ESCP-EAP - MEB Corporate Social Responsibility April 2009

Agenda Day 1
17:00 Corporate Social Responsibility why care? PwC's Sustainability Services at a glance Sustainable development a new buzz-word, but what does it mean? Setting the scene what is at stake? The challenge for business what does it mean to your company? -- break --18:30 Examples & case studies: what if everything goes wrong? 19:15 Now its over to you CSR at European Agro Company (SimulEthik) 20:00 END

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Agenda Day 2
17:00 Debrief previous session 17:30 Groups prepare for role play engaging stakeholders is not always an easy task 19:00 Role-play: Annual shareholder meeting of Greedman & Co 19:45 Conclusion and wrap-up 20:00 END

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PricewaterhouseCoopers Facts and Figures

PricewaterhouseCoopers is a truly global organisation with member firm offices in 766 cities in 150 countries. 146,000 partners and staff More than USD 25.2 billion net revenues in 2007 (up by 10.5%)

Filename

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Sustainable Business Solutions (SBS)

SBS French practice is part of a global team with over 800 Environmental, Health & Safety (EH&S) / sustainability experts in more than 20 countries In France, about 40 EH&S and sustainability professionals Broad environmental / sustainability services offering Signatory to UN Global Compact PwCs global CEO was elected chairman of WBCSD (World Business Council for Sustainable Development)

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3 grands marchs organiss en lignes de services (France)

Contribuer au dveloppement durable Vrification des informations :
Dcret NRE CO2 Rapports DD - Politiques publiques (institutions internationales et nationales) - Commerce international & mondialisation - Projets relatifs au march du carbone

Risque et conformit :
Due Diligences Evaluation des risques environnementaux Support laudit

Channel 1

Secteur public et partenariats public-priv

Crdibiliser les informations

Secteur Priv
Accompagner les dmarches

- Financement de l'accs l'eau potable

- Stratgie et communication - Organisation du DD - Gestion des produits, des services et de la technologie

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Our clients in France

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The SBS Global Network

Oslo Brussels

Helsinki Stockholm Copenhagen Moscow

Vancouver

London Paris

Amsterdam Prague Frankfurt Zurich Budapest Milan Bucharest Athens Beijing Tokyo Nicosia (Cyprus)

San Francisco Pittsburgh Los Angeles New York Lisbon

Madrid

Nearly 800 professionals Environmental, social and economic expertise

Lagos Caracas Bogota

New Delhi

Hong Kong Bombay

Wide variety of technical skills in environmental and social issues including :

Lima

Quito

Labour standards, Health and safety, Human rights,

Santiago

La Paz Harare Asuncion

Sao Paulo Johannesburg Brisbane Sydney Melbourne Wellington

Buenos Aires Montevideo

Stakeholder consultation, Corporate governance,

Sustainable Business Solutions

* September 2004 data

Socio-economic analysis and economic impact assessment.

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Five services to deliver value to clients internationally:

CSR strategy design and deployment Reporting and assurance of non-financial information Climate-change audit and consulting, and emissions trading services Transaction support on issues concerning EHS and corporate reputation; Supply-chain risk management

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Recent PwC Thoughtleadership publications

www.pwc.fr/dd www.pwc.com/sustainability

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Sustainable development A new buzz-word, but what does it mean?

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PricewaterhouseCoopers

Sustainable development (or Sustainability) is development that meets the needs of present generations without compromising the ability of future generations to meet their own needs
World Commission on Environment and Development (Brundtland Commission, 1987)

Corporate Sustainability is a business approach to create longterm shareholder value by embracing opportunities and managing risks deriving from economic, environmental and social developments
Dow Jones / SAM Sustainability Group Index

Corporate Social Responsibility is a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis as they are increasingly aware that responsible behaviour leads to sustainable business success. EU Green paper on CSR (July 2001)

