Capgemini Consulting's CEO Study 2008

”Mastering the Triple Bottom Line”

Presentation of Key findings

24.02.2009 v 0.9

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The study is based on a structured approach and gives valuable insight on sustainability from a strategic perspective

� Our objective is to generate insight on how Norwegian companies approach sustainability

from a strategic perspective

� The main focus is how to manage expectations from both shareholders and society to

deliver financial, environmental and social performance

Background

� Sustainability refers to how enterprises are striving to reach business objectives while

taking responsibility and protecting society at large (also referred to as Corporate Social

Responsibility)

� The Triple Bottom Line captures the essence of sustainability and refers to the balance in

delivering results across three dimensions: financial, social and environmental

Definitions

This is the largest study of its kind that has ever been conducted in Norway.This is the largest study of its kind that has ever been conducted in Norway.

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� The study is based on interviews with CEOs and Top Management of 55 Norwegian

enterprises

� 8 sectors are represented: Manufacturing, Financial services, Retail, Distribution, Oil and

Gas services, Energy, IT/Telecom and Property

Methodology

Capgemini has conducted an in-depth study of sustainability on the basis of interviews with top management in a wide range of Norwegian companies

Sustainability represents unprecedented business opportunities

Sustainability has become a top priority for CEOs

Environmental and social performance emerge as a major source of competitive advantage

Sustainability leaders have the potential to change the rules of the game

Mastering the Triple Bottom Line

requires thorough and strategically founded execution

Key findings:

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Non-disclosure

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Key finding 1

Sustainability has become a top priority for CEOs

“We experience a significant increase in demands on sustainability from our customers, especially within oil and gas”

- CEO, large Manufacturing company3

The pressure on CEOs to deliver environmental and social results has increased dramatically in recent years

To which extent do you experience increased demands to deliver results on environmental, ethical and other social

aspects in addition to economics?

What are the commercial drivers behind changes in respect to how you deal with sustainability?

Sustainability has raised to become a top priority for CEOsSustainability has raised to become a top priority for CEOs

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70% of CEOs experience significant increase in demands to deliver on environmental

and social aspects

Customer demands, cost savings and compliance drive sustainability changes

Despite industrial differences, almost all CEOs believe that sustainability will have a significant impact on their business within the next 10 years

There is a lucrative opportunity to capitalise by taking a leading position on sustainability in Norway.There is a lucrative opportunity to capitalise by taking a leading position on sustainability in Norway.

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“To which extent do you experience increased demands to deliver results on environmental, ethical and other social aspects in addition to economics?”

Sustainability demands vary across sectors

1 2 3 4 5

Total average

Telecom & IT

FSI

Retail

Distribution

Manufacturing

Property

Energy

Oil & Gas Services

Very

smallMedium Very largeSmall Large

Although some sustainability issues are important in all sectors, industrial sustainability challenges are distinctively different across sectors

Energy :

6

Distribution :

Manufacturing : Oil & Gas Services :

� Climate change

� Increasing energy

demand

� Clean energy

� Environmental impact of

operations (emissions

and waste)

� Business Ethics and

barriers of corruption

� Labour standards in

developing countries

� Good citizenship in local

community

� Stricter rules and

regulations for

compliance

� Route planning

� Energy use operations

� Emissions and waste to

air and sea

� Local sourcing

� Disposal of ships,

vehicles etc

� Energy use and efficiency

� Waste and hazardous

materials

� Water usage

� Recycling and packaging

� Scarcity of raw materials

� HSE requirements from

upstream companies

� Emissions to air and sea

� Supplier management

� Efficient resource

management

Sustainability issues listed across sectors :

7

Property : IT & Telecom :

Retail : Financial Services :

� Emission and waste

control

� Diversity and equal

opportunities

� Supplier sustainability

management

� Work place issues,

Health Safety and

Environment

� Energy use in buildings

� Waste from household

and construction

� Use of hazardous

materials and chemicals

� Environmental impact of

Telecom infrastructure

� Short lifetime of

equipment

� Owner rights and ”pirate

distribution”

