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Sustainability A Competitive Advantage In Your Career “Every single pressing social and global issue of our time is a business opportunity” (Peter Drucker) Financial Executives International Craig Raben, P.E., LEED AP September 2, 2010 Agenda - An Unsustainable Path - What Is Sustainability - Business Implications - The Sustainable Business - Implications For Financial Executives An Unsustainable Path Growing Concerns - Energy Sources - Food Supply - Inequality - Water Use - Natural Resources - Toxics Causing Symptoms With Synergistic Effects - Climate Change - Habitat - Biodiversity - Public Health - Security - Migration Exacerbated By - Globalization - Population Growth Increasing Public Awareness and Action What Is Sustainability? “The ability to meet today’s global economic, environmental and social needs without compromising the opportunity of future generations to meet theirs.” (UN Brundtland Commission, 1987) Why Its A Business Issue? - 63 Of 100 Largest Economic Entities Are Corporations (Werbach, 2009) - Growing Market Demand - Becoming More Mainstream - Finding Correlation Between Sustainability And Improved Results Majority Yet To Establish A Clear Business Case Sample Business Implications Communications – NGO Pressure – Negative Publicity Finance – – – – Investment Scrutiny Shareholder Proposals Sustainability Reporting Sustainability Indices Marketing And Sales – Customer Expectations – Competitors – Purchasing All Industries Impacted Operations and Supply Chain – Disruption and Price Variability – Vendor Practices Human Resources – – – – Recruitment/Retention Health Diversity/Equality Organizational Culture Regulatory And Quality – Reactive and Increasing – Product Level – Contaminants Highest Opportunity And Risk (Esty, 2006) Organizational Characteristics - High Brand Exposure - Big Environmental Impact - Dependent on Natural Resources - Exposure To Regulations - Increasing Potential For Regulation - Competitive Market For Talent - Low Market Power - Established Environmental Reputation List Is For Environmental, Similar List For Social Perspectives Limited - Milton Friedman: Social Responsibility Of Business Is To Increase Its Profits - Regulatory Compliance Functional - Managed By Silos (i.e. EHS, HR etc) - Approaches Are Often Independent Strategic - Aligned And Integrated - Group Responsibility The Sustainable Business “A company’s ability to achieve its business goals and increase long-term shareholder value by integrating economic, environmental and social opportunities into its business strategies.” (Wirtenberg, 2007) What Works: Common Traits 1. Stakeholder Engagement - Visioning Exercises - Involved In Defining Sustainability 2. Aspirations - Long Term Perspective 3. Aligned With Overall Strategy - Comprehensive Approach Illustrating Value 4. Integrated Throughout - Visible Management Support - Organizational Culture vs. Functional Silo 5. Communications - Transparent - Balanced The Sustainable Business (Cont.) What Works: Common Experiences 1. Drives Innovation - Different “Lens” - New Processes 2. Strengthens Culture - Everyone Has Skin In The Game - Emotional Connection and Purpose 3. Finding More Opportunity Than Expected 4. Tangible Bottom-line And Top-line Impacts Gaining Competitive Advantage Recent Trends Of Interest - Corporate Strategy Integration - Behavioral Interviewing - Management Education - SEC Reporting - Shareholder Resolutions - Grants, Rebates And Incentives - Regulatory Developments - Investment Indices And Analyst Reports - Supplier And Customer Expectations Opportunity To Differentiate For You And Your Org. Senior Financial Executive Role Potential Areas For Contribution - Change Management - Investor Relations - Performance Metrics - Vendor Oversight - Efficiency And Innovation - Accounting Practices - Project Support - Charitable Giving - Employee Engagement - Risk Management - Ethics And Governance - Mergers And Acquisitions - Rewards And Incentives - Capital Expenditures - Voluntary Standards - Measurement And Reporting - Internal Audit A Senior Financial Executive Plays A Critical Role (McKinsey: “Valuing Social Responsibility Programs”, 2009) (McKinsey: “Valuing Social Responsibility Programs”, 2009) Example Key Issues - Finance Structural Considerations (Hitchcock, 2007) - Negative Impacts Are Often Externalized - No Standard Performance Metrics Or Reporting - No Valuation On Nature - Limited Role of Risk Avoidance And Intangibles In Decision Making - Internal Accounting Methods (Silo vs. Systems Approach: ABC, LFC, LFA) Reporting - Sustainability Reporting Is Largely Voluntary, But In Some Cases Expected - Stand Alone Reports Imply Non-Strategic - State, Country, International And NGO Level Requirements And Approaches Example Key Issues (Cont.) Communications - Distrust Regarding Company Intentions, High Scrutiny - Often Need To Discuss Metrics Other Than Financial - Avoid Greenwashing - Balance And Transparency Standards, Expectations And Regulations - Lack Of Clarity, Still Evolving - Participate In Development, Partnerships With Stakeholders - Wide Range Of Voluntary, Local, National, Industry, International etc. Great Opportunity To Gain Skills And Differentiate Useful Resources - U.N. Environment Program – Finance Initiative - Global Reporting Initiative - World Business Council For Sustainable Development - World Resources Institute - American Institute Of CPAs - Corporate Sustainability Websites Summary - An Unsustainable Path - Growing Awareness, Concern And Action - A Business Issue - Trends And Implications For Finance Executives - Key Issues Currently With Clarity Needed Near-Term Opportunity To Develop New Skills And Differentiate Sustainability A Competitive Advantage In Your Career “Every single pressing social and global issue of our time is a business opportunity” (Peter Drucker) Financial Executives International Craig Raben, P.E., LEED AP September 2, 2010