Sam Yearbook 2012 Final Tcm794 328902

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In cooperation with

The

SustainabilityYearbook2012


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The Sustainability Yearbook 2012

2

Allerga, Ic.Dvid Ptt,

Chairman, President and CEO

For over 60 years, Allerga has bee committed to the health, saety,

ad well-beig o the people who put their trust i our products.

Every day, we strive to better peoples lives i a wide rage o ways rom

developig ew treatmets or complex ad disablig medical coditios to

oerig sciece-based medical aesthetic solutios. Our determiatio to make

a positive cotributio exteds to ot oly the people who beet rom our

products, but also to our employees ad to the global commuity i which welive ad work. It remais our goal to esure that our cotributio to sciece

refects our commitmet to sae, healthul workplaces, strog commuities

ad resposible, ethical busiess practices i everythig we do, rom research

ad developmet to sales ad marketig. Allerga is committed to

sustaiable developmet ad appreciates the opportuity to match

our sustaiable programs agaist the best i our idustry as

well as best-i-class. This gives us the opportuity

to cotiuously improve

our perormace.

PepsiCo

Ind K. Ni,

Chairman and CEO

PepsiCo is proud to be the DJSI Food ad Beverage

Supersector leader. The SAM Assessmet helps us track

progress agaist our Perormace with Purpose missio, which is to

deliver sustaiable growth by ivestig i a healthier uture or people ad

our plaet. We believe that our log-term protable growth is itrisically

liked to our ability to meet our social ad evirometal objectives. For

example, reducig our water ad eergy cosumptio geerates cost

savigs, ad implemetig sustaiable agriculture models lowers supply

chai risks ad costs. PepsiCos participatio i the Assessmet helps

us idetiy ad address emergig sustaiability issues

ad ehaces our ability to do busiess

resposibly i the commuities

where we operate.


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Foreword

3

Foreword

Dear reaDer,

It has bee 25 years sice the publicatio o The Brudt-

lad Commissios groudbreakig report Our Common

Future, deig the ow amiliar cocept o sustaiable

deelopmet as deelopmet that meets the eeds o

the preset without compromisig the ability o uture

geeratios to meet their ow eeds.

Sice the, as eideced by the steady icrease i

participatio rates i the aual SAM Corporate

Sustaiability Assessmet (CSA), compaies hae come alog way i recogizig the acial beets o embracig

sustaiability as a core compoet o their corporate

strategies. Yet, cotiued ecoomic ucertaity caused

by the ogoig acial crisis poits to the eed or a

reewed emphasis o log-term thikig ad a shit away

rom short-sighted behaior. We remai coiced that

a log-term ocus ad soud maagemethallmarks

o compaies that excel i sustaiability perormace

will prepare them to better weather turbulet ecoomic

eiromets such as the oe we ace today, giig them

a competitie adatage.

The 2012 editio o The Sustaiability Yearbook marks

the begiig o a global alliace betwee SAM ad

KPMG, aimed at helpig compaies measure ad e-

hace their corporate sustaiability perormace. To kick

o this collaboratio, this years publicatio oers our

perspecties o curret sustaiability topics.

First, KPMG examies why sustaiability has become i-

creasigly importat to goermets ad compaies i

some o the worlds astest growig ecoomies. The emerg-

ig markets ow stad at a crossroads i which they must

decide whether they wish to emulate a cetury-old Wester

model or deelopmet, or whether they preer to chart a

more sustaiable course to prosperity.

But a sustaiable path to deelopmet that limits the

egatie impact o the eiromet ad uture geer-

atios requires ioatie solutios. Sustaiability co-

sideratios hae cotiuously helped spark ew ideas,

which is why ioatio maagemet is a importat

compoet o the CSA. Thereore, i the secod chap-

ter o The Sustaiability Yearbook, SAM highlights

some prelimiary digs rom its ealuatio o com-

paies approach to ioatio maagemet.

As a ioatio-drie idustry, the chemical sector

bega addressig sustaiability cocers as early as the

mid-1980s ad has made great strides sice the. Based

o data collected through the CSA, SAM also explores

which sustaiability actors distiguish the leaders rom

the laggards i the chemical idustry.

Fially, Fras a Houte, Presidet ad Chie Executie

Ocer at Royal Philips Electroics explais how ioa-

tio ad sustaiability play a itegral role i adacig

his compays missio o touchig as may lies as pos-

sible with its gree ad social breakthroughs.

As always, The Sustaiability Yearbook proides isights

ito the 58 sectors examied by the 13th SAM Corporate

Sustaiability Assessmet, which determies the compaies

that are icluded i this reerece guide to the worlds

sustaiability leaders. The leadig compaies i 58 sectors

are classied ito three categoriesSAM Gold Class, SAM

Siler Class ad SAM Broze Classwith special status

awarded to Sector Leaders ad Sector Moers.

We hope you d The Sustaiability Yearbook a useul

tool that proides resh isights ito oe o the major

treds o our time, ad which has bee cotiuously

eolig oer the last 25 years.

Mc Bdg

Chie Executie Ocer

SAM

Td SkGlobal CEO

KPMG Climate Chage &

Sustaiability Serices


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4

Repsol YPF, S.A.at B, Chairman and CEO

Societys expectatios with regard to a compays cotributio to

sustaiable deelopmet hae grow cosiderably. I order to meet

humaitys log-term welare ad deelopmet eeds, we must esure that

our global ecoomy shits towards a more itelliget global eergy model that is

uiersally accessible ad compatible with the climatic stability o the plaet.

This, i tur, requires the smart ad sustaiable maagemet o our water,

eergy ad lad resources.

As a eergy compay, we recogize the eed to uderstad ad share the cocers o

this icreasigly itercoected global society. This meas opeig ourseles to public

scrutiy, beig trasparet, respectig huma rights ad ghtig corruptio. Thus

egagig i dialogue with ciil society ad participatig i

iitiaties such as the SAM Corporate Sustaiability Assessmet are ot oly

a eectie risk maagemet tool, but are aboe all, a way to create

parterships ad idetiy opportuities to esure that we

cotiue to moe towards deelopig

sustaiable eergy solutios.

Alcoa Ic.Ks Kd,

Chairman and CEO

Sustaiability dries eerythig we do at Alcoa, rom

how we mauacture our products, to the way our employees

iteract with the eiromet. At our core, the ery metalwe make is uiquely sustaiable. Alumium is light, strog,

o-corrosie ad iitely recyclable, ad Alcoas ioatie material

solutios are makig cars, trucks ad plaes lighter ad more

uel-eciet, buildigs eirometally riedly, packagig greeer,

ad cosumer electroics cooler. Eery day we lie our alues

o accoutability ad resposibility, ad cotiually seek to

improe our idustry-leadig practices i saety, atural

resource maagemet, emissios reductio

ad commuity partership.


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Table of Contents

5

Table o Cotets

ForeworD 3

1. KPMG: SuSTainaBiliTy DriverS in eMerGinG eConoMieS 7

2. innovaTion ManaGeMenT in The SaM CorPoraTe SuSTainaBiliTy aSSeSSMenT 17

3. SuSTainaBiliTy in The CheMiCal inDuSTry 31

4. inTerview wiTh PhiliPS 42

5. SaM SeCTor leaDerS 2012 49

6. SaM SeCTor MoverS 2012 52

7. SeCTor inSiGhTS: 58 SeCTorS aT a GlanCe 55

8. annex 116

8.1 SAM Prole 117

8.2 SAM Academic Actiities 1178.3 KPMG Prole 118

CoMPany overview 119


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6

CemigDjm Bsts d Ms, CEO

The importace o sustaiability to Cemig ca

be see i the act that sustaiability is embedded i its busiess

strategies. Sustaiability is a itegral part o the compays isio or

the uture, o its strategic plaig, o its decisios regardig the

acquisitio o ew assets, o its Declaratio o Ethical Priciples ad o all

Cemigs attitudes ad actiities.

Beig listed i the DJSI World all these years meas recogitio by the

iteratioal market o the set o strategic actios adopted by Cemig that

aim at osterig ew busiesses, workig i the iterest o iestors ad

improig corporate sustaiability practices. The aual assessmet by SAM

proides us with the ecessary bechmarkig to reiew ad improe

our programs ad processes i a cotiuous quest or

sustaiability-orieted improemets that esure the

compays perormace i the three dimesios:

ecoomic, eirometal ad social.

Capital ShoppigCetres Group PLC

ad nc,

Director o Corporate Responsibility

Capital Shoppig Cetres Group PLC is the leadig specialist

deeloper, ower ad maager o pre-emiet UK regioal shoppig ceters. Weare committed to workig closely with the commuities sered by our busiesses

ad operatig resposibly i terms o care or the eiromet, reductio i eergy

cosumptio ad promotio o icreased recyclig o waste. Bechmarkig

agaist best practice as sigposted by SAMs Corporate Sustaiability Assessmet

esures that we remai ocused o curret thikig about corporate

sustaiability issues ad such egagemet supports our drie to improe the

sustaiability o all aspects o our busiess year o year

or the beet o our iestors, customers

ad employees.


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1. KPMG: Sustainability Drivers in the Emerging Economies

7

1 SUSTAInABILITY DRIvERSIn THE EMERGInG ECOnOMIES


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8

1. Sustaiability Driers i the Emergig Ecoomies

w t dt t ds mgg mkts s d t s, t s c tt

t t t c t ct t g s stkg. accdg t T ecmst d t iMF, t

mgg cms t tk tk t dpd cms

bt 2008 d 20121, 2. accdg t t iMF, t d cctd gb

gt 20083.

