Assent's latest research paper attempts to clarify the relationship between companies’ environmental compliance strategies, and their profitability (as measured by their stock prices). An independent analysis—performed by two prestigious U.S. institutions: consulting firm Watermark Advisors, and Vanderbilt University’s Owen Graduate School of Management—examined the performance of one hundred publicly traded companies (Assent Customers). As Assent customers, these companies had all invested significantly in their compliance programs. - Did Their Stock Price Outperform the Market at Large? - How Much or How Little? - What Latent Functions Could Investing in Compliance Cause? - Why Should Companies Invest Vs Do the Bare Minimum? - What Conclusions Can we Draw About Investing in Compliance.

2. Introduction
Compliance regulations are often seen as taxes and or cost centers for companies. Each time new compliance
regulations are passed, lobby groups challenge the regulation’s efficacy, declaring the cost of compliance will
result in huge losses along with potential job cuts and subsequently launch court appeals. Is compliance simply
a cost center? Can companies that embrace compliance with mandated regulations and rally to put in place
in-depth programs compete or do they get left behind by the competitors who either outright avoid compliance
or do the bare minimum? If compliance related costs put firms with the most robust programs at a disadvan-
tage, should those not playing fair see the greatest impact to their bottom line? Through independent analysis
with Watermark Advisors and Vanderbilt Owen Graduate School of Management, an analysis of 100 public
Assent Compliance customers was conducted to see if, over a 5-year period, those that invested significantly in
their compliance programs outperformed the market (S&P 500).
Summary
Page 1 of 6 | Stock Price and Business Case For Compliance www.assentcompliance.com
Stock Price and Business Case For Compliance
Stock Price Analysis-5 Year Returns
The stock prices for the selected companies and S&P
500 were obtained via Yahoo! Finance for February
20, 2015, August 20, 2014, February 20, 2013, Febru-
ary 17, 2012, and February 19, 2010. All stock prices
were adjusted for splits, reverse splits, buybacks, and
additional equity issuances. Dividends were excluded
from this analysis, so the analysis focused solely on
stock prices and the return attributable to the change
in stock price from one period to the next.
Time 0 3 Year 4 Year 4.5 Year 5 Year
$100.00 $232.61 $358.80 $343.89 $346.59
$100.00 $132.78 $161.57 $174.62 $185.33
$100.00 $192.31 $272.55 $264.66 $276.56
$100.00 $132.78 $161.57 $174.62 $185.33
$100.00 $148.10 $199.16 $190.43 $193.52
$100.00 $132.78 $161.57 $174.62 $185.33
Top 10 Assent Customers
S&P 500
Top 20 Assent Customers
S&P 500
Customers 100 Public Sample
S&P 500
Cohort Breakdown
The returns were analyzed by assuming an investor
put $1.00 into a company covered by the compliance
software and $1.00 into the S&P 500 at time t = 0
(February 19, 2010). For each date, the percentage
change in per share price is the assumed dollar
change in the initial investment. E.g. if a stock
increased from $50 at t = 0 to $100 at t = 1, the $1.00
invested at t = 1 would be worth $2.00, a 100% return
on investment.
Researched performed independently by Jacob Wrot MBA Vanderbilt University | Investment Baking Analyst - Watermark Advisers

3. In presenting the chart, the ten companies with the
highest five year returns were juxtaposed with the
S&P 500. The five year return was selected over other
potential time frames to smooth out any short-term
fluctuations in a business-cycle, thus yielding a more
meaningful measure of long-term performance.
The S&P 500 was chosen as the benchmark for this
analysis because of its ubiquity when speaking about
large cap U.S. equities. The index includes 500 leading
companies and captures approximately 80% domestic
market capitalization.
Over the analyzed five year period, the top ten com-
panies using the compliance software had an average
total return of 247%, equating to a 28% compound
annual growth rate (CAGR). Over the same five year
period, the S&P 500 had a total return of 85%, which
equates to a CAGR of 13%.
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$70.00
$60.00
$50.00
$40.00
$30.00
$20.00
$10.00
$0.00
Time 0 3 Year 4 Year 4.5 Year 5 Year
MNTX
TDY
BC
TMO
CFX
HON
SPA
IMAX
HAR
S&P 500
ESL
Top 10 Assent Customers 5 Year Performance
If an investor had allocated $10 to each of the top ten
compliance firms ($100 in total), on February 19, 2010,
their $100 investment would now be worth $347
compared to only $185 had the investor invested in
the S&P 500 over the same time period.
$400.00
$350.00
$300.00
$250.00
$200.00
$150.00
$100.00
$50.00
$0.00
Time 0 3 Year 4 Year 4.5 Year 5 Year
Top 20 Assent Clients Versus the S&P 500
Compliance Firms S&P 500
Over the five year period, the top twenty companies
using the compliance software have an average
total return of 177%, a 23% CAGR. As stated above,
the S&P 500 had a total return of 85% (13% CAGR).
If an investor had invested $5 in each of the top
twenty performing compliance firms, $100 total, on
February 19, 2010, their $100 investment would
now be worth $277 compared to only $185, had the
investor allocated to the S&P 500 over the same
time period.
$300.00
$250.00
$200.00
$150.00
$100.00
$50.00
$0.00
Time 0 3 Year 4 Year 4.5 Year 5 Year
Assent Customers 100 Public Sample
Compliance Firms S&P 500
Over the five year period, all of the companies using
the compliance software have an average total
return of 94% (14% CAGR) compared to the 13%
CAGR of the S&P 500.
If an investor had invested $2.13 in each of the
companies using the compliance software, $100
total, on February 19, 2010, their $100 investment
would now be worth $194 compared to $185 with
an investment in the S&P 500 over the same time
period.
The Case for Compliance
It is often said that correlation is not causation, and
we cannot definitively say there is a departure from
that thinking here. Investing in a compliance
program does not cause returns to exceed those of
the market, but given the evidence above, we
cannot discard the idea that investment in com-
plaint companies is a profitable strategy when
measured against returns of the market at large.

