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Navigating the ratings and rankings landscape A focus on the Dow Jones Sustainability Indexes

March 31, 2011


Agenda Introduction Context DJSI overview Reasons to respond Navigating the application Questions and answers


Presenters Peter Truesdale – Associate Director Peter is an Associate Director of Corporate Citizenship, he specializes in a number of aspects: reporting, report assurance, and external standards. He has worked with a range of global companies and professional firms including ANZ, Lafarge, Mars, and SABMiller.

Megan DeYoung – Director, United States Megan manages Corporate Citizenship’s US practice and works with clients to develop and implement citizenship strategies that are closely tied with the business and to communicate clients’ initiatives to internal and external stakeholders. She has worked with many global companies including Abbott, Hershey’s, Aramark, and Unilever.


Corporate Citizenship’s work is global  Corporate Citizenship is a corporate responsibility management consulting company with offices in the US and UK  Since 1997, we have advised leading, global corporations on how to enhance and align their citizenship and traditional business activities to create strategic business value  We have a team of 30 and experience in 40 countries

“They have a real understanding of the issues in diverse countries around the world� - Unilever


We work across the spectrum of corporate responsibility and sustainability activity  We have developed strategy for several FTSE 100, Fortune 500, and DJSI Super Sector leaders  We have devised and implemented environmental data management systems in over 100 countries  We helped businesses invest $2.2 billion in local communities in 2009  We are one of the most awarded and trusted reporting consultants worldwide, working on 135 reports over for more than a decade with FTSE 100 and S&P 500 companies  We are global market leaders for assurance (135 reports verified) “They understood what was important to the way we operate, and where we could make the greatest difference� - Abbott


Reputation comes from a robust CR program and authentic communications

• Pursue ratings and rankings • Enable others to praise you

• Be yourself • Communicate, don’t just report • Create transparency

4. External recognition

3. Authentic communications

1. Internal buy-in

2. Robust CR program

• Engage managers and employees about value of corporate responsibility

• Focus on priority areas • Align with business objectives • Engage internal and external stakeholders


It is easy to become overwhelmed by ratings and rankings, but you can survive and prosper Trends

 Enormous growth  Consolidation of research firms  Some coverage in mainstream media

Added value

    

Challenges

 Variation in methodology (information sources, criteria)  Varied performance by single company

Tips

 Prioritization (ratings/rankings, programmatic improvement areas)  Leverage of existing material

Third-party validation of corporate responsibility commitment Comparison with competitors Internal buy-in and support of corporate responsibility Insight into company’s strengths and weaknesses Leverage for increased transparency


Many ratings / labels focus on a subset of citizenship issues Economic

Dow Jones Sustainability Indexes are one of the few ratings that touches numerous aspects of citizenship across a company

Environment

Social


Dow Jones Sustainability Indexes combine finance with corporate responsibility  Dow Jones launched the first set of global sustainability indexes in 1999 called Dow Jones Sustainability Indexes (DJSI)  DJSI tracks financial performance of leading sustainability-driven companies worldwide  DJSI focuses on how company recognizes risks and opportunities arising from sustainability issues in its business strategy  Sustainability Asset Management (SAM), an investment group focused exclusively on sustainability investing, manages DJSI  Top companies within industry group are included in DJSI


DJSI is four indexes that include top companies by sector

DJSI World

600 largest European companies

• Top 20% in each industry group selected • 45% market cap coverage in each market sector

DJSI Europe

• Top 20% in each industry group selected • Each industry group has 45% target market cap

DJSI North America

• Top 20% in each industry group selected • Each industry group has 45% target market cap

DJSI Asia/Pacific

600 largest North American* companies

600 largest Asia/Pacific** companies

SAM assessment

Dow Jones Total Global Stock Market Index

2,500 largest global companies

• Top 10% in each industry group selected • Each industry group has 20% target market cap

* Includes Canada and US. ** Includes companies from South Korea, Australia, New Zealand, Japan, Hong Kong, Taiwan, and Singapore.


Investors can opt to exclude certain sectors DJSI World

DJSI Europe

DJSI North America

DJSI Asia Pacific

Armaments & Firearms

X X X X

X X X X

X X X X

X X X X

Adult Entertainment

X

X

Alcohol Gambling Tobacco


Companies within a sector are evaluated for listing   

 

 



Automobiles & Parts  Auto Parts & Tires  Automobiles Banks  Banks BNK Basic Resources  Forestry & Paper  Aluminum  Steel  Mining  Pipelines  Alternative Energy Chemicals  Chemicals Construction & Materials  Building Materials & Fixtures  Heavy Construction Financial Services  Financial Services Food & Beverage  Beverages  Food Producers Health Care  Healthcare Providers  Medical Products  Biotechnology  Pharmaceuticals



  



Industrial Goods & Services  Aerospace & Defense  Containers & Packaging  Diversified Industrials  Electrical Components & Equipment  Electronic Equipment  Industrial Engineering  Industrial Transportation Supersector  Support Services • Food & Beverage  Waste & Disposal Services Insurance  Insurance Media  Media Oil and Gas  Oil & Gas Producers  Oil Equipment & Services  Pipelines  AlternativeTwo Energy(2) Sectors Personal & Household Goods • Beverages  Durable Household Products  Furnishing • Food Producers  Home Construction  Nondurable Household Products  Leisure Goods  Personal Products  Clothing, Accessories & Footwear  Tobacco

