Safety as a Springboard to Sustainability

1. Safety as a Springboard to Sustainability International Rail Safety Conference: Denver, Colorado 5th to 10th October 2008 James Catmur Arthur D. Little Limited 300 Science Park Cambridge United Kingdom Telephone +44 (0)870 336 6700 Fax + 44 (0)870 336 6701 www.adlittle.com

2. Safety as a Springboard to Sustainability Introduction Background • Safety is fundamental to the operations of public transport, poor safety performance can threaten the existence of a firm • Safety has been a long-standing fact of business for most firms • The way that company chooses to act forms part of its own responsibility as a corporation Problem • Sustainability is much higher up everyone’s agenda • There is an urgent need to respond • However, many companies are ill-equipped to tackle this area Answer • A robust safety culture within a firm can be an excellent springboard to wider sustainability Safety as a Springboard to Sustainability.ppt

3. Safety as a Springboard to Sustainability Safety as a starting point • Safety is part of the license to operate • As such it is already well managed • Safety has benefits for the bottom line and longevity of the firm • Reduced Costs – improved safety means services run to time reducing potential fines • Increased Opportunities – a good safety record can be the difference between success and failure in competitive tenders Safety as a Springboard to Sustainability.ppt

4. Safety as a Springboard to Sustainability Past focus on safety is being mirrored by the new focus on climate change The past focus on Safety… …is now mirrored by Sustainability • The Clapham accident • A turning point for UK rail safety • The Ladbroke Grove accident • Significant media attention • Increase in stakeholder interest • More interventionist approach by the safety regulator • Significant activity to address concerns • Intergovernmental Panel • Scientific evidence of mankind’s contribution to climate change • The Stern Review • Economic assessment • Climate change shown to have an impact on the global economy • Activity to address concerns Safety high up the agenda Sustainability higher up the agenda Safety as a Springboard to Sustainability.ppt

5. Safety as a Springboard to Sustainability Increasing importance of climate change brings with it pressure on other issues It is not enough to simply manage climate change and CO2 Corporations are in the Spotlight • Individual corporations are targeted as emitters, for example: • BAA/Heathrow airport are criticised over expansion plans • Drax, regularly attacked by pressure groups Leaders have Emerged • Virgin recently trialled an aircraft on running on biofuel • UK retailer Marks and Spencer have adopted “Plan A” Leadership Requires a Holistic Approach • The spotlight on climate change has elevated attention on other sustainability issues, for example human rights, supply chain working conditions, governance, corruption and benefit to society Safety as a Springboard to Sustainability.ppt

6. The influence of SRI funds is filtering into mainstream investment decisions 1. Investor expectations • Companies could enhance position through environmental performance 2. Tendering requirements • Could use best practice to help shape regulation 3. Regulation • Rising resource costs a threat to transport companies but could build client base 4. Resources • Competition from efficient vehicles could undermine the inherent advantage of mass transit 5. Competition • Integration of sustainability into decision making places pressure on poorly performing companies 6. Changing attitudes Safety as a Springboard to Sustainability The drivers are growing, especially relating to risks and opportunities associated with climate change Market Drivers Safety as a Springboard to Sustainability.ppt

7. Safety as a Springboard to Sustainability The difficulty is understanding which issues are relevant and where to draw the line Navigating corporate social responsibility isn’t easy Corporate citizenship Leadership ethics Probity Governance CSR Responsible marketing Disclosure Transparency Reputation management Environmental stewardship Non-financial risks Responsibility Engagement CSR Corporate social opportunity Enhanced analytics Accountability Community investment Business principles Social products Philanthropy Good business Competitive integration Sustainable innovation Sustainability- driven-innovation ESG risks Safety as a Springboard to Sustainability.ppt

