SOCIAL & ENVIRONMENTAL ISSUES
THE
NEW S T R A T E G I C B U S I N E S S R I S K
Mark Eadie
Executive Director, Environmental Management
The world is not getting any bigger…
Source: WWF, 2008
U.S. Resource Consumption

In their lifetime, each American consumes

535 kg of copper

7.2 tonnes of clays

14.1 tonnes of salt

569 kg of zinc

621 tonnes of stone, gravel and sand (= half a train-load)

346,000 litres of oil (= 18 petrol tankers)

6,100,000 cubic feet of gas

13.3 tonnes of iron ore

2,964 kg of bauxite

8.7 tonnes of phosphate

260 tonnes of coal

26.8 tonnes of other minerals and metals
Source: Mineral Information Institute, 2010
Growth in Consumerism
From 1.3 to 4 Billion
Middle Class in 30 Yrs
Source: Goldman Sachs, 2008
Global Consumption
If the whole world were to reach the level of consumption of the USA/Europe….
…we would need:
 3 X current world copper production
 2 X current zinc production
 6 X current oil production
 26% more than current bauxite production
 5 X current phosphate production
 3 X current coal production
 56% more than current gold production
Global Trends
 Trends in world wide extraction of selected materials, 1980 - 2005
Source: SERI Global Material Flow Database
Innovation in design needed?
Source: Umicore 2008
The Transformational Challenge
Resource
efficiency to
improve by
over 80%
80
70
60
% change since 1961
50
Life Expectancy 80yrs
Life Satisfaction 8/10
40
Footprint
HLY
Efficiency
30
20
10
2050
0
-10
1961
1966
1971
1976
1981
1986
1991
1996
2001
-20
-30
Source: NEF
80% reduction in CO2 emissions
What do we assess at J.P. Morgan?
 Financial activities
 Equity and debt underwriting – many IPOs, many bonds
 Loans
 Certain trading activities, including commodities
 M&A, including many advisories
 Principal investment
 Any transaction where high reputation risk perceived
 Industrial sectors
What are the risks?
The obvious business risks are the direct and indirect negative impacts, and
these are assessed through a variety of environmental and social assessment
methods
However, there are more and wider strategic business risks including:
 Lower resource availability
 Significantly growing social expectations of behaviour of companies
 Changing legislation
 Changing technical standards
But there are also positives
 Growing social understanding of different agendas
 Huge potential alternative revenue flows for resource reuse, recycling
 Advancing technical solutions lower costs
No single standard, but a rich reserve of guidance
 Legislation and regulations
 IFC Performance Standards (the main specific reference in the Equator Principles)
 OECD Guidelines
 IAIA Good Practices for EIAs
 IFC/World Bank EHS Guidelines and Sectoral Guidance
 Sector Standards, Guidance and Input: ICMM, IPIECA, IHA, RSPO, BCI
 Academic, NGO, commissioned studies and references
 Geographical
 sectoral (e.g. mining, oil and gas, forestry…)
 functional (e.g. water, biodiversity, poverty…)
 ISO14000, OHSAS18000, SA8000, proprietary protocols
(e.g. Anglo American Socio-Economic Assessment Toolkit, Shell SPMU guides)
 ILO, UN, EU conventions and guidance
Conclusions
 Governments, regulators, the media, NGOs, lenders, investors and society
have increasing expectations about how corporations manage environmental,
health, safety and social issues
Globalisation of society’s expectations
 Environmentally and socially responsible behaviour is not a “nice to have”:
it reduces costs and helps companies to stay in business
It’s about the money, not hugging trees
 Work for a better tomorrow: if we get hung up on yesterday’s performance or
behaviour we will get nowhere
Don’t let the perfect become the enemy of the good