Sustainability Frameworks

Bruce Starcher

2011

Sustainability Value Creation

Commerce Justice

Economic Environmental Social

Market Cap = Eliminate Toxins Basic Needs Food

+ Revenue Neutralize Carbon Shelter

- Cost Sustainable Lifestyle Sustainable Living Health

+ Brand Positive Change Wellness

+ Employees Education

- Financing Financial Security

- Risk Community Workplace

Social

Political

World

Ecosystem

Industry

Suppliers

Company

Value Creation

PersonCode of Conduct

Industry Association

X-Sector Groups

Open Platforms

Economic Value

Envi

ronm

enta

l, So

cial

val

ue

Beyo

nd

Asse

ssm

ents

Colla

bora

tion

Activ

ism

Shared Value

Enga

gem

ent

Total Rewards

Linear to Closed Loop Systems

• Systems diagram here …

CSR Maturity

Defensive Compliance Managerial Strategic Cooperative

Pre-2006 2006 - 2010 2011 - 2015 2015 - 2018 2018+

Employee Engagement None I’m aware of the message I understand the message I believe I am committed to act

Focus Deny practices, outcomes or responsibilities

Adopt a policy-based compliance approach as a

cost of doing business

Embed the societal issue into core management

processes Integrate the societal issue

into core business processes Connecting externally with

organizations to drive broader change

Activities No ActionOne or two projects

Green-washNo strategy

Bundle of Projects Management System Full Integration

Embedded No No Business ProcessesLeadership and

Management Processes, Strategy, Employee

Engagement

Strategy, Financing, Reputation, Brand

The “why”To defend against attacks to their reputation that in the short term could affect sales, recruitment,

productivity, and the brand.

To mitigate the erosion of economic value in the

medium term because of ongoing reputation and

litigation risks

To mitigate the erosion of economic value in the medium term and to

achieve longer-term gains buy integrating

responsible business practices into their daily

operations.

To enhance economic value in the long term and to gain

first mover advantage by aligning strategy and process innovations with the societal

issue

To enhance long term economic value by

overcoming any first mover disadvantages and to realize

gains through collective action.

Source: Simon Zadek, “The Path to Corporate Responsibility”

CSR Landscape

Economic Environmental Social Governance

Financial PerformanceEconomic Benefit

Supply Chain ResponsibilityManufacturing Agreements, Supplier Code of Conduct, Supplier Audits, Supplier SRE Training, Transparency, NGO Collaboration, Verification and AssuranceMinimal WasteReuse, Recycle, Repair, Rethink, Recover, Compost, Producer ResponsibilityEnvironmental SustainabilityMarketing Communications, Operations, Manufacturing, Logistics, Product Use, EH&S, Resource EfficiencyClimate and EnergyScope 1, Scope 2, Scope 3Sustainable DesignCompliance, Design for the Environment, Lifecycle Analysis (LCA), Accessibility, Zero Waste System

EmployeesDiversity and Inclusion, Balancing work-Life, People Development and Advancement, Employee and Global Citizenship, Employee Engagement, Compensation and Benefits, Promoting Wellness, Health and Safety.Human RightsOpen door policies, Diversity Policies, Human Rights and Labor Policies, Standards of Business Conduct.Supply Chain ResponsibilitySustainable Sourcing, Supplier Social Responsibility, NGO Collaboration, Transparency, Supplier DiversityCommunityEmployee Volunteerism, Corporate Philanthropy, Community Engagement, Economic ImpactPrivacy

Metrics and MeasurementChange ManagementCSR AssessmentsCSR Program Management

How to look at CSR

People Responsible Product Climate & Energy Minimal Waste Purpose Governance

Communities Product Carbon Management Waste to Landfill Ethics Metrics & Measurement

• Employee Volunteering• Community

Engagement• Corporate Philanthropy• Economic Impact

• Legal• Safe• Environmental• Sustainable• Ethical

• Scope 1• Scope 2• Scope 3

• CSR Metrics• CSR Measurement

Employees Process Waste to Water Values driven leadership CSR Assessments

• Diversity & Inclusion• Employee Engagement• Health Safety &

Wellness• Human Rights• Total Rewards• People Development• Work Life Programs

• Environmental Marketing Strategy

• Product Material Audit• Supplier Management• Design for Environment• Lifecycle Analysis