Emergig ecoomies accouted or early hal the

worlds exports i 2010 accordig to the WTO ad

it looks certai they will accout or much o the

expected global growth i years to come4. Accordig

to The Ecoomist, Wester multiatioals expect

to d 70% o their uture growth i the emergig

ecoomies, 40% o it i Chia ad Idia aloe.5

They will ot d these markets ucotested,

howeer. A ew breed o imble multiatioals

is eolig rom withi the emergig ecoomies.

These ew players are spottig ew markets ad

ioatig ew busiess models, serices ad

products to sere the dierse eeds o a rapidly

emergig global middle class.

At the same time as the emergig ecoomies

cotiue to improe their competitie positio,

some are also catchig up ast with the

deeloped ecoomies i terms o their approach

to sustaiability. They hae come a log way i a

short space o time ad are icreasigly aware o

the egatie as well as the positie impacts o rapid

ecoomic deelopmet ad idustrializatio.

May o the ecoomies discussed i this article

also d themseles coroted with sustaiability

issues as they bump up agaist pressig resource

costraits, such as water scarcity i South Arica

or a reliace o pollutig eergy sources i Chia.

As these ecoomies mesh eer more deeply ito

the wider global ecoomy, their leadig busiesses

eel more pressure rom oerseas iestors ad

parter compaies to grow sustaiably. Legislatio

is also driig the moe towards sustaiability i

eery ecoomy cited i this article, a tred beig

drie i part by the growig cocers o may

o these atios emergig middle class ad by

more actie ad egaged local commuities eager

to pressure compaies to act more sustaiably.

The impetus to address sustaiability is ot com-

ig solely rom exteral pressures but also rom a

icreasig, although by o meas uiersal, aware-ess that sustaiability ca also oer opportuity.

I the coutries which orm the ocus o this article

Brazil, Chia, Idia, Russia ad South Arica

icreasig umbers o orgaizatios are ow citig

the chace to limit reputatioal risk ad ehace

brad alue as reasos or egagig more deeply

with sustaiability issues.

But compaies i may emergig ecoomies

still lag behid their deeloped ecoomy peers.Opiios expressed by KPMG experts based i

these coutries suggest relatiely ew orgaizatios

i the emergig ecoomies recogize that there

could be ecoomic alue i makig sustaiability a

itegral part o corporate strategy. Few as yet see

a clear lik betwee sustaiability ad log-term

protability. It is apparet, howeer, that i most

emergig ecoomies, sustaiability as a issue has

take root, may compaies recogize the beets

o addressig the topic ad its importace is set

to grow.

1 IMF, World Ecoomic Outlook,2011.

2 http://www.ecoomist.com/ode/21525373

3 http://www.iadb.org/ital/italcdi/PE/2011/08815.pd

4 http://www.wto.org/eglish/ews_e/pres11_e/pr628_e.htm

5 http://hbr.org/2011/01/ew-busiess-models-i-emergig-

markets/ar/1


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9

FiGure 2: Co2

eMiSSionS Per CaPiTa 2009 (T Per CaPiTa)

Source: CO2 Emissios rom uel combustio 2011: Iteratioal Eergy Agecy

12

10

8

6

4

2

0

tpercpit

Brazil Chia Idia Russia South Arica

1.7

7.510.8

1.4

5.1

FiGure 3: CorruPTion PerCePTionS inDex 20118

Source: Corruptio Perceptios Idex 2011: Trasparecy Iteratioal

0Highly

Corrupt

10very Clea3.8 Brazil

3.6 Chia

3.1 Idia

2.4 Russia 4.1 South Arica

6 Global CompetitieessIdex 2011-2012 rakig:The Global CompetitieessIdex proides a bechmark othe may actors that uderpiatioal competitieess.Competitieess is deed as theset o istitutios, policies, ad

actors that determie the leel oproductiity o a coutry.

7 Rak i the Un HumaDeelopmet Idex: a measure oa coutrys achieemets basedo ecoomic, health ad socialidicators, usig measures sucha GDP per capita, lie expectacy,educatio ad literacy rates.

8 Corruptio PerceptiosIdex 2011:The Corruptio Perceptios Idex(CPI) raks coutries accordigto the perceptio o corruptioi the public sector. The CPI is aaggregate idicator that combiesdieret sources o iormatio

about corruptio, makig itpossible to compare coutries.

GDP ranKinG 2010GloBal CoMPeTiTiveneSS

inDex ranK 2011-20126

un huMan DeveloPMenT

inDex ranK 20117

Brazil 7 53 84

Chia 2 26 101

Idia 9 56 134

Russia 11 66 66

South Arica 28 50 123

FiGure 1: CounTry ranK overview

Source: World Deelopmet Idicators database, World Bak, 1 July 2011.

The Global Competitieess Idex 2011-2012 rakigs, World Ecoomic Forum.

Huma Deelopmet Report 2011, Uited natios Deelopmet Programme.


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10

1.1 Brazil

GDP Rakig 2010 7t

Global Competitieess Idex Rak 2011-2012 53d

Un Huma Deelopmet Idex Rak 2011 84t

CO2 Emissios per capita 2009 (t per capita) 1.7

Corruptio Perceptios Idex Rak 2011 73d

A parago or the global ecoomy, Brazil is ast

makig the trasitio rom a regioal to globalpower thaks to its cosistetly solid ecoomic

perormace, icludig growth i 2010 o 7.5%.

Its ecoomy is already the worlds seeth-largest

by GDP ad is expected to take th place i

comig years.9

Strog export growth ad iward iestmet

together with extesie social programs hae

helped lit millios o Brazilias out o poerty. A

majority o Brazilias are ow middle-class, addomestic cosumptio has become a importat

growth drier. Brazils egagemet i the global

ecoomy is a sigicat actor i driig its

sustaiability ageda. Brazilia compaies export

high quatities o commodities such as mierals,

oil ad gas ad agriculture products to Europea

ad Asia compaies, may o which request

disclosure o eirometal, social ad goerace

(ESG) iormatio.10

Accordig to KPMGs Iteratioal Surey o

Corporate Resposibility Reportig 2011 (KPMG CR

Report 2011), 88 o Brazils 100 largest compaies

report o corporate resposibility perormace i

the public domai. The chace to protect corporate

reputatio ad ehace brad alue as well as

ecoomic cosideratios such as cost saigs are

the major reasos cited or this extesie leel o

reportig.

Iestors are also driig the sustaiability ageda.

Beore they iest, oreig iestors (icludig pe-

sio uds, priate uds, priate equities ad ge-

eral iestors) are icreasigly lookig or eectie

corporate goerace as well as structures or ad-

dressig social ad eirometal resposibilities.

BOvESPA (the Brazilia Stock Exchage) alreadyhas a Corporate Sustaiability idex.

Regulatory pressures, such as the recet solid

residues law, passed i 2010, which establishes

corporate resposibility or hadlig waste,

pollutio ad emissios, are also playig their part.

Uder this law, certai eirometal impacts

could make compaies ad their respectie

maagemets guilty o a crimial oese. Media

scrutiy ad public cocers about health, saety,sweatshops, excessie workig hours, local

commuity coditios ad sexual ad moral

harassmet are also helpig drie greater corporate

sustaiability eorts.

As a cosequece o these actors, may Brazilia

compaies are brigig sustaiability issues

ad regulatios to their boards o directors ad

requirig maagemet to address them i the

compays risk maagemet priorities.

The Rio+20 eet i 2012, to be held i Rio de

Jaeiro to mark the 20th aiersary o the 1992

Uited natios Coerece o Eiromet ad

Deelopmet (UnCED) will sere as a importat

orum to urther deelop ad build o Brazils path

to greater busiess sustaiability.

9 Goldma Sachs, GlobalEcoomics Paper no. 153, 2007

10 http://www.state.go/r/pa/ei/bg/35640.htm


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11

1.2 China

GDP Rakig 2010 2d

Global Competitieess Idex Rak 2011-2012 26t

Un Huma Deelopmet Idex Rak 2011 101st


Corruptio Perceptios Idex Rak 2011 75t

Layig claim sice 2010 to the title o the worlds

secod-largest ecoomy ad its astest growig

major ecoomy, Chia has achieed aual growth

rates o almost 10% oer the last three decades.11, 12

Chia could become the worlds largest ecoomy (by

omial GDP) as early as 2020, accordig to Stad-

ard Chartered, ad it is already the worlds largest

exporter ad secod-largest importer o goods.13, 14

Chias igorous ecoomic growth has also

brought with it rapid social chage ad eiro-

metal degradatio. Eirometal problems,

such as pollutig eergy sources ad the eects

o urba deelopmet o the aailability o lad

or agriculture, are startig to create potetial bot-

tleecks to growth.

The Chiese public also has more explicit expecta-

tios about quality o lie, icome disparities ad

wealth distributio. Owig to icreasig actiism

o a commuity leel there is a growig ocus o

how orgaizatios ca improe their workig e-

iromets ad o how idustrial operatios ca

improe their eirometal perormace.

How iestors i Chia approach the sustaiabil-

ity tred is importat. They may be best sered by

costructig a iestmet thesis aroud macro-

ecoomic themes such as water risk, eergy securi-

ty, wage pressures, labor productiity ad pollutio

liabilities, issues that are directly impactig compa-

ies, rather tha merely lookig to back respo-

sible, ethical or socially orieted compaies.

