Sustainability A Consulting Perspective Olivier Corvez Presentation to Clark University November 2nd, 2009 Delivering sustainable solutions in a more competitive world Agenda Introduction Refresher on Sustainability interpretation Global panorama – Roots & trends ERM & Sustainability framework Case study Q&A Delivering sustainable solutions in a more competitive world 2 Defining Sustainability While companies talk about the triple bottom line, many (initially) focus on the environmental dimension Economic Prosperity Environmental Stewardship Social Responsibility • Return on equity • Eco-efficiency • Worker and public safety • Stock price growth • Energy and greenhouse gas (GHG) management • Market share • Addressing impacts and opportunities throughout the value chain • Local economic impacts (job creation, tax base, other investments) • Profitability • New market opportunities through innovative products and services • Human rights and living wage • Green technology and design • Stakeholder engagement and accountability • Support of conservation efforts and biodiversity • Strategic philanthropy Delivering sustainable solutions in a more competitive world 3 Sustainability Value Proposition A company’s strategic goals Reduce Costs • Reduce human and capital costs of accidents, injuries and deaths • Cost reduction through ecoefficiency Avoid Risks • Stay in compliance • Avoid supply chain risk • Avoid negative press • Maintain social license to operate Create Options • Facilitate entry into new markets • Create new products • Establish partnerships to innovate and grow • Avoid fees and fines Delivering sustainable solutions in a more competitive world 4 Major sustainability issues today Corporate ethics and governance Fair labor practices Responsible use of influence Climate change and energy security Water – availability and conservation Supply chain performance Product life cycle impacts Healthcare Delivering sustainable solutions in a more competitive world 5 Sustainability and responsible management Increasingly seen as the management approach of the progressive, responsible company Delivering sustainable solutions in a more competitive world 6 Why companies think Sustainability is important? Some Internal drivers : Some External drivers : Cost savings add to the bottom line Brand image (both opportunity- and risk-driven) Product innovation/new market opportunities Catalyst for business performance Influence financial sector/sustainability rating agencies Attracting/retaining people (e.g. “young high potentials”) Higher appreciation of stock value Dow Jones Sustainability Index CEO believers (Leading the movement) Increase Market Share Information becomes public more quickly (“CNNworld/Global Village”) International sustainability agenda (UN summit Johannesburg, Millennium development goals, etc): water, energy & climate change, health, biodiversity, population, poverty International agreements (e.g. Kyoto) and regional regulations (e.g. WEEE in the EU or REGI in the US) International competition De-regulation/absence of global governance: higher expectations of (larger) companies Regaining trust (after Enron/Worldcom etc.) Increasing influence of NGO’s and public at large More than 52% of the Global Fortune 250 are publishing an annual Corporate Responsibility performance report* * KPMG 2005 annual survey Delivering sustainable solutions in a more competitive world 7 History Health-Safety History 1950’s Drivers Employees Unions Regulations H&S Quality 1970’s Environment Sustainability 1990’s 2010’s Client needs Cost control Env. regs Public, Medias Resources Standard Local Certification OHSAS 18001 ISO 9000 ISO 14000 ? ISO 9001 ISO 14001 ? More and more scrutiny towards Corporations and transparency about their “non financial” practices & performances… Delivering sustainable solutions in a more competitive world 8 As scrutiny increases, so does the amount of annual CSR/ SD reports…. As with financial reporting rules, Countries are passing more law enacting public reporting of annual “non financial” performances… Total Output of CSR Reports Worldwide - 1992 to 2007 * Source : CorporateRegister.com Delivering sustainable solutions in a more competitive world 9 Total Amount of Annual CSR/ SD reports by Country…. In proportion to the total number of companies headquartered in these countries, the EU and Japan have been leading the way in generating the most Sustainability reports… Total Output of CSR Reports per Country Delivering sustainable solutions in a more competitive world 10 Evolution In content of the SD reports Anecdotal Stories Policy & Standards Delivering sustainable solutions in a more competitive world Evidence, Consistent Performance Systems & Governance 11 The return on investment Cost Reputation CARBON SAVINGS 35% WATER USE SAVINGS 30-50% ENERGY SAVINGS 30% Risk Management Delivering sustainable solutions in a more competitive world Average Green Building Cost Savings According to the Leadership in Energy & Environmental Design (LEED) 12 WASTE COST SAVINGS 50-90% Characteristics of Sustainability Leaders Today Management systems processes to define, measure, monitor & assure performance Transparency complete and comprehensive Engagement stakeholders have input and influence Global perspective systems are global, impacts measured locally Performance balanced (triple bottom line), material, detailed, easily accessible Leadership