• CSR Self-Audit• SCORE assessment

Supply Chain Waste to Air Change Management

• Integrate CSR in Sourcing

• Supplier Social and Environmental Responsibility

• Transparency• Supplier Diversity

• Communications• Training

CSR Program Management

Responsible Product

I am following the law

I will not harm our consumers

I will not harm the environment

I will meet this generation’s needs but not at the expense

of tomorrow’s generation

I will do the right thing for our stakeholders

The first platform speaks to the core of our business – our products.

We want to evolve from simply meeting our externally mandated / legal and safety requirements and move towards providing ethical products – products that do the right thing for our stakeholders.

LEGAL SAFEENVIRONMENTA

LSUSTAINABL

EETHICAL

Minimal Waste

Zero Waste is an inspiring and achievable long term vision and closely resembles the TQM mantra of zero defects. It focuses on redesigning systems and process for a total product lifecycle.

Waste represents costs, both to our shareholders and to our environment.

The approach is an iterative one based on setting a set of goals and then educating, assessing, prioritizing, auditing, identifying potential actions, implementing, reporting and then repeating the process until the goal is achieved.

Discard into the natural environment. Litter, dumping, burn barrels

High temperature destruction of material

Capture useful material for waste to energy program; saves energy and CO2 in the long term.

Discarded items are separated into materials that can be used again

Previously discarded items have value in another process or company

Buy less and use less

Waste as a resource

DEVASTATE

INCINERATE

GENERATE

RECYCLE REUSE REDUCERETHIN

K

Climate & Energy

Carbon is the common denominator for all energy sources. Whether you believe that carbon is a contributor to global warming or not, we do know that the byproduct of carbon based processes are pollution and growing costs.

As we understand and track our carbon footprint over time, we will be able to set aggressive goals to pursue with both environmental and economic benefits.

People

Brands exists because of people - our employees, our partners’ employees and the communities in which we operate.

COMMUNITY

Employee VolunteerismCommunity EngagementCorporate PhilanthropyEconomic Impact

SUPPLY CHAIN RESPONSIBILITY

Integrate CSR in sourcing operationsSupplier social and environmental responsibilityNGO CollaborationTransparencySupplier Diversity

EMPLOYEES

PurposeEmployee EngagementDiversityHuman RightsTotal RewardsPeople developmentWork-Life programsHealth, safety and wellness

Governance

GOVERNANCE

Metrics and MeasurementChange ManagementSustainability AssessmentsSustainability Program Management

Governance focuses on “how” we lead Sustainability across the organization and beyond. These are topics that require leadership and change management to affect how conducts business.

The Business of Sustainability

To be among the industry leaders in Corporate Social Responsibility

ConsumerCustomer

Product

Packaging

Post Sales

Category Specific Attributes

Minimal Waste Minimal Material WasteMinimal Process WasteReduce, Reuse, Rethink,…

Climate and Energy Carbon ManagementPeople Responsible Supply Chain

CommunityEmployees

Governance Metrics and MeasurementChange ManagementSustainability Program Management

Marketing SupplyChainR&D HR Communi-

cationsFinanceComplianceSales Investor Relations

Objective

Offering

Operations

Functional Strategies

Charac-teristics

Brand

Cost and environmental impact reductions across products and processesStrategy

Brand Vision

How do all these pieces fit together – from Sustainability Objectives to Functional strategies?

Over time, we will be moving from a project driven structure to a structure where Sustainability is integrated into each function and business.