Resposible iestmet as a ormal disciplie i

Chia is still a emergig eld. A small umber o

sustaiability-related idex products or uds hae

emerged i recet years deeloped by istitutios

ragig rom priate asset maagers to the

Shaghai Stock Exchage (SSE). A example is the

Sustaiable Deelopmet Idustry Idex lauched

i 2011. Howeer, there is ot yet a sigicat

commuity o asset owers or maagers with a

explicit ocus o sustaiability issues.

Despite the relatiely slow growth i the iestmet

sector, howeer, the Chiese corporate sector has

moed rapidly oer the last e years to adopt a

icreasigly systematic approach to sustaiability.

This growig corporate ocus has bee drie by ad

also cotributed to a rapid icrease i the degree o

trasparecy by Chiese compaies. More tha 700

Chiese compaies ow issue sustaiability reports

ad, accordig to the KPMG CR Report 2011, 50 o

Chias 100 largest compaies do so.

Both the Shaghai ad Shezhe stock exchages

ecourage sustaiability reportig, ad the goer-

met has asked all state-owed eterprises uder

SASAC (State-owed Assets Superisio ad Ad-

miistratio Commissio) to issue a report ad

establish a CSR departmet. The SASACs curret

e-year pla also icludes seeral eirometal

targets ocused aroud eergy itesity, carbo i-

tesity, water eciecy, ad seeral specic pollut-

ats alogside ecoomic growth goals.

Chias baks will hae a sigicat role to play

i promotig sustaiability. The Chiese Bakig

Regulatory Commissio has bee promotig gree

credit policies to accompay the goermets

idustrial restructurig priorities. The Commissio

is ecouragig baks to steer capital away rom

eergy-itesie, high-pollutig, ad oer-capacity

sectors ad towards strategic idustries icludig

alteratie-uel cars, eirometal ad eergy-

11 IMF, World Ecoomic Outlook,2011

12 http://www.bloomberg.com/ews/2011-05-26/chia-tops-idia-as-asia-coutry-most-likely-to-maitai-ecoomic-growth.html

13 http://www.ecoomist.com/ode/17733177

14 https://www.cia.go/library/publicatios/the-world-actbook/rakorder/2078rak.html


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12

saig techologies ad alteratie eergy. I somecases, this has led baks to look more careully at

the eirometal prole o idiidual cliets.15

As with Chias oerall deelopmet, the busiess

commuitys jourey o the sustaiability path is

beig compressed ito a ery short time period

compared to deeloped coutries. As a whole,

sustaiability themes are becomig material

busiess issues i Chia. Chiese compaies ted

ot to articulate sustaiability alue propositiosi the same maer as leadig multiatioal

corporatios, but the pressures are certaily isible.

Gie the relatiely low resource eciecy o much

o Chiese idustry, there are pletiul opportuities

to cut costs though operatioal eciecy, as well

as, i certai sectors, growig opportuities to

beet rom improed market positio through

gree products ad serices.

1.3 inDia

GDP Rakig 2010 9t





The worlds secod most populous coutry with 1.2

billio people ad the worlds ith-largest ecoomy

by purchasig power parity accordig to the IMF,

Idia is set to cotiue o its growth trajectory.

It is expected to leaprog Chias populatio by

2030 ad to oertake Japa to become the worldsthird-largest ecoomy by 2020.16, 17, 18

Despite this rapid deelopmet, sustaiability as

a corporate cocer i Idia is still i its iacy.

Reportig o sustaiability perormace has

icreased i the last e years, although accordig

to the KPMG CR Report 2011, oly 20 o the

top 100 Idia compaies report o corporate

resposibility perormace publicly ad oly 16

hae a corporate resposibility strategy i place

with well-deed objecties.

Sustaiability is ot a priority or most Idia

iestors either. O those that do take sustaiability

issues ito accout, commuity-based iitiaties

ad low carbo programs are priorities. A small

percetage o priate equity rms take accout o

eirometal ad health ad saety liability. For

sectors that rely strogly o their social licese to

operate, such as the mauacturig ad miig

sectors, compaies ace strog pressure rom local

goermets to respod to commuity eeds.

Otherwise Idias goermet, legal ad acial

istitutios are oly startig to drie the coutrys

orgaizatios to become more midul o their

eirometal ad social resposibilities.

I July 2011 the Miistry o Corporate Aairs i

associatio with the Idia Istitute o Corporate

Aairs updated the 2009 natioal volutary

Guidelies (nvG) o Social, Eirometal ad

Ecoomic Resposibilities o Busiess. Its priciples

coer trasparecy, goerace, eirometal

protectio ad social cocers.

15 Bak o Chia, 2010 CSRReport. http://pic.bakochia.com/bocappd/report/201106/

P020110620680809691168.pd

16 https://www.cia.go/library/publicatios/the-world-actbook/

geos/i.html

17 http://blogs.t.com/beyod-brics/2011/04/28/idia-oertakig-chia-ot-so-ast/#axzz1h3WJjXyJ

18 http://www.im.org/exteral/pubs/t/weo/2011/01/weodata/

weorept.aspx?sy=2008&ey=2011&scsm=1&ssd=1&sort=coutry&ds=.&br=1&c=534&s=nGDPD%2CnGDPDPC%2CPPPGDP%2CPPPPC%2CLP&grp=0&a=&pr.x=49&pr.

y=13#cs5


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13

I the public sector19, the Departmet o PublicEterprise i September 2011 issued its Guidelies

o Sustaiable Deelopmet or Cetral Public

Sector Eterprises (CPSEs), which lay out

compulsory sustaiable deelopmet iitiaties or

CPSEs maily ocusig o eirometal issues. As

part o its aual perormace ealuatio o CPSEs

durig 2010-11, the sustaiable deelopmet

parameter is gie a weight o e percet. As

CPSEs curretly accout or 23.7% o the atios

total GDP, these guidelies ca hae a potetiallyhigh impact o the sustaiability perormace o

Idias public sector.20

I the acial sector, i December 2007 the

Resere Bak o Idia published a circular requirig

baks to cosider promotig sustaiability through

their ow busiess practices ad ledig policies.

I additio, the Istitute o Chartered Accoutats

o Idia (ICAI) has udertake a special project

to suggest a suitable ramework or sustaiability

reportig i Idia compaies aual reports.

Other iceties driig Idia compaies to take

sustaiability ito accout reole maily aroud

maitaiig brad reputatio ad icreasig

isibility with sector peers iteratioally. The

KPMG CR Report 2011 has also idetied that 75 o

Idias 100 largest compaies report o corporate

resposibility to protect corporate reputatio while

55 take ito accout ethical cosideratios.

Idia compaies are expected to place icreasigimportace o climate chage issues. KPMG Idias

Corporate Reportig Surey 2011 shows that

26% o Idias 100 largest rms already idetiy

opportuities related to climate chage, 21%

report their carbo ootprit ad 22% participate

i the Carbo Disclosure Project (CDP).

As the post-Kyoto carbo emissios tradig

arragemets are still uclear, compaies that

were actiely iestig i low-carbo iitiatiesmay begi to hesitate due to this ucertaity ad

arrow their iestmets. As iitiaties such as the

Carbo Disclosure Project become more commo,

howeer, compaies are begiig to take their

climate chage impacts ito accout more seriously.

Although as a group they lag behid some o their

iteratioal peers i terms o the percetage

o compaies reportig ad egagig with

sustaiability issues, it is oetheless clear that

egagemet is growig ad Idia compaies are

icreasigly attetie to corporate resposibility

issues. While some large compaies hae started

to establish a clear lik betwee corporate

resposibility ad risk maagemet, may still eed

coicig o the busiess case or itegratig

sustaiability ito their busiess strategies.

19 http://dpemou.ic.i/MOUFiles/Sustaiable_De.pd

20 http://www.kpmg.com/In/e/IssuesAdIsights/ThoughtLeadership/Public-Sector-Eterprises.pd ad Departmeto Public Eterprises


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14

1.4 ruSSia

GDP Rakig 2010 11t




Corruptio Perceptios Idex Rak 2011 143d

Russias ecoomy is the worlds 11th-largest,

powered i large part by its abudat resource

riches icludig atural gas, oil, coal, ad precious

metals. By 2020, Russia is tipped to become the

worlds sixth-largest ecoomy.21, 22

Russias resources giats lead the way whe it

comes to icorporatig sustaiability ito the busi-

ess. The KPMG CR Report 2011 shows that 58 o

the coutrys 100 largest compaies are publishig

iormatio o their corporate resposibility per-

ormace, led by exporters i the miig ad oilad gas sectors. As might be expected they hae

more adaced sustaiability practices i areas

such as health ad saety as well as eirome-

tal stadards as they uderstad the eed to meet

iteratioal expectatios ad to stay i lie with

idustry peers. Regulatory pressure relatig to e-

ergy eciecy ad eirometal protectio is also

icreasig. Russia regulatios itroduced rom

2009 to 2011 iclude requiremets to itroduce

madatory eergy ad water meterig ad to labelthe eergy eciecy o buildigs ad goods. The

Russia goermet is also dratig legislatio to

stregthe eirometal laws which are curretly

cosidered leiet. A package o six billscoerig

topics icludig goermet eirometal moi-

torig, marie oil pollutio preetio measures

ad ecoomic iceties or waste maagemet

preset the largest eirometal legislatio re-

orm o the last 20 years.

