Office of Health, Safety and Security
Visiting Speakers Program
October 30, 2008
U.S. Department of Energy
Washington, DC
Office of Health, Safety and Security
The Office of Health, Safety and Security (HSS) is the Department of Energy's (DOE) corporate organization responsible for health, safety, environment, and security; providing corporate leadership and strategic vision to coordinate and integrate these vital programs. HSS is responsible for policy development and technical assistance; corporate analysis; corporate safety and security programs; education and training; complex-wide independent oversight; and enforcement. The Chief Health, Safety and Security Officer advises the Secretary and the Deputy Secretary on all matters related to health, safety and security across the complex.
Through its research on sustainability and industry’s successful use of its concept, HSS has a clear idea of the types of organizations with which it would be beneficial to collaborate on sustainability. Such outreach efforts provide a cooperative advantage of sustaining an organization’s efficiency and vitality by bringing together creative thought and diverse viewpoints toward common goals while demonstrating leadership’s commitment to listening to and reflecting the concerns and issues of its shareholders and stakeholders.
As the first phase of its outreach efforts, HSS created a Focus Group forum. The HSS Focus Group forum integrates senior HSS managers from across the organization to discuss and address topics and issues of interest to DOE managers and stakeholders. The objective of the Focus Group is to establish a means for responding to questions and concerns regarding HSS initiatives and activities for improving, the health, safety, and environmental and security performance within the Department and to maintain an ongoing dialogue with involved parties supportive of these efforts. HSS believes an outcome of these continuing discussions and collaborations will be improved worker health and safety programs and the solidification of a safety culture at DOE sites.
Glenn S. Podonsky
Chief Health, Safety and Security Officer
HSS Visiting Speaker Program
The next phase of HSS outreach activities is the creation of the Visiting Speaker Program. The Visiting Speaker Program consists of presentations by leaders drawn from a variety of disciplines to include business, organizational theory, performance management, sustainability, and organizational resilience, made to HSS management and selected attendees from other interested organizations (i.e., Office of Science, Office of Environmental Management, and the National Nuclear Security Administration).
The program is intended to focus agency attention at the management level to the emerging challenges and issues threatening the national security and economic prosperity of the United States. DOE’s mission, supported by HSS and other agency organizations, requires the most efficient and resilient leadership and organizational structure for successful mission completion and the continued safety, security, and prosperity of the nation. By inviting and having presenters from the wide range of public and private sector organizations, HSS is encouraging the transformation of government and demonstrating the various stages for change. This includes understanding the depth of the global issues, need for change, tools and means for transformation, and knowing the appropriate performance measurements to determine success and implement evolving management initiatives.
The Alliance for Science and Technology Research in America
ASTRA, The Alliance for Science & Technology Research in America, is a unique collaboration of individuals drawn from industry, professional and trade associations, universities, and research centers who are united in common cause to increase federal funding for the physical and mathematical sciences and engineering.
ASTRA was founded in 2001 by a group headed by Dr. Mary Good, former Undersecretary for Technology Policy at the U.S. Department of Commerce and currently Dean of the Donaghey School of Information Science and Engineering at the University of Arkansas. Members of ASTRA include leading industries, professional societies and associations, universities, and individual scientists and researchers. ASTRA is a nonprofit, tax-exempt organization whose members conduct policy research to educate the public about the linkages between scientific R&D funding and innovation, our standard of living, national security, and economic growth.
From a core group of about 16 key corporate, university and nonprofit leaders, ASTRA has expanded its membership to nearly 60 organizations and a nationwide network of about 3,400 individual scientists, researchers and policy makers.
Dow Chemical Company
With annual sales of $54 billion and 46,000 employees worldwide, Dow1 is a diversified chemical company that combines the power of science and technology with the “ Human Element ” to constantly improve what is essential to human progress. Dow delivers a broad range of products and services to customers in around 160 countries, connecting chemistry and innovation with the principles of sustainability to help provide everything from fresh water, food and pharmaceuticals to paints, packaging and personal care products.
Dow people around the world develop solutions for society based on Dow's inherent strength in science and technology. For over a decade, Dow has embraced and advocated Responsible Care® - a voluntary industry-wide commitment to safely handle our chemicals from inception in the laboratory to ultimate disposal. This worldwide commitment helps consumers lead better lives, customers succeed, stockholders prosper, employees achieve and communities thrive. Dow's essential elements of mission, vision, values, and strategy describe why the company exists, who Dow is, what Dow intends to do, and how they intend to do it. These essential elements provide insight, offer motivation, and point the way forward as Dow seeks to grow and achieve its goals.
MissionTo constantly improve what is essential to human progress by mastering science and technology.
Dow's mission represents a greater purpose in society.
Constantly improve … This concept is and has been the bedrock of Dow's culture since H.H. Dow first said, "If you can't do it better, why do it?" It underscores Dow’s drive to continually seek the best in everything it does, and an unwillingness to settle for anything less.
1 References to “Dow” or the “Company” mean The Dow Chemical Company and its consolidated subsidiaries unless otherwise expressly noted.
The Dow Chemical Company 2007 Corporate Report
TRANSFORMING
For 110 years, Dow has been in the business of change, rearranging atoms and
reshaping molecules to create new materials and new technologies. It has been
the cornerstone of our success.
Inspired by the Human Element, we strive to constantly improve those things
essential to human progress. From the clothes we wear to the food we eat.
From the homes we live in to the furnishings, fi xtures and fi ttings that adorn
them. Equipment that purifi es water and materials that save energy. Products
that make our daily lives easier, healthier, safer or more enjoyable. Dow’s chemistry
has long played an integral role in keeping pace with society’s ever-changing
ambitions and aspirations.
Today, transformation at Dow is taking place on a far broader scale than ever
before … with new thinking and a new direction. We are changing the shape
of the Company in a way that will deliver greater long-term value for our
stockholders, while maintaining exemplary standards of social, ethical and
environmental performance. It is not an overnight process, but in 2007 we
made good progress, establishing the foundation upon which to build Dow as
an earnings-growth company, clad with a reputation second to none among
investors, customers, employees, partners, governments and the public at large.
This report provides an overview of Dow and highlights some of the Company’s
activities and achievements in 2007. For a more detailed review of the year’s
performance, please visit www.dow.com.
New Game— A Message from Dow Chairman and CEO 2
New Heights— A summary of the year 4–5
New Direction — Overview of Dow’s strategy and Performance business agenda 6–7
New Frontiers—Dow’s geographic growth and joint venture strategy 8–9
New Solutions — Research, development and innovation 10–11
New Ambitions — Dow’s environmental agenda 12–13
New Expectations — Dow’s corporate citizenship 14–15
New Achievements — A signifi cant year 16–17
TRANSFORMATION…
the process of change
®Trademark of The Dow Chemical Company (“Dow”) or an affi liated company of Dow.
TRANSFORMATION…
the process of change
Do it better.
Do it better. It is a simple philosophy, but one that has been at the very core of Dow’s culture
since it was founded by Herbert H. Dow in 1897, shaping the Company into today’s world-class
chemical industry leader—a company that is committed, through chemistry, to the betterment
of global humanity.
The Company has come a very long way in 110 years. Today, we have customers in around
160 countries. We have 150 manufacturing sites in 35 countries. We have annual sales of almost
$54 billion. And we have a powerful Human Element— 46,000 men and women from virtually
every part of the globe who set Dow apart as they drive the Company to new heights of perfor-
mance, and help us meet the expectations of all our stakeholders.
THIS IS DOW
Dow’s Performance Portfolio
Dow’s $27 billion Performance portfolio serves
customers in markets around the world with
an extensive range of differentiated plastic,
chemical and agricultural solutions. Our prod-
ucts improve lifestyles in many ways: making
cars safer, buildings more energy effi cient,
food healthier, water cleaner, electronics more
durable, computers faster, and more. The key
to our success lies in aligning our technologies
and capabilities with our customers’ specifi c
needs—and backing that with outstanding
customer support. By accelerating innovation
and growth, while sharpening market and
customer focus, the Performance portfolio is
creating businesses and brands that deliver
higher margins and more consistent profi tability
for Dow.
PERFORMANCE PLASTICSDow AutomotiveDow Building SolutionsDow EpoxyPolyurethanes and Polyurethane SystemsSpecialty Plastics and ElastomersTechnology Licensing and Catalyst
PERFORMANCE CHEMICALSDesigned PolymersDow LatexSpecialty Chemicals
AGRICULTURAL SCIENCESDow AgroSciences
Dow’s Basics Portfolio
This powerhouse $26 billion portfolio of
leading basic plastics and chemicals serves
more than 6,000 customers worldwide, and is
an integrated source of raw materials for Dow’s
Performance businesses. It meets the changing
needs of a broad spectrum of industries —
from packaging, personal care, toys, pipes and
tools to adhesives, de-icers, pharmaceuticals,
paper and construction. The Basics portfolio is
growing primarily through joint ventures that
enable Dow to reduce capital intensity, expand
globally, and improve access to advantaged
feedstocks and energy.
BASIC PLASTICSPolyethylenePolypropylenePolystyrene
BASIC CHEMICALSCore ChemicalsEthylene Oxide/Ethylene Glycol
HYDROCARBONS AND ENERGY
2007 Corporate Report • 1
Net Sales (dollars in billions)
Net Income (dollars in billions)
Earnings per Share –Diluted
Dividends Declared per Share
Energy Intensity (BTUs per pound of production)
Injury and Illness Rate (recordable incidents per 200,000 work hours)
Taxes Paid (dollars in billions)
Total Purchases (dollars in billions)
Charitable Contributions (dollars in millions)
2007 HIGHLIGHTS
2007 SALES BY OPERATING SEGMENT
2007 SALES AND EMPLOYEES BY GEOGRAPHIC AREA
North AmericaSales: $20,498Employees: 22,800
EuropeSales: $19,614Employees: 14,100
Asia Pacifi cSales: $6,186Employees: 3,900India, Middle East, Africa
Sales: $1,470Employees: 1,200
Latin AmericaSales: $5,745Employees: 3,900
The forward-looking statements contained in this document involve risks and uncertainties that may affect the Company's operations, markets, products, services, prices and other factors as discussed more fully elsewhere and in fi lings with the U.S. Securities and Exchange Commission. These risks and uncertainties include, but are not limited to, economic, competitive, legal, governmental and technological factors. Accordingly, there is no assurance that the Company's expectations will be realized. The Company assumes no obligation to provide revisions to any forward-looking statements should circumstances change, except as otherwise required by securities and other applicable laws. References to "Dow" or the "Company" mean The Dow Chemical Company and its consolidated subsidiaries, unless otherwise expressly noted.
Performance Portfolio$27,246
Performance Plastics$15,116
Performance Chemicals$8,351
Agricultural Sciences$3,779
Basic Plastics$12,878
Basic Chemicals$5,863
Hydrocarbons and Energy$7,105
Basics Portfolio$25,846
Unallocated and Other: $421
(dollars in millions)
(dollars in millions)
2007 2006
$53.5 $49.1
$2.9 $3.7
$2.99 $3.82
$1.635 $1.50
3,811 3,863
0.29 0.40
$1.3 $1.6
$42.8 $35.3
$53.5 $27.9
Andrew N. LiverisPresident, Chief Executive Offi cer and Chairman of the Board
William F. BanholzerExecutive Vice President and Chief Technology Offi cer
Carol A. DudleyCorporate Vice President, Market Facing Businesses, Licensing and New Business Development
Julie Fasone HolderCorporate Vice President, Chief Marketing, Sales and Reputation Offi cer
Gregory M. FreiwaldCorporate Vice President,Human Resources, Corporate Affairs and Aviation
Michael R. GambrellExecutive Vice President, Basic Plastics and Chemicals, Manufacturing and Engineering
Heinz HallerExecutive Vice President, Performance Plastics and Chemicals
Charles J. KalilExecutive Vice President, General Counsel and Corporate Secretary
David E. KeplerExecutive Vice President, Chief Sustainability Offi cer, Chief Information Offi cer, Corporate Director of Shared Services
Juan R. LucianoBusiness Group President, Hydrocarbons and Energy
Geoffery E. MerszeiExecutive Vice President and Chief Financial Offi cer
Back row, left to rightWilliam F. BanholzerJulie Fasone HolderGregory M. FreiwaldJuan R. LucianoDavid E. KeplerCharles J. Kalil
Seated, left to rightMichael R. GambrellHeinz HallerAndrew N. LiverisGeoffery E. MerszeiCarol A. Dudley
2 • The Dow Chemical Company
NEW GAME
Dow’s Executive Leadership Team(at March 2, 2008)
Andrew N. LiverisPresident, Chief Executive Offi cer and Chairman of the BoardFebruary 14, 2008
The past year was a notable one for Dow. We delivered solid fi nancial results. We set the ground-
work for our transformational growth agenda. And, by combining the power of science and
technology with the Human Element, we took another signifi cant stride toward our vision of
being the largest, most profi table, most respected chemical company in the world.
In creating that vision, we intentionally set the bar high … recognizing that our obligations—
to our stockholders, to our employees, to the communities in which we operate and to our
customers — are also high. At Dow, we not only accept those obligations, we use them as the
fulcrum to lift ourselves and our Company to new heights of performance, sharply focused on
the triple bottom line of people, planet and profi ts.
We well know the critical importance of addressing each of those elements. They are the pillars
on which future success rests. Take any one away— weaken any single pillar— and we risk
damaging the whole.
Our decision to sign the U.N. Global Compact in 2007 underscores our resolve to ensure those
pillars remain strong. In this case, we will expand our pacesetting sustainability efforts and
collaborate with like-minded stakeholders on some of the most pressing issues facing the planet
and its people. Dow is already making signifi cant contributions in areas such as clean water, health
care, affordable housing, alternative energy and climate change. And through our groundbreaking
2015 goals, we’ve pledged to do even more by connecting chemistry and innovation with the
principles of sustainability to create new opportunity, new promise and new hope—as well as
to bring new business opportunities for our Company.
For Dow, sustainability is not only about strengthening the pillars of people and planet, it is also
about profi ts. Which is why we’re transforming … establishing ourselves as an earnings-growth
company that is more predictable in its profi tability. We took meaningful steps toward that goal
in 2007 and we will make even greater progress through the year ahead— creating signifi cant
long-term value for our stockholders while delivering on our promise to constantly improve what
is essential to human progress.
We thank you for your continued interest in Dow and we welcome your comments on how we
can continue to improve our performance in everything we do.
2007 Corporate Report • 3
“ Our obligations—to
our stockholders, to
our employees, to the
communities in which
we operate and to our
customers—are the
fulcrum to lift ourselves
and our Company to new
heights of performance.”
4 • The Dow Chemical Company
To realize our vision
of being the largest,
most profi table, most
respected chemical
company in the world,
Dow must do more
than keep pace…
Dow must set the pace.
NEW HEIGHTS
2007 was a signifi cant year for Dow. It was a year of record sales
and solid fi nancial results. It was a year in which we scaled new
heights in environmental stewardship and corporate citizenship,
setting new benchmarks for the entire chemical industry. And
it was a year in which we took further steps toward redefi ning
what it means to be THE world-class chemical company—a
company that surpasses its peers across every dimension of
fi nancial, social and environmental performance.
Financially, sales exceeded $50 billion for the fi rst time in
Dow’s history, climbing to $53.5 billion, 9 percent higher than
in 2006. Net income was $2.9 billion, which included the impact
of certain items with a net unfavorable impact of $735 million,
while earnings were $2.99 per share. Excluding certain items
for both periods, earnings per share for the year were $3.76,
compared with $4.25 in 2006.
Net Sales(dollars in millions)
Per Share Data(dollars)
Earnings –Diluted
Earnings –Excluding Certain Items*
Dividends Declared
*A reconciliation to the most directly comparable GAAP measure is provided on the Internet at www.dow.com in the Financial Reports page of the Investor Relations section.
03
32,6
32
05
46,3
07
07
53,5
13
04
40,1
61
06
49,1
24
03 04 0705 06
1.34
1.34
1.34 1.
50
3.82
4.25
4.62
4.37
2.93
2.71
1.87
1.39
3.76
2.99
1.63
5
05 06 07 2015
0.40
0.40
0.29
0.08
05 06 07 201504
3,96
6
3,90
9
3,86
3
3,81
1
2,97
5
03 04 05 0702 06
19,5
00
15,6
00
11,2
00
8,00
0
24,6
00
21,7
00
2007 Corporate Report • 5
We achieved record equity earnings of $1.1 billion, marking the
fourth consecutive year in which this contribution has topped
$900 million and the fi rst year in which it has exceeded $1 billion.
And we ended the year with our balance sheet as strong as it has
ever been, with a debt to capital ratio of 32 percent, with our
funded pension plans fully funded and with our priorities sharply
focused on investing for growth and remunerating stockholders.
Through 2007, that agenda gathered momentum. We invested
more than $1 billion in strategic acquisitions, we increased
capital spending by 17 percent to support organic growth,
we bought back more than 32 million shares as part of our
repurchase program, and we raised our quarterly dividend for
the second time in 18 months. For 95 years, Dow’s quarterly
dividend has consistently either been maintained or raised.
In 2007, Dow experienced yet another sharp rise in feedstock
and energy costs, which increased more than 10 percent
compared with 2006 to top $24 billion for the year— three
times what we paid in 2002.
Faced with this seemingly relentless climb, our commitment
to energy effi ciency remains as strong as ever. In 2007, we
achieved a further reduction in energy intensity — the amount
of energy used for every pound of product we produce—which
is now down 4 percent from our 2004 baseline against our goal
to achieve a 25 percent reduction by 2015.
Our commitment to employee health and safety also produced
tremendous results in 2007, as we cut the Company’s injury and
illness rate by more than 25 percent year over year. But this solid
progress was sadly overshadowed by the loss of one of our
colleagues, who died in a tragic aircraft accident while traveling
on Dow business. We continue to do everything possible to
infuse an employee mindset, a leadership attitude and a
corporate culture that will ensure all employees and contractors
return safely to their homes at the end of each work day.
And fi nally, throughout the year, we focused signifi cant resources
on maintaining our leadership position in corporate citizenship,
a role that we believe should drive positive change beyond our
fence lines, into our communities and across the globe. One of
our most notable actions was to support the Blue Planet Run,
an around-the-world relay that raised awareness and funds to
address the issue of 1.2 billion people who are living without
access to safe drinking water. In total, the Company’s charitable
contributions during 2007 totaled more than $53 million, providing
support to a broad range of events and organizations worldwide.
Injury and Illness(recordable incidents per 200,000 work hours)
Energy Intensity(BTUs per pound of production)
Hydrocarbon Feedstocks and Energy Costs(dollars in millions)
Baseline
Goal
Note: Other metrics are recorded, but the results are not available in time for this report. Please visit Dow’s website (www.dow.com) for updated results.
6 • The Dow Chemical Company
NEW DIRECTION
Better earnings growth. Better earnings consistency. To achieve
these twin goals, we have embarked on a path to transform the
Company in ways that will deliver greater long-term value for our
stockholders. Rather than being a company predictable in
its cyclicality, we will be a company that is more predictable
in its profi tability, even in an economic downturn. It’s a new
direction —and we are well on our way.
Building on a strong foundation
Dow already bears the hallmarks of an industry leader: a drive
for fi nancial discipline and operational excellence, a balanced
portfolio with signifi cant presence in all major chemical chains,
unmatched global reach, the low-cost advantages of site and
product integration, and a depth of technological innovation
that extends to both new and improved products and manufac-
turing processes.
On this solid foundation, we are shaping the new Dow. We
are focusing our investments on projects that will signifi cantly
bolster our Performance portfolio. We are expanding our geo-
graphic presence, strengthening our position in key emerging
economies around the world. We are creating exciting growth
opportunities for our Basics businesses through strategic joint
ventures. And we are driving ahead with our innovation agenda,
building a robust pipeline of differentiated solutions … new
products and new processes.
A focus on Performance
Our Performance portfolio, with its array of higher margin
products and market-facing activities, promises faster growth
and more consistent profi tability than can be achieved within
our Basics businesses. For that reason, it is the focus of Dow’s
invest-for-growth agenda.
In 2007, we announced three new Market Facing businesses—
Dow Coating Solutions, Dow Footwear Solutions and Dow
Fabric and Surface Care — and we continued to aggressively
grow our existing Performance business portfolio, both in size
and geographic reach. Highlights from the year include:
• Dow Building Solutions successfully started up a manufac-
turing plant for the production of STYROFOAM™ brand
insulation on the outskirts of Moscow, the Company’s fi rst-
ever production facility in Russia. This plant enables Dow to
better serve its growing customer base in both Russia and
Eastern Europe — regions where demand for insulation
materials is increasing rapidly.
• Dow AgroSciences took a number of signifi cant steps
to strengthen its position in the corn seeds business,
including the acquisitions of Brazilian company Agromen
Tecnologia, The Netherlands-based Duo Maize and assets
of Maize Technologies International, an Austrian corn
seeds company.
• The Company completed its acquisition of Wolff Walsrode
from the Bayer Group and, in doing so, announced the
formation of Dow Wolff Cellulosics, a $1 billion business
serving a broad spectrum of industry sectors, including
construction, personal care, pharmaceuticals and food.
• And we made a number of other strategic, bolt-on acquisi-
tions, among them two European polyurethanes systems
businesses — Hyperlast Limited and Edulan A/S — and
three leading epoxy formulators—UPPC AG in Germany, and
POLY-CARB Inc. and GNS Technologies in the United States.
Moving forward, our Performance growth agenda will center
around strategic acquisitions that strengthen our position in
areas such as health, energy, infrastructure and consumerism
—major opportunities that we see developing across the globe.
As we pursue that growth agenda, however, we will do so with
discipline and diligence, making sure that every acquisition is
strategically aligned, properly valued and takes place in a time
frame that makes sense for Dow.
2007 Corporate Report • 7
By transforming business models, refocusing innovation, strengthening our global presence and
recognizing the Human Element…
Dow is opening the door to a new era.
8 • The Dow Chemical Company
With production
facilities in 35
countries and
customers in 160,
with joint venture
partners in key
regions, and with
a highly talented
global workforce…
Dow is the most global of all chemical companies.
NEW FRONTIERS
Positioning ourselves in growth markets
We established our fi rst business outside the United States in 1942— the same year in which
sales surpassed $50 million for the fi rst time in Dow’s history. Sixty-fi ve years later, as we broke
through the $50 billion mark, roughly two-thirds of our revenue was generated overseas.
Our commitment to geographic growth remains strong, with a specifi c focus on emerging
economies … supplying the chemical and plastic building blocks that address a vast array
of human needs. As a result, the international reach of our businesses is having an evermore
signifi cant impact on the Company’s bottom line. And we expect this contribution to grow further
as we reap the benefi t of being the most global of all chemical companies, with assets in key
regions around the world, strong partnerships with major players in many different countries,
and highly talented, locally hired employees who have the relationships, the experience and the
knowledge to make things happen.
North AmericaDow sales: $20.5 billion38% of global total
Dow share of JV sales: $1.74 billion26% of global total
Latin AmericaDow sales: $5.7 billion11% of global total
Dow share of JV sales: $0.50 billion8% of global total
EuropeDow sales: $19.6 billion37% of global total
Dow share of JV sales: $1.34 billion20% of global total
2007 Corporate Report • 9
DOW’S 2007 GLOBAL SALES
$53.5 BILLIONDOW’S PROPORTIONATE SHARE OF 2007 JOINT VENTURE REVENUE*
$6.6 BILLION
Collaborating for smarter growth
As Dow focuses on improving earnings growth and consistency,
joint ventures are a crucial enabler, creating opportunities
to accelerate the Company’s strategic agenda across several
different dimensions. Joint ventures can provide access to key
markets, growth geographies, new technologies and advantaged
feedstocks, while at the same time lowering capital investment
and reducing risk. During 2007, we advanced our joint venture
agenda on several fronts.
Most notable was our agreement with Petrochemical Industries
Company (PIC), a wholly owned subsidiary of Kuwait Petroleum
Corporation, to form a global petrochemicals giant. When the
deal closes toward the end of 2008, the new 50:50 joint venture
will have sales of more than $11 billion and employ around 5,000
people, manufacturing and marketing polyethylene, ethylene-
amines, ethanolamines, polypropylene and polycarbonate to
customers worldwide.
Our agreement with PIC was not the only highlight of the year.
For example:
• We signed a Memorandum of Understanding with Chevron
Phillips Chemical to form a joint venture involving polystyrene
and styrene monomer assets in North and South America.
• We announced plans to form a joint venture with the National
Oil Corporation of Libya that will operate and expand the
country’s Ras Lanuf petrochemical complex.
• We signed a Memorandum of Understanding for our
proposed joint venture with Saudi Aramco, to build a large-
scale petrochemicals complex in eastern Saudi Arabia.
• We signed a cooperation agreement with Shenhua Group
to build a world-scale coal-to-chemicals complex in the
Shaanxi Province of China.
• We signed a Memorandum of Understanding with Crystalsev,
one of Brazil’s largest ethanol producers, to form a
joint venture to design and build a world-scale facility
to manufacture polyethylene from sugar cane.
• And we signed a Memorandum of Intent with Russia’s
Gazprom and SIBUR to explore a number of joint venture
opportunities in the area of hydrocarbons processing.
India, Middle East, AfricaDow sales: $1.5 billion3% of global total
Dow share of JV sales: $0.46 billion7% of global total
Asia Pacifi cDow sales: $6.2 billion12% of global total
Dow share of JV sales: $2.55 billion39% of global total
*Sales of nonconsolidated affi liates, excluding sales to other Dow entities.
10 • The Dow Chemical Company
NEW SOLUTIONS
The roads to solutions often start as needs. The need for safer, more fuel-effi cient cars. The need
to protect crops. The basic needs that sustain us: clean drinking water, an adequate food supply
and decent housing. Our aim is to fi nd better solutions through science and technology, combin-
ing the power of chemistry with the Human Element in a way that delivers long-term value to
our stockholders.
For example, during 2007, we signed a corn technology cross-licensing agreement with Monsanto
aimed at launching SmartStax™. SmartStax will provide the broadest spectrum insect protection
and weed control technology available to farmers, through the fi rst-ever eight-gene stack
offering from Dow AgroSciences and Monsanto.
TMSmartStax is a trademark of Monsanto Company.
By aligning our innovation agenda to the areas of greatest future global need — health, energy,
transportation, infrastructure and consumerism…
Dow is ideally placed to harvest future value-growth opportunities.
2007 Corporate Report • 11
Dow AgroSciences also announced Dow Herbicide Tolerance technology, an innovative new
family of traits that provides tolerance to multiple classes of herbicides in different crops and
offers farmers a wider choice of weed-fi ghting products.
Also in 2007, we launched Dow’s RENUVA™ Renewable Resource Technology, which uses
soybeans to make natural oil-based polyols that can be used to manufacture foams for furniture,
carpet and bedding applications that are virtually odor-free. The technology consumes around
60 percent less fossil fuel resources than conventional polyol technology and is greenhouse
gas neutral.
And Dow Building Solutions unveiled a next-generation foaming technology, enabling it to
manufacture STYROFOAM™ insulation products with a zero ozone-depletion factor and to
signifi cantly reduce Dow’s greenhouse gas emissions for North America.
During the past decade, our research and development (R&D) spending has increased by around
30 percent in real dollar terms. It is an investment that is paying dividends: in those same 10 years
our project pipeline has doubled from a net present value of $5 billion to about $10 billion; in
2007, 34 percent of Dow’s sales were from products introduced in the past fi ve years; since
2004, patent disclosures have more than doubled (from 411 in 2004 to almost 1,100 in 2007);
and last year Dow was ranked one of the 10 best global R&D companies by R&D magazine.
With more than 350 large projects currently in the development pipeline, and with major new
R&D facilities now being built in Shanghai, China, and Pune, India, that in-house success is set
to continue. But innovation doesn’t just occur in our own labs.
Taking the philosophy of the Human Element beyond the boundaries of our Company, we also
partner with universities, government institutions and members of the scientifi c community around
the world to develop new ideas and technologies. In 2007, for example, Dow issued a challenge to
researchers to develop an effective way to convert methane into chemical feedstocks without using
costly synthesis gas processes. To encourage this research, Dow will award grants of approximately
$1 million to $2 million annually, for three years.
TMTrademark of The Dow Chemical Company (“Dow”) or an affi liated company of Dow.
NEW AMBITIONS
Environmental stewardship and corporate citizenship have long been key priorities for Dow.
Today, they have a place at the very heart of the Company’s strategy, ranked among the most
important drivers of Dow’s long-term success.
Through 2007, we continued to make progress toward our ambitious 2015 Sustainability Goals.
Launched in 2006, these goals raise the bar signifi cantly higher for our environmental, health
and safety performance, while also addressing a broader set of challenges focused on local
communities, product stewardship and the reduction of our global environmental footprint.
In this respect, the year saw a number of signifi cant achievements by Dow, including:
• The Company continued efforts to enhance energy effi ciency through a broad range of
initiatives, including a process at Dow’s Terneuzen site in The Netherlands to re-use treated
household wastewater. The project saves energy, conserves water and reduces greenhouse
gas emissions.
12 • The Dow Chemical Company
05 06 07 2015
1.52
1.14
1.51
0.39
05 06 07 2015
75
464
586
730
05 06 07 2015
14
32
38
55
Severity Rate(recordable incidents, weighted for type, per 200,000 work hours)
Process Safety(number of incidents)
Leaks, Breaks and Spills(number of incidents)
Baseline
Goal
Note: Other metrics are recorded, but the results are not available in time for this report. Please visit Dow’s website (www.dow.com) for updated results.
• Dow joined with the Lawrence Berkeley National Laboratory and China’s Energy Research
Institute to develop a program aimed at supporting China’s efforts to improve energy effi ciency
and reduce energy intensity.
• Dow Building Solutions made further headway with its building-integrated photovoltaic program,
which will enable solar energy generation cells to be incorporated directly into the design of
commercial and residential building materials, such as roofi ng systems, exterior sidings and
fascias. The project received a $20 million grant from the U.S. Department of Energy as part of
the Solar America Initiative Pathways Program — bolstering Dow’s efforts to design, develop
and scale up production of building-integrated photovoltaic components that will signifi cantly
reduce the cost of solar energy.
• Dow Brazil and Jean-Michel Cousteau’s Ocean Futures Society launched the Ambassador of
the Environment Program in Guaruja, Brazil. This extension of Dow’s U.S. partnership with
Cousteau is designed to connect young people with the environment and teach them how
to live more sustainably.
• We continued to successfully introduce products and technologies to the marketplace while
demonstrating our commitment to sustainability. We launched Propylene Glycol Renewable,
a product used in a variety of industry applications that is made from glycerin generated during
the manufacture of biodiesel, a diesel-fuel alternative produced from vegetable oil. And
customers responded very positively to our announced joint venture with Crystalsev to build
the fi rst world-scale sugar cane-to-polyethylene facility, based in Brazil. As well as using a
renewable feedstock, the process will produce signifi cantly less carbon dioxide than traditional
polyethylene manufacturing processes.
• And we stepped up efforts to prepare next-generation leaders in the area of sustainability. The
Dow Chemical Company Foundation committed $2 million to establish a new Sustainable Products
and Solutions program with the University of California at Berkeley’s Haas School of Business, in
partnership with its College of Chemistry. In addition to its fi nancial contribution, Dow also loaned
an executive to facilitate the growth of the program. This multi-disciplinary research and learning
environment will lead to new thinking in the development of products that will be sustainable,
improve quality of life, and protect health and the environment.
Through its
2015 Sustainability
Goals, which set
ambitious targets
for local citizenship,
product stewardship
and standards
of environmental
performance…
Dow is scaling new heights.
2007 Corporate Report • 13
14 • The Dow Chemical Company
By connecting
chemistry and
innovation to the
Human Element
… creating new
hope, achieving
new standards and
securing new business
opportunities…
Dow is balancing the needs of its stakeholders.
NEW EXPECTATIONS
As we press forward with our long-term growth agenda, we remain committed to understanding
the needs and expectations of the people affected by our activities … and delivering on those
expectations. That commitment extends beyond the immediate sphere of our employees, our
retirees and the communities in which we operate, to embrace the Human Element across a far
wider societal plain: the end-users of our products, the governments and municipalities that
benefi t from our presence, and people across the globe facing fundamental needs that Dow can
help to address.
2007 Corporate Report • 15
2007 was a year in which we advanced that agenda on many
fronts, including:
• Conducting research to assess the quality of life in several
Dow locations around the world, to understand and priori-
tize local environmental, social and economic needs in the
communities in which we operate. The research will not only
help to ensure that we are a good neighbor and partner in
our 150 global communities, but will also help to strategically
position Dow in areas where we seek to have a presence in
the future.
• Making further strides to tackle the growing global issue of
clean water, including our sponsorship of the 15,200-mile
2007 Blue Planet Run.
• Provisionally agreeing to provide up to $30 million of loan
guarantees to WaterHealth International that would support
the installation of 2,000 community water systems in rural
India and provide a sustainable source of safe drinking water
for 11 million people in remote locations across the country.
• Launching a Sustainable Living campaign with our 46,000
employees around the globe, promoting ways that employees
and their families can reduce energy use, and encouraging
people to sign a personal commitment to the campaign.
• Building on our long-standing efforts to improve the safety
and security of chemicals transportation. In 2007, Dow joined
with the U.S. Federal Railroad Administration, Union Pacifi c
Corporation and Union Tank Car in various initiatives to
enhance the safety performance of rail tank cars, improve
shipment visibility, support community emergency response
education and design supply chains that reduce risk.
• Contributing more than $36 million to support a wide range
of programs that contribute to community success, support
sustainability, foster science in society and stimulate innova-
tion around the world. The Company also made substantive
one-time contributions to several global projects and a major
revitalization initiative in its hometown of Midland, Michigan,
U.S.A., bringing total philanthropy in 2007 to $53.5 million.
This compares with $27.9 million in 2006.
• In 2007, several of Dow’s commitments supported the
marketing activities and product development efforts of
individual businesses. For example, our continued partnership
with Habitat for Humanity not only supported the group’s
quest to eliminate substandard housing, but also served
to showcase the performance and versatility of a range
of products from Dow Building Solutions … including a
complete photovoltaic installation at Habitat’s 2007 Jimmy
Carter Work Project in Los Angeles, California, U.S.A.
Together, Dow’s environmental and societal commitments
put our Company on record as affi rming that our workplace,
community and environmental accomplishments will be among
the most important success factors for Dow’s future.
Global Business and Functionally Aligned Projects: $3.7Global Corporate Projects: $22.6 Disaster Relief: $1.1
Charitable Contributions by Geographic Area (dollars in millions)
North America $18.2
Europe $3.7
Asia Pacific $1.9
India, Middle East, Africa $1.2
Latin America $1.1
NEW ACHIEVEMENTS
First Quarter
• Dow starts up its fi rst-ever production facility in Russia, located in Kryukovo, outside Moscow. The plant will produce STYROFOAM™ Extruded Polystyrene insulation boards for Dow Building Solutions.
• Dow announces plans to increase production of CELLOSIZE™ Hydroxyethyl Cellulose at its site in Institute, West Virginia, U.S.A. The additional capacity will be used primarily in paint and oil fi eld applications.
• The Company confi rms it will begin global-scale production of its new INFUSE™ Olefi n Block Copolymers at Freeport, Texas, U.S.A., following a successful trial manufacturing run at the facility.
• Dow introduces Propylene Glycol Renewable, a propylene glycol made from the glycerin that is generated during the manufacture of biodiesel, a diesel-fuel alternative produced from vegetable oil.
• Dow’s Polyurethanes business unveils capital investment plans for two European facilities to expand capacity at its polyols plant in Terneuzen, The Netherlands, and its propylene glycol facility in Stade, Germany.
• The U.S. Department of Energy awards Dow a $20 million grant to advance integrated photovoltaics, a technology that incorporates solar power components directly into a variety of building materials.
• Dow declares a dividend of 37.5 cents per share … the Company’s 382nd consecutive cash dividend.
• A major new research program, sponsored by Dow, is announced by the Company, offering three-year grants to help develop technology that will convert methane to chemicals.
• Dow commits to being a founding sponsor of the Colorado Center for Biorefi ning and Biofuels, a research center devoted to developing new biofuels and biorefi ning technologies.
• The Company accepts a leadership role with EPCglobal, a non-profi t agency developing industry-driven standards for electronic product code technology that tracks items within a supply chain.
• Dow launches eight new grades of VERSIFY™ Plastomers and Elastomers, a highly versatile product range that delivers performance and processing benefi ts across an array of end-use applications.
Second Quarter
• Dow hosts its 110th Annual Meeting of Stockholders.
• Saudi Aramco and Dow sign a Memorandum of Understanding to move forward with their multibillion-dollar joint venture chemicals and plastics production complex near Ras Tanura, Saudi Arabia.
• Dow and Chevron Phillips Chemical announce plans for a 50:50 poly-styrene and styrene monomer joint venture in North and South America.
• Beijing-based Shenhua Group and Dow agree to a detailed feasibility study for a coal-to-chemicals joint venture in the Shaanxi Province of China.
• Dow raises its quarterly cash dividend by 12 percent to 42 cents per share. Since 1912, Dow has consistently either raised or maintained its quarterly dividend.
• Twenty-two elite runners gather in New York, U.S.A., at the start of the 2007 Blue Planet Run, an around-the-world relay sponsored by Dow to focus attention on the one billion-plus people without ready access to safe drinking water.
• The Company signs a Heads of Agreement with the National Oil Corporation of Libya to operate and expand the Ras Lanuf petrochemical complex on the country’s Mediterranean Sea coastline.
• Dow announces the completion of its acquisition of British Vita’s poly-urethane systems business, Hyperlast Limited, which includes elastomer systems facilities in the United Kingdom.
• CKE Restaurants Inc. announces that its Carl’s Jr.® and Hardee’s®
restaurant chains are converting to Dow AgroSciences’ zero trans fat Omega-9 Canola Oil.
• Dow joins the United States Climate Action Partnership, an alliance of major businesses and environmental groups calling on federal legislation to reduce greenhouse gas emissions.
• The Company opens a new polyurethane systems market development and prototyping laboratory in Egypt to help meet the growing needs of customers across the Middle East, India and Africa.
• Dow announces a partnership program with Lawrence Berkeley National Laboratory and the Chinese Energy Research Institute to support China in its efforts to improve energy effi ciency.
• Dow joins the United Nations Global Compact, the world’s largest global corporate citizenship initiative.
• At the Guaruja site in Brazil, Dow partners with its Community Advisory Panel and Jean-Michel Cousteau’s Ocean Futures Society to create Latin America’s fi rst Ambassador of the Environment program.
TMTrademark of The Dow Chemical Company (“Dow”) or an affi liated company of Dow.®Carl’s Jr. and Hardee’s are registered trademarks of CKE Restaurants Inc.
16 • The Dow Chemical Company
Fourth Quarter
• Gazprom, the world’s largest gas producer, signs a Memorandum of Intent with Dow and Russian petrochemical company, SIBUR, to evaluate potential chemical manufacturing opportunities using Russia’s natural gas capacity.
• Dow provides seed money to establish a new Sustainable Products and Solutions program, based at the Center for Responsible Business at the University of California at Berkeley’s Haas School of Business and in partnership with its College of Chemistry.
• Dow Wolff Cellulosics begins construction of the world’s largest methylcellulosics plant in Bitterfeld, Germany.
• Dow Wolff Cellulosics introduces an enhanced emulsion technology using METHOCEL™ Food Gums that helps eliminate trans fats in baked goods.
• The Company signs a Memorandum of Understanding with Hunton Energy relating to a potential petroleum coke gasifi cation plant in Texas, U.S.A. Hunton would build, own and operate the facility, and Dow would purchase synthetic natural gas and steam for its Texas Operations manufacturing site in Freeport.
• Dow and Petrochemical Industries Company of Kuwait announce plans to form a 50:50 joint venture petrochemicals company with revenues of more than $11 billion and 5,000 employees worldwide.
• Dow Building Solutions announces next-generation foaming agent technology that will enable the manufacture of STYROFOAM™ insulation with a zero ozone-depletion factor.
• Dow declares a dividend of 42 cents per share … the Company’s 385th consecutive cash dividend.
• The Company pledges $2 million to the Young Arab Leaders’ Global Action Program, an initiative designed to encourage dialogue among leaders across the globe.
• Dow Canada fi nalizes the sale of Dow’s caustic soda business in Western Canada to Univar Canada. This sale includes the West Coast Distribution Centre terminal assets as well as miscellaneous equipment.
• Dow completes the sale of its ETHAFOAM™ performance foam business to Sealed Air Corporation.
• Dow provisionally agrees to provide up to $30 million of loan guarantees to WaterHealth International that would support the fi nancing of 2,000 community water systems, serving 11 million people in rural India.
• Dow unveils its renewable grade polyurethane footwear soling system, VORALAST™ R.
• Dow announces plans to shut down a number of assets and make organizational changes within targeted support functions, eliminating approximately 1,000 jobs. As a consequence, the Company reports restructuring charges totaling $590 million in the fourth quarter, and expects to realize estimated savings of $180 million a year.
• Dow endorses the CEO Water Mandate and Caring for Climate, two voluntary initiatives of the U.N. Global Compact.
• Dow launches Dow Coating Solutions, a Market Facing business focused on providing materials, technology and solutions to the global coatings industry.
Third Quarter
• Dow completes the acquisition of Wolff Walsrode and forms Dow Wolff Cellulosics, a $1 billion specialty business focused on cellulosics and related chemistries and serving a broad spectrum of industry sectors.
• A corn cross-licensing agreement between Dow AgroSciences and Monsanto, aimed at launching SmartStaxTM, breaks new ground in the commercialization of gene stacking technology.
• The Company signs a Memorandum of Understanding with Brazilian ethanol producer, Crystalsev, to form a joint venture to manufacture polyethylene from sugar cane.
• Dow AgroSciences acquires Agromen Tecnologia, substantially expand-ing its Brazilian corn seeds business and strengthening the Company’s global corn seeds platform.
• Dow’s Polyurethanes Systems business announces plans to acquire Danish company Edulan A/S, an independent polyurethanes systems house specializing in rigid foam and elastomer technologies.
• Defi nitive agreements are signed by Dow to acquire three leading epoxy systems formulators: UPPC AG in Germany, and POLY-CARB Inc. and GNS Technologies in the United States.
• Dow AgroSciences unveils a new family of herbicide tolerance traits that will provide tolerance to multiple classes of herbicides in different crops. The technology should be ready to launch in corn in 2012.
• The Company introduces RENUVA™ Renewable Resource Technology, a proprietary process to produce bio-based polyols with high renew-able content.
• Singapore’s national water agency, PUB, signs an agreement to test Dow’s next-generation 16-inch FILMTEC™ membranes for use in water reclamation.
• Dow AgroSciences wins the “Best Formulation Innovation” award in the 2007 AGROW Awards for EcoZome™, an aqueous formulation technology for crop protection products that addresses issues with solvent systems.
• The Company launches SAFETOUCH™ Fiberglass-Free Insulation, a polyester fi ber batting with insulating properties of fi berglass-based materials that does not irritate skin, throat or eyes.
• Dow AgroSciences wins the United Nations’ Montreal Protocol Innovators Award at the annual Meeting of the Montreal Protocol.
• Dow Footwear Solutions announces its offi cial launch as a new Market Facing business for Dow.
• The Company declares a dividend of 42 cents per share … its 384th consecutive cash dividend.
• The Company launches Dow Fabric and Surface Care, a new Market Facing business.
• Dow FORTEFIBERTM Soluble Dietary Fiber products receive an inaugural Institute of Food Technologies Food Expo innovation award.
• Once again, Dow is included in the Dow Jones Sustainability World Index for the global chemical industry. The Company’s overall score ranks third highest across all 18 industry groups included in the Index.
TMTrademark of The Dow Chemical Company (“Dow”) or an affi liated company of Dow.TMSmartStax is a trademark of Monsanto Company.
® Trademark of The Dow Chemical Company (“Dow”) or an affi liated company of Dow. Form No. 161-00693
The Dow Chemical CompanyMidland, MI 48674 U.S.A.
2015 Sustainability Goals Update
2Q 2008
This report provides an overview of second quarter progress on Dow’s 2015 Sustainability Goals and other significant sustainability events.
Eventsk
Citizenship
Solutionsp
Footprint
1
Local Protection of Human Health and the Environment
Dow Latin America holds first ever Dow Sustainability Week
Injury and Illness Rate
1996
1997
1998
1999
2000
2001
200220
0320
0420
0520
0620
0720
0820
0920
1020
112012
2013
2014
2015
ActualYear to Date2015 Goal
Responsible Care®
Chemical Companies rate 1.2
US Manufacturing rate 6.3
0.0
0.5
1.0
1.5
2.0
2
Injury and Illness Severity Rate
ActualYear to Date2015 Goal
0
1
2
3
4
5
1996
1997
1998
1999
2000
2001
200220
0320
0420
0520
0620
0720
0820
0920
1020
1120
1220
1320
1420
15
Loss of Primary Containment Incidents
0
500
1,000
1,500
2,000
2,500
1996
1997
1998
1999
2000
2001
200220
0320
0420
0520
0620
0720
0820
0920
1020
112012
2013
2014
2015
ActualYear to Date
2015 GoalAnnualized
3
Motor Vehicle Accident Rate
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
1996
1997
1998
1999
2000
2001
200220
0320
0420
0520
0620
0720
0820
0920
1020
112012
2013
2014
2015
ActualYear to Date2015 Goal
4
Process Safety Incidents
0
20
40
60
80
100
120
140
1996
1997
1998
1999
2000
2001
200220
0320
0420
0520
0620
0720
0820
0920
1020
112012
2013
2014
2015
ActualYear to Date
2015 GoalAnnualized
Hazmat Transportation LOPC Count
0
10
20
30
40
50
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Highly Hazardous LOPCs Actual
Hazmat LOPCs Actual
Hazmat LOPCs Year to DateHazmat LOPCs Annualized
2015 Goal (Hazmat LOPCs)
12
5
Highly Hazardous Material Tonne-Miles
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
ActualYear to DateTonne-Miles Annualized
Mill
ion
Tonn
e-M
iles
2015 Goal
0
400
800
1,200
1,600
Contributing to Community Success
Around Dow
Product Safety Leadership
6
0
100
200
300
400
500
600
700
Actual
2015 Goal
Product Safety Assessments
Cumulative
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
132
Sustainable ChemistryHighlights for second quarter 2008 include:
7
Breakthroughs to World Challenges
8
Addressing Climate Change Energy Efficiency and Conservation
9
Intensity of Kyoto GHG as CO2 Equivalent
0.20
0.00
0.25
0.30
0.35
0.40
0.45
0.50
0.55
0.60
2015 Goal
Direct + Indirect GHG Intensity
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Printed In U.S.A.Published August 2008
® TM The DOW Diamond Logo and Human Element and design are trademarks of The Dow Chemical Company © 2008 ™IMPAXX, SYMMATRIX, SAFETOUCH, DOWTHERM, ECOSURF, AIRSTONE, STYROFOAM and LOMAX
are trademarks of The Dow Chemical Company (“Dow”) or an affiliated company of Dow®Responsible Care is a service mark of The American Chemistry Council in the United States
10
Form No. 233-00487-0808BBI
Energy Intensity Performance
1500
2000
2500
3000
3500
4000
BaseYear2005
BTUs
/ lb
40%
50%
60%
70%
80%
90%
100%
% Im
prov
emen
t
Actual
2015 Goal
Year to Date
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Valuing Our Communities
Corporate Responsibility Officer
O u r F a c t s
CommunityInvestmentsImproving the communities where we operate has long been a part of the Dow culture. In 1936, the Herbert H. and Grace A. Dow Foundation was established as a non-profit foundation to fund worthwhile community causes. In 1979, The Dow Chemical Company Foundation was created to further enhance community outreach by improving the understanding of science through science-related education projects and programs. The foundation continues today, investing in nonprofit organizations globally to improve quality of life in communities aroundthe world.
Contributing To Community
Success
® TM The DOW Diamond Logo and Human Element and design are trademarks of The Dow Chemical Company © 2008 Form No. 233-00504-0808BBI
Dow’s Position StatementUnderstanding the needs of the communities where we have a major presence, and responding in a constructive and appropriate way is part of our role as a member of the community and one to which we are deeply committed. We believe that by focusing on quality of life needs and enabling them to be fulfilled, we can create sustainability for our communities and for Dow.
External OverviewContributing to Community Success isabout engaging with our communitiesaround the world to establish open and transparent communication channels that lead to understanding. We value the knowledge and opinion of residentsabout how Dow can become part of the social fabric of the communitieswhere we operate. Two-way dialogue allows us to proactively assess, planand implement individual Community Success Plans that address local needs.Ultimately our goal is to make a positive contribution to the quality of life within communities where we have a presenceso that the community is improvedbecause of it.
Dow’s History in the AreaCommunity relations have been anessential part of Dow’s corporatepractices since the founding of thecompany in 1897. Supporting the communities where we operate is part of the Dow culture. From the early1930s with the Herbert H. and Grace A. Dow Foundation, and then later inthe 1970s with The Dow ChemicalCompany Foundation, community engagement has been and continues to be a driving force within our company.
Balancing the impact economic growth has on society and the environment creates real challenges for global communities in attaining their desired quality of life. As the world continues to change, our attitude and approach must shift to seek innovative and collaborative solutions that will result in benefits for our communities. At Dow, Community Success has been an evolution in the way we think about our community interface. We have evolved from directing activities in local communities to an approachthat sees us participating as a partner in addressing local quality of life concerns. It is this collaboration between company andcommunity that enables us to tackle key issues in order to truly make a difference and create a sustainable community.
How Dow Participates with
Communities to Address Issues
O u r P o s i t i o n
The Benefit of a PlanCommunity Success ensures that our resources (money, people and partnerships) are applied to specific objectives that yield the greatest breakthrough improvement in quality of life as defined by the community itself.
The goal states:“By 2015, 100 percent of Dow sites where we have a major presence will have achieved their individual community acceptance ratings which measure the community’s favorability with how Dow plays a positive role in making the community a better place to live.”
Dow’s Actions and CommitmentsDow has taken or is taking the following actions:
rightful role
community input
community needs
ConclusionSustainability requires every decision be made with the future in mind. It is about our relationship with the world around us – creating economic prosperity and social value while contributing to the preservation of our planet – and it demands that we be engaged corporate citizens globally and locally. We are collaborating with local businesses and citizens to create stronger, safer and sustainable communities – establishing joint goals and plans, and taking actions for the long-term success of all involved. Together we will work to help our communities succeed, and in doing so, we will be a positive influence for change.
For More InformationTo learn more about Dow’s Contributing to Community Success visit www.dow.com/commitments/goals/community.htm.
O u r P o s i t i o n
Published August 2008 ® TM The DOW Diamond Logo and Human Element and design are trademarks of The Dow Chemical Company © 2008 Form No. 233-00503-0808BBI
Dow’s Position StatementAs one of the largest chemical companies in the world, we are uniquely positioned to address the global challenges that live at the crossroads of greatest need and most significant business opportunity. Our 2015 Sustainability Goals serve as the yardstick tomeasure our progress in providing positive value and return for all of our stakeholders, and enhancing the quality of life of current and future generations. Specifically, the Sustainable Chemistry goal integrates the innovative application of science and technologywith societal needs and challenges to identify, commercialize and deliver solutions.
Sustainable Chemistry encompasses a lifecycle view of our products and processes in using our resources efficiently to minimize our footprint and improve the quality of the environment. We will strive for improvements in greenhousegas emissions, fresh water use, recycled materials as feedstocks, waste reduction, and renewableraw materials. The company challenges anyactivities that emit persistent, bioaccumulativeand toxic substances (PBTs) that are listed in the Stockholm Convention. Dow will promotebusinesses whose products fill social needs for drinking water, affordable housing, foodproduction, personal and public health, safetyand economic development, particularly in developing countries.
Dow will use sustainable chemistry to addressrising stakeholder expectations and to educate our employees about societal trends to ensure that we are making the right choices today that will deliver future innovations, improvements andprofits for the long-term sustainability of Dow andour world.
External OverviewThe predominant resource management model of mining, manufacturing, use and disposal must change. The world’s resourcesare becoming scarce, greenhouse gases are increasing in the atmosphere, and water accessibility is a crisis in many areas. As the global population continues to grow and countries strive to improve conditions for the poor, the current model is clearly not sustainable.
Sustainable chemistry is our “cradle to cradle” concept that drives us to use resources more efficiently, to minimize our footprint, to provide value to our shareholders and stakeholders, to deliver solutions for customer needs and to enhance the quality of life of current and future generations.
Introduction to Dow’s Position
on Sustainable Chemistry
O u r P o s i t i o n
Focus on Science
Dow’s History in the Area
“Bleach Lifters Bonnet or Helmet” protective unit to protect workers from possibleexcessive exposure to chlorine vapors.
co-generation.
effects of chemicals and chemical intermediates.
methods of waste treatment.
assessing the environmental impact of products and then taking appropriate stepsto protect employees, customers, and public and environmental health.
formalize the many programs already in place in different Dow locations to reduce
facilities by not producing waste if possible or by recycling or reusing that waste
almost $2 billion.
launched in Canada. At the World Summit on Sustainable Development in 2002,
sustainable development.
policies and initiatives.
environmental releases, chemical releases, and energy and water use.
considered key to the transformation of the company.
Dow’s Commitments
These LCAs will focus on breakthrough technologies and quantify the benefits for our customers and the users of the finished products.
growth in potential new products and solutions with sustainability advantages.
intergovernmental organizations, and non-governmental organizations, to provide perspectives on our sustainable chemistryapproach and our efforts to spur sustainable chemistry innovation.
student prizes, university partnerships and programs, and Dow employee awards.
O u r P o s i t i o n
Dow’s Actions
less CO2 over the life cycle.
new chemistry provides reduced environmental impact, compared to the manufacture of conventional polyols, as it uses less than half of the petroleum-based resources (fuel and raw materials) of current technology.
can coatings, as well as many other applications. This new process uses a renewable feedstock, reduces wastewater by over
store in Aurora, Colorado, in a secondary loop refrigeration system for meat, dairy, produce and other medium temperature-chilled foods. Compared to traditional refrigeration systems, secondary loop refrigeration systems have been proven to reduce
(that would otherwise be emitted into the atmosphere) instead of natural gas, to generate steam for the production of latex carpet backing.
http://www.dow.com/commitments/studies/index.htm.
ConclusionDow believes that Sustainable Chemistry goes well beyond mitigating the unintended consequences of chemistry. The world has
homes, computer chips, and life saving medicines. Chemistry is a defining factor in meeting critical human and environmental needs that will transform economic, environmental and social sustainability. We continue to deliver breakthrough improvements to existing Dow products and processes, and the next generation of chemical solutions and technologies. However, making our sustainability vision a reality will require unprecedented innovation and collaboration.
To learn more about Dow’s position on sustainable chemistry, visit http://www.dow.com/commitments/goals/chemistry.htm.Or learn about specific examples of more sustainable chemistry at Dow by visiting Sustainability Stories at http://www.dow.com/commitments/studies.
O u r P o s i t i o n
Published August 2008 ® TM The DOW Diamond Logo and Human Element and design are trademarks of The Dow Chemical Company © 2008 Form No. 233-00514-0808BBI
Dow entered into a sponsorship agreement with Saginaw County, Michigan, for the local civic arena in downtown Saginaw in an effort to help breathe new life into an economically depressed area of the city. The sponsorship allowed the center tocomplete renovations that had begun a few years earlier. In the few years since, The Dow Event Center has become more of aregional, rather than local, venue. The facility now hosts about 220 events each year, bringing in more than 200,000 visitorsfrom around the state. The ongoing success of the “TheDow,” as it is more commonly known, has spurred continuedrevitalization of the area.
To promote openness and understanding with the community,Dow Terneuzen organized two evenings of “Open Night Event” for the community, which marked the beginning of theNational Day of Chemistry in the Netherlands. Government leaders, business officials and more than 2,000 communitymembers participated in the after-dark event at Dow’s secondlargest site in the world. In addition to a bus tour of thesite, production and use of chemicals were shown throughlaser projections and all plants were festively illuminated.An exhibition of Dow products and their use in consumer products followed the tours.
In support of their Community Success Plan, Dow’sPittsburg, California, site hosted an Environmental Fair for area fourth graders, which included a first-ever ScienceTeacher Appreciation Dinner featuring oceanographer andexplorer Jean-Michel Cousteau. More than 250 attendees –including 150 educators – gathered on the award-winningDow Wetlands Preserve for a tour of the wetlands, a showof exhibits used by students, dinner and a presentation byCousteau about climate change; the importance of scienceeducation; growing up with his father, Jacques Cousteau;and more. Specific features of the Community Success plan are designed to increase exposure to the wetlands and promotescience education.
Dow in Cartagena, Colombia, created an integral program impacting four key areas: quality of public education, preparation of future leaders among young people in the community, sustainability projects and employee volunteerism. The projects include:programs to motivate children’s interest in science; employee volunteerism to improve education management at schools andto carry out health journeys; nutrition programs; development of linguistic, social, cognitive, artistic and affective potentials inyoung people; and the preservation of the community’s culture through dance and other artistic expressions. Dow developsits community program together with “Fundación Mamonal,” a nonprofit association that promotes the social development of communities.
Reputation and contributing to community success are hallmarks of the Dow Sarnia legacy project. After announcing closure of the Sarnia, Ontario, Canada site, Dow committed to providing funds up to $1 million in support of a community project that would benefit a broad cross-section of the community. A multi-agency proposal to build and coordinate the delivery of servicesat a community center for youth development in the city was chosen for the project.
How Dow Improves Our
Communities
O u r R e s u l t s
Adding Qualityto LifeDow is helping improve our communities, making them moreviable economically, more vibrant culturally and more vigilant environmentally.
On behalf of Dow’s Texas Operations, The Dow Chemical Company Foundation has made a significant pledge to establish The Dow Academic Center at Brazosport College in Texas. Brazosport College is critical to educating students in theFreeport, Texas, area and qualifying them for high-paying jobs at local companies like Dow. With more than 60 percent of high school graduates in Texas attending community colleges before going on to four-year universities, institutions likeBrazosport College are essential to prepare young adults for future success. The 35,000 square-foot multi-use facility will allow
for the expansion of the college’s baccalaureate degrees and will offer flexible classrooms, state-of-the-art labs and large meeting spaces for bothcollege and community use.
Dow Malaysia sponsored and helped to build a Visitor Information Center at the Ulu Geroh ecotourism area in Perak, Malaysia. Among effortsby Dow staff and family members was the creation of murals adorningthe four walls of the center. The establishment of the ecotourism areaallowed the indigenous Semai tribe to return to their cultural roots, protect the environment and make a living in the process. It is also ecologicallyimportant because the forest around the village houses a population of twoglobally threatened entities: the Rafflesia cantleyi, the world’s largest andmost distinctive smelling flower; and the Troides brookiana albescens, or Rajah Brooke’s Birdwing butterfly.
The Kasaoka site in Japan has been contributing equipment and displayboards to protect the breeding area of helmet crabs in Ikue Beach inKasaoka City. In addition to the helmet crabs, the territory of the crabs onIkue Beach was designated a national natural treasure in 1928. Dow’scontribution program was carefully selected after a series of discussionswith local government. The helmet crabs are known as a “living fossil.” They flourished on this planet hundreds of millions of years ago. They
are now disappearing from their habitat rapidly, but still live in several parts of the world including Japan, the U.S., China andPeninsular Malaysia.
More than 65 employees from Dow’s Louisiana Operations partnered with Office of Emergency Preparednessrepresentatives, the Iberville Parish (Louisiana) Sheriff’s Office and the Iberville Fire Department, going door to door to visit about 1,400 neighbors and share information about emergency preparedness. During the visits, residents were asked if they hadconcerns about area industry and if they knew what to do when the parish Community Alert Broadcast System was activated.
Engineers and other employees from West Virginia Operations participate in an annual community event that provides foodand raises money for Covenant House, a charitable organization that provides basic needs for the needy residents. Teams of engineers, contractors and architects build sculptures from thousands of cans of food that are later donated to the organization’sfood pantry. The sculptures are entered in a contest with various categories, one of them being the nutritional value of the foodused.
O u r R e s u l t s
Published August 2008 ® TM The DOW Diamond Logo and Human Element and design are trademarks of The Dow Chemical Company © 2008
Form No. 233-00505-0808BBI
SummaryWith manufacturing sites in 37 countries, Dow is a daily presence in towns and cities around the world as a neighbor,community leader, employer and manufacturer. As a corporate citizen, Dow has a daily responsibility to operate its facilitiessafely, treat people fairly and support the well-being of the communities in which it operates. Sustainability is about extendingthis responsibility for long-term well-being to ensure future generations of the community will have environmental, economic and social health.
By listening to the community, focusing on quality of life priority needs and supporting the fulfillment of those needs, Dow alsoensures its own ability to maintain and grow operations. As Dow expands globally, we extend the knowledge and experiencefrom our established regions to new andemerging geographies, while respecting localculture and heritage.
The Big PictureEnvironmental StewardshipDow’s 2005 Global Environment, Health andSafety Goals established high performanceexpectations that significantly reduced injuriesand chemical emissions into the air, land andwater. Dow’s 2015 Sustainability Goals buildon the progress that was made through thoseearlier goals. In working toward these goals, Dowhas fostered a culture that values, above all else,the safety of people and the environment. That culture serves as a foundation on which to builda broader sense of responsibility to not only theenvironment, but also to society as a whole. Dowcontinuously works to ensure that the natural resources of the communities in which it operates are not compromised by itspresence.
Economic StrengthDow is an active participant in the global marketplace, offering goods and services that create value for our customers, and inturn, bring value to their customers. This value is borne in communities where employees and local economies support Dowmanufacturing locations, so that value is created for the community through employment opportunities and greater economicprosperity. This demonstrates the connection of Dow’s economic strength with that of the local community.
EducationAn educated population is a critical competitive component within a community and a means to maintaining economic strengthwhile attracting businesses that need skilled employees. A well-rounded education equips citizens with the confidence toengage in public issues, using their knowledge to make informed decisions that result in beneficial public policy and laws.Particularly for Dow, a scientifically literate population with a basic understanding of science and technology, and the associatedissues, can better make decisions relating to Dow and others in the chemical industry. Highly educated and trained chemistsand engineers, as well as others within the scientific community, enable Dow to drive innovative growth and establish our competitive edge in the marketplace.
Unique Community ConsiderationsIn addition to the universal priorities of environment, economy and education, Dow understands that every community has issues that are a unique priority for them. Community success is about listening and learning from the community how Dow can support those priorities in ways that are meaningful and appropriate.
O u r V i s i o n
How Dow Cares About Our
Communities
Strong ConnectionsDow is interwoven with the communities where sites are located because Dow’s people are part of those same communities. This Human Element reveals Dow and its culture to the community, while simultaneouslyrevealing the community and its culture to Dow.
O u r V i s i o n
Dow’s Stake in this IssueStrong community engagement is an important contributor to a valued corporate reputation, one that establishes credibility and builds trust to work toward mutually beneficial outcomes for both the companyand the community. For Dow, this corresponds to a license to operate within the community.
What Dow Is Doing Now
between Dow and the community
Aratu, Brazil; Zhangjiagang, China; Stade, Germany; Rhine Center (Rhinemeunster, Germany; Drusenheim, France); Terneuzen, The Netherlands; Pittsburg, California; Hahnville, Louisiana; Plaquemine, Louisiana; Midland, Michigan; Freeport, Texas
Dow’s Future Commitment
to address identified gaps
Dow’s Long-Term VisionAs part of the evolution toward sustainability, Dow isimplementing a progressive model for community success.Globally, Dow is partnering with local communities toeffectively address community quality of life issues. Theobjective of community success is for the communities wherewe operate to not just recognize Dow as a part of their town,but to agree that Dow plays a significant role in appropriatelyenhancing the local quality of life today and long into thefuture.
Applying the Human ElementOur people are not just employees or retirees from our sites,but they are the neighbors, coaches, leaders, volunteers andparents who comprise the backbone of a community. Theyare the “face” of Dow, living our corporate values daily bymaking the community a better place to live, work and raise a family. It is this Human Element that defines Dow as a welcomedand valued corporate citizen.
Published August 2008 ® TM The DOW Diamond Logo and Human Element and design are trademarks of The Dow Chemical Company © 2008 Form No. 233-00502-0808BBI
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“Defining ‘Innovation’: A New Framework to Aid
Policymakers”
Is unavailable in this document
Document is available at
http://www.usinnovation.org/files/Defining_Innovation8
07.pdf
Perelman – Human-Centered Innovation � Page 1
Presented to the Innovation Vital Signs Workshop April 26-27, 2007
Toward Human-Centered Innovation
Lewis J. PerelmanSenior Advisor, Delmarva Strategies LLC
for Innovat ion’s Vita l S igns Workshop*, Wash ington DC, Apr i l 27, 2007
* Conduc ted by ASTRA and the Cen ter f or Accele rat ing Innovat ion on beha lf of the
Techno logy Admin is t ra t ion of the U.S . Depar tmen t of Commerce
Introduction
In regard to efforts on accelerating innovation—and particularly the project on Innovation’s Vital
Signs—there should be a greater focus on human-centered innovation, for at least two reasons.
First, change and innovation are not desirable ends in themselves; in fact, some innovation is
evidently wasteful and even destructive. Second, while further research is needed to determine the
detailed nature of the trend, current business news strongly suggests that the leading edge of
innovation today is increasingly driven by human-centered design.
This trend challenges much of the conventional wisdom underlying both public-sector and private,
philanthropic efforts to promote innovation as a general economic good. Such efforts in many cases
should be re-thought and adjusted to account for more than just the inputs to innovation, or the
gross level of resulting innovation activity. Rather, initiat ives to promote innovation need to assess
and consider the net social value of the resulting outcomes.
Defining ‘Human-Centered’ Design and Innovation
Innovation traditionally was viewed as a linear process: from basic research to technology
development and on to test/evaluation, demonstration, deployment, commercialization, and
ultimately, market penetration. And perhaps, if successful, market saturation, obsolescence, and
finally replacement. Human (and social) factors—needs, desires, demands, behavior—were
considered either not at all or intuitively, anecdotally, coincidentally, mechanically, and often
reactively. Innovation was driven, first, by hard science, engineering, and production, with
marketing and sales trailing behind like army camp followers.
Potential new products would emerge serendipitously from exploratory R&D. Marketing would
speculate on potential customers. Promising candidates for commercial products would be subjected
to test markets to see if consumers would accept and demand them. If so, full-scale production and
marketing would follow.
For well-known reasons we need not belabor here, that linear process was thrown topsy-turvy in the
past quarter century or so as information technology both empowered consumers and hugely boosted
the speed, agility, and volatility of design, production, and market processes. Two relevant artifacts
of that market revolution have been the ascendance of personalization and of ever more intimate,
nuanced, customer-supplier relationships.1
1 Government innovation—that is, R&D by government for government acquisition—continues to follow a process largely insulated from market dynamics, driven by political demands and often turgid bureaucratic
Perelman – Human-Centered Innovation � Page 2
Presented to the Innovation Vital Signs Workshop April 26-27, 2007
The “New Coke” fiasco of 1985 may be as good a symptom as any to mark the watershed between
the old producer-centered (production push) model of innovation and the new age of human-
centered (not just demand-pull but people-pull) form that increasingly drives the global marketplace.
An important lesson from the New Coke innovation blunder is that it did not result simply from
ignoring consumers. Indeed, the introduction of New Coke followed market research showing that
Pepsi was gaining market share from Coke because a new generation of consumers preferred the
sweeter taste of Pepsi. And blind market tests in fact indicated that a larger share of soft drink
consumers liked the greater sweetness of the New Coke formulation to the drier flavor of the old
Coke recipe.
But New Coke was rejected after its full-scale market introduction, and not just with disinterest but
with anger bordering on outrage.
What the old, mechanistic and reactive form of market research had failed so ingloriously to
anticipate was that Coca-Cola was not just something to drink but an important, almost sacred
cultural icon.
Human-centered design and innovation, in contrast, do more than replace the simple linear model of
innovation with the more elaborate web of the innovation ecosystem the Center for Accelerating
Innovation has charted—they put human and social imperatives first and foremost. Moreover, they
do not limit human factors to ergonomics and economic utility, but give acute attention to culture,
meaning, and behavior.
While human-centered design appears to be pushing the leading edge of innovation today, it has
deep historical roots. The basic conception of human-centered technical design began with the
discovery of the “learning curve” in the 1920s, and then serially evolved through the development of
“sociotechnical system design” at the Tavistock Institute in the 1950s, E.F. Schumacher’s concurrent
initiatives for “appropriate technology,” and, later, movements for “total quality management” and
“business process reengineering.” While varying in focus and application, the essential theme of
these challenges to Taylor ism’s mechanistic idiom of innovation was well expressed by the subtitle of
Schumacher’s popular book on small-scale systems: “Economics as if people mattered.”
The current expression of human-centered innovation can be observed in the work of leading
commercial design firms, which characteristically begin projects with exhaustive study of human and
social factors before any technical designs are plotted. One example is the Opti Desktop PC, which
won a gold award for China’s Lenovo Group and its American design partner ZIBA Design in the latest
annual industrial design excellence competition co-sponsored by Business Week and the Industrial
Designers Society of America.
The team’s design research, Business Week reported, was “dubbed ‘Search for the Soul’ of the
Chinese customer,” and aimed to help Lenovo compete on something more than just price. “Lenovo
and ZIBA delved deeply into Chinese consumer culture to ‘find out which design elements have
meaning and value for specific groups of Chinese consumers’…. [They] spent months immersed in
Chinese music, history, and objects of desire, such as cell phones, observing famil ies as they lived,
worked, and played.” At the end, the team had identified five distinct ‘technology tribes’ in China
and designed the Opti for the “Deep Immersers who seek escape through immersing themselves in
games online.”2
procedures that commonly are even more isolated from human user, organizational, and cultural
engagement or considerations.2 “The Best Product Design of 2006,” Business Week, July 10, 2006.
Perelman – Human-Centered Innovation � Page 3
Presented to the Innovation Vital Signs Workshop April 26-27, 2007
Innovation for What?
Mere boosterism may be satisfied with an agnostic notion of innovation—indifferent to innovation’s
actual consequences as long as they stimulate economic activity. But if value-free innovation is the
benchmark for Innovation’s Vital Signs, it follows that ‘clusters’ of global terror and criminal
networks, such as Iraq’s insurgents, are among the world’s leading models of ‘best practices.’ As
blogger John Robb reports:
Iraq's insurgency is a cooperative community arrangement between many diverse groups that
operates much like open source development in the software industry. As an adjunct to this
cooperative arrangement, micro-markets have formed around the arming and prosecution of
specific forms of attack. These micro-markets enhance innovation, participation, and skil l
development.
The best example of this is in the building and emplacement of IEDs3, where guerril la
entrepreneurs have formed cells for hire that specialize in certain aspects of the IED operations
chain (the IED, or homemade bomb, has become the weapon of choice for Iraqi guerril las
fighting US soldiers).4
This won’t do. The metaphor of ‘vital signs’ derives from the medical quest to save l ives and
improve health. Yet medical practice itself continues to be dogged by the nemesis of iatrogenic
illness—the cure that is more destructive than the disease it aims to treat.
Health care reformers increasingly are attempting to redirect programs and practices to focus on
tangible evidence of the actual outcomes of treatments and services, rather than just on inputs,
intentions, and acquisition of the latest technical inventions. However, generic innovation boosters
all too commonly plow ahead in blithe indifference to the ends and consequences of innovation,
ignoring such benchmarks in the morbidly rich history of innovation-gone-awry as these:
• Theodore Kaczynski (mathematician), A.Q. Khan (physicist), Ayman al-Zawahiri and Josef
Mengele (physicians), Shiro Ishii (microbiologist), Mohammed Atta (architect), Khalid Shaikh
Mohammed and Ramzi Yousef (engineers), as well as the yet-anonymous crafter of the 2001
anthrax attacks on the United States are just a few stars in the copious rogues’ gallery of
Richard Florida’s “creative class”5 who applied their innovative intellectual ski lls to malignant
ends.
• Long-Term Capital Management, a hedge fund founded In 1994 with two winners of the Nobel
Prize in Economics on its board promised affluent investors that its arcane mathematical models
would provide risk-free, extravagant returns. In 1998, the Federal Reserve had to round up a
bailout of over $3.6 billion, fearing that LTCM’s sudden collapse would spawn a global financial
disaster. Enron Corp., founded on a gusher of, if anything, even more breathless technological
hubris—promising to replace human-managed commodity markets with exotic automated trading
exchanges—blew up in 2001 with even more disruptive economic and legal impacts.
• The Careless Technology, a 1972 collect ion of papers from a symposium on the ecological effects
of international development, concluded that the great majority of projects sponsored by
development organizations over the previous three decades had done more harm than good—a
result of their narrow, technocratic specialization and lack of attendance to broad, ecosystem
impacts.6 Three decades later, Will iam Easterly, with 16 years of experience as a senior
economist at the World Bank, again concluded in two recent books that over a trillion dollars of
technocratically managed aid to ‘third world’ countries had yielded little or no improvement in
3 Improvised Explosive Devices.4 John Robb, “Journal: Iraq’s IED micro-markets,” Global Guerillas, Feb. 14, 2006 (http://globalguerrillas.typepad.com/globalguerrillas/2006/02/journal_more_in.html)5 Richard Florida, The Rise of the Creative Class (New York: Basic Books, 2002).6 M. Taghi Farvar and John P. Milton, eds., The Careless Technology: Ecology and International Development (New York: Doubleday, 1972).
Perelman – Human-Centered Innovation � Page 4
Presented to the Innovation Vital Signs Workshop April 26-27, 2007
the lot of the poor, often doing more harm than good—again, for lack of attention to how human
ecology actually works.
So there is something more to human-centered innovation than just attending to human factors in
production, ergonomics, or market demographics. Or even engaging the ‘lead users’ Eric Von Hippel
celebrates. Those are all good practices, maybe even necessary, but are not sufficient.
However confounding it may be to innovation planning and metrics, “human-centered” has an implicit
connotation of humaneness—which in turn demands some value standards to filter ‘good’ from ‘bad’
innovation.
Such a requirement does not fit well in the pristine framework of neoclassical economics and the arid
econometric tools contrived to inform it—with their agnostic, rationally utilitarian notion of demand.
Rather, we need to look to political economy and welfare economics to find ways to manage the
human value of innovation.
There we find that managing development according to the value of its impacts and consequences is
neither a new problem nor virgin territory. The techniques for doing so have been refined and
applied for decades in such fields as environmental protection, resource management, and
transportation, workplace, food, and drug safety.
The Trend
Anecdotal indicators suggest imminent decline of the more-of-the-same approach to accelerating
innovation, that is: more inputs of money and people to education and training and to R&D; gauging
progress by the gross volume of expense, activity, and intermediate artifacts (publications, patents,
product announcements, etc.); and a ‘land rush’ mentality to stake out and defend sprawling
haciendas of intellectual property. Among the l imitations to this conventional approach to
“innovation policy” Business Week7 and other publicat ions have noted are:
• China and India will increasingly out-compete the U.S. in sheer volume of educational output,
producing technically skilled workers who can be employed at a fraction of U.S. wages.
• Because R&D, innovation, and venture capital are all mobile, they increasingly are flowing out
toward these lower-cost centers of production.
• Incomes of U.S. college graduates with bachelor degrees actually declined some 8% in the past
three years.
• Even though the U.S. has a prominent lead in medical research, for instance, the pharmaceutical,
biotech, and medical devices industries have added only 19,000 workers in the past five years.
• With foreigners providing some 40% of the science and engineering graduate students in U.S.
universities, expanding subsidies for domestic higher education to some extent simply enhances
foreign competition.
• Since 2001, the health care sector added 1.7 mill ion jobs to the U.S. economy. The rest of the
private sector added none. The information technology sector lost more than 1.1 million jobs.
• Much of the mushrooming U.S. trade deficit may be attributed to borrowing from abroad to pay
for the growing costs of health care.8
7 Michael Mandel, “Can Anyone Steer This Economy?” Business Week (November 20, 2006).8 “What’s Really Propping Up The Economy,” Business Week (September 25, 2006).
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Presented to the Innovation Vital Signs Workshop April 26-27, 2007
Meanwhile, the specific quality of innovation—at the granular microeconomic, community, and even
personal levels—seems increasingly to be becoming the definitive factor of competit ive advantage.
As Fast Company recently reported:
Design, in short, is becoming an ever more important engine of corporate profit: It’s no
longer enough simply to outperform the competit ion; to thrive in a world of ceaseless and
rapid change, businesspeople have to outimagine the competition as well. They must learn
to think—to become—more l ike designers…
Corporate types, by and large, seek to fuel growth by building from bulletproof, reproducible
systems; designers generally attempt to do so by imagining something new, different,
better.9
The Challenge
The primary challenge to promulgating a more human-centered approach to managing and
accounting for innovation then is this:
• Can we encourage innovation that adds net social value? That is, whose benefits clearly
outweigh its costs?
• At the same time, can we deter—or at least not encourage—innovation that serves malicious
ends or that poses grave threats to humanity?
Certainly it is possible to posit various metrics of the social, economic, ecological, ethical, etc. value
of diverse activities aimed at fomenting innovation, and of the potential opportunities and threats
that they pose. Coming up with indicators that are demonstrably valid, reliable, and usable is a more
demanding challenge.
While good attentions alone will not suffice, waiting for—or expecting—a perfect metric solution
would be unrealistic. A practical solution is likely to be what Herbert Simon called a ‘sat isficing’ one:
not the hopelessly elusive ‘best practice’ but a program that is adequately on target and open to
further refinement.
Inevitably the cautionary lessons of Public Choice theory will come into play: in particular, that ‘rent-
seeking’ special interests invest and compete to steer public, political choices to provide parochial
benefits, often at the expense of the general welfare. Indeed, the military-industrial complex whose
distorting influence on public investment President Eisenhower warned about half a century ago has
sprawled into a broader government-industrial complex that often steers innovation subsidies toward
wasteful, anachronistic, or harmful results.
However, the same competitive, globalization trend noted earlier that is driving the imperative for
more human-centered innovation is progressively curtail ing the ability of national governments to
insulate their domestic constituents from the demands of global market forces. The growing power
of personalization and ‘crowdsourcing’—as in the forms of the blogosphere, citizen journalism, open
source systems, or globally networked consumer or civic insurgent cells—already have as much if not
more influence on the trajectory of economic development than the Congress and its lobbyist
courtiers. In this, Von Hippel’s observations of the ‘democratization’ of innovation are certainly
germane.
9 Roger Martin, “Tough Love,” Fast Company (October 2006). Emphasis added.
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Presented to the Innovation Vital Signs Workshop April 26-27, 2007
Towards a Strategy
One way to adapt Innovation’s Vital Signs to emphasize human-centered innovation (and perhaps to
curtail wasteful or destructive innovation) is to start with a management-by-exception approach.
That is, we may start by seeking to identify:
• Glaring barriers to human-centered innovation: policies, programs, and practices that discourage
detailed attendance to human and social requirements.
• Worst practices that drive innovation efforts toward wasteful or destructive outcomes.
• Warning signs that innovation efforts are heading toward unintended, undesirable consequences.
While it is easier to identify worst practices (which are demonstrably morbid or lethal in their effects)
than best practices (which are nearly impossible to identify unambiguously, are ever mutating, and
once codified only assure mediocrity), it may be most feasible to try to identify and track certain
essential features of human-centered innovation.
For instance, following the ZIBA example mentioned earlier: Programs that engage and invest in
ethnographers, anthropologists, and other social and behavioral analysts to study user desires,
expectations, behavior, and needs first, and then channel technical design based on the resulting
insights, would seem at least more l ikely to respond successfully to human requirements than
programs that simply engineer in a vacuum of social disinterest.
So, a positive corollary to management-by-exception may be to identify some of the essential ‘habits’
of highly effective, human-centered innovators, as in the approach taken by Jim Collins in his
research for Built to Last.10
Another instructive lesson from Collins’s work is this: He invested about a half mill ion dollars in the
research on which the book was based. A similar study of the requirements of human-centered
innovation is likely to demand at least a comparable investment of resources.
ISO ‘Good’ Innovation
Even once we agree about the need to value the outcomes of innovation efforts, we need apt terminology for what we are
aiming at. 'Human-centered' served to get our conversation going, but may not be clear enough or get traction. The
most practical terminology may just be the simplest.
Getting back to our original premise, obviously, not all innovation is good or desirable. So the essential objective is to filter
the good from the bad. That is:
• Reasonable people would prefer to invest in good innovation, and to not invest in or to even discourage bad
innovation.
• To do that, one needs standards, criteria, metrics—to discriminate the good from the bad innovations.
• Then, to actually fertilize the good and weed out the bad, one needs to know the “generative factors” in
innovation programs, practices, policies, etc. that cause either the good or bad outcomes.
I suggest then that we should describe the goal of our search as either simply “good innovation” or,
to be a bit more technical-sounding, “constructive innovation” (as opposed to destructive).
10 James C. Collins and Jerry I. Porras, Built to Last: Successful Habits of Visionary Companies (New York: HarperCollins, 1997).
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Presented to the Innovation Vital Signs Workshop April 26-27, 2007
What Is ‘Good’ Or ‘Constructive’ Innovation?
Before we get on to metrics, we need to have some defensible, philosophical definition of what we mean by ‘good’ or
‘constructive.’ At the moment, there appear to be three evident possibilities:
• Hippocratic = Do no harm.
This seems to me, literally, an ideal standard, but not a very practicable one for our purposes. Even in medical practice,
where the adherence to the principle is deeply rooted, modern practice continually (increasingly perhaps) requires making
choices between greater or lesser harm in pursuit of doing something good: e.g., using technology to prolong a life
afflicted with unbearable pain and suffering vs. assisted suicide, among numerous other examples.
• Progressive = net social benefit = [(benefits - costs) > 0].
As I noted previously, this is the subject of welfare economics, rich in theory, methodology, and experience. This is less
idealistic than the Hippocratic standard, but easier to accomplish conclusively in theory than in practice. I won't belabor
the reasons here for the distortions of social welfare regulation, but will summarize them with one word: politics.
• Satisficing = pretty good = socially (i.e., politically) acceptable.
Satisficing is Herbert Simon’s term for definitely non-ideal, practical choices between ‘better’ and ‘worse.’ (In this
framework, the ‘perfect’ is proverbially held up as ‘the enemy of the good’--a phrase that is problematical because it often
is, conveniently, misapplied to choices that really are not between perfect and good but between good and bad.)
That said, I suggest that the Progressive standard should define our practical goal—because that is how satisficing
solutions work in practice. I’m simply noticing a standard axiom of negotiating strategy: Ask for the moon and settle for a
meteorite.
Metrics
The substance of our proposed investigation then is, first, identify and evaluate metrics (‘vital signs’) that discriminate
good/bad or constructive/destructive innovations. I'm about to offer an initial list of possible candidates but must note
that, to bring the study to a valid conclusion, we need to take a double-barreled approach to distill such a list.
That is, we need to begin by considering candidate indicators—assuming that whatever information each requires actually
is available. It should be evident that there are facts about the outcomes of innovation that, if we knew them, would help
us discriminate between good and bad, but that we cannot get in practice—either because the data have not been
assembled yet, or because they are proprietary or classified or too costly or otherwise not immediately accessible.
Nevertheless, since we would hope that further research may eventually stimulate the collection of the needed data, or
open up its use for our purpose, we should not exclude potentially valuable indicators at the outset.
The second barrel then will be to assess and note which of the indicators we prefer are immediately available, which can
and should be made available in the future, and which may not be practicable for the time being.
That said, here are several possible indicators of good or bad innovation for initial consideration, in no particular order:
• Market penetration (+)—more and faster is an indication of social value.
• J.D. Power rating = customer satisfaction (+).
• Recalls (-).
• Endurance—the proposition being that really great, socially valuable innovations tend to endure in the market
for a long time because they are both essential and hard to beat (the wheel, the paper clip, Kleenex, the DC-3).
Note that I'm talking about persistence-in-use here, not individual product durability. (+)
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Presented to the Innovation Vital Signs Workshop April 26-27, 2007
• Generations—a corollary to Endurance, but a bit different, is number of generations or versions, an indicator of
the capacity for continual improvement to satisfy evolving demand. (+)
• Adaptations—another corollary is adaptation to different uses/applications than what the innovation was
originally intended for; more being an indicator of greater social value. (If Generations are vertical, Adaptations
are horizontal.) (+)
• Liability claims (-).
• Regulatory sanctions (-). One of these or the latter (liability) may be an anomaly; a slew of them is probably an
indicator of something really bad.
• Cost of development—other things equal, a good innovation that costs less to create is better than one that
costs more. (Even if other things are not entirely equal, it still might be better.) (+)
• Profitability—again, other things equal, a good innovation that is more profitable is better than one that is less
so. Not just because it makes investors/vendors happier but because it provides the fuel for further
(good) innovation.
• Abuse/misuse—pseudofed may be a boon for sinus sufferers, but its utility as a feedstock for illicit
methamphetamine labs is a bad thing. This is the dark side of the Adaptation force. (-)
• Appropriateness—viz. E.F. Schumacher et al. (+)
• Resource efficiency (+).
Finally, for now, we can throw in these catch-alls:
• Collateral damage (-).
• Collateral benefits (+).
This list is certainly incomplete but may be adequate for now to illustrate the types of indicators we would assess and
refine. And we don't need to get far into the second barrel to note at a glance that some of these data are evidently
easier to get than others, and some are more concrete than others that are more ambiguous and challenging to measure.
Generative Factors
As I mentioned, to study and analyze the generative factors that enable some innovation
programs/organizations/communities to produce 'good' innovations, while others spawn more or less ugly babies, I have
begun to look into the research methodology used by Collins and Porras to produce their hugely bestselling and immensely
profitable books, Built to Last and Good to Great. Broadly, they adapted the classic human psychology technique of
studying twins separated at birth.
While that seems to have worked well for them to distinguish the generative factors that distinguish great from mediocre
companies, it’s not immediately clear how well that might work to differentiate those factors between good/great
innovations and mediocre/bad innovations. However, given the success the technique has produced in their widely prized
work, it a research approach worth considering.
There are at least some aspects of their approach that make sense to emulate. First, once we have devised a list of
innovation value indicators, per above, we could copy their decision to focus on subjects that had been around long
enough to go through a full life cycle of development. Then, just as they surveyed a variety of companies across a
spectrum of different industries, we could apply our value vector to a wide variety of types of innovations in diverse
markets.
Perelman – Human-Centered Innovation � Page 9
Presented to the Innovation Vital Signs Workshop April 26-27, 2007
At first blush, it might well be possible to come up with paired twins of innovations ‘separated at birth,’ as they did with
companies, to compare the differentiating factors in the evolutionary paths of the ‘good’ and ‘bad’ twin respectively. If so,
it could be quite interesting to try.
Still, we must recognize that innovations are different from companies—the latter are discrete entities while innovations
are ideas that may be born and developed in several places/organizations at the same time, or at least concurrently.
Intellectual property law, of course, does tie particular innovations to particular persons/companies for some time. But not
all good/great innovations historically have been protected that way, and many at least have graduated at some point to
the public domain. (It’s not clear whether that is necessary to the criterion of a ‘full life cycle,’ since IP law lately has been
stretched in some instances to preserve protection seemingly in perpetuity.)
So, in any case, whatever may come from the twin pairs analysis, we probably also should take a broad list of notable
innovations, sort them into ‘good’ and ‘bad’ with our value vector, and then do at least a qualitative comparison,
attempting to identify one or more hypothetical patterns that differ between the good and bad. To do the latter, we might
choose some candidate innovations from each pile for which the history of their creation and development is well
documented. At the very least we would produce a valuable collection of case studies. (That might follow the path taken
by Peters and Waterman with In Search of Excellence, some 25 yrs ago.)
Beyond that, there likely are some more rigorous techniques that could differentiate some the generative factors in those
histories.
Dr. Lewis Perelman has over two decades of experience as an analyst, author, and consultant to private, public, and
nonprofit organizations. He has held senior staff positions at the Jet Propulsion Laboratory, the Hudson Institute, and the
Homeland Security Institute, and for several years has been Senior Advisor with Delmarva Strategies LLC. He lives and
works in the Washington, DC area. Contact: [email protected].
