How sustainability has expanded the role of the CFO

Transcription

1 How has exped role CFO A conversation with Marco Marrone, Chief Financial Officer Executive Vice President Finance, Canadian Tire Corp. 1

2 Canadian Tire fast facts 2 Canadian Tire was founded in What began as a single au garage in Toron has since grown in one Canada s most-shopped general merchise retailers. It is strengned by a Financial Services division is now one country s most recognized trusted brs. Business divisions Canadian Tire Retail (core retail business) Mark s (industrial fashion apparel) PartSce (specialty au parts chain) Canadian Tire Gas+ (petroleum) FGL Sports (consumer sporting goods) Financial Services 2011 quick stats Total retail sales: $11.6 billion Net income (after tax): $467 million Number employees: 68, successes Continued initiatives avoid costs reduce waste greenhouse gas emissions Incorporated business objectives in annual operating plan Linked objectives variable compensation certain executives, buyers managers Commenced installation 16 rop solar installations Opened protype sre model that is 75% more energy efficient than sres built in 2010 Exped initiatives beyond Canadian Tire retail Mark s Canadian Tire Gas+ sites Completed 438 business initiatives 3 in 2011, resulting in an annual benefits stream more than $5.6 million in avoided costs, 2,451 nnes avoided waste more than 6,900 nnes avoided greenhouse gas emissions, while generating $0.9 million in additional revenue 1 Effective March 5, 2012, Marco Marrone was appointed Chief Operating Officer Canadian Tire Retail Executive Vice President Canadian Tire Corp. Limited. 2 Please note that all figures are represented in Canadian dollars. 3 Initiatives vary in complexity size from changes made an individual retail product, a retrit made a fleet vehicle or building a new sre. Project completion for se initiatives is defined by a) commercial operation date for buildings product transport projects b) approval date for operations product projects. Projects are reported in quarter y are completed, unless data is not available, in which case completed project is reported in a future quarter provided it is in same year project s complete date or first quarter following year. A conversation with Marco Marrone, Chief Financial Officer Executive Vice President Finance, Canadian Tire Corp. To learn more, please visit ey.com/climatechange

3 Companies face growing pressure explain improve ir performance. That performance is subject significantly greater scrutiny than in past. For many companies, jney begins with a focus on risk regulary compliance. For ors, jney focuses on economic benefits. Still ors, like Canadian Tire Corp. (Canadian Tire), integrate in core strategy culture business. There are many paths a company can take advance along its jney. However, few can achieve success in embedding in core business strategy without involving Chief Financial Officer (CFO). A company needs build systems develop communication strategies. Most importantly, executives, employees, suppliers cusmers need accept support concept triple botm line that improving environment communities in which we live can also have financial benefits for company. In January 2012, Steve Starbuck, Ernst & Young s Americas Leader Climate Change Sustainability Services, sat down with Marco Marrone, Chief Financial Officer Executive Vice President Finance for Canadian Tire, discuss how company s business strategy has exped his role as CFO how his involvement has affected Canadian Tire s performance.

