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© Deloitte & ToucheWeidekampsgade 62300 Copenhagen VDenmark
Tel.: +45 (0) 33 76 32 39
Fax: +45 (0) 33 76 39 40
DeloitteSustainability Value Methodology
Copenhagen, 28 June 2006Preben SoerensenSam Vaseghi
Seite 2 © 9/27/2005 Deloitte & Touche
Leading companies understand that there is not always a trade-off between Shareholder & Stakeholder value
Create Sustainable
Value
Create pure Economic Value At the expense of environmental and
social value
DestroyValue
Stakeholder Value:
Social &Environmental
Value
Positive
Negative
Shareholder Value: Economic Value PositiveNegative
Source: Adapted from Sustainable Value Partners
Create pure Environmental &
Social Value
At the expense of economic value
Our approach aims at maximizing the benefits of converging value drivers in order to create sustainable value for both shareholders and stakeholders.
Seite 3 © 9/27/2005 Deloitte & Touche
Strategic Planning for Sustainable Development
Our Sustainability service offerings span across all Stakeholder and Shareholder Value Drivers
S T
A K
E H
O L
D E
R
V A
L U
E
S H A R E H O L D E R V A L U E
RevenueRevenueGrowthGrowth
AssetAssetEfficiencyEfficiency ExpectationsExpectations
Reporting & Performance
Measurement
OperatingOperatingMarginMargin
Enterprise Operational Excellence
Environment, Health and
Safety
Human Capital Management &
Employee Productivity
Disability & Work
Attendance Management
Corporate Governance & Transparency
Mate
rial
Mate
rial
Sou
rcin
g
Sou
rcin
g
Pro
du
cti
on
P
rod
ucti
on
Effi
cie
ncy
Effi
cie
ncy
Op
era
tion
al
Op
era
tion
al
Imp
act
Im
pact
P
rod
ucts
&
Pro
du
cts
&
Serv
ices
Serv
ices
Seite 4 © 9/27/2005 Deloitte & Touche
Our Sustainability service offerings span across all Stakeholder and Shareholder Value Drivers
S T
A K
E H
O L
D E
R
V A
L U
E
S H A R E H O L D E R V A L U E
RevenueRevenueGrowthGrowth
AssetAssetEfficiencyEfficiency ExpectationsExpectationsOperatingOperating
MarginMargin
Mate
rial
Mate
rial
Sou
rcin
g
Sou
rcin
g
Pro
du
cti
on
P
rod
ucti
on
Effi
cie
ncy
Effi
cie
ncy
Op
era
tion
al
Op
era
tion
al
Imp
act
Im
pact
P
rod
ucts
&
Pro
du
cts
&
Serv
ices
Serv
ices
1. Map Stakeholders’ Values1. Map Stakeholders’ Values 4. Map Shareholder Value4. Map Shareholder Value
2. Define Sustainability Issues2. Define Sustainability Issues 3. Design Business Case3. Design Business Case
Seite 5 © 9/27/2005 Deloitte & Touche
The Sustainability Value Methodology
1. Map Stakeholders’ Values1. Map Stakeholders’ Values 4. Map Shareholder Value4. Map Shareholder Value
•Identify/reassess and characterize stakeholders• Proactively identify/reassess stakeholder expectations•…
•Identify/reassess and characterize stakeholders• Proactively identify/reassess stakeholder expectations•…
2. Define Sustainability Issues2. Define Sustainability Issues
• Define/Refine key issues from stakeholder perspective• Translate definition of issues into shareholder perspective•…
• Define/Refine key issues from stakeholder perspective• Translate definition of issues into shareholder perspective•…
3. Design Business Case3. Design Business Case
• Track via ValueMap • Assess Risks and Opportunities• Design appropriate business cases by ValueMap•…
• Track via ValueMap • Assess Risks and Opportunities• Design appropriate business cases by ValueMap•…
• Apply ValueMap to map value from business cases• Apply ValuePrint to evaluate/assess business cases•…
