mapping the future of green innovation

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Map Change 2010 MD’s SUSTAINABILITY LEADERSHIP PERSPECTIVE MAPPING THE FUTURE OF GREEN INNOVATION

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The gap between corporations actual climate actions and consumer perception exposes the laggards, bashfuls, leaders, and the lucky. Where is the opportunity for innovation and profit?

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Page 1: Mapping the Future of Green Innovation

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Page 2: Mapping the Future of Green Innovation

In the race for marketleadership and differentiation,forward-thinking companiesare looking to green innovation as a key to future profi tability — and also as a shield against commoditization.

This document is an overview of Maddock Douglas’ perspective on the business opportunity illustrated by the MapChange 2010 quadrant study. We would like to thank all of the leaders (in all of the sectors) who participated in the study for their interviews, insight and courage to deliver innovation that is good for your bottom line and good for the world.

Page 3: Mapping the Future of Green Innovation

How sustainable are you?And do your customers agree?Corporations across North America are adopting green innovation for competitive advantage.

We expect that leaders who take full advantage of this burgeoning opportunity will drive long-term growth and increase revenue (Reference: The Economist Intelli-gence Unit: Business and the Sustainability Challenge). Those who wait for sustainabil-ity mandates to be imposed before acting will likely lose valuable ground.

We believe in order to compete, companies will need to generate “on brand” sustainableinnovation quickly and communicate it effectively.

MapChange™ 2010 tracks both the climate change actions of more than 90 leading U.S. corporations and consumer perception of those actions. The study illustrates that a signifi cant disparity exists between the actual sustainable activity of brands and consumers’ perception of sustainable activity of those brands.

To create the study, Maddock Douglas’ green innovation expert, Marc Stoiber, and his Vancouver team partnered with Climate Counts and Angus Reid Public Opinion to survey and compare a sampling of the top North American brands within these 10 sectors:

1 Food & Beverage

2 Apparel

3 Household

4 Internet, Software & Media

5 Electronics

6 Airlines

7 Hotels

8 Food Services

9 Consumer Shipping

10 Banks

To download MD’s MapChange 2010 Study or MD’s Sustainability Leadership Perspective,

go to www.futureofgreeninnovation.com.

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The 90+ corporations in this year’s study are among the world’s most well-known brands. Like most pioneers of movements, they will potentially draw both positive and negative attention. Either way, they should be commended for taking simple, measurable steps of public accountability, transparency and progress — regardless of the various stages of sustainability from which they are starting.

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We believe that participants in the MapChange study are driving the business and sustainability discussion from a position of strength and are already using the intelligence gleaned from the report. To date, innovators across industries and continents have been requesting to be included in MapChange 2011 and subsequent studies (e.g., Australia, New Zealand, Spain, London).

Some companies may choose not to participate and remain absent from future studies, perhaps because they are nervous about potentially being tagged as a poor performer. In reality, absence from the study could make them appear to be fence-sitters, which probably is not the case. We see very little benefi t come from resisting involvement.

We believe the time has come for sustainability to be completely integrated into companies’ core business strategies and innovation efforts (reference: Harvard Business Review September 2009 — “Why Sustainability is Now the Key Driver of Innovation”) instead of just a noteworthy CSR initiative reporting to public relations departments.

The MapChange study utilized Climate Counts’ company scorecard for “actual” climate action scores because of its simplicity, clarity and usefulness in providing clear benchmarks for addressing this increasingly complex challenge. We think the Climate Counts rating process (widely available to companies throughout the global marketplace) and “i2 — Industry Innovators” program, are among the most useful steps towards creating a road map, accessing resources, and guiding corporate evolution towards a more sustainable and profi table future.

Innovation Takes Courage

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Quadrants & Recommendations

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Each brand in the study received an “actual” and a “perceived” sustainability score between 0 and 100. The MapChange Study then plotted the results on a classic perceptual map. Although each brand’s situation is different, we believe quadrants share common traits, course corrections and innovation opportunities as categorized by the descriptions on the next page.

