The Business Model:
Challenges and Opportunities
www.sustainabilityadvantage.com
World Economic Center MontrealOctober 15, 2004
1. Terminology / Stages
2. Three First Wave Drivers
3. The “Stick” – The Perfect Storm of Risks
4. The “Carrot” – Business Benefits
5. Objection Handling Clinic
6. Drivers Mapped to Stages
Agenda
Definitions
Sustainable Development: Meeting the needs of the present without compromising the ability of future generations to meet their own needs. -- Brundtland Commission, 1987 --
Corporate Social Responsibility: The overall relationship of the corporation with its stakeholders. Elements of social responsibility include financial performance, creation and maintenance of employment, environmental stewardship, employee relations, and investment in community outreach. -- Conference Board of Canada --
Corporate Social Responsibility: The commitment of business to contribute to sustainable economic development – working with employees, their families, the local community and society at large to improve their quality of life. -- WBCSD --
Sustainability: The possibility that we all flourish forever. -- John Ehrenfeld, International Society for Industrial Ecology --
4 Systems Conditions for a Sustainable Society
In a sustainable society, nature is not subject to systematically increasing …
1. concentrations of substances from the earth’s crust2. concentrations of substances produced by society3. degradation by physical means (unsustainable harvesting)
… and …
4. people are not subject to conditions that systematically undermine their capacity to meet their needs -- The Natural Step --
Economy / Profits
Sustainable business
Profits
Taxes, R&D
Jobs
Expenditures
Training
Fair trade
Core values
Terminology
Environment / Planet
Eco-Efficiency
Manufacturing efficiencies
Operations efficiencies
Product efficiencies
Smart design
Cradle-to-cradle, take-back
Beyond compliance
Restorative to nature
Equity / People
Ethical business
Internal employees
Human rights
Health & Safety
Empowerment
Respect, Caring
Local community
Rest of the world
Sustainable Development (SD) Corporate SocialResponsibility (CSR)
Sustainability
Triple Bottom Line (TBL) 3Es / 3Ps
Corporate Responsibility (CR)
5 Sustainability Stages
5. Purpose / Values
-------------------------------
4. Integrated Strategy
3. Beyond Compliance
2. Compliance
1. Pre-Compliance
Ends vs. Means
Be a successful business …
… so that …
… we can continue to do the right things for the environment and society.
Do the right things for the environment and society …
… so that …
… we can continue to be a successful business.
1. Terminology / Stages
2. Three First Wave Drivers
3. The “Stick” – The Perfect Storm of Risks
4. The “Carrot” – Business Benefits
5. Objection Handling Clinic
6. Drivers Mapped to Stages
Agenda
3 First Wave Drivers
1. Founder / CEO’s personal passion … values based
2. PR crisis … reputation / brand value / image hit
3. Regulatory pressure ... actual or threatened
… sufficient for next wave?
1. Terminology / Stages
2. Three First Wave Drivers
3. The “Stick” – The Perfect Storm of Risks
4. The “Carrot” – Business Benefits
5. Objection Handling Clinic
6. Drivers Mapped to Stages
Agenda
The Perfect Storm
• Oct. 27 – Nov. 1, 1991
1. Hurricane Grace … near Bermuda2. Cold front over the Great Lakes3. Old warm front near Sable Island
• All were dying out• Energy from the 3 systems combined • Worst storm in history …100’ waves• Sudden, unexpected, devastating
“Perfect Storm” of Business Risks
10 Market Forces 5 Business Risks5 Mega-Issues 5 Demanding
Stakeholders
Climate Change Green Consumers
Market Risks
Balance Sheet Risks
Operating Risks
Capital Cost Risks
Sustainability Risks
+ Difficult access to capital
Pollution & Health
Activist Shareholders
Globalization Backlash
Civil Society / NGOs
Energy
Crunch
Government Regulators
Erosion of Trust Financial Sectors
10 Market Forces
10 Market Forces
5 Mega-Issues 5 Demanding Stakeholders
Climate Change Green Consumers
Pollution & Health
Activist Shareholders
Globalization Backlash
Civil Society / NGOs
Energy
Crunch
Government Regulators
Erosion of Trust Financial Sectors
Sea ChangeOf
RisingExpectations
A Perfect Storm … of Opportunities
Innovation
Productivity
Growth
Brand
Image
CompetitiveAdvantage
$aving$Revenue
Business Value
10 Market Forces
5 Mega-Issues 5 Demanding Stakeholders
Climate Change Green Consumers
Pollution & Health
Activist Shareholders
Globalization Backlash
Civil Society / NGOs
Energy Crunch Government Regulators
Erosion of Trust
Financial Sectors
1. Terminology / Stages
2. Three First Wave Drivers
3. The “Stick” – The Perfect Storm of Risks
4. The “Carrot” – Business Benefits
5. Objection Handling Clinic
6. Drivers Mapped to Stages
Agenda
Business Priorities
ProductivityBrand Image
Profit
Growth
Attracting & Retaining Top Talent
Managing Risks Innovation
Speed to Market
Leadership
Market Share
Motivation
Share Price
CompetitiveAdvantage
Governance
Expense Savings
New MarketsComplying withNew Regulations
Attracting & Retaining Customers
Responding to Emerging Market Forces
Revenue
Dow Jones Sustainability Index
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
5.5
6
6.5
7
7.5
Jan-90 Jan-91 Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04
Val
ue o
f $
1 i
nv
este
d
DS 400 S&P 500® Russell 1000®
Potential profit increase: 38%
+ Energized employees
+ Improved corporate image
+ Competitive advantage
+ Positioned for the future
Benefits to “SD Inc.”
