Sustainability Strategy ServicesEnvironmental Resources Management

Delivering sustainable solutions in a more competitive world

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Delivering Value through Sustainability

Today, companies face a number of demands – to create innovative products, meet shareholder expectations, and operate in a socially and environmentally responsible manner.

While some organizations have interpreted this last expectation as the need to comply with laws and regulations, many companies are actively leveraging sustainability drivers to create revenue growth, reduce costs, mitigate risks, and strengthen relationships with key stakeholders. At ERM, we refer to this as sustainability value: delivering top- and bottom-line benefits by capitalizing on opportunities and controlling risks associated with environmental and socioeconomic issues.

ERM helps companies uncover sustainability value by integrating social and environmental considerations into their business strategy, culture, operations, and decision-making processes. With our long heritage in the environmental, health and safety (EHS) arena, ERM understands how sustainability opportunities and risks vary from industry to industry and company to company, enabling us to deliver tailored solutions to help companies realize their objectives.

Sustainability Value:

Delivering top- and bottom-

line benefits by capitalizing

on opportunities and

controlling risks associated

with environmental and

socioeconomic issues.

Uncovering Sustainability Value across the Enterprise

Development Reduce project delays by addressing environmental and social issues up front

Marketing Leverage sustainability concerns to create new products and services that drive revenue growth

Operations Reduce material and energy costs through eco-efficiencies

Finance Receive lower interest rates and improved financial terms by becoming a better investment

Human Resources Attract and retain top talent that is increasingly concerned about sustainability issues

Sales Win contracts by demonstrating superior sustainability performance

Procurement Stabilize availability and price of key inputs; reduce human rights and environmental risks

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Achieving Sustainability

Embedding sustainability thinking into an enterprise isn’t easy, but our experience suggests there are four keys to success:

1. Be Forward-Looking

Articulate a compelling view of the future and what it means for the company’s business success. Identify trending issues early and use them to create competitive advantage.

2. Be Inspirational

Pursue sustainability as a leadership imperative – the issues are too complex to be left as a functional priority alone. Then empower individuals at all levels in the organization to accelerate your efforts.

3. Be Practical

Rigorously embed sustainability throughout day-to-day operations and decision-making. Draw clear linkages between sustainability and financial goals to convert non-believers.

4. Be Collaborative

Partner with your stakeholders to find novel, win-win solutions that propel your business forward. Don’t shy away from your detractors as debate will advance your thinking.

sustainability

corporatecitizenship

corporate social responsibilitysustainable development

triple bottom line

  people,  planet, profits

esgcorporate

shared value

global citizenship

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Sustainability and Your Business

While businesses face many shared challenges globally, not every issue is relevant to every company. Each sector faces unique issues due to the nature of its operations, products, and services. Further, individual companies may face specific challenges due to their geographic reach, past performance, or relationships with stakeholders. Additionally, every company has its own management culture, operational protocols, and financial, human resource and technological assets that impact their business strategy. At ERM, we understand that every organization is different and create strategies that address both external pressures and internal business realities.

Chemical,Pharmaceutical

Mining,Metals

Oil & Gas

Power

Consumer Products,Retail

Manufacturing

Chemical,Pharmaceutical

Mining,Metals

Oil & Gas

Power

Consumer Products,Retail

Manufacturing

Different sectors face different issues ...

Mining and oil and gas companies may pay particular attention to carbon, water, human rights, community engagement, and other license-to-operate issues that directly affect their ability to site projects and develop assets.

Power companies face unique challenges around fuel mix and carbon strategy, and their utility businesses need to carefully manage their distinct role in the local community.

Product stewardship, life cycle management, and product compliance are significant challenges to manufacturers who increasingly work with a complex and extended supply chain, more stringent product regulations, and changing customer buying habits.

Pharmaceutical companies have challenges related to ethical testing, access to medicines, pharmaceuticals in the environment, marketing practices, and pricing.

Food and beverage companies have specific challenges with water use, healthy food choices, and responsible marketing.

Consumer product companies and retailers are increasingly focused on supply chain management, product safety, reputation and brand, and end-of-life issues.

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... and individual cultural and institutional issues make each company unique.

public private

centralized decentralized

global regional

B2B B2C

products services

diversified focused

vertically integrated conglomerate

holding company operating company

... while some are common to all companies ...

• Environmental, social, and corporate governance disclosure requirements

• Increasing transparency expectations of stakeholders

• Ethical business practices

• Maintaining regulatory compliance

• Maintaining workplace safety and health

• Driving eco-efficiency and associated cost reductions

• Attracting and retaining talent

Companies in many sectors now need to consider life cycle impacts of their products not only for their customers but also their customers’ customers. Additionally, they are increasingly being held responsible for the actions of their suppliers.