4 Steve Starbuck Marco, Canadian Tire has embarked on a business jney. In line with its mate, y organization has tailored concept business with two objectives in mind. The first objective has been improve efficiency, reduce costs mitigate risk while improving environmental performance value chain. The second has been generate revenue opportunities from innovations in new products services. Tell us a little bit about why Canadian Tire initiated a business program how you developed y strategy. Marco Marrone In 2008, as an organization, we decided we could do more when it came. However, at time, was categorized as a cost center that was fragmented across enterprise. As a result, we needed take a different approach. We needed centralize, we needed make it a part business. By embedding in business strategy, we realized that we could not only deliver environmental benefits but also increase efficiency value chain, reduce costs improve business performance. Steve How did you embed business in Canadian Tire operating plan? Marco We started by understing which initiatives we wanted undertake what initiatives would generate. We n built se initiatives in annual operating plans. We measure activities results. But most importantly, we tie results variable compensation plans. Business initiatives become part employee objectives. Steve Typically, it s very difficult bridge operational silos facilitate more collaborative thinking across functional geographic lines business. It s obvious this is something Canadian Tire has achieved. Talk about how you were able do it. Marco We started by hiring Tyler Elm as Vice President Business Sustainability. Tyler came us with a wealth experience helping large organizations like s integrate business in broader business strategy. Tyler brought individuals from different groups across organization work ward a common goal. A buyer could be looking at packaging from perspective how sell product. However, that packaging could have a negative impact on transportation costs results. Tyler brought se two functions ger find a solution that maximized both economic environmental performance. Steve We recently wrote a white paper on how business is exping role CFO. You are very engaged in strategy here at Canadian Tire. What was thinking behind this organizational structure? Marco CFOs are always interested in money what we are spending money on, where we are getting returns how we are measuring benefits program. Embedding business in operating plan is key. As CFO, I m very interested in business plan s areas revenue, expenses, ultimately, botm line. I m also very involved in capital expenditures, approvals tracking. Ultimately, I need underst return for organization, both from a financial perspective as well as a perspective. Anor critical element a successful program is reporting. We embedded results in external financial reporting for two reasons: provide external world with updates on ensure that results go through rigor associated with external reporting. That kind rigor gives results credibility in market. Steve Let s talk about measurement a little bit more. When we talk about measurement, we ten think about it from stpoint what gets measured gets managed. You talked about external reporting. How have you reported y performance internally, how have you used it as a management ol? A cona conversation with Marco Marrone, Chief Financial Officer Executive Vice President Finance, Canadian Tire Corp. To learn more, please visit ey.com/climatechange

5 We embedded results in external financial reporting We embedded results in external financial reporting for two reasons: provide external world with updates on for two reasons: provide external world with updates on ensure that results go through rigor associated ensure that results go through rigor associated with with external external reporting. reporting. That That kind kind rigor rigor gives gives results results credibility credibility in in market. market. Marco Our first step is build initiatives in Marco Our first step is build initiatives in operating operating plan. plan. The The second second step step is is take take operating operating plan plan break break it it down down among among levels levels organization. organization. We We outline outline work work we we will will assign assign in in coming coming year year measures measures we we will will use use gauge gauge each each level s level s success. For example, example, we we may may assign assign an an employee in in merchising department an an objective developing a more sustainable approach product packaging. In In addition assigning objective, we we define expected result. We n measure progress quarterly track outcomes. At end year, year, employee s progress against ir objectives will determine his his or or her her variable compensation payout. Steve Clearly, you ve elevated discussion C-suite organization. You report Board get get Audit Committee involved. Would you you say say that that elevating business within Canadian Tire Tire has has resulted in in a transformational process for for organization? Marco I I certainly think it it has has created greater awareness within within organization. But But I I also also think organization looks looks at at differently. I I think think we we are are better positioned positioned identify identify great great investments that that provide improved improved service service or or superior superior products products cusmers, cusmers, have have an an economic economic benefit benefit Canadian Canadian Tire Tire help help environment. Business has elevated environment. Business has elevated thinking. Where it used be fragmented within thinking. Where it used be fragmented within organization, we now have a more holistic view organization, we now have a more holistic view opportunities. opportunities. In recent Ernst & Young/GreenBiz Group survey Steve In a recent Ernst & Young/GreenBiz Group survey corporate corporate pressionals, pressionals, 68% 68% respondents respondents indicate indicate that that y y measure measure value value ir ir reporting reporting based based on on feedback feedback from from stakeholders. stakeholders. How How would would you say say you you determine value value that that Canadian Canadian Tire Tire receives receives from its its reporting? Marco I think we we define value reporting in in three ways: by what invesr community is is saying about about reporting work we we are are undertaking, by what media is is saying, by by how employees feel about efforts. We We made that that value measurable by putting efforts in in external financial reporting. Adding that kind rigor means we are serious about business. If If you you go go management discussion analysis in in external reporting documents, section on on business has measures projects we we have worked on on in in last last quarter benefits we ve achieved. We We also also try try put se benefits in layman s terms by by linking m m something which an an average consumer could could relate, relate, such such as putting cost avoidance numbers every every quarter quarter in in context how many new new Canadian Tire Tire sres sres we we would would have build build get get same same economic economic value, value, or or how how many many homes homes could could be be powered powered with with equivalent equivalent energy energy use use emissions emissions we we have have avoided avoided through through work work on on energy productivity. energy productivity. Steve Has y business strategy become Has y business strategy become part y invesr relations strategy? part y invesr relations strategy?

