EEP Monitor EEP Sustainability Webinar 001

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Copyright 2009 by Monitor Company Group, L.P.

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any f orm or by any means electronic, mechanical, photocopying,

recording, or otherwise without the permission of Monitor Company Group, L.P.

This document provides an outline of a presentation and is incomplete without the accompanying oral commentary and discussion.

COMPANY CONFIDENTIAL

Sustainability:

Successful Strategies for the New Normal5 November 2009

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2ZMK-TTP-Sustainability_Webinar_Deck-11-30-09-LM Copyright 2009 Monitor Company Group, L.P. and Esty Environmental Partners Confidential

premium branding

global economic shifts

labor markets

energy pricevolatility

sources of rawgoods

increased uncertainty

climate change costs

internationalagreements

compliance costs

state/federal/local

carbon

emissions

water

toxics

Sustainability

Sustainability Pressures Mounting

Geo-strategicFactors

Regulatory Changes

accountability

eco-compliance regimesvendors

environmentalperformance

suppliers

product safety

Supply ChainPressures

resource pressures

deforestation

internalized costs

climate change

price increases

dysfunctionalecosystems

water

materialssourcing

Environmental

Degradation

eco-aware

goods &services

consciousness

personal impact

visibilitydemands

Consumer Attention

IncreasedRisks and

Opportunities

packaging

end-of-life solutions

productdisposal

Extended ProducerResponsibility

NGOs

waste

CSR

chemicals

politics


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Sustainability

Changed Corporate Attitudes Toward the Environment

Beyond Burden

Regulations

Costs

Risks

Upside Opportunity

Critical to Strategy


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Sustainability

But What About the Economic Collapse?


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Sustainability

Long-term Drivers Behind Sustainability Have Not Changed

Natural WorldDrivers

Green-OrientedStakeholders

+++EnergyPrices

GovernmentPressure


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Obamas Clean Energy Vision

New Direction at EnergyDepartment

Old School Environmental Protection

Agency

Reinvigorated Role for Science

Climate Change Action

Green Jobs and Green Economy

Sustainability

New U.S. Policy Dynamic


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8/308ZMK-TTP-Sustainability_Webinar_Deck-11-30-09-LM Copyright 2009 Monitor Company Group, L.P. and Esty Environmental Partners Confidential

Sustainability

Change Creates Opportunity

Venture Capital Invested in Cleantechin North America ($M)



Sustainability

Need to Be Strategic



Sustainability:Successful Strategies for the New Normal



Addressing sustainability well is a moral and legal imperative for firms, butit also and essentially involves profound strategic choices about thefirms competitiveness.

Comprehensive diagnosis of the firms exposure to sustainability issues, ifcombined with equally thoughtful analysis of their impact on industryattractiveness and relative competitive position, provides the basis for afirm to choose the most competitively valuable approach to sustainabilityand to design the integrated strategy to do good and to do wellsimultaneously.

Sustainability

The Strategic Imperative

A legal and moral

imperative

Regulatory requirements Social, financing

expectations

A competitiveness

issue

Appropriate response tosustainabilityrequirementsautomatically helps orhinders firms in trying togrow profitably

AND



Sustainability

Impact on Firm Competitiveness

Perceived

Value

Firm Competitors Firm Competitors

A B C A B C

Cost /

Unit

Firm

The actions a firm takes toaddress its sustainabilityissues ultimately affect the

relative perceived value ofits product, and/or itsrelative cost position both of which affect itsability to grow fasterand/or more profitablythan rivals

Before

After

AfterBefore



Sustainability

Impact on Industry Dynamics

Sustainability requirements will

affect an industryscompetitiveness relative to otherindustries

Price / performance of itsproducts relative to availablesubstitutes (including DIY and

DW)

Sustainability requirements willalso affect its intrinsicattractiveness (profitability)

E.g., higher / lower barriers tonew entrants due to cost of or

(lack of) access to necessaryclean technology, inputs

E.g., higher / lower buyer,supplier power because ofrequirement to use particularproduct design, etc.

