Avoiding the Reporting Trap - A Frontrunner Approach for Building 'Investor Proof' Sustainability Strategies

AVOIDING THE
REPORTING
TRAP
A FRONTRUNNER
APPROACH FOR BUILDING
‘INVESTOR PROOF’
SUSTAINABILITY
STRATEGIES

> Table of Contents
2
3
4
5
7
19
24
7. Food Sector
28
8. Telecommunication Sector
31
9. From report to result – our approach
33 11. What’s next? – some of our solutions
11 4. Making materialities work as innovation
drivers
35 Acknowledgements and sources
10. Does the value of benchmarking offset the
burden?
12
15
Foreword
Executive Summary
1. An introduction to different sustainability
perspectives
2. The Accountant’s Lens: risk mitigation
focus is becoming stale
3. The Investor’s Lens: the ROI of
sustainability
5. Chemical Sector
6. Pharmaceutical Sector
37 Annex: Checklist for avoiding the reporting trap
AVOIDINGTHEREPORTINGTRAP

Increasingly, resource scarcity is becoming a reality
in our every day business life. Over the past months
Bloomberg has been asking if “There is Enough
Lithium for Tesla's Gigafactory?” and Rabobank is
claiming that the animal protein gap is already
triggering important questions, such as how the
supply of vegetable protein sources can keep pace
with the rising demand for animal feed?
Ironically, during our 18 years experience, we
encountered many CSR and sustainability
departments that also suffer from a chronic lack of
resources. Evidently too much time is needed for
reporting activities and too little time is available for
generating considerable impact.
Our aim with “Avoiding the Reporting Trap” is to help
companies efficiently build “investor proof” strategies
while reducing the burden of non-financial reporting.
Together we need to move better and faster towards a
sustainable future. Hopefully our report is a small
contribution to that cause.
Jan van der Kaaij,
Managing Partner Finch&Beak
2
> Foreword

The reporting trap implies
that companies
predominantly use their
materiality analysis and
data for reporting
purposes only, and miss
the opportunity for value
creation from
sustainability issues for
shareholders and society.
Systematic materiality analysis and industry-level
standardization of sustainability issues have rendered
non-financial reporting more professional, but also
more complex. While an accountant’s lens with a
‘checking boxes’ risk mitigation perspective typically
ensures that sustainability information is being
collected in a methodical manner, it contains the risk
of falling into the reporting trap, where publication of
the sustainability report itself becomes the final
objective.
In contrast, there is the investor’s lens. Investors such
as BlackRock and Apax are increasingly looking for
frontrunner companies that report transparently on
material risks, but also on how these companies
leverage opportunities in order to ensure and enhance
long-term economic returns.
For these frontrunners, sustainability is an integral
part of the strategic focus and helps drive long term
value creation by addressing unmet needs for instance
through ‘greener’ product design, improved social
impact or by turning waste streams into valuable
resources. This kind of innovation often starts with the
design and implementation of new business models
that require strong capabilities for value chain
collaboration and strategic partnering. Next to a value
creation focus on material issues, jumping the
reporting trap requires supplementary skills –
particularly in the area of innovation and partner
development.
By analyzing Dow Jones Sustainability Index 2014 data
from industry leaders in the four sample sectors:
chemicals, pharmaceuticals, food and
telecommunications, different approaches for effective
execution have been identified:
• Chemical sector: Finding opportunities for strategic
collaboration and partnering to demonstrate societal
relevance
• Pharmaceutical sector: Adopting digitalization and
innovation, while ensuring greater transparency
• Food sector: Towards more balanced food
consumption and nutritional offers
• Telecommunication sector: From passive provider to
active entertainment and convenience contributor
The growing burden of engaging in sustainability
reporting and benchmarks increasingly makes sense
when companies look beyond the risk mitigation of
material issues – avoiding the reporting trap.
> Executive Summary
> Executive Summary 3

Sometimes, sustainability ‘champions’ such as
Unilever, Interface and Patagonia appear to be
a white whale of sorts. How do they manage to
embed sustainability while appearing to do so
in an almost effortless manner?
Luckily there is no reason to be intimidated.
Although they are doing things that may
appear to be magical, they are dealing with the
same market conditions, the same
shareholders expecting continuous growth
rates, and the same critical consumers, as the
rest of the industry. There is no motive why
other corporations could not follow into their
footsteps – as long as the notion of
sustainability is approached from the right
perspective.
Since the introduction of materiality
corporations have started involving their
stakeholders to determine which sustainability
issues have to be on top of their list. With the
emergence of advanced reporting standards,
more and more companies are using
materiality as the basis for reporting towards
their stakeholders. Such reports typically
contain valuable information on how they are
dealing with societal issues.
However, the positive intentions of an
organization often fall into the reporting trap.
This implies that companies predominantly use
their materiality analysis and data for reporting
purposes which leads to missed business
opportunities from materialities.
At times, non-financial reporting is still being
approached from an ‘assurance-based tick-
sheet’ point of view, where materialities are
seen as risks, and nothing more than risks.
Embedding sustainability requires a business
approach of sustainability issues and broader
megatrends, such as urbanization, scarcity of
resources and food security, being applied as
opportunities for creating value from
innovation.
From 18 years of experience and supported by
2014 Dow Jones Sustainability Index data from
the chemical, pharmaceutical, food and
telecommunication industries, this report is
created for companies that are looking to
improve their ROI from sustainability by
embedding it into the business strategy. Using
best practice examples on sustainable
innovations , it shows an effective approach to
actively avoid the reporting trap.
1. An introduction to different
sustainability perspectives
> An introduction to different sustainability perspectives
“If we achieve our
sustainability targets and no
one else follows,
we will have failed.”
Paul Polman, CEO, Unilever
4

