Krista Gullo

1
Engaging Stakeholders in a Report Review Process

• Krista Gullo
• Sustainable Business Strategies,
• Ford Motor Company
• June 14, 2006

2
Background

• History
• Vision
• Media-Format
• Whats different in 2005?
• Key Drivers

3
History of Fords reporting
4
Reporting vision

• Ford Motor Company is a world leader its
  sustainability reporting. Reporting is the basis
  of organizational learning. It demonstrates our
  values and both reflects and drives outstanding
  economic, environmental and social performance.

5
Media Format

• The Focus
• Continue current strategy big book supported
  by well stocked, easy to use web site. An
  award-winning classic, wholly reliable, in line
  with other reporters.
• The Escape Hybrid
• Enhance the current model with fresh thinking
  modified print report covering issues and key
  data with detailed web site. Recognizably
  comfortable but with novel aspects.
• The Model U
• Reinvent the report with an experimental,
  stakeholder-focused approach detailed web
  report supported by new types of printed support
  items.

We were going for a mix of the Escape
Hybrid-Model U for 2004/2005
6
Whats different in 2005?

• Sustainability vs. Corporate Citizenship
• Shorter, punchier print report, focused on small
  set of most material issues
• Comprehensive Web report
• Tone more challenging, driving the agenda
• Part of a suite of communication tools
• Materiality analysis
• Use of Report Review Committee to get stakeholder
  input, guidance and an opinion

7
Key drivers
Reporting strategy
Report Review Committee
Materiality analysis
8
Report Review Committee

• Purpose
• Roles
• Process
• Members
• Rules of Engagement
• Outcome
• Reactions
• Benefits
• Future plans

9
Purpose

• In the Part A of the 2002 version of the GRI,
  Using the GRI Guidelines, it states that a
  primary goal of reporting is to contribute to an
  ongoing stakeholder dialogue, and
• In Part C, Report Content, GRI asks reporting
  organizations to explain how stakeholders
  contribute to identifying and reporting the main
  issues for the organization related to the themes
  of sustainable development.

10
RRC Role

• The role of the RRC was to assist in development
  of the report and to increase its usability and
  relevance.
• Ford requested that the RRC focus its evaluation
  on how well the companys report aligns with the
  principles of Relevance, Completeness,
  Transparency and Inclusiveness (Reporting
  Principles found in Part B of the 2002 version of
  the GRI)
• The Committee was not asked to engage in formal
  verification or assurance processes regarding the
  accuracy or completeness of the information or
  data presented in the report.

11
Time Commitments and Compensation

• The time commitment asked of Report Review
  Committee members included
• Up to 8 hours of preparatory reading per meeting
• Participation in 2, 1.5 day, in-person meetings
• Up to 8 hours of phone and email participation in
  drafting of the Committee opinion letter.
• Each Committee Member received an honorarium for
  their participation in this process. If they
  chose, any Committee Member could decline
  reimbursement or nominate a charity to receive an
  equivalent amount as a donation.
• All meeting-related travel expenses were covered
  by Ford.
• Ford paid all expenses related to hosting and
  organizing the event.

12
Ford Role

• The RRC process was managed inside Ford by the
  Sustainable Business Strategies (SBS) team.
• In addition to SBS staff, the RRC process
  involved more than 20 Ford staff and senior
  management from different parts of the Company,
  including Purchasing, Governmental Affairs,
  Public Affairs, Marketing, Automotive and
  Workplace Safety, Environmental Quality,
  Economics and the Scientific Research Lab.

13
Chairperson and Facilitation Role

• The panel was chaired by a representative from
  Ceres. As chair, Ceres led the development of
  the committees opinion letter. Ceres also
  served as a full committee member and signed the
  opinion letter.
• SustainAbility acted as the facilitator for the
  RRC meetings.