� Internet fraud

� Raise of the LOHAS segment

� Energy efficiency in store design, transportation and logistics

� Recycling and environmental packaging

� Waste and hazardous materials

� Transparency

� Ethics in selling complex

financial products

� Green and sustainable

investments

� Remuneration in capital

market positions

Although some sustainability issues are important in all sectors, industrial sustainability challenges are distinctively different across sectors

Sustainability issues listed across sectors :

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Key finding 2

Sustainability represents major

business opportunities across most sectors

“This can be the oil-adventure of

Norwegian generations to come ”

- CEO, Norwegian Energy company

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80% of CEOs believe that sustainability create major market opportunities and that it will have a considerable impact on their business

To which extent does an increased focus on sustainability createmarket opportunities for your business?

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”It’s completely obvious that it will lead to market opportunities in the energy

sector”

CEO, Energy company

“These trends [on sustainability] lead to

enormous opportunities!”

CEO, Oil & Gas services

”Certainly over time it will provide [market opportunities], but we don’t use it

offensively today, in fear of bad publicity”

CEO, Financial Service Firm

“Sustainability provide opportunities because you are forced to think

differently”

CEO, Manufacturer

There are major differences between the sectors, but business opportunities emerge across all of them.There are major differences between the sectors, but business opportunities emerge across all of them.

How closely sustainability is to the business core has a large influence to which extent sustainability represent market opportunities

1 2 3 4 5

Total average

FSI

Manufacturing

Oil & Gas Services

Distribution

Retail

Telecom & IT

Property

Energy

To which extent do an increased focus on sustainability create market opportunities for your business?

Sustainability driven business opportunities vary across sectors

There are major differences among sectors, but business opportunities emerge across all of them.There are major differences among sectors, but business opportunities emerge across all of them.

By mapping initiatives discussed with CEOs in the study, market opportunities can be divided into five broad and distinct categories

Exploration and utilisation of scarce resources

1

Need for cleaner technologies

2

The raise of the LOHAS segment

3

Enabling the unprivileged

4

Exploring sustainability leadership options

5

Energy

Minerals

WaterRain forest

SpeciesOil

CCS

Cleanfuel

Wind, Solar,Biofuel Waste

managementSOx/NOxcleaning Recycling

Eco

Fairtrade

Health SustainabilityfeaturesGreen

materialsCarbonneutrality

Micro-credits

Reuse

Medicinesupply Low-cost

solutionsSanitarysolutions Water

Differentiation

Sustainabilityinnovation

Competitiveadvantage Sustainability

premiumsTalentacquisition

Complianceleadership

In coming years consumers will strongly consider sustainability issues in their buying decisions, but …

… most consumers are only willing to pay a small price difference for sustainability features !… most consumers are only willing to pay a small price difference for sustainability features !

Most important sustainability issues

in buying decisions

87 85 84

0

25

50

75

100

Energy and water

usage

Waste reduction

and control

Sustainable

manufacturing

features

% of respondents

Most important factors of sustainability recognised by consumers

Willingness to pay for sustainability is limited, but growing …

By introducing three dimensions to the business context, new competitive space driven by sustainability emerge across all sectors

Energy :

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Distribution :

Manufacturing : Oil & Gas Services :

� Renewable energy

� Clean technologies

� New and green energy

� Green certificates

� Trading emission quotas

� Smart Metering options

� Reverse logistics

� Disposal of ships and

vehicles

� Environmental

technologies for NOX,

SOX, BWT, CO2 etc

� Cleaner technologies in

value chain

� New products from

recyclable materials

� Green, Eco, Health and

Fairtrade products

� Carbon capture and

storage

� Increasing recovery factor

� Decommissioning

offshore platforms

� Cleaner technologies to

reduce emissions / waste

� Energy efficient and

energy saving solutions

� Strategic differentiation

and strategic innovation

� Cleaner technologies in

operations

� Local sourcing

opportunities

Business opportunities across sectors :