> The Accountant’s Lens: risk mitigation focus is becoming stale
Over the past decade, materiality analysis has
emerged as an instrument for mapping non-
financial business risks. It revealed factors that
might lie in investors’ blind spots and, as such,
remained unvalued by the market, because they
were out of scope from ‘traditional’ risk analysis.
Over the years, the materiality matrix has become a
reporting tool that offers an overview of issues with
an impact on the company’s long-term performance.
The rise of valuable initiatives such as the
International Integrated Reporting Council (IIRC)
and the Sustainability Accounting Standards Board
(SASB) underlines this development. Increasingly,
regulations and voluntary frameworks have been
put in place as non-financial risk analysis and
mitigation has started to become a significant part
of the annual reporting process. Some examples:
• In 2010, integrated reporting became mandatory
in South-Africa for listed companies on the
Johannesburg Stock Exchange.
• In 2013, both the IIRC’s International Integrated
Reporting Framework and the Global Reporting
Initiative’s G4 Guidelines were released.
• In 2014, a new EU directive was adopted,
reflecting the European Union’s position that
non-financial reporting is vital for managing
change towards a sustainable global economy.
As of 2017, approximately 6,000 EU companies
with more than 500 employees are required to
report on social, environmental and
governmental issues.
As usual, there are restrictions to these positive
developments. While helping to unveil material
risks, an exaggerated risk mitigation focus will most
likely result in a limited influence on business
strategy. Sticking solely to the accountant’s lens,
driven by compliance and assurance, is an approach
that carries some essential disadvantages.
Key risks of the accountant’s lens
Distance to the actual business strategy
Companies that approach materialities from a pure
accountant’s perspective typically use them for the
inventory of risks and, subsequently, the
development of mitigation strategies. By
considering non-financial reporting as the single
desired outcome, corporations run the risk of falling
into the reporting trap. Similarly, they lose the focus
on the ultimate goal: transposing materialities into
a well-executed strategy that offers opportunities
for innovation and engagement of stakeholders
while positively contributing to relevant societal
issues.
Taking a one-size-fits-all approach
The movement towards increased levels of
standardization in materiality analysis ensures that
the most common topics are efficiently addressed
on a general industry level. At the same time, global
companies can still have widely varying
characteristics, for example due to geographical
coverage, having in- or outsourced facilities or the
legal frameworks in which they operate. Over-
standardization limits companies to identify and act
upon aggregated company-specific issues, and at
the same time threatens potential distinction and
building competitive advantage.
5
2. The Accountant's Lens: risk mitigation focus is becoming stale

> The Accountant’s Lens: risk mitigation focus is becoming stale
GRI’s New Strategy:
Beyond reporting
In June 2015, the Global Reporting
Initiative (GRI) revealed its new
ambitions for the future. With its 2020
strategy entitled “Empowering
Sustainable Decisions”, GRI extends
from pure sustainability reporting to
focusing on capturing value creation
opportunities. It aims to empower
companies to leverage their capabilities
and competences towards building a
more sustainable economy and society.
The new strategy has four key priorities.
6
GRI’s four key priorities
1. Enabling Smart Policy
Providing governments, capital markets and international
organizations guidance on smart sustainability policies that
address some of the toughest challenges of our time, such
as climate change, human rights and corruption.
2. More Reporters and Better Reporting
Stimulating the non-financial reporting movement by
inspiring and inviting more organizations to start reporting
and for those that already do, to strive for better quality
reporting.
3. Moving Beyond Reports
Making clear that the sustainability report is valuable
output, but not the final result. Instead, the report serves as
the groundwork for sustainability efforts. GRI wants to make
sure that decision makers have access to high quality and
reliable information.
4. Innovation and Collaboration
Using the GRI standards as a launch pad for sustainable
innovation and collaboration with key stakeholders.
6

3. The Investor’s Lens: the ROI of sustainability
Contrary to the accountant’s lens, the investor’s
perspective looks at creating shareholder value.
Obviously, the business case for sustainability is not
always an easy one to make. Companies experience
much difficulty when describing the actual business
value of sustainability. A recent study demonstrates
that only 26% of CEO’s trust they have a clear business
case for sustainability. This translates into challenges
towards their shareholders as well. How do ESG
initiatives create a tangible impact on the bottom line,
in terms of cost savings, additional revenues or gross
margin protection? This complexity comes at a price.
As companies fail to quantify the return of their
activities, investors are left with question marks when
evaluating the impact that the company’s
sustainability efforts have on their future financial
position.
Linking sustainability to business risks and
opportunities
Both the accountant’s and investor’s lens are useful
perspectives. By combining the two, companies can
operationalize the materiality matrix and use it as the
base for a well-executed program.
Risks and opportunities can be clarified with metrics
used by investors to measure the performance of their
investment, creating a common language for both
parties.
Consider the example of former mining company
Umicore. In making the shift towards a circular
economy business model, this company is able to use
business metrics to explain its shareholders how the
change decreases exposure to volatility, and improves
financial and environmental performance as well as
the company’s competitive position.
From the standpoint of investors, environmental, social
and governance factors are used to drive investment
decisions. Private equity firm Apax Partners for
instance, has embedded sustainability principles in its
investment process as a tool to help release the full
potential of its portfolio. In the pre-investment phase,
a rigorous due diligence process takes place on ESG
risks and performance. After successfully passing this
test, companies included in the portfolio are then
monitored using a software system that collects data
on key ESG indicators.
7> The Investor’s Lens: the ROI of sustainability
BlackRock: building a culture of long-term
investment and growth
BlackRock, the world’s largest asset manager with
more than $4.3 trillion in assets under management,
emphasizes that managing risks forms a crucial part of
a company’s sustainability blueprint. One of
BlackRock’s main concerns is that corporations
currently are taking short-term decisions that may
bump earnings up in the near future, but might lead to
failures when looking at long-term viability. A tell-tale
sign of this phenomenon is a sustainability report that
separates business growth from social and
environmental issues.
As an investor, BlackRock is interested in
understanding how sustainability principles are
related to risks and opportunities for each business,
and how the company is managing that. The asset
manager finds itself encouraged by the efforts made by
leading companies in reporting material ESG risks, as
well as opportunities. This helps shareholders (and
others) to understand whether or not risks are
mitigated successfully and if opportunities are seized
in order to protect and improve long-term returns.