Europea regulatios also aect Russia compaies

seekig to export to Europe. For example, REACH,

the mai Europea law regulatig the productio

ad import o chemicals, icorporated ew

amedmets i 2010 that icrease the amout

o iormatio that eeds to be submitted whe

registerig substaces, such as a descriptio o the

methods o use ad risk maagemet procedures o

dieret substaces. To aoid the risk o exclusio

rom the Europea market, Russia compaiesmust esure compliace.

Russias 2002 corporate goerace code requires

ope joit stock compaies ad close joit stock

compaies to report o their compliace i their

aual report, although ew eorcemet mecha-

isms exist, ad there is o deeloped system or

moitorig compliace. With respect to oreig

iestors ad creditors, Russia compaies take

a more compliace-led approach to their sustai-ability requiremets by icorporatig iteratioal

rameworks such as the Equator priciples ad

arious iteratioal corporate goerace best

practices.

While Russia iestors do ot ted to hae

specic sustaiability requiremets whe iestig

i Russia compaies, they do take corporate

goerace issues seriously as they are kee to

protect their owership rights.

Accordig to the KPMG CR Report 2011, the mai

busiess driers or reportig o corporate respo-

sibility i Russia iclude ethical cosideratios as

well as protectig corporate reputatio ad e-

hacig brad alue. As yet, howeer, ew Russia

compaies thik sustaiability policies could sae

them moey or see a busiess case or itegratig

sustaiability ito their busiess strategies.

21 http://blog.euromoitor.com/2010/07/special-report-top-

10-largest-ecoomies-i-2020.html

22 https://www.cia.go/library/publicatios/the-world-actbook/

geos/rs.html


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15

1.5 SouTh aFriCa

GDP Rakig 2010 28t


Un Huma Deelopmet Idex Rak 2011 123d



South Arica is Aricas largest ad the worlds

28th-largest ecoomy, powered i large part by

its miig, eergy ad atural resources sectors.

Miig ad mierals cotribute almost 9% directly

ad aother 10% idirectly to GDP. They also

represet early a third o the Johaesburg Stock

Exchages market capitalizatio.23

The eects these idustries hae o the

eiromet ad surroudig commuities ad

the ote iheretly hazardous workig coditios

or employees hae required compaies i these

sectors to maage ad accout or their impacts

or may years ad to respod to regulatio,

stakeholders ad idustry best practices. This

reportig eiromet has spread to other sectors

i the coutry. The KPMG CR Report 2011 shows

that 97 o the coutrys 100 largest compaies ow

publish their corporate resposibility perormace,

a sigicatly greater umber tha i the other

emergig markets discussed i this article.

The 2009 Kig Code o Goerace, also kow

as the Kig III Report, which requires compaies

listed o the Johaesburg Stock Exchage to

publish itegrated reports (albeit o a apply-or-

explai basis), ecourages compaies to cosider

itegratig sustaiability ito their oerall strategy

ad reports. The KPMG CR Report 2011 shows

that 25 o the 100 largest South Arica compaies

publish sustaiability reports.

Although iestors i South Arica may ot yet

dieretiate widely betwee compaies with

aerage, good ad exceptioal reports, they are

payig closer attetio ad are more likely to be

wary o poorly perormig orgaizatios.

Eergy security, carbo emissios ad cost are

sigicat issues aectig sustaiability strategies

ad plas o a atioal ad corporate leel. South

Arica is curretly addig ew coal-red statios tomeet its short-term eeds24, although there is clear

cocer about the carbo implicatios. Costraits

to buildig a more sustaiable geeratio base,

howeer, iclude access to ace, techology

ad skills.

As eergy demads icrease, eergy costs are

expected to grow. The possible itroductio o

a eergy or carbo tax is aother actor driig

cocers about carbo output. While South Aricasabsolute carbo output is ot cosidered high,

its ecoomy is carbo-itesie relatie to GDP.

Without moes towards a less carbo-itesie

ecoomy, South Arica could become a sigicat

carbo emitter.

Water costraits i South Arica are becomig a

busiess imperatie or water-itesie busiesses,

such as power compaies. Capacity ad irastructure

improemets will icrease water costs, orcigwater-itesie busiesses to take a closer look

at how they use ad recycle water, a issue may

compaies are already takig actio o.

Health ad saety is aother critical sustaiability is-

sue, primarily i South Aricas miig ad atural

resources sectors. A high umber o ijuries or a a-

tality will stop operatios while iestigatios are car-

ried out to idetiy causes ad itroduce preeta-

23 Facts ad Figures 2010,Chamber o Mies oSouth Arica: http://www.bullio.org.za/Publicatios/Facts&Figures2010/F%20ad%20F%202011-small.pd

24 http://www.miigmx.com/ews/eergy/Eskom-plas-third-ew-coal-statio.htm


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16

tie measures. Mismaagemet o health ad saetyca hae a immediate impact o a compays bot-

tom lie ad iestor prots. Compaies, thereore,

kow that maagig health ad saety issues i their

operatios is essetial to attract iestors.

Future issues iclude how carbo emissios willbe dealt with as a result o COP17 i Durba ad

the questio o how compaies cotiue o the

jourey towards itegrated reportig.

1.6 SuMMinG uP

The emergig ecoomies rate o deelopmet

ad ecoomic growth is extraordiary ad

uprecedeted. It is pullig millios out o poerty

worldwide ad oerig them the meas to catch

up with the deeloped ecoomies.

Deelopig ecoomies also hae a opportuity

to outperorm their deeloped ecoomy peers by

growig their ecoomies o a more sustaiable

basis. The idustrial era or most deeloped atios

came at the cost o widespread eirometal

pollutio ad pressure o commuities ad

idiiduals. Deelopig atios are acig the

same kids o choices ad dilemmas today, but it

is clear their awareess o these choices ad their

uderstadig o how to egotiate a way through

them more sustaiably is growig. Iestors ad

compaies that uderstad the ature ad detail

o the opportuities this presets will be best

placed to prot rom them.


17/127


1.1 Ttulo del captulo

17

2 InnOvATIOn MAnAGEMEnTIn THE SAM CORPORATE

SUSTAInABILITY ASSESSMEnT


18/127


2. Innovation Management in the SAM Corporate Sustainability Assessment

18

2. Ioatio Maagemet i the

SAM Corporate Sustaiability Assessmet

hbd cs. B-pstcs. o msc pcsg ptms. Cb bs. ls-cttg

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dd t csms. Bt t sm t k ds dg t t, d t stps

cmps tkg t s tt t bst ds mpmtd t mst ct m?

J G, S Mg Sstbt Scs, s cmps tt

ptcptd t SaM Cpt Sstbt assssmt ppc t mgmt.

2.1 innovaTion anD SuSTainaBiliTy

Recocilig huma deelopmet ad ecoomic

growth with our ecological ootprit represets

oe o this ceturys greatest challeges. Improig

leels o huma deelopmet places additioal

pressures o the ecosystem ad reduces the amout

o aerage biocapacity aailable per perso. History

has show that as coutries progress o the Un

Huma Deelopmet Idexa measure o a

coutrys achieemets based o GDP per capita,

lie expectacy ad educatiothey also icrease

their eirometal ootprit.

FiGure 1: huMan DeveloPMenT inDex anD eColoGiCal FooTPrinT

Source: UnDP Huma Deelopmet Report, 2009, data rom Global Footprit network natioal Footprit Accouts

High huma deelopmetwithi the Earths limits

UnDPthresholdforhighhumadevelopmet

World aerage biocapacity per perso i 1961

World aerage biocapacity per perso i 2006

Ioatio is required to

eable huma deelopmet

by usig less biocapacity

Arica coutries

Asia coutries

Europea coutries

Lati America ad Caribbea coutries

north America coutries

Oceaia coutries

12

10

8

6

4

2

0

0.2 0.4 0.6 0.8 1.0

Ecologicalfootprit(globalhectaresperperso)


19/127



19

Such icreases are ee more drastic oce a coutryhas reached a high leel o huma deelopmet:

eery margial uit o improemet has a ee

greater impact o the ecosystem. As a result, two

key macroecoomic challeges hae emerged:

1. reducig the ecological ootprit o deeloped

coutries to sustaiable leels, ad

2. osterig ecoomic growth i emergig cou-

tries while limitig the eirometal impact o

their growig prosperity.

Clearly, may o societys primary egies o eco-

omic growth such as agriculture, eergy geera-

tio, costructio & housig, mobility, ad materi-

als must shit away rom usustaiable busiess

as usual practices towards sustaied ecoomic

growth that ca support a growig populatio well

ito the uture.1 Such challeges require ioatie

solutios, ad compaies that ca address these

challeges will ejoy a competitie adatage ithe log ru.

At the microecoomic leel, strikig a balace be-

twee ecoomic eciecy ad societal progress is

also required. Fearig a egatie impact o their

bottom lie, corporatios are ote hesitat to

embark o more sustaiable growth strategies.

Although may compaies are icreasigly rec-

ogizig the acial beets o implemetig

corporate sustaiability strategies, some corporateexecuties still beliee that societal beets ad

acial prots are mutually exclusie. This may

be true i a compays strategy has a particularly

arrow time horizo that aors short-term a-

cial returs oer log-term goals. While a strog

ocus o cost reductio may ideed geerate im-

mediate beets or compaies, these ade oce

eirometal ad social exteralities are take

ito accout.

Oe o the mai goals o corporate ioatio isto remai competitie by gaiig access to ew

markets ad reducig process costs. Ioatio

eables compaies to improe eciecies by

reducig the amout o eergy ad material iputs

used, ultimately lowerig productio costs. It also

allows compaies to update their rage o products

ad serices, aoidig losses as earlier geeratios

o products ad serices become obsolete.

