Royal Philips Electronics - Duurzaam Ondernemen · e a t P h i l i p s ’ 1 9 4 8 9 8 100 years of...

‘A matter of responsibility’‘A matter of responsibility’Philips and SustainabilityPhilips and Sustainability

Royal Philips ElectronicsRoyal Philips Electronics

Henk Henk de Bruin, Vicede Bruin, Vice--PresidentPresidentCorporate Sustainability OfficeCorporate Sustainability Office

2Corporate Sustainability OfficeCorporate Sustainability Office

Philips & Sustainability

“We recognize the need to perform not only against a single, financial bottom line, but against a triple bottom line. This involves thesimultaneous pursuit not only of economic prosperity,and environmental quality, but of social equity as well. It’s about living up to our brand promise Let’s make things better”

Gerard Kleisterlee President & CEO of Royal Philips Electronics


This presentation

•• Philips’ history in SustainabilityPhilips’ history in Sustainability

•• Why Sustainability?Why Sustainability?

•• The Sustainability business case?The Sustainability business case?

•• Sustainability and quality?Sustainability and quality?

•• Where do we stand?Where do we stand?

•• What are we going to do?What are we going to do?


Agenda








Anton & Gerard Philips …

… innovators and entrepreneurs who succeeded in business while improving the lives of customers and employees

Their founding belief was that by daring to make choices that improve the lives of people both inside and outside the company, they would be successful not by coincidence but by design


100 years of Personnel Policy (1)

Various health insurance arrangementsVarious health insurance arrangements

Profit sharingProfit sharing

Pension fundPension fund

Philips company schoolPhilips company school

First phase of housing program (1969 > 20.000)First phase of housing program (1969 > 20.000)

Collective labor agreementCollective labor agreement

55--day working weekday working week

19001900

19121912

19131913

19291929

1920 1920 –– 19311931

19501950

19611961


‘We at P

hilips’

‘We at P

hilips’

19481948




Items included in ‘We at Philips’:Items included in ‘We at Philips’:•• Personnel, Personnel, -- council, council, -- magazinemagazine•• Theft and reputationTheft and reputation•• Fines fundFines fund•• Sickness fundSickness fund•• Pension fundPension fund•• Educational fundEducational fund•• Sports and leisure activitiesSports and leisure activities•• HousingHousing•• AllotmentsAllotments•• Consultancy bureauConsultancy bureau


30 years of Environmental Policy

•• Participation in ‘Club of Rome’Participation in ‘Club of Rome’

•• Corporate Environmental functionCorporate Environmental function

•• Logbooks on manufacturing sitesLogbooks on manufacturing sites

•• Energy and emission reduction programsEnergy and emission reduction programs

•• First Global PolicyFirst Global Policy

•• Second Global PolicySecond Global Policy

•• First ‘all aspects’ action programFirst ‘all aspects’ action program

•• Second ‘all aspects’ action programSecond ‘all aspects’ action program

•• Third ‘all aspects’ action programThird ‘all aspects’ action program(2002 (2002 –– 2005)2005)

19701970

19711971

19741974

19801980

19871987

19911991

19941994

19981998

20022002


Our definitions

•• SustainabilitySustainability is defined as “meeting the needs of the is defined as “meeting the needs of the present generation without compromising the ability of present generation without compromising the ability of future generations to meet their own needs”future generations to meet their own needs”

•• Sustainable developmentSustainable development –– which is considered the path to which is considered the path to sustainability sustainability –– is the simultaneous pursuit of economic is the simultaneous pursuit of economic prosperity, environmental quality and social equityprosperity, environmental quality and social equity

•• Companies that pursue this path are known as Companies that pursue this path are known as sustainable sustainable entrepreneursentrepreneurs


What comprises sustainability?What comprises sustainability?

BUSINESS PRINCIPLESBUSINESS PRINCIPLES

Economic responsibilityEconomic responsibility

Environmental responsibilityEnvironmental responsibility

Social responsibilitySocial responsibility

Health &SafetyInternalInternal ExternalExternal

ProcessProcess ProductProduct

ProfitProfit ImpactImpact


Agenda








PhilipsPhilips

CustomersCustomers

FinancialFinancialSectorSector

ConsumersConsumersSuppliersSuppliers

EmployeesEmployees

GovernmentGovernmentShareholdersShareholders

NGO’sNGO’s

Why Sustainability?


