The Sustainable Enterprise Report Volume 2 from Deloitte and Kyoto Publishing

8/14/2019 The Sustainable Enterprise Report Volume 2 from Deloitte and Kyoto Publishing

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Publishing

INVEST.

Main Entry:2invest

Pronunciation:

\in-'vest\

Function:

verb

Definition:

To make use o or uture

beneits or advantages

Main Entry:

educate

Pronunciation:

\'d-j-,kt\

Function:

verb

Definition:

To develop mentally,

morally, or aesthetically

especially by instruction

Main Entry:

collaborate

Pronunciation:

\k-'la-b-,rt\

Function:

intransitive verb

Definition:

Work together on a

common enterprise

or project

EDUCATE. COLLABORATE.


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3/13www.awarenessintoaction.com

Green Business Is Good BusinessAndrew Winston / Co-Author of Green to Gold.....................................

Avoiding the Transparency TrapKathryn Pavlovsky / Deloitte Financial Advisory Services LLP...................

6 Steps to SustainabilityMarsha Willard, Darcy Hitchcock / Authors.........................................

Case Study: Medquist...................................................

Crossing the Green DivideJessica Bier, David Linich, Christopher Park / Deloitte Consulting LLP......

Case Study: Williams-Sonoma.................................

Accountable CompaniesBill Birchard / Author.......................................................................

Co-ProfitingNorman Beaulieu, Georges Dyer, Archie Kasnet / Aedi Group...............

Terms of ExcellenceSteve Rochlin / AccountAbility North America.....................................

An Inconvenient ValueRese Fox / Deloitte Financial Advisory Services LLP..............................

Your Bottom LineDoug Gatlin / U.S. Green Building Council.........................................

Existing Buildings Hold the KeyPaul von Paumgartten / Alliance for Sustainable Built Environments......

ContentsTHE SUSTAINABLEENTERPRISE REPORT:TURNING AWARENESS

INTO ACTION

PUBLISHER:

CHRISTOPHER SMITH

EDITOR:

HELEN HOLZER

COPY EDITOR:

LAURENCE CRUZ

EDITORIAL COORDINATOR:

GAIL HALLETT

PRODUCTION MANAGER:

PIA RIVERA

CLIENT DEVELOPMENT:

TARA DUNN

MACIEJ GALAZKA

PETER MACMARTIN

PRODUCTION AND DESIGN:

BLACKWAVE CREATIVE

PRESIDENT OF KYOTO PUBLISHING:

NICK SMITH

VICE PRESIDENT OF MARKETING:

MICHAEL RODGER

KYOTO PUBLISHING

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INSIDE TEXT:

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Contains 30% recycled fbers

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Introduction

SECTION 1:Accountability

SECTION 2: Facilities Management & Energy



Case Study: American Institue of Architects........

Solution Provider: Nortel................................................

Looking Past Single-impact CertificationsTim Cole / Forbo Flooring Systems.......................................................

But Not a Drop to DrinkLloyd Timberlake / World Business Council for Sustainable Development

Laying Down the Law

Steve Chadima / Suntech Energy Solutions...........................................

Energy at the Tipping PointChristopher Flavin / Worldwatch Institute.............................................

Risk IntelligenceMark Layton and Eric Hespenheide / Deloitte & Touche LLP....................

Solution Provider: BSI Management Systems.. .

Measuring UpPaul Dickinson / Carbon Disclosure Project...........................................

Solution Provider: Ex3.....................................................

Avoiding FraudAnthony Campanelli / Deloitte Financial Advisory Services LLP................

Solution Provider: QMI-SAI Global ...........................

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SECTION 3: Risk Management & Offsets



Retail StrategyNancy Wertheim / Deloitte Tax LLP...................................................

The Future of Electronics Recycling:An Interview with SSIs Jade Lee ...................................................

Profiting By EfficiencyWilson Korol / Nortel.....................................................................

