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Environmental Sustainability

Manufacturer Survey Results

This document is confidential and contains proprietary information. Neither the document nor any of the information contained therein may be reproduced or disclosed to any person under any circumstances without the prior express written permission of The Cambridge Group, Inc. Upon request, this document is to be promptly returned to The Cambridge Group, Inc.


Contents/Agenda  Survey Overview  ES Objectives and Obstacles  ES Current Performance  ES Related Top Line Growth  ES Collaboration


Our Sample Was Composed Mostly of Companies Operating Regionally in the US with under $5 Million in Annual Revenue Overview Overview

Organization Annual Revenue

Asia and Australia Middle East 10% and Africa

Over $100M 15%

$50M-$100M

Organization Operating Regions

Number of Operating Regions

Throughout the U.S.

Four or Five

4

12% Two or Three

8% Europe 8%

$10M-$50M 24%

55%

Latin and South America 6% $5M-$10M

Note*: Source:

3

12% 52% Regional U.S.

Under $5M

n=33 Environmental Sustainability Survey: Company Background - Q1, Q2, Q3

2

26 One


We Gathered Data from a Broad Range of Companies with a Focus on Services Overview Overview

Industries Represented – Counts* Services

12 (36%)

Industry

8 (24%)

Construction

6 (18%)

Education and Non-Profit

6 (18%)

Transportation

4 (12%)

Retail Paper & Packaging

3 (9%) 2 (6%)

Textiles

1 (3%)

Food and Beverages

1 (3%)

Note*: Source:

n=33; Some companies span multiple industries. Bars will not necessarily add up to 100% Environmental Sustainability Survey: Company Background - Q1, Q2, Q3

3

Industry TOTAL Services Financial Services Services Telecommunications Travel Industry Industrial Hardware Electronics Farm Construction Education and Non-Profit Education Business/Trade Association Transportation Retail Paper and Packaging Packaging/Containers Paper/Paper Products Textiles Food and Beverages Food Beverages

Count 33 12 1 10 1 2 8 3 1 3 2 6 6 2 4 4 3 2 1 1 1 1 1 1


While Few Companies Use Sustainability Frameworks, Those That Do Use a Wide Variety Overview Overview

 The largest number of companies follow the ISO 14000 Framework Percent of Industries Using Sustainability Frameworks – Raw Counts** None

22

ISO 14000

Note*: Note**: Source:

More than One

N=33 6%

One

27%

No Framework

67%

5

TNS*

3

Other

3

CERES Principles Dow Jones Sustainability

Number of Frameworks Subscribed to by Each Manufacturer

1 1

GRI*

1

Responsible Care

1

GRI – Global Reporting Initiative; TNS – The Natural Step Some companies in our sample follow multiple frameworks. Bars will not necessarily add up to 100% Environmental Sustainability Survey: Definition: Q2

4


On Average, Companies See ES Efforts as Higher Priority than Other Corporate Social Responsibility Priorities Overview Overview

ďƒ˜ The vast majority of companies see ES efforts as important to some degree Priority of ES Efforts in Comparison to Other Corporate Social Responsibility (CSR) Priorities N = 33 A Key Priority - 5

Source:

18%

4

21%

Equal Priority - 3

36%

2

18%

Not a Priority -1

6%)

39% See ES efforts as more of a priority than other CSR Priorities

24% See ES efforts as less of a priority than other CSR Priorities

Environmental Sustainability Survey: Objectives and Obstacles: Q1

5


Contents/Agenda  Survey Overview  ES Objectives and Obstacles  ES Current Performance  ES Related Top Line Growth  ES Collaboration

6


While Firms See Value in their ES Initiatives, Many Still Worry about the Returns They Will See on Them ES ESObjectives Objectivesand and Obstacles Obstacles

 Most companies see broad ES initiatives as a relevant part of their operation — 42% of surveyed firms see understanding consumer attitudes towards ES as a high priority

 The majority of ES initiatives focus on image improvement or recognizable financial gain — 66% of surveyed firms are pursuing cost reduction through their ES initiatives — 64% of surveyed firms are trying to accommodate consumer tastes or acquire new consumers through their ES efforts

 ES initiatives still face significant hurdles — Companies are concerned about the cost and the ROI of ES investments

Source:

