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A presentation by Ralf Barkemeyerat TBLI CONFERENCE EUROPE 2008.
Citation preview
Euromed Management School, Marseille
Queen‘s University Management School
Belfast
Sustainable Value In Automobile Production
An analysis of the sustainability performance of automobile manufacturers worldwide
Dr Tobias Hahn
Euromed Management School, Marseille (F)
Ralf Barkemeyer, Prof Frank Figge
Queen’s University Management School, Belfast (UK)
TBLI Conference Europe 2008, Amsterdam, 12-14 November 2008
- 2 -© Hahn, Figge & Barkemeyer 2008
Outline
– Introduction to the Sustainable Value approach– Rationale– How to calculate Sustainable Value
– Application to the car manufacturing sector worldwide
– Survey design– Some key results– Limitations & outlook
- 3 -© Hahn, Figge & Barkemeyer 2008
Sustainable Value approach in a nutshell Sustainable Value
– has been developed by Prof Frank Figge (Queen’s University Management School, Belfast/UK) and Dr Tobias Hahn (Euromed Management School Marseille/France).
– is the first value-oriented approach to assess corporate sustainability performance.
– assesses environmental and social resources analogously to the way economic resources are valued using opportunity cost.
– expresses the sustainable performance of a company in monetary terms (like e.g. in €).
– shows which companies use their economic, environmental and social resources in a value-creating way.
- 4 -© Hahn, Figge & Barkemeyer 2008
Financial market perspective versus Sustainability perspective
Financial markets only focus on economic capital. Objective: above average (risk-adjusted) return on
capital.
This falls short of the sustainability concept Companies not only use economic capital but also
environmental and social resources. Without environmental and social resources there is no
return. From the viewpoint of sustainability focussing only on
return on capital is insufficient. How can we determine if a company has created value
with its economic, environmental and social resources?
- 5 -© Hahn, Figge & Barkemeyer 2008
When are resources used in a value-creating way?
In general, value is created whenever the return exceeds costs:
Value = Return – Costs
This rule is fundamental to any economic assessment of corporate performance.
Sustainable Value extends this basic rule to environmental and social resources.
- 6 -© Hahn, Figge & Barkemeyer 2008
Easy in theory – difficult in practice
- > 0
Challenge: We need to express this in the same unit!
- 7 -© Hahn, Figge & Barkemeyer 2008
The Value-Oriented Approach
How much return is created?– How much € return is created per ton of CO2?
– How much € return is created per ton of VOC?
Compare the return of alternative uses (opportunity costs)– When used in another place – how much more return is
created (opportunity cost)?– Value is created only if the return exceeds the opportunity
costs.
- 8 -© Hahn, Figge & Barkemeyer 2008
Assessing Economic Performance...
Sources: Annual Report BMW Group 2005, Annual Reports of other car manufacturers, own calculations.
2005 BMWCar
manufacturing sector
Capital efficiency [EBIT / Total assets]
5.09% 2.53%
Value spread 2.56%
Capital use 74,566,000,000 €
Value contribution 1,905,337,764 €
- 9 -© Hahn, Figge & Barkemeyer 2008
… and Environmental Performance, analogously.
Sources: Annual Report BMW Group 2005, Sustainability Report BMW Group 2007/2008, Annual and Sustainability/Environmental Reports of other car manufacturers, own
calculations.
