SB Webinar | The Path to Generating Business Value from Product Sustainability

Sustainable Brands Webinar

June 18, 2014

2

Agenda • Tim Greiner, Managing Director, Pure Strategies– Business benefits

– Top practices

• Jennifer Duran, Global Head of Sustainable Innovation, RB– Product sustainability goals

– Integrating sustainability into product development

• Colleen VonHaden, Sustainability Director, Timberland– Supplier engagement to integrate sustainability across the supply

chain

• Q&A

3

4

Product sustainability measures, improves, and discloses

environmental and social impacts of products across the life cycle

5

What are the top benefits companies are already achieving from their product

sustainability efforts?

32%

41%

50%

50%

62%

62%

64%

69%

71%

74%

79%

Increased sales

Supply chain risk reduction

Product material cost savings

Future regulatory risk mitigation

Packaging cost savings

Meeting consumer demands

Logistics and supply chain cost savings

Meeting retailer requirements

Trust and brand enhancement

Employee engagement and productivity

Manufacturing cost savings

6

Which business benefits have you achieved and are important to achieve from your

company’s product sustainability program?

7

No single company in the survey expected a decrease in funding

this year for product sustainability

8

There are best practices that

performing companies use to plan,

execute, and advance product

sustainability that help them

achieve widespread benefits

9

Product Sustainability Top Practices

10


11

97% of performing companies

have product sustainability goals

12

Re. Think

Products

Re. Focus

Operations

Re.Commit

People

Increase Product

Sustainability

Minimize Impacts Mobilize Employees

10% Sustainable

Product Families

10% Resource

Reduction

(GHGs, Water, Waste)

3 New Awareness

Programs

1. Increase revenue by $ from more sustainable products

2. Increase sustainability of % of products

3. % of products in (sustainability/innovation) pipeline

13


14

What were the most highly valued

approaches to product sustainability assessment?

15

26%

27%

32%

33%

40%

68%

72%

Industry scorecards, criteria,standards

Life cycle assessment

Custom-designed scorecards,guidelines, software

Non-profit scorecards, criteria,standards

Chemicals of concern or harmfulmaterial assessment

Customer scorecards, criteria,standards

Supplier engagement

How valuable are the following approaches to product sustainability assessment?

Percent of all respondents rating high or very high.

16

Education & Training

Supplier Summits

Index (Surveying)

Initiatives

17


18

Where are performing companies

currently concentrating product

sustainability integration?

Commercial Phase | Bench-top Phase | Concept Phase

19

54%

23% 23%

72%67%

51%

CommercialPhase

Bench-top/Pilotphase

Concept phase

At Present In Two Years

In the product development process, where do you/will you concentrate product

sustainability efforts? High concentration as reported by performing companies

Performing companies are bringing sustainability into the product

development process

20

Identify

project

priorities

Semi-

quantitative

assessment

of priorities

Standardized

assessment

Final

assessment

21

Find the report at:

www.purestrategies.com

Tim Greiner

[email protected]

Security Level: Public

Sustainability at RBJennifer Duran18 June 2014

Our Vision and Purpose

Our vision is a world

where people are

healthier and live better

Our purpose is to make

a difference by giving people

innovative solutions for

healthier lives and

happier homes

Our approach responds to the global megatrends affecting the worldIn particular those we can influence

Growing need

for better

health &

hygiene

Increasing

water

scarcity

Rising energy

costs and

emission

constraints

Pressures

on natural

resources

and waste

Growth of

emerging

markets

Consumers

demand

greater

transparency

We set a new sustainability strategy in 2012With four big goals for 2020

Our strategy is organised into three key pillarsThese will help us meet our four big goals

Healthier Communities

Better Design

Better Production

Creating products that

use less water, energy

and packaging, and

more sustainable

ingredients.

Improving health and

hygiene behaviour

through our brands and

partnerships.

Reducing our

environmental impacts

in production, meeting

our social standards and

keeping our people safe.

Key strategic drivers of product-level metrics

Better Production

www.rb.com/sustainability

What is a ‘more sustainable innovation’ and how do we measure this?

