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Transcript of Www.sustainabilityadvantage.com [email protected] THE BUSINESS CA$E for the Sustainability...
www.sustainabilityadvantage.com
THE BUSINESS CA$Efor the Sustainability Imperative
CANSEEYork University
November 2, 2013
“Capitalism is under siege … The purpose of a business must be
redefined around creating shared value (CSV)…
How to reinvent capitalism—and unleash a wave of innovation and growth”
Michael Porter and Daniel Kramer, HBR, Jan-Feb 2011
CAPITALISM 2.0Capitalism 1.0 Capitalism 2.0
Purpose of the Firm
Maximize shareholder value; Short-term
Maximizing stakeholder value:Short- and long-term
Legitimate capitals Financial Financial, Natural, Social, Human
Bottom lines Profit Profit, Planet, People
Strategic focus Growth; Consumption Stakeholder well-being
Negative impacts Externalized Internalized
Boundaries The firm The firm’s value chain
Transparency As little as possible Naked
Business model Sell products; Take-Make-Waste; Linear
Sell services; Borrow-Use-Return; Circular, Cradle to Cradle; Closed loop
Source of financial capital
Stock market; Big financial institutions; Absentee owners
Smaller financial institutions; Crowd sourcing; Customers; Employees; Local communities; Shared ownership
Market focus Global More local
Access to
capital
Talent wars
Productivity
Innovation
Quality
Risk
management
Supply
security
Profit
Share price
Brand value
Revenue
growth
Market share
Expenses
(SUSTAINABILITY) STRATEGIES
“SUSTAINABILITY”
ONE MORE GOALENABLERS vs.
# Strategi
es
MORE RIGOROUS BUSINESS CASE
4.Reduced materials
1. Increased revenue2. Reduced energy
6.Reduced turnover
5.Increased productivity
7.Risks to revenue and expenses
3. Reduced waste
4
3
10
1
6
4
95% rewrite;
recalibrated
7+7
Benefits
Revenue
PROFIT
4.Reduced materials
1. Increased revenue2. Reduced energy
6.Reduced turnover
5.Increased productivity
7.R
ed
uce
d r
eve
nu
e a
nd
in
crease
d e
xpen
ses
3. Reduced waste
Opportunities RisksIncome Statement
10%
9%
75%
25%
2%
20%
+51 to
+81%
-16 to -36%
Exp
en
ses
SUSTAINABILITY CAPITAL RESERVE
SUSTAINABILITY BUSINESS CASE
SOURCES OF FUNDS
Sustainability Capital Reserve
+ ONLY COUNT BENEFITS AFTER PAYBACK PERIODS
Other internal or external capital markets
Treat as a high-yield, low-risk investment
Existing budgets
Government grants and incentives
WHICH “BUSINESS CASE”?
http://sustainabilityadvantage.com/2012/10/10/sustainability-business-case-1-more-profit/http://sustainabilityadvantage.com/2012/10/23/sustainability-business-case-2/
http://sustainabilityadvantage.com/2012/10/30/sustainability-business-case-3-share-price/
Sustainability Business Case #1: More Profit
Sustainability Business Case #2: Better ROI
Sustainability Business Case # 3: Higher Share Price
CAPITALISM 2.0Capitalism 1.0 Capitalism 2.0
Purpose of the Firm
Maximize shareholder value; Short-term
Maximizing stakeholder value:Short- and long-term
Legitimate capitals Financial Financial, Natural, Social, Human
Bottom lines Profit Profit, Planet, People
Strategic focus Growth; Consumption Stakeholder well-being
Negative impacts Externalized Internalized
Boundaries The firm The firm’s value chain
Transparency As little as possible Naked
Business model Sell products; Take-Make-Waste; Linear
Sell services; Borrow-Use-Return; Circular, Cradle to Cradle; Closed loop
Source of financial capital
Stock market; Big financial institutions; Absentee owners
Smaller financial institutions; Crowd sourcing; Customers; Employees; Local communities; Shared ownership
Market focus Global More local
THE FOURTH BENCHMARK
X1Baseline
year
Other companies
PerformanceToday
2Company
Goal
3
GO
AL
LIN
E(S
)4
Gold-standard benchmark
Material, science-based KPIs and Goals for a
Truly Sustainable Business Company X
FIVE BENEFITS
1. It addresses the confusion factor
2. It creates a sense of urgency
3. It raises the bar and sparks innovation
4. It identifies true leaders and best practices
5. It helps identify material ESG issues
SEVEN REASONS THAT IT’S TIME
1. Leading companies are ready
2. Important stakeholders are ready
3. Capitalism is ready
4. Business case is stronger than ever
5. Opportunity to harmonize with ESG standards
6. We’re running out of runway
7. It is doable
TRULY SUSTAINABLE BUSINESS
Economy
Society
Environment
If it were to operate forever, it would not only do no harm;
it would do well by doing some net good.