Only 26% of CEO’s trust they have a clear
business case for sustainability.
> The Investor’s Lens: the ROI of sustainability 8
Source: MIT Sloan & Boston Consulting Group

“In our experience, companies
that manage all dimensions of
the business to the highest
standards are more resilient
and generate more sustainable
financial returns over time.”
Michelle Edkins, Global Head of Corporate
Governance and Responsible Investments,
BlackRock
Key risks of the investor’s lens
Limited accuracy in quantifying business
value
The aforementioned struggle that companies
have in quantifying initiatives into tangible
impact on the bottom line makes it
nontransparent and difficult for investors to
value sustainability efforts. Benchmarks and
industry standards are helping to get the most
relevant data on the table, but these are often
very general and do not take the company’s
own specific situation into account.
Lack of long-term investment horizon
Societal issues such as food waste are
increasingly being addressed with value chain
approaches in collaboration with suppliers,
peers and/or end users. This creates more
complexity, which can make it difficult for
participants to distill direct financial benefits
on an individual company level. It might also
take more time to obtain a return on the efforts
made. As a result, investors are challenged to
understand both the upside of participating in
these initiatives, as well as the downside of not
doing so.
When combined with a short-term investment
horizon, shareholders might be tempted to
pressure companies to prioritize instant gains
over long-term value, risking them for instance
to put sustainable innovation on hold. If
companies start favoring quick-fix initiatives
over strategic ventures, this creates a risk for
greenwashing, particularly when the
accountant’s perspective is poorly embedded
and the identified material issues are not
clearly scoped.

Recent mergers and partnerships between large food
companies and retailers such as Heinz &
Kraft, Mondelez & D.E Master Blenders, and Ahold &
Delhaize, are underpinning the fact that food truly is a
global business. This calls for a global overview of the
issues that are most pressing for global stakeholders.
Nevertheless, significant variances may occur at the
level of regional and local conditions as well as
between different business areas.
Engaging with stakeholders on a global and local
level not only reveals which topics are most relevant
for your company to address, it can also help you to
determine how to best collaborate with suppliers,
customers or NGO’s to collectively tackle issues that
go beyond your organization’s influence. This does not
only accelerate sustainability progress, it also builds
stronger ties within your value chain, strengthens your
reputation, and will inspire employee engagement and
customer intimacy.
As a result global and diverse companies are
challenged to develop regional materiality
assessments that build on the company’s global
framework and that take, the specific (local)
stakeholder's needs and business impact for the
operating company, into account.
When developing a global-to-local materiality analysis,
three simple design criteria need to be considered:
1. Terminology: morph the legal and accountancy
lingo of the corporate materiality matrix into
language that can be straightforwardly linked to the
business.
2. Easily scalable: include solutions for “emerging”
businesses and markets that are just starting on
their sustainability journey
3. Clear measurement of progress: not only on
internal KPI’s but also external perception needs to
be considered.
A strong example of localizing materiality can be
sourced from the dairy sector with the development of
the Dairy Sustainability Framework.
In 2009, the Global Dairy Agenda for Action was
launched, which committed the dairy industry to
actively reduce greenhouse gas emissions. The
initiative developed a framework to provide
overarching goals and alignment of the sector’s actions
globally on the path to a broader sustainability: the
Dairy Sustainability Framework (DSF).
The DSF was designed to accelerate sustainability in
the dairy sector through a common language,
alignment of international sustainability activity and
through this generate a common sustainability
commitment at global, regional, national and
organizational levels. The Framework recognizes 11
key sustainability issues to be addressed.
Implementation of the different materialities can vary
depending on the company’s priority areas. However,
all the categories should ideally be evaluated and
tackled over time. In 2014, FrieslandCampina together
with its partners Unilever and Danone, started an
implementation pilot project to be able to demonstrate
the increasing sustainability of dairy farming to
customers and consumers.
Global-to-local implementation of material issues: Think global, act local Example: Dairy Sustainability Framework

4. Making materialities work as innovation drivers
Companies such as Novozymes, where the
‘sustainability department’ is part of their business
development team, discovered a long time ago that
materialities cannot be translated one-on-one into
sizable business opportunities. Even though in theory
big global issues, such as carbon emission or child
labor, create big global markets with unmet needs,
materialities need to be studied more closely in order
to reveal their true potential. This often requires
researching the materiality in its day-to-day practice in
its specific environment for which the support of value
chain partners is indispensable.
In line with this conclusion, our research in the four
target sectors demonstrates that apart from having the
right strategic focus, partnering in the value chain is
vital to uncover solutions that stand a chance as a new
product or service. Having the capabilities to
collaborate is vital to develop ideas that potentially
make sense. Meanwhile, companies need to make sure
that their rough ideas are challenged through
questions such as “What are the expected switching
costs?” and “How easily can the idea be scaled?”.
Once the material issues have been digested, qualified
and, together with some of the value chain partners,
turned into ideas that might work, the real efforts
start. The challenge with sustainable innovation, as
with all innovation, is not the generation of ideas, but
making them actually work. Applying lean startup
principles is recommended, especially since ‘green’
solutions seem to be very sensitive to differences
between what customers will tell you and what they
will actually do.
Using a ‘build-shape-launch’ approach to develop new
concepts, products or services, which starts with the
conception of a prototype that is constantly improved
and built upon, based on rigorous user testing and
customer feedback. Don’t be afraid to experiment, and
use extensive data analytics to measure what works
and what doesn’t – and adjust accordingly. Once
launched, apply innovation accounting techniques to
measure progress and set up milestones. If the concept
does not find recognition, it’s time to let go and pivot
towards a new idea to be explored.
> Making materialities work as innovation drivers
To get through the first most difficult phase of new
ideas, Innosight CEO, Scott D. Anthony provides a
simple acronym to take the right process steps called
DEFT:
• Document your idea and what you plan to do
• Evaluate based upon the strategic intent of the idea
• Focus on prioritized uncertainties with high impact
• Test early, learn and adjust
1111

Finding opportunities for
value chain collaboration
and strategic partnering to
demonstrate societal
relevance
The international chemical industry is shifting focus,
as Western companies are dealing with
commoditization of their products, and fierce
competition from emerging markets, which drives the
change towards specialty chemicals. The global shift is
most visible in sales output: EU sales shrunken from 33
% in 2003 to 16.7% in 2013, while sales from Chinese
chemical companies accelerated from 10% to 33.2%
during the same timeframe.
Developments that enable chemical companies to
regain their competitive edge are for instance found in
more innovative (bio-)technology, advanced
manufacturing and digitalization. The ability to
produce more customized products on a smaller scale
makes companies able to address more specific
functional customer needs. Waste efficiency and
renewable materials contribute to the development of
a circular economy, an ecosystem in which the
chemical industry with its technological knowhow is
playing a significant role.
While technological innovation is expected to make a
significant contribution, chemical companies will need
to adapt more than their hardware. New business
models are required, deploying unique assets and
abilities that differentiate innovative specialists from
low-cost competitors.
Most notably, strategic partnerships and value chain
collaborations are helpful instruments in creating
value from sustainable innovation. By working
together with customers and suppliers, companies get
a better grasp on the problem drivers and specific
client requirements, to better meet those needs with
tailored solutions.
An industry-wide collaboration example is the
‘Together for Sustainability’ initiative for sustainable
supply chains in the chemical industry. This network
connects 13 major companies, including DSM,
Clariant, BASF, Bayer and Henkel, with the aim of
developing and implementing a global audit program
to assess and improve sustainability practices within
the supply chain together with suppliers but also with
logistic service providers such as Vopak, Bertschi and
Hoyer.
As a major supplier to a broad range of industries, the
chemical industry can underline its societal relevance
in its position as a prime driver of sustainable
innovation with an impact that spreads out widely.
5. Chemical Sector
> Chemical Sector: Finding opportunities for value chain collaboration and strategic partnering to demonstrate societal relevance 49
12