Sustainable Innovation Calculator is a streamlined Life Cycle Analysis (LCA) tool that models product interactions from cradle to grave across relevant environmental impact categories

To qualify, a product must score better (green) in at least one of the following categories without scoring worse (red) in any others:

R&D can now assess the impact of choices in real time

Innovating more sustainable productsVia our new online sustainability calculator

Embedding into product development processTo consider sustainability earlier

LAUNCH

PHASE

DEVELOPMENT

1 & 2

PRE

LAUNCH

SCOPING &

CONCEPT DVLTFEASIBILITY

Brief

signed

Marketing and R&D to

consider impacts via

sustainability guidance

On pack

claims

Key milestone

1

Complete

calculator and

report status

Net

Revenu

e

Key milestone

2

Refresh

calculator and

report status

In 2013, we measured Net Revenue from more sustainable products for the first time…

• £230 million NR from more sustainable products (Q1-Q3 2013)

• Measured with the help of:

– Sustainable Innovation Calculator

– Global network of Sustainability Champions

• This process is helping to create a culture of sustainable innovation

• RB is committed to product stewardship, product safety and transparency*

What we mean by

* For more information on our product safety and stewardship programmes, see our 2013 Sustainability Report.

http://www.rb.com/sustainability-report2013

Find out more

www.rb.com/sustainability

www.happier-homes.com

[email protected]

External recognition

RB was included in both the Dow Jones Sustainability Index and the CDP’s Carbon Disclosure Leadership Index in 2013

[email protected]

mailto:[email protected]

Timberland

Supplier Sustainability Program

Colleen Von HadenSustainability Director

June 2014

SHARED RESPONSIBILITY with INCREASED FOCUS

Compliance Audit Team

• Terms of Engagement & Global

Compliance Principles

• Compliance Audits

•Social/Labor Compliance

•Health and Safety

•Environmental Licenses

•Facility Security

Supplier Sustainability Team

• Corrective Action Plan Development• CAP Development

• Root Cause Analysis

• Capacity Building

• Management Systems• SAI Social Fingerprint Framework

• GSCP Environmental Framework

• Sustainable Living Environments• Improving workers happiness & retention

• Beyond compliance; beyond factory walls

• Reducing absenteeism, improving retention

• Improving productivity and quality

RISK MITIGATION + VALUE CREATION

OUR GOAL

Look beyond compliance and beyond factory

walls to create a safe and healthy work

environment and community for 280,000

workers at 350 factories.

OUR RESULT

Happier, healthier, more productive

workforce . . . stronger communities and a

more resilient supply chain.

SUPPLIER SUSTAINABILITY STRATEGY

• Social Fingerprint (S/L

Management System)

• SLE: Sustainable Living

Environments

• SA8000 / WRAP

Worker Retention

Absenteeism

Productivity

Quality

Risk

Costs• GSCP Environmental

Management System

• Resource Efficiency

• ISO 14001

Social / Labor

Environment

Business Impact

Improved social & environmental performance enables improved

business performance

OPERATIONAL SUSTAINABILITY

2

Worker Well Being Description Business Impact

Social Fingerprint (S/L Management System)

Improve compliance performance and improve social/labor conditions with a Social/Labor Management system that drives consistent compliance and measurement of continuous improvement

• Reduced Risk• Reduced Cost (associated to

risk)

SLE: Sustainable Living Environments

Addressing worker health & well-being inside and outside factory walls to improve retention and reduce absenteeism.

• Decreased Absenteeism• Improved Retention,

Productivity, Quality• Decreased Costs

Env Protection Description Business Impact

GSCP Environmental Management System

Improve compliance performance and improve environmental impacts with an Env Management system that drives consistent compliance and measurement of continuous improvement

• Reduced Risk• Reduced Costs (associated to

risk)

Resource Efficiency More efficient operations with reduced waste and consumption of utilities

• Reduced Costs• Improved Image

HIGH LEVEL LINKS TO BUSINESS VALUE

10

* See Appendix for detail of social and environmental links to business impacts.

OUR PROCESS

In 2008, we began exploring these beliefs

more deeply with suppliers to gain a greater

understanding of workers’ needs and

opportunities for a better life.

We have conversations with workers using

participatory techniques of dialogue to

understand what aspects of basic living

needs they might be struggling with, to gain a

firsthand understanding of their perspectives.

We also look at the factory infrastructure with

management, contact community

organizations and trade unions, and consult

with nonprofit organizations and even other

brands to supplement what the workers

themselves tell us.

