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CAPITALISM 2.0: How Would We Recognize It If We Saw It?

CAPITALISM 2.0: How Would We Recognize It If We Saw It?. TSSS February 7, 2013. bobwillard@sympatico.ca www.sustainabilityadvantage.com. MY BACKBURNER QUESTIONS. 2012. 2009. 2005. 2002. Most sustainable enterprises?. Characteristics of a sustainable enterprise?. MIRROR MIRROR ….

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CAPITALISM 2.0: How Would We Recognize It If We Saw It?

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  1. CAPITALISM 2.0: How Would We Recognize It If We Saw It? TSSSFebruary 7, 2013 bobwillard@sympatico.cawww.sustainabilityadvantage.com

  2. MY BACKBURNER QUESTIONS 2012 2009 2005 2002 Most sustainable enterprises? Characteristics of a sustainable enterprise?

  3. MIRROR MIRROR … Top 5 most sustainable companies on the planet? Thoughts from our TSSS audience on Feb. 7, 2013… • Patagonia - 10 • Interface – 20 • Toyota – 1 • Vancity – 2 • GE – 1 • Seventh Generation – 7 • AutoShare, ZipCar – 2 • Suncor – 2 • Arcelor Metal Dofasco – 2 • Marks & Spencer - 1

  4. SAM RANKING • “Sustainability leaders” in 58 sectors • Used by DJSI • Assesses over 2,000 corporations http://www.sam-group.com/ … 2012 results

  5. FORTUNE MAGAZINE RANKING • “Most admired companies” • Chosen by businessmen http://money.cnn.com/magazines/fortune/most-admired/2012/full_list/… 2012 results

  6. NEWSWEEK RANKING • “Green rankings” • Helped by Trucost • Look at Global 500 & U.S. 500 http://www.thedailybeast.com/newsweek/2012/ … 2012 results

  7. GLOBAL 100 3,500 global public companies Compared to what is needed e.g. Factor Four improvements Key Performance Indicators Energy productivity Carbon productivity Water productivity Waste productivity Innovation capacity % Taxes paid CEO-to-Average-Worker Pay Pension fund status Safety performance Employee turnover Leadership diversity Clean capitalism pay link http://www.global100.org/; 2013 list

  8. GLOBAL 100: CANADA Top in Canada 21. Teck Resources 40. Barrick Gold 57. CN Railway 60. TELUS 71. Nexen 79. Enbridge 81. Suncor Energy 85 Sun Life Financial 87. Royal Bank 88. Cenovus Energy http://www.global100.org/; 2013 list

  9. MY BACKBURNER QUESTIONS 2012 2009 2005 2002 Stage 4 vs. Stage 5? Most sustainable enterprises? Characteristics of a sustainable enterprise?

  10. SUSTAINABILITY JOURNEY 5. PURPOSE & PASSION 4. INTEGRATED STRATEGY 3. Beyond Compliance 2. Compliance 1. Pre-Compliance

  11. “Over the last 10 years, the ‘Sustainability Imperative’ has emerged,magnified by escalating public and governmental concern about climate change, industrial pollution, food safety, andnatural resource depletion, among other issues.” Lubin and Esty, HBR May 2010

  12. “Expect the Unexpected: Building business value in a changing world,” KPMG, 2012

  13. “Capitalism is under siege … The purpose of a business must be redefined around creating shared value (CSV)… How to reinvent capitalism—and unleash a wave of innovation and growth” Porter and Kramer, HBR Jan-Feb 2011

  14. CAPITALISM 2.0

  15. DOWN-TO-EARTH ECONOMY Based on David Korten, “The Down-To-Earth Economy,” Yes! Magazine, Winter 2013

  16. THE REAL WORLD

  17. NESTED DEPENDENCIES Environment Human Society Human Economy X Enough, for all, forever.

  18. TRULY SUSTAINABLE ENTERPRISE Environment Human Society A truly sustainable enterprise creates positive economic, environmental, and social value. Human Economy X If it were to operate forever,it would not only do no harm; it would do well by doing some good.

