REI measures its greenhouse gas (GHG) emissions to minimize risks to our business and identify cost reduction opportunities. Our focus to reduce our emissions also aligns with our core purpose and vision to serve our customers 100 years from now and beyond.

Understanding REI's carbon footprint provides us insight that is sometimes counter to our business intuition, allowing our business divisions to use GHG emissions as a leading indicator to make informed decisions, including climate-neutral travel via REI Adventures, employee commuting and corporate travel, energy use, product transportation, direct fulfillment, and miscellaneous emissions.

We use two terms to reference climate change at REI. "Greenhouse gas footprint" is the total amount of GHGs that REI is responsible for converted into the equivalent amount of carbon dioxide. Our "climate impact" is the net contribution REI has on climate change, after our carbon offsets are subtracted.

The details of how we measure our environmental impacts can be found in the methodology appendix.

RESULTS

In 2010, we increased our absolute climate impact by 7.3 percent (75,072 tons of GHG emissions, or C02e) from 2009 levels. While an overall increase for the year, this is less than our company growth of 14 percent (by sales), and we continue to pursue absolute reductions toward achieving our long-term goals.

The most significant contributors to our climate impact increase are corporate travel, employee commuting, and product transportation which are a direct result of the company growth, financial success and recovery from the difficult economy. Direct fulfillment and natural gas use experienced nominal reductions compared to 2009.

At the beginning of 2006 we had a total of 81 stores, whereas at the end of 2010 we had 114. This growth also contributed to a higher volume of goods transported to our distribution centers, our stores and our customers.

In comparing our carbon impact for 2010 and previous years, most of our GHG reductions have been accomplished by strategic business management, efficiency and investments.

In February 2010, Climate Counts, a nonprofit organization that evaluates companies on their voluntary actions to reverse climate change, named REI one of six charter members in their Industry Innovators (i2) program. Our recognition was based on our measurement, reduction efforts and commitment to report our progress.

LOOKING AHEAD

In 2011, REI will implement performance indicators for greenhouse emissions across our business, as we do with revenue generating activities. Progress against indicators will be analyzed throughout the year by company leadership through internal reporting and complement our annual planning and budgeting process. This requires us to forecast the greenhouse gas impacts of all of our new projects and initiatives and use that information in our business decisions. Our 2011 GHG impact budget is to remain at or below our absolute climate impact in 2010, or 75,072 tons of CO2, regardless of our growth. We believe few companies in the retail industry are implementing similar accountability steps.

We continue to examine our largest single source of GHG emissions – air travel associated with REI Adventures – and our use of carbon offsets to address this source. REI Adventures will remain a contributor to our success, and our decision for future carbon offsetting will based on whether this approach maximizes business value for the co-op while minimizing environmental impact.

As REI grows, corporate travel will remain required for operating our business. We expect to grow our retail footprint by a minimum of eight stores in 2011, and international travel to manufacturing vendors will continue to be important to our branded product teams.