New Metrics 2012 9/28 10.45 - 11.30 Aleksandra Dobkowski-Joy

1. Identifying Materiality in
Corporate Sustainability
From theoretical underpinnings
to practical application

2. Today‘s conversation
• What is material?
• The evolution of material disclosure
• Materiality analysis in action: examples from the field
• Discussion and questions
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3. What is material?
―[T]opics and indicators ―An omitted fact is material if there
that reflect the is a substantial likelihood that a
organization‘s significant reasonable shareholder would
economic, environmenta consider it important in deciding
l, and social impacts, or how to vote‖.
that would substantively
influence the TSC Industries, Inc. v.
assessments and Northway, Inc., 426 U.S. 438, 449
decisions of (1976).
stakeholders.‖
―Material information‖ is defined by the Supreme Court
Global Reporting as presenting a substantial likelihood that the disclosure
Initiative G3 of the omitted fact would have been viewed by the
Sustainability Reporting reasonable investor as having significantly altered the
Guidelines. ―total mix‖ of information made available. Evaluating the
materiality of sustainability issues involves looking
beyond conventional measures of assets and liabilities to
those embedded in aspects of social and environmental
performance and stakeholder relationships, which may
hold the key to future business success or failure.
Sustainability Accounting Standards Board
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4. What is material?
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5. Why does materiality matter to companies?
Companies focus on material issues because…
• They pose significant opportunity
to build value: Success in
addressing material issues can Business Reporting
create significant value for brand and Strategy A robust
financial interest-holders. Materiality materiality
analysis leads analysis informs
to a more the balance
• They pose significant risk to balanced between detail
perception of a and breadth of
reputation and profitability: Failure company‘s coverage in
to address material issues can critical business reporting.
increase costs, depress sales, erode issues.
brand value, and cause the loss of
talent.
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6. Today‘s conversation
• What is material?
• The evolution of material disclosure
• Materiality analysis in action: examples from the field
• Discussion and questions
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7. Material disclosure: The Global Reporting
Initiative
Materiality is a central tenet
of reporting under the
proposed G4 Sustainability
Reporting Guidelines
…especially with regard to
Disclosures on Management
Approach and the selection
of indicators on which a
company will report.
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8. GRI Technical Protocol for Defining Report
Content and Boundaries (G3.1 version)
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9. Material disclosure: Sustainability Accounting
Standards Board
Similar to the Financial Accounting Standards
Board—except focused on
environmental, social, and governance issues—the
SASB will establish an understanding of material
sustainability risks and opportunities facing
companies, and create industry-based key
performance indicators suitable for disclosure in
standard filings such as the Form 10-K.
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10. SASB‘s materiality mapping process
http://www.sasb.org/materiality/determining-materiality/ 10

11. Today‘s conversation
• What is material?
• The evolution of material disclosure
• Materiality analysis in action: examples from the field
• Discussion and questions
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12. Framework LLC‘s approach to materiality
analysis
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13. Materiality applied: linking strategy with reporting
at CEMEX
CEMEX‘s sustainability strategy focuses on seven
priority areas
http://www.cemex.com/InvestorCenter/files/2011/CX_SDR2011.pdf
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14. BASF: Integrating
materiality into business
strategy
September 2012
BASF Corporation

