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Page 1: Booz & Company Bangkok, 21 August 2009 Profitability and Social Responsibility “Quo Vadis”

Booz & Company

Bangkok, 21 August 2009

Profitability and Social Responsibility“Quo Vadis”

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Booz & Company is a leading global management consulting firm

Booz & Company is a leading global management consulting firm — for nearly a century, we have helped our clients realize the essential advantage needed to survive, thrive, and win

Founded in 1914, our Firm is the oldest management consulting firm and the only consultancy that is a top-tier provider of consulting services to the private, public, and non-governmental sectors around the world

We bring foresight and knowledge, deep functional expertise, and a practice approach to build capabilities and deliver real impact

In 2008, we separated our operations from our U.S., government consulting business, which retains the name Booz Allen Hamilton

We continue our work with businesses, governments, and organisations around the world, now under the name Booz & Company

With annual sales of $1.3 billion, we have over 3,300 staff members in 57 offices than span more than 30 countries and 6 continents worldwide

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We create ‘Essential Advantage’ through our four key capabilities

Client Quotes

“Booz enabled different functional areas to work with each other, breaking down the normal departmental barriers and parochialism…” CEO

“We had done over 20 projects with other consultants, but none of them were successfully implemented. Booz accompanied us from initial concept all the way through successful implementation” Program Executive Sponsor

“The real benefit is that Booz not only helped us develop a process, but we ended up with something we could use. I was impressed by the fact that we learned by doing. The savings potential across all our product lines is staggering”. Client Executive

“Booz’s ability to coordinate people in several countries, different sites and functions – along with suppliers – was one of the major challenges it met. I don’t think we could have pulled this off at the level we did without Booz”. Client Executive

Results that Endure

Strategy

“Establish the case for Change”

Implementation

“Make the Change”

Functional and Cross-Functional Skills

“Define what to Change”

Change Management

“Make the Change stick”

A unique perspective on the dynamics of businesses and the competitive environment

Client-specific solutions to complex issues

Ability to execute or directly supervise the success-critical elements of the solution

Ability to structure and mange change programs on a global level

Deep functional expertise

Combined with specific industry knowledge

Ensuring results by changing behavioral and organizational characteristics of an organization

“Creating Essential Advantage”

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A Point of Departure …

“A corporation's purpose is to maximize returns to its shareholders.”

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A Point of Departure …

“A corporation's purpose is to maximize returns to its shareholders. Therefore,

corporations are only responsible to their shareholders and not to society as a whole.

Only people can have social responsibilities.”

“Those who would not force Greenpeace and the Salvation Army to generate a profit

should not force businesses to take responsibilities outside their area of

expertise.”

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Some definitions -- but not ‘labels’ (others include ‘Business Ethics’ and ‘Corporate Social Responsibility(1)’)

“Stakeholder Theory”

Developed by R. Edward Freeman in 1984 -- “Strategic Management -- a Stakeholder Approach”

“Stakeholder theory argues that a corporation is also responsible for other parties involved, including governmental bodies, political groups, trade associations, trade unions, communities, associated corporations, prospective employees, prospective customers, and the public at large”

“Sustainability”

“Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs. It contains within it two key concepts: – The concept of 'needs', in

particular the essential needs of the world's poor, to which overriding priority should be given; and

– The idea of limitations imposed by the state of technology and social organization on the environment's ability to meet present and future needs."

“Triple Bottom Line”

Coined by John Elkington in 1994, on his article “Towards the Sustainable Corporation: Win Win Win Business Strategies for Sustainable Development” (California Management Review)

The triple bottom line is made up of "social, economic and environmental" aspects -- "people, planet, profit"

It suggests that Corporations should be evaluated not only by their Financial Performance, but also by their ‘Environment’ and ‘Social’ performances

Source: www.corporate-ethics.org//pdf/Strategic_Management_A_Stakeholder_Approach.pdf

Source:“Our Common Future”, Brundtland Commission Report, United Nations (1987) -- World Commission on Environment and Development (WCED)

Source:http://cmr.berkeley.edu/search/articleDetail.aspx?article=4900#9601

(1) A built-in, self-regulating corporate mechanism whereby business would monitor and ensure their adherence to law, ethical standards, and international norms (Wikipedia)

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Some different views

“Stakeholder Theory”

Developed by R. Edward Freeman in 1984 -- “Strategic Management -- a Stakeholder Approach”

“Stakeholder theory argues that a corporation is also responsible for other parties involved, including governmental bodies, political groups, trade associations, trade unions, communities, associated corporations, prospective employees, prospective customers, and the public at large”

“Sustainability”

“Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs. It contains within it two key concepts: – The concept of 'needs', in

particular the essential needs of the world's poor, to which overriding priority should be given; and

– The idea of limitations imposed by the state of technology and social organization on the environment's ability to meet present and future needs."

