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1. MATERIALITY METRICS AND DECISION MAKING FOR
A VALUE-ADDED SUSTAINABILITY JOURNEY
Cristian Barcan, BASF
Charlene Wall-Warren, BASF
James Reagan, National Cattlemen’s Beef Association
Jeff Rice, Walmart
Mike Faupel, The Sustainability Consortium
2. MATERIALITY METRICS AND DECISION MAKING FOR
A VALUE-ADDED SUSTAINABILITY JOURNEY
Charlene Wall-Warren, BASF
4. 1 | Chemistry & connections…
2 | Agenda for today
3 | Let’s get started!
4 4
5. What new bonds can we create amongst
common elements?
n How do we …
n holistically & broadly consider the value chain
n determine & prioritize the top issues
n create a common language, common objectives
n consider the end-consumer product
n reach outside of our walls - upstream & downstream
n maximize the impact of our actions
55
6. Company Overview:
BASF – The Chemical Company
§ The world’s leading chemical company
§ Serves all major industries
§ 385 production facilities including six Verbund sites
§ World-class, innovative, high-value products
§ Intelligent, sustainable system solutions
§ 2011 Sales: €73.5 Billion
§ Employees: 111,000+
7. DRAFT
Why – our purpose
We create chemistry
for a sustainable future.
BASF Strategy: We create chemistry
7
8. Sustainability will become even more
important
SUPPLY
Earth’s
resources DEMAND +
Annual Human beings now
regenerative demand more from
capacity the Earth than can be 1976 2010
of the planet regenerated
Consumption of Earth’s resources
BASF Strategy: We create chemistry Source: Accenture.
8
9. Demographic challenges set the stage
for the future
Nine billion people in 2050 but only one earth
Resources, Food & Nutrition Quality of life
Environment & Climate
Chemistry as enabler
9 9
10. Sustainability drives innovations in new
growth fields
Resources, Environment Food & Nutrition Quality of life
& Climate
Chemistry as enabler
Customer
industries
Transportation Construction Consumer Health & Energy &
Goods Nutrition Electronics Agriculture Resources
Batteries Heat Organic Plant Energy
management Enzymes Medical management
Electronics biotechnology
Lightweight Functional Rare earth
composites crop care metals recycling
Heat
Wind energy
Growth
management
fields*
Water solutions
BASF Strategy: We create chemistry
10
11. 1 | Chemistry & connections…
2 | Agenda for today
3 | Let’s get started!
11 11
12. Agenda for today
n Need & direction for the future - Walmart
n "The increased importance of sustainability in consumer
goods value chains" Walmart, Jeff Rice - Director,
Sustainability 1:40-2:10
n Collaborative global approach - TSC
n "Enabling collaboration for sustainable consumer goods"
The Sustainability Consortium, Mike Faupel - Director,
Operations 2:10 – 2:40
n Break - 2:40 – 2:55
12
12
13. Agenda for today
n Conceptual approach - BASF
n "SET for more sustainable brands" Cristian Barcan - Applied
Sustainability Director, BASF Nutrition & Health) – 2:55 – 3:10
n Case Study - NCBA
n "More sustainable beef program" National Cattlemen's Beef
Association, J.O. Reagan - Executive VP– 3:10 – 3:25
n You guys work!
n "How to create the right chemistry along your value chain" -
3:25 – 4:20
n Conclusions…- 4:20 – 4:30
13
13
14. 1 | Chemistry & connections…
2 | Agenda for today
3 | Let’s get started!
14 14
16. DISCLAIMER:
This document, or any answers or information provided herein by BASF, does not constitute a legally binding obligation of BASF.
While the descriptions, designs, data and information contained herein are presented in good faith and believed to be accurate, it is
provided for your guidance only. Because many factors may affect processing or application/use, we recommend that you make
tests to determine the suitability of a product for your particular purpose prior to use. It does not relieve our customers from the
obligation to perform a full inspection of the products upon delivery or any other obligation. The claims and supporting data
provided in this publication have not been evaluated for compliance with any jurisdiction’s regulatory requirements and the results
reported may not be generally true under other conditions or in other matrices. Users must evaluate what claims and information
are appropriate and comply with a jurisdiction’s regulatory requirements. NO WARRANTIES OF ANY KIND, EITHER EXPRESS
OR IMPLIED, INCLUDING WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, ARE MADE
REGARDING PRODUCTS DESCRIBED OR DESIGNS, DATA OR INFORMATION SET FORTH, OR THAT THE PRODUCTS,
DESIGNS, DATA OR INFORMATION MAY BE USED WITHOUT INFRINGING THE INTELLECTUAL PROPERTY RIGHTS OF
OTHERS. IN NO CASE SHALL THE DESCRIPTIONS, INFORMATION, DATA OR DESIGNS PROVIDED BE CONSIDERED A
PART OF OUR TERMS AND CONDITIONS OF SALE.
