ENVIRONMENTAL INNOVATION AND CREATING SUSTAINABLE VALUE

HANK HABICHTManaging PartnerSAIL Venture Partners

SAIL Capital PartnersCalifornia | New York | Washington DC

Environmental Innovation and Creating Sustainable Value: Current Trends Shaping the Future of

Environmental Policy for the Retail Industry

Hank HabichtManaging Partner

• World-Renowned Cleantech Team

• Unparalleled Cleantech Domain Expertise

• Proven Ability to Invest in Leaders

• Track Record of Adding Strategic Value

• Vast Global Cleantech Networks

SAIL Snapshot

My Perspective

• 30 years – Government, Business, NGO, Investor

• SAIL Capital Partners – Starting third fund; pure play Cleantech Investment Team and focus

• Sustainability is about reducing environmental footprint in a way that delivers business value

• Leadership requires partnerships across institutions and sectors

• Innovative startups teaming with world’s largest corporations

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Strategic Relationships

Energy Green Innovation

Water

SAIL’s Current Portfolio

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Situation Analysis / Trends

• US Economic distractions – regulations, climate initiatives are under attack

• 70-75% Global demand growth is in non-OECD countries = trillions spent on greenfield infrastructure

• Biggest sustainability drivers:‐ Resource constraints – including climate induced food

pressures‐ Cost‐ Human health – viruses/microbes‐ Pollution/physical ecosystems

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Anomalies = Opportunity

• 1000’s of power plants idle most of the day• Water is biggest consumer of energy; vice versa• Waste is rampant in energy, water and agricultural, and in

pipes and wires• Of the billions of gallons of water treated to drinking

water standards, how much is actually drunk?• Intermittency of renewable power is unnecessary constraint• Diverse sources of trillions in financial capital seek “impact” and

“shared value”, yet are uncommitted. (See JPM and Michael Porter)

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Industry Issues

Key issues affecting companies in the retail and consumer goods sectors include:

• Price deflation versus rising costs• M&A expansion and consolidation• Supply chain management and stock control• Sourcing overseas and CSR• Accounting, reporting & regulation• Consumer and demographic trends• Human resources issues• Tax issues - PricewaterhouseCoopers

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For the Audience

What issue keeps you most awake at night?

a. RCRAb. Supply chain scrutinyc. Climate change d. Community support

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Environmental Concerns Across the Globe

Concerns are highest in developing countries, where people have more direct experience with environmental issues

Source: The Futures Company, Global SEE Monitor 2008, Unilever

% ‘Concerned and affects me or my family directly’

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Business Case: Growth in developing markets

D&E markets will suffer the worst effects of climate change:

• Acute shortages of water

• Desertification of agricultural land

• The winning companies will anticipate these trends with products that address changing consumer priorities

- Unilever Research

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Environmental Concerns during Economic Crisis

A surprisingly small percentage claim that the economic crisis has changed their view on environmental issues

Source: The Futures Company, Global SEE Monitor 2009, Unilever

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People view sustainability through a lens of proximity

Source: Unilever Qual. Research 2009

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What is Sustainable Investing?

• “Considering environmental sustainability, social responsibility and corporate governance (ESG) into the investment process.”

• “Good for people and the planet.”

• “Achieve financial goals while supporting a more sustainable economy.”

• “Creates far more prosperity with far fewer resources.”

• “Do well by doing good.”

All with the potential of a superior ROI!

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EPA: Policy Paradigm Shifts

Environmental Watchdog

Ensured that industries met legal requirements to control pollution

Pollution Preventer

Developed theory, tools, and practices that enabled it to move from controlling pollution to preventing it

Innovator

Today, draws on advances in science and technology to protect human health and the environment

- EPA, Sustainability

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Environmental Policies in Retail

1. INTERNATIONAL

• ISO 26000: 2010 – International Standard on Social Responsibility

2. NATIONAL

• EPA’s Environmentally Preferable Purchasing (EPP): supports federal government in “buying green”

• RCRA (Resource Conservation and Recovery Act) – Compliance and sustainability resources for retailers, including hazardous waste

3. STATE-LEVEL

• SB 657 - California Transparency in Supply Chains Act

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For the Audience

Which of the following best practices support store level compliance?

a. routine inspectionsb. employee trainingc. waste reduction programsd. a & b onlye. all of the above

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Sustainable Supply Chains

1. Dodd-Frank and Conflict Minerals• Illicit Minerals Trade Strategy• Due diligence on source and chain of materials

2. How retail companies can determine the precise sources of minerals

3. Supply chain examinations

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Greening the Supply Chain

Australia -GM HoldenBrazil - Dow

Chemical & J&J

China - GM & SGM

El Salvador & Guatemala –Wal-Mart

Maya Rainforest Preservation (with TNC & Rainforest

lAlliance)

Mexico - Alcoa

Romania - Alcoa

Costa Rica & Nicaragua – Coca Cola & Marriott

Chile & Morocco– Cleaner Production Partnership

World Environment Center: Implementing On-the-Ground Business Solutions, 2005-2011

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Greening the Supply Chain: Process

5) Suppliers’ initial

self-assessment of current performance, capabilities, and needs

3) Forming a supplier

core staff team

2) Kick-off event with senior

leadership involvement

1) Select and invite

suppliers to participate

6) Developing key

project goals and scope

7) Conducting

site visits and (web-based) training

8) Mid-term assessment

/necessary adjustments and follow-up visits

9) Finalizing the project

with Documentation of results

10) MNE’s feedback

to Suppliers and WEC

11) Learning and

celebrating success

MNE’s trackingfuture progress

© World Environment Center, 2009

BUSINESS VALUE

è Mitigating business risk

è Reducing costs

è Motivating better performing suppliers

è Preserving business continuity

è Enhancing market access and business strategy freedom

4) Two-day orientation

& training workshop

KEY FACTORS TO SUCCESS

(1) Obtaining senior management commitment

(2) Providing direct, on-the-ground support to suppliers

(3) Acknowledging the wide range of supplier competencies

(4) Demonstrating the economic value to suppliers

(5) Recognizing external initiatives for greener supplier performance

(6) Working within the national culture with local people

WEC regular reporting to Multinational

Enterprise (MNE)

Source: World Environment Center, 2009

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Drivers in Your Business

• Avoid palpable risk (including civil and enforcement liability)

• Find Cost Savings – Utilities, resources and supply chain costs, absenteeism

• Grow Sales – Drive committing customers loyalty

Source: BCG-WSF Report, Coca Cola Water Strategy

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Profitable Areas of Focus

• Supply Chain

• Embedded “virtual” Content

• Site Management – Non-point pollution/runoff

• Green Buildings

• Chemicals/Safety

• Partnerships in Communities

and New Markets

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Technologies/Initiatives

• Motors/Building envelope

• Building Energy Management

• Lighting

• Vehicles

• Alternatives to Chemicals

• Supply Chain Sustainability / Transparency

• Community Initiatives /Partnerships

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A Case Study in Green Cleaning

A revolutionary product that cleans and sanitizes with a 2-6 second spray of tap water, without the use of chemicals.