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Annik Magerholm Fet, Alf Steinar Sætre, Jon Halfdanarson

SISVI International seminar: Innovating for a sustainable strategy

Summary in English

Oslo, 22. February, 2016

SIS

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SIS

VI R

ep

ort

201

6-0

1

NTNU Trondheim Postadresse: 7491 Trondheim

Norges teknisk-naturvitenskapelige universitet Besøksadresse: Alfred Getz vei 1

Fakultet for samfunnsvitenskap og teknologiledelse Telefon: 73 59 35 11

Institutt for industriell økonomi og teknologiledelse Telefaks 73 59 10 45

Org.nr. 974 767 880

Title: Innovating for a sustainable strategy

Report no.:

SISVI Report 2016-10

Project: Sustainable Innovation and Shared Value

Creation in Norwegian Industry

Project no.:

Contracting partners:

Norwegian Research Council

SINTEF Raufoss Manufacturing AS

Cooperating companies:

Plasto AS, Hexagon Ragasco AS, Raufoss Water & Gas

AS, Molde Kunnskapspark AS, Wonderland As, MRB

AS, Forsvarsbygg

Date: 22 February 2016

Number of pages: 12

Number of appendices: 2

Authors:

Annik Magerholm Fet

Alf Steinar Sætre

Jon Halfdanarson

Signature:

Responsible:

Department of industrial economics and technology

management (IOT),

Norwegian University of Science and Technology

(NTNU)

Signature:

Summary:

This report is a summary of the second international SISVI seminar, “Innovating for a

sustainable strategy”. The seminar was held in English, in Oslo.

Professor Robert G. Eccles from Harvard Business School, visited us to talk about integrated

reporting, materiality, identifying the most important ESG issues, and how to become a

sustainable company.

Robert G. Eccles is a Professor of Management Practice, and is the world’s foremost expert

on integrated reporting and one of the world’s leaders on how companies and investors can

create sustainable strategies. He is the Founding Chairman of the Sustainability Accounting

Standards Board (SASB) and one of the founders of the International Integrated Reporting

Council (IIRC).

Appendices:

Company presentations and Robert G. Eccles’ presentations.

Key words: Integrated reporting, ESG issues, Sustainable strategy, Performance frontier

Distribution/access: Open

Contents Participants (34) ......................................................................................................................... 2

Programme ................................................................................................................................. 3

Seminar summary (Norwegian) ................................................................................................. 4

Welcome & company presentations ....................................................................................... 4

The performance frontier ....................................................................................................... 5

How to become a sustainable company ................................................................................. 5

Group session ......................................................................................................................... 6

Hexagon Ragasco ............................................................................................................... 6

Plasto .................................................................................................................................. 7

Raufoss Water & Gas ......................................................................................................... 8

Wonderland ........................................................................................................................ 8

Forsvarsbygg ...................................................................................................................... 9

World tour of what goes on in the capital markets .............................................................. 10

Appendix 1 – Company presentations .........................................................................................

Appendix 2 – Robert G. Eccles’ presentations ............................................................................

Participants (34)

Participant Company/institution E-mail

Ole Vidar Lyngstad Plasto AS [email protected]

Øyvind Bjorli Plasto AS [email protected]

Thor Kamfjord Norner AS [email protected]

Lars Kristian Ølstad

Raufoss Water & Gas

AS [email protected]

Geir Haugen

Raufoss Water & Gas


Hans Kristian Rønningen

Raufoss Water & Gas


Torild Jørgensen Forsvarsbygg [email protected]

Jon Daniel Nesje Wonderland AS [email protected]

Hege Sjo

Nærings- og

fiskeridepartementet [email protected]

Marit Moe Bjørnbet Sintef RM AS [email protected]

Geir Ringen Sintef RM AS [email protected]

Arild Aspelund NTNU WP1 [email protected]

Kristine B. Fredriksen NTNU WP1 [email protected]

Alf Steinar Sætre NTNU WP2 [email protected]

Nhien Nguyen NTNU WP2 [email protected]

Ingeborg Gjærum NTNU WP2 [email protected]

Caroline Riegels Karlsen NTNU WP2 [email protected]

Solveig W. Skogan NTNU WP2 [email protected]

Michael M. Jenssen NTNU WP3 [email protected]

Line Figenschou NTNU WP3 [email protected]

Synnøve F. Dalen NTNU WP3 [email protected]

Helene Wangen NTNU WP3 [email protected]

Lene Erdal NTNU WP3 [email protected]

Marianne W. Koch NTNU WP3 [email protected]

Sigurd S. Vildåsen NTNU WP3/4 [email protected]

Annik M. Fet NTNU WP4 [email protected]

Jon Halfdanarson NTNU WP4 [email protected]

Ina Vikøren NTNU WP4 [email protected]

Nina Heir NTNU WP4 [email protected]

Synne Mari Pedersen NTNU WP4 [email protected]

Sunniva Bratt Slette NTNU WP4 [email protected]

Paritosh Deshpande NTNU WP4 [email protected]

Eirik Hamre Korsen NTNU Gjøvik [email protected]

Tom Johnstad NTNU Gjøvik [email protected]

mailto:[email protected]




























Programme

10.00 – 11.30 Welcome & company presentations

The SISVI companies Plasto, Raufoss Water & Gas, Forsvarsbygg and Wonderland will give a short presentation of their company and their strategy for sustainability and innovation. Professor Eccles has requested that each company address the following issues in their presentations:

1. What are the 3 most important ESG (Environmental, Social and

corporate Governance) issues that really matter to you, positive or

negative?

2. What innovations (product, process or business model) are you

considering or working on that will change the slope of your

company’s performance frontier?

11.30 – 13.00 The performance frontier - Identifying ESG issues - Quantifying the relationship between financial and ESG performance - Innovative products, processes and business models - Communicating the company’s innovations to the stakeholders - Organizational barriers to change

13.00 – 14.00 Lunch

14.00 – 15.00 How to become a sustainable company Informal presentation with questions and discussions

15.00 – 16.00 Group session

Based on company presentations, the performance frontier and how to become a sustainable company, what could each company do differently?

