Telecom Italia, Paolo Nazzaro - Engagement Workshop. 3rd LundquiCSR Online Awards, Venice 27-28 Oct 2011


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Telecom Italia, Paolo Nazzaro - Engagement Workshop. 3rd LundquiCSR Online Awards, Venice 27-28 Oct 2011

  1. 1. Venice, October 28, 2011 Valuing non financial performanceIdentifying, measuring and managing material drivers of value Paolo Nazzaro Head of Group Sustainability - Telecom Italia 1
  2. 2. Reporting Gap 2
  3. 3. Central proposition► Non-financial performance is regarded as important by both senior executives and investors► Companies are slow to integrate non-financial performance measurements in the mainstream business strategy internally and to communicate these externally► Investors are slow to incorporate non-financial indicators into valuation models► ESG factors are a key driver of non-financial performance 3
  4. 4. What causes this information asymmetry? (1/2)Companies► Perceived lack of expertise in NFP issues and reticence to discuss unless intrinsic to core business strategy► Concern over the robustness of NFP management information and internal methodologies for delivering it► Lack of confidence in ability to manage NFP to deliver forecast numbers► Scepticism at investors’ interest in NFP► Worries about impact on personal credibility of promoting non-core financial messages 4
  5. 5. What causes this information asymmetry? (2/2)Investors► Inadequate evidence of causal link between NFP and financial performance► Lack of robust inter-company or sectoral frameworks for NFP comparison► Interest often limited to assessment of NFP directly impacting on strategy or leadership competence► Protection of proprietary analytical tools/approaches and market differentiation creating lack of transparency in NFP assessment methodologies► The relative importance of NFP issues differing between risk and regulatory environments 5
  6. 6. The LAB structure and the focus groups► Business leadership from Lloyds Banking Group and Telecom Italia► Parallel research programme: EABIS through its corporate founding partners, Doughty Centre for Corporate Responsibility at the Cranfield School of Management (UK), Bocconi (Italy), Vlerick Leuven Gent (Belgium)► Key partnership with EFFAS (ESG Commission) and DVFA► Moderation from CSR Europe► 5 focus groups (Rome, Frankfurt, Paris, Stockholm, Utrecht) with the participation of investors, businesses, consultants, representatives from institutions, academia and stakeholders 6
  7. 7. Outputs phase 1 of the LAB► A comprehensive review of the critical areas of non-financial performance and their contribution to financial performance► A framework for proposed metrics and strategies for management and communication of key areas of non-financial performance highlighting the link with financial performance► A declaration of principles and recommendations addressed to different stakeholders (companies, investors, EU institutions, business schools, trade bodies) 7
  8. 8. GRUPPO TELECOM ITALIA20 dicembre 2010ER – Branding, Corporate Identity e RicercheUso Confidenziale TELECOM ITALIA - CONFIDENZIALE
  9. 9. Recommendations – Investors 9
  10. 10. The Collaborative Venture Collaborative Project Venture led by: DELPHI Telecom Italia, Solvay, Lloyds Banking Group, KKR Companies’ Identification Assessment and best of superfactors practice sharing 10
  11. 11. Project Delphi Work Stream Structure Initial “Straw-Man” hypothesis of superfactors SPONSOR Validation from financial analysts (EFFAS) STEERING COMMITTEE and asset managers Validation from large asset owners PROJECT MANAGER Final list of superfactors WORKSTREAM LEADERS 11
  12. 12. Companies’ assessment and best practices sharing► CSR Europe and EABIS have developed a framework as an instrument to explore member’s experiences while measuring their non-financial performance, with the objective to identify their progress and thus their maturity. This framework is based on the outputs from the first phase of the Laboratory on Market Valuation of Non-Financial Performance► Learning process and best practices sharing► Both primary (companies’ self assessment + direct conversation with CSR Europe and EABIS’ representatives) and secondary (desk research completed throughout the enterprises disclosed attitudes) data examination.► Measurement is based on a scoring system that is attributed to each aspect where the companies are being scanned 12
  13. 13. Non-financial drivers and key metrics Non-financial drivers Key metrics Human Capital Employee engagement Customer Relations Customer Satisfaction Society Public perception Supply chain mgmt. Environment Carbon emissions Waste mgmt. Energy efficiency Innovation New product & process develop. Corporate Governance Ethical integrity Processes & procedures 13
  14. 14. A desired flightpath? 14