© 2007, Lewis J. Perelman
A NEW GENERATION OFAMERICAN INNOVATION
A P R I L 2 0 0 4
Executive Summary America’s economy leads the world because our system of private enterprise rewards innovation. Entrepreneurs, scientists, and skilled workers create and apply the technologies that are changing our world. President Bush believes that government must work to help create a new generation of American innovation and an atmosphere where innovation thrives. On April 26, 2004, President Bush announced a series of specific measures to inspire a new generation of American innovation – policies to encourage clean and reliable energy, assure better delivery of health care, and expand access to high-speed Internet in every part of America. By giving our workers the best technology and the best training, we will make sure that the American economy remains the most flexible, advanced, and productive in the world. 1) Providing a Cleaner and More Secure Energy Future through Hydrogen Fuel Technology: The President announced that the Department of Energy has selected partners through a competitive process to fund new hydrogen research projects totaling $350 million ($575 million with private cost share) to overcome obstacles to a hydrogen economy. This represents nearly one-third of the President’s $1.2 billion commitment in research funding to bring hydrogen and fuel cell technology from the laboratory to the showroom. The projects will include 28 awards to academia, industry, and national laboratories. The new hydrogen projects address four key areas:
o Creating effective hydrogen storage: Current hydrogen storage systems are inadequate for use in the wide range of vehicles that consumers demand. Exploratory research and development is needed to overcome the grand challenge for hydrogen storage.
o Conducting hydrogen vehicle and infrastructure “learning demonstrations”: To complement laboratory research, automakers and energy companies need to work together to develop integrated technology solutions for a national infrastructure. These demonstrations will provide important performance, cost, and durability data on fuel cell vehicle and hydrogen refueling infrastructure. This new data will allow us to refocus research priorities as progress is made.
o Developing affordable and durable hydrogen fuel cells: Currently, fuel cells are as much as ten times more expensive than internal combustion engines. New cost-shared projects will be formed with five businesses to develop fuel cells for consumer electronic devices, and auxiliary power and off-road applications.
o Developing a Hydrogen Education Campaign: A new effort will aim to build the next generation workforce, engage students in science and technology, and overcome the public education and acceptance barriers to achieving the hydrogen economy.
2) Transforming Health Care through Health Information Technology: President Bush believes that innovations in electronic medical records and the secure exchange of medical information will help transform health care in America - improving health care quality, reducing health care costs, preventing medical errors, improving administrative efficiencies, reducing paperwork, and increasing access to affordable health care. The President has set an ambitious goal of assuring that most Americans have electronic health records within the next 10 years. To achieve his 10-year goal, the President is taking the following steps to urge coordinated public and private sector efforts that will accelerate broader adoption of health information technologies:
o Adopting Health Information Standards. The President called for the completion and adoption of standards, collaboratively developed with the private sector, that will allow medical information to be stored and shared electronically while assuring privacy and security.
o Doubling Funding to $100 Million for Demonstration Projects on Health Information Technology. To build upon the progress we have already made in the area of health care standardization, the President’s
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proposed FY 2005 budget includes $100 million for demonstration projects by hospitals and health care providers that will help us test the effectiveness of health information technology and establish best practices for more widespread adoption in the health care industry.
o Fostering the Adoption of Health Information Technology. As one of the largest buyers of health care, the Federal Government can create incentives and opportunities for health care providers to use electronic records.
o Creating a New, Sub-Cabinet Level Position of National Health Information Technology Coordinator. The President will charge the National Coordinator with working with government, industry, and experts in the field to help fulfill his vision of a health care system that is patient-centered and that gives patients information they need to make clinical and economic decisions – in consultation with dedicated health care professionals.
3) Promoting Innovation and Economic Security through Broadband Technology: The President has called for universal, affordable access for broadband technology by the year 2007 and wants to make sure we give Americans plenty of technology choices when it comes to purchasing broadband. Broadband technology will enhance our Nation's economic competitiveness and will help improve education and health care for all Americans. Broadband provides Americans with high-speed Internet access connections that improve the Nation’s economic productivity and offer life-enhancing applications, such as distance learning, remote medical diagnostics, and the ability to work from home more effectively. The Bush Administration has implemented a wide range of policy directives to create economic incentives, remove regulatory barriers, and promote new technologies to help make broadband affordable. The President believes that lowering the cost of broadband will increase its use and availability.
o Making broadband access tax-free will lower the cost to consumers. The President is calling on Congress to pass legislation making access to broadband permanently tax-free.
o Working to enable the rollout of new broadband technologies. The Administration is acting aggressively to make additional spectrum available for wireless broadband and to create the technical standards needed to enable the widespread and responsible deployment of broadband over power lines.
o The Federal Government must do its part to remove hurdles that slow the deployment of broadband. Broadband providers often have to cross or use Federal lands to reach consumers. To ensure that broadband providers can get timely responses from the Federal Government, the President has directed agencies to reform their practices to simplify and standardize their rights-of-way processes.
These initiatives outlined above complement the Bush Administration’s other efforts to promote innovation and technology in America. President Bush has a proven track record of supporting America’s innovation economy, including:
o Helping Community Colleges Train 100,000 Additional Workers: The President’s Jobs for the 21st Century Initiative, announced in the State of the Union Address, includes a $250 million proposal to help America’s community colleges train 100,000 additional workers for the industries that are creating the most new jobs.
o Doubling the Number of Workers Receiving Federal Job Training Assistance: The President has proposed to give governors more flexibility to get Federal training funds into the hands of workers in the form of Innovation Training Accounts (ITAs). These accounts give workers access to a range of training options that will help them compete for high-skill, high-demand jobs.
o Increasing Federal R&D Funding: With President Bush’s FY 2005 budget proposal, total Federal R&D investment during the first term will be increased 44 percent, to a record $132 billion in FY 2005, compared to $91 billion in FY 2001. Federal R&D spending in the FY 2005 budget represents the greatest share of GDP in over ten years.
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o Supporting Nanotechnology Research: Since 2001, funding for nanotechnology R&D has more than doubled to $1 billion and funding for information technology R&D is up to $2 billion.
o Ensuring Better Health Care for All Americans: President Bush fulfilled a commitment by completing the historic doubling of the National Institutes of Health (NIH) budget by 2003, dramatically increasing medical research funded by NIH to speed cures and treatments for the diseases that plague our Nation and the world. The President’s FY 2005 budget provides $28.6 billion for NIH, a $729 million increase, which will allow NIH to support a record total of nearly 40,000 research project grants.
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Hydrogen Fuel Technology: a Cleaner and More Secure Energy Future “With a new national commitment, our scientists and engineers will overcome obstacles to taking these (hydrogen fuel cell) cars from laboratory to showroom, so that the first car driven by a child born today could be powered by hydrogen, and pollution-free.”
-- President George W. Bush, State of the Union Address, January 28, 2003
For too long, environmental policy in America has been dominated by a sterile debate between those who believe that pollution is the price of progress, and those who believe that we must limit and scale back our progress. The President believes that progress, innovation, and technology can help America leapfrog beyond these false choices – and meet the energy needs of a growing economy in environmentally responsible ways.
On April 26, 2004, President Bush announced that the Department of Energy (DOE) has selected partners
through a competitive process to fund new hydrogen research projects totaling $350 million ($575 million when private sector cost-sharing is included) to overcome obstacles to the development of hydrogen fuel technology. This represents nearly one-third of the President’s $1.2 billion commitment in research funding to bring hydrogen and fuel cell technology from the laboratory to the showroom. The projects will include 28 awards to academia, industry, and national laboratories. The new hydrogen projects address four key areas:
o Creating effective hydrogen storage: Current hydrogen storage systems are inadequate for use in the
wide range of vehicles that consumers demand. Exploratory research and development is needed to overcome the grand challenge for hydrogen storage: to store the amount of hydrogen required for a conventional driving range (more than 300 miles), within the vehicular constraints of weight, volume, efficiency, safety, and cost. The Department of Energy is working to develop three primary options (chemical hydrides, metal hydrides, and carbon materials) in addition to 15 individual projects to explore new materials for hydrogen storage. Over 45 organizations will be involved, including DOE national laboratories, universities, research institutes, and industry.
o Conducting limited hydrogen vehicle and infrastructure “learning demonstrations”: To complement
laboratory research, automakers and energy companies need to work together to develop integrated technology solutions for a national infrastructure. Eight automakers and six energy companies (under five major awards) will work together with their teams under this project to demonstrate integrated and complete system solutions operating in real world environments. Government and industry are providing matching funds. Teams also include utilities, universities, and small businesses. These demonstrations will provide important data on fuel cell vehicle and hydrogen-refueling infrastructure performance, cost, and durability and allow refocusing of research priorities as progress is made. These demonstrations are critical so that all stakeholders (including Congress) can track progress towards a commercialization decision in 2015.
o Developing affordable and durable hydrogen fuel cells: Currently, fuel cells and associated systems are
as much as ten times more expensive than internal combustion engines. New cost-shared projects will be formed with five businesses to develop fuel cells for consumer electronic devices, and auxiliary power and off-road applications.
o Developing a hydrogen education campaign: In direct response to the National Energy Policy, a hydrogen
education effort will aim to build the next generation workforce, engage students in science and technology, and overcome the public education and acceptance barriers to achieving the hydrogen economy. Middle school and high school curricula and teacher training will be developed. These projects will complement current education efforts for public and safety officials at all levels.
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Background – President Bush’s Hydrogen Fuel Initiative
In his 2003 State of the Union address, the President committed $1.2 billion over five years to accelerate research and development of hydrogen fuel cell and infrastructure technologies, including $720 million in new funding. The Hydrogen Fuel Initiative aims to help reverse America’s growing dependence on foreign oil by developing the technology for commercially viable hydrogen-powered fuel cells that power cars, trucks, homes, and businesses that emit no pollution or greenhouse gases.
Through partnerships with the private sector, the Hydrogen Fuel Initiative will make it practical and cost-
effective for large numbers of Americans to choose to use clean, hydrogen fuel cell vehicles by 2020 – so the first car driven by a child born today could be powered by fuel cells. This will dramatically improve America’s energy security by significantly reducing the need for imported oil, and help clean our air and reduce greenhouse gas emissions. The President's proposal has received broad, bipartisan support in Congress.
The Hydrogen Fuel Initiative complements the President's existing FreedomCAR partnership, which is
developing technologies needed for mass production of safe and affordable hydrogen-powered fuel cell vehicles, along with other advanced vehicle technologies. In total, President Bush has proposed $1.7 billion over five years for the Hydrogen Fuel and FreedomCAR initiatives.
Budget
The President’s FY 2005 budget proposes $228 million for the Hydrogen Fuel Initiative, a $69 million increase (43%) over the FY 2004 budget.
o The FY 05 request includes $29 million for basic science within the DOE’s Office of Science and $18 million
for safety, codes, and standards activities – consistent with the program’s needs and the recently released peer review report by the National Research Council.
o The FY 05 budget request also includes an increasing emphasis on exploratory research for hydrogen production, storage, and fuel cell technologies and continued technology validation.
o A mix of diverse energy feedstocks to produce hydrogen is needed to gradually make the transition to a secure, affordable, and environmentally safe hydrogen energy system; these include renewables, nuclear, and natural gas and coal with carbon management strategies.
Fuel Cell Technology
Fuel cells are a proven technology: America's astronauts have used fuel cells to generate electricity since the 1960s, but more work is needed to make them cost-effective for use in cars, trucks, homes, or businesses. Additional research and development is needed to spur rapid commercialization of these technologies so they can provide clean, domestically produced energy for transportation and other uses.
The President's initiatives seek to help the private sector overcome key technical and cost barriers for
fuel cells:
o Lowering the cost of hydrogen: Hydrogen is four times as expensive to produce as gasoline (when produced from its most affordable source, natural gas). The hydrogen fuel initiative seeks to lower that cost enough to make fuel cell cars cost-competitive with conventional gasoline-powered vehicles by 2015; and to advance the methods of producing hydrogen from renewable resources, nuclear energy, and even coal.
o Creating effective hydrogen storage: Current hydrogen storage systems are inadequate for use in the wide range of vehicles that consumers demand. New technology is needed.
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o Creating affordable hydrogen fuel cells: Fuel cell-based propulsion is now as much as ten times more expensive than internal combustion engines. The FreedomCAR initiative is working to reduce that cost to affordable levels.
America's dependence on foreign oil is increasing:
o America imports more than 55 percent of the oil it consumes; that is expected to grow to 70 percent by 2025. o Nearly all of our cars and trucks run on gasoline, and they are the main reason America imports so much oil.
Two-thirds of the 20 million barrels of oil Americans use each day is used for transportation. Fuel cell vehicles offer the best hope of dramatically reducing our dependence on foreign oil.
Hydrogen fuel will help reduce America's dependence on energy imports:
o Through the Hydrogen Fuel and FreedomCAR initiatives, the Federal Government, automakers and energy
companies will work together to overcome the technological and financial barriers to the successful development of commercially viable, emissions-free fuel cell vehicles that require no foreign oil.
o Hydrogen is domestically available in abundant quantities as a component of natural gas, coal, biomass, and even water.
o The Department of Energy estimates that the Hydrogen Fuel and FreedomCAR initiatives may help reduce our demand for petroleum by over 11 million barrels per day by 2040 – approximately the amount of oil America imports today.
Fuel cells will improve air quality and dramatically reduce greenhouse gas emissions:
o Vehicles are a significant source of air pollution in America. Hydrogen fuel cells create electricity to power cars without any tailpipe pollution.
o The hydrogen fuel and FreedomCAR initiatives may reduce America's greenhouse gas emissions from transportation alone by more than 500 million metric tons of carbon equivalent each year by 2040. Additional emissions reductions could be achieved by using fuel cells in applications such as generating electricity for residential or commercial uses.
Hydrogen is the key to a cleaner energy future:
o It has the highest energy content per unit of weight of any known fuel. o When burned in an engine, hydrogen can produce effectively zero emissions; when powering a fuel cell, its
only waste is water. o Hydrogen can be produced from abundant domestic resources including natural gas, coal, biomass, and
even water. o Combined with other technologies such as carbon capture and storage, renewable energy, and fusion
energy, fuel cells could help make an emissions-free energy future possible.
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Transforming Health Care: The President’s Health Information Technology Plan “By computerizing health records, we can avoid dangerous medical mistakes, reduce costs, and improve care.”
--President George W. Bush, State of the Union Address, January 20, 2004
President Bush has outlined a plan to ensure that most Americans have electronic health records within the next 10 years. The President believes that better health information technology is essential to his vision of a health care system that puts the needs and the values of the patient first and gives patients information they need to make clinical and economic decisions – in consultation with dedicated health care professionals.
The President’s Health Information Technology Plan will address longstanding problems of preventable
errors, uneven quality, and rising costs in the Nation’s health care system. The Problem: Challenges to the U.S. Health Care System
The U.S. health care system has a long and distinguished history of innovation. Discoveries move from the laboratory bench to the bedside, as basic research results are translated into new understanding of diseases, better diagnostic tools, and innovative treatments.
At the same time, our health care system faces major challenges. Health care spending and health insurance
premiums continue to rise at rates much higher than the rate of inflation. Despite spending over $1.6 trillion on health care as a Nation, there are still serious concerns about preventable errors, uneven health care quality, and poor communication among doctors, hospitals, and many other health care providers involved in the care of any one person.
o The Institute of Medicine estimates that between 44,000 and 98,000 Americans die each year from medical
errors. Many more die or have permanent disability because of inappropriate treatments, mistreatments, or missed treatments in ambulatory settings. Studies have found that as much as $300 billion is spent each year on health care that does not improve patient outcomes – treatment that is unnecessary, inappropriate, inefficient, or ineffective.
All these problems – high costs, uncertain value, medical errors, variable quality, administrative inefficiencies,
and poor coordination – are closely connected to our failure to use health information technology as an integral part of medical care. The innovation that has made our medical care the world’s best has not been applied to our health information systems. Other American industries have harnessed advanced information technologies, to the benefit of American consumers. Our air travel is safer than ever, and consumers now have ready and safe access to their financial information. Unlike these other industries, medicine still operates primarily with paper-based records. Our doctors and nurses have to manage 21st century medical technology and complex medical information with 19th century tools. America’s medical professionals are the best and brightest in the world, and set the standard for the world. It is a testament to their skill that they are able to achieve high-quality care in this antiquated system. In this outdated, paper-based system:
A patient's vital medical information is scattered across medical records kept by many different caregivers in many different locations – and all of the patient’s medical information is often unavailable at the time of care. For example, patients with medical emergencies too often are seen by doctors with no access to their critical medical information, such as allergies, current treatments or medications, and prior diagnoses.
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Physicians keep information about drugs, drug interactions, managed care formularies, clinical guidelines, and recent research in memory – a difficult task given the high volume of information.
o
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Medical orders and prescriptions are handwritten and are too often misunderstood or not followed in accordance with the physician’s instructions. Consumers lack access to useful, credible health information about treatment alternatives, which hospitals and physicians are best for their needs, or their own health status. Physicians do not always have the best information to select the best treatments for their patients, resulting in an unacceptable lag time before new scientific advances are used in patient care. They also do not have ready access to complete information about their patients, do not know how other doctors are treating their same patients, or how other health care providers around the country treat patients with the same condition. These conditions set the stage for preventable medical errors.
The Solution – Health Information Technology
Today, the President announced an ambitious goal of assuring that most Americans have electronic health records within the next 10 years.
o Within the next 10 years, electronic health records will ensure that complete health care information is
available for most Americans at the time and place of care, no matter where it originates. Participation by patients will be voluntary.
o These electronic health records will be designed to share information privately and securely among and between health care providers when authorized by the patient.
President Bush believes that innovations in electronic health records and the secure exchange of medical information will help transform health care in America - improving health care quality, preventing medical errors, reducing health care costs, improving administrative efficiencies, reducing paperwork, and increasing access to affordable health care.
The steps we need to take across the Nation are already underway in some places. Health information technologies – electronic medical records, computerized ordering of prescriptions and other medical tests, clinical decision support tools, and secure exchange of authorized information – improve quality, reduce medical errors, and prevent deaths. In the past three years, some communities, hospitals, clinicians, patient groups, and information technology companies have acted to improve their health information systems. These pioneering communities are taking the initiative and showing that health care can and must be modernized.
The President envisions a dramatically changed system:
When arriving at a physician’s office, new patients do not have to enter their personal information, allergies, medications, or medical history, since it is already available. A parent, who previously had to carry the child’s medical records and x-rays in a large box when seeing a new physician, can now keep the most important medical history on a keychain, or simply authorize the new physician to retrieve the information electronically from previous health care providers. Arriving at an emergency room, a senior with a chronic illness and memory difficulties authorizes her physicians to access her medical information from a recent hospitalization at another hospital - thus avoiding a potentially fatal drug interaction between the planned treatment and the patient’s current medications. Three patients with unusual sudden-onset fever and cough that would not individually be reported, show up at separate emergency rooms, and the trend is instantly reported to public health officials, who alert authorities of a possible disease outbreak or bioterror attack.
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The President’s Health Information Technology Plan
To achieve his 10-year goal, the President is taking the following steps to urge coordinated public and private sector efforts that will accelerate broader adoption of health information technology:
o Adopting Health Information Standards. The President called for the completion and adoption of
standards that will allow medical information to be stored and shared electronically while assuring privacy and security. The necessary work is already well underway and much of it has already been completed. In the last several years, the Department of Health and Human Services (HHS) has been collaborating with the private sector and other Federal agencies to identify and endorse voluntary standards that are necessary for health information to be shared safely and securely among health care providers. Federal agencies are accelerating their use of these standards. As part of this effort, HHS has recently negotiated and licensed a comprehensive medical vocabulary and made it available to everyone in the Nation at no cost. The results of these projects include standards for: Transmitting X-Rays Over the Internet: Today, a patient’s chest x-ray can be sent electronically from a
hospital or laboratory and read by the patient’s doctor in his office. Electronic Laboratory Results: Laboratory results can be sent electronically to the physician for
immediate analysis, diagnosis and treatment, and could be automatically entered into the patient’s electronic health record if one existed. For example, a doctor could retrieve this information for a hospitalized patient from his office, assuring a prompt response and eliminating errors and duplicative testing due to lost laboratory reports.
Electronic Prescriptions: Patients will save time because prescriptions can be sent electronically to their pharmacists. By eliminating illegible handwritten prescriptions, and because the technology automatically checks for possible allergies and harmful drug interactions with other drugs, standardized electronic prescriptions help to avoid serious medical errors. The technology also can generate automatic approval from a health insurer.
o Doubling Funding to $100 Million for Demonstration Projects on Health Care Information Technology.
To build upon the progress already made in the area of health information technology standards over the last several years, the President’s proposed FY 2005 budget includes $100 million for demonstration projects that will help us test the effectiveness of health information technology and establish best practices for more widespread adoption in the health care industry. This increase builds on the President’s FY 2004 budget which included $50 million, and these new
resources will support more local and regional grants so that pioneering communities, physicians, and hospitals can show that health care can be transformed by adopting and implementing health information technology.
In April 2004, more than 600 applications for funding were received for these grants, and HHS will be awarding grants this summer, following their peer-reviewed process for selecting grantees.
o Using the Federal Government to Foster the Adoption of Health Information Technology. As one of
the largest buyers of health care – in Medicare, Medicaid, the Community Health Centers program, the Federal Health Benefits program, Veterans medical care, and programs in the Department of Defense – the Federal Government can create incentives and opportunities for health care providers to use electronic records, much like the private sector is doing today. The President will direct these agencies to review their
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policies and programs and propose modifications and new actions, and to forward the recommendations to him within 90 days.
o Creating a New, Sub-Cabinet Level Position of National Health Information Technology Coordinator.
The President announced that he is creating a new sub-Cabinet level post at HHS, to provide national leadership and coordination necessary to achieve his 10-year goal. The individual will report directly to the HHS Secretary, and will be charged by the President with:
Guiding ongoing work on health information standards and working to identify and implement the various
steps needed to support and encourage health information technology in the public and private health care delivery systems.
Coordinating partnerships between government agencies and private sector stakeholders to speed the adoption of health information technology.
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Promoting Innovation and Economic Security Through Broadband Technology “This country needs a national goal for…the spread of broadband technology. We ought to have…universal, affordable access for broadband technology by the year 2007, and then we ought to make sure as soon as possible thereafter, consumers have got plenty of choices when it comes to [their] broadband carrier.”
--- President George W. Bush, March 26, 2004
Broadband provides Americans with high-speed Internet access connections that improve the Nation’s economic productivity and offer life-enhancing applications, such as distance learning, remote medical diagnostics, and the ability to work from home more effectively.
Consistent with this vision, the Administration has a record of comprehensive and demonstrably
effective broadband initiatives that are creating an economic and regulatory climate in which broadband can flourish. Developing the most competitive broadband market in the world will provide American consumers with the most affordable and highest quality broadband service in the world.
Broadband technology will enhance our Nation’s economic competitiveness and will help improve
education and health care for all Americans. The Bush Administration has implemented a wide range of policy directives to create economic incentives, remove regulatory barriers, and promote new technologies, all of which are essential to making broadband competitively available and affordable.
Creating Economic Incentives
In an effort to spur investment, the President signed into law a jobs and growth package that allowed companies to depreciate capital expenditures more quickly, including capital equipment used for broadband deployment. Companies are more likely to make important investments in broadband technology if they can depreciate the capital costs associated with broadband rollout more quickly.
President Bush is committed to making broadband affordable. The President has signed into law a two-
year extension of the Internet Access Tax moratorium and has called on Congress to pass legislation that would explicitly extend the moratorium to broadband and make the moratorium permanent. Taxing broadband access would increase the cost of broadband for consumers.
Removing Regulatory Barriers
The Administration supports the Federal Communications Commission’s (FCC) decision to free new fiber-to-the-home investments from legacy regulations. Deregulating new ultra-fast broadband infrastructure to the home removes a significant barrier to new capital investments.
On April 26, 2004, the President signed an Executive Memorandum that implements Federal rights-of-way
reforms to streamline the process for broadband providers to get access to Federal lands to build high-speed infrastructure. The reforms will help to minimize burdens on industry by simplifying and standardizing the rights-of-way process across all relevant agencies, while allowing agencies to use their resources wisely.
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Promoting Innovation
The Administration has made unprecedented strides in balancing the commercial spectrum needs of critical government agencies (including Department of Defense, Department of Transportation, and Department of Homeland Security) and commercial interests. The Administration has identified 90 MHz of spectrum to be auctioned for next generation wireless services.
o Currently only one wireless carrier is offering wireless broadband. Once the 90 MHz is auctioned, multiple
wireless carriers will have the opportunity to become broadband carriers – stimulating vigorous competition and bringing lower prices and improved services to consumers.
o The Administration has nearly doubled the amount of spectrum available for innovative wireless broadband applications such as Wi-Fi and Wi-Max. These technologies can provide a range of new services from granting consumers broadband access in restaurants, airports and other public places, to providing an economically viable solution for providing broadband services in rural areas.
o To ensure these technologies continue to develop, the Department of Commerce’s National Institute of Standards and Technology is chairing the Wi-Max standard setting body.
o To build on this record of success, the President has launched an initiative to create a Spectrum Policy for the 21st Century. The Department of Commerce is scheduled to deliver a report to the President this summer on how to improve spectrum management.
The Administration is working to enable the rollout of broadband technology. The Department of
Commerce is developing the technical specifications necessary to enable the widespread and responsible deployment of broadband over powerlines (BPL). Having conducted 10 million measurements of BPL systems, the Department of Commerce will be able to chart the clear technical path forward for BPL to coexist with other critical uses of spectrum. Once deployed, BPL has the potential to turn every electrical outlet into a broadband pipeline.
The President supports investment in research and development and has proposed the largest Federal
R&D budget in history, $132 billion in Fiscal Year 2005. Federal research and development help lay the foundation for advances in broadband technologies. In FY 2005, the National Information Technology Research and Development (NITRD) program is budgeted for $2.0 billion and includes research directly related to broadband technology. The President proposed making permanent the Research and Experimentation Tax Credit, which promotes private sector investment in new technologies such as broadband.
Important Facts about Broadband:
Broadband is high-speed Internet access. Broadband in the United States is “always-on,” allowing a computer to remain connected to the Internet 24
hours a day. Distance learning, remote medical procedures, interactive web teleconferencing, and real-time video and
audio all require Internet speeds beyond what traditional dial-up service can offer. Broadband has grown from just over 7 million subscriber lines in December 2000 to almost 24 million in June
2003, a 230 percent increase. Consumers are adopting broadband faster than they have adopted other technologies such as color
televisions, wireless phones, VCRs, and personal computers. Approximately 90 percent of all U.S. zip codes have access to at least one form of wireline broadband
connection (cable modem or DSL), up from just over 70 percent at the end of 2000. 75 percent of zip codes in the United States have access to broadband through both cable modem and DSL.
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Better Education for Better Jobs
America’s growing economy is a changing economy, and we must respond to these changes by helping more Americans gain the skills to find good jobs in our 21st Century economy.
President Bush has announced a plan to better prepare students for success in higher education and the
job market – including $33 million for expanded Pell Grants for low-income students who complete rigorous coursework in high school and scholarships for low-income students who pursue degrees in math and science.
The President’s plan will improve the quality of education at our Nation’s high schools – including $100
million to help striving readers and $120 million to improve math education. The President’s plan also strengthens and modernizes vocational and technical education, expands math and science education for all students, encourages students to take a rigorous high school curriculum, and enables educators to determine whether high schools are graduating students with the skills they need to succeed.
No Child Left Behind
To help the youngest Americans receive a quality education and learn the basic skills they will need to succeed in the future, President Bush proposed and signed into law the No Child Left Behind Act. All skills begin with the basics of reading and math, which should be learned in the early grades. Yet for too long, for too many children, those skills were never mastered. With the bipartisan No Child Left Behind Act, we are making progress toward educational excellence for every child. o Requiring states to set clear standards for what every child should learn – and taking steps to help each child
learn. o Holding schools accountable for student progress by regularly testing in the fundamental subjects of reading
and math. o Reporting results to parents and ensuring they have better options when schools are not performing. o Providing more funding – a 49% increase in Federal support for elementary and secondary education since
2001.
The Next Steps in Helping Young Americans Get the Skills They Need to Succeed in the 21st Century
The No Child Left Behind Act is providing accountability and resources to improve the achievement of America’s elementary and secondary students. These reforms are already beginning to show results in elementary reading and math scores, but President Bush also wants to ensure that all high school students will be better prepared to pursue higher education or enter the workforce. Unfortunately, recent results from the National Assessment of Educational Progress (NAEP) demonstrate that, while achievement for our Nation’s 4th and 8th graders is on the rise, scores for twelfth graders have declined in both reading and mathematics.
o Only 24 states require at least three years of math, and only 21 states require at least three years of science. o Because their math and science education is lacking, young Americans stand to miss out on job
opportunities, will lack the necessary skills for post-secondary study, or will not complete post-secondary study in a timely manner.
o Students who fall behind in reading have a greater chance of dropping out of high school altogether. Nationally, of one-hundred ninth-graders, only 67 will graduate from high school on time, only 38 will directly enter college, only 26 are still enrolled their sophomore year, and only 18 will end up graduating from college.
o U.S. 12th graders performed among the lowest of the 21 countries assessed in both math and science on the Third International Mathematics and Science Study.
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The President’s Solution High School
Striving Readers: The Administration is proposing a new $100 million Striving Readers Initiative that would make competitive grants to develop, implement, and evaluate effective reading interventions for middle or high school students reading significantly below grade level. This program would complement the Reading First State Grants program, which provides comprehensive reading instruction for children in kindergarten through third grade that is grounded in scientifically-based reading research. The proposal would provide funds to approximately 50 to 100 school districts for reading intervention programs to help middle and high school students catch up to their peers in reading.
Math: The Administration is proposing a $120 million increase for the Mathematics and Science Partnership
program authorized in the No Child Left Behind Act. The increase would support direct Federal competitive grants to partnerships to increase achievement in mathematics for secondary students. The new 3-year competitive grants would support projects that have significant potential to accelerate the mathematics achievement of all secondary students, but especially low-achieving students. The initiative would focus on ensuring that States and school districts implement professional development projects for mathematics teachers that are strongly grounded in research and that help mathematics teachers strengthen their skills.
Advanced Placement: Advanced Placement programs not only encourage the growth of Advanced Placement
(AP) and International Baccalaureate (IB) courses, but also serve as a mechanism for upgrading the entire high school curriculum for all students. The Administration is proposing a $28 million increase for the Advanced Placement program authorized in the No Child Left Behind Act bringing spending on it to nearly $52 million a year. The increase in funds will ensure that teachers in low-income schools are well-trained to teach AP and IB courses.
Adjunct Teacher Corps: Many school districts need opportunities and the personnel to strengthen instruction in
middle and high schools in the core academic subjects, especially mathematics and science. The Adjunct Teacher Corps would help alleviate this critical situation by bringing professionals with subject-matter knowledge and experience into the classroom. The Administration is proposing a new $40 million initiative to provide competitive grants to partnerships of school districts and public or private institutions to create opportunities for professionals to teach middle and high school courses in the core academic subjects, particularly in mathematics and science.
State Scholars: The Administration proposes $12 million in funding for the State Scholars program to make
grants available nationwide. In August 2002, President Bush announced the State Scholars Initiative, modeled on the successful Texas Scholars program, to encourage high school students to take more rigorous high school courses. Under the State Scholars Initiative, 12 States have already received assistance in developing and promoting strong courses of study, as well as providing special incentives for students enrolled in these programs.
Strengthening and Modernizing Support for Vocational Education: The major federal program for
vocational education, the Perkins Vocational Education program, has remained fundamentally unchanged since its founding in 1917; President Bush proposes to modernize this pre-World War I program to better serve the needs of the 21st century worker. The President’s proposal redirects $1 billion in annual funding from the Perkins Vocational Education program into a new Secondary and Technical Education program (Sec Tech) and requires
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that schools participating in the program offer 4 years of English, 3 years of math and science, and 3½ years of social studies as part of their vocational education curriculum.
Assessing Whether High Schools Are Producing Educated Graduates: To ensure that students graduating
from high school have the skills they need to succeed in post-secondary education or careers, the President’s plan would include 12th graders in the National Assessment of Educational Progress (NAEP). Currently, states are required to participate in the NAEP in 4th and 8th grades in reading and math every two years. Extending this requirement to 12th grade will enable educators to assess whether high schools are meeting the needs of students so they can learn the skills they will need to succeed. It will also help to identify areas where they are not meeting the needs of students and to strengthen curricula to ensure improvement in those areas.
Higher Education
Enhanced Pell Grants: The Bush Administration proposes to establish a $33 million program to enhance Pell Grants to reward low-income students who participate in the State Scholars Program by taking a rigorous high school curriculum. This program would provide up to an additional $1,000 per year to students in the first two years of college who complete the rigorous State Scholars curriculum in high school, enroll in college full time, and are Pell Grant recipients. Next year, approximately 36,000 low-income graduating high school seniors would be eligible to receive an enhanced Pell Grant under this proposal.
Presidential Math and Science Scholars Fund: To ensure that America remains the world leader in the
innovation economy – and to ensure that America’s graduates have the training they need to compete for the best jobs of the 21st century – President Bush wants to expand opportunities for math and science education in colleges and universities. The President proposes establishing a new public-private partnership to provide $100 million in grants to low-income students who study math or science. Under this plan, approximately 20,000 low-income students would receive up to $5,000 each to study math or science. Students would have to be eligible for Pell Grants to receive this additional $5,000, although this new fund would be run separately from the Pell Grant program.
o The cost of this new initiative would be offset by an important reform to the Pell Grant program. Currently,
there is no limit on the number of years an individual can receive a Pell Grant to help pay for an undergraduate degree. The Administration proposes an 8-year equivalent time limit for a 4-year equivalent degree and a 4-year equivalent time limit for a 2-year equivalent degree. This reform would encourage students to finish sooner and eliminate abuse of the program where students extend their studies excessively.
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Making Federal Job Training Work Better for America’s Workers
President Bush is committed to providing America’s workers with better training for better jobs. Job training for American workers is more important than ever, and we need a new way of delivering job training in America.
America’s growing economy is a changing economy, and some workers need new skills to succeed.
Today’s economy is an innovation economy. Two-thirds of America’s economic growth in the 1990s resulted from the introduction of new technologies – and 60% of the new jobs of the 21st century require skills held by only one-third of America’s workforce. We need to close the skills gap in America. Not enough workers are being trained quickly enough to take advantage of many of the new jobs that are being created. The Federal government provides state and local governments $4 billion through the Workforce Investment Act (WIA), but only 206,000 adults were trained last year.
President Bush has proposed significant reforms to Federal worker training programs to double the
number of workers receiving job training, to ensure those programs work better for America’s workers, and to close the skills gap so we fill every high growth job with a well-trained American worker. The President has proposed reforming major Federal job training programs to put strict limits on overhead to ensure tax dollars support training for workers who need it. And, he has called for giving workers personal job training accounts called Innovation Training Accounts (ITAs).
Background on the President’s Job Training Initiative
The Problem: Currently, the Federal government spends almost $23 billion for more than 30 programs spread across 10 departments and agencies. The result is a confusing hodgepodge of programs, some of which have remained fundamentally unchanged for decades, and administrative costs that prevent too many dollars from getting to the workers who need training the most.
o Bureaucracy: The programs in place to train workers are out-of-date, overlapping, and ineffective. Too
often, red tape and administrative costs eat up job training money before it even gets to workers. For example, the Department of Labor found that one of its One-Stop Career Centers was using less than 10% of its Federal money for training displaced workers. Most of the funds went to administrative costs—not training workers. President Bush believes that every dollar spent on unnecessary bureaucracy is a dollar taken out of the pocket of a worker who needs job training.
o Complexity: Job training programs are set up with so many rules that many workers, potential employers, and local community colleges do not participate. For example, 30 states have been granted temporary relief from these requirements so they don’t lose their link with community colleges. However, there are limits to what we can do under the current law. President Bush recognizes that the best training is not filling out forms – it is learning on the job or at a community college.
o Limited Accountability: Currently, there is no clear standard or benchmark to measure the effectiveness of federal job training programs. Federal grants to states for job training have 17 different measurements of accountability. President Bush proposes to refocus these programs on the end results that matter most to America’s workers – Did you get a job? How long did you keep it? And how much are you being paid?
o Failure to teach skills in demand: Remarkably, even though the law requires it, many job training programs do not assess what skills are in demand for jobs in the worker’s area. Instead, workers are moved through the system with little regard for whether they will have a realistic chance at a job when they complete training. President Bush believes we should be training workers for jobs in sectors of the economy that are most likely to grow.
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The President’s Solution o Less Red Tape and More Help for Workers: The President’s plan establishes a clear goal that the vast
majority of job training dollars should go to the workers who need them – rather than to bureaucratic overhead. Currently, administrative expenses are capped at 15%, but regulatory loopholes allow too many of our training dollars to be spent on bureaucracy and other non-training services. The President’s goal is to double the number of workers receiving job training by maximizing the available Federal dollars going to workers and eliminating unnecessary overhead costs.
o New Innovation Training Accounts (ITAs): The President proposes new Innovation Training Accounts
to provide workers with more flexible and responsive assistance. Workers would have more job training choices – they would be able to use community colleges, private-sector training providers, local businesses, or community organizations – to get the help they need in the most effective and efficient way possible. These ITAs would give states considerable flexibility to tailor training programs to the unique economic conditions of each state. ITAs would consolidate 4 major training and employment grant programs totaling $4 billion into a single grant, eliminating unnecessary overhead costs and making Federal support more effective and efficient.
o More Accountability: Under the President’s plan, states would be given more flexibility to design their
own workforce training programs. But they would also be required to set clear goals and outcomes focused on the number of workers placed in jobs, the duration of the job placement, and the earnings of the job. The President proposes consolidating the number of state performance goals of the Federal job training system from 17 to 3. Under the new goals, accountability will be determined by asking these questions: How many people are finding work? How much are workers earning in their new jobs? How long are they staying in these jobs?
o Jobs for the 21st Century Initiative: The President’s Jobs for the 21st Century Initiative, announced in the
State of the Union Address, includes a $250 million proposal to help America’s community colleges train 100,000 additional workers for the industries that are creating the most new jobs. This expands the Department of Labor’s successful High Growth Job Training Initiative, launched under President Bush in 2001, which has provided $71 million in 38 partnerships nationwide between community colleges, public workforce agencies, and employers. These initiatives help community colleges produce graduates with the skills most in demand by local employers.
o Personal Reemployment Accounts: The President has also proposed $50 million for a pilot program of
accounts of up to $3,000 for those unemployed workers who have the most difficulty finding jobs to use toward job training, transportation, childcare, or other assistance in obtaining a new job. Workers who found a job quickly would be able to keep the balance of the account as a reemployment bonus.
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FEDERAL LABORATORY CONSORTIUM FOR TECHNOLOGY TRANSFER
STRATEGIC PLAN FOR 2009
Federal Laboratory Consortium for Technology Transfer 1001 Connecticut Ave., NW
Suite 735 Washington, DC 20036 202-296-7201 (phone)
202-296-7203 (fax) www.federallabs.org
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FOREWORD
The Federal Laboratory Consortium for Technology Transfer (FLC) regularly reviews and updates its Strategic Plan, the purpose of which is to enhance the FLC’s role as the nation’s leader in technology transfer. The FLC Strategic Plan for 2009, which was approved by the Executive Board in July 2008, has helped the FLC accomplish this by ensuring that the Consortium provides the highest level of services to its members, as well as effective outreach to and coordination with all of its customers, including federal agencies and laboratories, industry, academia, state and local governments, and other nongovernmental technology transfer organizations.
In conjunction with the FLC Strategic Plan for 2009, the FLC, as part of an ongoing effort to improve its ability to meet the needs of its customers, developed a detailed “Execution Plan for the FLC Strategic Plan” that details how the goals and objectives identified in the Strategic Plan will be implemented. This focused approach will help the Consortium ensure that technology transfer remains a vital force in helping the U.S. economy maintain its leadership in the 21st
century global economic environment.
The FLC Strategic Plan for 2009, and the “Execution Plan for the FLC Strategic Plan,” were developed by the Planning and Policy Committee and approved for implementation by the Executive Board in July 2008.
J. Susan Sprake Planning and Policy Committee Chair
July 2008
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OVERVIEW
This document presents the Strategic Plan for the Federal Laboratory Consortium for Technology Transfer (FLC). It sets forth the FLC’s vision, mission, goals and objectives. It includes an attached “Execution Plan for the FLC Strategic Plan,” which details the action program, including specific activities, schedules, and responsible individuals, through which the FLC will implement its Strategic Plan.
VISION
The FLC, a nationwide network of more than 700 federal laboratories representing 17 departments and agencies, will be the nationally recognized leader for technology transfer. The FLC will provide the highest quality services and products to its membership so as to:
Educate and train federal technology transfer professionals.
Link technologies with laboratory missions and the marketplace.
Enable federal laboratories to facilitate the transfer of federally funded technology to nonfederal sectors, such as U.S. business and state and local governments.
Facilitate the effective and efficient application of federal research and development (R&D) resources to federal agency missions.
Facilitate the use of incoming technology to help meet federal agency missions.
Provide opportunities for its member laboratories to collaborate with the private and public sectors.
MISSION
The FLC was formally chartered in 1986 by the Federal Technology Transfer Act (P.L. 99-502) to help implement the nation’s national technology transfer policy. In accordance with its legislative mandate, which is codified in 15 United States Code (USC) 3710, the FLC will facilitate federal technology transfer by providing the forum for education, training, and laboratory networking to enhance professional development and to encourage excellence in federal technology transfer in order to assist federal agencies, laboratories, and their partners in the private sector to accomplish the rapid integration of R&D resources into the mainstream of the U.S. economy.
The FLC activities authorized by the Federal Technology Transfer Act of 1986 and codified in 15 USC 3710(e) are:
Develop and administer technology transfer techniques, training courses, and materials to increase the awareness of federal laboratory employees regarding the commercial potential of laboratory technology and innovations.
Provide advice and assistance to federal agencies and laboratories for use in their technology transfer programs.
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Provide a clearinghouse for requests for technical assistance from state and local governments, business, industrial development organizations, and not-for-profit organizations, including universities, federal agencies and laboratories, and other persons.
Facilitate communication and coordination between Offices of Technology Applications (ORTAs) at federal laboratories.
Utilize the expertise and services of the National Science Foundation, the Department of Commerce, NASA, and other federal agencies as necessary.
Facilitate the use of appropriate technology transfer mechanisms.
Assist laboratories with establishing programs using technical volunteers to provide technical assistance to local communities.
Facilitate communication and cooperation between federal laboratory ORTAs and regional, state, and local technology transfer organizations.
Assist colleges and universities, businesses, nonprofit organizations, state and local governments, and regional organizations with establishing programs to stimulate research and to encourage technology transfer in such areas as:
Technology program development Curriculum design Long-term research planning Personnel needs projections Productivity assessments.
Seek advice in each FLC region from representatives of state and local governments, large and small businesses, universities, and other appropriate persons on the effectiveness of the technology transfer program.
Work with the Director of the National Institute on Disability and Rehabilitation Research to compile a compendium of current and projected federal laboratory technologies and projects with an impact on assistive technology for individuals with disabilities.
GOALS AND OBJECTIVES
To realize its vision and accomplish its mission, the FLC has developed strategic goals and objectives designed to provide the necessary environment, organization, and technology transfer mechanisms to facilitate the fullest possible use of federally sponsored R&D by potential users in the public and private sectors. The FLC’s goals and objectives, which are fully detailed in the “Execution Plan for the FLC Strategic Plan,” are summarized and described as follows:
Strategic Goal 1—Develop FLC Members to Be Leaders in Technology Transfer
Strategic Objective 1-1—Provide and promote networking opportunities between FLC members and external organizations through national and regional meetings, partnering with other technology transfer organizations, and utilizing innovative networking tools. Strategic Objective 1-2—Provide technology transfer education and training opportunities for FLC members by implementing national and regional education and training events, developing onsite and Internet-based technology transfer courses, providing technology transfer resource materials, developing a professional development curriculum, and developing and maintaining databases of education and training resources and technology transfer mechanisms and procedures.
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Strategic Objective 1-3—Promote a national and regional FLC technology transfer awards program recognizing outstanding technology transfer accomplishments by individuals and member laboratories/agencies.Strategic Objective 1-4—Provide a membership and communications program that optimizes awareness of the FLC and technology transfer by providing resources and services to enable members and partners to learn about the FLC, technology transfer, and member capabilities; and enhancing new member outreach efforts.
Strategic Goal 2—Foster the Environment for Technology Transfer
Strategic Objective 2-1—Enhance access to federal technologies and facilities through participation in trade shows, publication of success stories, links to FLC contacts and resources, and promotion of laboratory events. Strategic Objective 2-2—Maintain a comprehensive system of communications through a publications program for members, potential members and partners, including industry; annual reports to Congress on the FLC’s technology transfer activities; a proactive outreach program to the communications media regarding technology transfer efforts and events; and enhancement of electronic communications activities, including the FLC website.Strategic Objective 2-3—Assist state and local governments, regional organizations, and academia to encourage technology transfer by establishing a formal mechanism for interaction between states and federal laboratories, with the explicit mission of developing funded strategic technology-based economic development initiatives.; and creating a brand for federal laboratories as a key contributor to technology-based regional economic development.Strategic Objective 2-4—Identify potential alliances by enhancing coordination/cooperation with professional organizations and trade unions and enhancing the FLC’s efforts to develop national technology initiatives in partnership with external organizations.
Strategic Goal 3—Enhance the Professional Organization Structure of the FLC
Strategic Objective 3-1—Increase FLC membership and participation through a formal membership committee structure, enhancing recordkeeping, increasing member involvement in the voting process, and increasing member participation in national and regional meetings.Strategic Objective 3-2—Plan for leadership development by establishing criteria for leadership positions, examining potential changes to the FLC bylaws, and developing an FLC Leadership Training Plan.Strategic Objective 3-3—Improve organizational structure by investigating engaging a full-time professional executive director and examining the benefits of reorganizing the Executive Board.Strategic Objective 3-4—Improve the FLC’s management process and communication by integrating strategic, operational, and financial planning activities; establishing an official calendar of regular, ongoing events, venues, and themes; and improving communication with the FLC’s constituency, including Congress, Agency
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Representatives, and laboratory directors.
EXECUTION PLAN FOR THE FLC STRATEGIC PLAN
In order to implement the Strategic Plan, the FLC developed an operational plan entitled the “Execution Plan for the FLC Strategic Plan,” which provides a detailed, coordinated approach to the tasks required to implement the goals and objectives described in the Strategic Plan. The Execution Plan identifies each strategic goal and objective described in the Strategic Plan and the FLC executive responsible for its accomplishment; describes the actions (“action statement”) required to implement the objective and identifies the responsible action leader; and spells out the detailed tasks (“execution action”), including start, due, and completion dates, required to accomplish the action statement.
GEMI1155 15th Street, NW, Suite 500 Washington, DC 20005 U.S.A.P: 202-296-7449 www.gemi.org
The Global Environmental Management Initiative (GEMI)
GEMI: A Case for Corporate Leadership – Two Decades of Environmental, Health and Safety (EHS) and Sustainability Progress
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In 1990, a group of corporate environmental leaders from The Business Roundtable recognized the need for corporate environmental leadership around the world. They had a vision that it was possible for a wide array of business sectors to: work together; learn from each other; share what they had learned; and, improve the environment and the ways their companies operated around the world while at the same time increasing the value of their businesses. Their vision led to the creation of the Global Environmental Management Initiative (GEMI).
In the early years of the environmental movement many in the NGO community were attempting to pursue regulatory agendas that would mandate codes of conduct for corporate environmental activities. At the same time, some in the business community perceived environmental issues as nothing more than a regulatory burden that added costs, which were always at the expense of business. In response to this, many companies created environmental departments to address internal and external challenges, but they still needed a forum to work with others in business to create the tools that would help those departments support their companies.
Within this atmosphere of global mistrust and skepticism, a group of CEOs from the Roundtable stepped up and asked their corporations’ environmental leaders to create an organization that could “get ahead” of the critics so that companies could effectively work together to improve the global environment, and do so in an economically and socially responsible way. The core of those leaders came from a corporate “who’s who” list of companies and included: Dorothy Bowers, Merck & Company; George Carpenter, The Procter & Gamble Company; Tom Davis, AT&T; Charles Goodman, Southern Company; and, Bill Sugar, Anheuser-Busch Companies.
Those early GEMI leaders knew that no group was better positioned and capable of outlining the most effective ways for business to address environmental, heath and safety (EHS) issues than the companies themselves. It was also evident that if business did not step forward and address ways to ensure responsible environmental management, others—including NGOs—would step forward and fill the gap created, imposing external policies and effectively “telling” business how to operate.
That knowledge, recognition and commitment laid the foundation for the vision of the organization as it is today, “To be globally recognized as a leader in providing strategies for business to achieve EHS excellence, economic success and corporate citizenship.” The mission of GEMI is: “Business helping business improve EHS performance, shareholder value and corporate citizenship.”
GEMI was created as an organization that would not advocate or lobby on policy issues. Rather, GEMI was designed as a member driven, “sweat equity” organization that would identify tools that needed to be created, develop them with member leadership and then share those tools freely with the world. The BRT corporate environmental leaders selected Lee Thomas and Susan Moore as the first management team to support the GEMI membership.
GEMI was designed to be, and has remained, a member-led and member-driven organization, using voluntary initiatives and the energy of the member companies to improve environmental management and address key corporate citizenship challenges and opportunities. Today, GEMI has 37 members from more than 22 diverse business sectors, all of whom bring unique insights to the discussion of the common challenges posed in environmental management. By working together and learning from each other, GEMI members are continually finding new ways to do their jobs better and in a way that provides value to their companies and the environment.
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GEMI is led by a Board of Directors, which is elected annually by the membership, and meets quarterly to review GEMI’s progress and to address strategies that will provide value to the members. The Board is comprised of a Chair, a Vice Chair, and the respective Chairs of the Committees, which include Finance, Tools, Membership, Communications & Marketing and Benchmarking. The Board also includes a representative from the Senior Advisory Council (SAC), and a Chair Emeritus, the former Chair of GEMI.
The majority of GEMI’s work is conducted in Work Groups, chaired by and comprised of representatives from member companies. Each Work Group develops a budget, approved by the Board of Directors, to develop a tool from inception through to the end of the project plan—either a paper publication and/or an interactive web tool. GEMI’s +28 tools, all products of the Work Groups, are discussed later in this article.
In addition to its Work Groups, GEMI has standing committees that work on procedural, administrative, and/or strategic issues, with direction from the Board of Directors. The committees include:
Benchmarking Committee: The Benchmarking Committee identifies and benchmarks key environmental, health and safety and sustainability management practices. Examples of benchmarking topics include: interaction with corporate board of directors, EHS cost accounting practices, EHS auditing practices, relationships with suppliers/contractors, sustainability and community relations. GEMI typically completes three or four benchmark surveys per year at no additional cost to members beyond their annual dues. By comparison, if each company were to independently develop a benchmarking exercise, the cost per company could range from $10,000 to $20,000 per issue benchmarked. After one year, the benchmark survey results are posted on GEMI’s web site, unless the membership requests and agrees that it should remain on the ‘Members Only’ site.
Communications & Marketing (C&M) Committee: The C&M Committee is responsible for extending GEMI's presence abroad through national and international press relations. The committee establishes well-defined guidelines for the creation and use of GEMI materials and reviews publications as they are developed. It also oversees the development of the monthly member newsletter, GEMI NEWS. In addition, the Committee focuses on creating a simple, standard marketing plan for tools and approves materials to be posted on the GEMI web site. Articles about GEMI activities have appeared in numerous newsletters and publications including, but not limited to: Business and the Environment (BATE); ECOSTATES; FinancialTimes; Greenbiz; Green@Work; Occupational Hazards; and, Sustainable Development International (SDI).
Membership Development Committee: The objective of the Membership Development Committee is to implement a strategic membership development plan, targeting environmentally responsible U.S. and non-U.S.-based companies. The Membership Development Committee also focuses on the needs of existing members to ensure that each year they will renew their membership in the organization. Despite the continuing fiscal challenges facing corporations, GEMI continues to grow and prosper; new members are consistently being brought into the Board of Directors as well as into leadership positions in the GEMI Committees, Networks and Work Groups.
Senior Advisory Council (SAC) Committee: The SAC is comprised of the Vice President or the most senior EHS/sustainability representative of member companies. The SAC assists in the development of future GEMI project topics and activities. Though GEMI uses a broad array of resources to identify issues that should be addressed by the membership, the SAC is the primary source through which leading EHS, sustainability and corporate social responsibility (CSR) issues are identified and filtered. Most GEMI tools have been the direct result of member-driven ideas that came from initial discussions of the SAC committee. The SAC meets annually to review GEMI’s progress and to identify issues or activities that are of specific interest to their companies. In 2007, the GEMI Senior Advisory Council (SAC) retained the Institute for the Future (IFTF) to develop a sustainability map for GEMI, the Map
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of Future Forces Affecting Sustainability. The map is a strategic tool for identifying and understanding future trends that will affect the EHS and sustainability landscape and incorporating this knowledge into strategies that create business value.
In addition to its Work Groups and Committees, GEMI also has a series of Networks that conduct on-going discussions on topics of interest to GEMI members. Networks can serve as a prelude to a Work Group by helping to define or clarify a topic of interest, or as a postscript to a Work Group that has completed the development of a GEMI tool by facilitating continued learning and information sharing. Direction for the Networks comes from the GEMI Board of Directors and the membership and each Network is re-evaluated annually to determine if it will continue into the following year.
GEMI’s current Networks include:
Emerging Issues Network: The GEMI Emerging Issues Network meets throughout the year to learn more and share information about the emerging EHS and sustainability issues the members are addressing.
Metrics Users Network: The Metrics User Network provides how-to knowledge in using the GEMI Metrics Navigator™, and to share best practices relative to sustainability metrics in business.
Pandemic Planning Network: The GEMI Pandemic Planning Network is in its information gathering phase and meets quarterly to share lessons learned about the topic.
The decade of the 1990s, from a development of GEMI tools perspective, focused on issues ranging from ways to self assess on EHS issues regarding total quality management, benchmarking, training, reporting and management systems.
The first GEMI tool, Environmental Self-Assessment Program (ESAP) used the 16 Environmental Management Principles of the International Chamber of Commerce (ICC) as a basis, or benchmark, against which to measure performance. The tool was designed so that businesses could pinpoint ways to increase the quality of environmental policy, planning, implementation and monitoring, and to allow them to prioritize environmental improvement opportunities. Though created in 1992, this tool remains an excellent resource for any entity that is just starting to better understand how to assess its company’s environmental performance.
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The second GEMI tool, Total Quality Environmental Management: The Primer, was created in 1993 and reflected corporate trends and activities relating to how total quality management systems could positively impact how companies operated. What GEMI leaders did in the early years of GEMI’s activities was to add environment to the total quality management business approach, thus the term Total Quality Environmental Management (TQEM). This primer was written for corporate environmental managers and takes a reader through the basic definitions and approaches of TQEM.
In 1994, as the concept of environmental management began to mature, GEMI created three tools.
The first expanded on the TQEM concept -- Environmental Reporting in a Total Quality Management Framework: A Primer was designed to help companies: identify problems before they occur; target key areas for management attention and possible expenses; provide support for needed improvements in existing management systems; and, provide a realistic basis for setting future performance expectations and holding line managers accountable.
The second tool focused on helping international companies find cost-effective pollution prevention initiatives by incorporating environmental costs into the business decision-making process. Finding Cost-Effective Pollution Prevention Initiatives: Incorporating Environmental Costs into Business Decision-Making includes topics such as identification and quantification of environmental costs and evaluating pollution prevention investments.
The third, Benchmarking for Continuous Environmental Improvement, provides a format and structure for conducting benchmarking studies. It was designed to teach the reader how to make environmental improvements based on existing or publicly available information and resources.
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Environmental, Health & Safety Training: A Primer (1995) started a process that went from only learning about an issue or set of challenges, to training others in what was beginning to be a more professional EHS function within GEMI companies. This primer was designed to assist companies in training their site EH&S personnel and it included practical how-to examples, and advanced training techniques.
In 1996, GEMI began looking at various ways to identify innovative programs and approaches that would help provide incentives for companies to improve their environmental, health and safety activities.
Incentives, Disincentives, Environmental Performance and Accountability for the 21st
Century, Idea 21 Work Group Reports included three reports that looked at management systems, industry incentives and innovative programs within the United States and Europe. Two other reports were also created that year.
ISO 14001 Environmental Management System Self-Assessment Checklist was based on the ISO 14001 standard and allowed for a rapid self-assessment of an organization or facility to determine how closely existing management practices and procedures correspond to the elements of the standard.
Environmental Reporting and Third Party Statements was designed to test whether third party attestation statements contained in voluntary corporate environmental reports added value in the eyes of external stakeholders. Other goals of the study included assessing which report elements contributed the most to communicating credibility, and evaluating the credibility of different types of organizations that perform certifications of corporate environmental reports.
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In 1997, the GEMI tools continued to expand their reach beyond just taking action on environmental activities into assessing the action being taken.
Measuring Environmental Performance: A Primer and Survey of Metrics in Use was designed to present a survey of environmental performance measurement tools and includes considerations for designing metrics programs, for selecting appropriate metrics, and for implementing, evaluating and improving such a program.
HSE Management, Information Systems Planning, Moving into the 21st
Century was designed to help EH&S managers reach new levels of performance by partnering their expertise with that of professionals in information management, manufacturing, operations, marketing, research and development, finance and legal issues from across the company.
Environment: Value to Business (EVTB) was the first primer that was designed to guide corporate environmental professionals in planning, creating, measuring and communicating the business value of environmental activities. This tool, developed in 1998, introduced the concept of Plan-Do-Check-Advance (PDCA) cycle of environmental management and offered suggestions for communicating business value to key internal and external stakeholders.
As GEMI began its journey outside the parameters of the internal EH&S activities of individual companies, there was an increasing realization that many GEMI companies were global companies that were operating in a responsible way around the globe, including the developing world.
In 1999, GEMI created a new tool, Fostering Environmental Prosperity, Multinationals in Developing Countries, which was a first of its kind report that linked economic data with case studies showing how multinational corporations are positive forces for both economic development and environmental, health and safety excellence in the developing countries in which they operate.
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In 1999, as there was increased interest by many organizations in finding creative and effective ways to provide incentives, GEMI developed a new tool, Environmental Improvement Through Business Incentives. Thisreport assessed incentives that have working in governments and the private sector to encourage companies to set environmental goals beyond compliance with existing laws.
With 10 years of experience and learning behind them, the members of GEMI began a new decade of activity and tool development in 2000 by expanding their discussions and the tools being developed to a range of general business issues that could be impacted by environmental, health and safety activities, including corporate citizenship.
The first tool in the new decade was a guidance document that was designed to help identify new processes and ways of addressing the role of environmental initiatives within broader business objectives, and how those activities can provide “top line” value to companies. Environment: Value to the Top Line (EVTL) includes case studies of companies who have implemented successful projects linking environmental and business objectives.
The second tool, published in 2001, focused on the important role that the supply chain plays in environmental, health and safety activities. NewPaths to Business Value: Strategic Sourcing – Environment, Health, and Safety was designed to address the business value of managing EH&S in key procurement issues. The tool helps companies to identify when, why, and how to pursue added business value by addressing EH&S performance of suppliers and contractors, and to understand how suppliers’ products and services can affect businesses and business planning.
In 2002, GEMI created its first water sustainability tool, Connecting the Drops Towards Creative Water Strategies: A Water Sustainability Tool. This tool and its accompanying web site (www.gemi.org/water) were designed to help businesses build a well-tailored strategy that fits the business’ needs and circumstances. Case studies are included that highlight ways that companies can create business value by pursuing the sustainable management of water resources.
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In the same year, Exploring Pathways to a Sustainable Enterprise: SD Planner
TM was created. The SD Planner
TMis a detailed and
comprehensive self-assessment tool designed to help companies evaluate, plan for and integrate sustainable development into business processes.
In 2004, GEMI reached in new external directions addressing issues that impact business often outside the fence line. Clear Advantage: Building Shareholder Value/Environment: Value to the Investor (EVI), is a tool that was designed to help provide businesses approaches on how to measure, manage and communicate EHS value to the financial community, thereby making “tangibles out of intangibles.”
Forging New Links: Enhancing Supply Chain Value Through Environmental Excellence is a tool and website (www.gemi.org/supplychain) that was designed to identify and illustrate opportunities for EHS professionals, in collaboration with other functions within their companies, to enhance supply chain performance.
Transparency: A Path to Public Trust is a tool that provides approaches that companies can consider as they address transparency related challenges and opportunities.
In 2007, GEMI launched Collecting the Drops: A Water Sustainability Planner (www.gemi.org/waterplanner). This tool guides a user through the process of taking a corporate water sustainability strategy and converting it into a site or unit strategy for water.
GEMI SD PlannerTM
and GEMI SD GatewayTM
(www.gemi.org/sd) is a detailed comprehensive planning tool that can be used to establish baseline performance, assess opportunities, set goals, develop action plans and evaluate progress towards a company’s sustainable development objectives.
The GEMI Metrics NavigatorTM
(www.gemi.org/metricsnavigator) is a tool to help organizations develop and implement metrics that provide insight into complex issues, support business strategies and contribute to business success. The tool presents a thorough, six-step process to select, implement and evaluate a set of critical few metrics that focus on an organization’s success.
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The GEMI Business and Climate Change web site (www.gemi.org/businessandclimate)describes ways that businesses can incorporate climate change objectives in their decisions and operations. The site provides information and guidance for businesses in all stages of the strategic planning lifecycle for climate change.
The GEMI HSE Web Depot (www.gemi.org/hsewebdepot) is a web-based information resource that is a framework for health, safety & environment-management information systems (HSE-MIS) and is based on a Plan, Do, Check, Advance (PDCA) lifecycle. The HSE Web Depot presents a framework for HSE-MIS planning, development, system rollout and improvement; and, organizes company experiences within these areas.
GEMI’s contribution to EHS management is evident in the reputation the organization has gained for itself over the past seventeen years, and in the caliber of the members who choose to participate and continue participation. GEMI tools have been cited by a wide range of media resources on sustainable development, supply chain management and outsourcing, corporate social responsibility, and others, in such news sources as Fortune Magazine. GEMI also participates in the annual UNEP Consultative Meeting on Business and Industry and has given several presentations over the years on the functional value of GEMI tools, and the importance of using such tools and case studies when addressing global EHS and sustainability issues.
The devotion of member companies to EHS is evident in their internal EHS management strategies, many of which are detailed as case studies in GEMI tools. For example, in a piece entitled “The Role of Sustainability at 3M” in the GEMI Metrics Navigator
TM, the
emphasis placed on environmental, social and economic sustainability by 3M was demonstrated in the descriptions of its sustainability programs. The required use of a “Life Cycle Management (LCM)” platform in the development, manufacturing and distribution of all products helps to reduce the environmental, health, safety and energy impacts throughout the entire product life cycle; the Pollution Prevention Pays (3P) platform goes back thirty years, focusing on reducing pollution at its source, and is a cornerstone for process improvements to reduce waste and improve productivity. Says the piece, “a company is only as good as its employees,” and 3M employees are devoted to responsible EHS and CSR practices. (Metrics Navigator
TM, 2007).
Bristol-Myers Squibb Company is yet another example of a GEMI company being on the cutting edge of EHS policy and helping others to learn from its experience. The MetricsNavigator
TM, also detailed how Bristol-Myers Squibb was “an early leader in reporting EHS
metrics…participated in developing the first draft of the Global Reporting Initiative (GRI) and was among the first to apply the GRI reporting standards.” The Company developed “extensive infrastructure, including procedures and databases…for EHS data collection, verification and reporting,” which has allowed it “to assess its potential impacts, to determine appropriate performance targets and to measure progress towards such targets.” Though Bristol-Myers Squibb Company began EHS metrics reporting because of external pressure, the internal system has gone above and beyond—and provided tangible, internal business benefits at the same time. (Metrics Navigator
TM, 2007).
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DuPont also exemplifies the role many GEMI companies play in leading the industry towards more sustainable business practices without sacrificing productivity or profit. As a large energy user, DuPont has both high manufacturing cost and a large environmental footprint, particularly as regards greenhouse gas emissions. By committing to increase its use of renewable energy sources—targeting 10% renewable energy by 2010, in only three years—DuPont “is taking a leadership role in changing the market landscape by increasing the demand for renewable sources, demonstrating the use of renewable sources as a practical alternative in managing energy consumption and reducing their associated environmental impacts” (Metrics Navigator
TM, 2007).
The Dow Chemical Company exemplified not only its commitment to the environment, but also to corporate citizenship in helping a client in Singapore to use water more efficiently. Using the FILMTEC system, the client implemented a system for reclaiming waste water, drastically reducing its environmental impact as regards water sustainability. Since 2000, an RO plant operation has been processing tertiary-treated wastewater effluent using FILMTEC fouling resistant elements and converting it to high-grade industrial water for Singapore’s petrochemical industry. Since start-up, the Singapore client’s reverse osmosis plant has performed well within the stringent operating conditions imposed. The high recovery of 86 percent pioneered by this project is now considered an industry benchmark in tertiary effluent wastewater reclamation. Operating costs are lower compared to older plants using membranes that are not designed to be resistant to fouling (Collecting the Drops: A Water Sustainability Planner, 2007).
In the 2003 Forging New Links: Enhancing Supply Chain Value Through Environmental Excellence, even more examples of GEMI companies excelling as business leaders in EHS can be found. A case study of Motorola’s Inbound Discrepancy Reporting (IDR) System detailed how a collaborative effort by EHS, Logistics, Quality, Finance, Packaging, and Sourcing representatives to develop a comprehensive approach to packaging and pallets allowed the company to save over $1 million in the first year alone, and over $5 million in 2004. Not only did Motorola establish new guidelines for packaging and shipping, but they further implemented the IDR system as a way to track supplier compliance, update supplier scorecard performance, and quantify the cost of non-compliance for potential recovery costs due to supplier defects. Between the years 2002-2003, IDR realized a 58% reduction in pallet-related injuries, saving $400,000 in Workmen’s Compensation cost; a 12% reduction in discarded pallets, equating to $120,000 of cost avoidance in new purchases; $400,000 savings in transportation expenses; $100,000 savings in reduced handling and storage of pallets; and a 16% improvement in recycling rate of non-hazardous wastes. Motorola took what was originally an EHS initiative—an effort to reduce injuries and decrease unnecessary waste and transportation—and developed it into an effective means of improving not only EHS and CSR practices, but also to focus on eliminating unnecessary spending and creating savings that could be passed along to consumers. (Forging New Links, 2003).
FedEx has been similarly concerned with the environmental impact of its packaging, and has been a leader in the field in minimizing that impact as much as possible. In 1998, FedEx revolutionized its packaging system, changing the overnight envelopes from 100% virgin bleached fiber to 100% recycled materials in only a year. They also redesigned their basic envelopes, releasing a new packaging made of 100% recycled whiteboard in November of 1999, with 35% of the recycled material coming from post-consumer content. Though there was a slight increase in production cost—one that could not be passed along to the consumer, as FedEx envelopes are provided for free to customers—the company felt that its environmental initiatives were important in keeping the company a leader in the field, and worked over the next few years after the envelopes’ release to reduce the unit cost back to its original level. (Forging New Links, 2003.)
These are but a few examples of the impressive advances GEMI members have been making in EHS management for nearly two decades. Each GEMI tool includes extensive reports and case studies from the GEMI membership. Almost as impressive is the overwhelming commitment of these and all
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GEMI companies to helping others in the business community achieve similar levels of EHS excellence—truly bringing to life the GEMI mission of “business helping business.”
GEMI members share their collective experience and expertise in EHS in a variety of ways. The case studies included in GEMI tools give concrete examples of how responsible environmental practices can be implemented without damaging profits, supplementing the strategic content of the tools with real-world evidence that the strategies work. GEMI held a series of conferences highlighting environmental concerns, rewarding progress and facilitating discussion of what remains to be done. Most recently, GEMI’s 15
th Year Anniversary conference in 2005, “Successes, Current Challenges,
and Future Trends,” featured a variety of keynote speakers discussing contemporary environmental issues, as well as panels discussing GEMI’s past, present and future. Prior to that conference, GEMI held events such as the 2003 “Sustainability Through Strategic Partnerships” conference, the 2002 “Securing the Future—Paths Forward” conference, the 2001 “An Odyssey in Environmental Excellence” conference, and the 2000 “Environment and Business Conference.”
GEMI and its member companies truly put into practice all aspects of their mission statement—they achieve EHS excellence and increase shareholder value themselves, and function as responsible corporate citizens helping business as a whole to share in the benefits of responsible EHS management strategies.
In addition to all of its other activities, GEMI has also entered into a number of very constructive collaborations and partnerships with external organizations.
GEMI is a founding partner of the Business Roundtable’s S.E.E. Change initiative, which was launched in 2005. Seeking to leverage the power of business as a force for good, Business Roundtable launched a sustainable growth initiative encouraging leading U.S. companies to embrace business strategies and projects that measurably improve Society, the Environment and the Economy. S.E.E. Change, encourages CEOs of the nation’s leading companies to commit to business strategies that combine traditional corporate goals of higher profit and lower cost with a strong commitment to environmental stewardship and social improvement. Roundtable companies will be asked to set challenging goals that contribute to both the bottom line and improvements to the quality of life – now and for future generations.
As a Partner of S.E.E. Change, GEMI provides its tools to Roundtable members and participates in the S.E.E. Change Steering Committee.
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GEMI has partnered with Environmental Defense Fund to develop a “Guide to Successful Corporate/NGO Partnerships,” which we anticipate will be launched to the public in the summer of 2008. As social and environmental performance becomes increasingly important to the private sector and external stakeholders alike, some companies and non-governmental organizations (NGOs) are benefiting from collaborating rather then clashing around "green issues." This guide will seek to educate the public and private sectors on the potential for positive environmental and economic success through collaboration between corporations and NGOs.
GEMI partnered with the National Council for Science and the Environment’s (NCSE) Council of Environmental Deans and Directors (CEDD) to conduct workshops to provide CEDD members with an understanding of GEMI and its tools with the intent and that they could be incorporated into course curriculum. Thirty-five schools attended the workshops. To-date, the following four schools have used the tools: Barnard College, Colleges of the Fenway, Duke University and Samford University.
In addition to the efforts of its Work Groups, Committees and Networks, GEMI is currently working on further developing the “GEMI Brand,” making the organization and the benefits it provides both better known and more widely marketed. The method for achieving this is threefold: emphasis is placed equally on education, tools and current members.
GEMI has identified three signature issues that it will be focusing its activities on for the next couple of years. GEMI is still in the discussion phase as to how best to address these issues to meet the needs of its members and the organization as a whole. The issues are: Climate and Energy; Supply Chain; and Water Sustainability.
GEMI has developed a catalogue of its tools, and continues to provide easy access to its tools, with all publications available electronically and without cost via its web site, www.gemi.org. GEMI also works cooperatively with a wide range of governmental organizations such as the United Nations, the U.S. State Department, the U.S. Environmental Protection Agency and the Department of Commerce.
GEMI is also continuing to build and develop relationships with colleges and universities, small/medium businesses and cooperative efforts with the government and NGO organizations to raise awareness of the issues in which GEMI is involved, its tools and of the organization itself.
GEMI members also participate in a wide range of international and domestic meetings and conferences, are speakers and panelists at various industry functions and are members of diverse
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industry associations—all of which demonstrate the caliber of GEMI’s members as leaders in EHS management, and promote the organization through those with whom it can be associated.
The Global Environmental Management Initiative has grown and matured since its beginning in 1990, remaining constantly on the leading edge of EHS issues and development. The organization is strong with its membership continuing to grow and to create and develop new tools and discussion forums around emerging ideas and approaches. GEMI offers members the opportunity to work with many of the world’s leading companies in developing and promoting the very best in global EHS and corporate citizenship strategies that can be applied around the world in a cost-effective manner. In addition, the cost savings and benefits derived from GEMI benchmarking further allow GEMI to share its knowledge as it continues to strive to help business help business to excel in EHS, shareholder value and corporate citizenship.
With the increased attention to a wide range of environmental, sustainability and climate-related issues, and with concerns being raised around the world by the realities of globalization, strong EHS and corporate citizenship leadership is vital if global companies’ licenses to operate are to be continually renewed and welcomed. GEMI has both the experience and commitment to take on these issues as they develop, and the organization’s continued growth and development are evidenced in the expansion of GEMI’s focus to include key sustainability and corporate citizenship issues. GEMI strategies remain environmentally friendly, socially responsible, fiscally sound and a valuable resource for the business community.
GEMI was formed almost 20 years ago as a grassroots initiative by leaders in the business community, to be a nonprofit business association of “business helping business achieve EHS excellence, shareholder value, and corporate citizenship.” GEMI has been and continues to be an organization that is member-driven, with “sweat equity” a key part of the organization’s operations. In its seventeen-year lifetime, GEMI has produced 28 interactive tools promoting responsible EHS practices, in addition to all of its other internal and external activities.
GEMI’s work is ongoing. Work Groups continue to develop creative and innovative methods for the improvement of EHS and sustainability practices. Networks continue to identify, discuss and address new emerging issues.
GEMI is comprised of environmental and sustainability professionals who are leaders and challenge solvers within their companies, striving each day to make the world a better place for the environment, for the economy and for society.
The organization, since its creation, has been committed to focusing on and merging environmental commitments, economic considerations and environmental leadership.
The results of almost 20 years of effort and commitment make it clear to all that the founders of GEMI would be pleased with how far GEMI has come, and with the important role that EHS ad sustainability issues will continue to play in a world where corporate citizenship has become a goal of all responsible global companies.
* 2008 * WRITTEN BY STEVEN B. HELLEM, EXECUTIVE DIRECTOR AND AMY M. GOLDMAN, DIRECTOR*
Clear Advantage:Building Shareholder Value
E N V I R O N M E N T : V A L U E T O T H E I N V E S T O R
I
The mission of the Global EnvironmentalManagement Initiative (GEMI) is to supportbusiness helping business improve environment,health and safety (EHS) performance, shareholdervalue, and corporate citizenship. GEMI hasproduced a series of tools that demonstrate howexcellence in EHS can add shareholder value tocompanies. The GEMI "Value" journey began withEnvironment: Value to Business published in 1998and continued with Environment: Value to the Top Line published in 2001.
The purpose of Clear Advantage: BuildingShareholder Value, GEMI's latest tool in theseries, is to enable businesses to measure,manage and communicate EHS value to thefinancial community or, in the words of BobBrady, retired fund manager at Citigroup, to "turnthe intangibles into tangibles." EHS is among theintangible value drivers that are hidden sourcesof organizational power—from regulatorycompliance that prevents liabilities, toproactively managing risk. Leveraging EHSresources can help create additional value forthe enterprise through strategy execution,enhancing brand and reputation, boostinginnovation and leadership.
This tool is a resource and guide containing avariety of data and tools to assist managers inunlocking the value contained in activities theyare required to perform but frequently regard asa cost of doing business—rather than as anopportunity to better position the enterprise withcustomers, investors and lenders, alliance
partners and current or prospective employees.Case studies from GEMI members help illustratethese opportunities.
Clear Advantage provides compelling evidenceof the link between EHS activities andshareholder value. Because an enterprise's EHSfunction cuts across many areas of business,this report covers the EHS function as well asrelated organizational activities: communityinvolvement, stakeholder relations, governance,transparency, and business continuity. In aclimate of increased focus on corporategovernance and shareholder activism, theseissues will only increase in importance.
Utilizing the value drivers identified, this reportwill demonstrate that strengths in EHS can addvalue to the enterprise. Specifically, this reportwill show how companies can measure anddisclose the strategic contributions of EHS toenhanced market valuation and identify EHS-related indicators that are linked to intangiblevalue drivers.
The intended audiences for this tool are seniorcompany executives, including CEOs, CFOs, andInvestor Relations (IR) professionals; mainstreamfinancial analysts and fund managers; and EHSand other managers. It can also provide membersof the socially responsible investment com-munities with useful data, as well as guidancefor EHS executives on how to better advisemanagements with whom they are engaged.
PrefaceFebruary 2004
John Harris, Ashland Inc.Jim Thomas, Novartis Corporation
Co-Chairs, Environment: Value to the Investor Work Group
II
The Global Environmental Management Initiative (GEMI) is a non-profit organizationof leading companies dedicated to fostering environmental, health, and safety
excellence and corporate citizenship worldwide. Through the collaborative efforts of itsmembers, GEMI also promotes a worldwide business ethic for environmental, health
and safety management and sustainable development through example and leadership.
The guidance included in this document is based on the professional judgment of theindividual collaborators listed in the acknowledgements. The ideas in this document
are those of the individual collaborators and not necessarily their organizations.Neither GEMI nor its consultants are responsible for any form of damage that may
result from the application of the guidance contained in this document.
This document has been produced by the Global Environmental Management Initiative(GEMI) and is solely the property of the organization. This document may not be
reproduced nor translated without the express written permission of GEMI, exceptfor use by member companies or for strictly educational purposes.
3MAbbott LaboratoriesAltriaAnheuser-Busch Inc.Ashland Inc.Aventis Pharmaceuticals Inc.Bristol-Myers Squibb Co.BNSF Railway CompanyThe Coca-Cola CompanyConAgra FoodsDell Inc.The Dow Chemical CompanyDuke EnergyDuPontEastman Kodak CompanyEli Lilly and CompanyFedEx ExpressGeorgia-Pacific CorporationHalliburton CompanyHewlett-Packard Company
Hoffmann-La RocheIntel CorporationJohnsonDiversey, Inc.Johnson & JohnsonJohnson Controls, Inc.Koch Industries, Inc.Lockheed Martin CorporationMerck & Company, Inc.Mirant CorporationMotorola, Inc.Novartis CorporationOccidental Petroleum CorporationPfizer IncThe Procter & Gamble CompanySchering-Plough CorporationSmithfield Foods, Inc.Southern CompanyTemple-Inland Inc.Texas Instruments IncorporatedWyeth
Global Environmental Management InitiativeGEMI Member Companies:
About The Global Environmental Management Initiative
III
Section 1 Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Section 2Making the Case . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2EHS Performance is Linked to Shareholder Value . . . . . . . . . . . . . . . .2EHS is an Intangible Driver of Market Value . . . . . . . . . . . . . . . . . . . .2How EHS-Related IntangiblesBecome Tangible Outcomes for Investors . . . . . . . . . . . . . . . . . . . . . .3Corporate Initiatives Reflect the Demandsof Global Capital Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4A Growing Awareness in the Financial Community . . . . . . . . . . . . . .6Ten Intangible Value Drivers for Measuring EHS Performance . . . . .8
Section 3A Closer Look . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10Customer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11Leadership & Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12Communication and Transparency . . . . . . . . . . . . . . . . . . . . . . . . . . .13Brand Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15Environmental and Social Reputation . . . . . . . . . . . . . . . . . . . . . . . .16Alliances and Networks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17Technology and Processes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19Human Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21Innovation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
Section 4From Concept to Practice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25Linkage Between EHS and IR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25The Clear Advantage Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25Step 1 - Identify Key Value Drivers . . . . . . . . . . . . . . . . . . . . . . . . . .26Step 2 - Assess Potential Contributions . . . . . . . . . . . . . . . . . . . . . . .27Step 3 - Develop Value-Enhancing Strategy . . . . . . . . . . . . . . . . . . .29Step 4 - Implement Strategy and Measure Results . . . . . . . . . . . . .31Step 5 - Communicate to Management and Investors . . . . . . . . . .31Step 6 - Assure Continuous Improvement . . . . . . . . . . . . . . . . . . . . .32
Section 5Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
Appendix ADiscussion Guide . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
Appendix BBibliography and References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36Intangible Value Drivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36EHS and Business Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36Socially Responsible Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
Appendix CGlossary and Acronyms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
Appendix DFootnotes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
ContentsAdditional supporting
information and
resources, as well as an
electronic version of this
document, are available
on the GEMI website,
www.gemi.org.
IV
Acknowledgements
Contributing GEMI Environment: Value to the Investor Work Group Members
Carty of the National Investor Relations Institute(NIRI), Suzanne Fallender of InstitutionalShareholders' Services, Katie Fry Hester ofSustainAbility, Elizabeth McGeveran of ISIS AssetManagement and Marge Wyrwas of Knight Tradingparticipated in a meeting to provide input on thedraft document. Linda Descano of Citigroup, PeterWilkes of Innovest, Tim Smith of Walden AssetManagement, Stan Craig, formerly of Merrill Lynch,Tim Lankford of SAM USA Inc. and Peter Wall andMichael Gormley of FTSE4Good provided inputand guidance during the early, formative stages ofthis project.
Audrey Bamberger, Anheuser-Busch Inc.Gregg Belardo, WyethTanya Blalock, Southern CompanyLaura Bradford, Bristol-Myers Squibb CompanyDon Brown, Dell Inc.Carol Cala, Eastman Kodak CompanyMark Chatelain, Johnson Controls, Inc.Stan Christian, Motorola, Inc.Steve Dishion, The Procter & Gamble CompanyJeff Forgang, Duke EnergyElizabeth Fraser, Aventis Pharmaceuticals Inc.Elizabeth Girardi Schoen, Pfizer IncVeronica Gliebe, Aventis PharmaceuticalsColin Goddard, AltriaRich Guimond, Motorola, Inc.Alex Heard, Intel CorporationMitch Jackson, FedEx ExpressDavid Jacoby, Georgia-Pacific CorporationBen Jordan, The Coca-Cola CompanyJim Kearney, Bristol-Myers Squibb CompanyJohn Kindervater, Eli Lilly and CompanyKen Larson, Hewlett-Packard CompanyDavid Lear, Hewlett-Packard CompanyDavid Lowy, AltriaMayda Martinez, Merck & Company, Inc.Keith Miller, 3MDean Miracle, Southern Company/Georgia PowerGus Moffitt, Schering-Plough CorporationEd Mongan, DuPontLeslie Montgomery, Southern Company
Clear Advantage was developed in a collaborativeprocess by GEMI's Environment: Value to theInvestor Work Group. Jim Thomas of NovartisCorporation and John Harris of Ashland Inc. co-chaired the project. Jonathan Low and PamelaCohen Kalafut of Cap Gemini Ernst & Young, JosephFiksel of Eco-Nomics LLC and Karina Funk of theMassachusetts Technology Collaborative createdClear Advantage. Cover art and overall graphicdesign were created by Laura McGoff. GEMI staffcontributing to this document includedSteve Hellem and Amy Goldman.
Special thanks:During the course of the project Robert Brady ofCitigroup (retired), Mark Brammer of Innovest, Beth
For more information about this project, please contact GEMI at: 202-296-7449 or [email protected].
Aldo Morrell, DuPontDennis Muscato, Hewlett-Packard CompanyGeorge Nagle, Bristol-Myers Squibb CompanyScott Noesen, The Dow Chemical CompanyHarry Ott, The Coca-Cola CompanyVivian Pai, Johnson & JohnsonElsie Rivera Palabrica, Abbott LaboratoriesMary Beth Parker, Mirant CorporationDon Radentz, ConAgra FoodsJames Reaves, Pfizer IncTed Reichelt, Intel CorporationWalt Rosenberg, Hewlett-Packard CompanyDavid Seep, BNSF Railway CompanyBert Share, Anheuser-Busch Inc.Robert Sherman, Halliburton CompanyLyle Staley, BNSF Railway CompanyAlan Stinchfield, Georgia-Pacific CorporationJohn L. Stein, Anheuser-Busch Inc. (retired)Richard Swan, Occidental Petroleum CorporationRobin Tollett, The Procter & Gamble CompanyDavid Townsend, Dell Inc.Lucian Turk, Dell Inc.Norm Varney, Lockheed Martin CorporationLara Wallentine, Texas Instruments IncorporatedTerry Welch, The Dow Chemical CompanyJeff Werwie, Johnson Controls, Inc.Robert Williams, Dell Inc.Carl Wirdak, Occidental Petroleum CorporationPat Wood, Georgia-Pacific Corporation
To succeed in today's global marketplace,companies must respond to the various marketforces that demand sound Environment, Healthand Safety (EHS) policies and practices. Themore successful companies will alsounderstand how these EHS policies contributeto shareholder value.
Experts have argued that, in effect, superiorEHS performance is a proxy indicator forsuperior management capability. As such,it can effectively communicate anorganization's ability to manage risk, reducevolatility, enhance transparency and buildstakeholder trust.
Risk management, transparency and trust areorganizational characteristics that marketsvalue, although they do not appear directly onfinancial statements. A substantial body ofevidence exists on how EHS practicescontribute to the bottom line, includingreductions in operating costs, insurancepremiums, and capital costs. It is thecontention of this document that EHSpractices contribute to shareholder value in abroader and more strategic way: by buildingcritical organizational capabilities. As such, themarkets value a company's EHS performanceevery day, whether it contributes to thatvaluation exercise consciously or not.
Thinking about EHS as merely a cost of doingbusiness is an opportunity lost. Organizationshave much to gain from measuring, managingand disclosing the positive impact of EHSperformance on shareholder value. Some ofthe facts, detailed below, suggest thatinvestors, senior executives and analystsconstitute a market for information related toEHS performance:
• 50 to 90% of a firm's market value can be attributed to intangibles like EHS.
• 35% of institutional investors' portfolio allocation decisions are based on intangibleslike EHS performance.
• 81% of Global 500 executives rate EHSissues among the top ten driving value intheir businesses.
This document provides a guide tocommunicating the value of EHS excellence.The document's goal is to show howcompanies can develop forward-looking toolsfocused on measuring the strategiccontributions of EHS to enhanced marketvaluation.
Section 1EXECUTIVE SUMMARY
Section 2, Making the Case, provides evidence to support the correlation between EHS performance
and financial outcomes. It may be of greatest benefit to Investor Relations Officers (IROs).
Section 3, A Closer Look, provides ten important EHS-related value drivers and related case studies
from GEMI member companies.
Section 4, From Concept to Practice, provides a methodology for EHS and IR colleagues to apply this
new knowledge and engage with senior executives in order to effectively measure, manage and disclose
the competitive advantage derived from superior EHS performance. Sections 3, 4 and the Appendices
are likely to be of value to all managers and EHS professionals.
1
INTANGIBLE DRIVERS, OFTEN INCLUDING EHS, ACCOUNT FORBETWEEN 50% AND 90% OF THE MARKET VALUE OF MOST FIRMS.3
Section 2MAKING THE CASE
EHS Performance is Linked toShareholder Value
The late 1990's and early 2000's were aturbulent period for the global investmentcommunity, with vast amounts of shareholderwealth being created and destroyed. Bothinstitutional and retail investors have learnedsome painful lessons, re-examined theirassumptions about what constitutes tangibleand intangible value, and broadened theirscope to consider characteristics that can leadto longer-term financial success.
One area of corporate performance that hasbegun to capture the attention of investmentprofessionals is environmental, health andsafety (EHS): a set of responsibilities thatcontributes directly to an organization's riskmanagement profile and is sometimes alsolinked with “corporate responsibility" or“sustainability." This report explores thelinkage between EHS performance andshareholder value creation. There isconsiderable evidence that EHS contributes toshareholder value in a variety of ways—notonly through “tangible" contributions such asrisk reduction and profitability improvements,but also through “intangibles" such as brandequity, human capital and strategy execution.In the words of one Chief Financial Officer(CFO):
“Every corporation is under intense pressure tocreate ever-increasing shareholder value.Enhancing environmental and socialperformance are enormous businessopportunities to do just that.”
Gary M. Pfeiffer,Sr. Vice President & CFO, DuPont
EHS is an Intangible Driver ofMarket Value
In order to understand the full potential forEHS value creation, it is first necessary toclarify the concept of intangible value drivers.The investment community increasinglyrecognizes the importance of intangibles in theshareholder value equation. Leadership,strategy execution, brand, human capitaland EHS performance are all currencies intoday's marketplace. A report on theIntangibles Economy to the EuropeanCommission noted that:
“Intangibles such as R&D, proprietary know-how, intellectual property and workforce skills,world-class supply networks and brands arenow the key drivers of wealth production whilephysical and financial assets are increasinglyregarded as commodities."1
The International Accounting Standards Boarddefines an intangible as an “identifiable, non-monetary asset without physical substanceheld for use in the production of goods orservices, for rental to others or foradministrative purposes."2 This report adopts abroader view: “Intangibles" describes thehuman, intellectual, social and structuralcapital of an organization. Thus, intangiblesinclude people, relationships, skills and ideasthat add value but are not traditionallyaccounted for on the balance sheet.
According to the Organization for EconomicCooperation and Development (OECD),investment by public companies in intangiblessuch as brand, R&D and training has exceededinvestment in tangibles like property, plant andequipment (PPE) since 1997.3
2
Figure 2-1 shows, further, that a company'smarket value has increasingly becomedecoupled from PPE and has increasinglybeen far outweighing companies’ tangibleasset bases.
