2008 Corporate Responsibility Report. Balance: Planet / People / Profit

Transcription

1 2008 Corporate Responsibility Report Balance: Planet / People / Profit

2 Contents 00 / Balance Pg. Introduction 02 Letter from CEO / Planet Introduction 05 Less Packaging 06 Partnerships 07 What s Next 08 Data / People Introduction 10 Friends InDeed 11 Reforestation 12 What s Next 13 Data / Profit Introduction 15 Wood Turnaround 16 Emerging Markets 17 What s Next 18 Data 19

3 00 / Balance Introduction / Striking the right balance requires a mix of harmony, control and vision. Steelcase is the global leader in providing office furniture solutions that help our customers have a better work experience. But we don t believe a company can be measured merely by its business strategy and results. We believe in taking a balanced approach to planet, people and profit. And we believe in doing it with our eyes wide open. That means taking pride in good news and good works, as long as we don t lose sight of what we still need to accomplish. And it means continually assessing and improving the fitness of our global enterprise to compete in a flat world where only the companies with a finely tuned sense of balance will thrive. We invite you to explore this report, which assesses our progress and describes our future around the balance of profitability, sustainability and social responsibility. 02

4 00 / Balance Letter from CEO To our shareholders and friends / There was an era when some business leaders believed, Greed is good. And there was a time when the conventional wisdom said, It costs more to protect the environment. At Steelcase, we ve never subscribed to either theory. And a growing number of companies agree with us. In today s global marketplace, any corporation must balance its responsibilities to shareholders, to customers, to the communities where we live, work and do business...and to the generations that come after us. We need not apologize for being a company that steadily focuses on improving its profitability. Those profits are the fuel that drives our ability to return value to our shareholders, reward our employees and do our part to make the world a better place. And instead of being a drain on profits, sustainability has become another source of inspiration for us leading to smarter products, more cost-effective processes and new solutions. Designing for the environment is part of the essential fabric of being a successful global enterprise. What else defines the successful corporation in this I want it anywhere, anytime world? I believe companies must keep pace with the changing definition of fitness. If you ve spent any time in the gym, you know that it s not enough to reach your desired level of fitness you must work just as hard, if not harder, to maintain that level. And what passed for fitness in a previous generation can seem less fit in a more demanding environment today. Several years ago, Steelcase began to modernize its industrial system once the model for the industry due to its size and bulk, but no longer the standard for fitness. Our new model needed to be more agile, so we have continued to apply lean principles across manufacturing, to develop a global supply chain and to improve our distribution process. As a result of this work, coupled with revenue growth, we have improved operating margins and made our system more efficient. We have greater capacity and a smaller environmental footprint. As we closed the books on fiscal year 2008, Steelcase announced additional manufacturing consolidations designed to maintain our fitness in the years to come. Our company is driving toward a long-term goal of 10-11% operating income as a percent of revenue. Last year I wrote in our annual report that it was time to turn our attention to the front end of our business, with the same willingness to rethink our business model that we brought to Operations. We have made strides in that direction but we are not there yet. This has been a year of realignment for Steelcase, preparing for the summer 2008 launch of a new premium brand and a significant collection of new products in North America and other global markets. And it was a year when we continued to embed sustainability into our business. As we design our new products, we continue to take into account the makeup and lifecycle of all components and source materials. I encourage you to read more about our growth and financial performance in the Profit section of this report; to learn more about our sustainability efforts in the Planet section; and to see some examples of our other social responsibility commitments in the People section. 03

5 00 / Balance Letter from CEO continued / I want to make another point about people specifically, the people of Steelcase. I am constantly impressed with their ability to adapt to constant change, to embrace our vision for reducing our footprint and to contribute their time and other resources to helping our communities. Now we are asking them to help us react to uncertain economic times. We ask a lot of our people, and I am extremely proud of their response. Our strategy and our people two big reasons why I m confident about Steelcase s future, our ability to deliver value to shareholders and customers and our ability to remain a fit and balanced enterprise. Jim Hackett 04

6 01 / Planet Introduction / Steelcase s sustainability vision calls on us to excel in every environmental dimension, with a current focus on three key platforms: materials chemistry, lifecycle assessment and recycle/reuse. We believe these areas have the greatest potential impact to the environment, to our customers and dealers and to our business. We also believe our future environmental progress should be inspired by the Cradle-to-Cradle philosophy developed by McDonough Braungart Design Chemistry (MBDC). In North America, the development of the Cradle-to-Cradle certification protocol provides a recognized platform to demonstrate our commitment to sustainability. Steelcase and its subsidiaries have more cradle-to-cradle certified products than any company, in any industry. We want to understand the impact of our products at every stage of their life. In Europe, our products are developed with systematic Life Cycle Assessment and demonstrate their performance through ISO-based Environmental Product Declarations certified by IPU in Denmark and Ensam Chamberry in France. 05

