Telling Your Environmental and

Social Performance Story

October 26, 2011

Andy McIntyre, EORM Managing Principal

Diane Firu, EORM Consultant

Philip Trowbridge, Sustainability Solutions Group LLC Managing Director

SUSTAINABILITY SOLUTIONS GROUP

Agenda

Content for Today

Introductions

Transparency

Trends

Standards and Guidelines

Reporting Process

Summary

Q&A Session

2

Introductions

Objectives

Update you on sustainability reporting standards now

in practice

Show you how to develop a reporting strategy that is

relevant to your business and incorporates best practices

Help you get started by walking you through the report

generation process

– Data gathering

– Data aggregation

– Report format

– Assurance

4

Our Presenters

Diane Firu Consultant, EORM

Diverse experience in a variety of market

areas including electronics,

semiconductor, photovoltaics,

biotechnology, and agriculture

Works on behalf of major multinational

corporations to develop sustainability

strategies

Supports clients with sustainability

reporting

Developed a benchmarking protocol from

the GRI reporting guidelines to

qualitatively and quantitatively measure

performance

Philip Trowbridge Founder & Managing Director,

Sustainability Solutions Group

+25 years as an environmental engineer

Diverse background with experience in government, industry and consulting

Experience in wide range of industries – high tech, instrumentation, mining, healthcare, and chemicals

Written and published 14 non-financial annual reports, numerous brochures and designed several web presentations for corporate sustainability data

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Transparency

Sustainability Transparency

Disclosure on

environmental, social and

governance performance

Usually voluntary

Synonyms:

– Citizenship reporting

– Social reporting

– Triple-bottom line reporting

– Corporation social

responsibility reporting

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Benefits of Transparency

Stakeholders

Build trust with stakeholders

– Customers

– Shareholders

– Employees

– NGOs

– Community

– Government

– Suppliers

Increased stakeholder participation in the business

8

Benefits of Transparency

9

Source: Sustainable Business Forum

Reputation

―Regard your good name as the richest

jewel you can possibly possess‖

– Socrates

―If you lose money for the firm, I’ll be

understanding. If you lose reputation

for the firm, I’ll be ruthless.‖

– Warren Buffett

―Reputation: You only know what it’s

worth, when it lies in tatters‖

– Financial Times

Trends

Reporting is on the rise…

11

“If sustainability is a

journey, as many like to

say, the non-financial

report is the vehicle

increasingly used by

companies to document

the trip.”

State of Green Business

2011, GreenBiz.com

Socially Responsible Investing

(SRI)

Spring 2011: Socially Responsible

Investing: Reaching New Heights

Estimates have been made that investment funds using some

sort of social or sustainability screen now account for 10% or

more of the total amount invested in professionally managed

funds in the U.S.

…US SRI funds total could reach $3 trillion in the next year

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Indexes

13

Rankings

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Rank Company Name GICS

Industry

Group

Country

1 STATOIL ASA NORWAY Energy

2 JOHNSON & JOHNSON UNITED STATES Pharmaceuticals, Biotechnology

3 NOVOZYMES DENMARK Materials

4 NOKIA OYJ FINLAND Technology Hardware & Equipment

5 UMICORE BELGIUM Materials

6 INTEL CORP UNITED STATES Semiconductors & Semiconductor

7 ASTRAZENECA PLC BRITAIN Pharmaceuticals, Biotechnology

8 CREDIT AGRICOLE SA FRANCE Banks

9 STOREBRAND ASA NORWAY Insurance

10 DANSKE BANK A/S DENMARK Banks

Standards and

Guidelines

15

Standards and Guidelines

16

17

GRI

Environmental

• Materials

• Energy

• Water

• Biodiversity

• Emissions, Effluents and Wastes

• Compliance

Human Rights

• Investment and Procurement Practices

• Non-discrimination

• Freedom of Association and Collective

• Bargaining

• Force labor

Labor Practices & Decent Work

• Employment

• Labor & Management Relationships

• Occupational Health and Safety

• Training

• Diversity and Equal Opportunity

Society

• Community

• Corruption

• Compliance

Product Responsibility

• Customer Health and Safety

• Product and Service Labeling

• Marketing

• Compliance

Economic

• Economic Performance

• Market Presence

• Indirect Economic Impacts

1,865 Reports

Performance Indicators

Application

18

UN Global Compact Communication on Progress (COP)