16.00 – 16.55 World tour of what goes on in the capital markets The changing role of corporate boards 16.55 – 17.00 Thank you and wrap up 18.00 - Dinner at Stock Spiseri

Seminar summary (Norwegian)

Welcome & company presentations

Professor Alf Steinar Sætre opened the seminar by welcoming everyone, and introducing our

special guest; Professor Robert G. Eccles.

Robert G. Eccles is a Professor of Management Practice, and is the world’s foremost expert

on integrated reporting and one of the world’s leaders on how companies and investors can

create sustainable strategies. He is the Founding Chairman of the Sustainability Accounting

Standards Board (SASB) and one of the founders of the International Integrated Reporting

Council (IIRC).

The SISVI core companies(Plasto AS, Hexagon Ragasco AS and Raufoss Water & Gas AS),

Forsvarsbygg and Wonderland AS held short presentations. The company was briefly

introduced along with their most important ESG(Environmental, Social and Governance)

issues, and their main strategies concerning innovation and sustainability.

o Lars Kristian Ølstad (CEO) presented Raufoss Water & Gas.

o Torild Jørgensen (Head of environmental department) presented Forsvarsbygg.

o Jon Daniel Nesje (CEO) presented Wonderland.

o Geir Ringen (Sintef) presented Hexagon Ragasco.

o Ole Vidar Lyngstad (Research director) presented Plaso.

Each company presentation was followed by questions and comments from the audience

and Professor Bob Eccles.

Picture 1: Professor Bob Eccles lecturing the seminar

The performance frontier

Professor Bob Eccles presents the theory behind the Performance Frontier

What identifies The Sustainable Corporation?

Sustainability programs, or a sustainable strategy?

The risks and penalties of prioritizing financial over ESG issues.

The relationship between financial and ESG performance

SASB’s (Sustainable Accounting Standards Board) universe of ESG Issues

Organizational barriers to change

Capital market pressure for short-term performance

How to become a sustainable company

Professor Bob Eccles starts up the seminar after lunch by teaching us how to become a

sustainable company

Stage 1: Reframing the corporate identity

o Leadership commitment

o External engagement (Stakeholder engagement)

Stage 2: Codifying the new identity

o Employee engagement

o Mechanisms of execution

Creating a culture of sustainability

o Capacity for transformational change

Short-term incremental steps

Long-term transformational

o Innovation

o Trust

Group session The seminar participants were divided into groups, and were based the company presentations, and Bob Eccles’ presentations, going to discuss what each company could do differently.

Picture 2: Professor Bob Eccles presenting the groups for the discussions.

Here are the notes from the group discussions:

Hexagon Ragasco Identified ESG issues: Safety (S): This is the issue of greatest concern and priority today. Safety is a key factor as their product is made to encapsulate hazardous materials. Any safety breaches will have a potentially detrimental reputational effect and hence also impact the financials. Recycling (E): As of today, the company has no or little information about its end-users. They do not know who they are or for what applications they use their products. In this area there is a substantial potential to track and store more customer data (use of big data, customer registration etc.) so that it is possible to follow the products through its life-cycle. Especially disposal of the product is something that is not a challenge today, but that will be an issue in the future. The current life-span of the containers have been prolonged, and so it takes a period of 10+ years before the containers has to be replaced/disposed. Part of the casing can be recycled, but the fiber-container cannot be re-used for the same purpose. There has been conducted some trials where it is churned up and re-used for asphalt purposes, and this is something that could be further researched.

Corruption (G): As for other Norwegian companies (and in the Raufoss industry cluster), increased internationalization gives way for new challenges. The company is set to enter Saudi-Arabia, a country where there is high risk of corruption. Compliance needs to be of greater focus when expanding the business into new markets. Also, media has put more spotlight on Norwegian companies' engagement in corrupt countries, and this is matter that will continue to be in the public interest. This issue is material because it, like safety, have great reputational effect and impact on the financial results. Other points from the discussion:

Transparency/disclosure: Hexagon Ragasco is part of a larger group, and it is reasonable to expect a larger pressure from the group level when it comes to company disclosure on sustainability issues. Today, the company also has little involvement with various stakeholders. There is thus great potential to engage with a larger audience when it comes to developing a strategy to address ESG-issues.

Busines model: there was little evidence of innovations in the business model. Organization-wide changes like this has to come from the group level.

Gas as key resource driver for the business: Hexagon Ragasco has a perspective of gas as a viable energy resources in at least 50 years to come, and do not view gas as a fossil energy source as a threat to the company business model. Also, the company is diversified, meaning that their products can be used for other applications than propane gas (other gases).

Plasto Identified ESG issues:

Social issues:

Support local activities

Create jobs for the local society

Contribute to people staying in Åndalsnes

Build relationships to residents and local business

Economically viable:

o Free marketing

o Important for recruiting

o Expanding contact networks

Environmental issues:

Recycling of big plastic components from the marine sector

Establishing some kind of incentives for the marine sector to return their old and used

components

The plastic components needs transport and needs to be cleaned and shredded before they

can be reused. The complete cycle needs to be mapped and assessed.

Could have a major positive effect on the local society, for example if some new business

should be started to handle this process.

Governance Issues:

Plasto is a family owned business, which may be challenging in terms of corporate

governance

o Extra vulnerable, dependant of the family’s commitment.

o Someone within the family have to be both willing and competent enough to take

over, if the company shall stay family owned.

o The local anchoring is extra solid because of the familys ties to the local society.

Raufoss Water & Gas Identified ESG issues: Social issues:

The work-training centre in the industry park at Raufoss keeps the manual montage labour in

Norway. This contributes to valuable work experience for people in need of this, lower

labour expenses for RWG, which again prevents the need for outsourcing and unnecessary

transportation of the components.

Environmental issues:

The increasing use of composites in the fittings that Isiflo produce.

o Lower energy consumption in the production process

o Composite components has a lower weight, which leads to lower emissions per

product when it comes to transport.

o The environmental concern of emissions of lead from brass fittings is eliminated by

the use of composite fittings.

o The loss of water is substancially reduced with the use of composite fittings.