Sustainability in the Technology Industry:An Interview with AMD Senior Strategist Larry Vertal........................

Solution Provider:Supply-Chain Services, Inc..........................................

What the Dickens!Stephen Stokes, Ph.D. / AMR Research............................................

Solution Provider:XCD Performance Consulting........................................

Case Study: AT&T..........................................................

Footnotes............................................................................

Solution Provider Index...............................................

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SECTION 4: Extended EnterpriseTHE ENTIRE CONTENT OF THISPUBLICATION IS PROTECTED BY COPY-

RIGHT, FULL DETAILS ARE AVAILABLE

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ERRORS OR OMISSIONS, OR FOR ANY

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OTHERWISE, SUFFERED AS A RESULT OF

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COMPETITION, NOR ASSUMES

RESPONSIBILITY FOR STATEMENTS/

OPINIONS EXPRESSED OR IMPLIED IN

THE ARTICLES OF THIS PUBLICATION.

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FOLLOWING ARTICLES ARE THOSE OF

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ARTICLES REPRESENT A COLLECTION

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DISCUSSION ON SUSTAINABILITY.

2008 BY KYOTO PUBLISHING

ALL RIGHTS RESERVED.

PUBLISHED NOVEMBER 2008

ISSN 1916-7180

US$495


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to look good.

www.deloitte.com

As used in this document, Deloitte means Deloitte LLP. Please see www.deloitte.com/us/about

for a detailed description of the legal structure of Deloitte LLP and its subsidiaries.

Copyright 2008 Deloitte Development LLC. All rights reserved.

Sustainability. Corporate responsibility.

Climate change. Once, these may not havebeen considered serious concerns.

Not anymore. Today, businesses also mustweigh the diverse interests of their customers,their workforce, and the communities in which

they operate. All without compromising theinterests of their shareholders.


7/13

Deloitte professionals can help you integrate

corporate responsibility and sustainabilitygoals into your business strategy and internalaudit plans, helping to minimize risk whileuncovering new opportunities.

Easy? No. But those who strike this

balance can lock in competitiveadvantages. Contact us to learn how.

www.deloitte.com/us/responsibility



white paper

Green Business Is Good BusinessEven in a near global recession, the Green Wave marches on:

5 forces making eco-business the new normAndrew Winston / Co-Author of Green to Gold

Oil Hits $100, Jolting Markets.

On Jan. 3, 2008, this headline blared across the

ront page o the Wall Street Journal. What a

roller coaster o energy prices weve been on since.

Ater rising to more than $145 per barrel in just six

months, the price o oil plummeted over 50 percent as

markets around the world crashed. Now companies

are breathing sighs o relie at prices that not that

long ago seemed astronomically high (as o writing

this paper, the price is still our times higher than it

was 10 years ago. )

But the short-term gyrations, while hard to stomach, are

not the real story. Most energy experts agree that a long-

term rise in energy costs is in the cards, and the recent

drop will only exacerbate the problem. A ew recent com-

ments rom the Wall Street Journaldemonstrate why:

Delayed exploration projects could lead to a

supply crimp in the next ew years i and when

demand comes roaring back.

Oil Companies Ability to Tap New Sources May

Have Peaked.

Credit Crunch and Falling Oil Hit Oil-Sands Projects.

The point is this: Lower prices and the recessionary

credit crunch only restrict investment in whats already

a tight, near-peak supply, thus slowing any expansion

in supply that wed need to meet the rise in demand.

The era o cheap energy and resources is over. The

long-term rise in energy costs is just one o the power-

ul reasons that green business is good business.

Using less energy and ewer resources clearly saves

money. I energy prices were the only reason to make

Green in a Recession

Do you think this green thing will take a back seat

now that money is tight?

