Escp2009-Csr Core v01

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ESCP-EAP - MEB

Corporate Social ResponsibilityApril 2009


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April 2009

Slide 2

Agenda Day 1

17:00 Corporate Social Responsibility why care?

PwC's Sustainability Services at a glance

Sustainable development a new buzz-word, but what does it

mean? Setting the scene what is at stake?

The challenge for business what does it mean to your company?

-- break ---

18:30 Examples & case studies: what if everything goes wrong?

19:15 Now its over to you CSR at European Agro Company (SimulEthik)

20:00 END


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Agenda Day 2

17:00 Debrief previous session

17:30 Groups prepare for role play engaging stakeholders is not always aneasy task

19:00 Role-play: Annual shareholder meeting of Greedman & Co19:45 Conclusion and wrap-up

20:00 END


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PricewaterhouseCoopers Facts and Figures

PricewaterhouseCoopers is atruly global organisation withmember firm offices in 766cities in 150 countries.

146,000 partners and staff

More than USD 25.2 billion net

revenues in 2007(up by 10.5%)

4 Filename


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Slide 5

Sustainable Business Solutions (SBS)

SBS French practice is part of a global team with over 800Environmental, Health & Safety (EH&S) / sustainability

experts in more than 20 countries In France, about 40 EH&S and sustainability professionals

Broad environmental / sustainability services offering

Signatory to UN Global Compact PwCs global CEO was elected chairman of WBCSD

(World Business Council for Sustainable Development)

5


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Vrification des informations :

Dcret NRE CO2 Rapports DD

Risque et conformit : Due Diligences Evaluation des risquesenvironnementaux

Support laudit

3 grands marchs organiss en lignes de services (France)

Channel 1

Secteur

Priv

Secteur publicet

partenariatspublic-priv

- Politiques publiques(institutionsinternationaleset nationales)

- Financement de l'accs l'eau potable

- Projets relatifs au marchdu carbone

- Stratgie et communication- Organisation du DD- Gestion des produits, desservices et de la technologieAccompagner

les dmarches

Crdibiliser

les informations

Contribuer audveloppement durable

- Commerce international &mondialisation


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April 2009

Slide 7

Our clients in France


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April 2009

Slide 8

Paris

London

New York

San Francisco

Stockholm

Frankfurt

Amsterdam

AthensMilan

Madrid

Tokyo

Budapest

Helsinki

Sao Paulo

Copenhagen

Oslo

Brussels

Bucharest

Zurich

Prague

Wellington

Lagos

Nicosia (Cyprus)

Melbourne

New Delhi

Harare

Johannesburg

Santiago

Buenos Aires

Lisbon

Vancouver

Quito

Lima

Montevideo

La Paz

Asuncion

Los Angeles

Sustainable Business Solutions* September 2004 data

Moscow

Beijing

Hong Kong

Pittsburgh

Brisbane

Sydney

Bombay

CaracasBogota

The SBS Global Network

Nearly 800 professionals

Environmental, social and economic expertise

Wide variety of technical skills in environmental and social issues including :

Labour standards,

Health and safety,

Human rights, Stakeholder consultation,

Corporate governance,

Socio-economic analysis and economic impact assessment.


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April 2009

Slide 9

Five services to deliver value to clients internationally:

CSR strategy design and deployment

Reporting and assurance of non-financial information

Climate-change audit and consulting, and emissions tradingservices

Transaction support on issues concerning EHS and corporatereputation;

Supply-chain risk management


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Recent PwC Thought-leadership publications

www.pwc.fr/ddwww.pwc.com/sustainability


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Sustainable development

A new buzz-word, butwhat does it mean?

16 PricewaterhouseCoopers


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Sustainable development

(or Sustainability) is development that

meets the needs of present generations

without compromising the ability of

future generations to meet their own

needs

World Commission on Environment and Development

(Brundtland Commission, 1987)


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Corporate Sustainability is a

business approach to create long-

term shareholder value by embracing

opportunities and managing risks

deriving from economic,

environmental and social

developments

Dow Jones / SAM Sustainability Group Index


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Corporate Social Responsibilityis aconcept whereby companies integrate socialand environmental concerns in their business

operations and in their interaction with theirstakeholders on a voluntary basis as theyare increasingly aware that responsiblebehaviour leads to sustainable businesssuccess.

EU Green paper on CSR (July 2001)


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April 2009

Slide 20

Why sustainable development is becoming so important ?

