Making Sustainability Stick ISSP Conference 2013 Kevin Wilhelm May 9, 2013

1. Making Sustainability Stick The Blueprint for Successful Implementation Kevin Wilhelm Making Sustainability Stick ISSP Conference 2013 Kevin Wilhelm May 9, 2013

2. What I’m going to talk about today • The 11 Steps for Successful Implementation • Common barriers your run into • How to overcome them • Illustrative and (sometimes funny, sometimes sad) case studies

3. Typical Barriers that need to be overcome • Overworked.Too much on plates already and another thing to do • No perceived senior buy-in • Boss doesn’t appreciate additional time away from my “job” • People don’t know what to do. Need training to think differently • No budget. Or issues between capital and operational • People don’t feel empowered • Apathy. Loss of momentumfor attending events, people stop reading communications, taking action • Middle management, Culture, Other

4. Phase I Phase II Phase III Phase IV Phase V Division/ Function Business System Team/ Department Company Individual Who: Growth $ Environmental & Social Benefits Environmental & Social Negatives Type of Change: Systemic Random Incremental Breakthrough Hero (martyr) Personal Influence Metrics Process Eco-Efficiency Structural Collaborative Game changing Radical Collaboration Systems view “Team Sport” Dominant Characteristics: Financial Drivers: Top Line Value Creation CostsMore Investment/ROI May 2, 2013

5. Phase I Phase II Phase III Phase IV Phase V Division/ Function Business System Team/ Department Company Individual Who: Random Incremental Breakthrough Systemic Type of Change: Environmental & Social Benefits Growth $ Environmental & Social Negatives Hero (martyr) Personal Influence Metrics Process Eco-Efficiency Structural Collaborative Game changing Radical Collaboration Systems view “Team Sport” Dominant Characteristics: Financial Drivers: Costs more Investments/ROI Top Line Value creation May 2, 2013

6. 1. Define Sustainability What does it mean to YOUR company? Why are we doing this? What do we stand for? What are we trying to accomplish? What is your role?

7. Attract talent, improve retention Save on fuel and delivery times Company Products are organic and local Respond to investor questions Passing to next generation Staying in business Saving money & the environment at the same time Human Resources Investor Relations Fleet/Logistics

8. 2. Business Case: External • Market Forces • Investors • Customers • Supply-Chain • Debt/Lenders • Insurance • Energy Prices • Commodity Prices • Societal Pressure • Extreme Weather • Employees • Industry Leadership • Political Instability Public Policy • GHG/Environment • Energy • Green Building • Waste/Recycling • Water • Human Rights/Trafficking • Toxins • FTC Guidelines • Conflict Minerals • External Reporting • IIRC, SASB • ISO Standards

9. 2. Business Case: Internal • Bottom Line (CFOs) • Compliance • Risk mitigation • Cost savings • Top Line (CEOs) • Opportunities • Revenue enhancement • New products/services • Focus on the top line • Competitive advantage and differentiation • Cost leadership • Differentiation • Market segmentation (focus) • Cautionary Tale • Client asked by Wal-Mart to evaluate LCA of product • Did not view as priority and did not provide data in time • Lost contract from a competitor who jumped to respond

10. 3. Materiality and Stakeholder Engagement “If you want to go fast, go alone. If you want to go far, go together.” How do they define sustainability? What’s important to them (socially, environmentally, financially) and what is not? What do they care about in regards to your business? • Primary groups • Customers • Employees • Suppliers • Investors • Community partners & • donor recipients • Secondary groups • Media • Government • NGOs • Industry associations

11. The “Perfect Storm” of Risks Pollution & Health Food & Water Crises Climate Change & Energy Crisis Poverty & Social Injustice Overharvesting & Species Extinction Tangibles / Financials Governments Customers Employees Intangibles /Reputation /Goodwill Customers Regulators Governments Communities Markets Communities Regulators Competitors Employees (Scientists) Public Investors (NGOs)

12. What’s happening with valuations 1978 1981 1998 2010 25% 95% 83% Tangibles / Financials 29% 5% Intangibles/Reputation/Goodwill 17% 71% 75%

13. 4. Baseline and assessment “You can’t know where you are headed unless you know where you are!” A sustainability baseline will help you: • Know where you are having the biggest impacts • Identify your “hotspots” • Understand where your greatest risks and opportunities exist • Determine low-hanging fruit so you can take action • Identify your barriers to implementation

14. Current State Desired State GAP

15. Case Study: Financial Institution • Prior to calculating emissions assumed paper was the largest source of emissions • GHG inventory revealed that business travel was the largest source

16. 5. Set goals and vision • 1. Set your North Star • Patagonia “Build the best product, cause no unnecessary harm, and use business to inspire and implement solutions to the environmental crisis.” FUTURE 2. Set the Right Goals to get you there (corporate, departmental & individual) PRESENT • 3. Integrate and communicate progress - employees need to know when you get there 4. Align KPI, Sustainability Goals with Corp Goals 5. Assign Responsibility and Accountability

17. 6. Management Support People need to see, hear, and feel Leadership support • Showing up and making yourself visible • Providing budget • Providing time and resources • Walking the talk and reinforce your message • Providing “air cover” so people can prove things out

18. 7. Change Management • Understanding change • Understand your people • Understand your culture • Breaking down silos and coordinating across departments • Engage the Naysayers and Skeptics • What’s going to go wrong with this plan? • “What has to happen for this to work?” • At every stage of work flow – “What could go wrong in this step?”