• Apply ValueMap to map value from business cases• Apply ValuePrint to evaluate/assess business cases•…
Seite 6 © 9/27/2005 Deloitte & Touche
First StepMap Stakeholders’ Values and Define Sustainabilty Issues
S T
A K
E H
O L
D E
R
V A
L U
E
S H A R E H O L D E R V A L U E
RevenueRevenueGrowthGrowth
AssetAssetEfficiencyEfficiency ExpectationsExpectationsOperatingOperating
MarginMargin
Mate
rial
Mate
rial
Sou
rcin
g
Sou
rcin
g
Pro
du
cti
on
P
rod
ucti
on
Effi
cie
ncy
Effi
cie
ncy
Op
era
tion
al
Op
era
tion
al
Imp
act
Im
pact
P
rod
ucts
&
Pro
du
cts
&
Serv
ices
Serv
ices
1. Map Stakeholders’ Values1. Map Stakeholders’ Values 4. Map Shareholder Value4. Map Shareholder Value
2. Define Sustainability Issues2. Define Sustainability Issues 3. Design Business Case3. Design Business Case
Seite 7 © 9/27/2005 Deloitte & Touche
Deloitte Generic Catalogue of Sustainability Issues
Global trend:
1. Changing demographics and the emergence of new consumer and labour markets.
2. Boosting innovation for efficiency and reduced impact on environmental and climate systems.
3. Preserving the natural resource base.
4. Doing business in a globalized, interconnected economy.
5. Earning the license to operate.
6. Changing geopolitical risk landscapes.
Seite 8 © 9/27/2005 Deloitte & Touche
Deloitte Generic Catalogue of Sustainability Issues
Global trend:
1. Changing demographics and the emergence of new consumer and labour markets.
2. Boosting innovation for efficiency and reduced impact on environmental and climate systems.
3. Preserving the natural resource base.
4. Doing business in a globalized, interconnected economy.
5. Earning the license to operate.
6. Changing geopolitical risk landscapes.
Environmental Issues New markets for environment-friendly
and energy-efficient products in emerging economies
Social Issues New markets for emerging consumer
needs in emerging economies Workplace health and safety* Labour standards* Human rights issues*
Corporate governance issues Complying with local laws, while
upholding global corporate governance and responsibility standards
Seite 9 © 9/27/2005 Deloitte & Touche
Deloitte Generic Catalogue of Sustainability Issues
Global trend:
1. Changing demographics and the emergence of new consumer and labour markets.
2. Boosting innovation for efficiency and reduced impact on environmental and climate systems.
3. Preserving the natural resource base.
4. Doing business in a globalized, interconnected economy.
5. Earning the license to operate.
6. Changing geopolitical risk landscapes.
Environmental Issues Carbon constraints (climate change) Environmental liabilities Pollution prevention Reducing emissions and resource use New markets for environment-friendly
and energy-efficient products
Seite 10 © 9/27/2005 Deloitte & Touche
Deloitte Generic Catalogue of Sustainability Issues
Global trend:
1. Changing demographics and the emergence of new consumer and labour markets.
2. Boosting innovation for efficiency and reduced impact on environmental and climate systems.
3. Preserving the natural resource base.
4. Doing business in a globalized, interconnected economy.
5. Earning the license to operate.
6. Changing geopolitical risk landscapes.
Environmental Issues Product stewardship Waste and toxic release management Accident and spills management Efforts to incorporate external costs
in planning and accounting
Seite 11 © 9/27/2005 Deloitte & Touche
Deloitte Generic Catalogue of Sustainability Issues
Global trend:
