6 • Air Emissions

7 • Waste

8 • Chemicals Management
Section 3: Energy and GHG
Energy and GHG– According to Higg Guide 12

• Track all energy and fuel sources

• Identify factors contributing most to energy use on
site
• Set normalized baseline for energy use
• Set normalized targets for energy reduction
• Action plan
• Demonstrate energy reductions against baseline

Source: How to Higg Guide

Energy and GHG - Background 13

Energy Use in Your Factory – Scope 1:

• Coal • Biomass
• Natural Gas • Solar Photovoltaic
• Petrol • Geothermal
• Diesel • Hydro, Micro-Hydro
• Fuel Oil • Wind

Guidance given in “GHG Protocol”

Source: How to Higg Guide
Energy and GHG - Background 14

Sources owned or controlled by another entity –

Scope 2:
• Purchased electricity
• Purchased chilled water
• Purchased steam

Guidance given in “GHG Protocol”

Source: How to Higg Guide

Energy and GHG - Background 15

List of common machines and equipment:

• Boiler
• Compressed Air System
• Motors
• Generator
• HVAC
• Incinerators
• Chiller and burner
• Dryers
• Lighting
• Production Equipment

Source: How to Higg Guide Guidance given in “GHG Protocol”

Energy and GHG - Background 16

Three broad scopes:

• Scope 1: All direct GHG emissions
• Scope 2: Indirect GHG emissions
• Scope 3: Other indirect emissions

→ Higg FEM tool will provide a GHG

calculation for both Scope 1 & Scope 2

Guidance given in “GHG Protocol”

Source: How to Higg Guide
Energy and GHG - Background 17

Benefits calculating GHG emissions using Higg FEM:

• Reduce energy cost
• Increase competitive advantage
• Get a start on future regulations on carbon and GHG
emissions
• Environmental stewardship

Guidance given in “GHG Protocol”

Source: How to Higg Guide

Energy and GHG - Levels 18

• Level 2:
2. Energy baselines
• Level 1: 3. Energy intensive • Level 3:
1. Tracking energy processes or 7. Scope 3 emissions
sources operations
8. Science-Based Targets
4. Energy targets
5. Improvement plan
6. Demonstrated
improvements

Source: How to Higg Guide

new in Higg FEM 2020

Energy and GHG – Level 1 19

Q1. Tracking energy sources

Requirement:
• Energy source
• Tracking
• Quantity of energy use
• Method
• Frequency of measurement

Source: How to Higg Guide

new in Higg FEM 2020

Energy and GHG – Level 1 20

Q1. Tracking energy sources – additional

information
• Tracking and Reporting Energy Use in Higg FEM
The following principles should be applied:
• Completeness
• Accuracy
• Consistency
• Transparency
• Data Quality Management
• The principles are adapted from the “GHG protocol”
Source: How to Higg Guide

new in Higg FEM 2020

Energy and GHG – Level 1 21

Q1. Tracking energy sources

Data quality checks

Do:
✓ Review source data
✓ Compare the current year with historical data.
✓ Ensure the most recent and updated versions of data
tracking spreadsheets are being used
✓ Ensure the proper units are reported
✓ Review any assumption

Source: How to Higg Guide

new in Higg FEM 2020

Energy and GHG – Level 1 22

Q1. Tracking energy sources

Data quality checks

Do not:
Report data that is not accurate

Report estimated data if it is not supported by

verifiable and reasonable accurate estimation

Source: How to Higg Guide

new in Higg FEM 2020

Energy and GHG – Level 1 23

Q1. Tracking energy sources

How this will be verified:

Verifiers must review all aspects of the facility’s energy
tracking program that could produce inaccuracies
including:
• The initial data collection processes and data sources
• The process and tools used to aggregate the data
• If any inconsistencies or errors are noted, the
reported information must be corrected

Source: How to Higg Guide

new in Higg FEM 2020

Energy and GHG – Level 2 24

Q2. Energy baselines

Question:

Has your facility set baselines for energy use?

Source: How to Higg Guide

Energy and GHG – Level 2 25

Q2. Normalized Baseline Example

1) Measure total energy use in a given time period (i.e.
kWh/year, m3 of diesel/year)

2) Divide by the chosen variable for that same time

period (garments/year, square meters of fabric/year)
1,000,000 kWh ÷ 500,000 garments shipped =
• Normalized Baseline Electricity Usage =
2 kWh/garment

2020 Electricity 2020 Production Volume

Consumption = (amount shipped) =
1 million kWh 500,000 garments
Energy and GHG – Level 2 26

Q3. Energy intensive processes or operations

Question:

Does your facility know what facility processes or

operations use the most energy?