14
Process

• 2005
• January Began work with Ceres and SustainAbility
  to create a Report Review Committee inspired by
  Nike, Inc.
• February Terms of Reference created Members
  identified and invited
• April In person meeting in Dearborn MI
• July Teleconference sessions
• August In person meeting in Boston MA Letter
  finalized
• October Honorariums and Carbon Offsets completed
• 2006
• February Briefing on Report Strategy

15
Meeting One, April 2005

• The first meeting of the Committee provided
  members with the opportunity to react to Ford's
  2003/04 Report, its reporting strategy and
  2004/05 Report outline.
• Presentations from Ford subject matters experts
• Review of KPI data
• Ford also solicited members' opinions on how to
  increase the degree to which its reporting aligns
  with the GRI Reporting Principles.

16
Meeting Two, August 2005

• The second meeting allowed Committee members to
  assess Fords success in producing a report that
  compliments its stakeholder dialogue efforts,
  addresses the sustainability performance issues
  most important to stakeholders and demonstrates
  consistency with the GRIs Reporting Principles.
  
• Discussion at this meeting was based on a draft
  web site and blue line draft of Fords 2004/05
  Report.

17
RRC members

• Bill BoyleDirector of Performance Reporting, BP
• Marc BrammerDirector of Research, Innovest
• Anthony EwingLecturer in Law, Columbia Law
  School
• Tom GladwinMax McGraw Professor of Sustainable
  Enterprise, University of Michigan, and Director
  of the Erb Institute for Global Sustainable
  Enterprise, jointly in the Ross School of
  Business and School of Natural Resources
  Environment
• Debra HallDirector, Corporate Accountability
  Program, Ceres
• Ritu Kumar Director, TERI-Europe
• Jason MarkClean Vehicles Program Director, Union
  of Concerned Scientists
• J. Bo Young LeeDirector, Advisory Services,
  Catalyst
• Garel RhysSMMT Chair in Motor Industry
  Economics, Cardiff Business School
• Amanda SauerSustainable Enterprise Program,
  World Resources Institute
• Peter SweatmanDirector, University of Michigan
  Transportation Research Institute (UMTRI)
• Betsy TaylorPresident, Center for a New American
  Dream
• John WilsonDirector for Socially Responsible
  Investing, Christian Brothers Investment Services
  
• Mark Lee, CEO SustainAbility, facilitator

18
Rules of Engagement

• Assume responsibility as individuals, not
  representatives of employers
• Treat others with respect
• Strive to seek consensus
• Agree on process for resignation and dismissal
• Limit technical language and use of jargon
• Keep contributions on point and brief.

19
Confidentiality

• The RRC process will follow the Chatham House
  Rule
• Participants are free to use the information
  received, but neither the identity nor the
  affiliation of the speaker(s), nor that of any
  other participant, may be revealed nor may it be
  mentioned that the information was received at
  such a meeting or gathering."

20
Outcome Fords value chain and its impacts
21
Outcome Materiality Matrix
22
Outcome Unedited opinion letter
23
Reactions

• Mixed press
• Mixed internally at Ford
• Inquiries from other companies regarding our
  process
• Positive from the NGO and SRI community

24
Reactions
Fords emissions record attackedFinancial
Times By James Mackintosh in LondonPublished
October 18 2005 2030 Last updated October 18
2005 2030 Ford, the third-largest carmaker, has
been attacked by its own sustainability committee
for failing to do enough to cut vehicular
greenhouse gas emissions, in spite of a 4.8 per
cent drop in the US this year. In response to the
companys annual sustainability report, issued on
Tuesday, the committee of academics,
environmental lobbyists and socially responsible
investment groups said Fords efforts to reduce
carbon dioxide emissions fall far short of the
necessary response to climate change. The
committee called for clear targets to improve
fuel economy, but welcomed efforts made to cut
CO² emissions from factories.
25
Benefits