Sustainable Development has to answer three main issues: Social equity and access to basic services:

- 1.2 billion people live with less than 1 US$ per day

- 1 billion people live without drinkable water- 2 billion people without sanitation system fro water

- 2.5 billion people live without electricity

Environmental issue:

- Emissions of CO2, during this century, temperature could raise between 2 and6C

- Protection of forests: destruction of tropical forest increases in the proportion ofone football ground per second

- Environmental footprint, if all the countries have the same environmental impact ofFrance, 3 planets should be necessary to guarantee living in a sustainable way.

Demographic issue: Population should increase by 50% by 2050, reaching more

than 9.3 billion of inhabitants


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A new business model : Triple bottom line - a balancedscorecard

*As defined by the Sustainability Asset Management Group (SAM)


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In brief

Sustainable Development appeared more than 20 years ago

Sustainability and/or Corporate Social Responsibility are

basically two different words for the same concept. One isapplicable at country/region level and the other one is applicableat organization level

New is: Listen to and engage with stakeholders

Triple-bottom line: the challenge is to find the right balancebetween economic, social, and environmental issues, fullyintegrated in the business strategy

Long-term perspective (beyond next quarter financial results?)and inter-generational transfers


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Slide 23

Setting the scene -

what is at stake ?


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April 2009

GDP/SalesRanking 1998

Countries

1...272829...323334

USA...NorwayDaimlerChryslerSaudi Arabia...GreeceWal-MartPortugal

The economic power of multinationals outweigh the one of some

countries


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25 PricewaterhouseCoopers

And are viewedas


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April 2009Shareholders

Customers

Employees

Society

Partners

Moving from shareholders only, to all stakeholders!


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April 2009

Slide 27

Moving from shareholders onlyto allstakeholders


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The challenge forbusiness:

What does this mean toour company?

Each company has to

define its own approach


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April 2009

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Mark Moody Stuart (CEO Shell)

My colleagues and I are totally

committed to a business strategy that

generates profits while contributingto the well being of the planet and its

people.

We see no alternative.We see no alternative.

Our values, Business Principles,

commitment to contribute to asustainable form of development are

inextricably linked to our long-term

commercial success.


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Sustainability issues are on theagenda of Boards:

John Smith (CEO GM) :

Steps towards sustainability: By taking steps towardssustainability, General Motors is moving into the future.

The impact of our products, plants, and partnership define

our future course as a corporation. It is the balance of

environmental, social, and economic actions of GM that

will help shape the world around us and provide a

foundation for today and the next generation. By our

deeds, we intend to lead.


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Sustainability issues are on theagenda of Boards:


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Sustainability issues are on theagenda of Boards (Spot the error )

DuPont is a science company that is focused onsustainable growth- creatingshareholder and societal value while decreasing ourenvironmental footprint.Our core values of safety, ethics, fair treatment of people and environmentalstewardship have remained constant over time... Looking ahead: as we

approach our 200th anniversary, we are dedicated to transform DuPont intoasustainable growth company.

As we move forward, we will leverage our intellectual capital andinnovativecapabilitiesto promote sustainable business practices around the world. We

believe this approach is imperative for achieving our business objectives,attracting and retaining top talent, preserving and enhancing ourreputationanddelivering long term corporate value.

Charles O. Holliday JR (CEO DuPont):

Kenneth L. Lay (former Chairman and CEO Enron):


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CSR i l b i l f h


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April 2009Slide 39

CSR is also about creating value for the

company Attract talents and motivate employees

Reduce costs and risks

Increase turnover

Change your business model, towards a functionality offerand not only a product delivery


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Examples & case studies

L


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Lesson #1:

If things can go

wrong, theywill

Edward A Murthy, Jr 1949, so called "Murthy's law"


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April 2009Slide 42

Impacts of sustainability risks July 2006, Palm / Treo lose 120 million euros of its value in

the stock exchange because some suppliers were notrespecting the ROHS (Restriction of HazardousSubstances) directive

August 2007, Mattel has to recall millions of products and

loses 27% of its value in the stock exchange beacausesome products contain high quantities of plumb

May 2007, an investment fund based in norway sells for414 million euros of Walmart shares because child labourhas been detected in some suppliers


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April 2009Slide 43

Lack of tracability

BusinessBusiness--toto--BusinessBusiness

BusinessBusiness--toto--ConsumersConsumers

ProductsProducts

InformationInformation

Dangerousmaterials?

Uncertainty in waste /recycling policies

Child labour?Labour conditions? ProductBoycott?