Source: How to Higg Guide

Energy and GHG – Level 2 27

Q4. Energy targets

Question:

Has your facility set targets for improving energy use? If

yes, select all sources of energy for which your facility
has set an energy or GHG reduction target.

Source: How to Higg Guide

new in Higg FEM 2020

Energy and GHG – Level 2 28

Q4. Energy reduction target

Formal targets should include:

• Base the target on a formal evaluation of
improvement opportunities and actions
• Define the exact target quantity
• Absolute or Normalized ?
• Start date and end date
• Measurement units
Ensure the target is relevant to reducing the site’s
energy use

Source: How to Higg Guide

Energy and GHG – Level 2 29

Q4. Energy reduction target – Additional Information

Reporting Targets in Higg FEM. Do:

✓ Review the target to ensure all aspects are covered
✓ Enter the targeted reduction or improvement as a
percentage.
✓ Select the appropriate target type in the FEM -
Absolute or Normalized
✓ Provide sufficient details on how the target will be met
in the “Describe the measures planned to achieve this
target:” field.

Source: How to Higg Guide

new in Higg FEM 2020

Energy and GHG – Level 2 30

Q4. Energy reduction target – Additional Information

Reporting Targets in Higg FEM. Do not:

Report a target that is not accurate (e.g. the data
source is unknown or has not been verified)
Report a target that is based on insufficient data
Report an estimated target if it is not supported by
verifiable and accurate estimation methodology and
data

Source: How to Higg Guide

new in Higg FEM 2020

Energy and GHG – Level 2 31

Q4* (NEW). Energy targets

Question:

Has your facility set targets for reducing your facility

overall GHG emissions?

Source: How to Higg Guide

new in Higg FEM 2020

Energy and GHG – Level 2 32

Q5. Implementation Plan

Question:

Does your facility have an implementation plan to

improve energy use and/or GHG Emissions?

Find here: Sample Implementation

Source: How to Higg Guide
Plan
Energy and GHG – Level 2 33

Q6. Demonstrated Improvements

Question:

• Has your facility improved energy consumption

compared with its baseline? If yes, select all sources
of energy that have been improved.

Source: How to Higg Guide

Energy and GHG – Level 2 34

Q6. Demonstrated Improvements

• We will ask to see all the items below and how they have been calculated
• Keep all reports in Excel
• Quantity with indication of unit of measure
• Percentage change to track progress

Source: How to Higg Guide

new in Higg FEM 2020

Energy and GHG – Level 2 35

Q6. Demonstrated Improvements – Additional Information

Reporting Improvements in Higg FEM. Do:
✓ Review the improvement data to ensure all aspects noted above are covered and that the information is
accurate.
✓ Enter the improvement quantity either as an absolute or normalized value. This is the year over year change in
energy use for the source. (e.g. previous year’s consumption – reporting year consumption = the change in
energy use) Make sure to enter a negative number for a reduction (e.g. -0.05 for a normalized reduction of 0.05
kWh/unit) and a positive number for an increase (e.g. +0.03 for a normalized increase in renewable energy use
of 0.03 kWh/unit)
✓ Select the appropriate units for the improvement. (If the appropriate units are not available, list the units in the
“Describe the strategies used to achieve this improvement:” field)
✓ Input the percent (%) change in the energy use of the source from the previous year. Make sure to enter a
negative percentage for a reduction (e.g. -5 for a 5% reduction), and a positive percentage for increased usage
(e.g. +5 for a 5% increase in usage).
✓ Provide sufficient details in the “Describe the strategies used to achieve this improvement:” field (e.g.
Normalized electricity consumption was reduced by optimizing the facility’s compressed air system).
Source: How to Higg Guide

new in Higg FEM 2020

Energy and GHG – Level 2 36

Q6. Demonstrated Improvements – Additional Information

Reporting Improvements in Higg FEM. Do not:

• Report improvements that are not accurate
• Report improvement that were not achieved in the FEM reporting year
• Report an improvement that is absolute and relates to a decrease in
production or reduced facility operations. This is why data normalization is
important.
• insufficient data

Source: How to Higg Guide

new in Higg FEM 2020

Energy and GHG – Level 2 37

Q6. Demonstrated Improvements – Additional Information

How this will be verified:

When verifying a facility’s targets, Verifiers must review:
• All supporting evidence (e.g. energy use data and baselines, etc.) to verify the
reported improvement quantity is accurate and attributable to measurable
actions taken to improve energy use.
• The implemented changes or actions taken to achieve the improvements.
• If any inconsistencies or errors are noted, the reported information must be
corrected

Source: How to Higg Guide

new in Higg FEM 2020

Energy and GHG – Level 3 38

Q7. Scope 3 emissions

Question:

Were your facility’s annual Scope 3

greenhouse gas (GHG) emissions
calculated during this reporting year?

