Workshop GG Corporate Sustainability Best Practices A Case Study - PDF document

Workshop GG Corporate Sustainability Best Practices … A Case Study of Bridgestone’s Global Sustainability Procurement Policy for Natural Rubber … An Interactive Session Wednesday, March 27, 2019 11:15 a.m. to 12:30 p.m.

Biographical Information E. Chase Dressman, Attorney, Taft Stettinius & Hollister LLP 425 Walnut St. Ste. 1800, Cincinnati OH 45202-3957 513-357-9406 Fax: 513-381-0205 cdressman@taftlaw.com E. Chase Dressman is an attorney in the Environmental practice group at Taft Stettinius & Hollister LLP's Cincinnati office. Chase advises clients with regard to compliance with federal and state environmental laws and regulations, environmental due diligence and transactional negotiations, and represents clients in environmental litigation. He has defended clients in dozens of environmental enforcement matters and pursued, defended and resolved dozens of environmental litigation claims under CERCLA and other state and federal environmental laws. He is currently serving his third term as the Chair of the Cincinnati Bar Association's Environmental Law Committee, and is the Chair of the Northern Kentucky Chamber of Commerce's Regional Youth Leadership program. Andrew D. Thompson Senior Counsel - Environmental, Health, Safety & Sustainability Bridgestone Americas Inc., 535 Marriott Dr., Nashville TN 37214 thompsonandy@bfusa.com Andy Thompson is Senior Counsel - Environmental, Health, Safety & Sustainability at Bridgestone Americas, Inc.'s corporate headquarters in Nashville, TN. Andy has significant regulatory experience both in his current role as in-house legal counsel at Bridgestone and in previous roles in environmental practice groups at private law firms. Andy has also previously served as the Bureau Chief of Ohio's Bureau of Underground Storage Tanks Regulation (BUSTR). Andy currently plays a key role in Bridgestone's Global Sustainability Procurement Policy, which is committed to a sustainable supply chain for natural rubber.

Corporate Sustainability Best Practices Applying Bridgestone’s Sustainability Ethic to the Global Natural Rubber Supply Chain

The Bridgestone Essence Framework The Bridgestone Essence Core & Vision Quality Environment Creation of Creation of Social Value Customer Value Safety Basis of Operation

Our Way to Serve VISION Understanding that Serving Society with Superior Quality is our heritage and our mission, and embracing our responsibility to future generations as a global leader in our industries, Bridgestone and its teammates around the world employ innovation and technology to improve the way people move, live, work and play.

Priority Areas and Management Fundamentals Accelerate sustainable Employ our strengths to Help ensure a healthy mobility innovations support our communities environment for current through advanced and enhance the way and future generations technologies and solutions people live, learn and work Contributing to In harmony with nature Accessible mobility a safer society Accessible and Reduce CO 2 Emissions Smart mobility inclusive education Promoting healthier Value natural resources Safe transportation communities MANAGEMENT FUNDAMENTALS Business Continuity (BCP), Human Rights, Labor Practices Compliance, Fair Competition Risk Management Procurement Quality and Customer Value Safety, Industrial Hygiene

Global Sustainable Procurement Policy • • Strengthened concepts included Global commonality and applicability ‒ Broad sustainability ‒ Traceability • From “guidelines” to “policy” ‒ Net‐Zero Deforestation/Peatlands • ‒ Land Rights Available in 13 languages ‒ Resilience • Supported by robust internal training and Reflects 3 rd party perspectives • governance ‒ Consultants ‒ Major NGOs (Under NDA via consultant) • SAQ for major suppliers ‒ Internal global working groups • SAQ‐TRC assessment in development • Broader than top competitors

Potential issues regarding Natural Rubber production Alignment of stakeholders on the environmental, social and governance potential issues: Industrial rubber plantations Smallholders Environment • Deforestation • Direct or indirect deforestation • Biodiversity (due to monoculture expansion) • Water pollution • Farm management practices (water pollution, soil • Soil degradation degradation) Social • Land grabbing • Economic vulnerability due to poor productivity • Social conflicts with local communities and performances and exposure to a volatile commodity traditional groups price • Child labor • Child labor on small size rubber farms due to poor • Consideration of workers’ rights socio-economic conditions • Working conditions Governance • Corruption issues • No traceability