I now hear this uest ion more than any other. Times

are uncertain, so who really knows what corporate

priorities will be over the next year or two? But at

the risk o being dead wrong very soon, Ill venturesome opinions. First, i theres a deep, prolonged

recession, the green movement slows down because

everything slows down. O course some parts o

the economy will lose momentum slower than oth-

ers (the growth o renewable energy, or example,

will likely continue but perhaps at a slower pace o

growth, much like Chinas recent 9 percent GDP rise

was oddly seen as recessionary).

Aside rom the macro issues, the critical point is that

delaying action on sustainability plans may be the

absolute wrong thing to do or your business. Being

ar more efcient and eective with resources remains

one o the main pillars o going green. As Dave Steiner,

CEO o Fortune 200 company Waste Management, said

recently, When things are this tight, people see that

its about saving jobs and money. Theres no better

time to take action. This instinct to dive in head frst

runs counter to the visceral need to batten down the

hatches and ride out the storm. But as in most reces-

sions, the companies that have the means to invest

in smart ways during down times rebound the astest

when the economy turns around.

A second pillar o green business using the environ-mental lens to create new ways to design, manuacture,



environmental thinking a core part o strategy, it

probably wouldnt be enough to drive undamental

change (especially given the incredible volatility that

makes some people say, Just wait or prices to drop

again). But the pressures on business are more com-

plicated than that, and they are here to stay. Green is

no ad or temporary blip in strategic ocus; its a new

way o doing business. A new norm has arrived.

To set the stage or the rest o The Sustainable

Enterprise Report, I point to ive o the biggest

shits making green business unavoidable, then turn

to some top-line thoughts on how to handle these

pressures and proit in this new eco-world.

Mega-Forces

O the seismic changes shiting how the world

works, two in particular seem to be moving much

aster than most businesses can get a handle on.

1. Commodity Prices: Its Not Just About Oil

Rising costs are a shock to the economic system, but

also to our assumptions. Inputs that were once minor

expenses are becoming hugely important to the bot-

tom line. Until airly recently, energy was a negligible

part o the total cost o running a data center. Today,

some o the largest server arms are spending hal their

variable costs on electricity or power and cooling.

Along with energy costs, wheat, copper, iron and many

other basic materials tripled or uadrupled in price in

recent years. (Even with the more recent commodity

decline, prices are historically high.) Increases in metal

prices make New Age materials like carbon iber, used

most amously in Boeings new Dreamliner 787, more

price competitive. Businesses are rethinking how to

design, make and ship things to reduce resource use.

Past price shocks were driven mainly by supply orces, such

as an ornery cartel. But now we ace a undamental mis-

and provide goods and services that use drastically

less resources still generates lasting value. A sustain-

ability ocus helps companies provide customers with

better products and to some extent a better lie. Is there

a better time or product and service innovation than

when consumers and business customers are stretched

thin? What business wouldnt want to create a more

proftable and innovative enterprise, all while building

stronger relationships with customers, employees,

communities and even shareholders?

These carrots o proitability and innovation are

important, but the undamental orces driving the

Green Wave make up a powerul stick as well. Allive o the pressures I outline here are still building, as

well as the underlying natural orces such as climate

change. (The planet doesnt much care whether were

in economic reeall.)

The economic recession wont stem the tide o the

Green Wave. Take the issue o business-to-business

pressure (or greening the supply chain). Wal-Mart

recently assembled all its Chinese suppliers in Beijing

to lay out the companys expectations and standards on

environmental and social issues. The worlds biggest

company and Chinas seventh-largest trading partner

(ranking among countries) made clear that noncom-

pliant suppliers will be, in the words o CEO Lee Scott,

banned rom making products or Wal-Mart. Those

are tough words and dont indicate any slowdown in

the companys ocus on sustainability.

So the Green Wave is here to stay. The recession brings

one positive development: The drop in energy prices

gives companies and our economy a bit o breathing

room to fnd efciencies and get o o oil as ast as

possible. So take advantage o the reprieve, push your

people to do more with less, and innovate to set your

company up or rapid growth and success when timesget better. They always do.



match between slower-growth supply the easy-access

resources are gone and surging demand, inexorably

rising with standards o living in India and China.

