36 NACD Directorship March/April 2012

EMC Corp., based in Hopkinton, Mass., is a global leader in providing information infrastructure and vir-tual infrastructure technologies, solutions and services. Its mission is to lead people and organizations on the journey to hybrid cloud computing. EMC’s more than 53,000 employees serve customers in over 80 countries and its network of suppliers and partners is distributed around the globe.

Sustainability is a cause célèbre these days, with a growing number of stakeholders voicing interest in learning more about company positions on envi‑ronmental and social matters. For some companies,

sustainability is a new concept; others have been engaged in addressing sustainability concerns for years.

Many of EMC’s sustainability initiatives have been in place since our early days—from incorpo‑rating energy efficiency measures in our facilities to encouraging a culture of volunteerism. Historically, these programs were typically driven by individuals or small groups in disparate functional areas. Now, EMC has evolved to adopt a more comprehensive, holistic approach to building a sustainable future by incorporating sustainability into our business strategy across the company. We have aligned our

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Sustainability and the BoardThe EMC Story

Case Study | Sustainability

By Kathrin Winkler and Rachel Lee

March/April 2012 www.directorship.com 37

efforts to a common set of goals and are pursuing them through cross‑functional collaboration and deeper engagement with our stakeholders and peers.

A key milestone in our journey was the publica‑tion in 2007 of EMC’s first sustainability report. The report provided a formal narrative of our sus‑tainability story, reflecting on the different dimen‑sions of our sustainability programs, activities and policies. Since then, these annual reports have helped us, our employees, customers and inves‑tors—indeed, all of our stakeholders—understand the challenges and the successes of EMC’s sustain‑ability program.

So what exactly is sustainability? What is the role of directors in this effort, and what are the benefits of sustainability reporting? In other words, why be green?

Defining Sustainability Sustainability can be defined as meeting the needs of the present without compromising the ability of future generations to meet their own needs. This is the definition offered a generation ago when a United Nations study group urged nations to em‑brace sustainable development in the broadest sense of the term, and published it in a landmark report titled Our Common Future. For corporations, this meant recognizing that how we conduct busi‑ness today has long‑term impacts on the future suc‑cess of our business and the world around us.

More recently, the Dow Jones Sustainability Index offered a different definition of corporate sustainability, describing it as “a business approach that creates long‑term shareholder value by em‑bracing opportunities and managing risks deriving from economic, environmental and social develop‑ments.” The DJSI definition recognizes that busi‑ness both impacts and depends on natural resources and on society, and that as a matter of good gover‑nance, corporations should leverage opportunities and mitigate business risks to achieve long‑term success.

At EMC, these principles come together in our four sustainability priorities:

■■ Reducing our impacts from energy consump‑tion, material use and waste

■■ Providing technologies and services to address some of the world’s challenges, such as energy, health care and delivery of government services

■■ Upholding the protection of human rights and investing in furthering education, innovation and inclusion for our employees and in communities around the world where they live and work

■■ Supporting EMC’s continued financial suc‑cess and increasing shareholder value through our commitments to corporate sustainability, good cor‑porate governance, and maintaining customer and community trust

These priorities embody EMC’s philosophy that as we make decisions, we should weigh social and environmental costs and values in the same way that we consider financial costs and values—all in a way that enables us to perpetuate the success of the com‑pany and the well‑being of all of our stakeholders. Executing these priorities is transforming how our products and services are sourced, designed, built, delivered, and especially how they are used.

The Role of the Board of Directors For companies to realize their potential, their boards of directors must be actively engaged in over‑seeing company strategy and execution. This assess‑ment should include the identification and evalu‑ation of principal business risks and opportunities, including the impact of social and environmental issues. In this regard, directors should take into con‑sideration a broad range of interests.

Under Massachusetts law, a director must dis‑charge his or her duty 1) in good faith, 2) with the care that a person in a like position would reason‑ably believe appropriate under similar circum‑stances, and 3) in a manner the director reasonably believes to be in the best interests of the corporation. The Massachusetts Business Corporations Act spe‑cifically permits directors to consider the interests of the corporation’s employees, suppliers, creditors and customers; the economy of the state, the region and the nation; community and societal consider‑ations, and the long‑term and short‑term interests of the corporation and its shareholders in determining what is in the corporation’s best interests.

More than 30 states have similar “constituency

38 NACD Directorship March/April 2012

Case Study | Sustainability

statutes” that expressly permit directors to weigh the interests of constituencies other than shareholders and considerations other than profit, including “so‑cietal” considerations.

Governance Model For sustainability to become a core value of a corporation, it must be integrated into every function beginning with the board of di‑rectors. The charter of the Corporate Governance and Nominating Committee of the EMC board empowers the committee to: “Consider corporate governance issues as well as issues related to corporate social responsibility and sustainability that may arise from time to time, and make recommendations to the board as appropriate. In this regard, the Committee shall act in accordance with the Massachusetts corpo‑rate statute whereby a director may consider the inter‑ests of specified constituencies and factors, including societal considerations.”

Management regularly reports on sustainability matters to the EMC governance committee and the full board. The governance committee over‑sees and advises the board on corporate governance matters and oversees the board’s execution of its risk management oversight responsibility. In addition, at least twice a year, the chief sustainability officer provides an update to the governance committee on our sustainability initiatives and progress. Topics discussed have included our priorities, engagement with stakeholders, customer feedback, employee engagement, and public reporting of challenges and accomplishments. Furthermore, sustainability matters are discussed at meetings of the EMC board in connection with reviews of the company’s strategic plans.