Thus, rom the macroecoomic ad the microeco-omic perspectie, ioatio is required i order

to eable both sustaiable deelopmet ad -

acial success. For this reaso, sustaiability has

emerged as oe o the key driers o ioatio.2

A sustaiability strategy that cosiders societal

eeds ad aims to reduce the compays ecological

ootprit ca proide compaies with a ramework

or deelopig ioatios to their processes ad

products, beettig compaies ad society alike.

2.1.1 T r emt rgts

Though some may cosider regulatios to be too

restrictie by imposig limitatios o compaies

actiities, geeratig additioal compliace-related

costs ad reducig productiity, regulatios hae,

i act, played a importat role i ecouragig

eirometal ioatios, ee i maily pro-

cess-related. This seemigly couterituitie o-

tio is described by the Porter Hypothesis, which

argues that properly desiged eirometalstadards ca trigger ioatio that may partially

or more tha oset the costs o complyig with

them. Thus, eirometal regulatio ca ideed

stimulate ioatio by makig compaies aware o

ad willig to exploit otherwise missed opportui-

ties.3, 4 Proactie compay behaior that aticipates

uture regulatios, ideties opportuities arisig

rom these chages ad implemets ad redesigs

products or processes to preet egatie eiro-

metal impacts, ot oly beets the eiromet,but ote also helps compaies establish competi-

tie adatages.5, 6, 7

1 visio 2050, WBCSD, 2010

2 Ram nidumolu, C.K. Prahalad,ad M.R. Ragaswami, WhySustaiability Is now the KeyDrier o Ioatio, HarardBusiess Reiew, September 2009

3 Porter, M.E., a der Lide,C., 1995. Toward a newCoceptio o the Eiromet-Competitieess Relatioship.Joural o Ecoomic Perspecties9, 97-118

4 Berauer, T., Egels, S.,Kammerer, D. ad nogareda,J.S., 2007. Explaiig GreeIoatio: Te Years aterPorters Wi-Wi Propositio:How to Study the Eectso Regulatio o CorporateEirometal Ioatio? I:Frak Bierma, P.-O.B., Peter,Heig Feidt, a.K.J. (Eds.),Politik ud Umwelt. PvS verlag

5

Berry, M.A., Rodielli, D.A.,1998. Proactie CorporateEirometal Maagemet:A new Idustrial Reolutio.Academy o MaagemetExecutie 12, 38-50

6 Hart, S.L., Ahuja, G., 1996.Does it Pay to be Gree? AEmpirical Examiatio o theRelatioship betwee EmissioReductio ad Firm Perormace.Busiess Strategy ad theEiromet 5, 30-37

7 Arag-Correra, J.A., Sharma,S., 2003. A CotigetResource-Based view o ProactieCorporate EirometalStrategy. Academy o

Maagemet Reiew 28, 71-88

Ioatiois required iorder to eableboth sustaiabledeelopmet adacial success.For this reaso,sustaiability hasemerged as oeo the key driers

o ioatio.


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20

2.1.2 T imptc it

Although most executies agree that ioatio

is a key cotributor to their compays success,

they also ackowledge that ioatio is dicult

to geerate, track ad maage. Accordig to a

McKisey surey8 coducted i 2010, 84% o

top maagers stated that ioatio is oe o

their top priorities. The ecoomic recessio has

ot chaged this iew: the ability to coert ew

ideas ito products ad serices remais a key goal

or eery compay. Despite ecoomic diculties,ioatio cotiues to receie acial support

rom compay maagemet; but a challegig

ecoomic eiromet urther uderscores the

importace o careully moitorig ad maagig

the ioatio process. not surprisigly, challeges

ariseparticularly i the early stages o ioatio

process maagemet whe priorities eed to be

deed, budgets allocated accordigly, targets

set, ad metrics to measure success hae to

be itroduced. 42% o the respodets statethat improemets i the orgaizatio aloe

would hae a sigicat impact o ioatio

perormace. Thus, the growig strategic

importace o ioatio requires compaies to

implemet a ormalized process iolig arious

areas o the rm, as well as a set o idicators to

measure achieemets.

2.2 MeaSurinG innovaTion ManaGeMenT

I order to ealuate compaies ioatio

maagemet processes ad tools or measurig

the outcomes o their ioatio iitiaties, SAM

itroduced a rage o ioatio-related questios

ito its aual Corporate Sustaiability Assessmet

i 2009. Each year, SAM iites 2,500 compaies

to participate i the aual Corporate Sustaiability

Assessmet (CSA), which cosists o a extesie

questioaire cotaiig oer 100 geeral ad

idustry-specic questios coerig the ecoomic,eirometal ad social dimesios.

Because the iormatio collected through the

assessmet is used i SAMs aluatio aalysis,

the CSA ocuses o sustaiability actors that are

releat to each idustry, material to the compaies

acial perormace ad uder-researched i

coetioal acial aalysis. By aalyzig the

sustaiability prole o compaies, SAM ca gai

a more comprehesie iew o their quality omaagemet ad ability to geerate alue.

8 McKisey Global Sureyresults, Ioatio ad

commercializatio, 2010

The growigstrategic

importaceo ioatio

requirescompaies to

implemeta ormalized

process ioligarious

areas o the rm,as well as a set o

idicators tomeasure

achieemets.


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21

FiGure 2: innovaTion inDiCaTorS uSeD in The SaM CorPoraTe SuSTainaBiliTy aSSeSSMenT

Source: SAM

it ipt: measures the amout o acial resources dedicated to the ioatio process.

it Pcss Mgmt: asks compaies to state whether they hae processes ad systems i

place to maage ioatio ad whether they hae deed releat key perormace idicators (KPIs).

it otpt: assesses the outcome o the ioatio process. Examples iclude the umber o

product ad process ioatios ad success rates o dieret ioatio steps.

it ipt

R&D Spending

Share of R&D budgetiested per ioatio

stage

Open Innovation

it Pcss

Mgmt

Cycle, success rate andKPIs or the dieret

ioatio stages

Structures and

Mechaism

it otpt

Product Innovations

Process Innovations

Environmental

Ioatios

Social Innovations

Ioatio is a complex ad multidimesioalcocept that caot be measured directly or with

oe sigle idicator. Thereore, SAM seeks to idetiy

more robust ioatio metrics that look beyodioatio iputs ad also aalyze ioatio

process maagemet ad ioatio outputs:

Ioatio isa complex admultidimesioalcocept thatcaot bemeasured directlyor with oe sigleidicator.


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22

For the 2011 Corporate Sustaiability Assessmet,a rage o ioatio maagemet questios has

bee icorporated ito the sustaiability questio-

aire or idustries i which ioatio is expected

to hae the greatest impact o compaies com-

petitieess. The specic questios used to assess

ioatio maagemet ary rom idustry to i-

dustry to refect specic characteristics that are par-ticularly releat to each sector.

I 2011, SAM collected ioatio data ad

calculated scores or a total o 319 compaies i

the ollowig sectors:

FiGure 3: SeCTorS evaluaTeD aCCorDinG To SaMS innovaTion ManaGeMenT CriTerion

Source: SAM

Sector

Aerospace & Deese

Auto Parts & Tires

Automobiles

Beerages

Biotechology

Chemicals

Clothig, Accessories & Footwear

Commuicatio Techology

Computer Hardware & Electroic Oce Equipmet

Computer Serices & Iteret

Diersied Idustrials

Durable Household Products

Electric Compoets & Equipmet

Electroic Equipmet

Fixed Lie Commuicatios

Sector

Food Producers

Furishig

Geeral Retailers

Healthcare Proiders

Idustrial Egieerig

Leisure Goods

Medical Products

Mobile Telecommuicatios

nodurable Household Products

Persoal Products

Pharmaceuticals

Semicoductors

Sotware

Waste & Disposal Serices


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23

2.3 reSulTS

The ealuatio o the criterio bega with a

aalysis o the ioatio maagemet scores

calculated or 319 compaies i 2011. These

compaies were the orgaized ito three groups

accordig to the score they receied or the

ioatio criterio:

ect pmc: compaies with a high

ioatio score o > 70 (out o a maximum o 100

poits)

ag pmc: compaies with a io-

atio score o betwee 40 ad 70

P pmc: compaies with a ioatioscore < 40

Compaies were the grouped at the supersector

leel (a broader groupig o similar idustries) i

order to idetiy which supersectors had the highest

percetage o top-perormig compaies. Similar

breakdows were also carried out or selected

idicators withi the ioatio maagemet

criterio such as R&D Spedig, Ope Ioatio

ad Eirometal Ioatio.

The results or the 2011 Ioatio Maagemet

criterio are summarized i the chart below:

FiGure 4: BreaKDown oF CoMPanieS By innovaTion ManaGeMenT SCoreS

Source: SAM

Aerage Perormace (score betwee 40-70)

Poor Perormace (score < 40)

Excellet Perormace (score > 70)37%

39%

24%


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24

By lookig at the distributio o the scores amogthe dieret supersectors or which the ioatio

criterio applies, oe ca obsere that the cosumer

goods, healthcare ad basic materials supersectors

hae the highest percetage o compaies receiig

a excellet score. Idustrials are i lie with the

aerage, while techology, telecommuicatios

ad cosumer serices are slightly laggig.

