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Innovating for Sustainability i nside-out challenges October 18, 2013 Steven Olson, Ph.D . Director, Center for Ethics

Innovating for Sustainability i nside-out challenges October 18, 2013 Steven Olson, Ph.D . Director, Center for Ethics & Corporate Responsibility Academic Director, Innovation Programs Co-Facilitator, Institute for Georgia Environmental Leadership. Some reflections to stimulate discussion.

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Innovating for Sustainability i nside-out challenges October 18, 2013 Steven Olson, Ph.D . Director, Center for Ethics

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  1. Innovating for Sustainability inside-out challenges October 18, 2013 Steven Olson, Ph.D. Director, Center for Ethics & Corporate Responsibility Academic Director, Innovation Programs Co-Facilitator, Institute for Georgia Environmental Leadership

  2. Some reflections to stimulate discussion • What has not changed… • What has changed… • The impact on what has changed for innovating toward more environmentally sustainable products, services & solutions

  3. No change in CSR as a Strategic Necessity 3

  4. Focus is still on value creating capabilitiesPorter’s Arrow Adapted from Porter, 1985.

  5. Working through the inside-out links toward advantage 5

  6. Working the outside-in linkages: Advantage? 6

  7. Tomorrow Internal Focus External Focus Today No change in sustainability portfolio Clean Technology Is there potential to realize major improvements through new technology? Sustainable Growth Vision Does our corporate vision direct us toward the solution of social & environmental problems? Pollution Prevention What are our most significant waste and emissions from current operations? Product Stewardship What are the implications for product design if we assume responsibility for a product’s entire lifecycle? Source: Stuart Hart

  8. US FINDINGS

  9. Edelman's 13th Annual survey, largest global exploration of trust Indicates Global Data Indicates US Data INFORMED PUBLICS ONLINE SURVEY IN 26 COUNTRIES • 31,000+ respondents • 5 years in 20+ markets • 8 years in 10+ markets • 500 respondents in U.S. and China & 200 in other countries • Ages 25-64 • College-educated • In top 25% of household income per age group in each country • Report significant media consumption and engagement in business news and public policy • 13 years of data GENERAL POPULATION • 1000 respondents per country surveyed • Ages 18+ • 2 years of data MARKET COMPARISONS Developed: US, UK, France, Germany and Japan Emerged: Brazil, Mexico, Russia, India and China

  10. After years of high distrust, shifts back toward neutral in 2013 2012 2011 2013 Big Changes from 2008 Germany +19 China +18 Canada +14 India +11 Trusters Big Changes from 2012 Germany +16 France +14 UK +12 US +10 Neutral Distrusters Composite score is an average of a country’s trust in all four institutions. Informed Publics ages 25-64 in 20-country global total

  11. LOWER TRUST among general population than informed publics 2013 2013 GENERAL PUBLIC INFORMED PUBLIC General Population is 9 points lower than Informed Publics Trusters Largest Differences between Gen Pop & Informed Publics Poland, US, Sweden: - 14 points Singapore, Ireland, Hong Kong, France: - 13 points Neutral Distrusters Composite score is an average of a country’s trust in all four institutions. General population and Informed Publics ages 25-64 in 26 country global total and across 26 countries

  12. Leadership Trust Gap Gap in Trust in Institution vs. Trust in Leadership -32 -28 -35 -47 -34 -35 -35 -28 -29 -32 -25 -27 Q11 -14. Below is a list of institutions. For each one, please indicate how much you trust that institution to do what is right using a 9-point scale where one means that you 'do not trust them at all' and nine means that you 'trust them a great deal'. (Top 4 Box, Trust); Q144A-147A. [“To Tell the Truth Regardless of how Complex or unpopular it is”] How much do you trust business leaders to do the following? Q144B-147B. [“To Tell the Truth Regardless of how Complex or unpopular it is”] How much do you trust government leaders to do the following? (Top Box, Trust A great Deal) General Population

  13. Crisis in leadership – trust in ethics and morality very low Global Trust business and government leaders to do the following: Business Leaders Government Leaders Q144A-147A. [SPLIT SAMPLE] How much do you trust business leaders to do the following? (Top Box- Trust A great Deal) General Population across 26-country global total