Governmental issues:

The expansion to new markets leads to a challenge relative to corruption. This is something

RWG has a strong focus on.

Wonderland Identified ESG issues: Circular economy

Assemble for disassembly

Establishment of a recycling network for used beds, example from France where customers

pay an extra fee when they buy the beds

Find new uses for recycled materials

Jon Daniel thinks this will be a requirement in the future, an industry standard, will therefore

be a potential competitive advantage for Wonderland to be ahead of this development. Will

also be good reputational wise, and a strong marketing opportunity

Type of materials

Polyurethane foam made from oil products, not environmental friendly, health hazard for

those who produce it

Textiles also of polyester types

Cotton production uses a lot of water

Need for alternative materials

Entails initial R&D costs

Quantify carbon footprint per bed

Establish a uniform way

Tried to use environmental product declerations, but not suitable for beds, need to be

improved

This is a criteria for some customers (hospitals/hotels)

Will strengthen their reliability as a supplier

Forsvarsbygg Identified ESG issues:

Energy efficiency in buildings

o Reduce operating costs

o Address the Norwegian department of defence’s strategies

Noise reduction from defence activities

o Increasing goodwill from local municipalities and communities

Value-chain management in construction and refurbishment activities

o Reducing risk

Making cultural properties available for society

o Giving back to society and improving image

o Revenues from events

World tour of what goes on in the capital markets The changing role of corporate boards

The board is responsible for looking after the long-term interests of the company.

Often two cultures in a company, CFO vs CSR, investors vs stakeholders.

Tension between market and regulation.

Collective action problem, system level, everyone blames each other.

Main question; how do you get system level change in a capital market?

o The relationship between asset owners and asset managers is key.

o What is needed to get concrete change in behaviour?

o Fiduciary duty, the common belief that board directors have a legal obligation to act

solely in the best interest of the shareholders.

Crucial to get the board of directors to take a position and get behind the material ESG issues

of the company to obtain a sustainable strategy.

The board should issue a statement on significant audience/materiality.

More on fiduciary duty: http://www.economistinsights.com/business-strategy/opinion/and-corporate-directors-report More on corporate disclosure and materiality: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2654199 http://youtu.be/Lsl-CFGctL8

http://www.economistinsights.com/business-strategy/opinion/and-corporate-directors-report

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2654199

http://youtu.be/Lsl-CFGctL8

Appendix 1 – Company presentations

Our Love of the Elements

WHERE QUALITY COUNTS – CHOOSE YOUR PARTNER WISELY

ISIFLO System

Perspective of the market

WeldingPlasticBrass

Welding

Plastic

Brass

Innovation from brass to composite

Reduced CO2 footprint

Social responsibility / share value creation: work training centre

Dare to be different!

- Immigrants- Drop-outs

from school- Unemployed

Challenges: Corporate Governance

New market possibilities in:

- Africa- Middle East

Areas with high degree of corruption and bribe

Isiflo Flexi-Sprint Technical data: PA12 based composite

Grip ring O-ring

Internal stop

Body

Installation depth

Push back ringSleeve

Area of applications: Pipes: PE,PEL,PEH (PE50,80,100) and PEXCold water 0-40°C / up to 16 bar

Material: Composite, a special glass reinforced PA12, developed for high strength and duration.Gives excellent strength in the area of threads

● STRONG ● SAFE ● FAST ● EASY

Nice to

meetYou !

Nice to

meetYou !

Thank you for your time

The Norwegian Defence Estate Agency

Green value creation

Torild Jørgensen, Head ofEnvironment- NDEA Specialistadvisory

The Norwegian Defence Estate Agency

Green value creation

Torild Jørgensen, Head ofEnvironment- NDEA Specialistadvisory

THIS IS WHO WE ARE:

The Norwegian Defense Estate Agency (NDEA) Located in the Defense sector

THE NORWEGIAN ARMED FORCES

USE, PRIORITISEAND MAKE DEMANDS

1

THE NORWEGIANMINISTRY OF DEFENCE

OWNS AND MAKES DECISIONS

THE NDEAADMINISTRATES, DELIVERS AND SAFEGUARDS

THE ADMINISTRATION MODEL

2 3

The biggest public sector propertyadministrator in Norway

■ 4 million square metresof building stock administrated

■ Divided between 12,500 buildingsand facilities

■ 75,000 square metres of space wasdisposed of in 2014

■Manages one of Norway’s largest forest portfolios

■Xx hectars natural areas■ We generate a turnover of NOK 7 billion

per year

Presentall of Norway

THE MISSION FOR THE ARMED FORCES

Social responsibility

NDEA supports the Norwegian Armed ForcesAgreed services and deliveries – plus consultancy

THE ADMINISTRATION MODEL

8

Directions for Environmental managemnet

Guidelines for env.management

Demands for safety steering

InstructionsFor env. management

UN

IT IN

DFE

NSE

ISO 14001

ENVIRONMENTAL POLICY AND STRATEGY

ACTION PLANS

MiljøaspektMål

Mission

UN

IT IN

ND

EA

ISO 14001

Hierarchy in the Defense sector regarding Environmental management

EnvironmentalStrategy2016 – 2020

ESG-issues

We protect theEnvironment

AN ENVIRONMENTAL STRATEGY FOR THE FUTUREThe aim of the strategy is to point at focus areas, and to prioritize the environmental work in the next four years

is based on sector guidelines, and public regulations the environmental management system follows the standard ISO14001

Three areas are designated as particularly important:

CLIMATE, ENERGY AND WASTE – USE OF RESOURCES

POLLUTION AND NOISE – ENVIRONMENTAL IMPACT

NATURE AND CULTURAL VALUES – SOCIAL CONTRIBUTION

STRUCTURE OF THE STRATEGY

AMBITIONOur main goals

ENVIRONMENTAL TARGETS Incorporated in the ordinary business scorecard

ACTIONS Distributed and concretized through the annual improvement plans

AMBITION

ENVIRONMENTAL TARGETS

ACTIONS

CLIMATE, ENVIRONMENT AND WASTENDEA should be an active contributor to reach Norway’s climate targets. Energy consumption, use of renewable energy and reduced use of resources are important elements in this effort.