15. Company Overview:
BASF – The Chemical Company
 The world’s leading chemical company
 Serves all major industries
 385 production facilities including six Verbund sites
 World-class, innovative, high-value products
 Intelligent, sustainable system solutions
 2011 Sales: €73.5 Billion
 Employees: 111,000+
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16. Sustainability will become even more
important
SUPPLY
Earth’s
resources DEMAND +
Annual Human beings now
regenerative demand more from
capacity the Earth than can be 1976 2010
of the planet regenerated
Consumption of Earth‘s resources
Source: Accenture.
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17. Sustainability in customer industries
drives innovations in new growth fields
Resources, Environment Food & Nutrition Quality of life
& Climate
Chemistry as enabler
Customer
industries
Transportation Construction Consumer Health & Energy &
Electronics Agriculture
Goods Nutrition Resources
Batteries Heat Organic Plant Energy
management Enzymes Medical
Electronics biotechnology management
Lightweight Functional Rare earth
Growth
fields*
composites crop care metals recycling
Heat
management Wind energy
Water solutions
BASF Strategy: We create chemistry
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18. Strategic sustainability issues
 BASF assesses sustainability
Energy &
issues and their impact on an
Climate ongoing basis
 In 2010, about 300
Water people, including
customers, NGOs, investors, s
Personnel Product cientists, regulators and BASF
develop. steward- employees, participated in
ship
interviews and surveys to
assess the most important
sustainability issues
 Selected key issues 2011:
– Energy and climate
– Water
– Product stewardship
For more information see www.basf.com/materiality – Personnel development
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19. Overview of our goals
Environment Energy and climate Water Emissions to air
(by 2020) protection  Drinking water for  Air pollutants -70%
 Greenhouse gases production -50%
(specific) -40%  Sustainable water Emissions to water
 Energy efficiency +35 % management in water
 Organic substances -80%
 Reduce (specific) greenhouse
stress areas 100 %
gas Emissions from natural gas
transport at Wingas -10%
Health Health protection
(each year) Health Performance Index comprises five criteria; Goal: score of at least 0.9 (maximal 1.0)
 Reported cases of occupational disease  Preventive medicine
 Medical emergency planning  Health promotion
 First aid
Safety and Occupational Safety Transportation safety Product safety
security  Work-related  Transportation  ―Safety check‖
accidents -80% accidents -70% for more than 99% of our
(by 2020) products
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20. Energy and climate
Helping our customers shrink their carbon footprint
Emissions avoided: Emissions along the entire
330 million metric tons value-adding chain
CO2e/year [million metric tons CO2e/year]:
Suppliers 65
BASF production 26
We help our Use of
customers to BASF end products 50
reduce their “carbon Disposal 30
footprint”.
Transport 4
Other sources 2
CO2e emissions at customers [million metric tons of CO2e/year]: CO2e emissions from BASF’s production
Without the use of BASF products: 1768 (GHG Protocol Scope 1&2)
With use of BASF products: 1438 CO2e emissions along the value-adding chain
(GHG Protocol Scope 3)
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21. Water
Responsible use of water resources is key priority
 BASF is a strategic partner in
the European Water
Partnership and member of
the WBCSD water leadership
team
 Majority of water (~90%) used
by BASF is used for cooling
 Global analysis of production
sites in 2010 determined that
one fifth of sites are located in
regions with high water stress
 These sites account for about
Red high water stress index (≥ 0.9)
7% of BASF‘s total water
Blue low water stress index (≤ 0.1)
demand (but less than 1% of
Green BASF sites
fresh water use)
WSI Data: Pfister et al., 2009
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22. Water Solutions
Business potential 2020
 Market size: €20 billion
 BASF sales potential: > €800 million
Existing activities
 High-performance flocculants, desalinization and
antifouling chemicals & polymers used in
membranes (BASF & Ciba)
 Acquired know-how on membrane technologies
and module systems (inge watertechnologies)
Targets
 Position BASF as the leading supplier of innovative
chemical solutions worldwide
 Forward integration into membrane technologies
 Leverage synergies to develop improved
additives, flocculants and polymers
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BASF Strategy: We create chemistry

23. Leading edge tools include material
sustainability issues
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24. CREATING SUSTAINABLE
IMPACT
September 2012

