Sustainability strategy erm soq jan2012


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Sustainability strategy erm soq jan2012

  1. 1. Sustainability Strategy Services Environmental Resources ManagementDelivering sustainable solutions in a more competitive world
  2. 2. Delivering Value through SustainabilitySustainability Value: Today, companies face a number of demands – to create innovative products, meet shareholder expectations, and operate in a socially and environmentallyDelivering top- and bottom- responsible manner.line benefits by capitalizing While some organizations have interpreted this last expectation as the needon opportunities and to comply with laws and regulations, many companies are actively leveragingcontrolling risks associated sustainability drivers to create revenue growth, reduce costs, mitigate risks, and strengthen relationships with key stakeholders. At ERM, we refer to thiswith environmental and as sustainability value: delivering top- and bottom-line benefits by capitalizingsocioeconomic issues. 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.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 2
  3. 3. corporate citizenship triple bottom line esg corporate shared value sustainability   people,   planet,  corporate social responsibility profits global citizenship sustainable developmentAchieving SustainabilityEmbedding sustainability thinking into an enterprise isn’t easy, but ourexperience suggests there are four keys to success:1. Be Forward-LookingArticulate a compelling view of the future and what it means for the company’sbusiness success. Identify trending issues early and use them to createcompetitive advantage.2. Be InspirationalPursue sustainability as a leadership imperative – the issues are too complexto be left as a functional priority alone. Then empower individuals at all levels inthe organization to accelerate your efforts.3. Be PracticalRigorously embed sustainability throughout day-to-day operations anddecision-making. Draw clear linkages between sustainability and financialgoals to convert non-believers.4. Be CollaborativePartner with your stakeholders to find novel, win-win solutions that propel yourbusiness forward. Don’t shy away from your detractors as debate will advanceyour thinking. 3
  4. 4. 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. 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 Manufacturing Manufacturing Power Power 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, Chemical, Chemical, Oil & Gas Oil & Gas Pharmaceutical more stringent product regulations, and changing customer Pharmaceutical buying habits. Pharmaceutical companies have challenges related to Mining, ethical testing, access to medicines, pharmaceuticals in the Consumer Products, Mining, Consumer Products, Metals environment, marketing practices, and pricing. Metals Retail Retail 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. 4
  5. 5. Sector Global Issues Issues Company Issues... 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 talentCompanies in many sectors now need to consider life cycle impacts of their productsnot only for their customers but also their customers’ customers. Additionally, they areincreasingly being held responsible for the actions of their suppliers.... 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 5
  6. 6. Our ApproachThe ProcessERM employs a proven methodology to assist clients implementation plan, including roles, responsibilities,in identifying and leveraging the sustainability value timing, budget and measurement. Once the plandrivers relevant to their businesses. This is a scalable is approved, we partner with clients to execute theand flexible process that can accommodate companies recommended strategies.that might be at different levels of maturity – from thosewho have just begun to address strategic sustainability Fundamental to all of these steps is the need toissues to those who might be in their second or third engage key management throughout the process.generation. We begin by assessing the company’s value Involvement early in the process can be particularlychain to obtain a holistic picture of the organization’s useful, not just to gain management insights into thesustainability risks and opportunities. Next, we quantify risks, opportunities and potential strategic responses,the benefit of addressing those issues, providing a but also to help manage the internal politicalcost-benefit analysis of different options to create the landscape and to build the critical organizational buy-business case for action. We then develop a detailed in needed to implement the resulting strategy. 1 2 3 4 Situation Business Action Implementation Analysis Case Planning and Monitoring Increasing Organizational Awareness and Buy-InProcess Steps: • Analyze company value • Define market drivers • Prioritize and sequence • Allocate budgets chain and markets, identify • Collect and analyze internal initiatives to address risks • Communicate internally and sustainability value drivers and external data and opportunities externally as appropriate • Assess customer • Quantify sustainability value • Identify change require- • Implement initiatives (via expectations and needs at stake ments (business processes, pilot programs to establish • Assess competitor actions • Identify initiatives to address competencies, etc.) proof points) and positioning risks and opportunities • Define plan, including • Track progress and adjust • Assess existing internal • Perform cost-benefit actions, roles, timing, KPIs as needed programs and performance analysis • Obtain management • Communicate benefits and • Define ambition level approval milestones achievedOutputs: Analysis of key issues, risks Value creation opportunities Sustainability strategy and Improved performance and opportunities and business case change management plan with quantifiable results 6
