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CORPORATE SUSTAINABILITYA New Frontier

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DEFINITIONS Sustain

– To give support to– Support the weight of– Keep up or prolong– To bear up under

Sustaining– Aiding in the support of an organization through a

special fee (sustaining member)

Sustained yield– Production of a biological resource under

management procedures which insure replacement of the part harvested by regrowth or reproduction (ca. 1905)

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What is Sustainability?

“Meeting our society’s needs in ways that don’t compromise the ability of future generations to meet theirs.”

“At its core, sustainability is about being responsible with resources – people, land, energy, water, materials and capital.”

Clark S. Davis, Vice Chairman – HOK, “A Green Convergence: Linking Environmental and Organizational Sustainability,” Horizons, RubinBrown, Spring 2009.

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“The word sustainability is all too often confused with simple survival in challenging economic conditions …”

“Now is the time for the forward thinking organization to assess the market, look at competitors and evaluate its long-term plan.”

“Keys to sustainability are customer satisfaction and satisfaction of your personnel.”

John F. Herber, Jr., Horizons, RubinBrown, Spring 2009.

What is Sustainability?

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Drivers of SustainabilityEconomic considerations 74%

Ethical considerations 53%

Innovation and learning 53%

Employee motivation 47%

Risk management/reduction 47%

Access to capital/shareholder value 39%

Reputation or brand 27%

Market position/share 21%

Supplier relationships 13%

Cost savings 9%

Improved government relations 9%

Source: KPMG Survey

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Financial– Shareholders (Institutions ---

Individuals)– Bond holders – Banks– Employees (including unions)– Other capital sources

(venture capitalists)

Supply chain– Customers– Alliance partners– Direct suppliers– Upstream suppliers– Contractors

Regulatory– SEC– IRS– Occupation Health and Safety– FDA– EPA– Accounting standards (FASB, IASB, PCAOB)– FCC

Political– Federal government– State & local governments– International governments– United Nations– EU– OPEC– NATO

Social– Local communities– General public– Academia– Charitable organizations– Environmental & social organizations

Stakeholders U.S. Public Organizations

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Corporate Sustainability Reporting (CSR)

Beginnings – highly unstructured – Corporate Social Responsibility reports

1997 – Global Reporting Initiative– Amsterdam-based nonprofit organization– Increased rigor and comparability

• Extends from crafting a CSR to specific performance indicators• Primary areas

economic, environmental, social performance (labor practices) human rights, society, and product responsibility

Strongly supported and implemented in Europe– Currently in Version 3 of Global Reporting Standards for

CSR

www.globalreporting.org

Sustainability - 8Profile of CSR

Sustainability Reporting Guidelines (Version 3)

Strategy and analysis Organizational profile Report parameters Governance, commitments, and engagements Management approach & performance

indicators– Reporting on trends– Use of protocols– Presentation of data– Data aggregation– Metrics

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Sustainability ReportingExpanded Listing

Integration to strategic planning – What is “strategic management?”

– External orientation– Focus on strengths– Prepare for unknown developments

• Business Continuity Planning • Disaster Recovery• Data backup

– Ability to adapt

Economic/financial Environmental Social performance (labor rights)

– Compensation and benefits– Diversity

Human rights Products & services Product responsibility Society (overall impact)

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CSRASSURANCE STANDARDS

Purpose = creditability of reports Flexible approach

– Internal systems (including internal audit)– External assurance (published conclusions on

quality of the report and information contained) Processes for preparation of report Assess validity of quality of performance by

organization

• Professional assurance providers (including but not limited to CPAs)

• Stakeholder panels• Others

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Qualities of External Assurance Competent external groups or individuals Systematic, documented, evidence based

approach Assessment of reasonableness of CSR

performance evaluation– Quality of data– Selection of items covered

Completed by individuals independent of organization or stakeholders

Report follows GRI Reporting Framework Results in written, publicly available opinion

– Also includes statement assurance provider about relationship to the organization

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Final Thoughts

“… leading companies view social and environmental responsiveness as an asset and an opportunity, not as a liability or cost. They recognize that an investment in the structures and systems to ensure strong social and environmental performance often pays dividends in terms of improved process and production quality, improved production efficiency and yields, improved innovation, lower risk, improved reputation, and increased profitability.”

Marc. J. Epstein, “Implementing Corporate Sustainability: Measuring and Managing Social and Environmental Impacts.” Strategic Finance, January 2009

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Final ThoughtsContinued

“A lean strategy is the relentless pursuit to eliminate waste in all business processes.”– Traditionally used on the “plant” floor– Today, throughout the organization

“Companies that have implemented lean are finding sustainability initiatives an easy extension of this philosophy.”

Mike Lewis, Horizons, RubinBrown, Spring 2009.

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Examples of CSR

Starbucks– Reports have been issued since 2001– An extensive CSR report– Follows GRI guidelines (Version 3)– Includes prior goals and performance

indicators– Includes independent assurance report

• Moss Adams, LLP (Accounting and Consulting firm) Since 2002

– Establishes 2015 goals

http://www.starbucks.com/sharedplanet

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Royal Dutch Shell– Reports have been issued since 1997– An extensive CSR report– Follows GRI guidelines (Version 3)– Includes prior goals and performance indicators– Assurance

• Internal controls established to validate information• External review committee report included in the

report (estab. in 2005)Objective is to insure report is balanced, relevant,

and responsiveIndependence is not clear

http://www.shell.com/home/content/responsible_energy/sustainability_reports/dir_shell_sustainability_reports.html

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Examples of CSR

Others