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Additionally, a multitude of latent benefits and
positive externalities may result from allocating
capital toward a basket of compliant firms.
Companies Investing in Compliance
Ensure Continued Market Access
Measured, by GDP the European Union is the most
lucrative market in the world. It is also the most
heavily regulated market in the world. The RoHS
regulation, which largely affects electronic
manufacturers, was the first major Restricted
Substance List (RSL) that came with a heavy punitive
burden for those in breach. This then paved the way
for the all-encompassing (all articles and chemicals
in scope) REACH regulation. Noncompliance with
these regulations means no market access, heavy
fines, and jail time if companies are found in breach.
The global trend is toward more regulation as
developed countries and their consumers place
more emphasis on the sourcing of their wares and
material constructs. Companies that choose not to
invest face loss of market access and should
therefore look at their compliance program as
mission critical.
The Need for Speed – When New
Regulations are Passed
As regulations come with stiffer enforcement
penalties and become more prominent in sheer
number, firms must be prepared for what is ahead
in order to comply quickly with any new regulations
coming online. Governments are becoming more
attentive and aggressive each year in passing
legislation that responds to social concerns of the
day – Dodd Frank section 1502 Conflict Minerals
being a prime example. The responsibility and
burden this places on companies are real and will
impact company reputations for those in breach. In
a recent (Aug 2014) Compliance Week article titled
“A New Breed of Regulations Won’t End with Conflict
Minerals” the author identifies where regulators
might look next:
Death Metal
A geographic hot spot that could lead to new law or
regulations is Indonesia. Tin produced in the region is
controversial, not just because of ongoing human
rights concerns, but for environmental reasons as
well. Recent protests have targeted Apple, Samsung,
Sony, LG, and others about the damage done to
tropical rainforests from tin mining in the country.
Palm Oil Problems
Palm oil, also produced in Indonesia along with other
countries, is another product drawing close attention
from activists and could end up on the radar of
regulators. Child labor is alleged to be widespread in
Indonesia’s palm oil industry. An investigative report
by Bloomberg Business Week, published in July,
documented evidence of human trafficking, violence
against workers, and slavery.
Wood
Certain wood, produced both domestically and
abroad, could end up on the list of materials
regulators want more information on regarding use
and initial source. Where companies get their wood,
and how they ensure proper reforestation programs
are in place, is a growing concern. Swedish furniture
maker Ikea, for example, consumes nearly one
percent of the total wood used commercially around
the world, making it one of the largest demanders of
wood in the retail sector. As such, it has been under
increasing pressure from activists to use source
products more responsibly. The company, in its most
recent sustainability report, insists it has done so.
Cobalt
It wasn’t included in the list of four conflict minerals
cited by the Dodd-Frank Act, but many speculate
cobalt could be eventually added.

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The Democratic Republic of Congo, targeted by the
rule, is also the world’s largest producer the mineral.
Cobalt is used as a blue pigment in many paints and
is widely used as a component of lithium ion
batteries. Its strength and durability has also made it
a preferred metal in tool construction, notably drill
bits, along with artificial joints and limbs.
Dirty Water:
A wide range of other physical commodities could
also, rather easily, fall under the regulatory umbrella,
including the sourcing of cotton, leather, food items,
and even water.
It Doesn’t End There. What about Poor
Sourcing Practises?
Factory Conditions: Reports of harsh working
conditions and employee suicides at China-based
manufacturer Foxconn have been an ongoing PR
nightmare for Apple and other tech companies
relying on the cheap labor Foxconn provides. Worker
safety also came to light, in dramatic fashion, earlier
this year when a garment factory collapse in
Bangladesh killed 1,129 workers. Following the
disaster, many retailers agreed to sign a legally
binding European accord requiring retailers to fund
fire safety and building improvements at the
Bangladesh factories they utilize. A non-legally
binding effort spearheaded in the U.S. for its
companies has been less successful, with firms like
Walmart and GAP citing legal liabilities for their
refusal to sign on. Although federal legislation to
force an EU type of agreement is unlikely, expect to
see shareholder activists push a similar agenda.
Human Trafficking and Slavery: Many U.S regulations
can trace their origin to similar efforts that initiated
either overseas or in their domestic markets.
Potential rules for public companies regarding human
trafficking and slavery would be an example of both.
The California Transparency in Supply Chains Act
requires many companies doing business in
California to disclose efforts they have taken to
eliminate human trafficking and slavery from their
supply chains. The law applies to retail sellers and
manufacturers in the state with annual worldwide
gross receipts exceeding $100 million.
In a climate where a multitude of regulations could
affect firms of all sizes, those that invest in a scalable
compliance program will win the race for market
access and favored market status. See “How Apple
Increased Its Market Cap by 8 Billion Dollars in 1 Day
through Compliance” (below).
When Your Biggest Clients Come
Knocking – Will you be Complying?
In the compliance space, it is often the biggest
companies who have the largest scope of regulatory
burden, but that does not mean SMB’s are exempt
or should be less attentive to the compliance
landscape. As tier 1 firms invest in their programs,
their supply chain will inevitably have to follow suit.
Being in a position where a large contract can be
withdrawn for noncompliance can be devastating to
smaller firms. For businesses who sell to the
government, this can also be highly impactful to the
bottom line. Say for example your firm is in
aerospace and defense. The government is
incentivized to uphold regulations it passes or risk
being challenged on their logic in passing the
regulation. Firms of all sizes and member of all
sectors must be cognizant of the notion that when
their larger client base invests in a compliance
program they will surely expect/demand the same of
their supply chain. Investing early is the best solution
to avoid business disruption.