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Property : IT & Telecom :

Retail : Financial Services :

� Energy efficient buildings

� Green materials

� Energy saving solutions

� Waste handling systems

� Environmental certificates

� Green IT

� Technological solutions

addressing energy saving

� Digital communication to

replace/reduce travel

� Using IT to educate

unprivileged

� Green, Eco, Health and Fairtrade products

� Emisson quotas to offer carbon neutral products

� Using recyclable materials

� Environmental product packaging

� Sustainable investment

portfolios

� Green funds

� Microcredits

� Carbon indexes

� Emission trading

� Carbon neutral products � Sustainable sourcing� Sustainable product

attributes� Product innovation

By introducing three dimensions to the business context, new competitive space driven by sustainability emerge across all sectors

Business opportunities across sectors :

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Key finding 3

Environmental and social performance emerge

as a major source of competitive advantage

“Sustainability is the single

biggest opportunity in 21st

century, and will be the next

source of competitive

advantage”

- H.Lee Scott, CEO Wal Mart

CEOs believe social and environmental initiatives can be leveraged to create competitive advantage

Sustainability performance may also represent competitive disadvantage – under certain circumstances the result could be denied market access or a non-competitive cost structure.

Sustainability performance may also represent competitive disadvantage – under certain circumstances the result could be denied market access or a non-competitive cost structure.

In which way can social, ethical and environmental initiatives also enhance your companies competitiveness?

In which way can social, ethical and environmental initiatives also damage your companies competitiveness?

According to CEOs; brand, risk and talent are the most promising strategic levers

Reduced market access and increased costs are seen as the largest potential pitfalls

Small Medium Very high

CEOs believe there are limited contradictions between financial performance and sustainability, but we believe trade-offs will emerge as ambitions increase

To what degree is it an area of conflict between providing the owners’ maximum rate of return as well as taking environment,

society and ethics into consideration?

Addressing sustainability will always involve trade-offs, but with the right prioritisation significant returns can be leveraged – also on the financial bottom line.

Addressing sustainability will always involve trade-offs, but with the right prioritisation significant returns can be leveraged – also on the financial bottom line.

CEOs do not see a substantial

contradiction between financial performance and sustainability

However, we believe a high ambition

level will create significant trade-offs

Meeting society’s basic expectations on sustainability is a necessity to operate in the

market place …

… but a robust correlation between sustainability performance and financial performance has

not been established.

We believe significant trade-offs will emerge as companies increase their level of ambition on the environmental and social bottom lines!

If the right initiatives are taken, there is a significant potential for positive returns - also

on the financial bottom line.total average ranking of 1.9

1 2 3 4 5

Small Medium Large

Energy

1 2 3 4 5

Retail

1 2 3 4 5

Manufacturing

1 2 3 4 5

FSI

1 2 3 4 5

Distribution

1 2 3 4 5

Property

1 2 3 4 5

Oil & gas services

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Sustainability leaders have the

potential to change the rules of the game

High

All represented industries report from “moderate” to “very high on sustainability driving an increase in demands and new market opportunities

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Even though the tendency is that all industries are strongly affected by this development, there are clear differences on strategic impact sustainability impose on the represented industrial sectors.

Even though the tendency is that all industries are strongly affected by this development, there are clear differences on strategic impact sustainability impose on the represented industrial sectors.

Increased Sustainability Dem

ands

Very Lo

wLimite

dMod

erate

High

Very High

Very Low Limited Moderate High Very High

Financial

Services

Manu-

facturing

Oil & Gas

Services

Property

Distribution Retail

IT/

Telecom

Energy

Sustainability Driven Market Opportunities

Financial

Services

Manufacturing

Oil & Gas

Services

Property

Distribution Retail

IT/

Telecom

Energy

Moderate High Very High

Sustainability Driven Market OpportunitiesMod

erate

Very High

Increased Sustainability Dem

ands

Differences in demands and opportunities create various strategic playgrounds for different industries

Potential for game changing strategies

Attractive positions for sustainability leadership

Enhance value chain performance and

increase standards to put competition on defence

Energy

Distribution RetailProperty

Protect reputation and

increase standards to put competition on defence

Oil & Gas

services

IT/TelecomFinancial

services

Manufacturing

Strategic Playgrounds

Where market opportunities is seen as ”very high” and demands

to deliver social and environmental performance are ”high”,

sustainability becomes strongly linked to business core, and

hence a strategic parameter for creating business performance.

