Sustainability Advantage: The Busine $$ Ca $ e for Sustainability

1. Sustainability Advantage: TheBusine$$ Ca$e for Sustainability PPPC Convention Toronto January 16, 2012 Bob Willard bobwillard@sympatico.ca www.sustainabilityadvantage.com

2. Sustainable Promotional Products • Cause-related promotional products • Donation to charity of person’s choice • Carbon offsets • Matching grants

3. Definitions of Sustainability Sustainable Development (SD) Meeting the needs of the present generation without compromising the ability of future generations to meet their own needs. – Brundtland Commission, 1987 – Sustainability The possibility that human and other forms of life on earth will flourish forever. – John Ehrenfeld, Professor Emeritus, MIT – Sustainable Development (SD) Enough - for all – forever. – African Delegate to Johannesburg (Rio+10) –

4. Core Concepts of Sustainability Futures ThinkingIntergenerational responsibility (Eco-)Systems ThinkingCarrying capacity of the planetto absorb waste and support life Social JusticeEquity, Dignity, Basic services, Human rights, Stakeholder voices Economic, Environmental, Social/Culturalresponsibilities

5. 3-Legged Sustainability Stool Sustainability Environmental Leg No Pollution & Waste Renewable Energy Conservation Restoration Economic Leg Good Jobs FairwagesSecurity Infrastructure Fair Trade Social Leg Working conditions Health services Education services Community & Culture Social justice Quality of Life / Genuine Wealth / Genuine Progress

6. Corporate Sustainability 3-Legged Stool Triple Bottom Line (TBL) = 3Es = 3Ps = Sustainability = Sustainable Development (SD) = Corporate Responsibility (CR) = Environmental, Social, Governance (ESG) = Corporate Social Responsibility (CSR) = Green Environment - Planet Eco-efficiencies Eco-effectiveness Economy - Profits GrowthJobs, Taxes Products Services Equity - People Employees Community / Culture World

7. Smart Business 3-Legged Stool Asset Management Natural Capital Economic / Financial Capital Built / Manufactured Capital Human Capital Social Capital Sustainable Value Creation

8. 5-Stage Sustainability Journey 5. Purpose/PassionAlign with founder’s / CEO’s values 4. Integrated StrategyEnhance company value / prosperity 3. Beyond ComplianceSave on eco-efficienciesAvoid PR crisis Avoid threat of new regulations 2. ComplianceAvoid fines, prosecution, bad PR 1. Pre-Compliance

9. The “Sustainability Imperative” Megatrend: “A fundamental shift in the competitive landscape that creates inescapable threats and game-changing opportunities ... profoundly affects companies’ competitiveness and even their survival.” Over the last 10 years, the “Sustainability Imperative” has emerged,magnified by escalating public and governmental concern about climate change, industrial pollution, food safety, and natural resource depletion, among other issues.” David A. Lubin and Daniel C. Esty, “The Sustainability Imperative,” HBR May 2010

10. Significant CEO Mindset Shift 2010 Increase Over 2007 CEOs Agree /Strongly Agree that sustainability should be …. … fully embedded into company strategy and operations … discussed and acted on by boards … fully embedded into subsidiaries’ strategies and operations … embedded throughout the global supply chain … the basis for industry collaborations and multi-stakeholder partnerships … incorporated into discussions with financial analysts Survey of 766 worldwide CEOs, including 50 in-depth interviews UN Global Compact and Accenture study, “A New Era of Sustainability,” June 2010

11. Stakeholders Driving Sustainability Stakeholders who CEOs believe will have the greatest impact on the way they manage societal expectations Consumers Employees Governments Communities Regulators Media Investment Community Suppliers NGOs Boards Organized Labor Other Survey of 766 worldwide CEOs, including 50 in-depth interviews UN Global Compact and Accenture study, “A New Era of Sustainability,” June 2010

12. CEOs: Sustainability Drivers Top 3 drivers of CEOs’ action on sustainability issues Brand, trust, and reputation Potential for revenue / growth / cost reduction Personal motivation Consumer / customer demand Employee engagement and recruitment Impact of development gapson business Governmental / regulatory environment Pressure from investors / shareholders Survey of 766 worldwide CEOs, including 50 in-depth interviews UN Global Compact and Accenture study, “A New Era of Sustainability,” June 2010

13. The “Iceberg” of Company Value 1998 1978 1981 2009 25% Tangibles / Financials 29% 83% 95% Intangibles / Non-Financials / Reputation / Goodwill 5% 71% 17% 75% Market Value / Capitalization Sources: For 2009, Hollender, Orgain, and Nunez, “The Business Case for Sustainability” [accessed July 30, 2011], Kaplan Eduneering/Seventh Generation Sustainability Institute, February 2010; for 1998 and 1981, Roberts, Keeble, and Brown, “The Business Case for Corporate Citizenship,” Arthur D. Little, 2002, p. 1; for 1978, Stewart, “Accounting Gets Radical,” Fortune, April 16, 2001.