Based on the 2014 results of the Dow Jones
Sustainability Index by RobecoSAM, a good
overview of the current sustainability status in the
chemical industry can be given. The graph
demonstrates the most important criteria for the
industry, comparing the industry average with a
selection of frontrunners. The frontrunners clearly
outperform the industry on all criteria: on average,
the score of the selected frontrunners is 83% higher
than the industry average. Moreover, frontrunners
distinguish themselves through a strategic focus on
sustainability.
On the economic dimension, the gap between the
frontrunners such as sector leader AkzoNobel and
industry average is the smallest. Particularly on
compliance criteria such as Corporate Governance
and Codes of Conduct, the industry on average
scores well. While the majority of companies in the
chemical industry seems to have adopted an
Environmental Policy, they yield varying results.
Frontrunners obtain scores that are more than twice
as high as the industry average in the area of
Operational Eco-Efficiency, and the gap for
companies that have adopted a Climate Strategy is
even more extreme. Frontrunners have made it their
priority to structurally reduce their environmental
impact, while the rest of the industry lags behind.
Within the social dimension, we see a pattern
comparable to the economic dimension. The
compliance-driven criterion of Labor Practice
Indicators and Human Rights shows a moderate
industry-wide score, while leading companies
perform better. However, the most distinctive gap of
the entire graph can be found on the issue of Human
Capital Development. Where leading chemical
companies have started to catch up and recognize
the value of developing their human capital, this
notion has not yet sunk in on an industry-wide level.
In conclusion, what seems to set the frontrunners
apart from the herd is a strategic focus on
sustainability as a key driver. They approach
sustainability as an opportunity for value creation,
and not just as a set of measurements in order to
comply with regulation. A balanced view on
materiality ensures chemical companies to look at
the broad picture and focus on the range of
economic, environmental and social issues that are
important to their stakeholders, have impact on
their businesses, and bring opportunities for the
development of initiatives that deliver cost savings
or generate direct revenues.
49
Sustainability status in the chemical industry
> Chemical Sector: Finding opportunities for value chain collaboration and strategic partnering to demonstrate societal relevance
0
25
50
75
100
Risk & Crisis
Management
Codes of
Conduct/Compliance/
Corruption&Bribery
Corporate Governance
Supply Chain
Management
Environmental
Policy/Management
System
Operational Eco-
Efficiency
Climate Strategy
Environmental Reporting
Labor Practice Indicators
& Human Rights
Human Capital
Development
Social Reporting
Chemicals (industry average)
Chemicals (frontrunners)
13
Source: RobecoSAM, DJSI 2014 Results

“By signing up to ‘Together for
Sustainability’, we will further
improve the efficiency of our
current processes, create
transparency around
sustainable supply markets,
and eventually benefit the
whole value chain.”
Tim Tolhurst, Chief Purchasing Officer, Royal DSM
Since its public listing in 2000, Danish
company Novozymes has been extremely
successful in delivering shareholder value from
sustainable innovation. Established as a
spin-off from sister company NovoNordisk,
Novozymes has focused on the enzyme
business. Using nature’s own technology, the
company has developed a wide range of
applications including food processing,
biofuels and biological for agriculture.
The most familiar example of an enzyme
product can be found in laundry detergents
that enable consumers to wash at lower
temperatures. The impact of such low
temperature detergents is remarkable. If for
instance all Belgian households, which on
average wash 4.5 times a week, would do their
laundry at 30°C, the amount of reduced carbon
dioxide is comparable to the emission of
100,000 cars.
Novozymes’ innovations are spurred on by
partnerships in specific areas for example as
with Unilever on Food and Beverages, Poet on
biofuels and Monsanto on agriculture. Also the
company participates in the UN Sustainable
Energy for All initiatives to scale up the
development and deployment of sustainable
bio-energy solutions. New products include an
enzymatic solution that converts waste oils to
biodiesel, and a probiotics product for animals
that decreases the use of antibiotics among
poultry.
49
Best Practice: Novozymes
> Chemical Sector: Finding opportunities for value chain collaboration and strategic partnering to demonstrate societal relevance
14

Adopting digitalization
and innovation, while
ensuring greater
transparency
Pharmaceutical companies appear to be stuck in trying
to find a balance between healthy profits and serving
the community. Rising health care costs are putting
margins under pressure, as health care insurance
companies are strictly evaluating suppliers on costs,
and governments are putting pressure on drug prices.
Patent expirations have driven up fierce competition
from generics: while US branded pharmaceutical sales
are expected to grow 2.0% between 2014 and 2019,
the growth rate for generic medicines is anticipated to
increase 4.8%.
Changing business models require pharmaceutical
companies to develop a solid retail strategy as the shift
is made from a focus on treatment of diseases to
prevention, putting consumers in a more active
decision-making role. However, legal and safety issues
have not benefited the industry’s reputation among the
public.
On the other hand, the sector has the highest score
across industries in the RobecoSAM Yearbook 2015
when it comes to reporting on material sustainability
issues in the annual report. Pharma clearly puts in the
communication effort, but appears to fail in leveraging
a positive impact on its public image. In order to
rebuild trust, transparency is a key factor. Constrained
by complex regulation, reporting on more than what is
legally required does not seem to come naturally for
the pharmaceutical sector. Further improvements can
be made by a better application of sustainability
standards, facilitating companies to gradually increase
transparency on key social and environmental issues in
a way that the information is useful for a broad range
of stakeholders.
In addition, the industry has to ensure its ability to
maintain high standards for ethics and quality, as well
as a focus on attracting and retaining the best talent to
execute and drive innovation in the sector. Data-driven
e-health startups harvest big data, identify potential
personal health risks while bringing disruptive
innovation to medical research and its outcomes.
To remain relevant in this fast-moving playing field,
pharmaceutical companies must adopt digitalization
and innovation in a broader sense. At the same time
they have to ensure higher levels of transparency in
order to keep up with the rising expectations of
consumers and regulators to build trust.
6. Pharmaceutical Sector
> Pharmaceutical Sector: Adopting digitalization and innovation, while ensuring greater transparency 49
15

