GHG Emissions Inventory 2015.

GHG EMISSIONS INVENTORY 2015

MRV Engenharia 2016/May Version 02 (post audit)

GHG EMISSIONS INVENTORY - 2015 MRV Engenharia

CLIENT

PROJECT

2015 Greenhouse Gas Emissions Inventory from MRV Engenharia

AUTHORS

Jéssyca Irene Guimarães; jguimaraes@waycarbon.com

CONTRIBUTORS

Thais de Morais Souza; thais.morais@mrv.com.br

HISTORY OF THE DOCUMENT Document Name

Date

Nature of revision /amendment

INVGEE-MRV-20160606

2016/06/06

Version 02 (post audit)

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GHG EMISSIONS INVENTORY - 2015 MRV Engenharia

SUMARY INTRODUCTION ..................................................................................................... 4 MRV ......................................................................................................................................................................... 4 ENVIRONMENT ..................................................................................................................................................... 4 MARKET ................................................................................................................................................................. 5 FINANCES ............................................................................................................................................................... 6 BOUNDARY OF THE INVENTORY ................................................................................. 7 METHODOLOGY ..................................................................................................... 9 RESULTS ............................................................................................................ 11 DISCUSSIONS....................................................................................................... 16

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GHG EMISSIONS INVENTORY - 2015 MRV Engenharia

INTRODUCTION MRV MRV operates in the construction sector in Brazil since 1979 and is the only construction company present in more than 140 cities in Brazil. Since 2012, the company is ranked as the largest construction company in the country, according to the ITC ranking award, that considers the greatest value in building area. In 2015, MRV delivered 2.1 million m2. In addition, it is a certified company by ISO 14001, OHSAS 18001 and GHG Protocol.

MRV has its focus on cost reduction, innovation and ethics; invests in social projects, environmental initiatives and encourages the sport. The values, vision and mission of the company were defined and implemented.

ENVIRONMENT Sustainability is one of the values and one of the most important pillars for the company, internally and externally.

MRV is based on three aspects for the establishment of its environmental indicator: construction materials and efficient use of resources; innovation in construction processes and waste generation and management.

Moreover, it is the only Brazilian company of lightweight construction to join the National Commitment to Improve Labor Conditions in the Construction Industry (in Portuguese: Compromisso Nacional para Aperfeiçoar as Condições de Trabalho na Indústria da Construção).

MRV is always looking for new solutions to reduce the impacts of its activities. Every project - from planning to completion - is guided by respect for the environment, a commitment that is also required from suppliers.

The construction phase demands special attention from MRV, regarding the responsible management of resources and reduction of environmental impacts. The shower water reuse in discharges, reuse of water for concrete mixer trucks washing and rainwater capture for garden and yard irrigation and for bathrooms washing represent a few examples of actions for optimize consumption.

Regarding waste management, efforts to improve the management of the material generated by the works have been carried out, making the volume of segregated waste grow from 75% in 2014 to 96% in 2015. The company no longer allocate about 247,000 m³ of construction waste in landfills, which represents more than 49,000 buckets, generating savings of more than R$ 3 million, with sustainable actions, donation, reuse, recycling, sale and reverse logistics of waste in our constructions.

In 2015, MRV reached silver seal on the GHG Protocol due to the 2014 emissions report, because of the publication of the full GHG inventory, including all sources of scope 1, 2 and certain sources of scope 3 (use of concrete and steel in constructions). Continuing the improvement process of the emissions reporting of 2016, MRV is reporting the 2015 emissions, expanding the scope 3 emissions reporting and performing external verification of the GHG inventory by Instituto Totum, a Verification Organization (VO) credited by Inmetro.

In 2016, MRV also carried the GHG emissions offsetting of MRV Sustainable site (2015 activities) through carbon credit purchase of Programa Amigo do Clima (www.amigodoclima.com.br). 500 kgCO2 were offset through the purchase of carbon credits of Atlantic Forest reforestation activity from Bulcão Farm, located in Aimorés (MG), that in thirteen years of reforestation (2000/2013) generated more than 96,000 carbon credits.