  7. 7. ToolsERM employs a wide array of proprietary tools and not only develop, but also implement these strategies.methodologies when creating and implementing With 40 years experience in helping companiessustainability strategies. These may include stakeholder improve their environmental, health and safety, andanalysis, value chain analysis, change management social performance, we are able to execute innovativeplanning, and training and awareness development, and effective plans to help companies realizeamong others. Additionally, ERM is uniquely positioned to sustainability value.OutcomesSustainability strategies tend to have common elements. We find actions often address the following sustainabilityprogram components. Stakeholder relations Stakeholder engagement and partnerships (employees, communities, NGOs, customers, suppliers, academic institutions). Disclosures and public reporting. Asset Development Supply chain Operations Products and services Community engagement. Drive expectations upstream. Resource conservation. Life cycle assessment. Due diligence. Risk mitigation. Pollution prevention. Product development process. Permit process optimization. Whole system eco-efficiency. Safety. Product/ service innovation. Green buildings. Contract terms and oversight. Health and wellness. Customer partnerships. Labor practices. Governance Structure, committees, roles. Policies and standards. Metrics, goals, and reporting. Ethics. Risk management. Auditing and oversight 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 7
  8. 8. Our Approach in ActionDeveloping a Sustainability Strategy that Updating the Sustainability Strategy andResults in Recognized Global Leadership: Program In The Wake Of A Major Acquisition:Consumer Products Company Diversified Mining CompanyERM helped a fiercely decentralized global consumer A global mining company wanted to upgrade andproducts company that had just formed a corporate formalize its sustainability management framework insustainability leadership team formalize and enhance its the wake of a major acquisition. ERM worked at thecompany-wide sustainability programs and performance corporate, business unit, division and site levels toenterprise-wide. implement a number of initiatives including: • Post-acquisition due diligence and integration: ERMOver the course of two years, ERM: helped assess the company’s global operations,• Assisted in the development a corporate sustainability reviewing the full scope of sustainability risks. This strategy that addresses product innovation, brand resulted in a blueprint for the desired post-integration, protection and enhancement, and strengthens and a roadmap for getting there. governance systems • Sustainability framework development and• Created corporate sustainability metrics including implementation: ERM helped update the company’s formal data definitions and data collection protocol sustainability framework including its governing• Assisted with the company’s Corporate Social business principles, sustainability policy, standards Responsibility report and Dow Jones Sustainability and assurance program to address emerging issues, Index application commitments to international standards and sector-• Developed corporate EHS policies and standards leading management practices. ERM also helped roll• Implemented an EHS management system in several out the new framework across the organization. business units around the world • Climate risk assessment and strategy development:• Conducted life cycle assessments (LCA) and assisted ERM conducted a detailed review of the physical with the development of a LCA program risks to the company’s operations and infrastructure, impacts of pending legislation and commercialThese efforts have helped the company become widely implications of climate change. The analysis supportedrecognized as a sustainability leader in its sector. 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. 8
