There has been a global shift in attitudes toward climate change in recent months. Concern among the public and the business community has risen significantly. Climate change is high on the agenda of the new U.S. administration, and critical climate treaty negotiations will take place in Copenhagen in 2009. Yet despite this, carbon emissions continue to rise.

Drastic and urgent action is required — and the private sector is uniquely situated to help make the necessary transition to a low-carbon economy. We aim to play our part, within our operations and beyond.

In 2008, we invested almost US$23 million in improving our energy efficiency. Upon completing the first calculation of our companywide carbon footprint, we set a more aggressive goal to reduce our carbon dioxide (CO₂) emissions by 15 percent by 2020, compared to our 2007 baseline. We also stepped up efforts to improve energy efficiency in our main areas of impact. We are pioneering hybrid technology that reduces truck carbon emissions by almost one-third, and we are significantly improving the energy efficiency of our facilities and sales and marketing equipment. These efforts are reducing our carbon footprint and associated risks, as well as delivering considerable cost savings and reputational benefits, and are potentially a source of competitive advantage.

Understanding Our Carbon Footprint

In 2008, we calculated, for the first time, our company’s carbon footprint — our total annual greenhouse gas emissions — for all countries where we operate. We also completed the first certified product carbon footprint – the greenhouse gas emissions created throughout a product’s lifecycle — of any sparkling beverage. By calculating these footprints, we have established useful baselines against which we can measure the progress of our emissions reduction strategies.

Operational Footprint

In 2008, we calculated our total carbon emissions for our business operations around the world — also known as our “carbon footprint.” To do so, we used the World Resources Institute and World Business Council for Sustainable Development’s Greenhouse Gas Protocol, the leading global standard for greenhouse gas accounting. The results will be verified in 2009 by the U.S. Environmental Protection Agency (EPA) as part of the Climate Leaders program.

Our calculations showed our overall carbon footprint to be approximately 6.1 million metric tons of CO₂e¹ emissions in 2007. Based on the Protocol guidance, these emissions are classified into different “Scopes,” depending on their source and origination. Scope 1 and 2 emissions make up our “core” emissions. Scope 1 emissions are direct emissions from our owned and operated sources, such as fuel burned during our day-to-day operations. Scope 2 emissions are indirect emissions resulting from electricity that we purchase and use in our business. Scope 1 and 2 emissions contribute 1.5 million metric tons CO₂e (29 percent) to our total footprint.

Scope 3 emissions are indirect emissions that occur at or from other sources that are generated as a consequence of our business. Under the Protocol, they are optional to measure and report. However, we have chosen to include and report Scope 3 emissions from our sales and marketing equipment, third-party distribution, and business travel, as we believe they are important aspects of our business. These Scope 3 emissions contribute 4.6 million metric tons (71 percent) to our footprint. Our calculations show that our largest climate impact is from our sales and marketing equipment (see page 14), the majority of which is in the marketplace and under the direct operational control of our customers. This challenges us to work with our customers to reduce this impact, and to ensure ongoing efficiency improvements are being made in our coolers and vending machines (see page 18).

1. CO₂e is “Carbon Dioxide equivalent” — meaning that it also takes into account other greenhouse gases produced in operations.

Our goal is to reduce the overall carbon footprint of our business operations by 15 percent by 2020, to lower our net emissions to 5.2 million metric tons. Taking into account business growth forecasts, if we were to do nothing to improve our efficiencies between today and 2020, this would be the equivalent of having to achieve a 40 percent emissions reduction in 2020.

Product Footprints

Beyond our direct emissions, we have a much broader footprint through our value chain. Through our partnership with the Carbon Trust in Great Britain, we calculated the carbon footprint of three of our most popular sparkling beverages, including Coca-Cola, Diet Coke, and Coke Zero (see case study below). This marked the first time that the footprint of any sparkling beverage has been certified by the Carbon Trust. The calculations are based on every stage of development for each of the three products — including the ingredients used to make our products, the manufacturing of our packaging, our own manufacturing and distribution processes, the cooling of a product within a retail environment, and consumer use and disposal of the packaging. In early 2009, we completed a similar certification project with the Carbon Trust in the United States for a 500mL PET bottle of Dasani and calculated its carbon footprint to be 140 grams of CO₂e per bottle.