6 Marco Not a great degree yet. I m also responsible for invesr relations. To date, we haven t received o many questions. But I believe it will become more more important in future. If we continue look at business, not as a cost but as a part business strategy business operations, we will make greater headway. Steve By all accounts, you ve had great success date. Canadian Tire has won a number awards is now included in a prominent sck index. What s next? Where does Canadian Tire go from here with its business strategy? Marco So far, Steve, we ve been focusing on Canadian Tire retail, which is largest division. The real value now is take business strategy or businesses: Mark s, FGL Sports petroleum. We intend embark on initiatives in se divisions drive not only economic benefits but also improvements in environmental performance. Steve Y involvement as CFO has clearly enhanced Canadian Tire s business strategy. How do you think y role in program has enhanced y position as CFO? Marco The opportunity for me has been have a greater view in business. By positioning as a business initiative, I am able see more dimensions business. It allows me get deeper in each divisions, learn more about businesses how y operate. Adding business lens enables me look at how we can take certain steps not only improve pritability but also improve environment. Steve We ten refer business strategy in terms making money, saving money managing risk in a low-carbon economy. We ve spent some time talking about efficiencies cost savings. Let s talk about how you have viewed y business strategy in terms generating additional revenue. Marco Steve, that s an excellent point. Obviously, we ve looked at initiatives asked: How can we avoid cost? But we have also thought about how we can generate revenue from initiatives. At a number Canadian Tire retail outlets, we have installed solar panels on ros generate renewable energy for local energy grid. As well, from a consumer-facing perspective, we ve been able produce environmentally preferred products that we now sell within retail environment. Steve What about risk component? How have you used y business strategy manage risk? Marco We ve looked at what would happen in a carbonconstrained economy. At a cost $30 per nne, in many cases, impact cost goods sold could be in low single-digit percentages. However, in some product categories, cost goods sold could be 30% or 40% higher. The modeling has allowed us quantify carbon price risk in se categories identify how we can take energy carbon out equation. That s how we are working manage risk. Steve That s anor great example why finance function should be involved. As we end time here day, do you have any final thoughts you d like share with or CFOs public or private companies? Marco Based on experience at Canadian Tire, I have f recommendations that helped make business strategy a success: 1. Get good people. It s absolutely vital have people who underst business can help launch initiatives across organization. 2. Make sure business is not fragmented. Pull it ger. That s where you really get some leverage. 3. Make it part y business plan. If it s something on side a feel-good exercise, you won t get far in organization. But if you make it part business, part business plan part people s objectives, you will make tremendous headway. 4. Put measurement systems in place. You have measure report on y initiatives. You also want have right resces in place conduct analyses that enable you gain insights in what data is telling you. Turning analyses in insights enables you sell a great opportunity business leader by identifying benefits business, as well as environment. Steve Marco, I want thank you for joining us day. It s been fascinating hear about Canadian Tire s business strategy how you, as CFO, have played an important role. A A conversation with with Marco Marco Marrone, Chief Chief Financial Officer Officer Executive Vice Vice President Finance, Canadian Tire Tire Corp. Corp. To learn To learn more, more, please please visit visit ey.com/climatechange

