CAPITALISM 2.0:
How Would We
Recognize It
If We Saw It?
TSSS
February 7, 2013
bobwillard@sympatico.ca
www.sustainabilityadvantage.com
MY BACKBURNER QUESTIONS
2012
2005
2009
2002
Most sustainable enterprises?
Characteristics of a sustainable enterprise?
MIRROR MIRROR …
Top 5 most sustainable companies on the planet?
Thoughts from our TSSS audience on Feb. 7, 2013…
1.
Patagonia - 10
2.
Interface – 20
3.
Toyota – 1
4.
Vancity – 2
5.
GE – 1
6.
Seventh Generation – 7
7.
AutoShare, ZipCar – 2
8.
Suncor – 2
9.
Arcelor Metal Dofasco – 2
10. Marks & Spencer - 1
SAM RANKING
• “Sustainability leaders” in 58 sectors
• Used by DJSI
• Assesses over 2,000 corporations
http://www.sam-group.com/ … 2012 results
FORTUNE MAGAZINE RANKING
• “Most admired companies”
• Chosen by businessmen
Rank
Top 10
1
Apple
Innovation
2
Google
People management
3
Amazon.com
4
Coca-Cola
5
IBM
6
FedEx
Reputation Attributes
Use of corporate assets
Social responsibility
Quality of management
Financial soundness
7
Berkshire Hathaway
8
Starbucks
9
Procter & Gamble
Quality of products/services
10
Southwest Airlines
Global competitiveness
Long-term investment
http://money.cnn.com/magazines/fortune/most-admired/2012/full_list/… 2012 results
NEWSWEEK RANKING
Rank
Top 10 Global
1
Santander Brasil
2
Wipro
3
Bradesco
4
IBM
5
National Bank Australia
6
BT Group
7
Munich Re
8
SAP
9
KPN
10
Marks & Spencer
• “Green rankings”
• Helped by Trucost
• Look at Global 500 & U.S. 500
Category
Wt’g
Environmental Impact
45%
Environmental
Management
45%
Environmental
Disclosure
10%
http://www.thedailybeast.com/newsweek/2012/ … 2012 results
100%
GLOBAL 100
3,500 global public companies
Compared to what is needed e.g. Factor Four improvements
http://www.global100.org/; 2013 list
Key Performance Indicators
1. Energy productivity
2. Carbon productivity
3. Water productivity
4. Waste productivity
5. Innovation capacity
6. % Taxes paid
7. CEO-to-Average-Worker Pay
8. Pension fund status
9. Safety performance
10. Employee turnover
11. Leadership diversity
12. Clean capitalism pay link
GLOBAL 100: CANADA
Top in Canada
21. Teck Resources
40. Barrick Gold
57. CN Railway
60. TELUS
71. Nexen
79. Enbridge
81. Suncor Energy
85 Sun Life Financial
87. Royal Bank
88. Cenovus Energy
http://www.global100.org/; 2013 list
MY BACKBURNER QUESTIONS
2012
2005
2009
2002
Stage 4 vs. Stage 5?
Most sustainable enterprises?
Characteristics of a sustainable enterprise?
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.”
Lubin and Esty, HBR May 2010
“Expect the Unexpected: Building business value in a changing world,” KPMG, 2012
“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”
Porter and Kramer, HBR Jan-Feb 2011
CAPITALISM 2.0
Capitalism 1.0
Capitalism 2.0
Purpose of the
Firm
Maximize shareholder
value; ROI; Growth
Creating shared stakeholder
value, including the Environment
Legitimate capitals
Financial
Financial, Natural, Human, Social
Bottom lines
Profit -first
Profit, People, Planet
Source of financial
capital
Stock market; Big
financial institutions;
Absentee owners
Stock market; Smaller financial
institutions; Customers;
Employees; Local communities
Market focus
Global
Local
Environmental and
social impacts
Externalized
Internalized
Accountability
boundaries
The Firm
The Firm’s value chain, over its
products’ life cycles
Transparency
As little as possible
Naked
Business model
Take-Make-Waste; Linear Borrow-Use-Return; Circular
DOWN-TO-EARTH ECONOMY
Wall Street’s
Organizing Principles
Nature’s
Organizing Principle
View of natural capital Limitless free resource,
to be exploited
Finite valuable resource, to be
respected and restored
Resource control
Monopolized
Shared
Growth
Infinite growth of money
and consumption
A stage in life’s endless
regenerative cycles
Timeframe
Immediate return
Sustained yield over time
Efficiency measures
Returns on financial
capital
Returns on social and natural
capital
Primary performance
indicators
Growth in financial
returns, assets
Life’s abundance, health,
resilience, and creative potential
Primary dynamic
Competition to
maximize self-interest
Cooperation to optimize selfand community-interest
Based on David Korten, “The Down-To-Earth Economy,” Yes! Magazine, Winter 2013
THE REAL WORLD
NESTED DEPENDENCIES
Environment
Human
Society
Human
Economy
X
Enough, for all, forever.