It is somewhat surprisig to see the below aerageperormace o the techology supersector. Oe o

the reasos or this is that techology compaies

are ote hesitat to disclose iormatio o their

ioatio maagemet processes ad outcomes.

Compaies that are ot trasparet about their

processes ad measuremet tools ted to receie

lower scores.

A geographical breakdow o the compaies

based o their coutry o domicile refects a

high leel o disclosuread as a result, higher

aerage scoresor compaies based i Europe

ad Asia ex-Japa, while scores are lower i the

US ad Japa. This is o coicidece, as may

techology compaies, which were oud to be

less trasparet, are located i those two coutries.

Asia ex-Japa, which is home to a large umber

o IT compaies, but has a higher percetage o

compaies with a excellet ioatio score, is a

exceptio to this tred.

FiGure 6: GeoGraPhiC BreaKDown oF CoMPanieS wiTh exCellenT innovaTion ManaGeMenT PerForManCeSource: SAM

number o Compaies Aalyzed % o Compaies with Excellet Perormace (score > 70)

FiGure 5: SuPerSeCTor BreaKDown oF CoMPanieS wiTh exCellenT innovaTion ManaGeMenT PerForManCe

Source: SAM


100

90

80

70

60

50

40

30

20

10

0

numberofCompies

Cosumer Goods Idustrials Techology Healthcare

40%

30%

20%

10%

0%Basic Materials Telecommuicatios Cosumer Serices

86

30 3031

54

69

19

16%13%

30%29%

17%25%

29%

120

100

80

60

40

20

0

numberofCompies

Europe north America Japa Asia (ex-Japa,AUS ad nZ)

100%

80%

60%

40%

20%

0%AUS ad nZ Lati America

29%

6 444

60

19%

0%

36%

15%

93111

0%


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25

2.3.1 it ipt

r&D Spdg

Disclosure o research ad deelopmet (R&D)

spedig is oe o the elemets used to measure

the iputs to the ioatio process. Compaies

were asked to proide the total amout o

R&D expeditures oer the last our years, the

breakdow betwee iteral spedig ad

outsourced spedig, persoel costs as well as

the total umber o ull-time employees dedicated

to R&D eorts.

Data or R&D expeditures was collected or the

288 compaies i the sectors that were eligible or

this questio. The results were oce agai clustered

accordig to their perormace or this measure:excellet (score > 70), aerage (score betwee 40

ad 70) ad poor (score < 40).

Based o the results o the 2011 assessmet,

compaies ca be classied ito two broad groups:

47% o the compaies show excellet perormace

or this measure, while 41% o the sample receied

a poor score. Iterestigly, the percetage o

compaies achieig a aerage score is relatiely

small. Oe reaso or this is that compaiesgeerally all ito oe o two extremes: either

they preer to report oly miimal iormatio o

R&D spedig as required by miimum accoutig

stadards, or they choose to be ully trasparet.

FiGure 7: BreaKDown oF CoMPanieS By r&D SPenDinG SCore

Source: SAM



Excellet Perormace (score > 70)12%

41%

47%

Amog the dieret supersectors, idustrials ad

basic materials cotaied the highest percetage

o compaies with excellet perormace, ollowed

by cosumer goods, techology ad telecommu-

icatios.

Howeer, it is importat to ote that measurig R&D

expeditures aloe is ot suciet or maagig

the ioatio process. Such idicators oer limited

isights ito a compays ioatio potetial:

higher R&D expeditures do ot ecessarily lead tomore ioatio.

FiGure 8: SuPerSeCTor BreaKDown oF CoMPanieS wiTh exCellenT r&D SPenDinG PerForManCe

Source: SAM


Cosumer Goods Idustrials Techology Basic Materials

70%

60%

50%

40%

30%

20%

10%

0%Telecommu-

icatiosCosumer Serices

45%

3019

30

54

62%

43%

57%

39%

6986

16%

100

90

80

70

60

50

40

30

2010

0

n

umberofCompies


26/127



26

op it

Because ioatio is ot oly geerated iside

the compay, the ioatio maagemet process

must also cosider ad itegrate exteral sources

o ioatio. new ideas requetly come rom

cosumers, suppliers, parters, research istitutios

or ee rom regulators. Thereore, ope ioatio

approaches are becomig icreasigly ital to

geeratig ew ideas that ca the be urther

deeloped withi the compay.

For this reaso, whe aalyzig iputs to the

ioatio process, SAM also ealuates the

compaies leel o opeess i their iteractios

with the outside world as they seek to deelop

ew ideas. The assessmet cosiders actors such

as research collaboratios with exteral busiessparters, distributed creatiity, acquisitios,

corporate eture capital, spi-os/start-ups,

techology licesig ad ope source.

Whe the 238 compaies that were eligible

or the ope ioatio questios are grouped

accordig to their scores o this measure, 20% o

the compaies receied a score o > 70, idicatig

that they use ope ioatio tools extesiely.

30% o the compaies receied a aeragescore o betwee 40 ad 70, meaig that they

employ some ope ioatio tools. 50% o

the participatig compaies that were asked this

questio either do ot actiely use such tools or did

ot proide iormatio.

FiGure 9: BreaKDown oF CoMPanieS By oPen innovaTion SCore

Source: SAM



Excellet Perormace (score > 70)

30%

50%

20%

new ideasrequetly come

romcosumers,

suppliers,parters, research

istitutiosor ee romregulators.


27/127



27

The techology ad basic materials sectors, whichhad a much higher proportio o compaies

achieig excellet perormace (score > 70) or this

idicator, are usig ope ioatio more actiely

tha compaies i other sectors. Idustrials, othe other had, appear to be more cautious about

actiely usig ope ioatio tools.

FiGure 10: SuPerSeCTor BreaKDown oF CoMPanieS wiTh exCellenT oPen innovaTion PerForManCe

Source: SAM

2.3.2 it Pcss Mgmt

I order to idetiy state-o-the-art key perormace

idicators (KPIs) used i ioatio maagemet,

compaies were asked to proide the top three

measures used withi each o the our mai

stages o ioatio: Core Research, Ideatio/

Applied Research, Deelopmet ad Product

Commercializatio & Process Implemetatio.

FiGure 11: STaGeS oF innovaTion ProCeSS ManaGeMenT

Source: SAM


it ipt

R&D Spending

Share of R&D budget invested

per ioatio stage

Open Innovation

it Pcss

Mgmt

Cycle, success rate and KPIs for

the dieret ioatio stages

Structures and Mechanism

it otpt

Product Innovations

Process Innovations

Environmental Innovations

Social Innovations

Stgs it

Pcss Mgmt

C

rsc

idt /

appd

rsc

Dpmt

Pdct

Cmmct

& Pcss

impmtt

Cosumer Goods Idustrials Techology Basic Materials

30%

20%

10%

0%

27%

26%

86

90

80

70

6050

40

30

20

10

0

numberofCompies

85

54

69 30

9%

22%


28/127



28

C rsc: research or academic researchwith no direct or immediate commercial benefts.

The results o the assessmet corm that the core

research phase is maily drie by project plaig

actiities, which iclude coductig easibility

studies, resource allocatio ad milestoe deitio.

Importat ioatio output idicators used by

compaies to measure the success o their core

research phase are primarily related to itellectual

property such as the umber o publicatios adpatets registered ad a ealuatio o the kow-

how built up durig this stage.

idt/appd rsc: the systematic or

unsystematic generation o ideas.

Compaies cited the importace o trackig

actiities related both to ideatio iputs such as

R&D expeditures, ad outputs such as the umber

o ew ideas geerated, the share o ew ideas

that make it to the ext phase o deelopmet

ad the lie-time o ew products. Project plaig

was also cosidered to be a importat elemet

o the ideatio stage ad icluded actiities such

as busiess plas ad easibility studies, all o

which are importat durig the early stages o the

ioatio process.

What seems to be missig or most compaies i

this stage are idicators showig that compaies

oster ioatio by ecouragig creatiity. For

example, compaies could allocate budget or time

to ree or ucostraied research ad the track

how may ioatios come out o these less

structured actiities.

Dpmt: reers to the development o spe-

cifc Product Innovations and Process Innovations.

Product Innovations

Product ioatios iclude goods ad serices

that are ew to the compay or that refect major

techical improemets or upgrades to existig

products such as improed quality, uctioality orew packagig.

I order to ealuate the success o the deelopmet

stage, compaies used acial idicators such

as R&D budget, reeue projectios ad pipelie

alue to estimate the alue o the ew product.

Compaies also cited a rage o market research

idicators such as user tests, pilot projects,

market eld test results, cliet eedback ad the

estimated impact o the brads alue i order togage the potetial success o the product uder

deelopmet.

Process Innovations

Process ioatios reer to processes that are ew

to the compay. These iclude the itroductio

o major or techical improemets to the

mauacturig techologies or processes used i

the productio o goods or i the distributio o

goods ad serices.

Compaies cited a umber o techical ad -

acial idicators used to ealuate the beets o

process ioatios that emerge durig the deel-

opmet stage. Techical easibility ad moitor-

ig idicators used to track the ew productio

process iclude ealuatig the success o pilot

projects, mass productiity tests, ad measurig

process quality ad mauacturig eciecy im-

proemets. Fiacial idicators icluded a rage

o costbeet aalyses.

Pdct Cmmct d Pcss imp-

mtt: reers to the actual commercializa-

tion o a product or the implementation o a

new process.

The most importat idicators compaies use to

ealuate their product commercializatio eorts

are related to marketig actiities such as trackig

the creatio o ew marketig materials, eet

promotios, marketig plas, media presece, ad

customer ad competitors reactios.