THIS IMPLIES: 15% reduction of energy consumption for the operation of buildings Reduce greenhouse gas emissions by phasing out fossil fuels for heating of buildings and facilities Always consider environmentally friendly solutions for relevant buildings and renovation projects to be prepared for

future stringent regulations Focus on increased recycling and recovery in rehabilitation 65% recycling of industrial waste

POLLUTION AND NOISENDEA’s strategy is to have leading expertise where we have defense specific environmental challenges. Through proactive work we should avoid spills. NDEA shall have an overview of pollution and noise from the activity of the Armed forces, and continuously implement preventive and mitigating measures. We will work for a balanced regulatory framework to provide sustainable conditions for the Armed forces at the same time safeguarding society's interests.

THIS IMPLIES: Good internal control through environmental management according to ISO 14001 Competence on good environmental management, operation and development of the defense sector’s estate,

buildings and construction Good dialogue with the environmental authorities to ensure development of environmental standards and regulations

taking into account the Armed forces training needs, and society’s interests Provide good advice for the defense sector regarding noise and vibration impacts from own activities

NATURE AND CULTURAL VALUESAs property manager NDEA should contribute to secure biodiversity. The cultural heritages should be managed as sources of knowledge and as a source of experience for present and future generations, and to ensure that the cultural values is not lost.

THIS IMPLIES : Updated knowledge about the natural environment should be an element in planning and decision processes Preventing spreading, and combat occurrences of invasive species Remediation of contaminated sites should be based on evaluations of environmental benefit, ecological impact,

greenhouse gas emsissions and socio-economic benefit Follow the requirements of the Norwegian PEFC forest management standard for operating and managing range

and forest properties Keep updated overviews and proper marking of cultural and natural values in firing and training ranges Listed fortresses shall be protected as cultural heritage and made available to the public Be a center of excellence in managing, developing and consultancy of public cultural heritages

THE NORWEGIAN ARMED FORCES

USE, PRIORITISEAND MAKE DEMANDS

1

THE NORWEGIANMINISTRY OF DEFENCE

OWNS AND MAKES DECISIONS

THE NDEAADMINISTRATES, DELIVERS AND SAFEGUARDS

STAKEHOLDERS

2 3

The Norwegian people

The Parliament

The Government

The Ministry of DefenseThe Ministry of Defense

Municipalities

Local politicians

Neighbours

The Armed forces

Employees Employees

Innovations

ZEB in Bergen

waste as resources

Delivering hot water as energy sorce

WE PROTECT THE ENVIRONMENT

Wonderland – SISVI 22 Feb 2016

Jon Daniel NesjeMSc Physics & MathematicsCEO Wonderland AS since Dec 2011Previously 20 years in Oil & Gas IndustryChairman of the Board at The Association of Norwegian Furniture and Interior Industry

Facts about Wonderland Located in Åndalsnes, Norway

Factory: 6 000 m² Warehouse: 10 000 m²

About 100 employees– 65 in production/warehouse– 35 in admin/sales

Automated production Turnover 2015: 295 MNOK Owned by management

unique people unique beds

Vision

My bed – my Wonderland

MissionTo create and deliver personalized bed solutions with unique features and design

ValuesTrustwothyInspiringProfessional

Markets• Norway – 73 % (216 MNOK)

• Bohus, Møbelringen, Skeidar, Free

• Denmark – 16 % (46 MNOK)• IDEmøbler, Ilva, Sengespecialisten, Free

• Sweden – 8 % (24 MNOK)• Sova

• Benelux – 2 % (6 MNOK)• Other markets – 1 % (3 MNOK)

2015 figures

Environmental Issues • Multi‐material products

– textiles – OEKO‐TEX®– foam – CertiPUR‐US®– latex – OEKO‐TEX®, RFA– wood – ISO– steel, plastics– challenging to decompose

• Several local suppliers• Engaged in industry initiative to improve environmental and quality performance, e.g. through use of EPDs

Social Engagement• Sponsoring local cultural and sports arrangements

• Supporting cancer research– Instead of Christmas gifts to customers

• Donating outgoing products to humanitarian organizations, e.g. orphanage in Romania

• Partner with Norwegian Football Association in their Eat Move Sleep initiative

The overall goal of Eat Move Sleep is to improve public health through a holistic approach to healthy food, physical activity and quality sleep, particularly focusing on children and young people.

Corporate Governance• Several changes in ownership since 2004

– PE ownership has professionalized management and reporting structure, and governance framework

• Current management ownership is challenging from a governance perspective–Multiple roles– Requires strong “independent” board and external auditors

Plans going forward• Reposition the company

‐ from “expert of beds” to “expert of sleep”‐ work more closely with R&D institutions

• International expansion• Develop differentiating product features and service concepts‐ innovation throughout the value chain

• Margin improvement‐ make/buy assessments, improving production processes and logistics, supplier development program

• Strengthen the financial basis of the company‐ allow investments in new markets, innovation and production facilities

• Develop new distribution channels

Norwegian Brand and IndustryIn The Heart Of Norway

Innovations since 1955-Founded 1955 by Odd Stenerud

-3rd generation family owned

-Modern facilities in Åndalsnes, Norway

-Development from idea to market

-Leading by technology and innovation

-Research-based innovation

- 26 robots

- 20 Injection Molding machines

- 25 to 1500 ton clamp force

- 42 employes, 3 shift production, 24/7 for up to 6 lines

- ( unmanned with stands during weekends )

- Products range from under 1 gram to over 100 kg.

- Research, Design & Engineering

- Mold shop

- Automated production

- NS-EN ISO 9001:2008 & NS-EN ISO 14001:2004

Facilities

Production

49%

Administration11%

Prod.Tech.

