The Busine$$ Ca$e for $ustainability

Bob Willard bobwillard@sympatico.ca www.sustainabilityadvantage.com

Barrie Business Sustainability

April 7, 2011

The “Sustainability Imperative”

David A. Lubin and Daniel C. Esty, “The Sustainability Imperative,” HBR May 2010

Megatrend: “A fundamental shift in the competitive landscape that creates

inescapable threats and game-changing opportunities ... profoundly affects companies’

competitiveness and even their survival.”

Over the last 10 years, the “Sustainability Imperative” has emerged,

magnified by escalating public and governmental concern about climate change, industrial pollution, food safety,

and natural resource depletion, among other issues.”

Significant CEO Mindset Shift

Survey of 766 worldwide CEOs, including 50 in-depth interviews UN Global Compact and Accenture study, “A New Era of Sustainability,” June 2010

… fully embedded into company strategy and operations

CEOs Agree /Strongly Agree that sustainability should be ….

… discussed and acted on by boards

… fully embedded into subsidiaries’ strategies and operations

… embedded throughout the global supply chain

… the basis for industry collaborations and multi-stakeholder partnerships

… incorporated into discussions with financial analysts

2010 Increase Over 2007

Stakeholders Driving Sustainability

Survey of 766 worldwide CEOs, including 50 in-depth interviews UN Global Compact and Accenture study, “A New Era of Sustainability,” June 2010

Stakeholders who CEOs believe will have the greatest impact on the way they manage societal expectations

Consumers

Employees

Governments

Communities

Regulators

Media

Investment Community

Suppliers

NGOs

Boards

Organized Labor

Other

CEOs: Sustainability Drivers

Survey of 766 worldwide CEOs, including 50 in-depth interviews UN Global Compact and Accenture study, “A New Era of Sustainability,” June 2010

Brand, trust, and reputation

Potential for revenue / growth / cost reduction

Personal motivation

Consumer / customer demand

Employee engagement and recruitment

Impact of development gapson business

Governmental / regulatory environment

Pressure from investors / shareholders

Top 3 drivers of CEOs’ action on sustainability issues

Corps Are Investing in Sustainability

• 59% of companies in all industry sectors increased their investments in sustainability in 2010, versus 25% in 2009.

• 69% expect their organization to step up its investment in and management of sustainability in 2011.

MIT Sloan and the Boston Consulting Group winter 2011 research report,“Sustainability: The ‘Embracers’ Seize Advantage,” Feb. 2011

Definitions of Sustainability

Sustainable Development (SD)Meeting the needs of the present generation

without compromising the ability of future generations to meet their own needs

-- Brundtland Commission, 1987 –

SustainabilityThe possibility that human and other forms of life on earth

will flourish forever -- John Ehrenfeld, Professor Emeritus. MIT –

Sustainable Development (SD)Enough - for all - forever

-- African Delegate to Johannesburg (Rio+10) --

The 4 DON’Ts of Sustainable Behavior

... buildup of substances extracted from the earth (e.g. heavy metals, fossil fuels, their life-cycle polluting byproducts)

... buildup of chemicals produced by society (e.g. 70,000+ chemicals, dioxins, PCBs, their life cycle byproducts)

... degradation of nature and its natural processes (e.g. over-harvesting, species extinction, peak soil, water security)

... conditions that undermine people’s capacity to meet their basic human needs and well-being(e.g. unsafe working conditions, chasm between the wealthy and the poor)

Do not contribute to the…

http://www.naturalstep.org/the-system-conditions;Darcy Hitchcock, “Sustainability Buzzwords,” ISSP Insight, October 2009

