Responsible Electronics 2013: CSR Rankings

The Electronic Industry Citizenship Coalition

Welcomes you to

Sponsored by

Exhibitors

CSR Rankings & Ratings The Investment Community

Annie WhiteSenior Sustainability Lead

About Sustainalytics

3

We help clients turn vast quantities of environmental, social and governance information into insightful, value-added analysis to enable more informed

investment and business decisions.

ESG Rating Reports

4

Best-of-sector approach

42 industries

60 to 100 core & industry-

specific indicators

Policies, management

systems, key performance

metrics

Controversial incidents

Research Themes

5

Environment(56)

Operations (26)

Supply chain (12)

Products (18)

Growth in Responsible Investing

Strong MomentumGrowth in UN PRI Signatories from 2010-2013

• As of March 2013, 1172 signatories in 53 countries, increase of 110% since 2009

• U.S. has the highest absolute number of signatories (164) with 39% increase

• Germany saw the strongest growth in signatories (225%)

Source: UNPRI Annual Reports, Progress Reports 2010-2012, www.unpri.org

US UK

Australi

a

France

Netherl

ands

Brazil

Switz

erlan

d

Canad

a

South Afri

ca

Denmark

German

y

Finlan

d0

20

40

60

80

100

120

140

160

180

2013201220112010

What is Driving RI Markets?

Regulatory risk (legislation, treaties, conventions)

Widen the client base

Materiality assessments

Corporates Willingness to Engage

• Companies covered by Sustainalytics have increased engagement with analysts & clients by 20-30% over the past 5 years

• TRIGGERS • Pressure from active investors• Sustainability ratings and rankings • Media coverage

• RESULTS• Companies are broadening their understanding of stakeholder groups • Improving what they measure and how they talk about it.

Emphasizing Risk & Preparedness

10

• Where does the company operate?• In what industry?Exposure

• Evaluating disclosure, policies, management systemsPreparedness

• Absolute vs. relative vs. ‘context based’ key performance indicators

• Controversies track record or ‘events’

Impact & Progress

11

Assessing ESG Risk Exposure

Unmanaged Risks

Unmanaged

ESG Risks

“ESG SHOCK

”

Opportunities

Q Is the company aware of its unmanaged exposure to ESG shocks?

Q Is the company’s ESG management a proxy for its overall management?

Q Is the company’s ESG strategy a positive business driver?

Annie WhiteSenior Sustainability [email protected]

Controversy Assessment

16

What is the impact of the incident?

How exceptional is it within the industry?

How direct is the company’s involvement?

Is it an isolated incident or part of a trend?

Has the company responded to address consequences

and prevent future occurrences?


Welcomes you to

Sponsored by

Exhibitors

Responsible Electronics 2013

Dara O’RourkeUC Berkeley and GoodGuide

iRatings, InstaRankings and Consumer Demands for Electronics Transparency

Consumers and Electronics• More questions than ever before about Electronics

• Where did my phone/tablet/laptop come from?

• What’s in it?

• Is it safe?

• Were workers treated fairly?

• Are there Conflict Minerals in my phone?

• What about Pollution? Toxics?

• E-Waste?

• Radiation?

Ratings/Rankings• Greenpeace – Guide to Greener Electronics

• Electronics TakeBack Campaign Scorecard

• Raise Hope – Conflict Minerals Ranking

• IPE Rankings of IT Firms in China

• EPEAT

• Energy Star

• AT&T – Eco-Rating

• Sprint – Scorecard

• O2 – Eco Ratings

• Walmart

• Best Buy

GoodGuide Ratings

32

Product & Company Ratings• GoodGuide uses “ontologies” to

define the issues that matter most• Issue frameworks are based on

current standards of practice in the relevant scientific domain:– Health: Modeled on the standard

output of chemical risk assessments or nutritional evaluations

– Environment: Modeled on the standard output of life cycle assessments

– Society: Modeled on standardized reporting on corporate social responsibility, as defined by the Global Reporting Initiative

• GoodGuide tracks over 1,500 indicators that provide evidence about how a product or company performs on an issue.