16
17. MATERIALITY METRICS AND DECISION MAKING FOR
A VALUE-ADDED SUSTAINABILITY JOURNEY
Jeff Rice, Walmart
18.
19. Sam Walton’s Vision
“
Give the world an opportunity to
see what it's like to save and have a
better life.”
20. Sustainability unlocks the true potential
of Walmart’s mission: Save Money, Live Better
“
Taking costs out of the business,
getting rid of waste, buying in a more
responsible way, and giving back to our
communities, is simply staying true to who
we are.
By bringing together save money with live
better, we make our business stronger.”
Mike Duke
President and CEO, Wal-Mart Stores, Inc.
21. Approach to sustainability
Operations
Operate for Less
Buy for
Less
associates suppliers
sustainability
360
Grow
Sales
Saving people money
so they can live better.
Sell for Less
communities
customers
Productivity Loop
www.walmartstores.com/sustainability
22. We began in 2005 with three aspirational goals
that guide everything we do in sustainability
To be supplied 100%
by renewable energy
To create zero waste
To sell products that sustain
people and the environment
23. Sustainability unlocks the true potential
of Walmart’s mission: Save Money, Live Better
“ As Walmart continues to grow and
become a better and more sustainable
business, those suppliers who partner
with us in building a responsible supply
chain will be the suppliers that will grow
with us. And you too will become a better
and more sustainable business.
Reducing waste, being more efficient, and
doing the right things the right way will
lower costs for your factories, for your
businesses and, ultimately, for the Walmart
customer.”
Mike Duke
President and CEO, Wal-Mart Stores, Inc.
24. First, we focused on specific product innovations
Driving scale and lowering the cost of
money saving, more efficient products. Building the market and
leveling the playing field
Supporting new product
launches
Increasing offerings, changing
assortment, adding
new suppliers.
Leading through our private brands
25. In 2009, we committed to the Sustainability Index
Sustainability Index: Tools that will…
• Improve the sustainability of the products our
customers love
• Integrate sustainability into our core business
• Drive the productivity loop by reducing cost,
increasing product quality and finding supply
chain efficiency
“If we work together, we can
create a new retail standard
• Increase customer’s trust in us and the brands
for the 21st century." we carry by leading in transparency
26. Walmart will Integrate Sustainability Into our
Business
“ we are building sustainability into the
nuts and bolts of what we do as a retailer –
buying and selling merchandise.
I believe we are at a turning point in retail
history… Working in partnership with
nearly 100 other companies, we think
we’ve found an innovative way to drive
change. The Sustainability Consortium
has begun delivering tools to our
product buyers to help us evaluate
product and supplier sustainability
Duncan Mac Naughten
President and CEO, Wal-Mart Stores, Inc.
27. TSC’s Work Can Supports Multiple Uses
▪ Training / Incentives
▪ Discussion Guides
▪ Scorecarding
▪ Prioritization and goal setting
▪ Product Design
▪ Customer Engagement
28. Sustainability Index: Core Components
Science and Alignment Integrate and Act Engage Customers
The Sustainability Integrate Into Engage Our
Consortium Business Customers
▪ Science / Standards ▪ Supplier / Category ▪ Lead industry in
metrics customer transparency
▪ Industry Alignment
▪ Incentives ▪ Build customer trust
▪ Stakeholder Engagement
▪ Business Processes ▪ Engage across channels
▪ External Credibility
▪ Training
29. We are training our buyers based on TSC science
Identify priority issues
Highlight improvement
opportunities
Sustainable Value Networks Walmart Stores, Inc.