Why sustainable development is becoming so important ? Sustainable Development has to answer three main issues:
Social equity and access to basic services: - 1.2 billion people live with less than 1 US$ per day - 1 billion people live without drinkable water - 2 billion people without sanitation system fro water - 2.5 billion people live without electricity Environmental issue: - Emissions of CO2, during this century, temperature could raise between 2 and 6C - Protection of forests: destruction of tropical forest increases in the proportion of one football ground per second - Environmental footprint, if all the countries have the same environmental impact of France, 3 planets should be necessary to guarantee living in a sustainable way. Demographic issue: Population should increase by 50% by 2050, reaching more than 9.3 billion of inhabitants April 2009
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A new business model : Triple bottom line - a balanced scorecard

*As defined by the Sustainability Asset Management Group (SAM)

April 2009

In brief Sustainable Development appeared more than 20 years ago Sustainability and/or Corporate Social Responsibility are basically two different words for the same concept. One is applicable at country/region level and the other one is applicable at organization level New is: Listen to and engage with stakeholders Triple-bottom line: the challenge is to find the right balance between economic, social, and environmental issues, fully integrated in the business strategy Long-term perspective (beyond next quarter financial results?) and inter-generational transfers
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Setting the scene what is at stake ?

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The economic power of multinationals outweigh the one of some countries GDP/Sales Ranking 1998

Countries USA ... Norway DaimlerChrysler Saudi Arabia ... Greece Wal-Mart Portugal
April 2009

1 ... 27 28 29 ... 32 33 34

And are viewed as

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Moving from shareholders only, to all stakeholders!

Employees Customers Society

Partners Shareholders
April 2009

Moving from shareholders only to all stakeholders

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The challenge for business: What does this mean to our company? Each company has to define its own approach

Mark Moody Stuart (CEO Shell)

My colleagues and I are totally committed to a business strategy that generates profits while contributing to the well being of the planet and its people. We see no alternative. Our values, Business Principles, commitment to contribute to a sustainable form of development are inextricably linked to our long-term commercial success.

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Sustainability issues are on the agenda of Boards:

John Smith (CEO GM) :

Steps towards sustainability: By taking steps towards sustainability, General Motors is moving into the future. The impact of our products, plants, and partnership define our future course as a corporation. It is the balance of environmental, social, and economic actions of GM that will help shape the world around us and provide a foundation for today and the next generation. By our deeds, we intend to lead.
April 2009

Sustainability issues are on the agenda of Boards:

April 2009

Sustainability issues are on the agenda of Boards (Spot the error )

Charles O. Holliday JR (CEO DuPont):

DuPont is a science company that is focused on sustainable growth - creating shareholder and societal value while decreasing our environmental footprint. Our core values of safety, ethics, fair treatment of people and environmental stewardship have remained constant over time... Looking ahead: as we approach our 200th anniversary, we are dedicated to transform DuPont into a sustainable growth company.
Kenneth L. Lay (former Chairman and CEO Enron):

As we move forward, we will leverage our intellectual capital and innovative capabilities to promote sustainable business practices around the world. We believe this approach is imperative for achieving our business objectives, attracting and retaining top talent, preserving and enhancing our reputation and delivering long term corporate value.
April 2009

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CSR is also about creating value for the company

Attract talents and motivate employees Reduce costs and risks Increase turnover Change your business model, towards a functionality offer and not only a product delivery

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Examples & case studies

Lesson #1: If things can go wrong, they will

Edward A Murthy, Jr 1949, so called "Murthy's law"

Impacts of sustainability risks

July 2006, Palm / Treo lose 120 million euros of its value in the stock exchange because some suppliers were not respecting the ROHS (Restriction of Hazardous Substances) directive

August 2007, Mattel has to recall millions of products and loses 27% of its value in the stock exchange beacause some products contain high quantities of plumb May 2007, an investment fund based in norway sells for 414 million euros of Walmart shares because child labour has been detected in some suppliers
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Example in the food industry : Accountability for environmental/social issues "from farm to fridge" ...

Business-to-Business

Food safety?