GoodGuide’s Ontology

Health Ontology

Environment OntologyRatings are done primarily at the company-level

Public information about the impacts of a company's policies and manufacturing operations almost never

have product-level resolution

Some product categories support environmental scores at the product-level, based on ascertainable product attributes like material choice, recyclability,

energy efficiency, etc.

If both product and company-level E scores are available, they are combined using weights that vary

by product category, based on degree to which product-level scores address overall impacts in that

category

Availability of indicator data varies significantly between large and small companies

• Coverage by third-party or regulatory databases (e.g., Toxics Release Inventory)

Social OntologyRatings are done at the company-level It is virtually impossible to acquire information about the impacts

a specific product has on social attributes such as worker rights, etc.

A few product categories support social impact scores at the product-level (e.g., coffee, because of

social focus of third-party certifications like Fair Trade)

Availability of indicator data varies significantly between public and private companies

• Coverage by third-party or regulatory databases• Maturity of governance structures

• Availability of resources to fund benefits, philanthropy, etc.

• Sophistication of policy positions or performance metrics

Data on Electronics• Hazardous Substances

• Environmentally Preferable Materials

• Sustainable Manufacturing Practices

• Device and Charger Energy Efficiency

• End-of-Life Management and Recycling Rates

• Socially Responsible Manufacturing

• Conflict Minerals

• Potential Health Issues (e.g., SAR)

• Device Certifications (such as ULE 110)

Data Sources• 1500 Data Sources

• Six Main Types:• Manufacturer Self-Disclosure

• Government Data

• Socially Responsible Investment Research Firms

• Academic Data and LCA Models

• NGOs

• Media (track last two trailing years of controversies)

GoodGuide Platform

ApplicationsAPIs

Company, Product and Attribute DatabaseInformatics Tools: Entity Resolution & Data Acquisition

Science Tools: Evaluative Frameworks & Ratings Engine

Business-to-Business ServicesConsumer Services

Retailer Screening/Rating Tools• Help retailers define and implement customized

sustainability standards

• Collect the data needed from a supply chain to implement the standard

• Integrate data into decision support tools

• Address full range of attributes important for sourcing

• Distribute sustainability and performance information to purchasers to create market demand for improving supply chains

Landing Page for Manufacturer

Product Profiles

Product Components

Summary

Table View Ratings

Summary 2

What’s Next?• Need to know what matters “scientifically”• And what matters to consumers• Need deep visibility into supply chains• And processes to communicate to stakeholders• Emerging Issues…

• Water• Alternatives Assessment• Labor Conditions• Production Model

Changing Processes and Incentives• Deeper Transparency and Smarter Monitoring

– Tracking Materials, Components, Modules, Workers• Root Cause Analysis

– Evaluating Pressures/Constraints in Supply Chain• Collaborative Problem Solving

– Real Stakeholder Participation• New Incentives to Find and Solve Problems

– Real Data Systems and Feedback Loops• Continuous, Rapid Improvement• Big N Predictive Analytics + Deep Dive Problem

Solving

Transparency and CSR Ratings• Threat and Opportunity• Need to Incentivize disclosure in supply chain• Use new information to identify opportunities

– Hot spots and hot button issues– Potential risks in supply chain– Potential opportunities for product/process

changes• Participate in an Open Conversation

– Learn what stakeholders really care about– Admit challenges, work towards better products

Moving Forward• Electronics Industry is Uniquely Positioned• To Reinvent/Redesign Products• To Influence Manufacturing Systems

– Ethical sourcing and purchasing• To Redesign Business Models

– E.g., Leasing – take-back & upgrades

• Collaborate across stakeholders• Build Platforms, Data, Apps for Supply Chain

Management and Problem Solving

Transparency is Here...


