2018 ENVIRONMENTAL, SOCIAL, GOVERNANCE AND SUSTAINABILITY REPORT

Transcription

1 2018 ENVIRONMENTAL, SOCIAL, GOVERNCE AND SUSTAIBILITY REPORT Compliant with Edison Electric Institute (EEI) and American Gas Association (AGA) Templates in place as of Nov. 29, 2018

2 2018 ENVIRONMENTAL, SOCIAL, GOVERNCE, AND SUSTAIBILITY REPORT CMS ENERGY & CONSUMERS ENERGY Environmental, Social, Governance (ESG) and Sustainability Report SECTION 1: QUALITATIVE INFORMATION Introduction CMS Energy, including our primary subsidiary, Consumers Energy, has integrated sustainable principles throughout all levels of our company. Our commitment to the triple bottom line People, Planet and Profit is our foundation. As Michigan s largest utility, consideration of environmental, social and governance (ESG) issues is embedded in our strategy, business planning and enterprise risk management processes. These commitments align with At CMS Energy, we know climate change is happening, and know we can do our part to care for the planet by focusing on a clean and lean operating strategy. our purpose: World Class Performance Delivering Hometown Service. The triple bottom line balances the interests of all of our stakeholders, including employees, customers, suppliers, regulators, Michigan residents and the investment community. CMS Energy is participating in voluntary industry initiatives, coordinated by the Edison Electric Institute (EEI) and the American Gas Association (AGA), to provide the public, our customers and investors with uniform and consistent ESG and sustainability-related metrics. This report supplements our existing disclosure on these issues, including the 2018 Sustainability Report. CMS Energy also published a Climate Assessment Report in November 2018, which can be found here.

3 2018 ENVIRONMENTAL, SOCIAL, GOVERNCE, AND SUSTAIBILITY REPORT CMS ENERGY & CONSUMERS ENERGY 2 Governance CMS Energy and Consumers Energy have multiple levels of sustainability oversight integrated into our daily operations. We use a variety of governance and risk management tools when addressing ESG and sustainability matters. These include, among others, oversight by the CMS Energy and Consumers Energy Boards of Directors (Board), an enterprise risk management program, and robust strategic and business planning processes. The Board is made up of a number of directors with experience and knowledge of ESG and sustainability issues. The Board has the highest level of oversight over our ESG and sustainability practices. Review of these practices occurs at the Board level by the Audit Committees (Audit Committee), Governance, Sustainability and Public Responsibility Committees (Governance Committee) and the Compensation and Human Resources Committees (Compensation Committee). The Audit Committee oversees our enterprise risk management framework, which includes strategic and operational risks, as well as the processes, guidelines and policies for identifying, assessing monitoring and mitigating such risks. Risk management is embedded into business processes and key decision making at all levels of the company. The Governance Committee is responsible for reviewing and evaluating the composition of the Board, recommending Board nominees, broadly overseeing the corporate governance and advising and assisting the Board on public responsibility and sustainability matters. Acknowledging the growing importance of sustainability and climate-related matters, the Board in 2018 formally tasked the Governance Committee with oversight of sustainability practices by adding this responsibility to its charter. The Compensation Committee is responsible for our executive compensation structure, benefit and compensation plans and critical human resource programs. The committee charters can be found at CMSEnergy.com.

4 2018 ENVIRONMENTAL, SOCIAL, GOVERNCE, AND SUSTAIBILITY REPORT CMS ENERGY & CONSUMERS ENERGY 3 We also have an Environmental Advisory Committee, made up of senior leadership that influences our environmental compliance and sustainability programs and governs decisions that support our commitment to the planet. This includes short and long-term strategic decisions and ESG disclosure reporting. In addition to a robust oversight structure, CMS Energy has an Enterprise Risk Management (ERM) program to ensure risks that may have a significant impact on the business are known and understood, and thus inform risk mitigation strategies. The scope, objectives and roles and responsibilities related to the ERM program are included in the company s Corporate Risk Policy, which is approved by the Audit Committee of the Board. The ERM program covers risks across several areas, including strategic, operational, regulatory, environmental, financial, information technology operations and cyber security for CMS Energy and its subsidiaries. Strategy and Integration Internal and external data sources are leveraged as input into our long-term strategic planning. This data is analyzed, used to update trend metrics and synthesized into an update on trends critical to our current and future business. This data influences multiple areas of our strategy including distributed energy resources, wholesale markets, customer energy usage trends and climate policy. This information is used to assess our strategic choices and the assumptions underlying our strategy. The senior team and Board engage with the insights and conclusions of this work multiple times each year to evaluate the strategic choices and test for potential new opportunities or threats.

