2012 was an important year for sustainability and responsibility at Tim Hortons. We commenced our work on new priorities and activities developed as part of the strategy update we performed in 2011. This update involved a comprehensive internal and external assessment which included best practice identification and analysis of current risks and opportunities, and stakeholder engagement.

While we have made considerable progress to date, we continue to consider ourselves to be at the early stages of our sustainability journey. We are excited about executing our strategic plan and showing additional progress in further embedding sustainability and responsibility across our Company.

Challenges

In executing our initial sustainability and responsibility strategy since 2009, we have learned a lot about embedding sustainability into our business and the various challenges and opportunities that are unique to our Company. While we have celebrated many successes, we have also identified a few areas for improvement and continued focus. We are committed to working with the entire Tim Hortons family to address these issues and advance on our sustainability journey.

Franchise business model – Similar to other quick service restaurant companies, we run a franchise business model. Currently, more than 99% of our restaurants in Canada and the U.S. are owned by independent Restaurant Owners. This type of business model is a strength, and pivotal to our long-standing history and culture. However, it also poses some unique challenges with respect to implementing sustainable business practices across the entire chain.

We support our Restaurant Owners in multiple areas, such as development and training of operational standards, real estate selection, menu innovation, marketing, etc. However, our Restaurant Owners are responsible for the day-to-day operation of their restaurants which includes Restaurant Team Member hiring and management, waste and utilities contracts, and general operational execution. For example, our LEED (Leadership in Energy and Environmental Design) restaurants are highly energy efficient; however, if the Restaurant Owner does not operate the restaurant to fully leverage the restaurant design, he or she may not receive the full benefits of decreased operating costs.

The successful execution of sustainable business practices requires commitment by our Restaurant Owners. Therefore, in our 2012-2014 sustainability strategy, we have identified Restaurant Owner and Team Member engagement as one of our priority areas.

Data collection – As evidenced in our goals and commitments, we believe that “what gets measured gets managed.” However, due to our franchised business model as described above, obtaining reliable environmental and social information/data from our Restaurant Owners can be a challenge. We continue to explore alternative ways to obtain the data that we require and are committed to working with Restaurant Owners to begin more direct engagement with respect to sustainability reporting.

We also feel that the further development of our corporate processes and procedures for sustainability data can be achieved. While we work towards improving our data collection processes, we have continued to work with our Internal Audit department in order to ensure that the data we obtain is accurate and reliable. Therefore, in our 2012-2014 sustainability strategy, we intend to continue to focus on sustainability reporting and data management as one of our priority areas.

Stakeholder education – Another sustainability challenge for our Company relates to stakeholder education. Many of our key issues (e.g., coffee sourcing, waste diversion and recycling, etc.) are complex and require an understanding of many different topics including materials science, industrial processes, agricultural practices, government legislation and more. Our ability to accurately communicate to, and educate, our stakeholders in these areas affects the progress we are able to make on key issues. For example, advancements in the area of restaurant waste diversion are only possible through the participation of our guests and our Restaurant Team Members. Therefore, in our 2012-2014 sustainability strategy, stakeholder engagement and communication will remain one of our priority areas.

Management of Risks and Opportunities

The assessment and management of risks and opportunities are embedded as part of our sustainability and responsibility strategy, governance framework and supporting implementation plan. Key aspects of our approach include:

• The assessment of sustainability and responsibility impacts of major business decisions;
• The integration of sustainability and responsibility into the Company’s Enterprise Risk Management process and internal performance scorecards;
• Monitoring our relations with our key stakeholders; and
• The assessment of sustainability and responsibility trends and consideration of public policy; consumer, corporate, and general public trends; issues; and developments that may impact the Company.

Further, a report of progress made on the Company’s sustainability and responsibility strategy, programs and performance is delivered to our Executive Team, the Nominating and Corporate Governance Committee of the Board of Directors, and our Restaurant Owner Advisory Board on a regular basis in order to facilitate appropriate governance and risk management practices.

We also perform a comprehensive assessment of significant business risks and opportunities in our Annual Report on Form 10-K. For more details, please see our 2012 Annual Report on Form 10-K.