8,000 signatories

2,834 COPs

19

ISO 26000 ―ISO SR‖

Comparison

Standards Participation Type Complexity Grading

En

vir

on

men

t

Hu

man

Rig

hts

Lab

or

Pra

cti

ces

Eth

ics

Eco

no

mic

GRI G3 Guidelines and

Sector supplements 1,865 in 2010

Reporting

standard with

KPIs

Complex Yes X X X X X

ISO 26000:2010,

Guidance for social

responsibility

Unknown,

released in

2010

Social

responsibility

guidance

Complex No X X X X X

UN Global Compact 8,000 in 2010 Principles with

reporting Simple No X X X X

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Others

Standards Participation Type Complexity

En

vir

on

men

t

Hu

man

Rig

hts

Lab

or

Pra

cti

ces

Eth

ics

Eco

no

mic

IPIECA Oil and gas

industry guidance

on voluntary

sustainability

reporting

22 large petroleum

companies in 2010

Reporting

standard Simple X X X X X

OECD Guidelines

for Multinational

Corporations

42 countries

Responsible

Business

Guidelines

Simple X X X X X

GHG Protocol 1,000+ in 2007 GHG reporting Complex X

Climate Registry 428 as of Sept 2011 GHG reporting Complex X

CDP 3,000 in 2010 GHG, water

reporting Simple X

21

Reporting Process

22

Reporting Process

23

Plan Develop

strategy and vision

Develop focus and

goals Quality

Internal organization

Write Set Boundaries

Outline Select

indicators for reporting

Collect data Analyze

data Provide

assurance

Design Format and frequency

Reporting Process

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Plan Develop

strategy and vision

Develop focus and

goals Quality

Internal organization

Write Set Boundaries

Outline Select

indicators for reporting

Collect data Analyze

data Provide

assurance

Design Format and frequency

Strategy and Vision

Competitive Landscape

Benchmark

– Priorities / Focus Areas

– Goals

– Gaps

– Opportunities for

improvement

– Competitive advantage

– Progress

25

Be

nc

hm

ark

ing

Re

su

lts

Company

GRI Benchmarking Summary

ECONOMIC

PRODUCT RESPONSIBILITY

SOCIETY

LABOR PRACTICES AND DECENT WORK

HUMAN RIGHTS

ENVIRONMENTAL

Strategy and Vision

Stakeholders

Identify stakeholders

Evaluate stakeholder concerns

Determine engagement and communication approach

– Power and influence

– Credibility

– Willingness to engage

– Partnerships

– Learning resource

– Issue relevance

– Geography

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Stakeholder Concerns

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Source: PEPSICO Purpose Website

http://www.pepsico.com/Purpose/Performance-with-Purpose/Our-Stakeholders.html

Develop Focus and Goals

Focus (Materiality)

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Priority – areas to implement a

data collection system, calculate

metrics, establish goals and Key

Performance Indicators (KPIs),

and show continuous

improvement

Manage – areas to develop

performance indicators and

actively manage

Track – areas to simply maintain

records

Sta

kehold

er

Exposure

Business Impact Low

High

High

Manage Priority

Track Manage

Develop Focus and Goals

Goals

Focus on areas of greatest risk or where opportunity

exists to ―stretch‖ the company

Describe future expected outcomes, long-term and

general guidelines for what you want to achieve

Align and understand management system goals

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Example – Johnson & Johnson

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Goal

• Reduce the environmental impacts of our operations

Objective

•20% absolute reduction in facility CO2 emissions

•Increase onsite renewable and clean-technology energy capacity to 50 megawatts

Strategy

•Comprehensive environmental management structure

•System of certification and assessment processes

•Company-wide accountability for progress against our goals

Activities

•Energy efficiency improvements in all of our operations

•Cogeneration—on-site generation of electricity and recovery of the waste heat to potentially achieve overall efficiencies of more than 80 percent

•On-site renewable energy that produces no CO2 emissions

•Renewable electric purchases

•Carbon trading and sequestration

“Healthy Future 2015, our

five-year strategic roadmap

to propel our corporate

citizenship and

sustainability commitments

forward, are 15 of the

boldest and broadest

sustainability goals we have

set to date‖

Quality

Before you write, think about…

Balance

Clarity

Accuracy

Timeliness

Comparability

Reliability

Audience

Comfort level and beyond

Level of detail

Plan for the future

Internal Organization

Getting Organized

Identify Champions/Team

Roles & Responsibilities

Define Milestones

Reviews

Account for Extras

Departments Involved

Environmental Health and Safety (EHS)

Facilities, Operations

Legal

Procurement / Supply Chain

Human Resources

Quality

Product

R&D

Marketing

Others….

