The Busine Cae for ustainability Barrie Business Sustainability

The Busine$$ Ca$e for $ustainability Barrie Business Sustainability April 7, 2011 Bob Willard bobwillard@sympatico. ca www. sustainabilityadvantage. com

The “Sustainability Imperative” Megatrend: “A fundamental shift in the competitive landscape that creates inescapable threats and game-changing opportunities. . . profoundly affects companies’ competitiveness and even their survival. ” 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 A. Lubin and Daniel C. Esty, “The Sustainability Imperative, ” HBR May 2010

Significant CEO Mindset Shift CEOs Agree /Strongly Agree that sustainability should be …. 2010 Increase Over 2007 … fully embedded into company strategy and operations … discussed and acted on by boards … fully embedded into subsidiaries’ strategies and operations … embedded throughout the global supply chain … the basis for industry collaborations and multi-stakeholder partnerships … incorporated into discussions with financial analysts Survey of 766 worldwide CEOs, including 50 in-depth interviews UN Global Compact and Accenture study, “A New Era of Sustainability, ” June 2010

Stakeholders Driving Sustainability Stakeholders who CEOs believe will have the greatest impact on the way they manage societal expectations Consumers Employees Governments Communities Regulators Media Investment Community Suppliers NGOs Boards Organized Labor Other Survey of 766 worldwide CEOs, including 50 in-depth interviews UN Global Compact and Accenture study, “A New Era of Sustainability, ” June 2010

CEOs: Sustainability Drivers Top 3 drivers of CEOs’ action on sustainability issues Brand, trust, and reputation Potential for revenue / growth / cost reduction Personal motivation Consumer / customer demand Employee engagement and recruitment Impact of development gaps on business Governmental / regulatory environment Pressure from investors / shareholders Survey of 766 worldwide CEOs, including 50 in-depth interviews UN Global Compact and Accenture study, “A New Era of Sustainability, ” June 2010

Corps Are Investing in Sustainability • 59% of companies in all industry sectors increased their investments in sustainability in 2010, versus 25% in 2009. • 69% expect their organization to step up its investment in and management of sustainability in 2011. MIT Sloan and the Boston Consulting Group winter 2011 research report, “Sustainability: The ‘Embracers’ Seize Advantage, ” Feb. 2011

Definitions of Sustainability Sustainable Development (SD) Meeting the needs of the present generation without compromising the ability of future generations to meet their own needs -- Brundtland Commission, 1987 – Sustainability The possibility that human and other forms of life on earth will flourish forever -- John Ehrenfeld, Professor Emeritus. MIT – Sustainable Development (SD) Enough - for all - forever -- African Delegate to Johannesburg (Rio+10) --

The 4 DON’Ts of Sustainable Behavior Do not contribute to the…. . . buildup of substances extracted from the earth (e. g. heavy metals, fossil fuels, their life-cycle polluting byproducts) . . . buildup of chemicals produced by society (e. g. 70, 000+ chemicals, dioxins, PCBs, their life cycle byproducts) . . . degradation of nature and its natural processes (e. g. over-harvesting, species extinction, peak soil, water security) . . . conditions that undermine people’s capacity to meet their basic human needs and well-being (e. g. unsafe working conditions, chasm between the wealthy and the poor) http: //www. naturalstep. org/the-system-conditions; Darcy Hitchcock, “Sustainability Buzzwords, ” ISSP Insight, October 2009

Core Concepts of Sustainability Futures Thinking Intergenerational responsibility (Eco-)Systems Thinking Carrying capacity of the planet to absorb waste and support life Social Justice Equity, Dignity, Basic services, Human rights, Stakeholder voices ****************** Economic, Environmental, Social/Cultural responsibilities

Sustainability 3 -Legged Stool Sustainability Economic Leg Good Jobs Fair wages Security Infrastructure Fair Trade Environmental Leg 0 Pollution & Waste Renewable Energy Conservation Restoration Social Leg Working conditions Health services Education services Community & Culture Social justice Quality of Life / Genuine Wealth / Genuine Progress

Corporate Sustainability 3 -Legged Stool Sustainability = Sustainable Development (SD) = Environmental, Social, Governance (ESG) = Corporate Social Responsibility (CSR) = Corporate Responsibility (CR) = Green = Triple Bottom Line (TBL) = 3 Es = 3 Ps Economy - Profits Growth, Jobs, Taxes Products Services Environment - Planet Eco-efficiencies Eco-effectiveness Equity - People Employees Community / Culture World

Smart Business 3 -Legged Stool Asset Management Natural Capital Economic / Financial Capital Built / Manufactured Capital Human Capital Social Capital Sustainable Value Creation

Municipal “ 3 -Legged Stool” Sustainable Community (28 Indicators) Economic Security Employment participation Unemployment rate Household shelter spending % Low income people Household debt Infrastructure & Built Environment Density Green buildings Green transportation use Local food production Renewable energy Clean tech business opportunity Ecological Integrity Water quality & consumption Green space Air quality Waste diversion, residential GHG emission reduction Urban biodiversity monitoring Social Well-being Life satisfaction Crime rate Health and access to care Cultural Events Homelessness Governance & Empowerment Education Voter turnout City council diversity Household garbage limit GHG reduction target Corporate Knights 5 th Annual Sustainable Cities Rankings, Winter 2011

Ranking of Sustainable Canadian Cities Ecological Economic Governance & Infrastructure Social Integrity Security Empowerment & Built Envir’t Well-Being 6. 93 7. 61 6. 07 Corporate Knights 4 th Annual Sustainable Cities Rankings, Issue 30, Winter 2010