Welcomes you to

Sponsored by

Exhibitors

Are You a Leader of Clean Capitalism?The Secrets of CSR Rankings

Oct. 2, 2013

Landscape

56

▪ More than 11% ($3.31 trillion) of assets under professional management in the U.S. are invested with social responsibility in mind.

“More than 50 distinct ratingmethodologies for assessingenvironmental and social performancehave been developed, more thana third of them since 2005.”-

Just-released McGill University and University of

California, Los Angeles, study.

Landscape

57

▪ A handful of the most popular ratings/rankings are picked up in the business media, and some are produced by the business media – i.e. Dow Jones Sustainability Index.

▪ Those corporations that rank high tend to highlight this as a “badge of honor” in their own marketing and communications to media, customers and investors.

The addition of sustainability indicators into Bloomberg terminals is a sign that assessing companies on ESG factors is going mainstream. It is becoming easier to access timely and accurate ESG measures, and such measures are expected to increase in number.

As more data becomes available and easily accessible, it is increasingly difficult for companies to portray their token accomplishments as meaningful – i.e. more than just green PR.

Differences Between Methodologies

58

Transparent vs. Opaque (“Black Box”)Qualitative vs. QuantitativeNarrow vs. Broad (e.g. just carbon versus blend of ESG KPI)

Publicly accessible data vs. private surveys

Rankings can differ widely on how they screen companies & weigh KPIs.

The Corporate Knights approach

59

▪ Mission: Information empowering markets to foster a better world

▪ Structure: Toronto-based, employee-owned B Corp, founded in 2002. CK is a signatory to the UN Principles for Responsible Investment.

▪ CK has three main segments:

– Corporate Knights Capital▫ Investment advisory services for asset owners and managers▫ External research projects (e.g. Global 100® and Sustainable

Stock Exchanges)

– Corporate Knights – “Magazine of the Year” 2013▫ World's largest circulation magazine focused on sustainability▫ Distributed in The Washington Post and Globe and Mail▫ Reaches 130,000 of the world’s most influential business

and political decision-makers

– Council for Clean Capitalism▫ The council has ten (10) current members▫ CEO-supported group catalyzing smart and efficient public policy▫ Engages with leading public policy-makers

60

Corporate Knights is globally recognized as a leader in measuring the financial value of sustainability

▪ Member of Advisory Council of Sustainability Accounting Standards Board (SASB)

▪ Participating in Intergovernmental Working Group of Experts on International Standards of Accounting and Reporting (ISAR)

▪ Official respondent at Principles for Responsible Investment (PRI) academic conferences

▪ Panelist at Global Reporting Initiative (GRI) meetings

"Corporate Knights is one of the most advanced practitioners seeking ESG correlation to core business metrics such as revenue growth, cost reduction, and profitability.“-Michael Porter, Harvard Business School

"I'm impressed with the rigor and methodology used by Corporate Knights.”-Marc Gunther, Fortune Magazine

"Corporate Knights is one of the most advanced practitioners seeking ESG correlation to core business metrics such as revenue growth, cost reduction, and profitability.“-Michael Porter, Harvard Business School

"I'm impressed with the rigor and methodology used by Corporate Knights.”-Marc Gunther, Fortune Magazine

61

Corporate Knights’ flagship performance ranking:The Global 100 Most Sustainable Corporations

▪ The Global 100 recognizes companies that are best-positioned to thrive in a ‘clean capitalism’ economy. Ranking unveiled annually at World Economic Forum in Davos.

▪ Measures companies’ exposure to a series of mega-trends that are redefining economic growth in the 21st century:

– Growing resource scarcity

– Rising levels of generalized environmental stress

– Increasing health & safety standards

– The systematic transition to a ‘knowledge economy’

– Heightening stakeholder expectations for corporate disclosure

Every industry is impacted by above trends.

