Green Building

Our buildings enable us to provide positive employee and customer experiences, and serve as our most significant connections with communities. Collectively, our buildings also represent one of our largest environmental impacts and, therefore, one of the best opportunities to reduce REI's overall footprint.

Our green building aspiration includes all of our new construction, ensuring every new store or building incorporates sustainable design features. We want REI's buildings to achieve the lowest energy intensity in their class, and we strive to make our existing stores greener through retrofits and better environmental practices. We seek to design all of our buildings to reduce environmental impacts and operating costs while aligning them with the REI brand and values. While we don't pursue LEED (the US Green Building Council's Leadership in Energy and Environmental Design standards) for each new store or every store retrofit, our knowledge and experience with the LEED standards helps us minimize our buildings' environmental impacts. Our LEED Certified portfolio includes:

• Portland Store (LEED Gold for Commercial Interiors)
• Pittsburgh Store (LEED Silver for Commercial Interiors)
• Boulder Store (LEED Gold for Retail – Commercial Interiors)
• Bedford Distribution Center (LEED Silver for New Construction)

Because green building encompasses elements of several of our priorities—energy efficiency, renewable energy and waste reduction—our green building aspiration reflects how we intend to run our operations, how we create great experiences for our customers and employees, and how our building footprint impacts the environment.

Highlights

In 2008, we expanded our green building prototype initiative with the opening of a new REI prototype store in Round Rock, Texas. Our first prototype in Boulder, Colorado, which opened in 2007, involved a significant state-of-the-art green redesign of an existing store.

Our Round Rock, Texas store represents the evolution of this initiative and was built from the ground up with a design that dramatically reduces energy consumption (48 percent less energy than stores that meet industry standards). The store features an energy efficient design, solar panel installation, solar hot water system and passive solar design. The store's design also includes the use of recycled and sustainable materials made from products such as sunflower seed husks, recycled tennis shoes, and reclaimed wood. We consider Round Rock a learning laboratory in addition to being a retail location, and we will apply lessons learned to future REI locations. We are pursuing LEED certification for this store.

REI was recognized by the Environmental Defense Fund for demonstrating technology and green building techniques developed for our prototype efforts could be quickly adapted to our other buildings. From solar hot water to energy efficiency to innovative materials, REI stores across the country have benefited from our prototype initiatives.

We continued to integrate green design into new stores built with traditional architecture and construction methods in 2008. For example, we installed solar panels on several of our stores, which helped our operations become more energy efficient and significantly reduced our GHGs. (See the greenhouse gas emissions section of this report for more information on our solar initiative.)

Our Bedford, PA distribution center earned LEED Silver certification for New Construction in 2008. At 525,000 square feet, our Bedford facility is also one of the very few distribution centers in the country to receive LEED certification. It incorporates energy efficiency concepts such as more than 360 skylights and windows, which bring in daylight and greatly decrease energy demand.

Challenges

Even with strides toward greater efficiency, REI's total cost of energy from electricity and natural gas (excluding self-generated electricity) rose faster than our consumption in 2008. Despite energy efficiency gains, REI's total energy cost was just below $7 million, up from $6 million in 2007. Some of the increase was from using more energy, but much of last year's increase was due to record high fossil fuel prices in 2008.

Adding new stores and facilities will increase our core environmental footprint, even when these facilities are designed with energy efficiency in mind. Some energy efficiency technologies make financial sense, but many others are not yet financially viable.

Looking Forward

As we move ahead, we continue to learn from efforts such as our prototype and solar initiatives. We will continue to apply the lessons learned to new and existing buildings in ways that make both environmental and economic sense.

We are developing operational systems to formalize how we measure operational efficiencies over time, including enterprise-wide energy metrics tied to budgeting. These efforts will help us understand the environmental impact across all REI facilities, enabling the development of strategies across all operations to reduce our environmental footprint.