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Conference call hosted by Sanford Bernstein February 24, 2015 Nancy Himmelfarb NJH Sustainability Consulting himmelfarb.com Company Sustainability: A Roadmap.

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Presentation on theme: "Conference call hosted by Sanford Bernstein February 24, 2015 Nancy Himmelfarb NJH Sustainability Consulting himmelfarb.com Company Sustainability: A Roadmap."— Presentation transcript:

1 Conference call hosted by Sanford Bernstein February 24, 2015 Nancy Himmelfarb NJH Sustainability Consulting himmelfarb.com Company Sustainability: A Roadmap for Investors following U.S. Packaged Food Companies & Restaurants

2 © 2015 NJH Sustainability Consulting Sustainability Pressures & Trends in Food TRANSPARENCY 2

3 © 2015 NJH Sustainability Consulting Importance of company sustainability Key sustainability rankings Rankings of U.S. packaged food companies and restaurants Roadmap for investors Today’s Agenda 3

4 © 2015 NJH Sustainability Consulting Why Company Sustainability is Important Improved Financial Performance Consumer Support & Reputation Enhancement Financial Risks Activist Pressures Political Pressures CARROTS STICKS Investor Interests 4

5 © 2015 NJH Sustainability Consulting Why Company Sustainability is Important Sustainability Efforts Lead to Better Financial Performance & Returns Actively managing and planning for climate change => 18% higher ROI Investing in carbon reductions => 50% lower volatility of earnings over the past decade & 21% stronger dividends Investing across U.S. companies that performed better than average on GHG emissions => 73% better return over the past 5 years than the S&P 500 Systematic sustainability management => higher share price Sources: CDP S&P 500 Climate Change Report 2014; FactSet data. 130% pop on IPO 632% 5-year total return 5

6 © 2015 NJH Sustainability Consulting Why Company Sustainability is Important Sustainability Efforts Drive Consumer Support and Reputation Enhancement “Firms with better CSR reputations have a much higher ability to foster desired supportive behaviors among consumers.” “One of the more significant indicators of public confidence in a company is its commitment to sustainability and its efforts to communicate and deliver on that commitment.” Sources: 2014 CSR RepTrak Study; Technomic (“Building a Better Foodservice Business through Sustainable and Responsible Practices”), Feb. 2014; Hill & Knowlton (“Companies Build Public Trust Through Sustainability Reporting, New Research Shows”), June 2014; “Foodservice companies that respond proactively and creatively to critical consumer demands [around sustainability] will reap significant reputational benefits, enhanced profit opportunities and greater shareholder value.” 6 “Locally sourced meats and seafood,” “locally grown produce” and “environmental sustainability” are top 3 culinary food trends for 2015.

7 © 2015 NJH Sustainability Consulting Why Company Sustainability is Important Sustainability Efforts Drive Consumer Support and Reputation Enhancement Sources: tudy.pdf; 7 30% eat foods that are certified organic Will spend more on ethically sourced meats & farm-to-table experiences 80% want to know more about how their food is grown 30% eat foods that are certified organic Will spend more on ethically sourced meats & farm-to-table experiences 80% want to know more about how their food is grown What Millenials Crave at Restaurants: 96% of global citizens will have a more positive image of the company 94% will be more likely to trust the company 93% will be more loyal to the company 91% likely to switch brands to support a good cause (if similar price/quality) 92% would buy a product with a social and/or environmental benefit 67% have done so in past 12 months 90% would boycott a company for irresponsible business practices 55% have done so in past 12 months 96% of global citizens will have a more positive image of the company 94% will be more likely to trust the company 93% will be more loyal to the company 91% likely to switch brands to support a good cause (if similar price/quality) 92% would buy a product with a social and/or environmental benefit 67% have done so in past 12 months 90% would boycott a company for irresponsible business practices 55% have done so in past 12 months If a Company Supports Social or Environmental Issues:

8 © 2015 NJH Sustainability Consulting Why Company Sustainability is Important Environment Is an Economic Threat Sources: Global Risk Report (2015 Edition), World Economic Forum, Jan. 19, 2015; economic-threat-business-risk-sustainability “The common denominator between water wars, climate change, social unrest and other direct and indirect consequences of environmental damage is economic risk.” 8

9 © 2015 NJH Sustainability Consulting Why Company Sustainability is Important Activists Pressure Food Companies on Sustainability 9

10 © 2015 NJH Sustainability Consulting Why Company Sustainability is Important Sustainability is on the Political Agenda Worldwide Sustainable Development Goals UN Climate Change Conference Carbon pricing initiatives Governments Companies More required ESG disclosures Sustainable Development Goals UN Climate Change Conference Carbon pricing initiatives Governments Companies More required ESG disclosures COMING UP Council of the European Union Directive 180+ laws and regulatory standards in 45 countries on sustainability reporting Sustainable Stock Exchange Initiative NASDAQ & NYSE Moody’s and S&P look at ESG risks 61 senators voted GHG pollution is causing climate changes UN Guidance for Companies on Respecting Human Rights to Water and Sanitation Council of the European Union Directive 180+ laws and regulatory standards in 45 countries on sustainability reporting Sustainable Stock Exchange Initiative NASDAQ & NYSE Moody’s and S&P look at ESG risks 61 senators voted GHG pollution is causing climate changes UN Guidance for Companies on Respecting Human Rights to Water and Sanitation NOW 10

