Sustainability Its Value and How Leading Companies and

Sustainability, It’s Value and How Leading Companies and Universities Are Approaching It By William R. Blackburn 10 th Annual Business Strategy and the Non-Market Environment Conference Kellogg School of Management Northwestern University May 7, 2010 illiam lackburn onsulting, Ltd. © 2010 William Blackburn Consulting, Ltd. WRB@WBlackburn. Consulting. com www. WBlackburn. Consulting. com

Why Are Companies Going Green? ? illiam lackburn onsulting, Ltd. © 2010 William Blackburn Consulting, Ltd. WRB@WBlackburn. Consulting. com www. WBlackburn. Consulting. com

Top Reasons for Increased Focus on Sustainability* WH 1. Reputation, brand 2. Stakeholder pressure (esp. customers) 3. Reduce waste (and costs), increase productivity Y? 4. Employee morale, motivation and recruitment 5. Peer pressure (competitors, high-visibility companies) *Source: 2007 Conference Board study of 16 major corporations illiam lackburn onsulting, Ltd. © 2010 William Blackburn Consulting, Ltd. WRB@WBlackburn. Consulting. com www. WBlackburn. Consulting. com

Top Obstacles to Corporate Progress on Sustainability* 1. Complexity and breadth of issues; uncertain solutions 2. Pace of business; growing number of priorities (short-term pressures) 3. Fear of adverse consequences from transparency; modesty about self-promotion 4. Lack of knowledgeable, skilled leaders to drive the initiative 5. No clear, significant impacts on the company from the marketplace 6. Financial challenges; lack ofofresources *Source: 2007 Conference Board study 16 major corporations illiam lackburn onsulting, Ltd. © 2010 William Blackburn Consulting, Ltd. WRB@WBlackburn. Consulting. com www. WBlackburn. Consulting. com

Sustainability Issues in Tough Economic Times q. Financial viability of the organization, its suppliers and key customers q. Waste/energy reduction (cost) q. Cost-efficient products q. Employee relations q. Safety q. Ethics q. Support for the less fortunate illiam lackburn onsulting, Ltd. © 2010 William Blackburn Consulting, Ltd. WRB@WBlackburn. Consulting. com www. WBlackburn. Consulting. com

Two Benefits for Organizations that Proactively Seek Sustainability 1. Long-term financial viability 2. Loyalty of key stakeholders illiam lackburn onsulting, Ltd. © 2010 William Blackburn Consulting, Ltd. WRB@WBlackburn. Consulting. com www. WBlackburn. Consulting. com

Organizations Need the Loyalty of Key Stakeholders to Be Successful Employees Funders Government Our Organization Communities Customers Rating Groups Activists General Public illiam lackburn onsulting, Ltd. © 2010 William Blackburn Consulting, Ltd. WRB@WBlackburn. Consulting. com www. WBlackburn. Consulting. com

Transparency Building Stakeholder Loyalty Credibility Stakeholder Engagement Stakeholder Loyalty Econ, Env, Soc Performance illiam lackburn onsulting, Ltd. © 2010 William Blackburn Consulting, Ltd. WRB@WBlackburn. Consulting. com www. WBlackburn. Consulting. com

Large corporations are beginning to see the strategic importance of sustainability. e. g. , Wal-Mart vice president of strategy & sustainability, 2005; senior vp, 2007 illiam lackburn onsulting, Ltd. © 2010 William Blackburn Consulting, Ltd. WRB@WBlackburn. Consulting. com www. WBlackburn. Consulting. com

Wal-Mart Packaging Initiatives q. Environmental Sustainability Packaging Summit § 45 major packaging suppliers § 2, 000 attendees q. Sustainable Packaging Value Network § 200 global packaging leaders from government, academia, NGOs, and industry q 5% Packaging Reduction Goal § 60, 000 suppliers § $11 billion savings ($3. 5 billion to Wal-Mart) illiam lackburn onsulting, Ltd. © 2010 William Blackburn Consulting, Ltd. WRB@WBlackburn. Consulting. com www. WBlackburn. Consulting. com

