let's talk: sustainability q2 2014 - a new point of view for business leaders

Let’s talk: sustainability Q2 2014

A new point of view for business leaders

23 April 2014


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► This material has been prepared for general informational

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those of EY.

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► These slides are for educational purposes only and are

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accounting advice.


Today’s moderator

Leisha John EY Americas Director of

Environmental Sustainability

#EYSustainability Join today’s Twitter discussion:


Let’s talk: sustainability A new point of view for business leaders

Sustainability on the go

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►Visit

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Today’s presenters

Nancy Gillis Ernst & Young LLP

Climate Change and Sustainability Services

Senior Manager

Chris Hagler Ernst & Young LLP


Southeast Practice Leader

Allie Rutherford Ernst & Young LLP

EY Center for Board Matters

Director — Corporate Governance

Ben Miller Ernst & Young LLP


Senior Manager

The information contained herein is a summary in nature. Viewers should consult their

own professional advisors to address their individual circumstances and concerns.


Today’s agenda

► Nine key elements of a sustainability strategy

► Proxy season 2014: preview of the environmental

and social shareholder proposals

► Banking on the benefits of accounting for GHG

emissions

► Using sustainability for competitive advantage in

government procurements

► Setting credible sustainability goals that drive real

business value Join now: #EYSustainability


Nine key elements that frame the sustainability strategy discussion

Sustainability

Tax implications Climate

change

Beyond compliance

Emissions

Energy agenda Innovation

Reporting

Social impact

Supply chain

Join now: #EYSustainability


Today’s agenda


► Proxy season 2014: preview of the

environmental and social shareholder proposals


emissions




business value Join now: #EYSustainability


Proxy season 2014: preview of the environmental and social shareholder proposals

Sustainability


change

Beyond compliance

Emissions


Reporting

Social impact

Supply chain Beyond

compliance

Innovation

Reporting

Climate change

Supply chain

Social impact

Emissions



Opinion check

Is your company actively engaging with your

investors on environmental sustainability, social

topics (such as global labor) and/or supply chain

topics?

Select all that apply

A. Yes, on environmental sustainability

B. Yes, on social topics

C. Yes, on supply chain

D. No

E. Don’t know or does not apply (EY, faculty, other)


Environmental and social (E&S) proposals

► Dominant category of shareholder proposals

► More than half of all proposals submitted

► Leading area for proposals withdrawn prior to going to

vote

► Due to successful company-investor engagement and

agreement


Top 10 most common shareholder proposals in 2014 (publicly disclosed through March 21)

0 10 20 30 40 50 60 70

Adopt majority vote to elect directors

Appoint independent board chair

Limit executive compensation

Eliminate classified board

Increase diversity on the board

Disclosure and oversight of lobbying spending

Disclosure and oversight of political spending

Assess and report on global labor practices/human rights

Set and report on GHG emissions reduction targets

Report on sustainability

Environmental and labor sustainability Other proposals overlapping environmental sustainability Governance proposals


2014 E&S shareholder proposals

► First-time or enhanced sustainability reporting

► Increased focus — supply chain and company-specific

situations

► Greenhouse gas (GHG) emissions cuts

► Requests to adopt and disclose quantitative measures

► Environmental impact of a financial institution’s lending

portfolio and financing activities

► Review of and reporting on global labor practices and

human rights

► Risk assessments across a company’s global supply chain



Next steps

► Understand the environmental and social priorities of your

investors

► Ensure there is a process in place to handle requests from

shareholders on these topics

► Plan for ongoing dialogue to:

► Secure investor support

► Mitigate against receipt of future proposals

► Identify opportunities



Today’s agenda






emissions




business value


Banking on the benefits of accounting for GHG emissions

Sustainability


change

Beyond compliance

Emissions


Reporting

Social impact

Supply chain

Reporting

Emissions

Beyond compliance

Reporting

Climate change



Measuring GHG emissions throughout the value chain

Availability of

methods to

measure impact

Impact

Directly generated

emissions

Established standards

exist Moderate to high

Financed

emissions —

emissions of

investment projects

and loan portfolios

Standards in

development Potentially high

Banks can reduce their direct energy use and emissions,

but they may be able to have a bigger impact via their

investments, loans and financial instruments.


Response of financial institutions

► Develop and implement methods to measure both the

operational and financed emissions

► Know the information — then decide how to use it

► Internal decision making

► External reporting

► Stay one step ahead

► Influential environmental groups and investors are armed

with substantial information



Unlocking business value

► New business opportunities: focus on reducing

GHG emissions may produce new opportunities

for financial institutions

► Green bonds

► Green mortgages — financing for consumer homes

► Improved reputation

► Positions financial institution as a leader

► Demonstrates a clear commitment to strong ESG programs

► Increased transparency leads to credible measurement

and reporting of sustainability efforts



What’s next

► Aligning with emerging standards for measuring

GHG emissions

► World Resources Institute (WRI) working group to

create Financial Sector Guidance for the Greenhouse

Gas Protocol’s Corporate Value Chain (Scope 3)

Accounting and Reporting Standard

► Beyond financial institutions to institutional investors

► Examine how this might be applicable to the supply

chains (or value chains) of other industries



Today’s agenda






emissions

► Using sustainability for competitive advantage

in government procurement


business value


Using sustainability for competitive advantage in government procurement

Sustainability


change

Beyond compliance

Emissions


Reporting

Social impact

Supply chain

Reporting

Innovation


Beyond compliance

Supply chain

Climate change


Opinion check

Does your company’s procurement function

consider the environmental and social performance

of your suppliers when making purchasing

decisions?