11 © 2015 NJH Sustainability Consulting 1.Risk mitigation (73%) 2.Avoiding firms with unethical conduct (55%) 3.Enhancing performance returns (52%) 1.Risk mitigation (73%) 2.Avoiding firms with unethical conduct (55%) 3.Enhancing performance returns (52%) DRIVERS 1.Investment decisions 2.Shareholder proposals 3.Proxy voting guidelines 4.Engaging with companies 5.Advocacy (Ceres-led INCR) 1.Investment decisions 2.Shareholder proposals 3.Proxy voting guidelines 4.Engaging with companies 5.Advocacy (Ceres-led INCR) USES Why Company Sustainability is Important Investors Have Specific Interests in Sustainability 88% of investors see sustainability as opportunity for competitive advantage and something to pay more attention to 78% see it as a differentiator in determining industry leaders 88% of investors see sustainability as opportunity for competitive advantage and something to pay more attention to 78% see it as a differentiator in determining industry leaders Sources: Price Waterhouse Coopers, “Sustainability goes mainstream: Insights into investor views,” May 2014; 11

12 © 2015 NJH Sustainability Consulting Sustainability Rankings: The Best Ones & What They Cover Myriad of Sustainability Rankings More than 100 ratings, rankings and indices focused on sustainability 12

13 © 2015 NJH Sustainability Consulting Scores publicly-traded companies worldwide with market cap of at least $2B based on an average of up to 12 equally- weighted KPI scores (KPIs based on GICS Industry Group) Scores 500 largest publicly-traded U.S. companies on their environmental performance based on a weighted average of 8 quantitative KPI scores (U.S. 500 list); also issues Global 500 list Scores Interbrand’s annual (100) Best Global Brand companies based on a combination of perception score and Deloitte’s environmental performance data, to develop list of top 50 green brands Scores Russell 1000 companies based on weighted average of 8 rankings (Environment Rank and Climate Change Rank each weighted separately at 19.5% and 16%, respectively, of total) Sustainability Rankings: The Best Ones & What They Cover Understand and Rate the Raters 13

14 © 2015 NJH Sustainability Consulting Ranks companies worldwide based on survey of 887 experts from 87 countries, asking “what specific companies are leaders in integrating sustainability into their business strategy?” Ranks companies worldwide based on responses to CDP questionnaires Carbon Disclosure Leadership Index Carbon Performance Leadership Index (A List) Water program Forests program Ranks companies worldwide based on criteria in 5 core categories, with sustainability included in “Corporate Citizenship and Responsibility” (20% weighting) Ranks companies worldwide, regionally & by country, using a “best-in-class” approach based on responses to proprietary sector-specific questionnaires (58 versions) and other data Sustainability Rankings: The Best Ones & What They Cover Understand and Rate the Raters 14

15 © 2015 NJH Sustainability Consulting Key Performance Indicator *As of June 4, For Global 100, KPIs may vary for different GICS Industry Groups Source: Corporate Knights Capital (internal document distributed for education purposes only) Sustainability Rankings: Comparing KPIs Covered 15

16 © 2015 NJH Sustainability Consulting 2014 Rankings: U.S. Food & Beverage Companies and Restaurants Rank /Company 6 McCormick 37 General Mills 41 Molson Coors Brewing 42 Brown-Forman 46 Hershey 53 Constellation Brands 78 Altria Company 90 Mead Johnson Nutrition 115 Dr Pepper Snapple Group 132 Keurig Green Mountain 137 JM Smucker 139 Kellogg 143 Mondelez International 147 Coca-Cola Rank/Company 153 ConAgra Foods 156 Campbell Soup 163 PepsiCo 187 McDonald’s 268 Bunge 283 Starbucks 304 Hormel Foods 308 Yum! Brands 366 Chipotle Mexican Grill 371 Tyson Foods 399 Monster Beverage 425 Lorillard 428 Burger King Worldwide Rank /Company 6 McCormick 37 General Mills 41 Molson Coors Brewing 42 Brown-Forman 46 Hershey 53 Constellation Brands 78 Altria Company 90 Mead Johnson Nutrition 115 Dr Pepper Snapple Group 132 Keurig Green Mountain 137 JM Smucker 139 Kellogg 143 Mondelez International 147 Coca-Cola Rank/Company 153 ConAgra Foods 156 Campbell Soup 163 PepsiCo 187 McDonald’s 268 Bunge 283 Starbucks 304 Hormel Foods 308 Yum! Brands 366 Chipotle Mexican Grill 371 Tyson Foods 399 Monster Beverage 425 Lorillard 428 Burger King Worldwide Rank/ Company 9 Coca-Cola Co 46 General Mills 54 PepsiCo 72 Conagra Foods 83 Brown-Forman 84 Yum! Brands Inc. 85 Molson Coors Brewing Company 89 Hormel Foods Corp. Rank/ Company 9 Coca-Cola Co 46 General Mills 54 PepsiCo 72 Conagra Foods 83 Brown-Forman 84 Yum! Brands Inc. 85 Molson Coors Brewing Company 89 Hormel Foods Corp. Sources: corporate-citizens