25. Bloomberg defines materiality for sustainability / financial as a
function of time and visibility
Long
term, unknown
LOW effect
Sustainability
Harder to
MATERIALITY define, but
Financial / very valuable
Sustainability
Bloomberg
focuses
here Financial
Well known, fully
HIGH discounted
NEAR TIME FAR
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26. We developed a framework to continually evaluate opportunities
and determine investment attractiveness
Environmental Benefits Financial Benefits Company Fit
Description  Measures impact on the  Measures financial  Measures the extent
environment from BLP‘s impact of the to which the change
business operations. change to the fits with the overall
company. BLP culture.
 Carbon emissions  Incremental  Fit with perception
Specific equivalents operating expense of BLP as a
Indicators  Non-biodegradable (one time and progressive
solid waste recurring) company
 Toxic waste  Incremental capital  Impact on employee
 Water usage expenditures satisfaction
 Deforestation  Incremental FTE  Impact on employee
 Impact on plant resources required interaction / shape
life, animal life land  Operating expense culture (hard
resources (e.g. strip savings working, passionate
mining)  ROI (Return on , customer-
Investment) centric, intuitive, etc
 NPV (Net Present .)
Value)
 Payback period
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27. The framework enabled Bloomberg identify and execute high
value projects with multiple benefits
Notable Achievements
Avoided equivalent
of one year of
emissions from  Released The Sustainability Edge in May, Bloomberg’s first
operations public sustainability report. We achieved a Global Reporting
Initiative B+ Application Level and a glowing review from the
Corporate Register titled “Bloomberg: A paragon of what they
preach”.
 With Markets Magazine and Bloomberg Businessweek FSC
certified, Bloomberg is the only multimedia company in the
world with 100% of its portfolio to be sustainably produced.
 By 2012, nearly 50% of our colleagues will work in certified
LEED offices around the world
 Ground broken on Solar Array at Skillman campus in 2011.
Project will generate 2.8M kWh, approximately 58% of Building
100’s annual electricity consumption.
Regional Projects: BGREEN
Facilities 25% Distribution Awareness
Asset Mgmt 8% Unaware
5%
Markets Mag 5% North
Asia America Neutral
Prof. Dev. 5% 5 6 7%
Project distribution
Global Real… 4% by Department
Latin Aware
Marketing 4% EMEA America
15 87%
9
Engineering 4%
InfoSys 4%
BGREEN/O… 40%
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28. During this time, we‘ve continued to learn and extend our efforts
beyond operations
Philanthropic Activity Product Development
Collaborating with and supporting NGOs driving • Leveraging Bloomberg‘s core strengths to develop
sustainability standard setting , disclosure and market products that accelerate solutions to environmental
development through voluntary, multi stakeholder challenges and successful business opportunities for
efforts Bloomberg
▪ Grants ▪ ESG Data
- Provided grants in partnership with customers to - created environmental, social and governance
environmental organizations to improve data sets to provide better insight into how
environmental data for financial integration
companies are managed ‗beyond financials‘
▪ Sponsorship ▪ BNEF Acquisition
- Support for sustainability events and initiatives
- added leading clean energy and carbon market
that bring together finance, industry
research and information provider into
governments and non-profits to address
Bloomberg suite of products
environmental challenges
▪ Best of Bloomberg ▪ Sustainability website
- Identify and co-deliver targeted sustainability - Launched a sustainability channel on
Bloomberg.com covering related issues to
specific volunteer programs for employees in
inform and hold the interest of the C-suite
multiple locations to educate and engage them
in areas important to Bloomberg
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29. To continue, we need a framework to leverage existing guiding
principles and objectives from multiple groups…
New Markets Risk Mgmt
/ Analytics
Supply Chain
Risk
Responsible
Forestry New
Management Customers
Brand/
Reputational
Management
Product
Enhanced
Community Content
Engagement/ Operations
Regional
Presence
Building the
Employee
Philanthropy Environmental Brand
Standards
Engagement & Transparency
Volunteer
Projects Electronics
Efficiency
Green Building
& E-Waste
& Energy Efficiency
Education /
Training Environmental
Impact reduction
Social Operating Cost Revenue
Investment reduction Generation
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30. ….to create a more robust sustainability integration effort that
drives value throughout the organization
6 key tenets to drive success
Partner Thought Operational Financial Market Business
Engagement Leadership Excellence Integration Development Opportunities
A COORDINATED, UNIQUE AND AGGRESSIVE APPROACH
TO ALIGN PHILANTHROPY, OPERATIONS AND PRODUCT TO
CREATE UNPRECEDENTED ‘SUSTAINABLE IMPACT’
PEOPLE PLANET PROFIT
PHILANTHROPY OPERATIONS PRODUCT
SYNDICATING BLOOMBERG BLOOMBERG
SUSTAINABLE BGREEN SUTAINABILITY
SOLUTIONS TO OUR SOLUTIONS PRODUCT STRATEGY
PARTNERS
Sustainability Independent
Department level
Anchor Accounting Sustainable
Corporate
Initiative Standards Board Finance Product
Carbon
(SASB) Group
Assessment
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31. Today‘s conversation
• What is material?
• The evolution of material disclosure
• Materiality analysis in action: examples from the field
• Discussion and questions
31

32. Discussion and questions
• Who decides? What stakeholder audiences or internal
criteria are most important to a materiality determination?
• A difference of opinion: How can we arrive at a consistent
definition of materiality and thresholds?
• Process and outcomes: Is the publication of approaches
to materiality analysis processes and lists of sector-based
material issues (by SASB and GRI) helpful and sufficient?
• More data vs. more material data: a false choice?
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33. Thank you!
Aleksandra Dobkowski-Joy Curtis Ravenel Charlene Wall Warren
adjoy@framework-llc.com cravenel@bloomberg.net charlene.wall@basf.com
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