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SUSTAINABILITY

CHAPTER 9. SUSTAINABILITY. Outline. Sustainable Development ?. 1987: World Commission on Environment and Development (The “ Brundtland Commission”) “Our Common Future”: Coined the term Sustainable Development :

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SUSTAINABILITY

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  1. CHAPTER 9 SUSTAINABILITY

  2. Outline

  3. Sustainable Development ? • 1987: World Commission on Environment and Development (The “Brundtland Commission”) • “Our Common Future”: Coined the term Sustainable Development: ”Development that meets the needs of the present without compromising the ability of future generations to meet their own needs”

  4. Social and Environmental Sustainability Source: Dunphy, Griffiths & Benn (2007)

  5. A Planet Under Threat means: • the population explosion • the natural limits to non-renewable resources • over-exploitation of renewable resources • growing ecotoxicity, threats from nuclear, biological and chemical technologies & catastrophes • reduced species diversity • incentive systems encouraging waste and pollution • environmental warming • extreme differences in income • lack of a systemic global view

  6. Predicted Social Impacts Associated with increases in average Global Temperature

  7. Local and global feedbacks i.e.: Changes in the clouds, the water content Of the atmosphere and the amount of Sunlight reflected by sea ice (albedo) Land use change PHYSICAL CHANGES IN CLIMATE Rising Rising Atmospheric Rising Global Mean • Atmospheric Greenhouses Impacts on Surface Temperatures GAS Temperatures Physical, RADIACTIVE (GMT) CONCENTRATION Biological Emissions FORCING and (Change in Rising Sea Levels § ( Measured in Human energy balance) Rising CO2 equivalent) systems Changes in rainfall variability § Ocean and seasonality Temperatures (Lagged) Changing Patterns of Natural § Climate variability Melting of Ice Sheets, Sea - Ice § and Land Glaciers Feedbacks including a possible reduction in The efficiency of the land and oceans to absorb Carbon dioxide emissions and increased natural Releases of methane Stern Report (2006) The Economics of Climate Change Source: Stern Review: The Economics of Climate Change :Fig. 1.4 (2006:8)

  8. The Cost of Inaction? From Finsia Industry Opinion Poll • Q: The UK's Stern Report in 2006 found that "doing nothing to stop global warming will prove far more costly to the global economy than taking measures in the next 10 to 15 years to fight it". To what extent do you agree or disagree with these findings? • A: 89% Finsia members surveyed agreed with the finding from the UK’s Stern Report.

  9. TRENDS Economical Ecological Socio-cultural • Interconnectivity • Deregulation • Accountability • Innovation speed • Global Trade • Access (information, capital) • Ageing structure • Transparency • Healthy living • Ageing population • Demographic changes • Social tensions • Urbanization • Instability of ecological • systems • Climate Change • Biodiversity • Scarcity of natural • resources (water, • energy, soil) Discontinuities / Challenges Sector / Issue / Markets Sector Challenges Trends Cause Discontinuities and Changes Source: SAM Research AG “Presentation for Ethos Conference 210609

  10. What Can Be Done? ‘The Norwegian Pension Fund invests its nation's oil revenue for the wellbeing of future generations. With about $460 billion under management, it is one of the world's biggest investors. It also has a strong ethical charter, and that's what has led to its decision to withdraw its $1 billion investment from Rio Tinto’. ‘Australian Institute of Superannuation Trustees released a ground-breaking report on super funds and climate change. Carbon Counts 2008: The Carbon Footprints of Australian Superannuation Investment Managers ‘ ‘By "carbon optimising" the ASX 200 (overweighting companies that are carbon efficient in each sector and underweighting carbon-intensive companies), carbon efficiency could be improved by 42 per cent without sacrificing returns’. • http://business.smh.com.au/business/climate-change-the-new-challenge-for-super-fund-returns-20080912-4fgz.html

  11. Automotive Manufacturers & Climate ChangeImpact of increased CO2 measures on profits (EBIT) Source: SAM Research, Changing Drivers Study, October 2003

  12. Share price development of Toyota and GMOctober 2003 – October 2005 (indexed) 2004 2005 2003

  13. Different transport systems/different vehicles/different engines/different energy There are currently around 32 million cars in China. However the rate of car ownership is low at only 25 per 1000 population. If ownership grew to the world average of 120 cars per 1000 then there would be 156 million cars, an increase of 124 million. If the rate of ownership grew to the American level of 700 per 1000 then China would have 910 million cars, an increase of 878 million cars which is 128 million more cars then currently exist on the whole planet.