5 2018 ENVIRONMENTAL, SOCIAL, GOVERNCE, AND SUSTAIBILITY REPORT CMS ENERGY & CONSUMERS ENERGY 4 Stakeholder Engagement We spend significant time and effort listening to our customers and key stakeholders before making decisions. Our long-term resource plans and our environmental and sustainability strategies consider People, the Planet, and Profit. For example, in 2017 and 2018 we engaged stakeholders in the development of our Clean Energy Breakthrough Goal as well as the development of our Integrated Resource Plan (IRP). That IRP engagement included a series of widely promoted public forums to give stakeholders an opportunity to provide input on our long-term resource plans. These forums were designed as basic informational and educational sessions with the chance to make comments and ask wide-ranging questions about topics such as renewable energy, energy efficiency and emerging technology. We also have an on-going outreach program to develop and maintain communication with our investors. We value these discussions, and the Board considers feedback when evaluating corporate governance issues. Our management regularly participates in investor and industry conferences throughout the year to discuss performance and ESG topics. Shareholders, employees and third parties may contact the Board with any inquiry or issue by the methods described on our website. The Board will respond as appropriate. Climate Change In the past five years, Consumers Energy has created a cleaner, more sustainable energy future for Michigan by taking a leadership position in reducing air emissions, water usage and landfill waste. Our actions speak louder than words and we have a track record of doing more than is required. Our actions to date have reduced our carbon emissions by 38 percent, reduced our water usage by 35 percent and avoided over one million cubic yards of landfill disposal, said Patti Poppe, president and CEO of CMS Energy and Consumers Energy.

6 2018 ENVIRONMENTAL, SOCIAL, GOVERNCE, AND SUSTAIBILITY REPORT CMS ENERGY & CONSUMERS ENERGY 5 But we are not satisfied. In February 2018, Consumers Energy announced a goal to reduce carbon emissions by 80 percent compared to 2005 levels and produce energy with zero coal by At the same time, we plan to have renewable energy sources and energy storage deliver more than 40 percent of our energy. Consumers Energy is embracing a cleaner and leaner vision, focused on eliminating wasted energy and adding more renewable energy sources, such as wind and solar. We are proud to provide the strong leadership to protect our planet and our home state for generations to come. Renewable Energy As outlined in our IRP, we plan to add 550 megawatts of wind to help us reach Michigan s 15 percent renewable energy standard by the end of We plan to add capacity on an incremental basis, allowing flexibility in planning and resource type to adapt to changing conditions. We re proposing 5,000 megawatts of solar energy with a ramp-up throughout the 2020s to prepare for the retirement of certain fossil-fueled units, as well as the end of some power purchase agreements. The additional solar capacity may be a mix of owned and purchased. The plan forecasts renewable energy levels of: 25 percent by percent by percent by This plan would help Consumers Energy reduce carbon emissions by more than 90 percent from Since 2005, Consumers Energy s renewable capacity has grown from 3 percent to 11 percent. We look forward to this percentage growing as we transition from coal to renewables in support of our clean energy goals. We own and operate two wind farms: Lake Winds Energy Park in Mason County and Cross Winds Energy Park in Tuscola County.

7 2018 ENVIRONMENTAL, SOCIAL, GOVERNCE, AND SUSTAIBILITY REPORT CMS ENERGY & CONSUMERS ENERGY 6 In addition to wind, we ve listened to customers to develop new renewable energy sources including: Operating solar power plants at Grand Valley State and Western Michigan universities that collectively generate up to 4 megawatts of clean energy. Offering a pilot program for households to install solar panels on rooftops. Launching a pilot program to allow businesses to purchase 100 percent clean energy, helping businesses achieve their corporate sustainability goals. Buying electricity from the 100-megawatt Apple Blossom wind farm in the Thumb. Enabling Our Strategy In addition to focusing on ESG-related issues in our core business, we also leverage our philanthropic initiatives in corporate giving and employee volunteerism to focus on our key People, Planet and Profit objectives. Consumers Energy Foundation Since 1990, the Consumers Energy Foundation has provided grants and mobilized volunteers to strengthen local education, social services, the environment and community, economic and cultural development. Foundation giving is separate and distinct from other company contributions, and cannot be used to directly benefit the corporation. The Foundation uses shareholder funds, along with contributions from current employees and retirees to support nonprofit organizations across Michigan and help create sustainable communities. In 2017, Consumers Energy, our charitable foundation and employees contributed more than $17 million to nonprofit organizations in the communities we serve.