TRULY SUSTAINABLE ENTERPRISE
Environment
Human
Society
Human
Economy
A truly sustainable
enterprise creates positive
economic, environmental,
and social value.
X
If it were to operate forever,
it would not only do no harm;
it would do well by doing some good.
GOLD STANDARD FRAMEWORK
ESG
Environmental
ESG CRITERIA
Breakout Group Discussion Question:
List 5 ESG criteria
that you would use to assess whether or not
a company is a truly sustainable enterprise.
“Mount Sustainability”
ESG CRITERIA
Breakout Group Idea Harvesting:
1.
"Noble purpose" – but how do we measure this, what is/are the
metric(s)
2.
Do consumers as well as investors understand the implications
of supporting the company? Criteria for this could be direct or
indirect, e.g. whether company is effective in
educating/communicating investors/consumers to understand
these effects/implications
3.
Fair wages and distribution of wealth throughout value chain –
inputs/outputs
4.
No waste in network/ecosystem – if there is a product with
waste must have way to reuse – closed loop process/concept
ESG CRITERIA
Breakout Group Idea Harvesting:
5.
Degree of community/stakeholder engagement – sliding scale
from hierarchy to cooperative (includes employees and
broader community)
6.
Is it a ‘learning organization’ with ‘permission to fail’
7.
PUMA – Is it possible to estimate what the environmental
impact of all our supply chain operations are and convert that
into a financial number – eg material resources, carbon, water
– if these costs are considered what was seen as a profitable
company can easily be seen as a losing company. Puma was
a leader in assessing actual costs when by internalizing what
were previously seen as externalities - they 'gave themselves
a bill' for environmental costs
ESG CRITERIA
Breakout Group Idea Harvesting:
8.
Need to be positive on all three legs of ESG or is there
allowance to be negative/neutral on 1-2, if positive on other(s)
– parallel to this is carbon trading –> can you 'buy yourself
out?' of being 'bad'
9.
100% of compensation for everyone in company not simply
tied to shareholder value but aligned 100% to stakeholder
value
10. Equity: i.e. no one is exploited through activities/operations of
company – could be evaluated on many levels including legal,
living wage  if we dream big, let's look at company's whole
value chain, not just the company (Big question – where does
accountability end? How much is enough? When is enough
enough?) And, if they ‘do too much good’, and put themselves
out of business, then the G leg of the stool is broken, right?
ESG GOLD STANDARD CRITERIA
Environmental
Carbon positive
Energy positive
Water positive
Materials positive
Waste positive
Provides services (vs. products)
Restorative to ecosystems
Social
Fair share of taxes
Labor rights & safe working conditions
Fair employee remuneration
Family-friendly benefits
Engaged employees
Local workers, purchases, & investments
Products & services build social capital
Governance / Financial
Financially sustainable
Ethical business practices
Diverse senior leadership
Transparent / Engaged stakeholders
Sustainable business model, policies, & systems
Sustainable value chain / Life-cycle accountability
Sustainability champion / Leader of transformation
MY BACKBURNER QUESTIONS
2012
2005
2009
2002
Correlation with
market value?
Stage 4 vs. Stage 5?
Most sustainable enterprises?
Characteristics of a sustainable enterprise?
MARKET PERFORMANCE
Robert G. Eccles et al, “The Impact of a Corporate Culture of Sustainability on Corporate Behavior
and Performance,” HBS working paper 12-035, Nov. 25, 2011.
http://www.hbs.edu/research/pdf/12-035.pdf..
REPORTING COMPANIES OUTPERFORM
• 53% of S&P 500 companies
are published sustainabilityor CSR-type reports in 2011,
up from 20% in 2010
• 63% follow the Global
Reporting Initiative (GRI)
framework
• Between 2007 and 2011,
companies that reported on
their sustainability efforts
outperformed the broad
S&P 500 Index
Governance and Accountability Institute, “2012 Corporate ESG / Sustainability / Responsibility
Reporting: Does It Matter?” December 2012
IIRC
Will create the globally accepted International <IR> Framework
that includes financial, governance, management commentary,
and sustainability reporting.
Reports will include material
sustainability impacts, and show how the
company creates value in the form of
financial, manufactured, human,
intellectual, and natural capitals.
• December 2013: Version 1.0 of the Framework
• Q1-Q4 2014: Pilot Program with the Business Network (80
companies) and the Investor Network (30 investors)
International Integrated Reporting Council (IIRC)
http://www.theiirc.org/
SASB
Will develop industry-specific standards to measure and disclose
ESG performance on the top 10 material sustainability issues,
for mandatory Form 10-K filings with the SEC.
A complete set of standards covering all 10 sectors and 89 industries
will be available in Q2 2015.
Sustainability Accounting Standards Board (SASB)
http://www.sasb.org/
GISR
Will create a world class corporate sustainability ratings standard,
to embed sustainability into the capital markets worldwide
Global Initiative for Sustainability Ratings
http://ratesustainability.org/resources/
CAPITALISM 2.0:
How Would We
Recognize It
If We Saw It?
TSSS
February 7, 2013
bobwillard@sympatico.ca
www.sustainabilityadvantage.com