Sometimes workers may need more education and information about available

services or infrastructure. Other times, it may be that affordable, adequate

options and services are not readily available. In either case, action is needed

The Business Value of Workers’ Children’s Wellbeing

Studies show that sixty percent of lost workdays each year can be attributed to stress.

Occupational stress has causes beyond working conditions, as conflicts between the

demands of workplace and home life are increasingly common—which we discovered

when interviewing workers at Timberland’s contract factories.

Empowering Workers through Financial Literacy

Understanding the causes of worker stress is critical for assessing worker needs and

helping our suppliers be more productive and profitable.

Financial security is an essential part of anyone’s livelihood. Yet 2.5 billion adults around

the world don’t use formal financial services to save or borrow money. Empowering the

working poor with proper knowledge and skill—and connecting them to financial products

and services—can help them manage money more effectively, invest in economic

opportunities, and reduce risks related to illness or loss of employment – for them and

their families.

Clean Drinking Water – a priceless commodity

If you were to ask an American business owner what single thing was most essential to

his or her workforce’s quality of life, the answer might be the electricity to power their

equipment or cars for their employees’ commute. But in many rural, developing countries,

the answer is often much more basic: clean drinking water.

TBL SUSTAINABILITY – ORG CHART

Mark Newton

VP

CSR

Colleen Von Haden

Senior Manager

Supplier Sustainability

Jackson He

Regional Manager

Asia Supplier Sustainability

Vincent He


Leeka Li


Songpon Pengchassmsri

Regional Manager S. Asia Supplier Sustainability

Rita Kodkarni

S. Asia Supplier Sustainability

Ann Caron

Analyst

Supplier Sustainability

Atlanta McIlwraith

Senior Manager

Community Engagement

Brianne Wood

Manager


Jill Holt

Coordinator


Betsy Blaisdell

Senior Manager

Environmental Stewardship

Open

Senior Manager

CSR Europe

Zeynep KayaalpEMEA SupplierSustainability(Contractor)

Carlos GiacomozziLatAm SupplierSustainability(Contractor)

Patrik FriskPresident

Supplier Sustainability Team

Team Skillset:•Technical knowledge (social, H&S, Env)•Rural Participatory Assessment Methodologies – Worker Engagement •Change Management•Facilitation•Project Management

Success Factors

• Positioning is key – “nice to do” v. “need to do”. Demonstrate the business case for

going beyond.

• Make the workers central to the process.

• Utilize rural participatory assessment methodologies to engage in dialogue with

the workers about very sensitive subjects

• Establish system of peer educators

• Establish CAP committees with worker representatives

• Have workers part of the solution brainstorming

• Hand-holding / Patience / Change agent skills

Topic Proven Value at TBL or VF Value Proven Externally

SOCIAL MANAGEMENT SYSTEMS

SAI Social Fingerprint

The Social Fingerprint framework focuses on 9 elements that SAI deems instrumental in evaluating an effective social/labor management system (rated Level 1 (basic) to Level 5 (best practice): 1.Clear and Complete Policies & Procedures2.Worker Involvement and Communication 3.Complaint Management and Resolution 4.Worker Training and Development5.Internal Social Performance Team (ISPT)6.Oversight of Suppliers and Subcontractors7.External Verification & Stakeholder Engagement8.Non-compliance resolution (CAP) process9.Progress on Corrective Actions

RISK MANAGEMENT: Increased level of performance on compliance audits.

A) Better Results. When factories meet higher levels on the SAI Social Fingerprint, they are more likely to receive initial acceptance from VF compliance audit.SAI Level 1: 0% AcceptedSAI Level 2: 24% AcceptedSAI Level 3: 71% Accepted

B) Consistent Results. Factories that meet the higher levels on the SAI Social Fingerprint are more likely to maintain the Accepted compliance rating:SAI Level 1: 0% Accepted YOYSAI Level 2: 18% Accepted YOYSAI Level 3: 82% Accepted YOY

COST REDUCTION: INFACT metrics studies showed that consistently managed and continuously improved workplace conditions with improved absenteeism, retention, and worker moral translates into reduced costs, improved quality and productivity.

COST REDUCTION: SA8000 case studies (2008) showed the following results, which may lead to lower factory operational costs resulting in lower product costs.•Annual worker turnover decreased from 78% to 32%•37% decrease in lost time from accidents and sickness•Avg tenure increased 12 mos to 25 mos.