7 In addition interview with Canadian Tire s CFO Executive Vice President Finance, Marco Marrone, we had opportunity spend a little bit time with Tyler Elm, Canadian Tire s Vice President Corporate Strategy Business Sustainability. In particular, we were interested in his views on how important he believes relationship is between Chief Sustainability Officer (CSO) CFO success a business strategy. Here s what he had say: economic performance that have given us traction. Without CFO, we wouldn t have rigor that we have around measurements, we wouldn t have signal employees that it s relevant. It s one thing have CEO tell organization work on. It s anor have robust measures that are in operating plans tied variable pay. What gets measured gets managed,, when it is tied compensation, it makes more p mind. Steve Tyler, we spent quite a bit time talking with Marco about role CFO how that role is changing value CFO can provide in developing executing a business strategy. From y viewpoint, what value do you see in having CFO so engaged? Tyler Elm In terms big picture, having CFO involved serves as a signal business that is relevant. At a deeper level, day--day long-term opportunities stem from measurement reporting. Getting business initiatives in operating plans core financial documents, having metrics that matter, se are what give us traction. We know economic environmental value initiatives we are undertaking. We can communicate m business, business can take ir objectives results CFO. They can say: Here s what we did this year: more than 400 business initiatives, $6 million in costs avoided, approximately a million dollars from new revenue sces enough energy savings power 1,000 homes. It s robustness measurement ability tie measures Steve So, access data, credibility data elevating results C-suite are all very important aspects how CFO can help CSO do his job how company can execute on its business plan. Tyler Absolutely. If I go in President s fice without data, he s going ask: Why should I care? But if I walk in his fice with a concrete analysis by lines business that outlines initiatives, measures, results benefits organization in last quarter, that changes conversation. Instead questioning validity numbers analysis, he s now asking: How can additional resces improve benefits? He s asking: What else can we do? Having CFO involved makes a huge difference. Getting business initiatives in operating plans core financial documents, having metrics that matter, se are what give us traction.

8 Our point view Download current thought leadership research findings at ey.com/climatechange From CFO involvement Six growing trends employee in corporate engagement: six An Ernst key & Young trends survey in cooperation in with GreenBiz Group corporate An Ernst & Young survey done in cooperation with GreenBiz Six growing trends in corporate An Ernst & Young survey in cooperation with GreenBiz Group Access thought leadership anywhere with EY Insights, new mobile app. Visit eyinsights.com Contact us Steve Starbuck How has exped CFO s role Brendan LeBlanc Ann Brockett Susan McGeachie Americas Canadian Leader, Leader, Central Executive Market Leader, Direcr, Assurance Climate Change Sustainability Services Climate Americas Change Climate Change Ernst Sustainability & Young Services LLP Sustainability Sustainability Services Services Ernst 3882 & Young LLP stephen.starbuck02@ey.com ann.m.brockett@ca.ey.com susan.mcgeachie@ca.ey.com brendan.leblanc@ey.com Ann Cathy Brockett Cobey Meghan Harris Americas Canadian Assurance Market Leader, Western Paul Market Naumf Leader, Climate Change Climate Change Climate Change Sustainability Services Global Leader, Sustainability Sustainability Services Sustainability Services Ernst & Young LLP Cleantech Tax Services cathy.r.cobey@ca.ey.com meghan.harris@ca.ey.com Ernst & Young ann.m.brockett@ca.ey.com Thibaut Millet Nicole paul.naumf@ey.com Poirier Brian Canadian Gilbert Advisory BC Market Leader, Executive Eastern Market Direcr, Leader, Compliance Reporting Climate Chris Change Walker Americas Climate Change Climate Change Sustainability Associate Services Direcr, Markets Sustainability Services Americas 8342 Climate Change Ernst & Young 2846LLP nicole.poirier@ca.ey.com Sustainability Services thibaut.millet@ca.ey.com Ernst & Young LLP brian.gilbert@ey.com chris.walker@ey.com Ernst & Young Ernst & Young Assurance Tax Transactions Advisory Assurance Tax Transactions Advisory About Ernst & Young About Ernst & Ernst Young & Young is a global leader in assurance, tax, Ernst transaction & Young is advisory a global leader services. in assurance, Worldwide, tax, transaction 152,000 people advisory are united services. by Worldwide, shared values 152,000 an unwavering people commitment are united by quality. shared We values make a an unwavering commitment quality. 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