1. Changing demographics and the emergence of new consumer and labour markets.
2. Boosting innovation for efficiency and reduced impact on environmental and climate systems.
3. Preserving the natural resource base.
4. Doing business in a globalized, interconnected economy.
5. Earning the license to operate.
6. Changing geopolitical risk landscapes.
Social Issues HR management (including
compensation, training, etc.) Attracting and retaining employees Workforce diversity and equal
opportunities
Seite 12 © 9/27/2005 Deloitte & Touche
Deloitte Generic Catalogue of Sustainability Issues
Global trend:
1. Changing demographics and the emergence of new consumer and labour markets.
2. Boosting innovation for efficiency and reduced impact on environmental and climate systems.
3. Preserving the natural resource base.
4. Doing business in a globalized, interconnected economy.
5. Earning the license to operate.
6. Changing geopolitical risk landscapes.
Environmental Issues Environmental governance and
management systems Accidents and spills management
Social Issues Community and NGO relations Government relations Investor relations Management of crisis situations*
Corporate governance issues Board structure and accountability Accounting and disclosure practices Audit committee structure and
independence of auditors Executive compensation Management of corruption and bribery
instances Business ethics policies Corporate citizenship engagement
Seite 13 © 9/27/2005 Deloitte & Touche
Deloitte Generic Catalogue of Sustainability Issues
Global trend:
1. Changing demographics and the emergence of new consumer and labour markets.
2. Boosting innovation for efficiency and reduced impact on environmental and climate systems.
3. Preserving the natural resource base.
4. Doing business in a globalized, interconnected economy.
5. Earning the license to operate.
6. Changing geopolitical risk landscapes.
Social Issues Human rights, community and
government relations in politically unstable countries/conflict zones
Corporate governance issues Policies and systems to manage risk
in politically unstable countries/conflict zones
Seite 14 © 9/27/2005 Deloitte & Touche
Aligned with the Strategic Planning for Sustainable Development
Example: Identifying together with youyour relevant and material Sustainability Issuesaligned with your corporate strategy
Environmental IssuesEnvironmental and safety management of production processesDeclining capacity of eco-systems to sustain intensive harvesting and production
methodsBusiness in a carbon-constrained world
Social IssuesChanging consumer preferences, new needs in emerging marketsManagement of global workforceLabour practices and HR managementCommunity relations, corporate citizenship engagement
Corporate Governance IssuesCorporate governance frameworkTransparency in relation to sourcing and production methodsGovernment relations, business ethics
Seite 15 © 9/27/2005 Deloitte & Touche
Second StepDesign Business Case and map shareholder Value
S T
A K
E H
O L
D E
R
V A
L U
E
S H A R E H O L D E R V A L U E
RevenueRevenueGrowthGrowth
AssetAssetEfficiencyEfficiency ExpectationsExpectationsOperatingOperating
MarginMargin
Mate
rial
Mate
rial
Sou
rcin
g
Sou
rcin
g
Pro
du
cti
on
P
rod
ucti
on
Effi
cie
ncy
Effi
cie
ncy
Op
era
tion
al
Op
era
tion
al
Imp
act
Im
pact
P
rod
ucts
&
Pro
du
cts
&
Serv
ices
Serv
ices
1. Map Stakeholders’ Values1. Map Stakeholders’ Values 4. Map Shareholder Value4. Map Shareholder Value
2. Define Sustainability Issues2. Define Sustainability Issues 3. Design Business Case3. Design Business Case
€
Seite 16 © 9/27/2005 Deloitte & Touche
4. Map Shareholder Value4. Map Shareholder Value3. Design Business Case3. Design Business Case
Proposed value framework for integration of key stakeholder issues
Issue
Issue
Issue
Issue
Issue
Issue
StrategyPolicies
Management-Systems
Litigation and regulatory risksLitigation and
regulatory risks
Operational risksOperational risks
Reputation and brands
Reputation and brands
Operational efficiencyOperational efficiency
InnovationInnovation
Access to new /Existing marketsAccess to new /Existing markets
Access to knowledge and skills
Access to knowledge and skills
Access to ressourcesAccess to ressources
OthersOthers
Risk premiumsRisk premiums
CostsCosts
RevenuesRevenues
Other (tax, reinvestment
rates)
Other (tax, reinvestment
rates)