Confidential
30. TSC KPIs are Driving Category Scorecards
Identify leaders and laggards
Highlight opportunities
Set goals, track progress
31. Walmart US: Integrating into Core Business
Processes
Annual Joint
Business Business
Planning Planning
Category Line
Strategy Reviews
32. Building into the Sam’s Club Brand Promise:
Great Quality Merchandise at an Amazing Value
EVP Portfolio Strategy
Merchandise Portfolio
Category Group SVP
Category Strategy
Joint Business
Category Planning
VP DMM
Item
Value Framework
Buyer
33. We’re going to ‘make it real’ with incentives
“ Every buyer will have sustainability
goals as part of his or her objectives,
and we will use the Index as the tool to
measure progress against those goals.
We’ll recognize and reward those
buyers and suppliers who are doing
well. We will also ask suppliers who
aren’t performing well to develop plans to
improve, and we’ll hold them
accountable for showing progress.
Duncan Mac Naughten
President and CEO, Wal-Mart Stores, Inc.
37. Measurement and reporting systems are crucial to progress in
product sustainability but are coupled with an array of challenges.
Today Challenges include
Science is enabling an Lack of a harmonized
understanding of social and measurement and reporting
environmental impacts and approach:
benefits
• Complexity driven by the
vast variety of products
Various corporate and
social initiatives launched • No holistic view of the value
in attempt to address chain
product sustainability
• No capability to credibly
differentiate products based
Global regulations on sustainability
are emerging with
unpredictable metrics • Need for consistency and
transparency in
measurement and reporting
But challenges exist…
Source: TSC team analysis
37
38. The Sustainability Consortium improves decision
making for product sustainability throughout the
entire product life cycle across all sectors.
Vision
To advance science to drive a new
generation of innovative products
and supply networks that address
environmental, social, and economic
imperatives
Enabling the consumer goods
industry to do things that matter Mission
about things that matter.
To design and implement credible,
transparent and scalable science-based
measurement and reporting systems
accessible for all producers, retailers, and
users of consumer products
Source: The Sustainability Consortium
38
39. 1 TSC is uniquely bringing together stakeholders
and creates unparalleled opportunity for collaboration.
Credibility
Leading universities and NGOs using
science-based approach to identify areas
of adverse impact in the supply chain
Efficiency
Academic
Minimizing multiple similar efforts
Institutions
and reducing supplier burden of
variable information requests
Harmonization The
Creating clear agreed upon terms Sustainability
and definitions by all stakeholders Consortium
Identifying common life cycle stages,
metrics, and reporting categories Non-profit
Corporations
organizations
Source: TSC
39
40. Translating TSC’s mission into impact requires doing four things:
Using a multi-stakeholder … to create practical
1 2
approach… measurement tools…
Approach
… that enable proactive … and unlock value in the
3 innovation in sustainability… 4 supply chain
Impact
Source: TSC team analysis
40
41. TSC tools will enable sustainable innovation
across the value chain
Current products Future products
Understand Share Declare
product category hotspots1 and
drivers information on best
Differentiate Communicate to consumers
practices products against baseline
Level 1 – Level 2 –
Category level Product level
▪ Broad product ▪ Product-specific
categories
▪ Quantitative tool to
▪ Qualitative benchmark against
assessment of hotspots1
baseline
1 Areas of adverse environmental and social impact across product supply chain
41
42. 2 TSC category-level products have 3 major components…
Category Sustainability Key Performance
Category Dossier
Profile (CSP) Indicators (KPIs)
Collection of evidence on Synthesis of product Metrics / questions to
product category and its sustainability knowledge measure and track product
supply chain, environmental and improvement category sustainability
and social hotspots, and opportunities
improvement opportunities
Source: TSC
42
43. 2 … to be used by buyers and suppliers to address
product sustainability in a cost efficient way
TSC provides Buyers
Communicate efficiently
and effectively with suppliers:
• Ask category-specific questions
• Track supplier performance using KPIs
Improved
product
• Hotspots sustainability
• Improvement and cost
opportunities Suppliers
• KPIs Address product sustainability
efficiency
more effectively and efficiently:
• Use a single reporting tool across buyers
• Enhance product development
• Reduce spending on sustainability
research and reporting
• Evaluate quality of input materials
Source: TSC
43
44. 2 TCS is working on 100 Level 1 products across 8 sectors.
