Industrial and Farm Equipment)

Home , FANUC

ABB, Atlas Copco, Bharat Heavy Electricals, Caterpillar Inc., Cooper I n d u s201 t r2 i Sustainability e s , C u m Reporting m i n s , of D the e e r e & Top 30 Global Capital Goods Companies Company, Eaton, Fanuc, Hyundai (*Industrial and Farm Equipment)

HeavyPacific Sustainability Industries, Index Scores: IllinoisA benchmarking toolTool for online sustainability Works, reporting Komatsu, Kubota, LeGrand, MAN Group, Mitsubishi Electric, Mitsubishi Heavy Industries, Nidec, Paccar Inc., Parker Hanniﬁn, Samsung Heavy Industries, Sandvik, Schindler Holding, Schneider Electric, Shanghai Electric Group, Sumitomo Electric Industries, Vallourec, Vestas Wind Systems, W ä r t s i l ä , a n d W W G r a i n g e r

J. Emil Morhardt, Elgeritte Adidjaja, Gracie Beck, Simone Berkovitz, Carolyn Campbell, Jaclyn T. D'Arcy, Whitney Ellen Dawson, Karen de Wolski, Elizabeth Duckworth, Erin Franks, Hilary Haskell, Alan Hu, Bukola Jimoh, Quentin Jones, Sam Kahr, Eric Robert King, Jordan Lieberman, Danielle L. Manning, Stepha- nie Oehler, Daniel Olmsted, Ashley Scott, Michael Handler Shoemaker, and Sachi Singh.

*This report is based on companies in the Forbes 2010 Capital Goods sector, roughly equivalent to the Fortune Magazine Industrial & Farm Equipment sector used in our previous reports.

Contents

Topics Page The Roberts Environmental Center has been the foremost Company Rankings 3 analyst of corporate sustainability reporting for over a PSI Overview 4 decade. We analyze corporate online disclosure using our PSI Scoring in a Nutshell 5 Pacific Sustainability Index (PSI) and publish the results Lead Analyst’s Commentary 6 online. Environmental Intent Topics 9 Environmental Reporting Topics 10 Industrial Sector** 2 2 2 2 2 2 2 2 2 Social Intent Topics 11 0 0 0 0 0 0 0 0 0 Social Reporting Topics 12 0 0 0 0 0 0 1 1 1 Environmental Intent Element of the PSI Scores 13 4 5 6 7 8 9 0 1 2 X X Environmental Reporting Element of the PSI 14 Aerospace & Defense Airlines X X Scores Social Intent Element of the PSI Scores 15 Banks, Insurance X X X X X Social Reporting Element of the PSI Scores 16 Chemicals X X Environmental Intent Scores Ranking 17 Colleges/Universities Computer, Office Equipment, & X Environmental Reporting Scores Ranking 18 Services Environmental Performance Scores Ranking 19 Conglomerates X Social Intent Scores Ranking 20 Food & Beverages X X X

Social Reporting Scores Ranking 21 Electronics & Semiconductors X X X X Social Performance Scores Ranking 22 Energy & Utilities X X X X Human Rights Reporting Element 23 Entertainment X Visual Cluster Analysis 24 Performance by Country 25 Federal Agencies X Relationship Between PSI Scores and Financial 26 Food Services X

Variables Forest & Paper Products X X X Number of Explicit numerical goals Reported 29 General Merchandiser X Number of Topics Showing Performance 30 Homebuilders X Improvement over Previous Year Data Number of Topics in which Performance was 32 Household, Apparel, & Personal X Better than Sector Average Products Analyst’s Comments, alphabetically listed by 33 Industrial & Farm Equipment X X X X company name Mail, Freight, & Shipping Medical Products & Equipment X Appendix: PSI Questionnaire 63 Metals X* X X Mining, Crude Oil X* X X

Questions should be addressed to: Motor Vehicle & Parts X X X X

Municipalities X Dr. J. Emil Morhardt, Director Oil and Gas Equipment X ([email protected]) Petroleum & Refining X X X Roberts Environmental Center Pharmaceuticals X X X X X Claremont McKenna College 925 N. Mills Ave. Claremont, CA 91711-5916, USA Scientific, Photo, & Control X Equipment Direct line: (909) 621-8190 Telecommunications, Network, & X Peripherals Elgeritte Adidjaja, Research Fellow Transportation X (909) 621-8698 ([email protected]) * Multiple-sector category was separated in later years.

Departmental Secretaries: (909) 621-8298

The goal of corporate report analysis conducted by the Roberts Envir onmental Center is to acquaint students with environmental and social issues facing the world’s industries, and the ways in which industry approaches and resolves these issues. The data presented in this report were collected by student research assistants and a research fellow at the Roberts Environmental Center. Copyright 2012 © by J. Emil Morhardt. All rights reserved.

www.roberts.cmc.edu 2 Capital Goods: Industrial & Farm Equipment Sector 2012 Capital Goods (Industrial and Farm Equipment) Sector Corporate Environmental and Sustainability Reporting