14. The “Perfect Storm” Threatens Financial and Social Capitals Species Extinction and Overharvesting Climate Change and Energy Crisis 25% Waste, Toxicity, and Health Tangibles / Financials Food and Water Crises Poverty and Social Injustice (NGOs) (Scientists) Intangibles / Non-Financials / Reputation / Goodwill Governments Global Markets Social license to operate Media Banks The Public Competitors Employees Communities Investors Customers Insurers Market Value / Capitalization Boards Economists

15. CEOs: Sustainability Drivers Top 3 drivers of CEOs’ action on sustainability issues Brand, trust, and reputation Potential for revenue / growth / cost reduction Personal motivation Consumer / customer demand Employee engagement and recruitment Impact of development gapson business Governmental / regulatory environment Pressure from investors / shareholders Survey of 766 worldwide CEOs, including 50 in-depth interviews UN Global Compact and Accenture study, “A New Era of Sustainability,” June 2010

16. Top 10 Business Priorities for 2011 Forrester's survey of 2,691 executives in Europe, North America, and Asia, “Forrsights Business Decision-Makers Survey, Q4 2010.”

17. One More Goal … or an Enabling Strategy? Profit Share price Growth Revenue Market share New markets Customer care Expenses Talent wars Productivity Innovation Brand imageQuality Risks Compliance Governance Supply security “Sustainability” Enabling Strategies

18. Income / Profit & Loss Statement Revenue / Sales • Expenses • Cost of goods sold (COGS) • Selling, general, and administrative (SG&A) • Interest, taxes, depreciation, and amortization (ITDA) Profit / Net Income

19. Wouldn’t it be nice if someone … …determined what real companies have achieved from their sustainability-related revenue enhancement and expense saving initiatives, by researching books, articles, press releases, surveys, research papers, case studies, etc. …sorted the benefits into generic categories …monetized the benefits and normalized themto revenue …projected profit improvements for typical companies, if they were to simply do what leading companies have already done, within the next 3 to 5 years 5. …made it easy to tailor the business case for a particular company with an open source simulator

20. 7 Business Case Benefits Opportunities Income Statement Risks Revenue 1. Increased Revenue 9% 2. Reduced energy expenses 75% 3. Reduced waste expenses 20% Reduced risks to revenue and expenses Reduced material and water expenses 10% Expenses Increased employee productivity / innovation 2% Reduced employee turnover expenses 25% +51 to +81% Profit -16 to -36% Sustainability Capital Reserve

21. Two Sample Typical Companies Potential Profit Increase 51% 81% Potential Profit at Risk -16% -36%

22. 5 Sources of Funds Existing budgets: maintenance, advertizing, marketing, communications, education Government grants and incentives, especially for early movers Sustainability Capital Reserve Other internal capital or external capital markets Treat as an investment, rather than as a cost: high yield, low risk Benefits are only counted after their 1 to 5 year payback period

23. The “Tipping Point” 5. Purpose & Passion Align with founder’s / CEO’s values 20% 4. Integrated Strategy Enhance company value / prosperity 3.3: Embed sustainable governance 3.2: Create new eco-effective products, services, leases 3.1: Improve supply chain conditions and footprints 3.0: Improve company eco-efficiencies and sustainability brand 3. Beyond Compliance Capture eco-efficiencies; Avoid PR and regulatory risks 2. Compliance 1. Pre-Compliance

24. Question • How long do you think it will be before we reach the sustainability tipping point in the business community? • 0-5 years • 5-10 years • 10-15 years • More than 15 years • Never

25. Time Until Sustainability Tipping Point 3% 10% 17% 44% 26% Source: Environmental Leader, “Time Until Sustainability Tipping Point is Reached, View of Global CEOs (% of respondents)” in Environmental and Energy Data Book Q2 2011, July 2011, p. 26. Based on survey of 1,251 companies, in UN Global Compact Annual Review 2010.

26. Corps Are Investing in Sustainability The growth of investment in sustainable business programs will be between 50-100% higher in 2013 than in 2011. Spending on sustainability programs by Australian, Canadian, U.K. and U.S. companies with over $1B in sales will hit $60B in 2013. (Verdantix, based on spending patterns of 2,500 global firms, March 2011) MIT Sloan and the Boston Consulting Group winter 2011 research report,“Sustainability: The ‘Embracers’ Seize Advantage,” Feb. 2011

27. Sustainable Promotional Products • Cause-related promotional products • Donation to charity of person’s choice • Carbon offsets • Matching grants

28. In Summary … Sustainability is smart business Relevant tocurrent organizational priorities Important stakeholders’ expectations are rising New market forces & risks are in play Large companies have a ripple effect on suppliers Promotional products are symbolic gestures Opportunity forleadership … by example Many willing, helpful, unusual partners

29. Sustainability Advantage: TheBusine$$ Ca$e for Sustainability PPPC Convention Toronto January 16, 2012 Bob Willard bobwillard@sympatico.ca www.sustainabilityadvantage.com