Threat of NewEntrants

Substitutes

SupplierPower

Rivalry Buyer Power

Regulation and the need to invest inmore sophisticated manufacturingand recycling processes may createhigher barriers to entry forfuture would-be competitorsErosion of cost position

and regulation may shift

competitive advantage acrossincumbents

Supplier power mayincrease sourcing inputsbecomes narrower due tonew pressures around

the disposal of materialsbyproducts duringmanufacturing

Demand forcategory as a

whole or for companysproducts specifically mayshift due to preferences,prices and regulatoryrequirements

Substitutes may become more or less of a threatas regulation and consumer preferences evolveand as raw material pricing fundamentally altersthe relative cost position of product offerings



Sustainability

A Firms Stance on Sustainability Is a Profound Strategic Choice

Simple compliance is NOT

competitively neutral

so

Firms must (re)choose wherethey gain competitiveadvantage

May mitigate sustainabilityeffects and seek to win viaother means, or

May seek to leveragesustainability drivenchanges

None

None

AdvantageAchieved

Other Ways

Advantage ThroughSustainability

Motivated Moves



Aspiration:

PROTECT

Aspiration:

ADVANCE

Aspiration:

TRANSFORM

1 2 3

Ensure sustainability dealtwith so as to a) meet legalrequirement, and b) not

erode competitive position

Strengthen some aspect ofproduct portfolio, costposition through selective

beyond the minimumsustainability investment

Establish sustainability ascore source of advantageand growth via

breakthrough innovationand investment

Sustainability

Making and Delivering on the Best Strategic Choice

SustainabilityBased Growth

MitigateRisk


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Sustainability

Analytic Tools and Frameworks

Issue Spotting

Stakeholder Mapping

Trend Tracking

Best Management Practices

Benchmarking

Eco-Advantage Opportunities

Priority Setting

Green Innovation



Sustainability

Environmental Issue Analysis

Irrigation

Fuel

Fertilizer, Pesticide,

Defoliant

Pallets, Shipping Cartons, Poly Bags, Cardboard, Strapped, Taping, Shrink Wrap, Shopping Bags

Runoff and Wastewater Discharge

Carbon Dioxide (CO2) and Other Greenhouse Gases

Air Pollutants, Such as Nitrogen Oxides and Sulpher Dioxide, Plus Solid and Sludge Wastes,Packaging

Air / Water / Soil Contaminants, Carcinogens, Irritants, Toxicants,Mutagens, Plant and Animal Poisons

Dye, Wash, Rinse

Electricity

Sizing, Bleaches, Dyes, Fixers, Neutralizers, Acids,Tints, Softeners, Inks, Detergents

Fuel Electricity

Raw Materials Manufacturing RetailDistribution

and Offices

Water

Energy

Chemicals

Packaging

Waste Water

Carbon

Toxins andHarmfuls

Other Emissionsand Wastes

ResourceUse

WasteandEm

issions



Sustainability

Stakeholder Mapping


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CEO Commitment

Environmental Management

Systems

Metrics

Incentives

Take Risks

Learn From Mistakes

Dont Over-learn past lessons

Employee Engagement

Personal Sustainability Plans

Environment or sustainability workgroup

Supply Chain Audits

Green Design

Buildings

Production

Products

Eco-Innovation

Signature Initiative

Reporting and Communications

Culture of Concern

Regulatory Strategy

Partnering

Advisory Board

Integration and Alignment Execution Matters

Sustainability

Environmental Management Best Practices


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Sustainability

Benchmarking

17

5 4

20

95

25

9

8

62

Organizational

Commitment &

Alignment

Core Environmental

Performance

Stakeholder

Communication &

Engagement

17

23

32

33

41

46

8

1216

48

43

11

0

32

Note: All scores are based on publicly available informationexcept Company: Internal Knowledge, which uses all data

available to EEP, derived from interviews and internal documents.