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THE BASHFULS (low perceived, high actual) Brands not getting “deserved credit”

according to the MapChange Study Highly accountable brands in need of

improved communications and/or more green consumer-facing innovations

MD Recommendations: Showcase green innovations as a core business priority and create ongoing dialogue with the public to openly share your commitment to sustainability. THE LAGGARDS

(low perceived, low actual) Least accountable brands according

to the MapChange Study Could be unaware that sustainability

drives innovation Might be living in the past; short-term

focused; resistant to change

MD Recommendations: Develop short-term and long-term green vision and corresponding plans for prioritized actions; begin deliberate transition to green consumer-facing innovations as well as measurable internal practices; be more willing to look beyond where you are today for what you will become tomorrow.

THE LEADERS (high perceived, high actual) Most infl uential brands in the market Organizations known for big-picture,

whole-systems thinking Seem to be consistently maintaining

green innovation pipeline and practices based on consumer insight/needs

MD Recommendations: Capitalize on leadership position; replace/acquire THE LAGGARDS and expose disparity between you and THE LUCKY (while sharing/teaching the willing and worthy how to catch up).

THE LUCKY (high perceived, low actual) Brands enjoying “undeserved credit”

and possibly short-lived benefi t of perception

At risk of being exposed as not what they seem in the eyes of the public

Could be unaware that sustainability drives innovation

MD Recommendations: Transparently identify and disclose green realities in the context of intentions and future (short-term and long-term green vision) consumer-facing innovations and eco-friendly milestones.

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Food & BeverageMD’s MapChange2010 Perspective

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Data Source Climate Counts / Angus Reid Public Opinion

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Can your next drink or snack really change the world? Maybe not, but the company that makes it certainly could. With tremendous distribution networks, packaging needs and consumer demand, these companies have a large climate footprint as a baseline and a lot of room to improve.

According to the MapChange Study, General Mills has a perceived sustainability score of 82 — but the brand’s actual score is 49. We think that’s a pretty big difference. Currently, that gap doesn’t seem to be hurting their numbers — or the numbers of other industry-leading brands. For example, General Mills was named a top corporate citizen by Corporate Responsibility Magazine in seven responsibility categories with a lower-weighted emphasis on green. However, the short-lived advantage of a strong, but shallow green perception, alone, will likely only last so long. We believe it is not what large companies stand to gain — but what they stand to lose that’s important.

Some brands in this sector are setting new standards for business as a whole, while others seem lost in the supermarket. All of them make products known for casual times with friends and family; as a whole, we think the sector needs work to avoid being known for being too relaxed about green innovation leadership.

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Data Source Climate Counts / Angus Reid Public Opinion

ApparelMD’s MapChange2010 Perspective

Data Source CliCli tmat Ce Countts / A/ Angu Rs R ideid PPublibli Oc O ipiniion

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Consumer wardrobes—and the fi ckle world of fashion—may change at breakneck pace, but does it change the world? We think it can. The Apparel sector has seen notable leadership on climate issues from some companies, but no green innovation from others. The unpredictable nature of the category suggests there is an opening for challenger brands and/or new product lines from exemplary green leaders like Nike.

Unlike with other market segments, data suggests that green clothing appears to be an incremental new category rather than intruding on the share of traditional clothing (according to the nonprofi t trade association Organic Exchange). Consumers are apparently not switching to green clothing, but instead are adding a few green items to their existing wardrobe (source: Mintel Green Living, January 2009). Curiously, it appears the largest apparel manufacturer in the world (and its portfolio of lifestyle brands with loyal enthusiast fan bases), “should” be dominating with green innovation, but doesn’t look that way.

The supply of organic cotton appears to be lagging behind the increased demand from leading manufacturers, which makes availability in preferred retail channels spotty. While the entire sector has faced scrutiny on developing world labor issues for years, we believe the time has also come for the industry to realize it has an impact on climate change, environmental and sustainability issues, as well (e.g., pesticide and land use for cotton, supply chain and labor factor cost optimization).

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Data Source Climate Counts / Angus Reid Public Opinion

HouseholdMD’s MapChange2010 Perspective

Data Source CliCli tmat Ce Countts / A/ Angu Rs R ideid PPublibli Oc O ipiniion

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Most of the necessities of day-to-day life fall within the Household products sector. It appears that consumers (especially parents) align their basic daily needs with values that relate to a safe, clean house and secure future — which includes supporting companies that are addressing climate change.

But the production of basic household goods is resource intensive; it has a multifaceted impact on the environment through packaging, disposal and more.

