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Business Value and Sustainability

Business Value and Sustainability. David Wheeler Erivan K Haub Program in Business and Sustainability. The SVA - sustainability paradox. The test of a first class mind is the ability to hold two opposing ideas in the head at the same time and still retain the ability to function

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Business Value and Sustainability

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  1. Business Value and Sustainability David Wheeler Erivan K Haub Program in Business and Sustainability

  2. The SVA - sustainability paradox The test of a first class mind is the ability to hold two opposing ideas in the head at the same time and still retain the ability to function F Scott Fitzgerald

  3. Shareholder Value Model Tomorrow Innovation Repositioning Growth Path Trajectory SVA Internal External Profit Risk Reduction Reputation Right to Operate Today

  4. ‘Sustainable’ Value Model Drivers Tomorrow Drivers Sustainability Lens Sustainability Lens Innovation Repositioning Growth Path Trajectory SVA Internal External Profit Risk Reduction Legitimacy Right to Operate Sustainability Lens Sustainability Lens Drivers Drivers Today

  5. Clean technologies Meet unmet needs Disruptive technologies Raise the bottom Footprint reduction Transparency accountability Resource productivity Stakeholder dialogue Sustainable Value Model Tomorrow Drivers Drivers Ballard Honeywell Grameen HP Innovation Repositioning Growth Path Trajectory Internal External Profit Risk Reduction Reputation Right to Operate 3M DuPont Suncor Placer Dome Drivers Drivers Today

  6. Drivers of change in stakeholder relations • The shifting sands of taxation and fiscal policy • internalisation of environmental and social costs • ecotaxation and fiscal reform • stakeholders’ need for assurance • attitude of investors • the governance issue • changing societal and workplace values • the rise of the ‘gold collar’ worker • the rise of the intelligent consumer • technology, e-commerce and e-communication • competition and competitiveness

  7. 20th Century production inputs access to capital market domination proprietary information 21st Century knowledge innovation competencies intellectual property and social capital brands reputation relationships Sources of wealth creation and competitive advantage

  8. Descriptive typology of approaches to stakeholder management • defensive (relationships avoided) • top down (risk and liability reduction) • interactive and innovative (trust-based, opportunity driving)

  9. TBL + Engaged Tier 3 Meeting reasonable expectations Responsive Tier 2 Tier 1 Compliant Avoiding harm Reconciling sustainability and corporate social responsibility

  10. Historical examples of stakeholder inclusion in US corporate strategy • General Electric - 1930s • Shareholders • Employees • Customers • General Public • Sears - 1950s • Customers • Employees • Community • Stockholders

  11. William Ford on stakeholders We want to find ingenious new ways to delight consumers, provide superior returns to shareholders and make the world a better place for us all. We can do well for employees, customers and shareholders, and we can do good for society. William C Ford Jr, Chairman, Ford Motor Company 13 May 1999

  12. The business case for investing in stakeholder relationships Eighteen mostly US companies with 50-100 year track records all demonstrated a strong commitment to people development and knowledge sharing. These companies ‘built to last’ outperformed comparator companies’ stock price 15 fold and average share prices 70 fold. James Collins & Jerry Porras, Built to Last

  13. The business case for balancing stakeholder relations Over an eleven year period, established US companies which balanced the interests of customers and workers with those of owners demonstrated sales growth four times and employment growth eight times that of companies which followed a ‘shareholder first’ strategy. James Kotter & John Heskett, 1991

  14. The business case for social capital US companies lose on average 50 per cent of their customers every five years, 50 per cent of their employees every four years and 50 per cent of their investors every year. But the most successful US companies have lower turnover rates. Frederick Reichheld, The Loyalty Effect

  15. Coca Cola Microsoft IBM General Electric Ford Disney Intel McDonalds Marlboro Nescafe $83.8 billion $56.6 billion $43.8 billion $33.5 billion $33.2 billion $32.3 billion $30.0 billion $26.2 billion $21.0 billion $17.6 billion Interbrand, 1999 The business case for reputation and protection of brand value

  16. Eco-efficiency The Potential 10 AAA vs. 10 CCC companies in: EcoValue ‘21 Top and Bottom Rated Companies1998 Total Return • aerospace defense • specialty chemical • chemicals • communication equipment • electric companies • electronics (semiconductors) • health care • iron and steel • paper, forest products, etc. • petroleum

  17. Social capital and the new economy Volatility and virtuality erode relationships - it’s that simple - which is why managers must learn to invest in social capital. Laurence Pruzak & Don Cohen, HBR June 2001

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