Research shows that non-financial performanceaccounts for up to 35% of institutionalinvestors' portfolio allocation decisions.5
Further research in the U.S. and Europedemonstrates that between 50% and 90% of acompany's market value can be explained byintangibles.6 Yet, a majority of executives inevery industry studied believed that there weredisconnects between the value drivers they feltwere critical to the company's success andwhat was actually being measured andreported.
For the purposes of this report, a value driveris defined as a fundamental and persistentcharacteristic of a business enterprise thatinfluences its market value. The report focuseson the role of EHS in strengthening thesevalue drivers, with an emphasis on theimportance of measuring and monitoring thelinks between EHS activities and outcomes ofinterest to Investor Relations.
Adding confidence to the importance ofidentifying key value drivers and assessing theircontributions to shareholder value creation, a1996 study entitled Measures That Matterestablished that the correlation between
intangibles and a company's price-to-earningsratio varies according to industry. Figure 2-2depicts how a one unit change in a score foreach intangible can be related to both a short-term and a long-term percentage change in anindustry's price-to-earnings ratio.7
How EHS-Related Intangibles BecomeTangible Outcomes for Investors
Past efforts to characterize EHS valuecontributions have focused largely onretrospective estimation of financial returnsassociated with EHS initiatives. That type ofinformation may not be of interest to theinvestment community for several reasons:
• EHS financial returns are simply aggregatedinto common financial performance metrics(such as operating costs), and there is nobenefit in singling out the relativecontributions of specific departments.
• EHS contributions to the bottom line tendto be incremental in nature (such asconverting wastes into by-products), andare generally seen as tactical rather thanstrategic.
• The more strategic contributions of EHStend to be associated with non-financialvalue drivers, such as relationships andreputation, which provide a prospective,rather than retrospective, view ofshareholder value.
Figure 2-1
Market Cap v.PPE Over Time4
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35% OF INSTITUTIONAL INVESTORS' PORTFOLIO ALLOCATIONDECISIONS ARE BASED ON INTANGIBLES LIKE EHS5
3
In contrast with past efforts, this reportfocuses on how improvements in EHS andsocial performance can strengthen a company'sintangible assets in a number of ways that inturn lead to tangible shareholder valuecreation. The many pathways to shareholdervalue are illustrated in Figure 2-3; for example:
• Pro-active initiatives to address EHS issuescan lead to new product innovation,development of new markets, and improvedprocess technologies. For example, 3M andBristol-Myers Squibb have incorporatedproduct life cycle review into their newproduct development processes, resulting infaster times to market and reducedcompliance burdens.
• Differentiation of a company through a reputation for corporate responsibility canenhance brand equity and strengthen itslicense to operate. For example, Dow andDuPont have been recognized as industryleaders through their initiatives to reduce airand water emissions in their globaloperations.
Corporate Initiatives Reflect the Demandsof Global Capital Markets
The types of value creation opportunities citedabove have existed for many years. Onlyrecently, as a result of new forces in thebusiness environment, has a broader awarenessof these opportunities spread among leadingmulti-nationals, shareholders, regulatorybodies, non-governmental bodies andconsortia. The evidence of growing interest insustainability generally and EHS specifically isimpressive.
• 68% of the 100 largest global companiesissue EHS reports 9
• 487 companies published corporatesustainability reports in 2001, up from 194in 1995 and 7 in 199010
• 81% of Global 500 executives surveyed rateEHS issues among the top ten value driversfor their business11
These trends are partly attributable toincreasing regulatory pressures, especially in
81% OF GLOBAL 500 EXECUTIVES SURVEYED RATE EHSISSUES AMONG THE TOP TEN VALUE DRIVERS FOR THEIR BUSINESS11
4
Figure 2-2 Relationship between Intangibles and P/E by Industry8
0% 15%
Computer Industry Pharmaceuticals Food Industry Oil and GasNon-Financial Criteria
Quality of Management
Quality of Productsand Services
Level of CustomerSatisfaction
Strength of Corporate Culture
Quality of Investor Communications
Effectiveness of ExecutiveCompensation Policies
Effectiveness of NewProduct Development
Strength of Market Position
0% 15% 0% 15% 0% 15%
Influence on Price Short Term Long Term (Brand Value included)
Europe. In April 2003, the New York Timesreported that “the European Union is adoptingenvironmental and consumer protectionlegislation that will go further in regulatingcorporate behavior than almost anything theUnited States government has enacted indecades."12 However, it has become clear thatbeing proactive about EHS and sustainabilitymakes good business sense. In the words ofWilliam Stavropoulos, CEO of The DowChemical Company:
“There is no question in my mind thatbusiness and the free enterprise system areessential to making sustainability work. Ourfocus at Dow is on hard-wiring it into ourcompany in the same way we have fullyinstitutionalized environment, health andsafety into our culture and into our work andpeople processes. Our challenge is to makesustainability sustainable. Ultimately, the worldwill judge our commitment to sustainabilitynot by what we say, but by what we do."
Market demand for greater transparency,ethical behavior and corporate governance hasled to an increase in voluntary disclosure,endorsed by the major exchanges in Europe
and the U.S, as well as greater scrutiny frommajor investors. In addition to customers,shareholders and employees, there is a broadercollection of stakeholders that can influencethe success of a business and are interested inEHS performance. These include: suppliers andbusiness partners; regulators and governmentofficials at the local, state and federal levels;neighboring communities; religious groups,advocacy groups and other NGOs; academicand research organizations; and, of course, themedia. Many leading companies haveestablished stakeholder outreach programs,often including extensive dialogue sessions andformation of external advisory panels. Somecorporations have gone a step further byestablishing formal alliances with specificenvironmental or public interest groups—seepage 20 for an example of how FedEx Expressis working with Environmental Defense'sAlliance for Environmental Innovation.
In short, EHS and social performance matter tostakeholders, whether it is diversity in theworkforce to the labor markets, innovation andrisk management to the capital markets, orpollution prevention to stakeholders in the
Product and ProcessInnovation
Reduced Waste andEmissions
Efficient Use ofResources
Occupational Healthand Safety
StakeholderEngagement
EmployeeSatisfaction
EnvironmentalProtection
CommunityQuality of Life
IncreasedProfitability
Improved CapitalUtilization
ShareholderValue
CustomerSatisfaction
IntellectualCapital
License toOperate
Reputation andBrand Image
ReducedRisk
TangibleOutcomes
Value to Society
IntangibleAssets
Figure 2-3
Overview of PathwaysLinking EHS toShareholder Value
5
VOTES RECEIVED IN FAVOR OF SHAREHOLDER RESOLUTIONS ONCORPORATE GOVERNANCE IN 2002 WERE TWICE THOSE RECEIVED IN 200118
community. The growing environmental andsocial concerns of stakeholders present aunique opportunity for companies to betterleverage their EHS capabilities. This will enablecompanies to both measure and manage thecontribution of EHS and social performance toshareholder value.
A Growing Awareness in the FinancialCommunity
Despite the surge of interest in EHS andsustainability, the majority of companyfinancial officers, institutional investors andfund managers are reluctant to addressenvironmental and social performance.However, a growing minority of investmentprofessionals believes that it is worthwhile toconsider the relationship between market value,EHS and social performance. In particular,
there is a heightened awareness of thecontribution of non-financial performance tomarket value in such areas as corporategovernance, transparency and business ethics.
EHS Excellence is an Indicator of SuperiorManagement
Some analysts have argued that EHSperformance is correlated with financialperformance, and therefore that EHSexcellence can be used as a proxy indicator forshareholder returns. The underlying logic isthat effective management of EHS issues is asign of good management, which drives goodfinancial performance. For example, Innovestconstructed an EHS management rating indexcalled EcoValue21® as an investment analysistool, and claims that it distinguishescompanies with superior returns across a rangeof industries. Figure 2-4 illustrates how, in the
Figure 2-4
Analysis of PharmaceuticalIndustry Stock PerformanceBased on EcoValue21®Rating Index13
20%
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May-01 Jun-01 July-01 Aug-01 Sept-01 Oct-01 Nov-01 Dec-01 Jan-02 Feb-02 Mar-02 Apr-02 May-02
Difference 0.0% 4.0% 3.7% 3.9% 7.1% 5.8% 5.2% 5.9% 9.0% 16.9% 16.5% 15.5% 17.2%
Top Half Average 0.0% -1.4% -0.2% -3.5% -1.5% -0.8% -2.3% -3.0% -8.3% -3.5% -4.7% -7.7% -8.2%
Bottom Half Average 0.0% -5.4% -3.9% -7.4% -8.6% -6.6% -7.5% -8.9% -17.2% -20.4% -21.2% -23.3% -25.4%
May
-01
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Chart courtesy of Innovest
pharmaceutical industry, companies with aboveaverage ratings have outperformed companieswith below average ratings by approximately17 percentage points (1700 basis points) sinceMay 2001.
Business Fundamentals go Beyond AuditedFinancials
The recent wave of accounting scandals in theU.S. has led investors and other corporatestakeholders to re-think their position on justwhat is “fundamental" to the valuation of acompany. There is mounting evidence of thefinancial risks associated not only withcorporate environmental liabilities, but ofglobal problems such as climate change.Although analysts may not always speak thelanguage of EHS and sustainability, Wall Streetis gradually becoming aware of the importanceof measurement and disclosure of non-financial elements of a business. For example,up to 86% of oil and gas industry analystssurveyed confirmed that company performancein regulatory compliance, employee health andsafety, community service and lawsuits doindeed impact the value of a firm (see Figure2-5).14
Concerns about global warming are alsomaking some of Europe's largest insurance
companies keenly interested in greenhouse gasemissions. Insurers claim that in the nextdecade, the annual cost of global warming willrise to $150 billion a year.15 In the absence ofU.S. government mandates, several groups haveformed, including the Energy Future Coalitionand the Pew Business Environmental LeadershipCouncil, to address the challenge of globalwarming. As financial executive Linda Descanoof Citigroup noted,
“These issues are no longer environmental andsocial issues but are now recognized asstrategic business issues."16
Shareholder Advocacy is Mounting
Shareholder advocacy interests have alsofocused on the issue of disclosure beyond thatrequired by law. A recent report by the RoseFoundation provides a thorough review of theevidence linking environmental performance tofinancial performance, and recommends thatfiduciaries of pension funds, foundations andcharitable trusts should take active steps toencourage disclosure of environmentalperformance information.17
There is mounting evidence that shareholderadvocacy can succeed through a variety ofmechanisms—the formal shareholder proxyprocess, private dialogue, public dialogue using
82%
RegulatoryCompliance
100
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50%
36%
86%
EmployeeSafety
CommunityService
Lawsuits
Figure 2-5 Percent of oil and gas industry analysts who feel thatselected EHS indicators impact the value of a firm.14
SOCIALLY SCREENED INVESTMENT PORTFOLIOS TURN OVER 50% LESS THAN OTHER MANAGED FUNDS9
7
8
the media, or litigation as a last resort. TheNew York Times reports that “shareholdershave filed 31 global warming resolutions with23 companies in the United States in 2003 and5 in Canada. The companies include automanufacturers, electric power companies andoil companies."18 Over 800 resolutions werefiled in 2002 concerning corporate governanceissues. The votes received in favor of suchresolutions were twice those received in 2001.
The stakes are increasing as multinationals inthe finance community band together tosupport their arguments for EHS considerationsin their finance portfolios. For example, tenleading banks from around the worldannounced in 2003 a set of voluntaryguidelines called the “Equator Principles,"whereby they intend to meet the InternationalFinance Corporation's EHS guidelines in theirprojects in developing countries. This is aninteresting and unprecedented expectation:banking clients must adhere to theseprinciples, and this is relevant to allcorporations. Principle #8 states that if aproject goes out of environmental or socialcompliance, this constitutes grounds for adefault on the loan.55
In 2002, the Corporation of London, inpartnership with international financial servicesfirms, put forth a set of guidelines called TheLondon Principles designed to elucidate “therole of financial services in sustainabledevelopment." Given that London has 58% ofthe global foreign equity market and isarguably, after New York, the most importantfinancial center in the world, this document isextraordinary. In addition, the principles wereendorsed by British Prime Minister TonyBlair.19
The Growth of Socially Responsible Investing (SRI)
There are now over 200 mutual funds, run byover 800 portfolio managers and analysts,dedicated to socially or environmentallyresponsible investing. In sum, socially screenedportfolios are now more than $2 trillion, over10% of the $19.9 trillion assets currently
under management in the U.S.20 Differentinvestment styles have emerged among fundsusing socially responsible, ethical orenvironmental criteria.21 The majority of the$2 trillion figure consists of screenedinvestments, but credible organizations in thepast several years have been developing scoringand ranking tools that rate companiesaccording to environmental, social andeconomic criteria. The Dow JonesSustainability Index scores companies basedlargely upon their responses to extensivequestionnaires,22 while the FTSE4Good Indexanalyzes EHS and social responsibilityactivities, with the stated intent of promotinga stronger business commitment.23 Theseindexes have generally performed in line withor have outperformed the broader marketaverages.24
Ten Intangible Value Drivers for MeasuringEHS Performance
Identifying and improving upon a company'skey value creation opportunities is only asuseful as the ability to communicate these tointerested stakeholders. To communicate moreeffectively the hidden value of EHS, the EHScommunity should adapt itself to the languageand world-view of the investment community.In practice, the importance of specific EHSissues can vary greatly from company tocompany, and an EHS department needs tounderstand its company's business strategiesand value drivers, and to develop its prioritiesaccordingly. Effective communication betweenthe EHS and the investor relations perspectivecan help focus on specific EHS valuecontributions in terms that are clear toinvestors.
The book Invisible Advantage25 helps bothindividuals and companies better understandand communicate the profound degree towhich intangibles are defining corporate valuecurrently and revolutionizing the ways inwhich business is conducted. Key intangiblesvary according to industry, but measures
9
related to management credibility,innovativeness, ability to attract talentedemployees and research leadership areconsistently highly correlated with marketvalue.26 The GEMI EVI Work Group hasidentified ten intangible value drivers thatreflect significant pathways for value creationthrough EHS and sustainability. These valuedrivers are listed in Figure 2-6, and form thebasis for the subsequent sections of this report.
Utilizing these value drivers, this reportdemonstrates that (a) strengths in EHS andsustainability can add value to the enterprise,and (b) these strengths can be quantified in
the form of an index that is relevant tocompany valuation. Specifically, this reportshows how companies can develop a forward-looking tool that focuses on measuring thestrategic contributions of EHS and socialperformance to enhanced market valuation.The identification of EHS-related indicatorsthat are linked to intangible value drivers is thesubject of the next section.
CUSTOMER The ability to develop customer relationships, satisfaction and loyalty.
Management capabilities, experience and leadership's vision forthe future.
Does management communicate honestly and openly? Are itscommunications believed and trusted? Does it hold itself accountable?
Strength of market position. The ability to expand the market,perception of product/service quality and investor confidence.
How the company is viewed globally with regard to environmentalconcerns, community concerns, regulators' concerns, inclusion in "mostadmired company" lists and triple bottom line.
Supply chain relationships, strategic alliances, partnerships.
Strategy execution, IT capabilities, inventory management, turnaroundtimes, flexibility, reengineering, quality, internal transparency.
Talent acquisition, workforce retention, employee relations,compensation, what makes a "great place to work."
The R&D pipeline, effectiveness of new-product development, patents,know-how, business secrets.
The ability to effectively manage the balance between potentialliabilities and potential opportunities.
LEADERSHIP ANDSTRATEGY
RISK
INNOVATION
TRANSPARENCY
BRAND EQUITY
ENVIRONMENTAL ANDSOCIAL REPUTATION
HUMAN CAPITAL
TECHNOLOGYAND PROCESSES
ALLIANCE ANDNETWORKS
Figure 2-6 The Measures that Matter
10
Section 3A CLOSER LOOK
This section describes and illustrates each ofthe 10 intangible value drivers listed in Figure2-6, and suggests performance indicators thatcan be used to quantify their EHS aspects.
• Customer satisfaction with EHS performance• Extent of customer relationships across product life cycle• Collaboration with customers on EHS solutions
Value Driver Sample Performance Indicators
CUSTOMER
LEADERSHIP ANDSTRATEGY
TRANSPARENCY
BRAND EQUITY
ENVIRONMENTALAND SOCIALREPUTATION
ALLIANCES ANDNETWORKS
TECHNOLOGYAND PROCESSES
HUMAN CAPITAL
INNOVATION
RISK
• Commitment to EHS/sustainability principles and goals• Articulation and execution of EHS strategy• Expression of diverse EHS views at Board level• Level of reporting for EHS function
• Disclosure of governance policies & procedures• Stakeholder engagement• Timeliness of communications• Quality and depth of EHS/sustainability reporting
• Perception of brand as environmentally and socially responsible• Value-added due to product stewardship• Presence in environmentally or socially-screened investment funds
• Regulatory compliance record• Third-party recognition and awards• Participation in EHS/sustainability consortia• Community development and philanthropy
• Collaboration on EHS/sustainability throughout the supply chain• Partnerships with EHS/sustainability-oriented organizations• Participation in industrial ecology networks
• Inherent product or process hazards• Effectiveness of risk prevention and risk management• Effective response to challenges and opportunities.
• Leadership and patent position in EHS technologies• Cost savings through EHS/sustainability innovation• EHS-related product or service differentiation
• Leadership in EHS/sustainability technologies & business practices• Design for EHS/sustainability processes and results• Energy and material conservation• Ecosystem impact minimization
• Workforce diversity, employee benefits and compensation• Employee rights and empowerment• Perception and awards as a "great place to work"
Figure 3-1 Indicators that Contribute to EHS Intangible Value Drivers
These are summarized in Figure 3-1. The nextsection presents a process for companies toidentify, measure, communicate, and managethese drivers of shareholder value.
The ability to develop customer relationships, satisfaction, and loyalty
Meeting basic customer expectations is nolonger sufficient. When competitors are anarms-reach or a “click away,” fostering solidcustomer relationships is essential. Theserelationships extend beyond the product orservice transaction—many customers nowexpect environmental and social responsibilityas well. For example, the U.S. Federalgovernment, which purchases $200 billionannually in goods and services, has adoptedComprehensive Procurement Guidelines thatgive preference to energy efficient,environmentally effective, and bio-basedproducts. Many large manufacturers haveadopted similar EHS procurement criteria. Inthe European Union, “green" purchasing isbecoming more common among consumers,backed by a policy directive that promotessustainable consumption through reducedconsumer packaging and energy efficiency.
The Philippines as Satisfied Customer:Mirant Corporation
Mirant's Philippine operations and involvementin the Philippine rural electrification programhave earned the company many coveted
environmental performance and corporatecitizenship awards. They have also beenrecognized as a top employer in thePhilippines. These accomplishments andcorporate commitment have helped sustain apositive working partnership with thePhilippine government. In ensuring a license to operate through corporate citizenship,Mirant can be more certain of a license togrow in the market when additionalinvestments are warranted.
Measures related to EHS performance inenhancing customer relationships include:
• Extent of disclosure of the environmental/social impacts of products and processes
• Customer loyalty and price toleranceattributable to EHS differentiation
• Extent of customer relationships throughoutthe life cycle of the product
• Third-party feedback and customersatisfaction awards
• Collaboration with customers on EHS-relatedinnovations or customer solutions.
• Customer satisfaction with EHS performance• Extent of customer relationships across product life cycle• Collaboration with customers on EHS solutions
CUSTOMER
Customer Satisfaction throughEnvironmental Services: Ashland Inc.
Ashland Distribution Company, a division of AshlandInc., offers a one-source, ‘closed-loop’ process to notonly supply chemicals, plastics and other materials,but also to manage hazardous and non-hazardouswaste streams for customers. Ashland’s EnvironmentalServices group, leverages a value-added customerservice from the in-house expertise and capabilitiesgained while handling these issues for Ashland’s ownchemical businesses. It offers a range of processing
11
and treatment options, compliance assurance andindustry-leading service throughout North America.
Key Intangibles:Customer, Technology and Processes
Sample Leading Indicators:• Customer cost of ownership for purchased
chemicals• Customer loyalty and retention• Revenue from environmental management
services
“Environmental protection is a complexundertaking, but the laws of nature are simple.We will provide leadership on the journey toan environmentally sustainable future, withefficient products and creative recyclingsystems."27
Carly FiorinaChairman and Chief Executive Officer, HP
The growing importance of transparency andcorporate responsibility has made EHS andsustainability commitment an essential elementof corporate leadership and governance. ChiefExecutives and Boards of Directors areincreasingly sensitive to the expectations ofshareholders, employees, and otherstakeholders.
Measures of EHS performance relevant toleadership and strategy include:
• Commitment and policies with regard to EHS/sustainability principles and goals
• Effectiveness of management in articulationand execution of EHS strategy, includingdialogue and engagement with externalstakeholders (see Transparency, page 13)
• Diversity and independence of the Board, including the number of outside Directors
• The level of reporting for the EHS/sustainability function.
• Commitment to EHS/sustainability principles and goals• Articulation and execution of EHS strategy• Expression of diverse EHS views at Board level• Level of reporting for EHS function
LEADERSHIP ANDSTRATEGY
One of the world's foremost proponents ofintegrating EHS issues into business strategy isChad Holliday, CEO of DuPont, who served as chairof the World Business Council for SustainableDevelopment (WBCSD). DuPont no longer viewsEHS and social performance as separate thrusts,but instead has woven them into its threecorporate strategic priorities:
• Knowledge intensity - creating products and services that deliver greater value to customers and shareholders with less physical mass
• Productivity - improving operating efficiency and capital utilization while reducing the supply chain environmental footprint
• Integrated science - seeking technological innovations that improve quality of life, e.g., by enhancing safety, recyclability, or nutrition.
DuPont has effectively bridged the communicationsgap between EHS performance and financialperformance by emphasizing the contributions ofEHS to key intangible value drivers, such asinnovation and technology.
Key Intangibles:Leadership and Strategy, Innovation
Sample Leading Indicators: • Shareholder value added per pound of product• Operating efficiency improvements attributable
to eco-efficiency• Percent of new products with differentiated
EHS/sustainability features
Management capabilities, experience, vision for the future
Integrating EHS into Business Strategy: DuPont
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Effective communication can be the linchpinof corporate reputations; negative impacts canbe dramatic when stakeholders are not giventhe information or ability to make an informedchoice.28 Transparency has become a criticalbusiness issue. The Sarbanes-Oxley Act is thelegislative incarnation of the spotlight thatinvestors, consumers, and employees now shineon the financial statements of a company.29
GEMI holds NGO transparency workshops andis developing a new tool to addresstransparency challenges.30
Indeed, companies may pay a price for notmanaging the disclosure of their information,given the ease with which consumers andregulators can now access information oncorporate practices. When the Toxic ReleaseInventory (TRI), a U.S. EPA database of wastemanagement activities, was first disclosed,shares of publicly-traded companies reportingdata markedly declined in the short-term.31
The implication is that investors updated theirexpectations of future returns for high TRIcompanies. This feedback from the marketprompted change: The firms with the largestdecline in market value subsequentlyresponded by reducing emissions more thantheir industry peers.32
Companies stepping up to this demand forinformation disclose not only credible financialstatements, but also their environmental andsocial policies and procedures. One recentstudy shows the relationship betweencompanies that disclose more detailedinformation about their governance and highershareholder return.33 Though this correlation isnot conclusive, it does underscore the validityof transparency in governance as a value driver.
Sample measures related to transparency andcommunication include:
• Disclosure of governance policies andprocedures, including:
� Disclosure of Director share ownership requirements
� Issuance of reports, policies, guidelines, andprocedures concerning EHS/Sustainability,dialogue meetings with stakeholders,disclosure of business process improvementinitiatives
� Stating how these policies relate to existinginternational standards
� Tying executive and employee compensationto meeting or exceeding internal standardsand guidelines
� “Continuous" reporting or book-keeping;timeliness of financial and non-financialinformation disclosure beyond quarterly orannual filings
• Extent of stakeholder engagement anddialogue:
� Number of community advisory panels at manufacturing sites
� Cooperation or alliances with non-governmental organizations (NGOs)
� Employee involvement in EHS/Sustainabilitypolicies and practices
• Timeliness of communications: e.g.,responses to unplanned incidents or releases
• Quality and depth of EHS/Sustainabilityreporting:
� Commitment to quantitative indicatorsand goals
� Adherence to international reporting standards
� Candidness about gaps and needed improvements
• Disclosure of governance policies and procedures• Stakeholder engagement• Timeliness of communications• Quality and depth of EHS/Sustainability reporting
COMMUNICATION ANDTRANSPARENCY
Does management communicate honestly and openly?Are its communications believed and trusted?Does management hold itself accountable?
14
Bristol-Myers Squibb (BMS), a global manufacturerof pharmaceuticals, recently recognized that anincreasing number of clinical trials are beingconducted in developing nations. In keeping withits social responsibility commitment, the companyformed a Bioethics Committee and developedpolicies regarding ethical issues in clinical trials,such as readability of forms and informed consenton behalf of children or disadvantaged subjects.One important consideration is that clinicalresearch should be done in a population that willderive benefit from that research, implying that theresulting products should be available to thepatients in that region. Another example is theemerging area of protection of privacy inpharmacogenetics, which seeks to predict diseasevulnerability or treatability in specific geneticgroups. Since bioethics is an evolving area, thecompany continues to reconsider and refine itspolicies.
BMS was approached by the Calvert Group, asocially responsible investment firm, to learn moreabout its corporate responsibility and ethicsprograms. During a meeting between Calvert andBMS researchers, the bioethics policies werefeatured as an ethical research example. Calverthas lauded these policies as a pharmaceuticalindustry model. At their suggestion, rather thankeeping its bioethics policies confidential, thecompany has decided to make them available uponrequest to interested stakeholders.
The transparency dialogue between Calvert andBMS supported Calvert's decision to include thecompany in the Calvert Social Index, which is usedas a basis for inclusion into many of its mutualfunds. As a result of its transparency and leadershipin the area of ethical research policies, Bristol-Myers Squibb hopes to be recognized not only bythe investment community, but also by the globalpopulations that it serves. It is plausible to expectthat governments, research institutions, and civilsociety will acknowledge the company as a trustedpartner in the conduct of future clinical trials, andthat this will translate into competitive advantagein growing international markets.
Key Intangibles: Transparency, Environmental and Social Reputation
Sample Leading Indicators: • Inclusion in socially responsible funds• Penetration into international markets• Clinical trials conducted in developing nations
that will benefit from research
Transparency in Bioethics Policy: Bristol-Myers Squibb
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Many GEMI companies (such as Coca-Cola,Intel and Johnson & Johnson) are householdnames, and there have been many attempts tocalculate a monetary value of such brands. Forexample, these brand names consistently scorehigh on Interbrand's annual ranking of the“World's Most Valuable Brands."34 Somecompanies have successfully tied their brand toan environmentally-friendly image, and haveleveraged this image to improve consumerawareness and customer loyalty. 35
Measures of brand equity that relate to EHSand sustainability include:
• Perception of the brand as environmentallyand socially responsible—this can influence
customer loyalty, lender and investorscrutiny, cost of capital
• Value added due to product stewardship—thecommitment of a company to support thesafe and responsible use of its productsthroughout the life cycle
• Eco-labels and other certifications earned
• Inclusion of the company in environmentaland social responsibility investor screens,such as Dow Jones Sustainability Index orFTSE4Good.
• Perception of brand as environmentally and socially responsible• Value-added due to product stewardship• Presence in environmentally and socially-screened investment funds
BRAND EQUITY Strength of market position, the ability to expand the market,perception of product/service quality, investor confidence
The merger of Hewlett-Packard (HP) and Compaqunited two companies that had long pursued acommitment to EHS performance and sustainability."HP strives to develop programs that reduce ourenvironmental footprint, as well as those of ourcustomers and partners," said Walt Rosenberg, VicePresident, Corporate, Social and Environmentalresponsibility, HP Corporate Affairs. The companyhas incorporated "design for environment" methodsinto its product development processes and workedwith suppliers to reduce EHS impacts associatedwith its products.
The EPA has awarded its 2003 EnvironmentalAchievement Award for U.S. EPA Region 9 to HP’sproduct recycling solutions facility in Roseville,California.
HP is the only technology company to have its owncomputer hardware recycling facilities in the
United States. With its partners, HP operates one ofthe world's largest hardware recycling facilities.HP's environmentally sound management of end-of-life hardware turns unwanted products intovaluable commodities that can be reused toproduce new products, reducing the burden on theEarth's resources.36
Key Intangibles:Brand Equity, Environmental and Social Reputation
Sample Leading Indicators: • Reduction in emissions, waste, and energy
consumption per product unit shipped• Percent of product mass recovered and recycled
at end-of-life
Sizing Up the Footprint: Hewlett-Packard (HP)
A company's reputation for environmental andsocial responsibility can have an importantimpact on strategic issues, such as access tocapital and global markets. While the primarynegotiating levers for most businesses arebased on economics, concern for EHS andsustainability can be a differentiator. Somehost governments may even demand adherenceto sustainable development principles as aprice of entry. Measurement and reporting ofEHS performance and corporate citizenshipinitiatives also help to build better relationshipswith stakeholders, especially at the local level.
Measures related to sustainability reputationinclude:37
• Regulatory compliance record (e.g.,violations, penalties, incidents), as well asshareholder activism and public criticism
• Third party recognition and awards forcorporate citizenship or EHS excellence
• Participation in consortia that promote EHSand sustainability, such as GEMI or theWorld Business Council for SustainableDevelopment (WBSCD)
• Community development and philanthropy, including donations, local investments, andvoluntary in-kind assistance.
ENVIRONMENTALAND SOCIALREPUTATION
How the company is viewed globally in terms of environmentalconcerns, community concerns, regulators' concerns, inclusion in “mostadmired company" lists, triple bottom line
3M has a strong commitment to sustainabledevelopment through environmental protection,social responsibility and economic progress. Itssustainability policies and practices are directlylinked to its four fundamental corporate values:
• Satisfying its customers with superior quality and value
• Providing investors an attractive return through sustained, high-quality growth
• Respecting its social and physical environment• Being a company that employees are proud to
be part of
3M has been recognized as a sustainability leaderby the Dow Jones Sustainability Index and hasachieved high rankings for quality of managementand innovation. The Harris Annual ReputationSurvey ranked 3M as the tenth most reputable U.S.company in 2002. 3M believes that itssustainability reputation translates into shareholder
value by (a) demonstrating that 3M is a well-managed company that addresses both risks andopportunities, (b) enhancing brand preferenceamongst consumers, and (c) attracting andretaining a diverse and talented work force.
Key Intangibles:Environmental and Social Reputation, Brand Equity,Human Capital
Sample Leading Indicators:• Recognition as a sustainability leader by
government, NGOs and business groups• Inclusion in environmentally- or socially-
screened funds• Product preference by consumers
• Regulatory compliance record• Third-party recognition and awards• Participation in EHS/sustainability consortia• Community development and philanthropy
Building a Reputation for Sustainability: 3M
16
Businesses over the years have come to acceptthe claim that “to build a company or acapability without regard for the chain inwhich it is embedded is a recipe for disaster."38
Scrutinizing a company's supply chain with anEHS lens can reveal the choices andopportunities a company has to cost-effectively improve performance. Raw materialsand new technological concepts, for example,may demand choices between higher-pollutingor cleaner-burning energy sources. Materialssourcing can lie squarely in the scope amongother strategic considerations. Manufacturerscan choose product designs that areupgradeable, with the potential for customerlock-in with a service relationship.
The Global Brand With a Local Reach: TheCoca-Cola Company
The network of local businesses that Coca-Colahas built is as impressive as its global brand.In over 200 countries, Coca-Cola operates withlocal partners. Even in geographies far fromits world headquarters such as in the MiddleEast, Coca-Cola employs 20,000 people directlyand 200,000 including retail and supply jobs.39
Their products are produced, sold, anddistributed by authorized local bottlingpartners, employing one million local citizens.
Zahi Khouri, chairman of the National BeverageCompany, a Middle Eastern bottler that is 15percent owned by Coca-Cola, said in aninterview with The Economist that Coca-Colastrongly supports local management ofoperations in other countries.39 Coca-Cola isthe second biggest corporate investor in theWest Bank region.
Measures that indicate leverage ofEHS/sustainability in alliances and networksinclude:
• Collaboration on EHS/sustainabilityimprovement through supply chainrelationships, including outsourcing,collaborative innovation, and procurementpolicies.
• Extent of outsourcing (e.g., cost of goods,materials, and services purchased)
• Percentage of suppliers that meet or exceedvoluntary environmental performancestandards
• Extent to which supplies are sourced locallyversus globally
• Number of alliances and joint ventures
• Explicit use of EHS and sustainability criteriain selection of suppliers and businesspartners
• Partnerships with EHS/sustainability-orientedorganizations, including NGOs, governmentsor other groups
• Participation in industrial ecology networks,in which waste byproducts of one companybecome feedstocks for another company.
GEMI's Supply Chain project is documentinghow collaborative relationships betweensuppliers and customers can improve overallsupply chain performance from both afinancial and EHS perspective. These types ofopportunities are also being explored by theSuppliers Partnership for the Environment (SP),a recently established automotive industryconsortium.
ALLIANCES ANDNETWORKS
Supply chain relationships, strategic alliances, partnerships
• Collaboration on EHS/sustainability throughout the supply chain• Partnerships with EHS/sustainability-oriented organizations• Participation in industrial ecology networks
17
In April 1999, Dow Chemical completed a two-yearcollaborative program with the Natural ResourcesDefense Council (NRDC) and five local activistgroups to voluntarily reduce waste and emissionsat the Michigan Operations site. The projectfostered broader efforts within Dow to shift fromtraditional environmental compliance to pollutionprevention and further integrate EHS concerns intobusiness decision making.
MSRI was a participatory process involving directcollaboration between Dow managers andenvironmental activists to first establish reductiontargets and then agree on pollution preventionactions. A full-time external expert was alsoretained by Dow to help identify the greatestopportunities for waste minimization and emissionreduction and to provide a credible technicalresource for the MSRI participants.
Results:
• EnvironmentalThe MSRI project set an aggressive goal of 35%reduction in waste and emissions. This goal wasactually exceeded—targeted emissions werereduced by 43%, and targeted wastes by 37%. Thetotal reductions achieved were over 10 millionpounds per year of wastes and about 1.5 millionpounds per year of air emissions, and some wastestreams, such as formaldehyde, were virtuallyeliminated. Consequently the TRI emissions fromthe Midland, Michigan site for 1998 were 41%lower than 1997.
• EconomicThe cost savings and process improvements thatMSRI delivered were exemplary. The reductions willbe paid for in less than one year, which translatesto an overall rate of return of 180%—a savings ofover $5.4 million per year with a total one timecapital expenditure of $3.1 million. Dow was thefirst company to harness the Six Sigmamethodology to directly improve EHS performance.
• SocialMSRI involved a multi-stakeholder, participatoryendeavor that enabled community participants togain an understanding of Dow's decision-makingprocess, and helped to establish common ground.Relationships with all stakeholders involved in theproject improved dramatically.
Key Intangibles:Alliances and Networks, Transparency
Sample Leading Indicators: • Measures of company's ability to prevent
pollution at its source, versus the capital required for pollution control
• Measures of the amount and quality of various stakeholder dialogues
• Environmental gains and competitive advantage due to process modifications
The Michigan Source Reduction Initiative (MSRI): The Dow Chemical Company
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The ability to exploit new practices is a criticalelement of sustained competitive advantage.40
In the past few decades, companies havebegun to introduce strategic frameworks andprocesses that take environmental costs andbenefits into account.
Design for Environment (DfE)41 is one suchtool, where environmental criteria are broughton board early in the product developmentstage. When combined with a Life CycleAssessment (LCA), these tools can not onlyimprove the environmental performance of aproduct during its use phase, but also simplifya product's end-of-life disassembly, reuse,recycling and disposal. Total cost assessment(TCA) has been another useful managementtool since the late 1980's, and when combinedwith environmental considerations can give acandid picture of total costs and benefits (seeSection 4 for further discussion on TCA).
Employing such tools at all levels of theorganization takes a commitment eitherthrough the provision of information about thetool or process, or by employing incentives andcompensation schemes. Companies that standout as leaders in organizational technologiesand processes will understand and quantify thebenefits of such tools, and provide acombination of information and incentives toimprove the measurable performance.42
Measures of superior technology and processperformance include:
• Leadership in EHS/sustainabilitytechnologies:
� Investment in alternative energy, bio-based products, etc.
� Adoption of sustainable process technologies
TECHNOLOGY ANDPROCESSES
Strategy execution; IT capabilities, inventory management, turnaroundtimes, flexibility, reengineering, quality, internal transparency• Leadership in EHS/sustainability technologies & business practices• Design for EHS/sustainability processes and results• Energy and material conservation• Ecosystem impact minimization
19
• Leadership in EHS/sustainability business practices:� Speed and quality of EHS due diligence� Incentives to develop “beyond compliance"
processes and technologies
• Design for EHS/sustainability processes and results:� Incorporation of EHS/sustainability criteria
into product realization processCollaboration with suppliers on life cycle impact reduction
� Materials and energy use reduction in product and process design
� Reductions in pollution, greenhouse gas emissions, hazardous wastes, etc.
� Improvements in product upgradeability, longevity, re-usability, etc.
� Reduction in product maintenance requirements and cost of ownership
• Energy and material conservation:� Initiatives to use renewable energy sources
and to increase energy efficiency� Percentage of the weight of products sold
that is reclaimable at the end of the products' useful life and percentage that is actually reclaimed
• Ecosystem impact minimization:� Brownfields re-development initiatives� Land use policies and habitat restoration� Ecological footprint reduction
Excellence in technology does not necessarilyrequire leading-edge innovation. In many casesit simply involves applying available expertiseand know-how to devise beneficial, cost-effective solutions. Moreover, technology doesnot refer only to the “hard" technologiesassociated with product design and processengineering; it also includes the “soft"technologies associated with business processesand decision-making.
FedEx Express, the Memphis, Tennessee-basedcompany that invented the express packagedelivery market, has been upgrading its ground-based delivery operations. In May 2003, FedExExpress announced it had agreed to purchase 20hybrid delivery trucks, the vanguard in a programthat has the potential to eventually replace its fleetof 30,000 medium-duty express delivery vans.FedEx Express is the first U.S. company to adapt thetechnology for diesel delivery vehicles on such alarge scale.
Hybrids, which combine a high-efficiency diesel orgas engine with an electric motor, have bothfinancial and environmental advantages. Theyrequire less maintenance because they run cleaner,and the braking systems last longer because themotor itself helps to decelerate the vehicle whilerecapturing kinetic energy. Through a combinationof fuel savings and lower maintenance costs, FedExExpress expects to recoup some of the higheracquisition costs of the hybrid vans. As productionlevels rise, these costs will come down (and savingsincrease). FedEx Express is working withEnvironmental Defense's Alliance for EnvironmentalInnovation to develop the environmentalperformance specifications for the new vehicles.
The scale of FedEx Express' commitment is likely totransform the economics of hybrid commercialvehicles, potentially enabling them to be mass-produced and more affordable for smallercompanies. Thus, FedEx Express is helping to jump-start a technology that could have widespreadeconomic and environmental benefits. In a recentreport, consumer consultant J.D. Power &Associates Inc. estimated there will be more than500,000 hybrid vehicles on the road by 2008 withtrucks accounting for 40% of that number.
Key Intangibles:Technology and Processes, Innovation, Alliances andNetworks
Sample Leading Indicators: • Percent of fleet utilizing alternative engine
technology• Life cycle operating and maintenance costs per
vehicle• Energy consumption per vehicle mile
Utilizing Advanced Technology: FedEx Express
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In a service-oriented economy, human capitalis critical to organizational success, whether acompany is product or service-oriented.Researchers have begun to quantify, in variousways, the effects of investment in humancapital. For example:
• A study of 405 public companies found thata well-managed workforce can add up to30% to a company's market value.43
• A study of 40 companies found thoseranking in the top half for trainingexpenditures per employee had higher netsales and higher gross profit per employeethan those in the bottom half; they also hada higher and faster-growing market-to-bookratio.44
• A study of 29 professional service firms in15 countries indicated that raising employeesatisfaction by 20% can boost financialperformance more than 40%.45
Measures of EHS contributions to humancapital include:
• Workforce diversity, employee benefits and compensation:� Composition of senior management and
governance bodies, including female/male ratio and other indicators of diversity asculturally appropriate.
� Net employment creation and average turnover
� Employee benefits beyond those legally mandated
� Clear organizational goals, incentives and performance measures
• Employee rights and empowerment:� Freedom of expression and tolerance for
individuality� Average training investment per employee
per year� Incentives for employee volunteerism,
education and career development� Culture of continuous improvement,
including employee health and safety.
• Perception and awards as a “Great Place to Work."
HUMAN CAPITAL Talent acquisition, workforce retention, employee relations,compensation, what makes a "great place to work"
Intel was ranked number three in Business Ethics2003 list of best corporate citizens. The magazineexplains that ethics at Intel "include carefulattention to employee safety—so much that CEOCraig Barrett insists he be sent an e-mail reportwithin 24 hours any time one of his firm's 80,000employees loses a single day of work to injury. 'Thispolicy allows us to look at the root causes of allaccidents and figure out what we can do toprevent them from occurring again,'” said DaveStangis, Intel's Director of Corporate Responsibility.In 2000, Intel's worldwide injury rate was just 0.27
injuries per 100 employees, compared to anindustry average of 6.7.
Key Intangibles:Human Capital, Environmental and SocialReputation
Sample Leading Indicators:• Awards and recognition• Employee satisfaction surveys• Employee health and safety statistics
Commitment to Employees: Intel Corporation
• Workforce diversity, employee benefits and compensation• Employee rights and empowerment• Perception and awards as a "great place to work"
21
Service, product and process innovations canall improve EHS performance as well as addoverall value to a corporation. Devisinginnovative ways to meet or beat compliancetargets may not only help reduce costs; it hasalso helped steer environmental regulation in adirection beneficial to producers as well as tosocial/environmental well-being. 46
Measures of EHS/sustainability contributions toinnovation include:
• Leadership and patent position in EHS technologies:
� Level of R&D investment in addressing regulatory requirements
� Licensing revenues from EHS technologies
• Cost savings through EHS/sustainability innovations, including operating costs,capital costs, service and support costs, orproduct takeback costs
• EHS-related product or servicedifferentiation, e.g., ability to extract ahigher margin.
INNOVATION The R&D pipeline, effectiveness of new-product development, patents,know-how, business secrets
Johnson Controls, Inc. (JCI) is the world's largestmanufacturer of automotive interiors andautomobile batteries, and a global leader in controlsystems and commercial facility management. JCIhas achieved growth through innovation, whileremaining committed to its values, includingintegrity, customer satisfaction and EHS excellence.
JCI began decades ago to promote battery recyclingand develop a reverse logistics infrastructure.Today, the recycling rate of battery lead exceeds93%, far higher than any other commodity, and 48states require lead-acid batteries to be recovered.In addition, lead and plastic process wastes arerecycled for re-use in new batteries and otherproducts such as X-ray shielding. Continuinginnovations in battery technology include designfor disassembly and development of higher voltagebatteries to support electronic control systems thatwill improve fuel efficiency and reduce emissions infuture vehicles.
As a leader in facility management, JCI focuses onmaking commercial buildings more energy efficient,safe, secure and comfortable. For example, inbuilding control systems, JCI's mercury-freethermostats provide a competitive advantage inmany applications (e.g., schools, hospitals). Oneimportant innovation was the Energy SavingPerformance Contracting approach, in which energyefficiency upgrades are financed through JCI andrepaid through energy savings. This approach isprojected to achieve $95 billion in energy savingsand 1.3 billion tons of carbon dioxide emissionreductions between 1990 and 2020.
Key Intangibles:Innovation, Risk
Sample Leading Indicators: • Energy/materials use per consumer product unit• Competitive advantage in bidding for contracts• Reduced cost of ownership and liability risks for
customers
Innovation and Environmental Benefits: Johnson Controls, Inc.
• Leadership and patent position in EHS technologies• Cost savings through EHS/sustainability innovation• EHS-related product or service differentiation
22
Proactive investing in environmental measuresbeyond those required by law can be good forthe bottom line, while limiting downside risk.47
Damages and hefty litigation fees are incentiveenough to manage proactively the risk ofunplanned incidents such as spills, workplaceaccidents or product-related injuries. Moreimportantly, such incidents may result in costlybusiness interruptions as well as adversepublicity that can compromise brand equityand reputation.
Risk management also has a positive aspect—the ability of a firm to pursue promisingbusiness opportunities that involve uncertainty.A company that is able to rapidly andeffectively discern potential obstacles orliabilities, e.g., through a due diligence processfor acquisition of new assets, is betterequipped to enhance long-term shareholderreturns. Likewise, a company that exercisesproduct stewardship, while advising customersand suppliers on how to minimize hazards intheir own operations, enhances both its ownrisk profile and its perceived value as abusiness partner.
Insurance Companies Re-think Risk Profiles
Swiss Re believes that companies that havepoor compliance records or are lacking in plansto mitigate climate change risks, are morelikely to attract shareholder lawsuits.Accordingly, the insurance giant has statedthat it may drop insurance for the directorsand officers of those companies who may bespecifically targeted by shareholders.
On the positive side, the effective riskmanagement program of Occidental PetroleumCorporation has been recognized by insurance
companies, resulting in Occidental beingoffered access to additional insurance capacityat preferred rates.
Measures related to effectiveness inEHS/sustainability exposure and risk include:
� Intrinsic product and process hazards, suchas presence of toxic constituents
� Effectiveness of risk prevention and risk management, including:
� Prevention of risks� Frequency of internal audits� Investment in meeting upcoming
regulatory requirements� Accrued environmental liabilities, fines,
warnings and penalties� Rate of worker days lost per 200,000
hours� Mitigation of impacts
� Crisis response and crisis management performance
� Waste recovery and recycling programs, whether in compliance with or in addition to regulatory initiatives
� Workers compensation case management costs
� Costs of unplanned business interruptions
� Effective responses to challenges and opportunities:
� Proactive policies to address regulatory initiatives and consumer preferences, e.g.,policies to prepare for climate change pressures, use of emissions trading schemes, product take-back regulations and consumerprivacy issues
� Proactive experimentation with environmental technologies such as joint implementation, emissions trading, pollution-prevention technologies
� Corporate citizenship and stakeholder engagement initiatives
RISK The ability to effectively manage the balance between potentialliabilities and potential opportunities• Inherent product or process hazards• Effectiveness of risk prevention and risk management• Effective response to challenges and opportunities
23
Novartis is one of the world's leading healthcarecompanies. The company has had a long history ofrisk management, using a variety of tools to assessrisks associated with new projects and acquisitions,as well as ongoing operations. For example,Novartis sites are required to annually maintain a"risk portfolio," a matrix that screens various risksin terms of their potential impacts and level ofcontrol. This information is rolled up to the Grouplevel, and is used to improve managementawareness and support priority-setting in resourceallocation.
Novartis has initiated a new program thataddresses business continuity by assuring that allbusiness interruption risks are properly anticipatedand managed. Costly business interruptions canpotentially be triggered by a variety ofcircumstances, from an unintentional release ofhazardous materials to a failure of criticalinformation systems. The Health, Safety andEnvironmental Department has the responsibility todevelop a framework for assuring businesscontinuity, including risk identification, contingencyplanning, crisis management and disaster recovery.In addition, looking beyond the fenceline, Novartishas established a product stewardship program toanticipate potential risks associated with design,material acquisition, distribution and use of itsproducts; for example, the company might chooseto eliminate chemical constituents with undesirableproperties.
Assuring Business Continuity: Novartis
24
Key Intangibles:Risk, Environmental and Social Reputation
Sample Leading Indicators: • Number of risks classified "high" for each
business unit• Percent completion of business continuity plans• Percent of product stewardship risk analyses
completed
Section 4FROM CONCEPT TO PRACTICE
Through identification of important EHS-related value drivers, companies can improvetheir competitive position and financialperformance over the long run. However, EHSvalue contributions are not meaningful to theinvestor unless they are properly articulatedand communicated.
Section 2 “Making the Case" and Section 3 “ACloser Look" are relevant for senior companyexecutives, mainstream financial analysts orfund managers, and investor relationsprofessionals. This section is intended as apractical primer for the EHS professional,working in collaboration with other corporatefunctions. This section, “From Concept toPractice" presents a step-by-step process foridentifying, measuring, communicating andmanaging these value drivers. The intent of theprocess is to help EHS professionals and theircompanies gain recognition for EHS excellencefrom their own internal investor relationsfunction, from the investment community andfrom other stakeholders.
Linkage Between EHS and IR
In its “Standards of Practice for InvestorRelations," the National Investor RelationsInstitute (NIRI) defines Investor Relations as:
“. . . a strategic corporate marketing activitycombining the disciplines of communicationsand finance that provides present andpotential investors with an accurate portrayalof a company's performance andprospect…Marketing in this context does notmean 'selling' a company's securities, butrather a process of identifying target audiencesand educating them about the present andpotential value of those securities."
The NIRI document further notes that theimportance of quality of management toinvestors suggests that those investors need toknow whether management can articulate avision and whether they have the resources to
accomplish that vision. To the extent that EHSexcellence can logically be understood to bepart of that vision, there is a clear role for EHSprofessionals to assist the Investor RelationsOfficer (IRO), the CFO and the company inachieving its goals.
The Clear Advantage Process
Communicating EHS excellence as part of acorporate vision requires a systematic processthat enables companies to recognize and takeadvantage of opportunities for value creation.This section presents the Clear Advantageprocess that has been developed to address theneeds of GEMI's participating membercompanies (see page II). The design of thisClear Advantage process is deliberately generic,so that it can be adapted by virtually anymanufacturing or service enterprise.
The Clear Advantage process, depicted in Figure4-1, consists of six cyclical steps, and followsthe familiar pattern of “plan, do, check, act"that underlies most contemporary businessprocess designs. Therefore, it will be simple forcompanies to incorporate the desirable featuresof Clear Advantage into their existing valuecreation processes.
It is recommended that the Clear Advantageprocess be carried out by a cross-functional“value creation team," under the guidance ofan “EHS value champion." The value championfor this type of initiative is frequently fromEHS management, although a champion fromanother senior management function (e.g.,CFO) could yield wider acceptance and greaterlegitimacy. In addition to EHS and IR, otherfunctions that may participate on this teaminclude strategic planning, new productdevelopment, marketing, operations, finance,engineering and human resources.
25
26
STEP 1 - Identify Key Value Drivers
Identification of value drivers is the startingpoint for any effort to enhance shareholdervalue. As described in Section 2 “Making theCase," a value driver is defined as afundamental and persistent characteristic of abusiness enterprise that influences its marketvalue. Authentic value drivers are fundamentalin that they represent a strong, intrinsiccharacteristic of an enterprise. They arepersistent in that they will have a lastingimpact on value regardless of marketfluctuations.
The nature and relative importance of thesevalue drivers varies by industry, geography andeconomic setting. It is likely that the strategicplanning and/or investor relations groupswithin a company will be able to provide aninitial list of perceived value drivers.
The following are guidelines for identifyingyour company's value drivers and related EHScontributions:
Action Items✓ With the help of internal strategic planning,
investor relations, and other groups, develop agenerally accepted list of key value drivers foryour company. It is best to perform thisexercise without preconceptions about whereEHS improvements might contribute thegreatest value. The value drivers that have beenidentified by GEMI members in Figure 2-6 mayprovide a useful starting point. These are
believed to be the most common but the list isnot all-inclusive
✓ Based on the team's expertise and insights,evaluate how EHS activities contribute to thesekey value drivers
✓ Develop a generally agreed upon ranking orclustering of the list of key drivers in terms ofrelative importance. Two ways of achieving thisare through informal consensus or having teammembers rank the drivers and calculateaverages
✓ To the extent possible, develop anunderstanding of your company's strengths orweaknesses in these driver categories vis-à-viscompetitors. Are there particular value driversfor which improvement would be particularly advantageous?
For Your ToolkitPerform an Intangibles Assessment
It may be helpful to assess the relative strengthof your company's intangible assets throughsimple surveying techniques. There are a numberof approaches; one example is an existing toolcalled the “Invisible Advantage Diagnostic"(available at http://www.predictiv.net). Suchquestions may be adapted in order to help assessthe relevance of EHS to each intangible valuedriver. For example, the following hypotheticalquestion explores how EHS capabilities are linkedto the Innovation process.
Illustrative example of a diagnostic question
To what extent does your organization leverageits EHS capabilities to support product andprocess innovation?
Identify KeyValue Drivers
Assess PotentialContributions
Develop ValueEnhancing Strategy
Assure ContinuousImprovement
Communicate to Managementand Investors
Implement Strategy andMeasure Results
STEP1
Figure 4-1 The Clear Advantage Process
STEP2
STEP3
STEP6
STEP5
STEP4
27
• EHS capabilities are not linked to theinnovation processes in a systematic way
• EHS considerations occasionally motivateadoption of new technologies aimed atemission control and/or waste reduction
• EHS knowledge is incorporated into facilityengineering to systematically improveoperating efficiency and safety, or
• EHS knowledge is applied systematically toencourage innovation in both facilityengineering and new product development
STEP 2 - Assess Potential Contributions
In order to identify the highest leverageopportunities, a company needs to movebeyond the qualitative identification ofintangible value drivers and develop anunderstanding of the relative magnitudeof each.
A variety of different conceptual frameworkshave been developed for characterizing thetangible and intangible assets that drive long-term performance. If a company has alreadyadopted one, then it makes sense to utilizethat framework to further explore EHSopportunities. The following Figures 4-2 and4-3 summarize two frameworks that are incommon use today.48
One of the most widely used frameworks is the“Balanced Scorecard," popularized by Kaplanand Norton,49 which proposes broadening
financial performance measurement to includethree major non-financial perspectives that areleading indicators of financial success:Learning and Growth, Internal Business ProcessExcellence, and Customer Relationships. Thisframework is illustrated in Figure 4-2.
Another important framework is the“intellectual capital" model developed byStewart50 and others, which includes thefollowing categories of intangible assets:
• Human Capital - skills and knowledge ofmanagement and employees
• Structural Capital - patents and proprietarydata, methodologies or processes
• Relationship Capital - bonds with customersand suppliers, and brand identity
Leading companies such as DuPont andGeneral Electric have systematically worked tosubstitute intellectual capital for physicalcapital in order to increase shareholder value—this is in line with a notion that intangibleassets are less expensive to maintain thantangible ones. The EHS value drivers in Section3 can be mapped into the intellectual capitalframework using an approach similar to theBalanced Scorecard example (see Figure 4-3).
While the frameworks discussed are extremelyrobust and flexible, they do not provideguidance to practitioners on what intangiblesneed to be emphasized within each of these
“If we succeed, how will we lookto our shareholders?”
CUSTOMER PERSPECTIVE
“To achieve my vision, how must Ilook to my customers?”
INTERNAL PERSPECTIVE
“To satisfy my customer, at whichprocesses must I excel?”
LEARNING PERSPECTIVE
FINANCIAL PERSPECTIVE
Figure 4-2 Balanced Scorecard Framework
STRATEGY
“To achieve my vision, how must myorganization learn and improve?”
28
GEMI Intangible Value Drivers
Bala
nced
Sco
reca
rd F
ram
ewor
k
FinancialPerspective
InternalPerspective
LearningPerspective
CustomerPerspective
Transparency Openness of an organization with regard to sharing information about how it operates.
Risk The ability to effectively manage the balance between potential liabilities and potential opportunities.
Technology Strategy execution; IT capabilities; inventory management; turnaround and Processes times; flexibility; reengineering; quality; internal transparency.
Human Capital Talent acquisition, workforce retention, employee relations, compensation; What makes a “great place to work.”
Innovation The R&D pipeline; effectiveness of new-product development; patents; know-how; business secrets
Leadership and Strategy Management capabilities; experience and leadership’s vision forthe future.
Alliances and Networks Supply chain relationships; strategic alliances; partnerships.
Customer The ability to develop customer relationships, satisfaction, and loyalty.
Brand Equity Strength of market position. The ability to expand the market, perception of product/service quality, investor confidence.
Environmental and How the company is viewed globally such as: environmental concerns, Social Reputation community concerns, regulators’ concerns, inclusion in “most admired
company” lists, triple bottom line.
broad perspectives. In particular, they do notprovide explicit linkages between the strengthof a company's intangibles and the financialperformance of interest to investors. Step 3will focus on measurement of financial valuedrivers and account for the impact ofintangible assets.
For this step in the Clear Advantage process,EHS management should assess how it canmake the greatest contribution to value. This isultimately a creative exercise. The followingaction items are by no means exhaustive, butthey should help to articulate and assess themost promising opportunities.
Action Items✓ Create a set of hypotheses about areas of EHS
performance that represent significantopportunities for value creation
✓ For each hypothesis, identify the value driveror drivers from Figure 2-6 that can beimproved (e.g., customer satisfaction)
✓ State the specific contribution and valueoutcome (e.g., design changes to a product
line resulting in customer benefits such aslower cost, convenience, etc.)
✓ Repeat steps, this time starting with Figure 2-6and brainstorming the value drivers that can beaffected by EHS performance.
For Your ToolkitAssess Total Costs A helpful tool for identifying value creationopportunities is total cost assessment (TCA), amethod for quantifying all EHS costs, bothinternal and external, associated with a businessdecision.51 TCA is a comprehensive process toidentify potentially hidden environmental andhealth costs and to mitigate future risks andcontingent costs for industrial processes,products or facilities. Costs that may not havebeen previously considered are generallyassociated with allocated overhead chargesand/or potential future costs, including hiddenimpacts on the environment and human health,as well as internal intangible costs. For example,the potential future costs associated with carbondioxide emissions can be considered indeveloping a strategy for carbon management.
Figure 4-3 How GEMI Intangible Value Drivers Populate the Balanced Scorecard Framework
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STEP 3 - Develop Value-EnhancingStrategy
The next step in the Clear Advantage process isthe development of a strategy for capturingnew opportunities to enhance shareholdervalue. Given an initial set of hypotheses aboutvalue creation opportunities, it is important toconsider each in a strategic business context.The box below describes some frameworks thatattempt to do so by linking value-basedindicators to shareholder returns. Theintangible value contributions described in thistool may be considered in addition to othervalue-based management models.
EHS Intangibles as Leading Indicators
Steps 1 and 2 helped to identify and rank theimportant drivers for creating and sustainingvalue and competitive advantage. Theseinsights can then be applied to develop aunique model for an individual company. Asillustrated in Figure 4-4, many of the EHSperformance indicators discussed in Section 3can be configured as inputs to a company-specific model of intangible value creation.
It is likely that most public companies alreadyhave approximately 70 percent of theinformation required to begin constructingsuch a model. These data almost always reside
Value-Based Management and Intangibles ValuationThe 1990s saw a growing strategic emphasis on frameworks for value-based management - i.e., therealization of corporate value through identification, measurement and management of the drivers ofcustomer value and shareholder returns. These methodologies included economic value added (EVA)measures that are claimed to approximate shareholder returns, and strategic management accountingsystems that provide information concerning the current and expected states of strategic uncertainties.
EVA has been a popular value-based indicator—approximately 40% of Fortune 500 firms have used EVA orsome variant for strategic planning purposes.52 Other mechanisms like EBITDA (Earnings Before Interest,Taxes, Depreciation and Amortization) and pro forma statements of earnings have also gained widespreaduse. Research suggests that as many as 65 percent of Fortune 500 companies have experimented with suchmodels.53 All three approaches have supporters and detractors. They are mentioned here because of therecognition they enjoy, not because they are recommended.
The past two decades have also witnessed new experimentation with intangible asset valuation. Bothfinancial and non-financial value drivers were determined from organizational strategy and value chainanalysis and hypothetical models were created by fitting together these drivers and estimating their impacton one another. This enabled assessment of how changes in value drivers impact financial results andshareholder value. PriceWaterhouseCoopers, Cap Gemini Ernst & Young and New York University ProfessorBaruch Lev have all developed such models.
Intangible Assets and Hard Financial OutcomesAdding confidence to the importance of identifying key value drivers and assessing their potentialcontributions in Steps 1 and 2, Decisions That Matter, a study published in 2001, identified critical drivers oflong-term economic value from the point of view of senior corporate financial executives.54 The study alsoassessed the performance consequences of gaps between measures for internal decision-making andexternal reporting. More than 80% of executives surveyed perceived a gap between the information theyreceived from their own companies and what they actually believed was critical to measure. Moreover, thesize of gaps within companies (i.e., the difference between what companies measure and what they believeis important) was strongly correlated with stock price, market value and other "hard" performance data.
VALUE ENHANCING STRATEGY FRAMEWORK examples
30
Stock Price
Earnings
Sales per Employee
Market Share
TangibleOutcomes
Inta
ngib
le V
alue
Dri
vers
Figure 4-4
ConceptualModel ofIntangible ValueCreation
Customer
Leadership andStrategy
Transparency
Brand Equity
Environmental/SocialReputation
Alliances andNetworks
Technology andProcesses
Human Capital
Innovation
Risk
in operational databases controlled at thebusiness unit or functional staff level, ratherthan in corporate financial databases. Bymining what is already known from a host ofqualitative evidence and quantitative measures,and seeking to identify indicators of EHSexcellence that cut across all their businessfunctions (procurement, supplier relations,product design, etc.), companies can obtain amore comprehensive view of EHS valuecreation. The model characterizes the potentialcontributions of EHS function to a spectrumof intangible assets, and thus shows how EHSresults are linked to financial outcomes.
The advantage of this sort of quantitativemodeling is that it permits more informedcommunication between EHS, InvestorRelations, Treasury and Chief Financial Officerstaffs about the expected impact ofinvestments in EHS activities, and underscoresthe linkage between the intangible valuedrivers and firm performance. It conducts thedialogue in the language of finance, which isfirst and foremost, in monetary terms.
Action Items✓ In a collaborative setting, consider the
opportunities selected in the first 2 steps andthen state goals for influencing particularvalue drivers
✓ Justify these goals in terms of expectedoutcomes (e.g., customer loyalty)
✓ Identify specific, measurable indicators ofimprovement for both the value drivers andanticipated outcomes
✓ Evaluate the costs, risks, and benefitsassociated with the strategy, in comparison tothe risks of maintaining status quo
✓ Develop an action plan, with clearaccountabilities, for realizing the proposedimprovements and assure compatibility withexisting business priorities.
For Your ToolkitDetermine MetricsMake a list of the types of information/data yourorganization is currently collecting to supportthose drivers, including where they reside in yourorganization. While many organizations collectdata to be used in the measurement andmonitoring of progress, most of it tends to reside
31
in disparate parts of the organization and isnever collectively compiled. What concepts areexplained well by current measurement systems?Where are they lacking? Chances are it is thedrivers of intangible value that are mostneglected.
Of available data, determine which can be usedas proxies to represent the EHS drivers. Theseproxies should be measurable, comprehensive,and generally accepted as reliable indicatorstoward the understanding of a particularconcept. Multiple measures should be gatheredfor each intangible driver to aid in its robustness.And, keep in mind that even if these measuresare less than ideal, they can likely be used as agood starting point to help you and other keymanagement understand where your organizationcurrently stands with regard to these valuedrivers.
STEP 4 - Implement Strategy and MeasureResults
The strategy developed in Step 3 provides abasis for launching implementation. Armedwith this sort of framework, a company canidentify, measure and begin to manage theways in which its EHS/Sustainability activitiesaffect other operations and outcomes. Used inconcert with cases, anecdotes and historicaltrend data, the quantitative model presents acomprehensive picture to senior executives,investment professionals and to all of anorganization's concerned constituencies. Itenables informed discussion of (a) how EHScan improve financial performance, and (b) themagnitude of financial improvements that canbe expected. Thus, a company can begin tomeaningfully analyze the return on itsinvestment in EHS resources.
Action Items✓ Identify and secure the needed resources,
including senior management endorsementand cross-functional collaboration
✓ Gather needed data to measure both theeffectiveness of internal process changes
designed to influence value and outcomes ✓ Expand the strategy previously developed to
assign detailed implementation responsibilitiesto value creation teams
✓ Convene periodic team meetings to evaluateprogress and adjust the ongoing action plansas appropriate
✓ Remain watchful for signals of change thatmay run contrary to previously conceivedstrategic assumptions and rationale.
For Your ToolkitBenchmark Your PerformanceOnce you have a baseline of strategicallyimportant EHS factors defined, it is important tounderstand where your company stands currentlyand benchmark against competitors. Startingwith a snapshot of your present organizationrelative to these factors, you can assess yourposition relative to your competitors. Once EHScontributions to market value are measured,organizations have a much better sense of wherethey stand and what needs to be changed inorder to improve.
STEP 5 - Communicate to Managementand Investors
Realization of shareholder value through EHSimprovements requires recognition of value bythe investment community. Therefore, effectivecommunication is an essential component ofthe Clear Advantage process. The subject ofintangible value drivers in general, and of EHScontributions in particular, is still relativelynew. Environmental and social performancemessages fall outside of mainstream investorcommunications. Accordingly, careful design ofthese value creation messages is needed toassure that they are both easily understoodand responsive to investor interests.
Apart from coordinating the Clear Advantageprocess, the EHS value champion (and/orinternal alliance, industry coalition, etc.) mustplay a critical advocacy role in bringing thevalue creation opportunities and results to theattention of internal management.
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The format and language in which the valuecreation message is framed must be carefullychosen. In addition to assisting in theconstruction of these messages, the EHS valuecreation team may need to assist in thedevelopment of supporting materials forinvestor communication.
Action Items✓ Monitor quantitative and qualitative
implementation results to capture evidence ofsuccessful value creation
✓ Develop internal communications regardingsuccessful outcomes for presentation to seniormanagement and investor relations
✓ Advocate incorporation of the EHS valuemessage into investor communications
✓ Support development of investorcommunication materials as needed
✓ Establish a mechanism to record EHScontributions and to validate the long-termimpacts on value drivers and market valuation.
For Your ToolkitThe returns to transparency far outweigh thereturns to secrecy. Communicate the changesthat you are making both within theorganization and outside.
While information itself is of limitedcompetitive value, what you do with thatinformation can make a great difference toyour key stakeholders. Now, more than ever,companies need to help their stakeholders,both internal and external, rebuild a sense oftrust through the actions and commitments ofcorporate leaders. Transparent communicationto employees, customers, suppliers, industrygroups, investors and Wall Street analystsabout intangible valuation can have manypositive outcomes. After all, it is not justhaving particular information but rather whatyou do with it that is truly important. If youcan show why a certain EHS factor is critical,and if you can improve your company'sperformance in this area as well as measureits impact on performance outcomes, youwill gain critical credibility in the eyes ofkey stakeholders.
STEP 6 - Assure Continuous Improvement
The final step in the Clear Advantage processis, in reality, an ongoing process - assuringthat the initial promise of EHS value creation isrealized through systematic monitoring andcontinuous improvement. This can be designedand carried out by members of the EHS valuecreation team.
Action Items✓ Monitor the execution of the value creation
strategy and capture lessons learned✓ Promote regular evaluation and refinement of
the strategy, including selected value creationopportunities, goals, and mechanisms foraction
✓ Research and understand company experiencewith investor communications that addressEHS value creation and recommendimprovements
✓ Monitor changes in the competitive landscapeand company characteristics that might promptadjustment of the Clear Advantage process
✓ Monitor the selected company performanceindicators and remain alert for leadingindicators of significant changes
✓ Review and re-consider key value drivers,hypothesized pathways to value, and businessrationale, as appropriate
✓ Conduct periodic, informal surveys of internalstaff to assure that the Clear Advantageprocess is operating effectively and efficiently.
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Clear Advantage provides compelling evidenceof the link between EHS activities andshareholder value. Because an enterprise's EHSfunction cuts across many areas of business,this report covers the EHS function as well asrelated organizational activities: communityinvolvement, stakeholder relations, governance,transparency and business continuity. In aclimate of increased focus on corporategovernance and shareholder activism, theseissues will only increase in importance.
Risk management and trust are among thecharacteristics influenced by the organizationalactivities noted above. The capital marketsvalue them, although they do not appeardirectly on financial statements. A substantialbody of evidence exists on how EHS practicesspecficially contribute to the bottom line,including reductions in operating costs,insurance premiums and capital costs. It is thecontention of this document that EHSpractices contribute to shareholder value in abroader and more strategic way: by buildingcritical organizational capabilities.
This report also serves as a practical primer forthe EHS professional, working in collaborationwith other corporate functions, by providing astep-by-step process for identifying,measuring, communicating and managingvalue drivers. The intent of this process is tohelp EHS professionals and their companiesgain recognition for EHS excellence from theirown internal investor relations function, fromthe investment community and from otherstakeholders. Hopefully this enables companiesto recognize and take advantage ofopportunities to create a Clear Advantage fortheir company and Build Shareholder Value.
Section 5CONCLUSION
34
Appendix ADISCUSSION GUIDE
These questions are intended to serve as guidelines in a discussion between staff members ofcorporate Environment, Health & Safety and Investor Relations.
1) Please rate your level of familiarity with the record of your company's Environmental, Health andSafety programs.(1 to 10 scale from "not at all" to "extremely").
NOT AT ALL EXTREMELY
1 � 2 � 3 � 4 � 5 � 6 � 7 � 8 � 9 � 10 �
2) If you answered 4 or above to Question 1, have you ever communicated this record to membersof the sell or buy side investment communities as part of your corporate IR strategy?
A � YesB � No
3) If yes, please describe the reaction you received.( 1 = indifference, 10 = great interest).
INDIFFERENCE GREAT INTEREST
1 � 2 � 3 � 4 � 5 � 6 � 7 � 8 � 9 � 10 �
4) If no, was it becauseA � You think the securities analysts and portfolio managers don't careB � You think the story is too negativeC � You think it is too risky to share this sort of informationD � Other stories about the company are more central to the corporate strategyE � You believe you need to know more yourself before disclosing this material
5) Would you be interested in learning more about the evidence of the positive correlation between EHSprograms and financial performance like stock price, P/E ratio?
A � YesB � No
6) If yes, what sort of information would you like?A � Quantitative dataB � Case studiesC � Narrative examplesD � Other, please explain
7) If no, why not?A � You think the securities analysts and portfolio managers don't careB � You think the story is too negativeC � You think it is too risky to share this sort of informationD � Other stories about the company are more central to the corporate strategyE � You believe you need to know more yourself before disclosing this material
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8) Please rate your level of interest in working with the EHS executives in your corporation to incorporate the value creation message into your company's IR strategy.(1 to 10 scale from "not at all" to "extremely" interested).
.NOT AT ALL EXTREMELY
1 � 2 � 3 � 4 � 5 � 6 � 7 � 8 � 9 � 10 �
9) If you answered 4 or above to Question 6, would you want to: A � Incorporate this material into a larger message about the effect of various intangible
on corporate value creation B � Focus solely on EHS or C � Both
10) To what degree do you think that socially responsible investing has a significant impact in investment decision-making?(1 to 10 scale from "not at all" to "extremely").
NOT AT ALL EXTREMELY
1 � 2 � 3 � 4 � 5 � 6 � 7 � 8 � 9 � 10 �
11) Over the next five years, to what degree do you think that socially responsible investment will become a more significant issue in investment decision-making?(1 to 10 scale from "not at all" to "extremely").
NOT AT ALL EXTREMELY
1 � 2 � 3 � 4 � 5 � 6 � 7 � 8 � 9 � 10 �
12) Would you like to learn more about what other companies are doing about disclosing this sortof information?
A � YesB � No
If yes, please describe your particular interests.
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Appendix BBIBLIOGRAPHY AND REFERENCES
Intangible Value DriversJ. Collins and J. Porras. Built to Last: SuccessfulHabits of Visionary Companies. New York: Harper,1997.
J.H. Daum, Intangible Assets and Value Creation,Wiley 2002.
R.S. Kaplan and D.P. Norton. The BalancedScorecard. Cambridge: Harvard Business SchoolPress, 1996.
Baruch Lev, Intangibles: Management, Measurementand Reporting, Brookings Institution Press, June2001.
Jonathan Low and Pamela Kalafut, InvisibleAdvantage, Perseus Press, 2002.
Thomas A. Stewart. Intellectual Capital: The NewWealth of Organizations. New York: Doubleday,1997.
EHS and Business ValueMatthew B. Arnold and Robert M. Day. “The NextBottom Line: Making Sustainable DevelopmentTangible," World Resources Institute, 1998.
The Aspen Institute, “Uncovering Value: IntegratingEnvironmental and Financial Performance," 1998.
Livio DeSimone and Frank Popoff. Eco-efficiency:The Business Link to Sustainable Development. TheMIT Press, 1997.
Marc J. Epstein and S. David Young. “Greening withEVA," Management Accounting, Jan. 1999.
Joseph Fiksel, “Revealing the Value of SustainableDevelopment," Corporate Strategy Today, Issue 7/8,2003.
Karina Funk, “Sustainability and Performance,"Sloan Management Review, Winter 2003.
P. Hawken, A. Lovins, and L.H. Lovins. NaturalCapitalism: Creating The Next Industrial Revolution.Rocky Mountain Institute, Snowmass, CO. 2001.
Andrew J. Hoffman, “Integrating Environmental andSocial Issues into Corporate Practice," Environment,June 2000.
C. Holliday and J.E. Pepper. Walking the Talk: TheBusiness Case for Sustainable Development. Geneva:World Business Council for SustainableDevelopment, 2001.
Adam B. Jaffe, Steven R. Peterson, Paul R. Portney,and Rovert N. Stavins. “Environmental Regulationand the Competitiveness of U.S. Manufacturing:What Does the Evidence Tell Us?" Journal ofEconomic Literature. Volume 33, pp. 132-163.March 1995.
Stephen Poltorzycki. Creating EnvironmentalBusiness Value. Crisp Publications, 1998.
Michael E Porter and Claas van der Linde. “Towarda New Conception of the Environment-Competitiveness Relationship." Journal of EconomicPerspectives. Vol. 9 No. 4, pps. 97-118. Fall 1995.
Forest Reinhardt. “Bringing the Environment Downto Earth." Harvard Business Review, pp. 149 - 157.July-August 1999.
Robert Repetto and Duncan Austin, Pure Profit: TheFinancial Implications of EnvironmentalPerformance, World Resources Institute, 2000.
SustainAbility and UNEP, “Buried Treasure:Uncovering the Business Case for CorporateSustainability," 2001.
Socially Responsible Investment S. Blake Goodman, J. Kron, T. Little, TheEnvironmental Fiduciary: The Case for IncorporatingEnvironmental Factors into Investment ManagementPolicies, The Rose Foundation for Communities &the Environment, Oakland, CA, 2002.
CERES, “Value at Risk: Climate Change and theFuture of Governance," April 2002.
Bruce R. Hutton et al. “Socially ResponsibleInvesting: Growing Issues and New Opportunities"Business and Society; Vol. 37 No.3 September,1998.
OECD, Corporate Responsibility: Private Initiativesand Public Goals, 2001.
Chris Laszlo, Dave Sherman, John Whalen.“Shareholder Value and Corporate Responsibility."Ethical Corporation Magazine. London: December2002.
U.S. Social Investment Forum, 2001 Report onSocially Responsible Investing Trends in the UnitedStates, SIF Industry Research Program, November28, 2001.
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Appendix CGLOSSARY AND ACRONYMS
Analyst. Employee of a brokerage or fundmanagement house who studies companies andmakes buy-and-sell recommendations on theirstocks. Most specialize in a specific industry.
Balance sheet. Also called the statement of financialcondition, it is a summary of the assets, liabilities,and owners' equity.
Book value. A company's book value is its totalassets minus intangible assets and liabilities, such asdebt.
Brand equity. An intangible value-added aspect ofparticular goods otherwise not considered unique.
Business case. A rationale for making a businessdecision, usually involving quantitative analysis ofcosts, benefits and trade-offs.
Buy side analyst. A financial analyst employed by anon-brokerage firm, typically one of the largermoney management firms that purchase securitieson their own accounts.
Cash flow. Earnings before depreciation,amortization and non-cash charges (sometimescalled cash earnings).
Corporate citizenship. Company activities concernedwith treating the stakeholders of the firm ethicallyand in a socially responsible manner.
Corporate governance. The system by whichbusiness corporations are directed and controlled.The corporate governance structure specifies thedistribution of rights and responsibilities amongdifferent participants in the corporation.
Corporate Social Responsibility (CSR). Commitmentto uphold the rights of citizens and communities,behave according to accepted ethical standards, andcontribute to socio-economic development andquality of life.
Correlation. A statistical correspondence betweentwo or more variables.
Earnings Before Interest, Taxes, Depreciation andAmortization (EBITDA). An indicator of a company'sfinancial performance calculated as revenues lessexpenses, excluding tax, interest, depreciation, andamortization.
Earnings Per Share (EPS). A commonly usedfinancial indicator, calculated by dividing acompany's net income by its number ofoutstanding shares.
Eco-efficiency. A measure of the resource intensityof a company's operations, including the inputs ofmaterials and energy required to manufacture anddeliver a unit of output.
Environmental performance. The performance of abusiness or facility according to selected indicatorsof environmental impact.
Environment, Health and Safety (EHS). Aprofessional discipline concerned with protection ofthe environment, human health, and safety throughthe application of scientific, engineering, andmanagement methods.
Full disclosure. A policy under which publicly heldcompanies must disclose all material informationthat might affect investment decisions to allinvestors at the same time (implemented in SECRegulation FD—Fair Disclosure).
Generally Accepted Accounting Principles (GAAP). Atechnical accounting term that encompasses theconventions, rules, and procedures necessary todefine accepted accounting practice at a particulartime.
Global warming. Gradual increase in averagetemperatures at the earth's suface, believed to resultfrom the “greenhouse effect" due to increasedatmospheric concentrations of carbon dioxide andother gases.
Human capital. The set of skills which employeesacquire on the job, through training and experience,and which increase their value in the marketplace.
Income statement. A statement showing therevenues, expenses, and income (the differencebetween revenues and expenses) of a corporationover some period of time.
Institutional investor. An investor that is not anindividual and may be a foundation, endowment,pension fund, or the like.
Intangible asset. A non-monetary asset, includingpeople, ideas, networks, and processes, which is nottraditionally accounted for on the balance sheet.
Intellectual capital. Knowledge that can beexploited for some money-making or other usefulpurpose, including the skills and knowledge that acompany has developed about how to make itsgoods or services.
Investor Relations (IR). A strategic corporatemarketing activity, combining the disciplines of
38
communications and finance, that provides presentand potential investors with an accurate portrayal ofa company's performance and prospects.
Leading indicator. A predictive indicator ofanticipated performance that can be observed priorto the period of performance.
Liability. A financial obligation, or the cash outlaythat must be made at a specific time to satisfy thecontractual terms of such an obligation.
License to operate. The ability of a corporation orbusiness to continue operations based on ongoingacceptance by external stakeholder groups.
Market value. (1) The price at which a security istrading and could be purchased or sold. (2) Thevalue investors believe a firm is worth; calculated bymultiplying the number of shares outstanding bythe current market price of a firm's shares.
Net present value. The amount of cash today that isequivalent in value to a payment, or to a stream offuture cash flows minus the cost.
Non-financial performance. The performance of abusiness measured in terms of non-financial aspectssuch as environmental and social responsibility.
Performance. The percentage change in a portfolio'svalue over a specified period.
Price elasticity. A measure of price-sensitivity in themarketplace: the percentage change in the quantityof a product divided by the percentage change inthe price.
Price-to-Earnings ratio (P/E). The multiple ofearnings at which a stock sells, determined bydividing current stock price by current earnings pershare (adjusted for stock splits).
Proxy. Document intended to provide shareholderswith information necessary to vote in an informedmanner on matters to be brought up at astockholders' meeting.
Return on Investment (ROI). A measure of acorporation's profitability, equal to a fiscal year'sincome divided by common stock and preferredstock equity plus long-term debt. ROI measureshow effectively the firm uses its capital to generateprofit.
Risk. (1) The possibility of losing rather thangaining. (2) A measure of price fluctuation relativeto a broad market gauge. (3) The possibility of anadverse incident due to the presence of hazards oruncertainties.
Screened portfolio investing. The application ofsocial criteria to conventional investments, such asstocks, bonds, and mutual funds.
Sell side analyst. a financial analyst who works for abrokerage firm and whose recommendations arepassed on to the brokerage firm's customers.
Shareholder resolution. A recommendation orrequirement, proposed by a shareholder, that acompany and/or its board of directors take actionpresented for a vote at the company's generalshareholders' meeting.
Socially Responsible Investing (SRI). Theincorporation of an investor's social, ethical, orreligious criteria into the investment decision-making process.
Stakeholder. Any party that has an interest,financial or otherwise, in a firm - stockholders,creditors, bondholders, employees, customers,management, the community, and the government.
Supply chain. A sequence of suppliers andcustomers that add value in the form of materials,components, or services, ultimately resulting in afinal product.
Sustainability. Conditions or characteristicssupportive of sustainable development,encompassing the environmental, social, andeconomic aspects of a corporation.
Tangible asset. An asset whose value depends onparticular physical properties, including reproducibleassets such as buildings and non-reproducible assetssuch as land.
Transparency. Openness of an organization withregard to sharing information about how itoperates. Transparency is enhanced by using aprocess of two-way, responsive dialogue.
Triple bottom line. A framework for sustainabledevelopment that defines three fundamental aspectsof corporate performance—economic,environmental, and social.
Value creation. Activities that generate shareholdervalue for a company, e.g., value-basedmanagement.
Sources:New York Times Financial GlossaryInvestopedia.comInvestorWords.comSearchTechTarget.comEconomics.about.comEco-Nomics LLC, NIRI, OECDGlobal Environmental Management Initiative (GEMI).
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Appendix DFOOTNOTES
16 Personal correspondence with Linda Descano.
17 S. Blake Goodman, J. Kron, T. Little, The EnvironmentalFiduciary: The Case for Incorporating EnvironmentalFactors into Investment Management Policies, TheRose Foundation for Communities & the Environment,Oakland, CA.
18 NYTimes 5/29/03, "Environmental Groups Gain AsCompanies Vote on Issues" by Katharine Q. Seelye.
19 The Principles are as follows:
1. Provide access to finance and risk managementproducts for investment, innovation and themost efficient use of existing assets
2. Promote transparency and high standards ofcorporate governance in themselves and in theactivities being financed
3. Reflect the cost of environmental and socialrisks in the pricing of financial and riskmanagement products
4. Exercise equity ownership to promote efficientand sustainable asset use and risk management
5. Provide access to finance for the developmentof environmentally beneficial technologies
6. Exercise equity ownership to promote highstandards of corporate social responsibility bythe activities being financed
7. Provide access to market finance and riskmanagement products to businesses indisadvantaged communities and developingeconomies.
20 Social Investment Forum Industry Research Program.November 28, 2001. 2001 Trends Report: 2001 Reporton Socially Responsible Investing Trends in the UnitedStates. Washington, DC. Social Investment Forum.
21 Distinct investment styles include environmentallyeffective investing (e.g., Winslow Management),socially responsible investing (e.g., companiesscreened by FTSE4Good Index), and sustainabilityinvesting (e.g., companies screened by Dow JonesSustainability Group Index or ranked by InnovestEcoValue'21).
22 More information athttp://www.sustainability-index.com/
23 More information athttp://www.ftse.com/ftse4good/index.jsp
24 Recent research reveals that there was no statisticallysignificant difference between the risk-adjustedreturns of socially responsible or ethical funds in theUS, Germany and the UK and those of conventionalfunds during the time period of January 1990 throughMarch 2001. See "International Evidence on EthicalMutual Fund Performance and Investment Style".
25 Low, Jonathan and Pamela Cohen Kalafut, "InvisibleAdvantage," Perseus Press, Cambridge, MA, USA(2002).
1 Eustace, Clark, “The Intangible Economy: Impact and Policy Issues." Report of the High Level Expert Groupon the Intangible Economy, Enterprise Directorate-General (Brussels: European Commission, October2000), 6-7.
2 Ramin, Kurt, “The Transparent Enterprise: The Value ofIntangibles." Presentation to European Commissionconference, Autonomous University of Madrid,November, 2002. also see Daum, Jurgen, "IntangibleAssets and Value Creation," Wiley & Sons, New York,2003.
3 Low, Jonathan and Pamela Cohen Kalafut, "InvisibleAdvantage," Perseus Press, Cambridge, MA, USA(2002).
4 Data: Top 100 greatest market cap firms for each yeardepicted, and total Plant, Property, Equipmentreported for same. Source: Compustat and CGEYanalysis.
5 Cap Gemini Ernst & Young's "Measures That Matter"study (1996), a survey of 300 sell-side analysts, 275buy-side analysts, as well as interviews with portfoliomanagers.
6 Low, Jonathan and Pamela Cohen Kalafut, "InvisibleAdvantage," Perseus Press, Cambridge, MA, USA(2002).
7 Cap Gemini Ernst & Young's "Measures That Matter"study (1996), a survey of 300 sell-side analysts, 275buy-side analysts, as well as interviews with portfoliomanagers.
8 Ibid.
9 Social Investment Forum Industry Research Program.November 28, 2001. 2001 Trends Report: 2001 Reporton Socially Responsible Investing Trends in the UnitedStates. Washington, DC: Social Investment Forum.
10 A. Cortese, "The New Accountability: Tracking theSocial Costs," New York Times, Sunday, March 24,2002.
11 Cap Gemini Ernst & Young's "Decisions That Matter"research study (1999), a survey of financial executivesat Global 500 corporations.
12 New York Times, April 14, 2003.
13 Source: Innovest Strategic Value Advisors.
14 Cap Gemini Ernst & Young's "Measures That Matter"study (1996), a survey of 300 sell-side analysts, 275buy-side analysts, as well as interviews with portfoliomanagers.
15 Webber, Martin. Monday, 14 October, 2002. TheEconomic Impact of Global Warming. World BusinessReview.
40
26 CGEY analysis of actual non-financial performance ascorrelated with market value revealed the followingvalue drivers: Innovation, Quality, Customer,Management, Alliances, Technology, Brand, Employee,Environment. Multiple, statistically independentmeasures are used as inputs for each driver in orderto ensure a robust model.
27 More information athttp://www.hp.com/hpinfo/globalcitizenship/environment/index.html
28 Low, Jonathan and Pamela Cohen Kalafut, "InvisibleAdvantage," Perseus Press, Cambridge, MA, USA(2002).
29 The SEC adopted the Sarbanes-Oxley Act in 2002,requiring CEOs and CFOs to certify the accuracy oftheir public reporting and to file federal forms in atimely manner so as to improve the accuracy ofinformation that is available to investors.
30 More information on the GEMI Transparencyworkgroup athttp://www.gemi.org/docs/workgroup.htm
31 See Hamilton, Kames T. 1995. "Pollution as News:Media and Stock Market Reactions to the ToxicsRelease Inventory Data." Journal of EnvironmentalEconomics and Management, vol. 28, pp. 98-113."Stockholders in firms reporting TRI pollution figuresexperienced negative, statistically significantabnormal returns upon the first release of theinformation."
32 Khanna, Madhu, Wilma Rose H. Quimio, and DoraBojilova. 1998. "Toxic Release Information: A PolicyTool for Environmental Protection." Journal ofEnvironmental Economics and Management, vol. 36,pp. 243-266. This article finds that the negative stockmarket returns following TRI disclosure had "asignificant negative impact on subsequent on-sitetoxic releases and a significant positive impact onwastes transferred off site, but their impact on totaltoxic wastes generated by these firms is negligible."The discrepancy with the Konar and Cohen (1997)findings is that the firm samples are different; Konarand Cohen analyze 130 publicly-traded firms fromseveral industries, while Khanna, Quimio and Bojilovaanalyze 40 firms from the chemical industry. In anyevent, there was a response by the firms in theirtreatment of waste, upon disclosure of TRI data.
33 Sibson Consulting, "A Study of Corporate GovernanceDisclosure Practices," Segal Company report, March2003.
34 "The 100 Top Brands." Business Week Special Report,August 4, 2003.
35 See for example Teisl, Mario F., Brian Roe, and RobertL. Hicks. "Can Eco-Labels Tune a Market? Evidencefrom Dolphin-Safe Labeling," Journal of EnvironmentalEconomics and Management, vol. 43, 339-359 2002.
36 http://www.hp.com/hpinfo/newsroom/press/2003/030422d.html
37 Many of these indicators are included in the GlobalReporting Initiative.
38 Fine, Charles. "Clockspeed: Winning Industry Controlin the Age of Temporary Advantage," Perseus Books,(1998).
39 The Economist, "Regime Change," October 31, 2002.
40 Teece D. and Pisano, 1994. The dynamic capabilities offirms: An Introduction. Industrial and CorporateChange 3(3): 537-556. In: Lennox, Michael andAndrew King. "Absorptive Capacity, InformationProvision and the Diffusion of Practice within Firms."New York University Stern School of Business WorkingPaper (submitted to Strategic Management Journal).