29/127



29

2.3.3 it otpt

A critical compoet o ay ioatio strategy is

a compays ability to measure the outcomes o

its ioatio iitiaties agaist its stated targets.

Compaies should be able to track the umber

ad eectieess o their product or process

ioatios, ad whether ay o their ioatios

hae led to positie eirometal or social

outcomes.

Because may ioatios are specically deel-oped to meet social or eirometal goals, SAMs

assessmet o ioatio outputs icludes a sec-

tio ocusig exclusiely o social ad eirome-

tal ioatios. The CSA dees eirometal

ioatios as all process, product ad orgaiza-

tioal ioatios that are beecial to the ei-

romet ad whose primary objectie is to improe

eirometal perormace.

For the 2011 assessmet, 227 compaies wereasked to proide iormatio o eirometal i-

oatio. I order to idetiy the importace o e-

irometal actors, compaies were asked to state

their primary motiatios or implemetig ei-

rometal ioatios. Amog others, compaies

cited commitmets to reducig their carbo oot-

prit, or icorporatig eirometal desig ito

their products, substitutig away rom hazardous

substaces, reducig eergy ad water cosump-

tio, ad recyclig waste ad by-products.

The compaies were grouped based o their e-

irometal ioatio score. More tha three-

ourths o the compaies use quatitatie measures

to track eirometal ioatios ad cosider

them to be a importat elemet o their ioa-

tio strategy. The outcome is cosistet with recet

studies9 highlightig the importace o sustaiabil-

ity as a key driig orce behid ioatio.

FiGure 12: BreaKDown oF CoMPanieS By environMenTal innovaTion SCore

Source: SAM



Excellet Perormace (score > 70)

55%

19%

26%

9 Ram nidumolu, C.K. Prahalad,ad M.R. Ragaswami, Why Sus-taiability Is now the Key Driero Ioatio, Harard BusiessReiew, September 2009


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30

Amog the major supersectors, idustrials ad ba-sic materials show the highest percetage o com-

paies with excellet perormace o eirome-tal ioatio.

2.4 ConCluSion

Ioatio is the process o traslatig a ew

idea ito a techological ad commercial success

ad is ital to esurig the log-term growth o

compaies. Because a eectie sustaiability

strategy ca help compaies create a competitie

adatage, it has eoled ito a icreasigly

importat drier guidig the ioatio process.

Eirometal ad social actors are becomig a

icreasigly importat elemet o the ioatio

maagemet process. Compaies hae recogized

that they ca geerate competitie adatages by

itroducig eirometal ioatios because

they ote eable the more eciet use o

resources, leadig to sigicat cost saigs. This

is oe o the most compellig argumets or

itroducig process chages. Further, pressure rom

customers, suppliers, regulators ad stakeholders

has cotiuously icreased, pushig compaies to

itroduce measures that help them improe their

eirometal ootprit.

Aalysis o the data submitted by compaies re-

eals that ioatio leaders, as idetied by the

2011 Corporate Sustaiability Assessmet, actiely

use a wide rage o idicators to maage the e-

ectieess o their ioatio strategies. Howeer,

gie that 39% o the participatig compaies

achieed a low ioatio score, oerall compay

disclosure leels could be improed urther.

Well-deed ioatio perormace idicators

are a useul maagemet tool or trackig the

success o a ioatio, ad are thereore

a importat compoet o a comprehesie

ioatio maagemet strategy aimed at

geeratig competitie adatages. Howeer,

beyod simply measurig ioatio iputs ad

outputs, compaies must also actiely maage

their progress agaist stated targets.

FiGure 13: SuPerSeCTor BreaKDown oF CoMPanieS wiTh exCellenT environMenTal innovaTion PerForManCe

Source: SAM


Compaies haerecogized that

they ca geeratecompetitie

adatages byitroducig

eirometalioatios

because they oteeable the more

eciet use oresources, leadigto sigicat cost

saigs.

nu

mberofCompies

80

70

60

50

40

30

20

10

0

40%

30%

20%

10%

0%

33%

25%

69

24%

30%

Idustrials Techology Cosumer Goods Basic Materials Telecommuicatios

54

3030

44

17%


31/127


1.1 Ttulo del captulo

31

3 SUSTAInABILITY In THECHEMICAL InDUSTRY


32/127


3. Sustainability in the Chemical Industry

32

3. Sustaiability i the Chemical Idustry

3.1 inTroDuCTion

For well oer a cetury, the chemical idustry hassourced oil-based raw materials ad mierals ad

tured them ito products serig a impressie

rage o applicatios ad idustries. Examples

spa rom dyes ad addities or plastics, wood

ad electroics to polymers or the automotie,

costructio ad cosumer idustries. From

ragraces to chemical itermediates that are

coerted ito high-alue pharmaceuticals, ad

rom ertilizers ad agrochemicals to soaps ad

waxes, chemicals hae trasormed our lies.

Although society has welcomed the may beets

that chemical products brig to daily lieultimately

becomig accustomed to their added alue ad

takig them or gratedit has also become

icreasigly aware that the growig presece

o chemical products ad operatios comes at a

price. Icreased waste productio ad greehouse

gas emissios, productio o toxic itermediates,

cocers oer the employee saety ad the saety

o commuities located ear chemical acilities

hae led to growig uease oer the amout o

chemicals i the eiromet ad their eect o

our health ad well-beig.

As growig awareess o the burde o chemicaloperatios has geerated public distrust, it comes

as o surprise that sustaiability thikig i the

idustry origiated i the orm o a stroger

corporate commitmet towards mitigatig the

eirometal impact o mauacturig operatios,

the remediatio o eirometal damage caused

by accidets ad the improemet o saety i the

work place.

To address these societal cocers, the chemical

idustry ouded Resposible Care1 i 1985 as a

olutary iitiatie requirig sigatory compaies

to commit to improig their perormace o

eirometal, saety ad product stewardship

matters. Today, the iitiatie is actie i 52 coutries

whose combied chemical operatios accout

or early 90% o global chemicals productio.

Oer the years, chemical compaies hae come

to realize that iestmets made to improe the

sustaiability o their operatios do hae a positie

ecoomic impact o their bottom lie protability,

or istace, i the orm o lower eergy costs or

health-related liabilities.1 http://www.icca-chem.org/e/

Home/Resposible-care/

ast ad rcc, PD, s t cmc dsts ppc t

sstbt s d t s, d bsd ss dt m SaMs Cpt

Sstbt assssmt t cmc dst, ggts sm t k sstbt

sss cd b t dst td.


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33

The last ew decades hae also witessed the rise

o product stewardship, which grew out o demador higher trasparecy o the compositio o

chemical products ad their log ad short-term

eects o the eiromet ad ed-users. Today,

regulatory rameworks such as REACH,2 are i

place to protect cosumers. At the same time,

o-goermetal orgaizatios hae compiled

ad published lists o chemicals whose use has

sparked cocers, i order to promote debate ad

help the idustry clease its product portolio by

elimiatig the use o certai substaces that haebee deemed harmul.3 Beyod bearig the costs

o adherig to legislatie rameworks, chemical

compaies hae recogized the importace o

aoidig the ecoomic cosequeces o deelopig

products that ru the risk o beig baed i the

uture. For istace, they hae bee icreasigly

egagig i product lie cycle aalysis early o

durig the ioatio process, a practice that

greatly cotributes to the improemet o theirsustaiability ootprit.4

The chemical idustry is a ioatio-drie

idustry: startig with a relatiely small spectrum

o raw materials, it deises ioatie processes

ad chemical reactios i order to produce oel

molecules desiged to meet specic applicatios.

Oer the decades, the research commuity has

come to recogize its uique positio eablig

it to shape the sustaiability ageda withi thechemical idustry. I the late 1990s, the twele

priciples o gree chemistry5 were articulated by

Paul Aastas ad Joh Warer. These priciples

cosist o a series o stadards ad objecties, ad

are ow broadly accepted by chemical compaies

as a idustry-wide bechmark or best sustaiable

practices.

Sustainability has been a key driver enabling the chemical industry to develop solutions or the uture.

As an industry-wide initiative, Responsible Care provides the chemical industry with a unique ramework

or developing continuous improvements throughout the industrys operations and value chains in order

to meet societys environmental, social and economic needs.

J Gts, Chairma, Resposible Care Europe

2 The Registratio, Ealuatio,

Authorizatio ad Restrictioo Chemical Substaces is theEuropea Commuitys regulatioo chemicals ad their use. Theaim o REACH is to improe theprotectio o huma health adthe eiromet through thebetter ad earlier ideticatio othe itrisic properties o chemicalsubstaces. http://ec.europa.eu/eiromet/chemicals/reach/reach_itro.htm

3 The SIn (Substitute It now!) List isa nGO drie project to speed upthe trasitio to a toxic ree world.The List cosists o 378 chemicalsthat ChemSec has idetied asSubstaces o very High Cocer

based o the criteria establishedby the EU chemical regulatio,REACH. http://www.silist.org/

4 http://www.icca-chem.org/Home/news-ad-press-releases/news-Archie/2009/G8-Chemical-Idustry-proposes-eectie-tools-or-climate-protectio1/

5 Aastas, P. T.; Warer, J. C.;Gree Chemistry Theory adPractice. Oxord: Oxord UiersityPress, 2000.


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34

Twelve PrinCiPleS oF Green CheMiSTry

1. Pt

It is better to preet waste tha to treat or clea up waste ater it has bee created.