Example in the food industry : Accountability for environmental/social

issues "from farm to fridge" ...

Food safety? Lack of trust?

Marketplace


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Lession # 2 : Bad presscan be bad for your

business


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" You do anything in the world to gain areputation. As soon as you have one, you seem

to want to throw it away.

It is silly of you, for there is only one thing in the

world worse than being talked about, and that isnot being talked about."

Oscar Wilde, The Picture of Dorian Gray, 1890

Purchasing Trends Change in


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Purchasing Trends - Change in

Consumers attitudes?BeforeSept.11

AfterSept.11

Would you switch brands at equal quality to support acause?

54% 81%

Is a companys commitment to causes important whenyou decide what to buy or where to shop?

52% 77%

Is a companys commitment to causes important whenyou decide where to work?

48% 76%

Do you plan to purchase a gift that supports a cause? 56% 64%

Is a companys commitment to causes important whenyou decide in which funds to invest?

40% 63%

Source: 2001 Cone/Roper Corporate Citizenship Study in the US

E h b d f


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April 2009Slide 47

Event the renown brand can face

brand attacks

Source : www.jeboycottdanone.fr

(website closed by court decision on 14 mai 2001

"I do boycott DANONE"

"Hey boss, we have a

small problem "

French| NewspaperLe Monde Frontpage

cartoon on April 21, 2001 :


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April 2009Slide 48

Risk on brand value andshareholder value


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Lesson #3 : "...I'm sure

financial markets don'tcare about these things"

Dow Jones Sustainability Index (DJSGI)


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April 2009Slide 50

50

Dow Jones Sustainability Index (DJSGI)

Outperforms the Dow Jones Industrial Index

Launched in August 1999by Swiss-based SAMPerformance Group andDow Jones

First global index trackingperformance of Top 10percent of the worldsleading sustainabilitycompanies

80

130

180

230

280

330

12/93 6/94 12/94 6/95 12/95 6/96 12/96 6/97 12/97 6/98 12/98 6/99 12/99 6/00 12/00 6/01 12/01 6/02 12/02 6/03 12/03

DJSI World (in USD) DJGI World (in USD)

DJSI World USD Performance and Risk (I)December 1993 - December 2003, USD, Price Index

DJSI World / DJGI World:

Correlation: 0.9641 Tracking Error: 4.34%

DJSI Volatility: 16.17% DJGI Volatility: 14.94%

101%

68%

Sustainability = Stakeholder but also Shareholder Value


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Sustainability Stakeholder but also Shareholder Value

MSCI World Index is a stock market index of all the developed markets


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April 2009Slide 52

52

How are companies on the DJSI Index selected?

1. Does the company belong to the Dow Jones Global(DJGI) investable universe?

2. To which industry group does the company belong?

3. What is the companys score on the CorporateSustainability Assessment?

4. How is the company ranked within its respective

industry group? Is the company among the Top 10percent in its industry peer group?


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April 2009Slide 53

53

DJSI Selection 2008


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April 2009Slide 54

How are companies on the DJSI Index selected?

Sustainability Assessment is composed of general and industry-specific sustainability criteria:

- Sustainability policy and strategy

- Management of sustainability opportunities

- Industry group-specific sustainability opportunities

- Strategic sustainability risks

- Management of sustainability risks- Industry group-specific sustainability risks

How are Companies on the Index selected?


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April 2009Slide 55

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How are Companies on the Index selected?

The DJSI Sustainability Assessment

Publicly available Information on thecompanies (e.g., press and media,

stakeholder opinions, NGO campaigns)

Assessment of companies policies and

reports based on company-provideddocuments and contacts (e.g., Annual andEH&S reports, company website)

Twenty-page questionnaire sent out by SAMto companies on the Dow Jones GeneralIndex

S i bili A i i A i


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Sustainability Assessment criteria Automotive 2007

S t i bilit A t 2007 A t ti


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Sustainability Assessment 2007 - Automotive

S ?


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April 2009Slide 58

Close to US$6bn in DJSI-basedinvestment vehicles

Attract long-term investors

Reduced volatility of share prices

Reduced cost of capital

Does it pay to care about Sustainability ?

Some views from investors and academics

D i ll b S i bili ?


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April 2009Slide 59

Does it really pay to care about Sustainability?