Food, Beverage
Electronics Automotive
& Agriculture
Toys Paper Other
Home & Personal Care Apparel
Source: TSC Knowledge Base (please see complete list of product categories in Appendix)
44
45. 3 TSC’s tools and frameworks enable proactive innovation
Companies recognized and
Transparent,
differentiated by creating standardized
products that address areas that and harmonized
matter systems
Drives at-scale improvements by Proactive
coordinating and sharing best Innovation
practices
Collaborate with stakeholders on Key environmental
sustainability solutions and social hotspots
“TSC can bring manufacturers,
retailers, and consumer advocacy
groups together to think how to
develop a campaign to drive
consumer behavior”
TSC member company
Source: TSC member interviews; team analysis
45
46. 4 TSC’s measurement and reporting system will drive
impact by unlocking the value in the supply chain.
Harmonized and transparent system
Transparency reduces complexity and saves costs
of Reporting throughout the supply chain
Standard metrics enable suppliers
Standardization
and buyers to work together on the
of Metrics
same environmental and social goals
Reducing cost and complexity of
Reduced Cost sustainability research and reporting
and Complexity allows companies to tackle impact
areas faster and more efficiently
46
49. Product Prioritization
Selection and prioritization draws on scientific and practical considerations
• Contribu-on
to
total
impact
of
Consumer
Goods
Industry
(where
Impact
=
Consumer
spending
x
es8mated
impact
from
economic
input/
Category
Selec-on
output
data),
and
Criteria
• Member
and
Stakeholder
Preferences
(e.g.
categories
with
the
most
member
overlap
(produced
or
sold)
and/or
known
cri8cal
issues
(e.g.
WWF’s
cri8cal
agro-‐commodi8es)
Mul-ple
Criteria.
General
theme:
Efficient
delivery:
• Categories
that
are
the
most
complete
(e.g.
Laptops,
Detergents)
• Available
informa8on
or
ini8a8ves
to
build
upon
(e.g.
Milk,
Wine)
Priori-za-on
of
• Categories
with
similar
inputs
(e.g.
Breakfast
Cereals,
Beer,
Bread)
Wave
1
Products
• Spread
the
workload
(e.g.
<=3
categories
per
produc8on
group)
Waves
2
&3
–
Sector
members
have
opportunity
to
shape
sequence
of
categories
49
50. KPI Development and Use
Definition
▪ KPIs are questions that members can use to track organizational progress on issues and opportunities described in a sustainability profile.
Required Elements of KPIs
▪ Must stem from an item identified in the CSP and described on the Dossiers. KPIs must be tied to one more of the following:
▪ Hotspots
▪ Critical Issues
▪ Stakeholder Concerns
▪ Must be objective
▪ Must be actionable
Things to Consider When Developing KPIs
▪ Complexity and variety of types of products within categories
▪ Geographic variety
▪ Limits of innovation, difficulties in addressing KPIs technically and financially
▪ Verification of resulting actions
▪ Thresholds for respondent successc
50
51. Anti-Trust Statement
The Sustainability Consortium is committed to facilitating a robust, open and honest exchange of ideas and information among its participants on subjects
relevant to the agenda of Consortium meetings. It is also committed to compliance with all applicable laws, including antitrust and competition laws.
To avoid any possible problems, communications and exchanges of information at or attendant to any Consortium‐related proceeding should directly relate to the
issues on the agenda.
There should be no discussions or exchanges of information regarding (1) what price any participant has or may charge for its products or services; (2) strategic
business plans or (3) whether or not to do business with any person or entity. The Sustainability Consortium does not condone disparagement or untrue
statements in any form.
Violation of these policies could jeopardize other participants and the goals of the Consortium and will not be tolerated. Please let Kevin Dooley or Jon Johnson
know immediately if you have a concern or question about a possible violation of this policy.
51
52. MATERIALITY METRICS AND DECISION MAKING FOR
A VALUE-ADDED SUSTAINABILITY JOURNEY
Christian Barcan, BASF
53. SET for More
Sustainable Brands
Cristian Barcan
SET for Applied Sustainability,
Nutrition & Health, BASF Corporation
San Diego, June 4-7 2012
54. With 9 billion people on Earth
predicted by 2050….
… And the need to use as much as
2.5 x planets worth to satisfy
demand at current pace….
Changes Need to Happen!
