GHG Emissions Inventory 2016.

GHG EMISSIONS INVENTORY 2016

Version 02 Jun/2017

MRV Engenharia Março 2017 VERSÃO 1.0

GHG EMISSIONS INVENTORY 2016 MRV ENGENHARIA CLIENT

PROJECT

2016 Greenhouse Gas Emissions Inventory from MRV Engenharia

AUTHORS

Jéssyca Guimarães; jguimaraes@waycarbon.com Flávia Perucci; flavia.perucci@waycarbon.com Bárbara Lopes; barbara.lopes@waycarbon.com

CONTRIBUTORS

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

Histórico do documento Nome do documento

INVGEE – MRV_20170706-English

www.waycarbon.com

Data

Natureza da revisão

07/06/2017

Version 02

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GHG EMISSIONS INVENTORY 2016 MRV ENGENHARIA SUMARY

1.

INTRODUCTION .................................................................................................. 4

2.

BOUNDARY OF THE INVENTORY....................................................................... 8

3. METHODOLOGY ............................................................................................... 10 3.1 GREENHOUSE GAS EMISSIONS CALCULATION ........................................... 10 3.2 RECALCULATION OF THE COMPARASION YEAR ......................................... 11 4. RESULTS ............................................................................................................. 12 4.1 GHG EMISSIONS BY GAS TYPE, GEOGRAPHIC COVERAGE, SCOPE AND OPERATIONAL UNIT ................................................................................................ 12 4.2 GHG EMISSIONS BY SCOPE, SUPERVISED ITEM, PRECURSOR AND TECHNOLOGY .......................................................................................................... 13 4.3 GHG PROTOCOL BRAZIL STANDARD FORMAT REPORT ............................. 14 5.

COMPARING INVENTORIES ............................................................................. 16

6.

DISCUSSION ...................................................................................................... 17

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1.

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. In 37 years of operation it sold over 260,000 properties in 20 Brazilian states and Distrito Federal. The company was ranked for the fourth consecutive year as the largest construction company in the country, according to the ITC ranking award that considers the greatest value in building area. In 2014 and 2015, MRV delivered 80,000 keys, with an average of 1 key delivered every 3 minutes.

MRV has its focus on cost reduction, innovation and ethics. Besides, it invests in social projects, environmental initiatives and encourages the sport. The values, vision and mission of the company were defined and implemented over the years. The company is certified by ISO 14.001, OHSAS 18.001, GHG Protocol, MRV + Green Seal and Green Construction MRV (in Portuguese Selo MRV+Verde e Obra Verde MRV).

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 2016, MRV reached gold seal on the GHG Protocol due to the 2015 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, cement and steel in constructions, paper consumed, Class B waste generation – plaster– and waste mix, air travel outsourced). This certificate attests that the company met all the mandatory requirements as determined by the program, following standards and methodologies internationally accepted for accounting of greenhouse gases emission. Continuing the improvement process of the emissions reporting of 2017, MRV is reporting the 2016 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 2017, MRV also carried the GHG emissions offsetting for 2016 activities of MRV websites (mrv.com.br and mrvsustentavel.com.br) through carbon credits purchase of Programa Amigo do Clima (www.amigodoclima.com.br). 300 kgCO2e were offset regarding MRV Sustainable (in Portuguese, MRV Sustentável) and 36.5 tCO2e for MRV website. The offsetting was carried through the purchase of carbon credits of Usina da Pedra activity which is located in Serrana (SP).

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 2016, it obtained important achievements of the listed companies: 62% share of the total releases of bands II and III of “Minha Casa Minha Vida” MCMV and 34% 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$120 million/year yields a return of R$2.5 billion/year in virtual sales.

Marketing reaches 140 million Brazilians (about 70% of the population). Moreover, in Belo Horizonte, 180 virtual servers are allocated to level 1 attendance.

• Online Leadership In 2016 it had more than 3 times of Facebook followers than other Construction Companies; about 5 times more followers on Twitter; 6 times more followers on Instagram and about 8 times more views on Youtube than other Construction Companies combined.

• Good relationship with customers More than 5,000,000 views of videos from #MeuMundoMelhor (translating as “mybetterworld”); about 55,000 calls answered; more than 90% of claims solved on first contact and only 0.32% 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 In the last 3 years, 657 million were invested in developing and balancing the Landbank.

Thereby, it was observed 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 83% from September 2014 to September 2016 going from 81.323 to 149.052.

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

• Mechanization and new technologies Standardized, mechanized and intelligent processes.

• Increased production efficiency More homogeneous and less costly constructions.

• 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 comparison 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: growth of 2.3% in the last quarter of 2016 compared to the last quarter of 2014; Dividend Yield - 12 months: growth of 12.7% in the last quarter of 2016 compared to the last quarter of 2014; Cash Yield - 12 months: growth of 31.29% in the first quarter of 2016 compared to the first quarter of 2014; ROE - 12 months: growth of 13.5% in the last quarter of 2016 compared to the last quarter of 2014; 2016 sales In 2016, 39,181 apartments were sold, with an increase of 1% in sales compared to the previous year (Figure 1). The most prominent units were: MRV Ribeirão Preto and MRV Nordeste, with 7,954 and 7,683 properties sold respectively (Figure 2).