COST REDUCTION: KPMG study (2012) showed the following ROI for improved HR practices and worker/management communications, which may lead to lower factory operational costs resulting in lower product costs:•Decreased Turnover 25-40%•Factories with strong social/labor management systems are more resilient, better positioned for long term business survival

APPENDIX A: DETAILED LINKS TO BUSINESS VALUE


WORKER WELL-BEING & SLE (Sustainable Living Environments)

Addressing workers mental and physical health and well-being inside the factoryto ensure motivated, loyal workers (Worker Well-being) and outside the factory to ensure their ability to meet basic needs and better their lives (Sustainable Living Environments).

Conduct surveys and focused discussion groups with workers to determine

o Causes of absenteeism and turnover

o Causes of low moralo Level of povertyo Opportunities to better lives

COST REDUCTION: Anecdotal correlations evidenced at key vendors (PY Vietnam, Youngone Bangladesh) and at owned facility (RFC), regarding improved worker moral, absenteeism, retention as a result of SLE type projects which may lead to lower factory operational costs resulting in lower product costs.

RISK MANAGEMENT: NGO campaigns for Living Wages remain strong. Feedback received from NGOs confirmed that in lieu of a Living Wage policy, TBL’s SLE initiative is an acceptable alternative approach to addressing poverty in supply chains, thereby reducing the risk of negative campaigns against the brand.

SALES GROWTH: Marketing content derived from SLE projects’ stories used in product marketing material.

COST REDUCTION: KPMG study (2012) showed ROI for investments in worker comfort, performance-based wage incentives, and improved worker/manager relations resulted in decreased turnover (36%), rework (65%) and absenteeism (53%), which may lead to lower factory operational costs resulting in lower product costs.

COST REDUCTION: BSR study (2010) quantified $3-4 return for every $1 spent on worker health program investments by way of improved absenteeism and retention resulting in improved lost time and lower costs associated with recruitment and training, which may lead to lower factory operational costs resulting in lower product costs.

APPENDIX B: DETAILED LINKS TO BUSINESS VALUE


MANAGEMENT SYSTEMS

GSCP Environmental Framework

The GSCP framework evaluates and guides factories in 9 environmental impact areas (rated Level 1 (basic) to Level 3 (best practice): 1. Environmental Management

System2. Energy Use3. Water Use4. Wastewater Discharge5. Air Emissions6. Waste Management7. Hazardous Substances8. Emergency Planning and Incident

Prevention9. Nuisances

RISK MANAGEMENT: Reduced brand risk from suppliers having improved environmental compliance and reduced environmental impacts. fight erroneous claims and

potentially negative press from NGOs

COST REDUCTION: Less energy, water and waste generated by suppliers result in reduced related costs for suppliers.

COST AVOIDANCE: Less resource intense factories are better positioned for long term operations, reducing VF costs to change suppliers in the future

Water efficiency and wastewater recycling reduces water dependency in areas where water risk is growing

Energy efficiency and use of renewable energy reduces power and manufacturing disruptions caused by aging and overburdened grids

Tightening environmental regulations have the potential to shut suppliers down that are resource intensive or have a history of non-compliance

COST AVOIDANCE: Reduced hazardous chemical use results in lower hazardous waste disposal costs and risk.

PRODUCT QUALITY: Quality, Lean and Environmental Management Systems require the same core components and therefore are highly complementary and reinforcing. Commonly you’ll see the two systems implemented together with the same core processes resulting in overall better management of process flow and waste.



Supplier ENERGY EFFICIENCYengagement, audits and improvements

COST REDUCTION: Transparency into reduced operational costs at factory allowing for more informed price negotiations

COST AVOIDANCE: Less energy intense factories are better positioned for long-term operations, reducing VF costs to change suppliers in the future.

SALES GROWTH: Reduced energy use in supply chain results in improved product sustainability scores, as demanded by retailers and consumers.

WASTEWATER effluent discharge treatment requirements

RISK MANAGEMENT: Reduced brand risk from discharging polluted water into the local environment and community.

COST REDUCTION: Treated wastewater can be recycled, thereby improving water efficiency at factory.


Find the report at:

www.purestrategies.com

Questions & Answers