To survive, companies must get lean and do it ast. Those

who produce the goods and services we all need using

drastically less material and energy will proft mightily.

The resource inefcient will wither and die.

2. Transparency: Open Up and Share

When you ly into Charleston, W.V., its hard to miss

the massive mining acilities: large splotches o dirt

where large hills once stood. So-called mountain-

top removal coal mining leaves a large wake o

destruction. One very small nongovernmental orga-

nization (NGO) called Appalachian Voices is ighting

this devastating industrial practice.

The NGO took publicly available data and mapped

all the mining sites on the popular view-rom-above

program Google Earth. Enter your zip code at www.

ilovemountains.org and youll see exactly which

hills were destroyed to power your home. So tiny

Appalachian Voices discovered a new way to battle

its much larger oe, using an outsized tool I call

orced transparency. Imagine how utilities and

mining companies eel about this openness.

Many companies are jumping ahead o the curve

and voluntarily disclosing operational inormation.On Dole Foods Web site, you can see the arm in

Peru where your organic bananas were grown (using

that pesky Google Earth again). Patagonia launched

The Footprint Chronicles online to publicly analyze

the environmental impacts o some key products

rom design through delivery. HP simply released

a list o every supplier; a voluntary e ort or HP, but

a bit more orced or the suppliers.

Your companys biggest stakeholders now expect

unheard o levels o openness about operations and

speciic products. Business customers, consumers

and employees are all demanding more every day.

Stakeholder pressures

For years, only one environmental stakeholder really

mattered: the government. Abide by the law and

you could call yoursel an environmental steward.

Stakeholder pressures have evolved rapidly. Here

are three dynamic and powerul groups whose ues-

tions will change the business landscape orever.

3. Your Business Customers: Greening of the

Supply Chain

A ew years ago, when Wal-Mart execs started talk-

ing seriously to outside advisors about sustainabil-

ity, they were nudged toward a big realization: As

large as the companys direct environmental impact

was, most o its ootprint was actually embedded

in the supply chain. Manuacturing and shipping all

those products dwared even 4,000 stores worth

o energy and resource use. The pressure Wal-Mart

and retail peers around the world (such as Tesco and

Marks & Spencer in the U.K.) now put on suppliers is

changing business in proound ways.

But it goes ar beyond just retail. In many industries,

both individual players and groups o competitors are

changing the ground rules. The Electronics Industry

Code o Conduct set new supplier standards, andthe Paper Working Group brings together a cross-

industry sampling o big names (and big paper users)

to increase the supply o environmentally preerable

orest products. Both o these partnerships have been

in the works or years. These and newer supply-chain

eorts are evolving in two interesting ways.

First, the uestions have expanded rom simple check-list audits, meant only to ensure compliance to much

broader inuiries. Some big customers are demanding

detailed environmental metrics (such as carbon-oot-



print data) and asking or changes in supplier practices

rom reducing packaging to redesigning distribution

routes to cut ossil uel and resource use.

Companies are even designing their own pseudo-regu-

latory standards. Wal-Marts supplier standard or how

much lead is allowed in toys on its shelves is actually ar

tougher than the U.S. governments regulation.

Second, greening the supply chain is morphing rom

demands lowing in just one direction rom customers

to suppliers to multilateral, real partnerships includ-

ing all the players in a ull value chain. In the aviation

industry, engine makers (GE), plane manuacturers

(Boeing), airlines (Virgin), and airports (Port o Seattle)

recently ormed a partnership to pursue carbon-

neutral growth or the industry. But will an initiative

like this work or will it amount to nothing more than

press releases? Its hard to say, but its a good strategy

to recognize the scale o the sustainability challenge

and work together to tackle the big hurdles.

