The Business Case for Sustainability Indicators: What’s Missing?
description
Transcript of The Business Case for Sustainability Indicators: What’s Missing?
Delivering sustainable solutions in a more competitive world © COPYRIGHT 2009 ERM
The Business Case for Sustainability Indicators: What’s Missing?
The Business Case for Sustainability Indicators: What’s Missing?
Grace Barrasso, ERM2nd National CSIN ConferenceToronto, 2-3 March 2010
Grace Barrasso, ERM2nd National CSIN ConferenceToronto, 2-3 March 2010
Delivering sustainable solutions in a more competitive world 2© COPYRIGHT 2009 ERM
ERM is a leading global environmental consultant
ERM is one of the world’s leading providers of environmental, health and safety, and social responsibility consulting
Over 35 years of experience
Completed projects in more than 160 countries
3,500 professional staff
Worked closely with 60% of the Global Fortune 500 companies in the past five years
70% of our business is repeat
Annual revenue of $695m (FY09)
ERM has been ratedas one of theTOP THREE
all-environmental firms for the past 7 years by
the Environmental Business Journal
Delivering sustainable solutions in a more competitive world 3© COPYRIGHT 2009 ERM
ERM Sustainability Services
Competitor analysis and benchmarking
Stakeholder engagement
Sustainability strategy, framework & systems
Opportunity identification and prioritization
Risk management
Metrics
Education
Energy & GHG management
Water management
Material efficiency improvements
Greening the built environment – buildings, operations, maintenance
Workplace health and safety
Third-party verification of metrics
Assessment of sustainability strategy and programs
Sustainability and Social Responsibility Reporting
Multimedia internal and external engagement and promotion strategies
Product vulnerability screening
Life Cycle Assessment
Life Cycle Management; total performance strategies
Product registration (e.g., REACH) and take-back strategies
Greener packaging and packaging reduction strategies
Strategy & Systems
Enterprise Operations
Supply Chain Management
Product Sustainability
Assurance & Reporting
Social impact analysis
Greener and more efficient transportation and distribution
Life cycle efficiency
Supplier engagement; partnerships for innovation and leadership level initiatives
Delivering sustainable solutions in a more competitive world 4© COPYRIGHT 2009 ERM
Defining Sustainability
To meet the needs of the present without compromising the ability of future generations to meet their own needs
- Brundtland Commission Operating business in a manner that meets or exceeds ethical, legal, commercial and public expectation that society has for business.
- Business for Social ResponsibilityA business approach to create
long-term shareholder value by embracing opportunities and managing risks derived from economic, environmental and social developments.
- DowJones Sustainability Group Index
Sustainability Sustainable Development Corporate Social Responsibility Corporate Responsibility Corporate Citizenship
Companies use different terms...
…that essentially mean the same thing; the “triple bottom line” of:
Economic Growth Environmental Stewardship Social Progress
Delivering sustainable solutions in a more competitive world 5© COPYRIGHT 2009 ERM
Sustainability as business strategy
- the world is changing
Economic growth and liberalization
Technological evolution(especially in communication)
Increased transparency
Rise of the multi-nationals
Growing concerns over environmental degradation
Increased sophistication and savvy of advocates
Clash of cultures
Wealth
Scope
Power and Influence
Expertise
New roles and responsibilities
for business
Business expansion
Globalization
Delivering sustainable solutions in a more competitive world 6© COPYRIGHT 2009 ERM
Sustainability and responsible management
Increasingly seen as the management approach of the progressive, responsible company
Delivering sustainable solutions in a more competitive world 7© COPYRIGHT 2009 ERM
Major Sustainability Issues Today
Corporate ethics and governance
Fair labor practices
Responsible use of influence
Climate change and energy security
Water – availability and conservation
Supply chain performance
Product life cycle impacts
Delivering sustainable solutions in a more competitive world 8© COPYRIGHT 2009 ERM
The return on investment
ENERGYSAVINGS
30%
CARBONSAVINGS
35%
WATERUSE
SAVINGS
30-50%
WASTECOST
SAVINGS
50-90%
Cost
Average Green Building Cost Savings According to the Leadership in Energy & Environmental Design (LEED)
Risk
Reputation
Delivering sustainable solutions in a more competitive world 9© COPYRIGHT 2009 ERM
Business Drivers for Environmental Stewardship
Facilitation Through Engagement
New project delays?
