Outperformance with
Sustainable Development Key Performance Indicators
                    (SD-KPIs)


                  D...
Focus on Key Challenges of Sustainable Development (SD)



„[…] we risk emptying sustainable development of content
      ...
SD-KPIs in EU Account / Modernisation Directives


DIRECTIVE 2003/51/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL
Acco...
Investors remain the most important target group also for SD-KPIs
in annual / management reports (empirical results for DA...
Demand of investors for relevant, sector-specific SD-KPIs



Empirical survey of
seven relevant investors and analysts
cov...
Results: Up to three most important SD-KPIs for ten sectors (SD-KPIs 1 - 3)



  Examples for SD-KPIs 1 with the highest
 ...
Dollar value of a single SD-KPI?
Automobile industry: Fleet consumption




Fuel efficiency
most important
factor for the
...
Dollar value of a single SD-KPI?
Utilities: Greenhouse gas intensity of energy production




                            ...
Dollar value of a single SD-KPI?
Banks: Sub-prime or predatory lending
       SD-KPI 2: Credit checks for SD risks and opp...
SD-KPIs
of different sectors




                                                     Source: Hesse (2008), p. 6.
        ...
SD-KPIs
of different sectors




                                                   Source: Hesse (2008), p. 7.


        ...
Source: Hesse (2008),
Dr. rer. oec. Axel Hesse, Senior Consultant, 40.
                            pp. 33, 36, November 20...
Best Practice for SD-KPIs Reporting




                   Source:
                   Hesse (2008), p. 43.
               ...
Automobile industry: BMW—not quite best practice




                                                   Source: BMW Group,...
Best Practice: Industrial goods—renewables: SolarWorld
• Climate protection adds value for the producer of low-emission re...
Which of these approaches to sustainability research do you believe will
lead to risk-adjusted out- or underperformance in...
Excursus: “Big Six”—the six most important SD challenges for the 21st century




                                        ...
SD-KPIs Concept—Highlights

                • From 2004 until now SD-M has elaborated
                  the SD-KPIs-concep...
Thank you for your attention!

  Contact: Hesse@SD-M.de
        www.SD-M.de
    Tel +49 251 2394678
  Mobile +49 173 64 22...
Upcoming SlideShare
Loading in …5
×

Outperformance with Sustainable Development Key Performance Indicators

1,791 views

Published on

A presentation by Axel Hesse at TBLI CONFERENCE EUROPE 2008.

0 Comments
1 Like
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total views
1,791
On SlideShare
0
From Embeds
0
Number of Embeds
18
Actions
Shares
0
Downloads
103
Comments
0
Likes
1
Embeds 0
No embeds