  19. GOLD STANDARD FRAMEWORK ESG Social Governance Environmental

  20. ESG CRITERIA Breakout Group Discussion Question: List 5 ESG criteria that you would use to assess whether or not a company is a truly sustainable enterprise. “Mount Sustainability”

  21. ESG CRITERIA Breakout Group Idea Harvesting: • "Noble purpose" – but how do we measure this, what is/are the metric(s) • Do consumers as well as investors understand the implications of supporting the company? Criteria for this could be direct or indirect, e.g. whether company is effective in educating/communicating investors/consumers to understand these effects/implications • Fair wages and distribution of wealth throughout value chain – inputs/outputs • No waste in network/ecosystem – if there is a product with waste must have way to reuse – closed loop process/concept

  22. ESG CRITERIA Breakout Group Idea Harvesting: Degree of community/stakeholder engagement – sliding scale from hierarchy to cooperative (includes employees and broader community) Is it a ‘learning organization’ with ‘permission to fail’ PUMA – Is it possible to estimate what the environmental impact of all our supply chain operations are and convert that into a financial number – eg material resources, carbon, water – if these costs are considered what was seen as a profitable company can easily be seen as a losing company. Puma was a leader in assessing actual costs when by internalizing what were previously seen as externalities - they 'gave themselves a bill' for environmental costs

  23. ESG CRITERIA Breakout Group Idea Harvesting: Need to be positive on all three legs of ESG or is there allowance to be negative/neutral on 1-2, if positive on other(s) – parallel to this is carbon trading –> can you 'buy yourself out?' of being 'bad' 100% of compensation for everyone in company not simply tied to shareholder value but aligned 100% to stakeholder value Equity: i.e. no one is exploited through activities/operations of company – could be evaluated on many levels including legal, living wage  if we dream big, let's look at company's whole value chain, not just the company (Big question – where does accountability end? How much is enough? When is enough enough?) And, if they ‘do too much good’, and put themselves out of business, then the G leg of the stool is broken, right?

  24. ESG GOLD STANDARD CRITERIA Environmental Carbon positive Energy positive Water positive Materials positive Waste positive Provides services (vs. products) Restorative to ecosystems Social Fair share of taxes Labor rights & safe working conditions Fair employee remuneration Family-friendly benefits Engaged employees Local workers, purchases, & investments Products & services build social capital Governance / Financial Financially sustainable Ethical business practices Diverse senior leadership Transparent / Engaged stakeholders Sustainable business model, policies, & systems Sustainable value chain / Life-cycle accountability Sustainability champion / Leader of transformation

  25. MY BACKBURNER QUESTIONS 2012 2009 2005 2002 Correlation with market value? Stage 4 vs. Stage 5? Most sustainable enterprises? Characteristics of a sustainable enterprise?

  26. MARKET PERFORMANCE Robert G. Eccles et al, “The Impact of a Corporate Culture of Sustainability on Corporate Behavior and Performance,” HBS working paper 12-035, Nov. 25, 2011. http://www.hbs.edu/research/pdf/12-035.pdf..

  27. REPORTING COMPANIES OUTPERFORM • 53% of S&P 500 companies are published sustainability- or CSR-type reports in 2011, up from 20% in 2010 • 63% follow the Global Reporting Initiative (GRI) framework • Between 2007 and 2011, companies that reported on their sustainability efforts outperformed the broad S&P 500 Index Governance and Accountability Institute, “2012 Corporate ESG / Sustainability / Responsibility Reporting: Does It Matter?” December 2012

  28. IIRC Will create the globally accepted International <IR> Frameworkthat includes financial, governance, management commentary, and sustainability reporting. Reports will include material sustainability impacts, and show how the company creates value in the form of financial, manufactured, human, intellectual, and natural capitals. • December 2013: Version 1.0 of the Framework • Q1-Q4 2014: Pilot Program with the Business Network (80 companies) and the Investor Network (30 investors) International Integrated Reporting Council (IIRC) http://www.theiirc.org/

  29. SASB Will develop industry-specific standards to measure and disclose ESG performance on the top 10 material sustainability issues, for mandatory Form 10-K filings with the SEC. A complete set of standards covering all 10 sectors and 89 industries will be available in Q2 2015. Sustainability Accounting Standards Board (SASB) http://www.sasb.org/

  30. GISR Will create a world class corporate sustainability ratings standard, to embed sustainability into the capital markets worldwide Global Initiative for Sustainability Ratings http://ratesustainability.org/resources/

  31. CAPITALISM 2.0: How Would We Recognize It If We Saw It? TSSSFebruary 7, 2013 bobwillard@sympatico.ca www.sustainabilityadvantage.com

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