• Brought outside stakeholder perspectives into
  Fords reporting process early enough to
  influence the actual content of the 2004/05
  Report
• Enhanced the quality and credibility of Fords
  reporting
• Solicited stakeholder input that helps Ford
  define appropriate reporting boundaries
• Directly exposed Ford management to external
  stakeholders points of view regarding the report
• Solicited stakeholder input on the value of
  assurance and Fords planned development of an
  assurance and verification strategy
• Gathered stakeholder input on existing Ford Key
  Performance Indicators (KPIs) and future KPI
  development
• Increased Ford understanding of stakeholder
  perceptions of Fords 2003/04 Report and their
  expectations for how Fords future reporting
  might evolve to best serve stakeholders diverse
  information needs
• Captured RRC members opinions of the RRC process
  itself.

26
Future plans

• Maintain contact with RRC regarding report
  strategy
• Respond to RRC letter in report website in 2006
  respond to individual RRC members as necessary
• Ceres Stakeholder team to review report website
  in 2006
• Continue development of assurance strategy for
  2007 report beginning in August including some
  new membership
• Robust check of Fords data and data collection
  system will continue, e.g. environmental and
  financial data

27
To view or order the report

• www.ford.com/go/sustainability
• Email sustaina_at_ford.com

28
Backup slides on materiality
29
Key steps in materiality analysis

• Define materiality
• Identify issues what is the range of Fords
  sustainability issues? From whose perspective?
• Prioritize issues what issues are most
  important? In what way and to whom?
• Review internal and external validation
• Use for reporting, strategy, communication

30
Criteria for material sustainability issues

• We define material issues as those that score
  highly on three criteria
• Having significant current or potential impact on
  the Company
• Of significant concern to stakeholders
• Over which Ford has a reasonable degree of control

31
What is materiality in a sustainability reporting
context?

• We consider material information to be that
  which is of greatest interest to, and which has
  the potential to affect the perception of, those
  stakeholders who wish to make informed decisions
  and judgments about the Companys commitment to
  environmental, social, and economic progress.
• Materiality as used in this sustainability
  report does not share the meaning assigned to
  this concept for purposes of financial reporting.

32
Issue Identification inputs

• Issues having significant current or potential
  impact on Ford
• Internal risk analyses
• Annual report on Form 10-K
• Fords ISO 14001 environmental control plan
• Employee surveys
• Issues of significant concern to external
  stakeholders
• Customer data
• Reputation tracking survey results
• Reports and summaries of stakeholder-based
  processes
• Sustainability context issues
• Issues identified through major initiatives like
  the UN Millennium Development Goals and
  Millennium Ecosystem Assessment

33
Inclusion of Stakeholders in Issue Identification

• Stakeholder-based process inputs
• Fords 2000 stakeholder dialogue
• Volvos 2003 stakeholder dialogue
• The first Report Review Committee in April 2005
• Shareholder resolutions and ongoing dialogue with
  filers
• WBCSD Sustainable Mobility Project
• GRI auto sector supplement
• Stakeholders represented include NGOs,
  shareholder activists, customers and the general
  public.
• We did not systematically capture the views of
  our suppliers, dealers, mainstream investors or
  host communities because we do not have
  comprehensive data for those stakeholders.

34
Issue prioritization process
35
Materiality Matrix
36
Review of Analysis

• Many rounds of revisions with the working group
• Internally with Ford Senior management
• Externally with the Report Review Committee

37
Use of Analysis

• All of the issues in the upper right (red) corner
  of the matrix are covered in the print report.
  For vehicle safety and public policy we sought to
  cover the most urgent aspects of those issues-
  vehicle safety in emerging markets and climate
  change policy
• Remaining issues in the orange area of the matrix
  are covered in the print and/or Web report,
  though some will be addressed in future reports
• We are also using the analysis to develop our
  sustainable business strategy

38
Fords value chain and its impacts
39
Challenges

• Lack of data for all stakeholders
• Subjectivity
• Issues overlap and interconnect in a complex
  system
• Completing a material report that is in
  accordance with GRI