8 2018 ENVIRONMENTAL, SOCIAL, GOVERNCE, AND SUSTAIBILITY REPORT CMS ENERGY & CONSUMERS ENERGY 7 Volunteerism Our company has a long history of supporting active employee volunteerism in a variety of areas. The company targets key volunteer opportunities that make a difference ensuring our branded Blue Shirts make a strong showing at key community events. The company implemented an online technology platform (CE Volunteers) in late 2017 to increase recruitment and engagement in volunteer opportunities as well as provide metrics and data about employee volunteerism that did not previously exist. In November and December of 2017, employees were asked to report 2017 volunteer hours in the new platform. More than 11,000 hours were reported; however, we expect many more volunteer hours were accrued throughout the year. As of August of 2018, approximately 10,500 volunteer hours in the communities we serve have been reported. Other Resources We provide extensive public reporting and are forthcoming in disclosures about ESG and sustainability, including our environmental stewardship and long-term strategy. We address these matters in Securities and Exchange Commission, Environmental Protection Agency and other regulatory agency filings, and by voluntarily reporting our climate risk strategy and related data to CDP (formerly known as the Carbon Disclosure Project). Additionally, we continually update and enhance disclosures relating to sustainability efforts on our website and in our Sustainability Report, which provide a better understanding of the breadth and depth of our climate-related planning and practices and can be found at ConsumersEnergy.com. Information on key performance indicators for Consumers Energy, the principal subsidiary of CMS Energy, can also be found in the chart below.

9 2018 ENVIRONMENTAL, SOCIAL, GOVERNCE, AND SUSTAIBILITY REPORT CMS ENERGY & CONSUMERS ENERGY 8 SECTION 2: QUANTITATIVE INFORMATION Disclaimer: All information below is being provided on a voluntarily basis, and as such, companies may elect to include or exclude any of the topics outlined below and customize the template to their specific needs. The decision to include data for historical and future years is at the discretion of each company and the specific years (e.g., historical baseline) should be chosen as appropriate for each company. Parent Company: Operating Company(s): Business Type(s): State(s) of Operation: State(s) with RPS Programs: Regulatory Environment: Report Date: 8/27/2018 CMS Energy Website: Consumers Energy Website: Sustainability Report: CMS Energy Corporation Consumers Energy Company Electric and gas utility Consumers Energy - Michigan Both Regulated and unregulated; Federal Energy Regulatory Commission, Michigan Public Service Commission, and Federal, state and local environmental laws and regulations CMSEnergy.com ConsumersEnergy.com The quantitative information on pages 8 12 is Consumers Energy data only. CMS Energy is the parent company of Consumers Energy. Baseline Last Year Current Year EMISSIONS PORTFOLIO Owned Nameplate Generation Capacity at end of year (MW) 1 Coal 3,055 2,105 2,105 Natural Gas 1,157 2,487 2,487 Nuclear 812 N/A N/A Petroleum Total Renewable Energy Resources 1,029 1,338 1,338 Biomass/Biogas N/A N/A N/A Geothermal N/A N/A N/A Hydroelectric 1,121 1,122 1,122 Solar N/A 4 4 Wind N/A Other N/A N/A N/A Purchased Power Nameplate Generation Capacity at end of year (MW) Coal Natural Gas 1,392 1,396 1,396 Nuclear N/A Petroleum N/A N/A N/A Total Renewable Energy Resources Biomass/Biogas Geothermal N/A N/A N/A Hydroelectric Solar N/A 7 7 Wind Other N/A N/A N/A 1 Represents Consumers Energy s share of the capacity of the J.H. Campbell 3 unit, net of the 6.69-percent ownership interest of the Michigan Public Power Agency and Wolverine Power Supply Cooperative, Inc., and Consumers Energy s 51-percent share of the capacity of Ludington. DTE Electric holds the remaining 49-percent ownership interest.