Our assessments show that primary packaging is responsible for the largest part of the carbon footprint of our products, and that cooling a product accounts for the second-largest part. This highlights the importance of lightweighting our packaging, increasing the recycled content of our packaging materials, and ensuring that our packaging is recycled by consumers.

Improving Our Energy Efficiency

Since 29 percent of our carbon footprint comes from our core emissions — Scopes 1 and 2 — one of our key priorities is to improve our energy efficiency.

Our Facilities

During 2008, we used 6,520 terajoules of energy and natural gas, which is a 0.7 percent decrease from 2007. We are continuing to implement energy-saving technology in our facilities and utilize our energy conservation toolkit, a computer-based program that allows facilities to collect data and benchmark their energy use to identify reductions and efficiencies. However, attempting to reduce energy use and water use at the same time can result in trade-offs — for example, using air rinsers rather than water on our production lines require more energy.

Major Lighting Retrofit

The most significant reduction in energy consumption comes from our project to install industrial and high-bay fluorescent lighting throughout our North American facilities. To date, we have converted 244 out of 338 eligible facilities. Lighting previously accounted for a significant amount of electricity consumption: 10 percent in our production facilities and up to 50 percent in sales and distribution facilities. Upon completion in 2009, the lighting energy use in these facilities is expected to decrease by as much as 50 percent, eliminating 52,000 metric tons of CO₂. In addition, the project is helping to reduce pressure on each country’s grid system, reducing electricity consumption by approximately 88 million kilowatt hours per year. In early 2009, the project received the Environmental Stewardship Award from Orion Energy Systems.

In Europe, a new lighting initiative is being implemented to standardize lighting quality across facilities for safety reasons. This will include sensors that automatically shut off or dim the lighting, as well as more energy-efficient lighting technology. We expect this initiative to deliver future energy savings.

Monitoring and Targeting

The greatest contribution to energy efficiency in Europe comes from our innovative energy monitoring and targeting systems. At our Sidcup, Great Britain, facility, we have been able to reduce our energy consumption by 10 percent, saving US$320,000 in 2008. These savings have derived from a number of initiatives, in particular the installation of 150 utility meters and data loggers to allow real-time analysis of energy usage and also new energy-efficient lighting in specific parts of the facility. We are now progressively implementing this level of monitoring throughout our European production facilities.

We also piloted a number of other energy-saving initiatives during 2008:

• Heat recovery — We are recovering heat from boilers in our College Park, Georgia, facility and using it to preheat water used in our production processes. This allows us to reduce our use of natural gas.
• Daylight technology — We are working with lighting supplier Orion to test innovative light pipes in our Milwaukee, Wisconsin; Downey, California; and Coachella, California, facilities. This award-winning technology collects and focuses daylight using highly reflective, geometrically arranged materials and consumes no electricity (see case study below).
• Motor replacement — We audited motors on our production lines and are developing a motor replacement and repair program to improve energy efficiency.

In 2009, we will explore other technologies, such as fuel cell combined heat and power as well as a pilot program to improve the use of compressed air during production processes.

Renewable Energy

We continue to explore cost-effective ways to increase our use of renewable energy. In Belgium, for example, we installed a geothermal system at our Chaudfontaine mineral water facility. By capturing and reusing the mineral water’s natural heat, we expect to reduce our facility’s energy consumption by up to 11 percent (see case study on page 18).

Other on-site initiatives include our three facilities in California that use solar panels to generate electricity, and we are continuing to research the possibility of wind energy in Great Britain.

Green Buildings

In addition to our production processes, we are designing new facilities to be more energy efficient. As we construct our new Coachella, California, facility, we have integrated the U.S. Green Building Council’s requirements for Leadership in Energy and Environmental Design (LEED^™), and the building is currently pending certification. We have also incorporated these requirements into our standards for design, construction, and management of buildings (see case study below).

Our Fleet

In 2008, we significantly expanded our hybrid electric fleet. By adding 120 delivery vehicles — including the first such trucks in Canada — we now own the largest fleet of hybrid heavy-duty vehicles in North America with a total of 142 trucks on the road. Continuing our partnership with Eaton Corporation and Kenworth, we launched our new hybrid electric tractor in early 2009. This tractor is the largest hybrid electric vehicle in North America.