Another Truth…. . Organizations are still struggling with the operational definition of sustainability!!! illiam lackburn onsulting, Ltd. © 2010 William Blackburn Consulting, Ltd. WRB@WBlackburn. Consulting. com www. WBlackburn. Consulting. com

General Definition of Sustainable Development/ Sustainability q. Brundtland Commission, 1987 q. Elkington’s Triple Bottom Line, 1997 illiam lackburn onsulting, Ltd. © 2010 William Blackburn Consulting, Ltd. WRB@WBlackburn. Consulting. com www. WBlackburn. Consulting. com

General Definition of Sustainability “The 2 Rs” (Blackburn 2007) q Respect: for people and other living things q Resources: the wise use of economic and natural resources —for the purpose of sustaining and promoting the long-term well-being of the organization and society. illiam lackburn onsulting, Ltd. © 2010 William Blackburn Consulting, Ltd. WRB@WBlackburn. Consulting. com www. WBlackburn. Consulting. com

Sustainability vs Other Terms? ? q. Sustainable Development q. Sustainable Growth q. Social Responsibility/ CSR q. Corporate (Global) Citizenship q. Corporate Responsibility q. Green illiam lackburn onsulting, Ltd. © 2010 William Blackburn Consulting, Ltd. WRB@WBlackburn. Consulting. com www. WBlackburn. Consulting. com

Defining Sustainability Obligations and Issues for Action q Going beyond Brundtland Comm, TBL and 2 Rs q Implied expectations of global stakeholders from Global Reporting Initiative (GRI) and sustainability reports q. Express expectations of global stakeholders o 2008 Conference Board study o Other standards (Ethos Indicators, STARS, Star Community Index, UNGC, ISO 26000, industry standards, etc. ) q. Identified expectations of stakeholders from direct engagements illiam lackburn onsulting, Ltd. © 2010 William Blackburn Consulting, Ltd. WRB@WBlackburn. Consulting. com www. WBlackburn. Consulting. com

Sustainability Standards —Principles, Management Tools q UN Global Compact principles: over 5000 businesses q ISO 26000 Social Responsibility Guidelines (2010); ISO 14001 Environmental Management System Standard: 200, 000 facilities q Sustainability Tracking, Assessment and Rating System (STARS) (2010): 500 universities q Star Community Index (2010? ): 1000 cities q Global Reporting Initiative (GRI) Sustainability Reporting Guidelines : 1300+ reporting organizations illiam lackburn onsulting, Ltd. © 2010 William Blackburn Consulting, Ltd. WRB@WBlackburn. Consulting. com www. WBlackburn. Consulting. com

Defining Sustainability Obligations and Issues for Action—Common Topics q Governance (oversight structures for legal and ethical compliance and risk control) q Human Rights (civil rights, nondiscrimination, etc. ) q Labor Practices (wages, working conditions, etc. ) q Environmental Issues (pollution, energy and resource conservation, biodiversity, etc. ) q Fair Operating Practices (anti-corruption, fair competition, etc. ) q Consumer Issues (fair marketing, consumer safety, etc. ) q Community Involvement & Development q Economic Viability of the Organization illiam lackburn onsulting, Ltd. © 2010 William Blackburn Consulting, Ltd. WRB@WBlackburn. Consulting. com www. WBlackburn. Consulting. com

Sustainable Products & Services q Improve the efficient use of natural and economic resources along the product life cycle q Provide greater respect and accommodation for the needs of people and other living things along the product life cycle illiam lackburn onsulting, Ltd. © 2010 William Blackburn Consulting, Ltd. WRB@WBlackburn. Consulting. com www. WBlackburn. Consulting. com

A Corporate Commitment to Sustainability (A Sample Sustainability Policy) It is within the best interests of our company and society as a whole that our company move along the path to sustainability. To that end, we will strive to achieve the following vision of performance: 1. Economic success: the wise use of financial resources a. Company Economic Prosperity Our business is positioned to survive and prosper economically. b. Community Economic Prosperity We are helping our community survive and prosper economically.

