THE BUSINESS CA$E
for the Sustainability Imperative
CANSEE
York University
November 2, 2013
bobwillard@sympatico.ca
www.sustainabilityadvantage.com
“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 2.0
Capitalism 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
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
Negative impacts
Externalized
Internalized
Boundaries
The firm
The firm’s value chain
Transparency
As little as possible
Naked
Business model
Sell products; TakeMake-Waste; Linear
Sell services; Borrow-Use-Return;
Circular, Cradle to Cradle; Closed loop
ENABLERS vs. ONE MORE GOAL
Profit
Access to capital
Share price
Talent wars
Brand value
Productivity
Revenue growth
Market share
Expenses
“SUSTAINABILITY”
Innovation
Quality
Risk management
Supply security
(SUSTAINABILITY) STRATEGIES
MORE RIGOROUS BUSINESS CASE
Benefits
95% rewrite;
recalibrated
# Strategies
1. Increased revenue
3
2. Reduced energy
10
3. Reduced waste
4
4. Reduced materials
4
5. Increased productivity
6
6. Reduced turnover
1
7. Risks to revenue
and expenses
7
+7
SUSTAINABILITY BUSINESS CASE
9%
25%
+51 to
+81%
PROFIT
-16 to
-36%
2. Reduced energy
75%
3. Reduced waste
20%
4. Reduced materials
10%
5. Increased productivity
6. Reduced turnover
SUSTAINABILITY
CAPITAL RESERVE
Revenue
7. Reduced revenue and
increased expenses
1. Increased revenue
Income Statement Risks
Expenses
Opportunities
2%
SOURCES OF FUNDS
 Existing budgets
 Government grants and incentives
 Sustainability Capital Reserve
 Other internal or external capital markets
 Treat as a high-yield, low-risk investment
+ ONLY COUNT BENEFITS AFTER PAYBACK PERIODS
WHICH “BUSINESS CASE”?
Sustainability Business Case #1:
More Profit
Sustainability Business Case #2:
Better ROI
Sustainability Business Case # 3:
Higher Share Price
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/
HOW WOULD WE RECOGNIZE A
TRULY SUSTAINABLE BUSINESS
IF WE SAW ONE?
CAPITALISM 2.0
Capitalism 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
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
Negative impacts
Externalized
Internalized
Boundaries
The firm
The firm’s value chain
Transparency
As little as possible
Naked
Business model
Sell products; TakeMake-Waste; Linear
Sell services; Borrow-Use-Return;
Circular, Cradle to Cradle; Closed loop
THE FOURTH BENCHMARK
Other companies
3
1
X
Baseline
year
Performance
Today
Company X
2
Company
Goal
4
GOAL LINE(S)
Gold-standard
benchmark
Material, science-based
KPIs and Goals for a
Truly Sustainable Business
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
Environment
Society
Economy
X
A truly sustainable business
creates positive environmental,
social, and economic value
… throughout its value chain/network
… contributing to the possibility
that human and other life will flourish
on our planet, forever
If it were to operate forever, it would not only do no harm;
it would do well by doing some net good.
METHODOLOGY / FLOW OF LOGIC
8 science-based System Conditions
for a sustainable environment (3)
and a sustainable social system (5)
8 Design Constraints for a truly sustainable business model
18 KPIs with measureable goals that
confirm the company is performing
within the Design Constraints
SYSTEM CONDITIONS
In a sustainable society, nature is not subject to systematically increasing …
1. concentrations of substances extracted from the Earth’s crust,
2. concentrations of substances produced by society,
3. degradation of nature by physical means,
…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; justice
4e. Meaning: purpose; making a difference
http://www.naturalstep.org/the-system-conditions
ORGANIZING FRAMEWORK
ESG
Environmental
KPIs & GOALS
•
•
•
•
•
•
Environment / Planet (6)
Society / People (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?
• 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?
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
Towards a Gold-standard Benchmark for a Truly Sustainable Business
http://www.naturalstep.ca/sites/default/files/gold-standard-benchmark-latest-version.pdf
CAPITALISM 2.0
Capitalism 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
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
Negative impacts
Externalized
Internalized
Boundaries
The firm
The firm’s value chain
Transparency
As little as possible
Naked
Business model
Sell products; TakeMake-Waste; Linear
Sell services; Borrow-Use-Return;
Circular, Cradle to Cradle; Closed loop
THE BUSINESS CA$E
for the Sustainability Imperative
CANSEE
York University
November 2, 2013
bobwillard@sympatico.ca
www.sustainabilityadvantage.com