Sustainability in the supply chain of Enel Green Power North America (EGPNA) 15.915. Sustainability Lab. Spring 2017 PROBLEM RESULTS Problem Statement: EGPNA would like to improve the sustainability of its supply chain,butdoes not have an understanding of what components have the greatest impact. WIND EGPNA has processes for managing sustainability in the construction, commissioning and ! Manufacturing has the most impact in the life cycle of Wind was the largest component of EGPNA’s purchases in the last 12 months operation of its facilities, but lacks a framework for its supply chain operations. a wind plant, particularly the cables, tower and nacelle. • Alonglifeofoperationsignificantlyreduces Injuries overall impacts. Environmental impacts decrease Which products have the greatest impact on the company’s Cables Human by around 17% for an increased lifetime of 4 years Impact Rights (20% of the baseline 20 years). Tower supply chain from the sustainability perspective? ! Recycling is the second most important phase. Nacelle • It is very important to recycle metals to account Project Scope: for end-of-cycle credits of avoided impact. ! A framework for evaluating the sustainability of the components of EGPNA’s supply chain. • Even better, turbines should be built with recycled Value ! A pilot hotspot analysis, to identify where to start and what indicators to use. metals. E E E ! Recommendations on how to develop a repeatable process that will enable EGPNA to ! Transportation can range between 1% and 40% of the embed sustainability into its supply chain. impact, justifying a case-by-case analysis. 30x 6.9 84.5% ! Human rights and human safety are a very material issue in wind power and should be studied further. Return on energy gCO2 / kWh Recyclability BUSINESS CASE ! In sensitive communities, analyze the potential impacts of land use, deforestation, noise and local impacts on S S ecotoxicity ► Injuries / potential Sustainability is increasingly material to investors and energy consumers. biodiversity, generally included in Environmental 7 1427 M working h (mg DCB-e Impact Assessments (EIA) in plant design. EGPNA is installing sustainable energy solutions / kWh) SOLAR ! Energy Management Solar will be the largest component of EGPNA’s ! Waste and Waste Water Management purchases in the coming years ! Hazardous Materials Management + = ! Lifecycle impacts of products and services • Products that are able to be recycled Hazardous Energy Impact waste Usage Are EGPNA’s suppliers sustainable? • End of life material recovered ! Materials sourcing Water Usage • Tungsten, Tin, Tantalum, and gold sourcing • Conflict materials ? Value + = S E E E ► EGPNA seeks to embed sustainability in its procurement and supply chain within 3 years. 1.2 348 225 88% ►The company’s reporting will be enhanced as a result. METHODOLOGY Injuries / M working h Energy MWh/MW Tons of CO2 / MW Recyclability

Focus 1 ELECTRICAL EQUIPMENT Identify primary consumption points Wind Turbines Electrical equipment 1 from Enel’s purchasing data ! Energy Management Focus 2 • Target suppliers with increased % of renewable Hazardous Energy Solar Panels Transportation energy in electricity use. Impact waste Efficiency • Favor suppliers that have transformers with SF6 Identify material issues technologies for load loss reductions. ! Waste and Hazardous Materials Management 2 from literature Industry Reports • Explore switchgear suppliers that develop + insulation fluids other than SF6. Value ! Lifecycle impacts of products and services Define scorecard • Target suppliers with comprehensive recycling and waste management policies. E E E 3 using benchmarks G • Target suppliers that have programs in place for 400 0.1% 90% S reclamation of GIS switchgears at end of life. E ! Product Safety

Indicator Benchmark Transf. Energy losses GIS SF6 Recyclability Climate Return on energy 30x LIFE-CYCLE ! Materials sourcing Change Grams CO2 per kWh 6.9 MWh/ MVA Losses Renewable energy in 80% ASSESSMENT ! Business Ethics and Competition operations Waste % recyclability 84.5 Toxicity Terrestrial 41 ecotoxicity potential (mg DCB-e / kWh) Freshwater 62 TRANSPORTATION ecotoxicity potential (mg DCB-e / kWh) ! CO2 emissions framework A 1 Prioritize by weight and distance • Determine the top components by weight 2 3 • Determine emissions by multiplying number B 4 of units, weight, distance and emissions 5 HOTSPOT Awareness HOTSPOTS factor for each mode of transportation. Hotspot Analysis 2 x 2 Matrix C 4 1 = 2 Manufacturer Impact Plant site 3 Value of D Quick 4 5 Component Hits E x Tier 2 Tier 1 Impact Value GOVERNANCE RECOMMENDATIONS

1. Define criteria to select suppliers, weighting in the different prioritized impacts. G " UN Global G " World Economic G " Carbon • Compact Forum’s Partnering Disclosure Use the scorecards of this project as checklists. " Employee Code Against Corruption Project • Update the benchmarks once a year. LEADERSHIP of Conduct ETHICS Initiative REPORTING " Life Cycle • " Business Partner " Bribery Risk Assessment Select suppliers that report on material issues according toSASB’sMaterialityMap. Code of Conduct Assessment " Supplier audit 2. Request an LCA or at least a detailed impact analysis to suppliers following Vestas and Sunpower’s examples. 3. Request an analysis of the local social impact of these suppliers on their communities as well. 4. Collaborate with Vestas, Sunpower, ABB and other suppliers in measuring and improving human rights and safety in the extended supply chain. NEXT STEPS 5. Assess the specific impact of transportation,byaskingabouttheoriginofcomponentstosuppliers. 6. Consider using a price for carbon to inform internal purchasing decisions. 1. Break down into components each of the categories analyzed (Wind, Solar, Electrical Components). 7. Collaborate in advancing the use of water footprint,takingintoaccounttypesofwaterandlocalwater 2. For each component, create benchmark scorecards,derivedfromthescorecardsprovidedinthisproject. scarcity. 3. Assess suppliers in regard to the key indicators and hotspots identified, using the scorecards. 8. Lead stakeholder dialogue and local community development. 4. Use the assessment for purchasing decisions, and collaborate with suppliers to improve the metrics. TEAM Joe Lucido Lorena Pelegrín Xavier Roca John Sterman Project Mentor