Where is all this upstream pressure headed? How

does it tie to transparency and how much will

companies need to share with their customers? All

signs point to a near uture where companies col-

lect a great deal o inormation on every product,

including energy and water use, toxic ootprint,

waste production, who manuactures it, where its

made and whether workers are paid a living wage.In other words, having at your ingertips the ull

range o sustainability inormation will become the

ante to play the game.

Companies that can answer basic and oten extensive

uestions about sustainability perormance will get

the beneit o the doubt, along with more shel space,

market share and mind share with consumers.

4. Your Consumers: Conflicted and Searching

For nearly 40 years roughly since the irst Earth Day

in 1970 environmental groups have been waiting

or a consumer values shit to drive purchases o green

products. Its not clear that its coming, or at least not

in the way many have hoped. Will consumers pay

more or green? Only a small percentage, perhaps.

But a growing number are looking or environmental

and social beneits in the products they buy; they just

dont want to sacriice uality or price. They want it

all, and why shouldnt they get it?

BBMG, a green-minded marketing agency, con-

ducted research on what consumers look or in

products. The not-so-shocking part: When they

ranked product attributes, price and uality

took the top two spots. But ater that, consumer pri-

orities got interesting. Three new issues rose above

perennial top-tier attributes such as convenience.

Where the product is made, how energy eicient it

is, and its health beneits placed third, ourth and

ith, respectively. BBMG dubbed buyers with these

concerns conscious consumers.

Consumers are redeining what they expect rom prod-

ucts. The most desired and successul product will soon

be the one that has the lowest carbon ootprint, uses

the ewest resources, contains no toxic chemicals and

is made by people earning a living wage, among other

things. These sustainability attributes will become part

o the new deinition o uality. Are your products

and services high uality in this new world?

5. Your Employees: Looking for More Than a

Paycheck

When the career Web site monster.com asked col-

lege students what they looked or in a prospective

employer, a ull 92 percent wanted to work or a

green company. Whether undergrads can deine

what they mean by green is almost beside the point.The next generation o workers will expect more

rom the companies they work or and buy rom.



Even supposedly money-grubbing MBAs (and I was

one) are showing some preerence or social respon-

sibility. In multiple surveys, up to two-thirds o MBAs

are looking or employers who share their values.

Current employees are not immune to this values

shit. In many companies, workers are orming green

teams to channel the desire to do the right thing

and reduce environmental impacts around the oice.

How you engage current and prospective employees

on environmental issues will drive the passion, pro-

ductivity and creativity o the entire enterprise.

Not Alone

O course, the three stakeholders Ive highlighted

business customers, consumers and employees are

not the only ones evolving. A ew other examples:

The financial community is taking climate risk seri-

ously. Citigroup, JP Morgan and Morgan Stanley

created the carbon principles that entail taking a

much harder look at all possible coal plant invest-

ments. Yes, banks are busy right now just surviving,

but you can be sure they will continue to look at risk

in their investments, speciically carbon and environ-

mental risk, more closely in the years to come.

Shareholders are getting restless, continuing to

place resolutions on the ballot at annual meetings.

The Rockeeller amily, descendents o the ounder

o ExxonMobil, made a lot o noise this year to push

the oil giant toward more climate-sensitive policies. Cities, states and countries are innovat ing in

the realm o environmental policy to encourage

expansion o renewable energy or increased recy-

cling. Caliornia alone has set its own aggressive

greenhouse gas plan and recently changed build-

ing codes to reuire green design principles.

Media outlets like Discover y Communications

24-hour channel Planet Green have grown morenumerous. The press is looking or stories o suc-

cess, ailure and greenwashing.

Watch these developing pressures to avoid being

caught by surprise. The rewards are ample or navi-

gating all stakeholder demands.