2005 BMWCar
manufacturing sector
Water-Efficiency [EBIT / m³ Water]
1,110 102
Value spread [EBIT / m³ Water]
1,008
Water use [m³] 3,417,341
Value contribution 3,446,088,239 €
- 10 -© Hahn, Figge & Barkemeyer 2008
The Assessment in 5 Steps: The BMW Case
Amount of resources used
Efficiency of BMW Group
[€/unit]
Efficiency of the car
sector [€/unit]
Value Contribution
l
j k mTotal assets [€] 74,566,000,000 * ( 0.051 - 0.025 ) = 1,905,337,764 €CO2-emissions [t] 1,304,971 * ( 2,907 - 708 ) = 2,869,053,864 €
NOx-emissions [t] 545 * ( 6,959,633 - 999,441 ) = 3,248,304,768 €
SOx-emissions [t] 8 * ( 456,987,952 - 1,886,825 ) = 3,777,339,356 €
VOC-emissions [t] 2,726 * ( 1,391,416 - 174,375 ) = 3,317,652,879 €
Waste generated [t] 454,821 * ( 8,340 - 2,269 ) = 2,761,155,769 €
Water used [m³] 3,417,341 * ( 1,110 - 102 ) = 3,446,088,239 €
Work accidents [nb] 1,061 * ( 3,574,929 - 811,168 ) = 2,932,350,774 €
Employees [nb] 105,798 * ( 35,851 - 15,861 ) = 2,114,911,663 €
Sustainable Value of BMW Group in 2005 2,930,243,897 €n
- 11 -© Hahn, Figge & Barkemeyer 2008
Scope of the Survey (i)
Car manufacturers:BMW Group, Daihatsu, DaimlerChrysler, Fiat Auto, Ford, GM, Honda, Hyundai, Isuzu, Mitsubishi, Nissan, PSA, Renault, Suzuki, Toyota, Volkswagen.
Indicators:
Environmental Indicators Social Indicators Economic indicators
CO2-Emissions No. of work accidents Total assets
NOx-Emissions No. of employees
SOx-Emissions
VOC-Emissions
Waste generated
Water use
- 12 -© Hahn, Figge & Barkemeyer 2008
Scope of the Survey (ii)
Operating profit (EBIT) from ordinary activities as the return figure.
Timeframe: 1999-2005 Average efficiency of the resource use of the car
manufacturers used as benchmark. The assessment is based on the environmental,
social, sustainability and annual reports of the car manufacturers.
The research project has been supported by BMW Group.
- 13 -© Hahn, Figge & Barkemeyer 2008
Explanatory power of the absolute Sustainable Value
A company creates Sustainable Value whenever it uses its resources more efficiently than a benchmark.
A positive Sustainable Value shows which companies use their economic, environmental, and social resources more efficiently than the sector on average.
A positive Sustainable Value shows the excess profit that is created because the resources have been used by a car manufacturer instead of by the sector on average.
Sustainable Value provides a monetary assessment of the sustainable out- or under-performance of a company.
- 14 -© Hahn, Figge & Barkemeyer 2008
Sustainable Value of Car Manufacturers(in thousand €)
1999 2000 2001 2002 2003 2004 2005
BMW Group 1,400,966 1,896,370 2,665,413 2,430,319 2,257,434 2,610,151 2,930,244
Daihatsu -230,631 -66,596 44,667 -174,125 -96,576 -83,906 15,773
DaimlerChrysler 4,356,271 -185,248 -2,304,332 1,414,477 1,198,706 1,803,638 1,532,179
Fiat Auto -1,415,742 -1,238,910 -1,219,718 -1,750,443 -1,389,213 -1,340,154 -929,643
Ford -105,608 977,759 -3,866,480 -3,532,873 -2,469,689 -1,186,707 -1,598,344
GM -3,449,413 -3,192,807 -5,388,452 -8,732,589 -6,311,083 -7,515,033 -13,717,362
