Social Profit Measurement Alternatives for Company Performance

PROJECT SCOPE Hitachi has a strong focus on Social Innovation, but while multi millions of dollars are being put into social beneficial initiatives, there are not quantifiable and repeatable measurements for success that can rival the ubiquity of common financial measurements like P&L, EBITDA etc. Startups and Fortune 500 companies may all aspire to do social good, or support sustainability, but the ultimate measurements of the success of a company that board members and investors use are the capital market accepted measurements of revenue growth, profitability and share price, which is driven by long term projections on those financial metrics. Good businesses can create social harm (e.g. the opioid crisis driven in part by profits for pharmaceuticals, social media creating obsession and distraction in an effort to monetize its user base to appease financial investors, food industries putting profit and "share of stomach" over health, etc). Investors are looking for ways to invest in socially responsible companies but ultimately the only repeatedly quantifiable measurement of success are financial in nature. Therefore, more and more institutions and consulting companies appeal for approaches such as “triple bottom lines” to emphasize the value of environmental and social good. In this context, all most all commercial companies are issuing sustainability report annually. However, lack of timeliness and lack of substantial, information are fatal disadvantages of those reports, making them more like a propaganda rather than a reflective introspection or an informative communication with investors. Even though Wenco currently can provide very comprehensive solutions to measure and improve productivity, asset health and safety via its Digital Platform, ESG is the missing piece of the puzzle. Therefore, this project is designed to encourage students to study existing guidelines and edge-cutting research of quantifying and reporting social good, sustainability, quality of life improvement, and other metrics that can be used across industries as a balance to purely financial measurements. These "Social Profit" measurements could be used to score candidate startups for investors and investment funds (particularly for employee pension funds or other limited partners that may desire socially responsible investment), or for shareholders and boards to evaluate corporate success beyond general "goodwill" or avoidance of bad brand image. These measurements should be numerical in nature and serve as a weighted combination with traditional financial measurements to create a truly balanced Balance Sheet of financial profitability AND social profitability. The data collecting and reporting shall be more frequent than currently common annual report. It could be quarterly, monthly, weekly, even daily, if not hourly, to maximize the efficacy of the report, and could eventually evolve to a real-time dashboard. Students are highly encouraged to start with mining industry and /or adjacent industries such as quarrying and construction, if they have appropriate knowledge, experience, resources, and connections. Students should be prepared to: To Be Found in Attachment

Strategic Market & Sales Channel Research: ESG Appraisal Products

Defined Tasks: Wenco has been undergoing research into ESG and the potential impact on its product line and customers. Initial Phase 1research focused on the overall ESG landscape, influencers and started to examine likely future standards. Phase 2 focused on defining an ESG dashboard that could be delivered by Wenco’s digital platform, focusing on three levels: enterprise, site, and equipment. The majority of the effort focused on equipment dashboards and integration with Wenco technologies (e.g. FMS). Phase 3 will look at the larger picture that will influence mining companies and the supply chain this industry belongs to. It will divide the research into two areas 1. Industry-leading influencers from the customer-demand side and other organizational influencers. For mining, these would include leading buyers such as Tesla, BMW, Tiffany and others (details listed below) as well as United Nations and other bodies. The research will examine what metrics they use to evaluate and influence suppliers along their supply chain in order to determine what operational reporting mining companies should offer in monthly/quarterly and annual reporting related to ESG. 2. The Financial market approach that includes banks, investors, auditors and standards bodies that will create the new “sustainability and social responsibility bottom line” mirrors the approach for financial profit reporting, as well as the technologies (e.g. blockchain) that may be used in such reporting. Expected outcomes: We break the task down into two areas, each area will be assigned to a student/team, respectively. Area 1: ESG management across supply chains. Student(s) assigned to this section are expected to choose six leading companies (three per 80-hour report duration) to carry out research across the supply chain, to figure out: 1. What are the ESG requirements/matrices those companies exert on their suppliers, including mining suppliers? 2. What monthly reports can be created by an ESG management system to help those companies? (Wenco will then determine if any of this data can be captured in near-real-time or by shifts to flow up to aggregated dashboards and reports) Potential supply chains to look at (minimum three per 80-hour session): a. Jewelry: Jewelers (Tiffany, Pandora, Chow Tai Fook, Cartier, etc.) --->Refineries (Johnson Matthey, HNH, etc.)-àmining companies (Barrick, Kinross, Newmont, etc.) b. Electronics: Consumer electronics (Apple, Sony, Nintendo, etc.) ---->Microelectronics (TSMC, NVIDIA, Samsung, Intel, STMicroelectronics, etc.) -àelectronic materials (Tanaka, Heraeus, etc.) àRefineriesàMining companies c. Electric vehicles: Carmakers (Tesla, BMW, etc.)àBattery makers (Panasonic, AESC, PEVE LG, CATL, etc.)àRefineriesàMining Companies d. Other TBD by students, including organizations such as United Nations, other leading industries. Student(s) are also highly encouraged to look at other relevant supply chains/leading companies. Area 2: ESG management through financial instruments. 1. What roles financial institutions are playing in ESG? Which will be the most influential in setting ESG standards and compelling mining and other suppliers to report/comply? 2. What kind of instruments are they using to regulate operating companies? - For example, “Green Loans” are quite popular recently. 3. Are they developing in-house solutions to appraise the ESG performance, or cooperating with 3rd parties? Which of those 3rd parties can be our potential M&A target/partners? Potential 3rd parties: a. Sustainalytics b. Refinitiv c. Envirosuite d. K2Fly e. Minetell Student(s) are also highly encouraged to find and research other targets. 4. How can the data they collect be validated? (e.g., using blockchain? A company called Minespider claimed they have blockchain technology for "green certification")