Company Rankings Overall Grade A+ Wärtsilä (Finland) Wärtsilä 63.39 B+ Schneider Electric (France) B+ Mitsubishi Electric (Japan) Schneider Electric 49.89 B Sandvik (Sweden) Mitsubishi Electric 48.70 B Komatsu (Japan) Sandvik 41.20 B- Vallourec (France) B- Sumitomo Electric Industries (Japan) Komatsu 40.44 B- LeGrand (France) Vallourec 39.06 B- Kubota (Japan) Sumitomo Electric Industries 36.93 B- ABB (Switzerland) C+ Caterpillar Inc. (USA) LeGrand 36.41 C+ Mitsubishi Heavy Industries (Japan) Kubota 36.35 C+ Atlas Copco (Sweden) ABB 35.47 C+ Samsung Heavy Industries (South Korea) Caterpillar Inc. 34.22 C+ MAN Group (Germany) Mitsubishi Heavy Industries 33.49 C Deere & Company (USA) Atlas Copco 31.20 C WW Grainger (USA) C Cooper Industries (USA) Samsung Heavy Industries 30.26 C- Schindler Holding (Switzerland) MAN Group 29.58 C- Nidec (Japan) Deere & Company 26.25 C- Cummins (USA) C- Eaton (USA) WW Grainger 25.36 C- Hyundai Heavy Industries (South Cooper Industries 24.69 Korea) Schindler Holding 23.23 C- Illinois Tool Works (USA) D+ Bharat Heavy Electricals (India) Nidec 22.76 D+ Paccar Inc. (USA) Cummins 22.76 D+ Parker Hannifin (USA) Eaton 21.46 F Shanghai Electric Group (China) F Fanuc (Japan) Hyundai Heavy Industries 20.10 F Vestas Wind Systems (USA) Illinois Tool Works 19.84 Bharat Heavy Electricals 16.09 Paccar Inc. 14.27 Parker Hannifin 13.28

Shanghai Electric Group 1.98 Fanuc 0.00 Vestas Wind Systems 0.00

0 25 50 75 100

This report is an analysis of the voluntary environmental and social reporting of companies on the 2010 Forbes List Capital Goods- Industrial and Farm Equipment sector lists. Data were collected from corporate websites during the initial analysis period (dates shown below). A draft sector report was then made available online and letters were sent to all companies inviting them to review the analysis, to identify anything missed by our analysts, and to post additional material on their websites if they wished to improve their scores. Analysis Period: 2/3/2011through 6/11/2011 Draft sector report available for review: 10/22/2011through 11/25/2011

www.roberts.cmc.edu 3 Capital Goods: Industrial & Farm Equipment Sector 2012 The Pacific Sustainability Index (PSI) Overview

the PSI Scoring System The Pacific Sustainability Index (PSI) uses two systematic questionnaires to analyze the quality of the sustainability reporting—a base questionnaire for reports across sectors and a sector-specific questionnaire for companies within the same sector. The selection of questions is based on, and periodically adjusted to, the most frequently-mentioned topics in over 1,900 corporate sustainability reports analyzed from 2002 through 2009 at the Roberts Environmental Center.

The Roberts Environmental Center The Roberts Environmental Center is an environmental research institute at Claremont McKenna College (CMC). Its mission is to provide students of all the Claremont Colleges with a comprehensive and realistic understanding of today’s environmental issues and the ways in which they are being and can be resolved-- beyond the confines of traditional academic disciplines and curriculum--and to identify, publicize, and encourage policies and practices that achieve economic and social goals in the most environmentally benign and protective manner. The Center is partially funded by an endowment from George R. Roberts (Founding Partner of Kohlberg Kravis Roberts & Co. and CMC alumnus), other grants and gifts, and is staffed by faculty and students from the Claremont Colleges.

Methodology Student analysts download relevant English language web pages from the main corporate website for analysis. Our scoring excludes data independently stored outside the main corporate website or available only in hard copy. When a corporate subsidiary has its own sustainability reporting, partial credit is given to the parent company when a direct link is provided in the main corporate website. We archive these web pages as PDF files for future reference. Our analysts use a keyword search function to search reporting of specific topics, fill out a PSI scoring sheet (http://www.roberts.cmc.edu/PSI/scoringsheet.asp), and track the coverage and depths of different sustainability issues mentioned in all online materials.

Scores and Ranks When they are finished scoring, the analysts enter their scoring results into the PSI database. The PSI database calculates scores and publishes them on the Center’s website. This sector report provides an in- depth analysis on sustainability reporting of the largest companies of the sector, as listed in the latest 2010 Forbes lists. Prior to publishing our sector report, we notify companies analyzed and encourage them to provide feedback and additional new online materials, which often improve their scores.

What do the scores mean? We normalize all the scores to the potential maximum score. Scores of subsets of the overall score are also normalized to their potential maxima. The letter grades (A+, A, A-, B+, etc.), however, are normalized to the highest scoring company analyzed in the report. Grades of individual companies in the report might be different from grades posted online on the Roberts Environmental Center's website, since the normalization of scores of an individual company online is not limited to the companies analyzed in the sector report, but also includes other companies of the same sector irrespective of the year of analysis. Companies with scores in the highest 4% get an A+ and any in the bottom 4% get an F. We assign these by dividing the maximum PSI score obtained in the sector into 12 equal parts then rounding fractional score up or down. This means that A+ and F are under-represented compared to the other grades. The same technique applies to the separate categories of environmental and social scores. Thus, we grade on the curve. We assume that the highest score obtained in the sector and any scores near it represent the state-of-the-art for that sector and deserve an A+.

www.roberts.cmc.edu 4 Capital Goods: Industrial & Farm Equipment Sector 2012 PSI Scoring in a Nutshell

Our analysis of sustainability reporting has a set of basic topics applied to all organizations as well as a series of sector-specific topics. The topics are divided into environmental and social categories—the latter including human rights—and into three types of information: 1) intent, 2) reporting, and 3) performance.

1. Intent The “Intent” topics are each worth two points; one point for a discussion of intentions, vision, or plans, and one point for evidence of specific actions taken to implement them.

2. Reporting The “Reporting” topics are each worth five points and are either quantitative (for which we expect numerical data) or qualitative (for which we don’t).

For quantitative topics, one point is available for a discussion, one point for putting the information into perspective (i.e. awards, industry standards, competitor performance, etc., or if the raw data are normalized by dividing by revenue, number of employees, number of widgets produced, etc.), one point for the presence of an explicit numerical goal, one point for numerical data from a single year, and one point for similar data from a previous year.

For qualitative topics, there are three criteria summed up to five points: 1.67 points for discussion, 1.67 points for initiatives or actions, and 1.67 points for perspective.

3. Performance For each “Reporting” topic, two performance points are available.

For quantitative topics, one point is given for improvement from the previous reporting period, and one point for better performance than the sector average (based on the data used for this sector report normalized by revenue).