Honda 478,627 800,889 1,727,173 1,249,135 924,972 864,987 1,949,269
Hyundai n/a n/a 1,757,274 1,339,793 806,052 302,486 772,099
Isuzu -435,583 -246,639 -59,383 -55,673 326,549 288,787 261,617
Mitsubishi -495,152 -868,822 -126,897 -6,986 -153,082 -727,595 -253,980
Nissan n/a n/a n/a 2,039,834 1,994,571 1,769,378 2,282,111
PSA -915,012 -450,172 338,220 161,119 -370,795 -336,059 183,565
Renault -256,499 -231,241 -831,971 -540,733 -533,732 528,852 -62,565
Suzuki -57,677 7,624 182,163 136,348 166,032 156,577 162,360
Toyota 1,623,358 3,025,886 5,358,868 5,091,582 5,690,916 5,031,069 6,502,027
Volkswagen -497,907 -228,095 1,723,455 930,817 -2,041,062 -2,166,474 -29,349
- 15 -© Hahn, Figge & Barkemeyer 2008
Sustainable Value of Car Manufacturers
-14,000,000,000 €
-13,000,000,000 €
-12,000,000,000 €
-11,000,000,000 €
-10,000,000,000 €
-9,000,000,000 €
-8,000,000,000 €
-7,000,000,000 €
-6,000,000,000 €
-5,000,000,000 €
-4,000,000,000 €
-3,000,000,000 €
-2,000,000,000 €
-1,000,000,000 €
0 €
1,000,000,000 €
2,000,000,000 €
3,000,000,000 €
4,000,000,000 €
5,000,000,000 €
6,000,000,000 €
7,000,000,000 €
1999 2000 2001 2002 2003 2004 2005
Su
sta
inab
le V
alu
e
BMW Group
Daihatsu
DaimlerChrysler
Fiat Auto
Ford
GM
Honda
Hyundai
Isuzu
Mitsubishi
Nissan
PSA
Renault
Suzuki
Toyota
Volkswagen
- 16 -© Hahn, Figge & Barkemeyer 2008
Sustainable Value and Company Size
The absolute Sustainable Value shows the amount of value that has been created by the use of the set of environmental, social and economic resources by a company in comparison to the car manufacturing sector on average.
Bigger companies tend to produce higher Sustainable Value indicators (positive as well as negative) as they produce more.
To correct for firm size, Sustainable Value can be divided by sales (Sustainable Value Margin).
The Sustainable Value Margin expresses Sustainable Value created by a company as the percentage of the sales of a company.
- 17 -© Hahn, Figge & Barkemeyer 2008
Sustainable Value per Sales: Sustainable Value Margin
1999 2000 2001 2002 2003 2004 2005 2006*
BMW Group 4.07% 5.09% 6.93% 5.73% 5.44% 5.89% 6.28%
Daihatsu -2.33% -0.76% 0.59% -2.38% -1.40% -1.06% 0.19%
DaimlerChrysler 2.90% -0.11% -1.51% 0.94% 0.86% 1.30% 1.02%
Fiat Auto -2.94% -4.95% -4.99% -7.90% -6.94% -6.52% -4.76%
Ford -0.07% 0.53% -2.13% -2.04% -1.70% -0.86% -1.12%
GM -2.08% -1.60% -2.72% -4.66% -3.85% -4.83% -8.87%
Honda 1.09% 1.71% 3.74% 2.67% 2.26% 2.01% 4.46%
Hyundai n/a n/a 5.17% 3.50% 2.36% 0.82% 1.73%
Isuzu -5.24% -2.65% -0.80% -0.84% 4.56% 4.11% 3.66%
Mitsubishi -2.34% -3.97% -0.60% -0.05% -1.61% -7.82% -2.59%
Nissan n/a n/a n/a 4.16% 4.09% 3.39% 4.11%
PSA -2.71% -1.15% 0.72% 0.40% -0.74% -0.69% 0.26%
Renault -0.68% -0.58% -2.29% -1.49% -1.42% 1.30% -0.15%
Suzuki -0.47% 0.05% 1.40% 1.07% 1.44% 1.31% 1.23%
Toyota 2.43% 3.17% 5.60% 5.52% 5.98% 4.98% 5.91%
Volkswagen -0.79% -0.36% 1.95% 1.07% -2.34% -2.44% -0.03%* = Trend
- 18 -© Hahn, Figge & Barkemeyer 2008
Sustainable Value Margin Trends:Europe
-9%
-8%
-7%
-6%
-5%
-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
7%
1999 2000 2001 2002 2003 2004 2005
Su
sta
inab
le V
alu
e /
