New Metrics 2012 9/28 13.00 - 13.45 Mark Serwinowski (panel)

1. The Role of Leading vs. Lagging Indicators
in Sustainability Planning
Panel discussion document prepared exclusively for:
The New Metrics of Sustainable Business Conference
September 28, 2012
The Wharton School

2. Panel Discussion Topics
 About the Panel
Sustainable Development
 Context Return on Investment (SDROI) is
the result when an enterprise
 Definitions stewards resources and capital
efficiently to create value for all
 Developments stakeholders.
 Adoption
 Q&A
 Key Takeaways
© 2002 - 2012 MetaVu, Inc. DU Executive MBA Week 2 – Sustainable Value Creation│ 2

3. Your Panel Today
Joe Wolfsberger Michael Muyot Mark A. Serwinowski
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The Case for Leading vs. Lagging Indicators in Sustainability Planning 3

4. Contributor / Collaborator
Bob Pojasek, phD
The Case for Leading vs. Lagging Indicators in Sustainability Planning 4

5. The Role of Leading vs. Lagging Indicators
in Sustainability Planning
Panel Discussion document prepared exclusively for:
The New Metrics of Sustainable Business Conference
Mark A. Serwinowski September 28, 2012
MetaVu, Inc.
1400 16th Street, Suite 400
Denver, Colorado USA 80202
The Wharton School
+1.303.679.8340
www.metavu.com

6. About MetaVu
Services Products
MetaVu helps company’s develop their business case for MetaVu’s Sustainable Development (SD) Tool Suite TM enables
sustainable development; collaborate to drive the innovation clients to directly link, assess and report operational performance
process and measure the ROI. From product and service impact in financial terms, linking metrics set by external frameworks (e.g.,
analysis, to process innovation, supply chain integration and GRI, CDP, DJSI, IFC, ISM) with leading indicators to measure SD ROI
organizational design and governance structures designed to at enterprise, business and product-level.
embed sustainability in the business.
Advisory service segments:
Strategy & Impact Analysis
Innovation For Future Markets
Resource & Process Optimization
EHS and Sustainability Management Systems
Reporting & Assurance
Legacy Liability & Restoration
Business Analytics and Technology
“Smart Innovator Award – Top Sustainability Consultant”
“Global Knowledge Sharing Award: EHS Management”
MetaVu was founded in 2002. Visit www.metavu.com for more information.
The Case for Leading vs. Lagging Indicators in Sustainability Planning 6

7. How Do Leading & Lagging Indicators
Enable Sustainability Planning?
Sustainable
Development:
Strategy built from the
fundamentals of a
business – knowledge of
the industry,
competition, demand,
alternatives, risk drivers
and unique value
proposition.
The Case for Leading vs. Lagging Indicators in Sustainability Planning 7

8. Leading vs. Lagging Indicators
Definitions / Framing
 Leading Indicators  Lagging Indicators
 Future Oriented  Past Oriented
 Performance Goals  Outcome Measures
 Predictive  Actuarial
 Process Focused (what)  Organizational Focused (who, how)
© 2002 – 2012 MetaVu, Inc. The Case for Leading vs. Lagging Indicators in Sustainability Planning 8

9. Leading vs. Lagging Indicators
Development & Adoption Timeline
SRI / ESG ESG
Indicators
Leading
Indicators
Lagging
Indicators
1970 ‘84 ‘87 ‘89 ‘92 ‘99 2000 ‘03 ‘05 ‘06 ‘09 ‘10 ‘11 ‘12 ‘13 ‘14
Note: General timeline of reporting frameworks, performance systems and relevance to sustainable development (not inclusive of all UN-chartered institutional / investor initiatives.)
© 2002 – 2012 MetaVu, Inc. The Case for Leading vs. Lagging Indicators in Sustainability Planning 9

10. Adoption of Leading Indicators
Leading Indicator Self Assessment (LISA) Tool
10 years of operations research -- cross-sector development.
Leading Indicator Self Assessment - All Industries
2012 Regional Leaders
LEADING INDICATOR SELF ASSESSMENT
1 2 3 4 5
FRAMEWORK CAPABILITIES MEASUREMENT INNOVATION STRATEGY
Inventory drivers Enterprise ESG Risk Enterprise- and Product, Services, Capital Stewardship
(externa / internal) profile of Value product-level to business model (natural, human,
to establish point- Chain, Supply Chain measure innovation; financial) to
of-view on the & Organizational environmental, Research & efficiently create
industry, Capabilities. social, economic Development. value for all
competition and impact. stakeholders.
customers.
© 2002 – 2012 MetaVu, Inc. The Case for Leading vs. Lagging Indicators in Sustainability Planning 10

11. Leading vs. Lagging Indicators
For Sustainability Planning
Traditional Business Sustainable Business
Sustainable
Development Leading Lagging Leading Lagging
ROI Story Indicators Indicators Indicators Indicators
• Procurement • TRIR • License to Operate • TRIR
Supply Chain requirements for • Process Risk • Supplier ESG Score • Fluency Trainings
Integration Safety Review • SD Management • OE / Reliability
• Management System • ROCE
System • % CAPEX in Local • Cost of Capital
Content
• Production efficiency
• Product / • EBITDA • % CAPEX in R&D • Cost efficiencies
Process Business Line • ROCE with SD Principles • ROCE
Excellence CAPEX / OPEX • Asset yield • Product Innovation • Cost of Capital
forecast Reformulation
• Revenue • ROCE • Resource efficiency • Resource
Product • Market Share • Cost (energy, materials, conservation,
Innovation • EBITDA efficiencies water) reduction,
• Reformulation recovery
• New Market Share • ROCE
• Revenue growth • Cost of capital
© 2002 – 2012 MetaVu, Inc. The Case for Leading vs. Lagging Indicators in Sustainability Planning 11