More than half of consumers (54%) feel that there is
not enough regulation in healthcare, the same level
that applies to the poorly rated financial services
industry.
Source: Edelman Trust Barometer 2015
> Pharmaceutical Sector: Adopting digitalization and innovation, while ensuring greater transparency 16

Comparable to the chemical industry, the
pharmaceutical frontrunners outperform the
industry average on all criteria, when looking at
2014 DJSI data. As it appears, the 80-percent
threshold is only exceeded on the three occasions of
Risk and Crisis Management, Codes of Conduct and
Corporate Governance, all in the economic
dimension. Overall good performance can again be
found on compliance-driven criteria, including
Labor Practice Indicators.
On the environmental dimension, frontrunners are
performing generally well except the industry
average lags behind, most notably when it comes to
Climate Strategy. Social dimension criteria show a
more varying level of maturity for both the industry
average and frontrunners. Most striking are the
scores on Human Capital Development: even
frontrunners perform very poorly here. This is
particularly remarkable for a knowledge-driven
industry such as the pharmaceutical industry, and
offers a major opportunity for improvement. Returns
of investment in human capital development efforts
include an increased capacity to innovate, lower
employee turnover and lower levels of absenteeism.
Stakeholder engagement and reporting are critical
factors for building trust and restoring reputation
that require serious attention across the industry.
While frontrunners are doing alright in terms of
Environmental Reporting, they are still challenged
where it matters most: Social Reporting. Overall the
performance on the Stakeholder Engagement
criterion is low compared to other sectors. This
suggests that pharmaceutical companies have
insufficient clear policies, procedures and
governance structures in terms of stakeholder
management, as well as a structural review of
activities in that area.
18
Sustainability status in the pharmaceutical industry
0
25
50
75
100
Risk & Crisis
Management
Codes of
Conduct/Compliance/C
orruption&Bribery
Supply Chain
Management
Environmental
Policy/Management
System
Operational Eco-
Efficiency
Climate Strategy
Environmental
Reporting
Labor Practice
Indicators & Human
Rights
Human Capital
Development
Stakeholder
Engagement
Social Reporting
Pharmaceuticals (industry average)
Pharmaceuticals (frontrunners)
> Pharmaceutical Sector: Adopting digitalization and innovation, while ensuring greater transparency
17

Best practice: Amgen
Amgen’s Neulasta Delivery Kit, launched in
March 2015, is an on-body injector which helps
easing some of the side effects of
chemotherapy by delivering pegfilgrastim, a
recovery drug, to patients the day after their
treatment starts. After a chemotherapy
session, clinicians can fill and activate the
syringe with the correct dosage. The on-body
injector is then applied to the patient, and
automatically activated the following day. This
provides the patient with the medicines they
need, and releases them from the burden of
having to return to the hospital for the shot.
> Pharmaceutical Sector: Adopting digitalization and innovation, while ensuring greater transparency
18

Towards more balanced
food consumption and
nutritional offers
The food industry is of the sectors upon which
megatrends such as population growth, growing levels
of consumption and climate change have the biggest
direct impact. The 9 billion people that are expected to
live on this planet in 2050 will be hungry for high-
quality and nutritious food that is affordable and
readily available.
The majority of the additional calories to be eaten (and
produced) by then will consist of animal protein, which
calls for an efficient growth in livestock production.
This industry already has a major impact on climate
change, as it is responsible for 14.5% of the global
total output in greenhouse gases – more than the
emissions from global transportation combined.
Meanwhile, changing weather conditions are already
having an impact on agricultural production. The
ongoing drought in California in the United States has
directly affected supplies and price levels of state-
sourced fruit, vegetables, nuts and dairy across the
entire US. In 2014 alone, loss of revenues and
additional pumping costs added up to $1.5 billion in
total drought-related costs for the agricultural sector.
One of the major food problems today is that food
production and consumption is not evenly distributed
across the globe. Up to a third of all food produced
never gets to be consumed, as it is spoiled, disqualified
or discarded. An innovative food waste counteraction
comes from the Swedish startup FoPo, that turns
almost expired fruits into a nutritional powder which
can easily be distributed to developing countries.
Frontrunning food producers are also taking measures
to improve the nutritional composition of their
products, for instance by reducing salt, fat and sugars
levels. Examples include a bold 43% sugar reduction
for children’s dairy beverage Fristi, and Nestlé
reducing the saturated fat levels of Kit Kat wafers.
Measures such as these reflect the pro-active intention
of food producers to respond to consumer’s concerns
and mitigate risks from potential regulations, such as
taxes on high calorie/high sugar products.
In the end, we all have to eat – and the food industry’s
challenges also pose a major opportunity to benefit
from a shift towards higher levels of consumption of a
more balanced nutritional offer.
7. Food Sector
> Food Sector: Towards more balanced food consumption and nutritional offers 19

About one in eight people in developing regions remain
chronically undernourished today – while 13% of the
world’s adult population was obese in 2014.
Source: World Health Organization, FAO
49> Food Sector: Towards more balanced food consumption and nutritional offers
20

21

The sparkling wine industry has a sustainable
product innovation that addresses various
materialities at once and can be found in the
eco-design of the bottle. In the past, the Comité
Interprofessionnel des Vins de Champagne
dictated the champagne industry with its
standards of producing authentic bottles of 75
centiliters with a weight of 900 grams.
However, in 2010, the committee agreed to
new standards for champagne bottles and
announced the technical validation of a bottle
of 835 grams.
This small change can result in an annual
reduction of 8,000 tons of CO2 emissions, the
equivalent of removing 3,000 cars from the
road. Looking at efficient logistics, up to 1,000
more bottles can be loaded in one, resulting in
a significant reduction in transport costs.
In addition, the design and advantages that
have been achieved in reducing the weight of
the glass led to 11% waste reduction. The
results of lighter champagne bottles emphasize
the great importance of packaging and its
environmental impact.
Innovative concepts that address food issues
are coming from within and beyond the
industry itself. Biotechnology innovations
for animal feed are making livestock
production more and more efficient. A life
science company such as DSM, for instance,
combines lowering greenhouse gas
emissions from livestock with higher milk
yields in Clean Cow: a feed additive
that reduces the internal production
of methane by cows.
Best Practice: Sustainable Champagne
22