  9. 9. Driving Cost Savings Through Defining The Business Value of Sustainability:Management of Non-Technical Risk: Chemical CompanyOil and Gas Company ERM was hired to define the business value ofERM engaged with a multinational integrated oil and sustainability to the company. A business model wasgas company to quantify the sustainability value at risk developed to present the results in terms of Net Presentwithin their upstream portfolio of major capital projects. Value. A global team of 12 ERM employees deployedIn this context, sustainability value is inexorably linked across the company to conduct senior leadership andto our client’s social license to operate, which can be executive-level discussions, collect data, and frameboth positively and negatively affected by so-called the business case analyses. ERM interviewed over 100non-technical risk (NTR). NTRs include all the risks executives, corporate managers, and technical leaders.associated with regulatory, legal, fiscal, cultural, socio-economic, and environmental interfaces of the project. Using financial inputs from published corporate reports and data provided by interviewees on products or costsTogether with our client, we engaged the executive that could be considered “sustainability-related,” ERMleadership of the organization with a persuasive business built a financial model for each business unit showingcase for action – finding almost $800M in eroded net top line revenue and bottom line savings, as well as thepresent value on four projects in just three years. From best method for avoiding serious risks and protecting thethere, we developed a multi-workstream phase of work reputation of the strengthen the leadership, capability, capacity, andprocess for managing and creating cultural awareness Through these discussions and financial modeling,of NTR within the organization, all of which were ERM clearly articulated the value of sustainability to thedesigned to drive improved business performance business leadership of the company. The team identifiedby catching and proactively managing NTRs earlier in approximately $4 billion in potential sustainability derivedproject development. On the ground, we have mobilized revenues across the company, and approximatelyteams – with both ERM and client representation – at $500 million in “incremental value” resulting from athree multi-billion dollar projects that are working to sustainability program implemented at the corporateintegrate environmental and social issues more firmly level.into the business culture of these projects. We haveseen tangible benefits of this integrated approach The ERM team prepared a path-forward plan to design,ranging from an improved schedule to functionally build, and implement a corporate sustainability program.integrated teams (e.g., engineering and regulatory). 9
  10. 10. Our strategy work is informed by 40 years of experienceimplementing sustainability programs worldwideSustainability Reporting and Disclosure: Life Cycle Assessment:Utility/Power Company Consumer Products CompanyERM assisted with a number of projects to improve the ERM conducted a life cycle assessment (LCA) on theintegrity of a major utility/power company’s sustainability company’s tissue products to help the company betterdata and to externally report performance to a variety of understand the impact of using recycled versus virginstakeholders. fiber through the products’ life cycle. • ERM assisted with the design and development the company’s sustainability report. As part of that effort, ERM examined the environmental footprints of seven ERM conducted a “pre-assurance” review to validate categories of tissue products throughout their life the data, prior to independent third party auditing cycles. The study compared 14 individual products with • ERM collected data and helped prepared responses varied percentages of recycled and virgin fiber makeup. for the Dow Jones Sustainability Index (DJSI) Product performance was analyzed across several application submittal, resulting in the company being impact categories: climate change, ozone depletion, listed in the North American index. ERM also assisted photo-oxidant formation, depletion of abiotic resources, in the Newsweek Green Rankings response, resulting eutrophication, acidification, human toxicity, fossil fuel in a significant rating improvement vis-à-vis industry consumption, solid waste, and water use. peers. • ERM reviewed SEC disclosures associated with ERM’s analysis established that both virgin fiber climate change risk to ensure that they met relevant and recycled fiber offer environmental benefits and regulatory guidelines shortcomings. The client is using this data to improve process management, increase efficiency, and reduce itsLocal Community Engagement: environmental footprint.Mining Company Eco-Efficiency and Cost Reduction:ERM worked with a mining company to design and Global Automotive Supplierimplement one of the South American country’s firstearly stakeholder engagement and disclosure strategies ERM developed a program to reduce natural resourcefor a gold and copper project planned in an area near consumption and waste at manufacturing facilities of aindigenous communities. ERM designed a community global automotive supplier. The program, integrated intoconsultation process, tailored to the needs of key the client’s operational excellence and six sigma efforts,stakeholder groups, to assist the company in increasing provides guidance on how to realize cost savings bydialog with and collecting feedback from affected reducing material inputs and minimizing waste streams,communities throughout the design phase of the project. including emissions, water and solid waste. ERM helpedThe plan created a number of positive outcomes, pilot the program, train employees and eventually roll itincluding: out globally. Cumulative cost savings to date total over • Increased transparency around the project $23M, in addition to environmental impact reductions. • 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 10
