Supply Chain Management Sustainability Balanced Scorecard Measurement & Metrics Sustainability Balanced Scorecard Mauricio Cavalieri Carreiro Good morning, I am Mauricio and I’m here to talk to you about Measurement and Metrics on the Supply Chain. So today we are going to see a study case about Sustainability Balanced Scorecard.

Sustainability Balanced Scorecard Motivation How to compare sustainable reports against multiple frameworks? Multiple understandings on sustainability; Different data metric and ways to report it; Proposal A standard and flexible method should be developed in order to compare sustainability progress between different companies. First of all, using scorecards to measure business performance isn’t a new idea. But there has been a recent trend among companies to measure the environmental impact of their supply chain. It is not easy, once it is still a challenge to compare sustainable reports against multiple frameworks. It happens because we have multiple understandings on sustainability and companies have different data metric and ways to report it. The solution for it would be A standard and flexible method should be developed in order to compare sustainability progress between different companies. What we are going to see now is a case study of a big company that have develop a Balanced Scorecard System focused on Sustainability.

Procter and Gamble - Case Study Company Profile Procter and Gamble was founded in 1837 as a soap and candle company; Net sales of nearly $84 billion in 2012 and more than $10 billion in net earnings; The company employs 126,000 people worldwide. As you can see, Procter and Gamble was founded in 1837 as a soap and candle company. Its net sales in 2012 were nearly $84 billion and more than $10 billion in net earnings. Also, the company employs 126,000 people worldwide. P&G acts in different areas as Beauty, Grooming, Health Care, Fabric Care & Home Care, Baby Care & Family Care. About 39% of it sales as in North America and 19% in Western Europe. http://annualreport.pg.com/annualreport2012/files/PG_2012_AnnualReport.pdf

Case Study Sustainability Balanced Scorecard (SBSC) Launched in 2010 by P&G with three main objectives: Improve key environmental indicators; Increase supply chain collaboration; Encourage the sharing of sustainable ideas. The scorecard will be used to track the company ways to its long term vision: Using 100% renewable or recycled materials for all of their products and packaging; Designing products that delight consumers while maximizing conservation of resources; Having zero consumer or manufacturing waste going to land fills; Powering all of their plants with 100% renewable energy. So, what happened in 2010 was that P&G launched its Sustainability Balanced Scorecard, after two years working on it. The main objectives of the SBSC were: Improve key environmental indicators, Increase supply chain collaboration and Encourage the sharing of sustainable ideas and collaboration. The scorecard will be used to track the company ways to its long term vision, that is: Using 100% renewable or recycled materials for all of our products and packaging; Designing products that delight consumers while maximizing conservation of resources; Having zero consumer or manufacturing waste going to land fills; Powering all of our plants with 100% renewable energy.

Case Study Sustainability Balanced Scorecard (SBSC) The scorecard measures absolute or intensity improvements in nine key metrics: 1. (Electric) Energy Usage 2. (Fuel) Energy Usage 3. (Input / Withdrawal) Water Usage 4. (Output / Discharge) Water Usage 5. Hazardous Waste Disposal 6. Non-Hazardous Waste Disposal 7. Kyoto Greenhouse Gas Emissions Direct (Scope 1) 8. Kyoto Greenhouse Gas Emissions Indirect (Scope 2) 9. Annual Volume/Output So, to measure the company’s performance through this track, the scorecard measures absolute or intensity improvements in nine key metrics: (Electric) Energy Usage, (Fuel) Energy Usage, (Input / Withdrawal) Water Usage, (Output / Discharge) Water Usage, Hazardous Waste Disposal, Non-Hazardous Waste Disposal, Direct Emissions of Kyoto Greenhouse Gas (Scope 1), Indirect Emissions of Kyoto Greenhouse Gas (Scope 2) and Annual Volume/Output. Direct Emissions of Kyoto Greenhouse Gas (Scope 1) - CO2, CH4, N2O, HFC, PFC, SF6. Indirect Emissions of Kyoto Greenhouse Gas (Scope 2) – NOx, CO, VOC, CFC, HCFC.

Case Study SBSC Excel Tool After defining these metrics, the company developed an Excel tool to facilitate the data handling. This is how the tool looks like. It’s very simple and there is a guide with the instructions of fill it and also about the rating criteria. It restricts the units you can report you data, in order to make a reasonable ranking and benchmarking. http://www.pgsupplier.com/en/current-suppliers/environmental-sustainability-scorecard.shtml

Case Study SBSC P&G Analysis Overview After using it for three years until now, with other company data, P&G estimates that in the past 10 years it has made $1 billion (£629 million) of operational savings from reductions in energy, water, waste and carbon dioxide emissions at its facilities. This has been the result of its sustainability efforts across the company, including use of the scorecard. As you can I see, there are good data about P&G results, also great charts at the website, but I wont take too long on it. http://www.pg.com/en_US/sustainability/performance/rw_summary.shtml

Case Study SBSC P&G Analysis Further Information P&G Sustainability Results: Sustainability Scorecard Excel Tool and Guides Download: http://www.pg.com/en_US/sustainability/performance/rw_summary.shtml http://www.pgsupplier.com/en/current-suppliers/environmental-sustainability-scorecard.shtml So if I could make you interested on that, you can get all the company’s results and download the tool and guides from these websites.