29%

R&D11%

Workforce- 42 employees

Sales 2002 - 2015

0102030405060708090

100110

Revenue NOK x 10 000 Employees EBITDA

80% of annual revenue from new products- less than 5 years in production

80% of annual revenue from new products- less than 5 years in production

0%

10%

20%

30%

40%2015 2014 2013

Markets

Injection9% After-

pressure15%

Cooling29%

Plastification

44%

Eject part3%

Typical cycle Bracket, walk-ways ++• Client

-Akva Group ASA / Helgeland Plast AS

• Scope

-Develop design and production technology for large IM-products for fish

farming

-110 kg, largest injection molded product in Europe?

• Technology:

- Automatized unmanned production

- Product with larger volume than IM-cylinder

Spheres for buoyancy• Client

-PartnerPlast ( Marine Subsea Group )

• Scope

-Develop design and production technology for spheres used in

buoyancy modules down to 1500 mbsl.

-System for 3000 mbsl under development

• Technology

- Fully automatized process, unmanned production

- 16 hemi-spheres per cycle, spin-welded to 8 spheres

- 22 000 spheres in bag on pallet

Lamp covers• Client

-Glamox

• Scope

-Development of lamp covers for demanding applications on

ships and off-shore installations

• Technology

- Automatized process for adhesion with gasket and packing

Bedframe springholder• Client

-Wonderland

• Scope

-Adjustable hardness in beds

•Technology

-Endless molding, 500 meters on drum

-Product larger than cavity in mold - same principles use for seismic

-Automatized unmanned production

Pleat-heat exchanger• Client

-Sperre Coolers AS

• Scope

-Develop composite frames for new heat exchanger system

-More efficient maintenance and service, less down-time

• Technology

-Efficient production of re-inforced polymer components, from

idea to cost-effective production - EsKomp

R&D-activities 201515 R&D-projects co-funded by EU, The Research Council of Norway and Innovation Norway

-FiberComp-AkvaMould-ESKomp-SPORT-SISVI-Multimat-AstoR / Preservia-LEDlum-SFI Manufacturing -1 EC-project, CeraSphere-Arena - iKuben and i4Plastics➡KMB - Trollab, NTNU

-15 % of revenue invested in R&D-activities

Innovation-reactorSustainable Innovation and Shared Value Creationin Norwegian Industry

«…develop knowledge that strengthens the industry’s long-term competitive capabilities in a way consistent with the concept of shared value. This means that value is created in a manner that meets both financial and societal needs where the latter typically encompasses environmental and social aspects.»

- IPN

High Level Group

PolyCrash

Large productsEndless moldings

Seismic+ automation

The 3 Pillars of Sustainability- Long term owners

- Healthy economy- Long term jobs

- Local workforce- Skill development

- Friendly to the environment- Employees live within a 15 minutes drive- Renewable energy

External engagement and networking - Sharing technology and competence with external

companies and networks

- Plasto is participating in a number of different industrial, regional and competence clusters

- CEO is board member and leader in several different industrial networks, research programs, and academic faculty boards

High Level Group

A Friendly, Responsible CompanyPlasto is supporting sports and leisure for kids and young people.

Plasto is sponsor for Norsk Fjellfestival, RaumaRock, Rauma Cykkelklubb and World Base Race.

New possibilitiesPlasto is always looking for new innovative solutions

Enviromental

Aquaculture and fish farming industry has big challenges with disease control, waste and local pollution.Plasto will like to be an innovative partner helping its customers with new solutions

- Bioploymer application

- Offshore solutions

MEGA-moldingDevelop in-mold technology for large products (-in small quantities)- Bracket 630 - 110 kg – State-of-art today- 300-400kg in few years?

Recycling and reuse of polymer from fishery- and fish farming equipment- 8000 -10 000 ton of polymer based fishfarming

equipment is scrapped in Norway every year.- Plasto would like to develop processes that can

make the use of recycled material into new equipment

- Plasto would like to have a central position in the value chain in the reuse of this material

Appendix 2 – Robert G. Eccles’ presentations

SISVI ‐ International Seminar 2/25/2016

WP 1: Alf Steinar Sætre 1

Copyright 2012 © Professors Robert Eccles and George Serafeim

George Serafeim & Robert Eccles

Harvard Business School

Oslo - February 22, 2016

The Performance Frontier

“Innovating for Sustainability”


Recognizes that a license to operate is given by society

Balance stakeholders’ interests and genuinely engages with stakeholders

Recognizes that trade-offs exist

Has a long-term orientation

Practices active governance

Uses integrated reporting

Focuses strategically on ESG issues that are the most “material” (have the greatest impact on the firm’s ability to create shareholder value)

Produces major innovations in products, processes and business models addressing those material issues

The Sustainable Corporation

2

Characteristics MM2




Cutting carbon emissions

Reducing waste

Enhancing operational efficiency at large

Paying workers above-market wages

Sustainability Programs could include …

3

Addresses the interests of all stakeholders (investors, employees, customers, governments, NGOs, society)

Increases shareholder value while improving firm ESG performance

Takes into account what is truly material to the company’s strategy

Is realistic about tradeoffs between financial and ESG factors

Not to create Sustainability Strategy that …

Characteristics


Foxconn in China

BP in the Gulf of Mexico

UBS and Swiss secrecy laws

Penalties for prioritizing financial over ESG issues can be severe

4

On the other hand …

Activities that help society, like voluntary emissions reduction, often create costs for the firm

How can companies overcome this predicament?