Why Sustainability?Why Sustainability?Business assets

• Value of a company comes from

• Physical assets:– Land– Manufacturing facilities

• Intangibles – up to 75% of total value: – Reputation and brand– Perceived risks– Ability for constructive dialogue and

partnerships with stakeholders


Why Sustainability?Partnerships

• Changing role of the partners– Dominance of governments diminished – Growing influence of business– Civil Society maturing


Some critical non-financial factors in relation to corporate reputational risk

• Business Integrity

• Environment

• Health and Safety

• Employee Satisfaction

• Non-Discrimination

• Equal Opportunities

• Diversity

• Human Rights

• Product Safety

• Customer Satisfaction

• Contribution to Society at Large


Why Sustainability?Why Sustainability?Accountability and transparency

Consequences for Business:

• External reporting: “More work”

• Need to be clear what you stand for– Your values and principles

• Need to be open about your performance– Reporting (success and failures)– Verification

• More Stakeholder interaction


18% 10%

24%

17%

13%

2002

1999

1996

1993

28%

Annual Corporate Sustainability ReportsTop 100 companies in 12 countries

SourceSource: KPMG International : KPMG International Survey on Corporate Sustainability ReportingSurvey on Corporate Sustainability Reporting 20022002

HSEHSE

Sustainability / SocialSustainability / Social


6%

9%

12%

15%

24%

25%

25%

30%

33%

37%

38%

43%

45%

46%

50%

28%

Other service

Construction & building materials

Finance, securities & insurance

Trade & retail

Metals, engineering & other manuafacturing

Food & beverage

Electronics & computers

Automotive

Pharmaceuticals

Mining

Transport

Oil & gas

Forestry, pulp & paper

Chemicals & synthetics

Communications and media

Utilities

Reporting by industry sector

SourceSource: KPMG International : KPMG International Survey on Corporate Sustainability ReportingSurvey on Corporate Sustainability Reporting 20022002


Agenda








78%

58%

48%

48%

27%

12%

10%

Reputation/Brand

Employee motivation

Market position

License to operate

Risk management

Access to capital

Innovation/learning

CEO’s opinion:what drives sustainability?% of response

Source: World Economic Forum CEO Survey 2003Source: World Economic Forum CEO Survey 2003


% % EffortEffort

Risk &Risk &rreputationeputationmanagementmanagement

TimeTime

Business Business value value creationcreation

NowNow

Business value from sustainable development

Integration of SDIntegration of SDiintonto business business processesprocesses and and


What is the Sustainability business case?

‘Sustainability is simply a ‘Sustainability is simply a matter of doing business’matter of doing business’

•• Brand equity Brand equity

•• License to operateLicense to operate

•• Customer loyaltyCustomer loyalty

•• Employee retentionEmployee retention

•• Flexibility in operationsFlexibility in operations

•• Lower cost of capitalLower cost of capital

•• Possible new source of revenue growthPossible new source of revenue growth

•• NonNon--financial management steering information for financial management steering information for improving corporate governanceimproving corporate governance


Agenda








The EFQM Model as tool for sustainability

ResultsEnablers

LeadershipLeadership ProcessesProcessesKeyKey

Performance Performance ResultsResults

Society Society ResultsResults

People ResultsPeople ResultsPeople People ManagementManagement

Policy & Policy & StrategyStrategy

Partner/ Partner/ ResourcesResources

Customer Customer ResultsResults

= area related to sustainability= area related to sustainability


Building blocks for Sustainability at Philips

• Where do we come from ?

• What are we good at ?

• How are we different ?

• Whom do we serve ?

• How do we act ?

• What do we believe in ?

• Why do we do all this ?

• Delight customers

• Deliver on commitments

• Develop people

• Depend on each other

• Lifestyle

• Healthcare

• Technology

BusinessBusinessExcellenceExcellence

SustainabilitySustainabilityBrandBrandFoundationFoundation

PhilipsPhilipsValuesValues

Business StrategyBusiness Strategy


Agenda








Where do we stand?