41 See for example Fiksel, J., Editor, "Design forEnvironment: Creating Eco-Efficient Products andProcesses", McGraw-Hill, New York, 1996.
42 See Lenox, Michael. January 2001. "OvercomingAgency and Information Problems in the Diffusion ofBest Practice within Firms." New York University SternSchool of Business (submitted to ManagementScience).
43 Drake Business Review, Amernik, Jerry. Watson WyattHuman Capital Index study (1999).
44 Low, Jonathan and Pamela Cohen Kalafut, "InvisibleAdvantage," Perseus Press, Cambridge, MA, USA(2002).
45 Ibid.
46 See for example Reinhardt, Forest L., "Bringing theEnvironment Down to Earth," Harvard BusinessReview (July-August 1999): 149-157.
47 Ibid.
48 Portions of this section are based on Joseph Fiksel,"Revealing the Value of Sustainable Development,"Corporate Strategy Today, Issue 7/8, 2003.
49 R.S. Kaplan and D.P. Norton. The Balanced Scorecard.Cambridge: Harvard Business School Press, 1996.
50 Thomas A. Stewart. Intellectual Capital: The NewWealth of Organizations. New York: Doubleday, 1997.
51 American Institute of Chemical Engineers' Center forWaste Reduction Technologies, Total Cost AssessmentMethodology, Washington, DC, 1999.
52 Low, Jonathan and Pamela Cohen Kalafut, "InvisibleAdvantage," Perseus Press, Cambridge, MA, USA(2002).
53 Cap Gemini Ernst & Young's "Decisions That Matter"research study (1999), a survey of Global 500financial executives.
54 Ibid.
55 More information athttp://www.equator-principles.com
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W W W . G E M I . O R G
Business Helping Business Achieve Global Environmental,Health and Safety Excellence and Corporate Citizenship
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Uni
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Uni
vers
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vest
or R
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tric
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ynn,
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ns
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Uni
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arl-J
ohan
n Fr
anck
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AM
Res
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lan
Hec
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.S. E
PA
Thom
as K
rick,
Acc
ount
Abi
lity
John
Lai
dlow
, HSB
CRo
b La
ke, H
ende
rson
Glo
bal F
und
Jona
than
Low
, Pre
dict
iv L
LCM
ark
Mils
tein
, Cor
nell
Uni
vers
ity, T
he J
ohns
on
Scho
ol a
nd C
ente
r fo
r Su
stai
nabl
e
Glo
bal E
nter
pris
eEv
e M
itlet
on-K
elly,
Lon
don
Scho
ol o
f
Ec
onom
ics;
Soc
iety
for
Org
aniz
atio
nal L
earn
ing
Tom
Mur
ray,
Env
ironm
enta
l Def
ense
Mar
y A
ltom
are
Nat
tras
s, S
usta
inab
ility
Par
tner
sBr
ian
Nat
tras
s, S
usta
inab
ility
Par
tner
s Er
ic O
lson
, Bus
ines
s fo
r So
cial
Res
pons
ibili
ty (B
SR)
Am
anda
Pen
n, E
thic
al In
vest
men
t Re
sear
ch
Serv
ices
(EIR
IS),
Lond
onJa
mes
L. R
itchi
e-D
unha
m, I
nstit
ute
for
Stra
tegi
c
Cla
rity;
Har
vard
Uni
vers
ityK
irvil
Skin
narla
nd, S
usta
inab
le S
eatt
le; T
rilog
y LL
C
Paul
Teb
o, D
uPon
t (R
etire
d); T
he T
ebo
Gro
upJa
ck W
hela
n, In
tern
atio
nal B
usin
ess
Lead
ers
Foru
m.
In a
dditi
on, J
ean
“Pog
o” D
avis
and
Jon
atha
n Lo
w
prov
ided
inpu
t an
d gu
idan
ce d
urin
g th
e ea
rly,
form
ativ
e st
ages
of
this
pro
ject
.
For
mo
re in
form
atio
n a
bo
ut
this
pro
ject
, p
leas
e co
nta
ct G
EMI,
at: 2
02-2
96-7
449
or
in
fo@
gem
i.org
.
GEM
I gra
tefu
lly a
ckno
wle
dges
Car
niva
l Cor
pora
tion
and
PLC
’s co
ntrib
utio
n to
the
des
ign
of t
he c
over
pag
e.
3
Pre
face
In b
usin
ess,
num
bers
driv
e pe
rfor
man
ce.
Com
pani
es u
se a
wid
e va
riety
of
met
rics
to g
auge
how
wel
l the
y ar
e m
eetin
g th
e ne
eds
of t
heir
cust
omer
s, in
vest
ors,
an
d ot
her
stak
ehol
ders
. So
ciet
y is
bec
omin
g m
ore
awar
e of
the
soc
ial a
nd e
nviro
nmen
tal i
mpa
cts
of b
usin
ess
activ
ities
, and
, thu
s, m
ore
inte
rest
ed in
the
re
latio
nshi
p be
twee
n th
e pe
rfor
man
ce o
f a
busi
ness
in t
hese
are
as a
nd it
s m
arke
t va
lue
and
finan
cial
per
form
ance
. Thi
s ha
s ge
nera
ted
a de
luge
of
stak
ehol
der
info
rmat
ion
requ
ests
of
com
pani
es. W
hile
muc
h ha
s be
en d
one
to d
efine
‘sus
tain
abili
ty’ a
nd s
usta
inab
ility
-rel
ated
met
rics
for
busi
ness
, the
re h
as b
een
less
foc
us
on a
ligni
ng m
etric
s w
ith b
usin
ess
stra
tegy
. Doi
ng s
o ca
n ad
d si
gnifi
cant
and
long
-ter
m v
alue
to
the
busi
ness
.
Prog
ress
ive
com
pani
es r
ecog
nize
tha
t th
eir
perf
orm
ance
is ju
dged
on
man
y le
vels
, not
just
the
ir fin
anci
al s
ucce
ss. U
sing
app
ropr
iate
met
rics
to d
escr
ibe
prog
ram
s or
bac
k up
sta
tem
ents
of
prog
ress
can
enh
ance
bus
ines
s’ c
redi
bilit
y. T
his
tool
was
des
igne
d to
look
at
indi
cato
rs o
f pe
rfor
man
ce a
nd p
ut t
he n
umbe
rs in
to
a co
ntex
t th
at g
oes
beyo
nd t
radi
tiona
l fina
ncia
l met
rics.
It p
rovi
des
a ro
adm
ap f
or c
ompa
nies
to
iden
tify
key
met
rics
for
thos
e ac
tions
tha
t dr
ive
long
-ter
m
sust
aina
bilit
y an
d a
ratio
nal,
thou
ghtf
ul b
asis
for
dec
isio
n-m
akin
g.
This
too
l use
s a
plan
ning
pro
cess
tha
t ca
n he
lp u
ncov
er r
elev
ant
and
mat
eria
l ind
icat
ors
and
prio
ritiz
e am
ong
thos
e th
at a
re t
he m
ost
effe
ctiv
e at
driv
ing
and
com
mun
icat
ing
perf
orm
ance
, bot
h in
tern
ally
and
ext
erna
lly. T
hrou
gh it
s ap
plic
atio
n, c
ompa
nies
can
dem
onst
rate
the
ir ba
sis
for
sele
ctin
g m
etric
s an
d en
hanc
e th
eir
valu
e fo
r m
anag
emen
t de
cisi
ons.
For
exa
mpl
e, a
re e
mpl
oyee
ret
entio
n, g
reen
hous
e ga
s m
anag
emen
t, c
omm
unity
invo
lvem
ent,
or
wat
er r
esou
rces
impo
rtan
t to
you
r bu
sine
ss s
trat
egy?
Why
or
why
not
? H
ow a
re t
hey
mea
sure
d? T
hese
are
the
kin
ds o
f qu
estio
ns t
hat
the
tool
can
hel
p yo
ur o
rgan
izat
ion
expl
ore.
The
GEM
I Met
rics
Nav
igat
or™
is t
he p
rodu
ct o
f a
two-
year
, col
labo
rativ
e jo
urne
y by
GEM
I mem
bers
, with
the
supp
ort
of t
he B
RID
GES
to
Sust
aina
bilit
y te
am
of G
olde
r A
ssoc
iate
s, a
nd a
num
ber
of o
ther
exp
erts
in t
he fi
elds
of
sust
aina
bilit
y, m
etric
s, a
nd o
rgan
izat
iona
l cha
nge
man
agem
ent.
Ove
r th
e co
urse
of
thre
e w
orks
hops
in t
he U
S an
d U
K, p
artic
ipan
ts f
rom
25
exte
rnal
org
aniz
atio
ns a
nd s
ever
al G
EMI c
ompa
nies
dis
cuss
ed s
trat
egic
per
form
ance
mea
sure
men
t an
d ev
alua
tion;
the
cha
lleng
es o
f su
stai
nabi
lity
and
rela
ted
met
rics
that
driv
e bu
sine
ss v
alue
, inn
ovat
ion
and
grow
th; a
nd in
tang
ible
fina
ncia
l driv
ers.
We
are
deep
ly
grat
eful
to
all w
ho p
artic
ipat
ed in
thi
s pr
oces
s fo
r th
eir
inva
luab
le c
ontr
ibut
ions
.
This
too
l doe
s no
t re
com
men
d an
y pa
rtic
ular
pat
h fo
r a
com
pany
to
take
, nor
doe
s it
advo
cate
a c
omm
on s
et o
f in
dica
tors
for
indu
stry
. O
rgan
izat
ions
may
wis
h to
use
the
too
l’s s
ix-s
tep
proc
ess
in f
ull,
or m
ay s
impl
y us
e it
as a
ref
eren
ce t
o fin
e tu
ne e
xist
ing
effo
rts.
In e
ither
cas
e, it
s us
e sh
ould
brin
g to
ligh
t op
port
uniti
es t
o be
tter
set
goa
ls a
nd c
omm
unic
ate
perf
orm
ance
aro
und
com
pany
val
ues
and
stra
tegy
.
We
hope
thi
s ap
proa
ch a
nd t
he c
ase
for
non-
finan
cial
met
rics
help
s yo
ur c
ompa
ny t
o be
tter
nav
igat
e th
e la
ndsc
ape
of c
orpo
rate
citi
zens
hip.
Let
us
know
if it
do
es a
t info@gem
i.org
.
Jim K
earn
ey
Le
slie
Mon
tgom
ery
Br
isto
l-Mye
rs S
quib
b C
ompa
ny
Sout
hern
Com
pany
Co-
chai
rs, G
EMI M
etric
s W
ork
Gro
up
Mar
ch 2
007
4
Execu
tive S
um
mary
Tr
aditi
onal
ly, b
usin
ess
obje
ctiv
es h
ave
been
de
fined
and
mea
sure
d in
fina
ncia
l ter
ms.
Yet
, to
real
ize
the
valu
e of
add
ress
ing
envi
ronm
enta
l, so
cial
and
bro
ader
eco
nom
ic is
sues
, non
-fina
ncia
l m
etric
s ca
n al
so d
rive
succ
ess
in t
he o
rgan
izat
ion
by in
dica
ting
how
wel
l it
exec
utes
on
its v
alue
s an
d be
liefs
. The
se m
etric
s ar
e ne
eded
to
com
plem
ent
trad
ition
al fi
nanc
ial m
easu
rem
ent
syst
ems
and
help
org
aniz
atio
ns m
anag
e lo
ng-t
erm
bus
ines
s op
port
uniti
es a
nd f
utur
e un
cert
aint
y an
d ris
ks.
The
chal
leng
e is
to
use
the
right
mix
of
met
rics
that
pro
vide
s va
lue
to t
he o
rgan
izat
ion
– by
pr
ovid
ing
mea
ning
ful i
nfor
mat
ion,
info
rmin
g st
rate
gy a
nd s
uppo
rtin
g de
cisi
on-m
akin
g.
The
Glo
bal E
nviro
nmen
tal M
anag
emen
t In
itiat
ive’
s (G
EMI)
Met
rics
Nav
igat
or™
is a
too
l to
hel
p or
gani
zatio
ns d
evel
op a
nd im
plem
ent
met
rics
that
pro
vide
insi
ght
into
com
plex
issu
es,
supp
ort
busi
ness
str
ateg
y an
d co
ntrib
ute
to
busi
ness
suc
cess
. The
too
l pre
sent
s a
thor
ough
, si
x-st
ep p
roce
ss t
o se
lect
, im
plem
ent
and
eval
uate
a s
et o
f ‘c
ritic
al f
ew’ m
etric
s th
at f
ocus
on
an
orga
niza
tion’
s su
cces
s. E
ach
step
pro
vide
s gu
idan
ce in
the
for
m o
f a
wor
kshe
et, s
erie
s of
qu
estio
ns o
r ch
eckl
ist.
Any
org
aniz
atio
n ca
n us
e th
e to
ol a
nd a
pply
it
at a
ny o
rgan
izat
iona
l lev
el. T
he p
roce
ss is
ver
y fle
xibl
e an
d do
es n
ot d
icta
te h
ow t
o co
mpl
ete
the
wor
kshe
ets.
In f
act,
the
too
l doe
s no
t re
quire
th
at w
orks
heet
s be
use
d at
all,
if a
n or
gani
zatio
n al
read
y us
es p
rove
n in
tern
al p
roce
sses
for
pa
rtic
ular
ste
ps. T
he s
tren
gth
of t
he t
ool i
s th
at
it of
fers
a r
igor
ous
thou
ght
proc
ess.
The
gre
ates
t va
lue
is in
how
it h
elps
indi
vidu
als,
gro
ups
or
entir
e or
gani
zatio
ns t
hink
thr
ough
the
pro
cess
-
the
logi
cal fl
ow o
f th
e si
x st
eps
- an
d no
t in
th
e m
etho
ds in
clud
ed. T
he s
umm
ary
wor
kshe
et
(on
page
5) p
rovi
des
an o
verv
iew
of
the
proc
ess
and
capt
ures
the
crit
ical
con
clus
ions
fro
m t
he s
ix
step
s.
In a
ver
y pr
actic
al w
ay, t
he G
EMI M
etric
sN
avig
ator
™ h
elps
the
use
r to
:
•de
term
ine
wha
t is
mat
eria
l – a
sk t
he r
ight
qu
estio
ns, p
riorit
ize
issu
es, i
dent
ify o
bjec
tives
an
d un
ders
tand
pot
entia
l con
sequ
ence
s at
se
vera
l dec
isio
n po
ints
•de
cide
wha
t an
d ho
w t
o m
easu
re –
und
erst
and
the
inte
ract
ions
bet
wee
n ec
onom
ic, s
ocia
l and
en
viro
nmen
tal i
ssue
s an
d so
rt t
hrou
gh a
n ar
ray
of p
ossi
ble
met
rics
•im
plem
ent
a m
etric
s pr
ogra
m
Onc
e th
e m
etric
s ha
ve b
een
chos
en, t
his
tool
he
lps
the
user
ana
lyze
how
eff
ectiv
ely
the
non-
finan
cial
met
rics:
•in
form
bus
ines
s de
cisi
ons
and
lead
ersh
ip
•al
ign
envi
ronm
enta
l, so
cial
and
eco
nom
ic is
sues
w
ith b
usin
ess
stra
tegy
•re
spon
d to
issu
es id
entifi
ed b
y em
ploy
ees
and
ex
tern
al s
take
hold
ers
•he
lp in
tegr
ate
holis
tic t
hink
ing
into
the
orga
niza
tion’
s cu
lture
•re
flect
bus
ines
s va
lues
and
yie
ld b
usin
ess
bene
fits
The
prin
cipa
l ben
efit
of u
sing
thi
s to
ol is
to
adva
nce
busi
ness
per
form
ance
thr
ough
the
dev
elop
men
t an
d us
e of
non
-fina
ncia
l mea
sure
men
ts.
5
WO
RK
SHEE
T: S
UM
MA
RY O
F K
EY P
OIN
TS
Wh
at is
m
ater
ial
Key
bu
sin
ess
ob
ject
ives
(fr
om
Ste
p 1
)
Envi
ron
men
tal,
soci
al a
nd
eco
no
mic
ele
men
ts s
up
po
rt b
usi
nes
s o
bje
ctiv
es (
curr
ent
and
fu
ture
) (f
rom
Ste
p 1
)
Key
em
plo
yees
an
d e
xter
nal
sta
keh
old
ers
in t
his
eff
ort
(fr
om
Ste
p 2
)
Cri
tica
l few
mat
eria
l iss
ues
(fr
om
Ste
p 2
)
Key
ob
ject
ives
wh
ich
rel
ate
to t
he
mat
eria
l iss
ues
(fr
om
Ste
p 3
)
Wh
at a
nd
h
ow
to
m
easu
re
Exp
ecte
d u
ses
of
the
met
rics
an
d b
y w
ho
m (
fro
m S
tep
4)
KPI
s an
d r
elat
ed m
etri
cs, w
hat
th
ey a
re a
nd
ho
w w
ell t
hey
mee
t th
e cr
iter
ia (
fro
m S
tep
4)
Ho
w t
oas
sure
ef
fect
iven
ess
Deg
ree
of
inte
gra
tio
n o
f m
etri
cs in
to m
anag
emen
t sy
stem
s (f
rom
Ste
p 5
)
Effe
ctiv
enes
s o
f m
etri
cs c
om
mu
nic
atio
n t
o u
sers
(fr
om
Ste
p 5
)
Exp
ecte
d o
rgan
izat
ion
al b
ehav
ior
(fro
m S
tep
6)
Exp
ecte
d c
han
ge
in p
erso
nal
beh
avio
r (f
rom
Ste
p 6
)
Use
of
met
rics
to
su
pp
ort
th
e b
usi
nes
s ca
se a
nd
refi
ne
bu
sin
ess
stra
teg
y (f
rom
Ste
p 6
)
Exp
ecte
d b
usi
nes
s va
lue
(fro
m S
tep
6)
6 Eco
no
mic
, en
viro
nm
enta
l an
d
soci
al c
on
cern
s in
tera
ct in
fu
nd
amen
tal w
ays,
man
y o
f w
hic
h a
re n
ot
wel
l un
der
sto
od
…B
usi
nes
ses
exis
t w
ith
in
soci
etie
s, a
nd
so
ciet
al v
alu
es
exp
ress
ed f
orm
ally
(th
rou
gh
la
ws
and
reg
ula
tio
ns)
an
d
info
rmal
ly (
thro
ug
h v
alu
es a
nd
cu
ltu
re)
affe
ct a
ll as
pec
ts o
f a
co
mp
any’
s o
per
atio
ns.
— K
irvi
l Ski
nn
arla
nd
Intr
od
uct
ion
Pe
rfor
man
ce m
easu
rem
ent
is c
ritic
al in
man
agin
g co
mpl
ex is
sues
tha
t ar
e co
re t
o th
e bu
sine
ss.
Met
rics
are
ess
entia
l not
onl
y fo
r m
anag
ing
the
orga
niza
tion,
but
als
o fo
r in
form
ing
busi
ness
st
rate
gies
. With
out
rele
vant
met
rics,
it is
diffi
cult
- if
not
impo
ssib
le -
to
unde
rsta
nd h
ow a
nd if
co
mpl
ex is
sues
adv
ance
bus
ines
s su
cces
s (s
eeth
eG
loss
ary
on
pag
e 56
fo
r th
e d
efin
itio
ns
of
ital
iciz
ed w
ord
s, in
bo
ld).
Sust
aina
ble
deve
lopm
ent*
is a
com
plex
issu
e th
at e
mer
ged
as a
bus
ines
s co
ncep
t in
the
19
90s.
Sin
ce t
hen
it ha
s ga
ined
cre
denc
e as
an
impo
rtan
t dr
iver
of
busi
ness
str
ateg
y. Y
et, t
o re
aliz
e th
e va
lue
of a
ddre
ssin
g en
viro
nmen
tal,
soci
al a
nd b
road
er e
cono
mic
issu
es, n
on-
finan
cial
met
rics
are
need
ed t
o co
mpl
emen
t tr
aditi
onal
, fina
ncia
l mea
sure
men
t sy
stem
s an
d he
lp o
rgan
izat
ions
man
age
long
-ter
m b
usin
ess
oppo
rtun
ities
and
fut
ure
unce
rtai
nty
and
risks
.
The
chal
leng
e is
to
use
the
right
mix
of
met
rics
that
pro
vide
s va
lue
to t
he o
rgan
izat
ion
– by
pr
ovid
ing
mea
ning
ful i
nfor
mat
ion,
info
rmin
g st
rate
gy a
nd s
uppo
rtin
g de
cisi
on-m
akin
g.
GEM
I’s M
etric
s N
avig
ator
™ is
a t
ool t
o he
lp
orga
niza
tions
dev
elop
and
impl
emen
t m
etric
s th
at p
rovi
de in
sigh
t in
to c
ompl
ex is
sues
, sup
port
bu
sine
ss s
trat
egy
and
cont
ribut
e to
bus
ines
s su
cces
s. T
he t
ool p
rese
nts
a th
orou
gh, s
ix-s
tep
proc
ess
to s
elec
t, im
plem
ent
and
eval
uate
a s
et o
f ‘c
ritic
al f
ew’ m
etric
s th
at a
ddre
ss:
•W
hat
perf
orm
ance
bes
t re
flect
s th
at w
hich
is
mat
eria
l to
the
orga
niza
tion
and
impo
rtan
tto
sta
keho
lder
s?
•H
ow c
an p
erfo
rman
ce f
or t
hese
issu
esbe
mea
sure
d?
•W
hich
met
rics
are
mos
t ef
fect
ive
in
deci
sion
-mak
ing?
•W
ho w
ill u
se t
hem
?
•H
ow c
an p
erfo
rman
ce e
valu
atio
n im
prov
e th
e or
gani
zatio
n’s
stra
tegi
c di
rect
ion?
Sust
ain
abili
ty a
s a
Bu
sin
ess
Issu
eEa
rly c
orpo
rate
app
licat
ions
of
sust
aina
bilit
y ap
proa
ches
wer
e ty
pica
lly m
arke
ting-
focu
sed
and
appl
ied
to s
ingl
e is
sues
– s
uch
as ‘g
reen
’ pro
duct
s.
How
ever
, for
sev
eral
yea
rs, t
here
has
bee
n gr
owin
g re
cogn
ition
tha
t a
holis
tic a
ppro
ach
to m
anag
ing
risks
and
opp
ortu
nitie
s cr
eate
s bu
sine
ss v
alue
.
Figu
re 1
(on
page
7) i
llust
rate
s th
e ev
olut
ion
of in
tegr
atin
g su
stai
nabi
lity
thin
king
into
an
orga
niza
tion.
Firs
t st
eps
typi
cally
incl
ude
initi
ativ
es
to m
anag
e en
viro
nmen
t, h
ealth
and
saf
ety
(EH
S)
risk
by m
ovin
g be
yond
com
plia
nce
thro
ugh
deve
lopi
ng in
tern
al p
olic
ies
or a
dher
ing
to
volu
ntar
y st
anda
rds.
As
orga
niza
tions
hav
e ev
olve
d fr
om f
ocus
ing
on
EHS
stra
tegi
es t
o su
stai
nabi
lity
stra
tegi
es, g
oals
an
d ob
ject
ives
hav
e be
com
e m
ore
com
plex
. At
the
sam
e tim
e, g
iven
the
bro
ad s
pect
rum
of
issu
es t
hat
fall
unde
r th
e su
stai
nabi
lity
umbr
ella
, po
tent
ial s
take
hold
ers
have
mul
tiplie
d an
d gr
own
mor
e di
vers
e. In
thi
s se
ttin
g, t
he n
eed
for
a cl
ear,
resu
lts-o
rient
ed s
trat
egy
has
gain
ed
incr
easi
ng im
port
ance
for
org
aniz
atio
ns. A
nd,
beca
use
orga
niza
tions
can
not
affo
rd t
o ad
dres
s ev
ery
aspe
ct t
o th
e sa
me
degr
ee a
nd o
n th
e sa
me
sche
dule
, cho
ices
mus
t be
mad
e an
d a
stra
tegi
c di
rect
ion
set.
* Fo
r pu
rpos
es o
f th
is t
ool,
GEM
I con
side
rs t
he t
erm
s an
d va
ried
defin
ition
s ‘s
usta
inab
ility
’, ‘t
riple
-bot
tom
-line
’, ‘c
orpo
rate
soc
ial
resp
onsi
bilit
y’, ‘
corp
orat
e ci
tizen
ship
’, ‘c
orpo
rate
res
pons
ibili
ty’ a
nd ‘s
usta
inab
le d
evel
opm
ent’
to
be in
terc
hang
eabl
e, a
nd t
o in
volv
e th
e el
emen
ts o
f en
viro
nmen
tal s
tew
ards
hip,
eco
nom
ic d
evel
opm
ent
and
soci
al p
rogr
ess.
7
© B
RID
GES
to
Sust
aina
bilit
y, G
olde
r A
ssoc
iate
s In
c. A
dapt
ed f
rom
Tran
sfor
min
g Su
stai
nabi
lity
Stra
tegy
into
Act
ion,
Bel
off
et a
l, 20
05
Fig
ure
1. E
volu
tio
n o
f In
teg
rati
ng
Su
stai
nab
ility
Th
inki
ng
into
an
Org
aniz
atio
n
RISKS
OPPORTU
NITY
hig
hhig
hlo
wlo
w-1
0+
1
Tom
orr
ow
Tod
ay
Syst
em
Application
Fun
ctio
n
Exte
rnal
Time Inte
rnal
Lead
ing
the
pac
k
Inn
ova
tin
g -
rais
ing
th
e ce
ilin
g
Exp
and
ing
the
visi
on
Imp
rovi
ng
th
e fl
oo
r
Mee
tin
g m
inim
um
sta
nd
ard
s
As
the
valu
e of
add
ress
ing
envi
ronm
enta
l and
so
cial
issu
es in
crea
ses,
it is
impo
rtan
t fo
r m
etric
s to
ga
uge
an o
rgan
izat
ion’
s su
cces
s m
ore
holis
tical
ly.
A n
ew g
ener
atio
n of
met
rics
is n
eede
d to
co
mpl
emen
t tr
aditi
onal
mea
sure
men
t sy
stem
s an
d he
lp m
anag
ers
deal
with
long
-ter
m b
usin
ess
oppo
rtun
ities
and
fut
ure
unce
rtai
nty
and
risk.
Lead
ing
met
rics
are
valu
able
bec
ause
the
y te
nd
to r
eflec
t ca
usat
ion
and
can
be u
sed
to p
redi
ct
perf
orm
ance
. How
ever
, bec
ause
lead
ing
met
rics
ofte
n re
flect
inta
ngib
le a
sset
s of
bus
ines
s, t
hey
can
be d
ifficu
lt to
iden
tify.
The
chal
leng
e is
to
find
the
right
mix
of
lead
ing
and
lagg
ing
met
rics,
for
issu
es t
hat
are
criti
cally
im
port
ant,
i.e.
, mat
eria
l. Th
ese
met
rics
mus
t ac
cura
tely
dep
ict
prog
ress
tow
ards
goa
ls a
nd
be e
ffec
tive
in c
omm
unic
atin
g in
form
atio
n to
di
ffer
ent
audi
ence
s. F
urth
er, t
he m
etric
s sh
ould
pr
ovid
e va
lue
to t
he o
rgan
izat
ion
with
out
crea
ting
sign
ifica
nt o
pera
tiona
l bur
dens
. (1)
Seve
ral t
ools
dev
elop
ed b
y G
EMI h
ighl
ight
the
im
port
ance
of
met
rics
(see
list
of
Res
ou
rces
in
On
line
Ap
pen
dix
). G
EMI’s
Cle
ar A
dvan
tage
:Bu
ildin
g Sh
areh
olde
r Va
lue
help
s to
pro
vide
bu
sine
sses
app
roac
hes
on h
ow t
o m
easu
re,
man
age
and
com
mun
icat
e EH
S va
lue
to t
he
finan
cial
com
mun
ity. G
EMI’s
Tra
nspa
renc
y: A
Pa
th t
o Pu
blic
Tru
st u
nder
scor
es p
erfo
rman
ce
repo
rtin
g to
est
ablis
h in
tegr
ity, b
uild
cre
dibi
lity,
ea
rn r
espe
ct a
nd d
evel
op t
rust
with
sta
keho
lder
s.
Met
rics
help
‘clo
se t
he lo
op’ i
n th
e su
stai
nabi
lity
plan
one
dev
elop
s us
ing
the
GEM
I’s E
xplo
ring
Path
way
s to
a S
usta
inab
le E
nter
pris
e: S
D
Plan
ner™
. Con
side
ratio
ns f
or t
he d
evel
opm
ent
of m
etric
s ha
ve b
een
prev
ious
ly d
iscu
ssed
in
a 1
997
GEM
I pub
licat
ion,
Mea
surin
gEn
viro
nmen
tal P
erfo
rman
ce.
The
GEM
I Met
rics
Nav
igat
or™
bui
lds
on t
hese
an
d ot
her
tool
s, b
ut f
ocus
es e
xclu
sive
ly o
n a
proc
ess
com
pani
es c
an u
se t
o de
velo
p re
leva
nt
sust
aina
bilit
y m
etric
s.
A N
ew G
ener
atio
n o
f M
etri
csO
rgan
izat
ions
use
met
rics
to ju
dge
prog
ress
in
impl
emen
ting
stra
tegi
es a
nd t
o im
prov
e op
erat
ions
. Tra
ditio
nally
, bus
ines
s ob
ject
ives
hav
e be
en d
efine
d an
d m
easu
red
in fi
nanc
ial t
erm
s.
Org
aniz
atio
ns h
ave
relie
d on
lagg
ing
met
rics
whi
ch
refle
ct p
ast o
utco
mes
of o
rgan
izat
iona
l per
form
ance
. W
hile
lagg
ing
met
rics
help
org
aniz
atio
ns m
anag
e im
pact
s, th
e ef
fect
ive
man
agem
ent o
f non
-fina
ncia
l iss
ues
requ
ires
the
use
of b
oth
lead
ing
and
lagg
ing
indi
cato
rs o
f per
form
ance
.
8
Str
ate
gic
Metr
ics
Develo
pm
en
t Pro
cess
: O
verv
iew
Wh
at is
th
e G
EMI M
etri
cs N
avig
ato
r™?
The
tool
is in
the
for
m o
f a
wor
kboo
k th
at g
uide
s th
e us
er t
hrou
gh a
ser
ies
of w
orks
heet
s to
arr
ive
at m
etric
s th
at s
uppo
rt b
usin
ess
stra
tegy
, enh
ance
de
cisi
on-m
akin
g an
d co
ntrib
ute
to m
anag
ing
busi
ness
suc
cess
in t
he f
ollo
win
g ar
eas:
•In
form
str
ateg
y –
by m
easu
ring
the
abili
ty o
f th
e or
gani
zatio
n to
mee
t its
goa
ls a
nd t
arg
ets.
•D
rive
impr
oved
per
form
ance
– b
y:
oes
tabl
ishi
ng b
ase-
line
perf
orm
ance
otr
acki
ng p
erfo
rman
ce o
ver
time,
incl
udin
g m
anag
emen
t sy
stem
per
form
ance
opr
ovid
ing
insi
ghts
into
hid
den
aspe
cts
of p
erfo
rman
ce
osu
ppor
ting
deci
sion
-mak
ing
oid
entif
ying
per
form
ance
impr
ovem
ent
oppo
rtun
ities
•M
easu
re w
hat
is r
ight
– O
rgan
izat
ions
fac
e st
akeh
olde
r pr
essu
re t
o ac
coun
t pu
blic
ly t
heir
perf
orm
ance
rel
ativ
e to
a g
row
ing
list
of
sust
aina
bilit
y-re
late
d pr
inci
ples
, sta
ndar
ds a
nd
indi
cato
rs. O
ften
it is
diffi
cult
to m
eet
vary
ing
expe
ctat
ions
and
det
erm
ine
whi
ch f
ram
ewor
ks
to u
se a
nd w
hat
to m
easu
re. B
y de
velo
ping
m
etric
s th
at a
re a
ligne
d w
ith b
usin
ess
stra
tegy
th
is t
ool e
nsur
es t
hat
an o
rgan
izat
ion
mea
sure
s w
hat
is r
ight
for
itse
lf an
d m
easu
res
thin
gs t
he
right
way
.
•Pr
ovid
e m
eani
ngfu
l inf
orm
atio
n –
Org
aniz
atio
ns
can
be o
verw
helm
ed b
y da
ta a
nd in
form
atio
n.Th
is t
ool h
elps
the
use
r de
cide
whi
ch in
form
atio
n re
ally
mat
ters
, how
to
cost
-eff
ectiv
ely
conv
ert
it in
to m
etric
s an
d ho
w t
o co
mm
unic
ate
data
and
re
sults
to
the
right
peo
ple.
•C
omm
unic
ate
effe
ctiv
ely
– M
etric
s m
ean
little
w
ithou
t th
e co
ntex
t of
how
the
y w
ill b
e us
ed
to im
prov
e pe
rfor
man
ce a
nd o
rgan
izat
iona
l al
ignm
ent.
Thi
s to
ol h
ighl
ight
s ho
w m
etric
s ar
e de
fined
and
influ
ence
d by
the
use
s an
d us
ers
of m
etric
s. F
urth
er, t
he t
ool h
elps
the
us
er c
hoos
e th
e ty
pe a
nd n
umbe
r of
met
rics
give
n th
e au
dien
ce.
Wh
at is
Un
iqu
e ab
ou
t th
e To
ol?
Whi
le t
here
are
man
y pu
blis
hed
reso
urce
s on
m
etric
s, t
his
tool
inco
rpor
ates
div
erse
per
spec
tives
in
to a
com
preh
ensi
ve f
ram
ewor
k th
at li
nks
non-
finan
cial
pro
gram
met
rics
to a
n or
gani
zatio
n’s
busi
ness
str
ateg
y in
a p
ract
ical
way
tha
t he
lps
the
user
to:
•as
k th
e rig
ht q
uest
ions
, prio
ritiz
e is
sues
, id
entif
y ob
ject
ives
and
und
erst
and
pote
ntia
l co
nseq
uenc
es a
t se
vera
l dec
isio
n po
ints
•be
tter
und
erst
and
the
inte
ract
ions
bet
wee
n ec
onom
ic, s
ocia
l and
env
ironm
enta
l iss
ues
•al
ign
envi
ronm
enta
l and
soc
ial i
ssue
s w
ith
bu
sine
ss s
trat
egy
•ad
vanc
e bu
sine
ss p
erfo
rman
ce u
sing
non-
finan
cial
mea
sure
men
ts
The
tool
doe
s no
t re
com
men
d sp
ecifi
c m
etric
s,
but
its a
pplic
atio
n w
ill le
ad a
n or
gani
zatio
n th
roug
h th
e pr
oces
s of
dev
elop
ing
com
pany
-sp
ecifi
c m
etric
s.
9
Met
ho
do
log
y -
Ho
w t
he
Too
l was
Dev
elo
ped
This
too
l was
dev
elop
ed t
hrou
gh c
onsu
ltatio
n be
twee
n th
e G
EMI M
etric
s W
ork
Gro
up a
nd
the
Gol
der
team
, and
with
inpu
t fr
om E
xter
nal
Adv
isor
y G
roup
s (E
AG
s) c
ompr
ised
of
key
thou
ght
lead
ers
with
exp
ertis
e ra
ngin
g fr
om c
orpo
rate
st
rate
gy t
o st
akeh
olde
r en
gage
men
t pr
oces
ses
to p
erfo
rman
ce m
easu
rem
ent.
The
se e
xper
ts
part
icip
ated
in a
t le
ast
one
of t
hree
wor
ksho
ps
whi
ch a
ddre
ssed
sel
ecte
d is
sues
em
bedd
ed in
th
e to
ol. C
ontr
ibut
ions
fro
m s
ever
al E
AG
exp
erts
ar
e in
clud
ed in
the
too
l as
‘EA
G P
ersp
ectiv
es’.
The
deta
iled
pers
pect
ives
in t
he o
nlin
e ap
pend
ix
can
enha
nce
unde
rsta
ndin
g of
cer
tain
key
poi
nts
or b
e us
ed t
o m
ake
the
busi
ness
cas
e fo
r ta
king
si
mila
r st
eps.
Cas
e ex
ampl
es, w
ritte
n by
GEM
I mem
bers
, ill
ustr
ate
oppo
rtun
ities
and
cha
lleng
es in
de
velo
ping
and
usi
ng m
etric
s. W
hile
the
re a
re
man
y en
viro
nmen
tal c
ases
, the
re is
wid
espr
ead
reco
gniti
on o
f th
e ne
ed f
or m
ore
wor
k in
de
velo
ping
soc
ial a
nd e
cono
mic
met
rics.
Oft
en
soci
al is
sues
are
mor
e re
adily
man
aged
and
ac
coun
ted
for
at t
he lo
cal l
evel
, mak
ing
it di
fficu
lt to
agg
rega
te o
r ‘r
oll-u
p’ p
erfo
rman
ce in
to a
sin
gle
met
ric. T
here
in li
es a
key
cha
lleng
e th
at t
his
tool
at
tem
pts
to a
ddre
ss.
Wh
o S
ho
uld
Use
it?
The
tool
is in
tend
ed f
or u
se b
y m
anag
ers
and
envi
ronm
enta
l, he
alth
and
saf
ety,
and
sus
tain
able
de
velo
pmen
t pr
actit
ione
rs. T
he t
ool c
an b
e ap
plie
d to
any
typ
e of
bus
ines
s an
d ap
plie
d at
any
or
gani
zatio
nal l
evel
. The
pro
cess
is fl
exib
le a
nd
adap
tabl
e so
tha
t in
divi
dual
s or
tea
ms
can
tailo
r it
to m
eet
thei
r sp
ecifi
c ne
eds.
Ho
w t
o U
se t
he
Too
lTh
e pr
oces
s de
scrib
ed in
the
too
l is
sequ
entia
l and
re
pres
ents
the
rec
omm
ende
d ap
proa
ch t
o m
etric
s de
velo
pmen
t, b
ut u
sers
may
ent
er a
t an
y st
ep a
nd
mov
e be
twee
n st
eps
as n
eces
sary
. Eac
h st
ep o
f th
e G
EMI M
etric
s N
avig
ator
™ p
rovi
des
guid
ance
in
the
for
m o
f a
wor
kshe
et, s
erie
s of
que
stio
ns
or c
heck
list
of e
valu
atio
n cr
iteria
. To
illus
trat
e th
e co
ntin
uous
nat
ure
of t
he m
etric
s de
velo
pmen
t pr
oces
s, t
he s
ix s
teps
are
sho
wn,
in F
igur
e 2,
in a
Pl
an, D
o, C
heck
, Adv
ance
cyc
le.
A h
ypot
hetic
al o
rgan
izat
ion
calle
d ‘X
YZ
Nut
ritio
nal
Beve
rage
’ is
used
as
an e
xam
ple
thro
ugho
ut m
ost
of t
he s
ix-s
tep
proc
ess.
GEM
I mem
ber
com
pani
es
popu
late
d so
me
tabl
es a
nd w
orks
heet
s ba
sed
on
thei
r ow
n ex
perie
nces
, pro
vidi
ng m
ore
illus
trat
ive
exam
ples
tha
n co
uld
be a
chie
ved
thro
ugh
any
hypo
thet
ical
mod
el. T
he t
ool a
lso
incl
udes
re
fere
nces
and
res
ourc
es t
hat
furt
her
supp
ort
the
met
rics
deve
lopm
ent
proc
ess.
Due
to
spac
e lim
itatio
ns in
the
pub
lishe
d ve
rsio
n, t
he e
lect
roni
c PD
F ve
rsio
n of
the
to
ol, w
hich
can
be
foun
d on
GEM
I’s w
ebsi
te,
ww
w.g
emi.o
rg/m
etri
csn
avig
ato
r, in
clud
es
elab
orat
ions
on
EAG
Per
spec
tives
, add
ition
al
reso
urce
s an
d bl
ank
wor
kshe
ets
in u
sabl
e fo
rmat
.
Fig
ure
2. S
trat
egic
Met
rics
Dev
elo
pm
ent
Pro
cess
AD
VA
NC
E
CH
EC
K
PLA
N
DO
Wh
at
an
d H
ow
to
Measu
re
(Ste
p 4
)
Wh
at
is M
ate
rial
(S
tep
s 1
- 3
)
Ho
w t
o A
ssu
re
Eff
ect
iven
ess
(S
tep
s 5
- 6
)
10
The
Six
Step
sTh
is s
ectio
n of
the
too
l out
lines
the
six
-ste
p m
etric
s de
velo
pmen
t pr
oces
s. T
o in
crea
se
the
effe
ctiv
enes
s an
d va
lue
of t
he m
etric
s,
info
rmat
ion
is c
olle
cted
and
dec
isio
ns a
re m
ade
to r
espo
nd t
o th
ree
guid
ing
stat
emen
ts:
•W
hat
is m
ater
ial
•W
hat
and
how
to
mea
sure
•H
ow t
o as
sure
eff
ectiv
enes
s
Step
s 1–
3: W
hat
is M
ater
ial?
St
eps
1-3
of t
he p
roce
ss h
elp
iden
tify
wha
t is
mat
eria
l to
an o
rgan
izat
ion.
Mat
eria
lity
is
defin
ed a
s th
e re
leva
nce
and
subs
tant
ialit
y of
an
issu
e to
the
org
aniz
atio
n. T
his
early
foc
us
on m
ater
ialit
y en
sure
s th
at t
he o
rgan
izat
ion
is
mea
surin
g th
at w
hich
is r
ight
for
the
m.
A n
umbe
r of
org
aniz
atio
ns h
ave
deve
lope
d cr
iteria
fo
r de
finin
g m
ater
ialit
y fo
r va
rious
pur
pose
s,
incl
udin
g fin
anci
al r
epor
ting
(2) ,
sust
aina
bilit
y re
port
ing
(3) ,
stak
ehol
der
enga
gem
ent
(4) a
nd
audi
ting
(5) .
This
pro
cess
use
s th
e fo
llow
ing
crite
ria
for
asse
ssin
g an
issu
e’s
mat
eria
lity:
•re
leva
nce
to t
he b
usin
ess
stra
tegy
•si
gnifi
canc
e of
the
org
aniz
atio
n’s
envi
ronm
enta
l, so
cial
and
/or
econ
omic
impa
cts
•le
vel o
f co
ncer
n to
ext
erna
l sta
keho
lder
s
•ab
ility
of
the
orga
niza
tion
to c
ontr
ol o
r in
fluen
ce
Step
4: W
hat
an
d H
ow
to
Mea
sure
St
ep 4
defi
nes
Key
Per
form
ance
Ind
icat
ors
(KPI
s),
i.e.,
as a
gen
eral
sta
tem
ent
of w
hat
to m
easu
re a
nd
deve
lops
met
rics,
i.e.
, as
the
spec
ific
mea
sure
men
t ac
com
pani
ed b
y cl
ear
desc
riptio
ns o
f ho
w it
is
mea
sure
d. T
his
step
hel
ps s
ort
thro
ugh
the
arra
y of
po
ssib
le m
etric
s to
sel
ect
the
stra
tegi
c m
etric
s th
at
focu
s on
bus
ines
s su
cces
s. T
his
step
brie
fly lo
oks
at
tact
ical
met
rics
at t
he o
pera
tiona
l lev
el.
Step
4 in
clud
es a
rea
lity-
chec
k to
ens
ure
the
chos
en
met
rics
are
effe
ctiv
ely
fulfi
lling
the
ir in
tend
ed
purp
ose.
Par
t of
thi
s st
ep is
to
ensu
re t
he v
alid
ity o
f th
e m
etric
s in
ter
ms
of r
elia
bilit
y, r
elev
ance
to
the
busi
ness
, acc
urac
y an
d ot
her
crite
ria.
Step
s 5–
6: H
ow
to
Ass
ure
Eff
ecti
ven
ess
Step
5 f
ocus
es o
n di
still
ing
data
into
use
ful a
nd
man
agea
ble
info
rmat
ion
that
is m
eani
ngfu
l to
the
inte
nded
use
rs. T
his
impl
emen
tatio
n st
ep e
ncou
rage
s th
e us
er t
o w
ork
with
exi
stin
g m
anag
emen
t an
d in
form
atio
n sy
stem
s. T
his
sect
ion
also
cau
tions
on
the
use
of m
etric
s th
at c
an b
e m
isle
adin
g or
mis
unde
rsto
od.
Step
6 is
a c
ritic
al a
sses
smen
t of
the
met
rics
and
the
effe
ctiv
enes
s of
the
dev
elop
men
t pr
oces
s its
elf.
Thi
s st
ep e
ncou
rage
s re
flect
ion
on t
he fi
ve
prev
ious
ste
ps a
nd c
heck
s if
the
met
rics
info
rm t
he
busi
ness
str
ateg
y. D
oing
so
assu
res
that
the
met
rics
have
met
the
ir go
als
and
resu
lt in
bus
ines
s va
lue
for
the
orga
niza
tion.
Add
ition
ally,
it f
oste
rs t
he
deve
lopm
ent
of a
hig
h le
vel s
umm
ary
of r
esul
ts
(see
sum
mar
y w
orks
heet
on
page
5).
Figu
re 3
sho
ws
a sc
hem
atic
of
the
six
step
s of
the
St
rate
gic
Met
rics
Dev
elop
men
t Pr
oces
s an
d th
e as
soci
ated
wor
kshe
ets.
Fig
ure
3. S
trat
egic
Met
rics
Dev
elo
pm
ent
Pro
cess
an
d A
sso
ciat
ed W
ork
shee
ts
1
2
3
4
5
6
Bu
sin
ess
(W1a
) &
sust
ain
abili
ty c
on
text
s (W
1b)
Prio
riti
zed
list
s o
f is
sues
:in
tern
al (
W2a
) &
ext
ern
al (
W2b
)
“Cri
tica
l few
” m
ater
ial i
ssu
es (
W3a
)&
key
ob
ject
ives
(W
3b)
Key
Per
form
ance
Ind
icat
ors
(W
4a)
& M
etri
cs (
W4b
& W
4c)
Eval
uat
ion
of
imp
lem
enta
tio
n
& c
om
mu
nic
atio
n (
W4b
)
Eval
uat
ion
of
met
rics
sys
tem
eff
ecti
ven
ess
(W4b
)&
su
mm
ary
of
all k
ey r
esu
lts
(su
mm
ary
wo
rksh
eet
in
Exec
uti
ve S
um
mar
y)
Eval
uat
e In
teg
rati
on
& Im
pro
vem
ent
Eval
uat
e an
d
Co
mm
un
icat
e M
etri
cs
Defi
ne
Key
Perf
orm
ance
Ind
icat
ors
an
dM
etri
cs
Dev
elo
p K
eyO
bje
ctiv
es
Ass
ess
Issu
es
Un
der
stan
d C
on
text
11
6H
ow
to
Ass
ure
Eff
ect
iven
ess
5H
ow
to
Ass
ure
Eff
ect
iven
ess
4W
hat
an
d H
ow
toM
easu
re3
Wh
at
is
Mate
rial
2W
hat
is
Mate
rial
1W
hat
is
Mate
rial
The
GEM
I Met
rics
Nav
igat
or™
is d
esig
ned
to h
elp
user
s de
velo
p no
n-tr
aditi
onal
met
rics
that
com
plem
ent
the
orga
niza
tion’
s ex
istin
g pe
rfor
man
ce m
easu
rem
ent
syst
em. T
he m
etric
s de
velo
pmen
t pr
oces
s be
gins
with
:
•ar
ticul
atin
g th
e or
gani
zatio
n’s
busi
ness
st
rate
gy, b
usin
ess
obje
ctiv
es a
nd p
erfo
rman
ce
mea
sure
men
t sy
stem
•m
appi
ng h
ow t
he o
rgan
izat
ion
curr
ently
ad
dres
ses
envi
ronm
enta
l, ec
onom
ic a
nd
so
cial
asp
ects
This
ens
ures
tha
t th
e m
etric
s su
ppor
t w
hat
is im
port
ant
to t
he o
rgan
izat
ion
and
can
adva
nce
busi
ness
per
form
ance
by
leve
ragi
ng
the
inte
ract
ions
bet
wee
n ec
onom
ic, s
ocia
l and
en
viro
nmen
tal i
ssue
s.
Defi
ne
the
Org
aniz
atio
nal
Sco
pe
The
tool
is a
pplic
able
to
orga
niza
tions
of
vario
us
scal
es a
nd le
vels
. An
orga
niza
tion
is d
efine
d as
an
entit
y “t
hat
has
its o
wn
func
tion
and
adm
inis
trat
ion.
”(6)
Exam
ples
of
an o
rgan
izat
ion
for
this
too
l inc
lude
an
entir
e co
rpor
atio
n, a
bu
sine
ss u
nit
and
a si
ngle
site
or
oper
atio
n.
Un
der
stan
d t
he
Bu
sin
ess
Succ
ess
Fact
ors
An
orga
niza
tion
sets
dire
ctio
n th
roug
h st
rate
gy a
nd
uses
mea
sure
men
ts t
o st
ay o
n tr
ack.
Mea
sure
men
ts
deve
lope
d ou
tsid
e of
the
org
aniz
atio
n’s
stra
tegi
c bu
sine
ss s
ucce
ss f
acto
rs w
ill n
ot d
rive
the
resu
lts
iden
tified
in t
he s
trat
egy.
(7)
Des
crib
ing
the
orga
niza
tion’
s bu
sine
ss s
trat
egy
is t
he e
ssen
tial fi
rst
step
in u
nder
stan
ding
the
bu
sine
ss s
ucce
ss f
acto
rs f
or d
evel
opin
g ne
w
met
rics.
Man
y or
gani
zatio
ns a
rtic
ulat
e th
eir
stra
tegy
thr
ough
vis
ion
and
mis
sion
sta
tem
ents
as
wel
l as
clea
rly s
tate
d bu
sine
ss o
bjec
tives
. So
me
also
dev
elop
cor
e va
lues
to
refle
ct c
hara
cter
istic
s th
at a
re im
port
ant
to t
he o
rgan
izat
ion.
Mea
sure
Bu
sin
ess
Perf
orm
ance
Trad
ition
al m
easu
rem
ent
sche
mes
tra
ck
perf
orm
ance
tow
ards
fina
ncia
l and
ope
ratio
nal
goal
s. In
add
ition
to
finan
cial
met
rics
man
y or
gani
zatio
ns u
se n
on-fi
nanc
ial m
easu
rem
ents
in
emer
ging
are
as, s
uch
as r
esou
rce
man
agem
ent,
w
orkp
lace
and
boa
rd d
iver
sity
and
cor
pora
te
gove
rnan
ce. M
easu
ringintangibles,
e.g
., re
puta
tion,
is in
crea
sing
ly r
ecog
nize
d as
asse
ssin
g hi
dden
val
ue t
hat
has
been
cre
ated
by
an o
rgan
izat
ion.
Org
aniz
atio
ns m
ay u
se a
var
iety
of
mea
sure
men
t m
odel
s to
inte
grat
e no
n-fin
anci
al a
nd fi
nanc
ial
mea
sure
men
ts in
clud
ing:
The
Bal
ance
d Sc
orec
ard,
Eco
nom
ic V
alue
Add
, Int
elle
ctua
l C
apita
l App
roac
hes,
Val
ue E
xplo
rer®
and
Val
ue
C
hain
Sco
rebo
ard™
. (8)
STE
P 1
Exp
ecte
d O
utc
om
es•
U
nder
stan
ding
of
the
or
gani
zatio
n’s
busi
ness
str
ateg
y
an
d ex
istin
g pe
rfor
man
ce
m
easu
rem
ent
syst
ems
•
Und
erst
andi
ng o
f ho
w
the
orga
niza
tion
curr
ently
addr
esse
s en
viro
nmen
tal,
soci
al a
nd e
cono
mic
asp
ects
1.
Un
ders
tan
din
g t
he C
on
text
for
Metr
ics
Develo
pm
en
t
12 EAG
Per
spec
tive
Wh
at
Is t
he M
easu
rem
en
t C
hall
en
ge?
Busi
ness
es h
ave
done
an
exce
llent
job
in im
plem
entin
g rig
orou
s fin
anci
al
mea
sure
men
ts (‘
wha
t w
e un
ders
tand
’) an
d, t
o so
me
exte
nt, p
roce
ss m
easu
rem
ents
(‘w
hat
we
thin
k w
e un
ders
tand
’). T
he c
halle
nge
is t
o m
ove
tow
ard
a dy
nam
ic a
nd
mul
ti-di
men
sion
al s
yste
m t
hat
inco
rpor
ates
mea
sure
men
ts o
f ‘w
hat
we
do n
ot
unde
rsta
nd’ (
see
tabl
e be
low
). Jim
Ritc
hie-
Dun
ham
of
the
Inst
itute
of
Stra
tegi
c C
larit
y ex
plor
es t
his
onlin
e at
ww
w.g
emi.o
rg/m
etri
csn
avig
ato
r.
Lin
k M
easu
rem
ent
to S
trat
egy
By d
evel
opin
g m
etric
s th
at a
re a
ligne
d w
ith
busi
ness
str
ateg
y th
is t
ool e
nsur
es t
hat
an
orga
niza
tion
mea
sure
s w
hat
is r
ight
for
the
m
and
mea
sure
s th
ings
the
rig
ht w
ay. F
urth
er, a
n or
gani
zatio
n ca
n id
entif
y an
d im
plem
ent
met
rics
in t
he c
onte
xt o
f w
here
the
org
aniz
atio
n is
he
aded
, not
sol
ely
base
d on
whe
re it
has
bee
n. (9
)
Des
crib
e th
e B
usi
nes
s Su
cces
s Fa
cto
rs
– W
ork
shee
t 1a
Wor
kshe
et 1
a (o
n pa
ge 1
3) p
rovi
des
a te
mpl
ate
for
docu
men
ting
the
orga
niza
tion’
s bu
sine
ss
stra
tegy
and
per
form
ance
mea
sure
men
t sy
stem
. Th
e co
mpl
eted
wor
kshe
et w
ill:
•de
fine
the
orga
niza
tiona
l sco
pe f
or w
hich
fut
ure
met
rics
will
be
deve
lope
d
•ar
ticul
ate
‘hig
h-le
vel’
goal
s
•ou
tline
the
bus
ines
s st
rate
gy, b
usin
ess
obje
ctiv
es
and
stra
tegi
c pe
rfor
man
ce m
easu
rem
ent
syst
em
to w
hich
new
met
rics
shou
ld r
elat
e
Stra
teg
icM
easu
rem
ent
Wh
at W
e U
nd
erst
and
Wh
at W
e Th
ink
We
Un
der
stan
dW
hat
We
Do
No
t U
nd
erst
and
Wh
at w
e w
ant
(mis
sio
n /
visi
on
)O
ne fi
nanc
ial m
easu
reO
ne m
issi
on -
driv
en m
easu
reO
ne in
tegr
ativ
e m
easu
re
Wh
o c
ares
(s
take
ho
lder
s)Sh
areh
olde
r va
lue
Supp
ly c
hain
val
ueM
ultip
lest
akeh
olde
r va
lue
Wh
at is
nee
ded
(r
eso
urc
es)
Cos
t dr
iver
sVa
lue
driv
ers
Reso
urce
dyn
amic
s
Ho
w w
e ea
ch
con
trib
ute
(fu
nct
ion
s)
Profi
t ce
nter
co
ntrib
utio
nPr
oces
s co
ntrib
utio
nSy
stem
ic c
ontr
ibut
ion
Ho
w w
e in
flu
ence
ea
ch o
ther
(r
elat
ion
ship
s)
Profi
t an
d lo
ss
cont
ribut
ions
Han
doff
s in
pro
cess
Rela
tions
hip
dyna
mic
s
Wh
at h
app
ens
then
(sys
tem
)Si
ngle
indi
cato
r of
fin
anci
al h
ealth
Mul
tiple
indi
cato
rs o
f pr
oces
s he
alth
Mul
tiple
indi
cato
rs o
f sy
stem
hea
lth
6H
ow
to
Ass
ure
Eff
ect
iven
ess
5H
ow
to
Ass
ure
Eff
ect
iven
ess
4W
hat
an
d H
ow
toM
easu
re3
Wh
at
is
Mate
rial
2W
hat
is
Mate
rial
1W
hat
is
Mate
rial
13
WO
RK
SHEE
T 1a
: U
ND
ERST
AN
D T
HE
BU
SIN
ESS
SUC
CES
S FA
CTO
RS
(XY
Z N
utrit
iona
l Bev
erag
e Ex
ampl
e)
Org
aniz
atio
n:
The
orga
niza
tiona
l uni
t un
der
cons
ider
atio
n fo
r m
etric
s de
velo
pmen
t X
YZ
Nut
ritio
nal B
ever
age
(a d
ivis
ion
of X
YZ
Food
Pro
duct
s, In
c.)
Mis
sio
n:
The
mis
sion
sta
tem
ent
for
the
orga
niza
tiona
l uni
t (o
r its
par
ent)
Prov
idin
g ou
r cu
stom
ers
nutr
itiou
s fo
od a
nd b
ever
age
prod
ucts
of
the
high
est
qual
ity t
hat
are
prod
uced
in
an
envi
ronm
enta
lly-s
ensi
tive
man
ner,
whi
le c
onsi
sten
tly e
xcee
ding
sha
reho
lder
exp
ecta
tion.
Co
re v
alu
es:
•Su
perio
r fin
anci
al p
erfo
rman
ce•
Nut
ritio
us p
rodu
cts
of t
he h
ighe
st q
ualit
y•
Safe
and
hea
lthy
wor
k en
viro
nmen
t•
Resp
onsi
ble
envi
ronm
enta
l pra
ctic
es•
Enric
hing
the
com
mun
ities
in w
hich
we
oper
ate
Vis
ion
fo
r p
rod
uct
/ p
roce
ss:
Supe
rior n
utrit
iona
l bev
erag
e br
and
whi
ch c
onsu
mer
s em
brac
e fo
r its
qua
lity,
tast
e an
d in
nova
tion.
Defi
ne
the
mar
ket
envi
ron
men
t:Fo
od a
nd B
ever
age
/ Nat
ural
Foo
ds In
dust
ry. C
onsu
mer
s fa
ll in
to t
hree
cat
egor
ies:
die
t an
d he
alth
y liv
ing,
lact
ose
alte
rnat
ive
and
orga
nic.
Bu
sin
ess
ob
ject
ives
:•
Incr
ease
mar
ket
shar
e•
Incr
ease
rev
enue
•Re
duce
cos
t
Bu
sin
ess
risk
s an
d o
pp
ort
un
itie
s:A
vaila
bilit
y an
d co
nsis
tenc
y of
raw
pro
duct
. Bui
ldin
g re
latio
nshi
ps a
nd p
artn
ersh
ips
with
org
anic
fa
rmer
s. F
ocus
ing
on e
mer
ging
mar
kets
by
build
ing
bran
d re
cogn
ition
and
edu
catin
g co
nsum
ers
on
heal
th b
enefi
ts o
f nu
triti
onal
bev
erag
e.
Bu
sin
ess
per
form
ance
mea
sure
men
t:Ba
lanc
ed S
core
card
(fina
ncia
l, cu
stom
ers,
bus
ines
s op
erat
ions
and
lear
ning
and
gro
wth
per
spec
tives
).
Cas
cade
d fr
om c
orpo
rate
dow
n to
eac
h bu
sine
ss d
ivis
ion
and
indi
vidu
al m
anag
er.
1.
Un
ders
tan
din
g t
he C
on
text
for
Metr
ics
Develo
pm
en
t
6H
ow
to
Ass
ure
Eff
ect
iven
ess
5H
ow
to
Ass
ure
Eff
ect
iven
ess
4W
hat
an
d H
ow
toM
easu
re3
Wh
at
is
Mate
rial
2W
hat
is
Mate
rial
1W
hat
is
Mate
rial
14
Wh
at S
ust
ain
abili
ty M
ean
s to
the
Org
aniz
atio
nIn
dev
elop
ing
the
sust
aina
bilit
y co
ntex
t,
a bu
sine
ss s
houl
d lo
ok b
eyon
d fin
anci
al
perf
orm
ance
to
see
how
env
ironm
enta
l, ec
onom
ic a
nd s
ocia
l iss
ues
curr
ently
are
, or
will
be
, add
ress
ed w
ithin
the
org
aniz
atio
n.
The
tang
ible
and
inta
ngib
le b
usin
ess
valu
es t
hat
can
resu
lt fr
om a
ddre
ssin
g no
n-fin
anci
al is
sues
ha
ve b
een
disc
usse
d in
GEM
I’s C
lear
Adv
anta
geto
ol (s
ee R
esou
rces
in O
nlin
e A
ppen
dix)
. Th
e ca
se e
xam
ple
by F
edEx
Cor
pora
tion
dem
onst
rate
s ho
w t
heir
corp
orat
e va
lues
refl
ect
the
capa
bilit
ies
of it
s co
re o
pera
tions
and
val
ues
of it
s em
ploy
ees.
Vario
us f
ram
ewor
ks a
nd m
etho
ds e
xist
to
help
iden
tify
issu
es a
n or
gani
zatio
n cu
rren
tly
addr
esse
s, in
clud
ing:
•th
e G
EMI S
D P
lann
er™
– c
an h
elp
docu
men
t th
e st
atus
for
env
ironm
enta
l, so
cial
or
econ
omic
issu
es a
nd t
he g
aps
betw
een
an
orga
niza
tion’
s cu
rren
t an
d de
sire
d po
sitio
n
•th
e BR
IDG
ES S
usta
inab
ility
Fra
mew
ork
(10)
– ill
ustr
ated
in F
igur
e 4
(on
page
15)
, thi
s fr
amew
ork
offe
rs a
mod
el t
o id
entif
y as
pect
s an
d im
pact
s th
at n
eed
to b
e co
nsid
ered
in
deve
lopi
ng m
etric
s
Cas
e ex
ampl
es b
y 3M
and
Eas
tman
Kod
ak
Com
pany
(on
page
s 16
& 1
7) il
lust
rate
how
an
orga
niza
tion’
s co
mm
itmen
t to
a s
usta
inab
ility
vi
sion
dire
ctly
sup
port
s th
e bu
sine
ss c
onte
xt.
Fed
Ex
Res
po
nse
to
Hu
rric
ane
Kat
rin
aTh
e va
lues
of
FedE
x C
orp.
and
its
empl
oyee
s ar
e re
flect
ed in
how
it u
ses
its c
apab
ilitie
s in
res
pons
e to
a
disa
ster
. Cor
pora
te v
alue
s ar
e cr
afte
d on
six
prin
cipl
es: P
eopl
e, S
ervi
ce, I
nnov
atio
n, In
tegr
ity, R
espo
nsib
ility
an
d Lo
yalty
. The
ir ex
ecut
ion
unde
rpin
ned
the
com
pany
’s pl
anni
ng a
nd r
espo
nse
to H
urric
ane
Kat
rina’
s de
vast
atio
n of
the
Gul
f C
oast
reg
ion
in 2
005.
The
natu
re o
f th
e tr
ansp
orta
tion
indu
stry
can
be
vola
tile,
mak
ing
cont
inge
ncy
plan
ning
cru
cial
to
a su
cces
sful
bu
sine
ss. V
aria
bles
suc
h as
wea
ther
pat
tern
s, m
echa
nica
l diffi
culti
es a
nd la
st-m
inut
e cu
stom
er n
eeds
rou
tinel
y af
fect
the
sys
tem
.
FedE
x, a
s pa
rt o
f its
nor
mal
ope
ratio
ns, m
aint
ains
a c
ompl
ex lo
gist
ics
netw
ork
to p
inpo
int
and
reso
lve
prob
lem
s be
fore
the
y im
pact
ser
vice
. For
exa
mpl
e, e
mer
genc
y re
lief
kits
con
tain
ing
two
tons
of
oper
atio
nal
supp
lies
are
cons
tant
ly o
n st
andb
y fo
r an
y fa
cilit
y w
ith a
n em
erge
ncy.
Fiv
e em
pty
FedE
x fli
ghts
ope
rate
ni
ghtly
, rea
dy t
o su
bstit
ute
for
out-
of-s
ervi
ce a
ircra
ft o
r he
lp w
ith a
sur
ge in
airl
ift d
eman
d.
In a
dditi
on, d
isas
ter
resp
onse
dril
ls a
re in
corp
orat
ed in
to t
he b
usin
ess
mod
el. A
s a
resu
lt, d
isas
ter
plan
ning
an
d re
spon
se a
re c
ore
com
pete
ncie
s th
at s
erve
bro
ader
hum
anita
rian
need
s. H
urric
ane
Kat
rina
dem
onst
rate
d th
is p
rinci
ple
whe
n it
deva
stat
ed t
he U
.S. G
ulf
Coa
st r
egio
n.
In a
ntic
ipat
ion
of K
atrin
a’s
land
fall,
Fed
Ex p
re-p
ositi
oned
sup
plie
s, in
clud
ing
30,0
00 g
allo
ns o
f w
ater
, 85,
000
hom
e ge
nera
tors
and
fou
r 4,
000-
lb. f
acili
ty r
epai
r ki
ts, n
ear
Bato
n Ro
uge
and
Talla
hass
ee s
o th
ey c
ould
qu
ickl
y be
tra
nspo
rted
to
the
poin
t of
nee
d. T
he c
ompa
ny jo
ined
for
ces
with
the
Red
Cro
ss, a
long
time
disa
ster
rel
ief
part
ner,
to d
eliv
er m
edic
al s
uppl
ies.
And
, Fed
Ex K
inko
’s de
liver
ed o
ffice
sup
plie
s to
gov
ernm
ent
relie
f w
orke
rs w
orki
ng o
nsite
.
The
valu
es t
hat
unde
rlie
thes
e ac
tions
ext
ende
d to
indi
vidu
al e
mpl
oyee
s. M
ike
Mitc
hell,
a s
enio
r te
chni
cal
advi
sor
at F
edEx
Exp
ress
, too
k in
depe
nden
t ac
tion
to d
eliv
er a
gen
erat
or a
nd t
echn
ical
equ
ipm
ent
to r
elie
f w
orke
rs w
ho d
espe
rate
ly n
eede
d a
func
tioni
ng c
omm
unic
atio
ns s
yste
m. H
is a
ctio
n en
able
d re
lief
team
s to
use
a
FedE
x co
mm
unic
atio
ns in
stal
latio
n th
at h
ad s
urvi
ved
the
stor
m.
Alth
ough
Mitc
hell’
s ac
tions
wer
e of
his
ow
n in
itiat
ive,
the
y w
ere
cons
iste
nt w
ith c
orpo
rate
phi
loso
phy.
Jus
t as
im
port
ant,
his
suc
cess
was
roo
ted
in t
he s
kills
and
tra
inin
g w
hich
are
indi
spen
sabl
e to
the
suc
cess
of
FedE
x as
a
busi
ness
.
6H
ow
to
Ass
ure
Eff
ect
iven
ess
5H
ow
to
Ass
ure
Eff
ect
iven
ess
4W
hat
an
d H
ow
toM
easu
re3
Wh
at
is
Mate
rial
2W
hat
is
Mate
rial
1W
hat
is
Mate
rial
15
Fig
ure
4. B
RID
GES
Su
stai
nab
ility
Fra
mew
ork
EAG
Per
spec
tive
Wh
at
Co
ntr
ibu
tes
toSh
are
ho
lder
Valu
e?
Shar
ehol
der
valu
e is
der
ived
fro
m t
he m
arke
t’s
perc
eptio
n of
a b
usin
ess’
abi
lity
to g
ener
ate
retu
rns
toda
y an
d in
the
fut
ure.
Onl
ine
at
ww
w.g
emi.o
rg/m
etri
csn
avig
ato
r, J
ean
‘Pog
o’ D
avis
, for
mer
ly o
f C
onoc
oPhi
llips
, ex
plai
ns h
ow e
nviro
nmen
tal a
nd s
ocie
tal
fact
ors
can
cont
ribut
e to
sha
reho
lder
val
ue b
y im
prov
ing
shor
t-te
rm r
etur
ns a
nd e
xcee
ding
the
m
arke
t’s e
xpec
tatio
ns o
f fu
ture
per
form
ance
.
1.
Un
ders
tan
din
g t
he C
on
text
for
Metr
ics
Develo
pm
en
t
6H
ow
to
Ass
ure
Eff
ect
iven
ess
5H
ow
to
Ass
ure
Eff
ect
iven
ess
4W
hat
an
d H
ow
toM
easu
re3
Wh
at
is
Mate
rial
2W
hat
is
Mate
rial
1W
hat
is
Mate
rial
{C
on
text
Go
vern
ance
an
d S
tru
ctu
re
Dimensions of Sustainability
Val
ue
Ch
ain
Envi
ron
men
tal
Eco
no
mic
Soci
al
Sup
ply
Pr
od
uct
ion
U
se
Fat
e
{{ Res
ou
rces
V
alu
es
Pl
ace
Tim
e
© B
RID
GES
to
Sust
aina
bilit
y, G
olde
r A
ssoc
iate
s In
c.
The
BRID
GES
Sus
tain
abili
ty F
ram
ewor
k of
fers
a m
odel
to
iden
tify
aspe
cts
and
impa
cts
that
nee
d to
be
con
side
red
in d
evel
opin
g m
etric
s. T
he f
ram
ewor
k re
cogn
izes
tha
t th
is r
equi
res
look
ing
at t
he
trip
le-b
otto
m-li
ne, n
ot o
nly
with
in t
he c
ompa
ny’s
fenc
e lin
e, b
ut a
lso
alon
g its
val
ue c
hain
. Eac
h fr
ame
serv
es a
s a
set
of le
nses
thr
ough
whi
ch t
he s
cope
of
the
issu
es c
an b
e de
fined
and
the
rel
evan
t ris
ks a
nd o
ppor
tuni
ties
asso
ciat
ed w
ith e
nviro
nmen
tal,
soci
al a
nd e
cono
mic
con
side
ratio
ns c
an b
e de
term
ined
. The
mos
t co
mm
on c
onte
xt f
ram
es o
f tim
e, p
lace
, val
ues
and
reso
urce
s de
fine
and
refin
e th
e sc
ope
of e
ach
issu
e.
16
3M
The
Ro
le o
f Su
stai
nab
ility
at
3MTh
e th
ree
legs
of
sust
aina
bilit
y (e
cono
mic
, env
ironm
enta
l and
soc
ial)
are
inte
rdep
ende
nt a
t 3M
. Thi
s is
evi
dent
fr
om it
s co
rpor
ate
busi
ness
impe
rativ
es:
1)C
orpo
rate
val
ues
2)Su
stai
nabl
e gr
owth
3)Pr
oduc
tivity
4)Ta
lent
man
agem
ent
The
first
bus
ines
s im
pera
tive,
3M
’s si
x fu
ndam
enta
l cor
pora
te v
alue
s ar
e re
flect
ed in
its
sust
aina
bilit
y po
licie
s an
d pr
actic
es. T
he c
ompa
ny’s
com
mitm
ent
to c
orpo
rate
gov
erna
nce
and
its s
usta
inab
ility
vis
ion
to “
activ
ely
cont
ribut
e to
sus
tain
able
dev
elop
men
t th
roug
h en
viro
nmen
tal p
rote
ctio
n, s
ocia
l res
pons
ibili
ty a
nd e
cono
mic
pro
gres
s” a
re
dire
ct r
eflec
tions
of
the
fund
amen
tal c
orpo
rate
val
ues.
Sust
aina
ble
grow
th a
nd p
rodu
ctiv
ity in
clud
e tw
o of
the
com
pany
’s m
ain
sust
aina
bilit
y pl
atfo
rms:
Life
Cyc
le
Man
agem
ent
(LC
M) a
nd P
ollu
tion
Prev
entio
n Pa
ys (3
P). L
CM
is a
req
uire
d pr
oces
s in
the
dev
elop
men
t,
man
ufac
turin
g an
d di
strib
utio
n fo
r al
l pro
duct
s to
red
uce
the
envi
ronm
enta
l, he
alth
, saf
ety
and
ener
gy im
pact
s th
roug
hout
the
ent
ire p
rodu
ct li
fe c
ycle
. 3P
is a
30-
year
-old
pro
gram
foc
used
at
redu
cing
pol
lutio
n at
its
sour
ce, w
hich
is a
cor
ners
tone
for
pro
cess
impr
ovem
ents
to
redu
ce w
aste
and
impr
ove
prod
uctiv
ity.
Last
ly, a
com
pany
is o
nly
as g
ood
as it
s em
ploy
ees.
3M
’s bu
sine
ss im
pera
tive
for
tale
nt m
anag
emen
t su
ppor
ts
its s
ocia
l sus
tain
abili
ty s
trat
egy
of m
eetin
g em
ploy
ee a
nd c
omm
unity
nee
ds a
s a
soci
ally
-res
pons
ible
com
pany
. Sp
ecifi
c ob
ject
ives
hav
e be
en d
evel
oped
aro
und
attr
actin
g an
d re
tain
ing
a di
vers
e an
d ta
lent
ed w
orkf
orce
, su
ppor
ting
cont
inuo
us le
arni
ng a
nd k
now
ledg
e-sh
arin
g an
d pr
ovid
ing
mea
ning
ful e
mpl
oym
ent
in a
wor
k en
viro
nmen
t th
at r
espe
cts
the
dign
ity o
f in
divi
dual
s.
6H
ow
to
Ass
ure
Eff
ect
iven
ess
5H
ow
to
Ass
ure
Eff
ect
iven
ess
4W
hat
an
d H
ow
toM
easu
re3
Wh
at
is
Mate
rial
2W
hat
is
Mate
rial
1W
hat
is
Mate
rial
17
Cu
rren
t Su
stai
nab
ility
Fo
cus
– W
ork
shee
t 1b
Wor
kshe
et 1
b (o
n pa
ge 1
8) p
rovi
des
a te
mpl
ate
for
iden
tifyi
ng w
here
the
org
aniz
atio
n cu
rren
tly
focu
ses,
or
plan
s to
foc
us, i
ts e
ffor
ts w
ith r
espe
ct
to e
nviro
nmen
tal,
soci
al a
nd e
cono
mic
issu
es
an
d in
itiat
ives
. The
org
aniz
atio
n sh
ould
be
able
to d
escr
ibe:
•th
e or
gani
zatio
n’s
curr
ent
focu
s w
ith r
espe
ct
to is
sues
impa
ctin
g bo
th t
he o
rgan
izat
ion’
s bu
sine
ss a
nd s
ocie
ty a
t la
rge
•th
e pr
ogra
ms
and
initi
ativ
es t
hat
are
in p
lace
•w
hich
cor
pora
te f
unct
ions
are
invo
lved
in t
hese
pr
ogra
ms
and
initi
ativ
es
•w
here
eff
orts
are
foc
used
in t
he v
alue
cha
in
Co
nsi
der
Div
erse
Per
spec
tive
sTo
col
lect
com
preh
ensi
ve in
form
atio
n fo
r W
orks
heet
1b,
rep
rese
ntat
ives
fro
m r
elev
ant
inte
rnal
fun
ctio
nal a
reas
mig
ht b
e co
nsul
ted.
This
cro
ss-f
unct
iona
l app
roac
h w
ill p
rovi
de d
iver
se
pers
pect
ives
on
wha
t is
sues
are
bei
ng a
ddre
ssed
an
d th
e in
itiat
ives
und
erw
ay in
the
org
aniz
atio
n.W
orks
heet
1b
prov
ides
exa
mpl
es t
o ill
ustr
ate
how
en
viro
nmen
tal,
soci
al a
nd e
cono
mic
issu
es c
an b
e m
anag
ed b
y va
rious
bus
ines
s fu
nctio
ns.
This
exe
rcis
e m
ay a
lso
prov
ide
insi
ght
into
em
ergi
ng a
nd e
nviro
nmen
tal,
soci
al o
r ec
onom
ic
issu
es t
hat
are
bein
g ov
erlo
oked
. Thi
s in
form
atio
n sh
ould
beg
in t
o ill
ustr
ate
how
res
pons
ible
co
rpor
ate
beha
vior
sup
port
s th
e bu
sine
ss a
nd
cont
ribut
es t
o sh
areh
olde
r va
lue.
East
man
Ko
dak C
om
pan
y
Sup
po
rtin
g B
usi
nes
s Tr
ansi
tio
n t
hro
ug
h R
esp
on
sib
le G
row
thK
odak
is t
rans
form
ing
its t
radi
tiona
l im
agin
g pr
oduc
ts a
nd s
ervi
ces
to c
ompe
te in
the
dig
ital m
arke
t. T
he
tran
sitio
n to
dig
ital t
echn
olog
ies
has
chan
ged
the
natu
re o
f K
odak
’s bu
sine
ss a
nd p
rese
nted
new
cha
lleng
es
and
oppo
rtun
ities
for
res
pons
ible
gro
wth
. Ear
ly in
thi
s tr
ansi
tion,
Kod
ak d
evel
oped
a s
et o
f Re
spon
sibl
e G
row
th
Prin
cipl
es, w
hich
est
ablis
hed
goal
s to
sup
port
bus
ines
s ob
ject
ives
for
con
tinue
d di
gita
l exp
ansi
on a
nd t
he
com
pany
’s co
mm
itmen
t to
hea
lth, s
afet
y, e
nviro
nmen
t an
d gl
obal
sus
tain
abili
ty.
The
digi
tal b
usin
ess
is m
ore
equi
pmen
t-in
tens
ive
com
pare
d to
tra
ditio
nal i
mag
ing,
mak
ing
life-
cycl
e pl
anni
ng
and
prod
uct
stew
ards
hip
criti
cally
impo
rtan
t. T
here
fore
, Kod
ak h
as s
et, a
s pa
rt o
f its
new
Res
pons
ible
Gro
wth
go
als,
a p
rodu
ct s
tew
ards
hip
goal
of
impr
ovin
g th
e en
viro
nmen
tal a
ttrib
utes
of
Kod
ak p
rodu
cts
thro
ugho
ut
thei
r lif
e cy
cle.
Thi
s go
al is
sup
port
ed b
y K
odak
’s co
mpr
ehen
sive
Pro
duct
Ste
war
dshi
p St
rate
gy, w
hich
incl
udes
a
set
of s
tand
ards
bas
ed o
n co
nsid
erat
ions
suc
h as
pen
ding
legi
slat
ion,
ris
k as
sess
men
t da
ta, p
oten
tial
envi
ronm
enta
l con
ditio
ns, p
rodu
ct s
afet
y/el
ectr
omag
netic
com
patib
ility
, use
of
rest
ricte
d m
ater
ials
and
end
-of-
life
cons
ider
atio
ns.
The
Kod
ak P
ictu
re K
iosk
pro
vide
s an
exa
mpl
e of
the
com
pany
’s co
mm
itmen
t to
pro
duct
ste
war
dshi
p an
d co
ntin
uous
impr
ovem
ent
durin
g th
e tr
ansi
tion
from
tra
ditio
nal t
o di
gita
l tec
hnol
ogie
s. S
ince
200
0, K
odak
’s Pi
ctur
e K
iosk
s ha
ve a
chie
ved
envi
ronm
enta
l im
prov
emen
ts w
hile
del
iver
ing
a la
rger
var
iety
of
prin
ts a
t fa
ster
th
roug
hput
s. A
s th
e ki
osk
evol
ves,
pro
duct
ste
war
dshi
p st
anda
rds
are
appl
ied
at e
ach
deve
lopm
ent
gate
/pha
se
from
idea
tion
to fi
nal d
esig
n. T
he r
esul
t ha
s be
en e
nviro
nmen
tal i
mpr
ovem
ents
in e
ach
succ
essi
ve g
ener
atio
n,
such
as
a re
duce
d m
ater
ial a
nd p
acka
ging
use
and
U.S
. EPA
EN
ERG
Y S
TAR®
com
plia
nce.
The
se e
nviro
nmen
tal
impr
ovem
ents
in t
he P
ictu
re K
iosk
refl
ect
Kod
ak’s
herit
age
of p
rodu
ct s
tew
ards
hip,
whi
le im
prov
ed
perf
orm
ance
cap
abili
ties
in p
rintin
g sp
eed
solid
ify it
s po
sitio
n of
gro
wth
and
inno
vatio
n in
the
dig
ital w
orld
.
1.
Un
ders
tan
din
g t
he C
on
text
for
Metr
ics
Develo
pm
en
t
6H
ow
to
Ass
ure
Eff
ect
iven
ess
5H
ow
to
Ass
ure
Eff
ect
iven
ess
4W
hat
an
d H
ow
toM
easu
re3
Wh
at
is
Mate
rial
2W
hat
is
Mate
rial
1W
hat
is
Mate
rial
18
WO
RK
SHEE
T 1b
: ID
ENTI
FY T
HE
FOC
US
ON
EN
VIR
ON
MEN
TAL,
SO
CIA
L A
ND
EC
ON
OM
IC IS
SUES
AN
D IN
ITIA
TIV
ES(X
YZ
Nut
ritio
nal B
ever
age
Exam
ple)
Org
aniz
atio
n’s
Su
stai
nab
ility
Defi
niti
on:
Brun
dtla
nd C
omm
issi
on (1
1) d
efini
tion
VA
LUE
CH
AIN
STA
GES
:S
= S
uppl
y; C
= C
ompa
ny O
pera
tions
; D =
Dis
trib
utio
n; U
= C
usto
mer
Use
of
Prod
uct
/ Ser
vice
; E =
End
of
Life
Val
ue
Ch
ain
Envi
ron
men
tal
Soci
alEc
on
om
ic
SR
eso
urc
e Ex
trac
tio
n,
Raw
Mat
eria
l D
evel
op
men
t &
Su
pp
ly
• Im
pact
on
biod
iver
sity
• C
ompe
nsat
ion
and
hum
an r
ight
s of
su
pplie
r’s e
mpl
oyee
s •
Mee
t bu
sine
ss c
ontr
act
oblig
atio
ns
a
s cu
stom
er
C
Res
earc
h &
D
evel
op
men
t
• S
ourc
ing
from
env
ironm
enta
lly-
s
ensi
tive
area
s •
Reg
ulat
ory
com
plia
nce
• C
onsi
der
envi
ronm
enta
l im
pact
of
new
pro
duct
s
• C
linic
al s
tudy
eth
ics
(e.g
., D
ecla
ratio
n of
Hel
sink
i)•
Tal
ent
rete
ntio
n / a
ttra
ctio
n
• P
aten
t an
d in
telle
ctua
l pro
pert
y pr
otec
tion
ethi
cs•
Res
pons
ible
env
ironm
enta
l pra
ctic
es•
Enr
ichi
ng t
he c
omm
uniti
es in
whi
chw
e op
erat
e
Man
ufa
ctu
rin
g /
O
per
atio
ns
•Re
gula
tory
com
plia
nce
•M
eetin
g su
stai
nabi
lity
goal
s•
Fai
r co
mpe
nsat
ion
and
bene
fits;
pr
actic
es o
n fr
eedo
m t
o or
gani
ze
• R
elat
ions
hip
to c
omm
uniti
es
surr
ound
ing
oper
atio
ns
•M
eet
prod
uctio
n an
d co
st g
oals
w
hile
con
form
ing
to t
he c
ompa
nyco
de o
f co
nduc
t
Mar
keti
ng
& S
ales
•Re
gula
tory
com
plia
nce
•A
cces
s to
pro
duct
s in
dev
elop
ing
w
orld
(F)
•Pr
icin
g•
Con
sum
er a
dver
tisin
g
DD
istr
ibu
tio
n
•Re
gula
tory
com
plia
nce
•G
HG
impa
ct o
f sh
ippi
ng /
tran
spor
tatio
n•
Com
pens
atio
n an
d hu
man
rig
hts
of
supp
lier’s
em
ploy
ees
or t
hose
of
third
pa
rty
dist
ribut
ion
com
pany
•Re
latio
nshi
p to
com
mun
ities
•O
n-tim
e de
liver
ies
that
mee
tpa
tient
dem
ands
UC
ust
om
er U
se o
f Pr
od
uct
/ S
ervi
ce
•Sa
fety
dat
a co
mpl
ete
•M
inim
ize
pack
agin
g•
Prop
er d
ispo
sal g
uide
lines
•W
arni
ngs
of p
oten
tial p
rodu
ct a
buse
•Em
phas
is o
n he
alth
y lif
esty
les,
not
pr
oduc
t us
e (F
)
•O
ver-
pres
crib
ing
EEn
d o
f Li
fe•
Prop
er d
ispo
sal v
erifi
ed•
Easy
dis
posa
l opt
ions
•Re
turn
ed p
rodu
ct p
ract
ices
6H
ow
to
Ass
ure
Eff
ect
iven
ess
5H
ow
to
Ass
ure
Eff
ect
iven
ess
4W
hat
an
d H
ow
toM
easu
re3
Wh
at
is
Mate
rial
2W
hat
is
Mate
rial
1W
hat
is
Mate
rial
NO
TE: a
nnot
ate
futu
re (F
) or
plan
ned
cons
ider
atio
ns
19
STE
P 2
Exp
ecte
d O
utc
om
es•
Id
entifi
catio
n an
d
pr
iorit
izat
ion
of is
sues
from
the
per
spec
tives
of
empl
oyee
s an
d ke
y
ex
tern
al s
take
hold
ers
EAG
Per
spec
tive
Ho
w C
an
On
e D
evelo
p
‘Su
stain
ab
ilit
y L
ead
ers
’?It
is a
ll ab
out
peop
le. M
any
com
pani
es la
ck
a pl
an t
o de
velo
p th
e un
ders
tand
ing
and
com
mitm
ent
for
sust
aina
bilit
y th
inki
ng in
le
ader
s at
all
leve
ls o
f th
e or
gani
zatio
n.A
n im
port
ant
first
ste
p is
to
iden
tify
the
cham
pion
s, d
oubt
ers
and
thos
e in
-bet
wee
n (i.
e., ‘
gree
n, r
ed, a
nd y
ello
w d
ots’
) with
in
the
orga
niza
tion
and
unde
rsta
nd h
ow
to in
volv
e th
em.
This
is d
iscu
ssed
by
Paul
Teb
o, f
orm
erly
of
DuP
ont,
onl
ine
at
w
ww
.gem
i.org
/met
rics
nav
igat
or
in
the
cont
ext
of d
evel
opin
g cu
rren
t an
d
fu
ture
lead
ers.
The
purp
ose
of S
tep
2 is
to
iden
tify
and
asse
ss
the
envi
ronm
enta
l, so
cial
and
eco
nom
ic is
sues
of
impo
rtan
ce t
o st
akeh
olde
rs. I
t w
ill h
elp
dete
rmin
e m
ater
ial i
ssue
s fo
r th
e or
gani
zatio
n an
d re
sult
in
prio
ritiz
ed li
sts
of is
sues
bas
ed o
n em
ploy
ees’
and
ex
tern
al s
take
hold
ers’
per
spec
tives
.
Inte
rnal
- Id
enti
fyin
g a
nd
En
gag
ing
Em
plo
yees
Ass
essi
ng w
hich
issu
es a
re im
port
ant
or m
ater
ial
to a
n or
gani
zatio
n be
gins
with
iden
tifyi
ng a
nd
enga
ging
key
em
ploy
ees
and
man
ager
s fr
om
vario
us f
unct
iona
l are
as. T
o de
term
ine
wha
t is
im
port
ant
inte
rnal
ly, t
he o
rgan
izat
ion
shou
ld b
ring
toge
ther
or
reac
h ou
t to
em
ploy
ees
who
hav
e th
e m
ost
expe
rienc
e in
add
ress
ing
envi
ronm
enta
l, so
cial
an
d ec
onom
ic c
once
rns.
Man
y in
tern
al in
itiat
ives
de
al w
ith o
ne o
r se
vera
l dim
ensi
ons
of c
orpo
rate
re
spon
sibi
lity
but
ther
e m
ay b
e lit
tle c
oord
inat
ion
or c
olla
bora
tion.
Thi
s ca
n be
an
oppo
rtun
ity f
or
the
orga
niza
tion
to lo
ok h
olis
tical
ly a
nd d
raw
upo
n ex
pert
ise
rega
rdle
ss o
f w
here
in t
he o
rgan
izat
ion
it is
fou
nd. I
t ca
n al
so b
e a
way
to
find
and
insp
ire
cham
pion
s in
the
org
aniz
atio
n.
Tabl
e 1
(on
page
20)
dem
onst
rate
s ho
w
empl
oyee
s of
fer
dive
rse
and
cros
s-fu
nctio
nal
pers
pect
ives
on
issu
es t
hat
pres
ent
risks
and
/or
oppo
rtun
ities
for
the
org
aniz
atio
n.