Core Concepts of Sustainability

Futures ThinkingIntergenerational responsibility

(Eco-)Systems ThinkingCarrying capacity of the planet

to absorb waste and support life

Social JusticeEquity, Dignity, Basic services, Human rights,

Stakeholder voices

************************************

Economic, Environmental, Social/Culturalresponsibilities

Sustainability 3-Legged Stool

Sustainability

Economic LegGood JobsFair wages

SecurityInfrastructure

Fair Trade

Social Leg Working conditions

Health servicesEducation services

Community & CultureSocial justice

Environmental Leg0 Pollution & WasteRenewable Energy

ConservationRestoration

Quality of Life / Genuine Wealth / Genuine Progress

Corporate Sustainability 3-Legged Stool

Sustainability = Sustainable Development (SD)= Environmental, Social, Governance (ESG)

= Corporate Social Responsibility (CSR)= Corporate Responsibility (CR) = Green= Triple Bottom Line (TBL) = 3Es = 3Ps

Economy - ProfitsGrowth, Jobs,

TaxesProductsServices

Equity - People Employees

Community / Culture World

Environment - PlanetEco-efficiencies

Eco-effectiveness

Smart Business 3-Legged Stool

Asset Management

Economic / FinancialCapital

Built / ManufacturedCapital

NaturalCapital

Human CapitalSocial Capital

Sustainable Value Creation

Municipal “3-Legged Stool”

Sustainable Community

(28 Indicators)

Economic SecurityEmployment participation

Unemployment rateHousehold shelter spending% Low income peopleHousehold debt

Infrastructure & Built Environment

Density Green buildings Green transportation useLocal food productionRenewable energyClean tech business opportunity

Ecological IntegrityWater quality & consumption

Green space Air quality Waste diversion, residentialGHG emission reduction Urban biodiversity monitoring

Social Well-beingLife satisfaction Crime rateHealth and access to careCultural Events Homelessness

Governance & Empowerment

Education Voter turnoutCity council diversity Household garbage limitGHG reduction target

Corporate Knights 5th Annual Sustainable Cities Rankings, Winter 2011

Ranking of Sustainable Canadian Cities

7.61

Ecological Integrity

EconomicSecurity

Governance & Empowerment

SocialWell-Being

Infrastructure & Built Envir’t

Corporate Knights 4th Annual Sustainable Cities Rankings, Issue 30, Winter 2010

6.93

6.07

Smart Community 3-Legged Stool

Resilient Community

Economic / FinancialCapital

Physical / BuiltCapital

NaturalCapital

Human Capital

Social Capital

Passion Capital

Cultural Capital

Political Capital

Community Value CreationCheryl Jacobs, “Measuring Success in Communities,” 2007

http://agbiopubs.sdstate.edu/articles/ExEx16005.pdf

5-Stage Sustainability Journey

5. Purpose/Passion Values-driven founder / CEO

2. Compliance Regulatory enforcement

1. Pre-Compliance

3. Beyond ComplianceSave on eco-efficienciesAvoid PR crisis Avoid threat of new regulations

4. Integrated Strategy Enhanced organizational value

The 3 R’s of Justifying Sustainability

RISKS

RESPONSIBILITIES

REWARDS

BUSINESS CASE

+

+

Based on Alan AtKisson, The IRIS Agreement, p. 127

Risks to Financial and Natural Capitals:Big-5 Sustainability Storm Fronts

Poverty and Social Injustice

Species Extinction and Overharvesting

Food and Water Crises

Waste, Toxicity,

and Health

The 3 R’s of Justifying Sustainability

RISKS

RESPONSIBILITIES

REWARDS

BUSINESS CASE

+

+

Based on Alan AtKisson, The IRIS Agreement, p. 127

Risks to Financial and Social Capitals:Stakeholders’ Rising Expectations

Waste, Toxicity, and Health

Poverty and Social Injustice

Species Extinction and Overharvesting

Food and Water Crises

Employees

Customers

Media Economists

(Scientists)

(NGOs)

Competitors

Markets

Governments Insurers

The Public Investors

BanksRisks to Reputation re Corporate Responsibilities

Social license

to operate

The 3 R’s of Justifying Sustainability

RISKS

RESPONSIBILITIES

REWARDS

BUSINESS CASE

+

+

Based on Alan AtKisson, The IRIS Agreement, p. 127

One More Goal … or an Enabling Strategy?