  11. 11. Sustainability Data Management: Carbon Footprinting and Analysis:Mining Company Oil and Gas CompanyERM helped a mining company improve the quality ERM developed a carbon footprint for a major oil andand accuracy of its sustainability data. As the gas company covering oil production, transportation,company collected data from multiple sites, ERM and refining operations. ERM developed a flowsheetdeveloped a tailored sustainability reporting guideline simulation based on a refinery mass and energy balanceand accompanying data collection tool in line with that was capable of taking yield data for a specifiedthe Global Reporting Initiative (GRI). The guideline mixture of crude oils and calculating the GHG emissionssets out the minimum reporting requirements for the from the refinery that were expected to result. The dataannual sustainable development report and describes allowed the company to view its operations holistically forthe definitions, processes, frequency, key controls the first time and also highlighted significant opportunitiesand responsibilities for collecting and reporting data. to decrease its footprint by streamlining certainThe implementation of the guideline has simplified the transportation practices.process for collecting data for the report and allowedthe company to publish reliable, complete and accurate EHS and Sustainability Governance:data externally. Pulp and Paper CompanyBaseline Water Assessment: ERM conducted an independent review of a globalAgricultural Processor pulp and paper company’s EHS & Sustainability (EHS&S) programs to identify gaps and opportunitiesERM was commissioned to conduct a baseline water for improvement. The review included seniorsustainability assessment for the worldwide operations management interviews, benchmarking, and site visits.of a leading agricultural processor whose products ERM recommendations that have subsequently beeninclude food ingredients; animal feeds and feed implemented include:ingredients; and biofuels. The client has assets spread • Creation of a standing EHS&S Councilover 50 countries with more than 200 processing plants. • Update and review of outdated EHS policies andThe assessment surveyed operational sites to obtain standardsinformation at both the macro (overall organization water • Enhancements to the audit programusage) and micro (site and community issues) levels by • Strategies to drive down incident severity andcollecting both quantitative and qualitative water data. associated costsERM then took the data and conducted analyses to • Creation of new support service structures to assistdetermine the client’s water consumption, costs, risks, specific business units in implementing EHS&Sand opportunities related to facilities operating in water- initiativesscarce areas. • More robust external communications including the development of a complete GRI sustainability report Selected Clients AkzoNobel DuPont Procter & Gamble Anglo American E.ON Kraftwerke Rio Tinto BASF Evonik Industries Sanofi-Aventis Bayer Ford Motor Company SATORP Becton Dickinson General Electric Schlumberger BNSF Railway Company Ingersoll-Rand Shell International Petroleum Ltd Boehringer Ingelheim Nalco Siemens Boeing Newcrest Mining Limited Statoil Chevron USA Inc. Novartis Syngenta Danaher Oracle Total Dell Panasonic Unilever 11
  12. 12. About ERMEnvironmental Resources Management (ERM) is a In the area of sustainability, ERM has worked across theleading global provider of sustainability consulting full range of industry sectors, with companies basedservices. We have over 140 offices in 40 countries and all over the world, working seamlessly between theemploy around 4,000 people. Over the past five years C-suite and plant-level operations. Our experience withwe have worked for more than 50 percent of the Global sustainability programs includes:Fortune 500 delivering innovative solutions to help themunderstand and manage sustainability challenges. • 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 managementERM has a well-established reputation for excellence, • Stakeholder engagementcombining deep technical expertise with world classmanagement consulting skills. Our experience with sustainability programs combined with more traditional environmental, health andERM provides global capability with a local regulatory safety activities (e.g., regulatory compliance, pollutionand cultural understanding. Our global staff represents prevention, incident prevention, and wellness) helps usa full range of disciplines from business to science, develop credible and implementable strategies at theengineering to communications. Our corporate structure enterprise, business unit, and asset levels.allows us to assemble project teams with the bestpossible mix of technical and management expertise,as well as geographic proximity to our clients’ locations.We have extensive internal networks to leverage ourcollective project experience across the R12-6JAN12