That is why we think this sector is a very visible example of innovation being good for the world AND the bottom line.

Consumers are ready to pay for sustainable innovations. Although they might be overwhelmed by choice (especially in this sector), the majority appear to believe that every choice can/should be a green choice — evidenced by green cleaning products having successfully made the transition to mainstream acceptance and widespread availability through retail distribution.

Consumers also have opinions on who’s making the effort. More often than not, it’s the popularity of new products that will drive higher green perception scores. We believe the market for green cleaning products will continue to outperform conventional cleaning products and continue to grow. Accordingly, even though commoditization is affecting both the industry leaders and the followers, many companies in this sector are injecting innovation into everything from their new products and services to packaging and social technology adoption in order to stand out.

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Internet, Software & MediaMD’s MapChange2010 Perspective

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Certainly, the fl ow of words, ideas and entertainment seems clean enough. But major Internet and software companies are some of the largest corporations in the world — with employees across the globe, countless suppliers and distributors, and a stronghold on our hearts and minds. Innovation has always been the name of the game in Silicon Valley, but we expect the way these successful companies affect climate change leadership during the next decade will be among their most important ideas to date.

How do the best-known players in this sector stack up on climate protection? It appears that Google, Microsoft and Yahoo rank higher in consumer perception (despite having signifi cantly lower “actual” scores) than General Electric — considered to be one of the pioneers of green products and green communication. Relatively speaking, there is a distinct perceived difference between producing tangible products and producing something as ethereal (and seemingly nonpolluting) as binary code.

Media companies, while perhaps best known for their role in worldwide communications, are large conglomerates that have their hands in scores of different businesses. With their astounding infl uence in the marketplace, we anticipate this group will need to play an even larger role in delivering green innovation across their portfolio and in providing substantive green information to audiences that are ready for it. We believe the ones that take the lead will do more good AND make more money.

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ElectronicsMD’s MapChange2010 Perspective

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Whether you are wired or wireless, you know the companies in the Electronics sector well. The best of these companies seem to make sure the latest technology is consistent with the most current thinking about corporate climate leadership. They’re doing everything from reducing emissions in their production processes, to offering new products that require less energy, to taking back products that are obsolete and turning them into the next big thing.

The range of scores in this sector is intriguing. Most notably, this sector showcased one of the strongest examples of a company with both well-aligned “actual” and “perceived” scores (i.e., HP had a differential of only 10 points). It appears HP has been producing sustainability-driven products since the 1990s — and a remarkable communications campaign touting them as well. We think by acting early on this future trend and sticking close to sound consumer insights, HP widened the gap between the market leader and the followers. In short, HP has had more time to fail faster — to develop processes, materials, practices and partnerships (e.g., Sustainability Consortium, their in-house think tank).

In a category where many of the products are disposed of within their fi rst year of existence, we suspect companies view the endless life cycle analysis of their new product pipeline as an immense challenge that takes the notion of real innovation to a higher level. We believe that if you’re not already growing with green or going there soon, you’re probably behind your competitors already.

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Data Source Climate Counts / Angus Reid Public OpinionData Source CliCli tmat Ce Countts / A/ Angu Rs R ideid PPublibli Oc O ipiniion

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AirlinesMD’s MapChange2010 Perspective

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The airline industry runs on carbon-based fuels, plain and simple. It’s an industry that requires innovation to drive growth and lead in the fi ght against global warming. Note to airlines: “It’s hard to read the label when you’re inside the jar.” We anticipate the fi rst airline to get themselves “outside the jar” (where they can see all the viable business opportunities) will reap the leadership benefi ts. Maybe the open-minded innovators at Virgin Airlines are working on this already.

It appears that a few of the airlines have made signifi cant effort towards improving the energy effi ciency of their aircraft and are working to incorporate their climate-focused programs into their overall business strategies and innovation pipeline. But overall, we think the entire sector lags behind in actual scores while decent perceived scores leave most of them grouped into THE LUCKY quadrant. This is a dangerous place to be, considering it appears that none has shown any leadership in supporting public policy relevant to climate change, and they have only shown limited work in setting goals, measurement and reduction of greenhouse gas emissions.

We think public relations efforts supporting fl ight offsets are the least they can do, but we believe this is a weak attempt at planning for the future of your business.