32

Reporting Process

33

Plan Develop

strategy and vision

Develop focus and

goals Quality

Internal organization

Write Set Boundaries

Outline Select

indicators for reporting

Collect data Analyze

data Provide

assurance

Design Format and frequency

Set Boundaries

Source: GRI Sustainability Reporting Guidelines v 3.1

Facility

Global

Joint Ventures

Limitations

Outline

35

Select Indicators

Establish metrics to measure performance related to

goals, objectives and targets

Use internationally recognized standards

Establish baseline from which to improve

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37

Collect Data

Qualitative

Governance

Proxy Statements

Annual Reports

Management Systems

Management Approaches

Risk Management

Policies

Procedures

Code of Conduct

Training

Quantitative

Performance Indicators

– Environmental

– Social

– Economic

38

Analyze Data

Trends

Good to show at least three years of data

Show

– Improvement

» Explain why

– Under performance

» Explain why

» Corrective actions

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Analyze Data

Normalization

Provides good period-to-period comparison

Guidelines

– Use a production or service-based index

– Explain the how, why and any limitations of the index

– Use for indicators directly affected by production or service

40

41

Normalization based

on production

Baseline and 3 year trend

Transparent about

not meeting goal

Explanation for not meeting goal

Assurance

Pros – Minimize reputation risk

– Build trust

– Enhance credibility

– Opportunity to improve

Cons – Expensive

– May need more than one

assurer

– Multi-year commitment

42

Assurance Standards – Global Reporting Initiative

– AccountAbility (AA1000AS)

– IAASB (ISAE 3000) – exposure

draft

43

Assurance

53% of GRI reports were not

externally assured

Only 16% of North American

GRI reports were assured

Reporting Process

44

Plan Develop

strategy and vision

Develop focus and

goals Quality

Internal organization

Write Set Boundaries

Outline Select

indicators for reporting

Collect data Analyze

data Provide

assurance

Design Format and frequency

Format and Frequency

Web vs. Print

Considerations Web Print

Main Audience General – e.g. consumers,

employees, NGOs

Focused – e.g. investors,

customers

Frequency More frequent – e.g. semi-

annual, quarterly

Less frequent – e.g. annual

Updates Easy to update Snapshot in time

Cost $ $$

Environmental Footprint Smaller (Electronic) Larger (Paper)

Formats PDF

HTML

XML

Brochure

Annual Report

Best Practices Minimize file size

Minimize use of Flash

Minimize layers / clicks

Video messaging

Executive Summary

Minimize paper

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Summary

Benefits to sustainability reporting

– Building trust with stakeholders

– Reputation

Trends

– SRI

– Indexes

– Rankings

Follow standards and guidelines available for reference

– GRI

– ISO 26000

– UN Global Compact..

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Reporting Process

47

Plan Develop

strategy and vision

Develop focus and

goals Quality

Internal organization

Write Set Boundaries

Outline Select

indicators for reporting

Collect data Analyze

data Provide

assurance

Design Format and frequency

Questions & Answer

Session

48

References

For more information on sustainability reporting standards and guidelines:

Global Reporting Initiative (GRI) www.globalreporting.org/Home

– Note: GRI has a survey link in the ―Get Involved‖ section on the homepage to submit comments about the development of the G4 guidelines. The first Public Comment Period for G4 is open until November 24th.

ISO 26000 www.iso.org/iso/social_responsibility

UN Global Compact www.unglobalcompact.org/

ULE 880: Sustainability for Manufacturing Organizations www.ulenvironment.com/ulenvironment/eng/pages/offerings/standards/organizations/

– Note: ULE 880 was not covered in the presentation, but a participant asked about it.

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References, continued

OECD Guidelines for Multinational Corporations www.oecd.org/department/0,3355,en_2649_34889_1_1_1_1_1,00.html

International Petroleum Industry Environmental Conservation Association (IPIECA) Guidelines www.ipieca.org/focus-area/reporting

GHG Protocol www.ghgprotocol.org/ – Note: The GHG Protocol recently released two new standards -

GHG Protocol Corporate Value Chain (Scope 3) Standard and GHG Protocol Product Life Cycle Standard.

Climate Registry www.theclimateregistry.org/

Carbon Disclosure Project https://www.cdproject.net/en-US/Pages/HomePage.aspx

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Q: When discussing Occupational Safety and

Health and Customer Safety and Health, are

lagging indicators, such as TRIR, the only

measure?

A: No, leading indicators can be used for reporting, but the GRI tends to focus on lagging indicators in these areas. Health and safety industry groups are trying to get GRI to address this in the new G4 framework. Some companies track ―near misses‖ as a leading indicator of potential health and safety issues.

Take a look at the ―Center for Safety and Health Sustainability‖ website at centershs.org/ for more information on their efforts to collaborate with GRI. A presentation describing the groups leading indicator recommendations can be found at: centershs.org/documents/TC_Safety_Health_Sustainability.pdf

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Q: For customers and others in the supply chain, how

much can the business dictate of communicate

procedures when the business has no control over the

third parties?