… contributing to the possibility that human and other life will flourish
on our planet, forever
… throughout its value chain/network
A truly sustainable business
creates positive environmental,
social, and economic value
WHERE
WHY
WHAT
X
METHODOLOGY / FLOW OF LOGIC
8 science-based System Conditions
for a sustainable environment (3)
and a sustainable social system (5)
18 KPIs with measureable goals that confirm the company is performing within the Design Constraints
8 Design Constraints for a truly sustainable business model
SYSTEM CONDITIONS
http://www.naturalstep.org/the-system-conditions
1. concentrations of substances extracted from the Earth’s crust,2. concentrations of substances produced by society,3. degradation of nature by physical means,
In a sustainable society, nature is not subject to systematically increasing …
…and 4. people are not subject to systemic barriers to their …4a. Wellness: physical, psychological, emotional and
spiritual wellness; safety 4b. Influence: participation in decision making; voice 4c. Learning: increasing competence; growth 4d. Equity: impartiality; respect; diversity; fairness; justice4e. Meaning: purpose; making a difference
KPIs & GOALS
Governance / Profit (6)•Board oversight: ESG committee•Policies and systems: embed ESG principles •Ethics: zero ethical violations•Disclosure: full disclosure on ESG aspects•Transparency: transparent about lobbying•Financial performance: going concern
Environment / Planet (6)•GHGs: zero or better•Energy: 100% renewable •Water used: sustainable share or net zero•Materials: 100% recycled/renewable•Waste / Pollution: zero or better•Ecosystems services: restorative?
Society / People (6)•Employee remuneration: fair living wage?•Human capital: enhanced annually?•Local economy: strengthened annually?•Community well-being: enhanced annually?•Social license to operate: enhanced annually?•Customer well-being: enhanced annually?
Towards a Gold-standard Benchmark for a Truly Sustainable Businesshttp://www.naturalstep.ca/sites/default/files/gold-standard-benchmark-latest-version.pdf
CAPITALISM 2.0Capitalism 1.0 Capitalism 2.0
Purpose of the Firm
Maximize shareholder value; Short-term
Maximizing stakeholder value:Short- and long-term
Legitimate capitals Financial Financial, Natural, Social, Human
Bottom lines Profit Profit, Planet, People
Strategic focus Growth; Consumption Stakeholder well-being
Negative impacts Externalized Internalized
Boundaries The firm The firm’s value chain
Transparency As little as possible Naked
Business model Sell products; Take-Make-Waste; Linear
Sell services; Borrow-Use-Return; Circular, Cradle to Cradle; Closed loop
Source of financial capital
Stock market; Big financial institutions; Absentee owners
Smaller financial institutions; Crowd sourcing; Customers; Employees; Local communities; Shared ownership
Market focus Global More local
www.sustainabilityadvantage.com
THE BUSINESS CA$Efor the Sustainability Imperative
CANSEEYork University
November 2, 2013