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Data Source Climate Counts / Angus Reid Public OpinionData Source CliCli tmat Ce Countts / A/ Angu Rs R ideid PPublibli Oc O ipiniion

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HotelsMD’s MapChange2010 Perspective

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The world’s largest hotel chains seem to be seeking practical ways to address a range of broad environmental impacts in their operations, from toxic chemical use to indoor air quality to water. With its large number of “one-time-use” items and water consumption emphasis, we think the hotel industry can see the potential fi nancial benefi ts of integrating green innovation into their future business strategy.However, few appear to be aligning such actions as part of a larger and more comprehensive carbon management strategy for competitive advantage.

Marriott has made signifi cant changes to its massive supply chain by replacing depleted inventories of supplies with newly developed green products, including recycled plastic key cards and pillows made of 100% recycled material. But an average sector score of 19 out of a possible 100 suggests the sector has much work ahead and lots of opportunity for leaders to make progress.

We believe the brands that fall into THE LUCKY and THE LAGGARDS quadrants are overdue to demonstrate tangible progress before the court of public opinion makes its ruling. We suspect fi xing this is a clear opportunity for green leadership. As an example, some competitive chains offer smaller boutique hotels that are completely carbon neutral.

Note: We need to see this sector innovate around getting much more serious about energy use and greenhouse gas emissions reduction. The industry overall has been struggling to adopt a certifi cation program that can be applied universally. Many of the forward-thinking hotels appear to be seeking special LEED certifi cation with the U.S. Green Building Council.

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Data Source Climate Counts / Angus Reid Public OpinionData Source CliCli tmat Ce Countts / A/ Angu Rs R ideid PPublibli Oc O ipiniion

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Food ServicesMD’s MapChange2010 Perspective

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The Food Services sector is a fi xture of every mall food court or freeway exit. It’s the fast and convenient comfort food we see everywhere — in the form of cafés, fast food chains and affordable, family-friendly restaurants. In the past, the sector has focused on issues like packaging, animal welfare and fair trade, but we think it is now under a spotlight for its impact on the planet.

We believe Starbucks shows that alignment of performance and perception does happen. The coffee giant’s MapChange 2010 “perceived” and “actual” scores are nearly identical. McDonald’s, on the other hand, is no stranger to the consequences of communication being too far out in front of actual performance. In 2009, McDonald’s took their lumps in the media for what some called textbook “greenwashing” when hundreds of European McDonald’s changed their famous red sign behind the Golden Arches to green (source: Chicago Tribune), while it appears simultaneously making vague claims about environmental action rather than embarking on more tangible and consumer satisfying green innovations.

The data suggests that “green” is confusing for many consumers. For instance, it appears that some equate generally good, and/or healthy things, with green as suggested by the incongruous MapChange scores for Wendy’s.

“The public has diffi culty discerning between sustainability and social innovation…so perhaps Wendy’s’ healthier offerings have formed its image as a green company.” — The New York Times, Green Inc. Blog 2.25.10. We anticipate that there is an opportunity — particularly in this category — for a leader to control the language and the rate of change.

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Data Source Climate Counts / Angus Reid Public OpinionData Source CliCli tmat Ce Countts / A/ Angu Rs R ideid PPublibli Oc O ipiniion

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Consumer ShippingMD’s MapChange2010 Perspective

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The consumer shipping industry — or the logistics/express delivery industry, as it’s sometimes called — has a considerable climate impact. With so many packages traveling by ground and air all over the world every day, the industry’s annual greenhouse gas emissions could run into the millions of tons. The results for the four leading shippers — DHL (and its parent Deutsche Post World Net), the U.S. Postal Service, UPS and FedEx — suggests an industry that has begun to address its climate impact, but has a long way to go.

Commercial shippers UPS and DHL score about equally well in how green their actions are, but when it comes to consumer perception of the two brands, It appears “Brown” delivers green to its competitive advantage — with much higher perceived scores than DHL. These large discrepancies are common throughout the study.

These gaps reinforce the need for individual brands to deliberately distinguish themselves by constantly innovating — and proudly communicating their true sustainability more accurately, more consistently and more transparently. We believe there is no greater advantage than a rich innovation pipeline.

