© Deloitte & Touche Weidekampsgade 6 2300 Copenhagen V Denmark Tel.:+45 (0) 33 76 32 39 Fax:+45 (0)...

© 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.


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

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Op

era

tion

al

Op

era

tion

al

Imp

act

Im

pact

P

rod

ucts

&

Pro

du

cts

&

Serv

ices

Serv

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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



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

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tion

al

Op

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al

Imp

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&

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Serv

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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


The Sustainability Value Methodology


•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•…


First StepMap Stakeholders’ Values and Define Sustainabilty Issues

S T

A K

E H

O L

D E

R

V A

L U

E




MarginMargin

Mate

rial

Mate

rial

Sou

rcin

g

Sou

rcin

g

Pro

du

cti

on

P

rod

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on

Effi

cie

ncy

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cie

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Op

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al

Op

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al

Imp

act

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pact

P

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Serv

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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.



Global trend:







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



Global trend:







Environmental Issues Carbon constraints (climate change) Environmental liabilities Pollution prevention Reducing emissions and resource use New markets for environment-friendly

and energy-efficient products



Global trend:







Environmental Issues Product stewardship Waste and toxic release management Accident and spills management Efforts to incorporate external costs

in planning and accounting



Global trend:







Social Issues HR management (including

compensation, training, etc.) Attracting and retaining employees Workforce diversity and equal

opportunities



Global trend:







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



Global trend:







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


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


Second StepDesign Business Case and map shareholder Value

S T

A K

E H

O L

D E

R

V A

L U

E




MarginMargin

Mate

rial

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€


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


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

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•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

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Cycl

e

How to address Economic, Social and Environmental Imperatives all together to create Shareholder Value


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


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

€


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


The Path to Value

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