Performance ranked by EEPsSustainability Scorecard

Performance Ranked by EEPs

Sustainability Scorecard


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Sustainability

Eco-advantage Plays

Cut costs

Lower eco-risks

Drive revenues

Green products / services

Green value innovation

Promote intangible value

Brand building

Corporate social responsibility


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Sustainability

Initiative Prioritization

High

High

Low

Low

Speed and Ease ofImplementation

Benefits toBusiness

Longer-termInvestments

Low-hangingFruit

2nd TierAgenda

Non-priorities


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Sustainability

Green Innovation

Re-Design

Products / services

Processes

Connect to customer

Re-Imagine

Recast goods / services Seek value innovation

Solve Customers Environmental Challenges

Build Intangible Green Value

Brand and image

Government and NGO attitudes

Employee engagement

S stainabilit


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Sustainability:Successful Strategies for the New Normal

S


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Sustainability

Strategic Posture: Protect

1Protect: Ensure sustainability issues

are dealt with so as to meet legalrequirements and not erodecompetitive position Components

1. Audit assessment of sustainability issues and their

competitiveness consequences

2. Effective integrated sustainability organization

Clear executive responsibility

Clear, specific prioritized (compliance) goals Good metrics, comprehensive, timely monitoring

Clear, established processes

3. Baseline contact with key constituents (conversation only)

4. Prioritized, funded competitive compliance action plans

List of one off moves needed to close gaps between

current performance and compliance and maintain

relative cost, product position (including exit, innovation,

etc.)

Typical Client Profile

Insufficient alignment around sustainabilitypressures or activities among key internal

constituencies

Wants to better understand sustainability relatedshortcomings in the overall business that presentrisk

Needs a clearer understanding of the views ofkey stakeholder groups as they relate to corebusiness activities and baseline program formanaging those constituencies

Foresees negative impact to profits of a keyproduct line from a specific piece of regulationgoing into effect (e.g., new emissions caps)

Has identified select business areas as needinggreening to avoid legal or PR exposure, i.e.,protect and avoid harm to current business.

S i bili


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2

Sustainability

Strategic Posture: Advance

Typical Client Profile

Faces a situation where being more competitivewith existing products means being greener (e.g.,due to threat of substitution)

Has identified substitution threat for certainproducts and seeks to not only offensively avertthe threat, but turn it into a positioning advantage

Looking to use sustainability as a new rationale

for rethinking a core business offering

Wants to build sustainability into a particular facetof operations or offering as a new way to engageemployees, suppliers, and other stakeholders

Advance: Strengthen some aspect of

product portfolio, cost position, industryposition through selective beyond-the-minimum investments in sustainability

Components





Clear, specific prioritized (compliance) goals

Good metrics, comprehensive, timely monitoring


3. WinWin engagement strategy to shape license to operatefavorably, gain endorsements and / or proprietary insight into

green needs

4. Prioritized, funded green advantage action plans intended

to drive revenue, lower costs in specific product line, BU,

geography

e.g., Build capability for continuous green innovation in

selected product lines, parts of business

e.g., using green technology to gain entrance to an

adjacent market e.g., reconfiguring / supply chain to create substantially

greener logistics platform

S t i bilit


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3Typical Client Profile

Seeks to derive significant competitive advantageby positioning as the green leader in a givenmarket

Betting on sustainability as a core pillar of futuregrowth and has already successfully tackledactivities like those in 2a and 2b

Like WalMart, seeking to green the entirebusiness wherever profitability can be enhanced

Strong senior alignment and ambition forsystemic change within the organization

Other?

Components





Clear, specific prioritized (compliance) goals Good metrics, comprehensive, timely monitoring


3. Stretch goals for green based growth; green as a core

strategic pillar

4. Identification of adjacent, breakthrough opportunities based

on green technologies, business models

5. Systematic, enterprise wide change / implementation plans

Transform: Substantial acceleration

in rate of growth, profit due tocomprehensive greening of business

Sustainability

Strategic Posture: Transform


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Copyright 2009 by Monitor Company Group, L.P.

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any f orm or by any means electronic, mechanical, photocopying,

recording, or otherwise without the permission of Monitor Company Group, L.P.This document provides an outline of a presentation and is incomplete without the accompanying oral commentary and discussion.

Eamonn Kelly([email protected])Daniel C. Esty([email protected])

Bob Lurie ([email protected])For general inquiries please contact Daniel Mausolf at [email protected]

This presentation will be available for viewing at www.monitor.com andwww.estyep.com.
http://www.monitor.com/http://www.estyep.com/http://www.estyep.com/http://www.monitor.com/

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EEP Monitor EEP Sustainability Webinar 001