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Data Source Climate Counts / Angus Reid Public Opinion

BanksMD’s MapChange2010 Perspective

Data Source CliCli tmat Ce Countts / A/ Angu Rs R ideid PPublibli Oc O ipiniion

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By 2020, green practices will infl uence 66% of consumers when they choose a fi nancial service provider. (source: April 2009 Mintel forecast estimates that in 2020, two thirds or “66% of U.S. consumers will be classifi ed as True or Light Greens, meaning that green practices will play a role in their choice of fi nancial services providers” — up from 51% in 2010). We believe those who are ahead in complying with earth-friendly legislation and satisfying consumer preference will fulfi ll the unmet needs in the market faster than the competition. They will likely drive profi t to the bottom line and take market share from others.

Take CitiGroup for example. CitiGroup has an actual sustainability score of 67 — the highest score in the banking sector. Yet CitiGroup is rated 6th out of 12 by consumers in terms of sustainability with a perceived score of 49. This gap indicates that, while CitiGroup is taking the initiative to go eco-friendly, their efforts are not readily recognized by consumers (because those efforts are not necessarily customer facing).

For those with a lower actual score, like Capital One (12), and higher perceived score (57), we think the opportunity to infuse more sustainability practices into innovative products, services and business models is just as large.

We believe the gap in scores doesn’t represent a glaring problem for most banks, yet. Currently, it represents opportunity.

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The markets agree…companies that embrace sustainability have achieved the highest share price growth over the past three years, whereas companies with the worst performance focused less on sustainability.”

The Economist Intelligence Unit, and Deloitte’s: “The Green Gap” 2009

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From the MapChange Study research and fi ve years of experience building and growing green brands, Marc Stoiber, VP of Green Innovation at Maddock Douglas, created “The 5 ‘C’s of Sustainability Branding,” a tool that outlines the fi ve things we think brand sustainability must be in order to succeed.

1. COMPETITIVE To compete, brands must innovate — and the best new innovations tend to be sustainable. All other benefi ts being equal, sustainability differentiates and provides tangible competitive advantage.

2. CONSUMER FACING Get the most benefi t out of new sustainability initiatives by making them something the consumer will see. Consumer-facing changes will have the most immediate impact on public perception and, potentially, fi nancial performance.

3. CORE Tying sustainability to a brand’s core business is another way to ensure it resonates with consumers. If a brand sells hamburgers, its sustainability has to be about hamburgers, (e.g., organic beef, recycled wrapper). Don’t do something that is unrelated to what people know you for, or they won’t reward your efforts.

4. CONVERSATIONAL Sustainability branding is more effective as a two-way conversation rather than one-way com-munication. Honesty and transparency will go a long way with consumers. Disclosing what you’re doing well and what you could be doing better will instill trust. And trust breeds loyalty. Inviting consumers to participate in a conversation about your process will further strengthen the brand/consumer relationship.

5. CREDIBLE Sustainability strengthens brands. But greenwashing, even if unintended, damages them. The key is sequence. As long as sustainability efforts are in place, functioning and measurable before being announced, they will be viewed as credible. And proven, objective credibility paired with innovation and communication is the key to sustainable brand success.

The 5 ‘C’s of Sustainability Branding

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Meth

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Overv

iewMethodology OverviewThe MapChange 2010 Study used two distinct methods to calculate actual and perceived leadership in addressing climate change.

ACTUAL SUSTAINABILITYTo measure actual brand sustainability, we used Climate Counts’ newly released 2010 corporate climate scores. For the past three years, Climate Counts has audited the brands within all 10 sectors using a scorecard that tracks corporate climate action in four key areas: measurement of impact, reduction of impact, engagement on public policy related to climate change, and openness and transparency with consumers on corporate climate activities.

CLIMATE COUNTS SCORECARDClimate Counts uses a 0 to 100 point scale and 22 criteria to determine if companies have:

MEASURED their climate “footprint”

REDUCED their impact on global warming

SUPPORTED (or suggest intent to block) progressive climate legislation

DISCLOSED (publicly) their climate actions clearly and comprehensively

PERCEIVED SUSTAINABILITYTo measure consumer brand perception, Angus Reid Public Opinion conducted an online survey of 2,032 American adults. The results were weighted to ensure a random sample that was representative of the entire adult American population.