Balancing Act




Innovation & Performance

5

SOURCE AUTHOR‘S ECONOM ETRIC ANALYSIS OF M ORE THAN 3,000 ORGANIZATIONSSOURCE AUTHOR‘S ECONOM ETRIC ANALYSIS OF M ORE THAN 3,000 ORGANIZATIONS

Minor Moderate Major

Level of Investment

Small Medium Large

Payback Period

< 2 years 2 – 5 years > 5 years

Risk Low Medium High

Adoption

Several companies in the sector or related secors have already adopted the innovation

Company is not in the first to adopt innovation, but is an early adopter

Company is the first in its sector or related sector to have adopted the innovation

Example Energy efficiency programs

Changing sourcing of raw materials to include environmental and social criteria

Reshaping governance, production, marketing, distribution processes, and product attributes to aligh a company‘s interests with societal welfare

The Performance Frontier


Dow’s Solar Shingle integrates low-cost, thin-film CIGS photovoltaic cells into a proprietaryroofing shingle design that represents a multi-functional solar energy-generating roofing product

Vodafone’s M-PESA app offers mobile money transfer services in Kenya, Afghanistan andTanzania

Walmart’s Love, Earth jewelry line features 100% traceable gold and silver jewelry

Product Innovations

6

Innovations




IBM’s Well-Being Management System is a “global, centralized system that links the company’soccupational medicine, industrial hygiene, safety, wellness and health benefits, strategicinitiatives and programs to IBM’s strategies covering manufacturing, research and development,sales and services worldwide”

BASF’s eco-efficiency analysis looks at environmental impact in proportion to a product’s cost-effectiveness, helping BASF, BASF’s customers and customers’ customers decide which choicesare most sensible ecologically and economically

Toyota’s CSR Boost-up Initiative allows staff to directly communicate with external stakeholders

Process Innovations

7

Innovations


Pushing the Boundary of The Performance Frontier

8

Identify material ESG issues

Quantify the relation between financial and ESG performance

Innovate in processes, products, and business models

Communicate the company’s innovations to stakeholders

Pushing Boundaries




SASB’s Universe of ESG Issues

9

Universe of ESG Issues

Environment

Social Capital

Human Capital

Business Model &

Innovation

Leadership & Governance

SASB ESG Universe


SASB Materiality Map for Managed Care

10

ISSUES Health Care

Biotechnology Pharmaceuticals Medical Equipment & Supplies Health Care Delivery Health Care Distribution Managed Care

Climate Change Risk 3.75 3.75 1.25 0.75 0.75 1

Environmental accidents & remediation 0.75 1.25 1.5 1 1 0.75

Water use & management 1 1.25 1.25 1 1 1

Energy management 2.25 2.5 2.25 3.75 1 1.75

Fuel management & transportation 0.5 0.75 0.75 0.5 2.25 0.5

GHG emissions & air pollution 1 1 1.75 1 1 1

Waste management & effluents 3 3 2.5 2.25 1.25 0.75

Biodiversity impacts 1 0.75 1 1.25 1 1

Communications & engagement 1 1 0.75 1 0.5 1.25

Community development 0.5 0.75 0.75 1.75 1.25 0.5

Impact from facilities 0.5 1 1 4 1.25 1

Customer satisfaction 0.75 0.75 1 2.25 1 3

Customer health & safety 5 5 3 3 1.5 2.5

Disclosure & labelling 3 3 2.5 0.75 2.75 0.75

Marketing & ethical advertising 2.5 2.5 2.5 1.75 2 1.75

Access to services 4.25 4.5 2.5 3 3 3

Customer privacy 0.75 0.75 1 2.25 1.75 2.75

New markets 3.5 3.75 1 0.75 0.75 0.75

Diversity & equal opportunity 1.25 1.25 1 1.25 1.25 1.25

Training & development 3 2.75 2 2.5 1.5 2

Recruitment & retention 2.25 2.5 1.5 3 1.75 1.5

Example of Materiality Map




Capital market pressure for short-term performance

Customer unwillingness to change or pay

Existing incentive contracts inside firms

Shortage of skills and expertise

Capital budgeting process

Organizational Barriers to Change

11

Barries to Change


Shaping your investor base through communication and integrated reporting

Creating a sustainable brand through marketing campaigns or changing product characteristics

Aligning incentives within the organization

Hiring and training people

Adjusting the discount rate to take into account non-linear effects

Finding the Solution

12

Solutions to Change




Sustainable is Powerful

For more info, visitwww.arabesque.com

SISVI International Seminar 2/25/2016

WP 1&2: Alf Steinar Sætre & Arild Aspelund 1


How to Become a Sustainable Company

Professors Robert G. Eccles


February 2016

Copyright 2012 © Professors Robert Eccles and George Serafeim2

Increased commitment 2010 / plan to increase commitment in 2013 (%)

60

90

70

80

Consumer products

Financial services Energy and utilities

Conglomerate

40

50

60

7050 80

Ind. goods & machineryIndustrial services

Healthcare

Have sustainability permanently on the management agenda (%)1

Chemicals

AutomobilesMedia

Technology and telecom Commodities

Service industry (2013)

Mixed industry (2013)

Product industry (2013)

All industries 2010

Avg. 2013 = 70%

Sample size

Construction

1. 2012 results onlyNote: Com m ercial-specific survey data only – does not include Academ ic, Governm ental or Non-profit categoriesSource: 2012 BCG-M IT Sustainability and Innovation Survey

Overview




How to Become a Sustainable Company

Source: Eccles, M iller and Serafeim (2012), Sloan M anagem ent Review

Reframing corporate identity

Leadership commitment

External engagement

Codifying new identity

Employee engagement

Mechanisms of execution

Broader range of people engage with external

stakeholders

Positive organizational attributes passed on to

next generation of leaders

Positive organizational attributes passed on to

next generation of leaders

Stage 1 Stage 2

How to become Sustainable?


Have a personal commitment to

sustainability

Be knowledgeable about sustainability

issues and communicate about the long-term

and nonfinancial issues

Stage One: Reframing the Corporate Identity

4

Leadership Commitment

Stage One : Leadership Commitment

Have a long-term vision rather than a

detailed plan

Make a clear business case for

pursuing sustainable goals, and be

willing to take smart risks in pursuit of

those goals

Leaders must




Stage One: Reframing the Corporate Identity

5

Stakeholder Engagement

Identify significant trends

Identify stakeholders that

represent these trends and

ensure they raise their

concerns

Stage One : Stakeholder Engagement

Credibly commit to contracting with

stakeholders on basis of mutual trust,

cooperation, and long-term horizon

Establish engagement process with key

stakeholders over time

Develop common understanding of relevant

issues over time


A Three-Phase Model for Stakeholder Engagement

Phase I: Establishing the context

Phase III: Reporting, Debriefing and Learning

Phase II: Addressing the Issue(s)

How Stakeholder Engagement?