High industry average scores indicate well-
established industry standards and a mature level of
sustainability. Looking at the Dow Jones
Sustainability Index 2014 data, Food products’
frontrunners outperform the herd, but the
difference between them is smaller than observed in
chemicals and pharmaceuticals. The industry
average scores are relatively high: an indicator for
high industry standards and a mature level of
sustainability. It is for a reason that companies from
this category, such as Unilever and Nestlé, are
consistently named among global sustainability
leaders across industries.
Gaps on criteria such as Corporate Governance,
Labor Practice Indicators and Human Rights are the
smallest, driven by compliance and established
industry-specific initiatives such as Fair Trade.
However, frontrunners clearly maintain their lead in
the environmental dimension. This suggests that the
industry in general is still figuring out how to
reduce environmental impact, and how to
communicate about this topic.
Social reporting appears to be the main challenge
for frontrunners. On Human Capital Development
industry average lags behind but, in contrast to
pharmaceuticals, frontrunner companies in food
have recognized the significance of this area and
are strategically investing in the development of
their people.
49
Sustainability status in the food industry
0
25
50
75
100
Risk & Crisis
Management
Codes of
orruption&Bribery
Supply Chain
Management
Environmental
Policy/Management
System
Operational Eco-
Efficiency
Climate Strategy
Environmental
Reporting
Labor Practice
Indicators & Human
Rights
Human Capital
Development
Social Reporting
Food Products (industry average)
Food Products (frontrunners)
> Food Sector: Towards more balanced food consumption and nutritional offers
23

From passive provider to
active entertainment and
convenience contributor
Characterized by high levels of consolidation, local
European telecommunication markets are steadily
following a US model of a small number of dominant
players with comparable market shares, supplemented
with maybe one or two operators with remarkably
lower presence. Over-the-top (OTT) content providers
like Netflix and Spotify make use of existing
infrastructure to offer their services, while more
established players such as Google and Apple are
expanding from being an OTT-only threat to actually
taking steps towards operating (virtual) mobile and
fiber networks themselves.
Regulatory developments may accelerate the
development of new business models and the
investment to meet the growing demand for speed and
capacity. The European Commission’s Digital Single
Market Strategy, to be delivered in 2016, is a key
framework that will influence the ability of telecom
operators to be competitive within the EU. The
Commission itself already boasts that a fully functional
Digital Single Market could contribute €415 billion per
year to the EU economy and create hundreds of
thousands of new jobs.
A shift towards providing more digital services may
contribute to redefining the telecoms profile from a
passive provider of an intangible service to a business
that plays an active role in supporting and delighting
the customer with convenience and entertainment.
Since consumers’ appreciation of telecom operators is
generally modest, repositioning as a technology or
entertainment company provides an opportunity for
building the positive brand associations that come with
this sector. Consumer trust in the technology industry
stood at 78%, according to the 2015 Edelman Trust
Barometer – the highest of all industries.
The emergence of a digital ecosystem of connected
people, devices and networks through the Internet of
Things presents itself as a major growth area. There
are valuable opportunities in partnering with other
companies to offer solutions in terms of e-health,
smart cities, cloud computing or digitized
manufacturing – innovations that will significantly
improve efficiency in industrial and business processes
as well as work habits and lifestyles.
8. Telecommunication Sector
> Telecommunication Sector: From passive provider to active entertainment and convenience contributor 24

Growth opportunities in the area of open innovation
are also found in venture funds and supporting
startups through accelerator programs. Accelerators
are popular: companies that have initiated programs of
their own (or started partnerships with existing
programs) include operators such as Telenet,
Telefónica, Deutsche Telekom and Vodafone. By
setting up a close connection with these young
businesses, corporations gain access to ideas for next-
generation services, as well as enjoying reputation
benefits and injecting a sense of intrapreneurship
among employees.
Finally, telecommunication companies have to take an
active standpoint in addressing consumer concerns
surrounding the industry. Privacy and data security
matters require firm internal policies and control
measures, but also offer opportunities. Expertise in
security, identity authentication and other forms of
privacy protection can be a reputational asset which
could also be positioned as a service to (business)
customers.
Deutsche Telekom, Intel and Cisco are collaborating in
the Challenge Up! Program, a joint startup initiative
organized by the three companies. In July 2015, twelve
startups were selected to participate in a 4-month
incubation program designed for young innovative
companies building Internet of Things solutions.
The winning teams were selected after five days of
intensive mentoring sessions and workshops during
the introductory Acceleration Week, where
participants worked on refining their pitching skills,
product development, business modeling, user
experience design and sales strategy. The startups
joining the Challenge Up! Incubation program come
from nine different countries, and are working on
solutions including a smart LED light bulb enhanced
with a presence sensor which helps to protect homes, a
solution that measures and helps maintain blood sugar
levels of diabetic patients, and a technology to provide
real-time information on parking vacancy.
49
Best Practice: Challenge Up!
> Telecommunication Sector: From passive provider to active entertainment and convenience contributor
25

Global mobile traffic data grew 69% in 2014 to 2.5
exabytes each month, and in the US approximately 35%
of mobile consumers check their smartphone
at least 50 times per day.
Source: Cisco Visual Networking Index 2015, Deloitte Global Mobile Consumer Survey US 2014
49> Telecommunication Sector: From passive provider to active entertainment and convenience contributor
26

