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

2. Sustainability Pressures & Trends in Food
Local
Pesticide-free
MSC-certified
Fair Trade
Hormone-free
Humane
TRANSPARENCY
Low Carbon Footprint
Cage-free
Natural
Animal Welfare Approved
Non-GMO
Antibiotics-free
Organic

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

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

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

6. 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.”
“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.”
“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.”
“Locally sourced meats and seafood,” “locally grown produce” and “environmental sustainability” are top 3 culinary food trends for 2015.
Sources: 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;

7. Why Company Sustainability is Important
Sustainability Efforts Drive Consumer Support and Reputation Enhancement
If a Company Supports Social or Environmental Issues:
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
What Millenials Crave at Restaurants:
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
Sources:

8. Why Company Sustainability is Important
Environment Is an Economic Threat
TOP GLOBAL RISKS
Water Crises
(#1 in terms of potential impact)
Extreme Weather Events
(#2 in terms of likelihood)
“The common denominator between water wars, climate change, social unrest and other direct and indirect consequences of environmental damage is economic risk.”
Sources: Global Risk Report (2015 Edition), World Economic Forum, Jan. 19, 2015;

9. Why Company Sustainability is Important
Activists Pressure Food Companies on Sustainability

10. Why Company Sustainability is Important
Sustainability is on the Political Agenda Worldwide
NOW
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
Sustainable Development Goals
UN Climate Change Conference
Carbon pricing initiatives
Governments
Companies
More required ESG disclosures

11. Why Company Sustainability is Important
Investors Have Specific Interests in Sustainability
USES
DRIVERS
Investment decisions
Shareholder proposals
Proxy voting guidelines
Engaging with companies
Advocacy (Ceres-led INCR)
Risk mitigation (73%)
Avoiding firms with unethical conduct (55%)
Enhancing performance returns (52%)
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;

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

13. Sustainability Rankings: The Best Ones & What They Cover
Understand and Rate the Raters
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 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)
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 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

14. Sustainability Rankings: The Best Ones & What They Cover
Understand and Rate the Raters
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 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
Ranks companies worldwide based on responses to CDP questionnaires
Carbon Disclosure Leadership Index
Carbon Performance Leadership Index (A List)
Water program
Forests program

15. Sustainability Rankings: Comparing KPIs Covered
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)

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

17. 2014 Rankings: U.S. Food & Beverage Companies and Restaurants
Rank/Company
49 General Mills
77 Campbell Soup
Rank/Company
9 Danone
18 Nestle
20 Coca-Cola
30 Pepsi
37 Starbucks
38 Kellogg’s
43 McDonald’s
50 Heineken
Percent of expert identification/Company
33 Unilever
4 Nestle
3 Coca-Cola
Food & Beverage Manufacturers
Foodservice
Aramark/ USA
Ingredion, Inc/ USA
Kellogg/ USA
PepsiCo/ USA
Sources:

18. 2014 Activist Rankings: U.S. Food & Beverage Companies and Restaurants
Relatively high score for General Mills
Low score for General Mills
Sources:

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

20. Limitations: The Investor Viewpoint
Investors Have Reasons for Not Fully Considering Sustainability Issues
Lack of common reporting standards
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 2014

21. Sustainability Reports Are a Key Resource
Investor Roadmap
Sustainability Reports Are a Key Resource
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
Reporting framework focused on integrated thinking
ESG tied to bottom line
“value creation”
Guiding Principles and Content Elements
no prescribed KPIs or disclosures

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

23. Key Questions to Ask Companies
Investor Roadmap
Key Questions to Ask Companies
Topic
Questions
Green rankings
Is company listed among key green rankings? If so, explain company’s score/ranking(s). If not, explain.
Sustainability report
Does company publish a sustainability report in accordance with GRI (G4) or SASB standards? An integrated report? If not, explain.
GHG metrics
What are company’s quantitative goals for GHG emissions cuts? Impacts? Deforestation policy?
Water metrics
What are company’s quantitative goals around water use & water quality? Impacts?
Materiality assessment & metrics tracking
Does company conduct an annual materiality assessment of sustainability impacts & management’s approach, including performance data and return on investment?
Ethical sourcing
What are company’s supply chain management policies and procedures? Are they third-party verified? What are impacts on animals and communities?

24. NJH Sustainability Consulting
Contact Information
Nancy Himmelfarb
NJH Sustainability Consulting