In e
ngag
ing
empl
oyee
s w
ho a
re n
ot n
eces
saril
y ve
rsed
in t
he c
once
pts
of s
usta
inab
ility
, it
is v
alua
ble
to id
entif
y an
d un
ders
tand
the
ir co
ntex
t, s
o as
to
com
mun
icat
e ef
fect
ivel
y an
d ga
in n
eede
d su
ppor
t. It
may
als
o be
use
ful t
o ch
arac
teriz
e th
e de
gree
to
whi
ch t
hey
supp
ort
the
conc
epts
of
sust
aina
bilit
y or
co
rpo
rate
soci
al r
esp
on
sib
ility
(CSR
).
Inte
rnal
- Id
enti
fyin
g C
urr
ent
and
Em
erg
ing
Issu
esO
nce
key
empl
oyee
s ar
e se
lect
ed, t
he o
rgan
izat
ion
can
then
iden
tify
and
eval
uate
the
ir is
sues
of
con
cern
. The
re a
re m
any
way
s to
col
lect
in
form
atio
n fr
om e
mpl
oyee
s ra
ngin
g fr
om
desk
top
rese
arch
to
inte
rvie
win
g or
con
duct
ing
info
rmal
sur
veys
, to
brin
ging
a t
eam
tog
ethe
r to
br
ains
torm
. Var
ious
inte
rnal
sou
rces
are
ava
ilabl
e to
hel
p id
entif
y is
sues
, inc
ludi
ng: i
nter
nal r
isk
anal
ysis
; com
pany
ann
ual a
nd fi
nanc
ial r
epor
ts;
empl
oyee
sur
veys
; env
ironm
enta
l man
agem
ent
syst
em c
ontr
ol p
lan;
sta
keho
lder
eng
agem
ent
plan
an
d sh
areh
olde
r re
solu
tions
.
2.
Ass
ess
Iss
ues
fro
m S
takeh
old
ers
’ Pers
pect
ives
6H
ow
to
Ass
ure
Eff
ect
iven
ess
5H
ow
to
Ass
ure
Eff
ect
iven
ess
4W
hat
an
d H
ow
toM
easu
re3
Wh
at
is
Mate
rial
2W
hat
is
Mate
rial
1W
hat
is
Mate
rial
20
TAB
LE 1
. EX
AM
PLES
OF
POTE
NTI
AL
ENV
IRO
NM
ENTA
L, S
OC
IAL
AN
D E
CO
NO
MIC
INTE
RN
AL
PER
SPEC
TIV
ES
Val
ue
Ch
ain
Bu
sin
ess
Fun
ctio
nEn
viro
nm
enta
lSo
cial
Eco
no
mic
S
Log
isti
cs /
Su
pp
ly
Ch
ain
Man
agem
ent
(Pro
cure
men
t)
Purc
hase
fro
m e
nviro
nmen
tally
-res
pons
ible
su
pplie
rsPu
rcha
se f
rom
sup
plie
rs w
ho o
bser
ve f
air
labo
r la
ws
and
guid
elin
es
Hel
p st
imul
ate
loca
l eco
nom
ic
deve
lopm
ent
thro
ugh
purc
hasi
ng
Exec
uti
ve M
anag
emen
tD
evel
op v
isio
n an
d po
licie
sD
evel
op v
isio
n an
d po
licie
sD
evel
op v
isio
n an
d po
licie
s
Fin
ance
& In
vest
or
Rel
atio
ns
Link
env
ironm
enta
l pra
ctic
es t
o lo
wer
fin
anci
al r
isk
Rela
te s
ocia
lly-r
espo
nsib
le p
ract
ices
to
low
er fi
nanc
ial r
isk
Incl
ude
com
pany
in S
ocia
lly R
espo
nsib
le
Inve
stin
g (S
RI) f
unds
Bu
sin
ess
Man
agem
ent
Dev
elop
goa
lsD
evel
op g
oals
Dev
elop
goa
ls
Leg
alC
ompl
ianc
eD
efen
d ag
ains
t lit
igat
ion
rega
rdin
g en
viro
nmen
tal p
ract
ices
Com
plia
nce
Def
end
agai
nst
litig
atio
n re
gard
ing
labo
r or
ot
her
soci
al a
ctio
nsC
ompl
ianc
e
Res
earc
h &
D
evel
op
men
tD
evel
op e
nviro
nmen
tally
-frie
ndly
prod
uct
/ ser
vice
Dev
elop
pro
duct
/ se
rvic
es t
hat
mee
t so
ciet
y’s
need
s eq
uita
bly
Stim
ulat
e in
nova
tion
and
new
mar
ket
idea
s
C
Man
ufa
ctu
rin
g /
O
per
atio
ns
Eco-
effic
ienc
y: r
educ
ing
envi
ronm
enta
l im
pact
s pe
r un
it of
out
put
Add
ress
con
cern
s of
loca
l com
mun
ityPr
ovid
e jo
bs
Envi
ron
men
tal,
Hea
lth
&
Saf
ety
Miti
gate
env
ironm
enta
l ris
kM
anag
e / r
educ
e EH
S fo
otpr
int
Man
age
heal
th a
nd s
afet
y ris
k, e
ngag
e co
lleag
ues
to a
dopt
cha
nge
Dem
onst
rate
sav
ings
thr
ough
po
llutio
n pr
even
tion
initi
ativ
es a
nd
acci
dent
red
uctio
n pr
ogra
ms
Hu
man
Res
ou
rces
Prom
ote
prog
ram
s to
hel
p em
ploy
ees
save
en
ergy
at
wor
k En
hanc
e em
ploy
ee h
ealth
and
wel
l-bei
ngC
reat
e jo
bs in
the
com
mun
ityM
inim
ize
outs
ourc
ing
of la
bor
Mar
keti
ng
& S
ales
Mar
ket
envi
ronm
enta
l ben
efits
of
prod
ucts
an
d se
rvic
esU
nder
stan
d re
late
d cu
stom
er n
eeds
Mar
ket
soci
ally
-res
pons
ible
man
agem
ent
and
envi
ronm
enta
lly-f
riend
ly p
rodu
ct a
nd s
ervi
ces
Co
mm
un
icat
ion
s (P
R)
Feat
ure
envi
ronm
enta
lly-r
espo
nsib
le
beha
vior
Enga
ge lo
cal s
take
hold
er c
omm
unity
Link
soc
ially
-res
pons
ible
beh
avio
r to
co
mpa
ny v
alue
DLo
gis
tics
/ SC
M(D
istr
ibu
tio
n)
Requ
ire s
hipp
ers
to m
eet
envi
ronm
enta
l law
s In
crea
se s
pend
ing
with
wom
en a
nd
min
ority
-ow
ned
supp
liers
Opt
imiz
e su
pply
and
dem
and
over
tim
e
UC
om
mu
nic
atio
ns
(Cu
sto
mer
Ser
vice
, PR
)C
omm
unic
ate
envi
ronm
enta
l ben
efits
and
risks
Use
foc
us g
roup
s on
cus
tom
er s
ervi
ceEv
alua
te r
etur
n on
inve
stm
ent
of
com
mun
icat
ion
effo
rts
EPr
od
uct
Ste
war
dsh
ipIn
trod
uce
recy
clab
le p
acka
ging
Min
imiz
e pr
oduc
t’s li
fecy
cle
impa
cts
Use
loca
l was
te s
ervi
ce c
ompa
nies
Expa
nd p
rodu
ct d
evel
opm
ent
/ pac
kagi
ng
take
-bac
k po
licy
No
te: V
ALU
E C
HA
IN S
TAG
ES:
S =
Su
pp
ly; C
= C
om
pan
y O
per
atio
ns;
D =
Dis
trib
uti
on
; U =
Cu
sto
mer
Use
of
Pro
du
ct /
Serv
ice;
E =
En
d o
f Li
fe
6H
ow
to
Ass
ure
Eff
ect
iven
ess
5H
ow
to
Ass
ure
Eff
ect
iven
ess
4W
hat
an
d H
ow
toM
easu
re3
Wh
at
is
Mate
rial
2W
hat
is
Mate
rial
1W
hat
is
Mate
rial
21
WO
RK
SHEE
T 2a
: IN
TER
NA
L –
PRIO
RIT
IZE
EMPL
OY
EES’
ISSU
ES O
F R
ELEV
AN
CE
TO T
HE
BU
SIN
ESS
(XY
Z N
utrit
iona
l Bev
erag
e Ex
ampl
e)
INST
RU
CTI
ON
S:Pl
ot t
he p
oten
tial a
nd c
urre
nt is
sues
iden
tified
by
empl
oyee
s. R
ate
each
issu
e as
Hig
h (H
), M
ediu
m (M
), or
Low
(L) a
ccor
ding
to
the
follo
win
g co
nsid
erat
ions
:O
rgan
izat
ion
’s Im
pac
ts•
Do
the
orga
niza
tion’
s ac
tiviti
es c
urre
ntly
or
have
the
pot
entia
l to
impa
ct t
he is
sue?
• A
re t
he c
urre
nt /
pote
ntia
l im
pact
s si
gnifi
cant
in c
ompa
rison
to
othe
r in
dust
ries
or p
eers
in t
he s
ame
sect
or?
Imp
ort
ance
to
Bu
sin
ess
Succ
ess
Fact
ors
• A
re t
here
sho
rt-
or lo
ng-t
erm
bus
ines
s ris
ks o
r op
port
uniti
es a
ssoc
iate
d w
ith t
he is
sue?
• W
ould
add
ress
ing
the
risks
/ op
port
uniti
es s
uppo
rt t
he o
rgan
izat
ion’
s bu
sine
ss s
trat
egy
and
obje
ctiv
es?
VA
LUE
CH
AIN
STA
GES
:S
= S
uppl
y; C
= C
ompa
ny O
pera
tions
; D =
Dis
trib
utio
n; U
= C
usto
mer
Use
of
Prod
uct
/ Ser
vice
; E =
End
of
Life
H
•En
ergy
use
(S, C
)•
Empl
oyee
Hea
lth a
nd S
afet
y (C
)•
Impa
ct o
n lo
cal c
omm
uniti
es (S
, C)
•Ta
lent
ret
entio
n (C
)
•W
ater
use
(S, C
)•
Org
anic
pro
duct
s (S
, U)
•N
utrit
ion
cont
ent
(U)
•En
ergy
use
(D)
M•
Imm
igra
tion
polic
y (C
)
•U
se o
f al
tern
ativ
e en
ergy
(S, C
, D)
•C
omm
unity
out
reac
h (C
)•
Educ
atio
n (U
, E)
•Lo
cal h
omel
ess
popu
latio
n (D
•Lo
cal e
cono
mic
de
velo
pmen
t (S,
C)
•Fa
rmin
g ru
n-of
fs (S
)
L•
Tran
spor
tatio
n in
fras
truc
ture
(D)
•Ta
xes
paid
(C)
•A
ir em
issi
ons
(D)
LM
H
Org
aniz
atio
n’s
Imp
acts
Rea
son
ing
beh
ind
Rat
ing
:H
igh
impa
cts,
dis
trib
utio
n is
maj
or c
ontr
ibut
or t
o en
ergy
use
and
ass
ocia
ted
cost
sM
ediu
m e
nerg
y in
tens
ity in
sup
ply
and
com
pany
ope
ratio
nsM
ediu
m p
oten
tial i
mpa
cts
and
oppo
rtun
ity f
or in
dust
ry le
ader
ship
Si
gnifi
cant
cur
rent
impa
cts,
med
ium
bus
ines
s ris
kM
ediu
m c
urre
nt im
pact
s, b
ut im
port
ant
as p
art
of c
ore
valu
eO
ppor
tuni
ty to
inte
grat
e in
to lo
cal f
abric
, with
hig
h im
pact
but
med
ium
impo
rtan
ce to
bus
ines
s St
anda
rd b
usin
ess
proc
edur
eRe
leva
nt b
ut n
ot im
port
ant
to b
usin
ess,
with
lim
ited
orga
niza
tion’
s im
pact
s
Issu
es (
exam
ple
s):
Ener
gy u
se (D
)En
ergy
use
(S, C
)U
se o
f alte
rnat
ive
ener
gy s
ourc
es (S
, C, D
)Fa
rmin
g ru
n-of
fs (S
)Em
ploy
ee H
ealth
and
Saf
ety
(C)
Loca
l eco
nom
ic d
evel
opm
ent
(C)
Taxe
s pa
id (C
)Tr
ansp
orta
tion
infr
astr
uctu
re (D
)
2.
Ass
ess
Iss
ues
fro
m S
takeh
old
ers
’ Pers
pect
ives
Am
ong
the
best
way
s to
iden
tify
both
cur
rent
an
d fu
ture
issu
es o
f co
ncer
n is
thr
ough
eff
ectiv
e em
ploy
ee e
ngag
emen
t. E
mpl
oyee
s ar
e th
e or
gani
zatio
n’s
‘ear
s-to
-the
-gro
und’
and
for
m a
ve
ry p
erce
ptiv
e ea
rly-w
arni
ng s
yste
m. W
hen
issu
es
are
iden
tified
, the
y m
ay n
ot b
e m
ater
ial t
oday
but
m
ay n
eed
to b
e co
nsid
ered
in t
he f
utur
e.
Wo
rksh
eet
2a –
Pri
ori
tizi
ng
Em
plo
yees
’ Iss
ues
Wor
kshe
et 2
a pr
ovid
es a
tem
plat
e to
rat
e an
d pr
iorit
ize
issu
es id
entifi
ed b
y an
inte
rnal
tea
m.
This
allo
ws
user
s to
rat
e th
e is
sues
iden
tified
at
each
val
ue c
hain
sta
ge b
ased
on
two
crite
ria u
sed
to a
sses
s re
leva
nce
to b
usin
ess,
incl
udin
g:
•im
port
ance
to
busi
ness
suc
cess
fac
tors
(y-a
xis)
–
Is t
he is
sue
impo
rtan
t to
the
org
aniz
atio
n,
busi
ness
str
ateg
y, o
bjec
tives
and
val
ues?
•si
gnifi
canc
e of
org
aniz
atio
n’s
impa
cts
(x-a
xis)
– D
oes
the
orga
niza
tion
have
cur
rent
or
po
tent
ial i
mpa
cts
to t
he o
utsi
de w
orld
with
re
spec
t to
the
env
ironm
enta
l, so
cial
and
/or
econ
omic
issu
e?
Wor
kshe
et 2
a pl
ots
ratin
gs f
or e
ach
issu
e ba
sed
on t
he c
ombi
natio
n of
the
tw
o cr
iteria
. Col
or
codi
ng d
emon
stra
tes
how
the
issu
es r
ate
in t
erm
s of
ove
rall
rele
vanc
e to
bus
ines
s. F
or e
xam
ple,
an
issu
e th
at r
ates
hig
hly
on b
oth
crite
ria is
de
term
ined
to
have
hig
h re
leva
nce
to b
usin
ess.
A
lso
this
con
solid
ates
issu
es id
entifi
ed a
t al
l val
ue
chai
n st
ages
. N
otic
e th
at is
sues
may
rec
eive
di
ffer
ent
ratin
gs a
t di
ffer
ent
stag
es o
f th
e va
lue
chai
n, e
.g.,
ener
gy u
se a
t th
e di
strib
utio
n st
age
rece
ives
a h
ighe
r ra
ting
than
ene
rgy
use
at t
he
supp
ly a
nd c
orpo
rate
ope
ratio
n st
ages
.
Importance to Business Success Factors
6H
ow
to
Ass
ure
Eff
ect
iven
ess
5H
ow
to
Ass
ure
Eff
ect
iven
ess
4W
hat
an
d H
ow
toM
easu
re3
Wh
at
is
Mate
rial
2W
hat
is
Mate
rial
1W
hat
is
Mate
rial
22
Exte
rnal
- E
ng
agin
g S
take
ho
lder
sH
ow t
he o
rgan
izat
ion
choo
ses
to e
ngag
e st
akeh
olde
rs s
houl
d be
gin
with
und
erst
andi
ng t
he
exis
ting
rela
tions
hip.
An
orga
niza
tion
may
cho
ose
to e
stab
lish
diff
eren
t ‘r
ules
of
enga
gem
ent’
for
a
host
ile s
take
hold
er v
ersu
s a
supp
ortiv
e an
d co
mm
itted
one
. The
GEM
I Tra
nspa
renc
y to
ol
outli
nes
a m
etho
d fo
r as
sess
ing
stak
ehol
der
rela
tions
hips
and
how
tha
t re
latio
nshi
p m
ay a
ffec
t en
gage
men
t. T
he c
ase
exam
ple
by T
he S
cott
s C
ompa
ny (o
n pa
ge 2
3) s
how
s ho
w is
sues
can
be
iden
tified
fro
m c
usto
mer
cal
ls.
Inco
rpo
rati
ng
Ext
ern
al
St
akeh
old
ers’
Per
spec
tive
sIn
corp
orat
ing
exte
rnal
sta
keho
lder
per
spec
tives
ca
n in
clud
e a
surv
ey o
f a
cros
s-se
ctio
n of
em
ploy
ees
know
ledg
eabl
e of
ext
erna
l sta
keho
lder
co
ncer
ns. A
s th
e G
EMI T
rans
pare
ncy
tool
poi
nts
out,
var
ious
sta
keho
lder
con
cern
s ar
e of
ten
know
n by
em
ploy
ees.
Nev
erth
eles
s, d
irect
en
gage
men
t of
the
sig
nific
ant
stak
ehol
ders
may
be
nec
essa
ry t
o fu
rthe
r id
entif
y, a
sses
s or
con
firm
th
eir
conc
erns
. Th
is e
nsur
es t
hat
the
mat
eria
l is
sues
iden
tified
thr
ough
thi
s pr
oces
s in
corp
orat
e th
e ex
pect
atio
ns a
nd n
eeds
of
all s
take
hold
ers.
Exte
rnal
- Id
enti
fyin
g S
take
ho
lder
sC
once
rns
of k
ey e
xter
nal s
take
hold
ers
have
bee
n a
hist
oric
driv
er f
or t
he in
tern
al m
anag
emen
t of
em
ergi
ng s
ocia
l and
env
ironm
enta
l iss
ues,
as
illus
trat
ed b
y th
e ca
se e
xam
ple
of B
risto
l-Mye
rs
Squi
bb (o
n pa
ge 2
3).
In a
dditi
on t
o th
e st
akeh
olde
r en
gage
men
t pr
oces
ses
alre
ady
prac
ticed
in a
n or
gani
zatio
n,
ther
e ar
e se
vera
l met
hods
to
iden
tify
whi
ch
exte
rnal
gro
ups
coul
d pl
ay a
key
rol
e in
iden
tifyi
ng
and
ratin
g is
sues
. GEM
I’s T
rans
pare
ncy:
A P
ath
to
Publ
ic T
rust
pro
vide
s gu
idan
ce in
:
•id
entif
ying
sig
nific
ant
stak
ehol
ders
tha
t in
tera
ct
with
the
org
aniz
atio
n
•ga
ther
ing
key
info
rmat
ion
rega
rdin
g st
akeh
olde
rs’ e
xpec
tatio
ns a
nd m
otiv
atio
ns, a
s w
ell a
s th
e cu
rren
t st
ate
of t
he o
rgan
izat
ion’
s re
latio
nshi
p w
ith t
hem
•de
cidi
ng w
hich
sta
keho
lder
s ar
e ‘s
igni
fican
t’ o
r ke
y to
the
org
aniz
atio
n
The
tool
fur
ther
cla
ssifi
es s
take
hold
ers
as
‘sig
nific
ant’
whe
n th
ey: (1
2)
•su
pply
res
ourc
es t
hat
are
criti
cal t
o th
e su
cces
s of
the
org
aniz
atio
n
•ha
ve s
omet
hing
at
risk;
the
ir w
elfa
re is
dire
ctly
af
fect
ed b
y th
e pe
rfor
man
ce o
f th
e or
gani
zatio
n
•ha
ve s
uffic
ient
pow
er t
o af
fect
the
pe
rfor
man
ce o
f th
e or
gani
zatio
n, e
ither
fa
vora
bly
or u
nfav
orab
ly
6H
ow
to
Ass
ure
Eff
ect
iven
ess
5H
ow
to
Ass
ure
Eff
ect
iven
ess
4W
hat
an
d H
ow
toM
easu
re3
Wh
at
is
Mate
rial
2W
hat
is
Mate
rial
1W
hat
is
Mate
rial
23
Bri
sto
l-M
yers
Sq
uib
b C
om
pan
y
Exte
rnal
Rep
ort
ing
an
d In
tern
al M
anag
emen
t o
f M
etri
csBr
isto
l-Mye
rs S
quib
b is
an
early
lead
er in
rep
ortin
g en
viro
nmen
tal,
heal
th a
nd s
afet
y (E
HS)
met
rics.
With
res
pect
to
gove
rnm
ent
and
med
ia r
epor
ts o
f en
viro
nmen
tal
data
, and
to
com
mun
ities
’ inq
uirie
s re
gard
ing
loca
l ope
ratio
ns, t
he c
ompa
ny b
egan
to
rep
ort
envi
ronm
enta
l per
form
ance
dat
a in
the
199
0s. I
n ad
ditio
n, t
he c
ompa
ny
part
icip
ated
in d
evel
opin
g th
e fir
st d
raft
of
the
Glo
bal R
epor
ting
Initi
ativ
e (G
RI) a
nd
was
am
ong
the
first
to
appl
y th
e G
RI r
epor
ting
stan
dard
s.
Whi
le r
epor
ting
EHS
met
rics
bega
n as
par
t of
Bris
tol-M
yers
Squ
ibb’
s ef
fort
to
mee
t ex
tern
al s
take
hold
er e
xpec
tatio
ns, i
t ha
s dr
iven
the
dev
elop
men
t of
an
orga
niza
tiona
l cap
acity
for
tra
ckin
g an
d m
anag
ing
non-
regu
lato
ry m
etric
s. A
n ex
tens
ive
infr
astr
uctu
re, i
nclu
ding
pro
cedu
res
and
data
base
s, w
ere
deve
lope
d fo
r EH
S da
ta c
olle
ctio
n, v
erifi
catio
n an
d re
port
ing.
In s
pite
of
the
exte
rnal
rep
ortin
g fo
cus,
the
met
rics
resu
lted
in a
ran
ge o
f in
tern
al m
anag
emen
t be
nefit
s, in
clud
ing:
•ab
ility
to
asse
ss t
he c
ompa
ny’s
pote
ntia
l env
ironm
enta
l im
pact
s
•id
entifi
catio
n of
cos
t-sa
ving
opp
ortu
nitie
s
•cr
oss-
func
tiona
l inv
olve
men
t an
d co
mpa
ny-w
ide
awar
enes
s of
sust
aina
bilit
y is
sues
In s
hort
, the
sys
tem
ena
bled
Bris
tol-M
yers
Squ
ibb
to a
sses
s its
pot
entia
l im
pact
s, t
o de
term
ine
appr
opria
te p
erfo
rman
ce t
arge
ts a
nd t
o m
easu
re p
rogr
ess
tow
ards
suc
h ta
rget
s. It
pro
vide
d m
uch
of t
he c
apac
ity f
or t
he d
evel
opm
ent
and
trac
king
of
the
com
pany
’s 20
10 s
usta
inab
ility
goa
ls.
Toda
y, B
risto
l-Mye
rs S
quib
b tr
acks
60
envi
ronm
enta
l par
amet
ers
in a
bout
50
faci
litie
s w
orld
wid
e an
d ha
s pr
oduc
ed s
usta
inab
ility
rep
orts
sin
ce 2
001.
Mai
ntai
ning
an
d fu
rthe
r de
velo
ping
met
rics
and
repo
rtin
g sy
stem
s, h
owev
er, d
o co
me
with
ch
alle
nges
. Firs
t, d
ata
colle
ctio
n an
d ve
rifica
tion
can
be c
ostly
, esp
ecia
lly in
ter
ms
of h
uman
res
ourc
es, a
nd n
eed
to b
e ef
fect
ivel
y m
anag
ed. F
urth
er, i
n ex
tern
al
repo
rtin
g, it
is c
ritic
al t
o un
ders
tand
tha
t in
form
atio
n m
ay b
e us
ed b
y th
e pu
blic
in
way
s w
hich
wer
e no
t in
tend
ed.
In s
umm
ary,
tho
ugh
initi
ally
driv
en b
y ex
tern
al r
eque
sts,
Bris
tol-M
yers
Squ
ibb’
s EH
S m
etric
s an
d re
port
ing
syst
em h
as b
roug
ht t
angi
ble,
inte
rnal
bus
ines
s be
nefit
s.
The S
cott
s C
om
pan
y
Iden
tify
ing
Issu
es f
rom
Co
nsu
mer
Cal
lsO
ne e
ffec
tive
way
for
iden
tifyi
ng is
sues
of
impo
rtan
ce t
o cu
stom
ers
is t
he
cons
umer
cal
ls m
ade
to t
he c
ompa
ny. S
cott
s ha
s es
tabl
ishe
d a
proc
ess
for
iden
tifyi
ng b
usin
ess
issu
es r
aise
d th
roug
h co
nsum
er c
alls
, com
mun
icat
ing
the
info
rmat
ion
to t
he v
ario
us b
usin
ess
func
tions
and
tra
nsla
ting
it in
to a
ctio
ns.
Scot
ts’ C
onsu
mer
Cal
l Cen
ter
rece
ives
rou
ghly
one
mill
ion
calls
ann
ually
fro
m
cons
umer
s fo
r al
l of
its p
rodu
ct li
nes.
Eve
ry in
com
ing
call
is lo
gged
into
a
data
base
, alo
ng w
ith k
ey in
form
atio
n su
ch a
s co
nsum
er c
once
rns,
pro
duct
s af
fect
ed a
nd t
he g
eogr
aphi
c lo
catio
n of
the
cal
l. Th
e da
taba
se is
rou
tinel
y an
alyz
ed a
nd c
ompa
red
to p
revi
ous
perio
ds t
o id
entif
y tr
ends
and
ano
mal
ies.
Th
e an
alys
is is
the
n re
port
ed t
o va
rious
dep
artm
ents
whe
re it
can
be
furt
her
exam
ined
to
iden
tify
issu
es t
hat
requ
ire t
he c
ompa
ny’s
atte
ntio
n.
The
data
base
is d
esig
ned
to f
acili
tate
col
labo
ratio
n be
twee
n va
rious
inte
rnal
de
part
men
ts, s
uch
as q
ualit
y as
sura
nce,
mar
ketin
g, r
esea
rch
& d
evel
opm
ent
and
envi
ronm
enta
l ste
war
dshi
p, t
o de
velo
p st
rate
gies
to
impr
ove
Scot
ts’ p
rodu
cts.
Th
e co
nsum
er c
all d
ata
have
bee
n ef
fect
ive
in id
entif
ying
ris
ks. E
ven
one
call
rela
ted
to a
ser
ious
saf
ety
issu
e, f
or e
xam
ple,
has
led
to a
pro
duct
bei
ng p
ulle
d ou
t of
the
mar
ket
and/
or r
e-en
gine
ered
for
impr
oved
saf
ety
perf
orm
ance
. Tha
t ch
ange
res
ulte
d in
a C
onsu
mer
Saf
ety
Aw
ard
from
the
Hom
e Sa
fety
Cou
ncil
for
prod
uct
inno
vatio
n.
Opp
ortu
nitie
s fo
r pr
oduc
ts t
hat
addr
ess
envi
ronm
enta
l con
cern
s ha
ve a
lso
been
id
entifi
ed t
hrou
gh c
onsu
mer
cal
ls. T
he d
esire
for
pho
spho
rous
-fre
e fe
rtili
zer
as
an o
ptio
n fo
r us
e ar
ound
sen
sitiv
e w
ater
way
s an
d C
anad
ian
mar
ket
dem
and
for
natu
ral p
rodu
cts
are
amon
g co
nsum
er is
sues
tha
t ha
ve le
d to
new
pro
duct
s.
6H
ow
to
Ass
ure
Eff
ect
iven
ess
5H
ow
to
Ass
ure
Eff
ect
iven
ess
4W
hat
an
d H
ow
toM
easu
re3
Wh
at
is
Mate
rial
2W
hat
is
Mate
rial
1W
hat
is
Mate
rial
2.
Ass
ess
Iss
ues
fro
m S
takeh
old
ers
’ Pers
pect
ives
24 EAG
Per
spec
tive
Are
So
cial
Go
als
Rele
van
t to
Bu
sin
ess
?C
omm
unity
indi
cato
r pr
ogra
ms
can
prov
ide
insi
ghts
into
wha
t is
impo
rtan
t to
the
loca
l com
mun
ity. W
hile
soc
ial /
com
mun
ity g
oals
are
typ
ical
ly o
utsi
de a
co
mpa
ny’s
sphe
re o
f co
ntro
l, th
ey a
re in
fluen
ced
by lo
cal b
usin
ess
polic
ies
and
prac
tices
(see
figu
re b
elow
). O
nlin
e at
ww
w.g
emi.o
rg/m
etri
csn
avig
ato
r, K
irvil
Skin
narla
nd o
f Su
stai
nabl
e Se
attle
and
Tril
ogy,
LLC
, exp
lore
s ho
w c
omm
unity
in
dica
tors
can
hel
p in
form
a c
ompa
ny in
det
erm
inin
g w
hat
is m
ater
ial a
nd in
sh
apin
g its
bus
ines
s go
als.
Soci
al G
oal
s
Sam
ple
Indi
cato
rs:
Livi
ng W
ages
Hea
lth C
are
Aff
orda
ble
Hou
sing
Publ
ic S
afet
yD
iver
sity
/ D
iscr
imin
atio
nEn
viro
nmen
tal Q
ualit
yEm
ploy
men
tEd
ucat
ion
Inco
me
Dis
trib
utio
nA
Co
mp
any’
s Sp
her
eo
f C
on
tro
l
Info
rm
Infl
uen
ce
Sph
ere
of
Infl
uen
ce —
Ou
tco
mes
in c
om
mu
nit
ies
are
affe
cted
by
man
y va
riab
les,
e.g
., d
emo
gra
ph
ic t
ren
ds,
eco
no
mic
tr
end
s, p
olit
ical
dec
isio
ns,
etc
.
Perf
orm
ance
Mea
sure
s
Bu
sin
ess
Go
als
RES
OU
RC
ES/
INPU
TSA
CTI
VIT
IES
OU
TPU
TSO
UTC
OM
ES
Wo
rksh
eets
2b
– P
rio
riti
zin
g
Ex
tern
al Is
sues
W
orks
heet
2b
(on
page
25)
pro
vide
s a
tem
plat
e to
rate
and
prio
ritiz
e iss
ues
of c
once
rn to
ext
erna
l st
akeh
olde
rs.T
his
allo
ws
user
s to
rat
e th
e is
sues
id
entifi
ed a
t fo
r ea
ch v
alue
cha
in s
tage
bas
ed o
n tw
o cr
iteria
:
•le
vel o
f co
ncer
n to
sta
keho
lder
s (x
-axi
s) –
Is t
he
issu
e is
of
high
cur
rent
or
pote
ntia
l con
cern
to
key
exte
rnal
sta
keho
lder
s?
•or
gani
zatio
n’s
abili
ty t
o co
ntro
l or
influ
ence
(y
-axi
s) –
Are
the
re a
ctio
ns t
he o
rgan
izat
ion
can
take
to
cont
rol o
r in
fluen
ce t
he is
sue?
Con
cern
s of
em
ploy
ees
and
exte
rnal
sta
keho
lder
s sh
ould
refl
ect
both
cur
rent
and
em
ergi
ng is
sues
ev
en if
the
y ar
e no
t of
hig
h co
ncer
n or
with
in
the
com
pany
’s ab
ility
to
cont
rol t
oday
. The
y m
ay
repr
esen
t fu
ture
issu
es t
o be
con
side
red
toda
y or
at
leas
t ‘p
arke
d’ f
or c
onsi
dera
tion
in t
he
futu
re. T
oget
her,
thes
e tw
o cr
iteria
det
erm
ine
the
sign
ifica
nce
of t
he e
xter
nal c
once
rns.
Wor
kshe
et 2
b pl
ots
issu
es’ r
atin
gs b
ased
on
the
com
bina
tion
of t
he t
wo
crite
ria a
nd t
he
colo
r co
ding
dem
onst
rate
s ho
w t
he is
sues
rat
e in
ter
ms
of o
vera
ll si
gnifi
canc
e. A
n is
sue
rate
d hi
ghly
on
both
crit
eria
is c
onsi
dere
d to
be
of h
igh
sign
ifica
nce
of e
xter
nal c
once
rn.
Som
e of
the
issu
es li
sted
in a
re id
entic
al t
o th
ose
iden
tified
ear
lier
from
the
per
spec
tive
of
empl
oyee
s (W
orks
heet
2a)
. Oth
er is
sues
, how
ever
, m
ay b
e id
entifi
ed o
nly
thro
ugh
the
pers
pect
ive
of
exte
rnal
sta
keho
lder
s.
Com
plet
ing
Step
2 w
ill r
esul
t in
prio
ritiz
ed li
sts
of is
sues
fro
m t
he p
ersp
ectiv
es o
f em
ploy
ees
and
exte
rnal
sta
keho
lder
s. T
he n
ext
step
will
out
line
how
to
cons
olid
ate
thes
e to
pro
duce
a s
hort
list
of
mat
eria
l iss
ues.
6H
ow
to
Ass
ure
Eff
ect
iven
ess
5H
ow
to
Ass
ure
Eff
ect
iven
ess
4W
hat
an
d H
ow
toM
easu
re3
Wh
at
is
Mate
rial
2W
hat
is
Mate
rial
1W
hat
is
Mate
rial
25
WO
RK
SHEE
T 2b
: EX
TER
NA
L –
PRIO
RIT
IZE
ISSU
ES O
F C
ON
CER
N T
O E
XTE
RN
AL
STA
KEH
OLD
ERS
(XY
Z N
utrit
iona
l Bev
erag
e Ex
ampl
e)
INST
RUCT
ION
S:Pl
ot th
e po
tent
ial a
nd c
urre
nt is
sues
iden
tified
by
exte
rnal
sta
keho
lder
s. R
ate
each
issu
e as
Hig
h (H
), M
ediu
m (M
) or L
ow (L
) acc
ordi
ng to
the
follo
win
g co
nsid
erat
ions
:
Leve
l of
Co
nce
rn t
o S
take
ho
lder
s•
How
str
ongl
y do
es e
ach
key
stak
ehol
der
grou
p ca
re a
bout
the
issu
e?
Org
aniz
atio
n’s
Ab
ility
to
Co
ntr
ol o
r In
flu
ence
•D
oes
the
orga
niza
tion
have
con
trol
or
influ
ence
ove
r th
e va
lue-
chai
n st
ages
aff
ectin
g th
e is
sue?
•A
re t
here
act
ions
the
org
aniz
atio
n ca
n ta
ke t
o af
fect
the
issu
e di
rect
ly o
r in
dire
ctly
?
VA
LUE
CH
AIN
STA
GES
:S
= S
uppl
y; C
= C
ompa
ny O
pera
tions
; D =
Dis
trib
utio
n; U
= C
usto
mer
Use
of
Prod
uct
/ Ser
vice
; E =
End
of
Life
Organization’s Ability to Control or Influence
H•
Ener
gy u
se (S
, C)
•W
ater
use
(C)
•Ed
ucat
ion
(U, E
)•
Com
mun
ity o
utre
ach
(C)
•Im
mig
ratio
n po
licy
(C)
•N
utrit
ion
cont
ent
(U)
•O
rgan
ic p
rodu
cts
(S, U
)•
Impa
ct o
n lo
cal c
omm
uniti
es (S
, C)
M•
Taxe
s pa
id (C
)
•U
se o
f al
tern
ativ
e en
ergy
(S, C
, D)
•Em
ploy
ee H
ealth
& S
afet
y (C
)•
Ener
gy u
se (D
)•
Ani
mal
rig
hts
(S)
•W
ater
use
(S)
•Fa
rmin
g ru
n-of
fs (S
)•
Loca
l eco
nom
ic d
evel
opm
ent
(S, C
)•
Air
emis
sion
s (D
)
L•
Loca
l hom
eles
s po
pula
tion
(D)
•Ta
lent
rete
ntio
n (C
)•
Tran
spor
tatio
n in
fras
truc
ture
(D)
•G
loba
l sec
urity
(S, C
, D)
LM
H
Rea
son
ing
beh
ind
Rat
ing
:H
igh
leve
l of
stak
ehol
der
conc
ern,
wel
l with
in o
rgan
izat
ion’
s ab
ility
to
cont
rol
Impo
rtan
t to
cus
tom
ers,
org
aniz
atio
n ca
n ex
pand
por
tfol
io a
nd m
odify
sou
rcin
gC
once
rn t
o so
me
stak
ehol
ders
, org
aniz
atio
n ca
n in
fluen
ce s
uppl
y ch
ain
Hig
h le
vel o
f sta
keho
lder
con
cern
, but
lim
ited
orga
niza
tion’
s ab
ility
to c
ontr
ol o
r infl
uenc
e
Issu
es (
exam
ple
s):
Nut
ritio
n co
nten
t (U
)O
rgan
ic p
rodu
cts
(S, U
)U
se o
f alte
rnat
ive
ener
gy (S
, C, D
)G
loba
l sec
urity
(S, C
, D)
Not
e: t
he is
sues
of
glob
al s
ecur
ity a
nd a
nim
al r
ight
s w
ere
adde
d by
ext
erna
l sta
keho
lder
s, n
ot in
clud
ed b
y em
ploy
ees
in W
orks
heet
2a
2.
Ass
ess
Iss
ues
fro
m S
takeh
old
ers
’ Pers
pect
ives
6H
ow
to
Ass
ure
Eff
ect
iven
ess
5H
ow
to
Ass
ure
Eff
ect
iven
ess
4W
hat
an
d H
ow
toM
easu
re3
Wh
at
is
Mate
rial
2W
hat
is
Mate
rial
1W
hat
is
Mate
rial
Leve
l of
Co
nce
rn t
o S
take
ho
lder
s
26
6H
ow
to
Ass
ure
Eff
ect
iven
ess
5H
ow
to
Ass
ure
Eff
ect
iven
ess
4W
hat
an
d H
ow
toM
easu
re3
Wh
at
is
Mate
rial
2W
hat
is
Mate
rial
1W
hat
is
Mate
rial
STE
P 3
Exp
ecte
d O
utc
om
es•
M
ater
ial i
ssue
s fo
r
co
nsid
erat
ion
in
deve
lopi
ng m
etric
s
•
Crit
ical
few
key
obj
ectiv
es
The
purp
ose
of S
tep
3 is
to:
•co
nsol
idat
e th
e in
tern
al a
nd e
xter
nal i
ssue
s to
pr
oduc
e a
shor
t lis
t of
issu
es m
ost
mat
eria
l to
the
orga
niza
tion
•id
entif
y po
tent
ial o
bjec
tives
, i.e
., w
hat
the
orga
niza
tion
may
wan
t to
ach
ieve
in a
ddre
ssin
g th
e m
ater
ial i
ssue
s
•se
lect
the
crit
ical
few
key
obj
ectiv
es b
ased
on
the
busi
ness
and
soc
ieta
l val
ue o
f ad
dres
sing
the
m
ater
ial i
ssue
s
This
is a
crit
ical
syn
thes
is o
f m
ater
ial i
ssue
s an
d th
eir
eval
uatio
n ag
ains
t th
e bu
sine
ss s
ucce
ss
fact
ors
outli
ned
in S
tep
1. S
tep
3 w
orks
heet
s lis
t m
ater
ial i
ssue
s an
d se
lect
ed k
ey o
bjec
tives
for
w
hich
KPI
s an
d m
etric
s w
ill b
e de
velo
ped.
Sele
ctin
g M
ater
ial I
ssu
es –
Wo
rksh
eet
3a
Mat
eria
lity
is e
xam
ined
in t
his
tool
thr
ough
the
fo
ur c
riter
ia d
iscu
ssed
in t
he O
verv
iew
. Tw
o of
th
ese
crite
ria w
ere
appl
ied
in W
orks
heet
2a
(on
page
21)
to
prio
ritiz
e is
sues
for
the
ir re
leva
nce
to b
usin
ess:
•im
port
ance
to
the
busi
ness
suc
cess
fac
tors
•si
gnifi
canc
e of
env
ironm
enta
l, so
cial
and
/or
econ
omic
impa
cts
from
the
org
aniz
atio
n
The
rem
aini
ng t
wo
crite
ria w
ere
appl
ied
in
Wor
kshe
et 2
b (o
n p
age
25) t
o pr
iorit
ize
issu
es f
or
sign
ifica
nce
of e
xter
nal c
once
rns:
•le
vel o
f co
ncer
n to
ext
erna
l sta
keho
lder
s
•th
e or
gani
zatio
n’s
abili
ty t
o co
ntro
l or
influ
ence
Wor
kshe
et 3
a (o
n pa
ge 2
7) s
erve
s as
a m
echa
nism
fo
r se
lect
ing
and
sum
mar
izin
g m
ater
ial i
ssue
s fr
om b
oth
inte
rnal
and
ext
erna
l sta
keho
lder
pe
rspe
ctiv
es. T
he is
sues
will
be
plot
ted
acco
rdin
g to
rel
evan
ce t
o bu
sine
ss (W
orks
heet
2a)
and
si
gnifi
canc
e of
con
cern
(Wor
kshe
et 2
b). F
or
the
exam
ple
of X
YZ
Nut
ritio
nal B
ever
age,
co
mm
unity
out
reac
h is
of
high
con
cern
to
exte
rnal
st
akeh
olde
rs b
ut o
f m
ediu
m r
elev
ance
to
the
busi
ness
, res
ultin
g in
a m
ediu
m m
ater
ialit
y in
W
orks
heet
3a.
This
fol
low
s th
e sa
me
form
at a
nd c
olor
-cod
ing
as
prev
ious
wor
kshe
ets.
Issu
es t
hat
fall
into
the
hig
h m
ater
ialit
y ra
ting
in W
orks
heet
3a
are
impo
rtan
t in
tern
ally
and
ext
erna
lly a
nd c
an b
e th
e ba
sis
for
key
obje
ctiv
es.
Issu
es t
hat
fall
into
the
med
ium
mat
eria
lity
ratin
g al
so w
arra
nt c
onsi
dera
tion
for
key
obje
ctiv
es. T
his
incl
udes
issu
es o
f hi
gh p
riorit
y fr
om t
he in
tern
al
pers
pect
ives
tha
t th
e ex
tern
al s
take
hold
ers
have
no
t ye
t re
cogn
ized
, or
vice
ver
sa.
In f
act,
issu
es
of h
igh
prio
rity
to e
xter
nal s
take
hold
ers
that
hav
e no
t be
en r
ecog
nize
d in
tern
ally
may
con
stitu
te
emer
ging
issu
es f
or t
he o
rgan
izat
ion.
Issu
es t
hat
rece
ive
low
rat
ings
are
not
mat
eria
l is
sues
and
may
not
req
uire
imm
edia
te a
tten
tion.
Fo
r X
YZ
Nut
ritio
nal B
ever
age,
the
se in
clud
e bo
rder
con
trol
, tra
nspo
rtat
ion
infr
astr
uctu
re a
nd
anim
al r
ight
s.
Sim
ilar
mat
eria
lity
ratin
gs a
re u
sed
by s
ome
com
pani
es. A
bbot
t, a
s ill
ustr
ated
in it
s ca
se
exam
ple
(on
page
28)
, rat
es is
sues
by
high
, m
ediu
m, a
nd lo
w p
riorit
y.
3.
Develo
p K
ey O
bje
ctiv
es
27
6H
ow
to
Ass
ure
Eff
ect
iven
ess
5H
ow
to
Ass
ure
Eff
ect
iven
ess
4W
hat
an
d H
ow
toM
easu
re3
Wh
at
is
Mate
rial
2W
hat
is
Mate
rial
1W
hat
is
Mate
rial
WO
RK
SHEE
T 3a
: SE
LEC
T M
ATE
RIA
L IS
SUES
(XY
Z N
utrit
iona
l Bev
erag
e Ex
ampl
e)
INST
RU
CTI
ON
S:Pl
ot t
he is
sues
acc
ordi
ng t
o ra
tings
rec
eive
d in
Wor
kshe
et 2
a (R
elev
ance
to
Busi
ness
) and
Wor
kshe
et 2
b (S
igni
fican
ce o
f C
once
rn).
H/H
=H
; H/M
=H
; H/L
= L
or
M; M
/M=
M; M
/L =
L; L
/L =
L
For
exam
ple,
Ene
rgy
Use
(S, C
) was
plo
tted
in t
he d
ark-
shad
ed a
rea
in W
orks
heet
2a
and
rece
ives
a h
igh
ratin
g on
the
Rel
evan
ce t
o th
e Bu
sine
ss a
xis
in
Wor
kshe
et 3
a. E
nerg
y U
se (S
, C) w
as p
lott
ed in
the
med
ium
-sha
ded
area
in W
orks
heet
2b
and
rece
ives
a m
ediu
m r
atin
g on
the
Sig
nific
ance
of
Con
cern
axi
s in
Wor
kshe
et 3
a. T
he o
vera
ll ra
ting
is h
igh
(dar
k sh
aded
) in
this
com
bine
d w
orks
heet
.
VA
LUE
CH
AIN
STA
GES
:S
= S
uppl
y; C
= C
ompa
ny O
pera
tions
; D =
Dis
trib
utio
n; U
= C
usto
mer
Use
of
Prod
uct
/ Ser
vice
; E =
End
of
Life
Significance of Concern(Worksheet 2b)
H
•Im
mig
ratio
n po
licy
(C)
•C
omm
unity
out
reac
h (C
)•
Educ
atio
n (U
, E)
•A
ir em
issi
ons
(D)
•N
utrit
ion
cont
ent
(U)
•O
rgan
ic p
rodu
cts
(S, U
)•
Wat
er u
se (S
)•
Impa
ct o
n lo
cal c
omm
uniti
es (S
, C)
•Lo
cal e
cono
mic
dev
elop
men
t (S
, C)
•Fa
rmin
g ru
n-of
fs (S
)
M•
Glo
bal s
ecur
ity (S
,C,D
)•
Ani
mal
rig
hts
(S)
•U
se o
f al
tern
ativ
e en
ergy
(S, C
, D)
•En
ergy
use
(S, C
, D)
•W
ater
use
(C)
•Em
ploy
ee H
ealth
& S
afet
y (C
)
L•
Taxe
s pa
id (C
)•
Tran
spor
tatio
n in
fras
truc
ture
(D)
•Lo
cal h
omel
ess
popu
latio
n (D
)•
Tale
nt r
eten
tion
(C)
LM
H
Rel
evan
ce t
o t
he
Bu
sin
ess
(Wor
kshe
et 2
a)
28
Dev
elo
pin
g K
ey O
bje
ctiv
es
Onc
e a
mat
eria
l iss
ue h
as b
een
sele
cted
, the
nex
t ta
sk is
to
dete
rmin
e:
•w
hat
does
the
org
aniz
atio
n w
ant
to d
o ab
out,
an
d ac
hiev
e w
ith, t
he m
ater
ial i
ssue
, i.e
., w
hat
are
the
pote
ntia
l obj
ectiv
es
•is
the
re s
uffic
ient
val
ue in
add
ress
ing
the
mat
eria
l iss
ue t
o be
the
bas
is f
or a
key
obj
ectiv
e
To b
e de
velo
ped
as a
key
obj
ectiv
e th
e m
ater
ial
issu
e m
ust
prov
ide
valu
e an
d su
ppor
t th
e bu
sine
ss
stra
tegy
iden
tified
in S
tep1
. The
re a
re t
hree
co
nsid
erat
ions
tha
t in
fluen
ce t
he s
elec
tion
of a
key
ob
ject
ive
and
form
the
bas
is o
f W
orks
heet
3b:
•re
leva
nt c
ompo
nent
s -
fact
ors
that
influ
ence
th
e m
ater
ial i
ssue
or
rela
ted
issu
es t
hat
can
be
clus
tere
d an
d ad
dres
sed
colle
ctiv
ely
with
the
m
ater
ial i
ssue
•po
tent
ial o
bjec
tives
- t
he d
esire
d ou
tcom
es
defin
ed in
ter
ms
of t
he o
rgan
izat
ion’
s ob
ject
ives
•va
lue
prop
ositi
on -
the
exp
ecte
d bu
sine
ss
and
soci
etal
val
ue g
ener
ated
in m
eetin
g th
e po
tent
ial o
bjec
tives
Ab
bo
tt
Man
agin
g E
mer
gin
g B
usi
nes
s Is
sues
Abb
ott’s
str
ateg
y fo
r m
anag
ing
emer
ging
bus
ines
s is
sues
rel
ies
on a
thr
ee-p
hase
pro
cess
of
asse
ssm
ent,
pr
iorit
izat
ion
and
impl
emen
tatio
n.
The
asse
ssm
ent
phas
e yi
elds
an
inve
ntor
y of
env
ironm
enta
l, ec
onom
ic a
nd s
ocia
l iss
ues.
The
issu
es a
re id
entifi
ed
thro
ugh
inte
rvie
ws
of in
tern
al p
artie
s an
d ex
tern
al s
take
hold
er e
ngag
emen
t an
d re
sear
ch. A
ppro
xim
atel
y 50
bu
sine
ss a
nd f
unct
iona
l lea
ders
are
invo
lved
in t
his
phas
e.
The
issu
es a
re t
hen
prio
ritiz
ed b
y a
team
of
25 c
orpo
rate
Vic
e Pr
esid
ents
and
Dire
ctor
s. E
ach
issu
e is
sco
red
for
its im
pact
on
Abb
ott
and
the
oppo
rtun
ity f
or a
ctio
n an
d m
appe
d. ’H
igh
Prio
rity’
issu
es id
entifi
ed h
ave
a pr
oact
ive
stra
tegy
and
ded
icat
ed r
esou
rces
and
peo
ple
supp
ort
impl
emen
tatio
n. Is
sues
tha
t ar
e ’M
ediu
m
Prio
rity’
req
uire
Abb
ott
not
only
to
mon
itor
with
app
ropr
iate
man
ager
s ke
pt in
form
ed, b
ut a
lso
to h
ave
posi
tions
dev
elop
ed a
nd k
now
whe
re t
hird
-par
ty s
uppo
rt e
xist
s. ’L
ow P
riorit
y’ is
sues
req
uire
onl
y m
onito
ring
and
man
ager
s be
kep
t in
form
ed. O
ther
issu
es t
hat
are
not
nece
ssar
ily m
anag
ed a
re p
lace
d in
a ‘P
arki
ng L
ot’ f
or
futu
re c
onsi
dera
tion.
The
impl
emen
tatio
n ph
ase
invo
lves
alig
ning
exi
stin
g te
ams
with
the
pol
icy
com
mitt
ee a
nd d
eter
min
ing
actio
n pl
ans
and
resp
onsi
bilit
ies.
Too
ls t
o su
ppor
t A
bbot
t’s e
mer
ging
issu
es’ s
trat
egy,
incl
udin
g pa
rtne
rshi
ps a
nd
com
mun
icat
ion
aven
ues,
are
als
o id
entifi
ed.
This
thr
ee-p
hase
pro
cess
is d
esig
ned
to p
rovi
de v
alue
at
seve
ral m
anag
emen
t le
vels
. The
ass
essm
ent
phas
e pr
ovid
es a
n op
port
unity
for
bus
ines
s le
ader
s to
be
info
rmed
abo
ut k
ey is
sues
and
mee
t to
dis
cuss
issu
es a
nd
chan
nel i
nfor
mat
ion
thro
ugh
a co
ordi
nate
d pr
oces
s. T
he p
riorit
izat
ion
phas
e le
ads
to b
ette
r pl
anni
ng a
nd h
elps
cr
eate
a c
omm
on p
urpo
se a
roun
d w
hat
is im
port
ant
and
wha
t A
bbot
t ca
n ad
dres
s fir
st. T
he im
plem
enta
tion
phas
e en
cour
ages
cro
ss-f
unct
iona
l act
ion,
impr
oves
dis
cuss
ion
of a
ccou
ntab
ility
, and
orie
nts
peop
le t
owar
ds t
he
resu
lts a
nd h
ow t
he e
mer
ging
issu
es c
an a
ffec
t th
e co
rpor
atio
n.
6H
ow
to
Ass
ure
Eff
ect
iven
ess
5H
ow
to
Ass
ure
Eff
ect
iven
ess
4W
hat
an
d H
ow
toM
easu
re3
Wh
at
is
Mate
rial
2W
hat
is
Mate
rial
1W
hat
is
Mate
rial
29
Du
Po
nt
Man
agin
g E
ner
gy
Ener
gy is
a m
ater
ial i
ssue
for
DuP
ont.
At
a co
nsum
ptio
n ra
te o
f 23
3 tr
illio
n BT
Us
per
year
, DuP
ont
is a
la
rge
ener
gy u
ser.
Ener
gy c
ontr
ibut
es s
igni
fican
tly t
o th
e co
st o
f m
anuf
actu
ring
as w
ell a
s to
the
com
pany
’s en
viro
nmen
tal f
ootp
rint,
incl
udin
g gr
eenh
ouse
gas
em
issi
ons.
The
refo
re, m
anag
ing
ener
gy c
onsu
mpt
ion
is
impo
rtan
t no
t on
ly t
o re
duce
cos
ts b
ut a
lso
to a
ddre
ss im
pact
s of
con
cern
to
exte
rnal
sta
keho
lder
s.
Two
stra
tegi
c m
etric
s ar
e us
ed b
y D
uPon
t to
man
age
ener
gy u
se: t
he t
otal
ann
ual c
onsu
mpt
ion
and
perc
ent
ener
gy f
rom
ren
ewab
le s
ourc
es. F
or t
otal
ann
ual c
onsu
mpt
ion,
DuP
ont
set
a ta
rget
of
keep
ing
ener
gy u
se fl
at
at t
he 1
990
base
line
in t
he f
ace
of t
he c
ompa
ny’s
grow
th. D
uPon
t ha
s ac
hiev
ed t
his
targ
et o
ver
the
past
ten
ye
ars,
and
in f
act,
red
uced
tot
al e
nerg
y us
e by
abo
ut s
ix p
erce
nt, w
hile
incr
easi
ng p
rodu
ctio
n by
41
perc
ent
over
the
sam
e pe
riod.
Thi
s re
sulte
d in
mor
e th
an $
3 bi
llion
of
ener
gy c
ost
avoi
danc
e.
Usi
ng r
enew
able
ene
rgy,
on
the
othe
r ha
nd, p
oses
an
oppo
rtun
ity f
or in
dust
ry le
ader
ship
. The
lack
of
both
co
st-e
ffec
tive
tech
nolo
gies
and
suf
ficie
nt m
arke
t de
man
d ha
s lo
ng h
inde
red
the
adva
nce
of r
enew
able
ene
rgy
usag
e in
the
mar
ketp
lace
. By
sett
ing
a ta
rget
of
achi
evin
g te
n pe
rcen
t of
its
ener
gy u
se f
rom
ren
ewab
le s
ourc
es
by 2
010,
DuP
ont
is t
akin
g a
lead
ersh
ip r
ole
in c
hang
ing
the
mar
ket
land
scap
e by
incr
easi
ng t
he d
eman
d fo
r re
new
able
sou
rces
, dem
onst
ratin
g th
e us
e of
ren
ewab
le s
ourc
es a
s a
prac
tical
alte
rnat
ive
in m
anag
ing
ener
gy
cons
umpt
ion
and
redu
cing
the
ir as
soci
ated
env
ironm
enta
l im
pact
s.
Rel
evan
t C
om
po
nen
tsTh
e re
leva
nt c
ompo
nent
s in
clud
e fa
ctor
s th
at
influ
ence
the
mat
eria
l iss
ue a
s w
ell a
s af
fect
the
or
gani
zatio
n’s
impa
cts
on t
he is
sue.
For
exa
mpl
e,
if th
e m
ater
ial i
ssue
is g
reen
hous
e ga
s (G
HG
) em
issi
ons,
a f
acto
r af
fect
ing
the
mat
eria
l iss
ue
wou
ld b
e en
ergy
use
and
the
org
aniz
atio
n’s
impa
ct o
n th
e is
sue
coul
d be
its
use
of
alte
rnat
ive
ener
gy.
Mul
tiple
mat
eria
l iss
ues
can
shar
e so
me
of t
he
sam
e re
leva
nt c
ompo
nent
s. F
or e
xam
ple,
if G
HG
em
issi
ons
and
the
use
of a
ltern
ativ
e en
ergy
are
bo
th m
ater
ial i
ssue
s th
ey c
ould
bot
h be
aff
ecte
d by
ris
ing
ener
gy p
rices
. A m
ater
ial i
ssue
can
al
so b
e a
rele
vant
com
pone
nt f
or o
ther
mat
eria
l is
sues
. For
exa
mpl
e, t
he p
ublic
’s co
ncer
n ov
er
GH
G e
mis
sion
s is
a r
elev
ant
com
pone
nt t
hat
coul
d in
fluen
ce t
he m
ater
ial i
ssue
of
the
use
of
alte
rnat
ive
ener
gy (t
he e
xam
ple
in W
orks
heet
3b
dem
onst
rate
s ho
w r
elev
ant
com
pone
nts
may
in
fluen
ce a
mat
eria
l iss
ue).
The
DuP
ont
case
exa
mpl
e ill
ustr
ates
how
the
m
ater
ial i
ssue
of
ener
gy c
an b
e m
anag
ed
thro
ugh
two
of it
s re
leva
nt c
ompo
nent
s: a
nnua
l co
nsum
ptio
n an
d us
e of
ren
ewab
le s
ourc
es.
Pote
nti
al O
bje
ctiv
eTh
e po
tent
ial o
bjec
tive
is t
he o
utco
me
or g
oal t
hat
the
orga
niza
tion
wan
ts t
o ac
hiev
e in
add
ress
ing
the
mat
eria
l iss
ue. T
here
can
be
mor
e th
an o
ne
pote
ntia
l obj
ectiv
e fo
r ea
ch m
ater
ial i
ssue
.
6H
ow
to
Ass
ure
Eff
ect
iven
ess
5H
ow
to
Ass
ure
Eff
ect
iven
ess
4W
hat
an
d H
ow
toM
easu
re3
Wh
at
is
Mate
rial
2W
hat
is
Mate
rial
1W
hat
is
Mate
rial
3.
Develo
p K
ey O
bje
ctiv
es
30
6H
ow
to
Ass
ure
Eff
ect
iven
ess
5H
ow
to
Ass
ure
Eff
ect
iven
ess
4W
hat
an
d H
ow
toM
easu
re3
Wh
at
is
Mate
rial
2W
hat
is
Mate
rial
1W
hat
is
Mate
rial
The D
ow
Ch
em
ical
Co
mp
an
y
Dev
elo
pin
g D
ow
’s 2
015
Sust
ain
abili
ty G
oal
sD
ow s
et it
s co
rpor
ate
visi
on t
o be
“th
e la
rges
t, m
ost
profi
tabl
e an
d m
ost
resp
ecte
d ch
emic
al c
ompa
ny in
th
e w
orld
”. T
hat
mea
ns, i
t as
pire
s to
hav
e th
e sc
ale
and
scop
e to
do
thin
gs o
ther
s ca
nnot
; to
offe
r gr
eat
shar
ehol
der
valu
e; a
nd t
o ea
rn t
he r
eput
atio
n of
an
indu
stry
lead
er in
mee
ting
and
stay
ing
ahea
d of
sta
keho
lder
s’
expe
ctat
ions
. Dow
’s 20
15 S
usta
inab
ility
Goa
ls, a
nnou
nced
in 2
006,
are
inte
nded
to
help
the
com
pany
ach
ieve
th
is v
isio
n.
Com
plet
ion
of D
ow’s
2005
Env
ironm
enta
l, H
ealth
and
Saf
ety
(EH
S) G
oals
has
dem
onst
rate
d its
abi
lity
to u
se
real
, mea
sura
ble
and
long
-ter
m g
oals
to
mot
ivat
e em
ploy
ees,
driv
e in
nova
tions
and
ach
ieve
per
form
ance
im
prov
emen
ts. T
o co
ntin
ue t
o m
eet
and
exce
ed s
take
hold
ers’
exp
ecta
tions
, Dow
rec
ogni
zed
the
need
to
expa
nd
the
para
met
ers
of it
s ne
w 1
0-ye
ar g
oals
bey
ond
EHS
to in
clud
e ot
her
aspe
cts
of it
s re
latio
nshi
p w
ith t
he w
orld
.
A s
take
hold
er e
ngag
emen
t pr
oces
s, s
tart
ed in
200
3 in
volv
ing
exec
utiv
es, e
mpl
oyee
s, it
s C
orpo
rate
Env
ironm
enta
l A
dvis
ory
Cou
ncil
and
exte
rnal
sta
keho
lder
rep
rese
ntat
ives
, ide
ntifi
ed t
hree
are
as f
or it
s ne
w s
et o
f go
als:
•im
prov
ing
loca
l cor
pora
te c
itize
nshi
p
•in
crea
sing
com
mitm
ent
to p
rodu
ct s
tew
ards
hip
•re
duci
ng g
loba
l foo
tprin
t
‘Crit
ical
few
’ goa
ls w
ith s
igni
fican
ce a
nd im
pact
s on
all
its s
take
hold
ers
wer
e id
entifi
ed f
or e
ach
of t
he t
hree
ar
eas
thro
ugh
disc
ussi
ons
at a
leve
l of
deta
il ap
prop
riate
to
each
sta
keho
lder
gro
up.
Dow
’s 20
15 S
usta
inab
ility
goa
ls e
xten
d be
yond
min
imiz
ing
the
risks
in it
s cu
rren
t op
erat
ions
tow
ards
pro
activ
e co
ntrib
utio
n to
the
glo
bal c
omm
unity
. Sp
ecifi
cally
, it
incl
udes
the
goa
l of
achi
evin
g by
201
5 at
leas
t th
ree
brea
kthr
ough
s th
at w
ill s
igni
fican
tly im
prov
e th
e w
orld
’s ab
ility
to
solv
e th
e ch
alle
nges
suc
h as
iden
tified
in t
he
Uni
ted
Nat
ions
Mill
enni
um D
evel
opm
ent
Goa
ls.
The
2015
Sus
tain
abili
ty G
oals
als
o ba
lanc
e th
e ne
eds
for
cons
tanc
y an
d fle
xibi
lity.
It in
clud
es s
peci
fic n
umer
ical
ta
rget
s, s
uch
as r
educ
ing
ener
gy in
tens
ity b
y 25
per
cent
, as
wel
l as
qual
itativ
e ta
rget
s, s
uch
as c
omm
itmen
ts t
o pa
rtic
ipat
e in
cer
tain
vol
unta
ry p
rogr
ams
and
to e
stab
lish
loca
l com
mun
ity g
oals
.
Val
ue
Pro
po
siti
on
Eval
uatin
g th
e va
lue
prop
ositi
on d
eter
min
es w
hich
of
the
pot
entia
l obj
ectiv
es c
ould
be
addr
esse
d as
st
rate
gic
key
obje
ctiv
es f
or t
he o
rgan
izat
ion.
Both
bus
ines
s an
d so
ciet
al v
alue
s sh
ould
be
artic
ulat
ed f
or e
ach
pote
ntia
l obj
ectiv
e(s)
de
velo
ped
for
each
mat
eria
l iss
ue. I
n as
sess
ing
the
busi
ness
val
ue, o
ne s
houl
d co
nsid
er w
heth
er a
po
tent
ial o
bjec
tive
supp
orts
the
bus
ines
s st
rate
gy.
Less
tan
gibl
e ef
fect
s, s
uch
as b
rand
imag
e an
d im
prov
ed r
eput
atio
n, s
houl
d al
so b
e co
nsid
ered
. Th
e ca
se e
xam
ple
by D
ow C
hem
ical
Com
pany
ill
ustr
ates
how
goa
ls a
nd m
etric
s ar
e de
velo
ped
to
supp
ort
a co
mpa
ny’s
busi
ness
mis
sion
.
Soci
etal
val
ues
are
unde
rsto
od b
road
ly a
s be
nefit
s th
e or
gani
zatio
n ca
n br
ing
to s
ocie
ty,
the
envi
ronm
ent
and
the
larg
er e
cono
mic
sys
tem
th
roug
h m
eetin
g th
e po
tent
ial o
bjec
tives
.
Valu
e pr
opos
ition
is t
he m
ost
impo
rtan
t co
nsid
erat
ion
in d
eter
min
ing
whe
ther
a p
oten
tial
obje
ctiv
e sh
ould
be
sele
cted
as
a ke
y ob
ject
ive.
Th
ese
pote
ntia
l val
ues
can
be r
egar
ded
as t
he fi
nal
scre
en o
f m
ater
ialit
y th
at c
onso
lidat
es t
he f
our
crite
ria d
iscu
ssed
ear
lier
in t
he s
tep.
31
6H
ow
to
Ass
ure
Eff
ect
iven
ess
5H
ow
to
Ass
ure
Eff
ect
iven
ess
4W
hat
an
d H
ow
toM
easu
re3
Wh
at
is
Mate
rial
2W
hat
is
Mate
rial
1W
hat
is
Mate
rial
3.
Develo
p K
ey O
bje
ctiv
es
Sele
ctin
g t
he
Key
Ob
ject
ives
–
Wo
rksh
eet
3bW
orks
heet
3b
(on
page
32)
pro
vide
s a
tem
plat
e fo
r do
cum
entin
g th
e co
nsid
erat
ions
tha
t go
into
th
e se
lect
ion
of a
key
obj
ectiv
e. B
egin
ning
with
th
e m
ater
ial i
ssue
s id
entifi
ed in
Wor
kshe
et 3
a,
a st
epw
ise
anal
ysis
of
the
rele
vant
com
pone
nts,
po
tent
ial o
bjec
tives
and
val
ue p
ropo
sitio
ns is
pe
rfor
med
and
doc
umen
ted
in W
orks
heet
3b.
To b
e se
lect
ed a
s a
key
obje
ctiv
e, a
pot
entia
l ob
ject
ive
mus
t pr
esen
t a
clea
r va
lue
prop
ositi
on.
The
key
obje
ctiv
es s
houl
d be
few
in n
umbe
r, re
pres
entin
g th
e cr
itica
l few
are
as w
here
the
or
gani
zatio
n w
ill f
ocus
its
atte
ntio
n an
d ef
fort
s.
Inte
rrel
ated
issu
es c
an o
ften
be
addr
esse
d th
roug
h on
e ke
y ob
ject
ive.
A p
oten
tial o
bjec
tive
may
not
be
sele
cted
as
a ke
y ob
ject
ive
for
a va
riety
of
reas
ons,
incl
udin
g:
•la
ck o
f cl
ear
busi
ness
or
soci
etal
val
ue
•le
ss im
med
iate
val
ue c
ompa
red
to o
ther
po
tent
ial o
bjec
tives
, and
thu
s po
stpo
ned
for
futu
re c
onsi
dera
tions
•ac
hiev
able
as
part
of
addr
essi
ng a
noth
er
mat
eria
l iss
ue t
hat
has
been
sel
ecte
d as
a k
ey
obje
ctiv
e an
d ca
n be
incl
uded
as
a lo
wer
-leve
l (m
ore
tact
ical
) obj
ectiv
e
•in
abili
ty o
f th
e bu
sine
ss t
o in
fluen
ce it
Com
ple
ting S
tep 3
res
ults
in t
he
prioritiza
tion
of
mat
eria
l iss
ues
and s
elec
tion o
f ke
y obje
ctiv
es f
or
whic
h K
PIs,
met
rics
and t
arget
s ar
e to
be
dev
eloped
.
EAG
Per
spec
tive
Ho
w C
an
On
e A
lig
n
En
vir
on
men
tal,
So
cial
an
d B
usi
ness
Valu
es?
The
com
mun
ity, e
nviro
nmen
t an
d pr
ivat
e se
ctor
all
bene
fit w
hen
busi
ness
and
su
stai
nabi
lity
inte
rest
s ar
e th
e sa
me.
Pau
l Te
bo, f
orm
erly
of
DuP
ont,
exp
lore
s ho
w
to u
nlea
sh t
he p
ower
of
sust
aina
bilit
y th
inki
ng in
bus
ines
s by
alig
ning
bus
ines
s ob
ject
ives
and
env
ironm
enta
l and
soc
ial
valu
es. T
he a
ppro
ach,
out
lined
onl
ine
at
w
ww
.gem
i.org
/met
rics
nav
igat
or,
will
in
tegr
ate
sust
aina
bilit
y in
to a
ll as
pect
sof
bus
ines
s.
32
6H
ow
to
Ass
ure
Eff
ect
iven
ess
5H
ow
to
Ass
ure
Eff
ect
iven
ess
4W
hat
an
d H
ow
toM
easu
re3
Wh
at
is
Mate
rial
2W
hat
is
Mate
rial
1W
hat
is
Mate
rial
WO
RK
SHEE
T 3
b: S
ELEC
T K
EY O
BJE
CTI
VES
(XY
Z N
utrit
iona
l Bev
erag
e Ex
ampl
e)
INST
RU
CTI
ON
S: D
ocum
ent
cons
ider
atio
ns t
hat
lead
to
the
sele
ctio
n of
key
obj
ectiv
es (i
n b
old
), in
clud
ing
the
listin
g of
:•
Mat
eria
l Iss
ue: ‘
high
’ and
‘med
ium
’ mat
eria
l iss
ues
from
Wor
kshe
et 3
a•
Rele
vant
Com
pone
nts:
fac
tors
tha
t in
fluen
ce t
he m
ater
ial i
ssue
or
the
orga
niza
tion’
s im
pact
on
the
mat
eria
l iss
ue•
Pote
ntia
l Obj
ectiv
e: o
bjec
tive(
s) o
r go
al(s
) to
be a
chie
ved
in a
ddre
ssin
g ea
ch m
ater
ial i
ssue
•Va
lue
Prop
ositi
on: b
usin
ess
and
soci
etal
val
ue o
f th
e po
tent
ial o
bjec
tives
VA
LUE
CH
AIN
STA
GES
:S
= S
uppl
y; C
= C
ompa
ny O
pera
tions
; D =
Dis
trib
utio
n; U
= C
usto
mer
Use
of
Prod
uct
/ Ser
vice
; E =
End
of
Life
Mat
eria
lIs
sue
Rel
evan
t C
om
po
nen
tsPo
ten
tial
Ob
ject
ive
Val
ue
Pro
po
siti
on
Sele
ct a
s K
ey
Ob
ject
ive?
Bu
sin
ess
Val
ue
Soci
etal
Val
ue
Educ
atio
nal
outr
each
(U, E
)
•La
ck o
f aw
aren
ess
of h
ealth
y di
et,
espe
cial
ly a
mon
g sc
hool
chi
ldre
n•
Lack
of
awar
enes
s of
recy
clin
g,
how
& w
hy
Incr
ease
invo
lvem
ent
in
educ
atio
nal o
utre
ach
prog
ram
s fo
r sc
hool
chi
ldre
n
•A
cces
s to
key
m
arke
t dem
ogra
phic
•Br
and
valu
e
•Pr
omot
e he
alth
y di
et
•Pr
omot
e re
duct
ion
of
pack
agin
g &
rec
yclin
g
No;
whi
le im
port
ant,
it is
par
t of
the
obj
ectiv
e of
bec
omin
g a
prov
ider
of
choi
ce f
or
scho
ol b
reak
fast
bev
erag
e
GH
Gem
issi
ons
(S, C
, D)
•En
ergy
use
•U
se o
f al
tern
ativ
e en
ergy
•Be
st-p
ract
ice
tech
nolo
gies
•En
ergy
cos
t•
Publ
ic c
once
rn o
n G
HG
em
issi
ons
Red
uce
GH
G e
mis
sio
ns
alo
ng
val
ue
chai
n•
Redu
ce e
nerg
y co
st in
va
lue
chai
n•
Mar
ketin
g be
nefit
s
•C
ontr
ibut
ing
to e
nerg
y se
curit
y•
Soci
etal
ben
efits
ass
ocia
ted
with
GH
G r
educ
tion;
red
uctio
n in
glo
bal c
limat
e ch
ange
Yes;
sig
nific
ant
bene
fits
& a
ddre
sses
mul
tiple
issu
es
Use
of
alte
rnat
ive
ener
gy(S
, C, D
)
•En
ergy
use
•G
HG
em
issi
ons
•En
ergy
cos
t•
Publ
ic c
once
rn o
n G
HG
em
issi
ons
Incr
ease
use
of
alte
rnat
ive
ener
gy
sou
rces
•C
ost,
may
dec
reas
e or
in
crea
se•
Mar
ketin
g be
nefit
s
•C
ontr
ibut
ing
to e
nerg
y se
curit
y•
Soci
etal
ben
efits
ass
ocia
ted
with
GH
G r
educ
tion;
red
uctio
n in
glo
bal c
limat
e ch
ange
No;
it is
a s
uppo
rtin
g ob
ject
ive
unde
r th
e ke
y ob
ject
ive,
GH
G r
educ
tion
Org
anic
prod
ucts
(S, U
)
•Fa
rmin
g ru
noff
s•
Loca
l eco
nom
ic d
evel
opm
ent
(rur
al c
omm
uniti
es)
•M
arke
t fo
r or
gani
c pr
oduc
ts
Incr
ease
org
anic
pro
duct
po
rtfo
lio a
nd s
ales
•C
aptu
re a
fas
t gr
owin
g fo
od &
be
vera
ge m
arke
t•
Mar
ketin
g be
nefit
s
•Re
duce
env
ironm
enta
l im
pact
s fr
om fa
rmin
g•
Incr
ease
jobs
in ru
ral A
mer
ica
Yes;
sig
nific
ant
bene
fits
& a
ddre
sses
mul
tiple
m
ater
ial i
ssue
s
Nut
ritio
nco
nten
t(U
)
•M
arke
t fo
r ba
lanc
ed
nutr
ition
pro
duct
s•
Con
cern
ove
r ch
ildre
n’s
nutr
ition
, esp
ecia
lly in
pub
lic s
choo
l
Dev
elop
soy
-bas
ed d
ieta
ry
supp
lem
ent
beve
rage
s•
Cap
ture
a p
oten
tially
de
velo
ping
mar
ket
•A
die
tary
sup
plem
ent
choi
ce
for
lact
ose
into
lera
nt p
erso
nsN
o; s
igni
fican
ce o
f be
nefit
s un
clea
r
Bec
om
e p
rovi
der
of
cho
ice
of
bal
ance
dn
utr
itio
nal
bre
akfa
stp
rod
uct
s fo
r ch
ildre
n
•G
row
th in
key
m
arke
t de
mog
raph
ic•
Bran
d va
lue
•A
ddre
ss la
ck o
f he
alth
y ch
oice
for
chi
ldre
n, e
spec
ially
sc
hool
child
ren
Yes;
sig
nific
ant
bene
fits
to
busi
ness
and
soc
iety
33
STE
P 4
Exp
ecte
d O
utc
om
es•
Es
tabl
ishe
d se
t of
Key
Perf
orm
ance
Indi
cato
r (K
PIs)
•
Und
erst
andi
ng o
f us
es a
nd
user
s of
met
rics
•
Mea
sure
men
ts t
hat
defin
e an
d su
ppor
t K
PIs
•
Cle
ar ta
rget
s fo
r the
met
rics
Step
4 b
uild
s up
on t
he c
ritic
al f
ew k
ey o
bjec
tives
se
lect
ed in
Ste
p 3
and
crea
tes
the
Key
Per
form
ance
In
dica
tors
(KPI
s) a
nd r
elat
ed s
trat
egic
met
rics.
For
purp
oses
of
this
too
l, G
EMI d
efine
s a
KPI
as
a ge
nera
l sta
tem
ent
of w
hat
to m
easu
re; a
nd a
m
etric
as
the
spec
ific
mea
sure
men
t ac
com
pani
ed
by c
lear
des
crip
tions
of
how
it is
mea
sure
d.
KPI
s an
d m
etric
s ar
e cl
osel
y re
late
d, b
ut t
hey
repr
esen
t tw
o di
stin
ct le
vels
. A K
PI c
an b
e de
fined
to
rep
rese
nt w
hat
the
orga
niza
tion
shou
ld m
easu
re
to r
eflec
t pe
rfor
man
ce a
gain
st a
key
obj
ectiv
e. A
m
etric
is a
qua
ntita
tive
mea
sure
, i.e
., a
num
ber
whi
ch is
giv
en m
eani
ng in
the
con
text
of
the
KPI
.A
KPI
can
be
appl
ied
cons
iste
ntly
thr
ough
out
the
orga
niza
tion,
but
as
a m
etric
can
be
expr
esse
d di
ffer
ently
dep
endi
ng o
n us
es a
nd u
sers
.
The
proc
ess
for
defin
ing
KPI
s an
d m
etric
s is
de
pict
ed in
Fig
ure
5, w
ith a
n ex
ampl
e. A
t th
e st
rate
gic
leve
l, m
ater
ial i
ssue
s an
d ke
y ob
ject
ives
de
term
ine
the
KPI
s an
d m
etric
s al
ong
with
the
ir as
soci
ated
tar
gets
. The
se s
trat
egic
-leve
l met
rics
are
used
to
driv
e ac
tions
thr
ough
out
the
orga
niza
tion
and
will
res
ult
in b
usin
ess
and
soci
etal
co
nseq
uenc
es, i
nclu
ding
long
er-t
erm
eff
ects
. Mor
e ta
ctic
al m
etric
s ca
n be
dev
elop
ed t
o tr
ack
the
imm
edia
te a
ctio
ns.
The
cons
eque
nces
of
appl
ying
th
e m
etric
s an
d/or
mee
ting
the
targ
ets
can
also
be
mea
sure
d, p
oten
tially
bec
omin
g ne
w m
etric
s,
to in
form
the
refi
nem
ent
and
deve
lopm
ent
of t
he
next
gen
erat
ion
of k
ey o
bjec
tives
and
KPI
s.
This
too
l is
focu
sed
prim
arily
on
KPI
s an
d m
etric
s at
the
str
ateg
ic le
vel,
refle
ctin
g th
e cr
itica
l few
ke
y ob
ject
ives
mos
t m
ater
ial t
o th
e or
gani
zatio
n.
Nev
erth
eles
s, t
he a
ppro
ach
pres
ente
d he
re c
an
be a
pplie
d at
var
ious
leve
ls o
f us
es, f
rom
str
ateg
ic
to t
actic
al.
Fig
ure
5. D
efin
ing
Key
Per
form
ance
Ind
icat
ors
an
d M
etri
cs
Exam
ple
:
INFO
RM
Mat
eria
lIs
sue
Key
Ob
ject
ives
KPI
Met
rics
&
Targ
ets
Act
ion
Act
ion
Act
ion
MET
RIC
S
1. Im
prov
e sa
larie
s &
con
ditio
ns
in A
sia
2. R
evis
it m
ater
nity
ben
efits
in
Latin
Am
eric
a3.
Mai
ntai
n sa
lary
& b
enefi
t le
vel
in N
orth
Am
eric
a &
Eur
ope
Att
ract
ing
&
reta
inin
g be
st
empl
oyee
s
Off
er c
ompe
titiv
e sa
lary
& b
enefi
tsRa
nkin
g of
sal
ary
&
bene
fits
rela
tive
to
peer
s
Med
ian
sala
ry &
be
nefit
s to
be
at
top
quar
tile
in
indu
stry
Met
rics
Co
nse
qu
ence
s
1. R
eten
tion
2. E
mpl
oyee
sat
isfa
ctio
n in
dex
4.
Defi
ne K
ey P
erf
orm
an
ce I
nd
icato
rs a
nd
Metr
ics
6H
ow
to
Ass
ure
Eff
ect
iven
ess
5H
ow
to
Ass
ure
Eff
ect
iven
ess
4W
hat
an
d H
ow
toM
easu
re3
Wh
at
is
Mate
rial
2W
hat
is
Mate
rial
1W
hat
is
Mate
rial
34
Fram
ewo
rk f
or
Mea
sure
men
t C
on
sid
erat
ion
sC
onsi
derin
g dr
iver
s an
d co
nseq
uenc
es a
s pa
rt
of t
he K
PIs
and
met
rics
help
s de
velo
p le
adin
g m
easu
rem
ents
as
wel
l as
mea
sure
men
ts o
f ac
hiev
ing
the
key
obje
ctiv
es. D
river
s in
clud
e pr
oces
ses,
act
ions
and
oth
er f
acto
rs t
hat
lead
to
the
inte
nded
out
com
e. F
or e
xam
ple,
usi
ng
rene
wab
le e
nerg
y so
urce
s ca
n re
duce
GH
G
emis
sion
s, a
nd t
hus,
can
be
rega
rded
as
one
of
the
driv
ers
that
aff
ect
that
inte
nded
out
com
e.
Con
sequ
ence
s in
clud
e im
med
iate
, med
ium
-ter
m
and
long
-ter
m e
ffec
ts o
f ac
hiev
ing
the
inte
nded
ou
tcom
e. E
nerg
y co
st a
void
ance
, for
exa
mpl
e, is
an im
med
iate
con
sequ
ence
of
redu
cing
ene
rgy
use.
Lon
ger-
term
con
sequ
ence
s in
clud
e po
tent
ial
inno
vatio
ns in
tec
hnol
ogy
deve
lopm
ent
and
busi
ness
mod
els,
alo
ng w
ith t
he a
ssoc
iate
d be
nefit
s to
the
soc
iety
suc
h as
red
uctio
n in
G
HG
s. S
ome
of t
he c
onse
quen
ces
deriv
ed f
rom
th
e bu
sine
ss a
nd s
ocie
tal v
alue
s ar
e id
entifi
ed in
W
orks
heet
3b
(on
page
32)
.
A K
PI t
ypic
ally
mea
sure
s th
e ou
tcom
e or
res
ult
inte
nded
by
the
key
obje
ctiv
e. It
is s
omet
imes
us
eful
to
esta
blis
h m
easu
rem
ents
for
eith
er t
he
driv
ers
or c
onse
quen
ces
of t
he o
utco
mes
as
part
of
the
org
aniz
atio
n’s
syst
em o
f K
PIs
and
met
rics.
Defi
nin
g t
he
Key
Per
form
ance
In
dic
ato
rs –
Wo
rksh
eet
4aW
orks
heet
4a
prov
ides
the
tem
plat
e fo
r ex
amin
ing
driv
ers
and
cons
eque
nces
in o
rder
to
defin
e th
e K
PIs
and
iden
tify
othe
r m
easu
rem
ent
cons
ider
atio
ns t
hat
late
r ar
e de
velo
ped
into
m
etric
s.
Whi
le a
KPI
is u
sual
ly a
n ou
tcom
e m
easu
re d
eriv
ed
from
the
key
obj
ectiv
e, t
hat
is n
ot a
lway
s th
e ca
se.
If ne
cess
ary,
mor
e th
an o
ne K
PI c
an b
e de
fined
for
a
key
obje
ctiv
e.
WO
RK
SHEE
T 4a
: DEF
INE
THE
KEY
PER
FOR
MA
NC
E IN
DIC
ATO
RS
(XY
Z N
utrit
iona
l Bev
erag
e Ex
ampl
e)
INST
RU
CTI
ON
S:Id
entif
y th
e dr
iver
s th
at a
ffec
t th
e ke
y ob
ject
ive
and
pote
ntia
l con
sequ
ence
s (f
or t
he b
usin
ess
and
for
soci
ety)
in m
eetin
g th
e ke
y ob
ject
ive.
This
info
rmat
ion
info
rms
the
deci
sion
as
to w
hat
to t
rack
as
KPI
s. In
dica
te o
ther
mea
sure
men
t co
nsid
erat
ions
rel
ated
to
the
KPI
tha
t ca
n be
dev
elop
ed in
to m
etric
s in
late
r st
ages
. K
ey O
bjec
tives
wer
e id
entifi
ed e
arlie
r in
Wor
kshe
et 3
b.
Mat
eria
lIs
sue
Key
Ob
ject
ive
Dri
vers
Co
nse
qu
ence
sK
ey P
erfo
rman
ce
Ind
icat
or
(KPI
)O
ther
Mea
sure
men
t C
on
sid
erat
ion
s
GH
Gem
issi
ons
(S, C
, D)
Redu
ce G
HG
em
issi
ons
alon
g va
lue
chai
n
•En
ergy
effi
cien
cy•
Use
of
rene
wab
le e
nerg
y•
Impl
emen
tatio
n of
bes
t pr
actic
e te
chno
logy
and
pro
cess
es
•En
ergy
cos
t re
duct
ion
•In
nova
tions
: tec
hnol
ogy
&
bus
ines
s m
odel
•En
ergy
cos
t re
duct
ion
•In
nova
tions
:te
chno
logy
&
busi
ness
mod
el
•Pe
rcen
t en
ergy
fro
m
rene
wab
le r
esou
rces
•Be
st p
ract
ice
impl
emen
tatio
n•
Ener
gy c
ost-
savi
ng
Org
anic
prod
ucts
(S, U
)
Incr
ease
org
anic
pr
oduc
t po
rtfo
lio
and
sale
s
•N
ew o
rgan
ic p
rodu
ct
deve
lopm
ent
•M
arke
ting
of o
rgan
ic p
rodu
cts
•Re
latio
nshi
p w
ith o
rgan
ic
farm
ers
•In
crea
sed
sale
s•
Bran
d im
age
•D
rivin
g m
ore
sust
aina
ble
agric
ultu
re
•Pe
rcen
t re
venu
e fr
om o
rgan
ic
prod
ucts
•Im
plem
enta
tion
of o
rgan
ic
farm
ers
prog
ram
•C
usto
mer
per
cept
ion
•A
void
ance
in p
estic
ide
run-
offs
Nut
ritio
nco
nten
t(U
)
Beco
me
prov
ider
of
choi
ce o
f ba
lanc
ed-
nutr
ition
al b
reak
fast
pr
oduc
ts f
or c
hild
ren
•C
hild
ren
nutr
ition
aw
aren
ess
cam
paig
n at
sch
ools
•N
utrit
ion
cont
ent
in p
rodu
cts
•In
crea
sed
sale
s•
Bran
d im
age
•C
ontr
ibut
ing
to
c
hild
ren’
s he
alth
•Sc
hool
chi
ldre
n re
ache
d in
nut
ritio
n aw
aren
ess
cam
paig
n•
Nut
ritio
n co
nten
t
6H
ow
to
Ass
ure
Eff
ect
iven
ess
5H
ow
to
Ass
ure
Eff
ect
iven
ess
4W
hat
an
d H
ow
toM
easu
re3
Wh
at
is
Mate
rial
2W
hat
is
Mate
rial
1W
hat
is
Mate
rial
35
The
exam
ples
incl
uded
in W
orks
heet
4a
cont
inue
fr
om t
he k
ey o
bjec
tives
iden
tified
in W
orks
heet
3b
for
the
hyp
othe
tical
‘XY
Z N
utrit
iona
l Bev
erag
e’
busi
ness
. For
the
GH
G r
educ
tion
obje
ctiv
es, t
wo
KPI
s w
ere
dete
rmin
ed t
o be
equ
ally
impo
rtan
t:
net
GH
G e
mis
sion
s (a
n ou
tcom
e m
easu
re) a
nd
ener
gy u
se (a
driv
er f
or G
HG
em
issi
ons)
. Fo
r th
e ob
ject
ive
of b
ecom
ing
the
prov
ider
of
choi
ce f
or
bala
nced
-nut
ritio
nal b
reak
fast
for
chi
ldre
n, t
he K
PI
is c
hose
n to
refl
ect
one
of t
he c
ausa
l fac
tors
, i.e
., th
e nu
mbe
r of
sch
oolc
hild
ren
reac
hed
in n
utrit
ion
awar
enes
s ca
mpa
ign.
In t
his
case
, the
driv
er w
as
cons
ider
ed t
he c
ritic
al p
art
of m
eetin
g th
e ke
y ob
ject
ive
as w
ell a
s m
ore
suita
ble
to m
easu
re.
KPIs
and
othe
r mea
sure
men
t con
sider
atio
ns id
entifi
ed
in W
orks
heet
4a
info
rm th
e de
velo
pmen
t of m
etric
s fo
r var
ious
use
s an
d us
ers
in th
e or
gani
zatio
n.
Use
s an
d U
sers
of
Met
rics
The
uses
and
use
rs o
f m
etric
s in
fluen
ce h
ow t
hey
are
defin
ed. M
etric
s by
the
mse
lves
mea
n lit
tle o
utsi
de
of t
he c
onte
xt o
f ho
w t
hey
will
be
used
to
impr
ove
perf
orm
ance
and
org
aniz
atio
nal i
nteg
ratio
n.