7 01 / Planet Less Packaging / Reducing the environmental impact of our products means thinking about every step in the process. Sometimes it s a matter of thinking smaller. The Development team at Steelcase s international headquarters in Strasbourg, France, elected to package a new chair in three pieces, as opposed to putting a fully assembled chair in a larger box. Right away, this cut in half the amount of cardboard required. But this meant more assembly would be required at the customer site. Designers and engineers came up with a way to put the chair back together, without tools, in 32 seconds. (The marketing team liked the idea so much that they decided to name the product 32 Seconds.) 32Seconds Now the sustainability impact expands. More boxes can fit on one truck, so fewer trucks are needed 35% fewer trucks than if we ship the chair fully assembled. The boxes also take up less room in the factory and the dealer s warehouse, saving floor space and related energy. 35% Fewer Trucks 06

8 01 / Planet Partnerships / When it comes to sustainability, it s important to have friends. Steelcase was one of the first companies to work with the U.S. Environmental Protection Agency and Department of Commerce in The Green Suppliers Network (GSN). The network is based on the logic that sustainability and lean manufacturing go together each is about removing waste from every step of the process. Steelcase engages its suppliers in technical reviews that help each of these partners and ultimately Steelcase increase productivity and eliminate anything that doesn t add value in the eyes of the consumer. We re also working with our dealers to address the use of products at the end of their life. The Environmental Partnership Program provides environmentally responsible options for Steelcase furniture that customers no longer want or need. Depending on the type, quantity and condition of the furniture, we will help resell it to other businesses, donate it to a non-profit organization or recycle it with the goal of minimizing the amount of waste that goes into a landfill. EPA Environmental Protection Agency GSN The Green Suppliers Network In fiscal year 2008, Steelcase launched the Green Giant program at This program allows us to spotlight the work of other sustainable champions and partners whom we admire not just in the environmental arena, but as responsible citizens overall. 07

9 01 / Planet What s Next / Wind Energy Steelcase set an aggressive goal to reduce our environmental footprint by 25% by 2012, when the company will celebrate its 100th anniversary. Shrinking the footprint requires a variety of new approaches, and here s one: Steelcase has agreed to buy all of the renewable energy credits from a new wind farm in Texas for at least five years. This is the first time a company has made an up-front commitment to purchase all the credits from a large-scale wind farm. Our investment helps make it possible for eight giant turbines to start generating wind power in the panhandle area of Texas. Beginning this summer, that electricity will flow into the local system, and according to U.S. Department of Energy (DOE) formulas, it s enough wind energy to power 2,925 homes and to remove 60 million pounds of carbon dioxide from the atmosphere for a year Homes -25% Environmental Footprint The farm, called the Wege Wind Energy Farm, provided by Steelcase, recognizes the contributions of Peter Wege, the son of one of our company s founders and a long-time environmental champion. We hope our investment will inspire other companies to pursue alternative energy sources. -60MM Pounds of CO2 08

10 01 / Planet 01 Data / -100MM Gallons H20 Since 2003, the water consumption by Steelcase as a global company has steadily decreased from 269,000,000 gallons to 169,000,000 gallons in Teague Brand Visual Characteristics C2C Draft // Leader -25 Monochromatic Rainbows are nice, but pick your flavor. Tons of VOC Emissions Typographic A word can be worth a 1000 pictures. We re making significant progress toward our goal of reducing our environmental footprint overall. This past year alone Steelcase reduced global VOC emissions by 25 tons. EPA Gold WasteWise Award For the third consecutive year, Steelcase was honored with the U.S. EPA s Gold Achievement WasteWise Award in the Large Business Category for Product Stewardship. 23K Tons of Recycled Steel In 2007, Pathways Privacy Wall was the first ever Visual Anchors Bold/Monolithic Simple/Focused Restrained Real movable wall system Drama to receive and Punch. a Cradle to Cradle Clean compositions. In the last Self-Controlled. year alone, we have recycled Alive. close to Product Certification. Tension. Steelcase and its subsidiaries Anti-Minutia. 23,000 tons Just of Enough. steel around the globe. Not over-polished. are the leaders in the Weight total images. number of Cradle A to clear hierarchy. Pragmatic Efficiency. Not over-mannered. Cradle Certified products Confidence. in any industry. Clarity of communication. Less is More. Analog. Informed Flexiblility Improvisation built on structure. Culturally Aware Cultural references integrated into design. Read more about Steelcase s commitment to the environment at 09

