the north star of managing non-financial performance: science-based goal-setting and analysis

TheNorthStarofManagingNon-FinancialPerformance:Science-basedGoal-settingand

Analysis

Bob Willard, Sustainability Advantage @bob_willard

Andrew Winston, The Big Pivot @AndrewWinston

Jeff Gowdy, J.Gowdy Consulting @JGowdyConsult

Bill Baue, Reporting 3.0 @bbaue

Martin Rich, Future-Fit Foundation @FutureFitBiz

Astrid Fellingham, Analyst @FutureFitBiz

Besuretoengageintheapp:sb16app.com

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PivotGoals.comThe ESG, science-based, and visionary targets of the largest companies

Jeff GowdySustainable Brands New Metrics// Boston// November 14, 2016

Outline• Part I: Pivot Goals Overview and topline results

• Part II: Results from the GF100

• Part III: Science and Ethics-based Goals• Results from GF100• What Next

• Part IV: Example Analyses using Goals data• Future Fit example• Transportation sector example• Biodiversity example

Part I: Pivot Goals Overview The Global Fortune 500�s Sustainability Goals

PivotGoals.com Search Criteria:•Keyword search

• Company Name, Goals (e.g., search for �Future Fit� or “deforestation”)

•Checkbox search/narrowing to…• 29 ESG Focus Areas (Climate, Water, Human Rights, etc.)• By Industries, Macro and Micro• Value Chain stage (from supply chain to end of life)• Absolute/Intensity• Goal Type (specific & dated; undated; intentional)

* Note: the full Fortune 200’s goals are loaded; some of companies 201-500 are loaded

Part I: Pivot Goals Topline Results

• 85 of the Fortune 100 (85%) have sustainability goals• Total: 970• Min: 1 (PEMEX)• Max: 91 (Nestle)• Average: 9.7/company (all 100)• Average: 11.4/company (85 with goals)

Note: Calculations as of Sep 2015; results change as new data is loaded


• 85 of the Fortune 100 (85%) have sustainability goals

• How do they communicate the goals?– Report: 81 (95.3%)

• Standalone Report: 74 (87.1%)• Annual Report: 7 (8.2%)

– Website: 4 (4.7%)



• 85 of the Fortune 100 (85%) have sustainability goals– 81 publish Reports

• What Kind of Reports?– Sustainability Report: 26 (32.1%)– CSR/CR Report: 23 (28.4%)– Other Standalone Report (not called Sustainability/CSR): 18 (22.2%)– Environmental Report: 7 (8.6%)– Annual Report: 7 (8.6%)



• Goals of F100 are:• Specific and mostly time-bound (68%)• Mostly absolute (88%) vs. relative/intensity (12%)• Predominantly about operations, although cover value chain:

• Supply chain: 17% • Operations: 66% • Use phase: 13% • End-of-life: 2%


Part II: Results from the GF100

• Goals by ESG Focus Areas

• Goals by when they are due

• Companies with most goals

Number of Goals by ESG focus areas

10Note: Calculations as of Sep 2015; results change as new data is loaded

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29PivotGoalscategories

Number ofGoals

We Like Round Numbers (and open endedness)


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2017 2018 2019 2020 2025 2050 Ongoing Open Other

WhentheGoalsAreDue

Number ofGoals

Companies with Most Goals


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TwentyorMoreGoals

Number ofGoals

Part III: Science and Ethics-based Goals

Definitions•Science-based

– Based on scientific knowledge or inherent logic of thresholds in vital capitals in the natural world

– Goals that are in line with these externally-based thresholds can be considered science-equivalent, even if not explicitly stated as based on science

– E.g., for carbon: 6%+ reduction in carbon intensity per year, or 3% per year in absolute emissions

•Future Fit or Ethics-based– Express aspirations or performance in terms of fairness, justice, or equity –

the conditions we need to build human capital and create a thriving, prosperous world

– In terms that don’t have science-based thresholds

•None– Goals that do not satisfy any of the above definitions.