For qualitative topics, we give one point for any indication of improvement from previous reporting periods, and one point for perspective.

The 11 “human rights” topics are scored differently, with five “reporting” points; 2.5 points for formally adopting a policy or standard and 2.5 points for a description of monitoring measures. In addition, there are two “performance” points; one point for evidence of actions to reinforce policy and one point for a quantitative indication of compliance.

Distribution of Scores by topics

www.roberts.cmc.edu 5 Capital Goods: Industrial & Farm Equipment Sector 2012 Lead Analyst’s challenges. Furthermore, Wärtsilä discusses the issue that the “Growth in the world’s energy needs, Commentary combined with increasingly stringent environmental requirements, creates a challenging operating By Hilary Haskel, CMC ‘14 climate for companies in Wärtsilä’s line of business.” Consequently, “Wärtsilä has responded to these challenges by improving the energy efficiency of its The leader in the Capital Goods products while simultaneously reducing their sector overall is Wärtsilä, the only emissions” as obstacles that must be overcome. company to receive a grade of “A+” Wärtsilä’s exemplary corporate sustainability in its corporate environmental and reporting serves as a framework for the other sustainability reporting. However, Fanuc, Vestas companies of the Capital Goods sector. Wind Systems, and Shanghai Electric Group all received a grade of “F” in their corporate Life Cycle Analysis environmental and sustainability reporting, overall. A major contributor to the low grades received by many Capital goods, the inputs required in the Capital Goods sector companies is the lack of production of other goods, play an important role in reporting on Life Cycle Analysis, an integral aspect of global industry. Not only do the companies that corporate environmental and sustainability reporting manufacture capital goods have an impact on social for the Capital Goods sector. Only 43.3 % of and environmental factors, but their products affect companies within this sector addressed this topic, the manufacturing process further down the supply and the relative depth of reporting on this topic was chain as well. For this reason, capital goods are an only 19.0%, indicating a need for improvement in this integral aspect of the Life Cycle Analysis process. In area. Comparatively, companies from the Capital the EPA’s Life Cycle Assessment: Principle and Goods sector focus substantially on reporting their Practice, the main importance of capital goods in a products’ performance, including emission levels, fuel “cradle to grave approach” that ranges from “the efficiency, and recyclability. Therefore, it is not gathering of raw materials from the earth to create surprising that for the Environmental Reporting topics the product and ends at the point when all materials 1 for the Capital Goods sector, Products Reporting was are returned to the earth” is through the reported at the highest rate for all companies manufacturing process. Furthermore, because “LCA combined, 60%. For the Social Reporting elements of evaluates all stages of a product’s life from the the PSI Scores, consumer education programs, perspective that they are interdependent, meaning ibid. product performance, safety; and product that one operation leads to the next,” it is important performance, noise; were reported by all companies. to consider the “interdependence” of capital goods This data further reflects the importance of not only within the process. LCA is an important aspect of the companies’ manufacturing processes, but the corporate environmental and sustainability reporting product sustainability and responsibility of the in that “LCA provides a comprehensive view of the products that the companies in the Capital Goods environmental aspects of the product or process and sector produce. a more accurate picture of the true environmental trade-offs in product and process selection.” ibid. Wärtsilä not only received the highest PSI score in its sector, but it also captures the importance 1 United States. Environmental Protection of capital goods in sustainable production through its Agency. National Risk Management Research discussion of product performance. The company Laboratory Office of Research and reports that its main role in sustainability is “to supply Development. Life Cycle Assessment: Principles and environmentally sound solutions and services, which Practice. By Mary Ann Curran. Scientific enable its customers to develop their business in a Applications International Corporation (SAIC), May sustainable way. This requires continuous investment 2006. Web. 20 Apr. 2012. in technology development and an on-going search . explains the demands that the Capital Goods sector must respond to in the face of environmental

www.roberts.cmc.edu 6 Capital Goods: Industrial & Farm Equipment Sector 2012 Due to the relatively low level of reporting caused because inputs are not used effectively in the on LCA with respect to capital goods, it is important to process of production, that is, inputs are not consider why this might be problematic in converted completely [embodied] into useful output.”3 sustainability reporting. In an article by Rolf Ramirez goes on to “refer(s) to capital that can Frischknecht et al, there is discussion of whether or increase the effectiveness (or productivity) of input- not capital goods should be included in LCA of other use and reduce pollution per unit of input and per unit products, and what factors should be considered of output as conservation capital,” ibid. which the when making this determination. It must be noted Capital Goods sector must strive to produce in the that: future in order to create more sustainable production In ISO standards 14040 and 14044 the capital goods are practices for entire industries. The economical explicitly part of the product system. Thus, it is doubtful considerations of conservation capital investment if capital goods can be excluded per se as has been done in quite a number of case studies and LCA include that “…conservation capital is rival and databases. There is yet no clear idea about if and when productivity enhancing; there exist private incentives capital goods play an important role in life cycle to invest in it. However, since producers are likely to 2 assessments. disregard the public benefits of investing in Cooper Industries has implemented its LCA so that conservation capital, they will under invest in it “companies are also using this LCA tool, making it relative to the socially optimal level.” ibid Therefore, in easier for customers to compare products from order for there to be sustainable development different suppliers” in order to address this issue. through investment in capital goods that allow for Cooper Industries serves as an example to other efficient production, there must be an emphasis on companies in the Capital Goods industry as to why it research and development of capital goods in the is important to provide data on LCA in sustainability Capital Goods sector. reporting. Frischknecht’s conclusion is that the most relevant factors in LCA are “whether maintenance Over-arching Goals and depreciation costs of capital equipment form a substantial part of the product price (Heijungs et al. Given the PSI scores of companies from the 1992a), and whether actual environmental hot spots Capital Goods sector on a global scale, the ibid. occur along the capital goods' supply chain.” importance of sustainable development in both These factors are important considerations when developing and developed countries is a necessary assessing the Capital Goods sector’s implementation consideration. In the United Nation’s Agenda 21, of LCA. “Chapter 34: Transfer of Environmentally Sound It is not only important to consider the Technology, Cooperation & Capacity-Building;” there impacts of capital goods in LCA, but also the is discussion of “The availability of scientific and performance of capital goods. The efficiency of these technological information and access to and transfer input factors in supply chains are an essential aspect of environmentally sound technology are essential of the sustainability of industrial practices. According requirements for sustainable development.”4 This to Ramirez et al, The Capital Goods sector must dedicate itself to producing technology and capital so that “investment in capital goods augments the effectiveness of input use and, thus, input productivity 3 Ramirez, Donna T., Madhu Khanna, and and lowers the pollution intensity of inputs…” This David Zilberman. "Conservation Capital and leads to the “Underlying…premise that pollution is Sustainable Economic Growth." Department of Agricultural & Resource Economics College of 2 Frischknecht, Rolf, Hans-Jorg Althaus, Natural Resources | University oCalifornia, Berkeley. Christian Bauer, Gabor Doka, Thomas Heck, Niels University of California, Berkeley. Web. 20 Apr. Jungbluth, Daniel Kellengerger, and Thomas 2012. Nemecek. "The Environmental Relevance of Capital . Analysis (2006). ESU-Services Fair Consulting in Sustainability. ESU-services Ltd., 21 Feb. 2007. 4 "DSD :: Resources - Publications - Core Web. 4 Apr. 2012. . 2009. Web. 20 Apr. 2012.