2. atm ecm

Sythetic methods should be desiged to maximize the icorporatio o all materials used i the

process ito the al product.

3. lss hds Cmc Stss

Whereer practicable, sythetic methods should be desiged to use ad geerate substaces that

possess little or o toxicity to huma health ad the eiromet.

4. Dsgg S Cmcs

Chemical products should be desiged to eect their desired uctio while miimizig their toxicity.

5. S Sts d as

The use o auxiliary substaces (e.g., solets, separatio agets, etc.) should be made uecessary

whereer possible ad iocuous whe used.

6. Dsg eg ecc

Eergy requiremets o chemical processes should be recogized or their eirometal ad

ecoomic impacts ad should be miimized. I possible, sythetic methods should be coducted at

ambiet temperature ad pressure.

7. us rb Fdstcks

A raw material or eedstock should be reewable rather tha depletig wheeer techically ad

ecoomically practicable.

8. rdc Dts

Uecessary deriatizatio (use o blockig groups, protectio/deprotectio, temporary modicatio

o physical/chemical processes) should be miimized or aoided i possible, because such steps

require additioal reagets ad ca geerate waste.

9. Ctss

Catalytic reagets (as selectie as possible) are superior to stoichiometric reagets.

10. Dsg Dgdt

Chemical products should be desiged so that at the ed o their uctio they break dow ito

iocuous degradatio products ad do ot persist i the eiromet.

11. r-tm ass Pt Pt

Aalytical methodologies eed to be urther deeloped to allow or real-time, i-process moitorig

ad cotrol prior to the ormatio o hazardous substaces.

12. it S Cmst accdt Pt

Substaces ad the orm o a substace used i a chemical process should be chose to miimize the

potetial or chemical accidets, icludig releases, explosios, ad res.*Aastas, P. T.; Warer, J. C.; Gree Chemistry: Theory ad Practice, Oxord Uiersity Press, 2000.


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35

More recetly, the rise o log-term megatredshas proided the chemical idustry with added

iceties or ulockig its potetial to delier

sustaiability-related ioatios. Examples o

such ioatios iclude ew battery materials to

support electric-based mobility, lightweight ad

ao-structured composites, catalysts ad addities

or the productio o reewable eergies ad the

deelopmet o idustrial biotechology ad bio-

mass based processes to reduce our depedece

o oil.

Fially, or the chemical idustry sustaiability

has also take the orm o icreased corporate

goerace ad trasparecy, thereby esurig

that compaies are maaged with the best iterests

o their shareholders i mid, while also respectig

stakeholders such as customers, employees ad

suppliers. Itegrity ad trasparecy o corporate

operatios ad decisios are particularly releat

or global chemical compaies: because they

are actie i dieret local markets, they must

simultaeously comply with iteratioal stadards

ad local regulatios i order to establish successul

log-term busiess relatioships. Local quality

stadards or labor practices ary rom coutry to

coutry, ad compaies must be willig ad able

to show that they hae goe beyod miimum

iteratioal stadards ad hae made a eort to

adapt to local requiremets. Thus, trasparecy is

particularly importat i compaies wish to maitai

their social licese to operate i certai markets

ad is a ecessary requiremet or egagig i

costructie dialogue with local stakeholders ad

the commuities i which they are actie.

3.2 BaCKGrounD anD MeThoDoloGy

I order to iorm the debate o sustaiability topics

ad idetiy key treds that are releat to the

chemical idustry, SAM has aalyzed data collected

rom chemical compaies that participated i the

SAM Corporate Sustaiability Assessmet (CSA)

oer the last three years.

SAMs iestmet methodology is based o the

assessmet o a compays sustaiability prole

ad o the itegratio o this iormatio itostadard acial aalysis. The collectio o

compay-specic sustaiability data is thereore

key to obtaiig a comprehesie acial prole

or each compay. For this reaso, SAM iites

the largest 2,500 publicly traded compaies to

participate i its aual Corporate Sustaiability

Assessmet. This questioaire-based assessmet

coers a rage o acially releat ecoomic,

eirometal ad social criteria through oer

1,000 data poits. Because this iormatio is

itegrated ito acial aalysis, SAM ocuses

o sustaiability actors that ca hae a impact

o compaies acial perormace. At the

same time, the iormatio collected through

the assessmet proides a aluable oeriew o

sustaiability practices i seeral idustry sectors.

Similar to other sectors, the sustaiability

questioaire or the chemical idustry is desiged

to capture both geeral ad idustry-specic

criteria coerig the ecoomic, eirometal ad

social dimesios, as show i Figures 1 & 2. Each

dimesio cosists o approximately 5-6 criteria,

ad each criterio cotais approximately 20

questios, totalig approximately 100 questios.

For each compay, a total sustaiability score o

up to 100 poits is calculated usig a weighted

aerage o the three dimesios.

The rise o log-term megatredshas proidedthe chemicalidustry withadded icetiesor ulockigits potetialto deliersustaiability-

relatedioatios.


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36

SaM CorPoraTe SuSTainaBiliTy aSSeSSMenT For The CheMiCal inDuSTry

FiGure 1: weiGhTinG SCheMe: reFleCTinG inDuSTry-SPeCiFiC exPoSure

Source: SAM

Geeral

Idustry-Specic

Total

Social

Eirometal

Ecoomic

47%

35%

37%

100%

53%

28%

FiGure 2: SuSTainaBiliTy CriTeria For The CheMiCal inDuSTry

Source: SAM

Ecoomic Dimesio Criteria

Corporate Goerace Geeral

Risk & Crisis Maagemet Geeral

Codes o Coduct/Compliace/Corruptio & Bribery Geeral

Customer Relatioship Maagemet Idustry-Specic

Ioatio Maagemet Idustry-Specic

Eirometal Dimesio Criteria

Eirometal Reportig Geeral

Eirometal Policy/Maagemet System Idustry-Specic

Operatioal Eco-Eciecy Idustry-Specic

Product Stewardship Idustry-SpecicClimate Strategy Idustry-Specic

Geetically Modied Orgaisms Idustry-Specic

Social Dimesio Criteria

Social Reportig Geeral

Labor Practice Idicators Geeral

Huma Capital Deelopmet Geeral

Talet Attractio & Retetio Geeral

Corporate Citizeship & Philathropy Geeral

Occupatioal Health & Saety Idustry-Specic

Stadards or Suppliers Idustry-Specic


37/127



37

ecmc Dms (28%)

Cross-idustry criteria such as corporate govern-

ance, risk & crisis management, ad codes o con-

ductare complemeted by idustry-specic criteria

that assess the chemical idustrys core oerig:

chemical productsboth rom a customer relation-

ship managementad innovation management

poit o iew.

emt Dms (35%)

Alog with the geeral criterio environmental re-porting, specic criteria hae bee tailored to the

chemical idustry oer the years to capture a com-

pays ability to measure its emissios (operational

eco-efciency), assess the eirometal impact

o its products (product stewardship) ad measure

the impact o its operatios o climate chage (cli-

mate strategy).

Sc Dms (37%)

Geeral criteria ocus o assessig the relatioshipbetwee a compay ad its curret ad prospectie

employees ( social reporting, labor practice indica-

tors, human capital developmentad talent attrac-

tion & retention). Because o their relatie impor-

tace to chemical operatios, certai criteria hae

bee specically tailored to the chemical idustry to

assess occupational health& saetystadards as well

as the compays commitmet towards establishig

quality standards or its suppliers.

For the purpose o this aalysis, data was retrieedrom the aual SAM CSAs carried out oer the

last three years (2009-2011), a period durig

which the participatio o chemical compaies has

bee relatiely steady. For each o the three years

examied, sustaiability scores or the top 20%

perormig compaies (sustaiability leaders) ad

the worst 20% perormig compaies (sustaiability

laggards) were retrieed. Three-year aerage scores

were calculated at the total leel, the dimesio

leel ad the criteria leel or both the group oleaders ad laggards. I order to carry out a gap

aalysis ad determie which criteria dieretiate

the leaders rom the laggards, the 3-year aerage

scores or the leaders were compared to those o

the laggards.

3.3 reSulTS anD DiSCuSSion

3.3.1 ecmc, emt d Sc Dms

Figure 3 proides a oeriew o 3-year aerage

scores or sustaiability leaders ad laggards i thechemical sector or the ecoomic, eirometal

ad social dimesios. I additio, the 3-year aer-

age o the total sustaiability score, which is calcu-

lated usig a weighted aerage o the three dime-

sios, is show or the leaders ad the laggards.

FiGure 3: DiMenSion level GaP analySiS BeTween SuSTainaBiliTy leaDerS anD SuSTainaBiliTy laGGarDS in The CheMiCal inDuSTry

Source: SAM

100

90

80

70

60

50

40

30

20

10

0

3

-yeravergeScore

Total Score Ecoomic Dimesio Eirometal Dimesio Social Dimesio

Leaders

Laggards

33%

28%29% 27%


38/127



38

The 3-year aerage total score or the sustaiabilityleaders is higher tha that o the sustaiability

laggards by a aerage o 29 poits, ad a similar

dierece ca be obsered or each o the three

dimesios: ecoomic, eirometal ad social.

Most otably, both leaders ad laggards achiee

the highest aerage score i the eirometal

dimesio ad the lowest aerage score i the

social dimesio.

Although the results at the dimesio leel aresomewhat predictable, aalysis at the more

graular criteria lee

Sam Yearbook 2012 Final Tcm794 328902

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