15

Area CriteriaScience/Data BasedGHG/Climate 3% absolute or 6% intensity reduction per yearEnergy 3% absolute or 6% intensity reduction per yearRenewables Similar pace of change as above or 100% goalAir Zero target or Context/Science-based indicationWater "Water-neutral", "watershed", "water stress"Waste/Pollution Zero target (<1% landfill or incineration)Haz Waste Zero targetPackaging 100% certified target or zero deforestationToxics Zero target or indication of green chemistry guidelinesBiodiversity/Land Use Zero net impact or context/science mentionForest Large certified target or zero deforestationFood & Ag (Sourcing) All sustainability sourced

Health & Wellness (Nutrition) Reduction based on dietary standards

Future-Fit

Governance Zero incidents of corruption, unethical practice, 100% transparency

Safety Either zero injuries/fatalities or certification for all facilitiesEmployees 100% employees getting living wage and othersHuman Rights Zero violations

PivotGoals CriteriaforScienceandEthicsbased

Science-equivalent/Ethics Goals• 2 categories…

– Science-equivalent (for a large part of business, not full value-chain)– Ethics-equivalent: moral, ethical, or based on flourishing model

• Of 970 goals of the GF100, 20.6% are in the ballpark…– 110 (11.4%) Science-equivalent ( >1% explicitly science-based)**– 52 (5.4%) Very close to Science-equivalent but missing one aspect– 37 (3.8%) F2 & Ethics-equivalent

– 768 (79.2%) are none of the above

• Trends– Slow and Steady increase in Science and Ethics based– But, the pace is not fast enough given the timeframe dictated by science

Note: Calculations as of Sep .2015; results change as new data is loaded

Top 10 – Companies with Most Science/Ethics-based Goals

Note: Calculations as of Sep .2015; results change as new data is loaded

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Nestle E.ON Nissan Microsoft P&G Honda Costco Kroger BankofAmerica

ENI HP

Top10Companies

Number ofScience/Ethics Goals

What Next?

• Science and Ethics based as the “floor” rather than the “ceiling”

• Transparency and ownership of goals: the case of the disappearing goals

• Are science and ethics-based enough? (hint: context)

Context-based Goals include Allocations

Source:http://www.sustainablebrands.com/news_and_views/new_metrics/mark_mcelroy/science%E2%80%93_what%E2%80%99s_difference

Part IV: Example Analyses using Goals data

• Future Fit example

• Transportation sector example

• Biodiversity example

Future Fit Business Benchmark

• Afuture-fitbusinessisonethat innowayundermines–andideallyincreases– thepossibilitythathumansandotherlifewillflourishonEarthforever.

à 20“futurefit”goalsthatanyandeverycompanyneedstodotoensureitsabilitytosurviveandthriveinthefuture

If Future Fit were a company in Pivot Goals

• Itwould…

• CoverallfourmajorstagesoftheValueChain

• HavefullcoverageoftheESGfocusareas(17inPivotGoals)thathaveascienceandethicsbasedthresholds,whichnoF500hasreachedyet

à ProvidesStepbystepguidetosettingscienceandethicsbasedGoalsthatcoverthefullgamutofESG

Science-based goal setting example

EntireOperations

PlusPartofValueChain

AllofValueChain

PartialOperations0%

50%

100%

100%+ornetpositive

ExtentofGoalCoverageSource:PivotGoals.com,companywebsites

PivotGoalsScience-basedThresholdforWaste

Wasterecycling,reuse,energy

Auto Makers, company goals

0%

50%

100%GeneralMotors Honda PivotGoalsScience-based

ThresholdforWaste

EntireOperations


AllofValueChain

PartialOperations

Source:PivotGoals.com,companywebsites

100%+ornetpositive


ExtentofGoalCoverage

0%

50%

100%PivotGoalsScience-basedThresholdforWaste

Component Makers, company goals

EntireOperations


AllofValueChain

PartialOperations


100%+ornetpositive



0%

50%

100%PivotGoalsScience-basedThresholdforWaste

Product Makers (e.g. tires), company goals

EntireOperations


AllofValueChain

PartialOperations


100%+ornetpositive



Transportation Sector, company goals

0%

50%

100%EastJapanCompany


EntireOperations


AllofValueChain

PartialOperations

100%+ornetpositive




0%

50%

100%Wal-Mart PivotGoalsScience-based

ThresholdforWaste

Retailers, company goals

0% EntireOperations


AllofValueChain

PartialOperations


100%+ornetpositive



0%

50%

100%

AutoMakers

Products,e.g.Tires

Components

TransportationSector(outside of

Auto)

Retailers


Summary plot of goals

0% EntireOperations


AllofValueChain

PartialOperations


100%+ornetpositive



Biodiversity example from WHC Conservation Conference

EntireOperations

Plus PartofValueChain

AllofValueChain

PartialOperations

0%

50%

100%

ImpactReduction


Mapping of Biodiversity Goals of GF500 from Pivot Goals

Future-FitBusiness Benchmark

[email protected]

Welcometothe“Anthropocene”or“GreatAcceleration”