Clean capitalism is an economic system in which prices incorporate social, economic and ecological benefits and costs, and actors know the full impacts of their marketplace actions

Overview of Global 100 ranking process

62

All companies that had a market capitalization in excess of $US 2 billion

The Global 100

Selection

Screening

Starting Universe

Mid, large, and mega-cap public companies

Description Details

Companies that pass all four screens constitute the Global 100 Shortlist

Companies screened for :– Sustainability disclosure

practices– Financial health– Product categories– Sanctions

Companies in the shortlisted are contacted to confirm and supplement the data we have collected

Companies only scored on the ‘priority KPIs’ for their respective industry group

Companies in the Global 100 Shortlist are scored on up to 12 KPIs, covering resource, employee, and financial management

Each GICS sector is assigned a fixed number of slots in the final Global 100 list, (based on each sector’s contribution to the total market cap of the Global 100’s financial benchmark, the MSCI ACWI).

The Global 100 is populated

Consists of the top performing companies within each industry group

The Global 100 KPIs: Link to sustainability performance

63

KPI Methodology Link to sustainability performance

Energy Productivity Revenue / energy use Rising energy prices

Carbon Productivity Revenue / GHG emissions Regulations towards curbing GHG emissions. Costs from cap-and-trade/carbon tax

Water Productivity Revenue / water use Environmental concern for scarce freshwater resources

Waste Productivity Revenue / waste produced Increasing resources costs and scarcity

Innovation Capacity R&D expenses / revenueDevelopment of new and better products and services with increased efficiency

Percentage Tax Paid Cash tax / EBITDA Fulfillment of social contract

CEO-Average Worker Pay

CEO compensation / average employee compensation

Motivating employees

Pension Fund StatusUnfunded liabilities / market capitalization

Responsibility towards services rendered by retired employees

Safety Performance Fatalities and lost time incidents Ethical responsibility and regulations towards employee health and safety

Employee TurnoverNumber of departures / average total employees

Preservation of human capital

Leadership DiversityFemale representation on board of directors and executive team

Equality of opportunity and talent

Clean Capitalism Pay Link

Senior executive pay linked to clean capitalism targets

Integration of responsible outcomes into corporate strategy

Resource management

Financial management

Employee management

Indicators are different for each industry group “Priority” = 10% Threshold

64

Energy Produc-

tivity

Carbon Produc-

tivity

Water Produc-

tivity

Waste Produc-

tivityInnovation Capacity

Employee Turnover

Safety Perfor-mance

CEO-Average

Worker Pay

Pension Fund

Status % Tax Paid

Leader-ship

Diversity

Clean Capitalism Pay Link Total

Type of indicator Priority Priority Priority Priority Priority Priority Priority Priority Universal Universal Universal Universal

Automobiles & Components P P P P P P P P P P P P 12

Banks P P P P P P P P P P 10

Capital Goods P P P P P P P P P P P P 12

Commercial & Prof. Services P P P P P P P P P P 10

Consumer Durables & Apparel

P P P P P P P P P P 10

Consumer Services P P P P P P P P P 9

Diversified Financials P P P P P P P P P P 10

Energy P P P P P P P P P P P P 12

Food & Staples Retailing P P P P P P P P P P P 11

Food Beverage & Tobacco P P P P P P P P P P P P 12

Health Care Equip & Serv. P P P P P P P P P P 10

Household & Personal Products

P P P P P P P P P P P P 12

Insurance P P P P P P P P P 9

Materials P P P P P P P P P P P P 12

Media P P P P P P P P P P P 11

Pharma & Biotech P P P P P P P P P P P P 12

Real Estate P P P P P P P P P P 10

Retailing P P P P P P 6

Semiconductors P P P P P P P P P P P P 12

Software & Services P P P P P P P P 8

Technology Hardware & Equip.