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GHG EMISSIONS INVENTORY - 2015 MRV Engenharia

MARKET MRV has six key market differentials: •

Nationwide It operates in high demand and low competition areas; MRV implements a standardized and industrialized process; It achieves scale gain and cost savings and creates barriers to entry in the markets in which it operates.

•

Market leadership in Brazil In the third quarter of 2015, it obtained important achievements of the listed companies: 74% share of the total releases of bands II and III of MCMV and 42% in the total cumulative releases for the year.

•

Consolidated sales structure Team of more than three thousand internal brokers only for MRV products; investments in training and sales techniques to improve productivity and quality of the sales process; commissioning policy management for own staff and sales strategy setting.

•

Effective Marketing An investment of R$100 million/year yields a return of R$2 billion/year in virtual sales. Marketing reaches 140 million Brazilians (about 70% of the population). Moreover, in Belo Horizonte, 130 virtual servers are allocated to level 1 attendance.

•

Online Leadership About 81% more views on institutional site than other construction companies; 25% more followers on Facebook than other construction companies; 87.5% more followers on Twitter than other construction companies and 1% more views on YouTube than other Construction Companies.

•

Good relationship with customers More than 4,000,000 views of videos from #MeuMundoMelhor (translating as “mybetterworld”); more than 55,000 calls answered; more than 90% of claims solved on first contact and only 0.40% of complaints registered.

•

Leadership in the key business indicators MRV is positioned forward of the other construction companies both in contracted sales (R$) and releases in 2014 and 2015.

OPERATION MRV has nine major operating advantages: •

Landbank Growth of the participating cities (cities with enough stock to ensure the estimated speed of sales to the region), with 15% costs reduction associated with 2015 fraction. There was a Landbank units increase of 22% from December 2014 to December 2015, and an increase of 26% of Landbank in Reais (R$) in the same period.

•

Experienced production team Approximately 26,000 people dedicated to production and employees with leadership positions having an average of nine years with the company.

•

Mechanization and new technologies Standardized, mechanized and intelligent processes.

•

Increased production efficiency More homogeneous and less costly constructions.

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GHG EMISSIONS INVENTORY - 2015 MRV Engenharia

•

Efficiency in execution Increased production capacity, resulting in an 8% reduction in the productivity index and a 25% increase in production rate between 2015 and 2014.

•

Evolution in gross margin Evolution in gross margin due to renegotiation with suppliers, increase productivity, reduction of project gaps, better conditions for land purchase.

•

Large number of delivered units Increased number of delivered units in 2014 and 2015 in relation to other construction companies.

•

Efficient administrative structure Best General & Administrative (G&A) / Net Revenue .rate of the sector.

FINANCES MRV has three main financial advantages: •

Associative Credit MRV has considerably reduced its receivables flow, thus contributing to a lower need for working capital for project launched.

•

Consistency in cash generation and low leverage Higher corporate rating industry (brAA-) by Fitch Rating and Standard & Poor’s; improvement of systems and processes of the CEF in 2011; growth of BB's operations model "Associative Credit" started in 2013.

•

Consistency and stability in the company's Yields.

EPS Yield - 12 months: average quarterly growth of 4,3%; Dividend Yield - 12 months: average quarterly growth of 0,5%; Cash Yield - 12 months: average quarterly growth of 6,2%; ROE - 12 months: average quarterly growth of 2,8%.

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GHG EMISSIONS INVENTORY - 2015 MRV Engenharia

BOUNDARY OF THE INVENTORY Reference period: 2015 Organizational boundaries: MRV,its subsidiaries (Table 1) and their towns of operation (Figure 1).

Table 1 – The MRV subsidiaries and the boundary of the 2015 Inventory.

Subsidiaries

Localization

Urbamais MRL Prime MRV Triângulo MRV Sul MRV São Paulo MRV Ribeirão Preto MRV Nordeste MRV Espírito Santo MRV Campinas MRV Belo Horizonte

Belo Horizonte - MG Rio de Janeiro - RJ Campo Grande - MS Uberlândia - MG Curitiba – PR São Paulo – SP Ribeirão Preto - SP Salvador – BA Serra – ES Campinas - SP Belo Horizonte - MG

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Operational control Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes

Shareholding 60% 37,41% 60% 100% 100% 100% 100% 100% 100% 100% 100%

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GHG EMISSIONS INVENTORY - 2015 MRV Engenharia

Figure 1 – The cities of MRV performance whose disclosure was made in the 2015 Sustainability Report.

