Transcript Sustainability Imperative

THE
GOOD NEWS
ABOUT THE
NEW SU$TAINABILITY
IMPERATIVE
2014 Kaleidoscope Conference
Algonquin College
May 13, 2014
[email protected]
sustainabilityadvantage.com
CORPORATE SUSTAINABILITY
TRIPLE BOTTOM LINE
Planet / Environment
CORPORATE SUSTAINABILITY
GREEN +CSR
Environmental
CORPORATE SUSTAINABILITY
ESG
Environmental
CORPORATE SUSTAINABILITY
ASSET MANAGEMENT
Natural Capital
AC S-E-E FRAMEWORK
http://www3.algonquincollege.com/sustainability/overview-2/our-framework/
THE REAL “REAL WORLD”
NESTED INTERDEPENDENCIES
FIVE-STAGE SUSTAINABILITY JOURNEY
5. PURPOSE & PASSION
4. INTEGRATED STRATEGY
3. Beyond Compliance
2. Compliance
1. Pre-Compliance
“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 Lubin and Daniel Esty, HBR, May-June 2010
“Expect the Unexpected: Building business value in a changing world,” KPMG, 2012
ENABLERS vs. ONE MORE GOAL
Profit
Access to capital
Share price
Talent wars
Brand value
Productivity
Revenue growth
Market share
Expenses
ROI
“SUSTAINABILITY”
Innovation
Quality
Risk management
Supply security
(SUSTAINABILITY) STRATEGIES
SUSTAINABILITY BUSINESS CASE
Income Statement Risks
9%
2. Reduced energy
75%
3. Reduced waste
20%
4. Reduced materials
10%
5. Increased productivity
2%
6. Reduced turnover
25%
7. Reduced revenue and
increased expenses
Revenue
1. Increased revenue
Expenses
Opportunities
+51 to
+81%
PROFIT
-16 to
-36%
SUSTAINABILITY
CAPITAL RESERVE
Company Data Profile
Revenue
Energy expense
Materials and water expense
Total salary / payroll expense
Profit
Average salary
Number of employees
Small
Professional
Services
Large,
Manufacturing
& Distribution
$1,000,000
$500,000,000
$20,000
$10,000,000
$50,000
$150,000,000
$300,000
$150,000,000
$70,000
$35,000,000
$50,000
$40,000
6
3,750
Potential profit increase
51%
81%
Potential profit at risk
-16%
-36%
60-employee manufacturing company
42 projects between 2006-2008
58% reduction in electricity usage
90% reduction in natural gas usage
Reduced annual CO2 emissions by 115 tonnes
Increased profits by 76%.
Invested $46,186 to yield energy savings of $89,152
Average pay-back period of 6.3 months
“Manufacturer finds lighting energy efficiency convenient,” Green Manufacturer, March 1, 2010
GREEN BUILDING BENEFITS: TO WHOM?
• Slower depreciation
• Higher occupancy rate
• Easier financing
• Reduced downtime
• Rapid ROI
• Lower operating costs
• Higher market value
• Lower maintenance costs
• Lower refurbishment costs
• Lower design and
• Corporate image / prestige
• Increased
construction costs
• Compliance with regulations
productivity
• Faster sales
Adapted from Cleland Robertson, Lead Manager, Sustainable Construction & Infrastructure Group,
Sustainable Business Solutions, PwC Chile. Based on World Green Building Council.
GREEN BUILDINGS: PRODUCTIVITY
World Green Building Council, “The Business Case for Green Buildings,” March 2013
Profit could
increase by 51-81%
Bottom Line
Business Case
Profit could
drop by 16-36%
“Expect the Unexpected: Building business value in a changing world,” KPMG, 2012
RISKS TO REVENUE
Potential Revenue Erosion
% Rev. % Probability
at Risk within 5 yrs
Risk from poor reputation on energy and carbon
management
5%
25%
Risk from poor reputation on water management
5%
25%
Risk from poor reputation on materials and waste
management
5%
20%
Risk from poor reputations of suppliers or customers
5%
10%
Risk from poor reputation on eco-system damages
5%
1%
10%
10%
2%
5%
Risk from less competitive prices
Risk from sudden disruptions in the value chain
Revenue at risk
5%
RISK OF ESCALATING EXPENSES
Potential Escalating Expenses
Risk of higher cost of energy
%
% Probability
Potential within 5 yrs
Impact
10%
75%
100%
25%
Risk of higher cost of waste
5%
70%
Risk of higher cost of water and materials
5%
75%
0.60%
75%
Risk of higher employee voluntary turnover
5%
25%
Risk of lower employee productivity
1%
10%
Risk of a price on carbon ($20/T x 300T/$1M Rev.)
Risk of higher cost of capital (Debt = 30% of Rev.)
Potential increase in expenses
11% to 31%
Impact on profit from revenue and expense risks
-16% to -36%
GLOBAL RISKS 2014
• 10-year outlook
• 31 global risks with the potential to
cause significant negative impact across
entire countries and industries
• Five classifications:
• Economic,
• Environmental
• Societal
• Geopolitical
• Technological
• All are interconnected.
World Economic Forum (WEF), “Global Risks 2014,” January 2014.
RISK LIKELIHOODS AND IMPACTS
World Economic Forum (WEF), “Global Risks 2014,” January 2014.
RISK INTERCONNECTIONS
World Economic Forum (WEF), “Global Risks 2014,” January 2014.
OECD RISKS BY 2050
1. 80% increase in world energy demand, with 85% from fossil
fuels; 50% increase in GHGs (685 ppm)
2. Urban air pollution / ground-level ozone is top cause of
mortality, ahead of dirty water and lack of sanitation.
3. Global biodiversity declines by a further 10%, mature forests
shrink by 13%.
4. Global water demand increases by some 55%; competing
demands put water use by farmers at risk; 40% of the global
population live in river basins under severe water stress
OECD, “Environmental Outlook to 2050.”
“A weakening of the pillars of our planetary
infrastructure
—a stable climate, clean air and water, healthy
biodiversity, and abundant resources— is
costing business real money”
If this hotter, scarcer, more transparent, and
unpredictable world is the new normal, then
how must companies act to ensure a prosperous
future for all, including themselves? …
That’s the Big Pivot … and it’s nonnegotiable.”
New companies will be more resilient, robust, and able to thrive in
fast-changing times”
Andrew Winston, The Big Pivot, HBR Press, 2014
7-STEP CHANGE PROCESS
Embed and align changes
Mobilize commitment
Build case(s) for change
Develop strategies Continuously
and
Assess current realities Learn
Adapt
Inspire shared vision(s)
Wake up and decide
THE
GOOD NEWS
ABOUT THE
NEW SU$TAINABILITY
IMPERATIVE
2014 Kaleidoscope Conference
Algonquin College
May 13, 2014
[email protected]
sustainabilityadvantage.com