The Sustainability Opportunity

Purpose of Presentation: Provide senior executives with background and business case for initiating sustainability strategies. Outline: Why is sustainability a business issue for retailers? What is sustainability? How to initiate a sustainability strategy in your company.

Defining sustainability:
Business strategies and practices that promote the long-term well being of the environment, society and the bottom line
FMI Sustainability Task Force

Sustainability Is..
change in mindset and the way you do business and not !ust a new program or two.

"ery uni#ue to every company and therefore$ there is no one%si&ed%fits% all approach.

Why is Sustainability a Business Issue for etailers!

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Who #ares $bout Sustainability!

Our #usto%ers
'() of consumers agree with the statement that it is important for the *.+. food industry$ both food manufacturers and supermarkets$ to be more proactive about addressing environmental concerns.
FMI- arris !oll "##$

,') of consumers are interested in -eco%friendly. products and /0) actively look for them. Information %esources, Inc& "##$ 1/) of mericans think that they will be extremely green in the next five years while only 22) classify themselves as extremely green now. 'al-Mart (ive Better Inde) "##$ +ales of -green. cleaning products increased 3() in (004.
Information %esources, Inc&

5rganic food sales were up 20') between (002 to (003 and up (() in (004. Mintel %esearch*+rganic Trade ,ssociation

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Who #ares $bout Sustainability!

The Publi' mericans consider a company6s commitment to social issues when deciding the following: Which companies they want to see doing business in their communities$ ,4) 7vs. 3,) in (0028 Where to work$ 99) 7vs. 1,) in (0028 Which stocks or mutual funds to invest in$ 44) 7vs. 10) in (0028 ,9) say they want a company to support issues based on where its business can have the most social and:or environmental impacts. ,0) of respondents listed health as the leading issue for companies to address.
(009 ;one ;ause <volution +urvey

Who #ares $bout Sustainability!

Our )uture *%ployees survey of 2$,00 Cen D%ers 7people between the ages of 2/ and (38 in (004 found that: 42) agreed they are personally responsible for making a difference in the world= 9,) think companies have the same responsibility= 93) are more likely to pay attention to a company>s messages if it has a deep commitment to a cause= and$ ?early '0) stated they are @likely@ or @very likely@ to switch from one brand to another based on a strong association with a good cause. ;one and AP Bnsights

Who #ares $bout Sustainability!

Our )uture *%ployees ,2From a survey in 5ctober (009 by AonsterEG H 7division of Aonster Worldwide geared towards entry% level positions8 of college graduates found: ;ollege graduates are looking for more than !ust a first !ob or an internship. Ehey are looking to work for businesses that help the environment. ,0) of those surveyed said they are interested in a !ob that has a positive impact on the environment '() would chose working for an environmentally friendly company.

Who #ares $bout Sustainability!

Super%ar1ets2 3reen is 3reen..
Ehe average basket si&e is three times larger when <co%Friendly or Creen products are in the basket$ and the more items purchased$ the higher the average basket si&e. Potential Creen buyers are current 5rganic food buyers= recogni&ing that only 20) of 5rganic buyers are currently purchasing Creen products. Creen and 5rganic shoppers are 3') loyal 7share of grocery wallet8 to their chain and more than two times loyal than the average consumer.
-atalina Marketing September, "##$

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Who #ares $bout Sustainability!

Other #o%panies
5f the top 200 largest retailers$ ,/) are involved in green practices and 4( of those have increased their green investments during the past two years.
IJ5 +iedman Getail ;ompass +urvey$ 5ctober (009

9') of + K P 200 companies have special sections on their website dedicated to social and environmental policies and performance$ up from 3') in (003.
+ocial Bnvestment Gesearch nalysis ?etwork

Creen consumerism will be a huge driver of innovation and product change in the food retail sectorL.the biggest consumer trend of them all..
Mucy ?eville%Golfe$ Eesco

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Who #ares $bout Sustainability!

Sharehol4ers5In6estors
Bn 2''0$ there were 3 investment indexes based on sustainability in ?orth merica$ <urope and ustralia. Bn (009$ there are (2 including the Jow Nones +ustainability Bndex. Aost of the leading brokerages 7Coldman +achs$ ;itigroup$ NPAorgan$ Aerrill Mynch$ and Aorgan +tanley8 have published investment research on the impact of social and environmental trends on the performance of companies in key industries= and$ 32 banks from 29 countries representing an overwhelming portion of the pro!ect finance market 7including Iank of merica$ ;itigroup$ NPAorgan ;hase$ Wachovia and Wells Fargo8 have adopted the -<#uator Principles. as a means of standardi&ing the review of social and environmental factors in lending.

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Why is Sustainability an Issue for Business!

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Why is Sustainability a Business Issue!

Ehe world population is growing at unprecedented rates and putting greater pressure on already overstressed natural resources= Ehere are growing expectations on business to help solve environmental and social issues from government$ employees$ customers and the public broadly= and How individual companies respond to these trends will influence their profitability and longevity.