2. Social responsibility: respect for people a. Respect for Employees We treat our employees in a respectful, fair, non-exploitative way, especially with regard to compensation and benefits; promotion; training; open, constructive dialogue with management; involvement in decision-making; working conditions that are safe, healthy and non-coercive; rights of association, collective bargaining and privacy; employment-termination practices; and work-life balance. b. Diversity, Fair Hiring Practices We promote diversity and use hiring practices that are fair, responsible, nondiscriminatory, and non-exploitative for our employees, board members, and suppliers. c. Responsible Governance We manage our risks properly, use our economic power responsibly and operate our business in a way that is ethical and legal. d. Respect for Stakeholders We are transparent, respectful and fair to local populations, investors, suppliers and other stakeholders outside our organization who may be affected by our operations. We work collaboratively with our communities, governments and supply chain to enhance the well-being of others. e. Fair Dealing With Customers We are honest and fair with our customers, competing fairly for their business, anticipating their needs, respecting their privacy, and providing them safe and effective products and services under the conditions we promise.

3. Environmental responsibility: respect for life; the wise management and use of natural resources a. Resource Conservation We conserve our use of natural resources to the extent practicable. b. Waste Prevention and Management We reduce to the extent practicable the volume and degree of hazard of the wastes we generate from our operations, and handle them in a safe, legal and responsible way to minimize their environmental effects. c. Environmental Risk Control and Restoration We minimize the risk of spills and other potentially harmful environmental incidents, restore the environment where damaged by us, and enhance it to better support biodiversity. d. Supply Chain Impacts We work with others in our supply chain to help assure environmental impacts and risks associated with our products and services are reduced and properly controlled. e. Collaboration With Communities We collaborate with our communities to protect and improve the environment.

Examples of Economic Topics Sales Debt and interest Community donations Profits Wages Taxes Dividends Market share Tax subsidies Cash flow Retained earnings Local purchasing R&D investment Liabilities Credit rating Capital expenditures Return on investment Brand strength

Examples of Social Topics Ethics Workplace safety Employee shared values Product usefulness Corporate governance Employee work-life balance Product quality Employee relations Human rights (security policies, etc. ) Product safety Product labeling Union relations Board diversity Producer responsibility Supplier diversity Consumer privacy Employee privacy Emergency preparedness Non-discrimination policies Child labor Community outreach Forced labor Employment Disciplinary practices Transparent public reporting Flexible work options Dependent care benefits Charitable donations Bribery and corruption Antitrust practices Securities regulation Occupational health Industrial hygiene Bioterrorism Worker violence Indoor air pollution Indigenous rights Legal compliance concerning the above topics Fair advertising and labeling Impacts on local cultures Employee diversity Employee training and development Employee wellness programs Employee assistance programs Employee turnover Employee layoff policies Anti-sexual harassment policies Political contributions Helping the disadvantaged Food product nutrition Support for community services Access to healthcare by the poor

Examples of Environmental Topics Waste disposal Air pollution Water pollution Chemical spills Greenhouse gases Ozone-depleting substances Water conservation Energy conservation Natural resource usage Pollution prevention Recycling Biodiversity Packaging reduction Soil contamination Product take-back Natural habitat restoration Wetlands protection Wildlife conservation Animal rights Product energy use Customer disposal of products Precautionary Principle Spill prevention Renewable energy and materials Endangered species Soil erosion/depletion Environmentally sensitive design Compliance with environmental laws and permits

Some Observations About Sustainability § Sustainability is not about one thing. § The business case for sustainability is really the business case for a process that looks at sustainability trends and issues and prioritizes among the opportunities and threats to an organization to select those for action that contribute the most value. illiam lackburn onsulting, Ltd. © 2010 William Blackburn Consulting, Ltd. WRB@WBlackburn. Consulting. com www. WBlackburn. Consulting. com

Common Organizational Threats and Opportunities Threats Opportunities -Legal -Productivity, cost -Financial -Employee relations -Reputational -Reputation, brand -Competitive -License to operate, community appeal -Operational -Sales, new markets, customer appeal -Innovation, new products and services illiam lackburn onsulting, Ltd. © 2010 William Blackburn Consulting, Ltd. WRB@WBlackburn. Consulting. com www. WBlackburn. Consulting. com