Potential Legal Issues – Anti-Trust • Sherman Antitrust Act – Outlaws “every contract, combination, or conspiracy in restraint of trade” and any “monopolization, attempted monopolization, or conspiracy or combination to monopolize.” • Conduct must occur during the flow of interstate commerce or have an appreciable effect on some activity that occurs during interstate commerce. • Does not prohibit every restraint of trade – only those that are unreasonable.

Potential Legal Issues – Anti-Trust • Sherman Antitrust Act • Per se Violations: – Conduct found to have a “pernicious effect on competition” and lacking “any redeeming virtue.” – Civil violation found merely by proving that the conduct occurred and fell within a per se category. – Require no further inquiry into the practice’s actual effect on the market or the intentions of those individuals engaged in the practice. – Examples: arrangements to fix prices, divide markets, rig bids, or concerted refusals to deal.

Potential Legal Issues – Anti-Trust • Sherman Antitrust Act • Violations of the “Rule of Reason”: – Totality of the circumstances test – asks whether the challenged practice promotes or suppresses market competition. – Intent and motive are relevant when predicting future consequences. – Fact-specific inquiry, including the particular businesses involved, the history of the restraining, and why it was imposed. – Standard of whether the practice “unreasonably restrains trade.”

Potential Legal Issues – Anti-Trust • Sherman Antitrust Act • Penalties: civil and criminal – Criminal penalties of up to $100 million for a corporation and $1 million for an individual, along with up to 10 years in prison. – Maximum fine may be increased to twice the amount the conspirators gained from the illegal acts or twice the money lost by the victims of the crime, if either of those amounts is over $100 million. • Cooperation vs. Collusion • Concerted vs. Independent Action

Potential Legal Issues – Anti-Trust • Clayton Antitrust Act – Prohibits additional activities not within the scope of Sherman Antitrust Act, such as: o Price discrimination between different purchasers, if such discrimination tends to create a monopoly. o Exclusive dealing agreements. o Tying arrangements. o Mergers and acquisitions that substantially reduce market competition. • Bottom Line : Need to include legal analysis of potential antitrust issues at every stage of effort. Must have game-plan and clear code of conduct among participants to avoid violations of antitrust law.

A uniquely positioned industry 6 million smallholders Natural rubber growers/producers Tire and car makers Consumers and end users Millions of consumers/end users

Tire Industry Project 11 Global Leading Tire Company Members

Potential Legal Issues – Contractual Arrangements • Legal, binding contract establishing and governing cooperative effort. • Can involve creation of new entity or the use of one or more direct contracts between the group members. • Scope/nature of cooperation need to be defined. • Define group members’ rights and obligations. – Who contributes what to the group effort? – Who has the final say? – How are decisions made?

Potential Legal Issues – Contractual Arrangements • Contracts need to answer the basic (and not so basic) questions about the parties’ cooperation: – How long will the arrangement last? – What is the scope of the arrangement? – How will objectives be met? – How are disputes or conflicts supposed to be handled? – How do the parties deal with changing circumstances (e.g., market changes; employee turnover; changing laws or priorities; mergers/acquisitions/bankruptcies)? – How are new members admitted?

Potential Legal Issues – Contractual Arrangements • Common Issues: – Free-riders. – Late-joiners. – Frankenstein creations. – Amount/nature of group contributions (e.g., financial; administrative; marketing; company resources/contacts). – Dispute resolution. – Breaking-up. – Voting rights.

Potential Legal Issues – Contractual Arrangements • Examples of types of group contracts: – Joint Venture Agreements. – Contribution Agreements (e.g., asset transfers; provision of services). – IP Assignment/License Agreements. – Distribution or Manufacturing Agreements. – Loan Agreements. – Guaranties. – Joint Venture Entity Formation Documents. – Permits and Approvals. – Employment Agreements.