12. Takeaways
Leading & Lagging Indicators in Sustainability Planning
 Developments
 Institutional and Sector developments continue
 Adoption
 Not Leading vs. Lagging ---- Leading AND Lagging
 Enables enterprise risk point of view
 Creates linkage between Opex and Capex
 Drives governance and compensation (for long term)
 Links reporting, operations and financial performance
 Frames the narrative for investing and measuring ROI
The Case for Leading vs. Lagging Indicators in Sustainability Planning 12

13. The Role of Leading vs. Lagging Indicators
in Sustainability Planning
Panel Discussion document prepared exclusively for:
The New Metrics of Sustainable Business Conference
September 28, 2012
Joe Wolfsberger / 704 877-3992 The Wharton School

14. History of Metrics Tracking and Reporting
One Person’s Perspective
 Early Reporting of Company Sustainability Data
 Mostly environmental data collected for compliance purposes
 Reporting expanded with implementation of enterprise EHS databases
 Reporting of readily accessible data – no inter-company consistency
 Second Phase Incorporated EHS Data
 Third Phase Expanded to Include Social Data
 Currently a Push to Include Governance Information
 Current Trends
 Standardization of Reporting Format
 One Report
 Ranking of Performance by Independent Organizations
 Integration of Sustainability Metrics into Corporate Strategies and Reporting to Create
Competitive Advantages
 Leading Indicators and Integration into Operational Excellence
The Case for Leading vs. Lagging Indicators in Sustainability Planning 14

15. The Case for Leading Indicators
 For 40 Years we have convinced our leadership to rely on
lagging indicators – why change?
 At the enterprise level probably will not change but as you go lower in the organization
the metrics need to be more activity oriented and actionable
 Measuring lagging indicators is like driving by looking in the rear view mirror
 Lagging indicators create the sense of being powerless and do not drive universal
ownership
 Leading indicators drive a culture of Zero Risk Tolerance
 Reduced risk saves money and creates a competitive advantage
 Leading indicators are antecedents of the desired outcomes
 Success in driving a culture of operational excellence for sustainability supports
improvements in quality and operations
 The concept of Leading Indicators are often not understood
 Often they require a leap of faith – don’t be afraid to start
small
The Case for Leading vs. Lagging Indicators in Sustainability Planning 15

16. Examples of Leading Indicators for Sustainability
 Enterprise Level
 Employee Engagement Scores
 Sales Associated with Green Products
 Percent of sites meeting minimum energy efficiency standards
 Percent of operating sites having ISO 14001 Certified Management Systems
 Percent of suppliers with EHS Management Systems
 Percent of employee population participating on sustainability projects
 Percent of employees involved in a community sustainability event
 Number of employees with a performance goal on sustainability
 Number of energy conservation projects identified and submitted
 Site Level
 Number of near misses identified and investigated
 Number of Kaizen (Rapid Improvement Events) containing EHS improvements
 Score on objective measure of a site’s sustainability culture
 Percent of employees participating in carpools / high efficiency vehicle programs
 Number of right behaviors observed
The Case for Leading vs. Lagging Indicators in Sustainability Planning 16

17. The Role of Leading vs. Lagging Indicators
in Sustainability Planning
A Panel Discussion
Discussion Forum document prepared exclusively for:
The New Metrics of Sustainable Business Conference
September 28, 2012
Michael Muyot
CRD Analytics
+1.347.415.6243
The Wharton School
mmuyot@crdanalytics.com

18. About CRD Analytics
CRD Analytics is a leading provider of independent sustainability investment analytics. Using its
proprietary SmartView® 360 Platform, CRD Analytics empowers its clients with actionable and
performance-driven information distilled from large sets of complex data including financial,
environmental, social, governance, brand perception and reputational risk. CRD Analytics partners
with its clients to construct proprietary index-based products – Exchange-Traded Funds (ETFs),
separately-managed accounts, mutual funds and Unit Investment Trusts (UITs).
Product & Services Overview Established Indexes & Rankings
 Financial Indexes powered by SmartView 360
 Sustainability Rankings (Global & Regional)
 Investment Analysis via Bloomberg BMART
 Advisory Services: Sustainable Investing
 Algorithm Design for Licensing or Sale
 Facilitated Executive Roundtables
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The Case for Leading vs. Lagging Indicators in Sustainability Planning 18

19. The New Formula
for Sustainable Development & Investing
Financial Corporate Operational Revenue
Analysis Governance Excellence Growth Model
Environmental Social Net Positive Innovation
Impact Responsibility Impacts Targets
a = ƒ(Lagging) + (Leading)+(Industry-Specific)
Sustainability Capabilities
Framework
Innovation
Performance
Measurement Strategy
The Case for Leading vs. Lagging Indicators in Sustainability Planning 19

20. Keys to Success: Mainstreaming for Investors
KEYS TO SUCESS
1. Standardized Scoring
2. Comparable Measurement
3. Reputable Algorithm
4. Linked to Financial Performance
5. Success Stories from Companies
The Case for Leading vs. Lagging Indicators in Sustainability Planning 20

21. Q&A

22. Contact Us
Joe Michael Mark A.
Wolfsberger Muyot Serwinowski
President & Founder President & Founder
CRD Analytics MetaVu
(347) 415-6243 (303) 475-7426
wolf7277@gmail.com mmuyot@crdanalytics.com mas@metavu.com
@crdanalytics
@metavu
In/Mark-A-Serwinowski
In/MichaelMuyot
MetaVu
CRD Analytics
Youtube.com/user/sdROItv Youtube.com/user/sdROItv
The Case for Leading vs. Lagging Indicators in Sustainability Planning 22