  14. 16 attributes to building trust ENGAGEMENT LISTENS TO CUSTOMER NEEDS AND FEEDBACK INTEGRITY TREATS EMPLOYEES WELL PLACES CUSTOMERS AHEAD OF PROFITS Edelman Trust Barometer research reveals 16 SPECIFIC ATTRIBUTES which build trust. These can be grouped into FIVE PERFORMANCE CLUSTERS listed here in rank order of importance. COMMUNICATES FREQUENTLY AND HONESTLY ON THE STATE OF ITS BUSINESS HAS ETHICAL BUSINESS PRACTICES PRODUCTS & SERVICES TAKES RESPONSIBLE ACTIONS TO ADDRESS AN ISSUE OR CRISIS HAS TRANSPARENT AND OPEN BUSINESS PRACTICES OFFERS HIGH QUALITY PRODUCTS OR SERVICES PURPOSE IS AN INNOVATOR OF NEW PRODUCTS, SERVICES OR IDEAS WORKS TO PROTECT AND IMPROVE THE ENVIRONMENT ADDRESSES SOCIETY’S NEEDS IN ITS EVERYDAY BUSINESS CREATES PROGRAMS THAT POSITIVELY IMPACT THE LOCAL COMMUNITY PARTNERS WITH NGOs, GOVERNMENT AND 3RD PARTIES TO ADDRESS SOCIETAL NEEDS OPERATIONS HAS HIGHLY-REGARDED AND WIDELY ADMIRED TOP LEADERSHIP RANKS ON A GLOBAL LIST OF TOP COMPANIES DELIVERS CONSISTENT FINANCIAL RETURNS TO INVESTORS

  15. How we have evolved…now the attributes can be grouped into 5 distinct clusters INTEGRITY (58%) Edelman Trust Barometer’s 2008 TRUST DRIVERS* Edelman Trust Barometer’s 2013 TRUST PERFORMANCE CLUSTERS PRODUCTS & SERVICES (54%) PURPOSE (47%) ENGAGEMENT (59%) Reputation as a place to work (81%) Financial performance (76%) Respected CEO or leader(71%) OPERATIONS (39%) OPERATIONS (76%) *Data used includes Informed Publics ages 35-64 only in 18-country global total

  16. TRUST BUILDING ATTRIBUTES – LARGE GAP IN Expectation VS. PERFORMANCE Business importance vs. COMPANY performance – us Gap Importance Performance Q80-Q96. [TRACKING] How important is each of the following actions to building your TRUST in a company? Use a nine-point scale where one means that action is “not at all important to building your trust” and nine means it is “extremely important to building your trust” in a company. (Top 2 Box, Very/ Extremely Important) General Population in US (excludes ‘Don’t Know’ responses Q114-Q129.)Please rate [INSERT COMPANY]on how well you think they are performing on each of the following attributes. Use a nine-point scale where one means they are performing “extremely poorly” and nine means they are performing “extremely well”. (Top 2 Box, Performing Very/ Extremely Well) General Population in US

  17. TRUST IMPACT GRID PERFORMING UNDER-PERFORMING ON HIGH PRIORITIES TRUST-BUILDING IMPACT QUADRANT ENGAGEMENT ENGAGEMENT PRODUCTS & SERVICES INTEGRITY INTEGRITY PRODUCTS & SERVICES STATED IMPORTANCE PURPOSE PURPOSE OPERATIONS OPERATIONS OVER-PERFORMING ON LOWER PRIORITIES LOW PERFORMANCE ON LOWER EXPECTATIONS PERCEIVED PERFORMANCE

  18. Innovating for Sustainability: How much? How fast? The Innovation Genome How Much? How Fast? www.jeffdegraff.com 20

  19. Doesn’t innovation create paradoxes, tensions, conflict? Services Solutions Incremental vs. Radical Build vs. buy Push vs. pull Strategy first vs. competency first Capital committee vs. VC funds Portfolio vs. opportunity Department vs. company Aligned vs. diversified Tension = Health www.jeffdegraff.com

  20. inevitable tensions and risks we face innovating toward sustainability A lot of innovation and risk. SUSTAINABLE VISIONholds this together but… chaos or orphans? The Innovation Genome Slow innovation with people risks. VALUES & PURPOSE hold this together but… lose opportunities? Fast innovation with little risk. SPEED & WINS hold this together but… manipulative&unsustainable? A little innovation with little risk. PROCESS holds this together but… bureaucracy?

  21. One size doesn’t fit all • Innovation requires connecting the dots & crossing boundaries. • Diversity is essential to produce creative tension, but within the context of a larger system • How are you diversifying the innovation gene pool ?

  22. Forget the 80/20 Rule and Follow the 20/80 Rule (the DeGraffrule) It’s Easier to Change 20% of the Firm 80% Than 80% of the Firm 20% • Outstanding • Seeks to grow • Risk of change low • Reward of change high • 20/80 rule • Crisis • Seeks to survive • Risk of change low • Reward of change high • 20/80 rule • Normal • Seeks to maintain equilibrium • Risk of change high • Reward of change low • 80/20 rule The more radical the innovation, the more it needs to start on the fringes www.jeffdegraff.com 24

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