Climate Protection

Greenhouse Gas (GHG) emissions are a cause of concern around the globe and to Dell, given their impact on our climate. Because power generation from carbon sources results in GHG emissions, our company has established programs to reduce energy use and use renewable energy sources. Dell’s climate strategy is aligned with the fundamental elements of the Kyoto Protocol including designing and implementing climate change programs, measuring emissions, promoting energy efficient technologies, observing climate science, assessing impacts, and developing response strategies. From a business perspective, energy use is a controllable operating expense. Reducing energy use improves Dell’s profitability, increases shareholder value and is consistent with our direct business model. Figure 23 illustrates Dell's approach to climate protection.

                                       FIGURE 23: DELL CLIMATE PROTECTION STRATEGIES

Area	Specific Focus	2006 Results
Greenhouse Gas Measurement	Assess the total carbon footprint of Dell leased and owned assets. Design energy efficient products.	Calculated Dell greenhouse gas emissions from worldwide electricity use. For the first time, Dell attained measurements worldwide. Pre-configured PC systems with Dell Energy Smart settings. Designed Energy Smart servers with energy-efficient features that reduced power consumption by 25 percent. Continued to produce ENERGY STAR products.
Product Design, Installation and Use	Enable energy efficient product installations. Reduce energy use during product use. Help customers offset GHG emissions from product use.	Reduced energy use for customers by designing new and retrofitting existing data centers. Educated customers about features that reduce the energy required to operate Dell products. Introduced Plant a Tree for Me program.
Facilities and Manufacturing	Reduce emissions from on-site fuel usage and electricity consumption.	Expanded energy conservation programs in U.S. facilities.
Transportation	Reduce energy use for shipping products to our customers.	Improved shipping procedures. Introduced customer delivery notification process. Opened more manufacturing facilities to build products closer to our customers.

Measuring the Dell Climate Footprint

We are working to gather the necessary data to calculate greenhouse gas emissions from Dell owned and leased assets. This effort involves gathering energy use data on electricity, heating fuels, transportation fuels, product transportation, employee commuting and business travel in Dell facilities worldwide. Dell also measures indirect GHG emissions from energy consumption during customer use. Carbon dioxide emissions were estimated using the methodology published by World Business Council for Sustainable Development's Greenhouse Gas Protocol Initiative (www.ghgprotocol.org).

Carbon intensity, or the ratio between carbon dioxide emissions and revenue dollars, is a generally accepted measurement to reflect the efficiency of the economy with respect to carbon emissions. Figure 24 shows the carbon intensity for our operations worldwide for fiscal year 2007 (using preliminary revenue data). Our emissions totaled 385,000 metric tons of carbon dioxide.

This graph represents the first time we’ve reported indirect emissions from electricity use for our operations. Previously, we reported electricity-related emissions from all U.S. operations, but we reported data only for manufacturing facilities outside the U.S.

Climate Reduction Goals

Figure 24 illustrates actual carbon emissions worldwide from electricity use and associated carbon intensity. We have established a goal to reduce our carbon intensity an additional 15 percent by 2012.

Dell has requested that its primary suppliers begin reporting greenhouse gas (GHG) emissions data. Suppliers risk having their overall scores reduced during Dell quarterly business reviews for not identifying and publicly reporting GHG emissions. A supplier’s volume of Dell business can be affected by the scores earned on reviews. Dell will work with suppliers on emissions reduction strategies once data is collected.

Product Innovations to Protect Our Climate

We value efficiency at Dell — especially when it comes to designing our products or working with our customers to reduce the energy required to operate them. Efficiency benefits not only the environment, but also lowers the total cost of ownership by reducing power consumption. Beyond the efficiency of the product itself, we also work with our larger customers to minimize energy use in their data centers through power management and efficient heating and cooling. Lastly, we provide our customers with the opportunity to offset emissions from the use of electricity through our new Plant a Tree for Me Program.

Customers can visit Dell’s energy resource site at www.dell.com/energy to view the energy-efficient features of Dell product families and data centers. The Web site also provides energy calculators that can help estimate power needs, potential emissions avoidance and potential cost savings.

