Scott Marshall Associate Dean, Graduate Programs and Research

 What is meant by ‘corporate transparency’? ◦ Actions that reduce ‘information asymmetry’ in one or more components of a company’s value chain by revealing ‘credence attributes’ ◦ ‘Credence Attributes’ – characteristics of processes, products and companies that a consumer/citizen is not able to determine 1.Before purchasing and during use of a product, 2.When living in proximity, and/or 3.Considering investment decisions

 The Transparent Economy – TIGERS ◦ Traceability (Patagonia)(Patagonia) ◦ Integrated Reporting ◦ Government Leadership ◦ Environmental Boundaries (Global Footprint Network)(Global Footprint Network) ◦ Rating and Ranking ◦ Shadow Economies (Business & Human Rights Resource Centre - adidas)(Business & Human Rights Resource Centre - adidas)

 Leadership in the Age of Transparency ◦ “The big idea: The key to becoming a contemporary corporate leader is to take on responsibility for externalities—what economists call the impacts you have on the world (like pollution) for which you are not called to account.” ◦ Ripples of Responsibility  Take Ownership  Take Action  Take Interest

Pressures – Civil Society and NGOs

Pressures – Investment Community Investment Funds Incorporating ESG Factors, Number of Funds Total Net Assets (In Billions) $12 $96 $154 $136 $151 $179 $202 $569 SOURCE: Social Investment Forum Foundation NOTE: ESG funds include mutual funds, annuity funds, closed-end funds, exchange-traded funds (ETFs), products, alternative investment funds and other pooled but exclude separate account vehicles.

Pressures – Government  Key developments globally –Growing number of Multilateral Environmental Agreements –International corporate accountability / MNC liability regimes –EU Chemicals policy (REACH) –EU Integrated Product Policy - LCA implications –Regulatory pressure for reporting –Environmental tax reform requirements –Personal / class action claims

Pressures – Competitors and Industry Leaders 2010 Ceres-ACCA Sustainability Reporting Awards

Trends – Certifications and Labels  Demand for products with ecolabels is growing.  Fragmentation and confusion to institutional buyers as well as individual consumers.  Confusion continues to grow due to competing claims on what makes a product ‘green’, ‘socially responsible’, etc., especially when there are two or more competing schemes for the same sector or product.

Trends – Certifications and Labels Product Certifications

Trends – Certifications and Labels Process Certifications

Trends – Certifications and Labels  Is “Organic” a Product or Process certification?

Trends – Certifications and Labels For more information, check out:  Ecolabel Index ( andwww.ecolabelindex.com  Global Ecolabel Monitor, Towards Transparency 2010 (Source: World Resource Institute and Big Room)

Trends – Reporting  Sustainability reporting-norm among large companies globally, reports, ,100 reports.  Variable and unreliable measurement and disclosure results.  Synchronization of voluntary reporting frameworks; XBRL taxonomies for non-financial information; new U.S. SEC rule requiring financial statements in a XBRL format as part of SEC filings.  Regulatory and audit oversight of sustainability issues-norm within five years, in both the developed and developing world, across all industries.

Trends – Corporate Affiliations

 Competitive Dynamics Selected Footwear Marketers (> US$1 Bill) Company Nike, Inc. $8,387.1 $9,025.1 $10,472.9 $10, Adidas AG 5, , , ,237.5 Puma AG 1, , , ,110.3 Asics Corporation 1, , , ,728.6 Geox SpA , ,313.2 Skechers USA Inc , ,139.6 Wolverine Worldwide Inc , , ,106.1 Ecco Sko A/S ,012.2 The Timberland Company 1, , , Jones Apparel Group

 Competitive Dynamics Company Fair Labor Association DJSI 2010 CERES Report Award Global 100BICEP * Eco- Index Nike, Inc.√2009√√ Adidas AG√√2010 Puma AG√√√ Asics Corporation√√ Geox SpA Skechers USA Inc. Wolverine Worldwide Inc. Ecco Sko A/S The Timberland Co.2010√√ Jones Apparel Grp BICEP: Business for Innovative Climate and Energy Policy

 Competitive Dynamics Brooks?

 Significantly increasing demands for transparency – process, product, company  Also, significant increasing mechanisms for conveying transparency – some legitimate, some not. Fair amount of confusion.  Leadership matters! A lot! Need to discover what is authentic about what a company says…and what others say about a company.  Apparel and Footwear – competition is primary driver of sustainability-based initiatives. Consumers and governments are important, but secondary.

 In teams of 4 or 5 (not 1,2,3,6, etc.) 1. Identify and describe the key risks that UPS wanted to ‘proactively manage’. Understand UPS’ strategy by placing these risks into the four quadrants of the Sustainability Value Framework. 2. Identify and briefly describe UPS’ key stakeholders and how they relate to CSR risks. 3. Share with each other the key outcomes of your teams’ transparency analyses of UPS’ recent CSR report. 4. Identify the ways you believe that transparency through its CSR report helps/doesn’t help UPS ‘proactively manage risk’.