19. Engage the Skeptics

20. Phase I Phase II Phase III Phase IV Phase V Division/ Function Business System Team/ Department Company Individual Who: Random Incremental Breakthrough Systemic Type of Change: Environmental & Social Benefits Growth $ Environmental & Social Negatives Hero (martyr) Personal Influence Metrics Process Eco-Efficiency Structural Collaborative Game changing Radical Collaboration Systems view “Team Sport” Dominant Characteristics: Financial Drivers: Costs more Investments/ROI Top Line Value creation May 2, 2013

21. 8. Employee Engagement Gallop Study showed that actively engaging employees can… • 16% in profitability • 18% in productivity • 49% in turnover for low-turnover companies (those with 40% or lower annualized turnover) • 12% in customer loyalty • 37% in absenteeism • 60% in quality (defects)

22. “….engaging employees in sustainability initiatives can improve a business’s bottom line and help it reach its sustainability goals.” National Environmental Education Foundation • Training and opportunity • Tie it to the job, day to day • Make it personal: engage the head, heart & hands • Intrapreneuring “The (sustainability) campaign brought people together like we’ve never been able to before or since” Ken Hopper of Scandic Hotels

23. 9. Implementation • Prioritize – focus on what matters • Incorporate into decision making and policies • Systems to support sustainability: Kaizen, LEAN • Add purchasing/supplier requirements around sustainability • Align with other corporate efforts –including philanthropy, investments, marketing and communications • Protection when sponsor leaves

24. Things you can do in your job

25. 10. Institutionalize • Job descriptions and on-boarding • Potential employees, existing employees, board members • Align benefits, evaluation and compensation • Results Only Work Environment • Rewards and recognition • Gamification • Measure progress and keep the competition real with data • Kilowatt crackdown, Talking Trash, etc

26. 11. Communications • External • What report is right for you? • Use of social media • Transparency builds trust, creates value and • reduces risk Internal • Continuous communication & reinforcement of what & why • Share the good and the bad • Sharing best practices

27. 11 keys for successful sustainability implementation • Define Sustainability • Make the Business Case • Stakeholder Engagement – What’s important to them • Baseline - Measure what matters, metrics and KPIs • Aligned Vision and Goals • Mgmt Support & Resource Commitment (Time, Money, People) • Understand your Org & People – How best to “do change” • Employee Engagement: Train, empower, intrapreneur • Implement: Create policies and procedures • Institutionalize: Job descriptions, evaluations, compensation • Communicate Most importantly, HAVE FUN!

28. Making Sustainability Stick The Blueprint for Successful Implementation Kevin Wilhelm Come Ask me how we can help you ! Kevin Wilhelm, Sustainable Business Consulting www.sustainablebizconsulting.com kevin@sustainablebizconsulting.com

29. Example Questions • How important is it to you that we take into consideration and actively address environmental/social initiatives? • What specific sustainability issues are most important to you? (environmental, social, economical) • Which specific initiatives would you like to see us participating in or putting more resources towards within the next 1-3 years? • What are we doing that you like? • What should we be doing that we aren’t? • Are there any aspects of your relationship with us that could be improved through better environmental or social practices?

30. Before starting… • Get the right people in the room • Explain why the baseline is important • Ensure people understand the outputs, what you are trying to do with the final result • Determine your boundary, what is in and what is outside of “your company” • Delegate tasks (assign responsibility) and continuously check in on data gathering • Let them know this won’t be a one-time exercise, so they start building processes for gathering this data the first time they look for it. • Make sure you get sign off from the key decision makers so data isn’t delayed

31. Keys to setting your sustainability goals • Clarity: Clear, concise, goals with one unified vision that people understand • Strategic Intent: Determine focus areas, make a commitment, develop metrics for success • Alignment: Goals aligned across all departments - internally, collaboratively, and diagonally • SMART: Need to be Specific, Measurable, Actionable, Results Oriented & Time Specific. • Listening: Engage skeptics, listen to issues and anticipate obstacles • Accountability: Who’s responsible for achieving the goal • Reinforcement : They need to be constantly communicated and reinforced

32. 9. Implementation • Prioritize – focus on what matters • Incorporate into decision making and policies • Systems to support sustainability • Kaizen, Toyota LEAN, Microsoft Personal Carbon Allowance • Align Sustainability with other corporate efforts –including philanthropy& investments

33. Things you can do in your job

34. SWOT and GAP analysis Adapted from the WRI’s Sustainability Swat (sSWOT) tool

35. 2. Business Case • Demonstrate the business value it will bring to your company over the short and long term External Market Forces Public Policy and Regulation Internal Top line Competitive Advantage

36. What to include For the baseline to be successful, you have to include those areas that: • Have the biggest social and environmental impact • Are most material to your company • You have the most control over – either operationally or financially • Customers and stakeholders are most likely to ask about • Could prevent your company from operating if something drastic were to occur (market collapse, natural disaster, etc)

37. Employees have different learning Styles