Tabl
e 2
lists
the
var
ious
use
s of
met
rics
whi
ch
gene
rally
are
gro
uped
into
fou
r ca
tego
ries
(13):
•le
arni
ng –
pro
duce
und
erst
andi
ng a
nd in
sigh
ts
into
opp
ortu
nitie
s fo
r im
prov
emen
t t
hrou
gh
the
iden
tifica
tion
and
asse
ssm
ent
of a
spec
ts,
impa
cts
and
issu
es
•de
cisi
on-m
akin
g –
gen
erat
e in
sigh
ts t
o su
ppor
t de
cisi
on-m
akin
g
•ac
coun
tabi
lity
– pr
ovid
e in
form
atio
n to
judg
e in
divi
dual
s’ o
r un
its’ p
erfo
rman
ce
•de
mon
stra
tion
– co
nvin
ce o
r re
assu
re s
take
hold
ers
abou
t or
gani
zatio
n’s
perf
orm
ance
and
tre
nds,
in
clud
ing
dem
onst
ratin
g th
e co
nnec
tion
betw
een
envi
ronm
enta
l, so
cial
and
fina
ncia
l per
form
ance
Met
rics
can
be u
sed
by s
ever
al f
unct
iona
l are
as in
th
e or
gani
zatio
n as
sho
wn
in T
able
2.
In S
tep
2,
exam
ples
dem
onst
rate
d ho
w d
ecis
ions
are
mad
e in
num
erou
s fu
nctio
nal a
reas
usi
ng e
nviro
nmen
tal,
soci
al a
nd e
cono
mic
info
rmat
ion.
In
dete
rmin
ing
who
will
use
the
met
rics
cons
ider
:
•w
here
with
in t
he o
rgan
izat
ion
deci
sion
s in
volv
ing
KPI
s ar
e m
ade
•w
hich
peo
ple
are
resp
onsi
ble
for
mee
ting
the
key
obje
ctiv
e
•w
hat
info
rmat
ion
will
be
need
ed t
o in
form
th
ose
deci
sion
s
Tab
le 2
. EX
AM
PLES
OF
USE
S A
ND
USE
RS
OF
MET
RIC
S
Use
s o
f M
etri
csM
anag
emen
tO
per
atio
ns
Fin
anci
alEn
viro
nm
ent
Hea
lth
Saf
ety
Res
earc
h a
nd
Dev
elo
pm
ent
Hu
man
Res
ou
rces
Pub
licR
elat
ion
sIn
vest
or
Rel
atio
ns
Lear
nin
g•
Benc
hmar
k In
tern
ally
•Ev
alua
te A
ltern
ativ
es
Dec
isio
n-M
akin
g•
Iden
tify
Impr
ovem
ent
Opt
ions
Acc
ou
nta
bili
ty•
Repo
rt t
o St
akeh
olde
rs
•Tr
ack
Perf
orm
ance
Dem
on
stra
tio
n•
Build
the
Bus
ines
s C
ase
•Pr
omot
e SD
6H
ow
to
Ass
ure
Eff
ect
iven
ess
5H
ow
to
Ass
ure
Eff
ect
iven
ess
4W
hat
an
d H
ow
toM
easu
re3
Wh
at
is
Mate
rial
2W
hat
is
Mate
rial
1W
hat
is
Mate
rial
4.
Defi
ne K
ey P
erf
orm
an
ce I
nd
icato
rs a
nd
Metr
ics
36
How
a m
etric
is d
efine
d an
d pr
esen
ted,
how
ever
, ca
n di
ffer
am
ong
uses
and
use
rs. M
etric
s us
ed
for
man
agem
ent
prog
ress
tra
ckin
g, e
xter
nal
com
mun
icat
ion
and
Rese
arch
& D
evel
opm
ent
deci
sion
-mak
ing,
for
exa
mpl
e, m
ay in
volv
e di
ffer
ent
defin
ition
s in
ter
ms
of b
ound
arie
s, d
ata
sour
ces
and
leve
l of
spec
ifici
ty.
Typ
es o
f M
etri
csTh
e fr
amew
ork
desc
ribed
ear
lier
prov
ides
a w
ay
to c
ateg
oriz
e th
e ty
pes
of m
etric
s. D
escr
iptio
ns o
f th
ese
cate
gorie
s fo
llow
and
exa
mpl
es a
re s
how
n in
Tab
le 3
(on
page
37)
.
Out
com
e M
etri
csO
utc
om
e m
etri
cs a
re m
easu
rem
ents
of
resu
lts.
Man
y of
the
exi
stin
g m
etric
s st
anda
rds,
suc
h as
th
e G
loba
l Rep
ortin
g In
itiat
ive
(GRI
), ha
ve la
rgel
y fo
cuse
d on
out
com
e m
etric
s. O
utco
me
met
rics
typi
cally
incl
ude:
•O
ne-d
imen
sion
al m
etric
s -
ofte
n ex
pres
sed
as
the
abso
lute
mag
nitu
de o
f th
e or
gani
zatio
n’s
impa
cts
per
time
perio
d
•C
ross
-cut
ting
met
rics
(Inte
grat
ed P
erfo
rman
ce
Met
rics)
- e
xpre
ss t
wo
or m
ore
dim
ensi
ons
of
perf
orm
ance
, usu
ally
as
ratio
s. E
co-e
ffici
ency
and
so
cio-
effic
ienc
y m
etric
s ar
e ex
ampl
es o
f cr
oss-
cutt
ing
indi
cato
rs
Both
one
-dim
ensi
onal
and
cro
ss-c
uttin
g m
etric
s ca
n be
eff
ectiv
e m
easu
rem
ents
of
outc
omes
. Th
e ch
oice
is b
ased
larg
ely
on w
hat
it is
to
be
mea
sure
d. A
KPI
usu
ally
poi
nts
to a
n ou
tcom
e m
etric
, mea
surin
g th
e ou
tcom
e in
tend
ed b
y th
e ke
y ob
ject
ive.
Pro
cess
Met
rics
Pro
cess
met
rics
mea
sure
the
act
ions
or
proc
esse
s th
at d
rive
the
inte
nded
out
com
es i.
e.,t
he c
ause
s,
and
are
usua
lly t
ied
to t
he a
ctio
n pl
ans
to a
chie
ve
targ
ets.
The
y in
clud
e m
etric
s th
at m
easu
re t
he
perf
orm
ance
of
man
agem
ent
proc
esse
s as
wel
l as
tech
nica
l and
ope
ratio
nal p
roce
sses
put
in p
lace
to
prod
uce
the
inte
nded
out
com
es.
Proc
ess
met
rics
can
be u
sed
as e
ffec
tive
lead
ing
met
rics.
For
exa
mpl
e, if
the
per
form
ance
obj
ectiv
e fo
r an
org
aniz
atio
n is
to
redu
ce t
he n
umbe
r of
no
n-co
mpl
ianc
e co
mpl
aint
s, t
he o
utco
me
met
ric
is t
he n
umbe
r of
non
-com
plia
nce
com
plai
nts.
H
owev
er, a
cau
se-e
ffec
t an
alys
is m
ight
rev
eal t
hat
lack
of
appr
opria
te t
rain
ing
is t
he d
river
of
non-
com
plia
nce.
In t
his
case
, an
appr
opria
te p
roce
ss
met
ric m
ight
incl
ude
the
num
ber
of e
mpl
oyee
s th
at
have
rec
eive
d co
mpl
ianc
e tr
aini
ng o
r th
e nu
mbe
r of
em
ploy
ees
who
hav
e ch
ange
d th
eir
beha
vior
as
a re
sult
of t
rain
ing.
Thi
s pr
oces
s m
etric
, in
addi
tion
to
the
outc
ome
met
ric, w
ill p
rovi
de t
he o
rgan
izat
ion
with
gre
ater
insi
ght
into
the
mat
eria
l iss
ue a
nd t
he
actio
ns t
o ac
hiev
e ob
ject
ives
.
Proc
ess
met
rics
can
be q
uant
itativ
e or
qu
alita
tive.
For
exa
mpl
e, in
mea
surin
g th
e pr
oces
s of
sta
keho
lder
eng
agem
ent,
one
can
us
e qu
antit
ativ
e m
easu
rem
ents
, suc
h as
the
nu
mbe
r of
sta
keho
lder
s en
gage
d, o
r qu
alita
tive
mea
sure
men
ts, s
uch
as s
take
hold
er s
atis
fact
ion
and
perc
eive
d ef
fect
iven
ess.
Co
nse
qu
ence
Met
rics
Co
nse
qu
ence
met
rics
refl
ect
the
cons
eque
nces
or
eff
ects
on
the
broa
der
syst
em o
f th
e in
tend
ed
outc
omes
. The
se t
ypes
of
met
rics
may
incl
ude:
•Bu
sine
ss c
onse
quen
ce m
etric
s m
easu
re t
he
busi
ness
and
fina
ncia
l con
sequ
ence
s of
th
e in
tend
ed o
utco
mes
. The
se c
an c
aptu
re
bene
fits
to t
he o
rgan
izat
ion,
bot
h ta
ngib
le a
nd
inta
ngib
le. F
or e
xam
ple,
an
ethi
cal r
eput
atio
n in
dex
can
info
rm a
n or
gani
zatio
n ho
w it
s bu
sine
ss is
per
ceiv
ed.
•So
ciet
al c
onse
quen
ce m
etric
s co
nnec
t ac
tions
an
d ac
tiviti
es t
o th
e br
oade
r ec
onom
ic,
envi
ronm
enta
l and
soc
ial s
yste
ms
with
in
whi
ch t
hey
oper
ate.
An
exam
ple
of a
soc
ieta
l va
lue
met
ric m
ight
be
the
num
ber
of a
cres
of
habi
tat
an o
rgan
izat
ion
crea
ted
in p
ropo
rtio
n to
the
num
ber
of a
cres
of
habi
tat
crea
ted
in
the
regi
on.
Exam
ples
of
the
diff
eren
t ty
pes
of m
etric
s ar
e sh
own
in T
able
3.
All
type
s of
met
rics
have
the
pot
entia
l to
be
rele
vant
to
mos
t us
es a
nd u
sers
, so
they
sho
uld
all
be c
onsi
dere
d in
bui
ldin
g th
e m
etric
s. H
owev
er,
cert
ain
type
s ar
e m
ore
appl
icab
le t
o ce
rtai
n us
es.
For
exam
ple,
Res
earc
h &
Dev
elop
men
t de
cisi
on-
mak
ing
typi
cally
rel
ies
on o
utco
me
and,
to
a le
sser
ex
tent
, con
sequ
ence
met
rics.
Pro
cess
met
rics,
on
the
othe
r ha
nd, a
re u
sefu
l to
man
age
and
trac
k pr
ogre
ss t
owar
ds g
oals
, i.e
., ac
coun
tabi
lity,
alo
ng
with
out
com
e m
etric
s.
Con
sequ
ence
met
rics
are
part
icul
arly
use
ful i
n de
mon
stra
ting
the
valu
e of
an
orga
niza
tion’
s ef
fort
s. C
ase
exam
ples
by
The
Proc
ter
& G
ambl
e C
ompa
ny a
nd In
tel C
orpo
ratio
n (o
n pa
ge 3
8)
prov
ide
exam
ples
of
met
rics
that
may
be
used
to
man
age,
tra
ck a
nd c
omm
unic
ate
a co
mpa
ny’s
impa
cts
on t
he s
ocie
ty.
6H
ow
to
Ass
ure
Eff
ect
iven
ess
5H
ow
to
Ass
ure
Eff
ect
iven
ess
4W
hat
an
d H
ow
toM
easu
re3
Wh
at
is
Mate
rial
2W
hat
is
Mate
rial
1W
hat
is
Mate
rial
37
TAB
LE 3
. EX
AM
PLES
OF
ENV
IRO
NM
ENTA
L, S
OC
IAL
AN
D E
CO
NO
MIC
MET
RIC
S
Met
ric
Typ
esEn
viro
nm
enta
lSo
cial
Eco
no
mic
Ou
tco
me
One
-dim
ensi
onal
•En
ergy
con
sum
ptio
n pe
r ye
ar•
Perc
ent
raw
mat
eria
ls r
ecyc
led
fr
om c
usto
mer
s
•Lo
st-t
ime
inci
dent
fre
quen
cy•
Com
mun
ity p
erce
ptio
n in
dex
•D
olla
rs in
sal
arie
s an
d ta
x be
nefit
s flo
win
g to
the
lo
cal c
omm
unity
Cro
ss-c
uttin
g•
Ener
gy c
onsu
mpt
ion
per
unit
of v
alue
add
•To
tal r
aw m
ater
ials
per
uni
t of
val
ue a
dd•
Num
ber
of c
omm
unity
com
plai
nts
per
unit
of v
alue
add
to
the
com
pany
•Ec
onom
ic b
enefi
ts t
o th
e co
mm
unity
per
uni
t of
va
lue
add
to t
he c
ompa
ny
Pro
cess
Man
agem
ent
& O
pera
tions
•N
umbe
r of
ene
rgy
revi
ew
ac
tiviti
es c
ondu
cted
•Pe
rcen
t fa
cilit
ies
part
icip
atin
g in
res
ourc
e-ef
ficie
ncy
trai
ning
•In
corp
orat
ion
of e
nerg
y-ef
ficie
nt
tech
nolo
gies
in f
acili
ties
•Pe
rcen
t of
bus
ines
s un
its t
hat
have
hum
an
right
s po
licy
and
proc
edur
es r
egar
ding
ch
ild la
bor
•N
umbe
r or
per
cent
of
cont
ract
ors
and
supp
liers
aud
ited
for
use
of c
hild
labo
r
•N
umbe
r of
exe
cutiv
e re
view
mee
tings
on
soci
oeco
nom
ic r
isks
and
cha
lleng
es
Co
nse
qu
ence
Busi
ness
•C
ost
redu
ctio
n fr
om e
nerg
y
sav
ings
pro
gram
•Em
ploy
ee r
eten
tion
inde
x •
Repu
tatio
n in
dex
•Po
tent
ial c
ost
of le
gal l
iabi
lity
rela
ted
to
com
mun
ity a
ctio
ns
Soci
etal
•La
nd a
rea
of e
cosy
stem
sav
ed d
ue t
o re
duct
ion
in r
aw m
ater
ial u
se•
Num
ber
of q
ualit
y-ad
just
ed li
fe y
ears
save
d by
pro
duct
use
•C
ompa
ny’s
cont
ribut
ion
to lo
cal e
cono
mic
de
velo
pmen
t
4.
Defi
ne K
ey P
erf
orm
an
ce I
nd
icato
rs a
nd
Metr
ics
6H
ow
to
Ass
ure
Eff
ect
iven
ess
5H
ow
to
Ass
ure
Eff
ect
iven
ess
4W
hat
an
d H
ow
toM
easu
re3
Wh
at
is
Mate
rial
2W
hat
is
Mate
rial
1W
hat
is
Mate
rial
38
Inte
l C
orp
ora
tio
n
Ass
essi
ng
Per
form
ance
of
Edu
cati
on
Pro
gra
ms
Inte
l str
ives
to
be a
tru
sted
par
tner
to
educ
ator
s an
d go
vern
men
ts w
orld
wid
e.
Inte
gral
to
the
com
pany
’s m
issi
on is
a f
ocus
on
“suc
cess
for
all,
” pr
ovid
ing
prog
ram
s an
d re
sour
ces
that
impr
ove
teac
hing
and
lear
ning
to
ever
yone
in
clud
ing
wom
en, u
nder
-rep
rese
nted
min
oriti
es a
nd t
hose
with
litt
le o
r no
acc
ess
to t
echn
olog
y.
Seve
ral d
istin
ct p
rogr
ams
wor
k in
con
cert
to
achi
eve
Inte
l’s e
duca
tion
mis
sion
in
bot
h de
velo
ped
and
deve
lopi
ng c
ount
ries.
Ann
ual g
oals
are
set
for
the
se
prog
ram
s, a
llow
ing
Inte
l to
cont
inua
lly a
sses
s its
per
form
ance
. For
200
6, t
he g
oals
in
clud
e, f
or e
xam
ple:
•Ex
tend
its
teac
hers
’ pro
fess
iona
l dev
elop
men
t pr
ogra
m t
o re
ach
an a
dditi
onal
90
0,00
0 te
ache
rs a
nd fi
ve n
ew c
ount
ries
•G
row
its
afte
r-sc
hool
pro
gram
s in
gov
ernm
ent-
fund
ed c
omm
unity
tech
nolo
gy c
ente
rs w
ith t
he g
oal o
f re
achi
ng a
n ad
ditio
nal 1
50,0
00 le
arne
rs
and
addi
ng t
hree
new
cou
ntrie
s
In C
hina
, Int
el r
ecen
tly a
nnou
nced
in 2
006
a ne
w p
lan
to t
rain
one
mill
ion
elem
enta
ry a
nd m
iddl
e sc
hool
tea
cher
s ov
er t
he n
ext
five
year
s, h
elpi
ng t
hem
use
in
form
atio
n te
chno
logi
es in
tea
chin
g. M
ore
than
10,
000
pers
onal
com
pute
rs w
ill
be p
rovi
ded
to C
hina
’s ru
ral s
choo
ls b
y 20
08.
The
effe
cts
of In
tel’s
eff
ort
are
evid
ent
in M
inas
Ger
ais,
a B
razi
lian
stat
e pr
evio
usly
id
entifi
ed a
s ha
ving
the
low
est
com
pute
r lit
erac
y ra
te in
the
cou
ntry
. Int
el
prov
ided
ove
r 2,
400
scho
ols
in t
he s
tate
a c
ompl
ete
tech
nolo
gy in
fras
truc
ture
w
ith c
ompu
ters
in s
choo
l lab
s, li
brar
ies
and
adm
inis
trat
ive
offic
es. T
he p
rogr
am
also
invo
lves
tra
inin
g te
ache
rs w
ith t
he n
eces
sary
ski
lls t
o fu
lly r
ealiz
e th
e po
tent
ial
of t
he t
echn
olog
y. U
ltim
atel
y, t
his
will
hel
p te
ache
rs in
tegr
ate
tech
nolo
gy in
to
the
regu
lar
curr
icul
um a
nd e
nhan
ce s
tude
nt’s
lear
ning
cap
acity
in t
he c
lass
room
. By
the
end
of
2006
, app
roxi
mat
ely
170,
000
teac
hers
and
2.5
mill
ion
stud
ents
in
Min
as G
erai
s w
ill b
enefi
t fr
om t
his
proj
ect.
The P
roct
er
& G
am
ble
Co
mp
an
y (
P&
G)
Exp
lori
ng
New
Val
ue-
Cre
atio
n M
etri
csTh
e Pr
octe
r &
Gam
ble
Com
pany
’s (P
&G
’s) v
isio
n of
sus
tain
able
dev
elop
men
t in
corp
orat
es n
ot o
nly
redu
cing
cos
ts a
nd im
pact
s bu
t al
so c
reat
ing
valu
e an
d bu
sine
ss g
row
th t
hrou
gh s
ales
, new
mar
kets
, new
con
sum
ers
and
new
bu
sine
sses
. Thi
s ca
n be
ach
ieve
d w
hen
soci
etal
cha
lleng
es, s
uch
as t
hose
id
entifi
ed in
the
Uni
ted
Nat
ions
’ Mill
enni
um D
evel
opm
ent
Goa
ls, i
nter
sect
P&
G’s
abili
ty t
o in
nova
te.
P&G
has
iden
tified
a n
umbe
r of
are
as f
or it
s co
ntrib
utio
n to
sus
tain
able
de
velo
pmen
t. T
hese
incl
ude
safe
wat
er, i
mpr
oved
hyg
iene
and
qua
lity
of li
fe
of c
hild
ren
and
wom
en. T
o m
easu
re t
he p
erfo
rman
ce o
f th
ese
new
initi
ativ
es,
trad
ition
al b
usin
ess
and
envi
ronm
enta
l met
rics
no lo
nger
suf
fice.
Inst
ead,
the
y ne
ed t
o be
mea
sure
d by
new
‘val
ue-c
reat
ion’
met
rics,
suc
h as
dis
ease
avo
ided
, liv
es s
aved
, the
num
ber
of c
hild
ren
who
rea
ch t
heir
full
deve
lopm
ent
pote
ntia
l an
d w
ays
in w
hich
wom
en’s
lives
are
impr
oved
as
a re
sult
of P
&G
pro
duct
and
/or
serv
ice
inno
vatio
ns.
P&G
’s w
ater
pur
ifier
s, f
or e
xam
ple,
pre
sent
sig
nific
ant
oppo
rtun
ities
to
impr
ove
and
even
sav
e liv
es in
dev
elop
ing
coun
trie
s. W
ith t
his
safe
wat
er t
echn
olog
y,
P&G
can
acc
urat
ely
trac
k th
e co
nsum
ptio
n an
d re
peat
use
of
the
prod
uct
and
the
estim
ated
vol
ume
of w
ater
tre
ated
. Mea
surin
g an
d re
port
ing
on d
isea
se a
void
ed
and
lives
sav
ed b
y an
inno
vatio
n at
the
com
pany
leve
l, ho
wev
er, i
s re
lativ
ely
new
. N
ever
thel
ess,
res
earc
hers
and
non
-gov
ernm
enta
l org
aniz
atio
ns (N
GO
s) h
ave
mea
sure
d th
e w
ater
pur
ifier
s’ e
ffec
ts in
ter
ms
of p
erce
nt d
iarr
hea
redu
ctio
n an
d th
e nu
mbe
r of
dia
rrhe
a ep
isod
es a
vert
ed in
cer
tain
reg
ions
. The
se m
etric
s ar
e im
port
ant
for
P&G
to
eval
uate
and
com
mun
icat
e th
e ef
fect
iven
ess
of t
he p
rodu
ct.
In d
evel
opin
g va
lue-
crea
tion
met
rics
that
are
cre
dibl
e an
d tr
ansp
aren
t to
st
akeh
olde
rs, t
he m
etric
s ne
ed t
o be
alig
ned
with
tho
se u
sed
by N
GO
s,
gove
rnm
ents
, res
earc
h an
d he
alth
org
aniz
atio
ns w
ho a
re lo
ng-s
tand
ing
mem
bers
of
the
pub
lic h
ealth
com
mun
ities
. Par
tner
ship
s w
ith t
hese
gro
ups
allo
w P
&G
to
gain
exp
erie
nce
in it
s ap
proa
ch t
o he
alth
and
dev
elop
men
t an
d in
the
use
of
valu
e-cr
eatio
n m
etric
s. U
ltim
atel
y, t
his
can
lead
to
the
deve
lopm
ent
of s
peci
fic
goal
s to
gui
de t
he c
ompa
ny’s
sust
aina
bilit
y ac
tions
.
6H
ow
to
Ass
ure
Eff
ect
iven
ess
5H
ow
to
Ass
ure
Eff
ect
iven
ess
4W
hat
an
d H
ow
toM
easu
re3
Wh
at
is
Mate
rial
2W
hat
is
Mate
rial
1W
hat
is
Mate
rial
39
Du
Po
nt
Met
rics
to
Dri
ve S
ust
ain
able
Gro
wth
Sust
aina
ble
grow
th is
the
str
ateg
ic m
issi
on o
f D
uPon
t. T
o m
easu
re s
usta
inab
le g
row
th, D
uPon
t pr
evio
usly
de
velo
ped
’shar
ehol
der
valu
e ad
d (S
VA) p
er p
ound
of
prod
uctio
n’ a
s a
sing
le m
etric
tha
t co
mbi
nes
mul
tiple
en
viro
nmen
tal a
nd e
cono
mic
con
side
ratio
ns in
one
num
ber.
As
mas
s of
pro
duct
is g
ener
ally
cor
rela
ted
with
en
viro
nmen
tal i
mpa
cts,
the
SVA
/lb m
etric
was
des
igne
d to
driv
e en
viro
nmen
tal f
ootp
rint
redu
ctio
n as
wel
l as
to
mov
e th
e co
mpa
ny t
owar
d m
ore
know
ledg
e-in
tens
ive,
hig
her-
valu
e pr
oduc
ts a
nd s
ervi
ces.
Thi
s m
etric
ha
s pr
oven
use
ful f
or p
lann
ing
and
stra
tegi
c di
scus
sion
s. N
ever
thel
ess,
DuP
ont
foun
d th
e m
etric
to
be o
verly
se
nsiti
ve t
o fa
ctor
s th
at h
ad li
ttle
eff
ect
on t
he s
tate
of
the
envi
ronm
ent,
incl
udin
g m
arke
t pr
ice
fluct
uatio
ns
and
busi
ness
acq
uisi
tions
and
div
estit
ures
.
Ther
efor
e, D
uPon
t ha
s fo
cuse
d on
ano
ther
set
of
mar
ketp
lace
and
foo
tprin
t re
duct
ion
met
rics
to d
rive
sust
aina
ble
grow
th in
its
oper
atio
ns. O
ne e
xam
ple
is t
he ‘r
even
ue f
rom
non
-dep
leta
ble
reso
urce
s’. T
his
met
ric is
cal
cula
ted
from
the
rev
enue
gen
erat
ed f
rom
DuP
ont’s
bus
ines
ses
that
rel
y pr
imar
ily o
n re
new
able
re
sour
ces
(suc
h as
see
d, s
oy a
nd b
io-b
ased
pol
ymer
bus
ines
ses)
or
the
com
pany
’s hu
man
res
ourc
es a
nd
know
ledg
e ba
se (s
uch
as s
afet
y co
nsul
ting
serv
ices
and
tec
hnol
ogy
licen
sing
). D
uPon
t ha
s se
t th
e go
al o
f ne
arly
dou
blin
g its
rev
enue
s fr
om n
on-d
eple
tabl
e re
sour
ces
to a
t le
ast
$8 b
illio
n by
201
5.
Like
SVA
/lb, t
he m
etric
is in
tend
ed t
o dr
ive
the
com
pany
tow
ard
a lo
wer
env
ironm
enta
l foo
tprin
t an
d m
ore
know
ledg
e-in
tens
ive
serv
ices
. The
met
ric w
as s
elec
ted
as a
foc
us f
or D
uPon
t as
it m
akes
sen
se t
o al
l th
ree
legs
of
the
trip
le-b
otto
m-li
ne. E
cono
mic
ally
, it
redu
ces
expo
sure
to
mar
ket
vola
tility
ass
ocia
ted
with
pe
trol
eum
and
oth
er d
eple
tabl
e re
sour
ces.
At
the
sam
e tim
e, it
add
ress
es s
take
hold
ers’
con
cern
s re
gard
ing
the
depl
etio
n of
nat
ural
res
ourc
es a
nd r
elat
ed e
nviro
nmen
tal i
mpa
cts.
Met
rics
Cri
teri
a –
Wo
rksh
eet
4b
To d
rive
impr
ovem
ent
and
orga
niza
tiona
l in
tegr
atio
n, a
met
ric s
houl
d m
eet
man
y of
the
fo
llow
ing
crite
ria:
•re
leva
nt t
o bu
sine
ss -
alig
ned
with
bus
ines
s ob
ject
ives
and
refl
ect
issu
es t
hat
are
mat
eria
l to
the
orga
niza
tion
•tr
ansf
orm
ativ
e -
will
lead
to
posi
tive
cons
eque
nces
•ac
cura
te -
refl
ect
wha
t it
is in
tend
ed t
o m
easu
re
•re
liabl
e -
repr
oduc
ible
and
com
para
ble
acro
ss
repo
rtin
g pe
riods
and
org
aniz
atio
nal u
nits
•m
eani
ngfu
l and
use
ful -
can
be
rela
ted
to
actio
ns a
nd e
ffec
tive
for
its in
tend
ed u
se
and
user
s
•un
ders
tand
able
- c
omm
unic
ated
with
in c
onte
xt
that
gen
erat
es in
sigh
ts f
or d
ecis
ion-
mak
ing
•co
st-e
ffec
tive
- ca
n be
dev
elop
ed a
nd
impl
emen
ted
with
rea
sona
ble
cost
s
DuP
ont
illus
trat
es in
its
case
exa
mpl
e ho
w s
ome
of t
he a
bove
crit
eria
app
ly in
dev
elop
ing
met
rics.
In a
dditi
on, t
here
are
crit
eria
tha
t ap
ply
to t
he
suite
of
met
rics:
•fe
w in
num
ber
- co
ncen
trat
e on
the
crit
ical
few
to
foc
us o
rgan
izat
iona
l eff
ort
and
impl
emen
t a
cost
-eff
ectiv
e m
etric
s pr
ogra
m
•ba
lanc
ed -
incl
ude
the
right
mix
of
lead
ing
and
lagg
ing
met
rics,
diff
eren
t ty
pes
of m
etric
s an
d th
e so
cial
, env
ironm
enta
l and
eco
nom
ic
dim
ensi
ons
to d
rive
impr
ovem
ent
and
orga
niza
tiona
l int
egra
tion
•va
luab
le -
the
sui
te o
f m
etric
s re
sults
in t
angi
ble
and
inta
ngib
le v
alue
for
the
org
aniz
atio
n
3M c
ase
exam
ple
(on
page
41)
dis
cuss
es t
he
proc
ess
and
cons
ider
atio
ns in
dev
elop
ing
an
effe
ctiv
e su
ite o
f ke
y m
etric
s (it
s ‘E
HS
scor
ecar
d’).
Wor
kshe
et 4
b (o
n pa
ge 4
0) p
rovi
des
a ch
eckl
ist
of c
riter
ia in
defi
ning
the
KPI
s an
d m
etric
s (in
th
e fir
st c
olum
n). T
he c
riter
ia a
re a
pplie
d ag
ain
in t
he im
plem
enta
tion
of t
he m
etric
s (in
the
se
cond
col
umn
for
Step
5) a
nd in
ass
essi
ng t
heir
effe
ctiv
enes
s (in
the
thi
rd c
olum
n fo
r St
ep 6
).
4.
Defi
ne K
ey P
erf
orm
an
ce I
nd
icato
rs a
nd
Metr
ics
6H
ow
to
Ass
ure
Eff
ect
iven
ess
5H
ow
to
Ass
ure
Eff
ect
iven
ess
4W
hat
an
d H
ow
toM
easu
re3
Wh
at
is
Mate
rial
2W
hat
is
Mate
rial
1W
hat
is
Mate
rial
40
6H
ow
to
Ass
ure
Eff
ect
iven
ess
5H
ow
to
Ass
ure
Eff
ect
iven
ess
4W
hat
an
d H
ow
toM
easu
re3
Wh
at
is
Mate
rial
2W
hat
is
Mate
rial
1W
hat
is
Mate
rial
WO
RK
SHEE
T 4b
: EV
ALU
ATE
MET
RIC
S EF
FEC
TIV
ENES
S C
HEC
KLI
ST (
to b
e us
ed in
Ste
ps 4
-6)
Cri
teri
a
Co
nsi
der
atio
ns
Step
4D
efin
e K
PIs
and
Met
rics
Step
5Im
ple
men
t M
etri
csSt
ep 6
Eval
uat
e Im
pro
vem
ent
& In
teg
rati
on
For individual metrics
Rel
evan
t to
B
usi
nes
s
•Re
flect
key
obj
ectiv
es•
Inte
grat
ed in
to e
xist
ing
man
agem
ent
syst
em•
Supp
ort
busi
ness
obj
ectiv
es•
Rele
vant
to
asse
ssin
g fu
ture
per
form
ance
•A
lign
staf
f an
d m
anag
emen
t on
str
ateg
y
Tran
sfo
rmat
ive
•W
ill le
ad t
o po
sitiv
e co
nseq
uenc
es•
Pote
ntia
l for
uni
nten
ded
nega
tive
cons
eque
nces
is
cons
ider
ed a
nd a
ddre
ssed
as
nece
ssar
y•
Requ
ire a
ctio
ns o
r be
havi
or c
hang
es b
eyon
d bu
sine
ss
as u
sual
•Ta
rget
s ar
e in
spira
tiona
l
•Le
ad to
the
inte
nded
and
oth
er p
ositi
ve b
ehav
ior c
hang
es•
Driv
e pe
rfor
man
ce im
prov
emen
t•
Stre
tch
orga
niza
tion
to in
nova
te in
reac
hing
goa
ls•
Broa
den
inte
rnal
invo
lvem
ent
and
enga
gem
ent
•C
hang
e th
e m
inds
ets
/ att
itude
s of
em
ploy
ees
tow
ard
the
impo
rtan
ce o
f ad
dres
sing
the
issu
es
Acc
ura
te•
Mea
sure
wha
t was
inte
nded
to m
easu
re•
Incl
ude
key
risks
and
opp
ortu
nitie
s w
ithin
the
m
etric
’s bo
unda
ries
•A
ccur
acy
of t
he m
etric
and
und
erly
ing
data
are
verifi
able
•C
alcu
late
d ba
sed
on c
redi
ble
data
N/A
Rel
iab
le
•Re
prod
ucib
le a
nd c
ompa
rabl
e ac
ross
org
aniz
atio
n an
d re
port
ing
perio
ds•
Supp
orte
d by
sta
ndar
dize
d de
finiti
on a
nd p
roce
dure
s fo
r da
ta c
olle
ctio
n an
d ca
lcul
atio
n
•D
efini
tion
and
proc
edur
es a
re c
lear
ly u
nder
stoo
d an
d ca
n be
fol
low
ed b
y us
ers
•C
ompa
rabl
e da
ta a
re c
olle
cted
acr
oss
or
gani
zatio
nal u
nits
N/A
Mea
nin
gfu
l&
Use
ful
•Re
leva
nt t
o th
e in
tend
ed u
sers
and
use
s•
Can
be
rela
ted
to a
ctio
n pl
an a
nd a
ccou
ntab
le t
arge
ts•
Can
be
scal
ed a
s de
sired
acr
oss
valu
e ch
ain
and
orga
niza
tiona
l lev
els
•Pr
ovid
e su
ffici
ent
prec
isio
n an
d gr
anul
arity
to
be
use
ful
•Ef
fect
ive
in u
se a
nd in
sup
port
ing
de
cisi
on-m
akin
g pr
oces
s•
Link
ope
ratio
nal m
etric
s to
str
ateg
ic m
etric
s•
Tim
ely
in t
erm
s of
the
per
iodi
c co
llect
ion
of d
ata
rela
tive
to k
ey d
ecis
ions
•Pr
ovid
e re
leva
nt, t
imel
y an
d re
liabl
e in
form
atio
n to
de
cisi
on-m
aker
s•
Mee
t th
e in
tend
ed u
ses
for
the
inte
nded
use
rs
Und
erst
anda
ble
•Ex
pres
sed
in t
erm
s th
at is
und
erst
anda
ble
to t
he
inte
nded
aud
ienc
e•
Com
mun
icat
ed in
con
text
that
sup
port
use
and
insig
hts
•C
an b
e vi
sual
ly p
rese
nted
to
intu
itive
ly d
emon
stra
te
tren
ds a
nd d
irect
ions
(e.g
., us
ing
a ‘d
ashb
oard
’) N
/A
For the suite of metrics
Co
st-E
ffec
tive
•C
an b
e de
velo
ped
from
ava
ilabl
e da
ta, w
hene
ver p
ossib
le•
Reas
onab
le a
nd c
ost-
effe
ctiv
e le
vels
of
gran
ular
ity
and
prec
isio
n
•D
ata
are
calc
ulat
ed c
ost-
effe
ctiv
ely,
in a
usa
ble
man
ner,
with
out e
xten
sive
man
ual i
nter
vent
ion
N/A
Few
in N
um
ber
•Ba
sed
on t
he ‘c
ritic
al f
ew’ k
ey o
bjec
tives
•C
ombi
ne m
ultip
le m
etric
s, a
s ap
prop
riate
N/A
N/A
Bal
ance
d•
Incl
ude
lead
ing
and
lagg
ing
indi
cato
rs, a
s ap
prop
riate
N/A
•C
ompl
emen
t tra
ditio
nal fi
nanc
ial m
easu
rem
ents
•Se
t of m
etric
s re
flect
soc
ial,
envi
ronm
enta
l and
ec
onom
ic c
onsid
erat
ions
, whe
neve
r app
licab
le
Val
uab
leN
/AN
/A•
Met
rics
link
to b
usin
ess
valu
e, b
oth
tang
ible
and
inta
ngib
le
41
6H
ow
to
Ass
ure
Eff
ect
iven
ess
5H
ow
to
Ass
ure
Eff
ect
iven
ess
4W
hat
an
d H
ow
toM
easu
re3
Wh
at
is
Mate
rial
2W
hat
is
Mate
rial
1W
hat
is
Mate
rial
3M
Sco
reca
rd t
o D
rive
Per
form
ance
3M’s
Envi
ronm
enta
l, H
ealth
and
Saf
ety
(EH
S) S
core
card
is a
n im
port
ant
tool
for
driv
ing
the
com
pany
’s EH
S pe
rfor
man
ce. E
ach
scor
ecar
d is
pro
duce
d qu
arte
rly f
or a
ll fa
cilit
ies,
div
isio
ns (i
.e.,
busi
ness
uni
ts) a
nd c
ount
ries
whe
re 3
M o
pera
tes.
The
sco
reca
rd c
onta
ins
a se
t of
met
rics
with
a p
re-d
eter
min
ed g
oal t
hat
is m
easu
red
each
ye
ar a
nd u
ses
a gr
een,
yel
low
, and
red
col
or s
chem
e to
tra
ck p
erfo
rman
ce t
owar
d th
e go
al. T
he in
tent
is t
o en
sure
key
met
rics
are
defin
ed a
nd t
rack
ed a
nd t
hat
perf
orm
ance
rel
ativ
e to
the
tar
gets
is r
epor
ted.
Scor
ecar
d m
etric
s ar
e re
view
ed a
nd s
elec
ted
annu
ally
by
a te
am o
f co
rpor
ate
and
busi
ness
EH
S pr
ofes
sion
als.
Ea
ch m
etric
is e
valu
ated
for
a v
arie
ty o
f pa
ram
eter
s to
det
erm
ine
its a
pplic
abili
ty o
n th
e ne
xt c
alen
dar
year
sc
orec
ard.
Som
e of
the
se p
aram
eter
s in
clud
e: d
esire
d EH
S ou
tcom
e, le
adin
g / l
aggi
ng s
tatu
s, r
epor
ting
freq
uenc
y an
d le
ngth
of
impl
emen
tatio
n. S
core
card
met
rics
gene
rally
req
uire
glo
bal a
pplic
abili
ty a
nd a
re
bala
nced
bet
wee
n le
adin
g an
d la
ggin
g in
dica
tors
. Lea
ding
indi
cato
rs, s
uch
as E
HS
plan
s, P
ollu
tion
Prev
entio
n Pa
ys (3
P) p
rogr
am im
plem
enta
tion
and
EHS
self-
asse
ssm
ent
perf
orm
ance
, are
mea
sure
s of
opp
ortu
nitie
s th
at
will
res
ult
in im
prov
ed E
HS
outc
omes
. The
se m
etric
s ar
e cr
itica
l to
prov
idin
g fle
xibi
lity
for
faci
litie
s to
add
ress
th
eir
indi
vidu
al n
eeds
and
opp
ortu
nitie
s, w
ithou
t us
ing
a ‘o
ne s
ize
fits
all’
appr
oach
. Lag
ging
indi
cato
rs, s
uch
as
inci
dent
rat
e an
d ai
r em
issi
ons,
are
mea
sure
s of
how
eff
ectiv
ely
oppo
rtun
ities
wer
e ad
dres
sed
durin
g th
e ye
ar.
The
over
all o
utco
me
of t
he 3
M E
HS
Scor
ecar
d is
incr
ease
d pe
rfor
man
ce a
nd a
ccou
ntab
ility
. 3M
exp
ects
all
of
its f
acili
ties
to h
ave
high
leve
ls o
f EH
S pe
rfor
man
ce. T
he 3
M E
HS
Scor
ecar
d pr
ovid
es v
isib
ility
at
all l
evel
s of
the
or
gani
zatio
n to
ens
ure
that
eve
ryon
e is
wor
king
to
mee
t th
ese
expe
ctat
ions
and
tha
t th
ey h
ave
the
reso
urce
s an
d m
anag
emen
t su
ppor
t to
do
so.
Bu
ildin
g t
he
Met
rics
The
uses
and
use
rs, t
ypes
of
met
rics
and
crite
ria
disc
usse
d ea
rlier
are
impo
rtan
t co
nsid
erat
ions
for
de
finin
g a
met
ric. A
num
ber
of s
teps
are
invo
lved
in
defi
ning
a m
etric
:
•se
ttin
g th
e bo
unda
ry
•de
finin
g th
e fo
rm t
he m
etric
tak
es
•as
sess
ing
pote
ntia
l dat
a so
urce
s
•de
term
inin
g th
e ne
cess
ary
leve
l of
prec
isio
n an
d sp
ecifi
city
Each
of
thes
e st
eps
is n
eces
sary
for
com
ing
up w
ith a
rig
orou
s de
finiti
on a
nd f
orm
ula
or
guid
elin
es f
or h
ow t
hey
will
be
calc
ulat
ed.
Sett
ing
th
e B
ou
nd
ary
Met
rics
may
enc
ompa
ss o
ne o
r m
ore
stag
es in
the
or
gani
zatio
n’s
valu
e ch
ain.
In d
efini
ng a
met
ric,
one
need
s to
set
the
bou
ndar
y fo
r w
hat
the
met
ric is
to
incl
ude.
Thi
s is
impo
rtan
t to
ens
ure
its a
ccur
acy
- ev
eryt
hing
tha
t sh
ould
be
mea
sure
d as
par
t of
the
met
ric is
to
be in
clud
ed w
ithin
the
m
etric
’s bo
unda
ry.
Con
side
r th
e ex
ampl
e in
Wor
kshe
et 3
b (o
n pa
ge
32) w
here
one
of
the
key
obje
ctiv
es is
to
redu
ce
ener
gy c
ost
and
the
orga
niza
tion’
s ex
posu
re t
o th
e cl
imat
e ch
ange
issu
e. R
elat
ed t
o a
GH
G e
mis
sion
K
PI id
entifi
ed f
or t
his
key
obje
ctiv
e, t
he m
etric
sh
ould
incl
ude
estim
ated
em
issi
ons
from
hea
t an
d po
wer
gen
erat
ion,
reg
ardl
ess
of w
heth
er
they
are
with
in t
he o
rgan
izat
ion’
s fe
nce-
line.
Fo
cusi
ng s
olel
y on
GH
G e
mis
sion
s fr
om w
ithin
th
e fe
nce-
line
can
be m
isle
adin
g. F
or e
xam
ple,
ou
tsou
rcin
g po
wer
gen
erat
ion,
esp
ecia
lly t
o a
less
ef
ficie
nt e
ntity
, can
impr
ove
a m
etric
lim
ited
to
the
orga
niza
tion’
s di
rect
ope
ratio
ns (f
rom
with
in
the
fenc
e-lin
e) w
hile
act
ually
lead
ing
to in
crea
sed
indi
rect
em
issi
ons
from
pur
chas
ed e
lect
ricity
. Em
issi
ons
have
sim
ply
been
shi
fted
or
tran
sfer
red
outs
ide
the
fenc
e-lin
e, a
nd t
otal
GH
G e
mis
sion
s to
th
e en
viro
nmen
t m
ay h
ave
actu
ally
incr
ease
d.
Step
2’s
asse
ssm
ent
of is
sues
sho
uld
prov
ide
the
basi
s fo
r de
term
inin
g th
e re
leva
nt v
alue
cha
in
stag
es t
o be
incl
uded
in t
he m
etric
. Bo
unda
ries
may
var
y fr
om o
ne m
etric
to
anot
her.
4.
Defi
ne K
ey P
erf
orm
an
ce I
nd
icato
rs a
nd
Metr
ics
42
6H
ow
to
Ass
ure
Eff
ect
iven
ess
5H
ow
to
Ass
ure
Eff
ect
iven
ess
4W
hat
an
d H
ow
toM
easu
re3
Wh
at
is
Mate
rial
2W
hat
is
Mate
rial
1W
hat
is
Mate
rial
A m
etri
c n
eed
s to
be
suffi
cien
tly
pre
cise
an
d s
pec
ific
to b
e m
ean
ing
ful
an
d u
sab
le.
Defi
nin
g t
he
Form
of
the
Met
ric
Ther
e ar
e m
any
form
s a
met
ric c
an t
ake.
Som
e ca
n be
exp
ress
ed in
abs
olut
e fo
rm, i
.e.,
in t
he
form
it is
col
lect
ed, s
uch
as t
otal
occ
urre
nces
of
a s
peci
fic t
ype
of in
cide
nt p
er y
ear.
Met
rics,
ho
wev
er, a
re o
ften
exp
ress
ed in
rat
ios,
indi
ces
and
othe
r fo
rms
that
pro
vide
con
text
and
ena
ble
mor
e ef
fect
ive
com
paris
on o
ver
time
and
acro
ss
the
orga
niza
tion.
The
for
m o
f a
met
ric c
ontr
ibut
es
to h
ow m
eani
ngfu
l and
use
ful t
he m
etric
is f
or it
s in
tend
ed u
ses
and
user
s.
In f
orm
ing
a m
etric
, one
sho
uld
cons
ider
the
follo
win
g:
•In
clus
ion
of q
uant
itativ
e an
d qu
alita
tive
mea
sure
men
ts -
Whi
le m
etric
s ar
e ge
nera
lly
rega
rded
as
quan
titat
ive,
som
e m
easu
re
qual
itativ
e pa
ram
eter
s. E
xam
ples
com
mon
ly
are
foun
d in
the
soc
ial a
rea
and
incl
ude
indi
ces
of e
mpl
oyee
mor
ale
and
cust
omer
sat
isfa
ctio
n,
calc
ulat
ed f
rom
qua
litat
ive
(or
subj
ectiv
e)
surv
ey r
esul
ts. W
hile
qua
litat
ive
mea
sure
men
ts
can
capt
ure
mor
e su
bjec
tive
attr
ibut
es
such
as
satis
fact
ion,
att
itude
, sen
se o
f w
ell-
bein
g, im
port
ance
of
issu
e, e
tc.,
they
can
be
inte
rpre
ted
num
eric
ally
by
appl
ying
ran
king
or
scor
ing
met
hods
•N
orm
aliz
atio
n -
Nor
mal
izat
ion
can
prod
uce
ratio
s th
at p
rovi
de b
ette
r co
ntex
t an
d m
ore
effe
ctiv
e sc
ale
for
com
paris
on. S
ome
deno
min
ator
s fo
r no
rmal
izat
ion
incl
ude:
opr
oduc
tion
thro
ughp
ut -
Sui
tabl
e fo
r a
m
anuf
actu
ring
orga
niza
tion
that
mak
es
prod
ucts
of
sim
ilar
char
acte
ristic
s an
d ec
onom
ic v
alue
, e.g
., a
sing
le p
rodu
ct f
acili
ty,
this
den
omin
ator
is s
eldo
m e
ffec
tive
for
mor
e di
vers
e or
ser
vice
-orie
nted
org
aniz
atio
ns
ofin
anci
al m
easu
rem
ents
of
valu
e -
Fina
ncia
l m
easu
rem
ents
, suc
h as
rev
enue
, sha
reho
lder
va
lue
add
(SVA
) and
eco
nom
ic v
alue
ad
d (E
VA),
are
appl
ied
to n
orm
aliz
e th
e or
gani
zatio
n’s
impa
cts.
Exa
mpl
es a
re e
co-
effic
ienc
y an
d so
cio-
effic
ienc
y m
etric
s, s
uch
as jo
b cr
eatio
n pe
r do
llar
SVA
. Va
lue-
add
mea
sure
men
ts a
re o
ften
mor
e ap
prop
riate
in
repr
esen
ting
the
finan
cial
val
ue d
irect
ly r
elat
ed
to t
he im
pact
s
In a
dditi
on t
o co
nven
tiona
l mea
sure
men
ts
of v
alue
-add
, a s
usta
inab
le v
alue
-add
can
be
defin
ed. F
igur
e 6
(on
page
43)
illu
stra
tes
a su
stai
nabl
e va
lue-
add
calc
ulat
ed a
s th
e di
ffer
ence
be
twee
n re
venu
e an
d th
e co
sts
of n
atur
al c
apita
l. Th
is in
clud
es n
ot o
nly
econ
omic
pro
fit b
ut a
lso
the
com
pany
’s co
ntrib
utio
n to
the
dev
elop
men
t of
hum
an /
soci
al c
apita
l.
•In
dexe
s an
d co
mpo
site
indi
ces
- A
met
ric m
ay
also
tak
e th
e fo
rm o
f a
com
posi
te in
dex
- a
com
bine
d m
easu
re e
ncom
pass
ing
vario
us o
ther
m
etric
s. E
xam
ples
incl
ude:
oTo
tal c
ost
- su
m o
f in
tern
al a
nd e
xter
nal
mon
etar
y co
sts
of e
nviro
nmen
tal a
nd s
ocia
l im
pact
s
oEc
olog
ical
foo
tprin
t -
a co
mbi
ned
estim
ate
of e
nviro
nmen
tal i
mpa
cts
expr
esse
d in
ter
ms
of e
quiv
alen
t la
nd a
rea
impa
cted
and
oth
er
ecol
ogic
al in
dice
s
oD
isab
ility
-Adj
uste
d Li
fe Y
ears
(DA
LY),
Qua
lity-
Adj
uste
d Li
fe Y
ears
(QA
LY) a
nd o
ther
hea
lth-
base
d in
dice
s fo
r w
eigh
ting
impa
cts
in t
erm
s of
hum
an h
ealth
oSe
mi-q
uant
itativ
e co
mpo
site
sco
re w
eigh
ted
by im
port
ance
to
stak
ehol
ders
, suc
h as
ou
tline
d in
the
ISO
-140
40 s
erie
s of
sta
ndar
ds
for
life-
cycl
e as
sess
men
t
43
Fig
ure
6.
‘Su
stai
nab
le V
alu
e-A
dd
’ to
Co
mp
any
and
So
ciet
y
Sust
ain
able
Val
ue-
Ad
d =
Rev
enu
e –
Co
sts
of
Nat
ura
l Cap
ital
Cos
ts o
f en
ergy
and
util
ities
, mat
eria
ls, a
nd la
nd (i
f si
gnifi
cant
) are
use
d as
pro
xies
for
the
cos
ts o
f na
tura
l cap
ital.
The
Val
ue A
dd r
epre
sent
s co
ntrib
utio
ns t
o th
e de
velo
pmen
t of
fina
ncia
l / b
uilt
capi
tal
and
hum
an /
soci
al c
apita
l.
Pro
fit
Kn
ow
led
ge
Lab
or
Oth
er C
apit
al
Ener
gy/
Uti
litie
s
Mat
eria
l
Lan
d
Rev
enu
e
Val
ue
Ad
dto
co
mp
any
& s
oci
ety
Co
sts
of
Nat
ura
l Cap
ital
(lim
ited
nat
ura
l res
ou
rces
)
4.
Defi
ne K
ey P
erf
orm
an
ce I
nd
icato
rs a
nd
Metr
ics
6H
ow
to
Ass
ure
Eff
ect
iven
ess
5H
ow
to
Ass
ure
Eff
ect
iven
ess
4W
hat
an
d H
ow
toM
easu
re3
Wh
at
is
Mate
rial
2W
hat
is
Mate
rial
1W
hat
is
Mate
rial
oLo
cally
nor
mal
ized
met
rics
coul
d in
clud
e w
ages
as
a ra
tio t
o pr
evai
ling
loca
l wag
es o
r w
ater
use
as
a ra
tio t
o an
nual
vol
ume
loca
lly
allo
cate
d fo
r in
dust
ry u
se
oC
ompo
site
indi
ces
deve
lope
d by
inve
stm
ent
anal
ysis
and
res
earc
h or
gani
zatio
ns
Repr
esen
tativ
es f
rom
Eth
ical
Inve
stm
ent
Rese
arch
Se
rvic
es (E
IRIS
), Su
stai
nabl
e A
sset
Man
agem
ent
(SA
M) a
nd In
vest
or R
espo
nsib
ility
Res
earc
h C
ente
r (IR
RC) p
artic
ipat
ed in
the
GEM
I EA
G
sess
ions
. Bo
th E
IRIS
and
SA
M h
ave
deve
lope
d an
d ap
plie
d co
mpo
site
indi
ces
to a
sses
s co
rpor
ate
sust
aina
bilit
y pr
actic
es b
ased
on
com
pany
qu
estio
nnai
res
and
anal
ysis
of
publ
ic in
form
atio
n.
IRRC
poi
nted
out
the
val
ue-c
hain
per
spec
tive
that
ana
lyst
s in
crea
sing
ly a
pply,
con
side
ring
risks
be
yond
the
com
pany
’s im
med
iate
sph
ere
of
cont
rol (
see
the
EAG
per
spec
tive,
Are
Soc
ial G
oals
Re
leva
nt t
o Bu
sine
ss?
on p
age
24).
Diffi
culty
in c
ombi
ning
var
ious
met
rics
into
co
mpo
site
indi
ces
varie
s. T
otal
cos
t, f
or e
xam
ple,
yi
elds
val
uabl
e re
sults
but
oft
en r
equi
res
the
labo
rious
and
unc
erta
in p
roce
ss o
f m
onet
izin
g as
pect
s ha
ving
unc
erta
in fi
nanc
ial v
alue
. The
use
of
sem
i-qua
ntita
tive
scor
es, o
n th
e ot
her
hand
, ca
n pr
ocee
d on
ce a
con
sens
us is
rea
ched
on
how
ea
ch m
etric
is n
orm
aliz
ed a
nd a
wei
ght
assi
gned
to
eac
h m
etric
.
In d
eter
min
ing
the
form
and
wha
t is
incl
uded
w
ithin
the
met
ric, t
he o
rgan
izat
ion
also
nee
ds t
o de
term
ine
whe
ther
the
met
ric c
an b
e m
eani
ngfu
l an
d us
eful
at
the
diff
eren
t or
gani
zatio
nal l
evel
s.
Pote
nti
al D
ata
Sou
rces
an
d L
evel
s o
f Pr
ecis
ion
/ S
pec
ifici
tyTh
e av
aila
bilit
y of
dat
a so
urce
s is
an
impo
rtan
t co
nsid
erat
ion
in d
eter
min
ing
whe
ther
the
met
ric c
an
be d
evel
oped
in a
cos
t-ef
fect
ive
man
ner.
The
met
ric
can
be o
btai
ned
thro
ugh
vario
us m
eans
, inc
ludi
ng:
•di
rect
ly c
alcu
late
d fr
om a
vaila
ble
data
•es
timat
ed o
r m
odel
ed f
rom
ava
ilabl
e da
ta
•ca
lcul
ated
, est
imat
ed, o
r m
odel
ed f
rom
dat
a no
t cu
rren
tly c
olle
cted
by
the
orga
niza
tion
To m
inim
ize
cost
, con
side
r us
ing
avai
labl
e da
ta o
r da
ta t
hat
can
be c
olle
cted
usi
ng t
he e
xist
ing
data
co
llect
ion
syst
em.
Whe
n da
ta a
re n
ot a
vaila
ble
to d
irect
ly c
alcu
late
the
met
ric, c
onsi
der
whe
ther
es
timat
ion
from
ava
ilabl
e da
ta is
suf
ficie
nt.
For
exam
ple,
a G
HG
met
ric is
com
mon
ly e
stim
ated
fr
om a
vaila
ble
ener
gy-u
se d
ata.
Dat
a so
urce
s an
d av
aila
bilit
y ar
e tig
htly
link
ed w
ith
the
leve
l of
prec
isio
n an
d sp
ecifi
city
nee
ded
for
the
met
ric.
Spec
ifici
ty r
efer
s to
the
low
est
leve
l of
the
orga
niza
tion
to w
hich
the
met
ric is
rep
orte
d.
Was
tew
ater
dat
a, f
or e
xam
ple,
may
be
read
ily
avai
labl
e fo
r an
ent
ire la
rge
man
ufac
turin
g fa
cilit
y,
but
not
for
the
indi
vidu
al p
roce
ss u
nits
with
in
the
faci
lity.
A m
etric
nee
ds t
o be
suf
ficie
ntly
pr
ecis
e an
d sp
ecifi
c to
be
mea
ning
ful a
nd u
sabl
e.
How
ever
, gre
ater
pre
cisi
on a
nd s
peci
ficity
tha
n ar
e ne
cess
ary
may
mak
e da
ta c
olle
ctio
n an
d ca
lcul
atio
n co
st-p
rohi
bitiv
e.
© B
RID
GES
to
Sust
aina
bilit
y, G
olde
r A
ssoc
iate
s In
c.
44
Sett
ing
Tar
get
s Ta
rget
s ar
e pe
rfor
man
ce g
oals
tha
t ar
e re
leva
nt t
o th
e or
gani
zatio
n’s
key
obje
ctiv
es.
An
orga
niza
tion
can
set
envi
ronm
enta
l and
soc
ial t
arge
ts in
muc
h th
e sa
me
way
tha
t it
sets
fina
ncia
l tar
gets
. To
cont
ribut
e to
per
form
ance
impr
ovem
ent,
a t
arge
t sh
ould
be:
•Sp
ecifi
c -
focu
sed
on a
spe
cific
obj
ectiv
e an
d th
e ou
tcom
e th
at is
exp
ecte
d
•M
easu
rabl
e -
thro
ugh
mea
sure
men
ts d
efine
d in
th
e m
etric
s
•A
chie
vabl
e -
know
ledg
e, t
ools
and
res
ourc
es
shou
ld b
e av
aila
ble
to a
chie
ve t
arge
ts
•R
ealis
tic -
with
act
ions
the
org
aniz
atio
n ca
n ta
ke
to a
chie
ve t
arge
ts
•Ti
me-
spec
ific
- w
ith t
imel
ine
atta
ched
to
a ta
rget
Targ
ets
mee
ting
the
abov
e cr
iteria
are
com
mon
lykn
own
as t
he ‘S
MA
RT’ t
arge
ts, r
eflec
ting
the
initi
al le
tter
s of
the
crit
eria
. Tar
gets
can
be
incr
emen
tal o
r st
retc
h.
Incr
emen
tal t
arg
ets
are
set
to a
chie
ve g
radu
al
chan
ge a
nd u
sual
ly t
o m
eet
a th
resh
old
esse
ntia
l to
rem
aini
ng o
pera
tiona
l. S
tret
ch t
arg
ets
are
mor
e re
volu
tiona
ry t
arge
ts.
A s
tret
ch t
arge
t is
set
with
le
ss u
nder
stan
ding
of
how
it w
ill b
e m
et. S
tret
ch
targ
ets
are
mea
nt t
o sp
ark
orga
niza
tiona
l cha
nge
by s
timul
atin
g in
nova
tion,
enc
oura
ging
em
ploy
ees
to p
ush
trad
ition
al b
ound
arie
s an
d ch
alle
ngin
g th
e cu
rren
t w
ays
of d
oing
bus
ines
s. T
hus,
the
y ar
e us
ually
set
for
a lo
nger
ter
m, a
llow
ing
time
for
chan
ges
and
inno
vatio
n. N
ever
thel
ess,
set
ting
stre
tch
targ
ets
is a
cha
lleng
ing
task
. D
ecis
ions
m
ust
be m
ade
as t
o ho
w f
ar t
o st
retc
h a
targ
et,
whi
le k
eepi
ng it
cre
dibl
e.
DuP
ont’s
cas
e ex
ampl
e su
mm
ariz
es it
s co
nsid
erat
ions
and
pro
cess
for
dev
elop
ing
stre
tch
targ
ets.
Sou
ther
n C
ompa
ny’s
zero
inju
ry t
arge
t,
(on
page
45)
is a
n ex
ampl
e of
a s
tret
ch t
arge
t de
sign
ed t
o ch
ange
an
orga
niza
tion’
s m
inds
et.
6H
ow
to
Ass
ure
Eff
ect
iven
ess
5H
ow
to
Ass
ure
Eff
ect
iven
ess
4W
hat
an
d H
ow
toM
easu
re3
Wh
at
is
Mate
rial
2W
hat
is
Mate
rial
1W
hat
is
Mate
rial
Du
Po
nt
Sett
ing
’Ach
ieva
bly
Str
etch
ed’ T
arg
ets
Cor
pora
te e
nviro
nmen
tal a
nd s
usta
inab
ility
goa
ls a
t D
uPon
t ar
e se
t on
a n
ine-
to-t
en-y
ear
timef
ram
e. T
his
long
er
perio
d al
low
s th
e co
rpor
atio
n to
set
mor
e ch
alle
ngin
g (i.
e., ’
stre
tche
d’) g
oals
and
suf
ficie
nt t
ime
to in
nova
te a
nd
find
crea
tive
solu
tions
tha
t ar
e be
tter
for
the
bus
ines
s as
wel
l as
the
envi
ronm
ent.
Aft
er is
sues
are
iden
tified
and
prio
ritiz
ed, t
he f
ollo
win
g ge
neric
pro
cess
is u
sed
to s
et t
he c
orpo
rate
goa
ls:
•de
velo
p a
base
line
on w
here
the
com
pany
cur
rent
ly s
tand
s on
the
issu
es
•de
term
ine
wha
t th
e co
mpa
ny in
tend
s to
do
abou
t th
e is
sues
•es
timat
e th
e le
vels
of
impr
ovem
ent
that
can
be
reas
onab
ly e
xpec
ted
base
d on
exi
stin
g te
chno
logi
es,
cu
rren
t Re
sear
ch &
Dev
elop
men
t ef
fort
s an
d an
ticip
ated
cha
nges
in t
he m
arke
tpla
ce
•de
cide
on
spec
ific
targ
ets
that
can
suf
ficie
ntly
cha
lleng
e th
e co
mpa
ny
Ulti
mat
ely,
set
ting
targ
ets
is a
pro
cess
tha
t re
quire
s no
t on
ly q
uant
itativ
e an
d qu
alita
tive
anal
ysis
, but
als
o a
stro
ng le
ader
ship
rol
e. I
n ad
ditio
n to
det
erm
inin
g ta
rget
s th
at w
ill a
dequ
atel
y ch
alle
nge
the
com
pany
, lea
ders
hip
mus
t en
sure
tha
t th
e ta
rget
s se
t ar
e fe
asib
le, l
est
the
com
pany
’s cr
edib
ility
may
be
harm
ed. F
urth
erm
ore,
le
ader
ship
mus
t en
sure
tha
t th
e ta
rget
s w
ill b
enefi
t th
e en
viro
nmen
t an
d so
ciet
y w
hile
als
o m
akin
g ec
onom
ic
sens
e fo
r th
e co
mpa
ny.
Inte
rnal
met
rics,
or
‘mile
ston
es’,
are
deve
lope
d to
ben
chm
ark
the
com
pany
’s pr
ogre
ss t
owar
d th
e go
als.
To
assu
re
cont
inuo
us im
prov
emen
t, m
ore
imm
edia
te t
wo-
to-t
hree
-yea
r ta
rget
s ar
e se
t an
d m
anag
ed a
t D
uPon
t’s in
divi
dual
bu
sine
ss u
nits
.
To “
near
ly d
oubl
e re
venu
es f
rom
non
-dep
leta
ble
reso
urce
s to
at
leas
t $8
bill
ion
by 2
015”
is a
n ex
ampl
e of
a
long
er-t
erm
goa
l set
at
DuP
ont.
Suc
h go
als
are
valu
able
in s
timul
atin
g ne
w id
eas,
esp
ecia
lly in
Res
earc
h &
D
evel
opm
ent
and
way
s to
mar
ket
prod
ucts
and
ser
vice
s. T
hey
chal
leng
e em
ploy
ees
to c
reat
e a
mor
e su
stai
nabl
e co
mpa
ny t
hat
will
pro
vide
mea
sura
ble
soci
etal
val
ue.
45
4.
Defi
ne K
ey P
erf
orm
an
ce I
nd
icato
rs a
nd
Metr
ics
6H
ow
to
Ass
ure
Eff
ect
iven
ess
5H
ow
to
Ass
ure
Eff
ect
iven
ess
4W
hat
an
d H
ow
toM
easu
re3
Wh
at
is
Mate
rial
2W
hat
is
Mate
rial
1W
hat
is
Mate
rial
So
uth
ern
Co
mp
an
y
‘Tar
get
Zer
o’ t
o C
han
ge
Emp
loye
es’ M
ind
sets
Sout
hern
Com
pany
is a
n ov
eral
l lea
der
in t
he U
nite
d St
ates
pow
er in
dust
ry. Y
et, c
olle
ctiv
e 20
02-2
004
resu
lts f
or
all u
tiliti
es in
the
com
pany
’s re
gion
pla
ced
its s
afet
y pe
rfor
man
ce in
the
thi
rd q
uart
ile. T
his
was
att
ribut
able
to
a cu
lture
tha
t be
lieve
d in
cide
nts
wer
e un
avoi
dabl
e an
d ac
cept
able
. To
achi
eve
wor
ld c
lass
saf
ety
perf
orm
ance
tha
t th
e co
mpa
ny d
esire
s, t
his
min
dset
had
to
chan
ge.
Sout
hern
Com
pany
his
toric
ally
has
bee
n ef
fect
ive
in a
ccom
plis
hing
cor
pora
te g
oals
tha
t it
sets
for
itse
lf.
Nev
erth
eles
s, p
ast
safe
ty g
oals
hav
e no
t br
ough
t th
e ex
celle
nce
expe
cted
of
a le
ader
ship
com
pany
. Thu
s,
effe
ctiv
e in
200
5, S
outh
ern
Com
pany
set
a n
ew s
afet
y go
al –
‘Tar
get
Zero
’ – t
o ac
hiev
e ze
ro in
jurie
s ev
ery
day
on e
very
job.
One
may
que
stio
n w
heth
er a
zer
o go
al is
rea
listic
. The
key
, how
ever
, is
to e
mbe
d in
to t
he o
rgan
izat
ion
the
belie
fs,
expe
ctat
ions
and
per
form
ance
sta
ndar
ds in
here
nt in
‘Tar
get
Zero
.’ A
set
of
prin
cipl
es r
ecen
tly a
dopt
ed b
y th
e co
mpa
ny’s
Cen
tral
Saf
ety
Com
mitt
ee c
larifi
es t
hree
val
ues
criti
cal f
or t
he c
ompa
ny’s
succ
ess
in a
chie
ving
the
goa
l:
•‘B
elie
ve it
!’ –
em
ploy
ees
mus
t fir
mly
bel
ieve
tha
t al
l inj
urie
s an
d oc
cupa
tiona
l illn
esse
s ar
e pr
even
tabl
e an
d
ever
y ta
sk c
an b
e pl
anne
d an
d co
mpl
eted
saf
ely
•‘E
xpec
t it!
’ – e
mpl
oyee
s m
ust
unde
rsta
nd t
hat
wor
king
saf
ely
is a
con
ditio
n fo
r em
ploy
men
t; a
nd m
anag
ers,
su
perv
isor
s an
d in
divi
dual
s ar
e he
ld a
ccou
ntab
le f
or u
nsaf
e be
havi
ors
and
cond
ition
s
•‘L
ive
it!’ –
em
ploy
ees
mus
t co
mm
it to
hea
lth a
nd s
afet
y ru
les
and
to c
ontin
uous
impr
ovem
ent;
and
lead
ers
m
ust
reco
gniz
e an
d re
war
d su
cces
ses
A c
ultu
re w
ill c
hang
e on
ly w
ith t
ime.
Man
agem
ent
is fi
rst
resp
onsi
ble
for
dem
onst
ratin
g th
e ch
ange
and
cr
eatin
g th
e en
viro
nmen
t fo
r sa
fety
exc
elle
nce.
The
re a
re c
urre
ntly
org
aniz
atio
ns w
ithin
Sou
ther
n C
ompa
ny
that
are
bec
omin
g w
orld
cla
ss p
erfo
rmer
s. T
hat
shou
ld b
ecom
e th
e ne
w n
orm
for
saf
ety.
The
res
ults
so
far
are
enco
urag
ing.
In t
he fi
rst
year
of
impl
emen
tatio
n, S
outh
ern
Com
pany
red
uced
rec
orda
ble
inju
ries
by 2
5 pe
rcen
t an
d lo
st w
ork
time
inju
ries
by 4
0 pe
rcen
t.
Bu
ild M
etri
cs a
nd
Set
Tar
get
s –
Wo
rksh
eet
4c
Wor
kshe
et 4
c (o
n pa
ge 4
6) p
rovi
des
a te
mpl
ate
to s
umm
ariz
e th
e se
t of
met
rics
that
sup
port
the
K
PIs
and
incl
udes
: the
for
mul
a fo
r ea
ch m
etric
, th
e pr
otoc
ol, i
.e.,
proc
edur
e fo
r m
easu
ring
and
calc
ulat
ing
the
met
ric a
nd a
ny a
ssum
ptio
ns t
hat
go
into
the
cal
cula
tion.
The
Nee
d f
or
Co
mp
lem
enta
ry M
etri
csIn
add
ition
to
the
stra
tegi
c m
etric
s th
at d
irect
ly
refle
ct t
he K
PIs,
add
ition
al m
etric
s ca
n be
de
velo
ped
to a
ddre
ss s
peci
fic n
eeds
. Th
ese
met
rics
are
com
plem
enta
ry t
o th
e cr
itica
l few
m
easu
rem
ents
and
can
incl
ude
met
rics
that
:
•em
phas
ize
cert
ain
com
pone
nts
of t
he s
trat
egic
m
etric
s, e
.g.,
mas
s of
tox
ic r
aw m
ater
ials
em
phas
izes
an
elem
ent
of a
n ov
eral
l mat
eria
l co
nsum
ptio
n m
etric
•in
clud
e co
mpo
nent
s no
t ac
coun
ted
for
in t
he
stra
tegi
c m
etric
s, e
.g.,
tran
spor
tatio
n en
ergy
m
etric
com
plem
ents
an
ener
gy m
etric
for
the
co
mpa
ny’s
oper
atio
ns
•pr
ovid
e ad
ditio
nal i
nsig
hts
to t
he s
trat
egic
m
etric
s, e
.g.,
toxi
city
rat
ing
com
plem
ents
the
to
tal m
ass
of t
oxic
s re
leas
ed
•su
ppor
t th
e st
rate
gic
met
rics’
impl
emen
tatio
n an
d ev
alua
tion,
e.g
., nu
mbe
r of
peo
ple
who
re
ceiv
ed m
etric
s an
d be
st-p
ract
ice
trai
ning
s
46
6H
ow
to
Ass
ure
Eff
ect
iven
ess
5H
ow
to
Ass
ure
Eff
ect
iven
ess
4W
hat
an
d H
ow
toM
easu
re3
Wh
at
is
Mate
rial
2W
hat
is
Mate
rial
1W
hat
is
Mate
rial
WO
RK
SHEE
T 4c
: BU
ILD
MET
RIC
S A
ND
SET
TA
RG
ETS
(XY
Z N
utrit
iona
l Bev
erag
e Ex
ampl
e)
Mat
eria
l Iss
ue(
s)M
ater
ial i
ssue
(s) a
ddre
ssed
by
key
obje
ctiv
eG
HG
em
issi
ons,
ene
rgy
use
and
use
of a
ltern
ativ
e en
ergy
Key
Ob
ject
ive
A s
elec
ted
key
obje
ctiv
eRe
duce
GH
G e
mis
sion
s al
ong
valu
e ch
ain
KPI
sD
escr
iptio
n of
the
mea
sure
(s) o
f pe
rfor
man
ce t
owar
d a
key
obje
ctiv
e(s)
GH
G e
mis
sion
s En
ergy
red
uctio
n re
lativ
e to
gro
wth
Use
& U
sers
Div
erse
use
rsD
iver
se u
sers
Met
ric
Defi
nit
ion
sM
easu
rem
ents
tha
t fu
rthe
r de
fine
and
supp
ort
the
KPI
– T
he ‘h
ow-t
o’ o
f K
PI
GH
G e
mis
sion
s fr
om re
leva
nt v
alue
cha
in s
tage
s, e
xpre
ssed
per
sal
es re
venu
eEn
ergy
use
per
sal
es r
even
ue
Met
ric
Bo
un
dar
yFa
rmin
g, t
rans
port
atio
n, h
eat
& p
ower
gen
erat
ion,
com
pany
’s op
erat
ions
Com
pany
’s op
erat
ions
and
tra
nspo
rtat
ion
Rep
ort
ing
Lev
elBu
sine
ss U
nit
Busi
ness
Uni
t
Form
ula
Sum
of
GH
G e
mis
sion
s fr
om e
ach
valu
e ch
ain
stag
es (C
O2-
equ
iv/y
r) p
er
US$
sal
esA
nnua
l ene
rgy
use
(MJ/
year
) per
US$
sal
es
Pro
toco
ls &
Ass
um
pti
on
s
•G
HG
fro
m f
arm
ing
(ups
trea
m):
Estim
ate
usin
g U
S av
erag
e fo
r co
nven
tiona
l an
d or
gani
c so
y be
an f
arm
ing
•G
HG
fro
m in
com
ing
tran
spor
tatio
n an
d fr
om d
istr
ibut
ion:
Est
imat
e fr
om lo
gist
ics
data
usi
ng W
BCSD
gui
delin
es f
or c
alcu
latin
g G
HG
fro
m
tran
spor
tatio
n•
GH
G f
rom
hea
t an
d po
wer
gen
erat
ion:
Cal
cula
te f
rom
ele
ctric
ity a
nd s
team
us
e at
fac
ilitie
s an
d G
HG
em
issi
on f
acto
rs f
rom
sup
plie
rs•
Non
-CO
2 G
HG
em
issi
ons
conv
erte
d in
to C
O2
equi
vale
nts
follo
win
g IP
CC
20-y
ear
horiz
on•
Sale
s re
venu
e: f
ollo
w fi
nanc
ial a
ccou
ntin
g ca
lcul
atio
n
•En
ergy
use
cal
cula
ted
as fu
el e
quiv
alen
ce (i
n M
J)•
For
purc
hase
d el
ectr
icity
and
ste
am, r
epor
t as
th
e eq
uiva
lenc
e of
fue
l req
uire
d to
gen
erat
e an
d de
liver
the
ene
rgy
•Sa
les
reve
nue:
fol
low
fina
ncia
l
acco
untin
g ca
lcul
atio
n
Dat
a So
urc
esSe
e ca
lcul
atio
n pr
otoc
ols
& a
ssum
ptio
ns a
bove
Util
ity d
ata;
tra
nspo
rtat
ion
reco
rds
GH
G e
mis
sion
s al
ong
valu
e ch
ain
Freq
uen
cyA
nnua
lQ
uart
erly
Targ
etRe
duce
30
perc
ent
in 5
yea
rsRe
duce
10
perc
ent
in 5
yea
rs
47
Step
5 o
utlin
es h
ow to
impl
emen
t the
met
rics
and
inte
grat
e th
em in
to e
xist
ing
info
rmat
ion
and
man
agem
ent s
yste
ms.
Thi
s st
ep w
ill c
onfir
m th
at th
e or
gani
zatio
n ha
s a
syst
emat
ic a
ppro
ach
to m
easu
ring
key
finan
cial
and
non
-fina
ncia
l per
form
ance
and
en
sure
that
the
info
rmat
ion
gene
rate
d is
relia
ble,
co
mpl
ete,
com
para
ble
and
rele
vant
.
The
syst
emat
ic in
tegr
atio
n of
met
rics
into
m
anag
emen
t an
d in
form
atio
n sy
stem
s ca
n lin
k st
rate
gy a
nd o
pera
tions
to
prod
uce
insi
ghts
fo
r de
cisi
on-m
aker
s an
d tr
ansl
ate
impo
rtan
t in
form
atio
n to
key
sta
keho
lder
s. Im
plem
enta
tion
is n
ot o
nly
abou
t th
e m
echa
nics
of
syst
ems,
but
al
so a
bout
the
eff
ectiv
enes
s of
com
mun
icat
ion.
Th
e m
etric
s ne
ed t
o be
mea
ning
ful a
nd
unde
rsta
ndab
le t
o th
e in
tend
ed a
udie
nce.
Inte
gra
tio
n in
to E
xist
ing
Sys
tem
s In
inte
rvie
win
g U
.S. s
enio
r ex
ecut
ives
and
maj
or
gove
rnm
ents
, KPM
G L
LP id
entifi
ed o
rgan
izat
iona
l be
nefit
s by
dev
elop
ing
and
impl
emen
ting
a m
easu
rem
ent
syst
em t
hat
is a
ligne
d w
ith a
n or
gani
zatio
n’s
stra
tegy
. Thi
s al
ignm
ent
ensu
res
that
, wha
teve
r m
etric
s an
org
aniz
atio
n us
es, t
hey
are
mea
surin
g w
hat
is r
ight
for
the
m, a
s w
ell a
s m
easu
ring
thin
gs t
he r
ight
way
. The
alig
nmen
t fu
rthe
r tr
ansl
ates
met
rics
into
spe
cific
act
ion
step
s th
at g
ener
ally
ben
efit
the
orga
niza
tion.
Th
e re
sear
ch a
lso
foun
d th
at f
or m
easu
rem
ent
to
prov
ide
a co
mpe
titiv
e ad
vant
age,
it n
eeds
to
be
cons
ider
ed a
s a
core
org
aniz
atio
nal p
roce
ss (1
4).
To e
mbe
d th
e m
etric
s in
to e
xist
ing
prac
tices
and
sy
stem
s, o
ne n
eeds
to:
•id
entif
y th
ose
acco
unta
ble
for
the
met
rics
proc
ess
•de
velo
p a
form
al im
plem
enta
tion
appr
oach
•es
tabl
ish
an im
plem
enta
tion
team
•de
velo
p a
writ
ten
proc
edur
e or
gui
danc
e do
cum
ent
base
d on
the
met
rics
defin
ition
•in
tegr
ate
into
the
exi
stin
g da
ta c
olle
ctio
n an
d in
form
atio
n m
anag
emen
t sy
stem
, whe
neve
r po
ssib
le
•in
tegr
ate
into
pla
nnin
g, b
udge
ting
or o
ther
re
leva
nt b
usin
ess
proc
esse
s
•in
corp
orat
e th
e us
e of
met
rics
into
job
perf
orm
ance
eva
luat
ion
crite
ria
•es
tabl
ish
a pr
oces
s fo
r re
view
ing,
refi
ning
and
re
tirin
g m
etric
s
Dat
a M
anag
emen
tTh
e da
ta n
eede
d to
cal
cula
te t
he c
hose
n m
etric
s ar
e id
entifi
ed in
Ste
p 4,
alo
ng w
ith c
onsi
dera
tion
of w
heth
er t
he m
etric
s ca
n be
cal
cula
ted
or
estim
ated
fro
m a
vaila
ble
data
. In
inte
grat
ing
the
new
ly d
evel
oped
met
rics
into
exi
stin
g in
form
atio
n sy
stem
, one
nee
ds t
o as
k:
•W
here
do
(or
will
) the
nec
essa
ry d
ata
resi
de?
•W
ho is
(or
will
be)
res
pons
ible
for
the
dat
a?
•H
ow o
ften
are
the
dat
a (o
r w
ill b
e) c
olle
cted
?
•H
ow a
re (o
r ca
n) t
he d
ata
be v
erifi
ed f
or
accu
racy
?
•A
re t
he d
ata
(or
will
the
dat
a be
) com
para
ble
acro
ss f
acili
ties
or o
rgan
izat
iona
l uni
ts f
or t
he
purp
ose
of t
he m
etric
?
Obt
aini
ng c
ompa
rabl
e da
ta c
an b
e ch
alle
ngin
g ac
ross
a la
rge
orga
niza
tion.
Env
ironm
enta
l, he
alth
and
saf
ety
data
, in
part
icul
ar, a
re t
ypic
ally
co
llect
ed t
o sa
tisfy
loca
l reg
ulat
ory
requ
irem
ents
th
at v
ary
acro
ss t
he d
iffer
ent
juris
dict
ions
tha
t an
or
gani
zatio
n op
erat
es.
6H
ow
to
Ass
ure
Eff
ect
iven
ess
5H
ow
to
Ass
ure
Eff
ect
iven
ess
4W
hat
an
d H
ow
toM
easu
re3
Wh
at
is
Mate
rial
2W
hat
is
Mate
rial
1W
hat
is
Mate
rial
STE
P 5
Exp
ecte
d O
utc
om
es•
Re
gula
r co
mm
unic
atio
n
and
feed
back
bas
ed o
n
perf
orm
ance
aga
inst
tar
gets
5.
Evalu
ate
an
d C
om
mu
nic
ate
Metr
ics
48
Cla
rity
in d
efini
tions
and
bou
ndar
ies
can
impr
ove
the
com
para
bilit
y of
met
rics.
For
exa
mpl
e, in
stea
d of
mea
surin
g em
issi
ons
from
a u
nifo
rm s
et o
f su
bsta
nces
, the
met
ric c
an b
e re
-defi
ned
in t
erm
s of
sub
stan
ces
of c
once
rn t
o th
e lo
cal c
onte
xt.
Use
of
an a
utom
ated
info
rmat
ion
man
agem
ent
syst
em c
an e
ffec
tivel
y re
duce
the
cos
t an
d hu
man
re
sour
ces
requ
ired
to s
uppo
rt d
ata
colle
ctio
n an
d ve
rifica
tion
and
repo
rtin
g in
a t
imel
y m
anne
r. O
ne s
uch
tool
is t
he G
EMI H
SE W
eb D
epo
t,an
EH
S m
anag
emen
t in
form
atio
n sy
stem
s to
ol t
hat
can
be f
ound
at
ww
w.g
emi.o
rg/
hse
web
dep
ot.
org
.
John
son
Con
trol
s In
c. p
rovi
des
a ca
se e
xam
ple
of
a w
eb-b
ased
info
rmat
ion
man
agem
ent
syst
em t
o m
anag
e en
ergy
and
gre
enho
use
gas
data
.
Inte
gra
tio
n in
to B
usi
nes
s Pr
oce
sses
Met
rics
can
have
mul
tiple
use
s an
d us
ers.
In
impl
emen
ting
the
met
rics,
one
nee
ds to
ask
whe
ther
:
•gu
idel
ines
and
inst
ruct
ions
ass
ocia
ted
with
the
m
etric
s ar
e ef
fect
ivel
y co
mm
unic
ated
and
are
un
ders
tand
able
to
the
user
s
•us
ers
reco
gniz
e th
e va
lue
of t
he m
etric
s
Vario
us c
omm
unic
atio
n ve
nues
, suc
h as
an
inte
rnal
com
pany
’s w
ebsi
te a
nd s
hort
cou
rses
, may
be
use
d to
dis
sem
inat
e in
form
atio
n re
latin
g to
the
m
etric
s an
d ex
ampl
es o
f is
sues
and
suc
cess
es in
th
e m
etric
s’ im
plem
enta
tion.
One
sho
uld
also
con
side
r w
heth
er t
he m
etric
s pr
ogra
m c
an b
e in
tegr
ated
into
exi
stin
g pr
oces
ses,
su
ch a
s Si
x Si
gma
as
dem
onst
rate
d in
the
3M
cas
e ex
ampl
e (o
n pa
ge 4
9).
Joh
nso
n C
on
tro
ls,
Inc.
Man
agin
g E
ner
gy
and
Gre
enh
ou
se G
as D
ata
Ener
gy u
se m
anag
emen
t is
an
impo
rtan
t pa
rt o
f re
duci
ng g
reen
hous
e ga
ses
(GH
Gs)
and
a c
ore
busi
ness
of
Joh
nson
Con
trol
s, In
c. T
o as
sist
bus
ines
ses
in m
anag
ing
ener
gy a
nd G
HG
dat
a in
vent
ory,
tra
ckin
g, a
nd
repo
rtin
g, J
ohns
on C
ontr
ols,
Inc.
dev
elop
ed a
Util
ity B
ill P
aym
ent
& M
anag
emen
t Re
port
ing
Syst
em.
The
syst
em f
eatu
res
accu
rate
, con
sist
ent,
cos
t-ef
fect
ive,
tim
e sa
ving
, cre
dibl
e, fl
exib
le a
nd u
nder
stan
dabl
e ap
proa
ch f
or m
anag
ing
the
data
. The
se f
eatu
res
incl
ude:
•A
ccur
ate
Base
line
Dev
elop
men
t –
a m
odul
ar a
nd s
cala
ble
syst
em t
hat
sim
plifi
es c
alcu
latio
ns a
t fa
cilit
y an
d co
rpor
ate
leve
ls a
nd a
ccou
nts
for
chan
ging
bou
ndar
ies
due
to m
erge
rs, a
cqui
sitio
ns a
nd d
ispo
sals
•Si
mpl
ified
Em
issi
ons
Repo
rtin
g –
prov
ides
GH
G a
nd o
ther
em
issi
on f
acto
rs t
hat
mee
t va
rious
pub
lic
repo
rtin
g re
quire
men
ts f
or d
irect
and
indi
rect
em
issi
ons
•Ex
pert
Em
issi
ons
Info
rmat
ion
Man
agem
ent
– m
anag
es d
ata
in a
sec
ure
and
verifi
able
Web
app
licat
ion
that
fac
ilita
tes
data
ent
ry, a
utom
atic
cal
cula
tion
of d
eriv
ed d
ata,
and
ana
lysi
s of
tre
nds,
effi
cien
cy a
nd
cost
red
uctio
n op
port
uniti
es
Use
rs, i
nclu
ding
Joh
nson
Con
trol
s, In
c. a
nd it
s cu
stom
ers,
can
eas
ily c
olle
ct e
mis
sion
s da
ta f
rom
mul
tiple
fa
cilit
ies
wor
ldw
ide
and
use
the
syst
em t
o su
ppor
t so
und
deci
sion
-mak
ing.
Co
mm
un
icat
ing
Res
ult
s M
etric
s sh
ould
be
com
mun
icat
ed in
way
s th
at p
rovi
de m
eani
ngfu
l ins
ight
s an
d ar
e un
ders
tand
able
to
deci
sion
-mak
ers
and
othe
r au
dien
ces
that
can
ben
efit
from
the
m. T
o ac
hiev
e th
at, c
onsi
der
the:
•le
vel o
f ro
ll-up
and
det
ails
req
uire
d fo
r di
ffer
ent
audi
ence
s
•co
ntex
t in
whi
ch t
he m
etric
s ar
e pr
esen
ted
•vi
sual
dep
ictio
n of
the
met
ric
In a
dditi
on t
o co
mpo
site
indi
ces
that
com
bine
m
ultip
le m
easu
rem
ents
, met
rics
can
be r
olle
d-up
or a
ggre
gate
d or
gani
zatio
nally
and
geo
grap
hica
lly,
such
as
from
a b
usin
ess
unit
to t
he r
egio
nal
com
pany
and
the
n w
orld
wid
e. J
udic
ious
use
of
such
met
rics
can
be e
ffec
tive
in c
omm
unic
atin
g th
e bi
gger
pic
ture
, esp
ecia
lly t
o m
anag
ers
look
ing
for
a ge
nera
l tre
nd in
the
org
aniz
atio
n. H
owev
er,
one
mus
t ex
erci
se c
autio
n in
mak
ing
deci
sion
s on
su
ch b
ird’s-
eye-
view
met
rics.
Det
ails
nee
d to
be
avai
labl
e to
sup
port
the
use
of
com
posi
te in
dice
s an
d ro
lled-
up m
etric
s an
d co
nsid
ered
in p
rodu
cing
in
sigh
ts f
rom
suc
h m
etric
s.
Not
all
met
rics
are
suita
ble
for
roll-
up.
Loca
l co
mm
unity
issu
es, w
hile
impo
rtan
t at
the
co
rpor
ate
leve
l, ne
ed t
o ha
ve m
etric
s m
anag
ed a
t
6H
ow
to
Ass
ure
Eff
ect
iven
ess
5H
ow
to
Ass
ure
Eff
ect
iven
ess
4W
hat
an
d H
ow
toM
easu
re3
Wh
at
is
Mate
rial
2W
hat
is
Mate
rial
1W
hat
is
Mate
rial
49
3M
Mo
vin
g T
ow
ard
Su
stai
nab
ility
th
rou
gh
Six
Sig
ma
Six
Sigm
a no
t on
ly d
rives
bus
ines
ses
proc
ess
impr
ovem
ent,
but
hel
ps m
ove
3M f
urth
er t
owar
d its
vis
ion
of
sust
aina
bilit
y. In
200
1, 3
M e
mbr
aced
Six
Sig
ma
to h
elp
the
com
pany
ana
lyze
and
impr
ove
its c
ritic
al b
usin
ess
proc
esse
s an
d, o
ver
the
last
few
yea
rs, S
ix S
igm
a ha
s be
com
e in
grai
ned
in a
ll of
3M
’s bu
sine
ss p
ract
ices
. In
part
icul
ar, i
t ha
s be
com
e an
impo
rtan
t to
ol in
hel
ping
3M
ach
ieve
its
sust
aina
bilit
y go
als.