www.roberts.cmc.edu 7 Capital Goods: Industrial & Farm Equipment Sector 2012 section of the Agenda stresses “The availability of company represents the Capital Goods sector in both scientific and technological information and access China and India, for both of these developing nations, to and transfer of environmentally sound technology the overall environmental PSI scores were the lowest [as] essential requirements for sustainable compared to all other countries. This fact development.” ibid. The Capital Goods Sector, on a demonstrates the need for sustainable technology global scale, is in the position to be able to provide and capital goods in these nations, as already made “access to and transfer of environmentally sound evident by the relatively low environmental PSI technology,” to developing nations, in the wake of the scores received by the companies from these increasing demand for “green” and low emissions countries. The process of technology transfer has production methods. With sustainable practices from been facilitated through relevant international the Capital Goods sector, the “vicious cycle of organizations such as the United Nations economic decline, increasing poverty, and Environment Programme (UNEP), the United Nations environmental degradation” ibid. can be halted with Development, Programme (UNDP), and the United technology transfer and sustainable development. Nations Industrial Development, Organization “Principle 9” of the Rio Declaration on Environment (UN1DO)” ibid. and Development, cited in the Issue Paper of the The Capital Goods sector offers promise for United Nations Minestrial Conference of the Least improving corporate sustainability, especially in the Developed Countries, asserted the following: realm of tapping into global opportunities and States should cooperate to strengthen crossing efficiency frontiers. In addition, the Capital endogenous capacity-building for sustainable Goods sector is unique in that the corporate development by improving scientific sustainability of its companies not only impacts the understanding through exchanges of scientific company’s corporate sustainability, but supply chains and technological knowledge, and by enhancing as well through the company’s products. This unique the development, adaptation, diffusion, and transfer of attribute of the Capital Goods sector places it in the technologies, including new and innovative position to be a leader in corporate sustainability. technologies. 5

Consequently, the case for technology transfers have the potential “To promote long-term technological partnerships between holders of environmentally sound technologies and potential users,” ibid. in order to make an impact on the sustainability of the developing world through these nations’ means of production. As developing countries such as China and India grow at a rapid pace, especially in GDP, their capital inputs must also do so in order to support this new economic expansion. Although only one

5 "Globalization and the Least Developed Countries: Issues in Technology." Making Globalization Work for the LDCs. Proc. of United Nations Ministerial Conference of the Least Developed Countries, Turkey, Istanbul. United Nations. Web. 20 Apr. 2012. .

www.roberts.cmc.edu 8 Capital Goods: Industrial & Farm Equipment Sector 2012 Capital Goods (Industrial and Farm Equipment)

Environmental Intent Topics

Percent of possible points for all companies combined. Two possible points for each topic: Accountability 70.00 70 4 * Report contact person 19 * Environmental management structure Management 60 16 Environmental education 52.50 * 51.00 20 * Environmental management system 21 Environmental accounting 50 * 23 * Stakeholder consultation 41.67 Policy 40 9 * Environmental policy statement 10 * Climate change/global warming 11 * Habitat/ecosystem conservation 30 12 * Biodiversity 13 * Green purchasing Vision 20 5 * Environmental visionary statement 6 * Environmental impediments and challenges

0 Policy Vision Management Accountability

Notes: * These numbers correspond to the numbers in the PSI questionnaire. Items with numbers higher than 99 are sector- specific questions. Appendix 1 has the complete questionnaire. www.roberts.cmc.edu 9 Capital Goods: Industrial & Farm Equipment Sector 2012 Capital Goods (Industrial and Farm Equipment)

Environmental Reporting Topics Seven possible points for each topic:

Emissions to Air Percent of possible points for all companies combined. 83 * Greenhouse gases (or CO2 equivalents), total 114 * Volatile organic compounds (VOCs) 115 * Methane (CH4) 60 60.00 118 * Carbon monoxide (CO) 121 * Nitrogen oxides (NOx) 122 * Volatile organic carbon (VOC), concentration 49.33 * 50 123 Particulate matter (dust) 124 * Logistics emissions Energy 26 * Energy used (total) 40 27 * Energy used (renewable) * 33.11 103 Energy used: Logistics 29.78 Management 28.78 30 26.45 38 * Notices of violation (environmental) 39 * Environmental expenses and investments 23.17 40 * Fines (environmental)