raise the bar for their industry; set best practice; cited by 3rd parties Humility no “green washing” – sustainability portrayed as a challenge and a responsibility Delivering sustainable solutions in a more competitive world 13 ERM’s Approach to Sustainability Consulting Delivering sustainable solutions in a more competitive world Suite of ERM Sustainability Services Sustainability strategy Metrics, goals, and policy development Programs and projects Greening supply chain Training and awareness Product life cycle impacts Information management New product development Corporate non-financial reporting Third-party reviews … Delivering sustainable solutions in a more competitive world 15 Delivering the ERM Sustainability Framework - Overview Mindset I have a clear idea of why and where I'm going Program Phases specific issues (external forces) Identify and scale Stakeholders importance & issues Review overall Critical Milestones Business growth strategy I can see how it will work Defining Current Profile Context Analysis Map sector Key Activities I know what I will change Assess Company’s products and services from a Sustainability perspective Sustainable Business Elaboration High level redesign Blueprint I can see the benefits Identify vision, goals and objectives. Analyze results Identify Quick wins from Sustainability Scorecard assessment and medium/ long term priorities Implementing the program Review Identify business value proposition and route to them Execution & Review performance Design Program Set tangible targets, priorities and milestones Quantify performance results (positive and negative) Analyze results resources necessary Our Sustainability Framework is embedded in the Company’s Business strategy Delivering sustainable solutions in a more competitive world 16 Steps to developing a CSR strategy ERM’s suggested approach to defining the CSR/ SD strategy and introduce some key areas for decision-making, as follows: Defining your business case Defining your journey Defining strategic fit Embedding CSR strategy into your organisation Delivering sustainable solutions in a more competitive world 17 Defining strategic fit: What is your SD opportunity? Tomorrow’s Opportunity Product Innovation Sustainable Development Internal focus External focus Stakeholder Responsiveness Operational Excellence Today’s Market Adapted from S. Hart (2005), Capitalism at the Crossroads Delivering sustainable solutions in a more competitive world 18 Defining the journey: Where are you now and where do you want to be? Stage 5: Stage 4: Competitive Stage 3: Integrated Stage 2 : Stage 1: PreCompliance Coping/ Risk Strategy management Compliance Delivering sustainable solutions in a more competitive world 19 Advantage Two Interlinked Action Fronts Create and Implement a Sustainability Strategy Supporting Actions and Organizational Changes to Ensure Buy-in, Integration, and Implementation of the Sustainability Strategy Delivering sustainable solutions in a more competitive world 20 Foundations Reputation Capstone. If you don’t have the bottom three, not much to support reputation Emerging Risks Improving Performance Performance as a business (cost reduction, cycle time, growth) Assuring Performance (Compliance and Assurance) Foundation, without that nothing else matters much Source: ERM 2004 Business Integration Forums Delivering sustainable solutions in a more competitive world 21 Both risks coming from rising expectations and risks coming from changes in the business model Case Study Delivering sustainable solutions in a more competitive world The Wal-Mart Effect Wal-Mart’s Sustainability Strategy Be supplied 100% by renewable energy Create zero waste Sell products that sustain our resources and environment Become the access point for organic foods at a value Customers Investors Sustainable products more relevant to selective user => $ growth Lower risk and volatility Drive emotional / intangible appeal Drive new customer segment growth Increase profits by reducing costs Sustainability Profitability Increased Share Price Delivering sustainable solutions in a more competitive world 23 The Wal-Mart Effect – Energy efficiency module Wal-Mart is investing $500MM to achieve goals … Reduce greenhouse gases across network by 20% over next 7 years Design and build more “Experimental Stores” that are 25-30% more efficient emits up to 30% less greenhouse gas within the next 4 years Increase fleet efficiency by 25% in the next 3 years Share technology learning with “the world,” including competitors Reengineer all 14 Value Networks to be environmentally sustainable … and have initiated a program over the next 18 months that will show preference to suppliers who set their own goals and aggressively reduce their own emissions Delivering sustainable solutions in a more competitive world 24 Conclusion - Sustainability Best Practice Effective Sustainability 1. Championed at the highest levels 2. Cross functional, high level steering committee 3. Innovative public/private partnerships 4. Focused on engaging stakeholders, not managing critics 5. Effective use of resources and influence 6. Strategically focused philanthropy Delivering sustainable solutions in a more competitive world 25 Q&A Olivier Corvez Environmental Resource Management 399 Boylston Street Boston MA 02116 Tel: 617 646 7800 Email : olivier.corvez@erm.com Delivering sustainable solutions in a more competitive world 26