Figure 1 - Total of apartments sold in 2016.

41.213 38.795

2014

2015

39.181

2016

Figure 2 - Total of apartments sold by region.

7.954

7.683

6.398

6.113 5.745 4.222 3.653 3.312

2.568

2.415

2.385

5.017 4.258

2.919 2.277

3.421 3.535

4.518 3.722

1.779 1.567

MRV MRV MRV Belo MRV MRV MRV São Horizonte Campinas Espírito Nordeste Ribeirão Paulo Santo Preto 2015

MRV Sul

MRV Triângulo

2016

BOUNDARY OF THE INVENTORY

Reference period: 2016 Organizational boundaries: MRV Engenharia , its subsidiaries (Table 1) and their towns of operation (Figure 3).

Table 1 - The MRV subsidiaries and the boundary of the 2016 Inventory.

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

3.411

3.242

2.511

1.313

2014

2.

5.324

5.170

3.845

967

MRL

7.945

Localization 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

Operational control Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Sim

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

Prime

Figure 3 - Cities in which the company operates whose disclosure was made in the 2016 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.

3. Â

METHODOLOGY

3.1 Â

GREENHOUSE GAS EMISSIONS CALCULATION

GHG emissions and removals are calculated by souce and sink, indiviadually, according to the following: đ?‘Źđ?’Š,đ?’ˆ,đ??˛ = đ?‘Ťđ?‘¨đ?’Š,đ?’š ∙ đ?‘­đ?‘Źđ?’Š,đ?’ˆ,đ?’š ∙ đ?‘ˇđ?‘¨đ?‘Žđ?’ˆ  đ?‘Źđ?’Š,đ?’ˆ,đ?’š GHG emissions or removals g attributable to a given source or sink i during year y, in tCO2e; đ?‘Ťđ?‘¨đ?’Š,đ?’š Activity data consolidated referring to a source or sink i for year y, in unit u. As highlighted above, the consolited activity data will consist of all registered attributes of each source/sink. đ?‘­đ?‘Źđ?’Š,đ?’ˆ,đ?’š GHG Emission factor or removal g applicable to source or sink i for year y, in tGHG g/u1; đ?‘ˇđ?‘¨đ?‘Žđ?’ˆ GHG Global Warm Potencial g, in tCO2e/t GEE g2; i

Index that denotes a source activity or individual sink;

g

Index that denotes a greenhouse gas (GHG);

u

Index that denotes the unit of a consolidated activity data.

y

Reference year of the report.

The appropriated calculation method choice resulted from data availability and specific emission factors, combustion technologies used in process, among others. The calculations were implemented by operation between the data source database compiled, and the emission factors database under WayCarbon curatorship.

1

The emission factors adopted were the ones available in the literature and recognized and revised database.

It were prioritized emission factors that are local, recent and reflect the type of technology of the organization’s value chain activities.

2 The Global Warm Potential (GWP) is a factor that describes the impact of the ratioactive force of an unit based in the mass of a GHG related to an unit of equivalent carbon dioxide during a period.

RECALCULATION OF THE COMPARASION YEAR

3.2

In accordance with the requirements of the standard NBR ISO 14.064 Part 1, in order to guarantee the comparability of the GHG emissions over time, it should be applied the procedure of recalculation of the base year if significant changes are recorded in any of the items below: I.

Operational boundaries changes;

II.

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

III.

Changes in quantification methodologies that causes significant alterations in the inventory result.

The record of significant alterations that imply in the recalculation of the emissions should be maintened for consideration in the reports of the subsequent years. It is pointed out below whether or not there was a need for recalculation of other inventoried years and, if so, what is the reason for doing so (according to items I to III above).

There was no need for recalculation of the base year Base year recalculation was required. Reason:

I.

II.

III.

The base year recalculation was required due to correction of data on electricity consumption in 2015. Before, it was informed that the spending on eletric energy consumption from the National Interlinked System (in Portuguese Sistema Interligado Nacional, SIN) was R$ 8,421,755.63. However, the data has been corrected to the correct value that is R$ 17,084,837.69. That way, the emissions associated to the electric energy purchase in 2015, that before were 3,604.57 tCO2e, became 7,312.43 tCO2e, which represents an increase of 103% of scope 2 emissions or a growth of 2.5% of total emissions in 2015 comparared to the post-audit version of the GHG emissions in 2015.

4.

RESULTS

GHG EMISSIONS BY GAS TYPE, GEOGRAPHIC COVERAGE, SCOPE AND OPERATIONAL UNIT 4.1

Figure 4 - GHG emissions contemplated by the Kyoto Protocol regarding the company activities in 2016 under the operational control. (A) GHG Emissions segregated by gas. (B) Geographical scope of GHG emissions. (C) GHG Emissions by operational unit. (D) GHG Emissions by Scope.