Stage Two: Codifying the New Identity

7

Employee Engagement

Identify bases of engagement

Articulate connections between employee contributions and the sustainability goals of the company

Enable cross-functional communication and idea exchange

Communicate impact, receive feedback to create dialogue

Stage Two : Employee Engagement


Stage Two: Codifying the New Identity

8

Employee Engagement

Formal

Organizational structure, incentive, budget

targeting

Enterprise-wide management system to ensure

measurement and control

Resource allocation processes, e.g., capital

budgeting

Stage Two : Employee Engagement

Direct ties to performance evaluation

and compensation

Accountability processes that

measure results and ensure

objectives are met

Informal

Culture, norms, values, beliefs, stories




Creating a Culture of Sustainability

9Source: Eccles, M iller and Serafeim (2012), Sloan M anagem ent Review

Trust

Capacity for transformational

change

Innovation

Stage I:Reframing

corporate identity

Stage II:Codifying new

identity

Creates and amplifiesCorporate Culture

Reinforces

Sustainable Culture


A Culture of Sustainability

Change Capabilities

• Short-term incremental

• Large-scale transformational

Changing the Rules or “Meaning”

Radical Improvement

Incremental Changes

Sustainable Culture




A Culture of Sustainability

11

Trust

• Demonstrate that employees’ contributions are valued

• Consciously align actions with values

• Honour commitments

• Make decisions based on what is good for the business and society

Sustainable Culture


Discussion Questions

1. What are the major barriers to becoming a sustainable company?

Do you think these vary by sector?

Which sectors are most difficult for becoming a sustainable company?

2. How can they be overcome?

3. What is your own personal experience with a company trying to develop a sustainable strategy?

Do you know..?




Sustainable is Powerful

For more info, visitwww.arabesque.com



H A R V A R D | B U S I N E S S | S C H O O L

Copyright 2015 © Professor Robert G. Eccles

SISVI International Seminar

Oslo, Norway

February 22, 2016

Robert G. Eccles


Characteristics and Performance Consequences

of a Sustainable Strategy:


Questions


Characteristics of sustainable firms

• Does the governance structure of sustainable firms differ from traditional firms and, ifyes, in what ways?

• Do sustainable firms have better stakeholder engagement?

• Do sustainable firms have longer time horizons?

• How do their information collection and dissemination systems for nonfinancial datadiffer?

Performance implications

• Could meeting other stakeholders’ expectations come at the cost of creating shareholdervalue since tradeoffs often exist?

• How can financial and nonfinancial (environmental, social, and governance)performance be achieved at the same time?




Sample Construction


• Firms with an explicit emphasis on employees, customers, products, thecommunity, and the environment as part of their business model

• Adopted policies prior to CSR becoming widespread, less likely to havemeasurement error by including firms that are either “green-washing” oradopting these policies only for public relations purposes

• Introduce a long lag between our independent and dependent variables -mitigate the likelihood of biases that could arise from reverse causality

• Outcome: 90 companies (High Sustainability or Sustainable firms)


Sample Construction


• Match each firm with another firm that has adopted almost no environmental and social policies throughout the 1990s and 2000s

• Exact matching on subsector and matching with closest neighbor on Size, ROA, MTB, Asset Turnover, and Leverage in 1993

• Outcome: 90 firms (Low Sustainability or Traditional firms)

Total assets ROA Leverage Turnover MTB

Sustainability N Average St. Dev. AverageSt.

Dev.Average St. Dev. Average St. Dev. Average St. Dev.

Low 90 8,182 28,213 7.54 8.02 0.57 0.19 1.05 0.62 3.41 2.18

High 90 8,591 22,230 7.86 7.54 0.56 0.18 1.02 0.57 3.44 1.88

p-value diff 0.914 0.781 0.726 0.703 0.927

Source: WorldScope




Implications for Financial Performance


• Firms in the High Sustainability group might underperform because they

experience high labor costs by providing excessive benefits to their employees,

pass valuable business opportunities that do not fit their values and norms, such asselling products with adverse environmental consequences, and

deny paying bribes to gain business in corrupt countries where bribe payments arethe norm

• Firms in the High Sustainability group might outperform because they

are able to attract better human capital,

establish more reliable supply chains,

avoid conflicts and costly controversies with nearby communities, and

engage in more product and process innovations


Buy‐and‐hold Returns


• For High and Low Sustainability firms

• Value-weighted portfolios

• Stock returns

0.00

5.00

10.00

15.00

20.00

25.00

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Low

High




Buy‐and‐hold returns


• For High and Low Sustainability firms

• Return-on-Equity (ROE)

0

5

10

15

20

25

30

35

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Low VW

High VW

Low EW

High EW


Conclusion


High Sustainability firms are characterized by

distinct governance mechanisms which directly involve the board insustainability issues and link executive compensation to sustainabilityobjectives;

a much higher level of and deeper stakeholder engagement, coupled withmechanisms for making it as effective as possible, including reporting;

a longer-term time horizon in their external communications which ismatched by a larger proportion of long-term investors;

greater attention to nonfinancial measures regarding employees; a greateremphasis on external environmental and social standards for selecting,monitoring and measuring the performance of their suppliers;

a higher level of transparency in their disclosure of nonfinancial informationand

superior accounting and stock market performance in the long-term




Questions for Discussion


• What are the underlying causal mechanisms?

• How can you identify high sustainability firms?

• How can you identify firms that are becoming highsustainability firms?

• How do you know if the market has already priced intheir superior performance potential?

• Over what time frame should you consider the returnon your investments?