Preparing for a New World

Even in a near global recession, the Green Wave

marches on and the options or avoiding it are dis-

appearing. How do you handle these pressures? It

took me and my co-author a whole book to provide

some kind o template. Here are a ew guideposts

or navigating the tricky path rom green to gold:

It doesnt really matter anymore if ever yone in the

organization is convinced about environmental

challenges (in particular climate change). Most

industries are moving on rom the debate and

taking action. Its bad or business to ight the

changes and ignore what customers, employees

and other stakeholders are expecting. The busi-

ness case is clearer than ever, so convince skeptics

in the organization with hard numbers, not just

pleas to do the right thing.

You cant sit on the sidelines anymore. Industries

that didnt think they had an environmental

ootprint, such as inance or IT, are inding deep

connections to the issues. Many industries will

ind these changes absolutely undamental. They

present both enormous risks (think o the auto

industry shakeup o 2008) and unprecedented

opportunities; or example, the IT world can oersolutions to the vast data and measurement needs

that transparency and ootprint tracking create.

You cant determine alone what your issues are. Per-

ceptions rom stakeholders matter nearly as much as

the acts. I you have the biggest brand in your value

chain, you will get attention, or good or bad.

Key Actions

Develop a value chain perspective. The envi-

ronmental impacts within your own our walls


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are unlikely to be a majority o your ull ootprint.

The true risks and opportunities may all outside

your direct control.

Start with measurement. Understand the

impacts up and down the chain. See where you

can wield the most leverage.

Be transparent about your ootprint, your suc-

cesses and your challenges.

Communicate openly with your employees and

customers. Remember that acknowledging ail-

ings and hurdles is not enough. Start acting on

them and show progress.

Develop real, tangible programs, products

and improvements beore launching a large-

scale marketing campaign. Start with pilot pro-

grams i necessary.

Get resource efficient now. Oil prices may

latten out or the time being, but long-term,

prospects or cheap energy and easy access to key

resources are nearly zero.

Help your customers/consumers. Your buyers

are oten conused about the choices they have.

Be the provider o both inormation and solutions;

reduce their ootprint and solve any tradeo that

consumers see between green and uality, and

youll win loyalty and sales.

The most eective companies will balance incremen-

tal, measurable steps with swing or the ences

innovation. All the actions above are tactical andsmart. But true leaders will see the scale o change

demanded by the pressures o rising prices, trans-

parency, and customer and employee needs. They

will ask themselves some tough uestions.

Tennant, a manuacturer o commercial cleaning

euipment, had always sold big loor-scrubbing

machines that used chemicals. Company execs andinnovators in the R&D department asked themselves

i it was possible to clean in a nontoxic way, re-

ducing the customers environmental burden. The

companys new technology uses just tap water to

clean hard suraces better and aster than beore.

Like a world-class athlete who redeines a sport or

whats considered ast or strong, some companies are

redeining their products and their markets, shocking

business partners, competitors and customers.

The ive pressures outlined will orce dramatic

change in many industries. Is your company ready

to take a giant leap orward?

Andrew Winston,

ounder o Winston

Eco-Strategies, is the

co-author o Green to

Gold, the best-selling

guide to what works

and what doesnt when

companies go green. He

is an expert on green

business, helping irms use environmental thinking to

drive growth and build stronger relationships with em-

ployees, customers and other stakeholders. His clients

have included Bank o America, HP, PepsiCo and IKEA.

Winstons early career included advising companies on

corporate strategy while at Boston Consulting Group,

and management positions in strategy and marketingat Time Warner and MTV. He served as director o the

Corporate Environmental Strategy Project at Yales

School o Forestry and Environmental Studies. Winston

speaks to corporate audiences around the world about

the beneits o going green. For these eorts, he was

named a Planet Deender by Rock the Earth. He re-

ceived a BA in economics rom Princeton, an MBA rom

Columbia, and an MA in environmental managementrom Yale. He resides in Riverside, Conn. For more on

his work, see www.andrewwinston.com.

The Sustainable Enterprise Report Volume 2 from Deloitte and Kyoto Publishing

Documents

Transcript of The Sustainable Enterprise Report Volume 2 from Deloitte and Kyoto Publishing