Environmental Sustainability Survey: Objectives and Obstacles: Q1

7


Consumer Relations and Financial Advantage Are the Most Common Objectives of Companies’ Current ES Initiatives ES ESObjectives Objectivesand and Obstacles Obstacles

Top 2 Box – General Categories of ES Effort Objectives *

Top 2 Box and Mean Score – Specific Categories* Top 2 Box

Consumer Relations

21 (64%)

Financial Advantage

19 (58%)

Regulation Related Actions

17 (52%)

Image Improvement Supplier Relations

Note*: Note**: Source:

16 (48%)

8 (24%)

Consumer Relations Address Consumer Needs/Requirements Acquire New Consumers Financial Advantage Reduce Costs Improve Profit Margin Increase Revenue Improve Market Share Regulation Related Actions Minimize Risk Address Regulatory Requirements Image Improvement Improve Brand Equity Differentiate vis-a-is Competition Supplier Relations Acquire New Suppliers Address Supplier Needs/Requirements

Sample size n = 33 Range (5 Point Scale) Environmental Sustainability Survey: Objectives and Obstacles: Q2

8

21 21 21 19 22 22 21 20 17 19 18 16 19 19 8 12 9

Mean Score** 3.8 3.7 3.6 3.9 3.8 3.8 3.8 3.6 3.6 3.5 3.5 3.5 3.3 3.5 2.8 2.7 2.7


Nearly Half of Companies See Understanding Consumers’ Attitudes Towards ES as a Higher Priority ES ESObjectives Objectivesand and Obstacles Obstacles

ďƒ˜ These firms may see better ES understanding as a way of enhancing their current consumer-related ES initiatives Understanding Consumer Attitudes toward ES as a Priority N=31

Source:

High Priority - 5

19%

4

23%

Medium Priority - 3

29%

2

10%

Low Priority - 1

19%

Environmental Sustainability Survey: Consumer and Customer Insights: Q1

9

42% See understanding consumers and their attitudes towards ES as a higher priority

29% See understanding consumers and their attitudes towards ES as a lower priority


Most Companies Have Broad Initiatives Ranging Across Multiple Facets of ES ES ESObjectives Objectivesand and Obstacles Obstacles

ďƒ˜ Conservation and pollution reduction are of the highest priority

ďƒ˜ Sustainable waste disposal and more general ES initiatives like green facilities and the green product offerings are less of a priority Percent of Firms Including Activity in Their Overall Sustainability Program 88%

Conservation

Note*: Source:

Importance of Activity in Sustainability Programs* 3.6

94% 82%

79%

Pollution Reduction

Sustainable Waste Disposal

Conservation

General

Range (5 Point Scale) Environmental Sustainability Survey: Objectives and Obstacles: Q3

10

3.5

Pollution Reduction

3.2

3.2

Sustainable Waste Disposal

General


Despite Having Established ES Initiatives, the Financial Viability of Current Programs Stands as a Barrier to Most Companies ES ESObjectives Objectivesand and Obstacles Obstacles

Factors out of a company’s direct control like immature technology and regulatory uncertainty also stand as barriers

Disclosure risk, lack of external collaboration/communication, and lack of leadership are seen as minor barriers

Barriers in Current Sustainability Programs A Major Barrier

Somewhat A Barrier

Not a Barrier

30%

39%

30%

Cost to execute

Costs and Priorities

Unidentifiable/ Unacceptable ROI Misaligned or non-existent internal incentives and priorities

Resource Constraints

6%

Regulatory uncertainty Poor external collaboration/communication

45%

16% 25%

50%

15% 13%

39%

32% 22%

55% 75%

Environmental Sustainability Survey: Objectives and Obstacles: Q15

11

31 31 32

38%

45%

3% Source:

42% 66%

13%

31 33

32%

42%

9%

Disclosure Risk

32% 55%

23%

Capacity constraints

Immature Technology

39% 39%

Lack of skilled resources

Lack of Leadership

External Constraints

29%

33

32 33 31 32


Contents/Agenda  Survey Overview  ES Objectives and Obstacles  ES Current Performance  ES Related Top Line Growth  ES Collaboration

12


Many Firms Intend to Increase Their ES Related Activity but Tend to Avoid Resource Intensive Objectives ES ESCurrent CurrentPerformance Performance