11 02 / People Introduction / We believe it s not only appropriate for the company to give back to the communities in which we operate, but it s smart business. Since our founding in 1912, we have made it a priority to help build our communities into prosperous, vibrant places. Healthy communities are important to the well-being of society and the overall economy. They provide an environment that helps companies like Steelcase grow, innovate and attract outstanding talent. (And we never forget that our commitment to people begins with providing a supportive work environment for our employees around the world.) Steelcase supports a variety of communitybased initiatives around the world through a combination of cash and furniture donations, volunteerism and community organization leadership. We target programs that will build public trust, foster education, respond to community needs, instill employee pride and support our values and business objectives. 10

12 02 / People Friends InDeed / Steelcase gains its knowledge of the workplace by observing how people work individually, together and in teams. Why not apply the same principle to the way children play? As the most recent component of Steelcase s established partnership with Habitat for Humanity, we sponsored the construction of a backyard play structure that will be auctioned to benefit the local Habitat for Humanity chapter. It s the third time we ve built a Habitat playhouse, with most of the labor provided by Steelcase employee volunteers. Habitat for Humanity is just one of the organizations supported by our Friends InDeed program, which allows employees to volunteer on company time. We ve found it s not only a great way to help the community, but Friends InDeed projects are excellent teambuilding opportunities for Steelcase departments. Over the past two years, participation in Grand Rapids has doubled to more than 6,000 volunteer hours a year. The next challenge is to expand the program to other Steelcase locations Volunteer Hours 11

13 02 / People Reforestation / About three years ago, a devastating fire roared through old-growth forest in the Guadalajara region of Spain. With more than 13,000 hectares of land affected and 11 deaths among the firefighters who battled the blaze, the disaster was literally a black mark on the Spanish ecosystem. In fiscal year 2008, the Spanish government came looking to the private sector for help. At about the same time, Steelcase began expanding its Corporate Relations program in the U.S. to become global in scope, even though different cultures have very different ideas about volunteerism and community involvement by corporations. More than 50 Steelcase employees have participated in a tree planting effort to begin regenerating the forests that were lost. Steelcase is also providing financial support to allow specialists to monitor the area and ensure that the reforestation is a success. We also see it as an opportunity to educate people in our company and in the local area about the importance of sustainability and our role in that process. 50+ Steelcase Employees Our forestry connections don t stop in Spain. Steelcase is collaborating with Purdue University scientists to plant a research plot next to our Grand Rapids Wood Plant which will grow higher quality trees and grow them faster. 12

14 02 / People What s Next / University Prep Thriving communities are built on strong public education systems. That s one of the reasons Steelcase is so deeply involved in making urban education better. In the fall of 2008, a new school will open in Grand Rapids. It s the result of a partnership between business leaders and the public schools, designed as a tuitionfree college prep school for grades six through 12. Modeled on a similar school in Detroit that sends more than 90 percent of its students to college, University Preparatory Academy in Grand Rapids is a new model for urban education. Steelcase provided seed money and inspiration, and is committed to helping furnish the building. The idea is resonating in the community. More than 220 families applied for 128 spots in the inaugural sixth grade class, with the winners chosen by lottery. The first class is diverse and ready for a very different learning experience. 220Families 13

15 02 / People Data / #17 Best Corporate Citizen In 2007, Steelcase was named one of the 100 Best Corporate Citizens by CRO Magazine. Ranked number 17, Steelcase is the highest-rated of the 24 companies making a debut on this year s list. F.A.C.T.S. WMCAT Education & Job Opportunities Steelcase played an instrumental role in the development of the West Michigan Center for Arts and Technology, a facility dedicated to helping connect economically disadvantaged people with educational and job training opportunities. As part of the F.A.C.T.S. reading program, Steelcase employees have been helping students at Brookside Elementary, our partner school, learn to read a skill directly linked to future success in school and in life Hours Since 1993, retired Steelcase employees have been actively volunteering their time through the Steelcase C.A.R.E. program. This past year, retirees donated over 5,300 hours of community service. Read more about Steelcase s commitment to the local communities in which we live and work at 14