August
2011
December 2011 BASF
Nutri8on
&
Health
54
54
55. Major market trends –
opportunities for growth
Aging Growing
Sustainability population urbanization Food safety
Raise of the Health &
Food security middle class Wellness
December 2011 55
Copyright BASF SE
56. Geting into the Sustainability gear
n Start thinking holistic
n Plan SUSTAINABLE (beyond
Society tomorrow)
n Strengthen partnerships with well
positioned supply chain partners
Ecology n Go beyond price: Focus on supplying
VALUE
n Collaborate
Economy n Employ measuring tools
“You cannot manage what
you don’t …know”
December 2011 BASF Nutrition & Health 56
57. Sustainability
– an opportunity, not a challenge
n A differentiation and innovation
opportunity – making sustainability
brand relevant
n Measurable along the entire value
A journey,
chain
not a
destination
n Not an “either or”: any product can
be more sustainable
n Improving a products’ sustainability
over time è continuous
improvement
December 2011 57
Copyright BASF SE
58. Sustainable development over time
is a journey
Starting point Path forward Next steps
“Better for
SET puts your product your Future”
Consumer
on a journey to Product
more sustainability or Brand
December 2011 58
Copyright BASF SE
59. Helping on The Journey
Our SET Initiative to Selective Partners
SUSTAINABLE
“Better for Your Future”
o Corporate reporting
o Stakeholder
perception analysis
(Hot Spot Analysis)
DESIRABLE DISTINCTIVE o Eco-Efficiency
Analysis®
Consumer
o Eco-Efficiency
Product or
Online Manager®
Brand
o Whole-chain
traceability program
o Consumer and
stakeholders
CREDIBLE marketing &
positioning
December 2011 59
Copyright BASF SE
60. Reliable and sustainable value chains
Our vision for tomorrow
§ Supplier reliability
§ Trust in the whole value chain
§ Sustainable value chains - the norm
§ Long term strategic partnership
§ Innovation driven collaborations
§ Fair trade practices
§ Consumer focus
§ “Better for our future” business
December 2011 60
Copyright BASF SE
61.
62. MATERIALITY METRICS AND DECISION MAKING FOR
A VALUE-ADDED SUSTAINABILITY JOURNEY
James Reagan, National Cattlemen’s Beef Association
December 2011 62
65. Global Beef Cow Numbers
220,000
215,000
Million Head
210,000
205,000
200,000
195,000
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10
YEARS
66. Beef Cow Inventory
40
F2011
DOWN
400,000
HEAD
39
38
37
36
Million Head
35
34
33
32
31
30
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10
Source: USDA
F
Projected 2011 YEARS
67. U.S. Beef Cow Operations
1,050,000
1,000,000
Number of Operations
950,000
900,000
850,000
800,000
750,000
700,000
650,000
600,000
YEARS
Source: USDA
68. How
Do
We
Address
the
Challenge?
§ Must
improve
the
Sustainability
of
all
Agricultural
Products
§ Develop
Sustainability
Ini8a8ves
designed
to
enhance
Efficiencies
and
drive
Sustainability
in
the
beef
industry.
69. Purpose & Approach
• Conduct
a
comprehensive
cow/calf
to
plate
sustainability
assessment
of
the
U.S.
Beef
Industry.
Ø Quan%fy
all
systems
inputs
and
outputs
Ø Iden%fy
areas
for
improvement
70. Ultimate Goal
Enhance
the
sustainability
of
U.S.
beef
to
ensure
a
beYer
quality
of
life
for
today’s
global
popula8on
as
well
as
genera8ons
to
come.
72. Project Scope
Hotspot Analysis
§ Literature review
§ Stakeholder’s survey
Life Cycle Assessment
§ Environmental, cost and
social parameters
Producer tool
§ Eco-Efficiency Mgr
Optimization Tool;
Producer Tool
73. Long-Term Sustainability Project
Benefits
• Supply chain focus in the right areas for
improvement
– Will actually make a difference
– Avoid arbitrary imposed “sustainable” practices
that are costly and impractical
• Create value for all participants in the value
chain
• Effectively address the needs for more
sustainable alternatives
74. Keep in mind
1. Continuous improvement over time
2. A journey, NOT a destination
3. More sustainable product, rather than a
sustainable product
75. Progress to Date
ü Stakeholder survey has been finalized
ü Interviews were completed in March
ü HSA was completed in April
ü First modeling was held in April
ü LCA work initiated on pre- and post-knocking box
• Industry rollout scheduled for mid-January 2013
• Eco-efficiency model; Producer tool