Wednesday April 4, 2012

“The Evolving Metrics for Corporate Sustainability: Beyond

Waste Water and Energy”

Dr. Blair FeltmateDirector of Sustainability Practice, University of Waterloo

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The Value and Process of Developing aSustainable Development Index (SDI)

Toronto Sustainability Speakers Series

April 04, 2012

Dr. Blair FeltmateDirector, Sustainability Practices, Faculty of Environment, University of Waterloo

Chair, Climate Change Adaptation Project (Canada)bfeltmat@uwaterloo.ca

Overview

1. General Observations on Corporate SD Reporting

2. Case Study: Purpose and Characteristics of the SDI, Canadian Electricity Association

3. SDI: Weighting and Scoring of Performance Metrics

4. SDI 2010 Thresholds & Score

5. SDI for 2006-2010 (2004/05 base years)

6. Next Steps

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Corporate Sustainable Development Reporting:General Observations

1. Canadian corporations produce about 150 Sustainable Development Reports annually, and 3,000 are produced globally

2. Since Place Dome Inc. produced Canada’s first Corporate Environmental Report (early 1990s), followed by Noranda Inc. and Falconbridge Ltd., the look and content of SD/Environmental Reports has not changed much

3. SD Reports are not generally well reviewed/embraced by the financial community (e.g., financial analysts, institutional and retail money managers, institutional money management consultants, VPs Finance, etc.)

4. SD Reports are often difficult for Boards of Directors and Senior Management to fully appreciate/digest

To remedy this omission, SD Reports must be changed in at least two ways:

A. Sustainable Development IndexB. Identification of 3-6 key SD metrics, that financial analysts can readily

translate into financial value creation, presented up-front in SD Reports

Purpose and Characteristics of the Sustainable Development IndexPurpose of the SDI

The SDI enables the CEA and all stakeholders to determine if the CEA membership is collectively trending “better or worse” in reference to SD – NOTE: the SDI could be applied to any association, company or government enterprise

Characteristics of SDI

The SDI includes measures of environmental, social and economic performance

The SDI is predisposed to transparency regarding the relative contribution of environmental, economic and social performance metrics to the index

The SDI is “simple” to calculate The SDI is predisposed to being amended/updated

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Weighting and Scoring of Performance Metrics: Consensus Reached in 2009/2010

SDI can (and does) have an unbalanced number of metrics within each category of Environment, Society and Economy

Each SDI category of Environment, Society and Economy is given equal weighting in the SDI calculation, regardless of the number of metrics per category

Scoring for a given metric in a given year is made relative to a % change in performance relative to the average of the base years 2004/05o 2004/05 were chosen as base years due to (a) data availability, (b) integrity of data, (c)

a mean of 2 years helps to lesson the impacts of a single ‘anomalous” year, and (d) going back “too far” may be perceived as compromising the rigour of the analysis

A score is determined relative to a % change in performance based on pre-assigned criteriao pre-assigned criteria were established based on a sensitivity analysis of annual

variation in criteria performance

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Current SDI Parameters

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EnvironmentNOx TotalNOx IntensitySO2 TotalSO2 IntensityCO2 eq. TotalSpillsSF6% of companies with ISO Consistent EMSSocietyAll Injury/Illness Frequency RateLost Time Injury Frequency RateLost Time Injury Severity Rate% of companies producing a public Sustainability report% companies with a public education program% of companies with an Aboriginal Relations group/senior advisory position% of companies with business relationships or partnerships with Aboriginal communities% of companies with procedures or practices to ensure training & employment opportunities for Aboriginal employeesTotal value of annual company charitable donations ($)EconomyTotal capital expenditures on new / refurbished generation infrastructure ($/yr)Total capital expenditures on new / refurbished transmission infrastructure ($/yr)Total capital expenditures on new / refurbished distribution infrastructure ($/yr)System Average Interruption Duration Index (SAIDI)System Average Interruption Frequency Index (SAIFI)Total Energy saved through external energy conservation initiatives

SDI – 2010 Environment Thresholds & Score

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Score: 61.11

0 25 500% relative <6% decrease >6% decreaseto base yrs relative to base yrs relative to base yrs

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SDI Summary for 2006-2010

SDI Summary 2006-2010

Overall Environmental Social Economic

2006 8.54 28.13 12.50 -15.002007 2.92 6.25 12.50 -10.002008 28.33 62.50 12.50 10.002009 55.42 62.50 43.75 60.002010 53.33 56.25 68.75 35.00

SDI for 2006 – 2010 (04/05 base yrs)

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Next Steps

SDI Broad Application

• associations and companies across all industry sectors could develop and present similar style SDIs

• SDIs could be presented on the inside front cover of SD and related reports

• SD is generally not on the “radar screen” of financial analysts, retail and institutional money managers, and institutional money management consultants – SDIs could contribute to turning this situation around

• SD reports have not evolved much in the past 15 years – SDIs could offer change that would be positively received by key stakeholders (notably senior management and Boards)