20 Materials Usage 147 * Life Cycle Analysis (LCA) 13.56 148 * Materials used: Non-returnable packaging

10 Products 141 * Product performance, emissions 142 * Product performance, fuel efficiency 143 * Product performance, recyclability 0 Recycling

Water 30 * Waste recycled: solid waste Waste Energy Products

Recycling 32 * Waste (office) recycled

Management 106 * Materials recycled: Wastewater Emissions to Air to Emissions Materials Usage Materials 107 * Materials reused or recycled: Packaging materials 184 * Remanufacturing of products Waste 34 * Waste (solid) disposed of 35 * Waste (hazardous) produced 37 * Waste (hazardous) released to the environment 109 * Waste: Packaging materials 110 * Waste water released to natural water bodies Water 29 * Water used

Notes: * These numbers correspond to the numbers in the PSI questionnaire. Items with numbers higher than 99 are sector- specific questions. Appendix 1 has the complete questionnaire. www.roberts.cmc.edu 10 Capital Goods: Industrial & Farm Equipment Sector 2012 Capital Goods (Industrial and Farm Equipment)

Social Intent Topics

Two possible points for each topic: Percent of possible points for all companies combined. Accountability 51 Health and safety, or social organizational 70 * 64.44 structure 54 * Third-party validation 58.33 60 56.67 Management 17 * Workforce profile: ethnicities/race 18 * Workforce profile: gender 50 52 * Workforce profile: age 53 * Emergency preparedness program 40 82 * Employee training for career development 32.33 Policy 45 Social policy statement 30 26.67 * 47 * Code of conduct or business ethics 49 * Supplier screening based on social or 20 environmental performance/ supplier management Social Demographic 10 80 * Employment for individuals with disabilities Vision 0 42 * Social visionary statement

Policy Vision 43 * Social impediments and challenges Management ility Accountab Social Demographic Social

Notes: * These numbers correspond to the numbers in the PSI questionnaire. Items with numbers higher than 99 are sector- specific questions. Appendix 1 has the complete questionnaire. www.roberts.cmc.edu 11 Capital Goods: Industrial & Farm Equipment Sector 2012 Capital Goods (Industrial and Farm Equipment)

Social Reporting Topics Seven possible points for each topic: Human Rights Percent of possible points for all companies combined. 1 * Sexual harassment 7 * Political contributions 60 56.21 8 * Bribery 58 * Anti-corruption practices 59 Degrading treatment or punishment of employees 50 * 60 * Elimination of discrimination in respect to employment and occupation 61 * Free association and collective bargaining of 40 employees 62 * Fair compensation of employees 29.15 28.00 63 * Elimination of all forms of forced and compulsory 30 26.11 labor 64 * Reasonable working hours 65 * Effective abolition of child labor 20 Management 2 * Women in management 10 Qualitative Social 66 * Community development 67 * Employee satisfaction surveys 0 68 * Community education 70 * Occupational health and safety protection 72 * Employee volunteerism Management Human Rights Human 151 * Product performance, noise Qualitative Social Qualitative Quantitative Social Quantitative 152 * Consumer education program 156 * Product performance, safety Quantitative Social 3 * Employee turnover rate 74 * Recordable incident/accident rate 75 * Lost workday case rate 76 * Health and safety citations 77 * Health and safety fines 81 * Social community investment

Notes: * These numbers correspond to the numbers in the PSI questionnaire. Items with numbers higher than 99 are sector- specific questions. Appendix 1 has the complete questionnaire. www.roberts.cmc.edu 12 Capital Goods: Industrial & Farm Equipment Sector 2012 Capital Goods (Industrial and Farm Equipment) Environmental Intent Elements of the PSI Scores

Environmental visionary 93.3% statement 88.3%

Environmental management 83.3% system 75.0%

Environmental policy 83.3% statement 80.0%

Climate change/global 73.3% warming 68.3%

Environmental management 73.3% structure 50.0%

Environmental impediments 56.7% and challenges 51.7%

56.7% Stakeholder consultation 48.3%

53.3% Environmental education 50.0%

46.7% Environmental accounting 36.7%

Habitat/ecosystem 43.3% conservation 35.0%

40.0% Biodiversity 38.3%

40.0% Report contact person 33.3%

36.7% Green purchasing 33.3%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

= Percentage of companies addressing the topics = Percentage of the total possible number of points awarded to all companies combined for each topic, indicating the depth of reporting coverage measured by PSI criteria for each topic. If both percentages are the same it means that each of those reporting companies reporting on a topic got all the possible points.

www.roberts.cmc.edu 13 Capital Goods: Industrial & Farm Equipment Sector 2012 Capital Goods (Industrial and Farm Equipment) Environmental Reporting Elements of the PSI Scores

100.0% Materials used: Non-returnable packaging 14 . 3 %

100.0% Remanufacturing of products 57.1% 100.0% Product performance, recyclability 42.9%

100.0% Product performance, fuel efficiency 14 . 3 % 100.0% Waste water released to natural water bodies 14 . 3 %

100.0% Product performance, emissions 71.4%

100.0% Materials reused or recycled: Packaging materials 42.9% 100.0% Logistics emissions 85.7%

100.0% Waste: Packaging materials 28.6%

100.0% Energy used: Logistics 28.6%

79.3% Greenhouse gases (or CO2 equivalents), total 47.3%

70.0% Waste (solid) disposed of 30.5% 70.0% Water used 35.2% 70.0% Energy used (total) 33.8%

63.3% Waste recycled: solid waste 29.5%

62.1% Nitrogen oxides (NOx) 23.2%

53.3% Waste (hazardous) produced 22.4% 43.3% Life Cycle Analysis (LCA) 19 . 0 %

43.3% Volatile organic compounds (VOCs) 20.5%

40.0% Energy used (renewable) 13 . 3 %

40.0% Environmental expenses and investments 17 . 1%

33.3% Waste (hazardous) released to the environment 11. 0 % 31.0% Particulate matter (dust) 8.9%