A. Yes

B. No

C. Don’t know or does not apply (EY, faculty, other)


Just like companies, government agencies:

► Look for ways to reduce costs

► Need to meet requirements set by various stakeholders

► Federal Acquisition Regulation (FAR) 23.103

► Office of Management and Budget (OMB) Sustainability

and Energy Scorecard

► Think in terms of Total Cost of Ownership, i.e., add

maintenance and disposal costs to the “price”

If a company can demonstrate that its solution is more

efficient to run and maintain, and less expensive to dispose

of, those benefits equate to real cost savings for the agency.

Why sustainability matters to government agencies (and other institutional purchasers)


Making sustainability a competitive advantage in government procurement

Advantage for supplier organizational sustainability

► Pass savings on to government

► Energy-efficient buildings

► Conferencing versus travel

► Package and ship efficiently

► Link your sustainability

initiatives to a Strategic

Sustainability Performance

Plan (SSPP)

► Agencies must meet SSPP goals

► Agencies can leverage supplier initiatives

► Mitigate environmental risks that may cause supply disruptions

► Government is risk adverse

Competitive advantage:

highlight sustainability

initiatives related to

agency SSPP goals

and risk concerns


How to use sustainability for procurement competitive advantage

Communicating your sustainability value

effectively could make the difference between

winning or losing an important contract.

► Know your sustainability benefits — company and product

► Effectively communicate them in procurements

► Link them to agency goals and risk concerns



Today’s agenda






emissions



► Setting credible sustainability goals that drive

real business value


Setting credible sustainability goals that drive real business value

Sustainability


change

Beyond compliance

Emissions


Reporting

Social impact

Supply chain

Reporting

Beyond compliance

Innovation

Reporting

Social impact

Emissions



Opinion check

Which of the following business drivers are most

relevant to your sustainability goal setting?

A. Brand reputation

B. New revenue opportunities

C. Operational/costs savings

D. Social license to operate

E. Risk mitigation

F. Don’t know or does not apply (EY, faculty, other)


Business value

► Environmental goals

► Many can be directly linked to driving cost savings

Financial capital

Dependency on natural

capital

Example:

energy efficiency

► Social goals

► Reputational risks could be hiding in the supply chain and

erode reputational capital

► Transparency with stakeholders through goal setting can

build reputational capital Join now: #EYSustainability


Business value

► Goals should:

► Be relevant to your organization’s value drivers and

focused on the key resources and relationships your

organization depends on for success

► Be specific, measurable and realistic

Goal setting plays a crucial role in ensuring

that an organization’s sustainability program

is driving real business value.



Challenges to setting relevant goals

► Defining commitments in a clear manner

► Engaging top-level executives and middle management

► Determining what counts and setting priorities

► Identifying quantifiable metrics while balancing costs of

reporting with usefulness of the output

► Building infrastructure to produce reliable and complete

data for progress statements

► Maintaining focus on continuous improvement

► Sustainability isn’t ‘once and done’

► Update goals and seek new sustainability opportunities



Tips for goal setting

► Assemble the right team — get buy-in from executives

and frontline implementers

► Focus goals on material areas and do not over extend

► Identify instruments to measure and monitor performance

before you finalize goals

► Provide relevant and meaningful context for goals that are

relevant to your company’s impact to the business, the

local community and the global community (science-

based environmental goals)

► Be prepared for the naysayers — sustainability goals will

be scrutinized, so clearly define key terms in your

commitments


One-minute recap


Continue the conversation

► Let’s talk: sustainability A new point of view for business

leaders — April 2014

► Tomorrow’s investment rules Global survey of institutional

investors on nonfinancial performance

► Let’s talk: sustainability Addressing risks, overcoming challenges

and achieving results

Connect with us:

► ey.com/us/sustainability

► @EYnews

► @EY_Sustainable


Opinion check

Which of these topics would you like us to address

in an upcoming webcast?

A. Conflict minerals reporting round-up

B. Using the Environment, Health and Safety

program to improve the culture of compliance

C. Why carbon still matters

D. Risks and opportunities in oil and gas

E. Other (Use the QA feature to send your topic ideas)

Select all that apply


Contact us

Nancy Gillis

Chris Hagler

@chrishagler

Leisha John

Ben Miller

@benleemiller

Allie Rutherford

+1 703 3281493

[email protected]

+1 404 817 5799

[email protected]

+1 305 415 1480

[email protected]

+1 604 891 8320

[email protected]

+1 202 327 7026

[email protected]


Thanks for participating.