A “maxdiff” methodology was used to assist the respondents in evaluating the 97 companies represented across 10 dif-ferent sectors, meaning that respondents were asked to “choose the best and worst company in terms of their leadership in addressing climate change” out of a random group of 3 to 6 companies (dependent on the number of companies in each sector). The survey was divided into two parts, with fi ve sectors in each, to mitigate respondent fatigue and ensure the quality of the data.

For more of the MapChange Study methodology and limitations, download the study at www.futureofgreeninnovation.com

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After working with 25% of the Fortune 100, Maddock Douglas can say that green innovation is just one method of ensuring future growth. You need to develop and nurture a portfolio of relevant new products, services and business models in order to solidify your position with customers as an innovation leader — green or otherwise. This is not simply hollow rhetoric.

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LOOKING FOR THE BLACK & WHITE BUSINESS CASE FOR GOING GREEN?

MapChange 2011 identifi es and prioritizes THE opportunities to capitalize on with green innovation; specifi cally quantifying where there is consumer demand and revenue opportunity for YOUR brands and sub-brands within YOUR vertical industry.

Offered by Maddock Douglas in partnership with nonprofi t ClimateCounts.org:

MapChange 2011 sponsoring subscribers can leap ahead of competitors by using this study to decisively deploy resources and capital towards sustainability initiatives that matter, leading to clear revenue, profi t and market capitalization opportunities related to “green” initiatives.

We believe companies that are meaningfully committed to sustainability outperform their peers. According to a recent A.T. Kearney study, they outperformed their competitors by 15% (during the recession), adding an average of $650 million to their market capitalization.

MapChange 2011, the standard for diagnostic and prescriptive green innovation, will be released in the fall of 2010.

To reserve your place in MapChange 2011 and to become a sponsoring subscriber, contact Cindy Malone at [email protected] or 630.563.6490. Deadline for inclusion is June 4, 2010.

www.futureofgreeninnovation.com

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Wall Street has identifi ed innovation as the highest indicator of future profi tability. We believe your ability to innovate will either make you a dominant force or make you extinct.

For most businesses, innovating new products or services means working with a long list of specialty partner fi rms, like research, ideation, industrial design, branding, advertising, onlineand media. That leads to a cumbersome, time-consuming and ineffi cient process of handoffs.

Maddock Douglas: Agency of Innovation®

Maddock Douglas was built from the ground up to manage the whole life cycle of your innovation process from research to ideation to marketing strategy and branding through launch. Our services are rigorous, invigorating and battle tested.

To date, 25% of the Fortune 100 have tapped Maddock Douglas to help drive innovation intothe market. In turn, we’ve helped our clients produce billions in topline revenue.

About Green InnovationSince 2005, the experts at our newly acquired Vancouver offi ce have been helping companies adopt environmentally innovative measures to create competitive advantage. Led by founder Marc Stoiber, their mission is to create and brand products and services that are good for the world AND good for the bottom line. Marc is also an expert speaker on green brand innovation, with engagements that include the TED Vancouver Conference and Strategy’s Cause and Effect Conference.

About Maddock DouglasFor more information on the study or to obtain the map for your sector,please contact us:

MARC STOIBER VP of Green [email protected]

Press inquiries: Sara Buschkamp [email protected]

Headquarters 111 Adell Place, Elmhurst, IL630.279.3939 630.279.0553 (fax)

East Coast66 Fort Point St., Norwalk, CT 06855

Northwest204-1650 Duranleau StreetGranville Is., Vancouver, BC V6H 3S4

To reserve your place in MapChange 2011 and to become a sponsoring subscriber, contact Cindy Malone at [email protected] or 630.563.6490.

www.futureofgreeninnovation.com

To reserve you

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Isn’t a paper book on green a bit of a contradiction?

We live in an imperfect world.

And while critics may argue that a paper book is a bad use of energy and resources, we don’t agree.

True, sending messages electroni-cally leaves a lighter footprint. And versions of this book have, in fact, already been sent electroni-cally to thousands of people.

But books have their place.

They can be pondered, put down and picked up, earmarked, scribbled on and passed along to friends in ways that e-mail simply can’t.

And let’s not forget, all books are not created alike.

This book was printed on 100% post-consumer waste paper.

You can help us make this book an even better use of resources. Share it with someone else who can use it — perhaps another leader who runs a company interested in green innovation or a writer who can spread the word.

That way, this little book might just make a good impact on our world.

Doing well by doing good.

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