Business-to-Consumers

Lack of trust?

Child labour? Labour conditions? Dangerous materials?

Market place

Products

Information

Lack of tracability

Product Boycott?

Uncertainty in waste / recycling policies

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Lession # 2 : Bad press can be bad for your business

" You do anything in the world to gain a reputation. As soon as you have one, you seem to want to throw it away. It is silly of you, for there is only one thing in the world worse than being talked about, and that is not being talked about."
Oscar Wilde, The Picture of Dorian Gray, 1890

Purchasing Trends - Change in Consumers attitudes?

Before Sept.11 Would you switch brands at equal quality to support a cause? Is a companys commitment to causes important when you decide what to buy or where to shop? Is a companys commitment to causes important when you decide where to work? Do you plan to purchase a gift that supports a cause? Is a companys commitment to causes important when you decide in which funds to invest? 54% After Sept.11 81%

52%

77%

48%

76%

56% 40%

64% 63%

Source: 2001 Cone/Roper Corporate Citizenship Study in the US

Event the renown brand can face brand attacks

French| Newspaper Le Monde Frontpage cartoon on April 21, 2001 :

"I do boycott DANONE"

"Hey boss, we have a small problem "

Source : www.jeboycottdanone.fr (website closed by court decision on 14 mai 2001

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Risk on brand value and shareholder value

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Lesson #3 : "...I'm sure financial markets don't care about these things"

Dow Jones Sustainability Index (DJSGI) Outperforms the Dow Jones Industrial Index
Launched in August 1999 by Swiss-based SAM Performance Group and Dow Jones First global index tracking performance of Top 10 percent of the worlds leading sustainability companies

DJSI World USD Performance and Risk (I)

December 1993 - December 2003, USD, Price Index DJSI World / DJGI World: Correlation: DJSI Volatility:
330

0.9641 16.17%

Tracking Error: 4.34% DJGI Volatility: 14.94%

280

230

101%
180

68%

130

80 12/93 6/94 12/94 6/95 12/95 6/96 12/96 6/97 12/97 6/98 12/98 6/99 12/99 6/00 12/00 6/01 12/01 6/02 12/02 6/03 12/03

DJSI World (in USD)

DJGI World (in USD)

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Sustainability = Stakeholder but also Shareholder Value

April 2009

MSCI World Index is a stock market index of all the developed markets

How are companies on the DJSI Index selected?

1. Does the company belong to the Dow Jones Global (DJGI) investable universe? 2. To which industry group does the company belong? 3. What is the companys score on the Corporate Sustainability Assessment? 4. How is the company ranked within its respective industry group? Is the company among the Top 10 percent in its industry peer group?

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DJSI Selection 2008

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How are companies on the DJSI Index selected?

Sustainability Assessment is composed of general and industryspecific sustainability criteria: - Sustainability policy and strategy - Management of sustainability opportunities - Industry group-specific sustainability opportunities - Strategic sustainability risks - Management of sustainability risks - Industry group-specific sustainability risks

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How are Companies on the Index selected? The DJSI Sustainability Assessment
Publicly available Information on the companies (e.g., press and media, stakeholder opinions, NGO campaigns) Assessment of companies policies and reports based on company-provided documents and contacts (e.g., Annual and EH&S reports, company website) Twenty-page questionnaire sent out by SAM to companies on the Dow Jones General Index
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Sustainability Assessment criteria Automotive 2007

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Sustainability Assessment 2007 - Automotive

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Does it pay to care about Sustainability ? Some views from investors and academics Close to US$6bn in DJSI-based investment vehicles Attract long-term investors Reduced volatility of share prices Reduced cost of capital

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Does it really pay to care about Sustainability? At least some investors take their chances

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Lesson # 4 : "...Financial markets do care about these things"

Even the strongest brands can crumble

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Coca-Cola and Food Safety

WALL STREET 5 June 1999 : 70$ 21 June1999 : 61$

- 13%

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Impact of major crisis on company stock-price (%)