Sustainability Trends: Conditions Responses § Growth in Global Business Competition § Speed of Communications/ Digital Divide § Widening Prosperity Gap (Health, Income, Services) § Population Growth § Serious Disease § Mental Health Problems § Increased Immigration; Lower Fertility in Industrialized Nations § Hunger and Malnutrition § Child and Forced Labor § Education Needs for the Disenfranchised § Urbanization § Over-consumption of Resources § Obesity; Poor Food Nutrition § Fossil Fuel Depletion § Climate Change § Deforestation § Threats to Biodiversity § Fresh Water Depletion/Water Contamination § Wetlands Destruction § Fish Depletion § Coral Reef Destruction § Spread of Hazardous Pollutants § Declining Soil Quality § Ozone Depletion § Declining Corporate Credibility § Opposition to Globalization § Extended Producer Responsibility § Green Products § Green Marketing/Labeling § Green Product Certification § Rise in Socially Responsible Investing § Investor Concerns about Corporate Governance § Increased Demands for Transparency/ Public Reporting § Growing Power of NGOs/CSOs § Increasing Global Terrorism

Issues Addressed by the 2015 UN Millennium Development Goals q Extreme poverty and hunger q Universal primary education q Gender equality q Child mortality q Maternal mortality and health q HIV/AIDS, malaria and other diseases q Environmental sustainability q Global partnerships to help developing nations illiam lackburn onsulting, Ltd. © 2010 William Blackburn Consulting, Ltd. WRB@WBlackburn. Consulting. com www. WBlackburn. Consulting. com

How are organizations responding to these trends? ? illiam lackburn onsulting, Ltd. © 2010 William Blackburn Consulting, Ltd. WRB@WBlackburn. Consulting. com www. WBlackburn. Consulting. com

Sustainability Trends Drive Response of Organizations Trend § Climate Change § Fossil Fuel Depletion Over Consumption of Resources Changing Population Profile illiam lackburn onsulting, Ltd. Response § Energy Conservation § Carbon Footprinting § Recycled Content § Dematerialization Diversity Programs © 2010 William Blackburn Consulting, Ltd. WRB@WBlackburn. Consulting. com www. WBlackburn. Consulting. com

The Drivers The Efficient Enablers A champion/leader with mgmt support Organizational structure Approach for selling the organization on sustainability Deployment and integration Accountability mechanisms The Pathway The Evaluators Vision and policy Indicators and goals Operating system standards Measuring and reporting progress Strategic planning for aligned priorities Stakeholder engagement and feedback © 2007 William Blackburn Consulting, Ltd.

Number of Companies 11 0 7 Greenhouse Gas Red. 3 5 4 1 No. of Companies with Goals on Subject Per Conf Bd. Study Safety 4 Energy Reduction 4 Water Use 4 1 0 4 1 (total=11) Waste Red. 3 1 Product Design/ Rev. 3 1 Philanthropy 3 1 Mgmt. Systems 2 Fleet Safety 2 1 Diversity 2 1 Renewable/ Clean Energy 0 3 0 No. with Metric Goals Pkg. Reduction 3 0 Source: W. Blackburn, Frameworks for Integrating Citizenship and Sustainability…, Report 1446, (2009), available at www. Conference-Board. org Supplier Rev. Air Pollution Red. 2 Waste Recycling 1 1 Process/Fac. Design Rev. 1 1 Wastewater Red. No. with Non-metric Objectives Goal Subject 2

Approach to Sustainability at Universities q Administration (planning and leadership) q Campus operations q Curriculum q Research; policy development q Student activities q Community outreach illiam lackburn onsulting, Ltd. © 2010 William Blackburn Consulting, Ltd. WRB@WBlackburn. Consulting. com www. WBlackburn. Consulting. com

Sustainability at Universities —Typical Social and Economic Issues q. Social § § § § Diversity, nondiscrimination Student substance abuse, mental & physical health Volunteerism Cafeteria nutrition Crime rate, safety Service learning, sustainability in curriculum Quality of education (ratings, etc. ); graduation rates q. Economic § Financial health of institution § Costs of attendance; hrs at min wage for students to pay costs § Salaries vs. minimum wage and vs. median household income for community § Procurements from local suppliers § Charitable donations illiam lackburn onsulting, Ltd. © 2010 William Blackburn Consulting, Ltd. WRB@WBlackburn. Consulting. com www. WBlackburn. Consulting. com