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Sustainability in the 9ar1etpla'e: The :e; *<uation

So'ial 7 *n6iron%ental Issues as 9ar1et )or'es
3lobal Population *?plosion Wealthy :ation #onsu%ption Patterns De'lining $6ailability of :atural esour'es

3lobal Tren4s 9agnify 9ar1et )or'es

3ro;th5I%pa't of #i6il So'iety 3lobali@ation ole of 3o6ern%ent #onne'te4ness

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#hange4 Operating #on4itions for etailers

Business 8alue at Sta1e

Business

esponse:

See1 Out Opportunities fro% So'ial an4 *n6iron%ental Tren4s Integrate So'ial an4 *n6iron%ental Tren4s into Business Strategy 7 Other De'isions
;opyright <cos ;orporation (004

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*n6iron%ental 7 So'ial Issues: Business Perspe'ti6es

Ol4 S'hool: 'ost to be li6e4 ;ith an4 %ini%i@e4 :e; S'hool: 'an a44 sharehol4er 6alue :e?t S'hool: 'entral to bran4 6alue Whi'h is your s'hoolto4ay an4 in the future!

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Ai6ing Beyon4 *arthBs #apa'ity

Where Are The Fish?
bout half of all monitored Oglobal fishP stocks are now fully exploited and another #uarter are overexploited$ depleted$ or slowly recovering. (001 Food K griculture 5rgani&ation

Better Food Uses More Water

90) of world freshwater use is for agriculture. Crowing global populations coupled with the shifting trend in the diet to more water%intensive food such as meat and fruits will further exacerbate already stressed regional water supplies.
*nited ?ations <nvironment Programme

Climate: The Food Chains Weakest Link

Ehe impact of climate change coupled with the efforts to mitigate climate change will have a variety of impacts on availability and price of many agricultural products$ especially corn. 'all Street .ournal Market 'atch Aay (009

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#li%ate #hange
group of (,1 institutional investors with assets of Q12 trillion under management have re#uested and received detailed information from approximately 2000 companies about their greenhouse gas emissions and plans for managing those emissions. Bn a (009 survey of consumers in the *+ and the *H$ 40) of respondents said that they want companies to provide more product%based information at the point of sale and half would rather do business with companies that are working to reduce their contribution to global warming.
,ccount,bility

Bn response to shareholder re#uest$ Ehe Home Jepot$ Mowe6s and +imon Property Croup 7largest shopping mall company in *+8 have agreed to significantly expand reporting and disclosure on energy%efficiency performance$ with the two big%box retailers also agreeing to discuss greenhouse gas emissions.
/reenBi0&-om

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Ai6ing Beyon4 *arthBs #apa'ity

umans are drawing on capital rather than interest, and once that is e)hausted, they will find Mother 1ature reluctant to make a loan&
February 2/$ (009 Ehe ;olumbus Jispatch

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3lobal Be'o%ing Ao'al: Tren4s in the 9ar1etpla'e

Ehe public believes retailers are responsible for the environmental and social issues associated with their supply chain 7Ehink Home Jepot8 Bncreasing globali&ation continues to cloud the source of raw materials and government food inspectors are stretched too thin 7Ehink ;hina8 ;ompliance with environmental$ health and safety regulations are no longer the ceiling for the public6s expectations but the floor 7Ehink Eeflon8

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$'ti6ists are Be'o%ing In'reasingly #re4ible

Who the Public Believes to Act in the Best Interest o !ociet" 30 20
) of -yes. minus ) of -no.

/0 0 C/0 C20
:3Os Dnite 4 :a tions Aa rge Ao'a l #o% pa nie s :a tiona l 3o6e rn% e nts 3loba l #o% pa nie s

'orld 2conomic Forum "##3

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$'ti6ists are Ea6ing an I%pa't

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#o%panies Wor1ing ;ith *n6iron%ental 3roups for Sustainable esults

World Wildlife Fund and ;oca%;ola have created a partnership to conserve and enhance fresh water resources around the world. *nilever partnered with Creenpeace to develop HF;%Free Free&ers and market them to specific customers. Fed<x <xpress and <nvironmental Jefense worked together to develop new generation of pickup and delivery trucks that decrease particulate emissions by '4 percent and travel 39 percent farther on a gallon of fuel$ reducing fuel costs by over a third. CreenIlue Bnstitute created the +ustainable Packaging ;oalition that brings together a range of stakeholders to create a more robust environmental vision for packaging.