Strategic Market Research: Safety Sales

Purpose: · Based on pre-defined competitive threats to Wenco’s Fatigue Management offering, identify contingencies in a go to market strategy which will facilitate our revenue goals. Overview: Wenco has recently acquired a fatigue management company that measures brain activity and empowers operators with the information they need to act and avert personal harm and damage to onsite assets. With a focus on the surface mining market, we would like the student to engage in a competitive analysis of Fatigue Management solutions directed specifically at surface mining. In the surface mining market, smart safety solutions are becoming a prerequisite to successfully winning a bid as a fleet management provider. Considering this, Wenco must leverage a deep understanding of the competitive strength of the fatigue solutions coming from our direct competition amongst FMS providers. Amongst fatigue Management offerings in surface mining there are several categories based on the technology delivered and the level of prediction provided by the product. Each of these offerings has a unique profile of advantages/disadvantages that determine competitive strength. As technology advances, Wenco’s offering will constantly face new competitive threats to be identified and needs plans to defend against them. Number of Individual Students Required: 2 Defined Tasks: · At this stage of research, we will provide students with defined competitive threats to our product. Students should expect to: · Engage in Market Research to identify best practice contingency plans for addressing threats. · Develop several alternatives to defend against each defined threat. · Select superior contingency plans in conjunction with Wenco Analysts. · Provide a final deliverable that provides actionable recommendations that Wenco can employ to effectively defend against these threats.

Quantitive Modeling - ESG & Financing Cost

Purpose of Research: Even though there are plenty of evidences that institutional investors have been considering ESG factors in their valuation models for decades, their quantitative methods still remain unclear. Wenco is aiming at creating a predictive model that can use today's ESG performance to estimate tomorrow's financing cost, to give customers' C-Suites some idea that how can their bottom lines be affected by proactively managing environmental and social issues. Number of individual students required: 1 Defined Tasks: Our previous research shows that ESG-Sustainability scoring is an emerging business recently. There are three types of organizations, non-profit or for profit, in the market acting as providers. For-profit This is the kind of direct competitors. They have two different business models. Provide customized sustainability management solution for customers by charging development fee + licensing fee. For example, Rockwell Automation. Establish a universally accepted scoring system, and charge everyone who want to access the detail score of a specific company. For example, Sustainalytics, Refinitiv, etc. On top of what we already have looked at, there are still a lot of institutions waiting to be researched, including famous MSCI, Bloomberg, S&P and ECPI. The latter business model has a bigger customer base than the former because almost all institutional investors have their own model/solution to quantify ESG factors by dollar, all they need is data. 2. Non-Profit There are also a lot of non-profit organizations providing ESG scores and performance reports. The interval of report renewing is very long, normally from 1 year to 2 years, because of the lack of funding and limited data access. RMI and CDP are examples of this kind of competitors. 3. Affiliations/Academic Institutions Affiliations of national governments, guilds and UN are also leaders in this market. Most of them only provide guidelines for companies and investors to build their own dashboard/report, while others also established a forum/community for members to share their research. Academics institutions, especially business schools, are actively conducting research and appealing for the adoption of “triple bottom lines” instead of traditional unique economic bottom line. Some of research is quite insightful and provide comprehensive frameworks of appraising ESG performance and connecting the performance to economic bottom line. Both kinds in this category are not “pure competitors” but rather “semi-competitors” that also have high potential of becoming partners. PRI, TSM, and SASB are examples of government affiliations, while Wharton and Schulich are those of academic institutions. From demanding side, Big companies, such as Rio Tinto, and institutional investors, such as big banks including RBC, are developing their own appraisal systems, while others are proactively looking for solutions. Expected outcomes: 1. Collecting data from institutional investors and banks 2. Collecting data from companies, especially mining companies 3. Create a model to quantify ESG performance has on financial factors, including but not limited to changes in financial frictions 4. Test the model with real world data Remarks: Students in Richmond, BC will be considered first