ENERGY STAR Products

Dell has actively partnered with the Environmental Protection Agency’s (EPA) ENERGY STAR program for more than a decade. ENERGY STAR products reduce energy consumption, thereby reducing electricity costs for our customers, and reducing greenhouse gas emissions and other pollutants generated during power generation.

In fiscal year 2007, Dell introduced Energy Smart, complementing the EPA ENERGY STAR program and providing customers the ability to optimize performance and efficiency through product and service offerings.

Our latest OptiPlex desktop PC systems are pre-configured with the new Dell Energy Smart settings. Energy Smart features can save up to $53 annually per unit, and by adding a flat-panel monitor the annual power savings compared to previous-generation systems can reach $69 per system. Applying the Dell Energy Smart energy-efficiency settings of the new OptiPlex systems to all Dell desktops sold within the past year could save enough electricity to avoid about 12.5 million tons of carbon dioxide emissions, the equivalent of removing an estimated 2.5 million cars from the road. This equates to over $1 billion in operating cost savings opportunities for our customers.

Energy efficiency is a fundamental design criterion for all PowerEdge servers. The introduction of Energy Smart servers reduces not only server power draw, but also the resulting system heat. Dell PowerEdge Energy Smart servers also use energy efficient hard drives, advanced fan technology, high efficiency power supplies, and low voltage processors. Taken together, these improvements reduce power requirements by up to 25 percent. Although Energy Smart servers cost about $100 more than similarly configured servers, customers can save up to $200 annually in energy costs per server.

China Energy Conservation Contribution Award

China Energy Conservation Production Certification (CECP) is required by a China government procurement program. Since 2005, Latitude, OptiPlex, Inspiron and Precision computers, which are marketed in China, have all received CECP certification.

In 2006, the China Standard Certification Center (CSC) awarded Dell their Energy Conservation Contribution Award for our commitment to developing energy efficient products.

Energy Efficient Consulting Services

In addition to selling energy efficient products, we provide consulting services to improve the energy efficiency of our customers’ data centers. Our work in this area focuses on four services: environmental assessments, capacity planning, virtualization, and energy efficiency research.

Data Center Environmental Assessment Services

Dell helps companies make an existing facility or a newly acquired data center more energy efficient. We perform a comprehensive assessment and develop a customized remediation plan to reduce energy use in heating, ventilation, and air conditioning (HVAC) and power delivery systems.

Data Center Capacity Planner

Dell helps customers select the appropriate systems to meet their computing needs with an eye towards energy efficiency. As businesses grow, they need more computational capacity — a need typically met by adding servers in the data center. Delivering the energy to each server generates heat, which in turn requires additional energy to cool equipment. Every watt consumed by a server and other information technology (IT) equipment generally incurs at least another watt through cooling, power backup and power delivery. This Dell service helps customers use the latest energy efficiency and computing technology to accommodate capacity growth.

Virtualization

We enable customers to virtualize their servers. Doing so can significantly reduce the number of servers an organization needs. Companies can slash data center costs by consolidating equipment to fewer, higher-performance servers running virtual environments. We can save our customers money by decreasing power consumption, reducing cooling requirements, and minimizing data center square footage.

Energy Efficiency Research

Vendors or customers that want to validate or develop custom energy-efficient solutions can work directly with the Dell Energy Efficiency Research Center in Austin, which simulates the data center environment. At the lab, customers and vendors test different HVAC, power delivery, and airflows on a range of IT deployments and workloads to find which technology or combination of technologies delivers the most efficient solutions.

To ensure that customers can take advantage of existing energy-efficient best practices and technology standards, Dell works with a number of industry groups and participates in several global initiatives, including:

ASHRAE: The American Society of Heating, Refrigeration, and Air Conditioning Engineers, which advances the art and science of heating, ventilation, air conditioning and refrigeration to promote sustainability.

DMTF: The Distributed Management Task Force, which is leading an industry effort to ensure that all energy-related and power-consumption components in a system are interoperable, can communicate with management systems, and can support virtualization.

Ecma International: An internationally based standards organization, which is leading the development of international IT standards, including an effort focused on energy efficiency.