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3lobali@ation 7 Safety of D.S. )oo4 Supply #hain

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The #hange4 Operating *n6iron%ent

Eigher #onsu%er *?pe'tations 7want performance and price while being environmentally and socially responsible.8 8oluntary $'tions Be'o%ing :e; Stan4ar4 Sustainable Supply #hain Offerings Sharehol4ers5In6estors Dsing Sustainability in atings an4 $nalyses

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The Opportunities
Crowth 5pportunities Crow Aarket +hare Iuild ;ustomer Moyalty Jifferentiation and Iranding Bmprove <mployee Aorale and Moyalty Bncrease <fficiency:Productivity Geduce Gisk Help +ecure the +upply ;hain for Future void ?egative Public 5pinion Prepare for: Ie head of ?ew Gegulations

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What etailers are $lrea4y Doing.

Gecycling R Gevenue: Ehree FAB Aembers made close to F"0 %illion in re6enue in (004 from recycling plastics and cardboard. Ieing Creen R Aaking Creen: +everal ma!or retailers are focusing on -green. as the driving strategy behind new store development. +eismic +hift in +upply ;hain: +ome of the largest retailers in the world are implementing sustainable practices throughout their supply chains resulting in ma!or positive impacts on the bottom line$ and impacts on the price and availability of environmentally and socially preferable goods and services. ;atch of the Jay for Eomorrow: small retail chain responded to consumer re#uests for more choice in sustainable seafood. Ehey adopted Fishwise$ a sustainable seafood education and marketing program. Gesults were increased customer loyalty$ sales and profits and have transitioned their product offering to almost completely sustainable seafood.

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Eo; to Initiate a Sustainability Strategy in Gour #o%pany

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#hange in 9in4set: Sustainability is 9ore #o%ple? Than $ny Other 9ar1et Tren4 Past or Present
Bmpacts all aspects of business Aost effective strategies are those that deliver financial value for the company 7not PG or philanthropic8 Bnvolves Ehose in the "alue ;hain and Ieyond: % +uppliers % Covernments % ;onsumers % <mployees % Producers % ?C5s % +hareholders % 5ther

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$ Sustainable #o%pany.
*nderstands environmental and social issues as business issues Jevelops business strategies around issues that generate shareholder and societal value ;ontinually engages with a broad network of external stakeholders within and beyond the value chain

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Integrating Sustainability Will

Help manage complexity from environmental and social issues now impacting the marketplace +harpen the -over the hori&on radar. and open up -insights. into the evolution of the market place Hedge against future risks by connecting to key stakeholders and trends in society

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Potential Eur4les in I%ple%enting Sustainability

Bnternal lignment: +ustainability impacts all aspects of the company and must be seen as aligning with the culture and changing the way employees think. Ehere will be naysayers$ it takes time to have this alignment. ?ot Nust -Feel Cood. Fluff: +ustainability tends to be relegated to the philanthropic department or for external affairs to handle but it is a business issue with real value at stake. Walk the Ealk: company that makes big promises with little delivery or one that brands itself -green. with little behind the curtain will get caught and labelled a -greenwasher..

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)ra%e;or1 for an *ffe'ti6e Sustainability Strategy

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Detail on )ra%e;or1

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Gour Sustainability Tea%

Bdentify one person to lead the effort who has experience in developing and implementing business strategy. Iuild a core%team representing areas of 5perations$ +ourcing$ Aanagement and Aarketing:;onsumer ffairs % should assist in development and implementation. +enior Aanagement must provide support and be included in regular updates on progress.

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Where to Start: The )9I Sustainability Tool1it

framework and guide to help you initiate and -operationali&e. sustainability within your company at the strategic level Practical tips$ advice and strategies on approaching and implementing sustainability Iest practices$ learnings and other examples of companies in the food retail value chain that are working on sustainability

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)9IBS Sustainability Tas1 )or'e

Mission# To develo$ the tools and resources needed b" the industr" to hel$ move sustainabilit" initiatives or%ard&

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-Bt is not the strongest species that survive$ nor the most intelligent$ but the ones who are most responsive to change.. %;harles Jarwin%

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FAB recogni&es the commitment and support of our sponsoring companies in the development of the soon to be released FMI !ustainabilit" !tarter 'it (release )anuar" *++,-& We are grateful for their help in making this important resource available to help you move forward #uickly with your company sustainability programs:

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$DDITIO:$A SAID*S O: *:8I O:9*:T$A ISSD*S

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S'ien'e ationale

Ai6ing Beyon4 the *arthBs #apa'ity

3lobal Population In'reasing *?ponentially

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S'ien'e ationale

Ai6ing Beyon4 the *arthBs #apa'ity

Where Will We 3et Our )ish in the )uture!

*? Aillennium ssessment

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Ai6ing Beyon4 the *arthBs #apa'ity

In'rease in Portion of Aan4 #ulti6ate4 #ontinues
9ore lan4 ;as 'on6erte4 to 'roplan4 in the 30 years after /."0 than in the /"0 years bet;een /(00 an4 /+"0.

#ulti6ate4 Syste%s in 2000 'o6er 2"H of *arthBs terrestrial surfa'e

*? Aillennium ssessment

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