Case Study SBSC Suppliers Analysis P&G’s external business partners assessment The greatest improvements in the Company’s environmental footprint came with its logistics and chemicals suppliers. Suppliers from developing markets such as China, India and Brazil tended to show the most improvement with US suppliers not far behind. Nearly half of the companies earning the highest rating came from Europe. The two measurable areas with the greatest improvement across the board were Hazardous Waste and Water Usage (Discharge). Direct Greenhouse Gas Emissions and Fuel Energy were tied for third. Overall, when combining all suppliers and categories, there was an improvement in 55% of the measurable categories About 25% of the external business partners also offered innovation ideas where they could work with P&G to further improve the environmental footprint. What I want to talk about now is that P&G decided to expand SBSC for its Suppliers in order to encourage suppliers to make environmental improvements in their own supply chains. So, this tool was also used to assess P&G’s external business partners’ impacts, their sustainability innovation ideas and also promotes collaboration. As the main results we can see that the greatest improvements in the Company’s environmental footprint came with its logistics and chemicals suppliers. Suppliers from developing markets such as China, India and Brazil tended to show the most improvement with US suppliers not far behind. Nearly half of the companies earning the highest rating came from Europe. The two measurable areas with the greatest improvement across the board were Hazardous Waste and Water Usage (Output / Discharge). Direct Greenhouse Gas Emissions (Scope 1) and Fuel Energy were tied for third. Overall, when combining all suppliers and categories, there was an improvement in 55% of the measurable categories and about 25% of P&G external business partners offered innovation ideas where they could work with P&G to further improve the environmental footprint.

Case Study SBSC Suppliers Analysis These are some of P&G suppliers that earned the highest scores on the Sustainability Balanced Scorecard: These are some of P&G suppliers that earned the highest scores on the Sustainability Balanced Scorecard. According to P&G, the 17 companies that earned the highest score possible were: AMCOR - Australia Breakthrough Fuel - USA Diamond Packaging - USA Elif - Turkey Éltex – Hungary Fibertex Personal Care A/S – Denmark FIRMENICH SA – Switzerland GESA Form + Funktion Displaybau GmbH – Germany MeadWestvaco – USA Novozymes – Denmark Nypro Mebane – USA Lonza – Switzerland Rising Display Ltd – China RKW SE – Germany Sandler AG – Germany PaperWorks, Inc – USA (formerly Specialized Packaging Group, Inc.) Zhong Rong - China

Case Study Sharing good practices On April 2012, P&G made its Sustainability Scorecard Analysis Tool freely available for any company. Feedbacks received help developing the tool with insights from different markets. Improving P&G image for costumers an other companies. And the stage that this initiative is nowadays is: P&G realized that the scorecard was a surprisingly versatile tool. So they decided that it wasn’t just relevant to them, but to any company that wanted to measure and improve the sustainability of its supply chain. So rather than keeping it all for themselves, they decided to share with the whole market the not only their results, but also the excel-based analysis tool, which makes it easy for any company to aggregate, sort and summarize the scorecard data from their suppliers for free. Since then, other companies like General Mills have adopted or adapted the scorecard for their needs. By sharing, they’ve received more feedback on how to improve it and have incorporated those insights into subsequent iterations. As more companies use the tool, their insights will help make it even better- which makes it a better product for all who use it and a more sustainable world for everyone.

Major Brands Map This map is just to show how big are these two brands we are talking about and to imagine what huge change it would be if all of them also started measuring their impacts and develop sustainable solutions with their suppliers. http://logoblink.com/wp-content/uploads/2012/04/major-brand-logos-map-2012.jpg

Conclusions Once measurement and analysis of Supply Chain environmental impact is not a well defined process among companies, initiatives like this come as a great opportunity to have not only companies’ suppliers involved but also a cooperative improvement between them. Further, besides the environment impact reduction, companies would also have a financial return, as we saw in P&G case. As a suggestion, the Sustainability Scorecard could now started be used with a wider approach going further than the Environment metrics only, but also approaching to the other aspects of sustainability, that are Social and Economic.

References [1] Sharpe, D. - Supply Chain Management Lecture 13 - Measurement & Metrics; [2] Hussey, D.M.;Kirsop, P.L.;Meissen, R.E. - Global reporting initiative guidelines: An evaluation of sustainable development metrics for industry; [3] http://www.pgsupplier.com/en/current-suppliers/environmental-sustainability-scorecard.shtml [4] http://annualreport.pg.com/annualreport2012/files/PG_2012_AnnualReport.pdf [5] http://www.pg.com/en_US/sustainability/performance/rw_summary.shtml [6] http://www.pg.com/en_UK/news-views/Inside_PG-Quarterly_Newsletter/issue5/sustainability2.html [7] http://news.pg.com/press-release/pg-corporate-announcements/pg-shares-data-results-and-analysis-tool-supplier-scorecard

References Thank you Any questions?