Operational boundaries: the sources of the above operational units were considered in the inventory. The Scope emissions covered were: scope 1 (direct emissions), scope 2 (indirect emissions by electrical or thermal energy consumption) and scope 3 (indirect emissions).

Consolidation approach: accounted emissions were consolidated at the organizational level through the operational control approach.

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GHG EMISSIONS INVENTORY - 2015 MRV Engenharia

METHODOLOGY GHG EMISSIONS OF CALCULATION Through CLIMAS (Climate Management System), emissions are calculated monthly, individually by source and

by GHG, following the equation: Emission = Activity_data x Conversion_factor x Emission_factor x Consolidation_factor Where: • • •

•

•

Emission = GHG emissions attributable to a given source, in tGEE; Activity_data = Parameter measurement result referring to a source, in the unit of measurement ‘un’.

Conversion_factor = Ratio between units of measurement of the same physical quantity. It is used to convert the unit of measurement of the data measure (un) to the unit of measurement of the emission factor (un.base); Emission_factor = Ratio of GHG emissions (in tGEE) by unit of source activity. The emission factors used are a database cured by WayCarbon and available in CLIMAS (Climate Management System) platform. In the system, it is possible to obtain an extract of the factors used and their calculation memory..

Consolidation_factor = Factor used to allocate the emissions source in total organization total. The consolidation factor relates to the shareholding (0% to 100%) or operational control (yes = 1, no = 0) of the organization over the operational unit to which the source belongs.

Once calculated, the value of "Emission" is individually rounded to six decimal places.

The emission results in gas ton are converted to tonnes of CO2 equivalent (tCO2e) by multiplying the global warming potential of each gas (GWP, global warming potential).

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GHG EMISSIONS INVENTORY - 2015 MRV Engenharia

RECALCULATING THE BASE YEAR According to the requirements of the standard ISO 14064 Part 1 in order to ensure comparability of GHG emissions over time, it should be applied the recalculation procedure for the base year if significant changes are registered in any of the following: I. II.

Changes in operational boundaries; Changes in ownership or control of GHG emission sources transferred into or out of organizational boundaries;

III.

Changes in quantification methodologies that result in significant changes in the results of the inventory.

To compare the emissions of 2015 with the emissions of 2014, it was necessary to carry out the recalculation of 2014 emissions from vegetation removal activity because there were quantification methodology changes, resulting in significant changes on the inventory (item III above).

In 2015, for the calculation of vegetal supression emissions in 2014, the data in suppressed hectare sent by MRV was used. However, the adoption of the vegetation removal emission factor from a native area hectare available in the Second National Inventory Report (2010) made the 2014 emissions overestimated. Thus, it was adopted a new factor that considered the supressed vegetation units, that is, the average density of carbon in a vegetation unit. This new factor was adopted for the 2014 and 2015 inventories.

In addition to the change in the vegetation removal factor, other emission factors were reviewed and updated.

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GHG EMISSIONS INVENTORY - 2015 MRV Engenharia

RESULTS GHG emissions by gas type, geographic coverage, scope and operational unit

Emission of the GHG contemplated by the Kyoto Protocol, under the operational control. (A) GHG Emission segregated by gas. (B) Geographical scope of GHG emissions. (C) GHG Emissions by Scope. (D) GHG Emissions by operational unit.

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GHG EMISSIONS INVENTORY - 2015 MRV Engenharia

GHG emissions by supervised item, category, precursor and technology

Emission of the GHG contemplated by the Kyoto Protocol, under the operational control. The graphic A shows 98% of the relevant emissions. (A) GHG emissions by supervised item. (B) GHG emissions by category. (C) GHG emissions by precursor. (D) GHG emissions by technology.