17 © 2015 NJH Sustainability Consulting 2014 Rankings: U.S. Food & Beverage Companies and Restaurants Rank/Compan y 9 Danone 18 Nestle 20 Coca-Cola 30 Pepsi 37 Starbucks 38 Kellogg’s 43 McDonald’s 50 Heineken Rank/Compan y 9 Danone 18 Nestle 20 Coca-Cola 30 Pepsi 37 Starbucks 38 Kellogg’s 43 McDonald’s 50 Heineken Rank/Company 49 General Mills 77 Campbell Soup Rank/Company 49 General Mills 77 Campbell Soup Food & Beverage Manufacturers Ingredion, Inc/ USA Kellogg/ USA PepsiCo/ USA Foodservice Aramark/ USA Food & Beverage Manufacturers Ingredion, Inc/ USA Kellogg/ USA PepsiCo/ USA Foodservice Aramark/ USA Percent of expert identification/C ompany 33 Unilever 4 Nestle 3 Coca-Cola Percent of expert identification/C ompany 33 Unilever 4 Nestle 3 Coca-Cola 17 Sources: Rankings.aspx?rankingID=107&year=895;

18 © 2015 NJH Sustainability Consulting 2014 Activist Rankings: U.S. Food & Beverage Companies and Restaurants Sources: 500/companies?f%5B0%5D=field_industry_sector%3A30 18 Low score for General Mills Relatively high score for General Mills

19 © 2015 NJH Sustainability Consulting 2014 Rankings: U.S. Food & Beverage Companies and Restaurants Source: Praise for Select Companies PepsiCo – stakeholder engagement Coca-Cola – water stewardship Starbuck’s – investor dialog General Mills – sustainable agriculture Brown Forman – disclosure PepsiCo – stakeholder engagement Coca-Cola – water stewardship Starbuck’s – investor dialog General Mills – sustainable agriculture Brown Forman – disclosure April

20 © 2015 NJH Sustainability Consulting Limitations: The Investor Viewpoint Investors Have Reasons for Not Fully Considering Sustainability Issues 1.Lack of common reporting standards 2.Poor transparency & reporting by U.S. listed companies financial quantification of risks & opportunities (82%) comparability of information (79%) relevance and implications of sustainability risks (74%) 1.Lack of common reporting standards 2.Poor transparency & reporting by U.S. listed companies financial quantification of risks & opportunities (82%) comparability of information (79%) relevance and implications of sustainability risks (74%) Source: “Sustainability goes mainstream: Insights into investor views”, Price Waterhouse Coopers, May

21 © 2015 NJH Sustainability Consulting Investor Roadmap Sustainability Reports Are a Key Resource De facto international reporting framework G4 Guidelines materiality assessment more specific disclosures in DMA De facto international reporting framework G4 Guidelines materiality assessment more specific disclosures in DMA New sustainability accounting standards for U.S. public companies “material” sustainability issues and related metrics Sector/industry Services/Restaurants Consumption I/Processed Foods New sustainability accounting standards for U.S. public companies “material” sustainability issues and related metrics Sector/industry Services/Restaurants Consumption I/Processed Foods Reporting framework focused on integrated thinking ESG tied to bottom line “value creation” Guiding Principles and Content Elements no prescribed KPIs or disclosures Reporting framework focused on integrated thinking ESG tied to bottom line “value creation” Guiding Principles and Content Elements no prescribed KPIs or disclosures 21

22 © 2015 NJH Sustainability Consulting Investor Roadmap Flash Point Issues: Looking Beyond Ratings & Reports 22 1.GHG & energy metrics 2.Water metrics 3.Materiality assessment all sustainability impacts material to the business & stakeholders 4.Ethical sourcing (entire supply chain) 1.Transparency, accountability & integration 1.GHG & energy metrics 2.Water metrics 3.Materiality assessment all sustainability impacts material to the business & stakeholders 4.Ethical sourcing (entire supply chain) 1.Transparency, accountability & integration Checklist

23 © 2015 NJH Sustainability Consulting Investor Roadmap Key Questions to Ask Companies 23

24 © 2015 NJH Sustainability Consulting Contact Information Nancy Himmelfarb NJH Sustainability Consulting Nancy Himmelfarb NJH Sustainability Consulting 24


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