CERES

Corporate Social Responsibility: Does It Matter?

Presentation to the 8th Annual Conference International Corporate Governance Network Milan, Italy
Dr. Robert Kinloch Massie Executive Director CERES Board of Directors Global Reporting Initiative July 12, 2002
www.ceres.org

A Crisis in Leadership

US Markets: A Breakdown in Trust

President George W. Bush

With 80 million Americans participating as shareholders of companies, we must ensure high standards, tough disclosure requirements and accurate information. April 24, 2002

There is a need for a renewed corporate responsibility in America. Those entrusted with shareholders' money must -- must -- strive for the highest of high standards.
June 26, 2002

What is CERES?
CERES CERES
Most powerful U.S. coalition of environmental, labor, and investors (85 organizations) A network of more than 70 corporations that have endorsed the CERES Principles The oldest (1989) and most trusted environmental code of conduct in U.S. The convenor, with UNEP, of the Global Reporting Initiative (GRI) www.CERES.org

Selected Coalition Members

CERES
AFL-CIO Interfaith Center on Corporate Responsibility (church pension funds) Citizens Funds Conservation International Domini Social Investments Friends of the Earth New York City Employee Retirement System Social Accountability International Social Investment Forum SustainAbility

Trillium Asset Management

Walden Asset Management

Friends, Ivory & Sime

World Wildlife Fund U.S.

Selected CERES Endorsers

CERES
American Airlines Bank of America Baxter International Bethlehem Steel Coca-Cola USA Consolidated Edison FleetBoston Financial General Motors Interface ITT Industries Nike Northeast Utilities Saunders Hotel Group Sunoco

Ford Motor Company

US Trust Company

CERES Launched GRI

CERES
Over five years (1997-2002), with hundreds of global partners, built a generally accepted framework for corporate sustainability reporting GRI now independent, establishing headquarters in Amsterdam - 14 eminent board members

New version to be released around Johannesburg summit

Would invite ICGN members to support emerging standard by requesting GRI-based disclosure from portfolio companies www.globalreporting.org

GRI Charter Group

AccountAbility Amnesty International Association of Chartered Certified Accountants Baxter International CERES Deloitte Touche General Motors Greenpeace International Human Rights Watch Instituto Ethos KPMG Nike

CERES

Social Accountability International Transparency International United Nations Environment Programme UN High Commission on Human Rights World Bank Group World Conservation Union World Resources Institute WWF International

Consejo Empresario Argentino para el Desarollo Sostenible Conservation International Consumers International Ford Motor Co.

Oxfam International PricewaterhouseCoopers Royal Dutch/Shell

Companies using GRI- a Sampling

American Home Products AT&T Baxter Biffa Waste Services Ltd. Body Shop International Bristol-Myers Squibb British Airways BT Carillion Electrolux ESAB Ford Motor Company Fuji Xerox General Motors Henkel ITT/Flygt Johnson & Johnson Kirin Brewing KLM Konica NEC Nissan Nokia Novo Nordisk Procter & Gamble Ricoh Royal Philips Electronics Saint-Gobain SAS SASOL Scandiflex Shell Severn Trent SITA South African Breweries Suncor Energy Sunoco Thames Water TXU Europe Vauxhall Motors Ltd VAW Aluminium Waste Recycling Group

CERES

CERES

Strong Government Support for Standardized Reporting

European Union CSR guidelines Japanese Environment Agency US EPA Performance Track UK: Environmental Reporting Guidelines France: Article 116 Denmark: Sustainability Reporting Guidelines

CERES 2002 Sustainable Governance Project

CERES

Underlying premise: CEOs and boards can no longer oversee large global businesses without:
understanding key questions of sustainability, such as climate, energy, water, biodiversity, inequality setting goals and measuring outcomes

disclosing the results through an international standard verified by third parties

Failure to do so exposes firm to unnecessary risk

In 21st century, good governance includes strategic approach to sustainability

CERES

Example: embedded climate risk

All US sectors and portfolios exposed to varying degrees of climate risk
Agriculture, energy, forestry, insurance, real estate, tourism, transportation, water and waste, etc.

Future costs could be large

Regulations (CA), financial losses, lawsuits Much more research needed!

Failure to assess long-term portfolio risk could be breach of fiduciary duty

U.S.: embedded climate risk

CERES

California: agriculture, especially fruits, nuts, wine. Cost of lettuce quadrupled this spring due to strange weather conditions

Florida: potential loss of Everglades after $7.9 billion federal investment

Alaska: breaks in pipelines due to melting of permafrost Across U.S.: drop in water table and aquifers, displacement of migratory birds, threat to coastal airports, expanded tropical disease areas, drought in New England, floods in Texas TOTAL COST TO U.S. ECONOMY = ??????

Colorado: 984 fires have destroyed 375,000 acres CERES

Barry Gutierrez News

CERES

CERES Report: Value at Risk: Climate Change and the Future of Governance
Recommendations for Institutional Investors

Seek out expertise

Examine embedded climate risk portfolio-wide Take action to mitigate risk
Incorporate climate change analysis into investment strategies Require greater disclosure from firms Encourage best practice from portfolio companies

Pursue opportunities
Clean, lower-carbon technologies

Growing realization among U.S. investors that climate change is a governance issue

CERES

May 29, 2002: 20% (= $55 billion) of shareholders voted against management of Exxon-Mobil on a climate related resolution

Why?

Neither the CEO, nor the board, nor management have a plan for appropriately managing the assets of the company given the challenge of climate change. [Investors] are going to treat it as a governance issue, not as an environmental issue.
Mark Bateman Investor Responsibility Research Center (IRRC)

21st Century will see Convergence of Sustainability and Governance Agendas

CERES

CERES is committed to:

Conducting collaborative research to assess long-term financial impacts Sharing U.S. information, resources, and allies with other ICGN members

Supporting adoption of GRI, including greenhouse gas disclosure, by all US companies

Promoting ICGN decisions on good governance

For more information -

CERES

www.ceres.org Free report downloads available www.globalreporting.org Complete information on all activities Annual CERES Conference April 1-3, 2003 - New York Hilton
Contact: Dr. Robert Kinloch Massie (massie@ceres.org) Dr. Ariane van Buren (vanburen@ceres.org)