3M h
as a
long
-sta
ndin
g co
mm
itmen
t to
sus
tain
able
dev
elop
men
t th
roug
h en
viro
nmen
tal p
rote
ctio
n, s
ocia
l re
spon
sibi
lity
and
econ
omic
pro
gres
s. M
ore
then
30
year
s ag
o, 3
M’s
form
er V
ice
Pres
iden
t of
Env
ironm
enta
l En
gine
erin
g an
d Po
llutio
n C
ontr
ol, D
r. Jo
e Li
ng, c
reat
ed 3
M’s
Pollu
tion
Prev
entio
n Pa
ys o
r 3P
pro
gram
bec
ause
he
bel
ieve
d th
at, “
pollu
tion
is w
aste
, and
was
te t
oday
lead
s to
sho
rtag
es t
omor
row
.” D
r. Li
ng k
new
the
n, w
hat
man
y co
mpa
nies
are
just
beg
inni
ng t
o em
brac
e, t
hat
pollu
tion
prev
entio
n is
mor
e en
viro
nmen
tally
eff
ectiv
e,
tech
nica
lly s
ound
and
eco
nom
ical
tha
n co
nven
tiona
l pol
lutio
n co
ntro
l equ
ipm
ent.
Six
Sigm
a is
, ess
entia
lly, a
con
tinua
tion
of D
r. Li
ng’s
philo
soph
y ab
out
redu
cing
was
te a
nd in
effic
ienc
y.
At
3M, S
ix S
igm
a ha
s pr
oved
tha
t fu
ndam
enta
l pro
cess
cha
nge
lead
s to
hig
her
qual
ity o
utpu
t, in
crea
sed
prod
uctiv
ity a
nd e
nerg
ized
em
ploy
ees.
Whe
n co
uple
d, p
ollu
tion
prev
entio
n an
d Si
x Si
gma
add
up t
o bi
g nu
mbe
rs in
cos
t sa
ving
s an
d en
viro
nmen
tal p
erfo
rman
ce. B
oth
prog
ram
s st
reng
then
3M
’s co
re b
usin
ess
proc
esse
s an
d ca
n pr
omot
e th
e pr
oduc
tion
of m
ore
prod
ucts
and
ser
vice
s th
at u
se f
ewer
res
ourc
es a
nd h
ave
less
env
ironm
enta
l im
pact
.
In a
dditi
on, S
ix S
igm
a is
hel
ping
the
com
pany
impr
ove
its s
ocia
l pro
gram
s. In
200
5, 3
M im
plem
ente
d a
Six
Sigm
a pr
ojec
t to
ana
lyze
and
impr
ove
its m
echa
nism
s fo
r st
akeh
olde
r en
gage
men
t at
its
U.S
. fac
ilitie
s.
Six
Sigm
a’s
tool
s to
driv
e co
ntin
uous
impr
ovem
ent
and
bett
er u
nder
stan
d th
e cu
stom
er, o
r in
thi
s ca
se t
he
stak
ehol
der,
wer
e in
stru
men
tal i
n al
low
ing
3M t
o be
tter
a p
roce
ss f
or f
acili
ties
to a
ntic
ipat
e an
d re
spon
d to
st
akeh
olde
r co
ncer
ns a
nd e
stab
lish
a co
nsis
tent
, doc
umen
ted
and
proa
ctiv
e sy
stem
to
driv
e im
plem
enta
tion.
the
loca
l lev
el o
r th
ey c
an lo
se s
ome
of t
heir
valu
e if
rolle
d- u
p (1
5) ,
e.g.
, wat
er u
se in
a w
ater
-str
esse
d re
gion
on
the
wor
ld.
Met
rics
also
nee
d to
be
com
mun
icat
ed in
con
text
, re
lativ
e to
:
•hi
stor
ical
per
form
ance
to
dem
onst
rate
tre
nds
•ta
rget
s to
dem
onst
rate
pro
gres
s
•in
dust
ry b
ench
mar
ks to
ass
ess
com
petit
ive
stan
ding
•si
mila
r or
gani
zatio
nal u
nits
(e.g
., si
mila
r fa
cilit
ies
in a
cor
pora
tion)
to
iden
tify
best
pra
ctic
es
•ot
her
entit
ies
in t
he v
alue
cha
in t
o id
entif
y w
here
to
focu
s ef
fort
s
From
the
sta
ndpo
int
of v
isua
lly d
epic
ting
met
rics
so t
hat
they
rea
dily
con
vey
info
rmat
ion,
th
e us
e of
cha
rts
and
grap
hics
can
eff
ectiv
ely
rein
forc
e th
e co
ntex
t an
d fa
cilit
ate
insi
ghts
fro
m
the
met
rics.
The
cas
e ex
ampl
e by
Joh
nson
&
John
son
(on
page
50)
dem
onst
rate
s th
e us
e of
a
dash
boar
d to
driv
e ac
tions
and
com
mun
icat
e pr
ogre
ss t
owar
ds E
HS
goal
s.
Eval
uat
ion
of
Imp
lem
enta
tio
n &
C
om
mu
nic
atio
n-W
ork
shee
t 4b
The
seco
nd c
olum
n of
Wor
kshe
et 4
b (o
n pa
ge
40) p
rovi
des
a ch
eckl
ist
of c
riter
ia t
o ev
alua
te
the
met
rics’
eff
ectiv
enes
s in
impl
emen
tatio
n.
In a
dditi
on, o
ne c
an r
evis
it Ta
ble
2 (o
n pa
ge
35) a
nd a
sses
s th
e ef
fect
iven
ess
of m
etric
s im
plem
enta
tion
and
com
mun
icat
ion
for
each
of
the
use
s an
d us
ers.
Do
the
met
rics
supp
ort
the
inte
nded
use
, and
if t
hey
are
mea
ning
ful
and
unde
rsta
ndab
le t
o th
e us
er, g
iven
the
ir pe
rspe
ctiv
es a
nd le
vel o
f co
mm
itmen
t.
If an
y of
the
crit
eria
sho
wn
in W
orks
heet
4b
cann
ot b
e co
nfirm
ed in
the
impl
emen
tatio
n st
age,
re
fine
the
met
rics
proc
edur
e an
d gu
idel
ines
or
retu
rn t
o th
e m
etric
s de
velo
pmen
t pr
oces
s in
Ste
p 4
to r
edefi
ne t
he m
etric
s.
Mis
use
s o
f M
etri
csM
etrics
an
d t
arg
ets
can
so
met
imes
be
use
d f
or
pu
rpo
ses
for
wh
ich
th
ey a
re n
ot
inte
nd
ed.
On
e co
mm
on
mis
use
is t
o h
old
peo
ple
acc
ou
nta
ble
fo
r m
etrics
no
t d
esig
ned
fo
r ac
cou
nta
bili
ty.
For
exam
ple
, th
ere
is a
po
ten
tial
to
un
der
rep
ort
sa
fety
sta
tist
ics
if a
n o
rgan
izat
ion
fo
cuse
s st
rict
ly
on
a r
epo
rtab
le n
um
ber
. M
etrics
dev
elo
ped
fo
r in
tern
al le
arn
ing
, fo
r in
stan
ce,
are
oft
en n
ot
app
rop
riat
e fo
r ac
cou
nta
bili
ty.
Sim
ilarly,
str
etch
ta
rget
s in
ten
ded
to
drive
inn
ova
tio
n s
ho
uld
no
t b
e as
soci
ated
with
pen
alties
fo
r n
ot
mee
tin
g
the
targ
ets.
5.
Evalu
ate
an
d C
om
mu
nic
ate
Metr
ics
6H
ow
to
Ass
ure
Eff
ect
iven
ess
5H
ow
to
Ass
ure
Eff
ect
iven
ess
4W
hat
an
d H
ow
toM
easu
re3
Wh
at
is
Mate
rial
2W
hat
is
Mate
rial
1W
hat
is
Mate
rial
50
Joh
nso
n &
Jo
hn
son
Co
mm
un
icat
ing
Pro
gre
ss t
ow
ard
Go
als
John
son
& Jo
hnso
n re
cent
ly m
arke
d th
e en
dpoi
nt o
f its
200
0-20
05 N
ext G
ener
atio
n G
oals
– a
set o
f man
agem
ent a
nd e
nviro
nmen
tal p
erfo
rman
ce g
oals
impl
emen
ted
acro
ss th
e co
mpa
ny’s
dive
rse
oper
atio
ns in
57
coun
trie
s.
The
Envi
ronm
enta
l Per
form
ance
Das
hboa
rd (s
ee F
igur
e) w
as a
n im
port
ant t
ool i
n co
mm
unic
atin
g th
e pe
rfor
man
ce g
oals
to e
mpl
oyee
s an
d m
anag
ers.
It is
des
igne
d to
pro
vide
insig
hts
on p
erfo
rman
ce a
nd c
an b
e us
ed a
t mul
tiple
org
aniz
atio
nal l
evel
s: fr
om a
faci
lity,
busin
ess
unit,
regi
on, t
o th
e w
orld
wid
e co
rpor
atio
n. P
rogr
ess
tow
ard
each
goa
l cat
egor
y is
disp
laye
d as
gr
een
(‘On-
Targ
et’),
yel
low
(‘C
autio
n’),
or re
d (‘N
eeds
Att
entio
n’) (
show
n in
the
acco
mpa
nyin
g Fi
gure
as
light
, med
ium
, and
dar
k sh
ades
, res
pect
ivel
y).
Perf
orm
ance
is ra
ted
usin
g bo
th p
roce
ss m
etric
s (e
.g.,
best
pra
ctic
e im
plem
enta
tion)
and
out
com
e m
etric
s (e
.g.,
perc
ent a
void
ance
in p
acka
ging
use
). C
ompo
site
indi
ces
wer
e al
so u
sed
to c
ombi
ne m
ultip
le p
erfo
rman
ce m
etric
s an
d cr
iteria
into
sin
gle
scor
es. T
hres
hold
s w
ere
set f
or th
e di
ffer
ent c
olor
-cod
ed ra
tings
. To
allo
w e
ffec
tive
roll-
up, t
he c
riter
ia m
ay v
ary
from
one
or
gani
zatio
nal l
evel
to th
e ne
xt. F
or in
stan
ce, f
or th
e C
ompl
ianc
e/Ri
sk M
anag
emen
t cat
egor
y, a
gree
n O
n-Ta
rget
ratin
g fo
r a fa
cilit
y re
quire
s IS
O 1
4001
cer
tifica
tion,
alo
ng w
ith a
few
ot
her p
roce
ss re
quire
men
ts. A
t the
bus
ines
s un
it le
vel,
how
ever
, the
sam
e ra
ting
requ
ires
that
a c
erta
in p
erce
ntag
e of
its
faci
litie
s m
eet f
acilit
y-le
vel g
reen
ratin
g.
The
Envi
ronm
enta
l Per
form
ance
Das
hboa
rds
wer
e po
sted
pro
min
ently
in a
ll fa
cilit
ies
and
revi
ewed
sem
i-ann
ually
by
John
son
& Jo
hnso
n’s
Wor
ldw
ide
Envi
ronm
enta
l Ste
erin
g C
omm
ittee
ch
aire
d by
one
of i
ts V
ice
Cha
irmen
. Sim
ilar D
ashb
oard
s w
ill al
so b
e us
ed to
trac
k an
d co
mm
unic
ate
prog
ress
tow
ard
the
com
pany
’s ne
w H
ealth
y Pl
anet
201
0 G
oals.
6H
ow
to
Ass
ure
Eff
ect
iven
ess
5H
ow
to
Ass
ure
Eff
ect
iven
ess
4W
hat
an
d H
ow
toM
easu
re3
Wh
at
is
Mate
rial
2W
hat
is
Mate
rial
1W
hat
is
Mate
rial
Nex
t G
ener
atio
n G
oal
Pro
gre
ssR
easo
ns
/ C
om
men
tsC
ompl
ianc
e / R
isk
Man
agem
ent
3 N
onco
mpl
ianc
e ev
ents
Mgt
Sys
tem
s / I
SO 1
4001
ISO
cer
tified
, MA
ARS
rat
ing
= 2
, MA
P no
t re
view
ed a
nd s
igne
d, 1
00%
of
MA
P ite
ms
on t
ime,
C
CO
pla
n on
goin
g &
on
sche
dule
New
Pro
duct
/Pro
cess
Rev
iew
100%
of
New
Pro
duct
s/Pr
oces
ses/
Pack
agin
g re
view
ed u
sing
the
DfE
too
l or
equi
vale
nt.
Exte
rnal
Man
ufac
turin
g76
% E
M w
ith E
HS
cont
ract
lang
uage
, 40%
EM
aud
its o
n sc
hedu
le, 1
00%
EM
aud
ited
befo
re u
se,
0 un
acce
ptab
le E
M, 0
Mar
gina
l EM
Ener
gy U
se93
% E
nhan
ced
Best
Pra
ctic
es im
plem
ente
d
Wat
er U
se81
% B
est p
ract
ices
impl
emen
ted.
Cum
ulat
ive
PBA
= 7
.15,
Wat
er U
sage
= 5
02,3
86 m
3 , A
void
ed =
35,
897
m3
Raw
Mat
eria
l Use
Tota
l avo
idan
ce: 1
,589
,456
Tot
al u
sage
: 53,
165,
445
(PBA
: 3.0
)
Pack
agin
g U
sePa
ckag
ing
avoi
danc
e =
726
,489
Pack
agin
g U
se =
13,
592,
000
(5.4
PBA
)
Was
te R
educ
tion
(NPO
)
1. N
on-h
az N
PO a
void
ed =
1,2
75,1
94 T
otal
Non
-haz
NPO
= 8
1,09
5,43
2 (1
.57
PBA
)2.
Haz
NPO
avo
ided
= 1
4,14
6,30
2 To
tal H
az N
PO =
109
,443
,578
(12.
9 PB
A)
3. T
oxic
NPO
avo
ided
= 1
, 914
,000
Tot
al T
oxic
NPO
= 3
2,40
3,39
6 (5
.9 P
BA)
4. U
se o
f Pr
efer
red
Was
te M
gmt
Met
hod
= 1
6% d
ecre
ase
from
200
0
12
34
Joh
nso
n &
Jo
hn
son
En
viro
nm
enta
l Per
form
ance
Das
hb
oar
d (
Exam
ple
)
51
Met
rics
can
also
be
effe
ctiv
e fo
r on
e us
e bu
t no
t ot
hers
. For
exa
mpl
e, s
ome
met
rics
that
rel
y on
for
ecas
ted
data
are
eff
ectiv
e fo
r pl
anni
ng o
r en
gine
erin
g de
cisi
on-m
akin
g us
ing
fore
cast
ed
data
. H
owev
er, t
o us
e th
em f
or d
ay-t
o-da
y pr
ogre
ss t
rack
ing
may
pro
ve in
effe
ctiv
e du
e to
po
or d
ata
qual
ity a
nd r
elia
bilit
y. A
lso,
exe
rcis
e ca
utio
n w
ith m
etric
s de
velo
ped
for
exte
rnal
st
akeh
olde
rs. W
hile
tra
nspa
renc
y ty
pica
lly b
rings
va
lue
to t
he o
rgan
izat
ion,
con
side
r po
tent
ial
mis
use
or m
isin
terp
reta
tion
by t
hird
-par
ties,
whi
ch
can
affe
ct t
he c
ompa
ny’s
com
petit
iven
ess
or
secu
rity
of it
s op
erat
ions
.
Ret
irin
g M
etri
csA
met
ric s
houl
d be
con
side
red
for
retir
emen
t w
hen
it no
long
er s
erve
s its
pur
pose
. A
met
ric
may
no
long
er s
atis
fy t
he e
valu
atio
n cr
iteria
use
d in
Wor
kshe
et 4
due
to
vario
us f
acto
rs, i
nclu
ding
:
•su
cces
ses
- it
is n
o lo
nger
mea
ning
ful i
n dr
ivin
g ac
tions
as
the
targ
ets
have
bee
n ac
hiev
ed; i
t is
no
long
er t
rans
form
ativ
e as
the
new
beh
avio
r be
com
es t
he n
orm
•sh
ort
com
ing
s -
it r
esu
lts
in u
nin
ten
ded
ad
vers
e ac
tio
ns
and
co
nse
qu
ence
s; it
req
uire
s g
reat
er r
eso
urc
es a
nd
is le
ss c
ost
-eff
ective
th
an a
ntici
pat
ed
•ch
ange
s in
the
org
aniz
atio
n an
d/or
ext
erna
l bu
sine
ss e
nviro
nmen
t -
it is
no
long
er r
elev
ant
as t
he b
usin
ess
obje
ctiv
es h
ave
chan
ged
If an
y of
the
se p
rove
tru
e, r
etur
n to
the
beg
inni
ng
of t
he S
trat
egic
Met
rics
Dev
elop
men
t Pr
oces
s an
d de
fine
a ne
w m
etric
.
Ach
ievi
ng t
he t
arge
t an
d ot
her
obje
ctiv
es
asso
ciat
ed w
ith a
met
ric, h
owev
er, s
houl
d no
t
auto
mat
ical
ly le
ad t
o a
met
ric’s
retir
emen
t.
To a
ssur
e co
ntin
uous
impr
ovem
ent
and
orga
niza
tiona
l int
egra
tion,
one
sho
uld
cons
ider
al
tern
ativ
es s
uch
as:
•up
datin
g th
e ta
rget
•co
ntin
uing
to
mon
itor
the
met
ric
•re
finin
g th
e m
etric
For
exam
ple,
a m
etric
on
the
tota
l num
ber
of s
afet
y in
cide
nts
may
lose
its
effe
ctiv
enes
s in
driv
ing
impr
ovem
ents
as
an o
rgan
izat
ion
appr
oach
es t
he t
arge
t of
zer
o in
cide
nts.
In
fact
, it
may
driv
e th
e w
rong
beh
avio
r, e.
g.,
mov
ing
away
fro
m c
olla
bora
ting
on s
olut
ions
to
sim
ply
blam
ing
the
unit
whe
re t
he in
cide
nt
occu
rred
. Thi
s si
gnal
s th
e ne
ed f
or n
ew m
etric
s.
Retir
ing
a m
etric
, how
ever
, typ
ical
ly r
equi
res
man
agem
ent
and
key
stak
ehol
der
inpu
t, a
s w
ell
as r
epla
cem
ent
met
rics
and
a tr
ansi
tion
plan
. M
etric
s on
the
tot
al n
umbe
r of
inci
dent
s m
ay b
e re
plac
ed b
y pr
oces
s m
etric
s re
flect
ing
the
caus
es
behi
nd t
he in
cide
nts,
and
thu
s pr
ovid
e m
ore
in-d
epth
ana
lysi
s. T
hey
serv
e as
the
new
set
of
met
rics
on w
hich
the
org
aniz
atio
n fo
cuse
s.
5.
Evalu
ate
an
d C
om
mu
nic
ate
Metr
ics
6H
ow
to
Ass
ure
Eff
ect
iven
ess
5H
ow
to
Ass
ure
Eff
ect
iven
ess
4W
hat
an
d H
ow
toM
easu
re3
Wh
at
is
Mate
rial
2W
hat
is
Mate
rial
1W
hat
is
Mate
rial
STE
P 6
Exp
ecte
d O
utc
om
es•
A
sses
smen
t of
how
met
rics
are
driv
ing
impr
ovem
ent
an
d or
gani
zatio
nal
al
ignm
ent
and
crea
ting
busi
ness
ben
efits
52
Step
6 is
a c
ritic
al a
sses
smen
t of
the
met
rics,
re
flect
ing
on t
he fi
ve p
revi
ous
step
s of
the
too
l. W
hile
the
re a
re v
ital c
onne
ctio
ns b
etw
een
each
of
the
ear
lier
step
s, n
owhe
re w
ill t
he li
nkag
es
and
the
impo
rtan
ce o
f cy
clin
g ba
ck b
etw
een
prev
ious
ste
ps b
e m
ore
evid
ent
than
in t
his
final
st
ep. H
ere
the
focu
s is
on
how
eff
ectiv
ely
the
non-
finan
cial
met
rics:
•in
form
bus
ines
s de
cisi
ons,
pro
mot
e le
arni
ng a
nd
lead
ersh
ip a
nd d
emon
stra
te t
he b
usin
ess
case
•su
ppor
t th
e bu
sine
ss s
trat
egy
•en
gage
em
ploy
ees
and
exte
rnal
sta
keho
lder
s
•re
spon
d to
issu
es id
entifi
ed b
y st
akeh
olde
rs
•ch
ange
the
beh
avio
r an
d at
titud
e ch
ange
of
indi
vidu
als
with
in t
he o
rgan
izat
ion
•he
lp in
tegr
ate
sust
aina
bilit
y th
inki
ng in
to t
he
orga
niza
tion’
s cu
lture
•re
flect
bus
ines
s va
lues
and
yie
ld b
usin
ess
bene
fits
Ulti
mat
ely
this
ana
lysi
s w
ill d
eter
min
e th
e bu
sine
ss
valu
e th
at h
as b
een
achi
eved
thr
ough
the
met
rics
deve
lopm
ent
proc
ess.
Cri
teri
a fo
r M
easu
rin
g S
ucc
ess
The
bene
fits
prov
ided
by
this
too
l can
be
eval
uate
d by
a f
ew s
yste
m m
etric
s th
at a
ddre
ss
the
follo
win
g qu
estio
ns.
•A
re t
he a
spec
ts, i
ssue
s an
d m
etric
s re
leva
nt
to t
he b
usin
ess?
Are
the
y re
flect
ed in
bu
sine
ss o
bjec
tives
and
str
ateg
ies?
Are
the
y in
corp
orat
ed in
to t
he p
rogr
ams
desi
gned
to
addr
ess
them
? Is
tha
t re
leva
nce
acce
pted
by
key
empl
oyee
s? D
o yo
u ha
ve t
heir
buy-
in?
•A
re t
he m
etric
s m
eani
ngfu
l and
use
ful?
Do
they
sup
port
man
agem
ent
deci
sion
-mak
ing?
D
o th
ey m
eet
the
inte
nded
use
s fo
r th
e in
tend
ed u
sers
? D
o th
ey p
rodu
ce m
eani
ngfu
l re
sults
for
the
bus
ines
s?
•A
re t
hey
tran
sfor
mat
ive?
Hav
e th
ey b
een
inte
grat
ed in
to t
he c
ultu
re o
f th
e co
mpa
ny?
Hav
e th
ey c
hang
ed m
inds
ets,
att
itude
s an
d be
havi
or?
•A
re t
hey
bala
nced
in t
erm
s of
inte
rrel
atin
g en
viro
nmen
tal,
soci
al a
nd e
cono
mic
issu
es a
nd
resu
lts?
Do
they
link
acr
oss
func
tions
and
fro
m
stra
tegy
to
oper
atio
ns?
•A
re t
hey
valu
able
to
the
orga
niza
tion?
Do
the
met
rics
driv
e th
e rig
ht p
erfo
rman
ce a
nd d
o th
ey
resu
lt in
bet
ter
busi
ness
per
form
ance
? D
oes
this
lead
to
grea
ter
busi
ness
val
ue, t
angi
ble
and/
or in
tang
ible
?
•H
ave
the
met
rics
been
mis
used
or
man
ipul
ated
in u
nint
ende
d w
ays?
Are
the
m
etric
s ac
cess
ible
to
thos
e w
ho in
tend
to
use
them
aga
inst
the
org
aniz
atio
n?
Det
erm
inin
g th
e de
gree
to
whi
ch t
he m
etric
s sy
stem
mee
ts t
he c
riter
ia (t
he t
hird
col
umn
of
Wor
kshe
et 4
b on
pag
e 40
) sho
uld
prov
ide
insi
ghts
in
to w
here
the
sys
tem
will
nee
d to
be
revi
sed.
It
is
the
feed
back
loop
to
earli
er s
teps
and
pro
vide
s an
op
port
unity
to
refle
ct o
n th
e pr
oces
s an
d ra
te t
he
effe
ctiv
enes
s of
the
pro
cess
and
its
resu
lts.
Cas
e ex
ampl
es b
y th
e O
ccid
enta
l Pet
role
um
Cor
pora
tion
(on
page
53)
and
Pfiz
er In
c. (o
n pa
ge
54) i
llust
rate
the
eva
luat
ion
of m
etric
sys
tem
s to
as
sure
the
ir ef
fect
iven
ess
and
in d
evel
opin
g th
e ne
xt g
ener
atio
n of
met
rics.
A f
ocu
s g
rou
p o
f em
plo
yees
fro
m
acro
ss f
un
ctio
nal
ar
eas
is m
ost
like
ly t
o
un
der
stan
d t
he
dir
ect
and
ind
irec
t, t
ang
ible
an
d in
tan
gib
le v
alu
es
that
are
bei
ng
, an
d
can
be,
der
ived
.
6H
ow
to
Ass
ure
Eff
ect
iven
ess
5H
ow
to
Ass
ure
Eff
ect
iven
ess
4W
hat
an
d H
ow
toM
easu
re3
Wh
at
is
Mate
rial
2W
hat
is
Mate
rial
1W
hat
is
Mate
rial
6.
Evalu
ate
Im
pro
vem
en
t an
d I
nte
gra
tio
n
53
Eval
uat
ing
Eff
ecti
ven
ess
of
the
Pro
cess
Ther
e ar
e nu
mer
ous
way
s to
eva
luat
e ef
fect
iven
ess
of t
he p
roce
ss:
•B
uy-
in–
The
proc
ess
is o
nly
as g
ood
as t
he
peop
le w
ho a
re in
volv
ed, b
elie
ve it
to
be, a
nd
are
satis
fied
with
the
res
ults
. If
ther
e is
lim
ited
or
no b
uy-in
fro
m t
he s
take
hold
ers
in t
he p
roce
ss
and/
or r
esul
ts, t
hen
revi
sit
the
met
rics.
If t
here
is
a h
igh
degr
ee o
f bu
y-in
but
the
res
ults
do
not
refle
ct it
, loo
k at
the
man
agem
ent
syst
em a
nd
met
rics
to d
eter
min
e w
here
the
pro
blem
lies
.Fo
r ex
ampl
e, s
take
hold
er s
urve
ys t
hat
rate
the
ef
fect
iven
ess
of t
he p
roce
ss a
nd s
atis
fact
ion
that
the
res
ults
refl
ect
stak
ehol
der
inpu
t ca
n
be c
onsi
dere
d.
EAG
Per
spec
tive
Ho
w C
an
On
e F
orm
an
Eff
ect
ive ‘
Pic
ture
’ fo
r D
iffe
ren
t U
sers
of
Metr
ics?
A m
etric
s pr
ogra
m is
eff
ectiv
e w
hen
it is
re
leva
nt t
o th
e de
cisi
on-m
aker
s an
d ca
n he
lp
them
for
m a
n ac
cura
te p
ictu
re o
f w
here
the
or
gani
zatio
n is
and
whe
re it
is h
eadi
ng.
Onl
ine
atw
ww
.gem
i.org
/met
rics
nav
igat
or,
Jim
Ri
tchi
e-D
unha
m o
f th
e In
stitu
te o
f St
rate
gic
Cla
rity
expl
ores
way
s to
com
mun
icat
e ef
fect
ivel
y w
ith d
iffer
ent
grou
ps o
f us
ers,
de
pend
ing
on w
heth
er t
hey
unde
rsta
nd
sust
aina
bilit
y an
d w
heth
er t
hey
wan
t to
un
ders
tand
it.
Occ
iden
tal
Petr
ole
um
Co
rpo
rati
on
Peri
od
ic R
evie
w o
f M
etri
cs a
nd
th
e M
anag
emen
t Sy
stem
The
envi
ronm
ent,
hea
lth a
nd s
afet
y (E
HS)
man
agem
ent
syst
em o
f O
ccid
enta
l Pet
role
um r
elie
s up
on t
he u
se o
f m
etric
s to
pur
sue
cont
inuo
us p
erfo
rman
ce im
prov
emen
t. A
long
with
ong
oing
qua
rter
ly a
nd a
nnua
l bus
ines
s un
it (B
U) r
evie
ws
of p
erfo
rman
ce, O
ccid
enta
l inc
lude
s an
ass
essm
ent
of m
etric
s in
its
perio
dic
man
agem
ent
syst
ems
revi
ew, w
hich
is c
ondu
cted
at
the
dire
ctio
n of
Occ
iden
tal’s
EH
S C
omm
ittee
of
the
Boar
d of
Dire
ctor
s.
Kno
wn
as t
he P
rogr
am R
evie
w, t
he e
valu
atio
n pr
ovid
es a
n ov
eral
l opi
nion
abo
ut t
he a
bilit
y of
the
BU
’s m
anag
emen
t te
am a
nd s
yste
m t
o ac
hiev
e th
e pe
rfor
man
ce g
oals
spe
cifie
d in
the
cor
pora
tion’
s EH
S po
licy
and
proc
edur
es. I
t co
nfirm
s th
at B
U le
ader
s ar
e in
tegr
atin
g EH
S co
nsid
erat
ions
into
bus
ines
s pl
anni
ng a
nd d
ecis
ion-
mak
ing
proc
esse
s. F
ocus
ing
on fi
ve k
ey m
anag
emen
t di
men
sion
s –
Lead
ersh
ip, B
usin
ess
Inte
grat
ion,
Pla
nnin
g,
Man
agem
ent
Syst
ems
and
Reso
urce
s –
the
Prog
ram
Rev
iew
che
cks
for
conf
orm
ance
with
EH
S po
licy,
ass
esse
s th
e im
pact
of
pers
onne
l cha
nges
and
reo
rgan
izat
ions
, det
erm
ines
the
sta
tus
of p
rior
Prog
ram
Rev
iew
issu
es a
nd
oppo
rtun
ities
for
impr
ovem
ent
and
iden
tifies
new
opp
ortu
nitie
s fo
r sy
stem
enh
ance
men
t.
The
basi
c te
net
of E
HS
lead
ersh
ip is
tha
t ex
ecut
ive
and
line
man
ager
s ar
e th
e pr
imar
y ow
ners
of
the
EHS
prog
ram
and
are
acc
ount
able
for
EH
S co
mpl
ianc
e an
d co
ntin
uous
impr
ovem
ent.
Yea
r-ov
er-y
ear
EHS
perf
orm
ance
rel
ativ
e to
the
met
rics
(lagg
ing
and
lead
ing)
est
ablis
hed
by t
he B
U p
rovi
des
a ke
y be
nchm
ark
for
prog
ress
. Int
ervi
ews
of e
xecu
tive
and
line
man
agem
ent,
as
wel
l as
mem
bers
of
vario
us b
usin
ess
unit
staf
f de
part
men
ts, t
est
pers
onal
und
erst
andi
ng o
f an
d ac
coun
tabi
lity
for
achi
evin
g go
als.
Met
rics
are
also
ass
esse
d fo
r th
eir
rele
vanc
e (Is
the
re a
con
nect
ion
to t
he g
oal?
), ef
fect
iven
ess
(Do
they
mot
ivat
e pe
rfor
man
ce?)
and
th
e de
gree
to
whi
ch t
hey
are
embe
dded
into
cor
e bu
sine
ss p
roce
sses
. The
rev
iew
con
firm
s th
at t
he m
easu
res
bein
g us
ed c
ontr
ibut
e to
org
aniz
atio
nal a
lignm
ent
and
rein
forc
e th
e ro
les
of t
eam
s an
d in
divi
dual
s th
roug
h es
tabl
ishe
d re
cogn
ition
and
com
pens
atio
n sy
stem
s.
At
the
conc
lusi
on o
f th
e re
view
, the
bus
ines
s un
it C
EO m
eets
with
Occ
iden
tal’s
EH
S Bo
ard
Com
mitt
ee t
o di
scus
s th
e re
sults
of
the
revi
ew, i
nclu
ding
impo
rtan
t pe
rfor
man
ce t
rend
s / i
ssue
s an
d pl
anne
d ac
tions
. Per
iodi
c fo
llow
-up
of
plan
ned
actio
ns, a
s w
ell a
s re
gula
r ev
alua
tion
of p
erfo
rman
ce a
gain
st m
etric
s an
d m
ilest
ones
ser
ve t
o cl
ose
the
man
agem
ent
syst
ems
loop
.
6H
ow
to
Ass
ure
Eff
ect
iven
ess
5H
ow
to
Ass
ure
Eff
ect
iven
ess
4W
hat
an
d H
ow
toM
easu
re3
Wh
at
is
Mate
rial
2W
hat
is
Mate
rial
1W
hat
is
Mate
rial
54
Pfi
zer
Inc
Eval
uat
ing
Co
mp
any-
Wid
e G
oal
sPfi
zer
has
esta
blis
hed
com
pany
-wid
e en
viro
nmen
t, h
ealth
and
saf
ety
(EH
S) g
oals
on
clim
ate
chan
ge a
nd
ener
gy, w
hich
are
:
•To
red
uce
CO
2 em
issi
ons
by 3
5 pe
rcen
t pe
r m
illio
n do
llars
of
sale
s by
200
7 fr
om t
he b
asel
ine
year
200
0
•To
mee
t 35
per
cent
of
its g
loba
l ele
ctric
ity n
eeds
by
2010
thr
ough
‘cle
an’ e
nerg
y so
urce
s, in
clud
ing
co-g
ener
atio
n, s
olar
, and
win
d po
wer
By 2
006,
Pfiz
er is
clo
se t
o ac
hiev
ing
the
35 p
erce
nt r
educ
tion
targ
et f
or C
O2
emis
sion
s an
d is
on
trac
k to
war
ds it
s cl
ean
ener
gy g
oal.
As
it ap
proa
ches
the
200
7 ta
rget
yea
r fo
r C
O2
emis
sion
red
uctio
n, P
fizer
is
eval
uatin
g its
cur
rent
goa
ls a
nd t
arge
ts in
pre
para
tion
for
deve
lopi
ng t
he n
ext
set.
The
com
pany
-wid
e cl
imat
e ch
ange
and
ene
rgy
goal
s w
ere
deve
lope
d to
cap
ture
exi
stin
g in
tere
sts
and
proj
ect
idea
s by
Pfiz
er s
taff
, refl
ect
man
agem
ent’s
con
cern
on
risks
and
opp
ortu
nitie
s an
d m
eet
exte
rnal
st
akeh
olde
rs’ e
xpec
tatio
ns. A
s a
phar
mac
eutic
al c
ompa
ny, P
fizer
’s ca
rbon
foo
tprin
t is
rel
ativ
ely
smal
l and
en
ergy
rem
ains
a s
mal
l fra
ctio
n of
the
cos
t of
goo
ds s
old.
How
ever
, the
goa
ls a
re r
egar
ded
as im
port
ant
in
stre
ngth
enin
g th
e co
mpa
ny’s
repu
tatio
n as
an
indu
stry
lead
er.
The
goal
s ha
ve b
een
effe
ctiv
e in
rai
sing
aw
aren
ess
on t
he is
sues
and
pro
vidi
ng t
arge
ts in
dev
elop
ing
impr
ovem
ent
proj
ects
. Est
ablis
hing
cor
pora
te g
oals
hel
ped
ener
gy r
educ
tion
and
clea
n en
ergy
pro
ject
s in
com
petin
g fo
r ca
pita
l. W
hile
the
se p
roje
cts
are
ofte
n di
sadv
anta
ged
due
to lo
w r
etur
n on
inve
stm
ent,
em
ploy
ees
and
man
agem
ent
have
now
lear
ned
that
the
y in
volv
e ve
ry lo
w r
isk
and
are
wor
th d
oing
.
In e
valu
atin
g co
mpa
ny-w
ide
goal
s an
d ta
rget
s, P
fizer
is a
sses
sing
met
rics
used
for
the
tar
gets
, per
form
ance
ta
rget
s to
set
for
the
nex
t ge
nera
tion’
s go
als
and
othe
r is
sues
tha
t m
ay b
ecom
e m
ater
ial a
nd r
equi
re c
ompa
ny-
wid
e EH
S go
als.
Thi
s in
clud
es r
evis
iting
the
bou
ndar
ies
and
deno
min
ator
s us
ed in
the
pre
sent
set
of
met
rics
and
iden
tifyi
ng o
ther
pos
sibl
e m
easu
res
that
can
bet
ter
capt
ure
wha
t is
mat
eria
l int
erna
lly a
nd e
xter
nally
.
•B
ehav
ior
chan
ge
– Th
e de
gree
to
whi
ch t
he
met
rics
and
thei
r un
derly
ing
logi
c he
lp in
form
a
rele
vant
, acc
urat
e an
d va
luab
le p
ictu
re f
or
the
empl
oyee
s is
impo
rtan
t in
eva
luat
ing
the
succ
ess
of t
he m
etric
s pr
ogra
m d
evel
oped
. Su
cces
sful
ly in
form
ing,
and
the
refo
re s
hift
ing
attit
udes
, min
dset
s an
d be
havi
ors
from
‘tho
se
who
do
not
get
sust
aina
bilit
y an
d do
not
wan
t to
’ to
‘tho
se w
ho g
et s
usta
inab
ility
and
wan
t to
’ is
criti
cal t
o th
e su
cces
s of
any
met
rics
prog
ram
. Fu
rthe
r, as
sess
ing
the
unde
rsta
ndin
g an
d co
mm
itmen
t of
bot
h se
nior
lead
ers
and
the
entir
e or
gani
zatio
n is
impo
rtan
t to
the
su
cces
s in
bui
ldin
g a
sust
aina
bilit
y cu
lture
and
th
e m
easu
re o
f su
ch a
cul
ture
.
Ther
efor
e, p
erio
dica
lly s
urve
ying
the
em
ploy
ees
to a
sses
s ho
w t
heir
attit
udes
and
beh
avio
rs a
re
chan
ging
to
reco
gniz
e th
e va
lue
of s
usta
inab
ility
th
inki
ng is
ano
ther
way
to
asse
ss t
he d
egre
e to
w
hich
the
met
rics
effo
rt is
driv
ing
chan
ge.
•O
rgan
izat
ion
al in
teg
rati
on
& c
han
ge
– H
ow
wel
l the
issu
es, o
bjec
tives
and
rel
ated
met
rics
are
inte
grat
ed in
to t
he o
rgan
izat
ion
and
driv
e or
gani
zatio
nal c
hang
e is
ano
ther
cat
egor
y fo
r ev
alua
tion.
To
asse
ss t
he t
rans
form
ativ
e na
ture
of
the
met
rics
and
the
proc
ess
behi
nd t
hem
, co
nsid
er t
he u
nder
lyin
g at
trib
utes
of
a co
mpl
ex
lear
ning
org
aniz
atio
n. D
oes
the
orga
niza
tion
supp
ort
and
rew
ard
lear
ning
beh
avio
r? D
oes
it ha
ve a
n in
nova
tion
cultu
re?
Doe
s it
enco
urag
e cr
oss-
func
tiona
l tea
min
g an
d re
war
d le
ader
ship
in
new
are
as?
A s
elf-
asse
ssm
ent
by e
mpl
oyee
s w
hich
rat
es t
he c
ompa
ny’s
attr
ibut
es a
s a
lear
ning
org
aniz
atio
n w
ill s
hed
som
e lig
ht
on h
ow w
ell t
he o
rgan
izat
ion
can
lear
n fr
om e
mbr
acin
g th
e ch
alle
nges
inhe
rent
in
sust
aina
bilit
y ac
tions
.
6H
ow
to
Ass
ure
Eff
ect
iven
ess
5H
ow
to
Ass
ure
Eff
ect
iven
ess
4W
hat
an
d H
ow
toM
easu
re3
Wh
at
is
Mate
rial
2W
hat
is
Mate
rial
1W
hat
is
Mate
rial
55
EAG
Per
spec
tive
Wh
at
are
th
e C
hara
cteri
stic
s o
f a L
earn
ing
Org
an
izati
on
?A
lear
ning
org
aniz
atio
n is
one
tha
t is
abl
e to
ch
ange
its
beha
vior
s an
d m
inds
ets
as a
res
ult
of e
xper
ienc
e. S
uch
an o
rgan
izat
ion
allo
ws
indi
vidu
als
to t
hriv
e an
d en
gage
in le
gitim
ate
expl
orat
ions
of
the
spac
e of
pos
sibi
litie
s an
d is
abl
e to
ada
pt t
o ex
tern
al c
hang
es. A
ful
ler
desc
riptio
n of
the
cha
ract
eris
tics
of a
lear
ning
or
gani
zatio
n, a
s su
mm
ariz
ed b
y Ev
e M
ittle
ton-
Kel
ly o
f Lo
ndon
Sch
ool o
f Ec
onom
ics
and
the
Soci
ety
of O
rgan
izat
iona
l Lea
rnin
g –
UK
, can
be
fou
nd o
nlin
e at
ww
w.g
emi.o
rg/m
etri
csn
avig
ato
r.
EAG
Per
spec
tive
Do
Yo
ur
Metr
ics
Dri
ve I
nn
ovati
on
?Th
e ne
ed f
or s
trat
egic
met
rics
cann
ot b
e un
ders
tate
d, f
or t
hey
ultim
atel
y he
lp d
eter
min
e w
here
inve
stm
ents
are
mad
e an
d w
hat
the
over
all s
trat
egic
dire
ctio
n of
the
firm
is g
oing
to
be
in a
ver
y dy
nam
ic m
arke
tpla
ce. M
ark
Mils
tein
of
Cen
ter
for
Sust
aina
ble
Glo
bal
Ente
rpris
e, c
halle
nges
org
aniz
atio
ns t
o an
swer
, “D
o yo
ur m
etric
s m
atch
you
r st
ated
inte
ntio
ns
to g
et b
eyon
d in
crem
enta
l inn
ovat
ion?
” on
line
atw
ww
.gem
i.org
/met
rics
nav
igat
or.
•M
etri
cs r
esu
lts
– Th
e pe
rfor
man
ce o
f th
e m
etric
s is
als
o im
port
ant,
alth
ough
the
se r
esul
ts
will
tak
e tim
e to
rea
lize.
Are
the
met
rics
driv
ing
the
right
per
form
ance
of
the
syst
em?
Wha
t ar
e th
e re
sults
rel
ativ
e to
the
tar
gets
? If
the
re
sults
are
con
side
red
poor
, ask
: Are
the
tar
gets
re
ason
able
? A
re t
he m
etric
s th
e rig
ht o
nes?
D
o th
ey in
fac
t su
ppor
t th
e us
es f
or w
hich
the
y w
ere
deve
lope
d? A
re t
hey
bein
g us
ed b
y th
e in
tend
ed p
artie
s? D
oes
the
man
agem
ent
syst
em
supp
ort
the
achi
evem
ent
of t
hose
tar
gets
?
•B
usi
nes
s va
lue
– La
stly,
the
met
rics
proc
ess
and
resu
lting
met
rics
will
onl
y be
use
ful i
f th
e ef
fort
has
ben
efici
al a
nd v
alua
ble
resu
lts
for
the
busi
ness
org
aniz
atio
n. In
the
fina
l an
alys
is, w
hat
bene
fits
can
be d
eriv
ed f
rom
an
inte
grat
ion
of t
hese
issu
es, o
bjec
tives
and
m
etric
s in
to t
he b
usin
ess?
Wha
t is
the
val
ue
prop
ositi
on?
A f
ocus
gro
up o
f em
ploy
ees
from
acr
oss
func
tiona
l are
as is
mos
t lik
ely
to
unde
rsta
nd t
he d
irect
and
indi
rect
, tan
gibl
e an
d in
tang
ible
, val
ues
that
are
bei
ng, a
nd c
an b
e de
rived
. The
se p
eopl
e sh
ould
be
aske
d w
hat
unde
rlyin
g va
lue
is a
chie
ved
thro
ugh
adop
ting
sust
aina
bilit
y co
ncep
ts a
nd w
heth
er t
he m
etric
s de
mon
stra
te t
his
bene
fit.
This
eva
luat
ion
is t
he
mos
t im
port
ant,
as
it is
all
abou
t pe
ople
and
ho
w t
hey
reco
gniz
e va
lue.
Valu
es t
hat
can
be c
onsi
dere
d an
d pe
rhap
s ra
nked
or
rat
ed in
clud
e:
oab
ility
to
asse
ss im
pact
s in
ter
ms
of t
angi
ble
and
inta
ngib
le b
usin
ess
valu
e
oid
entifi
catio
n of
cos
t-sa
ving
and
rev
enue
-ge
nera
ting
oppo
rtun
ities
oris
k re
duct
ion
oin
form
ed /
impr
oved
dec
isio
n-m
akin
g
om
utua
lly b
enefi
cial
rel
atio
nshi
ps w
ith e
xter
nal
stak
ehol
ders
ost
reng
then
ed li
cens
e to
ope
rate
in th
e co
mm
unity
oop
port
unity
to
build
alli
ance
s w
ith o
ther
s (n
on-g
over
nmen
t or
gani
zatio
ns, g
over
nmen
t ag
enci
es, c
omm
uniti
es, o
ther
bus
ines
ses)
oen
tran
ce t
o, a
nd e
xpan
sion
of,
mar
kets
oen
hanc
ed r
eput
atio
n
oen
hanc
ed a
bilit
y to
att
ract
and
reta
in to
p ta
lent
oab
ility
to
fore
cast
issu
es
oin
dust
ry le
ader
ship
and
com
petit
ive
adva
ntag
e
In C
on
clu
sio
nRe
gard
less
of
how
thi
s to
ol is
use
d, it
sho
uld
gene
rate
mea
ning
ful c
oncl
usio
ns. T
he s
umm
ary
wor
kshe
et (o
n pa
ge 5
) cap
ture
s th
e fe
w c
ritic
al
conc
lusi
ons
from
eac
h st
ep a
nd is
a lo
gica
l fr
amew
ork
for
com
mun
icat
ing
the
‘wha
t’ a
nd
‘why
’ of
met
rics.
It c
an b
e us
ed t
o ge
nera
te
a su
mm
ary
for
seni
or m
anag
emen
t w
hich
de
mon
stra
tes
the
met
rics
deve
lopm
ent
proc
ess
and
outc
omes
, inc
ludi
ng t
he b
usin
ess
ratio
nale
.
This
too
l doe
s no
t re
com
men
d sp
ecifi
c m
etric
s;
rath
er, i
t pr
ovid
es a
fra
mew
ork
for
iden
tifyi
ng a
nd
man
agin
g en
viro
nmen
tal,
soci
al a
nd e
cono
mic
is
sues
, and
a p
roce
ss f
or d
evel
opin
g th
e cr
itica
l fe
w m
etric
s w
hich
mea
sure
per
form
ance
. The
st
reng
th o
f th
e to
ol is
tha
t it
offe
rs a
rig
orou
s th
ough
t pr
oces
s. T
he g
reat
est
valu
e is
in h
ow it
he
lps
indi
vidu
als,
gro
ups
or e
ntire
org
aniz
atio
ns
thin
k th
roug
h th
e pr
oces
s -
the
logi
cal fl
ow o
f th
e si
x st
eps
– w
ith s
ugge
sted
met
hods
to
deve
lop
or a
ugm
ent
in-h
ouse
app
roac
hes.
The
prin
cipa
l be
nefit
of
usin
g th
e to
ol is
to
adva
nce
busi
ness
pe
rfor
man
ce t
hrou
gh t
he d
evel
opm
ent
and
use
of
non-
finan
cial
mea
sure
men
ts. 6.
Evalu
ate
Im
pro
vem
en
t an
d I
nte
gra
tio
n
6H
ow
to
Ass
ure
Eff
ect
iven
ess
5H
ow
to
Ass
ure
Eff
ect
iven
ess
4W
hat
an
d H
ow
toM
easu
re3
Wh
at
is
Mate
rial
2W
hat
is
Mate
rial
1W
hat
is
Mate
rial
56
Glo
ssary
Co
nse
qu
ence
Met
rics
– r
eflec
t th
e
cons
eque
nces
or
effe
cts
on t
he b
road
er s
yste
m o
f th
e in
tend
ed o
utco
mes
.
Co
rpo
rate
So
cial
Res
po
nsi
bili
ty (C
SR) –
is a
co
mm
itmen
t to
uph
old
hum
an r
ight
s, b
ehav
e ac
cord
ing
to a
ccep
ted
ethi
cal s
tand
ards
and
co
ntrib
ute
to s
ocio
-eco
nom
ic d
evel
opm
ent
and
qual
ity o
f lif
e. (1
6)
Incr
emen
tal T
arg
ets
– ar
e se
t to
ach
ieve
gr
adua
l cha
nge.
Inta
ng
ible
s –
are
non-
mon
etar
y as
sets
, inc
ludi
ng
peop
le, i
deas
, net
wor
ks a
nd p
roce
sses
, whi
ch
ar
e no
t tr
aditi
onal
ly a
ccou
nted
for
on
the
ba
lanc
e sh
eet.
Key
Per
form
ance
Ind
icat
or
(KPI
) – is
an
indi
cato
r of
per
form
ance
tow
ard
a ke
y ob
ject
ive(
s), i
.e.,
wha
t to
mea
sure
.
Lag
gin
g M
etri
cs –
is a
mea
sure
whi
ch r
eflec
ts
past
out
com
es o
f pe
rfor
man
ce.
Lead
ing
Met
rics
– is
a p
redi
ctiv
e m
easu
re o
f an
ticip
ated
per
form
ance
tha
t ca
n be
obs
erve
d pr
ior
to t
he p
erio
d of
per
form
ance
.
Mat
eria
lity
– is
defi
ned
as t
he r
elev
ance
and
su
bsta
ntia
lity
of a
n is
sue
to t
he o
rgan
izat
ion.
Met
ric
– is
a q
uant
itativ
e m
easu
re, i
.e.,
wha
t to
m
easu
re. W
hile
KPI
s ar
e st
rate
gic
met
rics
that
m
ust
be t
ied
to a
key
obj
ectiv
e an
d a
targ
et, a
m
etric
is a
num
ber
whi
ch is
giv
en m
eani
ng in
the
co
ntex
t of
the
KPI
.
Ou
tco
me
Met
rics
– a
re m
easu
rem
ents
of
resu
lts.
Pro
cess
Met
rics
– m
easu
re t
he a
ctio
ns o
r pr
oces
ses
that
driv
e th
e in
tend
ed o
utco
mes
, i.e
., th
e ca
uses
, and
are
usu
ally
tie
d to
the
act
ion
plan
s pu
t in
pla
ce t
o ac
hiev
e ta
rget
s.
Spec
ifici
ty –
ref
ers
to t
he lo
wes
t le
vel o
f th
e or
gani
zatio
n to
whi
ch t
he m
etric
is r
epor
ted.
Stre
tch
Tar
get
s –
are
mor
e re
volu
tiona
ry t
arge
ts.
A s
tret
ch t
arge
t is
set
with
less
und
erst
andi
ng o
f ho
w it
will
be
met
.
Targ
ets
– ar
e qu
antifi
able
per
form
ance
goa
ls
that
are
rel
evan
t to
the
org
aniz
atio
n’s
obje
ctiv
es
and
deriv
ed f
rom
its
KPI
’s. A
tar
get
is e
xpre
ssed
as
a t
angi
ble
mea
sura
ble
obje
ctiv
e, a
gain
st w
hich
ac
tual
ach
ieve
men
t ca
n be
com
pare
d. (1
7)
Refe
ren
ces
1. A
.L. W
hite
, “Fa
de, I
nteg
rate
or
Tran
sfor
m?
The
Futu
re o
f C
SR,”
Bus
ines
s fo
r So
cial
Res
pons
ibili
ty (B
SR) R
epor
t, A
ugus
t 20
05
(h
ttp://w
ww.bsr.org/CSR
Resources
)
2. F
ASB
Sta
tem
ent
of F
inan
cial
Acc
ount
ing
Con
cept
s 2
(htt
p://w
ww
.fas
b.or
g/st
/); S
EC S
taff
Acc
ount
ing
Bulle
tin (S
AB)
Num
ber
99 o
n M
ater
ialit
y
(h
ttp://sec.gov/interps/acco
unt/sab99
.htm
)
3. S
usta
inA
bilit
y Is
sue
Brie
f #6
“M
ater
ialit
y,”
Mar
ch 2
004
(http://w
ww.sustainab
ility.com/insight/issu
e-brief.asp
?id=65
); N
ike
FY04
Cor
pora
te
R
espo
nsib
ility
Rep
ort;
For
d M
otor
Com
pany
Sus
tain
abili
ty R
epor
t 20
04/0
5
4. G
EMI T
rans
pare
ncy:
A P
ath
to P
ublic
Tru
st (h
ttp://w
ww.gem
i.org
); U
NEP
Sta
keho
lder
Eng
agem
ent
Man
ual (http://w
ww.unep
tie.org/outrea
ch)
5. A
A10
00 s
tand
ards
(http://w
ww.accountability21
.net/aa1
000)
6. IS
O 1
4001
sta
ndar
d, S
ectio
n 3.
12 (h
ttp://w
ww.iso.org/iso
/en/prods-services/otherpubs/iso14
000)
7. K
PMG
, “A
chie
ving
Mea
sura
ble
Perf
orm
ance
Impr
ovem
ent
in a
Cha
ngin
g W
orld
: The
Sea
rch
for
New
Insi
ghts
,” 2
004
(h
ttp://w
ww.kpmg.com.au/aci/docs/m
easu
re-perform
ance.pdf)
8. Ib
id.
9. Ib
id.
10. B
. Bel
off,
“Pl
anni
ng f
or S
usta
inab
ility
,” in
Tra
nsfo
rmin
g Su
stai
nabi
lity
Stra
tegy
into
Act
ion:
The
Che
mic
al In
dust
ry, B
. Bel
off,
M. L
ines
, and
D. T
anzi
l
(eds
.), J
ohn
Wile
y &
Son
s, H
obok
en, N
J, 2
005
11. W
CED
, Our
Com
mon
Fut
ure
(198
7), O
xfor
d: O
xfor
d U
nive
rsity
Pre
ss. I
SBN
0-1
9-28
2080
-X
12. T
.A. K
ocha
n an
d S.
A. R
uben
stei
n, “
Tow
ard
a St
akeh
olde
r Th
eory
of
the
Firm
: The
Sat
urn
Part
ners
hip,
” O
rgan
izat
iona
l Sci
ence
, 11(
4):3
67-8
6, 2
000.
13. A
dapt
ed fr
om p
rese
ntat
ion
by B
arba
ra W
inte
r-Wat
son
of E
RM to
the
GEM
I Met
rics
Wor
kgro
up, S
epte
mbe
r 21,
200
4
14. S
ee f
ootn
ote
8
15. P
rese
ntat
ion
by P
atric
e Fl
ynn
at t
he G
EMI M
etric
s W
orkg
roup
Ext
erna
l Adv
isor
y G
roup
mee
ting,
Mar
ch 1
, 200
6
16. G
EMI F
orgi
ng N
ew L
inks
: Enh
anci
ng S
uppl
y C
hain
Val
ue t
hrou
gh E
nviro
nmen
tal E
xcel
lenc
e 20
04
17.S
ervi
ng t
he A
mer
ican
Pub
lic: B
est
Prac
tices
in P
erfo
rman
ce M
easu
rem
ent.
Nat
iona
l Per
form
ance
Rev
iew
: Ben
chm
arki
ng R
epor
t. J
une
1997
.
Glo
bal
En
viro
nm
enta
l Man
agem
ent
Init
iati
ve11
55 1
5th
Stre
et, N
W, S
uite
500
Was
hing
ton,
DC
200
05Te
l. 20
2-29
6-74
49w
ww
.gem
i.org
Prin
ted
wit
h 1
00%
so
y-b
ased
inks
on
rec
ycle
d p
aper
(25%
po
st-c
on
sum
er w
aste
co
nte
nt
and
50%
to
tal r
ecyc
led
fib
er)
12008
GE
MI:
Pro
vid
ing
Bu
sin
ess V
alu
e t
o its
Mem
bers
Th
e G
lob
al E
nvir
on
men
tal
Ma
nag
em
en
t In
itia
tive (
GE
MI)
22008
GE
MI
Valu
es
Vis
ion
:
“To
be
glo
ba
lly r
eco
gn
ize
d a
s a
le
ad
er
in p
rovid
ing
str
ate
gie
s f
or
busin
esses t
o a
chie
ve E
HS
excelle
nce,
econom
ic s
uccess, and c
orp
ora
te c
itiz
enship
.”
Mis
sio
n:
“Bu
sin
ess h
elp
ing
bu
sin
ess im
pro
ve
EH
S
pe
rfo
rma
nce
, sh
are
ho
lde
r va
lue
, a
nd
co
rpo
rate
citiz
en
sh
ip.”
32008
Cu
rren
t M
emb
ers
42008
Wh
at
Does
GE
MI
Do?
•H
elp
se
nio
r-le
ve
l E
HS
pra
ctitio
ne
rs b
eco
me
mo
re g
lob
ally
e
ffective &
rele
vant in
their b
usin
ess b
y focusin
g o
n:
–A
ch
ievin
g &
ma
inta
inin
g E
HS
exce
llen
ce
–In
tegra
ting E
HS
with b
roader
corp
ora
te a
gendas
–D
rivin
g b
usin
ess v
alu
e (
i.e., the v
alu
e E
HS
brings to the ‘busin
ess o
f th
e b
usin
ess’)
•P
rovid
e p
rog
ram
s t
o h
elp
me
mb
ers
le
arn
fro
m o
ne
a
no
ther
& fro
m E
HS
/CS
R thought le
aders
acro
ss d
ivers
e
bu
sin
ess s
ecto
rs
–F
orm
ats
inclu
de:
meetings,
focused d
ialo
gues,
netw
ork
ing,
Webin
ars
, benchm
ark
ing, to
ols
, re
port
s &
oth
er
work
pro
ducts
52008
Gove
rnan
ce
•S
en
ior
Ad
vis
ory
Co
un
cil
–C
om
prised o
f m
em
ber
com
panie
s’V
ice P
resid
ents
(or
most senio
r E
HS
re
pre
se
nta
tive
); m
ee
t a
nn
ua
lly
–S
ets
vis
ion a
nd a
ssis
ts in d
evelo
pin
g f
utu
re p
roje
ct
topic
s &
a
ctivitie
s
•B
oard
of
Dir
ecto
rs–
Co
mp
rise
d o
f m
em
be
r co
mp
an
y e
mp
loye
es;
ele
cte
d a
nn
ua
lly
–D
evelo
p s
trate
gic
pla
n,
pro
vid
e f
iducia
ry r
esponsib
ility
& a
ssis
t w
ith
daily
opera
tions o
f th
e o
rganiz
ation
•C
ha
irp
ers
on
s–
Wo
rk G
rou
ps: develo
p focused tools
(fr
om
concept to
fin
ished
pro
duct)
with d
esig
nate
d r
esourc
es
–N
etw
ork
s:
co
nd
uct
on
go
ing
dis
cu
ssio
ns o
n m
em
be
r-d
rive
n t
op
ics;
may s
erv
e a
s p
relu
de o
r posts
cript to
a W
ork
Gro
up
–C
om
mit
tees
: w
ork
on p
rocedura
l, a
dm
inis
trative o
r str
ate
gic
issues
as d
irecte
d b
y the B
oard
62008
Valu
e of
GE
MI
•F
ills
a U
niq
ue N
ich
e
–D
evelo
ps u
sefu
l busin
ess tools
to r
espond e
ffectively
to c
urr
ent
& e
me
rgin
g issu
es
–P
rovid
es m
ulti-secto
r appro
ach f
or
com
mon,
str
ate
gic
busin
ess
issues
–P
rom
ote
s s
haring o
f ‘b
est pra
ctices’acro
ss d
ivers
e industr
y
secto
rs
–F
ocuses o
n e
ffective p
rocess
self-a
ssessm
ent to
ols
(Note
: does
NO
Tpro
mote
a “
one-s
ize-f
its-a
ll”appro
ach to m
anagin
g E
HS
& C
SR
is
su
es)
•L
ev
era
ge
d R
es
ou
rce
s
–A
ny s
ingle
tool or
benchm
ark
surv
ey c
ost
exceeds a
nnual
mem
bers
hip
dues
–In
valu
able
inte
llectu
al capital of
part
icip
ants
is s
hare
d (
Note
:antitr
ust guid
elin
es to k
eep d
iscussio
ns focused a
ppro
priate
ly)
72008
Va
lue
of
GE
MI
(co
nt’
d)
•R
eco
gn
itio
n &
Exp
osu
re
–G
lob
ally
re
co
gn
ize
d a
s a
cre
dib
le a
sso
cia
tio
n o
f le
ad
ing
co
mp
an
ies
& E
HS
/CS
R p
ractitio
ne
rs
–M
em
be
r co
mp
an
y c
ase
exa
mp
les h
igh
ligh
ted
in
all
pu
blic
atio
ns
–O
pport
unity t
o e
ngage w
ith r
especte
d n
ational &
inte
rnational
org
aniz
ations to im
pro
ve the e
nvironm
ent(p
rovid
es a
‘safe
space’
for
engagem
ent)
•M
em
ber-
Dri
ven
Acti
vit
ies
–P
rovid
es ta
ng
ible
, a
ctio
na
ble
id
ea
s a
nd
to
ols
th
at ca
n b
e
imple
mente
d a
t hom
e
–M
em
bers
hip
has s
ignific
ant
input
on t
he t
opic
s a
ddre
ssed
–O
pp
ort
un
ity f
or
ind
ivid
ua
l le
ad
ers
hip
de
ve
lop
me
nt
exis
ts
82008
A L
ega
cy o
f V
alu
e-D
rive
n,
Inte
gra
ted
To
ols
To
talQ
uality
En
vir
on
men
tal
Man
ag
em
en
t
(TQ
EM
)
En
vir
on
men
tal
Acco
un
tab
ilit
y&
Perf
orm
an
ce
Str
ate
gic
Issu
es
Resp
on
se:
Wate
r,
Su
sta
inab
leD
evelo
pm
en
t,S
up
ply
Ch
ain
,
Clim
ate
Po
llu
tio
n
Pre
ven
tio
n(P
2)
En
vir
on
men
tal
Man
ag
em
en
t
Syste
ms
(EM
S)
En
vir
on
men
t:B
usin
ess
Valu
e
-To
the
bu
sin
ess
-To
pL
ine
Valu
e
-Bo
tto
mL
ine
Valu
e
En
gag
ing
Sta
keh
old
ers
:
Tra
nsp
are
ncy,M
etr
ics
92008
Rec
ent
To
ols
ww
w.g
em
i.o
rg/b
usin
essan
dclim
ate
“M
ap
of
Fu
ture
Fo
rces A
ffecti
ng
Su
sta
inab
ilit
y”
ww
w.g
em
i.o
rg/m
etr
ics
na
vig
ato
r
ww
w.g
em
i.o
rg/s
d
ww
w.g
em
i.o
rg/w
ate
rpla
nn
er
ww
w.g
em
i.o
rg/h
sew
eb
dep
ot
10
2008
Inn
ova
tion
s in
2008:
New
Tools
•L
au
nc
h o
f n
ew
to
ols
:
–G
EM
I-E
nviro
nm
en
tal D
efe
nse
‘G
uid
e t
o S
uccessfu
l
Co
rpo
rate
/NG
O P
art
ners
hip
s’
(Targ
et
rele
ase:
Su
mm
er)
–T
he Institu
te for
the F
utu
re’s
“M
ap
of
Fu
ture
Fo
rces
Aff
ecti
ng
Su
sta
inab
ilit
y”
(Targ
et
rele
ase:
Su
mm
er)
•L
au
nc
h u
pd
ate
d w
eb
sit
es
:
–G
EM
I.o
rg(R
ele
ased
Marc
h 2
008)
–H
SE
Web
Dep
ot.
org
(Rele
ased
Marc
h 2
008)
–B
us
ine
ss
an
dC
lim
ate
.org
(Re
lea
se
d J
an
ua
ry 2
00
8)
11
2008
Sig
na
ture
Iss
ues
•W
ate
r S
usta
inab
ilit
y
–F
acili
tate
pro
ce
ss f
or
de
ve
lop
ing
co
rpo
rate
an
d lo
ca
lize
d w
ate
r use s
trate
gie
s,
inclu
din
g s
hari
ng b
est
pra
ctices a
nd e
xperiences
•G
lob
al C
lim
ate
& E
nerg
y
–P
rovid
ing tip
s a
nd tools
to h
elp
inte
gra
te c
limate
& e
nerg
y issues
into
EH
S/C
SR
eff
ort
s w
orld
wid
e
•S
up
ply
Ch
ain
–F
ocus o
n im
ple
menting targ
ete
d E
HS
-rela
ted c
hanges a
cro
ss the
valu
e c
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IN Focus September 11, 2008
Can America Invent Its Way Back?
"Innovation economics" shows how smart ideas can turn
into jobs and growth—and keep the U.S. competitive
by Michael Mandel
Will 2009 be the year of innovation economics?
Pessimism about America's future is growing. People worry about the long-term impact of the housing crisis, global competition, and expensive energy. And the policy solutions offered by Republicans and Democrats—mainly tax cuts and government spending programs—seem insufficient.
Yet beneath the gloom, economists and business leaders across the political spectrum are slowly coming to an agreement: Innovation is the best—and maybe the only—way the U.S. can get out of its economic hole. New products, services, and ways of doing business can create enough growth to enable Americans to prosper over the long run.
Certainly the Presidential candidates are taking the idea seriously. John McCain has proposed a $300 million prize for the person or company that creates a better battery technology to power cars. Barack Obama has called for spending $150 billion over the next 10 years on clean-energy technologies. The hoped-for outcome: more jobs, more competitive trade, less dependence on foreign oil.
But here's the conundrum: If money alone were enough to guarantee successful innovation, the U.S. would be in much better shape than it is today. Since 2000, the nation's public and private sectors have poured almost $5 trillion into research and development and higher education, the key contributors to innovation. Nevertheless, employment in most technologically advanced industries has stagnated or even fallen. The number of domestic jobs in the computer and electronics sector continues to plunge while pharmaceutical and biotech companies lay off as many workers as they hire. And even the industry category that includes Google (GOOG)—Internet publishing and Web search portals—has added only 15,000 jobs since 2003.
The new field of innovation economics addresses this gap between spending and results. Economists are increasingly studying what drives successful innovation to learn how companies can get more bang from the bucks spent on R&D and higher education. At the same time, they're collecting new data on American R&D initiatives to understand what's working in the U.S. and what's not. And most important, economists are making concrete proposals about how to turn smart ideas into jobs and growth.
DISAPPOINTING BIOTECH AND NANOTECH
This focus on innovation as a crucial way to develop a competitive edge is a big change from the past. While a handful of economists have studied technological change, the main focus of policy-minded economists has, until recently, been on traditional topics such as taxes, government spending, and trade.
Now some of the brightest minds in the field, including Daron Acemoglu of Massachusetts Institute of Technology, winner of the 2005 John Bates Clark Medal for the top economist under 40, are paying a lot more attention. His work examines how government and business decisions such as outsourcing can influence the direction of technological change.
But theorizing isn't enough without good data. That's why government statisticians such as Lynda Carlson of the National Science Foundation are trying to find new ways to quantify innovation and its impacts on business. In January the NSF will launch an annual survey of 40,000 companies asking how much they spend on R&D in the U.S. and overseas, by type of business and country. "For the first time, we'll have a clear picture of what kind of research companies are doing globally and what benefits they are getting from their spending," says Carlson, who is spearheading the survey.
Economists are also suggesting how to use new tools to boost innovation. They're studying when prizes for technological advances make sense. They're proposing ways state and local governments can best encourage innovation-based economic development. And they're exploring how to make optimal use of the billions of dollars' worth of research conducted in government-funded national labs.
It's possible the longstanding partisan debate over tax rates and budget deficits may soon become a sideshow. "The main purpose of economic policy should be to spur innovation and growth," argues economist Robert Atkinson, head of the Information Technology & Innovation Foundation (ITIF), a nonpartisan think tank in Washington. "This is not an issue either party owns."
Historically, technological change has been the biggest force for productivity growth in the U.S. The latest figures show that "multifactor productivity"—a category that includes technological change and other improvements in business processes—accounted for 45% of productivity gains between 1987 and 2007. "Ninety-five percent of economists agree that innovation is the most important thing for long-run growth," says Acemoglu of MIT.
What's more, the best way to keep the U.S. competitive is to bank on promising new ideas. America still is a leader in resources devoted to innovation, as measured by the share of gross domestic product spent on R&D and higher education. But it can't compete with China, India, and other developing countries on labor costs. And it's unlikely the U.S. can depend on cheap capital because it borrows so much money from overseas. Indeed, personal, corporate, and government savings combined total only 14% of GDP in the U.S., vs. an average 22% among other industrialized nations.
But innovation has fallen short of its promise in recent years. While some info tech corporations are still thriving, other sectors that were supposed to drive growth have faltered.
Biotech companies have produced new drugs, but so far no real breakthroughs. And nanotechnology has been slow to generate commercial products.
Worse, the historic link between jobs and innovation seems to have vanished, at least for now. In the past, pioneering industries such as automobile manufacturing and aerospace were big job creators. Today, jobs in cutting-edge sectors are down 12% since their 2001 peak. (Those industries include computer and communications hardware, software and computer-systems design, aircraft, drugs and medical devices, telecom, and Internet outfits such as Google and Yahoo! (YHOO))
Until recently, economists had few good remedies when innovation stopped producing enough tangible benefits. Thats because technological progress—the discovery of penicillin or the invention of the laser—was viewed mainly as the product of science and serendipity, and therefore not very responsive to economic forces.
As a result, economists had only one blunt tool for stimulating innovation: larger government research grants and tax breaks for businesses. Economists for the most part treated R&D spending as an investment in a physical asset, just like an office building or truck.
DO PRIZES WORK?
But there were always some who saw beyond this narrow view. In the 1940s, Joseph Schumpeter of Harvard University coined the phrase creative destruction to describe the necessary turmoil caused by innovation. Robert Solow of MIT won a Nobel Prize for economics for his work on technological progress and growth. And Dale Jorgenson of Harvard and William Baumol of New York University have been mentioned as potential Nobel laureates for their work in areas such as technological change and entrepreneurship.
Economists began taking a broader interest in innovation during the New Economy boom of the 1990s, which was driven by breakthroughs in information technology. At the same time, economist Paul Romer, now at Stanford University, showed how spending on innovation was different from the usual sort of capital investment because the gains from new ideas and discoveries could be shared by everyone.
Today, researchers are focusing on ways to make those undertakings more efficient. "Innovation is not just exerting effort and spending money, it's problem-solving," says Karim Lakhani, a professor at Harvard Business School. Lakhani has been studying what is called distributed innovation, in which solutions to a business or technical problem are solicited from a wide variety of people. Open-source software or companies like InnoCentive, which encourages outside researchers to work on corporate problems, are good examples. By contrast, most companies are unwilling to draw on outside expertise. "It's the broadcast of the problem that is important," argues Lakhani. "By publicizing a problem, we can get access to better ideas."
Lakhani is encouraged by the growing number of prizes for innovative products, such as the Progressive Automotive X prize ($10 million for a car that gets 100 mpg). However, offering more—and smaller—prizes would allow a wider range of people to take on a challenge, he argues. "We want diversity of eyeballs."
One way to attract broader attention to a problem is to conduct more R&D overseas. In part, that's because scientists and engineers in India, China, and Eastern Europe are cheaper than their American counterparts. In addition, global collaboration can improve results by bringing in more diverse perspectives.
But globalizing research and production can also alter the direction of technological change—with potentially negative effects on U.S. prosperity. MIT's Acemoglu, who holds dual American and Turkish citizenship, argues in his work that in the past U.S. companies directed their research to take advantage of the well-educated American workforce. Now, as more multinationals move operations overseas, they are developing technologies adapted for their less skilled foreign workforces. In other words, offshoring is affecting the direction of innovation in ways that are more favorable to countries such as China and India. In particular, says Acemoglu, "China is going to have a major effect on technology."
Measuring the impact of outsourcing and other factors on innovation will require far better statistics than are now available. That's why the NSF is pushing hard to collect greatly improved data on R&D and innovation, a tough task. Its new study aims to provide useful information for both businesses and policymakers, says Carlson, who helped create the government's statistics on energy consumption before she joined NSF in 2000. The survey will ask a wide range of questions, including whether companies are using their research to create new products or simply to improve existing ones. "The new statistics will provide benchmarks for companies," says Carlson, "and allow them to see how their R&D and innovation performance compares to the rest of their industry."
Even as better data are collected, the government is also upgrading the system of economic statistics it uses to produce GDP figures. The goal: to shed more light on innovation and other drivers of growth. Late this year, the Bureau of Economic Analysis plans to publish a "blueprint for innovation" showing how the government stats can better capture innovation-related expenses such as education and R&D, says BEA director J. Steve Landefeld.
ACADEMIC AND CORPORATE ALLIANCES
What kinds of policies can improve the performance of U.S. innovation? Since 2000, the Bush Administration has boosted spending on nondefense R&D by roughly 40%, after adjusting for inflation. Still, more could be done. Democrat Obama wants to double federal funding for basic research, which in real terms is up just about 20% since 2000. Both the GOPs McCain and Obama want to boost support for the development of less polluting technologies.
But a big point of innovation economics is that money alone is not enough. Atkinson, of the think tank ITIF, argues that the R&D tax credit needs to be reworked to encourage collaboration. He suggests giving companies credit on their tax returns for 40% of the money they spend on research partnerships with universities and government laboratories, not just for their increased spending, as the current law allows.
Atkinson also advocates creating a national foundation, similar to the NSF, with the mission of promoting innovation. The idea has some support: In June, Senators Hillary Clinton (D-
N.Y.) and Susan Collins (R-Maine) introduced legislation to set up a National Innovation Council.
One of the hottest areas in the field is the use of government aid to cultivate "innovation clusters," or collections of local companies and academic institutions working together to create new products and processes. Ideally, those alliances would build on existing expertise in a region.
Last November, for example, Maine voters passed a $50 million bond issue to help finance groundbreaking local business initiatives. In early August, grants totalling $29 million were announced, including funds to renovate a commercial pulp mill by adding a pilot plant to produce ethanol—without reducing the mill's usual output.
Will innovation economics keep America growing? Proponents are upbeat about the long-term technological possibilities, despite the current pullback. "Like the 1970s, people are going to assume that a short-term slowdown means the trend is slower as well," says Stanford's Romer. "But the arguments for long-run optimism are as strong as they have ever been."
Business Exchange: Read, save, and add content on BW's new Web 2.0 topic
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Race You to the Moon
Hoping to kick-start a new era of privately funded space exploration, the X Prize Foundation teamed up with Google year to announce the Google Lunar X Prize. The partners award $20 million to the first team that lands a robot explorer the moon and beams back pictures and video. (NASA and government-run space programs need not apply.) Speaking from Google's Mountain View (Calif.) headquarters on Sep. 19, 2007, Peter H. Diamandis, CEO of the X Prize Foundation, described his organization's role in spurring innovation in such things as genomics, superefficient cars, and spaceships.
IN Technology September 11, 2008
Los Alamos and Sandia: R&D Treasures
How the famous weapons labs, Los Alamos and Sandia,
are aiding corporations and spinning off startups
by Pete Engardio
For decades, Procter & Gamble (PG) has been creating petroleum-derived materials that are engineering marvels. Tide bottles that don't explode if dropped from a high shelf onto a Wal-Mart (WMT) floor. Shampoo emulsions that don't separate, whether they're shipped by plane at 30,000 feet or warehoused at temperatures of 120F. Billions of disposable diapers that absorb, breathe, and stretch exactly the same way—wrapped in packages that never fade.
Now P&G is joining the "go green" bandwagon. The problem, says Thomas J. Lange, the company's director of modeling and simulation: "Natural materials may not be as pure, as strong, or as stable over time" as petro-plastics. And developing replacements for them takes deep science that is beyond the ken of most companies.
Enter Los Alamos National Laboratory and Sandia National Laboratories. That's right, the fabled weapons-research centers in New Mexico that spawned America's nuclear arsenal. In a partnership that has lasted 14 years, P&G is tapping the labs' supercomputers and immense brain trusts to create new eco-friendly materials for consumer products. "These are the only places I can go in the world that have such a range of world-class physicists, chemists, biologists, production engineers, and computational scientists," says Lange. "These labs are national treasures."
Public-private collaborations such as P&G's are earning praise in many quarters. They're just what Congress had in mind two decades ago when it began pushing the nation's hundreds of national labs to transfer more of their knowhow to U.S. companies. Many of the facilities, which are dedicated to security, space, health, and energy research, jumped at the challenge. For one, they were eager to earn contract-research fees from corporations. And it was a chance to test their world-beating computer systems and software in some of the most demanding business settings.
After a burst of deals in the late 1990s, however, the number of new research collaborations and commercial spin-offs declined. Scientists say the joint ventures and startups suffered from too much red tape. They also faced a drop in federal subsidies, the bursting of the tech bubble, and the task of coaxing scientists to think in business terms.
"Without market signals, the labs have shown a predictable capacity to be overtaken by bureaucracy," says Carl J. Schramm, president of the Ewing Marion Kauffman Foundation, which focuses on entrepreneurship. The casualties, Schramm says, are "speed, effectiveness, and inventiveness."
Now, as the idea of "innovation economics" gains currency in Washington, executives are once again turning to the national labs, especially those such as Sandia, Los Alamos, Lawrence Livermore, and others that belong to the Energy Dept. These centers are still committed to national security. But at a time when U.S. industries are under pressure to address America's energy crisis while facing ever-tougher competition abroad, the labs understand they have an important role to play.
Companies, for their part, know they can save on research costs when they partner with the labs. Together, Sandia and Los Alamos employ about 4,000 PhD scientists and thousands of engineers, and they have a long legacy of innovation in everything from biofuels and microelectronics to medical devices. P&G's collaboration with Los Alamos in computer simulation has saved the company upwards of $1 billion. Goodyear Tire & Rubber (GT) says Sandia helped radically speed up product launches, a key to its recent financial turnaround.
The labs aren't simply collaborating. They're spinning off new tech companies amid the mesas and deserts of New Mexico. An industrial park on 240 acres abutting Sandia's sprawling Albuquerque compound boasts 27 startups that employ 2,184 people and have attracted $234 million in investment capital. All of these companies were founded by former Sandia scientists or rely on technology licensed from the lab. Los Alamos has helped spawn 54 spin-offs since 1997. A recent one, APJeT, is trying to commercialize an ionized gas known as atmospheric plasma, which was first developed by Los Alamos to kill anthrax spores. The company now uses the process to make fabrics water-resistant. Another of Los Alamos' affiliate, CNT Technologies of Seattle, is turning tiny carbon nanotubes into strong yarns that can be woven into sporting goods, aircraft parts, and artificial limbs.
Goodyear and Sandia have been working together since 1993, when the Akron company enlisted the lab to help design and test new car tires. At the time, the company was running through at least four physical prototypes for each model of tire, which then would have to be tested over thousands of miles—a process that took three years on average. In exchange for fees that can run several million dollars a year, Sandia gave Goodyear access to supercomputers and software code it had developed to simulate explosions, design weapons systems components, or model the stresses on a bridge. Over the next decade more than a dozen Sandia scientists worked on software to assist Goodyear engineers. The code helped them to accurately predict how each design tweak would affect traction, pressure, and rubber wear under a range of road conditions and speeds. "It all adds up to a fairly nasty problem you have to solve," says Benjamin Spencer, a Sandia software developer who works with Goodyear. But there's a side benefit, Spencer says: The collaboration is "making our code more robust."
The Goodyear project culminated in the Assurance TripleTred, which launched in 2005. It's a tire with three different treads for driving on icy, wet, and dry pavement. The program also enabled Goodyear designers to make use of such materials as volcanic pumice and glass microfibers, which aid the tire in gripping slick surfaces. The Assurance became one of Goodyear's best-selling tires, and the company has adopted virtual design for each of the several hundred new tires it develops every year for vehicles ranging from sports cars to garbage trucks to earth movers. The development cycle, which now often requires just a single prototype, has shrunk to as little as eight months, says Surendra Chawla, Goodyear's head of commercial tire research. The portion of the company's annual R&D budget consumed by testing and building molds for tire manufacturing has dropped from 40% to 15% since 2001, he says.
Despite the obvious benefits that have flowed to Goodyear and P&G, however, only a handful of corporations have forged this sort of long-term collaboration. Companies complain that it takes too long—up to a year—to negotiate a joint R&D project or license technology from a federal lab. Officials at the labs have their own complaints: They say U.S. companies mainly want off-the-shelf technology they can use immediately, as opposed to investing in research that won't pay off for three to five years.
Bureaucracy also is slowing the spin-off of startups. Unlike at universities, scientists at federal labs are barred from serving as paid consultants. And as long as they're on the government payroll, they can't hold equity stakes in companies that license their research. Moreover, few hard-core scientists want to trade secure posts at premier labs for risky jobs in industry. This is a stark contrast to Silicon Valley, where "people are spring-loaded to leave and begin their next startup," says Gary Ebersole, a serial entrepreneur from the San Francisco Bay area who moved to Santa Fe and licensed software from Los Alamos to start a social networking company.
The National Labs want to lower the hurdles to entrepreneurship. They're offering staff two-year "entrepreneurial leaves" to give them a taste of life outside. They also understand that Congress wants to see scientists and their spin-offs succeed. So Los Alamos set up a fund that doles out $350,000 a year in seed capital to startups. Both Sandia and Los Alamos are experimenting with ways to let departing scientists maintain access to their facilities while working at startups. They even offer courses to familiarize their staff with entrepreneurship. "We don't yet have a model that is tuned to the nation's needs," says Sandia Chief Technology Officer Richard H. Stulen. "But we're getting better."
25 JANUARY 2008 VOL 319 SCIENCE www.sciencemag.org424
ASSOCIATIONAFFAIRS
The American Association for the Advance-ment of Science (AAAS) is not about theadvancement of science just for science’s sake.Rather, as indicated by the Association’s motto,“Advancing Science, Serving Society,” it isabout advancing science in the context of adesire to improve the human condition. Thismission necessarily entails attention to thesocial as well as natural sciences; attention to theembodiment of science in technology throughengineering; and attention to the processes bywhich understandings from the natural sci-ences, the social sciences, and engineeringinfluence—or fail to influence—public policy.All of these long-standing preoccupations of theAAAS are integral to the theme of the 2007Annual Meeting and of this essay, “Science andTechnology for Sustainable Well-Being.”
I begin my exploration of that theme withsome premises and definitions relating to well-being and sustainability, before turning to a tax-onomy of shortfalls in sustainable well-beingand a rough quantification of those that arereflected in morbidity and mortality. I thenaddress the status of five specific challenges inwhich science and technology (S&T) have par-ticularly important roles to play: meeting thebasic needs of the poor; managing the competi-tion for the land, water, and terrestrial biota ofthe planet; maintaining the integrity of theoceans; mastering the energy-economy-envi-ronment dilemma; and moving toward anuclear weapon–free world. I close with somethoughts on what more is needed in order toimprove the pace of progress, including whatthe AAAS is doing and can do and what indi-vidual scientists and engineers can do.
Well-Being and SustainabilityHuman well-being rests on a foundation ofthree pillars, the preservation and enhancement
of all three of which constitute the core respon-sibilities of society:
•Economic conditions and processes, suchas production, employment, income, wealth,markets, trade, and the technologies that facili-tate all of these;
•Sociopolitical conditions and processes,such as national and personal security, liberty,justice, the rule of law, education, health care,the pursuit of science and the arts, and otheraspects of civil society and culture; and
•Environmental conditions and processes,including our planet’s air, water, soils, min-eral resources, biota, and climate, and all ofthe natural and anthropogenic processes thataffect them.
Arguments about which of the three pillarsis “most important” are pointless, in partbecause each of the three is indispensable: Justas a three-legged stool falls down if any legfails, so is human well-being dependent on theintegrity of all three pillars.
The futility of attempts to strengthen anyone of the pillars in ways that dangerouslyweaken one or both of the others is underlinedby their interdependence. The economic sys-tem cannot function without inputs from theenvironmental system, nor can it functionwithout elements of societal stability andorder provided by the sociopolitical system.And societal stability itself cannot be main-tained in the face of environmental disaster, asthe effect of Hurricane Katrina on NewOrleans demonstrated is true even in the mosteconomically prosperous and technologicallycapable country in the world.
This understanding about the elements ofwell-being leads, when combined with theproposition that improvements in well-beingare most meaningful if they can be sustained, toa set of definitions that embody the essence ofthe sustainable-well-being challenge (1):
•Development means improving the humancondition in all of its aspects, not only economicbut also sociopolitical and environmental;
•Sustainable development means doing soby means and to end points that are consistentwith maintaining the improved conditionsindefinitely; and
•Sustainable well-being, in my lexicon,
entails pursuing sustainable development toachieve well-being where it is now most con-spicuously absent, as well as converting to asustainable basis the maintenance and expan-sion of well-being where it already exists but isbeing provided by unsustainable means.
ShortfallsPersistent shortfalls in the pursuit of sustainablewell-being are evident across a range of dimen-sions of the human condition, including (2):
•Poverty, afflicting not only the 2.5 billionpeople in the poorest countries who live on lessthan the equivalent of $2 per day, but also hun-dreds of millions in addition who have muchmore but still cannot afford many of the ingre-dients of a decent existence in the more prosper-ous settings in which they live;
•Preventable disease, which keeps infantand child mortality high and life expectancylow, especially in Africa but among the verypoor everywhere;
•Impoverishment of the environment, mean-ing progressive erosion of the environmentalunderpinnings of well-being in the qualities ofair, water, soil, biota, and climate;
•Pervasiveness of organized violence,manifested in the well over 100 instances ofarmed conflict since World War II (nearly allof them in the South, with a total loss of life inthe tens of millions), as well as in the globalrise of terrorism;
•Oppression of human rights in other ways(for the preceding items are also forms of suchoppression), denying human beings their dig-nity, their liberty, their personal security, andtheir possibilities for shaping their own des-tinies; and
•Wastage of human potential, resulting fromall of the foregoing and the despair and apathythat accompany them, from shortfalls in educa-tion, and from the loss of cultural diversity.
Underlying these shortfalls is an array ofdriving forces and aggravating factors, amongthem:
•Non-use, ineffective use, and misuse ofS&T, including misuses both intentional (as inthe development and deployment of weaponsof mass destruction) and inadvertent (as mani-fested in the side effects of broad-spectrumherbicides, pesticides, and antibiotics);
•Maldistribution of consumption and invest-ment, where the maldistribution is of threekinds: between rich and poor as the beneficiar-ies of both consumption and investment;between military and civilian forms of con-sumption and investment [“too much for war-fare, too little for welfare” (3)]; and between thetwo activities themselves; i.e., between too
P R E S I D E N T I A L A D D R E S S
Science and Technology forSustainable Well-BeingJohn P. Holdren
John P. Holdren is Teresa and John Heinz Professor ofEnvironmental Policy at the Kennedy School of Govern-ment as well as professor in the Department of Earthand Planetary Sciences, Harvard University, and direc-tor of the Woods Hole Research Center. He served aspresident of the American Association for the Advance-ment of Science (AAAS) from February 2006 to Febru-ary 2007. This article is adapted from the PresidentialAddress he delivered at the AAAS Annual Meeting in SanFrancisco on 15 February 2007.
PublishedbyAAAS
CORRECTED 11 APRIL; SEE LAST PAGE
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much consumption and too little investment;•Incompetence, mismanagement, and cor-
ruption, which although sometimes attributedto developing countries particularly are in factpervasive in industrialized and developingcountries alike;
•Continuing population growth, which,while not the sole cause of any of the shortfallslisted, makes the remedy of all of them moredifficult (4); and
•Ignorance, apathy, and denial, the firstconsisting of lack of exposure to informationand the second and third of havingthe information but lacking the con-viction or optimism or understand-ing to act on it.
The magnitudes of the contri-butions to premature mortality of anumber of the shortfalls and theirrespective contributing factorsare shown in Table 1, which isadapted from a remarkablecompilation of the underlyingcauses of premature death pro-duced by the World Health Organi-zation (WHO) (5–7).
How Can S&T Help?Table 1 underlines the role, inglobal mortality, of shortfalls in thedeployment if not always the devel-opment of adequate technologiesfor food production, clean waterand sanitation, and clean and effi-cient energy supply. I would char-acterize the roles of S&T inaddressing the challenges of sus-tainable well-being in broaderterms as follows:
•Advances in science improveour understanding of shortfalls,dangers, and possibilities andenable advances in technology.
•Advances in technology helpmeet basic human needs and driveeconomic growth through increasedproductivity, reduced costs, reducedresource use and environmentalimpact, and new or improved prod-ucts and services.
•S&T together provide the basisfor integrated assessment of challenges andopportunities, advice to decision-makers andthe public about these, and formal and informaleducation toward a more S&T-literate (andtherefore more informed and capable) society.
The need to do better with S&T applied tothe goal of sustainable well-being is particu-larly compelling in relation to the five specific
challenges mentioned above, and I turn tothese now.