1. Reduced recruiting costs
2. Reduced attrition costs
3. Increased employee productivity
4. Reduced expenses in manufacturing
5. Reduced expenses at commercial sites(energy, water, consumables)
6. Increased revenue / market share
7. Reduced risk, easier financing
7 Benefit Areas
Usual
focus
1. Reduced recruiting costs -1%
2. Reduced attrition costs -2%
3. Increased employee productivity +10.5%
4. Reduced expenses in manufacturing -5% (-2.5%)
5. Reduced expenses at commercial sites -20%(energy, water, consumables)
6. Increased revenue / market share +5%
7. Reduced risk, easier financing -5%
7 Benefit Areas … % Improvement
… yielding a Profit increase of +38%
7 Benefit Areas … Relative Sizes
Recruiting
Attrition
Productivity
Manufacturing
Commercial Sites
Revenue
Risk, Financing
1. Reduced recruiting costs -1%
2. Reduced attrition costs -2%
3. Increased employee productivity +10.5%
4. Reduced expenses in manufacturing -5% (-2.5%)
5. Reduced expenses at commercial sites -20%(energy, water, consumables)
6. Increased revenue / market share +5%
7. Reduced risk, easier financing -5%
7 Benefit Areas … % Improvement
… yielding a Profit increase of +38%
1. Reduced recruiting costs -1%
2. Reduced attrition costs -2%
3. Increased employee productivity +10.5%
4. Reduced expenses in manufacturing -5% (-2.5%)
5. Reduced expenses at commercial sites -20%(energy, water, consumables)
6. Increased revenue / market share +5%
7. Reduced risk, easier financing -5%
What if …
… yielding a Profit increase of +38%
+2%
+35%
1. Reduced recruiting costs -1%
2. Reduced attrition costs -2%
3. Increased employee productivity +10.5%
4. Reduced expenses in manufacturing -5% (-2.5%)
5. Reduced expenses at commercial sites -20%(energy, water, consumables)
6. Increased revenue / market share +5%
7. Reduced risk, easier financing -5%
What if …
… yielding a Profit increase of +38%
+4%
+23%
1. Reduced recruiting costs -1%
2. Reduced attrition costs -2%
3. Increased employee productivity +10.5%
4. Reduced expenses in manufacturing -5% (-2.5%)
5. Reduced expenses at commercial sites -20%(energy, water, consumables)
6. Increased revenue / market share +5%
7. Reduced risk, easier financing -5%
What if …
… yielding a Profit increase of +38%
+2%
+4%
+20%
1. Terminology / Stages
2. Three First Wave Drivers
3. The “Stick” – The Perfect Storm of Risks
4. The “Carrot” – Business Benefits
5. Objection Handling Clinic
6. Drivers Mapped to Stages
Agenda
4 Inhibiters to Next Wave
1. Lack of support from senior leaders Too busy … not strategic … no pressure from
important people … not our problem … too hard to change … personal credibility issue
2. Fear of backlash Don’t want to blow own horn … green-washing
accusations … open the floodgates … guilt-by-association … skeletons in our closet
3. Weak business case Doing enough … WIIFM … short-term … perverse
subsidies … payback criteria … insulting … too good to be true
4. Mindset What problem … anti-capitalistic … govt’s problem
… -ve baggage … new idea … MBA legitimacy
Mental Models
SUSTAINABLEENVIRONMENT
Sustainable Society
Sustainable Economy
Environment
ECONOMY
Society
Typical business view Sustainable view
1. Terminology / Stages
2. Three First Wave Drivers
3. The “Stick” – The Perfect Storm of Risks
4. The “Carrot” – Business Benefits
5. Objection Handling Clinic
6. Drivers Mapped to Stages
Agenda
5 Sustainability Drivers
3 First Wave Drivers1. Founder / CEO’s personal passion … values based
2. PR crisis … reputation / brand value / image hit
3. Regulatory pressure ... actual or threatened
2 Emerging Drivers1. “Perfect Storm” of threats to license to operate
2. Compelling, relevant business case
First Wave Drivers
5. Purpose / Passion
-------------------------------
4. Integrated Strategy
3. Beyond Compliance
2. Compliance
1. Pre-Compliance
• Regulatory Threat
• Passionate CEO
• Regulatory Pressure• PR Crisis
Emerging Drivers
5. Purpose / Passion
-------------------------------
4. Integrated Strategy
3. Beyond Compliance
2. Compliance
1. Pre-Compliance
• Regulatory Threat• Business Case
• Passionate CEO
• Regulatory Pressure• PR Crisis
• “Perfect Storm”• Business Value
The Business Model:
Challenges and Opportunities
www.sustainabilityadvantage.com
World Economic Center MontrealOctober 15, 2004
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