4.2 Â

GHG EMISSIONS BY SCOPE, SUPERVISED ITEM, PRECURSOR AND TECHNOLOGY

Figure 5 - GHG emissions contemplated by the Kyoto Protocol regarding MRV activities in 2016 under the operational control. Emissions are described by scope, supervised item and technology.

4.3 Â

GHG PROTOCOL BRAZIL STANDARD FORMAT REPORT

Total emissions in ton of gas (tGHG) Table 2 - GHG emissions 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 tGHG).

Total emissions in CO2-equivalent ton (tCO2e) Table 3 - 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).

Scope 1 emissions, of biogenic CO2 and CO2 removals by category (tCO2e) Table 4 - 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 of biogenic CO2 emissions under operational control. . Emissions of biogenic CO2 and CO2 removals are not added to the total inventory but are reported separately.

Scope 2 emissions, of biogenic CO2 and CO2 removals by category (tCO2e) Table 5 – Scope 2 GHG emissions contemplated by the Kyoto Protocol, under the operational control. The table was formatted according to the GHG Protocol, table 3.3. Scope 2. Indirect emissions by energy consumption.

Emissions of biogenic CO2 and CO2 removals are not added to the total inventory but are reported separately.

Scope 3 emissions, of biogenic CO2 and CO2 removals by category (tCO2e) Table 6 - Scope 3 GHG emissions contemplated by the Kyoto Protocol, under the operational control. The table was formatted according to the GHG Protocol, table 3.4. Scope 3. Indirect emissions. Emissions of biogenic CO2 and CO2 removals are not added to the total inventory but are reported separately.

Emissions by Operational Unit (tCO2e) Table 7 – GHG emissions contemplated by the Kyoto Protocol, under the operational control. Values in tCO2e.

Emissions under MRV in the table refer to outsourced air travel emissions of the entire company, that is, all operational units.

5. Â

COMPARING INVENTORIES

Figure 6 - GHG emissions contemplated by the Kyoto Protocol under the operational control comparing GHG emissions in 2015 and 2016 (in tCO2 and %).

6.

DISCUSSION

The greenhouse gas emissions in MRV were estimated in 199,346.56 tCO2e in 2016. It was found that 91% are scope 3 emissions; 7.4% are scope 1 and 1.6% are scope 2.

Regarding the scope 1 emissions, the two main emission sources were comercial diesel consumed (52% of scope 1 emissions) and aviation querosene from private aircraft (14% of scope 1 emissions), which was replaced by a greater one in 2016. Despite the fact that diesel was an important emission source in 2016, there was a decrease of 15% of its use comparing 2015 and 2016. That is due to the replacement of diesel powered forklifts to LPG powered ones. Besides the above, the fugitive emissions of r-410A gas (first year of reporting this source due to better data management) and vegetation removal, corresponded, respectively, to 13% e 11% of scope 1 emissions. There was a 22% decrease in scope 1 emissions between 2015 and 2016.

Concerning scope 2 emissions, it is noted that there was a decrease of 23.3% of spending on eletric energy consumption. Simultaneously, the reduction of about 34% of the average emission factor of the National Interlinked System (in Portuguese Sistema Interligado Nacional, SIN) and increase of about 53% of average electricity tariff in Brazil (data from ANEEL3), resulted in a reduction of 56% of scope 2 emissions.

The most representative emission in 2016 is due to concrete consumption in construction (scope 3), accountable for 71.3% of total emissions. The operational unit MRV Campinas presented the greatest increase in using this input, which represents an addition of 21,662.98 tCO2e compared to 2015 inventory. The increase of concrete utilization in MRV as a whole is associated to the use of concrete walls in construction. Due to the high number of construction in progress in 2016, it was found that there was also an increase of cement consumption in types CP II, CP IV and CPV, which are used for finishing and plastering facades virtually in all operational units. As a consequence, there was an increment of 23,103.43 tCO2e in 2016 compared to the previous year. An increase in concrete and a decrease in cement consumption is projected over the years, since the company's current construction methodology is focused on concrete walls.

The steel bought also has great contribution in scope 3 emissions (14,685.79 tCO2e in 2016), corresponding to 7.4% of total emissions, which means an increase of 22% os this actitivity emissions between 2015 and 2016.

Lastly, there was a 23% increase of MRV total emissions between 2015 and 2016, due mostly to the increase of concrete and cement consumption, that is, an increase of scope 3 emissions in 34%, since the scope 1 and 2 emissions decreased, respectively 24% and 56%.

ANEEL - National Agency of Electric Energy (in Portuguese Agência Nacional de Energia Elétrica) . Technical Information / Decision Support System Reports. Average tariffs (R $ / MWh) by consumption classes and by geographic regions of Brazil - monthly and annual from 2003. Classification: "Commercial, services and others".

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