Meeting the Basic Needs of the PoorThe contemporary effort to address this mostfundamental of sustainable-development needsis cataloged and chronicled in the MillenniumDevelopment Goals (MDG) project of theUnited Nations (UN). The MDGs, consisting ofeight overarching goals and specific targets forthe pace of progress to be made on them, wereofficially adopted in 2000. The goals, targets,
and some indicators of the extent of progress onthem are summarized in Table 2. The MDG pic-ture is clearly mixed. Many regions are on trackto meet many of the targets, but other regions—and above all sub-Saharan Africa—are pro-jected to fall short on most of them. What isworse, while the MDGs appear ambitious interms of the pace of improvement embodied in
the targets, they are really very modest whenviewed in terms of the immense shortfalls inwell-being that would persist into 2015 andbeyond even if the targets were met. Where thetargets do seem likely to be met for the world asa whole, moreover, as is the case for access tosafe drinking water, regional shortfalls stillloom large (8).
The considerable progress that has beenmade in some important respects (such as inlife expectancy, which has been improving vir-tually everywhere other than sub-Saharan
Africa and the former SovietUnion) has been the result of acombination of economic andsocial factors, but improvements intechnology appear to have been themost important (9). Among otheradvances, widespread gains in theproductivity of agriculture, whichplayed a crucial role in improvingnutrition and health in the develop-ing world, were driven above all byinvestments in agricultural S&Tthat yielded, in strictly economicterms, enormous rates of return;and export-led economic growth,providing the means with whichthe public and private sectors inmany developing countries havecontributed to lifting portions oftheir populations out of poverty,has likewise been driven stronglyby technology (9).
Relatively simple and inexpen-sive technologies can have largepositive impacts on the most funda-mental aspects of well-being, suchas public health, as was initiallydemonstrated in today’s industrial-ized countries when they first intro-duced simple water-treatment tech-nologies (8) and has been shownmore recently in developing coun-tries with such simple innovationsas oral rehydration therapy for diar-rheal diseases, which has sharplylowered death rates even in circum-stances where incomes were notrising (9). A current example oflarge “bang for the buck” in the
public health domain is the rapid expansion inthe use of insecticide-treated bed nets tocombat malaria, particularly in Africa, fundedby a combination of private, governmental, andmultilateral initiatives (10).
These insights and examples only serve tounderline how much better we could be doingwith the application of S&T to meeting basic
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Primary shortfalls
and drivers
Millions of
years of life lost
Poverty, technology, apathy
Consumption, denial
Ignorance, denial
Denial
Poverty, technology, apathy
Violence
Poverty. technology
Wasted potential, ignorance, denial
Consumption, technology
Consumption, technology, denial
200
150
80
50
50
40
35
30
6
5
CONTRIBUTORS TO GLOBAL MORTALITY IN 20001
Fundamental cause
Childhood and maternal malnutrition
High blood pressure, cholesterol,
overweight, low physical activity
Unsafe sex
Tobacco
Unsafe water
War and revolution
(20th-century average)
Indoor smoke from solid fuels
Alcohol
Urban air pollution
Global climate change
Table 1. Contributors to global mortality in 2000, categorized by fundamentalcauses. Units in column three are millions of years of life lost to prematuredeaths in the year 2000 (= numbers of premature deaths in 2000 from the indi-cated cause × average loss of life expectancy per death from that cause). Thecategorization of fundamental causes and associated lost-life estimates are fromWHO (5), except for “war and revolution”; that figure is the author’s estimate forthe 20th-century annual average, based on a UN figure of about 100 millionconflict-related deaths in the 20th century (6) and the author’s guess of 40years of lost life expectancy per conflict-related death. Attributions of relevant“shortfalls and drivers” are the author’s (7).
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human needs if a more respectable effort werebeing devoted to this aim. The dimension of theshortfall is suggested by the figures for officialdevelopment assistance (ODA) from the Orga-nization for Economic Cooperation and Devel-opment (OECD): A recent upturn in ODA hasbrought the total back only to the 1990 level of0.33% of the gross national income of thedonor countries (this despite long-standinginternational agreement on a target of 1%,which itself seems pathetically small in relationto both the needs and the opportunities) (11).The United States, by far the richest country inthe world in gross national income, is the stingi-est among all the OECD countries in the frac-tion of it, 0.2%, devoted toODA. [Americans spend 3.5times more on tobacco and 20times more on defense (12).]
Land, Water, and TerrestrialBiotaTurning to the environmentaldimension of sustainablewell-being, a central chal-lenge is how to managethe intensifying competi-tion among human uses for theland, water, and biota of theplanet. Those uses fall mainlyinto three categories:
•Land and water for hous-ing, commerce, industry, andinfrastructure (energy, trans-port, and communications).
•Land, water, and net pri-mary productivity (NPP) forthe production of food, feed fordomestic animals, fiber, biofu-els, and chemical feedstocks.
•Land, water, and biota(plants, animals, and microor-ganisms) for recreation,beauty, the solace of unspoilednature, and other “ecosystemservices.”
The term “ecosystem serv-ices” refers to functions ofecosystems that underpinhuman well-being, including,besides those already sepa-rately mentioned, regulationof water flows; detoxificationand purification of soil, water,and air; nutrient cycling; soilformation and maintenance;controls on the populationsand distribution of pests andpathogens; pollination of
flowers and crops; maintenance of biodiver-sity; and regulation of climate (through, e.g.,evapotranspiration, reflectivity, and carbonsequestration) (13, 14).
The competition among these uses for thelimited supplies of land and water and thebiota that these can support is being intensi-fied by rising population and affluence, withaffluence providing a particularly powerfulmultiplier in the demand for land and waterfor agriculture and pasture as rising incomestranslate into higher consumption of meat.Also contributing to the intensification of thecompetition is global climate change (aboutwhich more will be said below), which is
sharply increasing the demand for both bio-fuels and carbon sequestration in intact forests(15) at the same time as it stresses farms andforests in many parts of the world withincreased heat, drought, and wildfires (16).
A number of other factors complicate thechallenge of managing the competing uses ofland, water, and biota. One is the rising tide oftoxic spillovers from energy supply, industry,and agriculture, which reduce the usability ofwater and otherwise directly stress managedand unmanaged ecosystems alike (more aboutthis below, too). Another is the prevalence ofhaphazard, unintegrated, and short-range plan-ning in relation to society’s uses of land and
water. A third—and one of theprimary causes of the preced-ing two—is the frequent fail-ure to charge a reasonableprice (or any price at all) forthe use of environmentalresources or the degradationof environmental conditionsand services.
A quantitative picture ofworld water supply anddemand is presented in Table3 (17). A key point is that onlyabout a quarter of total runoffand recharge is actually avail-able for human use (afteruncaptured storm runoff andremote areas are subtracted),and nearly 40% of the glob-ally available amount isalready being used. (Irrigatedagriculture is by far the largestuser, and it is the fastest-growing—driven above all byrising demand for grain tofeed to animals and now, inthe United States especially,for corn to convert toethanol.) There is a differenceof a factor of 40 in currentannual water withdrawals perperson between the poorestand richest countries, whichbodes ill for future waterdemand in relation to supplyas incomes and populationscontinue to rise.
The widespread supposi-tion that humans can use all ofthe “available” runoff is inerror, moreover. Enough flowmust be left in rivers to meetecological needs. Takingthese ecological flow require-
ASSOCIATIONAFFAIRS
Target ProgressGoal
Eradicate extreme poverty
and hunger
Achieve universal primary
education
Promote gender equality
and empower women
Reduce child mortality
Improve maternal health
Combat HIV/AIDS,
malaria, and other
diseases
Ensure environmental
sustainability
Develop a global
partnership for
development
Proportion of people
living on less than $1 per
day to be halved between
1990 and 2015
Full course of primary
schooling for boys and
girls everywhere by 2005
Eliminate gender disparities at
all levels of education by 2015
Reduce under-5 mortality
rate by 2/3 between 1990
and 2015
Reduce maternal mortality
rate by 3/4 between 1990
and 2015
Have halted and begun to
reverse spread of HIV/AIDS
and incidence of malaria
by 2015
Proportion of people lacking
access to safe drinking water
and basic sanitation to be
halved between 1990 and 2015
No quantitative target; a range
of qualitative goals address
mechanisms of assistance
Target already met in East and
Southeast Asia, but other
developing regions are behind
pace needed to meet it by 2015
Southern Asia, northern Africa,
and Latin America on track to
meet target; other developing
regions behind
Nearly all developing regions
far off pace needed to meet target
East and Southeast Asia, northern
Africa, and Latin American on track
to meet target; other developing
regions far behind
East and Southeast Asia, northern
Africa, and Latin American on track
to meet target; other developing
regions behind
No. of people with HIV/AIDS may
have stabilized in sub-Saharan
Africa; is rising in most other
developing regions
East and Southeast Asia, northern
Africa, and Latin America on track
to meet sanitation target; other
developing regions behind
If official development assistance
is the index, progress is slight;
debt and trade measures look better
MDG’s, targets, and pace of progress2
Table 2. MDGs, targets, and pace of progress (10, 11).
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ments into account reveals that many of theworld’s river basins are already overexploited:Human withdrawals are leaving less water inrivers than needed to meet ecological require-ments. Rising human water demands are alsoleading, at many locations around the world, tothe extraction of groundwater from aquifers atrates exceeding natural recharge, leading todeclining water tables, wells running dry, andincreased drilling and pumping costs (8).
The current extent of human exploitation ofEath’s land surface and vegetation is, similarly,far greater than is generally supposed. Crops,pastures, and grazing now take up about 40% ofthe planet’s 133 million km2 of ice-free land(18). Forests, which once covered 50 millionkm2, have shrunk by about 10 million km2 inthe past 300 years (with half of that loss occur-ring in the past half century), and desert andnear-desert lands have expanded by nearly 10million km2. Cities, towns, roads, and airportsnow cover about 2% of the land area—approaching 3 million km2 (18–20).
Arguably a more informative measure ofthe scale of human intervention in terrestrialecosystems than areas transformed is thefraction of the NPP of those ecosystems thathuman activities have eliminated or appropri-ated for human purposes; a pioneering studyin the mid-1980s estimated that humansappropriate about 25% of terrestrial NPP andhave eliminated nearly another 15% throughland transformations (21). Subsequent stud-ies using the more extensive remote-sensinginformation and geographic information sys-tems (GIS) databases that have become avail-able in the meantime have altered the detailsof the picture but reinforced the basic findingthat, depending on the definitions employed,human activities are appropriating between25 and 40% of terrestrial NPP (22).
Considering the increases in humandemands for NPP that are in prospect both forthe combination of food and feed and for bio-fuels, and considering the need to leave largeareas of forest substantially intact for purposesof carbon sequestration and other ecosystemfunctions, these are not encouraging numbers.They become even less so when one considersthe loss of biodiversity that has accompaniedthe level of appropriation of terrestrial NPPalready reached.
The Millennium Ecosystem Assessmentcompleted in 2005 developed estimates forcontemporary and projected extinction ratescompared to past rates suggested by the fossilrecord: 100 to 1000 times past extinction ratestoday, another 10 to 100 times higher in thefuture (13). And already in 2000 it was esti-
mated that 18% of mammal species,12% of bird species, and 8% of plantspecies worldwide were threatenedwith extinction (23); the projectedincreases in extinction rates, if theymaterialize, thus portend a biodiver-sity catastrophe.
The current state of under-standing of ecosystem structureand function does not generallyallow prediction of what forms anddegrees of local or regional biodiver-sity decline will lead to severeimpacts on basic ecosystem functionsand the services associated withthem. To confuse this ignorance withcause for complacency would befolly, however. The most elementarycommon sense (embodied in AldoLeopold’s famous dictum from ASand County Almanac that “The firstrule of intelligent tinkering is to saveall the parts” )—reinforced by a largepart of the detailed ecological knowl-edge accumulated since—tells us thatcontinuing biodiversity loss musteventually exact a large toll in ecosys-tem performance and resilienceagainst shocks and stresses both natu-ral and anthropogenic (24).
What is needed from S&T in rela-tion to the intensifying competitionfor land, water, and biota? We need,for reasons both purely scientific andas a basis for sensible ecosystem man-agement, a large increase in ecologi-cal research focused on the relationslinking biodiversity and other aspectsof ecosystem condition with ecosys-tem function and services; and weneed a better understanding of whatthose services do and could deliver insupport of human well-being, as wellas better ways to quantify their valuefor incorporation into the market andnonmarket processes shaping thefuture of ecosystems (25).
We need more studies that combine pro-jected land requirements for food and feed,fiber, biofuels, and infrastructure—rather thanpretending that each use can be analyzed sepa-rately—and that attempt to reconcile the com-bined demands with the requirement forenough land covered by intact forests and othernative ecosystems to provide the carbonsequestration and other ecosystem servicessociety cannot do without (26). We need moreeffective use of the capabilities provided bysatellite imagery and other remote sensing, and
by GIS, both for conducting such studies andfor conveying the results to publics and deci-sion-makers in forms they will understand anduse (27). And, not least, we need technologiesfor extracting food, fiber, and fuel from agricul-tural and forest ecosystems in ways less disrup-tive of the other services those systems providethan the technologies typically used today (28).
The OceansThe oceans cover 70% of the surface of theplanet, contain 98% of the water, and contributeabout half of the NPP. They are a gigantic bal-
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Available river flow and recharge/world population
Per capita withdrawals, global average
Nigeria
Israel
China
Mexico
Italy
United States
World desalting capacity/world population
1,400,000,000
30,000,000
10,000,000
100,000
10,000
Cubic kilometers
The world’s water 3
120,000
70,000
50,000
12,000
5,000
13
Cubic kilometers per year
1,800
800
50
300
500
800
1,000
2,000
2
Cubic meters per person
per year
Stocks
Water in the oceans (~35,000
parts per million salt)
Water locked up in ice
Groundwater
Water in lakes and rivers
Water in the atmosphere
Flows
Precipitation on land
Evaporation from land
River runoff and groundwater recharge
Available river flow and recharge
Withdrawals for human use
of which Agriculture 3,500
Industry 1,000
Domestic 500
World desalting capacity
Flows per capita
Table 3. Where is the world’s water and where is it going?Compiled and rounded from several sources (17). 1 km3 = 109
m3 = 1012 liters = 264 × 109 gallons. Available river flow andrecharge = runoff + recharge – uncaptured storm runoff –remote areas. Withdrawals for human use are estimated for2007. Per capita withdrawals are data for 2000.
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ance wheel in Earth’s weather and climate.They are an immense reservoir of biodiversity;one even less cataloged and characterized thanthat of the terrestrial biota. And fisheriesderived from them supply 20% or more of theper capita animal-derived protein consumed by40% of the human population (29).
Although the oceans are perceived by manyas being too gigantic and immutable to bemuch influenced by human activities, theyhave actually been, like the land, substantiallyaltered by human influences. Human-causedwarming of Earth’s surface and atmospherehas penetrated theoceans to depths ofhundreds of meters;and absorption by theocean of part of thecarbon dioxide (CO2)added to the atmos-phere by human activ-ities has lowered theaverage pH of seawa-ter by about 0.1 (30).Lead and mercurymobilized by humansmove through marinefood webs, concen-trating at the higherlevels, as do syntheticorganic compoundssuch as DDT andPCBs. No part of theoceans is free of tracesof oil spills or free ofplastic trash.
The most conspic-uous of human impactson the oceans to date has been the decline in thepopulations of many of the fish and shellfish weharvest for food. Marine fish catches reached aplateau in the mid-1990s and have been main-tained there since only by dint of harvestinglower in the food web; continuing expansion ofthe total supply of protein from fish and shell-fish has depended on rapid growth in aquacul-ture (31). The real magnitude of the humanimpact, however, is revealed only by lookingregion by region and species by species at thefish and shellfish stocks on which the catch haddepended; it is a picture of devastating decline,brought about not only by unsustainable harvestof target species but also by the extensivebycatch and bottom-habitat destruction broughtabout by widely used if reprehensible fishingtechniques (32).
Coral reefs, which have the highest densityof biodiversity in the oceans, are also increas-ingly endangered. Originally the risks to reefs
came mainly from subsistence fishing and sed-iment runoff from agriculture and land devel-opment on inhabited islands; to this was lateradded the stress on reef fish populations fromrapidly expanding commercial fishing to sup-ply the aquarium trade in North America andEurope and the live-fish restaurant trade in Eastand Southeast Asia, as well as physical damageto the reefs from the influx of cruise ships andthe reef-walking tourists they carry (33).
Today, coral reefs are being affectedthroughout their range by two further factorsthat are independent of local population densi-
ties, tourist influxes,and commercial fish-ing fleets: increasingwater temperatures,which can causebleaching (ejection ofthe living coral organ-isms from the calciumcarbonate structure)and disease; anddeclining pH, whichhinders the ability oforganisms to make thecalcium carbonate. Arecent survey con-cluded that 30% ofthe world’s coral reefsare already severelydamaged and that60% could be lost by2030 (33).
Another sign oftrouble in the oceansis the rapid prolifera-tion of harmful algal
blooms and the oxygen-depleted “dead zones”that are often the ultimate result. This phenom-enon is largely driven by overfertilization ofcoastal zones by river runoff laden with nutri-ents from sewage and agriculture. The numberof regions affected and the scale of the impactin individual regions appear to have beengrowing recently, with a doubling time on theorder of a decade (29, 34).
Scientifically, technologically, and politi-cally, human pressures on the oceans are evenmore challenging to deal with than the pres-sures on terrestrial ecosystems discussedabove. Difficulties of observation and study inthe oceans mean that the marine realm is lesswell explored and less well understood than ter-restrial ecosystems. Technologically, the oceansare a more difficult operating environment thanthe land for almost any purpose. Politically, theproblems of governance and management ofocean resources and the ocean environment are
compounded by the circumstance that most ofthe world ocean is a commons, not the provinceof any nation.
Much of what is needed from S&T in rela-tion to the challenge of sustainability for oceansystems and services, however, is similar towhat is needed on the terrestrial side: moreresearch on marine ecosystem structure, func-tion, and service; more and better monitoringand reporting, in forms meaningful to andusable by decision-makers; and more integra-tion of analyses relating to multiple interactinguses and stresses, so that limits on what is sus-tainable can be identif ied before they areexceeded. Also needed on the marine side istechnological change in relation to what wealready know is unsustainable: replacement ofharvesting technologies that destroy habitat anddecimate bycatch with more resource-friendlyalternatives, and modification of agriculturaland sewage-treatment practices on land in orderto drastically reduce the dead zone–inducingimpacts of nutrient-laden river runoff (35).
The Energy-Economy-EnvironmentDilemmaThe essence of this dilemma resides in tworobust propositions (36–38): First, reliable andaffordable energy is essential for meeting basichuman needs and fueling economic growth.Second, the harvesting, transport, processing,and conversion of energy using the resourcesand technologies relied upon today cause alarge share of the most difficult and damagingenvironmental problems society faces.
Contemporary technologies of energy sup-ply are responsible for most indoor and outdoorair pollution exposure, most acid precipitation,most radioactive wastes, much of the hydrocar-bon and trace-metal pollution of soil andgroundwater, nearly all of the oil added byhumans to the oceans, and most of the human-caused emissions of greenhouse gases that arealtering the global climate (39).
The study of these environmental impactsof energy has been a major preoccupation ofmine for nearly four decades. I have concludedfrom this study that energy is the hardest part ofthe environment problem; environment is thehardest part of the energy problem; and resolv-ing the energy-economy-environmentdilemma is the hardest part of the challenge ofsustainable well-being for industrial and devel-oping countries alike.
Figure 1 shows the composition of worldprimary energy supply during the bulk of thefossil-fuel era to date, from 1850 to 2000 (40).Energy use increased 20-fold over this period—that number being the product of a somewhat
ASSOCIATIONAFFAIRS
World Energy 1850–2000
0
50
100
150
200
250
300
350
400
450
500
1850 1875 1900 1925 1950 1975 2000
Year
EJ/
year
Gas
Oil
Coal
Nuclear
Hydro +
Biomass
Fig. 1. World supply of primary energy1850–2000 (40). Primary energy refers to energyforms found in nature (such as fuelwood, crudepetroleum, and coal), as opposed to secondaryforms (such as charcoal, gasoline, and electricity)produced from the primary ones using technology.“Hydro +” includes hydropower, geothermal,wind, and solar. Fossil fuels are counted at higherheating value and hydropower is counted asenergy content, not fossil-fuel equivalent. 1 exa-joule (EJ) = 1018 joules = 0.95 quadrillion Btu.
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greater than fivefold increase in world popula-tion and a somewhat less than fourfold increasein average energy use per person (41). Fossil-fuel use increased more than 150-fold, risingfrom 12% of the modest energy use of 1850 to79% of 2000’s much larger total. By 2005, fos-sil fuels were contributing 81% of the worldprimary energy supply, 82% in China, and 88%in the United States (42); even in the electricitysector (where nuclear, hydropower, wind, solar,and geothermal energies make their largestcontributions), fossil fuels accounted for two-thirds of global generation (Table 4).
The huge increase in fossil-fuel use over thepast century and a half played a large role inexpanding the impact of humankind as a globalbiogeochemical force (43), not only throughthe associated emissions of CO2, oxides of sul-fur and nitrogen, trace metals, and more, butalso through the mobilization of other materi-als, production of fertilizer, transport of water,and transformations of land that the availabilityof this energy made possible (44). At the end ofthe 20th century and the beginning of the 21st,the fossil-fuel–dominated energy supply sys-tem continued to impose immense environ-mental burdens at local, regional, andglobal scales, despite large invest-ments and some success in reducingemissions to air and water per unit ofenergy supplied (29).
Fine particles appear to be the mosttoxic of the usual air pollutantsresulting from the combustion offossil and biomass fuels, andwhether emitted directly or formedin the atmosphere from gaseous pre-cursors, they have proven difficult tocontrol (45). The concentrations offine particulates in urban air in theUnited States, Western Europe, andJapan have mostly been falling inrecent years, but in cities across thedeveloping world the concentrationshave risen to shockingly high levels—often several times the WHO guide-lines (29). As noted above in connec-tion with Table 1, population expo-sures to particulate matter from thecombustion of fossil and biomass fuelsindoors are even greater, with com-mensurate impacts on health.
A major regional impact of fossil-fuel combustion is wet and dry depo-sition of sulfur and nitrogen, much ofit in acidic forms. Of the sulfur oxideand nitrogen oxide emissions that arethe precursors of this fallout, the for-mer are somewhat easier to control
technologically. Global emissions of both arenow increasing, however, as rapid expansion ofpoorly controlled sources in Asia, and to alesser extent in Africa and Latin America, isnow more than offsetting reductions in theindustrialized countries (29).
Mid-range projections for energy growthover the next few decades show world use ofenergy reaching 1.5 and 2 to 2.5 times the 2005level by 2030 and 2050, respectively; electricitygeneration in these “business-as-usual” casesnearly doubles by 2030 and triples by 2050(46). Although these are daunting numbersfrom the standpoint of sustainability, the prob-lem is not that the world is running out ofenergy. It isn’t (37, 47). But it is running out ofcheap and easy oil and gas, and it is running outof environmental capacity to absorb, withoutintolerable consequences, the impacts of mobi-lizing these quantities of energy in the ways wehave been accustomed to doing it (48).
Much discussion of the oil issue has beenframed around the contentious question of“peak oil” (49): When will global production ofconventional petroleum reach a peak and beginto decline, as U.S. domestic production did
around 1970? The question derives its impor-tance from the proposition that reaching thispeak globally will presage large and long-last-ing increases in the price of oil, plus a costly anddemanding scramble for alternatives to fill thewidening gap between the demand for liquidfuel and the supply of conventional petroleum.
Oil-supply pessimists argue that the peak ofconventional oil production could occur anytime now; oil-supply optimists say it probablywon’t happen until after 2030, perhaps not untilafter 2050. Similar arguments go on about con-ventional supplies of natural gas, the totalrecoverable resources of which are thoughtto be not greatly different, in terms of energycontent, from those of crude petroleum.
In my judgment, it’s difficult to tell at thisjuncture whether the optimists or the pessimistsare closer to right about when the world willexperience peak oil, but the answer is not veryimportant as a determinant of what we need tobe doing. After all, it’s clear that heavy oildependence carries substantial economic andpolitical risks in a world where high proportionsof the reserves and remaining recoverableresources lie in regions that are unstable and/orcontrolled by authoritarian governments thathave sometimes been inclined to wield oil sup-ply as a weapon. It’s also clear that world oil use(which is dominated by the transport sector and,within it, by motor vehicles) is a huge producerof conventional air pollutants, as well as beingabout equal to coal burning as a contributor tothe global buildup of the heat-trapping gas CO2(29, 42). Given these liabilities, it makes senseto be looking urgently for ways to reduce oildependence (while working to clean up contin-uing uses of oil), no matter when we think peakoil might occur under business as usual.
Indeed, the problem of how to reduce thedangers from urban and regional air pollutionand from overdependence on oil in the face ofrising worldwide demand for personal trans-portation is one of the two greatest challengesat the energy-economy-environment intersec-tion. The other one is how to provide theaffordable energy needed to create and sustainprosperity everywhere without wrecking theglobal climate with the CO2 emitted by fossil-fuel burning.
Climate is the envelope within which nearlyall other environmental conditions andprocesses important to human well-being mustfunction (50). Climate strongly influences (soclimate change directly affects) the availabilityof water; the productivity of farms, forests, andfisheries; the prevalence of oppressive heat andhumidity; the geography of disease; the dam-ages to be expected from storms, floods,
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World energy supply in 20054
Primary energy (exajoules)
of which Oil
Natural gas
Coal
Nuclear energy
Hydropower
Biomass and other
514
34%
21%
26%
6%
2%
11%
WORLD
106
40%
24%
25%
8%
1%
3%
USA
80
18%
2%
62%
0.6%
2%
15%
CHINA
Primary energy (terawatt-hours)
of which Coal
Oil and gas
Nuclear
Hydropower
Wind, geothermal, and solar
17,300
40%
26%
16%
16%
2%
4,000
50%
21%
20%
7%
2%
2,400
80%
3%
2%
15%
0.1%
Table 4. World energy supply in 2005. About a third of the pri-mary energy is devoted to electricity generation. Net electricity= gross generation less the electricity used within the generat-ing facility. In the “primary energy” column, hydropower iscounted as energy content, not fossil-fuel equivalent. “Other”includes wind, geothermal, and solar energy (42).
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droughts, and wildfires; the property losses tobe expected from sea-level rise; the investmentsof capital, technology, and energy devoted toameliorating aspects of climate we don’t like;and the distribution and abundance of speciesof all kinds (those we love and those we hate). Asufficient distortion in the climatic enve-lope, as recent human activities arewell on the way to achieving, can beexpected to have substantial impactsin most of these dimensions.
Indeed, after a rise in global aver-age surface temperature of about0.75º ± 0.20ºC since 1880–1900(51), changes in most of these cat-egories, and significant damagesin many, have already becomeapparent (5, 10, 16, 52, 53). Largeimpacts from seemingly modestchanges in global average surfacetemperature underline the reality thatthis temperature is a sensitive proxyfor the state of the world’s climate,which consists of the patterns in spaceand time not only of temperature andhumidity but of sun and clouds, rain-fall and snowfall, winds and stormtracks, and more. (The sensitivity ofthe temperature proxy for the state ofthe climate is often illustrated by theobservation that the difference inglobal average surface temperaturebetween an ice age and a warm inter-glacial—drastically different cli-mates—is only about 5ºC.)
There is no longer any seriousdoubt that most of the climatic changethat has been observed over the pastfew decades has been due to humanrather than natural influences (54). Asshown in Table 5, the largest of thepositive human “forcings” (warminginfluences) has been the buildup ofCO2 in the atmosphere over the pasttwo and a half centuries. (About two-thirds of this buildup has come fromfossil-fuel burning and the other one-third from land-use change.) Otherimportant contributors have beenmethane from energy supply, land-usechange, and waste disposal; halocarbons from avariety of commercial and industrial applica-tions; nitrous oxide from fertilizer and combus-tion; and soot from inefficient engines and bio-mass burning. Partially offsetting coolingeffects have been caused by the reflecting andcloud-forming effects of human-produced par-ticulate matter and by increased surface reflec-tivity due to deforestation and desertification.
Facing the menace of growing, human-caused disruption of global climate, civiliza-tion has only three options: mitigation (takingsteps to reduce the pace and the magnitude ofthe climatic changes we are causing); adapta-tion (taking steps to reduce the adverse impactsof the changes that occur); and suffering from
impacts not averted by either mitigation oradaptation. We are already doing some of eachand will do more of all, but what the mix will bedepends on choices that society will makegoing forward. Avoiding increases in sufferingthat could become catastrophic will requirelarge increases in the efforts devoted to bothmitigation and adaptation.
A 2007 report for the UN Commission on
Sustainable Development, focused on what todo, emphasizing mitigation and adaptationequally, concluded that the chances of a “tip-ping point” into unmanageable degrees of cli-matic change increase steeply once the globalaverage surface temperature exceeds 2º to2.5ºC above the pre-industrial level, and thatmitigation strategies should therefore bedesigned to avoid increases larger than that(52). Having a better-than-even chance of doingthis means stabilizing atmospheric concentra-tions of greenhouse gases and particles at theequivalent of no more than 450 to 500 parts permillion by volume (ppmv) of CO2 (55, 56).
A mitigation strategy sufficient to achievesuch stabilization will need to address methane,halocarbons, nitrous oxide, and soot as well asCO2, but the largest and most difficult reduc-tions from business-as-usual trajectories offuture emissions are those needed for CO2itself. The difficulty in the case of CO2 emis-sions from the energy system resides in the cur-rent 80% dependence of world energy supplyon fossil fuels, the technical difficulty of avoid-ing release to the atmosphere of the immensequantities of CO2 involved, and the longturnover time of the energy-system capitalstock (meaning that the shares of the differentenergy sources are hard to change quickly)(57). In the case of the 15 to 25% of global CO2emissions still coming from deforestation(essentially all of it now in the tropics), the dif-ficulty is that the causes of this deforestation aredeeply embedded in the economics of food,timber, biofuel, trade, and development, and inthe lack of valuation and marketization of theservices of intact forests (58).
Stabilizing atmospheric CO2 at 500 ppmvwould be possible if global emissions fromfossil-fuel combustion in 2050 could be cut inhalf from the mid-range business-as-usual fig-ure of 14 billion metric tons of carbon in CO2per year. Numerous studies of how reductionsof this general magnitude might be achievedhave been undertaken (59), and, notwithstand-ing differences in emphasis, virtually all haveshown that: (i) such reductions are possible butvery demanding to achieve; (ii) there is no sin-gle silver-bullet approach that can do all or evenmost of the job; (iii) it is essential, in terms ofboth feasibility of the ultimate aim and cost ofachieving it, to begin reductions sooner ratherthan later; (iv) the quickest and cheapest avail-able reductions will be through improving theefficiency of energy end-use in residential andcommercial buildings, manufacturing, andtransport, but costlier measures to reduce emis-sions from the energy supply system will alsoneed to be embraced; and (v) without major
ASSOCIATIONAFFAIRS
Disrupting earth’s climate5Cause of forcing
Change in atmospheric concentration of
Carbon dioxide
Methane
Halocarbons
Nitrous oxide
Tropospheric ozone
Stratospheric ozone
Soot
Reflecting particles
Cloud-forming effect of particles
Change in reflectivity of surface (albedo) due to
Land-use change
Soot on snow
Change in solar irradiance
+1.66 (±0.17)
+0.55 (±0.07)
+0.34 (±0.03)
+0.16 (±0.02)
+0.35 (–0.10,+0.30)
–0.05 (±0.10)
+0.3 (±0.2)
–0.8 (±0.4)
–0.7 (–1.1,+0.4)
–0.2 (±0.2)
+0.1 (±0.1)
+0.12 (–0.06,+0.18)
Magnitude of
forcing (W/m2)
Table 5. IPCC estimates of principal human-produced and nat-ural forcings since 1750. Forcings are essentially changes inEarth’s energy balance, measured in watts per square meter ofthe planetary surface, with positive values denoting warminginfluences and negative values denoting cooling. The uncer-tainty range is given in parentheses. Large volcanic eruptionsproduce negative forcings of a few years’ duration due to theparticles they inject into the atmosphere, but they are notincluded in the table because no trend is evident in the size ofthis effect over time. Effects of the 11-year sunspot cycle arelikewise not shown because they average out over time periodslonger than that. Note that the IPCC’s best estimate of the con-tribution of the net change in input from the Sun since 1750 issome 14 times smaller than that of the CO
2(30).
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improvements in technology on both thedemand side and the supply side—and a majorexpansion of international cooperation in thedevelopment and deployment of these tech-nologies—the world is unlikely to achievereductions as large as required.
The improved technologies we should bepursuing, for help not only with the energy-cli-mate challenge but also with other aspects ofthe energy-economy-environment dilemma,are of many kinds: improved batteries for plug-in hybrid vehicles; cheaper photovoltaic cells;improved coal-gasification technologies tomake electricity and hydrogen while capturingCO2; new processes for producing hydrogenfrom water using solar energy; better means ofhydrogen storage; cheaper, more durable, moreefficient fuel cells; biofuel options that do notcompete with food production or drive defor-estation; advanced fission reactors with prolif-eration-resistant fuel cycles and increasedrobustness against malfunction and malfea-sance; fusion; more attractive and efficient pub-lic transportation options; and a range of poten-tial advances in materials science, biotechnol-ogy, nanotechnology, information technology,and process engineering that could drasticallyreduce the energy and resource requirements ofmanufacturing and food production (60).
Also urgently needed from S&T in theenergy-climate domain are improved under-standing of potential tipping points related toice-sheet disintegration and carbon releasefrom the heating of northern soils; a greatlyexpanded research, development, anddemonstration effort to determine the bestapproaches for both geologic and enhancedbiologic sequestration of CO2; a serious pro-gram of research to determine whether thereare “geoengineering” options (to createglobal cooling effects that counter the ongo-ing warming) that make practical sense; andwide-ranging integrated assessments of theoptions for adaptation (61).
Adequately addressing these and otherneeds in the science and engineering of theenergy-environment interaction would proba-bly require a 2- to 10-fold increase in the sumof public and private spending for energyresearch, development, and demonstration(ERD&D) (62). This sounds daunting, but theamounts involved are astonishingly smallcompared to what society spends for energyitself (63). There are signs that the private sec-tor is ramping up its efforts in ERD&D inresponse to the challenge, but for reasons thathave been abundantly documented (64), thepublic sector must also play a large role in theneeded expansion. Sadly, until now there has
been precious little sign of that happening,notwithstanding abundant rhetoric from polit-ical leaders about new technologies being thekey to the solution (65).
Moving Toward Elimination of NuclearWeaponsThroughout the Cold War, the world’s nucleararsenals (which reached tens of thousands ofnuclear weapons on each side in the USA-USSR confrontation and hundreds each in thepossession of the United Kingdom, France,China, and probably Israel) were recognized bynearly everyone as a threat to the existence of asizable part of the human population and to thewell-being of most of it, if any significant frac-tion of them were ever used. Following thepeaceful end of the Cold War at the beginningof the 1990s, however, the salience of the threatfrom these nuclear weapons rapidly receded inthe minds of most people. The most plausiblepolitical source of a nuclear conflagration haddisappeared, and the only related set of worriesthat retained any widespread salience was aconcern—initially much less compelling andimmediate than the Cold War’s nuclear threathad been—about the possible acquisition ofnuclear weapons by rogue states and terrorists.
The tendency toward complacency aboutdangers from nuclear weapons in the posses-sion of the major powers was reinforced by con-siderable shrinkage in the U.S. and Russianarsenals—as weapons now deemed surpluswere retired from active service and a processof dismantling was begun—and subsequentlyby conclusion of the Moscow Treaty of 2002,which appeared to promise further significantcuts. Meanwhile, the refocusing of residualconcerns about nuclear weapons on issues ofproliferation and terrorism proceeded apace,driven by the initial discovery of a nuclearweapon program in Iraq, the Indian and Pak-istani nuclear tests of 1998, the revelation ofA. Q. Khan’s proliferation network, theunmasking of North Korea’s nuclear weaponprogram, and the exercise of frighteninglyorganized and destructive (even if non-nuclear)terrorist capabilities on September 11, 2001.
To be concerned about nuclear prolifera-tion and the possibility of nuclear terrorismcertainly wasn’t and isn’t wrong (66). But tobelieve that the nuclear weapons still in thepossession of the United States, Russia, andthe other de jure nuclear weapon states (67)are not themselves still a major threat to theworld is to underrate both the direct threat oftheir use that remains and the ways in whichtheir existence influences the proliferationand terrorism threats.
Concerning the possibility that these major-power weapons might in fact be used, highlyrelevant facts (which polls show are largelyunknown to the U.S. public) are as follows: (i)These arsenals still contain altogether about20,000 nuclear weapons, of which the UnitedStates possesses about half; (ii) most of the U.S.and Russian nuclear weapons are not coveredby the Moscow Treaty, which governs only asubcategory called “operationally deployedstrategic nuclear weapons” (and which alsolacks any provision or mechanism for verifica-tion); (iii) the United States and Russia eachcontinue to maintain about 2000 strategicnuclear weapons on short-reaction-time alert,increasing the chance of use by mistake or mal-function; and (iv) the United States and Russiaboth reserve the “right” of first use of nuclearweapons, including in response to non-nuclearthreats. While the chance of large-scale use ofU.S. and Soviet/Russian nuclear weapons cer-tainly diminished with the end of the Cold War,then, the danger has by no means completelydisappeared (68, 69).
The existing nuclear arsenals and the pos-tures of their owners toward their potentialuses and improvement are hardly uncon-nected, moreover, from the dangers of nuclearproliferation and nuclear terrorism. The evi-dent intentions of the current nuclear weaponstates to retain large arsenals indefinitely, tomaintain high states of alert, to continue tothreaten first use of nuclear weapons evenagainst states that do not possess them, and topursue development of new types of nuclearweapons for increased effectiveness or newpurposes are manifestly incompatible withthe bargain embodied in the Non-Prolifera-tion Treaty and corrosive of the nonprolifera-tion regime (70).
More specifically, with these stances thenuclear weapon states forfeit any moral author-ity to which they might aspire on questions ofnuclear weapon possession, and they reduce thechances of gaining the cooperation of the worldcommunity on technology-transfer restrictionsand sanctions directed against proliferators.They also directly encourage proliferation byreinforcing the view that nuclear weapons havegreat political and military value and by under-mining confidence that nonpossession ofnuclear weapons means a country need not fearbeing attacked with them.
Nuclear proliferation itself, when it occurs,tends to increase both the incentives and theopportunities for further proliferation, as wellas expanding the opportunities for terroristacquisition of nuclear weapons. The expansionof opportunities accompanying proliferation
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comes not merely because nuclear weapons,nuclear weapons expertise, and nuclear explo-sive materials have been put in additionalhands in additional locations, from which theymay spread further (as the Khan network soappallingly demonstrated), but especiallybecause they have been placed into contextswhere there has been no experience in control-ling them. Constraints on the numbers, disper-sion, and contemplated uses of nuclearweapons are important, therefore, both toreduce the probability of accidental, erro-neous, unauthorized, or authorized use and toreduce the chances of nuclear weapons com-ing into the possession of additional prolifer-ant states or terrorists.
Ultimately, however, the only alternative tocontinued proliferation is achievement of a uni-versal prohibition on nuclear weapons, coupledwith means to ensure confidence in compli-ance. If possession of nuclear weapons does nottend toward zero, it will tend instead toward uni-versality; and though no one can predict thepace of this, it will mean, in the long run, thatthe probability of use of these weapons willtend toward unity (71). There are, moreover,powerful arguments that a prohibition ofnuclear weapons is not only a practical andmoral but a legal necessity, under internationallaw (72). It is also telling that, over the years,more and more of the people who have hadcommand over the U.S. nuclear arsenal and thepolicies governing its use have reached the con-clusion that pursuing prohibition is the onlysensible option (73).
While the contrary is often claimed, prohibi-tion does not require “un-inventing” nuclearweapons (an impossibility). Societies sepa-rately and together have productively prohib-ited murder, slavery, and chemical and biologi-cal weapons without imagining that these havebeen un-invented. Nor is verification an insur-mountable obstacle. Verification, with furtherinnovations both technical and social, can bemore effective than most suppose (74); and inany case, the dangers to the world from cheat-ing are likely to be smaller than the dangers tobe expected in a world from which nuclearweapons have not been banned (75).
As for timing, the buildup of the globalnuclear weapon stockpile from a dozen in 1946(all in the possession of the United States) to thepeak of about 65,000 in 1986 took just fourdecades; another two decades later, the numberhad fallen by more than two-thirds (76). I see noreason the world shouldn’t aim for getting tozero in another two decades; that is, by about2025. Crucial early steps in that directioninclude declarations by the nuclear weapon
states that they will never, in any circum-stances, use nuclear weapons first or againstcountries that do not possess such weapons; de-alerting of all nuclear forces; a series of pro-gressively deeper cuts in total numbers ofnuclear weapons (strategic and nonstrategic,deployed and nondeployed), with physicaldestruction of all of the weapons made surplusby these cuts and disposition of their nuclearexplosive materials in ways that effectively pre-clude their reuse for weapons, and with interna-tionally agreed means of verification; ratifica-tion and entry into force of the ComprehensiveNuclear Test Ban Treaty; and negotiation of acutoff of production of nuclear explosive mate-rials for weapons (77).
S&T can contribute to achieving suchprogress in several ways: through technicaladvances that make verifying weapon-reduc-tion agreements easier (and thus make agreeingto them easier); through other technicaladvances that make nuclear energy technologyless likely to be used for nuclear weaponryand/or more likely to be detected if this hap-pens; through applications of science and engi-neering to the task of reducing the dangers ofaccidental, erroneous, or unauthorized use ofnuclear weapons, as well to the task of obviatingany need for nuclear explosive testing ofweapons, for as long as these still exist; andthrough S&T-based integrated assessmentsclarifying dangers and pitfalls on the path tozero and how to avoid them.
Almost certainly, getting to a world ofzero nuclear weapons will be as much a mat-ter of political wisdom, political courage,and diminution in the motivations for armedconflict of any sort as a matter of S&T per se.But in the domain of diminishing motiva-tions for conflict, the alleviation of the othershortfalls in sustainable well-being dis-cussed here—to which, as I have tried toshow, S&T have large contributions tomake—will be indispensable (78).
What Else Is Needed? Beyond the points made already here about thecontributions needed from S&T with respect tothe five specific challenges on which I havefocused, I want to mention some cross-cuttingdesiderata. We need:
•A stronger, clearer focus by scientists andtechnologists on the largest threats to humanwell-being;
•Greater emphasis on analysis of threats andremedies by teams that are interdisciplinary,intersectoral, international, and intergenera-tional (as the problems are);
•Undergraduate education and graduate
training better matched to these tasks;•More attention to interactions among
threats and to remedies that address multiplethreats at once;
•Larger and more coordinated investmentsin advances in S&T that meet key needs atlower cost with smaller adverse side effects;
•Clearer and more compelling argumentsto policy-makers about the threats and theremedies; and
•Increased public S&T literacy.Most, if not all, of these aims would be
advanced by wider acceptance, within the aca-demic scientific and engineering communitiesand elsewhere, of the proposition that applied,interdisciplinary, and integrative work by indi-vidual scientists and technologists and by teamsis not necessarily less rigorous, less demanding,or less worthy of recognition—and certainlynot less valuable to society—than work that isnarrower or “purer” (79).
The role of the AAAS in advancing theseideas has been and remains immensely impor-tant. It is the largest, most diverse, and mostinterdisciplinary of U.S. scientific societies,and it is also the most influential. Our flagshippublication, Science, has the largest paid circu-lation among all the peer-reviewed sciencejournals in the world and enjoys a well-earnedreputation for discerning coverage of the inter-section of S&T with public policy (as well asfor cutting-edge reports on disciplinaryresearch in multiple fields). The extraordinaryintellectual smorgasbord of our annual meetingmakes it the year’s most important gathering forthe growing segment of the S&T communityinterested in the interactions among S&T disci-plines and in the influence of S&T on thehuman condition. It also draws, appropriately,by far the most and best media coverage of anyscientific meeting (80).
As a visit to the AAAS Web site atwww.aaas.org will reveal, there is much more.A remarkable array of interdisciplinary, inter-sectoral, practice- and policy-oriented centers,programs, and initiatives operate out of AAASheadquarters and engage the energies of mem-bers and the attention of publics and policy-makers all around the world. The AAAS R&DBudget and Policy Program provides the mostcomprehensive and continuously up-to-datecoverage available anywhere on patterns, prior-ities, and policy underpinnings of U.S. govern-ment investments in S&T. Since 1973, theAAAS Science and Technology Policy Fellow-ship programs have been installing postdoctoralto mid-career scientists and engineers in keyvenues of the federal government where theirinsights can inform real-world policy-making
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while they learn how the policy process worksand how it can be made to work better; therehave been something in the range of 2000 ofthese AAAS S&T fellows, and this tremendousbody of talent and experience now constitutesa major part of the national community ofteaching and practice in science, technology,and public policy. And the extraordinary AAASProject 2061 has become a major force instrengthening S&T education in our schoolsand communities.
What More Can Individuals Do?Individual scientists and technologists con-cerned with the roles of S&T in the pursuit ofsustainable well-being have available to theman array of avenues and opportunities for effec-tive thought and action. Perhaps the most obvi-ous of these, given what I have just said aboutthe AAAS, is to increase one’s support for, par-ticipation in, and use of the relevant activitiesand resources of this organization. The similaractivities of other science- and engineering-oriented professional societies, academies, andnongovernmental organizations (NGOs) like-wise need and deserve increased participationand support.
More specifically, I would urge every sci-entist and engineer with an interest in the inter-section of S&T with sustainable well-being (inall the senses I have explored here and more) toread more and think more about relevant fieldsoutside your normal area of specialization, aswell as about the interconnections of your spe-cialty to these other domains and to the practi-cal problems of improving the human condi-tion; to improve the aspects of your communi-cation skills that are germane to conveyingyour understandings about these interconnec-tions to members of the public and to policy-makers; to actively seek out additional andmore effective avenues for doing so (includingbut not limited to increased participation in therelevant activities of the AAAS and otherNGOs); and indeed to “tithe” 10% of your pro-fessional time and effort to working in theseand other ways to increase the benefits of S&Tfor the human condition and to decrease theliabilities (81).
If so much as a substantial fraction of theworld’s scientists and engineers resolved to dothis much, the acceleration of progress towardsustainable well-being for all of Earth’s inhabi-tants would surprise us all.
References and Notes
1. See especially the classic treatise on sustainable development by
the World Commission on Environment and Development, G. H.
Brundtland, chair, Our Common Future (Oxford Univ. Press, 1987),
and the more comprehensive and analytical update by the National
Research Council Board on Sustainable Development, Our Common
Journey: A Transition Toward Sustainability (National Academy Press,
Washington, DC, 1999).
2. A number of the formulations in this section are adapted from J. P.
Holdren, G. C. Daily, P. R. Ehrlich, in Defining and Measuring Sustain-
ability The Biogeophysical Foundations, M. Munasinghe, W. Shearer,
Eds. (World Bank, Washington, DC, 1995), pp. 3–17.
3. The quoted formulation is from Robert Kates.
4. This was the key insight in Paul Ehrlich’s The Population Bomb
(Ballantine, New York, 1968), as well as one of those in Harrison
Brown’s prescient earlier book, The Challenge of Man’s Future
(Viking, New York, 1954). The elementary but discomfiting truth of it
may account for the vast amount of ink, paper, and angry energy that
has been expended trying in vain to refute it.
5. WHO, The World Health Report 2002 (WHO, Geneva, 2002); see
also K. R. Smith, M. Ezatti, Annu. Rev. Environ. Resour. 30, 291
(2005).
6. UN Development Programme (UNDP), The Human Development
Report 2005: International Cooperation at a Crossroads (UNDP, New
York, 2005).
7. An unsurprising conclusion from Table 1 is that poverty is a bigger
cause of loss of life in today’s world than high consumption is. More
surprising to some, although known to specialists since the early
1980s, is that indoor air pollution from the use of solid fuels in prim-
itive stoves for cooking, boiling water, and space heating in develop-
ing countries is a far bigger killer than the outdoor air pollution in all
of the world’s cities. See K. R. Smith, A. L. Aggarwal, R. M. Dave,
Atmos. Environ. 17, 2343 (1983). Also surprising to many is WHO’s
finding that, already in 2000, climate change was approaching
urban air pollution as a contributor to global mortality, principally
through the effects of increases in heat waves, floods, droughts, and
the incidence of certain tropical diseases. For a discussion of the
WHO estimate, arguing that it is conservative, see J. A. Patz et al.,
Nature 438, 310 (2005).
8. UNDP, Human Development Report 2006: Beyond Scarcity—
Power, Poverty, and the Global Water Crisis (Palgrave Macmillan,
New York, 2006).
9. UNDP, Human Development Report 2001: Making New Technolo-
gies Work for Human Development (Oxford Univ. Press, New York,
2001).
10. UN, The Millennium Development Goals Report (UN, New York,
2006).
11. World Bank, Global Monitoring Report: Millennium Develop-
ment Goals (World Bank, Washington, DC, 2007)
12. See U.S. Dept. of Commerce, 2007 Statistical Abstract of the
United States (U.S. Government Printing Office, Washington DC,
2007). The United States compounds its distinction as the meanest
of wealthy countries in aid-giving by claiming the record for the frac-
tion of its aid that is “tied”: that is, the money must be used to pur-
chase goods and services from the donor (6).
13. Millennium Ecosystem Assessment (MEA), Ecosystems and
Human Well-being: Biodiversity Synthesis (World Resources Institute,
Washington, DC, 2005).
14. G. C. Daily, Ed., Nature’s Services: Societal Dependence on Nat-
ural Ecosystems (Island Press, Washington, DC, 1997).
15. Growing concern about global climate change, which is driven
largely by the buildup of CO2
and other greenhouse gases in the
atmosphere, has helped drive increased demand for biofuels
because of the impression that they are CO2-neutral. This is indeed
the case if the biomass being used for energy is replaced by new
growth as rapidly as it is burned, and if no fossil fuels are used for
growing the energy crop, harvesting it, transporting it, and convert-
ing it into the desired fuel form. Most often the latter condition is not
met in the real world, as it most emphatically is not in the case of corn
ethanol, which is by far the most rapidly expanding biofuel enterprise
in the United States. But a biofuel operation that is short of CO2-neu-
tral may still offer some greenhouse gas–abatement benefit com-
pared to direct burning of fossil fuel. See, e.g., A. E. Farrell et al., Sci-
ence 311, 506 (2006), and J. Hill, E. Nelson, D. Tilman, S. Polasky, D.
Tiffany, Proc. Natl. Acad. Sci. U.S.A. 103, 11206 (2006).
16. Intergovernmental Panel on Climate Change (IPCC), Climate
Change 2007: Impacts, Adaptation, and Vulnerability (Contribution
of Working Group II to the Fourth Assessment Report of the IPCC,
Cambridge Univ. Press, Cambridge, 2007).
17. Compiled and rounded from P. Gleick, Ed., The World’s Water:
2006-7 (Island Press, Washington, DC, 2006); T. Oki, S. Kanae,
Science 313, 1068 (2006); and UN Environment Programme
(UNEP), Vital Water Graphics (UNEP, Washington, DC, 2002).
18. J. A. Foley et al., Science 309, 570 (2005).
19. For further detail about human transformations of land and
related impacts, see especially the classic by B. L. Turner et al., Eds.,
The Earth As Transformed by Human Action (Cambridge Univ. Press,
Cambridge, 1991), as well as R. DeFries, G. Asner, R. Houghton, Eds.,
Ecosystems and Land Use Change (Geophysical Monograph Series,
vol. 153, American Geophysical Union, Washington, DC, 2004) and
(21).
20. MEA, Current State and Trends: Findings of the Conditions and
Trends Working Group (MEA, Washington, DC, 2005).
21. P. M. Vitousek, P. R. Ehrlich, A. H. Ehrlich, P. A. Matson, Bioscience
36, 368 (1986). NPP is the part of the energy captured by primary
producers (mostly plants) that is not used by the plants for their own
metabolic processes; hence, it is available for consumption by other
organisms or addition to stocks.
22. See, most recently, H. Haberl et al., Proc. Natl. Acad, Sci.
U.S.A.104, 12942 (2007).
23. F. S. Chapin III et al., Nature 405, 234 (2000). See also R. Dirzo,
P. H. Raven, Annu. Rev. Environ. Resour. 28, 137 (2003) and (13).
24. A. Leopold, A Sand County Almanac (Oxford Univ. Press, Oxford,
1949, reissued by Ballantine Books, New York 1970). For more cur-
rent ecological insight about the “why worry about biodiversity loss?”
question, see P. M. Vitousek, H. A. Mooney, J. Lubchenco, J. M. Melillo,
Science 277, 494 (1997) and (13).
25. Good catalogs of the research needs in these domains have been
provided by the MEA (13, 20) and by the indicators project of the H.
John Heinz III Center for Science, Economics, and the Environment:
Heinz Center, The State of the Nation’s Ecosystems (Cambridge Univ.
Press, Cambridge, 2002); Heinz Center, Filling the Gaps: Priority
Data Needs and Key Management Challenges for National Reporting
on Ecosystem Condition (Heinz Center, Washington, DC, 2006).
26. See, e.g., B. Soares-Filho et al., Nature 440, 520 (2006).
27. See, e.g., C. L. Convis Jr., Ed., Conservation Geography: Case
Studies in GIS, Computer Mapping, and Activism (ESRI Press, CA,
2001), and A. Falconer, J. Foresman, Eds., A System for Survival, GIS
and Sustainable Development (ESRI Press, CA, 2002).
28. The approach being promoted by Tilman and colleagues on the
use of mixed prairie grasses as feedstock for cellulosic ethanol pro-
duction is a good example [D. Tilman, J. Hill, C. Lehman, Science
314, 1598 (2006)].
29. UNEP, Global Environmental Outlook 4 (GEO-4,UNEP, Nairobi,
Kenya, 2007).
30. IPCC, Climate Change 2007: The Physical Science Basis (Contri-
bution of Working Group I to the Fourth Assessment Report of the
IPCC, Cambridge Univ. Press, Cambridge, 2007).
31. See., e.g., J. B. C. Jackson et al., Science 293, 629 (2001), and
World Bank, Global Economic Prospects 2007 (World Bank, Wash-
ington, DC, 2007).
32. B. Worm et al., Science 314, 787 (2006).
33. T. P. Hughes et al., Science 301, 929 (2003).
34. L. Mee, Sci. Am. 295, 79 (November 2006) and (29).
35. For more extensive discussions of what is required to sustain the
integrity and services of the oceans—including not only scientific
and technological but the all-important management and gover-
nance dimensions—see, e.g., Pew Oceans Commission, L. E.
Panetta, chair, America’s Living Oceans: Charting a Course for Sea
Change (Pew Oceans Commission, Arlington, VA, 2003) and (13).
36. M. K. Hubbert, in National Research Council, Resources and Man
(W. H. Freeman, San Francisco, 1969), chap. 8.
37. J. Holdren, P. Herrera, Energy (Sierra Club Books, NY, 1971).
38. J. Goldemberg, Ed., The World Energy Assessment (UNDP, UN
Department of Economic and Social Affairs, and World Energy Coun-
cil, New York, 2000).
39. Much of this was already clear from the pioneering report of the
1970 summer workshop organized at the Massachusetts Institute of
Technology (MIT) by Carroll Wilson, Study of Critical Environment
Problems (MIT Press, Cambridge, MA, 1970). A more recent synoptic
account is the chapter on “Energy, Environment, and Health,” J. P.
Holdren, K. R. Smith, convening lead authors, in (38). See also (16,
19, 20, 29).
40. Data for Fig. 1 were compiled and reconciled from J. Darm-
stadter, Energy in the World Economy ( Johns Hopkins Univ. Press,
Baltimore, MD, 1968); D. O. Hall, G. W. Barnard, P. A. Moss, Biomass
for Energy in Developing Countries (Pergamon, Oxford, 1982); BP
www.sciencemag.org SCIENCE VOL 319 25 JANUARY 2008 433
2007
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25 JANUARY 2008 VOL 319 SCIENCE www.sciencemag.org434
Amoco, Stat. Rev. World Energy (BP, London, annual); and (36).
Graphic courtesy of S. Fetter.
41. J. P. Holdren, Popul. Environ. 12, 231 (1991).
42. International Energy Agency, Key World Energy Statistics 2007
(OECD, Paris, 2007).
43. P. J. Crutzen, W. Steffen, Clim. Change 61, 251 (2003).
44. For earlier discussions of this issue, see, e.g., J. Holdren, P.
Ehrlich, Am. Sci. 62, 282 (1974) and the references cited in (20, 21,
37).
45. C. A. Pope et al., JAMA 287, 1132 (2002); J. Kaiser, Science 307,
1858 (2005).
46. U.S. Energy Information Administration, International Energy
Outlook 2007 (U.S. Department of Energy, Washington, DC, 2007).
47. See, e.g., IPCC, Climate Change 2007: Mitigation (Working
Group III Contribution to the IPCC Fourth Assessment Report, IPCC,
Geneva, 2007).
48. J. P. Holdren, Innovations 1, 3 (2006).
49. Credit for the idea of approximating the production trajectory of
a depletable resources as a Gaussian curve and for insights about the
significance of the peak year and how to predict it belongs to the late
geophysicist M. King Hubbert, who in the 1950s used this approach
to correctly predict that U.S. domestic production of conventional oil
would peak around 1970 [(36) and references therein]. He also pre-
dicted that world production of crude petroleum would peak between
2000 and 2010. Reviews, extensions, and critiques of Hubbert’s
approach now constitute a considerable literature; see, e.g., K. Def-
feyes, Hubbert’s Peak: The Impending World Oil Shortage (Farrar,
Straus & Giroux, New York, 2002), and C. J. van der Veen, Eos 87,
199 (2006).
50. Some of the formulations about climate in what follows have
been adapted from (48).
51. The beginning of the buildup of atmospheric greenhouse gases
attributable to human activities dates back to even before 1750, the
nominal start of the Industrial Revolution and the zero point used by
the IPCC for its estimates of subsequent human influences. Earlier
human contributions to atmospheric greenhouse gas concentrations
came principally from deforestation and other land-use change (43).
The human influences on global average surface temperature did not
become large enough to be clearly discernible against the backdrop
of natural variability until the 20th century, however. See especially
J. Hansen et al., Proc. Natl. Acad, Sci. U.S.A. 103, 14288 (2006), as
well as (16).
52. P. Raven et al., Confronting Climate Change: Avoiding the
Unmanageable and Managing the Unavoidable (UN Foundation,
Washington, DC, 2007).
53. UNDP, Human Development Report 2007-2008: Fighting
Climate Change (UNDP, Washington, DC, 2007).
54. Even the IPCC, which by its structure and process is designed to
be ultraconservative in its pronouncements, rates the probability that
most of the observed change has been due to human influences as
between 90 and 95% in its 2007 report (30).
55. For convenience, the IPCC and other analysts often represent the
net effect of all of the human influences on Earth’s energy balance as
the increased concentration of CO2
alone that would be needed to
achieve the same effect, starting from a reference point of 278 ppmv
of CO2in 1750. In 2005, when the actual CO
2concentration was 379
ppmv, the additional warming influences of the non-CO2greenhouse
gases and soot were the equivalent of another 100 ppmv of CO2, and
the cooling effects of human-produced reflecting and cloud-forming
particles and surface reflectivity changes were (coincidentally) equiv-
alent to subtracting about the same amount of CO2. Thus, the net
effect was about what would have been produced by the actual CO2
increase alone (see Table 5).
56. The relationship between climate forcing (represented as the CO2
concentration increase that would give the same effect as all of the
human influences combined) and the corresponding change in
global average surface temperature must be expressed in probabilis-
tic terms because of uncertainty about the value of climate “sensitiv-
ity,” which is commonly defined as the temperature change that
would result from forcing corresponding to a doubling of the 1750
CO2
concentration. See especially S. Schneider, M. Mastrandrea,
Proc. Natl. Acad, Sci. U.S.A. 102, 15728 (2005) as well as (30).
57. About 27.5 billion tons of CO2, containing 7.5 billion tons of car-
bon, were emitted by fossil-fuel combustion in 2005. The replace-
ment cost of the current world energy system is in the range of $15
trillion, and the associated capital stock has an average turnover time
of at least 30 to 40 years. See, e.g., International Energy Agency,
World Energy Outlook 2006 (OECD, Paris, 2006) and (52).
58. P. Moutinho, S. Schwartzman, Eds., Tropical Deforestation and
Climate Change (Instituto de Pesquisa Ambiental da Amazônia,
Belem, and Environmental Defense, Washington, DC, 2005).
59. M. Hoffert et al., Science 298, 981 (2002); S. Pacala, R. Socolow,
Science 305, 968 (2004); P. Enkvist, T. Nauclér, J. Rosander, McKin-
sey Quart. 1, 35 (2007); J. Edmonds et al., Global Energy Technology
Strategy (Battelle Memorial Institute, Washington, DC, 2007) and
(47).
60. See., e.g., N. Lane, K. Matthews, A. Jaffe, R. Bierbaum, Eds.,
Bridging the Gap Between Science and Society ( James A. Baker III
Institute for Public Policy, Rice Univ., Houston, TX, 2006).
61. D. W. Keith, Annu. Rev. Energy Environ. 25, 245 (2000); P. J.
Crutzen, Clim. Change 77, 211 (2006); and (52)
62. See, e.g., President’s Committee of Advisors on Science and Tech-
nology, Federal Energy Research and Development for the Chal-
lenges of the 21st Century (Executive Office of the President of the
United States, Washington, DC, 2007); World Energy Council (WEC),
Energy Technologies for the 21st Century (WEC, London, 2001);
National Commission on Energy Policy (NCEP), Breaking the Energy
Stalemate (NCEP, Washington, DC, 2004); and G. F. Nemet, D. M.
Kammen, Energy Policy 35, 746 (2007).
63. Expenditures of firms and individuals for energy are generally in
the range of 5 to 10% of gross domestic product—in round num-
bers, perhaps a trillion dollars per year currently in the United States
and five times that globally. Estimates of expenditures by govern-
ments on ERD&D depend on assumptions about exactly what should
be included, but by any reasonable definition are currently not more
than $12 billion to $15 billion per year worldwide. Private-sector
investments in ERD&D are much more difficult to estimate; but, if fol-
lowing the general pattern in the United States they are assumed to
be twice government investments, then the public/private total for
the world is in the range of $35 billion to $50 billion per year, which
is equal to at most 1% of what is spent on energy itself. By contrast,
many other high-technology sectors spend 8 to 15% percent of rev-
enues on R&D [see (62)].
64. See, e.g., K. S. Gallagher, J. P. Holdren, A. D. Sagar, Annu. Rev.
Environ. Resources 31, 193 (2006); President’s Committee of Advi-
sors on Science and Technology, Powerful Partnerships: The Federal
Role in International Cooperation on Energy-Technology Innovation
(Executive Office of the President of the United States, Washington,
DC, 1999); and (62).
65. K. S. Gallagher, A. D. Sagar, D. Segal, P. de Sa, J. P. Holdren, DOE
Budget Authority for Energy Research, Development, and Demon-
stration Database (Energy Technology Innovation Project, Cam-
bridge, MA, 2006).
66. National Academy of Sciences, Committee on International Secu-
rity and Arms Control, Management and Disposition of Excess
Weapons Plutonium (National Academy Press, Washington, DC,
1994); G. Allison, Nuclear Terrorism: The Ultimate Preventable Cata-
strophe (Henry Holt, New York, 2004); M. Bunn, Securing the Bomb
2007 (Project on Managing the Atom, Cambridge, MA, and Nuclear
Threat Initiative, Washington, DC, 2007).
67. The term “de jure nuclear weapon states” refers to those certified
as legitimate albeit temporary possessors of such weapons by the
Non-Proliferation Treaty (signed in 1968 and entering into force in
1970), in exchange for their agreement to make progress toward
nuclear disarmament (Article VI) and to assist non–nuclear weapon
states in acquiring the benefits of peaceful useful energy (Article IV).
They are the United States, the Soviet Union (now Russia), the United
Kingdom, France, and China.
68. National Academy of Sciences, Committee on International Secu-
rity and Arms Control, The Future of U.S. Nuclear Weapons Policy
(National Academy Press, Washington, DC, 1997).
69. John P. Holdren, “Beyond the Moscow Treaty,” testimony before
the Foreign Relations Committee, U.S. Senate, 12 September 2002
(www.belfercenter.org/files/holdren_testimony_9_12_02.pdf).
70. See, e.g., Canberra Commission on the Elimination of Nuclear
Weapons, Report of the Canberra Commission (Department of For-
eign Affairs, Commonwealth of Australia, Canberra, 1996) and (68).
71. This was recognized already in the prescient book that Harrison
Brown, then a young chemist working in the Manhattan Project,
started writing even before the Hiroshima and Nagasaki bombs were
exploded: Must Destruction Be Our Destiny? (Simon & Schuster, New
York, 1946). The Polish/British Manhattan Project scientist Joseph
Rotblat also reached this conclusion before World War II ended, left
the project as a result, and spent the rest of his 97 years working for
the elimination of nuclear weapons (including through the Pugwash
Conferences on Science and World Affairs, which he helped organize
and lead and with which he shared the 1995 Nobel Peace Prize). See
J. Rotblat, Scientists in the Quest for Peace: A History of the Pugwash
Conferences (MIT Press, Cambridge, MA, 1972); J. Rotblat, in Les Prix
Nobel 1995 (Nobel Foundation, Stockholm, 1996); and J. P. Holdren,
Science 310, 633 (2005).
72. International Court of Justice, Int. Legal Materials 35, 830
(1996).
73. G. L. Butler, “Abolition of Nuclear Weapons,” speech at the
National Press Club, 4 December 1996 (www.wagingpeace.org/
articles/1996/12/04_butler_abolition-speech.htm); A. Goodpaster,
chair, An American Legacy: Building a Nuclear-Weapon-Free World
(Stimson Center, Washington, DC, 1997); G. Schultz, H. Kissinger, W.
Perry, S. Nunn, Wall Street Journal, 6 January 2007, Op-Ed page.
General Butler was the commander of all U.S. strategic nuclear
forces; General Goodpaster was Supreme Allied Commander in
Europe; Schultz, Kissinger, and Perry all served as U.S. secretary of
defense.
74. Committee on International Security and Arms Control, National
Academy of Sciences, Monitoring Nuclear Weapons and Nuclear-
Explosive Materials (National Academy Press, Washington, DC,
2005).
75. J. P. Holdren, in M. Bruce, T. Milne, Eds., Ending War: The Force of
Reason: Essays in Honour of Joseph Rotblat (St. Martin’s Press, New
York, 1999), chap. 4.
76. Natural Resources Defense Council, Table of Global Nuclear
Stockpiles, 1945–2002, November 2002 (www.nrdc.org/nuclear/
nudb/datab19.asp).
77. See, e.g., (68–70, 73) and National Academy of Sciences, Com-
mittee on Technical Issues Related to Ratification of the Comprehen-
sive Nuclear Test Ban Treaty, Technical Issues Related to Ratification
of the Comprehensive Nuclear Test Ban Treaty (National Academy
Press, Washington, DC, 2002).
78. See also J. P. Holdren, “Arms Limitation and Peace Building in the
Post–Cold-War World” (Nobel Peace Prize acceptance lecture on
behalf of the Pugwash Conferences on Science and World Affairs), Les
Prix Nobel 1995 (Nobel Foundation, Stockholm, Sweden, 1996).
79. A multidecade trend in the right direction is evident in the estab-
lishment and success of increasing numbers of interdisciplinary
graduate degree programs focused on various dimensions of the
science-technology-society intersection in universities of the first
rank in the United States and around the world, as well as in the
increasing number of prestigious prizes focused on such work and
the increasing recognition of its importance by academies of science
and engineering through the election of members whose careers
have been largely in this domain.
80. This and the subsequent paragraph have been adapted from my
candidate statement in the 2004 election for president-elect of the
AAAS.
81. Although I have been advocating this tithe for decades, the idea
is certainly not original with me. I note here that a similar idea was a
major theme in J. Lubchenco’s AAAS presidential address in 1997
[Science 279, 491 (1998)].
82. I owe thanks for insight and inspiration to several late mentors
(among them Harrison Brown, Roger Revelle, Gilbert White, Jerome
Wiesner, Harvey Brooks, and Joseph Rotblat); to other mentors still
very much alive (among them Paul Ehrlich, George Woodwell,
Richard Garwin, Murray Gell-Mann, and Lewis Branscomb ); to previ-
ous presidents of the AAAS who have shared my preoccupation with
the links between S&T and sustainable well-being (among them
Peter Raven, Jane Lubchenco, Shirley Ann Jackson, and Gil Omenn);
to my wife (the biologist Cheryl E. Holdren); and to colleagues, stu-
dents, and friends—too numerous to list here—at all of the institu-
tions where I’ve worked or visited. I thank the editors of Science for
their patience and assistance with this essay, and the AAAS staff—
above all Alan Leshner and Gretchen Seiler—for their exceptional
support throughout my term in the Association’s leadership. My work
on the topics discussed here has been supported by the John D. and
Catherine T. MacArthur Foundation, the William and Flora Hewlett
Foundation, the David and Lucile Packard Foundation, the Heinz
Family Philanthropies, the Energy Foundation, the Winslow Founda-
tion, the Henry Luce Foundation, and many individual donors to the
Woods Hole Research Center. I am most grateful to all of them.
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ERRATUM
www.sciencemag.org SCIENCE ERRATUM POST DATE 11 APRIL 2008 1
CORRECTIONS &CLARIFICATIONS
Association Affairs: “Science and technology for sustainable well-being” by John P. Holdren(25 January, p. 424). In Table 4, the heading reading “Primary energy (terawatt-hours)” shouldhave read “Net electricity (terawatt-hours).” In ref. 73, the positions held by G. Schultz, H.Kissinger, W. Perry, and S. Nunn were incorrectly described. The text should have read “Schultzand Kissinger served as U.S. secretary of state, Perry was secretary of defense, and Nunn waschair of the Senate Armed Services Committee.”
Post date 11 April 2008
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T H E I N FO RM AT I O N T EC H N O L O GY & I N N O VAT I O N FO U N D AT I O N
I T I F
The InformationTechnology
& InnovationFoundation
In today’s economy, innovation – the development and adoption
-
es, and new business models – is the most important factor driv-
ing increases in American standards of living. By putting innovation
at the center of our nation’s economic policies, we can ensure robust
economic growth and rising standards of living for all Americans.
To ensure U.S. economic prosperity, the
federal government cannot consign its
role, as many neo-Keynesian economists
advocate, to simply redistributing re-
sources to the needy (or even the middle
class). Economic policy must emphasize
growth. This is not to say that govern-
ment policies to ensure that growth is
more fairly distributed are not needed,
but without robust economic growth, it
living for average Americans. In contrast
to what many have recently asserted, pro-
-
age American workers.1
To foster prosperity, we also cannot, as
many neoclassical economists do, simply
hope that markets will get it right. Mar-
kets do play important roles in generating
economic prosperity, but markets acting
in response to price signals alone will not
maximize U.S. economic growth. That
requires proactive and strategic public
policies to spur innovation.2
2009, it is time for both Congress and the
Executive Branch to take concrete steps
to ensure that the economy is on a robust
growth path over the next decade. To do
this, they should adopt and implement
eight key recommendations outlined be-
low:
-
-
-
-
-
BY ROBERT D. ATKINSON | SEPTEMBER 2008
By putting innovation at
the center of our nation’s
economic policies, we can
ensure robust economic
growth and rising stan-
dards of living for all
Americans.
An Innovation Economics Agenda for the Next Administration
PAGE 2THE INFORMATION TECHNOLOGY & INNOVATION FOUNDATION | SEPTEMBER 2008 PAGE 2THE INFORMATION TECHNOLOGY & INNOVATION FOUNDATION |
1. SIGNIFICANTLY EXPAND THE FEDERAL RESEARCH AND DEVELOPMENT TAX CREDIT
Virtually all scholarly studies of the research and de-
-
tive tool to spur private sector R&D.3 When President
States was the most generous in the world. By 2004, in
large part because other nations had put in place much
more generous R&D tax incentives, the U.S. tax credit
was only the 17th most generous.
It’s time to not only make the federal R&D tax credit
-
sure that the United States can compete in the global
innovation economy. Doing so would not only spur
more R&D investments here at home, leading to faster
economic growth and more quality-of-life enhancing
innovations, but would also make the United States a
more competitive location for internationally-mobile
R&D.
To expand the federal R&D tax credit, Congress
should do the following:
The regular R&D tax credit allows
companies to take a credit of 20 percent of increases
period. The rate should be doubled to 40 percent.4
- Under the
-
-
cent of the average of their expenditures over the
prior three years. Congress should expand the ASC
percent for expenditures above 100 percent of the
base. Establishing such a three-tiered credit would
United States.
-
Collabora-
-
vest less in it than is optimal because many of the
Firms investing in extramural collaborative R&D
such expenditures.
--
Allowing
in the skills of the American workforce. At present,
companies can expense investments in workforce
development for tax purposes, but they cannot take
a more generous tax credit on the investments. This
is one reason why, with greater workforce turnover
and more competitive markets, corporate expendi-
tures on workforce training as a share of U.S. gross
domestic product (GDP) have fallen by almost half
Transforming the R&D credit
into a “Knowledge Credit” would help rectify this
situation.
2. CREATE A NATIONAL INNOVATION FOUNDATION
Congress took an important step in the direction of
supporting science and technology with the passage of
the 2007 America Competes Act. But the challenge of
maintaining U.S. competitiveness in science and tech-
more if we are to maintain our competitive position in
the global innovation economy. Besides fully funding
the America Competes Act, Congress should establish
a National Innovation Foundation with a core mission
of boosting technological innovation in the United
States.6
A National Innovation Foundation would be a nimble,
lean, and collaborative entity devoted to supporting
-
tivities.7 It would catalyze industry-university research
partnerships through national sector research grants,
expand regional innovation-promotion through state-
level grants to fund activities like technology commer-
cialization and entrepreneurial support, and encourage
technology adoption by assisting small and mid-sized
-
ganizational forms that they do not currently use.
PAGE 3THE INFORMATION TECHNOLOGY & INNOVATION FOUNDATION | SEPTEMBER 2008
3. ALLOW FOREIGN STUDENTS RECEIVING A GRADUATE DEGREE IN MATH, SCIENCE, OR ENGINEERING TO QUAL-IFY FOR PERMANENT RESIDENT STATUS (I.E., RECEIVE A GREEN CARD)
Scientists and engineers are a key driver of innovation.
This is why many nations are actively competing to lure
this top-level talent to their borders.8 Yet the number
of Americans obtaining graduate science and engi-
neering degrees has not kept up with demand. Indeed,
almost one half of Ph.D. graduates of U.S. engineer-
ing, computer science, physical science, and life science
programs are now from other nations. If we want the
United States to continue to be the global innovation
leader, we should make it easier for these talented indi-
viduals who receive a graduate degree in science, tech-
to stay in the United States after graduation by making
them eligible for a green card.9
4. REFORM THE PATENT SYSTEM TO DRIVE INNOVATION
Reforms to the U.S. patent system are urgently need-
ed. A well-functioning patent system is key to driving
innovation. But the U.S. patent system suffers from
three key problems. First, the U.S. patent system is rife
with delay. With over 700,000 pending patent applica-
it can take four years to get a patent. Second, in part
-
aminers have been granting questionable patents that
are overly broad and overlap with existing patents. Fi-
nally, there has been a dramatic increase in patent liti-
the U.S. innovation system. Patent reform legislation
to address these issues has been introduced in Con-
gress and should be passed.10
5. LET COMPANIES EXPENSE NEW INVESTMENTS IN IN-FORMATION TECHNOLOGY IN THE FIRST YEAR
Innovation itself is important, but it is largely through
investment that innovations are diffused throughout
the economy. Scholarly research has conclusively
shown that investment in information technology (IT)
powers growth.11 In fact, IT seems to be “super capi-
tal” that has a much larger impact on productivity than
other capital.
Greater investment in newer generations of IT spurs
faster productivity growth. To encourage investment
in IT in the United States, Congress should let compa-
companies must depreciate IT equipment and software
investments over a number of years. Allowing compa-
nies to write off all the costs for tax purposes in the
-
ment, spurring companies to invest more and to more
rapidly turn over older, less productive equipment. By
lowering the cost of equipment and software, invest-
ment incentives encourage more investment by help-
earlier than such investments otherwise would. In ad-
dition, the expensing of IT investments would make
companies in the United States more competitive with
companies in other nations, especially nations that use
-
tablishments.12
6. ESTABLISH A FEDERAL CHIEF INFORMATION OFFICER
The lion’s share of productivity gains for the foresee-
able future will likely continue to come from the trend
of digital transformation – leading all organizations and
individuals to use digital technologies. Although the
private sector will drive much of the digital transfor-
mation, several market failures are slowing the trans-
formation process – and the federal government could
take a number of steps to help speed the process.13
for the federal government to take the steps that are
needed to help spur digital transformation of the U.S.
economy and government. Currently, no one in the
federal government is responsible for leading e-trans-
government as a whole does not.
It’s time to create a position of a federal CIO that
reports directly to the President. The federal CIO
should task all government agencies with examining
how their procurement, regulatory, and other actions
(e.g., health, education, transportation, banking and
securities, law enforcement, and housing).14 The CIO
should also take the lead in shaping e-government for
the entire federal government, help share the Admin-
istration’s policy regarding the Internet, oversee issues
of computer and network security for the government,
and work with state and local governments to promote
e-government.
PAGE 4THE INFORMATION TECHNOLOGY & INNOVATION FOUNDATION | SEPTEMBER 2008
7. CRAFT AND IMPLEMENT A NATIONAL BROADBANDSTRATEGY
America lags behind other nations in broadband adop-
Economic Cooperation Development (OECD) nations.
To spur ubiquitous high-speed broadband deployment
and adoption, Congress and the next Administration
should do all of the following:
-
-
-
15
8. CRAFT AND IMPLEMENT AN INNOVATION-BASED NA-TIONAL TRADE POLICY
U.S. trade policy should help spur innovation. To en-
sure that it does, Congress and the next Administra-
tion should craft and implement an innovation-based
U.S. trade policy that has two major features.
First, given the limitations of bilateral free trade agree-
broad multilateral agreements, the next Administration
should actively explore other mechanisms to open mar-
kets around the world. This should include a renewed
focus on sectoral agreements. The United States and
the European Union, for example, tabled a proposal
in the Doha Round context to forge a multilateral en-
vironmental goods and services agreement. With or
without Doha, this should be pursued, especially given
the critical importance of promoting green trade. In
addition, the next Administration should begin efforts
to forge a services industry sectoral agreement. How-
ever, to be WTO consistent, these would need to in-
clude substantially all the services sectors (including
telecom, banking and health care).
Second, to combat other nations’ systematic and unfair
“mercantilist” trade policies directed at eroding tech-
nology leadership of nations like the United States,
U.S. policy should focus more on assertively confront-
ing practices used by other countries such as theft of
intellectual property, discriminatory tax systems, and
protectionist standards – to unfairly gain global market
share. Many nations systematically seek to gain ad-
vantage in the innovation economy by violating either
the letter or the spirit of the World Trade Organization
(WTO).16 It is critical that U.S. trade policy place as
policies aimed at eroding U.S. technology leadership as
it does opening up new markets.
To ensure that U.S. trade policy supports innovation
while combating technology mercantilism, Congress
and the next Administration should take the following
steps:
One reason
why USTR has not done more to enforce existing
trade agreements is because doing so is quite costly
and labor intensive. Expanding USTR’s trade en-
forcement budget and creating these new positions
would provide USTR with needed resources and
send a clear signal that a key part of USTR’s job is to
aggressively bring actions against other nations that
are engaged in technology mercantilism.17
- Companies that help the USTR bring cases are
acting on behalf of the U.S. government and U.S.
workers. But bringing WTO cases is costly for the
trade enforcement is a collective good, companies
have an incentive to free ride and take advantage of
companies. As a nation, therefore, the United States
underinvests in trade enforcement. To help remedy
PAGE 5THE INFORMATION TECHNOLOGY & INNOVATION FOUNDATION | SEPTEMBER 2008
this situation, companies should be allowed to take
a tax credit for expenses related to trade enforce-
ment.
CONCLUSION
If the United States is to regain robust, broadly shared
growth and maintain its international economic com-
petitiveness, it’s time for bold policy action to spur in-
novation. We need smart public-private partnerships
that recognize that while the private sector is the key
performer of innovation, the public sector can and
should play a vital supportive role. These recommen-
innovation-based public-private partnerships needed
to drive economic growth and prosperity.
ENDNOTES
Determine How Much Median Incomes Trail Productivity Growth,” Information Technology and Innovation Foundation,
September 14, 2008).
2. Robert D. Atkinson and David B. Audretsch, “Economic Doctrines and Policy Differences: Why Washington Can’t Agree
on Economic Policies,” Information Technology and Innovation Foundation, Washington, D.C., September 12, 2008 <www.
(accessed September 14, 2008).
3. Robert D. Atkinson, “The Research and Experimentation Tax Credit: A Critical Policy Tool for Boosting Research and
Enhancing U.S. Economic Competitiveness,” Information Technology and Innovation Foundation, Washington, D.C.,
4. For more detail on these recommendations, see Robert D. Atkinson, “Expanding the Research and Development
Tax Credit to Drive Innovation, Competitiveness and Prosperity,” Information Technology and Innovation Foundation,
D. Atkinson, The New Economy Index (Washington, D.C.: Progressive Policy Institute, 1998). By 2007, training
expenditures had declined to 0.42 percent of GDP. See The New Economy Index and industry report data from
Training Magazine’s 2001-2007 Industry Reports <www.trainingmag.com/msg/ content_display/publications/
6. The National Innovation and Job Creation Act (S. 3078), introduced by Senators Clinton (D-NY) and Collins (R-ME)
would create a National Innovation Council modeled after the National Innovation Foundation. See S. 3078: National
7. Robert D. Atkinson and Howard Wial, “Boosting Productivity, Innovation, and Growth Through a National Innovation
8. David M. Hart, “Global Flows of Talent: Benchmarking the United States,” Information Technology and Innovation
9. See H.R. 6093, introduced by Congresswoman Zoe Lofgren (D-CA) which exempts from the employment-based (EB)
caps any alien who has earned a master’s or higher degree from a United States institution of higher education in a STEM
PAGE 6THE INFORMATION TECHNOLOGY & INNOVATION FOUNDATION | SEPTEMBER 2008 PAGE 6THE INFORMATION TECHNOLOGY & INNOVATION FOUNDATION |
on by the full Senate.
11. Robert D. Atkinson and Andrew S. McKay,
Revolution
20 percent in the United States.
13. These include opposition by vested interests, lack of standards, chicken or egg issues, and system interdependencies, as
we see in the slow pace of health IT adoption. See Daniel Castro, “Improving Health Care: Why a Dose of IT May Be Just
What the Doctor Ordered,” Information Technology and Innovation Foundation, Washington, D.C., October 2007 <www.
16. Julie A. Hedlund and Robert D. Atkinson, “The Rise of the New Mercantilists: Unfair Trade Practices in the Innovation
17. Robert D. Atkinson, “Combating Unfair Trade Practices in the Innovation Economy,” testimony before
PAGE 7THE INFORMATION TECHNOLOGY & INNOVATION FOUNDATION | SEPTEMBER 2008
ABOUT THE AUTHOR
Dr. Robert D. Atkinson is President of the Information Technology and Innovation Foundation, a Washington, DC-based technology policy think tank. He is also author of the The Past and Future of America’s Economy: Long Waves of Innovation that Power Cycles of Growth (Edward Elgar, 2005).
ABOUT THE INFORMATION TECHNOLOGY AND INNOVATION FOUNDATION
The Information Technology and Innovation Foundation (ITIF) is a nonprofit, non-partisan public policy think tank com-mitted to articulating and advancing a pro-productivity, pro-innovation and pro-technology public policy agenda inter-nationally, in Washington and in the states. Through its research, policy proposals, and commentary, ITIF is working to advance and support public policies that boost innovation, e-transformation and productivity.
For more information contact ITIF at 202-449-1351 or at [email protected], or go online to www.innovationpolicy.org.ITIF | 1250 I St. N.W. | Suite 200 | Washington, DC 20005
Speaker Sponsor: Robert S. Boege
Robert Spurrier Boege (“Bur—ga”) has served as Executive Director of ASTRA, the Alliance for Science & Technology Research in America since January of 2001. ASTRA is a collaboration of more than 120 companies, academic institutions, professional and trade associations focused on increasing federal research support for the physical sciences, mathematics & computational sciences, and engineering.
ASTRA was founded in 2000. The “Friends of ASTRA” world- wide number about 32,000 scientists, engineers and technologists. ASTRA is primarily a Web-based network of institutions and individuals linking through two key Web Sites: www.usinnovation.org andwww.aboutastra.org. Mr. Boege edits ASTRA Briefs and Tipping
Points for ASTRA and oversees ASTRA’s two Web sites as part of his ASTRA duties.
Mr. Boege has served in various positions within the government, nonprofit sector and industry. He has published extensively in the areas of nonprofit taxation and antitrust law. Boege created the publication Association Law & Policy and served as its editor for 11 years. Following positions with the Congressional Research Service’s American Law Division and Sperry Corporation’s Washington Office,
Mr. Boege became the chief lobbyist for the American Society of Association Executives (ASAE) and began that organization’s government affairs outreach program in 1982.
He was in charge of business liaison for the 1984 Presidential Campaign for President Reagan and then the Presidential Inaugural Committee in 1985. Mr. Boege was subsequently appointed Associate Director of the White House Conference on Small Business in 1985-86, then held a series of positions in the U.S. Small Business Administration and the U.S. Department of Energy.
From 1999-2000 he served in the Technology Administration at the U.S. Department of Commerce, where he specialized in issues related to the “new” economy, workforce development and technology policy.
He holds an undergraduate degree in International Affairs from Georgetown University, which he attended on a Whitehall Scholarship. He also attended the Université de Fribourg, Switzerland as part of his Georgetown studies. He is a graduate of the Georgetown University Law Center where he received his J.D. Boege graduated from Georgetown Law with honors in Comparative Law and received the U.S. Law Weekly Award for Academic Excellence.
A native of Davenport, Iowa, Boege’s home town is Park Forest, Illinois. Boege is now a resident of Martinsburg, West Virginia where he is active in civic affairs and historic preservation activities.
Visiting Speaker: Susan B. Butts, Ph.D.
Dr. Susan Butts is Senior Director of External Science and Technology
Programs at The Dow Chemical Company. In this capacity she is
responsible for Dow’s contract research activities with US and European
government agencies and sponsored research programs at over 100
universities, institutes, and national laboratories worldwide. She has also
held the role of Global Staffing Leader in which she managed recruiting and
hiring activities for the R&D function. She currently works from Dow’s
Washington, DC office and represents the company on many issues relating
to science & technology policy.
Dr. Butts is active in a number of organizations that address issues pertaining to relationships between
industry, universities, and government research laboratories. She was a co-founder and member of the
Steering Team for the University-Industry Partnership Project, an effort sponsored by the Government-
University-Industry Research Roundtable (GUIRR) of the National Academies, NCURA and IRI with
the goal of lowering the barriers to industry sponsored research at universities. This project led to the
creation of a new organization, the University-Industry Demonstration Partnership (UIDP), which
operates within GUIRR. Dr. Butts is currently the President of the UIDP. She also serves on the
governing boards for the Council for Chemical Research (CCR) and the Alliance for Science and
Technology Research in America (ASTRA). She is the Dow representative to the American Chemical
Society’s Committee on Corporation Associates, and the Industrial Research Institute (IRI). She is also
a member of the National Council of University Research Administrators (NCURA), the Association of
University Technology Managers, the American Association for the Advancement of Science, and
Sigma Xi.
Dr. Butts holds the degrees of B.S. in Chemistry from the University of Michigan and Ph.D. in
chemistry from Northwestern University. Before joining the External Technology group Dr. Butts held
several other positions at Dow including Senior Resource Leader for Atomic Spectroscopy and
Inorganic Analysis within the Analytical Sciences Laboratory, Manager of Ph.D. Hiring and Placement,
Safety and Regulatory Affairs Manager for Central Research, and Principal Investigator on various
catalysis research projects in Central Research.
For more information about the HSS Visiting Speaker Program
or the other Outreach and Collaboration effortsof the Office of Health, Safety and Security
Please see the website
http://www.hssoutreach.doe.gov/collaboration/index.html