Among the four industries included in this report,
telecommunication services is the industry where
the gap between the industry average and
frontrunners is the smallest, based on DJSI 2014
data. On 12 sustainability criteria, the scores of the
frontrunners are on average only 30% higher than
the industry’s average.
In terms of environmental performance, Operational
Eco-Efficiency appears to be a sore tooth for
frontrunner companies and, to a lesser extent,
industry average. Growing a business fueled by
pumping networks and ever-increasing levels of
data consumption, while reducing carbon emissions
and energy consumption appears to be tricky.
Finally, a rather high score on both average and
frontrunner level can be found on Stakeholder
Engagement, suggesting that communication with
local communities has been recognized as a key
indicator for success by telecommunication
companies.
49
Sustainability status in the telecommunication industry
0
25
50
75
100
Risk & Crisis
Management
Codes of
orruption&Bribery
Supply Chain
Management
Environmental
Policy/Management
System
Operational Eco-
Efficiency
Climate Strategy
Environmental
Reporting
Labor Practice
Indicators & Human
Rights
Human Capital
Development
Social Reporting
Telecommunication Services (industry average)
Telecommunication Services (frontrunners)
> Telecommunication Sector: From passive provider to active entertainment and convenience contributor
27

9. From report to result – our approach
In order to prevent that reporting becomes the end-
station of the sustainability journey, companies should
use their material issues to create an impact that is
tangible for investors and other stakeholders. Focusing
on the relevant material issues helps to identify the
specific opportunities and pointing out the route
towards leveraging those opportunities. The GLOBE-US
model is developed to integrate sustainability into the
business model, according to its seven-step approach.
GLOBE-US leads to a strategy roadmap for business
value from sustainability through a structured and
comprehensible process.
Starting with the existing business model based on the
Business Model Canvas by Osterwalder and Pigneur,
the stakeholder landscape is defined and the most
material issues for the company are assessed, resulting
in a materiality matrix. By looking at how competitors
are performing on sustainability, the relevant touch-
points for value creation emerge. After making a
selection of most relevant issues, ambitions and
targets for future progress are set. Opportunities for
value creation can be identified in the strategic areas
of eco-efficiency, innovation and customer intimacy.
Finally, real innovators incorporate feedback gathered
throughout the process into the business model for a
complete business model re-design.
28> From report to result – our approach

A practical application of the GLOBE-US model is
found in Belgian telecom company Telenet. Starting in
2010, the efforts of Telenet’s sustainability reporting
activities quickly led to inclusion in the Dow Jones
Sustainability Index. This outstanding performance
helped Telenet with its reputation towards investors,
but unfortunately did not lead to a comparable
improvement of the company’s sustainability
reputation among consumers, nor did it trigger service
innovations.
As a response, a five year master plan was designed.
This master plan aimed at cementing the company’s
sustainability policy as an integral part of long-term
strategy and included the goal to become one of the
top ten reputable brands in Belgium by 2017. Three
distinct areas for improvement were designated to
achieve this ambition:
• Establishing potential for sustainable innovation to
become “neighbor of choice”
• Training aimed at internal capacity building on
business design thinking from societal challenges
• Building engaging communications for both
internal and external stakeholders
In 2013, the packaging of Telenet’s set-top boxes was
redesigned, leading to savings of over € 2 million thus
far. In addition to going green in products, Telenet also
engaged with beginning entrepreneurs, both to
support their development and draw on their valuable
insights. In August 2014, the company launched an
entrepreneurial accelerator ecosystem to support
aspiring entrepreneurs and promote innovation.
Out of the 450 applications, Telenet selected ten
startups focused on innovation domains, like games, e-
commerce, big data and social innovation. The majority
of the startups aimed to achieve positive societal
results such as education, circular economy solutions
that increase the yield of underleveraged assets, and
improvement of neighborhoods. In the spring of 2015,
five out of the ten participants received second stage
funding. A second year of the accelerator program
begins with a brand new selection of startups in
October 2015.
A more detailed version of the Telenet case was
previously published on INSEAD Knowledge Blog.
49> From report to result – our approach
Using the GLOBE-US process to avoid the reporting trap
29

The key lesson from the Telenet experience is
that C-suite managers responsible for
sustainability programs should steer clear of
the reporting trap. After getting the basics
right in reporting, and sustainability being
embedded in the organization’s core, a strong
focus on sustainable innovation is the next
frontier.
A deeply-rooted company purpose is a great
enabler to make bold initiatives fly. Not all
CEOs will be as inspirational as Paul Polman or
Richard Branson, but there are some key
elements to help infuse sustainability into the
veins of the corporation.
Formal routes include establishing a clear
governance structure including board
responsibility and linking relevant KPIs to
senior management’s remunerations. More
informal interventions can be planned in order
to engage employees, for instance through
internal capacity building in training and
education sessions and stimulating
intrapreneurship focused on societal issues.
Finally, companies have to speak up. Without
communication, stakeholders will not be able
to acknowledge the company’s efforts nor
become a part of the change. By being vocal
about the sustainability journey and
communicating consistently on the most
relevant occasions, corporate reputation, as
well as engaging with stakeholders to create
shared value, can be seized.
“I think it comes down to
setting an agenda for
transformational change in the
business and then really
driving that change through
innovation.”
Steve Howard, Chief Sustainability Officer,
IKEA Group
> From report to result – our approach
30

10. Does the value of benchmarking offset the burden?
Aside from the annual sustainability or integrated
reporting efforts, each year companies receive a large
number of invitations to participate in sustainability
benchmarks, ratings or surveys. Value of participating
lies in the opportunity to compare performance with
peers and, in case of a good evaluation, sustainability
leadership will be demonstrated by a credible third
party.
Rankings are voluntary, laborious and there
are many around so companies should opt
for those few rankings that matter most.
However, some companies feel overwhelmed by the
sheer volume of requests and workload presented with
responding to these questionnaires. How do you
determine which are the most relevant rankings in
order to make an informed decision about allocating
resources? For companies that want to avoid the
reporting trap, here are four things to consider:
1. Initiator and target group
Who is asking the questions and for whom are the
insights being collected? Make sure to have clear
priorities in terms of stakeholder relevance and
impact in order to determine which groups are most
deserving your attention. For most companies,
customers are among the most important
stakeholder groups, which could justify to respond
to an EcoVadis request from a major client as a key
priority.
2. Focus and recognition of the benchmark or ranking
Are they focusing solely on a specific issue or are
they looking to assess the company’s sustainability
performance as a proxy for financial success
in the long term? In addition, consider whether the
rating applies an industry-specific perspective or if
all companies are jumping through the same
hoop.
> Does the value of benchmarking offset the burden?
31

