THE GOOD NEWS ABOUT THE NEW SU$TAINABILITY IMPERATIVE 2014 Kaleidoscope Conference Algonquin College May 13, 2014 bobwillard@sympatico.ca sustainabilityadvantage.com CORPORATE SUSTAINABILITY TRIPLE BOTTOM LINE Planet / Environment CORPORATE SUSTAINABILITY GREEN +CSR Environmental CORPORATE SUSTAINABILITY ESG Environmental CORPORATE SUSTAINABILITY ASSET MANAGEMENT Natural Capital AC S-E-E FRAMEWORK http://www3.algonquincollege.com/sustainability/overview-2/our-framework/ THE REAL “REAL WORLD” NESTED INTERDEPENDENCIES FIVE-STAGE SUSTAINABILITY JOURNEY 5. PURPOSE & PASSION 4. INTEGRATED STRATEGY 3. Beyond Compliance 2. Compliance 1. Pre-Compliance “Over the last 10 years, the ‘Sustainability Imperative’ has emerged, magnified by escalating public and governmental concern about climate change, industrial pollution, food safety, and natural resource depletion, among other issues.” David Lubin and Daniel Esty, HBR, May-June 2010 “Expect the Unexpected: Building business value in a changing world,” KPMG, 2012 ENABLERS vs. ONE MORE GOAL Profit Access to capital Share price Talent wars Brand value Productivity Revenue growth Market share Expenses ROI “SUSTAINABILITY” Innovation Quality Risk management Supply security (SUSTAINABILITY) STRATEGIES SUSTAINABILITY BUSINESS CASE Income Statement Risks 9% 2. Reduced energy 75% 3. Reduced waste 20% 4. Reduced materials 10% 5. Increased productivity 2% 6. Reduced turnover 25% 7. Reduced revenue and increased expenses Revenue 1. Increased revenue Expenses Opportunities +51 to +81% PROFIT -16 to -36% SUSTAINABILITY CAPITAL RESERVE Company Data Profile Revenue Energy expense Materials and water expense Total salary / payroll expense Profit Average salary Number of employees Small Professional Services Large, Manufacturing & Distribution $1,000,000 $500,000,000 $20,000 $10,000,000 $50,000 $150,000,000 $300,000 $150,000,000 $70,000 $35,000,000 $50,000 $40,000 6 3,750 Potential profit increase 51% 81% Potential profit at risk -16% -36% 60-employee manufacturing company 42 projects between 2006-2008 58% reduction in electricity usage 90% reduction in natural gas usage Reduced annual CO2 emissions by 115 tonnes Increased profits by 76%. Invested $46,186 to yield energy savings of $89,152 Average pay-back period of 6.3 months “Manufacturer finds lighting energy efficiency convenient,” Green Manufacturer, March 1, 2010 GREEN BUILDING BENEFITS: TO WHOM? • Slower depreciation • Higher occupancy rate • Easier financing • Reduced downtime • Rapid ROI • Lower operating costs • Higher market value • Lower maintenance costs • Lower refurbishment costs • Lower design and • Corporate image / prestige • Increased construction costs • Compliance with regulations productivity • Faster sales Adapted from Cleland Robertson, Lead Manager, Sustainable Construction & Infrastructure Group, Sustainable Business Solutions, PwC Chile. Based on World Green Building Council. GREEN BUILDINGS: PRODUCTIVITY World Green Building Council, “The Business Case for Green Buildings,” March 2013 Profit could increase by 51-81% Bottom Line Business Case Profit could drop by 16-36% “Expect the Unexpected: Building business value in a changing world,” KPMG, 2012 RISKS TO REVENUE Potential Revenue Erosion % Rev. % Probability at Risk within 5 yrs Risk from poor reputation on energy and carbon management 5% 25% Risk from poor reputation on water management 5% 25% Risk from poor reputation on materials and waste management 5% 20% Risk from poor reputations of suppliers or customers 5% 10% Risk from poor reputation on eco-system damages 5% 1% 10% 10% 2% 5% Risk from less competitive prices Risk from sudden disruptions in the value chain Revenue at risk 5% RISK OF ESCALATING EXPENSES Potential Escalating Expenses Risk of higher cost of energy % % Probability Potential within 5 yrs Impact 10% 75% 100% 25% Risk of higher cost of waste 5% 70% Risk of higher cost of water and materials 5% 75% 0.60% 75% Risk of higher employee voluntary turnover 5% 25% Risk of lower employee productivity 1% 10% Risk of a price on carbon ($20/T x 300T/$1M Rev.) Risk of higher cost of capital (Debt = 30% of Rev.) Potential increase in expenses 11% to 31% Impact on profit from revenue and expense risks -16% to -36% GLOBAL RISKS 2014 • 10-year outlook • 31 global risks with the potential to cause significant negative impact across entire countries and industries • Five classifications: • Economic, • Environmental • Societal • Geopolitical • Technological • All are interconnected. World Economic Forum (WEF), “Global Risks 2014,” January 2014. RISK LIKELIHOODS AND IMPACTS World Economic Forum (WEF), “Global Risks 2014,” January 2014. RISK INTERCONNECTIONS World Economic Forum (WEF), “Global Risks 2014,” January 2014. OECD RISKS BY 2050 1. 80% increase in world energy demand, with 85% from fossil fuels; 50% increase in GHGs (685 ppm) 2. Urban air pollution / ground-level ozone is top cause of mortality, ahead of dirty water and lack of sanitation. 3. Global biodiversity declines by a further 10%, mature forests shrink by 13%. 4. Global water demand increases by some 55%; competing demands put water use by farmers at risk; 40% of the global population live in river basins under severe water stress OECD, “Environmental Outlook to 2050.” “A weakening of the pillars of our planetary infrastructure —a stable climate, clean air and water, healthy biodiversity, and abundant resources— is costing business real money” If this hotter, scarcer, more transparent, and unpredictable world is the new normal, then how must companies act to ensure a prosperous future for all, including themselves? … That’s the Big Pivot … and it’s nonnegotiable.” New companies will be more resilient, robust, and able to thrive in fast-changing times” Andrew Winston, The Big Pivot, HBR Press, 2014 7-STEP CHANGE PROCESS Embed and align changes Mobilize commitment Build case(s) for change Develop strategies Continuously and Assess current realities Learn Adapt Inspire shared vision(s) Wake up and decide THE GOOD NEWS ABOUT THE NEW SU$TAINABILITY IMPERATIVE 2014 Kaleidoscope Conference Algonquin College May 13, 2014 bobwillard@sympatico.ca sustainabilityadvantage.com