Sustainability

Governance

Functional Platform Ownership

Marketing ProductDevelopment

Supply Chain Compliance HR Sustainabilit

y

ResponsibleProduct ◦ MinimalWaste ◦ ◦ Climate &Energy ◦ ◦ ◦ People Governance

Leadership Integral ◦ Peripheral

From planning to execution

Vision Identification Sponsorship Project Embedded Monitor

Ownership Sustainability Sustainability Sustainability Function Function Function/Sustainability

ActionDevelop long

term vision and roadmap

Identify projects that deliver on the long term

vision

Sponsor projects across the

organization

Function leads projects and creates the

capability across the organization

Function owns process and deliverables across the

organization

Function and Sustainability monitor the process to

ensure implementation

and ongoing performance

Sustainability Evolution

Defensive Compliance Managerial Strategic Cooperative

Responsible Product

- Packaging- Non compliant chemicals- Supplier Sustainability Compliance- Green Products

- Green Product Portfolio - Sustainable Packaging - Responsible Supply Chain - Lifecycle Analysis - PVC substitution - Ongoing Product Material Compliance

- Full understanding of all product inputs, components, processes and their impacts. - Detailed plan(s) in place to reduce or eliminate impacts, to become resource "neutral" via upcycling, alliances to create industrial nutrients (i.e. waste= food). Minimizing transport; packaging, etc.

- Continuation and extension of strategic work. Industry leadership in all product categories re: methods, R&D, manufacturing, sourcing.- Mentorship and strategic alliances outside of industry to spread knowledge.

Climate and Energy

- Carbon Management• Scope1• Scope 2• Scope 3

- Carbon Management• Scope1• Scope 2• Scope 3

- Deep understanding of the environmental impacts of ALL aspects of the enterprise by all employees AND all company activities analyzed and guided by this understanding.- Sharing of knowledge and active support of science and research institutions working in these areas.

Sustainability Evolution

Defensive Compliance Managerial Strategic Cooperative

Minimal Waste

- General Office Printing

- Site Recycling - General Office Printing - Solid Waste Reduction

- Process Redesign- 100% take back packaging guaranty, including agreements with suppliers re: packaging types, materials and transport strategy.Incentive plan(s) to actively engage customers in 's zero waste initiative.

- Approaching or achieved “Minimal waste" goal...and continuing to make adjustments to perpetuate it.- Active participation in multi-industry coalitions re: zero waste strategies around the world.

People

- Purpose- Employee Engagement- Diversity- Compensation and benefits- People development- Work-Life programs- Health, safety and wellness

- Employee Engagement- Community Engagement- Integrate Sustainability metrics in MIP and MBO objectives- Introduction of cash and non-cash (e.g. awards/recognition, time off, etc.) incentives for employee ideas or projects.- Partnering with schools (elementary through university) to develop brand awareness AND environmental/social goals.- Partnering with non-profits and community based NGOs to provide products and raise awareness of company mission & goals.

- Continuation and expansion of strategic era plans. Employee generated ideas have resulted in spin-off businesses or organizations that work with .

Sustainability EvolutionDefensive Compliance Managerial Strategic Cooperative

Governance

- Environmental Business Case- Customer Sustainability risk profile and requirement- Sustainability Baseline audit- Embed Sustainability in key processes- Customer Request process and structure

- Align around a long term Sustainability roadmap- Sustainability External Reporting- Sustainability Communications- Sustainability Training- Establish Sustainability metrics, measurement and reporting infrastructure- Public goals- Link values to behaviors and performance appraisals- Develop Company level Sustainability strategy and integrate into corporate strategy- Build external network among NGOs, leading Sustainability companies and other key sustainability players

- Develop Company level Sustainability strategy and integrate into corporate strategy- Integrate Sustainability in ’s Culture.- Increased investment by SRI and institutional investors as a result of Sustainability accomplishments and goals.- Well established e-learning systems and other internal/cultural mechanisms allow budget resources to be freed up for other uses.

- Corporate Governance- Access to SRI funding- Management compensation includes Sustainability component.-External Networks, Working Groups, External Collaboration- All Board members have familiarity and /or expertise with Sustainability goals and issues.- Company and shareholders are completely and actively aligned with regard to 's Sustainability agenda and goals.- Company is leading by example and supporting political and social policies that further environmental and social practices and initiatives.- Compensation of all employees AND selection of all suppliers, contractors and vendors have mandatory Sustainability goal requirements.