“Triple Bottom Line”

Coined by John Elkington in 1994, on his article “Towards the Sustainable Corporation: Win Win Win Business Strategies for Sustainable Development” (California Management Review)

The triple bottom line is made up of "social, economic and environmental" aspects -- "people, planet, profit"

It suggests that Corporations should be evaluated not only by their Financial Performance, but also by their ‘Environment’ and ‘Social’ performances

Source: www.corporate-ethics.org//pdf/Strategic_Management_A_Stakeholder_Approach.pdf

Source:“Our Common Future”, Brundtland Commission Report, United Nations (1987) -- World Commission on Environment and Development (WCED)

Source:http://cmr.berkeley.edu/search/articleDetail.aspx?article=4900#9601

(1) A built-in, self-regulating corporate mechanism whereby business would monitor and ensure their adherence to law, ethical standards, and international norms (Wikipedia)

“The idea of sustainable development is an oxymoron because development inevitably depletes and degrades the

environment” Redclift, M. (2005). "Sustainable Development (1987–2005): an Oxymoron Comes of Age.”

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A better starting point?

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Some objectives

Aims of today’s discussion:

– Improve our understanding of what sustainability means for us

– Raise questions that will ultimately drive what we might need to do differently

It is NOT:

– A list of actions

– Workplans

Potential Questions that companies need to answer:

– How do we define sustainability to fit our market, people and beliefs?

– How important is sustainability?

– Should we take a leader or follower position in sustainability?

– Where to from here?

1

2

3

4

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How do we define sustainability to fit our market, people and beliefs?

“being able to adapt to future challenges to continue to do what we do”

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What do we think? What is our definition?

“integrating economic progress, social development, and environmental concerns with the objective of ensuring a quality of life for future

generations that is at least as good as today's.”

United Nations

“meeting the needs of the present without compromising the ability of future generations to meet their needs”

“using, developing and protecting resources in a manner that enables people to meet their current needs and also provides that future

generations can meet their own needs”

Or should we say:

Oregon State University

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• Health concerns (e.g. childhood obesity)

• Responsible marketing• Resource efficiency • Community

investment/engagement

• Organic• Consumer-conscious

labelling• Green initiatives• Corporate mission & values

• Socially responsible employer• Employee learning &

development

• Low cost• High quality• Labelling• Reduced packaging• Food miles / carbon footprint• Responsible sourcing

• Investment returns• Corporate social responsibility• Good governance

• OH&S• Waste disposal & recycling• Waste minimisation

How important it is depends on our current challenges

Current Operating Landscape

Regulation

Consumers preferences

Community expectations

Customer advocacy

EmployeesShareholder requirements

Any others?

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CLIENT EXAMPLE:

Candy Manufacturer

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Should we lead or follow?

Compliance

(immediate term)

Short term business advantages+ compliance

Investing for the future

+ short term business advantages

+ compliance

Altruism (investing for society)

Doing the minimum necessary

Capturing short term opportunities

Addressing long term issues

Do things for the right reasons and profits will follow

Head office told us to The legislation/customers

require it Competitors doing so we

need to keep up

To manage risks to our business

To save money (eg through energy efficiency, reduced packaging)

To be prepared for coming changes (eg emissions trading)

It will drive innovation that will keep us ahead of our competitors

It will shape our future products

To ensure the long term future of our company

To build credibility in the community against brand shocks

It is part of who we are/our heritage

It is good for staff morale It is our duty to leave this

world a better place

What we measure and report

How we make our products What we make Why we exist

Description:

What it impacts:

Sustainability approaches:

Possible contexts:

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Alternative frameworks exist…

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Philanthropy

Community Affairs

Corporate Community Investment

SustainableEnterprise

Meeting Government Regulation

CSR Tree

Inc

rea

sin

gly

Stra

teg

ic

En

ga

gin

g S

tak

eh

old

ers

Source: Richard Bernhard, “Transitioning to Strategic CSR”, Thai-American Business (Journal of the American Chamber of Commerce in Thailand, 2009)

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Hotel Chain

Sustainability mission

To place an emphasis on all four elements of Sustainability (social, cultural, economic and environmental)

Shift mindsets (values, attitudes and beliefs) when they are out of step with the realities of a finite planet and a globally powerful human race