Sustainability and Environmental Rating Schemes for Universities q Sustainability (econ, env, soc. ) § STARS (Sustainability Tracking, Assessment and Rating System) by Association for the Advancement of Sustainability in Higher Education (AASHE), http: //www. aashe. org/stars/index. php § Beyond Grey Pinstripes ratings of business schools by World Resources Institute (WRI), http: //www. beyondgreypinstripes. org/rankings/topten. cfm § Business as Unusual student rankings of graduate business schools by Net Impact, http: //netimpact. org/displaycommon. cfm? an=1&subarticlenbr=2294 q Environmental § The College Sustainability Report Card, http: //www. greenreportcard. org § The Princeton Review’s Green Rating, http: //www. princetonreview. com/green. aspx illiam lackburn onsulting, Ltd. © 2010 William Blackburn Consulting, Ltd. WRB@WBlackburn. Consulting. com www. WBlackburn. Consulting. com

7 Recommendations for Universities 1. Top Support: Obtain support from top university officials. 2. Team: Create multifunctional sustainability team with student, faculty, administrative and operations staff and alumni input. 3. Policy & Goals: Build from existing commitments/statements to develop and implement a true sustainability policy (economic, social, environmental); identify priorities and supporting goals and initiatives. 4. Evaluation: Do STARS analysis; use U of NC (Chapel Hill), UBC and other highly-ranked schools as benchmarks for progress. 5. Report: Publish meaningful, transparent, annual sustainability report; 6. Engage Stakeholders: Use report to engage internal and external stakeholders on the university’s sustainability issues and initiatives. Educate the public and community on the sustainability concept. 7. Publicize Efforts: Publicize efforts with media and rating organizations. illiam lackburn onsulting, Ltd. © 2010 William Blackburn Consulting, Ltd. WRB@WBlackburn. Consulting. com www. WBlackburn. Consulting. com

The Sustainability Handbook— The Complete Management Guide to Achieving Social, Economic and Environmental Responsibility (See www. WBlackburn. Consulting. com ) illiam lackburn onsulting, Ltd. © 2010 William Blackburn Consulting, Ltd. WRB@WBlackburn. Consulting. com www. WBlackburn. Consulting. com

World’s Population (in Billions) 10 9 8 7 6 5 4 3 2 1 0 illiam lackburn onsulting, Ltd. 1930 1999 2050 © 2010 William Blackburn Consulting, Ltd. WRB@WBlackburn. Consulting. com www. WBlackburn. Consulting. com

US Consumption and Waste!! § 5% of the population § 25 -30% of the resources wastes and §Need 5 -6 worlds at current production if everyone consumed at US rates! Source: Worldwatch Institute, 2003, 2004; US Geological Survey, 1998 illiam lackburn onsulting, Ltd. © 2010 William Blackburn Consulting, Ltd. WRB@WBlackburn. Consulting. com www. WBlackburn. Consulting. com

Corporate Partnerships with NGOs and Government* q Healthcare q Water, climate change q Employee volunteerism) q Education on relevant skills q EPA voluntary programs q Customer-oriented partnerships q Supplier-oriented partnerships *Source: 2007 Conference Board study of 11 major corporations illiam lackburn onsulting, Ltd. © 2010 William Blackburn Consulting, Ltd. WRB@WBlackburn. Consulting. com www. WBlackburn. Consulting. com

Corporate Supply Chain Programs* q Risk-based programs q Approach 1. Requirements or guidelines document (supplier codes) 2. Evaluation process • Questionnaires; self assessments • Expert site evaluations 3. Communications and networking forums and CSR awards 4. Downstream collaboration (e. g. , Aveda, Coca-Cola) *Source: 2007 Conference Board study of 11 major corporations illiam lackburn onsulting, Ltd. © 2010 William Blackburn Consulting, Ltd. WRB@WBlackburn. Consulting. com www. WBlackburn. Consulting. com