Trucost Case

COMPANY OVERVIEW
Founded in 2000 by Simon Thomas and Andrew Jacobs. An environmental research company Notable investors include Bob Monks, Jacob Rothschild and Ben Goldsmith. MISSION:
To help organizations better understand their operations and supply chains environmental consequences and costs, thereby enabling investors and corporate managers make better investment decisions.
Till 2011 45 employees.

Investment community, corporate managers and government agencies. the worlds most comprehensive data on corporate environmental impacts. Physical quantities (eg. Tons of pollution) financial costs. While the revenue of the company increased by 9% to $2.7 million in 2010, operating loss was $3.3 million.
Highly competitive industry; 21 in 2000 to 108 in 2010.

Best-in-class in terms of comprehensiveness, robustness and usefulness. Outcome of recent industry analysis.
The company required a strategy to secure its own financial sustainability
PRODUCTS, SERVICES AND MARKETS

Comprehensive Corporate Profiles. More than 700 environmental impacts; including emissions of GHG and toxic chemicals.
The company relied on reports from corporate websites, government databases and proprietary financial databases.
Alternatively, Trucost also generated estimates from its proprietary model.
Competitors of Trucost included Dow Jones Sustainability Index, Ethical Investment Research Services (EIRIS), FTSE4Good, Sustainanalytics etc. Unlike its competitors, the company estimated environmental damage costs. Putting a price on environmental damage presented the information in straightforward business terms.
Trucost Service Offerings: Environmental footprint Environmental data validation Environmental impact valuation Supply chain hot spot footprint Supply chain engagement $20 - $25 million dollar market.
Trucost market share 15%. Clients included AXA investment managers, Calvert investments, London Pension fund investments etc.
Challenges & Decisions

Needed to gain Market share Trucost data was very comprehensive & robust Strategies failed Most investors were willing to compromise on quality to pay lower prices
Strategies
Raised Awareness of its products & services Newsweeks Green Rankings
Developing a certification scheme

Companies primarily used environmental data for marketing purposes No support from Trucosts successful clients
Newsweek 2010 Green Rankings: US Results
Competitors & Distribution channels

Collaborated & acquired clients Publicly highlight data inaccuracies in company reports Analyzing trucost data using specialized software tools Conflicts of interest
Environmental Benefit Model The Trucost Process

The environmental benefit model is the compilation and evaluation of inputs, outputs and the environmental impacts associated with a product, process, or activity which includes the identification of energy, materials and substances used and emissions and wastes released to the environment, over the established life cycle of the product, process or activity.
Water
Raw Materials
Fuels/Energy
Resource Extraction & Processing
Production
Distribution & Use
Disposal/ Recycling
Emissions to Water
Emissions to Air
Waste
Trucost Evaluation Process Phase 1
Trucost Evaluation Process

Trucost InputOutput Model Valuation Studies
Financial Analysis
Segmental Analysis Identify the activities that the company performs and assign costs and percentages
Initial Profile
Disclosures and Public Registers Analyze company disclosures and public registries for actual impact data and incorporate if adequate
Direct and Indirect Impacts Analyze emissions and resource usage by the company and its supply chain
External Cost Profile Apply external prices to the resources and emissions to allow comparison on a variety of issues
Breakdown the companys financial results
Produce a modelled profile of the company with quantities of resources and emissions
Company Verification Process

Generate Report Send Report to Company Send a copy of the report to the company for their verification or enhancement Incorporate Feedback Analyze any feedback received from the company and incorporate it if comprehensive and consistent Review with New Disclosures Monitor the public domain for any new environmental disclosures that the company makes throughout the period
Produce one page Company Briefing as the information is entered into the calculator
Companys Methodology - How the process works

1. Analyse company data Trucost initially analyses financial information from sources such as FactSet or Dun & Bradstreet to establish the business activities of an organisation and then apportions its revenues to those activities.
2. Map company data Using this information, our environmental profiling model can calculate an organisation's direct and supply chain environmental impacts.
3. Incorporated reported data At this point, things get really interesting. Trucost enhances its data model by incorporating reported environmental data obtained from public sources such as annual reports and websites. Where environmental reporting is not available, Trucost draws on sources of proxy information such as fuel use or expenditure data, which can be converted into emissions data. Our analysts standardise reported figures to ensure that the data covers the total operations of a company and that the impacts are categorised according to acknowledged reporting standards. Each analysed company is then invited to verify or refine the environmental profile Trucost has created. Trucost analysts validate and authenticate any amendments or further disclosures made by the company. These additional disclosures are exclusive to Trucost and further augment our data. 4. Prioritise environmental impacts Once the environmental impacts have been calculated and a full understanding of the organisation has been acquired, Trucost generates reports on an organisation's impacts and assesses which areas need to be prioritised to reduce impacts.
Environmental Impacts
Source: UK Government Environmental Reporting Guidelines
Understand the financial risk to your organisation from environmental externalities across your own operations and your supply chain Systematically measure and report your organisation's use of natural capital Access data that will allow your organisation to move towards fully integrated reporting Enhance your reputation and brand value by demonstrating to stakeholders that you are accounting for your environmental impacts
The benefits: Environmental Impact Valuation
Key Industry Trends

A proliferation of ratings Additional flavors Ratings go mainstream Lack of Transparency Technology is changing ratings game
Benefits
Driving better sustainability performance or transparency Creating healthy competition Initiating constructive dialogue
Shortcomings
Too much noise Performance vs Disclosure Apples-to-Oranges Comparisons Ambiguous sustainable future
Analysis
The only constant is change Based on public information Responsiveness trumps performance Ratings beget ratings.
Uncovering Best Practices

Transperancy = Trust = Value Simple Ratings Quality of ratings Forward looking perspective Invest time with companies to be rated
Ratings in future
Financially viable Fewer but high quality ratings Competing on analysis rather than data collection Value adding
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COMPANY OVERVIEW

Till 2011 45 employees.

Highly competitive industry; 21 in 2000 to 108 in 2010.

The company required a strategy to secure its own financial sustainability

PRODUCTS, SERVICES AND MARKETS

Challenges & Decisions

Developing a certification scheme

Newsweek 2010 Green Rankings: US Results

Competitors & Distribution channels

Environmental Benefit Model The Trucost Process

Resource Extraction & Processing

Distribution & Use

Trucost Evaluation Process Phase 1

Trucost Evaluation Process

Breakdown the companys financial results

Company Verification Process

Companys Methodology - How the process works

Source: UK Government Environmental Reporting Guidelines

The benefits: Environmental Impact Valuation

Key Industry Trends

Uncovering Best Practices

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