  14. The Future of Urban Transport ?

  15. Company Exposure • Development of Greenhouse gas emissions • inventory, both direct and indirect (electricity) • emissions for key business units. • Greenhouse gas Key Performance Indicators: • - Product intensity († CO2-2/unit of product) • - Op cost sensitivity († CO2-e/$ operating costs) • - Equity exposure, through investments • - Past exposure • - Future exposure Framework for Assessing Company Climate Change Understanding the Risk • Value Chain Exposure • missions' associated with supply & product • chain, e.g. transport, energy intensive outputs; • Differential exposure from Annex-1 & non-Annex-1 • suppliers • Investment Decisions: • Considerations of liability • in investment decision • Purchasing Policies • Hedging positions • Scenario Analysis • Competitor Exposure • Competitor exposure • Substitute exposure • Opportunities • Abatement Opportunities: • Identification of abatement opportunities • Development of marginal cost curve for abatement • Supply chain potential Managing the Risk

  16. Ethics • Employee values & beliefs • Corporate governance Codes • “Extended producer responsibility” • Management & reporting standards Reputation • Market sensitivity to environmental & social issues • Global transparency due to electronic media Materiality • Linkage of sustainability performance to shareholder value • Opportunities for growth of new products & services Business Drivers

  17. Adoption • Sustainability is seen as “fuzzy” and not relevant to the company’s primary business mission • The business case for adopting sustainability cannot easily be reduced to monetary terms • Commitment to sustainability, transparency, and disclosure may exceed “comfort zone” Practice • Sustainability is viewed as a traditional compliance issue, rather than an innovation opportunity • Lack of accepted standards complicates the measurement of progress toward sustainability • Trade-off decisions are more difficult under the broad scope of the “triple bottom line” Barriers to Sustainability

  18. Corporate Hall of Shame 2007

  19. Corporate Hall of Shame 2007

  20. Emerging Business Values ‘The broader role of corporations in society lies in understanding the interdependence between economic growth, social development and environmental protection’ Gail Kelly, CEO Westpac, 20 February, 2008. ‘CSR is rational, enlightened and self-interested business behaviour’ Westpac, 2006:15. ‘Sustainability is here to stay or we may not be’. Niall Fitzgerald, CEO Unilever ‘Climate change has focused our attention on sustainability issues generally and, as an industry, we need to better reconcile the incentives that drive short-term profits with the risks to our economy over the long-term’. Stephen Harrison AO, Interim CEO, Finsia:‘Tip of the Iceberg Report’ 2006.

  21. Kofi Annan Launches UNEP FI Principles at NYSE 2006

  22. UNEP Finance Initiative

  23. UNEP Finance Initiative: Principles of Responsible InvestmentAustralian Financial Institution Signatories Asset Owners Investment Managers ARIA (Australian Reward Investment Alliance) AMP Capital Investors AustralianSuper Australian Ethical Investment Ltd. CARE Super BT Financial Group Catholic Superannuation Fund Colonial First State CBUS Superannuation Scheme Drapac Christian Super Five Oceans Asset Management ESSSuper Foresters ANA Mutual Hesta Super Indian Ocean Rim Local Government Superannuation Scheme Portfolio Partners Local Super Statewide Superannuation Trust UniSuper VicSuper Vision Super

  24. KEY FIDUCIARY DUTIES DUTY TO ACT DUTY TO ACT FOR PRUDENTLY A PROPER CAUSE Act in the best interests Carry out the items of the beneficiaries as Of the trust a whole Act with care, skill and Take proper advice Diligence regarding Diversity Someone else’s investment Apply special Consider the suitability Consider relevant Act reasonably Knowledge and skill Of investments considerations Australia (Fiduciary Canada and UK US (fiduciary duties MODERN SOLE PURPOSE Duties set out in case (fiduciary duties set case law and federal PRUDENT TEST Law and statute) Out in case law and And state statute) INVESTOR RULE Statute) Source: Freshfields , Bruckhaus and Deringer . A legal framework for theIntegration of environmental, social and governance issues into institutional nvestment October 2005. UNEP Finance Initiative Innovative financing for sustainability . Fiduciary Duties

  25. Institutional Investor Voting 2000-2003

  26. Evolving CSR Standards Architecture Source: Allouche (2006). Corporate Social Responsibility; Concept, Accountability and Reporting.

  27. Corporate Strategies to Deliver Value to Society

  28. The Phase Model Rejection Non-responsiveness Compliance Efficiency Strategic proactivity The sustaining corporation From Dunphy, D. , Griffiths, A. and Benn, S., Organisational Change for Corporate Sustainability, Routledge, London and New York, 2003; revised edition 2007)

  29. Model of Sustainable Value Adapted from Hart and Milstein 2003

  30. Growth of SRI Investment Assets in Australia 2000- 2006 Source: Ethical Investment Association (EIA) 2006 SRI Benchmarking Survey

  31. Blending Economic and Social Value Source: Jed Emerson (2006)(See www.blendedvalue.org)

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