GlobalIssues

SectorIssues

CompanyIssues

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• Define market drivers• Collect and analyze internal

and external data• Quantify sustainability value

at stake • Identify initiatives to address

risks and opportunities• Perform cost-benefit

analysis

Value creation opportunities and business case

• Prioritize and sequence initiatives to address risks and opportunities

• Identify change require-ments (business processes, competencies, etc.)

• Define plan, including actions, roles, timing, KPIs

• Obtain management approval

Sustainability strategy and change management plan

• Analyze company value chain and markets, identify sustainability value drivers

• Assess customer expectations and needs

• Assess competitor actions and positioning

• Assess existing internal programs and performance

• Define ambition level

Analysis of key issues, risks and opportunities

• Allocate budgets• Communicate internally and

externally as appropriate • Implement initiatives (via

pilot programs to establish proof points)

• Track progress and adjust as needed

• Communicate benefits and milestones achieved

Improved performance with quantifiable results

Our Approach

SituationAnalysis

BusinessCase

ActionPlanning

Implementationand Monitoring

1 2 3 4

Increasing Organizational Awareness and Buy-In

Process Steps:

Outputs:

The Process

ERM employs a proven methodology to assist clients in identifying and leveraging the sustainability value drivers relevant to their businesses. This is a scalable and flexible process that can accommodate companies that might be at different levels of maturity – from those who have just begun to address strategic sustainability issues to those who might be in their second or third generation. We begin by assessing the company’s value chain to obtain a holistic picture of the organization’s sustainability risks and opportunities. Next, we quantify the benefit of addressing those issues, providing a cost-benefit analysis of different options to create the business case for action. We then develop a detailed

implementation plan, including roles, responsibilities, timing, budget and measurement. Once the plan is approved, we partner with clients to execute the recommended strategies.

Fundamental to all of these steps is the need to engage key management throughout the process. Involvement early in the process can be particularly useful, not just to gain management insights into the risks, opportunities and potential strategic responses, but also to help manage the internal political landscape and to build the critical organizational buy-in needed to implement the resulting strategy.

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Asset Development

Community engagement.Due diligence.

Permit process optimization.Green buildings.

Products and services

Life cycle assessment.Product development process.

Product/ service innovation.Customer partnerships.

Supply chain

Drive expectations upstream.Risk mitigation.

Whole system eco-efficiency.Contract terms and oversight.

Operations

Resource conservation.Pollution prevention.

Safety.Health and wellness.

Labor practices.

Stakeholder relations Stakeholder engagement and partnerships (employees, communities, NGOs, customers, suppliers, academic institutions).

Disclosures and public reporting.

GovernanceStructure, committees, roles. Policies and standards. Metrics, goals, and reporting.

Ethics. Risk management. Auditing and oversight

Tools

ERM employs a wide array of proprietary tools and methodologies when creating and implementing sustainability strategies. These may include stakeholder analysis, value chain analysis, change management planning, and training and awareness development, among others. Additionally, ERM is uniquely positioned to

Having a good plan is not enough – it must be effectively implemented. Success requires:

• Visible leadership from the top that cascades down the line organization• Change management processes that foster cultural change and employee engagement, and are sensitive to

the needs of individual departments and staff members• Adequate resources (e.g., people, technology, operating and capital budget)• Oversight to ensure progress is monitored and corrective actions taken as needed• Accountability for results

not only develop, but also implement these strategies. With 40 years experience in helping companies improve their environmental, health and safety, and social performance, we are able to execute innovative and effective plans to help companies realize sustainability value.

Outcomes

Sustainability strategies tend to have common elements. We find actions often address the following sustainability program components.

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Our Approach in Action

Developing a Sustainability Strategy that Results in Recognized Global Leadership: Consumer Products Company

ERM helped a fiercely decentralized global consumer products company that had just formed a corporate sustainability leadership team formalize and enhance its company-wide sustainability programs and performance enterprise-wide.

Over the course of two years, ERM:• Assisted in the development a corporate sustainability

strategy that addresses product innovation, brand protection and enhancement, and strengthens governance systems

• Created corporate sustainability metrics including formal data definitions and data collection protocol

• Assisted with the company’s Corporate Social Responsibility report and Dow Jones Sustainability Index application

• Developed corporate EHS policies and standards• Implemented an EHS management system in several

business units around the world• Conducted life cycle assessments (LCA) and assisted

with the development of a LCA program

These efforts have helped the company become widely recognized as a sustainability leader in its sector.

Updating the Sustainability Strategy and Program In The Wake Of A Major Acquisition: Diversified Mining Company

A global mining company wanted to upgrade and formalize its sustainability management framework in the wake of a major acquisition. ERM worked at the corporate, business unit, division and site levels to implement a number of initiatives including:• Post-acquisition due diligence and integration: ERM

helped assess the company’s global operations, reviewing the full scope of sustainability risks. This resulted in a blueprint for the desired post-integration, and a roadmap for getting there.