Corporate Governance


• Boards of directors perform a monitoring and advising role and ensure thatmanagement is making decisions in a way that is consistent withorganizational objectives

• Top management compensation plans align managerial incentives with thegoals of the organization by linking executive compensation to keyperformance indicators that are used for measuring corporate performance

• Prediction 1a: High Sustainability firms are more likely to have the board review the sustainability performance of the corporation

• Prediction 1b: High Sustainability firms are more likely to link executive compensation to sustainability metrics




Corporate Governance


Sustainability Difference

Governance Low High p-value

Board

Formal Board Responsibility / Corporate Citizenship 21.6% 52.7% <0.001

Sustainability Committee 14.7% 40.9% <0.001

Compensation

Variable Compensation Metrics / Social Metrics 21.6% 35.1% 0.022

Variable Compensation Metrics / Environmental Metrics 8.1% 17.6% 0.011

Variable Compensation Metrics / External Perception Metrics 10.8% 32.4% 0.004

Source: SAM and ASSET4




• Engagement is necessary for understanding these stakeholders’ needs andexpectations in order to make decisions about how best to address them(Freeman, 1984; Freeman, Harrison, and Wicks, 2007)

• Prediction 2: High Sustainability firms have better stakeholder engagement practices







Stakeholder Engagement Low High p-value

PriorOpportunities Risks Examination 2.7% 31.1% <0.001Stakeholder Identification 10.8% 45.9% <0.001Training 0.0% 14.9% <0.001

DuringConcerns 2.7% 32.4% <0.001Grievance Mechanism 2.7% 18.9% <0.001Common Understanding 13.5% 36.5% <0.001Scope Agreement 8.1% 36.5% <0.001Targets 0.0% 16.2% <0.001

AfterBoard Feedback 5.4% 32.4% <0.001Result Reporting 0.0% 31.1% <0.001Public Reports 0.0% 20.3% <0.001

Source: SAM

Time Horizon



• Integrating environmental and social policies in the business model andoperations requires a long-term perspective

• Incurring short-term costs while expecting long-term benefits

Providing positive externalities and internalizing negative externalities

Building good stakeholder relations as part of a corporation’s strategy takestime to materialize, is idiosyncratic to each corporation, and depends on itshistory; such relationships are based on mutual respect, trust, andcooperation and such ties take time to develop (Choi and Wang, 2010)

Prediction 3: High Sustainability firms are more long-term oriented




Time Horizon



Measures of long-term orientation Low High p-value

Long-term vs. Short-term Investors -5.31 -2.29 <0.001

Long-term vs. Short-term Discussion 0.96 1.08 0.030


Measurement of Nonfinancial Information


• Performance measurement is essential for management to determine how well it is executing on its strategy and to make whatever corrections are necessary (Kaplan and Norton, 2008)

• Reporting on performance measures to the board is an essential element of corporate governance, so that the board can form an opinion about whether the management is executing the strategy of the organization well

• Quality, comparability, and credibility of information is enhanced by internal and external audit procedures which verify the accuracy of this information or the extent to which standards are being followed

Prediction 4: High Sustainability firms are more likely to collect nonfinancial data







Employees Low High p-value

HR Performance Indicators / Nonfinancial 16.2% 54.1% <0.001

KPI Labor / EHS Fatalities Tracking 26.3% 77.4% <0.001

KPI Labor / EHS Near Miss Tracking 26.3% 64.5% <0.001

KPI Labor / EHS Performance Tracking 89.5% 95.2% 0.871


Customers Low High p-value

Customer Lifestyle 2.7% 5.4% 0.461

Geographical Segmentation 10.8% 18.9% 0.101

Potential Lifetime Value 2.7% 8.1% 0.164

Customer Generated Revenues 8.1% 18.9% 0.041

Historical Sales Trends 8.1% 16.2% 0.100

Products Bought 8.1% 14.9% 0.194

Cost Of Service 2.7% 6.8% 0.279

Source: SAM




Sustainability DifferenceSuppliers Low High p-valueEnvironmentalEMS 18.2% 50.0% <0.001Environmental Production Standards 25.7% 45.6% <0.001Environmental Data Availability 0.0% 12.3% 0.018Environmental Policy 0.0% 17.4% <0.001Product LCA 0.0% 6.6% 0.052SocialHuman Right Standards 5.7% 17.4% <0.001OHS Standards 25.7% 62.9% <0.001Grievance Process 0.0% 8.1% 0.039Labor Standards 8.1% 18.6% 0.020StandardsInternational Standards Compliance 0.0% 12.3% <0.001National Standards Compliance 8.1% 14.9% 0.057

Source: SAM




Disclosure of Nonfinancial Information


• External reporting of performance is how the company communicates to shareholders and otherstakeholders how productively it is using the capital and other resources they have provided to thecorporation

• Prediction 6: High Sustainability firms are more likely to disclose nonfinancial data


Nonfinancial disclosure Low High p-value

Quantity

ESG Disclosure - Bloomberg 17.86 29.90 <0.001

ESG Disclosure - Thomson Reuters 36.91 46.38 <0.001

Coverage

Sustainability report covers global activities 8.3% 41.4% <0.001

IntegrationNonfinancial vs. Financial Discussion 0.68 0.96 <0.001

Social Data Integrated in Financial Reports 5.4% 25.7% 0.008

Environmental Data Integrated in Financial Reports 10.8% 32.4% 0.011

Source: SAM, Bloomberg ,and ASSET4


Evidence of Investor Appetite for Integrated


• According to a 2014 Ernst & Young survey on “Tomorrows Investment Rules,”institutional investors want a clearer view of what is material and want it directlyfrom the company:

• Materiality is a key concept that emerged from this survey. Investors were morelikely to value information which came directly from the company itself ratherthan from third-party sources. In addition, among those that never considerESG information in their decision-making process, the main reason forrejecting it was that they felt it was not material

• Two new tools that may accelerate the adoption of Integrated Reporting by theinvestor audience:

• Statement of Significant Audiences and Materiality

• Sustainable Value Matrix




Table Four


US Supreme Court SASB

GRI

CDP

AccountAbilityIIRCIASB

FASB

SEC

Materiality


Materiality


Materiality: Nonfinancial Accounting Standards

The SEC does not distinguish between financial and nonfinancial information

Strong sector influence for nonfinancial (environmental, social, and governance)

Materiality is entity-specific

Materiality is binary

Materiality requires judgment

Materiality should ultimately be decided by the board of directors




Integrated Reporting


“An integrated report is a concise communication about how an organization’s strategy, governance, performance and prospects, in the context of its external environment, lead to the creation of value in the short, medium and long term”

Source: Integrated Reporting <IR>


Integrated Reporting: Value Creation Process


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