 Many surveyed companies intend to expand their ES offerings in the coming years  While many firms have ES initiatives, many of them are not fully developed — Many companies are willing to clearly define and integrate ES initiatives and issues as long as they are not resource-intensive — Current ES initiatives suffer from a lack of support and poor execution

 The majority of companies have not established metrics to measure their progress in ES — The most successful metrics are those that help to control costs, such as monitoring energy use — Metrics for emissions and other types of pollution – those that do not impact company operations – remain largely unused

13


Companies Expect More of Their Products to Possess ES Related Attributes in the Next Three Years ES ESObjectives Objectivesand and Obstacles Obstacles

ďƒ˜ While many firms express their intention to rapidly increase their sales of products with ES-related attributes, barriers like cost and unclear ROI may prevent them from doing so as quickly as they would like Current vs. Future Percentage of Products with ES Related Attributes N=26 75%-100%

15%

50%-74%

15%

25%-49%

N=26

35% 4%

4% 27%

0%-24%

65% 35%

Today

Source:

Expected in 3 Years

Environmental Sustainability Survey: Customer and Supplier Collaboration: Q2

14


While Companies Are Willing to Clearly Define a Vision for ES and Integrate It into Plans, Concerns about Cost and ROI Result in Insufficient Support of ES Initiatives ES ESCurrent CurrentPerformance Performance

ďƒ˜ Over 60% of companies feel that their current ES initiatives are not adequately supported or executed ďƒ˜ Less costly aspects of ES, such as definition and alignment, have been more successful Current Performance of ES among Responding Companies My company has . . . A Clear Definition of ES and ES Initiatives

Support of ESRelated Initiatives Integration and Alignment of ES with Corporate Structure Execution of ES Related Initiatives

Source:

Disagree Strongly

Disagree Somewhat

Agree Somewhat

Agree Strongly

16%

38%

38%

9%

41%

22%

25%

19%

22%

41%

Environmental Sustainability Survey: Current Performance: Q1

15

31%

38%

6%

16%

31%

9%


While the Role of ES Is Somewhat Well Understood and Accepted, Support Is Lacking in More Resource Intensive Initiatives ES ESCurrent CurrentPerformance Performance

Current Performance: Definition of ES and ES Initiatives

It is clearly defined

It has been identified as a strategic enabler of growth

It is clearly and consistently understood by the entire

Current Performance: Support for ES Related Initiatives It is supported by executive leadership

18%

It is clearly and consistently understood by the entire organization 14%

Environmental sustainabilityrelated consumer research and analysis is being conducted

11%

Efforts are actively measured and evaluated

Resource Intensiveness Scale* Not Resource Intensive Somewhat Resource Intensive Highly Resource Intensive Note*: Source:

25%

TCG Assessment Environmental Sustainability Survey: Current Performance: Q1

16

17%

12%

11%


While the Role of ES Is Somewhat Well Understood and Accepted, Support Is Lacking in More Resource Intensive Initiatives (cont.) ES ESCurrent CurrentPerformance Performance

Current Performance: Integration and Alignment of ES with Corporate Structure and Strategy It is aligned with corporate and functional business objectives and strategies Efforts are aligned with/ the company’s overall/ strategic plan It is integrated into the companywide strategic planning process It is integrated into the growth and innovation/ process Efforts are integrated into top line growth initiatives

Current Performance: Execution of ES-Related Initiatives Efforts are opportunistically executed as needed

24%

The company has been collaborating with customers on efforts

19%

21%

Specific programs have been developed

18%

The company has been collaborating with suppliers on efforts

18%

16%

Revamped existing products to be more ES friendly

18%

14%

Developed new ES oriented offerings for consumers Made acquisitions/divestitures to better align company with ES initiatives

14%

Resource Intensiveness Scale* Not Resource Intensive Somewhat Resource Intensive Note*: Source:

22%

Highly Resource Intensive

TCG Assessment Environmental Sustainability Survey: Current Performance: Q1

17

13% 4%


ES Governance Models Have Not Been Established in Most Companies ES ESCurrent CurrentPerformance Performance

Prevalence of ES Governance Models - % of Manufacturers That Have Each of the Following: 49% 44% 39% 36% 33% 26% 18% Mature Function/Group

6%

Developing Function/Group

6%

Limited

6%

7%

10%

16%

13% 13%

10%

13%

10% 10%

10%

10% 17%

13%

3% 20% 13%

Chief Full-Time Staff Sustainability Officer

Source:

40%

13%

13%

13%

Local ES Control

Reporting Metrics

CrossFunctional Oversight Committees

Environmental Sustainability Survey: Organizational Structure: Q1

18

Collaboration Tools

23% 17%

Ad Hoc Committees

ES Management Program/ Process


ES Metrics Are Not Widely Used, Especially Those That Have No Direct Financial Effects on the Company ES ESCurrent CurrentPerformance Performance

 The majority of companies do not use standard metrics to measure the progress of their ES initiatives — The most commonly used metrics are those that help companies financially, such as those that measure energy consumption — Metrics that measure emissions and eco-system preservation are not used often, as they currently have no impact on the economics of a company

 A small core of companies is deeply committed to utilizing multiple metrics to measure ES initiative progress — 6% of companies interviewed used all 4 offered metrics to measure their progress on energy use

19


Metrics for Eco-System Preservation and the Reduction of Harmful Emissions Are Not Utilized by the Vast Majority of Companies ES ESCurrent CurrentPerformance Performance

Percent of Manufacturers Using Metrics to Measure Reduction of Harmful Emissions* Total emissions generated per year Emissions generated Per Unit Other No formal metric

Note*: Source:

6%

Percent of Manufacturers Using Metrics to Measure Eco-System Preservation* Number of new locations that are ’brownfield’ development % of products sourced responsibly

9% 6%

Other 91%

Some companies utilize multiple metrics. Bars will not necessarily sum to 100% Environmental Sustainability Survey: Objectives and Obstacles: Q5

20

None

6% 9% 6% 85%


Metrics for Measuring Water Use and Waste Reduction Are Not Used by Most Companies but Are More Commonly Used than Those Measuring Emissions or Preservation ES ESCurrent CurrentPerformance Performance

Percent of Manufacturers Using Metrics to Measure Water Conservation and Reuse* Total Waste Generated Per Year Total Waste Generated Per Unit % Reduction in Waste Volume going to Landfills per Year % reduction in waste produced during operational processes Other No formal metric

Note*: Source:

Percent of Manufacturers Using Metrics to Measure Waste Reduction* Total Water Consumed Per Year

9% 3%

18%

Water Consumption per Unit

6%

Waste-water Generated per Unit

6%

21%

% savings in water use

9%

Other

6% 70%

No formal metric

Some companies utilize multiple metrics. Bars will not necessarily sum to 100% Environmental Sustainability Survey: Objectives and Obstacles: Q6

21

18% 9% 70%


Metrics Relating to the Reduction, Reuse, and Recycling of Packaging Are Used by Nearly as Many Firms as Metrics for Waste and Water Use Reduction ES ESCurrent CurrentPerformance Performance

Percent of Manufacturers Using Metrics to Measure Reduced Packaging/BioDegradable Packaging* Amount of packaging materials used by weight Amount of packaging materials by volume % Reduction in product packaging per unit Product/package ratio

Total Waste Recycled per Year

3%

Recycling Rate

6%

% Of Waste Sold for Re-Use Per Year

3% 12%

Number of Products with Sustainable Packaging

12%

Note*: Source:

15%

9%

% recycled content of distribution packaging

No formal metrics

Percent of Manufacturers Using Metrics to Measure Product/Packaging Recycling*

Other

70%

No Formal Metrics

Some companies utilize multiple metrics. Bars will not necessarily sum to 100% Environmental Sustainability Survey: Objectives and Obstacles: Q10

22

18%

6%

3%

73%


Energy Conservation Metrics Are the Most Commonly Utilized Class of Measurement but Are Still Used by Fewer than Half of Companies ES ESCurrent CurrentPerformance Performance

ďƒ˜ A core group of firms use measure their energy use with multiple metrics Percent of Manufacturers Using Metrics to Measure Energy Conservation and Alternative Energy* Total Energy Consumed Per Year

33%

% Reduction in Energy Consumed Per Year

27%

% Energy use from alternative sources

% Energy use offset by alternative energy credits

Other

12%

6%

9%

58%

No formal metrics

Note: Source:

Some companies utilize multiple metrics. Bars will not necessarily sum to 100% Environmental Sustainability Survey: Objectives and Obstacles: Q4