 









Real Estate  Real Estate Retail  Food & Drug Retailers  Specialized Consumer Service  General Retailers Technology  Software  Computer Services & Internet  Communication Technology  Semiconductors  Computer Hardware & Electronic Office Equipment Travel & Leisure  Gambling  Hotels, Restaurants, Bars, and Recreational Services  Travel & Tourism  Airlines Telecommunications  Fixed Line Telecommunications  Mobile Telecommunications Utilities  Electricity  Gas Distribution  Water


Polling question #1  Did your company respond to the DJSI invitation in 2010?  Yes  No  Did not receive an invitation


The DJSI selection process is competitive

2010 Selection Process 2,617 companies invited to submit applications

1,393 companies analyzed • 698 companies submitted questionnaire • 695 companies analyzed exclusively on publicly available information

318 companies qualified


There are external and internal benefits to even responding to DJSI Inclusion is competitive: what do companies gain?

1,393 companies analyzed

There are numerous internal gains whether companies are listed or not:  Build corporate citizenship reporting  Increase awareness and reputation of citizenship internally  Identify areas for operational and strategy improvement

318 companies listed

DJSI is the equivalent of a sustainability Oscar!  Most prestigious  Most recognized  Most respected benchmark of sustainability performance


Polling question #2  Is your company planning to respond to the DJSI invitation in 2011?  Yes  No  Not anticipating an invitation


DJSI evaluates companies based on several sources of information 1. Survey

 There are generic questions and sector specific questions  Dozens of questions; can be as much as 100  Sector survey usually changes only slightly year-to-year, but occasionally is overhauled  Topics related to economic, environment, and social  Web-based application process

2. Company documentation

 Inclusion of documents that support our responses and provide additional information and/or proof points of our activities; DJSI accepts documents which are:  Publicly available (preferred)  Confidential  Documents may be policies, spreadsheets, snapshots of intranet web pages, and many other types of support

3. Media and stakeholder analysis

 SAM conducts additional research to review media coverage and stakeholder views on certain topics are considered


What criteria does DJSI cover?  DJSI focuses on how a company recognizes the risks and opportunities arising from sustainability issues in its business strategy  DJSI looks at a company’s economic, environmental, and social impacts General criteria Economic  Corporate governance  Risk and crisis management  Codes of conduct / compliance / anti-corruption and bribery

Environment  Environmental reporting

Social  Labor practice indicators  Human capital development  Talent attraction and retention  Corporate citizenship / philanthropy  Social reporting


What is the survey format?

Question

General question or industry specific question on company’s economic, environmental, and social impacts

Answer (table, check boxes)

Location to provide requested data or indicate the answer choice(s) that apply to your company

Qualitative response

Area to provide comments to explain answer and provide additional information

Relevant documents (attachments)

Option to add references to support or expand your response


What are the key considerations when responding? Investor survey  DJSI is not interested in sustainability per se; they are interested in how the risks and opportunities arising from sustainability issues are recognized in business strategy  DJSI lists companies with systems and processes that drive continuous performance improvement and lead to effective business long-term

Confidentiality

 The entire submission is confidential  Sensitive documents can be marked confidential

Relative scoring

 Companies can improve their responses year-on-year without changing their position on an index because other companies improve as well  DJSI rewards continuous performance

Expectations

 If this is your first submission, have realistic expectations  There is much to gain internally just by going through the process


There are three models for external review Quick review of response  We identify questions with perceived easy opportunities to enhance a company’s response  We can conduct this review at any point, but find it is often useful to perform this review at the beginning and when the draft is close to complete, but there is still time to make revisions before the submission deadline

Deep dives of response  We conduct a review of priority sections of a company’s response, providing insight on what the section is asking and probing about structures and processes a company has that may apply to the section  We provide ongoing support for owners of priority sections as the owners develop their response

Management of submission  We develop the first draft of the submission based on last year’s submission and publicly available information  We meet with internal stakeholders to discuss individual questions to enhance responses  We revise responses based on internal meetings and new or updated documentation


The entire DJSI process runs over several months

Turn around time of the submission is about two months March

Where we are now

April

DJSI Survey released – April 7

May

June

DJSI Survey Due – June 2

September

DJSI Results Released – September 8


Give us a ring For further information please contact: Corporate Citizenship www.corporate-citizenship.com Peter Truesdale Associate Director

Megan De Young Director, United States

Corporate Citizenship 5th Floor, Holborn Gate 330 High Holborn London WC1V 7QG United Kingdom

Corporate Citizenship 241 Centre Street 4th Floor New York, NY 10013 United States

T: +44 (0)20 7861 1631 E: peter.truesdale@ corporate-citizenship.com

T: +1 212 226 3702 E: megan.deyoung@ corporate-citizenship.com


Navigating the ratings and rankings landscape, a focus on DJSI