The Green Grid: An association of IT professionals, which seeks to lower the overall consumption of power in data centers around the globe. As a founding member, Dell joined other IT companies to encourage the private and public sector to develop and use power-conserving information technologies. For more information, see www.thegreengrid.org.

Offsetting Emissions from Product Use: Plant a Tree for Me

Dell recently announced a global carbon offset initiative, the Plant a Tree for Me program, which plants trees for customers to offset the carbon impact of electricity required to power their systems. This first-of-its-kind program underscores Dell’s commitment to continued broad environmental stewardship. Dell is the first international technology company to offer customers the opportunity to offset carbon dioxide emissions associated with the electricity used to power their computers.

We’ve partnered with the Conservation Fund and Carbonfund.org, nonprofit organizations that will use the funds to plant trees in managed forests. Customers are not charged any program administrative fees; 100 percent of the donations received by the Plant a Tree for Me program go to the organizations to facilitate tree planting.

When launched in January of 2007, the program enabled Dell customers to offset the carbon impact of their laptop computer use for $2 and desktop system use for $6. In March 2007, the program was expanded to allow any U.S. contributor, regardless of purchase, to donate $40 for a server, $13 for a computer workstation, $4 for a CRT monitor, $4 for a laser printer, $3 for an LCD monitor and $1 for an inkjet printer. According to EPA and Dell estimates, the cost is equivalent to the cost of the average amount of electricity used by the device over three years. Additionally, contributors can offset the estimated total one-year carbon impact of an average U.S. citizen by donating $99 to the program. Dell plans to expand this program into other regions by the end of 2007.

Reducing Emissions from Operations

Energy use reduction is becoming our most important environmental initiative in manufacturing and operations. By reducing energy, we can reduce our greenhouse gas and combustion-related air emissions, and reduce our share of the environmental impacts related to energy production.

In previous reports, we have shown energy use from U.S., and global manufacturing facilities normalized to revenue. Due to growth in our office-based facilities outside the U.S. over the last few years, we have realized that more complete energy data from all of our facilities is needed. We collected a significant proportion of that data in fiscal year 2007, which will allow us to report on global energy usage trends in future reports.

Carbon dioxide emissions from our buildings-based operations come primarily from electricity usage. As Figure 25 illustrates, Dell’s U.S. electricity usage for fiscal year 2007 accounts for about 97.8 percent of the carbon emissions from our facilities; natural gas use and other miscellaneous fuel uses account for less than three percent of total emissions.

In fiscal year 2007, we completed several energy improvement projects, ranging from installing more efficient lighting systems to improving the controls and motors in our heating and cooling systems. To date, much of the activity has taken place in our U.S. facilities. However, we are beginning to expand our efforts globally and expect to be able to report on progress in other regions in next year's report.

Figure 26 shows the total electricity usage trends in all our U.S. facilities plus our global manufacturing operations. Our electricity use has continued to grow as we add new facilities, increase our data center capacity, and increase staffing.

However, Figure 27 shows how our energy efficiency improvements have made a difference. Electricity usage per square foot in our U.S. office buildings has decreased nearly 5 percent from fiscal year 2006.

Figure 28 shows the total gas consumption in our U.S. facilities, which increased in fiscal year 2007 due to the addition of new facilities. However, we improved the efficiency of gas usage by 4.3 percent over fiscal year 2006.

We plan to continue to improve our operational energy efficiency each year as we make further improvements to our current facilities and design higher efficiencies into our future buildings.

During fiscal year 2007, we obtained an 8.33 percent increase in the amount of renewable energy supplied by Austin Energy for our Austin-based facilities. We are now contracted for close to 13 million kWh per year, which in fiscal year 2007 represented about 8.3 percent of the electricity used at these facilities. We are evaluating other potential sources for renewable electricity for fiscal year 2008 and beyond.

Energy Efficient Transportation

We’re working to make our product delivery system as efficient as possible. Doing so reduces costs, delivery times and air pollution. Three programs were key to these efforts in fiscal year 2007: LTL Direct, Customer Delivery Notification, and Geographic Manufacturing (GeoMan).

LTL Direct

During the third quarter of fiscal year 2007, we implemented our Less Than Truckload (LTL) program. Known as LTL Direct, the project streamlines our transportation network to reduce transit times to customers (minimizing the total miles traveled) and to convert more product shipments from air to ground. The program also reduces the amount of packaging materials.