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Compliance Means Bigger and Better
Data:
Firms who invest in their compliance program
improve data quality and control. This has direct
affects during the R&D phase and a strong
compliance program permeates through the
engineering department allowing both speed and
efficiency in the department. One of the most
crippling things to happen for a firm can be
conducting a recall due to non-compliant parts. With
a robust and developed compliance program firms
can help mitigate this financial and PR risk.
8 Billion Dollars In Market Cap and The
Business Case For Compliance:
On the day Apple announced it was 100%
conflict-tantalum free, the media was quick to pick up
the story and Apple was featured on popular tech
blogs, the New York Times and dozens of other tier 1
media outlets. (Mashable, Venture Beat, LA Times,
etc) . What did this mean for its bottom line? At the
opening bell, Apple’s stock price was $535 and come
market close, it was $544. Apple had 892 Million
shares outstanding. Thus, the resultant increase in
market cap was (892 million x $9 =) ~$8 billion. While
companies often see compliance and sustainability as
simply an expense item, it shows that both Main Steet
and Wall Street reward compliant companies.
Consumers gravitate toward brands who publicize
their compliance and Wall Street rewards them. It
seems then that investment into a compliance
programs can pay huge dividends. In a recent article
published by the National Association for
Environmental Management (NAEM) they cite as their
headline: The Business Case for Sustainability is
Getting Easier To Make. Among leading companies,
the concept is widely understood both in theory, as
well as in operational terms. These advanced efforts
have rippled throughout the entire business
ecosystem, spurring new attention to sustainability at
all levels of the supply chain.
Broader cultural awareness of sustainability means
employees are coming to work with a better
understanding of the topic, which makes it an easier
sell for those seeking buy-in for their projects. This
alignment includes those in leadership roles as well,
as sustainability has gone from an abstract external
conversation to one that relates to what companies
are doing internally. As one Assent customer
(included Top 10 category above and with
sophisticated sustainability/compliance program) was
quoted, “After a few years of watching and listening
and trying to understand what was being talked
about with regards to sustainability, our team and
myself and many of the professionals in our function
said, ‘Well that’s what I do. Or that’s mostly what I
do.’” Indeed, according to NAEM’s 2012 report on EHS
and Sustainability Staffing and Structure, the top
programs respondents identified as “sustainable” fall
within the responsibilities of the EHS function: carbon
foot-printing, setting sustainability goals, energy and
carbon management, sustainability strategy, waste
recycling, and water efficiency. Regardless of age or
size, all companies we spoke with have a strong focus
on meeting environment, health and safety, and,
increasingly, sustainability regulations. As product
compliance, green chemistry, storm water, and cap
and-trade regulations come into effect, many of the
programs companies are voluntarily undertaking
today will be written into the formal regulatory
requirements. The risks of non-compliance are easy
to quantify, as they are associated with fines, bad
publicity, and even losing preferred-supplier status.
Compliance also serves as the foundation upon
which most sustainability programs are built, as one
respondent described, “We believe as a fundamental
basis of being a sustainable organization, we need to
be compliant with environmental regulations.”

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Conclusion:
Data suggests there is an ROI for compliance. In
both the B2B and B2C markets, companies who
can demonstrate they play fair are rewarded by
their customers. This translates to better
relationships, increased sales and better
corporate governance. All segments of the
Assent customer list data set (top 10, top 20 and
the list in its entirety) demonstrate that
companies who embrace robust compliance
programs and automate those processes
through software in conjunction with top tier
support will beat the street in both the short and
long term outlooks. The business case for
compliance is clear.
1
http://mashable.com/2014/02/13/apple-conflict-free-metals/
http://www.nytimes.com/2014/02/14/technology/apple-says-s
upplies-dont-come-from-war-zones.html?hpw&rref=business
&_r=0
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