Sale
s
BMW Group
DaimlerChrysler
Fiat Auto
PSA
Renault
Volkswagen
- 19 -© Hahn, Figge & Barkemeyer 2008
Sustainable Value Margin Trends:Asia
-6%
-5%
-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
7%
1999 2000 2001 2002 2003 2004 2005
Su
sta
inab
le V
alu
e /
Sale
s
Daihatsu
Honda
Hyundai
Isuzu
Mitsubishi
Nissan
Suzuki
Toyota
Series5
BMW Group
- 20 -© Hahn, Figge & Barkemeyer 2008
Sustainable Value Margin Trends:North America
-9%
-8%
-7%
-6%
-5%
-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
7%
1999 2000 2001 2002 2003 2004 2005
Su
sta
inab
le V
alu
e /
Sale
s
Ford
GM
Series1
BMW Group
- 21 -© Hahn, Figge & Barkemeyer 2008
Ranking: Sustainable Value Margin
1999 2000 2001 2002 2003 2004 2005
BMW Group 1 1 1 1 2 1 1
Daihatsu 10 9 8 14 10 12 10
DaimlerChrysler 2 6 11 8 8 7 8
Fiat Auto 13 14 15 16 16 15 15
Ford 5 4 12 13 13 11 13
GM 9 11 14 15 15 14 16
Honda 4 3 4 5 6 5 3
Hyundai n/a n/a 3 4 5 9 6
Isuzu 14 12 10 11 3 3 5
Mitsubishi 11 13 9 10 12 16 14
Nissan n/a n/a n/a 3 4 4 4
PSA 12 10 7 9 9 10 9
Renault 7 8 13 12 11 8 12
Suzuki 6 5 6 6 7 6 7
Toyota 3 2 2 2 1 2 2
Volkswagen 8 7 5 7 14 13 11
- 22 -© Hahn, Figge & Barkemeyer 2008
Sustainable Value Margin: PSA versus Renault
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
1999 2000 2001 2002 2003 2004 2005
Su
sta
ina
ble
Va
lue
a
s P
erc
en
tag
e o
f S
ale
s
FIAT Auto BMW Group
PSA Renault
- 23 -© Hahn, Figge & Barkemeyer 2008
PSA‘s Sustainable Value1999-2005 (Million €)
1999 2000 2001 2002 2003 2004 2005
Total assets -283 472 1,263 1,075 316 190 189
CO2-emissions 238 778 1,423 1,505 1,160 1,254 1,207
NOx-emissions -64 481 845 1,386 708 772 1,018
SOx-emissions -2,187 -454 -509 34 -449 561 967
VOC-emissions -2,168 -2,150 -753 -1,539 -2,097 -2,144 -1,351
Total waste generated -567 -319 440 899 382 320 671
Water use -1,519 -1,174 -108 59 -875 -1,012 -432
No. of work accidents -357 710 -986 -750 -1,020 750
No. of employees -1,686 -1,328 -266 -982 -1,732 -1,947 -1,367
Sustainable Value -915 -450 338 161 -371 -336 184
Sustainable Value Margin -2.71% -1.15% 0.72% 0.40% -0.74% -0.69% 0.26%
For comparison
Operating profit (million €) 1,674 2,121 2,652 2,913 2,195 2,182 1,940
Re
sou
rce
s
Value contributions in million €
- 24 -© Hahn, Figge & Barkemeyer 2008
Renault‘s Sustainable Value1999-2005 (Million €)
1999 2000 2001 2002 2003 2004 2005
Total assets 83 197 -784 -264 -485 410 -409
CO2-emissions 1,547 1,418 66 874 764 1,775 797
NOx-emissions 198 1,271 571
SOx-emissions -168 1,219 606
VOC-emissions -1,139 -1,118 -1,781 -1,635 -1,442 -396 -831
Total waste generated -1,201 -1,110 -1,881 -1,649 -1,668 -437 -792
Water use -266 -271 -1,121 -858 -962 79 -504
No. of work accidents -302 104 -331 -222 126 1,023 683
No. of employees -1,029 -1,301 -1,656 -1,113 -1,167 -184 -685
Sustainable Value -256 -231 -832 -541 -534 529 -63
Sustainable Value Margin -0.68% -0.58% -2.29% -1.49% -1.42% 1.30% -0.15%
For comparison
Operating profit (million €) 2,205 2,022 473 1,483 1,402 2,418 1,323
Re
sou
rce
s
Value contributions in million €
- 25 -© Hahn, Figge & Barkemeyer 2008
Resource specific Ranking Sustainable Value Margin 2005