Investment: <$50k
Annual savings: $153k
Compressed Air
Resource Efficiency Product Innovation
Brand Differentiation
Delivering sustainable solutions in a more competitive world 10© COPYRIGHT 2009 ERM
Major Sustainability Trends Today
Life Cycle Assessment
Advocacy
Green Building
Delivering sustainable solutions in a more competitive world 11© COPYRIGHT 2009 ERM
Major Sustainability Trends Today
Unilever’s extensive water strategy has addressed its own water consumption, water associated with the use of its products, and advocacy for sustainable water practices.
Holistic Approach
Delivering sustainable solutions in a more competitive world 12© COPYRIGHT 2009 ERM
Major Sustainability Trends Today Collaboration
Innovative, large scope projects; CGI is working with:
Microsoft to develop online tools for 40 of the world’s largest cities to monitor GHGs
1,100 US mayors, Walmart, and 25 manufacturers to encourage the use of green products
The City of Chicago to green the Sears Tower and Merchandise Mart
USGBC to establish a green schools programs that drive energy performance
Delivering sustainable solutions in a more competitive world 13© COPYRIGHT 2009 ERM
Major Sustainability Trends Today
Most organizations have values – most are lofty. How does that organization assure that its values are embedded into the way it does business?
Delivering sustainable solutions in a more competitive world 14© COPYRIGHT 2009 ERM
Metric Evaluation…
Do the metrics:
Inform business decisions, promote learning and demonstrate the business case?
Support the business strategy?
Engage employees and external stakeholders?
Respond to issues identified by stakeholders?
Change the behavior of individuals?
Help integrate sustainability thinking into the organization’s culture
Reflect business values and yield high benefits?
Source - GEMI
Delivering sustainable solutions in a more competitive world 15© COPYRIGHT 2009 ERM
Implementing a Performance Based Program
Identify Environmental
Aspects
Identify Environmental
Aspects
Baseline Performance
Baseline Performance
Select Indicators
Select Indicators
1 2 3
EstablishTrackingSystems
EstablishTrackingSystems
Set Targets
Set Targets
4 5
Delivering sustainable solutions in a more competitive world 16© COPYRIGHT 2009 ERM
Assessment: Impacts, Assessment: Impacts, Opportunities, Risks Opportunities, Risks
Strategy: Approach Strategy: Approach and Prioritiesand Priorities
Implementing Change Implementing Change
Mobilizing action: Mobilizing action: Levers and LeadersLevers and Leaders
Creating a path forward Have a process – respect it
xxxxEvery company and industry
has issues unique to them that also may impact reputation. Know your material issues…know your impacts. Engage internally.
Delivering sustainable solutions in a more competitive world 17© COPYRIGHT 2009 ERM
Creating a path forward Where do you want to be?