23


Contents/Agenda  Survey Overview  ES Objectives and Obstacles  ES Current Performance  ES Related Top Line Growth  ES Collaboration

24


While ES Is Not Seen as an Engine of Growth, ES Initiatives That Improve Corporate Image or Offer Quick Financial Results Receive Greater Investment Levels ES ESRelated RelatedGrowth Growth

ES Investments to Drive Top Line Growth Marketing and communication of ES efforts Buying locally to reduce/ minimize shipping

17% 31%

14% 32%

ES related products and services

31%

17%

17%

21%

24%

14% 18%

7%

59%

7%

45%

21%

69%

11% 14%

11%

100%

11%

14%

14%

10%

100%

4% 10% 100%

14%

21%

7% 10%

7% 100%

7%

100%

3%

Environmental Sustainability Survey: Top Line Growth Initiatives: Q1

25

100% 100%

21%

10%

100% 100%

17%

18%

24%

57%

100%

21% 29%

21%

Qualifying customers based on ES efforts

Source:

21%

32%

31%

ES related social programs

Selling of waste/ recycled materials as revenue Qualifying vendors based on ES Efforts Using sustainable energy sources across the supply chain

17%

11%

18%

Use of recycled content in packaging Developing "Greener" facilities

17%

24%


A Lack of Internal Alignment on the Value of ES Is the Most Common Barrier to ES-Related Top Line Growth ES ESRelated RelatedGrowth Growth

 ES related growth still faces barriers – both internally and externally Mean Score – Barriers to ES Related Top Line Growth (1 = “Not a Barrier”, 5 = “A Significant Barrier”)

Top 2 Box

Lack of Consumer Insights Lack of Confidence of Consumers’ Willingness to Purchase

34%

2.5

Lack of Cooperation From Customers

31%

2.6

Lack of Cooperation From Suppliers

2.5

24%

Lack of resources

3.2

Unidentifiable ROI

2.8

Lack of or Misaligned Internal Priorities or Incentives Lack of internal cross-functional collaboration Source:

28%

2.6

2.6 2.5

Environmental Sustainability Survey: Top Line Growth Initiatives: Q1

26

37% 34% 25% 21%

Consumer Related Barriers Business Partner Related Barriers Internal Barriers


Contents/Agenda  Survey Overview  ES Objectives and Obstacles  ES Current Performance  ES Related Top Line Growth  ES Collaboration

27


Collaborative ES Efforts Most Often Seek to Directly Improve Finances or Competitiveness ES ESCollaboration Collaboration

Mean Score – ES Customer and Supplier Collaboration Objectives Product/Product Line Enhancement

Improve Quality

57%

Broaden product and service offerings

57%

Improve brand strength and good will Brand Image and Customer Relations

Creation of Customer Advantage

Improve Financials

Improve relationship with customers Revising assortments for more ES friendly offers

68% 33%

Maintain competitive functionality and value

71%

Target New Consumer or Customer Segments

61%

Address customer requirements

61%

Increase Sales Reduce Cost

Source:

71%

Environmental Sustainability Survey: Customer and Supplier Collaboration: Q1

28

74% 67%


Companies Most Commonly Collaborate in ES Initiatives That Might Reduce Costs without Eroding Their Own Competitive Advantage Such as Conserving Energy or Reducing Waste ES ESCollaboration Collaboration

ďƒ˜ Collaboration with less direct impact, like reducing emissions, is less popular

Mean Score* – Current Collaboration with Customers on ES Pollution Reduction

2.8

Conservation

2.4

Corporate Direction

Community Affairs

Note*: Source:

2.3

2.0

Range (5 point scale) Environmental Sustainability Survey: Customer and Supplier Collaboration: Q2

29

Pollution Reduction Waste Reduction Product and Packaging Recycling Reduction of packaging/Increased use of bio-degradable packaging Reduction of emissions Conservation Energy Conservation Water conservation Agriculture/Organic Foods/Livestock Care Eco-System, Natural Resource Conservation Corporate Direction Marketing and Product/Service Consumer Research Creating more ES Friendly Offerings Community Affairs Social Programs Lobbying

Top 2 Box 29% 39% 39% 36% 18% 14% 39% 25% 15% 11% 11% 25% 22% 11% 11% 18% 30% 11%


Environmental Sustainability - Manufacturer Survey Results