To
tal
ass
ets
CO
2-
em
issio
ns
NO
x-
em
issio
ns
SO
x-
em
issio
ns
VO
C-
em
issio
ns
To
tal
waste
g
en
era
ted
Wate
r u
se
No
. o
f w
ork
acc
ide
nts
No
. o
f em
plo
yees
OV
ER
AL
L
RA
NK
Ranks in 2005
BMW Group 4 2 1 1 3 3 1 1 4 1
Daihatsu 7 10 9 6 10 11 12 8 10
DaimlerChrysler 10 11 6 5 5 7 6 9 8
Fiat Auto 15 16 15 14 16 15 15
Ford 13 13 9 10 13 6 10 13
GM 16 15 12 12 14 15 15 7 16 16
Honda 2 1 2 1 3 2 3
Hyundai 8 9 4 4 8 6 7 2 6 6
Isuzu 5 5 3 3 4 4 5 5 5
Mitsubishi 14 14 11 11 12 13 14 13 14
Nissan 1 4 5 4 3 4
PSA 9 6 7 9 13 9 10 4 12 9
Renault 12 7 8 10 11 12 11 3 11 12
Suzuki 6 8 5 7 6 9 7 7
Toyota 3 3 2 2 1 2 2 1 2
Volkswagen 11 12 10 8 7 8 8 5 14 11
- 26 -© Hahn, Figge & Barkemeyer 2008
Limits and Outlook
Life cycle issues – At this stage, Sustainable Value does not cover resource
use up and down the value chain. Data availability and quality
– Data from corporate reporting insufficiently standardised.– Definitions of indicators vary.– Reported environmental and social data often does not
cover the scope of financial information. Inclusion of social indicators remains difficult
– Not all social information is available in quantified absolute terms.
Benchmark does not define a state of sustainability.
- 27 -© Hahn, Figge & Barkemeyer 2008
Data Collection and Verification: An Example of Ford
There is less mineral waste worldwide than in North America!
http
://ww
w.fo
rd.co
m/e
n/co
mp
an
y/
ab
ou
t/su
stain
ab
ility/re
port/
en
vD
ata
Waste
.htm
- 28 -© Hahn, Figge & Barkemeyer 2008
Data Collection and Verification: Sometimes it’s just hard to believe…
Mitsubishi Motors Corp. Environmental
Sustainability Report 2004, p. 48
Daihatsu Group Environmental
Report 2005, p. 49
- 29 -© Hahn, Figge & Barkemeyer 2008
Value of Sustainable Value
Sustainable Value applies the logic of investment performance assessment to environmental and social resources.
To create value the return on environmental resources must cover the costs of the resources.
Sustainable Value compares the resource use of a company to a benchmark and thus defines the cost of a resource via opportunity costs.
Sustainable Value can be used with different benchmarks. As a result, Sustainable Value expresses corporate
environmental or sustainable performance in monetary terms.
Integrated triple bottom line assessment.
- 30 -© Hahn, Figge & Barkemeyer 2008
More information on the internet:
The study and more information on the Sustainable Value approach are freely available at:
www.sustainablevalue.com
- 31 -© Hahn, Figge & Barkemeyer 2008
www.sustainablevaluecalculator.com
- 32 -© Hahn, Figge & Barkemeyer 2008
Contact information
Dr Tobias HahnAssociate Professor of Corporate Sustainability, CSR and Environmental Management
Euromed Management SchoolDomaine de Luminy - BP 921 13 288 Marseille cedex 9, France
E-Mail: [email protected]
Professor Frank FiggeProfessor of Management and Sustainability
Queen's University Management School25 University SquareBelfast BT7 1NN, Northern Ireland, UK
E-Mail: [email protected]
- 33 -© Hahn, Figge & Barkemeyer 2008
Thank you very much!