Where the degree of sustainability driven opportunities and

increasing demands are seen as ”high”, sustainability is not as

directly linked to core business, but there are significant

sustainability potential and risks related to underperformance.

Moderate business opportunities, but high increase in

demands indicate strong regulatory regimes related to

production, manufacturing and operating environment. Being

sustainable is business critical, affecting licence to operate.

Sectors rating increase in demands and market opportunities as “moderate” should still assess how sustainability impacts competitive advantage. Ignoring sustainability represents significant risks, while mastering it protects reputation and can create new market opportunities in niche markets.

Despite differences, we believe sustainability can offer promising benefits within all industry sectors.Despite differences, we believe sustainability can offer promising benefits within all industry sectors.

Comments

We can categorise the sustainability leadership according to two dimensions; Market Driven Leadership and Compliance Driven Leadership

Compliance Driven Leadership

Marke

t Driv

en Lea

dership

Sustainability Leadership

Energy

Distribution

Oil & Gas

services

IT/Telecom

Financial

services

Market Driven Leadership:

• Developing new products and achieving

market differentiation

• Changing the rules of the game

Compliance Driven Leadership

• The potential of outperforming competitors

by driving the sustainability practices forward

within regulated industries

• Increasing the gap and thus competitive

advantage

Comments

Manufacturing

Retail

Property

� CEOs in our study confirm our belief that

sustainability will have a profound impact

on business- and operating models in

the future

� Mastering the dynamics of the Triple

Bottom Line is about playing a new

game where the importance of

environmental and social performance

increases dramatically

� In order to balance all three dimensions,

businesses must carefully consider risks

and opportunities within their current

business context and operating model

� The companies that excel in mastering

the Triple Bottom Line, enabling strategic

integration of sustainability issues with

core capabilities, will also prevail in the

market place

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The rules of the game are changing, and mastering the Triple Bottom Line is emerging as a prerequisite for success

Companies that are able to grasp the system within which they operate, and the limits and requirements the system imposes, will be the ones to flourish in the future business environment (John Ehrenfeldt – Sustainability by design).

Companies that are able to grasp the system within which they operate, and the limits and requirements the system imposes, will be the ones to flourish in the future business environment (John Ehrenfeldt – Sustainability by design).

Finan

cial

Perform

ance

Environmental and Social Performance

Mastering the

Triple Bottom Line

Superior

Returns

Negative

Returns

Successful

adaptor

Sustainability

leadership

Over

investoingNon-

compliant

1

2

3

4

Four Generic Sustainability Positions

Expected Impact on Financial Performance

Sustainability Position vs Economic Slowdown?

In view of the survey findings and the current economic climate, we still see long term opportunities in taking a clear position on sustainability

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Key findings:

Sustainability represents

unprecedented business

opportunities

Sustainability has become a top

priority for CEOs

Environmental and social

performance emerge as a major

source of competitive advantage

Sustainability leaders have the

potential to change the rules of the

game

Mastering the Triple Bottom Line

requires thorough and

strategically founded execution

Declining markets

and challenges related

to cost structure

Taking a leading

position on

sustainability

Struggling to maintain the strategic

focus and priorities on long term

growth areas within existing core

business

Struggling to reduce existing cost base and turning fixed costs into variable costs, without deteriorating cash flow from core areas – reducing the relative

competitive advantage

What companies will be best positioned to outperform

competition as soon the market rebound from slowdown and

decline – realising fast and profitable growth…?

99 of the most sustainable companies, on the Dow Jones Sustainability Index, has outperformed its peers by 15 % during the last six months of economic downturn.