At least some investors take their chances


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Lesson # 4 : "...Financial

markets do care aboutthese things"

Even the strongest brands can crumble


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April 2009Slide 61

Even the strongest brands can crumble

Coca Cola and Food Safety


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April 2009Slide 62

WALL STREET5 June 1999 : 70$

21 June1999 : 61$

- 13%

Coca-Cola and Food Safety

Impact of major crisis on company


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April 2009

stock-price (%)

Seveso (Juillet 76)Hoffmann - La Roche

Bhopal (Dc. 84)Union Carbide

Pollution du Rhin (Nov. 86)Sandoz

3 months later 1 year later

Group Market Group Market

-15

-16

-12

-8

+10

+2

-13

+14

-5

0

+23

+6


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Lesson # 5 : "...it is also

about creating newmarket opportunities"

New demand for products environmental and socialfriendly


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April 2009Slide 65

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friendly

Increasing demand for labelled products that guaranteesocial and environmental performance: Fair Trade, Eco

label (European flower)

Basic principes for Fair Trade

- Existence of a Fair Trade Labelling Organization (FLO)

- Main products covered: cotton, coffee, cocoa, tea, etc

- Basis principle is to pay more than the conventional market price tofarmers located in developed countries (fair trade premium price)

- Control over all the supply chain

But false labels and/or green washing can be verydangerous for the respectability of the brand


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dangerous for the respectability of the brand


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Lesson # 6 : "...and what

about changing thebusiness model ?"

Environment constraints and new habits fromconsumers allow to think new business models


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April 2009Slide 69

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consumers allow to think new business models

Development of an economy of functionality

Interface rent fitted carpet and do not sell them

Michelin Fleet Solutions is a renting system of tyresfor big company clients of Michelin, it means a

higher profitability for Michelin by enlarging the lifeduration of the tyres and savings for the clients byreducing fuel consumption and taking care of usedtyres disposal

Development of a social business to answer thedemand of the base of the pyramid

Grameen Danone Food


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Lesson # 7 :comunicate

on your CSR programmesis not about telling a nice

story but facing criticalissues in a transparent

manner"

External communication on CSR aspects isstructured through standards


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April 2009Slide 71

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structured through standards

CSR reporting rules are more and more mature and evolvequickly

Version 3 of the Global Reporting Initiative (GRI) 940companies worlwide at the end of 2008

AA 1000 (Accountability)

UN Global Compact Communication on Progress (COP)

Best practices in CSR reports: engage stakeholders / define their

needs, focus on main issues, set objectives and show results,develop a set of coherent indicators and explain trends in yourperformance, speak about what is going wrong also, use opinion ofexternal stakeholders to progress (experts, NGOs, etc)

Now its over to you


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y

Strategic management for the European Agro Company


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g g p g p y


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Role-play: Engaging stakeholders is notalways an easy task

Group 1: "Greedman & Co"Group 2: "NGO GreenFeast"

Group 3: "Greedman shareholders"


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Discussion,Lessons Learned &

Take-Away

Some key issues


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Does the company actively engage dialogue with stakeholders ?

Is the company's management prepared to respond to critics?

What are the risks associated with the companys brandname ? How can a company protect the brand name?

Does the company manage properly it's supply chain partners?

Are social or ethical values an important part the company's brandnameand are corporate codes of conduct in line with these values?

Does the company use green / social or ethical marketing?

Does the company face brand attacks or product boycotts?

Is the company accused of a lack of transparency on environmental,social, or ethical issues?

Key learnings: Corporate Social Responsibility


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CSR is voluntary in the EU

It is embedded in the business culture

Not a mandatory requirement thus no public enforcementmechanism

Enforcement through stakeholders: pressure groups andmarket demand (e.g., financial markets).

Ability to dialogue with stakeholders is key: understand theirconcerns,

Pressure on companies to become more transparent andmore accountable

Two different strategies prevail: mitigating risks (avoid theworst) and seeking opportunity

Leading companies integrated in their business model andfind it adds value.

Feedback session engaging with stakeholders is not always an


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easy task.: recap of instructions for each group Group 1: Greedman & Co management

Group 2: Environmental NGO GreenFeast

Group 3 : Shareholders of Greedman & Co

- Employees

- Former Greedman & Co employee, US based, retired- Institutional investor (US based)

- Financial analyst

- Housewife

Contact


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Slide 79

Clment Lefevre

PricewaterhouseCoopers

63 rue de Villiers

92208 Neuilly-sur-Seine

France

tel +33 1 56 57 89 78

fax +33 1 56 57 16 36

e-mail [email protected]

www.pwcglobal.com/sustainability

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