Letter from Robert Brown

I have headed up Ford Motor Company’s Sustainability function for a little more than a year, but my tenure at the Company spans more than three decades. During this time, I have seen a genuine transformation as Ford integrated sustainability into its business plan, its products, its operations and its relationship with stakeholders. Although we have a Sustainability department, our biggest accomplishment is having employees from all business units and levels of the Company – including our officers – contribute to this transformation and advance our sustainability efforts through their own work.

It’s easy to assert that sustainability is integrated into the Company. It’s a little harder to demonstrate. We have extensive information about sustainability integration in the Governance section of this report, and the summary of goals, commitments and status provides insight into our direction on our most material issues. I’ll also call out a few examples of integration below.

• In Product Development, our cycle plan, which sets out the vehicles to be built over a five-year period, incorporates a variety of sustainability must-haves, including fuel economy sufficient to keep us on our climate goal glidepath. Each new product also has a variety of targets around vehicle safety, sustainable materials and other attributes. While the improving fuel economy of our vehicles gets the most attention, we’ve had a number of accomplishments in other areas, too. The 2013 Ford Fusion, for example, uses recycled cotton to provide noise dampening; recycled plastic battery car casings for underbody components; and the equivalent of more than 30,000 soybeans in foam seat cushions, seat backs and head restraints.

• Our Purchasing department leads the implementation of our Code of Human Rights, Basic Working Conditions and Corporate Responsibility (Policy Letter 24) throughout our supply chain, which is much more challenging than implementing it in our own facilities. In 2012, for example, they worked with others in the industry to train 325 Ford suppliers. This department has also taken a proactive approach to reaching across organizational and industry boundaries to work toward an effective approach to eliminating Conflict Minerals and forced labor in the complex and interconnected automotive supply chain.

• Our Research and Innovation function is an important partner in identifying and quantifying our material sustainability issues. Ford scientists developed the intellectual basis for our science-based climate change strategy, as well as the carbon dioxide model that guides its implementation. Our researchers now play an equally important role in our water strategy, helping to peer into the future to understand how increasing water scarcity will affect our operations, our markets and the communities in which we live and work – and how we can craft an effective response. Research and Innovation is also leading the implementation of our Blueprint for Mobility, because mobility is an important issue shaping the future of markets for our vehicles.

• Ford has more than 100 years of commitment to community engagement. Our sustainability and business priorities, including water, human rights and driving safety, guide our efforts in communities around the globe, and the Ford Motor Company Fund is an important partner in testing innovative solutions to global challenges.

• Our Human Resources department is also important to sustainability. We know that prospective employees care about a wide range of factors when evaluating opportunities, including a company’s sustainability record and reputation. Our Human Resources function plays a vital role in communicating our commitment and aligning incentives with sustainability performance.

We often get questions about how we integrate sustainability with performance measurement and compensation. At Ford, we develop business plans in five-year increments and establish sustainability targets based on an analysis of external factors that could impact the business and available resources. Each business unit and function leader has accountability for meeting the targets. Progress is reviewed, generally weekly, at the highest level of the Company. So virtually every function has some accountability for sustainability performance.

In addition, each salaried Ford employee has individual metrics that are established with their supervisor; the metrics are based on the overall Company business plan, which includes sustainability targets. Because of the degree of integration at Ford, people in diverse functions have sustainability-related metrics, whether it’s attaining a certain percentage of recycled and renewable content in a new vehicle, or engaging suppliers on sustainability issues. Progress is reviewed against the metrics at least twice a year, and performance relative to the metrics is an important factor in determining merit salary increases.

On the bonus compensation side, all salaried employees’ bonuses are based on a single set of company objectives, which are mostly, but not entirely, financial metrics. Ford’s financial health is one of the issues we’ve identified as most material from a sustainability point of view. For example, Ford’s strong performance in North America in 2012 was due in part to the fact that many of our facilities are now operating at or near capacity. This is the profitability “sweet spot,” but it also indicates environmental and social efficiency. For example, our per-vehicle performance on energy, water and waste has shown long-term improving trends. Nevertheless, we occasionally encounter situations where plants operate below capacity, which introduces inefficiencies. Factories that operate most efficiently offer the safest work environment and the most stable employment and long-term opportunities for employees.

Quality is another important issue that has sustainability implications. High-quality vehicles last longer, are more economical and create less waste over their lifetimes, so they clearly have sustainability advantages. At the same time, customers increasingly weigh sustainability actions in their views of quality. Over the last decade, we’ve established a record of strong and improving quality performance, although we slipped in a few cases last year. We are working tirelessly to improve quality, even as we introduce new technologies and new vehicles at an ever-increasing rate.

While integration is a main feature of our sustainability strategy internally, outside our walls we seek collaboration within our industry, across industries and across sectors. Throughout this report you will find references to innovative partnerships. For example, we have taken a collaborative approach to developing sustainable materials to reduce costs and share the benefits. We are working with Coca-Cola, Nike, Procter & Gamble and Heinz on bio-plastics and with the Oak Ridge National Laboratory and Dow on carbon fiber. This kind of cooperation is vital to making progress on the many challenges we face. It’s only through sharing, caring and trusting one another that we will grow ourselves, and lay the groundwork for generations to come.

Robert Brown
Vice President, Sustainability, Environment and Safety Engineering
June 2013