Arla Foods Consolidated Annual Report 2021

125 Arla Foods Consolidated Annual Report 2021 / Environmental, social and governance (ESG) data / Notes Environmental figures 1.1 GREENHOUSE GAS EMISSIONS (CO2e) Contents III Accounting policies Calculating CO₂ equivalents Greenhouse gases are gases that contribute to the warming of the climate by absorbing infrared radiation. Besides the widely known carbon dioxide (CO2), there are two other major greenhouse gases associated with dairy production: methane (CH4) and nitrous oxide (N2O). In order to calculate Arla's total greenhouse gas emissions (the carbon footprint), different greenhouse gas emissions are converted into carbon dioxide equivalents (CO2e). The conversion of different gases reflects their global warming potential. The potency of the different gases is taken into consideration according to the following calculations (based on the IPCC* Fifth Assessment Report, Climate Change 2013): 1 kg of carbon dioxide (CO2) = 1 kg of CO₂e 1 kg of methane (CH4) = 28 kg of CO₂e 1 kg of nitrous oxide (N2O) = 265 kg of CO₂e The majority of Arla's emissions are methane from digestion and manure storage, nitrous oxide from fertilizer and manure usage. Greenhouse gas emissions are categorised into three scopes according to where they appear across the value chain, and what control the company has over them. Scope 1 All direct emissions Scope 1 emissions relate to activities under the group's control. This includes transport using Arla's vehicles, and direct emissions from Arla's production facilities. Scope 1 emissions are calculated in accordance with the methodology set out in the GHG protocol by applying emission factors to Arla-specific activity data. Scope 2-Indirect emissions Scope 2 emissions relate to the indirect emissions caused by Arla's energy purchases, i.e. electricity or heat. Scope 2 emissions are calculated in accordance with the methodology set out in the GHG protocol by applying emission factors to Arla-specific activity data. In 2020, Arla switched from location-based scope 2 reporting to market-based reporting and updated the 2015 baseline. The market-based allocation approach reflects emissions from the specific electricity and other contractual instruments that Arla purchases, which may differ from the average electricity and other energy sources generated in a specific country. This gives Arla the chance to purchase electricity and other contractual instruments that emit less greenhouse WHERE DO OUR EMISSIONS COME FROM? N₂O CO₂ N₂O/CH4 CH4 CH4 gases than the country average. In accordance with the GHG protocol, Arla discloses scope 2 emissions according to both the market- and location-based method (also known as dual reporting). Scope 3-Other indirect emissions Scope 3 emissions relate to emissions from sources that Arla does not directly own or control. They cover emissions from purchased goods and services (e.g. raw milk purchased from owners and contract farmers, whey, packaging and transport purchased from suppliers), but also waste processing from sites. Scope 3 emissions are, in line with the GHG protocol, calculated by applying emission factors to Arla-specific activity data. ← CO2 CO2 CO₂ Scope 1 2% Feed production Farms Transport Production and offices Transport Waste management Scope 3 96% Purchased energy Scope 2 2% According to the 2021 quantification of Arla's climate impact, scope 1 and 2 emissions accounted for 2 and 2 per cent of total emissions, respectively. Scope 3 emissions accounted for 96 per cent of Arla's climate impact. Milk production on farm (including, among many factors, methane emitted by cows, and emissions related to feed and transport of feed) accounted for 83 per cent of total emissions. * The IPCC (Intergovernmental Panel on Climate Change) is the United Nations' body for assessing the science related to climate change.

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