20.0% Fines (environmental) 6.7%

20.0% Notices of violation (environmental) 5.2%

10 . 7 % Methane (CH4) 1. 5 %

6.7% Waste (office) recycled 1. 9 %

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

www.roberts.cmc.edu 14 Capital Goods: Industrial & Farm Equipment Sector 2012 Capital Goods (Industrial and Farm Equipment) Social Intent Elements of the PSI Scores

90.0% Social visionary statement 83.3%

83.3% Code of conduct or business ethics 75.0%

76.7% Employee training for career development 70.0%

73.3% Health and safety, or social organizational structure 55.0%

66.7% Social policy statement 61.7%

63.3% Third-party validation 58.3%

Supplier screening based on social or environmental 60.0% performance/ supplier management 56.7%

40.0% Emergency preparedness program 31.7%

40.0% Social impediments and challenges 33.3%

36.7% Workforce profile: gender 28.3%

33.3% Employment for individuals with disabilities 26.7%

20.0% Workforce profile: age 15.0%

20.0% Workforce profile: ethnicities/race 16.7%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

www.roberts.cmc.edu 15 Capital Goods: Industrial & Farm Equipment Sector 2012 Capital Goods (Industrial and Farm Equipment) Social Reporting Elements of the PSI Scores

100.0% Consumer education program 28.6%

100.0% Product performance, safety 28.6%

100.0% Product performance, noise 42.9%

86.7% Community development 48.6%

83.3% Occupational health and safety protection 60.0%

Elimination of discrimination in respect to employment and 80.0% occupation 34.3% 73.3% Social community investment 25.7%

70.0% Community education 39.0%

66.7% Recordable incident/accident rate 33.8%

63.3% Employee volunteerism 36.2%

63.3% Lost workday case rate 32.9%

56.7% Effective abolition of child labor 20.0%

53.3% Free association and collective bargaining of employees 19 . 0 %

53.3% Anti-corruption practices 25.7%

50.0% Elimination of all forms of forced and compulsory labor 21.9%

50.0% Fair compensation of employees 26.7%

46.7% Political contributions 17 . 1%

46.7% Bribery 20.5%

43.3% Sexual harassment 21.0%

40.0% Women in management 20.0%

36.7% Degrading treatment or punishment of employees 12 . 4 %

30.0% Employee satisfaction surveys 17 . 6 %

26.7% Reasonable working hours 10 . 5 %

23.3% Health and safety citations 6.7%

20.0% Employee turnover rate 9.5%

10 . 0 % Health and safety fines 3.3%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

www.roberts.cmc.edu 16 Capital Goods: Industrial & Farm Equipment Sector 2012 Environmental Intent Scores EI Score Rankings A+ Schneider Electric Schneider Electric 92.3 A Mitsubishi Electric Mitsubishi Electric 88.5 A Komatsu A- Samsung Heavy Industries Komatsu 84.6 A- Wärtsilä Samsung Heavy Industries 80.8 A- MAN Group

Wärtsilä 76.9 A- Caterpillar Inc. B+ Vallourec MAN Group 76.9 B+ Kubota Caterpillar Inc. 76.9 B+ Mitsubishi Heavy Industries B+ Nidec Vallourec 73.1 B Sumitomo Electric Industries Kubota 73.1 B Hyundai Heavy Industries Mitsubishi Heavy Industries 73.1 B Sandvik B- LeGrand Nidec 69.2 B- Cummins Sumitomo Electric Industries 65.4 B- Atlas Copco ABBB- Hyundai Heavy Industries 65.4 C+ Cooper Industries Sandvik 61.5 C+ WW Grainger LeGrand 57.7 C+ Bharat Heavy Electricals C Paccar Inc. Cummins 57.7 C- Parker Hannifin Atlas Copco 57.7 C- Schindler Holding

ABB 57.7 C- Eaton D+ Illinois Tool Works Cooper Industries 46.2 D+ Deere & Company WW Grainger 42.3 F Shanghai Electric Group F Fanuc Bharat Heavy Electricals 42.3 F Vestas Wind Systems Paccar Inc. 38.5

Parker Hannifin 26.9

Schindler Holding 26.9

Eaton 26.9

Illinois Tool Works 23.1

Deere & Company 23.1

Shanghai Electric Group 3.8

Fanuc 0.0

Vestas Wind Systems 0.0

0 25 50 75 100

Environmental intent scores include topics about the firm’s products, environmental organization, vision and commitment, stakeholders, environmental policy and certifications, environmental aspects and impacts, choice of environmental performance indicators and those used by the industry, environmental initiatives and mitigations, and environmental goals and targets.

www.roberts.cmc.edu 17 Capital Goods: Industrial & Farm Equipment Sector 2012 Environmental Reporting Scores ER Score Rankings

Wärtsilä 61.18 A+ Wärtsilä A Mitsubishi Electric Mitsubishi Electric 54.12 B+ Sandvik Sandvik 45.88 B+ Schneider Electric Schneider Electric 43.81 B- Vallourec Vallourec 37.65 B- Sumitomo Electric Industries Sumitomo Electric Industries 34.51 B- Komatsu C+ Mitsubishi Heavy Industries Komatsu 34.05 C+ Caterpillar Inc. Mitsubishi Heavy Industries 32.94 C+ Schindler Holding Caterpillar Inc. 31.37 C+ Hyundai Heavy Industries Schindler Holding 30.59 C ABB Hyundai Heavy Industries 28.24 C LeGrand ABB 27.84 C MAN Group C Kubota LeGrand 27.45 C Samsung Heavy Industries MAN Group 27.45 C Atlas Copco Kubota 27.06 D+ Cummins Samsung Heavy Industries 25.10 D+ Deere & Company Atlas Copco 23.92 D+ Eaton D+ Cooper Industries Cummins 17.65 D Nidec Deere & Company 16.47 D WW Grainger Eaton 15.29 D Parker Hannifin Cooper Industries 13.33 D Illinois Tool Works Nidec 11.76 D- Bharat Heavy Electricals F Paccar Inc. WW Grainger 8.24 F Fanuc Parker Hannifin 8.24 F Shanghai Electric Group Illinois Tool Works 8.24 F Vestas Wind Systems Bharat Heavy Electricals 4.71 Paccar Inc. 1.96 Fanuc 0.00 Shanghai Electric Group 0.00 Vestas Wind Systems 0.00