Smart Community 3 -Legged Stool Resilient Community Economic / Financial Capital Physical / Built Capital Natural Capital Human Capital Social Capital Passion Capital Cultural Capital Political Capital Community Value Creation Cheryl Jacobs, “Measuring Success in Communities, ” 2007 http: //agbiopubs. sdstate. edu/articles/Ex. Ex 16005. pdf

5 -Stage Sustainability Journey 5. Purpose/Passion Values-driven founder / CEO 4. Integrated Strategy Enhanced organizational value 3. Beyond Compliance Save on eco-efficiencies Avoid PR crisis Avoid threat of new regulations 2. Compliance Regulatory enforcement 1. Pre-Compliance

The 3 R’s of Justifying Sustainability RISKS + RESPONSIBILITIES + REWARDS BUSINESS CASE Based on Alan At. Kisson, The IRIS Agreement, p. 127

Risks to Financial and Natural Capitals: Big-5 Sustainability Storm Fronts Waste, Toxicity, and Health Species Extinction and Overharvesting Poverty and Social Injustice Food and Water Crises

The 3 R’s of Justifying Sustainability RISKS + RESPONSIBILITIES + REWARDS BUSINESS CASE Based on Alan At. Kisson, The IRIS Agreement, p. 127

Risks to Financial and Social Capitals: Stakeholders’ Rising Expectations Species Extinction and Overharvesting Waste, Toxicity, and Health Poverty and Social Injustice (NGOs) Media The Public Customers Employees Competitors Food and Water Crises e s n e c li te l cia pera o S o to Economists Investors Risks to Reputation re Banks Corporate Responsibilities Governments Insurers Markets (Scientists)

The 3 R’s of Justifying Sustainability RISKS + RESPONSIBILITIES + REWARDS BUSINESS CASE Based on Alan At. Kisson, The IRIS Agreement, p. 127

One More Goal … or an Enabling Strategy? Profit Innovation Share price Speed to market Growth New markets Revenue Talent wars Customer care Expense savings Competition R V E EL E C AN Market share Productivity Motivation Brand image Managing risks Leadership Compliance Governance Supply security

The 3 R’s of Justifying Sustainability RISKS + RESPONSIBILITIES + SME Companies: At least 66% more profit REWARDS BUSINESS CASE Large Companies: At least 38% more profit

Potential SME Profit Increase • Reduced recruiting costs -1% • Reduced attrition costs -2% • Increased employee productivity +6% l • Eco-efficiencies: savings in energy/carbon, a -10% u s U us water, materials, waste handling c fo • Increased revenue / market share +5% • Lower insurance & borrowing costs -5% … yielding a profit increase of +66% REPUTATION

Potential Improvements - Municipal • Reduced recruiting costs • Reduced attrition costs • Increased employee productivity Same as for a business • Eco-efficiencies: savings in energy, water, materials, waste handling • Reduced infrastructure costs / more efficient use of tax revenues • Increased public trust & confidence / Increased leverage of social capital / Magnet for companies and citizens REPUTATION l a nti te o p H e g u

3 M Eco-Efficiency Savings Pollution Prevention Pays (3 P) Up-front waste prevention: Product reformulation, process modification, equipment redesign, and recycling and reuse “Fourth P”—People. Employee suggestion program generated $1. 4 B in first-year savings through 8, 100 voluntary projects over 35 years (1975 -2010) http: //solutions. 3 m. com/wps/portal/3 M/en_US/3 M-Sustainability/Global/Environment/3 P/

Employees Are Key to Eco-Efficiencies Community Centre Conservation Challenge (CCCC) 8 Community Centres; June – August 2009 Annual verified energy savings of $90, 000 • • • “Low cost / No cost” employee engagement approach Classy “no pizza boxes” luncheon to launch the challenge Trained maintenance staff and programs facilitators Engaged staff in inventory of plugs and savings ideas Presented winning team leaders with trophies at Council Classy thank-you closing luncheon for all participants Results included in City’s Leisure Guide Ernie Davies and Suzanne Elston, Oshawa Environment and Energy Mgmt Services Presentation to the Durham Region Roundtable on Climate Change, June 2010

The 3 R’s of Justifying Sustainability Climate Change & Energy Crises RISKS + RESPONSIBILITIES (NGOs) (Scientists) Customers Economists Governments + REWARDS BUSINESS CASE Employees Investors Insurers At least 38% to 66% more Profit

The New Economy • Low-carbon economy vs. fossil fuel-based economy • Local supply chains vs. global supply chains • Services vs. products • “Dematerialization” vs. physical goods, processes, or travel using “virtual” alternatives like videoconferencing or online shopping” • Responsible consumption / thrift vs. over-consumption • Low / No-growth model vs. “grow or die” model • New ownership models: employees, customers, co-ops, social venture funds, government funding • New company purposes: “Social enterprises, ” “B Corps, ” “Hybrid organizations, ” “Flexible purpose corporations” (California Bill SB 201, Corporate Flexibility Act, Feb. 2011)

In Summary … Sustainability is smart business Important stakeholders’ expectations are rising New market forces & risks are in play Relevant to existing organizational priorities Can protect & enhance organizational values Many willing, helpful partners Opportunity for leadership … by example

The Busine$$ Ca$e for $ustainability Barrie Business Sustainability April 7, 2011 Bob Willard bobwillard@sympatico. ca www. sustainabilityadvantage. com