Restructure objectives and targets when the rewards and incentives are inconsistent with long-term social, cultural, economic and environmental aims

Actions

Philanthropy / Community

AffairsAltruism

Contribute a percentage of revenues to local communities and local charities, who may be in need of assistance

Matching donations from guests

SustainabilityShort term

business advantage

Bulk purchasing Minimal packaging purchasing policy

Community Investment /

Sustainability

Investing for the Future

Priority of purchasing locally manufactured products & natural / organic produce -- enhancing local capabilities

Fair trade purchasing practices Carbon offset Fund

FUNDING 0.5% of all income from guests is ‘donated’ to our Social

Responsibility Program

An example

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Example: Global beverage company

Sustainable companies find areas of mutual interest and ways to make “doing good” and “doing well” synonymous, thus avoiding the implied conflict between society and shareholders

XXCo. is working toward several sweet spots

– It has business goals of cost reduction which overlap with a series of environmental improvements to reduce energy, waste, and packaging

Source: The Sustainability Sweet Spot; Andrew W. Savitz, with Karl Weber; Environmental Quality Management

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Another example

The Bedol Water Clock is the most accurate, environmentally practical, hassle-free chronometer of its kind. Want a high quality, beautifully designed clock that literally runs itself?  Look no further.   Because the handsome Bedol Water Clock works 100% on natural power. It’s true. No batteries, no chemicals, no electricity – no pollution. You don’t even need to wind it up! Just fill the tank with natural tap water ... add a splash of natural lemon juice ... and you’re set for 6 to 8 weeks of accurate timekeeping before refreshing. (You won’t even lose time while changing water, thanks to the built-in memory chip!)

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Example: We have examined the major emissions from our travel and office consumables

TravelTravel Office ConsumablesOffice Consumables Office FacilitiesOffice Facilities Off Site CostsOff Site Costs

Carbon Emissions SizingCarbon Emissions Sizing

ServicesServices

BusinessBusiness

EconomyEconomy

FirstFirst

AirAir

AutoAuto

Public transportPublic transport

LimosLimos

TaxisTaxis

ElectricityElectricity

Copying paperCopying paper

Food & BeverageFood & Beverage

WasteWaste

WaterWater

LightsLights

EquipmentEquipment

Examined in this analysis

Bldg embodied energy

Bldg embodied energy

Building maintenance

Building maintenance

Furniture embod. energy

Furniture embod. energy

Air-conditioningAir-conditioning

CleaningCleaning

Banking & InsuranceBanking & Insurance

CouriersCouriers

IT and CommsIT and Comms

Client facil. & consumablesClient facil. & consumables

HotelsHotels

Meals & entertainment

Meals & entertainment

Hired carsHired cars

Out of scope:– Personal decisions unrelated to the business: Eg Travel to and from office,

Use by staff of client facilities and consumables– Indirect emissions which result from the choices made by others and

therefore beyond our control eg, Created by restaurants which we use

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EmissionsFY09

6,39296,021462,061

5,904,345

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

5,000,000

5,500,000

6,000,000

kg of CO2e

PaperTaxis & LimosElectricityAir travel

Air travel dominates our emissions followed by electricity and vehicle travel

91% of emissions

Total = 6,500,000 kgs of CO2e

Note: FY is April to March

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Compliance

Fighting FiresPlaying Catch-up with Competitors

Doing what we have to

Lagging the pack and ultimately exerting more effort

Adopting a reactive approach to dealing with matters of sustainability

Conforming to minimum societal expectations and keeping within

regulations

4

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Short Term Business Advantage

Managing RisksIn the Pack Saving Money

Being in the slip stream requires less effort

Adopting sustainable practice to mitigate risk exposure

Implementing sustainable practice has a short term financial upside

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Investing for the Future

Embracing ChangeLeading the WayInnovating New

Products

Being the leader of the pack and setting the standard for sustainable

practice

Understanding that the definition of Sustainability is not static and that

the only way to fully adapt is to embrace change

Allowing sustainable initiatives to shape ideas and drive innovation

4

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Altruism

A Better WorldValues and Beliefs Connection

Being guided by values and beliefs and holding a set of objectives

beyond profit

Contributing to a greater purpose that serves humanity

Creating linkages between people

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A Hypothesis …

“XXX can significantly improve long-term corporate profitability because it reduces

risks and inefficiencies while offering a host of potential benefits such as enhanced

brand reputation and employee engagement”

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“The future can no longer be takenfor granted – it needs to be rescued.”

“… after Agriculture, Industry, and Knowledge, the next revolution is Sustainability.”

Richard Neville (Footprints of the Future)


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