By converting braking energy into supplementary electrical power, these vehicles use approximately 30 percent less fuel, reducing CO₂ emissions by almost one-third. In 2009, we plan to deploy an incremental 186 hybrid electric tractors and trucks across North America, and are piloting similar hybrid technology in Belgium. This will bring our total number of hybrid trucks to 328. In 2008, our commitment to hybrid technology gained the first Southeast Diesel Collaborative Award by the U.S. Environmental Protection Agency Region 4. We were also named Fleet of the Year and Eco-Company of the Year by Beverage World magazine.

In 2009, we will pilot four fully electric vehicles in the United States. These vehicles run on 100 percent electricity and produce zero emissions. We will also triple our fleet of light-duty hybrid automobiles to include approximately 300 vehicles, and we are exploring other technology, such as fuel cells for forklifts.

However, our hybrid electric technology currently accounts for only a fraction of our 20,000 delivery vehicles, so we continue to reduce the impacts of our conventional fleet.

For example, new diesel vehicles that we put on the road today are up to 50 percent more efficient than older, traditional diesel vehicles. We support the SmartWay Transport Partnership, an innovative collaboration between the U.S. EPA and the freight industry that aims to cut CO₂ emissions by up to 66 million metric tons per year.

In Europe, our beverages are primarily delivered to our customers by third parties, so we work in partnership with customers and logistics firms to improve the sustainability of our transport. We are working together on enhancing the efficiency of deliveries, sharing bulk transport, avoiding empty return trucks, and exploring alternative means of transportation, such as rail.

Our Sales and Marketing Equipment

The 2.4 million vending machines, beverage dispensers, and coolers that deliver chilled beverages to consumers are operated by our customers at their place of business. As a result, we have little control over the operating conditions of this equipment. However, with these emissions accounting for an estimated 4.6 million metric tons, sales and marketing equipment represents a major focus of our emissions reduction strategy.

We are committed to significantly improving the energy efficiency of our sales and marketing equipment over time. Our new equipment is now 50 percent more efficient than coolers and vending machines purchased in 2000. In North America, we have determined that through our projected purchases of new equipment and adjustments made to the current fleet of equipment in the marketplace, we will reduce the energy consumption of our sales and marketing equipment estate by around 40 percent.

Energy Management Devices

The EMS-55 energy management device is a major part of our commitment to reducing the climate impacts of our refrigeration equipment. These proprietary devices activate lights and adjust cooling power based on usage signals and improve energy efficiency by up to 35 percent. More than 55,000 of these devices were installed in our equipment by the end of 2008, which is equal to about two percent of our total equipment inventory. We are now installing EMS-55 devices in all new coolers in Europe and North America that hold more than 250 liters of product.

Low-Energy Light Emitting Diode (LED) Lighting

We are working with suppliers to expand our use of LED lighting in sales and marketing equipment. This low-energy lighting generates less heat and reduces energy consumption. In North America, we are pursuing LED options with more suppliers, while in Europe we are testing second-generation LED lighting. Our goal is to progressively apply it to all new equipment where technically and economically viable.

HFC-Free Refrigeration

Still widely used in commercial and domestic refrigeration, hydrofluorocarbons (HFCs) can have significant global warming impact. We have already eliminated HFCs from the insulation in our equipment, and we are working to eliminate them from our equipment completely. We are piloting alternative refrigerant gases, such as CO₂, which has less of an environmental impact than HFCs. In Europe, we are also testing hydrocarbon-based refrigeration. While the commercial availability and economic viability of such technology still poses a challenge, our goal is to have 1,400 CO₂ coolers in place in time for the Vancouver 2010 Olympic Winter Games.

Working with Customers

Increasingly, we are engaging with customers to identify energy-saving opportunities. These opportunities may involve new technology such as energy management devices, or simple changes such as switching off the lights. In 2008, we worked with Wal-Mart to reduce the energy consumption of vending machines in employee break rooms. By switching off the lights and timing the cooling function to coincide with store hours, we were able to help our customers find opportunities for additional energy savings. In 2009, we will work with our customers to develop a more accurate understanding of the carbon footprint of our sales and marketing equipment when operated on their premises.

Online

• Carbon Disclosure Project
• Carbon Trust
• EPA Climate Leaders