10 2018 ENVIRONMENTAL, SOCIAL, GOVERNCE, AND SUSTAIBILITY REPORT CMS ENERGY & CONSUMERS ENERGY 9 Baseline Last Year Current Year EMISSIONS (cont) Net Generation for the data year (MWh) Coal 18,810,000 9,739,000 10,098,000 Natural Gas 119,500 6,161,500 5,154,000 Nuclear 5,336,000 N/A N/A Petroleum 111,500 40,500 48,000 Total Renewable Energy Resources -93, , ,000 Biomass/Biogas N/A N/A N/A Geothermal N/A N/A N/A Hydroelectric -93, , ,000 Solar N/A 4,000 6,000 Wind N/A 627, ,000 Other N/A N/A N/A Purchased Power for the data year (MWh) Coal 482, , ,000 Natural Gas 7,061,151 5,995,000 5,521,000 Nuclear N/A 6,927,000 6,780,000 Petroleum N/A N/A N/A Total Renewable Energy Resources 1,236,343 2,148,000 2,245,000 Biomass/Biogas 1,199,810 1,194,000 1,234,000 Geothermal N/A N/A N/A Hydroelectric 33,964 45,000 52,000 Solar N/A 7,000 6,900 Wind 2, , ,000 Other 219,151 3,688,000 4,384,000 Investing in the Future: Capital Expenditures, Energy Efficiency (EE), and Smart Meters Total Annual Capital Expenditures (nominal dollars) $593,000,000 1,656,000,000 1,632,000,000 Incremental Annual Electricity Savings from EE Measures (MWh) N/A 352, ,121 Incremental Annual Investment in Electric EE Programs (nominal dollars) N/A 77,215,000 13,500,000 Percent of Total Electric Customers with Smart Meters (at end of year) N/A Retail Electric Customer Count (at end of year) Commercial 214, , ,734 Industrial 8,595 1,485 1,433 Residential 1,565,601 1,595,470 1,601,688 GHG Emissions: Carbon Dioxide (CO 2 ) and Carbon Dioxide Equivalent (CO 2 e) Owned Generation Carbon Dioxide (CO 2 ) Total Owned Generation CO 2 Emissions (MT) 20,157,066 12,968,880 12,831,770 Total Owned Generation CO 2 Emissions Intensity (MT/Net MWh) Carbon Dioxide Equivalent (CO 2 e) Total Owned Generation CO 2 e Emissions (MT) N/A 13,001,487 12,890,968 Total Owned Generation CO 2 e Emissions Intensity (MT/Net MWh) N/A Purchased Power Carbon Dioxide (CO 2 ) Total Purchased Generation CO 2 Emissions (MT) 3,799,350 7,849,679 7,196,288 Total Purchased Generation CO 2 Emissions Intensity (MT/Net MWh) Carbon Dioxide Equivalent (CO 2 e) Total Purchased Generation CO 2 e Emissions (MT) N/A 7,875,639 7,229,254 Total Purchased Generation CO 2 e Emissions Intensity (MT/Net MWh) N/A

11 2018 ENVIRONMENTAL, SOCIAL, GOVERNCE, AND SUSTAIBILITY REPORT CMS ENERGY & CONSUMERS ENERGY 10 Baseline Last Year Current Year EMISSIONS (cont) Owned Generation + Purchased Power Carbon Dioxide (CO 2 ) Total Owned + Purchased Generation CO 2 Emissions (MT) 23,956,416 22,531,986 20,028,058 Total Owned + Purchased Generation CO 2 Emissions Intensity (MT/Net MWh) Carbon Dioxide Equivalent (CO 2 e) Total Owned + Purchased Generation CO 2 e Emissions (MT) N/A 22,531,986 20,120,222 Total Owned + Purchased Generation CO 2 e Emissions Intensity (MT/Net MWh) N/A Non-Generation CO 2 e Emissions Fugitive CO 2 e emissions of sulfur hexafluoride (MT) N/A 1,767 1,756 Fugitive CO 2 e emissions from natural gas distribution (MT) N/A 116, ,645 Nitrogen Oxide (NO x ), Sulfur Dioxide (SO 2 ), Mercury (Hg) Generation basis for calculation Fossil Nitrogen Oxide (NO x ) Total NO x Emissions (MT) 29,105 4,945 4,029 Total NO x Emissions Intensity (MT/Net MWh) 1.19E E E-04 Sulfur Dioxide (SO 2 ) Total SO 2 Emissions (MT) 85,020 17,026 5,226 Total SO 2 Emissions Intensity (MT/Net MWh) 3.50E E E-04 Mercury (Hg) Total Hg Emissions (kg) N/A Total Hg Emissions Intensity (kg/net MWh) N/A 5.503E E-06 Baseline Last Year Current Year RESOURCES Human Resources Total Number of Employees 8,114 7,366 7,496 Total Number on Board of Directors/Trustees Total Women on Board of Directors/Trustees Total Minorities on Board of Directors/Trustees Employee Safety Metrics Recordable Incident Rate Lost-time Case Rate Days Away, Restricted, and Transfer (DART) Rate Work-related Fatalities Fresh Water Resources Water Withdrawals - Consumptive (Billions of Liters/Net MWh) N/A 3.22E E-07 Water Withdrawals - Non-Consumptive (Billions of Liters/Net MWh) N/A 8.97E E-05 Waste Products Amount of Hazardous Waste Manifested for Disposal N/A Percent of Coal Combustion Products Beneficially Used N/A 12% 20%