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GHG EMISSIONS INVENTORY - 2015 MRV Engenharia

Emission of the GHG contemplated by the Kyoto Protocol, under the operational control. The table was formatted according to the GHG Protocol, table 3.1 Part 1 (emissions by gas and scope, in tGEE).

Emission of the GHG contemplated by the Kyoto Protocol, under the operational control. The table was formatted according to the GHG Protocol, table 3.1 Part 2 (emissions by gas and scope, in tCO2e).

Emission of the GHG contemplated by the Kyoto Protocol, under the operational control. The table was formatted according to the GHG Protocol, table 3.2. Values in tCO2e. Scope 1: direct emissions, biogenic CO2 emissions and CO2 removals by sinks. Emissions of biogenic CO2 and CO2 removals are not added to the total inventory but are reported separately.

Emission of the GHG contemplated by the Kyoto Protocol, under the operational control. The table was formatted according to the GHG Protocol, table 3.3. Values in tCO2e. Scope 2: indirect emissions by electrical or thermal energy consumption, biogenic CO2 emissions and CO2 removals by sinks. Emissions of biogenic CO2 and CO2 removals are not added to the total inventory but are reported separately.

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GHG EMISSIONS INVENTORY - 2015 MRV Engenharia

Emission of the GHG contemplated by the Kyoto Protocol, under the operational control. The table was formatted according to the GHG Protocol, table 3.4. Values in tCO2e. Scope 3: indirect emissions, biogenic CO2 emissions and CO2 removals by sinks. Emissions of biogenic CO2 and CO2 removals are not added to the total inventory but are reported separately.

Emission of the GHG contemplated by the Kyoto Protocol, under the operational control. The table was formatted according to the GHG Protocol, table 3.7. Values in tCO2e.

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GHG EMISSIONS INVENTORY - 2015 MRV Engenharia

COMPARING INVENTORIES

Emission of the GHG contemplated by the Kyoto Protocol, under the operational control and the comparison between the GHG emissions in 2014 and 2015 (in tCO2e and %).

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GHG EMISSIONS INVENTORY - 2015 MRV Engenharia

DISCUSSIONS The GHG emissions by MRV were estimated at 158,074.24 tCO2e in 2015. Over this amount, 85% are Scope 3 emissions. The largest emission source of MRV was the consumption of concrete in constructions, accounting for 47% of total emissions. The second and third largest sources of emissions were, respectively, wood (class B waste) disposal (24% of emissions) and steel consumption (8% of emissions). These three sources accounted for 78% of total emissions. Although they are indirect sources of emissions (Scope 3), the continuous construction process efficiency reduces the use of these materials, which helps to reduce emissions.

Analyzing only the Scope 1 emissions, which correspond to 12% of total, the main emission sources were diesel consumption in machinery (about 6% of total emissions) and LPG in stationary sources (about 3% of total emissions), besides the transport of engineers named as ‘deposit in the bank account’ (1%) and the suppression of native vegetation of the Atlantic Forest Biome (1%), Brazilian Cerrado (0.6%) and Caatinga (0.1%).

Between 2014 and 2015, there was a reduction of 16% in emissions, mainly due to the reduction of 53% in emissions related to the consumption of concrete. In 2014, the concrete consumption was 704.37 m3 and in 2015, it was consumed 330.12 m3 of concrete. In addition, the consumption of steel was reduced, resulting in a variation of -13% on there source emissions.

Although the GHG emissions have reduced between the years, new sources of emissions were included in 2015.

MRV included the accounting of organic waste, wood waste, cement sacks and toilet paper, which contributed with 47,239.76 tCO2e. In addition, the consumption of cement portland (CP) II, III, IV and V emitted 838.73 tCO2e. In relation to vegetation removal, there was a significant emissions increase (2,748%) due to accounting for the supression of all regional. It is noteworthy that in 2014 had only been accounted the vegetation suppression of Urbamais regional.

For a further reduction of emissions, analyzing the Scope 1 sources, that means, sources that MRV can control, it is suggested to monitor the activities that consume LPG on the constructions to optimize the fuel consumption.

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