2014 Kaleidoscope Conference Algonquin College May 13, 2014 THE GOOD NEWS ABOUT THE NEW SU$TAINABILITY IMPERATIVE [email protected]@sympatico.ca.

2014 Kaleidoscope ConferenceAlgonquin College

May 13, 2014

THE GOOD NEWS ABOUT THE

NEW SU$TAINABILITY IMPERATIVE

[email protected] sustainabilityadvantage.com

CORPORATE SUSTAINABILITY

TRIPLE BOTTOM LINE

Eco

nom

y

Environment

Equit

y

Pro

fits

/

Planet /

Peop

le

/

CORPORATE SUSTAINABILITY

GREEN +CSR

Eco

nom

ic

Environmental

Socia

l

CORPORATE SUSTAINABILITY

ESG

Gov

ernan

ce

Environmental

Social

CORPORATE SUSTAINABILITY

ASSET MANAGEMENT

Fin

anci

al /

Man

ufa

cture

dC

apit

al

Natural Capital

Hum

an /

Social

Cap

ital

AC S-E-E FRAMEWORK

http://www3.algonquincollege.com/sustainability/overview-2/our-framework/

THE REAL “REAL WORLD”

NESTED INTERDEPENDENCIES

1. Pre-Compliance

2. Compliance

4. INTEGRATED STRATEGY

5. PURPOSE & PASSION

FIVE-STAGE SUSTAINABILITY JOURNEY

3. Beyond Compliance

“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 Lubin and Daniel Esty, HBR, May-

June 2010

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

Access to

capital

Talent wars

Productivity

Innovation

Quality

Risk

management

Supply security

Profit

Share price

Brand value

Revenue

growth

Market share

Expenses

ROI

(SUSTAINABILITY) STRATEGIES

“SUSTAINABILITY”

ENABLERS vs. ONE MORE GOAL

Revenue

PROFIT

4.Reduced materials

1. Increased revenue2. Reduced energy

6.Reduced turnover

5.Increased productivity 7

.Red

uce

d r

eve

nu

e

an

d i

ncr

ease

d

exp

en

ses3. Reduced waste

Opportunities RisksIncome Statement

10%

9%

75%

25%

2%

20%

+51 to

+81%

-16 to -36%

Exp

en

ses

SUSTAINABILITY CAPITAL RESERVE

SUSTAINABILITY BUSINESS CASE

Company Data Profile

Small Professi

onal Services

Large, Manufactu

ring & Distributio

n

Revenue $1,000,000

$500,000,000

Energy expense $20,000 $10,000,000

Materials and water expense

$50,000 $150,000,000

Total salary / payroll expense

$300,000 $150,000,000

Profit $70,000 $35,000,000

Average salary $50,000 $40,000

Number of employees 6 3,750

Potential profit increase

51% 81%

Potential profit at risk-

16%-

36%

60-employee manufacturing company

58% reduction in electricity usage90% reduction in natural gas usage

Reduced annual CO2 emissions by 115 tonnes

Invested $46,186 to yield energy savings of $89,152

Average pay-back period of 6.3 months

Increased profits by 76%.

“Manufacturer finds lighting energy efficiency convenient,” Green Manufacturer, March 1, 2010

42 projects between 2006-2008

GREEN BUILDING BENEFITS: TO WHOM?

Adapted from Cleland Robertson, Lead Manager, Sustainable Construction & Infrastructure Group, Sustainable Business Solutions, PwC Chile. Based on World Green Building Council.

• Reduced downtime• Lower operating costs• Lower maintenance costs

• Easier financing• Rapid ROI• Higher market value

• Slower depreciation• Higher occupancy rate

• Lower refurbishment costs• Corporate image / prestige• Compliance with regulations

• Lower design and construction costs• Faster sales

• Increased productivity

GREEN BUILDINGS: PRODUCTIVITY

World Green Building Council, “The Business Case for Green Buildings,” March 2013

Bottom Line Business Case

Profit could drop by 16-

36%“Expect the Unexpected: Building business value in a changing world,” KPMG, 2012

Profit could increase by 51-

81%

Revenue at risk

Risk from poor reputation on energy and carbon management

Risk from poor reputation on water management

Risk from poor reputation on materials and waste management

Risk from poor reputations of suppliers or customers

Risk from poor reputation on eco-system damages

Risk from less competitive prices

Risk from sudden disruptions in the value chain

5%

Potential Revenue Erosion% Rev.

at Risk

% Probability within 5 yrs

5%

5%

2%

5%

5%

10%

25%

25%

20%

5%

10%

1%

10%

5%

RISKS TO REVENUE

Potential increase in expenses

Risk of higher cost of energy

Risk of a price on carbon ($20/T x 300T/$1M Rev.)

Risk of higher cost of waste

Risk of higher cost of water and materials

Risk of higher cost of capital (Debt = 30% of Rev.)

Risk of higher employee voluntary turnover

Risk of lower employee productivity

10%

Potential Escalating Expenses %

Potential Impact

% Probability within 5 yrs

100%

5%

5%

0.60%

5%

75%

25%

70%

75%

75%

25%

11% to 31%

1% 10%

Impact on profit from revenue and expense risks -16% to -36%

RISK OF ESCALATING EXPENSES

GLOBAL RISKS 2014

• 10-year outlook

• 31 global risks with the potential to cause significant negative impact across entire countries and industries

• Five classifications: • Economic, • Environmental • Societal• Geopolitical • Technological

• All are interconnected.

World Economic Forum (WEF), “Global Risks 2014,” January 2014.

RISK LIKELIHOODS AND IMPACTS

World Economic Forum (WEF), “Global Risks 2014,” January 2014.

RISK INTERCONNECTIONS

World Economic Forum (WEF), “Global Risks 2014,” January 2014.

1.80% increase in world energy demand, with 85% from fossil fuels; 50% increase in GHGs (685 ppm)

2.Urban air pollution / ground-level ozone is top cause of mortality, ahead of dirty water and lack of sanitation.  

3.Global biodiversity declines by a further 10%, mature forests shrink by 13%.

4.Global water demand increases by some 55%; competing demands put water use by farmers at risk; 40% of the global population live in river basins under severe water stress

OECD RISKS BY 2050

OECD, “Environmental Outlook to 2050.”

New companies will be more resilient, robust, and able to thrive in fast-changing times”

Andrew Winston, The Big Pivot, HBR Press, 2014

“A weakening of the pillars of our planetary infrastructure

—a stable climate, clean air and water, healthy biodiversity, and

abundant resources— is costing business real money”

If this hotter, scarcer, more transparent, and unpredictable world is the new normal, then how

must companies act to ensure a prosperous future for all, including

themselves? … That’s the Big Pivot … and it’s

nonnegotiable.”

Assess current realities

7-STEP CHANGE PROCESS

Wake up and decide

Build case(s) for change

Inspire shared vision(s)

Develop strategies

Mobilize commitment

Embed and align changes

ContinuouslyLearn and

Adapt

2014 Kaleidoscope ConferenceAlgonquin College

May 13, 2014

THE GOOD NEWS ABOUT THE

NEW SU$TAINABILITY IMPERATIVE

[email protected] sustainabilityadvantage.com