16 03 / Profit Introduction / Fiscal year 2008 was another year of steady progress for Steelcase. The company grew to $3.4 billion in annual sales, an increase of 10.4 percent over the prior year. Net income of $133.2 million was a 24.6 percent gain over the prior year. This resulted in earnings per share of $0.93. Steelcase returned nearly $500 million to shareholders during the year. We did this through regular quarterly dividends, a special cash dividend and share repurchases, and still finished the year with a strong balance sheet. We invite you to explore the details of our financial performance in the company s 10-K report. Steelcase remains passionately committed to its mission of providing people with a great work experience. We begin by understanding the nature of work. As we extend our reach into vertical markets such as healthcare (where our Nurture brand continues to thrive) and higher education, we are learning more about the impact of the experience on everyone who enters a particular space. We believe continued success will come from combining our insights and innovation with a sharp focus on process excellence and a global reach that is unmatched in our industry. 15

17 03 / Profit Wood Turnaround / A robust wood furniture offering helps Steelcase provide a broad array of solutions for our customers, but the wood product category has long been a lower-performing part of our business. Fiscal year 2008, however, saw a dramatic turnaround as Steelcase Wood approached breakeven compared to a $27.5 million operating loss in the prior year. There s no single element that contributed to this significant improvement. Rather, it s the combination of the right portfolio and the right execution that made this a watershed year for Wood and established a direction that we expect to continue. The relaunch of our EE6 product, combined with new research on private offices, resonated with customers and resulted in increased sales. The introduction of a durable water-borne finish called Clarity helped minimize the use of solvents in the manufacturing process and gives customers another reason to consider Steelcase. In operations, we began to realize the efficiencies from consolidating wood manufacturing from three locations to one our LEED-certified (U.S. Green Building Council s LEED Program Leadership in Energy and Environmental Design) Wood Plant in Grand Rapids. With the help of resources from our steel manufacturing facilities, the Wood team improved the yield on raw materials and reduced scrap, improved quality and on-time delivery performance and made meaningful gains in gross margins. 16

18 03 / Profit Emerging markets / There are more than 150 cities in China with a population of one million or more. And as China s rapid development continues, there will be more and more opportunities for Steelcase to serve Chinese companies as well as the Western companies that also see great opportunity in the Asia Pacific market. Steelcase has been making measured investments in China and India, building the infrastructure necessary to compete in this region. Unlike its North America distribution model with an emphasis on a strong dealer network, Steelcase sells direct to many of its Asian customers. Steelcase made a strategic acquisition in fiscal year 2008 that had an immediate impact on market share in China and India. We ve purchased Ultra, a thriving office furniture company with a strong reputation for service and project management. Ultra s product portfolio complements the Steelcase offering at lower price points, providing an expanded menu of solutions for an expanding marketplace. 17

19 03 / Profit What s Next / Reinvention Fiscal year 2009 will be a year of reinvention on the white-collar side of our company. We ll be looking at processes that can be improved, work that can be consolidated and other efficiencies that can reduce operating expenses. As part of this initiative, Steelcase is developing new office space in Kuala Lumpur for a service center that will continue to support our Asian business while adding resources to support other geographies as well. 18

20 03 / Profit Data / $3.4 Billion Steelcase serves customers through a network of over 600 dealers and approximately 13,500 employees worldwide. Fiscal year 2008 revenue was $3.4 billion. AR 2008 Read the full fiscal year 2008 Steelcase Annual Report and Proxy in the Investor Relations section of our corporate website. SCS NYSE Steelcase s stock symbol is SCS on the New York Stock Exchange. 19

21 03 / Profit Data continued / Stock Performance ($ DOLLARS) DATE: 02/28/03 02/27/04 02/25/05 02/24/06 02/23/07 02/29/08 S&P 500 Stock Index Peer Group Steelcase NOTES: 1. S&P 500 is used as a performance indicator of the overall stock market 2. The peer group consists of three companies that manufacture office furniture and have industry characteristics that we believe to be similar to Steelcase s. The peer group consists of Herman Miller, Inc., HNI Corporation (f/k/a HON Industries Inc.), and Kimball International. Revenue ($ BILLIONS) $2.3 $2.6 $2.9 $3.1 $3.4 Gross Profit (% OF REVENUE) Income From Continuing Operations After Tax ($ MILLIONS) 04 $11.7 $48.9 $106.9 $133.2 Dividends Paid ($ MILLIONS) $35.5 $35.6 $49.2 FY: FY: FY: FY: 04 ($42.0) $67.2 $

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