0 25 50 75 100

Environmental reporting scores are based on the degree to which the company discusses its emissions, energy sources and consumption, environmental incidents and violations, materials use, mitigations and remediation, waste produced, and water used. They also include use of life cycle analysis, environmental performance and stewardship of products, and environmental performance of suppliers and contractors.

www.roberts.cmc.edu 18 Capital Goods: Industrial & Farm Equipment Sector 2012 Environmental Performance Scores EP Score Rankings

A+ Wärtsilä Wärtsilä 26.47 A Mitsubishi Heavy Industries Mitsubishi Heavy Industries 23.53 A ABB ABB 23.53 A- Schneider Electric Schneider Electric 21.43 B+ Vallourec Vallourec 20.59 B+ Sumitomo Electric Industries Sumitomo Electric Industries 20.59 B+ Mitsubishi Electric Mitsubishi Electric 20.59 B MAN Group MAN Group 17.65 B- LeGrand LeGrand 14.71 B- Parker Hannifin Parker Hannifin 14.71 B- Eaton C- WW Grainger Eaton 14.71 C- Sandvik WW Grainger 8.82 C- Schindler Holding Sandvik 8.82 C- Kubota Schindler Holding 8.82 C- Atlas Copco Kubota 8.82 C- Hyundai Heavy Industries Atlas Copco 8.82 C- Caterpillar Inc. Hyundai Heavy Industries 8.82 D+ Komatsu Caterpillar Inc. 8.82 D+ Nidec Komatsu 7.14 D+ Cummins Nidec 5.88 D- Samsung Heavy Industries Cummins 5.88 F Cooper Industries Samsung Heavy Industries 2.94 F Paccar Inc. Cooper Industries 0.00 F Fanuc Paccar Inc. 0.00 F Bharat Heavy Electricals Fanuc 0.00 F Shanghai Electric Group Bharat Heavy Electricals 0.00 F Vestas Wind Systems Shanghai Electric Group 0.00 F Illinois Tool Works Vestas Wind Systems 0.00 F Deere & Company Illinois Tool Works 0.00 Deere & Company 0.00

0 25 50 75 100

Environmental performance scores are based on whether or not the firm has improved its performance on each of the topics discussed under the heading of environmental reporting, and on whether the quality of the performance is better than that of the firm’s peers. Scoring for each topic is one point if performance is better than in previous reports, two points if better than industry peers, three points if both.

www.roberts.cmc.edu 19 Capital Goods: Industrial & Farm Equipment Sector 2012 Social Intent Scores SI Score Rankings A+ Schneider Electric Schneider Electric 92.31 A LeGrand LeGrand 84.62 A Mitsubishi Electric Mitsubishi Electric 84.62 B+ Sumitomo Electric Industries Sumitomo Electric Industries 73.08 B Samsung Heavy Industries Samsung Heavy Industries 65.38 B Kubota Kubota 65.38 B WW Grainger WW Grainger 61.54 B- Wärtsilä Wärtsilä 57.69 B- Atlas Copco Atlas Copco 57.69 B- Komatsu Komatsu 57.69 B- Deere & Company C+ Vallourec Deere & Company 53.85 C+ Caterpillar Inc. Vallourec 50.00 C+ Sandvik Caterpillar Inc. 50.00 C+ Parker Hannifin Sandvik 46.15 C+ MAN Group Parker Hannifin 46.15 C+ Schindler Holding MAN Group 46.15 C+ Bharat Heavy Electricals Schindler Holding 46.15 C+ Cooper Industries Bharat Heavy Electricals 46.15 C Nidec Cooper Industries 42.31 C Hyundai Heavy Industries Nidec 38.46 C ABB Hyundai Heavy Industries 38.46 C- Paccar Inc. ABB 38.46 C- Cummins Paccar Inc. 34.62 C- Eaton Cummins 34.62 C- Mitsubishi Heavy Industries Eaton 34.62 D+ Illinois Tool Works Mitsubishi Heavy Industries 34.62 D- Shanghai Electric Group Illinois Tool Works 23.08 F Fanuc Shanghai Electric Group 7.69 F Vestas Wind Systems Fanuc 0.00 Vestas Wind Systems 0.00

0 25 50 75 100

Social intent scores include topics about the firm’s financials, employees, safety reporting, social management organization, social vision and commitment, stakeholders, social policy and certifications, social aspects and impacts, choice of social performance indicators and those used by the industry, social initiatives and mitigations, and social goals and targets.

www.roberts.cmc.edu 20 Capital Goods: Industrial & Farm Equipment Sector 2012 Social Reporting Scores SR Score Rankings

Wärtsilä 70.29 A+ Wärtsilä Komatsu 52.95 B+ Komatsu Schneider Electric 46.52 B Schneider Electric Sandvik 45.94 B Sandvik ABB 44.20 B ABB Mitsubishi Electric 41.59 B- Mitsubishi Electric LeGrand 41.01 B- LeGrand Vallourec 40.00 B- Vallourec Atlas Copco 38.70 B- Atlas Copco Illinois Tool Works 38.70 B- Illinois Tool Works C+ Kubota Kubota 36.81 C+ Deere & Company Deere & Company 35.65 C+ Cooper Industries Cooper Industries 35.36 C+ Caterpillar Inc. Caterpillar Inc. 34.64 C+ Sumitomo Electric Industries Sumitomo Electric Industries 33.77 C+ Mitsubishi Heavy Industries Mitsubishi Heavy Industries 32.32 C MAN Group MAN Group 28.99 C Eaton Eaton 28.41 C Samsung Heavy Industries Samsung Heavy Industries 28.26 C WW Grainger WW Grainger 27.97 C- Nidec Nidec 25.07 C- Cummins Cummins 25.07 D+ Schindler Holding Schindler Holding 20.29 D+ Bharat Heavy Electricals Bharat Heavy Electricals 19.56 D+ Paccar Inc. Paccar Inc. 17.39 D Parker Hannifin Parker Hannifin 9.13 D- Hyundai Heavy Industries Hyundai Heavy Industries 8.12 F Shanghai Electric Group Shanghai Electric Group 2.90 F Fanuc Fanuc 0.00 F Vestas Wind Systems Vestas Wind Systems 0.00