Innovation

Speed to market

New markets

Talent wars

Productivity

Motivation

Brand image

Managing risks

Compliance

Supply security

Profit

Share price

Growth

Revenue

Customer care

Expense savings

Competition

Market share

Leadership

Governance

RELEVANC

E

The 3 R’s of Justifying Sustainability

RISKS

RESPONSIBILITIES

REWARDS

BUSINESS CASE

+

+Large

Companies:At least 38%more profit

SME Companies:At least 66%more profit

Potential SME Profit Increase

… yielding a profit increase of +66%

-1%

-2%

+6%

-10%

+5%

-5%

REPUTATION

• Reduced recruiting costs

• Reduced attrition costs

• Increased employee productivity

• Increased revenue / market share

• Eco-efficiencies: savings in energy/carbon, water, materials, waste handling

• Lower insurance & borrowing costs

Usual

focus

Potential Improvements - Municipal

• Reduced recruiting costs

• Reduced attrition costs

• Increased employee productivity

• Eco-efficiencies: savings in energy, water, materials, waste handling

• Reduced infrastructure costs / more efficient use of tax revenues

• Increased public trust & confidence / Increased leverage of social capital / Magnet for companies and citizens

Same as for a

business

Huge potential

REPUTATION

3M Eco-Efficiency Savings

Pollution Prevention Pays (3P)

Up-front waste prevention: Product reformulation, process modification, equipment redesign, and recycling and reuse

“Fourth P”—People. Employee suggestion program generated

$1.4B in first-year savings through 8,100 voluntary projects over 35 years (1975-2010)

http://solutions.3m.com/wps/portal/3M/en_US/3M-Sustainability/Global/Environment/3P/

Employees Are Key to Eco-Efficiencies

Community Centre Conservation Challenge (CCCC)8 Community Centres; June – August 2009Annual verified energy savings of $90,000

“Low cost / No cost” employee engagement approach• Classy “no pizza boxes” luncheon to launch the challenge• Trained maintenance staff and programs facilitators• Engaged staff in inventory of plugs and savings ideas• Presented winning team leaders with trophies at Council• Classy thank-you closing luncheon for all participants• Results included in City’s Leisure GuideErnie Davies and Suzanne Elston, Oshawa Environment and Energy Mgmt Services

Presentation to the Durham Region Roundtable on Climate Change, June 2010

The 3 R’s of Justifying Sustainability

RISKS

RESPONSIBILITIES

REWARDS

BUSINESS CASE

+

+

Climate Change &

Energy Crises

Employees

Customers Economists

(Scientists)(NGOs)

Governments

Insurers

Investors

At least 38% to 66% more Profit

The New Economy

• New ownership models: employees, customers, co-ops, social venture funds, government funding

• New company purposes: “Social enterprises,” “B Corps,” “Hybrid organizations,” “Flexible purpose corporations” (California Bill SB 201, Corporate Flexibility Act, Feb. 2011) 

• Responsible consumption / thrift vs. over-consumption• Low / No-growth model vs. “grow or die” model

• Services vs. products• “Dematerialization” vs. physical goods, processes, or travel

using “virtual” alternatives like videoconferencing or online shopping”

• Low-carbon economy vs. fossil fuel-based economy• Local supply chains vs. global supply chains

In Summary …

Sustainability is smart business

Important stakeholders’ expectations are rising

New market forces & risks are in play

Relevant to existing organizational priorities

Can protect & enhance organizational values

Many willing, helpful partners

Opportunity for leadership … by example

The Busine$$ Ca$e for $ustainability

Bob Willard bobwillard@sympatico.ca www.sustainabilityadvantage.com

Barrie Business Sustainability

April 7, 2011