Denial/ Discovery Defensive Offensive Transformative
Denial/ Discovery• Definitional confusion• Report > actions• Focus on Green Agenda (or just
climate change)• Difficult to move beyond learning
Offensive• Energizing the company• Create value for customers,
shareholders, employees• Can focus on efficiency or on
growth/innovation• Inject new content into existing
business processes
Transformative• Game-changing issue
for the business model• Requires relevance,
timing, champions• Focus on values,
culture, world view
Defensive• Protecting the company• License to Operate• Extended supply chains• Integrated with other efforts• Risks and expectations
Delivering sustainable solutions in a more competitive world 18© COPYRIGHT 2009 ERM
Creating a path forward Determine your initial scope
• Return on equity
• Stock price growth
• Market share
• Profitability
• New market opportunities through innovative products and services
Economic Prosperity
• Eco-efficiency
• Use of renewable resources and alternative fuels
• Addressing impacts and opportunities throughout the value chain
• Green technology and design
• Support of conservation efforts and biodiversity
Environmental Stewardship
• Worker and public safety
• Local economic impacts (job creation, tax base, other investments)
• Human rights and living wage
• Stakeholder engagement and accountability
• Strategic philanthropy
Social Responsibility
While companies talk about the triple bottom line, many (initially) focus on the environmental dimension
Delivering sustainable solutions in a more competitive world 19© COPYRIGHT 2009 ERM
Creating a path forward Internal engagement
Start with internal engagement
Engage executives first
Engage employees
Educate
Ask, don’t tell
Customize your approach
Engage individually
Engage team functions
Always be prepared
It’s a bit backward to start with reporting, but some do…and some must
Sustainability Report
Delivering sustainable solutions in a more competitive world 20© COPYRIGHT 2009 ERM
Governance Policy, Standards, Accountability, Assurance The alignment, systems, and accountability schemes that drive
performance in other functions will drive performance in sustainability
Integrate into the business
Business Goals and Strategy
Environmental Goals and Strategy
Environmental Management System
Critical Tools (including metrics)
D R
I V E
R S
E N
A B
L E
R S
Delivering sustainable solutions in a more competitive world 21© COPYRIGHT 2009 ERM
Agree on a process
Involve key decision makers
Review relevant information and data
Current company impacts and associated risks
Potential scenarios (regulatory, advocates, customers)(associated risks and opportunities)
Advocacy, leading and peer company activity
Reach consensus, if not agreement
Engage externally, as appropriate
Create talking points for internal stakeholders
Communicate broadly
Governance Policy and Positioning
Delivering sustainable solutions in a more competitive world 22© COPYRIGHT 2009 ERM
Company Value “Iceberg”
Balance Sheet
Market Capitalization
Delivering sustainable solutions in a more competitive world 23© COPYRIGHT 2009 ERM
IntangiblesNonfinancials - Brand Image
Reputation - Stakeholder Relationships
TangiblesFinancials
Market Capitalization
Balance Sheet
Delivering sustainable solutions in a more competitive world 24© COPYRIGHT 2009 ERM
Company Value “Iceberg”: 1981
Intangibles - Nonfinancials
Tangibles - Financials
Market Capitalization
Balance Sheet
83%
17%
Arthur D. Little, The Business Case for Corporate Citizenship , 2002
Delivering sustainable solutions in a more competitive world 25© COPYRIGHT 2009 ERM
Company Value “Iceberg”: 1998
Intangibles - Nonfinancials
TangiblesFinancials
29%
71%
Arthur D. Little, The Business Case for Corporate Citizenship , 2002
Delivering sustainable solutions in a more competitive world 26© COPYRIGHT 2009 ERM
Sea of Demanding Stakeholders
Nonfinancials
Financials
Employees
Customers
Media
Economists
Scientists
NGOs
Competitors
Global Markets
Governments
Insurers
The Public Investors
Banks
Trade Associations
Delivering sustainable solutions in a more competitive world 27© COPYRIGHT 2009 ERM
Two-Part Business Case
Nonfinancials
Financials
Employees
Customers
Media
Economists
Scientists
NGOs
Competitors
Global Markets
Governments
Insurers
The Public Investors
Banks
Trade Associations
Delivering sustainable solutions in a more competitive world 28© COPYRIGHT 2009 ERM
Mega-Issue Storm Clouds
Employees
Customers
Media
Economists
Scientists
NGOs
Competitors
Global Markets
Governments
Insurers
The Public Investors
Banks
Water CrisisPandemics
Other …
Erosion of Trust
Pollution & HealthClimate Crisis
Trade Associations
Delivering sustainable solutions in a more competitive world 29© COPYRIGHT 2009 ERM
Awakened Public - Consumers
The “Goracle factor” + Hurricane Katrina + Weird weather + Gas prices
+ IPCC reports + …(other awakeners)
• 70-80% of consumers say they are switching to “green” companies;
• 25% actually did in 2009
•LOHAS (Lifestyles of Health and Sustainability) sector:$200B in 2007 $420B by 2010 $845B by 2015
Delivering sustainable solutions in a more competitive world 30© COPYRIGHT 2009 ERM
Two-Part Business Case
Nonfinancials
Financials
Employees
Customers
Media
Economists
Scientists
NGOs
Competitors
Global Markets
Governments
Insurers
The Public Investors
Banks
Trade Associations
Delivering sustainable solutions in a more competitive world 31© COPYRIGHT 2009 ERM
Economic
Environment Social
• Society/Community
• Labor Practices/
Decent Work
• Human Rights
• Product Responsibility
• Materials
• Energy
• Water
• Biodiversity
• Emissions
• Effluents and Waste
• Products and Services
• Compliance
• Transport
• Economic Performance
• Market Presence
• Indirect Economic Impact
KPIs
KPIs
KPIs30
40
9
Corporate Governance
GRI Indicators - 79
Delivering sustainable solutions in a more competitive world 32© COPYRIGHT 2009 ERM
GRI Reporting Principles
MaterialityDoes the information in the report cover topics and indicators that reflect the organization's
significant economic, environmental, and social impacts?