• Sustainability framework development and implementation: ERM helped update the company’s sustainability framework including its governing business principles, sustainability policy, standards and assurance program to address emerging issues, commitments to international standards and sector-leading management practices. ERM also helped roll out the new framework across the organization.

• Climate risk assessment and strategy development: ERM conducted a detailed review of the physical risks to the company’s operations and infrastructure, impacts of pending legislation and commercial implications of climate change. The analysis supported development of a corporate climate change strategy.

• Annual sustainability strategy review: ERM works closely with senior management to review and assess corporate business strategies and plans against internal and external sustainability risks to help the company adjust its short-term strategy to address its most material sustainability issues.

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Driving Cost Savings Through Management of Non-Technical Risk: Oil and Gas Company

ERM engaged with a multinational integrated oil and gas company to quantify the sustainability value at risk within their upstream portfolio of major capital projects. In this context, sustainability value is inexorably linked to our client’s social license to operate, which can be both positively and negatively affected by so-called non-technical risk (NTR). NTRs include all the risks associated with regulatory, legal, fiscal, cultural, socio-economic, and environmental interfaces of the project.

Together with our client, we engaged the executive leadership of the organization with a persuasive business case for action – finding almost $800M in eroded net present value on four projects in just three years. From there, we developed a multi-workstream phase of work to strengthen the leadership, capability, capacity, and process for managing and creating cultural awareness of NTR within the organization, all of which were designed to drive improved business performance by catching and proactively managing NTRs earlier in project development. On the ground, we have mobilized teams – with both ERM and client representation – at three multi-billion dollar projects that are working to integrate environmental and social issues more firmly into the business culture of these projects. We have seen tangible benefits of this integrated approach ranging from an improved schedule to functionally integrated teams (e.g., engineering and regulatory).

Defining The Business Value of Sustainability: Chemical Company

ERM was hired to define the business value of sustainability to the company. A business model was developed to present the results in terms of Net Present Value. A global team of 12 ERM employees deployed across the company to conduct senior leadership and executive-level discussions, collect data, and frame the business case analyses. ERM interviewed over 100 executives, corporate managers, and technical leaders.

Using financial inputs from published corporate reports and data provided by interviewees on products or costs that could be considered “sustainability-related,” ERM built a financial model for each business unit showing top line revenue and bottom line savings, as well as the best method for avoiding serious risks and protecting the reputation of the company.

Through these discussions and financial modeling, ERM clearly articulated the value of sustainability to the business leadership of the company. The team identified approximately $4 billion in potential sustainability derived revenues across the company, and approximately $500 million in “incremental value” resulting from a sustainability program implemented at the corporate level.

The ERM team prepared a path-forward plan to design, build, and implement a corporate sustainability program.

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Sustainability Reporting and Disclosure: Utility/Power Company

ERM assisted with a number of projects to improve the integrity of a major utility/power company’s sustainability data and to externally report performance to a variety of stakeholders.• ERM assisted with the design and development the

company’s sustainability report. As part of that effort, ERM conducted a “pre-assurance” review to validate the data, prior to independent third party auditing

• ERM collected data and helped prepared responses for the Dow Jones Sustainability Index (DJSI) application submittal, resulting in the company being listed in the North American index. ERM also assisted in the Newsweek Green Rankings response, resulting in a significant rating improvement vis-à-vis industry peers.

• ERM reviewed SEC disclosures associated with climate change risk to ensure that they met relevant regulatory guidelines

Local Community Engagement: Mining Company

ERM worked with a mining company to design and implement one of the South American country’s first early stakeholder engagement and disclosure strategies for a gold and copper project planned in an area near indigenous communities. ERM designed a community consultation process, tailored to the needs of key stakeholder groups, to assist the company in increasing dialog with and collecting feedback from affected communities throughout the design phase of the project. The plan created a number of positive outcomes, including:• Increased transparency around the project • Mitigation of social risks by capturing and addressing

stakeholder concerns before the formal EIA process• Avoidance of delays when national regulations were

revised to require consultation with indigenous groups

Life Cycle Assessment: Consumer Products Company

ERM conducted a life cycle assessment (LCA) on the company’s tissue products to help the company better understand the impact of using recycled versus virgin fiber through the products’ life cycle.

ERM examined the environmental footprints of seven categories of tissue products throughout their life cycles. The study compared 14 individual products with varied percentages of recycled and virgin fiber makeup. Product performance was analyzed across several impact categories: climate change, ozone depletion, photo-oxidant formation, depletion of abiotic resources, eutrophication, acidification, human toxicity, fossil fuel consumption, solid waste, and water use.

ERM’s analysis established that both virgin fiber and recycled fiber offer environmental benefits and shortcomings. The client is using this data to improve process management, increase efficiency, and reduce its environmental footprint.