Environment

Wemustrethinkhowwedo– andvalue– business

Environment

Society

BusinessEnvironment Society

Business

Society

ShareholderValue SharedValue SystemValue

Business

Business isallthatmatters:companiesprivatizegainswhilesocializinglosses

Businesscomesfirst:negativeimpactsarejustifiedby‘doinggood’elsewhere

Business innowayhindersandideallyacceleratesthetransitiontoaprosperousfutureforall

Future-FitBusinessAbusinessthatcreatesvaluewhileinno

wayundermining– andideallyincreasing–thepossibilitythathumansandother

lifewillflourishonEarthforever

Inasustainable society,natureisnotsubjecttosystemicallyincreasingconcentrationsof

minedsubstances

Inasustainable society,natureisnotsubjecttosystemically

increasingdegradationbyphysicalmeans

Inasustainable society,people arenotsubjecttosystemicbarrierstohealth,influence, impartiality,

competenceandmeaning

Inasustainable society,natureisnotsubjecttosystemicallyincreasingconcentrationsof

substances producedbysociety

Thestartingpoint:Earthasasystem

Sowhatmusteverycompanystrivetodotoensurethatitbecomesfuture-fit?

…andwhatcananycompanydotocreatesystem

valueinandbeyonditspursuitoffuture-fitness?

Everybusinessispartofacomplex,interdependentvalueweb

Afuture-fitbusinessreaches(orexceeds)extra-financialbreak-eventoensurethat…

Saleschain

Supplychain

CompanyOperations

…itdoesnotbreachthesystemconditions

through itsownoperationalactivities

…itdoesnotexternalizebreaches

throughout itssupplychain

…itdoesnotforcebreaches tooccur

through thesaleofitsgoodsandservices

Anybusinesscancreatesystemvalueinandbeyonditspursuitoffuture-fitnessthrough...

Restorativeoperationsgoingbeyondbreak-evenwithinitsownfourwalls

Valuewebfitnessincreasingthefitnessofothersinthevalueweb

Valuewebinclusivitycreateinclusivesupply/sales chains, beneficialproducts

Broaderinterventionsactionstoimprovefitness beyondthesupply/sales chain

Supplychain

Saleschain

CompanyOperations

Itequipsbusinessleaderswithacleardestinationtoaimfor

Ithelpstoguidestrategicinnovation

Itoffers actionableinsight onnature/sizeofperformancegaps

Itinspiresandhighlightstruesustainabilityleadership

TheBenchmarkisdesignedtobeusefulandusable

Usecase1ExploretheSDGsanddevelopanauthenticresponse tothem

HowyoucanstartusingtheBenchmarktoday


HowcanyoumakesenseoftheSDGs?

Anddevelopanauthenticresponsetothem?

Future-FitGoalshelpanybusinessrespondtotheSDGS…

…whichcanbeusedtoengageandexcitestakeholders

Usecase2Runa‘healthcheck’ofyourbusinessmodels,processesandproducts

HowyoucanstartusingtheBenchmarktoday


Future-FitBusiness BenchmarkFutureFitBusiness.org

Goals relating to

the environment,

communities and

employees also apply

to a company’s core suppliers Future-Fit

Business Benchmark

Ifafuture-fitgoalseems‘impossible’youneedarethink!

Community concerns

are actively solicited,

impartially judged

and transparently

addressed

Future-Fi

t

Business Benchmark

1 goal specific to communities

7 goals specific to the environment5 goals specific to employees

5 goals specific to customers

All goals relating to the environment, employees

and communities extend to certain suppliers too

3 goals specific to society as a whole

Future-FitBusiness BenchmarkMaterials derive

from sources that

respect the welfare

of ecosystems, people and animals


Every company relies to some extent upon third-party suppliers – as, in turn, do they. Such interdependencies leads to extremely complex supply chains. So where should mutual accountability for supplier impacts end?A future-fit company takes responsibility for any impact resulting from the provision of supplied goods or services if their absence would seriously affect its business. We consider two types of such core suppliers:• Outsourced functions: A company is mutually accountable for the

operational impacts of any direct supplier to whom it outsources core business functions (e.g. customer support, manufacturing, logistics).

• Product inputs: A company that sells goods (or services whose delivery requires goods to be consumed) is mutually accountable for all cradle-to-gate operational impacts caused by the creation of its product inputs (raw materials and their derivatives).Future-fit goals relating to operations (grouped under the environment,

employees and communities) must ultimately be reached by all of a company’s core suppliers if the company as a whole is deemed to be future-fit. That’s because a company’s ability to create value depends on the actions – and thus impacts – of its core suppliers. Future-FitBusiness Benchmark

Runafuture-fit‘healthcheck’onyourbusiness…

Future-FitBusiness BenchmarkThankyou!