StakeholderInclusivene
ssDoes the report identify its stakeholders and explain how it has responded to their reasonable
expectations and interests?
Sustainability Context Does the report present the organization's performance in the wider context of sustainability?
CompletenessIs the report boundary sufficient to reflect economic, and social impacts and enable
stakeholder's to assess the organization's performance?
Balance Does the report reflect positive and negative aspects?
ComparabilityAre issues presented in a manner that enables stakeholders to analyze changes in the organization's performance over time, and support analysis relative to other organizations?
Accuracy Does the report indicate data that has been measured?
Timeliness Is the information disclosed while it is recent and relevant?
Clarity Is the information understandable and accessible to stakeholders?
Reliability
Information and processes used in the preparation of a report should be gathered, recorded, compiled, analyzed, and disclosed in a way that could be subject to examination and that
establishes the quality and materiality of the information.
Delivering sustainable solutions in a more competitive world 33© COPYRIGHT 2009 ERM
Characteristics of Sustainability Leaders Today
Management systemsprocesses to define, measure, monitor & assure performance
Transparencycomplete and comprehensive
Engagementstakeholders have input and influence
Global perspectivesystems are global, impacts measured locally
Performancebalanced (triple bottom line), material, detailed, easily accessible
Leadershipraise the bar for their industry; set best practice; cited by 3 rd parties
Humilityno “green washing” – sustainability portrayed as a challenge and a responsibility
Delivering sustainable solutions in a more competitive world 34© COPYRIGHT 2009 ERM
Stakeholder Engagement – “New” Media
Blogs are new but this use is…Intel CSR Leadership Team talks to the public, then waits for comments
•Reporting
•Indicators and Sustainability
•Strategic Philanthropy
•Environment
•Energy
•Supply Chain Management
•EHS
•Diversity
Delivering sustainable solutions in a more competitive world 35© COPYRIGHT 2009 ERM
Concluding Remarks
Sustainability indicators do not always provide the “whole picture”
Important to monetize the value of stakeholders in order to determine who has the influence over new dynamics
Sustainability reporting: can assist organizations to evaluate where they stand
Transparent indicators and to include both traditional EHS indicators and external risk factors
Importance of determining what is material to an organization is paramount
Top level commitment
Cross-functional team with collaborative leadership
Extensive internal engagement
Continuous benchmarking, emerging issue tracking, and sector analysis
Foundational policy or positioning
Strong alignment with business goals, values, and company culture
Clear connection between each program and its specific business benefits
Strategy built from the bottom up
Delivering sustainable solutions in a more competitive world 36© COPYRIGHT 2009 ERM
THANK YOU FOR YOUR ATTENTION
Grace Barrasso
Senior Consultant
Environmental Resources Management (ERM)
www.erm.com
+1 514 880 6663 Cell
+1 416 646 3608 Telephone