No notes for slide

Outperformance with Sustainable Development Key Performance Indicators

  1. 1. Outperformance with Sustainable Development Key Performance Indicators (SD-KPIs) Dr. Axel Hesse Senior Consultant, SD-M TBLI Conference Europe, 13 November 2008 Dr. rer. oec. Axel Hesse, Senior Consultant, November 2008, Page 1
  2. 2. Focus on Key Challenges of Sustainable Development (SD) „[…] we risk emptying sustainable development of content by seeking to extend it to everything. […] we should begin accepting that if sustainability is to have a meaningful, universally recognisable core, many issues will have to be excluded. Otherwise, the cart will simply not move forward.” Source: Upton, S., Chairman of the OECD Round Table on SD (2002), pp. 8-9. SD-M consults institutional investors, companies and politics regarding performance-enhancing management of global core challenges for SD. Dr. rer. oec. Axel Hesse, Senior Consultant, November 2008, Page 2
  3. 3. SD-KPIs in EU Account / Modernisation Directives DIRECTIVE 2003/51/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL Account Directive 78/660/EEC is hereby amended as follows: The annual report shall include […] To the extent necessary for an understanding of the company's development, performance or position, the analysis shall include both financial and, where appropriate, non-financial key performance indicators relevant to the particular business, including information relating to environmental and employee matters; SD-KPIs are non-financial key performance indicators (KPIs) regarding a Sustainable Development (SD), SD-KPIs which are relevant to the particular business and which have to be disclosed in annual reports / management reports. Dr. rer. oec. Axel Hesse, Senior Consultant, November 2008, Page 3
  4. 4. Investors remain the most important target group also for SD-KPIs in annual / management reports (empirical results for DAX-30 companies). Source: Hesse (2006), p. 11. Dr. rer. oec. Axel Hesse, Senior Consultant, November 2008, Page 4
  5. 5. Demand of investors for relevant, sector-specific SD-KPIs Empirical survey of seven relevant investors and analysts covering SD factors. Open question: Which are the up to three most important sector-specific SD-KPIs A study by Dr. Axel Hesse (SD-M) for the business development, the for Deloitte and the German Federal Ministry of the Environment position and the expected development of ten different industries? Source: Hesse (2007), 40 pages. Dr. rer. oec. Axel Hesse, Senior Consultant, November 2008, Page 5
  6. 6. Results: Up to three most important SD-KPIs for ten sectors (SD-KPIs 1 - 3) Examples for SD-KPIs 1 with the highest importance for the business‘ development, the position and the expected development Automobile industry: Fleet consumption (7 out of 7 investors / analysts) Utilities: Greenhouse gas intensity of energy production (6 out of 7) Transport and logistics services: Energy and greenhouse gas efficiency (6 out 7) Consumer goods and retail: Compliance to environmental and social standards in the supply chain (6 out of 7) Pharmaceuticals: Access strategies to medicines for the poor (5 out of 7) Naming of >40% of the investors/analysts necessary to define a SD-KPI Source: Hesse (2007). Dr. rer. oec. Axel Hesse, Senior Consultant, November 2008, Page 6
  7. 7. Dollar value of a single SD-KPI? Automobile industry: Fleet consumption Fuel efficiency most important factor for the consumer‘s purchase decision! And: 80-95% of CO2 emissions during the use phase Standard&Poor’s: 600-3.000 Euros per vehicle to meet upcoming EU emissions standards Dr. rer. oec. Axel Hesse, Senior Consultant, November 2008, Page 7
  8. 8. Dollar value of a single SD-KPI? Utilities: Greenhouse gas intensity of energy production RWE: >1 billion Euro per year additional costs for the purchase of emission rights from 2008 (2007: 100 million Euro) Vattenfall Europe: 500 - 700 million Euro per year Source: Handelsblatt, May 16, 2007, p. 14. Dr. rer. oec. Axel Hesse, Senior Consultant, November 2008, Page 8
  9. 9. Dollar value of a single SD-KPI? Banks: Sub-prime or predatory lending SD-KPI 2: Credit checks for SD risks and opportunities in retail banking Source: Hesse (2007), p. 11. Dr. rer. oec. Axel Hesse, Senior Consultant, November 2008, Page 9
  10. 10. SD-KPIs of different sectors Source: Hesse (2008), p. 6. Dr. rer. oec. Axel Hesse, Senior Consultant, November 2008, Page 10
  11. 11. SD-KPIs of different sectors Source: Hesse (2008), p. 7. Dr. rer. oec. Axel Hesse, Senior Consultant, November 2008, Page 11
  12. 12. Source: Hesse (2008), Dr. rer. oec. Axel Hesse, Senior Consultant, 40. pp. 33, 36, November 2008, Page 12
  13. 13. Best Practice for SD-KPIs Reporting Source: Hesse (2008), p. 43. Dr. rer. oec. Axel Hesse, Senior Consultant, November 2008, Page 13
  14. 14. Automobile industry: BMW—not quite best practice Source: BMW Group, Annual Report 2006, pp. 30–31. • BMW reduced fuel consumption from 1990 until 2005 about 30%—relatively. • However, the most important information, the absolute amount of the emissions of the fleet, was not reported at all. • The sales-weighted absolute amount of the brand BMW was 192 g CO2/km, the highest emission value of all European competitors (except for Porsche). • Impending EU regulation (130 g CO2/km): BMW can expect price increases of between Euro 1500-3000 per automobile on average across its fleet. • Investors do not receive these material information. Dr. rer. oec. Axel Hesse, Senior Consultant, November 2008, Page 14
  15. 15. Best Practice: Industrial goods—renewables: SolarWorld • Climate protection adds value for the producer of low-emission renewable energy • Positive CO2 budget shows that the carbon dioxide emissions avoided by means of SolarWorld products in 2006 exceed the emissions generated throughout the Group by a factor of more than 45 • Simultaneously pursue economic and environmental goals • The Group´s CO2 emissions have therefore remained constant at around 41 (previous year: 41) thousand tonnes of CO2 equivalents despite the increase in production in 2006 • Due to the solar power modules supplied by SolarWorld at the end of the value chain, the environment is spared a total of around 1.9 (previous year: 1.2) million tons of CO2. • The environmental damage prevented in this way is worth around 130 (previous year: 84) million € Sources: SolarWorld, Annual Report 2006, p. 42 + Hesse (2008). Dr. rer. oec. Axel Hesse, Senior Consultant, November 2008, Page 15
  16. 16. Which of these approaches to sustainability research do you believe will lead to risk-adjusted out- or underperformance in the future? Assets under Management: US$ 715 billion Dr. rer. oec. Axel Hesse, Senior Consultant, November 2008, Page 16
  17. 17. Excursus: “Big Six”—the six most important SD challenges for the 21st century 1 2 freshwater 3 4 => poverty 5 6 Sources: UNEP (2000), p. 339.; Hesse (2002-2007). The quot;Big Sixquot;-Concept is protected by copyright. Institutional Investors could use the „Big Six“ for thematic investments with outperformance in the long term. Dr. rer. oec. Axel Hesse, Senior Consultant, November 2008, Page 17
  18. 18. SD-KPIs Concept—Highlights • From 2004 until now SD-M has elaborated the SD-KPIs-concept, which is protected by copyright. • Easy data collection • Easy communication • Materiality (EU accounting law) • Strong partners: Deloitte Prof. Baetge, #1 accounting prof in Germany 15year-lasting competition „The Best Annual Report“ of „manager magazine“ • „Standardization“: Stront interest of KPMG and Ernst&Young Association of Chartered Certified Accountants (ACCA) Fédération des Experts Comptables Européens (FEE): organisation for the accountancy profession in Europe • Institutional Investors could use SD-KPIs for Best-in-Class-Investments with high outperformance in the long term from 2009. Dr. rer. oec. Axel Hesse, Senior Consultant, November 2008, Page 18
  19. 19. Thank you for your attention! Contact: Hesse@SD-M.de www.SD-M.de Tel +49 251 2394678 Mobile +49 173 64 222 11 Dr. rer. oec. Axel Hesse, Senior Consultant, November 2008, Page 19

×