12 2018 ENVIRONMENTAL, SOCIAL, GOVERNCE, AND SUSTAIBILITY REPORT CMS ENERGY & CONSUMERS ENERGY 11 AGA VOLUNTARY SUSTAIBILITY METRICS: Quantitative Information Disclaimer: All information below is being provided on a voluntary basis, and as such, companies may elect to include or exclude any of the topics outlined below and customize the template to their specific needs. The decision to include data for historical and future years is at the discretion of each company and the specific years (e.g., historical baseline) should be chosen as appropriate for each company. American Gas Association. All rights reserved. Parent Company: CMS Energy Operating Company(s): Consumers Energy Business Type(s): Combined Gas and Electric State(s) of Operation: Michigan Regulatory Environment: Regulated Report Date: Nov. 29, 2018 Note: Data from from operating companies is rolled up to the corporate level. TURAL GAS Current Year DISTRIBUTION RESOURCES 2017 Methane Emissions And Mitigation from Distribution Mains Number of Gas Distribution Customers 1,763,743 Distribution Mains in Service Plastic (miles) 14, Cathodically Protected Steel - Bare & Coated (miles) 12, Unprotected Steel - Bare & Coated (miles) Cast Iron / Wrought Iron - without upgrades (miles) Plan/Commitment to Replace / Upgrade Remaining Miles of Distribution Mains (# years to complete) Unprotected Steel (Bare & Coated) (yrs to complete) Cast Iron / Wrought Iron (yrs to complete) Distribution CO 2 e Fugitive Emissions In order to improve the safety and reliability of our natural gas system, CE is investing nearly $2 billion to replace 2,600 miles of natural gas pipelines. Our Enhanced Infrastructure Replacement Program (EIRP) is a 25-year project, which began in years remaining in program 19 years remaining in program CO2e Fugitive Methane Emissions from Gas Distribution Operations (metric tons) 232, Natural Gas Throughput from Gas Distribution Operations in thousands of scf 353,761, CO2e Fugitive Methane Emissions Rate (metric tons per thousands scf of Throughput) Natural Gas Transmission and Storage Transmission Pipelines, Blow Down Volumes, and Fugitive Emissions Total Miles of Transmission Pipeline Operated by gas utility (miles) Volume of Transmission Pipeline Blow Down Emissions - outside storage and compression facilities: scf natural gas metric tons 2 Underground Natural Gas Storage Emissions Storage Facility Wellhead Component Fugitive Emissions (metric tons of CO2e) Onshore Natural Gas Transmission Compression Emissions Compressor Station Fugitive Emissions (metric tons CO2e) Co2e Emissions For Transmission, Compression, And Storage CO2e Emissions for Transmission Pipelines (metric tons) CO2e Emissions for Storage Facilities (metric tons) (3 of 7 compressor stations are above Subpart W reporting threshold) CO2e Emissions for Transmission Compression Facilities (metric tons) (3 of 7 compressor stations are above Subpart W reporting threshold)

13 2018 ENVIRONMENTAL, SOCIAL, GOVERNCE, AND SUSTAIBILITY REPORT CMS ENERGY & CONSUMERS ENERGY 12 TURAL GAS Current Year DISTRIBUTION RESOURCES 2017 Conventional Air Emissions from Transmission, Compression, and Storage Emissions reported for all permitted sources (minor or major) Includes all 7 compressor stations NOx ( metric tons per year) VOC (metric tons per year) Natural Gas Gathering and Boosting Methane Emissions Gathering and Boosting Pipelines, Blow Down Volumes, and Emissions Total Miles of Gathering Pipeline Operated by gas utility (miles) Volume of Gathering Pipeline Blow Down Emissions (scf) Gathering Pipeline Blow-Down Emissions outside storage and compression facilities (metric tons CO2e) Co2e Combustion Emissions for Gathering & Boosting Compression CO2e Emissions for Gathering & Boosting Compression Stations (metric tons) Conventional Combustion Emissions from Gathering & Boosting Compression Emissions reported for all permitted sources (minor or major) NOx ( metric tons per year) VOC (metric tons per year) This report contains forward-looking statements which may cause our results to differ materially. All forward-looking statements should be considered in the context of the risk and other factors detailed from time to time in CMS Energy s and Consumers Energy s Securities and Exchange Commission ( SEC ) filings. Forward-looking statements should be read in conjunction with FORWARD-LOOKING STATEMENTS AND INFORMATION and RISK FACTORS sections of our most recent Form 10-K and as updated in other reports we file with the SEC, which can be found on our Regulatory Filings page. CMS Energy and Consumers Energy have no obligation to update or revise forward-looking statements regardless of whether new information, future events, or any other factors affect the information contained in the statements.