> Does the value of benchmarking offset the burden?
Additionally, it is worth to review the reputation
of the requesting party. Meta-benchmarks such
as SustainAbility’s Rate the Raters provide
insight in the credibility of well-known raters
such as CDP, Dow Jones Sustainability Index and
the FTSE4Good Index series. Asking your most
important stakeholders directly which third-
party sources they trust can also be a good way
to assess.
3. Level of personalized feedback on performance
Which feedback on company performance is
provided once the questionnaires are processed?
Feedback from these assessments can be a
valuable tool, as it provides an objective
reflection of performance. However, the
usefulness of this feedback depends on the level
of detail and insight into areas for improvement.
Comprehensive results (e.g. partial scores on
sub-criteria) can be used to plan interventions
for improving performance and measure year-on-
year improvement on these areas.
4. Public communication on results
Finally, it is worth noting how the rating agency
communicates its results. Particularly when
companies are looking for recognition of their
sustainability efforts from independent third-
party sources, the level of transparency on
outcomes is an important criterion to take into
account. Publications such as the RobecoSAM
Sustainability Yearbook, which includes
complete listings of leading companies for 59
industries, are particularly useful to
demonstrate your company’s performance from
an independent expert objective.
32
“The data collection and
review process we engage in as
part of DJSI’s annual
evaluation provide an
opportunity to engage leaders
and experts across our
company, drive change and
foster improved performance
in our sustainability program.”
Art Gibson, VP of Environment, Health & Safety, and
Sustainability, Baxter International Inc.

Where to go from here?
Check out our Checklist for avoiding the
reporting trap on page 37. It contains a
useful structure to self-assess your
sustainability strategy.
To support our customers on embedding
sustainability into the business, Finch &
Beak offers a range of consulting services
including:
33
Appraisal and development of a 100-days outlook
Identification and status measurement of the
current sustainability efforts including corporate
communication. Which sustainability issues carry
value creation potential, in relation to the core
business? To what extent are opportunities from
sustainability captured and communicated? Our
100-days outlook identifies your potential building
blocks for integrated sustainability and contains an
action list for execution.
Contact Josée van der Hoek
Founding Partner Finch & Beak,
to receive more information
about the 100-days outlook at
josee@finchandbeak.com or call
+31 765 22 28 17.
DJSI and CDP – Heatmap Analysis
Based upon your Company Scorecard, our heatmap
analysis identifies the main improvement criteria for
next year’s participation, including an analysis of
your company’s sustainability performance
compared to best-in-class and industry’s average. In
doing so, next year’s score can be improved by
starting to work directly on challenges that matter.
Ask Nikkie Vinke, Senior
Consultant Finch & Beak, for
more information on the DJSI and
CDPHeatmap Analysis at
nikkie@finchandbeak.com or call
+31 765 22 28 17.
> What’s next? – some of our solutions
11. What’s next? – some of our solutions

Finch & Beak is an agency that helps companies
accelerate their performance on today’s biggest
sustainability challenges. In 1997, we launched our
business as Between-us: a boutique consultancy
that worked on bringing sustainability into the
mainstream. During this 20 year period, we have
serviced over 100 corporate clients throughout
Europe, trained more than 5000 executives and
worked with top level business schools from around
the globe.
Today, our rapidly shifting society and its
sustainability challenges mean that things have to
change and that we have no time to waste. It is
essential for businesses, to be adaptable if they are
to survive and thrive in these turbulent times. Finch
& Beak uniquely focuses on helping its clients to
speed up the process of business evolution. We
deliver clear and concise services aimed at building
business cases and turning them more quickly and
effectively into value for both the company and
society.
www.finchandbeak.com
Founded in 1995, RobecoSAM is an investment
specialist focused exclusively on Sustainability
Investing. It offers asset management,
indices, engagement, voting, impact analysis,
sustainability assessments, and benchmarking
services.
Asset management capabilities cater to
institutional asset owners and financial
intermediaries and cover a range of ESG integrated
investments (in public and private equity), featuring
a strong record in resource efficiency theme
strategies. Together with S&P Dow Jones Indices,
RobecoSAM publishes the globally recognized Dow
Jones Sustainability Indices (DJSI). Based on its
Corporate Sustainability Assessment, an annual
ESG analysis of 2,800 listed companies,
RobecoSAM has compiled one of the world’s most
comprehensive databases of financially material
sustainability information.
www.robecosam.com
34
About Finch & Beak
About RobecoSAM
This publication has been prepared for general
guidance on matters of interest only, and does not
constitute professional advice. You should not act
upon the information contained in this publication
without obtaining specific professional advice. No
representation or warranty (express or implied) is
given as to the accuracy or completeness of the
information contained in this publication, and, to
the extent permitted by law, Between-us Media
Marketing Consultants B.V., its members,
employees and partners do not accept or assume
any liability, responsibility or duty of care for any
consequences of you or anyone else acting, or
refraining to act, in reliance on the information
contained in this publication or for any decision
based on it. © 2015 Between-us Media Marketing
Consultants B.V. All rights reserved.
Copyright and Disclaimer

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36

> Annex: Checklist for avoiding the reporting trap
Vision: Integrated sustainability can only be achieved when the overall, long-term goal of the company is aligned with the sustainability
objectives. Sustainability sits at the heart of the business vision.
5
Areas of engagement: A clear understanding of the business environment is required to determine value creation opportunities. The areas
of engagement describe your geographical areas of operation, the customer segments you serve, structure of your value chain, overview of
products and services, selection of your key stakeholders and a list of the most relevant material issues.
Business case: Sustainability needs to fit within the current activities and has to leverage the core competencies of the company, such as
operational excellence or growth leadership. By developing the business case for sustainability, it will become clear how sustainability will
add to the bottom line.
Differentiation: Sustainability is a driving force when it comes to increasing the competitiveness of the company. Mapping the strategic
areas that will make the company winning helps you to enlarge competitive edges. Reputation, the pricing of products and services,
innovative or better products and services, customer intimacy or eco-efficiency are key differentiating areas.
13Targets & ambitions: You can only measure success when sustainability goals are formulated in the initial phase. In this way, the company
tracks its progress over years and you know where to adjust or accelerate. Formulated external goals can be measured by benchmarking.
18
Means & tools: The path towards achieving the sustainability goals requires a solid implementation plan. Stakeholder engagement
activities and internal trainings are crucial tools for embedding sustainability into the business.
Staging: You need to schedule a roadmap for integrated sustainability by determining the speed and sequence of developing sustainability
within the company.
37> Annex: Checklist for avoiding the reporting trap

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