The Busine $$ Ca $ e for $ustainability

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

2. 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

3. Significant CEO Mindset Shift 2010 Increase Over 2007 CEOs Agree /Strongly Agree that sustainability should be …. … 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

4. 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

5. 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 gapson 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

6. 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

7. 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) --

8. 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

9. Core Concepts of Sustainability Futures ThinkingIntergenerational responsibility (Eco-)Systems ThinkingCarrying capacity of the planetto absorb waste and support life Social JusticeEquity, Dignity, Basic services, Human rights, Stakeholder voices************************************ Economic, Environmental, Social/Culturalresponsibilities

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

11. 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) = 3Es = 3Ps Environment - Planet Eco-efficiencies Eco-effectiveness Economy - Profits Growth, Jobs, Taxes Products Services Equity - People Employees Community / Culture World

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

13. Municipal “3-Legged Stool” Ecological Integrity Water quality & consumptionGreen space Air quality Waste diversion, residentialGHG emission reduction Urban biodiversity monitoring Sustainable Community(28 Indicators) Economic Security Employment participationUnemployment rateHousehold shelter spending% Low income peopleHousehold debt Infrastructure & Built Environment Density Green buildings Green transportation useLocal food productionRenewable energyClean tech business opportunity Social Well-being Life satisfaction Crime rateHealth and access to careCultural Events Homelessness Governance & Empowerment Education Voter turnoutCity council diversity Household garbage limitGHG reduction target Corporate Knights 5th Annual Sustainable Cities Rankings, Winter 2011

14. Ranking of Sustainable Canadian Cities Ecological Integrity Economic Security Governance & Empowerment Infrastructure & Built Envir’t Social Well-Being 6.93 7.61 6.07 Corporate Knights 4th Annual Sustainable Cities Rankings, Issue 30, Winter 2010

15. Smart Community 3-Legged Stool Resilient Community Natural Capital Economic / Financial Capital Physical / Built Capital Human Capital Social Capital Passion Capital Cultural Capital Political Capital Community Value Creation Cheryl Jacobs, “Measuring Success in Communities,” 2007http://agbiopubs.sdstate.edu/articles/ExEx16005.pdf

16. 5-Stage Sustainability Journey 5. Purpose/PassionValues-driven founder / CEO 4. Integrated Strategy Enhanced organizational value 3. Beyond ComplianceSave on eco-efficienciesAvoid PR crisis Avoid threat of new regulations 2. ComplianceRegulatory enforcement 1. Pre-Compliance

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

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

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

20. Risks to Financial and Social Capitals:Stakeholders’ Rising Expectations Species Extinction and Overharvesting Waste, Toxicity, and Health Climate Change and Energy Crises Poverty and Social Injustice Food and Water Crises Media (NGOs) Economists Social license to operate The Public Investors Customers Banks Risks to Reputation re Corporate Responsibilities Markets Employees Governments Insurers (Scientists) Competitors

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

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

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

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

25. Potential Improvements - Municipal • Reduced recruiting costs • Reduced attrition costs • Increased employee productivity • 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 Same as for a business Huge potential REPUTATION

26. 3M Eco-Efficiency Savings Pollution Prevention Pays (3P) Up-front waste prevention: Product reformulation, process modification, equipment redesign, and recycling and reuse“Fourth P”—People. Employee suggestion program generated$1.4B in first-year savings through 8,100 voluntary projects over 35 years (1975-2010) http://solutions.3m.com/wps/portal/3M/en_US/3M-Sustainability/Global/Environment/3P/

27. Employees Are Key to Eco-Efficiencies • Community Centre Conservation Challenge (CCCC)8 Community Centres; June – August 2009Annual 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

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

29. The New Economy • Low-carbon economy vs. fossil fuel-based economy • Local supply chains vs. global supply chains • Servicesvs. 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)

30. 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

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