Sept 2007

1. CSR in the core business Matteo Bartolomeo Head of CSR Audit Vigeo Italia Member of the managing committee Vigeo Group Sept 2007

2. Objectives • The presentation investigates the main obstacles that make it difficult to integrate CSR related-elements into fundamental corporate activities (such as human resources management, purchasing, marketing and sales, research and development); the presentation will then illustrate how CSR officers can overcome these obstacles by periodically assessing the level of implementation of policies and management systems and the quality of results. • The presentation is structured along the following lines: • The company • The issue • The approach adopted • Conclusions and generalisation of findings

3. The company • A previously public owned corporation • Listed in the Italian stock exchange with a subsidiary listed in South America • The company operates in a highly regulated market providing an essential service • The CSR officer is relatively new to the function (but he is a senior executive in the company) • The company is very dynamic on a number of CSR related projects

4. The issue • The CSR Officer faces information and internal communication related problems in terms of: • Full understanding of the level of CSR commitment and effectiveness of policies and systems. This lack of knowledge increases proportionally with the physical and cultural distance of subsidiaries. • Difficulty in explaining to colleagues and top managers that some policies (and their implementation) can have a great business impact (risks and opportunities). There are two typical concerns directly tied with this: • On the one side, the CSR strategy is implicitly very narrow in scope and in depth, and does not really influence ANY process • On the other side, core business activities are exposed to excessive risks (market, legal, reputation, internal cohesion, …) that need to be managed

5. The issue • Generalised conviction that stakeholders relationships, for a firm operating thanks to a concession and as monopolist, are regulated by law and therefore fully assessed by the internal compliance service • Internal conflicts among functions. Without a fertile environment, CSR inevitably generates conflicts with a number of other important functions: personnel, purchasing, facility, environment, design. • Drivers for launching the CSR Audit: • To better understand the corporate situation in terms CSR (policy-systems-performance gaps, good practices, risks exposure) • To prioritise efforts for CSR related activities • To position CSR at the core of business processes and overcome prejudices on CSR • To get personal and department (Communication) legitimacy within the firm

6. The approach adopted • Vigeo offered a CSR Audit. The CRS Audit is a second party assessment of the existence and implementation of policies and management systems and the results in different domains: • Environment, Human rights, Employees, Corporate Governance, Suppliers and clients, Community involvement • The project has been carried out following the Vigeo Methodology for CSR Audit, entailing: • Customisation of domains and criteria • Interviews with corporate managers of different functions and level of responsibility (around 35) • Interviews with stakeholders, including internal stakeholders • Analysis, scoring, reports preparation • Presentation of interim and final results to a high level committee composed by executives • The CSR Audit has been perfomed looking at the core business functions and NOT at the CSR activity itself. Therefore it has assessed the performance of different business processes in terms of ability to anticipate and manage risks

7. Main project work packages Fase 4 Stesura e revisione del rapporto Fase 1 Avvio, analisi delle specificità e definizione griglia di riferimento Fase 2 Raccolta delle informazioni (Documentali e interviste) Fase 3 Analisi, ponderazione, valutazione e redazione del rapporto Fase 5 Suggerimenti e implicazioni strategiche Workshop per il top management e identificazione di azioni migliorative Consegna dei due rapporti di CSR Audit Kick off e presentazione della griglia di valutazione Creazione di un Comitato di Progetto Identificazione interlocutori. Incontri con personale e attori esterni Presentazione delle prime evidenze e dello schema di valutazione

8. Conclusions and generalisation of findings • Generating and sharing reliable information on the real effectiveness of policies and systems in assuring CSR related results can have various positive effects: • It obviously allows the adoption of grounded decisions for reshaping processes and organisation, including setting priorities and assigning tangible targets. • But the benefits may go much beyond this and involve very intangible aspects such as business culture and management attitude: • It shows the pitfalls of the traditional approach to CSR, but, at the same time, it can overcome the conviction that CSR has no potential in influencing core business processes • It makes it explicit the importance of virtually every single behavior and process in reducing risks and reinforcing the relationship with stakeholders • It generates awareness, at the level of top and middle management, over the role of cooperation and of shared ownership on a number of horizontal programmes

9. Matteo BartolomeoT: +39 02 36518113M:+39 3338750972matteo.bartolomeo@vigeo.comFederico VersaceT: +39 02 36518114M:+39 3472480025federico.versace@vigeo.comStefano IsolicaT: +39 02 36518114M:+39 3288454215stefano.isolica@vigeo.comSara fagliaT: +39 02 36518112sara.faglia@vigeo.com