WACCWACC
Free cash flows
Free cash flows
Shareholder value
Shareholder value
Stakeholder value
Stakeholder value
Seite 17 © 9/27/2005 Deloitte & Touche
How to address Economic, Social and Environmental imperatives all together
Improve materials efficiency of production processes
• Design products that allow in-creased use of recycled materials: use procurement deals and partnerships to assure the quality and supply
• Return wastes to process for recycling, reuse or remanufacturing reducing the quantity of materials purchased and the cost of disposal
Improve Production Efficiency
Use
of
Recy
cled
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rials
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Seite 18 © 9/27/2005 Deloitte & Touche
•Rationalize and/or realign product development efforts•Increase emphasis on modular, extensible, scalable designs•Improve prototyping, piloting and testing processes•Ensure the use of recyclable packaging•Improve recovery, reuse, and recycling of packaging•Manage the entire product life cycle / products sold that are reclaimable at the end of the products’ life (recycle or reuse of the product materials or components)
Improve Development & Production
efficiency
Impro
ve P
roduct
&
Serv
ices
Cycl
e
How to address Economic, Social and Environmental Imperatives all together to create Shareholder Value
Seite 19 © 9/27/2005 Deloitte & Touche
Shareholder Value Tracking of Sustainability Issues
Even if aligned with the objectives, these projects may double count benefits
Many issues appear to have negative financial return
The company objective is to increase Grow Constituent Base by 10%
Add sensitivity analysis, if available
However 70% of the portfolio is focused on Asset Efficiency
Seite 20 © 9/27/2005 Deloitte & Touche
Design Business Case
The ValuePrint Approach focuses on how to develop a business case using ValuePrint. In the broader context of Deloitte’s commitment to provide professional services that deliver measurable business value, the Path to Value method represents an approach to managing the engagement life cycle to target, identify, and deliver value-creating opportunities for our clients. The ValuePrint Approach is included in the Path to Value method
The ValuePrint Approach
Assess Client Strategies and
Issues**
Develop Business Case Scope Statement
Conduct Business Case Financial
Analysis
Develop Business Case Workplan
Prepare Business Case Executive
Report
Monitor Result
1 2 3 4
Initiation
Monitoring
€
Seite 21 © 9/27/2005 Deloitte & Touche
Components of The Value Methodology
Enterprise Value Map: provides a simple conceptual framework that relates client issues and activities to shareholder value; a powerful visual interface for discussing how actions and strategies align against value drivers.
ValueAnalytics: provides user friendly but rigorous financial analysis, both over time and compared to client competitors, across key value drivers.
ValueLink: is an on-line portal which provides access to firm thought leadership and intellectual property using the Enterprise Value Map framework as the primary navigation approach; helps match Deloitte capabilities to client issues
ValuePrint: is a business case development tool which aligns to the Enterprise Value Map structure; financial impact templates (FIT’s) reside in ValueLink and are assembled into consolidated project business case
MapIt (part of Portfolio Landscape): is a simple tool that provides a quick portfolio view of projects (ours or others) and illustrates how they align against client issues and strategy as they are mapped onto the Enterprise Value Map.
Portfolio Landscape: is a service offering and approach that provides a rigorous portfolio view of a companies programs/projects, relating them back to the Enterprise Value Map, showing how they align against company strategy, needs and priorities.
The Value Initiative e-Learning CDROM: is a multi-media learning program which provides more detailed awareness and learning related to the use of The Value Initiative enablers
Value Based Billing: is a means of establishing a value-based pricing and deal structure on selected projects
Value Tracking: is a means of identifying, tracking and communicating value delivered to the client
Seite 22 © 9/27/2005 Deloitte & Touche
The Path to Value
Seite 23 © 9/27/2005 Deloitte & Touche