The North Star of Managing Non-Financial Performance

• Bob Willard – Exercise: The Future-Fit Goals

FUTURE-FIT BUSINESS

If it were to operate forever, it would not only do no harm, it could do well by doing some net good.

A Future-Fit Business creates value while in no way undermining

– and ideally increasing –the possibility that humans and other

life will flourish on Earth forever.

FOURTH BENCHMARK

Requiredstate

Baselineyear

Othercompany

Short-termgoals

Othercompany

Company today

Currentstate

Future-FitCompany

ß Past Futureà

Posterisdownloadable fromsustainabilityadvantage.com/books-dvds/future-fit-business-benchmark/

All renewable energy.

All environmentally responsible and socially equitable water use.

All materials derive from sources that respect the welfare of ecosystems, people and animals.

All concerns addressed.

Operations emit no GHGS.

All products can be repurposed.

All products emit no GHGs.

All products do no harm to people or the environment.


Informed about all impacts.

Operations emit no substances which cause harm.

Operational byproducts are repurposed.

Operations do not encroach on ecosystems or communities.

Business conducted ethically.

Right taxes paid.

Lobbying does not undermine FF

Safeguard employee health.

Pay at least a living wage.

No discrimination.

Fair employment terms.


* 13 goals also apply to suppliers in the company’s core supply chains

futurefitbusiness.org

FUTURE-FIT GOALS*

*

*

*

*

*

*

** *

*

*

*

GOAL COMPARISONSCommon SustainabilityFrameworks

Future-FitBusinessB

enchmarkG

oals

GlobalR

eportingInitiative(GRI)

BCorpC

ertificationAssessm

ent

ISO26000

CER

ES21stC

enturyCorp

WBCSD

Action2020PriorityA

reas

CKG

lobal100Criteria

SASBM

aterialIssues

DJSIR

obecoSAMQuestions

IntegratedReporting<IR

>

UNGlobalC

ompact

CDP–

Carbon,W

ater,Forests

UNSD

Gs

PivotGoalsD

atabase

TransformationalC

ompany

21 149 462 37 35 9 12 30 88 5 10 77 17 29 19

sustainabilityadvantage.com/books-dvds/future-fit-business-benchmark/

F2B2-RELATED DOWNLOADS

sustainabilityadvantage.com/books-dvds/future-fit-business-benchmark/

• F2B2 Context Poster: Maps the SDGs and the foundational science that define the society we want to the F2B2 goals for the five categories of sustainability initiatives that contribute to the SDGs.

• Goals Comparison: Maps the 21 F2B2 goals to 13 other sustainability reporting and standards frameworks, (e.g. GRI, SDGs, B Lab BIA, DJSI, ISO 26000, Global 100 KPIs)

• Companies with Similar Goals: Fortune 200 companies that already have F2B2-like goals, from the Pivot Goals database and other sources.

• KFI Calculations: Summary of KFIs for the 21 F2B2 goals as explained in detail in F2B2 Part 2, including metrics for supply chain aggregation.

• Stakeholder Map: Maps 21 F2B2 goals to its six stakeholders.• Threat Comparisons: Eight sources for threats to society cited in F2B2.

• Wellbeing comparisons: Maps principles to 7 society wellbeing frameworks.

The North Star of Managing Non-Financial Performance

• Bill Baue – MultiCapital Scorecard and ThriveAbility: how do they all relate?!

PositiveMavericks

• Workproductively(notobstructively)towardpositivechange• Aremotivatedmorebyultimateends,withintermediateendsandmeansservingasvehicles,notdestinations

• Challengetheconstraints,structurallimitations,unconsciousbiasandshadowagendasoftheinstitutionsandorganizationstheyworkwith

• Backcast fromadesiredfuture,buildingbridgefoundationsonthefarsideoftheriver

• Workcollaborativelyinne(x)tworks withotherpositivemavericks

• Thinkandactatsystemslevels• Seektransformative(notjustincremental)change

Goal-Setting&TransitionPlanning

NextGenerationSustainabilityInitiativesCycle


• FutureFitBusinessBenchmark



• FutureFitBusinessBenchmark• Science-BasedTargets



• FutureFitBusinessBenchmark• Science-BasedTargets• PivotGoals



• FutureFitBusinessBenchmark• Science-BasedTargets• PivotGoals• PreventableSurprises



ImplementingStrategies






• ThriveAbilityFoundation






• EmbeddingProject




Measuring&Accounting











• TotalContribution








• TotalContribution• MultiCapital Scorecard®





Reporting









Reporting





• Reporting3.0


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