P P P P P P P P P P 10

Telecommunication Services P P P P P P P P P P P P 12

Transportation P P P P P P P P P P P P 12

Utilities P P P P P P P P P P P P 12

Disclosure of core sustainability indicators is growing

65

2007 2008 2009 2010 20110

500

1,000

1,500

2,000

2,500

Energy Water Waste GHGs Employee turnover Lost-time injury rate

Num

ber

of p

ubli

cly

trad

ed c

ompa

nies

Electronics Industry

66

Captured by three industries within the Global Industry Classification Standard (GICS):

-----------------------------------------

Semiconductors and Equipment

Technology Hardware and Equipment

Consumer Durables and Apparel (which includes consumer electronics)

Semiconductors & Equipment Companies

67

TOP RANKED (2013 Global 100 Universe)

1. ASML Holding NV (Netherlands)

Disclosed 10 of 12 KPIs.

Strengths include perfect energy score, top quartile carbon score, top quartile water score, top quartile waste score, top quartile employee turnover score.

2. Intel Corp (United States)


Strengths include top quartile tax score, top quartile (almost perfect) leadership diversity score, existence of a clean capitalism pay link.

3. Q-Cells SE (Germany)

Disclosed 8 of 12 KPIs

Strengths include top quartile safety score

Semiconductors and Equipment Companies

68

BOTTOM RANKED (2013 Global 100 Universe)

1. Orise Technology Co Ltd (Taiwan) – 99th

2. Sanan Optoelectronics Co Ltd (China) – 98th

3. Dongbu HiTek Co Ltd (South Korea) – 97th

Each company disclosed at most 5 of 12 KPIs

Disclosure Rates of Voluntary KPIs for Semiconductors and Equipment Companies

69

Innovation Capacity (96%) Energy (18%) Water (18%) Waste (18%) Employee Turnover (12%) Carbon (10%) CEO-Average Worker Pay (6%) Safety (1%)

Technology Hardware & Equipment Companies

70


1. Cisco Systems Inc (United States)

Disclosed 9 of 10 Priority KPIs.

Strengths include existence of a clean capitalism pay link and a top quartile innovation capacity score.

2. Apple Inc (United States)


Strengths include top quartile energy score, top quartile carbon score, top quartile water score, perfect waste score.

3. Alcatel-Lucent (France)


Strengths include top quartile leadership diversity score, perfect pension score (more than fully funded pension plan), top quartile innovation capacity score.

Technology Hardware & Equipment Companies

71


1. China TeleTech Holding Inc (China) – 259th

2. Telling Telecommunications Holding Co (China) – 259th

3. Minal Industries Ltd. (India) – 259th


Disclosure Rates of Voluntary KPIs forTechnology Hardware & Equipment Companies

72

Innovation Capacity (93%) Waste (18%) Water (18%) Energy (16%) Carbon (12%) CEO-Average Worker Pay (5%)

Consumer Electronics Companies (GICS sub-industry)

73


1. Casio Computer Co Ltd (Japan)

Disclosed 9 of the 10 Priority KPIs

Strengths include top quartile (vs. other Consumer Durables & Apparel companies) waste score, top quartile taxes paid score, and top quartile innovation capacity score.

2. Harman International Industries (United States)


Strengths include top innovation capacity score.

3. Sharp Corp (Japan)


Strengths include a perfect waste score and a top quartile innovation capacity score.

Consumer Electronics Companies (GICS sub-industry)

74


1. China!

2. China!

3. China!


Disclosure Rates of Voluntary KPIs forConsumer Electronics Companies

75

Innovation Capacity (81%) Energy (23%) Carbon (19%) Waste (15%) Water (15%) CEO-Average Worker Pay (0%)

Analyzing corporate sustainability disclosures: The role of reporting companies

76

Companies which do not report their sustainability performance data may miss out on an opportunity to be recognized as a sustainability leader.

Companies are encouraged to:

1. Disclose sustainability data to the market in a timely manner. E.g. Australian and Japanese companies were found to be among the fastest to come to market with their sustainability performance data.