Source: How to Higg Guide

Energy and GHG – Level 3 39

Q7. Scope 3 emissions

Energy and GHG – Level 3 40

RELEVANCE OF OFFSETTING:
1. Avoid
2. Reduce Scope 1 and Scope 2 energy consumption Offset
and hence GHG emissions (energy efficiency)
3. Use more renewable energy sources for Scope 1 Renewable Energy
and 2 and hence reduce GHG emissions
4. Develop products that use less energy Energy Efficiency
5. Avoid or Reduce Scope 3 emissions by avoiding /
reducing activities/ increasing energy efficiency Avoid
6. Use more renewable energy sources for Scope 3
7. Offset emissions
Energy and GHG – Level 3 41

Q7. Science-Based Targets

Question:
Has your facility set a Science-Based Target according
to the SBTi?
• If No, Is your facility preparing to set a Science-
Based Target according to the SBTi?
Suggested Upload:
Documentation to show you have set a Science-Based
Target according to the SBTi in the reporting year.

Note: Question is not scored

Source: How to Higg Guide

new in Higg FEM 2020

Science-Based Targets
Science Based Targets 43

• Partnership: CDP, UN Global Compact, WRI and WWF

• Limiting global warming to below 2° C, calling for an alignment
towards 1.5° C
• Define emissions reduction targets that ensure
transformational action
• Used to:
• Increase innovation
• Reduce regulatory uncertainty
• Strengthen investor confidence an credibility
• Improve profitability and competitiveness
• Joined the initiative so far:
Gap Inc., Nike, Levi’s, VF Corporation, ASICS, adidas, H&M,
PUMA, Under Armour and Walmart among others Source: sciencebasedtargets.org

Read more
What is a Science-Based Target? 44

• Clearly defined pathway to future-proof growth

• Specifies how much and how quickly companies
need to reduce their greenhouse gas emissions
• Targets to be in line with what is necessary to meet
the goals of the Paris Agreement:
o To limit global warming to well-below 2°C above
pre-industrial levels and pursue efforts to limit
warming to 1.5°C

Read more
What are the steps to define my own Science-Based Targets 45

• Commitment letter / Target Setting Letter (SMEs)

1
• Develop a target (within 24 months)
2
• Submit your target for validation
3
• Announce the targets
4
• Start working towards the target, monitor and annual public report
5

Please click here for the Call to action, 2020

How to set Science-Based Targets 46

Absolute Target Intensity Target

reduction in GHG emissions to the reduction in the ratio of GHG
atmosphere over time in units of emissions relative to a business
metric tons of CO2e metric, such as output, production,
sales or revenue

Absolute: reduce total scope 3 emissions by 10% from 2020 levels by 2025
Intensity: reduce scope 3 emissions per unit of revenue by 25% from 2020
levels by 2025
 Rules – apparel and footwear 47

• Targets must cover a minimum of 5 years and a

maximum of 15 years
• No inclusion of targets that have already been achieved
• Base year should be most recent year for which data are
available
• Targets for scope 1 and 2 should be consistent with the
trajectory well below 2°C
• The use of offsets does not count
• Avoided emissions do not count
• Targets to source renewable electricity are acceptable
• Scope 3 must be included if it accounts for more than
40% of scopes 1-3 (exception for SMEs)
Please click here for the SBT Guidance for the apparel and footwear sector.
Methods for Scope 1 and 2 48

Absolute contraction (recommended):

• All companies reduce absolute emissions at the
same rate
• Well below 2°C: Min. 2.5% annual linear reduction
• 1.5°C: Min. 4.3% annual linear reduction
Physical intensity:
• Intensity based on product portfolio
• Should lead to the same absolute reductions as
for absolute contraction
Economic intensity:
• For example per unit of value added
• Should lead to the same absolute reductions as
for absolute contraction