DoingDoing

InsightInsight

CommunicateCommunicate

DialogueDialogue

•• Since 1891Since 1891

•• 1994 (first environmental program)1994 (first environmental program)•• 1998 (first environmental report)1998 (first environmental report)•• 2003 (first sustainability report)2003 (first sustainability report)

•• 20032003

•• Q3 2003Q3 2003


Governance of sustainability

Task forceTask forceReportingReporting

Task forceTask forceCommunicationCommunication

Task forceTask forceNew businessesNew businesses

Sustainability boardSustainability board

Sustainability Group & Sustainability Group & Corporate Sustainability OfficeCorporate Sustainability Office


Multi-step process

Social IssuesSocial Issues

Health &Health &SafetySafety

EnvironmentalEnvironmental

highhigh

Maturity levelMaturity level

WorldWorld--class levelclass level

11––2 years2 years

lowlow



Assurance/Assurance/profiling levelprofiling level


Systematic Action Plans

Ambition/VisionAmbition/Vision

Policy/StrategyPolicy/Strategy

Action programsAction programs

MeasurementsMeasurements

CheckCheck

DoDo

PlanPlan

Act

Act


Integration of policies and systems (1)

Social Issues

Health & Safety

Environmental

Corporate

Sustainability

Policy

Integration Balanced addressing

Opportunities

Risk Assurance

Separate policies


Integration of policies and systems (2)

Philips first Sustainability Annual Report

•• We have long recognized the need to integrate We have long recognized the need to integrate economic prosperity, environmental quality and social economic prosperity, environmental quality and social equity in our performance. It is build in our heritage, our equity in our performance. It is build in our heritage, our value’s and our commitment to improve the quality of value’s and our commitment to improve the quality of people lives. Now for the first time we have measured people lives. Now for the first time we have measured and reported on our sustainability performanceand reported on our sustainability performance

•• As announced in our Environmental report for 2001, we As announced in our Environmental report for 2001, we have developed a more comprehensive report for 2002. have developed a more comprehensive report for 2002. We have established a Sustainability board and We have established a Sustainability board and Corporate Sustainability Office. The report has been Corporate Sustainability Office. The report has been developed following the Guidelines Core Indicators as developed following the Guidelines Core Indicators as set by the GRI (Global Reporting Initiative). The report set by the GRI (Global Reporting Initiative). The report has been verified by KPMGhas been verified by KPMG

•• With the Sustainability report we made our first step With the Sustainability report we made our first step towards sustainability reporting and further strengthen towards sustainability reporting and further strengthen our efforts in this important area. It shows our approach our efforts in this important area. It shows our approach to sustainable development and offers detailed insight to sustainable development and offers detailed insight in our performance and the white spots we still havein our performance and the white spots we still have

Why?

How?

What?


Some feedback on Sustainability Report 2002

‘Further integration of sustainability into the Philips strategy and ways of working (Sustainability should not be an add-on)’

‘More focus on issues that Philips sees as most important’

‘More dilemma sharing’

‘More stakeholder dialogue’

‘The tone and presentation of the report needs to be acknowledgedas one of the highest quality. Graphs, language and presentationtechniques make the report accessible to a wide range of stakeholders’

‘A beautifully written and laid-out report; a model for good clear design’


From Environmental to Sustainability Report (1)

•• Corporate staff (Sustainability Office): from 2 to 4 FTECorporate staff (Sustainability Office): from 2 to 4 FTE

•• Divisional staff: Expected increase of capacity from 10 Divisional staff: Expected increase of capacity from 10 to 13 FTEto 13 FTE

•• Additional tasks for existing functional disciplines Additional tasks for existing functional disciplines HRM, purchasing, compliance officers. Capacity HRM, purchasing, compliance officers. Capacity increase yet unknown but estimated at 5 increase yet unknown but estimated at 5 –– 10%10%

•• Environmental data: 250 reporting organizationsEnvironmental data: 250 reporting organizations


From Environmental to Sustainability Report (2)

•• Health & Safety, social issues (internal), business principles: Health & Safety, social issues (internal), business principles: 500 reporting organizations500 reporting organizations

•• Community interaction reporting: 60 country organizationsCommunity interaction reporting: 60 country organizations

•• Supplier database reporting: 2500 ‘key’ suppliers Supplier database reporting: 2500 ‘key’ suppliers

•• Customer privacy reporting: 3 internal databases with number Customer privacy reporting: 3 internal databases with number of reporting organizations under investigationof reporting organizations under investigation

•• Verification costs up with 25% and now above 600.000 EuroVerification costs up with 25% and now above 600.000 Euro

•• Worldwide automated Intranet based data collection system Worldwide automated Intranet based data collection system with modular approach for new subjectswith modular approach for new subjects