2. Ensure that sustainability data aggregators such as Bloomberg have their data on their platform

3. Report sustainability data points in accordance with a globally accepted reporting standards

4. Strive to report data points for 100% of a given company’s global operations.

5. Provide Sustainability contact for the company in the same way as contact details are provided for “Investor Relations.”

CK Ranker – “Kranker” mobile app

77

www.ckranker.com

CK Capital’s suite of Clean Cap® and Integrated Cap® indices help portfolio managers increase risk adjusted stock returns

78

▪ CK Capital uses a rules-based quantitative research process to identify sustainability and financial factors linked to risk adjusted stock returns for companies in each GICS Sector*.

▪ Clean Cap® indices use company performance on a basket of sustainability factors collectively predictive of same-sector alpha to tilt companies off of a mkt cap-weighted benchmark.

▪ Integrated Cap® indices reweight securities from a mkt-cap weighted benchmark using a combination of sustainability and financial factors collectively predictive of same-sector alpha.

© 2013 CK Capital - Proprietary and Confidential

Index type: Clean Cap® Integrated Cap®

Investment objective:

Outperform benchmark

Outperform benchmark

Approach: Tilting (each security’s index weight capped at +/- 20% from benchmark weight).

Each security in the benchmark is wholly re-weighted.

Factor Selection:

Sustainability Sustainability + fundamentals

Geographic coverage:

US, Canada, UK, Europe, Australia, Japan

Rebalance: Annually Monthly

Suitability: Passive investors focused on sustainability integration

Passive and active investors

* Global Industry Classification Standard (GICS).

CK Capital is the first research provider to integrate corporate sustainability analysis into an enhanced indexing strategy

79

▪ CK Capital’s suite of Clean Cap® and Integrated Cap® indices use sustainability and financial factors linked to alpha to offer investors superior risk adjusted returns.

© 2013 CK Capital - Proprietary and Confidential

Performance of the Integrated Cap ® US Index , the Clean Cap® US Index and the S&P 500*^

* As of August 31 , 2013, all figures are gross of fees.

Historical performance from 1-Jan-08 to 31-Dec-12

Live performance from 1-Jan-13

^S&P500 is the property of Standard and Poor’s, all data used was taken from publically available sources.

Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13$45

$65

$85

$105

$125

$145

$165

Integrated Cap US IndexClean Cap US IndexS&P 500

Va

lue

of

Inv

es

tme

nt

$158.23

$134.04

$126.14

Sustainability performance and research:What lies ahead?

80

Harmonization of sustainability reporting standards into one single and global set of acceptable standards in the same way as IFRSs are for financial reporting.

Reliance on audited data: the lack of auditing may limit the potential of sustainability data.

For rankings, transparency and understandability are key criteria for credibility.

Building legitimacy of rankings, for example through more stakeholder consultation.

Focus on exclusively quantitative and hence objective sustainability assessment methodologies.

Increasing convergence of sustainability research to respond to the needs of investor decision-making.

The Takeaway…

81

“As sophistication, transparency

and market interest in environmental (and social/governance)

performance increase, investors are likely to become increasingly judicious in deciding

which actions taken by a firm are truly substantive and which are pursued

symbolically.”

“Investment managers are likely to be better served by

thoroughly understanding the key advantages and

disadvantages of each rating methodology available to them,

and selecting from among them a set of indicators small enough to be manageable yet

large enough to capture a comprehensive array of non-

overlapping indicators.”

A couple of interesting paragraphs from the recent McGill/UoC(LA) study:

For more information

82

All inquiries can be directed to the Global 100 research team at [email protected]

We welcome feedback from all stakeholders

www.corporateknights.com

Twitter: @corporateknight

mailto:[email protected]

http://www.corporateknights.com/

http://twitter.com/corporateknight


Welcomes you to

Sponsored by

Exhibitors

Responsible Electronics 2013: CSR Rankings

Business

Transcript of Responsible Electronics 2013: CSR Rankings