0 25 50 75 100

Social reporting scores are based on the degree to which the company discusses various aspects of its dealings with its employees and contractors. They also include social costs and investments.

www.roberts.cmc.edu 21 Capital Goods: Industrial & Farm Equipment Sector 2012 Social Performance Scores SP Score Rankings

A+ Wärtsilä Wärtsilä 56.52 B- Komatsu Komatsu 34.62 C+ WW Grainger WW Grainger 26.09 C+ Kubota Kubota 26.09 C Mitsubishi Electric Mitsubishi Electric 21.74 C- Sandvik Sandvik 19.57 C- Deere & Company Deere & Company 19.57 C- Vallourec Vallourec 17.39 C- Schneider Electric Schneider Electric 17.39 D+ Sumitomo Electric Industries Sumitomo Electric Industries 15.22 D+ Caterpillar Inc. Caterpillar Inc. 15.22 D+ Mitsubishi Heavy Industries Mitsubishi Heavy Industries 13.04 ABBD+ ABB 13.04 D Paccar Inc. Paccar Inc. 10.87 D Cooper Industries Cooper Industries 8.70 D LeGrand D Nidec LeGrand 8.70 D Samsung Heavy Industries Nidec 8.70 D- Schindler Holding Samsung Heavy Industries 8.70 D- Cummins Schindler Holding 6.52 D- Bharat Heavy Electricals Cummins 6.52 D- Eaton Bharat Heavy Electricals 4.35 D- Atlas Copco Eaton 4.35 F Parker Hannifin Atlas Copco 4.35 F Hyundai Heavy Industries Parker Hannifin 2.17 F MAN Group Hyundai Heavy Industries 2.17 F Fanuc MAN Group 0.00 F Shanghai Electric Group Fanuc 0.00 F Vestas Wind Systems Shanghai Electric Group 0.00 F Illinois Tool Works Vestas Wind Systems 0.00 Illinois Tool Works 0.00

0 25 50 75 100

Social performance scores are based on improvement, performance better than the sector average, or statements of compliance with established social standards.

www.roberts.cmc.edu 22 Capital Goods: Industrial & Farm Equipment Sector 2012 Capital Goods (Industrial and Farm Equipment) Human Rights Reporting Elements of the PSI Scores

Percent of companies reporting* Human Rights Topics adoption reinforcement monitoring compliance Anti-corruption practices 53.3% 26.7% 6.7% 3.3% Bribery 46.7% 20.0% 3.3% 3.3% Degrading treatment or punishment of employees 36.7% 6.7% 0.0% 0.0% Effective abolition of child labor 56.7% 13.3% 0.0% 0.0% Elimination of all forms of forced and compulsory labor 50.0% 20.0% 6.7% 0.0% Elimination of discrimination in respect to employment 80.0% 33.3% 6.7% 0.0% and occupation Fair compensation of employees 50.0% 26.7% 13.3% 3.3% Free association and collective bargaining of 53.3% 10.0% 3.3% 0.0% employees Political contributions 46.7% 13.3% 0.0% 3.3% Reasonable working hours 26.7% 10.0% 0.0% 0.0% Sexual harassment 43.3% 26.7% 3.3% 0.0% Basis of Scores Adoption We assign one point for adoption of a policy standard or for an explicit discussion of an organization’s stance on each of 11 human rights principles. Reinforcement We assign one point for a description of reinforcement actions to make a policy stronger, such as providing educational programs, training, or other activities to promote awareness. Monitoring We assign one point for a description of monitoring measures including mechanisms to detect violations at an early stage, providing systematic reporting, or establishment of committee structure to oversee risky activities. Compliance We assign one point for a quantitative indication of compliance, such as a description of incidences of failure of compliance, or a statement that there were no such incidences.

www.roberts.cmc.edu 23 Capital Goods: Industrial & Farm Equipment Sector 2012 Capital Goods (Industrial and Farm Equipment) Average Overall, Environmental, and Social PSI Scores Performance by Country This graph illustrates the average PSI in three categories--overall, USA environmental, and social-- breakdown by countries. Since Switzerland our sample size follows the Sweden world's largest companies from South Korea the Fortune list, several countries Japan have only one company score to Overall India represent the whole country's sustainability reporting in the Germany sector. France Finland Country N China China 1 Finland 1 France 4 USA Germany 1 Switzerland India 1 Sweden Japan 7 South Korea 2 South Korea Sweden 2 Japan Switzerland 2 Environmental India USA 10 Germany France Finland China

USA Switzerland Sweden South Korea Japan Social India Germany France Finland China

0 10203040506070

www.roberts.cmc.edu 24 Capital Goods: Industrial & Farm Equipment Sector 2012 Visual Cluster Analysis Visual cluster analysis multivariate data of the sort produced by the PSI are difficult to summarize. Here we have created radar diagrams of the performance of each company analyzed in the sector by its environmental and social intent, reporting, and performance sorted by company ranking. Maximum scores will match the outer sides of the hexagon, which total up to 100 percent.

EI = Environmental Intent, ER = Environmental Reporting, EP = Environmental Performance SI = Social Intent, SR = Social Reporting, SP = Social Performance

ER ER ER ER ER 100 100 100 100 100

75 75 75 75 75