At the company‑level, EMC’s Green Business Leadership team, a virtual team comprised of leaders from business functions throughout the company, acts together to ensure they are working from a set of common goals and assumptions, aligning their initia‑tives, tapping into the talent of the global workforce and driving global, corporate programs across the company. Ultimately, however, the responsibility to incorporate environmental and social considerations into our business resides with every individual in the company (see illustration at left).

The EMC Sustainability Report and GRIAs a U.S. public company, EMC reports on its fi‑nancial health to investors through annual and quarterly reports approved by our board of directors and filed with the Securities and Exchange Com‑mission. Since 2007, EMC has supplemented our SEC filings with a sustainability report that high‑lights our activities.

We use the Global Reporting Initiative frame‑work, a standard that is to sustainability reporting what Generally Accepted Accounting Principles (and their global companion, International Finan‑cial Reporting Standards) are to financial reporting. Some 80 percent of the Global Fortune 250 com‑panies and the 100 largest firms based in the United States have produced sustainability reports, most of them using the GRI framework.

The GRI framework lays out a process for com‑panies to identify relevant and material topics on which they should report. GRI provides a useful checklist that can be adapted and tailored by in‑dividual companies; it is not a check‑the‑box re‑porting exercise. Indeed, the GRI guidelines cau‑tion: “The process begins with the identification of relevant topics. Relevant topics are then prioritized as material aspects, which are then validated. The end result of this process is a list of material aspects and related standard disclosures.…The reporting organization’s senior decision‑makers should take ownership of the process for defining report con‑tent, and should approve any associated strategic decisions.”

Consistent with the GRI framework, EMC fo‑cuses our reporting on topics that are important to our business. As the GRI “technical protocol” reads: “Material topics for a reporting organization should include those topics that have a direct or in‑direct impact on an organization’s ability to create, preserve or erode economic, environmental and social value for itself, its stakeholders and society at large.…Sustainability impacts create both oppor‑tunities and risks for an organization. The ability of an organization to recognize opportunities and risks, and act effectively in relation to them, will determine whether the organization creates, pre‑serves or erodes value.”

March/April 2012 www.directorship.com 39

How We Applied GRI EMC organizes our anal‑ysis around the three categories proposed by GRI: economic (including financial performance, market presence and indirect economic impacts); environ-mental (including materials, energy, water, biodi‑versity and emissions/effluents/waste, compliance, products and services, and transport); and social (including labor, human rights and product respon‑sibility).

Each category has a series of detailed indicators that EMC uses to determine the topics most signif‑icant to our business. We also seek input from our shareholders, customers, employees and suppliers, and obtain information from structured analyses of our sustainability impacts, dependencies and opportunities.

Each year, we review the GRI indicators and con‑sider where we can and should expand the scope of our reporting. All in all, GRI offers well over 100 possible topics on which companies may consider reporting.

Benefits of Sustainability ReportingWhile some foreign jurisdictions are beginning to mandate sustainability reporting, it is still voluntary in the United States. In our experience, being a vol‑untary reporter is challenging, but well worth the effort. The report has served as a vehicle to help us articulate and gain buy‑in across the company for our sustainability goals and strategies; to inspire us to measure and track our performance; and to im‑prove communication with all of our stakeholders. Other benefits include:

■■ Creating a structure with which to assess the environmental and social risks and opportunities in EMC’s business

■■ Clarifying the relationships between financial and nonfinancial activities

■■ Establishing a cadence for the collection and review of performance data throughout the company

■■ Helping to streamline processes, reduce costs, and increase efficiency by encouraging year over year monitoring and goal‑setting

■■ Benchmarking and evaluating our sustainabil‑ity performance with respect to external norms such as industry or other codes, regulations, performance

standards and/or voluntary initiatives■■ Encouraging transparency and accountability■■ Improving our reputation in the general pub‑

lic and among customers■■ Recognizing the achievements of our employ‑

ees and encouraging innovation globallyThere are also benefits that accrue to the world

around us. The reporting process has contributed to improvements in EMC’s performance—from reducing our energy consumption and green‑house gas emissions, to design innovations that have reduced material use and waste from prod‑ucts and packaging, to investments in education and health care. The report has been a primary means for sharing our own experiences, chal‑lenges and successes with others that are con‑fronting similar issues and opportunities. Finally, it has provided external stakeholders and inves‑tors with the information they need to track our impact on society, and society’s impact on our business.

EMC’s sustainability programs are receiving recognition. In 2011, EMC was listed in the Dow Jones Sustainability Index for North America. We were ranked 13th in the U.S. in Newsweek’s Green Rankings, and listed in the Carbon Disclosure Leadership Index for the fifth year running. In 2010, we were named Board of the Year by the New England Chapter of the National Associa‑tion of Corporate Directors, in part because of our work in sustainability. These rankings recognize and applaud the hard work and creativity of EMC employees.

Despite considerable progress, we are early in our journey. As we wrote in our most recent re‑port: “We have accomplished much, but know it is a constantly evolving process. We are past the easy wins and working toward the true challenge—em‑bedding sustainability into our every day business culture and strategy.” D

eMC and gRi co-presented on sustainability and the board, with an inaugural program in November at the NACD Heartland Chapter in Kansas City. A pro-gram is now being planned for southern California; other local chapter programs will follow.

Kathrin Winkler (top) is chief sustainability officer at eMC. Rachel Lee is se-nior corporate counsel at eMC.