Eco-Efficiency and Cost Reduction: Global Automotive Supplier

ERM developed a program to reduce natural resource consumption and waste at manufacturing facilities of a global automotive supplier. The program, integrated into the client’s operational excellence and six sigma efforts, provides guidance on how to realize cost savings by reducing material inputs and minimizing waste streams, including emissions, water and solid waste. ERM helped pilot the program, train employees and eventually roll it out globally. Cumulative cost savings to date total over $23M, in addition to environmental impact reductions.

Our strategy work is informed by 40 years of experience implementing sustainability programs worldwide

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AkzoNobel

Anglo American

BASF

Bayer

Becton Dickinson

BNSF Railway Company

Boehringer Ingelheim

Boeing

Chevron USA Inc.

Danaher

Dell

DuPont

E.ON Kraftwerke

Evonik Industries

Ford Motor Company

General Electric

Ingersoll-Rand

Nalco

Newcrest Mining Limited

Novartis

Oracle

Panasonic

Procter & Gamble

Rio Tinto

Sanofi-Aventis

SATORP

Schlumberger

Shell International Petroleum Ltd

Siemens

Statoil

Syngenta

Total

Unilever

Sustainability Data Management: Mining Company

ERM helped a mining company improve the quality and accuracy of its sustainability data. As the company collected data from multiple sites, ERM developed a tailored sustainability reporting guideline and accompanying data collection tool in line with the Global Reporting Initiative (GRI). The guideline sets out the minimum reporting requirements for the annual sustainable development report and describes the definitions, processes, frequency, key controls and responsibilities for collecting and reporting data. The implementation of the guideline has simplified the process for collecting data for the report and allowed the company to publish reliable, complete and accurate data externally.

Baseline Water Assessment: Agricultural Processor

ERM was commissioned to conduct a baseline water sustainability assessment for the worldwide operations of a leading agricultural processor whose products include food ingredients; animal feeds and feed ingredients; and biofuels. The client has assets spread over 50 countries with more than 200 processing plants. The assessment surveyed operational sites to obtain information at both the macro (overall organization water usage) and micro (site and community issues) levels by collecting both quantitative and qualitative water data. ERM then took the data and conducted analyses to determine the client’s water consumption, costs, risks, and opportunities related to facilities operating in water-scarce areas.

Carbon Footprinting and Analysis: Oil and Gas Company

ERM developed a carbon footprint for a major oil and gas company covering oil production, transportation, and refining operations. ERM developed a flowsheet simulation based on a refinery mass and energy balance that was capable of taking yield data for a specified mixture of crude oils and calculating the GHG emissions from the refinery that were expected to result. The data allowed the company to view its operations holistically for the first time and also highlighted significant opportunities to decrease its footprint by streamlining certain transportation practices.

EHS and Sustainability Governance: Pulp and Paper Company

ERM conducted an independent review of a global pulp and paper company’s EHS & Sustainability (EHS&S) programs to identify gaps and opportunities for improvement. The review included senior management interviews, benchmarking, and site visits. ERM recommendations that have subsequently been implemented include:• Creation of a standing EHS&S Council• Update and review of outdated EHS policies and

standards• Enhancements to the audit program• Strategies to drive down incident severity and

associated costs• Creation of new support service structures to assist

specific business units in implementing EHS&S initiatives

• More robust external communications including the development of a complete GRI sustainability report

Selected Clients

www.erm.com R12-6JAN12

About ERM

Environmental Resources Management (ERM) is a leading global provider of sustainability consulting services. We have over 140 offices in 40 countries and employ around 4,000 people. Over the past five years we have worked for more than 50 percent of the Global Fortune 500 delivering innovative solutions to help them understand and manage sustainability challenges.

ERM has a well-established reputation for excellence, combining deep technical expertise with world class management consulting skills.

ERM provides global capability with a local regulatory and cultural understanding. Our global staff represents a full range of disciplines from business to science, engineering to communications. Our corporate structure allows us to assemble project teams with the best possible mix of technical and management expertise, as well as geographic proximity to our clients’ locations. We have extensive internal networks to leverage our collective project experience across the globe.

In the area of sustainability, ERM has worked across the full range of industry sectors, with companies based all over the world, working seamlessly between the C-suite and plant-level operations. Our experience with sustainability programs includes:

• Strategy development• Corporate governance• Management systems• Metrics, goals, and scorecards• Carbon and water footprinting• Materials flows and life cycle assessments• Information technology solutions• Public sustainability reporting and disclosure• Data validation and assurance• Supply chain management• Energy, greenhouse gases, and climate change• Integrated water management• Stakeholder engagement

Our experience with sustainability programs combined with more traditional environmental, health and safety activities (e.g., regulatory compliance, pollution prevention, incident prevention, and wellness) helps us develop credible and implementable strategies at the enterprise, business unit, and asset levels.