99 of the most sustainable companies, on the Dow Jones Sustainability Index, has outperformed its peers by 15 % during the last six months of economic downturn.

• Reducing costs

• Increasing demands

• Core element of strategy

• Compliance issues still vital

• Securing market access

• Access to resources

• Prices on energy and raw materials are decreasing

• Reduced will and ability to pay a price premium

• Reduced funding

Need for business response

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We find that most of our clients struggle to respond strategically on the new business climate driven by sustainability

Economic responsibility

Social responsibilityEnvironmental responsibility

Water use

Recycling & product take back

Corruption and bribery

Community development

Minorities

Supply chain

Efficiency

Profitability

Responsible accounting

Human rights

Culture

Quality goods

Workplace health & safetyWaste

control

Emissions

Energy use

Product stewardship

Use of human resources

Equal opportunities

Job creation Marketing & advertising standards

Diversity

Pricing

Climate change

Eco-efficiency

Value creation

Innovations

Eco-luxury

Sustainable growth

Transportation

Use of dangerous materials Inclusive society

EducationAccess

The complex landscape of sustainability issues

As corporations now also have to be competitive in the environmental and social dimensions – the basis of competition is changing and the role of executives is getting more complex.

As corporations now also have to be competitive in the environmental and social dimensions – the basis of competition is changing and the role of executives is getting more complex.

Identify sustainability impact of business climate

Understand current social and environmental performance

Explore sustainability leadership options

Review business strategy and formulate TBL ambitions

Prioritise TBL initiatives

Identified business needs

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“CSR can be much more than just a cost, constraint, or charitable deed. Approached strategically, it

generates opportunity, innovation, and competitive advantage for corporations—while solving pressing

social problems”

On the highest level, the strategy formulation contain the same steps, but the analyses and outcome are distinctively different

Society

Economy

Environment

Define assumptions and strategic context

Analysis of internal

capabilities and industry context

Identification and assessment of risks and

opportunities

Strategy development

Implementation planning

Implementation

Monitor & review progress

Capgemini Consulting’s strategy development framework

The TBL perspective

Analysis of market conditions, competitive arenas and the organisations potential for developing competitive advantage provide the basis for the strategic direction.

Analysis of market conditions, competitive arenas and the organisations potential for developing competitive advantage provide the basis for the strategic direction.

- M. Porter & R. Kramer 2007

Most strategic sustainability options fall within the categories of five generic strategies

Locating the core

– Positioning your Core Business in the industry value system

Developing the core

– Differentiating the Core Business

Elaborating the Core Business

– Growing the core; making the core business larger

Extending the Core Business

– Extending the corporate strategic scope

Reconceiving the Core Business

– Consolidate and rationalise the business

Five generic strategies

We believe that within most sectors there will be niche markets where differentiated sustainability strategies can have large impact or even game changing potential.

We believe that within most sectors there will be niche markets where differentiated sustainability strategies can have large impact or even game changing potential.

Sources: H. Mintzberg

5

2

1

3

4

Industry im

pact

Strategic re - orientation

1

2

3

4

5

Effort and impact

� The generic strategies can be categorised based on potential to change the competitive rules in the industry and change and effort required to implement the strategy

Capgemini service offering is adapted to different needs and maturity levels, but all offerings have a strategic perspective on sustainability

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Key findings:

Sustainability represents unprecedented business opportunities

Sustainability has become a top priority for CEOs

Environmental and social performance emerge as a major source of competitive advantage

Sustainability leaders have the potential to change the rules of the game

Mastering the Triple Bottom Line requires thorough and strategically founded execution

TBL opportunity

scan

Strategy review

Full scale strategy-process

Project scopePotential for value creation

Four typical project approaches

TBL health check

Contact:

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Tel: +47 24 12 80 00Mobil: +47 95 11 81 33

Anders.rygh@capgemini.com

Anders RyghCapgemini ConsultingPrincipal |Head of Business Strategy and M&A