Large product orders to our business customers are shipped by LTL carriers in either 28-foot or 53-foot trailers. In the past, freight was double-stacked in the trailers, which often damaged boxes or pallets. Once a box was damaged, the product would have to be returned and a replacement product issued and reshipped to the customer. This doubled the packaging, transportation, and fuel costs to deliver the replacement product. If a pallet was damaged due to the shifting of product within the trailer, it had to be replaced, which resulted in increased lumber costs and waste. To decrease the possibility of damage to products and pallets in-transit and to increase the efficiency of the network, Dell took the following steps:

Added metal beams (known as “logistics bars”) and air bags in LTL trailers that transport freight in direct lanes. The logistics bars allow for pallets to be double-stacked inside a trailer without having the pallets physically touch one another, which prevents damage to the packaging, product, or pallet. Air bags placed between pallets cushion the loads. Purchased and installed air compressors (and wall-mounted hose spools) in each factory at each LTL door to inflate the air bags. Analyzed the logistics network to design an optimal LTL network to load freight onto LTL trailers and ship directly to the final destination rather than first delivering freight to a local terminal where the freight would be unloaded, stored, and then re-loaded onto outbound trailers. Contracted with newer, better equipped and more capable LTL carriers. Analyzed the time-in-transit times (TNTs) posted by the LTL carriers to design an efficient terminal network that reduced transit times and identified direct lanes to our customers.

The LTL Direct program has resulted in an immediate reduction in damage to products and pallets.

Customer Delivery Notification

Fiscal year 2007 also saw a renewed emphasis on designing expedited transportation networks and utilizing technology to increase first-time deliveries to our customers. Customer Delivery Notification (CDN) is a process whereby customers are contacted and provided with a proposed delivery window. Each customer is given the option of selecting a delivery time that best fits their schedule instead of having a delivery truck attempt a delivery while the customer is not at home. Since implementing the CDN program, Dell has increased first-time deliveries to over 80 percent and greatly reduced transportation use.

Geographic Manufacturing (GeoMan)

Dell’s Geographic Manufacturing (GeoMan) strategy is our effort to build products closer to our customers. GeoMan reduces transportation costs and minimizes customer delivery time, which will result in $20 million in logistics savings. We achieved these savings by adding a new manufacturing facility in Winston-Salem, North Carolina, to assemble and ship computers to East Coast customers. From an environmental standpoint, delivery trucks traveled fewer miles, thereby reducing GHG transportation emissions.

Optimizing Transportation Networks to Reduce Emissions

Dell has continued our commitment to reducing GHG emissions in our transportation networks while delivering computers and other products to our customers. Recognizing a global responsibility to manage climate change concerns, Dell remains focused on several voluntary initiatives that enhance air quality.

One of Dell’s key tenets for optimizing transportation costs is to maximize the use of ground transportation by trucks through air-to-ground conversion to minimize the use of transportation by airplanes. Because air transportation creates approximately seven times more GHG emissions than ground transportation, this optimization is vital to reducing GHG emissions. Throughout the years, Dell has implemented, and continuously enhanced, expedited ground transportation networks. Dell has implemented manufacturing and fulfillment planning processes, with patents pending, to increase the ability to meet customer expectations with ground shipping instead of air shipping. Furthermore, Dell has established manufacturing locations to allow the assembly of computers closer to the customer, which reduces the total transit distance and minimizes the use of air transportation. This trend in optimizing freight transportation by shifting from planes to trucks continues to be Dell’s strategy for outbound shipping.

Figure 29 shows Dell’s trend for using air and ground transportation as a percentage of our parcel shipments to customers for the past seven years.

VGR, Sweden: On Measuring Environmental Benefits

Changing from a CRT to a flat panel monitor will save VGR 1,962 megawatts per year or enough electricity to power 322 average Swedish homes for a year.

Enabling the Energy Smart setup feature will save VGR 1,826 megawatts per year or enough electricity to power 299 average Swedish homes for a year.

Changing from a CRT to a flat panel monitor will phase out 13 to 16 thousand kilograms of lead.