A: Controlling third-party and supplier behavior can be

challenging. Many companies have supplier codes of

conduct (e.g. Apple) which outlines the companies

expectations regarding supplier operations. The code is

often included as a clause in the supplier contract and

can be enforced through periodic audits of the suppliers

operations.

Take a look at EORM’s recent webinar materials on

supply chain for more information:

www.eorm.com/news/index.php?category=events&page

=082411web

52

Q: Can you explain normalization more - for example,

should you report the actual number and a normalized

number? Is revenue okay for normalization?

A: Normalization provides good period-to-period

comparison for efficiency of the company’s operation.

However, reporting only normalized data can mask

challenges associated with a company’s operation that

are evident when reviewing actual data. Therefore, it is

strongly recommended to communicate both normalized

data and actual data. Normalization based on revenue is

not recommended because it reflects more information

about the sale of your products/services and condition of

the markets than your actual footprint. The use a

production or service-based index is recommended.

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Q: How do companies deal with data normalization

and metrics with large swings in production rates

due to economy or other factors?

A: Using a production based normalization factor accounts for

these large swings in production rates and provides a good

comparison for intensity of resource use regardless of

production rates. That said, it is important to normalize only

data that is directly affected by production or changes similar

to production. A description of the calculations and rationale

used to develop a normalization index is always

recommended. The trends and abnormalities should also be

explained. I have seen quite a few reports that describe

economic challenges recently. It would be important to

mention this and how it impacts your operations to help

readers better understand the data.

54

Q: Is there a particular size threshold for this

kind of reporting?

A: With regards to company size – No. Although, large

public companies tend to report more often than small

private companies. The great thing about the GRI is that

it is scalable to organizations of any size.

With regards to report size – No. There are many very

short reports and many very long reports. It depends on

the purpose and audience of your report.

55

You indicated that Sustainability reporting can be

time consuming. What is the average number of

resources that a large multinational would dedicate

to sustainability reporting?

A: The total timeframe from start to finish for a first report

can take up to six months. Companies typically have at

least one person dedicated to managing and gathering

the information and at least one person from the

individual departments contributing to the content. For

example, the Sustainability Manager could be in charge

of the overall report completion, but rely on the HR

manager for HR data, EHS manager for EHS data, etc.

56

Q: Is the GRI easily accessible or are you

required to become a member?

A: Yes, the GRI G3 Reporting Framework is available for

free on the GRI website. Membership is not required to

use the framework.

www.globalreporting.org/ReportingFramework/

57

Q: Can you explain the Application Levels

for GRI more? Is a C report bad?

A: The Application Levels indicate the extent to which the

Guidelines have been applied. A ―C‖ grade report is not

bad, but there should be some level of effort in the

coming years to improve the level of disclosure. Please

see the GRI website for more information at:

www.globalreporting.org/ReportingFramework/Applicatio

nLevels/

58

Q: When is the G4 standard

expected to be finalized?

A: ―The feedback from the Public Comment will feed into the

development process. The Working Groups will develop

a first draft of G4, which will be available for public

comment in 2012. G4’s final draft will be influenced by

the results of this international public consultation. The

final draft will be ready for approval by GRI’s governance

bodies in late 2012, before the planned launch in 2013.‖

www.globalreporting.org/CurrentPriorities/G4Developme

nts/WhatIsG4/

59

Q: How do companies report qualitative

information year after year? For example

governance structure, management systems, etc.

A: Many times companies provide a brief explanation of the

qualitative information and refer to specific documents

with a reference link in the report. Examples include

policies, governance structure, committee charters and

codes of conduct.

60

Q: What about ULE 880?

A: ―UL Environment, in partnership with GreenBiz Group,

published Interim Sustainability Requirements under the

title ULE ISR 880, its first organization-wide sustainability

standard that sets requirements to evaluate the

sustainability of manufacturing organizations.‖ The

requirements are still in development and pilot testing is

currently underway.

www.ulenvironment.com/ulenvironment/eng/pages/offerin

gs/standards/organizations/

61

Thank You!

Contact Info

Philip Trowbridge, Sustainability Solutions Group

ptrowbridge@ssgllc.net

830.822.7550

Diane Firu, EORM

firud@eorm.com

408.790.9272

About Us

EORM

History

– Founded in 1990 by Environmental, Health and Safety (EHS) managers from industry

Today

– Six offices in US

» Extensive International Partner Resources

– 135 employees focused on supporting EHS and Sustainability needs

– Servicing 350 clients -- small to very large companies

– ISO 14001 and OHSAS 18001 Certified

– Climate Registry participant

64

About Us

Sustainability Solutions Group

Founded in 2009

Working with small and Fortune 500 companies to:

– Develop strategies for corporate sustainability

– Establish systematic approach to integrating sustainability

into organizations

– Measure performance and develop goals/targets

– Engage stakeholders

– Improve transparency

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