We believe it is important to engage with stakeholders to understand issues, impacts, risks and opportunities that can affect our organization. We engage a variety of different stakeholder groups through the methods outlined in the table below. For information on how these activities affect how we determine what content to include in our Report, please see the Materiality and Defining Report Content section.

Stakeholder Engagement Table

STAKEHOLDER TYPE	ENGAGEMENT METHOD	FREQUENCY
Restaurant Owners	Regional Meetings	Twice a year
	Restaurant Owner Advisory Board1	Three times a year
	Restaurant Owner Conference Calls	Throughout the year
	Restaurant Owner Leadership Symposiums	Once a year
	Restaurant Owner Opinion Survey	Every two years
	Sustainability and Responsibility Roundtable	New in 2013
Corporate Employees	Company-wide Communications Meetings	Twice a year
	Employee Opinion Survey	As required
	Employee Newsletter	Quarterly
	Senior Management Leadership Symposium	Annually
Restaurant Team Members	Team Member Hotline (phone, email, mail)	Continuous
	Hospitality Manager Conference Calls	Monthly
	Manager Symposiums	Annually
Guests	Guest Services (phone, email, letters)	Continuous
	Guest Panel Research (focus groups, online)	As required
Investors/Analysts	Annual Meeting	Annually
	Financial Reporting, Investor/Analyst calls	Quarterly
	Investor enquiries (phone, email, letters)	Continuous
Suppliers	Face-to-face meetings, phone and email	Continuous
	Cross-functional meetings to review quality reports	As required
	Industry Events	As required
	Supplier Symposium	Every two years
Government (Federal, Provincial/State, Municipal)	Face-to-face meetings (e.g., public meetings, municipal council meetings, etc.), phone and email	As required
Non-governmental Organizations/Sustainability Thought Leaders	Face-to-face meetings, phone and email	As required
	Sustainability and Responsibility Advisory Council	As required
Local Communities/Community Organizations	Face-to-face meetings, phone and email	As required
Industry Associations	Face-to-face meetings, conferences, workshops, phone and email	As required

We prioritized the sustainability and responsibility issues based on an assessment of Company-wide risks and opportunities and a review of alignment with current Company strategic plans. The issues that had the greatest perceived impact on our business and on our stakeholders were:


Each of these topics has been addressed in our 2012 Sustainability and Responsibility Report. For further details, please see the Development of Commitments and Goals section.


Commitments

As part of our Making a True Difference framework, we developed overarching sustainability and responsibility commitments. Our commitments are aspirational, long-term statements related to our most important sustainability and responsibility issues, as follows:

CATEGORY	SUB-CATEGORY	OUR COMMITMENT
Guests	Menu Options	Provide our guests with balanced choices
	Guest Experience	Provide a hospitable and welcoming overall experience
Employees	Employee Culture	Champion a culture that is fair and provides opportunities
Partners	Partners	Manage stakeholders with honesty, transparency and respect
Children	Children	Make a meaningful contribution to the lives of children
Community	Community Success	Make our communities a better place to live in
Coffee Partnership	Coffee Partnership	Help build viable coffee communities
Environmental Stewardship	Waste Reduction	Reduce the waste we create in all aspects of our business
	Resource Reduction	Reduce the energy, carbon emissions and resources we use
Supply Chain	Supply Chain	Ensure best practices are embedded across our supply chain

In developing these commitments, three main inputs were used which included:

• Priorities identified by our comprehensive sustainability strategy and planning;
• Our assessment of business risks and opportunities; and
• Our stakeholder engagement results and materiality assessment of our most important sustainability issues.

Please see our Sustainability Strategy Development and Materiality and Defining Report Content sections for supporting details.

Goals

In addition to our commitments, we also set goals in each of our focus areas. Our goals are tangible, short-term targets that focus on improving our performance. These goals are reviewed on an annual basis to maintain their relevance to our stakeholder expectations and business.

Progress with regards to our goals can be found throughout the Report. To access an overview of all of our goals, please visit our 2012 Sustainability and Responsibility Performance Summary Report.