3 months later Group Market Seveso (Juillet 76) Hoffmann - La Roche 1 year later Group Market

-15

-8

-13

Bhopal (Dc. 84) Union Carbide

-16

+10

+14

+23

Pollution du Rhin (Nov. 86) Sandoz

-12

+2

-5

+6

April 2009

Lesson # 5 : "...it is also about creating new market opportunities"

April 2009

New demand for products environmental and social friendly

Increasing demand for labelled products that guarantee

social and environmental performance: Fair Trade, Eco label (European flower)

Basic principes for Fair Trade

- Existence of a Fair Trade Labelling Organization (FLO) - Main products covered: cotton, coffee, cocoa, tea, etc - Basis principle is to pay more than the conventional market price to farmers located in developed countries (fair trade premium price) - Control over all the supply chain
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But false labels and/or green washing can be very dangerous for the respectability of the brand

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Lesson # 6 : "...and what about changing the business model ?"

April 2009

Environment constraints and new habits from consumers allow to think new business models
Development of an economy of functionality

Interface rent fitted carpet and do not sell them Michelin Fleet Solutions is a renting system of tyres for big company clients of Michelin, it means a higher profitability for Michelin by enlarging the life duration of the tyres and savings for the clients by reducing fuel consumption and taking care of used tyres disposal
Development of a social business to answer the

demand of the base of the pyramid

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Grameen Danone Food

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Lesson # 7 :comunicate on your CSR programmes is not about telling a nice story but facing critical issues in a transparent manner"
April 2009

External communication on CSR aspects is structured through standards

CSR reporting rules are more and more mature and evolve

quickly Version 3 of the Global Reporting Initiative (GRI) 940 companies worlwide at the end of 2008 AA 1000 (Accountability) UN Global Compact Communication on Progress (COP)
Best practices in CSR reports: engage stakeholders / define their

needs, focus on main issues, set objectives and show results, develop a set of coherent indicators and explain trends in your performance, speak about what is going wrong also, use opinion of external stakeholders to progress (experts, NGOs, etc)
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Now its over to you

Strategic management for the European Agro Company

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Role-play: Engaging stakeholders is not always an easy task Group 1: "Greedman & Co" Group 2: "NGO GreenFeast" Group 3: "Greedman shareholders"

Discussion, Lessons Learned & Take-Away

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Some key issues

Does the company actively engage dialogue with stakeholders ? Is the company's management prepared to respond to critics? What are the risks associated with the companys brandname ? How can a company protect the brand name? Does the company manage properly it's supply chain partners? Are social or ethical values an important part the company's brandname and are corporate codes of conduct in line with these values? Does the company use green / social or ethical marketing? Does the company face brand attacks or product boycotts? Is the company accused of a lack of transparency on environmental, social, or ethical issues?

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Key learnings: Corporate Social Responsibility CSR is voluntary in the EU It is embedded in the business culture Not a mandatory requirement thus no public enforcement mechanism Enforcement through stakeholders: pressure groups and market demand (e.g., financial markets). Ability to dialogue with stakeholders is key: understand their concerns, Pressure on companies to become more transparent and more accountable Two different strategies prevail: mitigating risks (avoid the worst) and seeking opportunity Leading companies integrated in their business model and find it adds value. April 2009
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Feedback session engaging with stakeholders is not always an easy task.: recap of instructions for each group Group 1: Greedman & Co management Group 2: Environmental NGO GreenFeast Group 3 : Shareholders of Greedman & Co - Employees - Former Greedman & Co employee, US based, retired - Institutional investor (US based) - Financial analyst - Housewife

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Contact

Clment Lefevre
PricewaterhouseCoopers 63 rue de Villiers 92208 Neuilly-sur-Seine France tel +33 1 56 57 89 78 fax +33 1 56 57 16 36 e-mail clement.lefevre.@fr.pwc.com www.pwcglobal.com/sustainability

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