DJSI Ranks Philips #1 in Cyclical goods sector

Cyclical Goods Market Leader•2004 DJSI World•2004 DJSI S TOXX


Vision on GRI guidelines

•• Comprehensive and often exhausting to adhere toComprehensive and often exhausting to adhere to

•• Helpful in structuring a Sustainability ReportHelpful in structuring a Sustainability Report

•• Since GRI ‘covers almost anything’ there is some conflict of Since GRI ‘covers almost anything’ there is some conflict of interest between GRI reporting and creating focusinterest between GRI reporting and creating focus

•• Guidelines per industry sector can be useful, but decreases Guidelines per industry sector can be useful, but decreases comparability at a ‘Fortune 500 level’comparability at a ‘Fortune 500 level’

•• Philips will follow the GRI guidelines again for the 2003 reportPhilips will follow the GRI guidelines again for the 2003 reportand will continue to provide a four page full version matrix in and will continue to provide a four page full version matrix in the back of the Sustainability Report 2003the back of the Sustainability Report 2003


Philips insight development in reporting parameters

Definition of maturity levels per parameterDefinition of maturity levels per parameter

1.1. Only a best practice example and no policy (yet)Only a best practice example and no policy (yet)2.2. Policy definedPolicy defined3.3. Policy communicatedPolicy communicated4.4. Policy implementedPolicy implemented5.5. Data measurement system in place:Data measurement system in place:

•• Quantitative data (‘hard data’ e.g. figures)Quantitative data (‘hard data’ e.g. figures)•• Qualitative data (‘soft data’ e.g. perception measurement)Qualitative data (‘soft data’ e.g. perception measurement)

Best practices may also serve as an illustration for the levels Best practices may also serve as an illustration for the levels 2 2 -- 55


Philips Sustainability Report(ing) at present•• The Annual Sustainability Report is a strong The Annual Sustainability Report is a strong

communication tool toward employeescommunication tool toward employees

•• The Annual Sustainability Report is a communication tool The Annual Sustainability Report is a communication tool and excellent bases for stakeholder dialogueand excellent bases for stakeholder dialogue

•• Verification of results have proven to be a boundary Verification of results have proven to be a boundary condition for data reliabilitycondition for data reliability

•• Reliable data reporting for new parameters is a process Reliable data reporting for new parameters is a process that takes 2 that takes 2 –– 4 years4 years

•• Reliable nonReliable non--financial data are gaining importance as financial data are gaining importance as management steering informationmanagement steering information


Agenda








Philips’ ambition level

Sustainable entrepreneur:Sustainable entrepreneur:

•• Leader in major external sustainability ratingsLeader in major external sustainability ratingssystems in the electronics sectorsystems in the electronics sector

•• Adequate risk assurance managementAdequate risk assurance management

•• Well established stakeholder dialogue mechanismWell established stakeholder dialogue mechanism

•• Identification and implementation of business Identification and implementation of business opportunitiesopportunities


Management Agenda Sustainability 2003

•• Overall Sustainability Report 2003 at a moderate level of Overall Sustainability Report 2003 at a moderate level of assurance (available in March 2004)assurance (available in March 2004)

•• Focus on standardization of reporting and verificationFocus on standardization of reporting and verification

•• Policy in place and roll out started for suppliersPolicy in place and roll out started for suppliers

•• Diversity/Inclusion: from stake in the ground to a programDiversity/Inclusion: from stake in the ground to a program

•• Social investments activities well structured (90 % “known” , Social investments activities well structured (90 % “known” , 80 % of 2004 budget in Health/Education)80 % of 2004 budget in Health/Education)

•• Sustainable business projects defined and decided uponSustainable business projects defined and decided upon


Quality of lifeQuality of life

Access Access toto

EuropeNorth AmericaLatin AmericaAsia PacificCorporate

TOTAL 10 million

HealthHealth EducationEducation

Focus for social investments


Focus for social investments

The Global PyramidThe Global Pyramid

< $1,500< $1,500

$1,500 $1,500 -- $10,000$10,000

> $10,000> $10,000

4,0004,000

1,5001,500

500500

Purchasing PowerPurchasing PowerParity per yearParity per year

Population Population in millionsin millions

DevelopingDevelopingmarketsmarkets

AdvancedAdvancedmarketsmarkets

EmergingEmergingmarketsmarkets

LowLow

MediumMedium

HighHigh


The sustainability assignment for the year ahead

FocusFocus

DirectionDirection

VisibilityVisibility

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