how human impact drives profit: higher returns for both stakeholders and shareholders

How Human Impact Drives Profit: Higher Returns for BothStakeholders + Shareholders

Triple Bottom Line Investing (TBLI)Paris, France - Europe 2007

R. Paul Herman CEO + Founder

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Today’s Discussion

• Who We Are

• Unfulfilled Stakeholder Expectations

• The HIP Framework & Scorecard

• How to Deliver Human Impact + Profit

©2007 All rights reserved

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Our Cross-Sector Experience Is Global


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• Who We Are





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Executives See Sustainability As Mission-Critical, But See a Large Gap In Capability


Source: McKinsey survey of 4,238 executives, July 2006

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Customers Use Their Dollars to “Vote”

REPEL THE NEGATIVE

“What have you ever done in response to a firm’s behavior you considered against the best interest of society?”

67% took some form of action

49% refused to BUY products

38% recommended others NOT buy 19% refused to INVEST in that stock Source: Fleishman Hillard / National Consumer League

consumer survey, 2006/07

SEEK THE POSITIVE

65% want to buy products & services from firms that deliver social good - How firms treat employees

& the environment and NOT its charity

47% have researched a company on the Internet to check their social or environmental performance

66% see social impact as a strong indicator of whether to invest in a stock

Source: McKinsey survey of 4,063 consumers, July 2006


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Staff Looking to Employers for Purpose

“Commitment to social issues” is a major factor for Americans deciding…

52%

40%

48%

+20%

+26%

+29%

0% 25% 50% 75% 100%

Wish myemployer would

do more forsocial causes

How I invest

Where I work

2001/04 survey 2007 survey

77%

66%

72%

Source: ConeCause survey of 1096 consumers in 2001, 2004 and 2007


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Investors Want Quantitative Human Impact Measures Linked

to Profit• 71% of investors want info on a company’s human,

social and environmental performance– 100% of financial advisors to social investors desire

quantified “units of output” of companies’ impact on society

• Nearly 10% of assets under professional management ($2.3 Trillion) have an active social-investment mission– 263% growth over past decade

• Trusted financial brands set benchmarks– FTSE4Good, Dow Jones Sustainability Index

• Equator Principles (social/environmental criteria) adopted by global banks providing 80% of project finance capital


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HIP Companies Outperform Benchmarks

GS Sustainoutperform

s +25% beyond

MSCI World in 22

months


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• Who We Are





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Solving Four Core Human Problems Leads to Sustainable, Profitable Growth


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1) Health: Products save lives …if affordable

The PET image shows concentrations of cancer cells in a color spectrum just as weather radar shows varying concentrations of precipitation. The anatomical image generated

by the CT scan acts as the 'map' showing physicians precisely where the cancer is located. The

Discovery platform combines both of these images and like a television radar, pinpoints

activity and location fused into one image.


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2) Wealth: Are all customers served?

Pensions for

Unemployed!

Investment banks

& finance firms are launching new product

lines:

• ING: offers carbon reduction on auto leases (€5 monthly)

• Citigroup: micro-finance lending unit is a full profit center & attracts global staff

• Goldman Sachs: offers high-net-worth investment pools to low-income markets


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2b) Wealth: Increasing access to capital

• Unbanked = 10% of US families; 10 million households– Frequently pay high fees relative to frequent transactions

• New services increase wealth for customers:– Money in: Lower check cashing fees– Money out: Easier shopping at Wal-mart, car rentals, hotels– Transfers: Trusted remittances to family abroad– Investments: Access to ShareBuilder partnership


…and more retailers are invading financial servicesHome Depot: auto financing and insuranceKroger: mortgages, home equity, pet insurance

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3) Earth: Barclays Breathe-Free Card

• Targets UK customersfocused on climate change– In USA by comparison,

10 MM “dark greens”and 30 MM “light greens”

• This segment values “green” characteristics, so card is made of eco-friendly materials

• Connects existing practices (e-billing, online changes) with lower emissions brand promise

• Also differentiates by donating half of profitsto eco-projects (min. ₤1 MM; max. ₤5MM)


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4) Equality: Diverse Owners Add Value

• Only a dozen US companies buy $1 billion or more from women- and ethnic-owned suppliers– Consumer: Altria, AT&T, P&G, Verizon, Wal-Mart– Auto: DaimlerChrysler, Ford, GM, Toyota USA– Industrial: IBM, Johnson Controls, Lockheed Martin

• Innovation is the core benefit says P&G– “A diverse organization (and supply chain)

will out-think, out-innovate and out-perform a homogenous organization every time”


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• Who We Are





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“Fast Company” magazineFirst Annual HIP Scorecard


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How HIP Practices Deliver ProfitFive Core Areas Leading Examples Leading Firms

1. Vision 50% by 2015 AMDZero by 2020 Interface

2. Measures 10-point balanced scorecard PG&E

3. Financials $10B, $20B, $50B revenue GE$400mm cost savings Interface+2% more; 40% less energy Liberty

PropertySolar tax credits Walgreens

4. Accountability Board committees; GEPerformance targets for Intel

VPs, managers, staff Herman Miller

5. Decision Making Approval / integration of United Tech’snew product designs Nike

These 5 disciplines increase both Human Impact + Profitdelivering higher shareholder value and societal benefit


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Drivers of HIP Revenue Differ By Firm

• The more HIP Practices followed, the higher the share of revenue that delivers sustainable, profitable growth

0

25

50

75

PG&E LibertyProperty

Interface Infosys Wal-Mart McDonald's

Health Wealth Earth Equality

2006 Revenue Share Rated HIP – Segmented by Human Impact


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How Will Your Portfolio Be HIP?


how human impact drives profit: higher returns for both stakeholders and shareholders

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