8. Safety as a Springboard to Sustainability Assess how social and environmental issues are managed across a business Governance Business integrationof sustainability Environmental stewardship Social performance • Vision/mission • Board of Directors • Organisation and culture • Business principles • Performance measurement & management • Stakeholder engagement • Profitability and growth • Reputation • Strategic management • R&D • Products and services • Markets • Partners and alliances • Environmental impact • Resource utilisation • Facilities and operations • Climate Change and carbon • Workplace • Treatment of employees • Human rights • Community • Benefit to society Safety as a Springboard to Sustainability.ppt

9. Safety as a Springboard to Sustainability Review company’s positioning in the ‘zone of acceptability’, and against peers and investor expectations Sustainable Performance Leading edge • Scores 5 on the ADL Sustainable Performance Template • Performance is tomorrow’s leading practice Sustainable performance 5 Leading Edge Zone of acceptability Performance Top-quartile • Scores 3 on the ADL Sustainable Performance Template • Performance is leading edge for the industry 3 Prevailing 1 Prevailing Trailing edge • Scores 1 on the ADL Sustainable Performance Template • Performance is consistent with industry Past Present Future Timeline Safety as a Springboard to Sustainability.ppt

10. Company performance Future Stakeholder Expectations Zone of competitor performance1 Safety as a Springboard to Sustainability Results were benchmarked to highlight the strengths, weaknesses, opportunities and threats 5 4 3 2 1 - Vision/Mission Board of Directors Organisation and Culture Business Principles Performance Measurement Stakeholder Engagement Research and Development Products and Services Markets Partners and Alliances Environmental Impact Resource Utilisation Facilities and Operations Workplace Treatment of Employees Human Rights Community Benefit to Society Profitability and Growth Climate Change and Carbon Reputation Management Strategic Management Score Governance Integration of Sustainability Environmental Stewardship Social Performance 1Based on four benchmark companies examined for this project Safety as a Springboard to Sustainability.ppt

11. Safety as a Springboard to Sustainability To address the key drivers of sustainability, three different options are presented • Maintain present activities, including biofuel and hybrid trials, eco-driving initiatives and technology upgrades at depots • Communication is enhanced Governance issues such as determining and publicising policies and measuring performance are addressed 1: Risk Management • Overhauls approach to those areas where it is deemed furthest from future stakeholder expectations • Seeks to become identified with sustainability in its business but maintains a cautious approach to rolling out new technologies, etc 2: Stakeholder Responsive • Leads and shapes the direction of sustainability in the transport sector, working with regulators to influence new regulation • Seeks out new avenues for revenue from intelligent transport • Maintains a leadership position in resource management 3: Leading Edge Safety as a Springboard to Sustainability.ppt

12. Business As Usual Leading Edge Stakeholder Responsive Risk Management Safety as a Springboard to Sustainability The three options, with ‘leading edge’ matching both peer performance and investor expectations 5 4 3 2 1 - Vision/Mission Board of Directors Organisation and Culture Business Principles Performance Measurement Stakeholder Engagement Research and Development Products and Services Markets Partners and Alliances Environmental Impact Resource Utilisation Facilities and Operations Workplace Treatment of Employees Human Rights Community Benefit to Society Profitability and Growth Climate Change and Carbon Reputation Management Strategic Management Score Governance Integration of Sustainability Environmental Stewardship Social Performance Safety as a Springboard to Sustainability.ppt

13. Safety as a Springboard to Sustainability Companies who have learned to manage safety are better placed to manage sustainability • In reality it is no more of a change than that required to manage safety • Companies who already manage safety: • Can see the tangible financial and operational value • Can also accept and understand the intangible benefits • Are well placed to use the same experience to manage sustainability: • Seeing beyond the jargon and image of being “Sustainable” • Understand that it is about protecting and growing the firm • An approach can be taken which builds upon strengths developed in safety and other key sustainability related areas The effort required to manage sustainability may seem high Focus on issues which are material and which are demonstrated a through the business case – just like any other strategic business issue Safety as a Springboard to Sustainability.ppt