Bob Willard's Slides: "A Look at a Proposed Gold-Standard Benchmark for Sustainability Performance”

GOLD-STANDARD ESG BENCHMARK FOR A

TRULY SUSTAINABLE BUSINESS

[email protected] www.sustainabilityadvantage.com

HOW WOULD WE RECOGNIZE A TRULY SUSTAINABLE BUSINESS

IF WE SAW ONE?

THE FOURTH BENCHMARK

X!1 Baseline

year!

Other companies!

Performance Today!

2 Company

Goal!

3 GO

AL LINE(S)!

4

Gold-standard benchmark !

Material, science-based KPIs and Goals for a

Truly Sustainable Business !Company X!

FIVE BENEFITS

1.  It addresses the confusion factor

2.  It creates a sense of urgency

3.  It raises the bar and sparks innovation

4.  It identifies true leaders and best practices

5.  It helps identify material ESG issues

SEVEN REASONS THAT IT’S TIME 1.  Leading companies are ready

2.  Important stakeholders are ready

3.  Capitalism is ready

4.  Business case is stronger than ever

5.  Opportunity to harmonize with ESG standards

6.  We’re running out of runway

7.  It is doable

THE REAL WORLD

NESTED DEPENDENCIES

Human Economy

Human Society

Environment

X

TRULY SUSTAINABLE BUSINESS

Economy

Society

Environment

If it were to operate forever, it would not only do no harm; it would do well by doing some net good.

… contributing to the possibility that human and other life will flourish

on our planet, forever

… throughout its value chain/network

A truly sustainable business creates positive environmental,

social, and economic value

X

METHODOLOGY / FLOW OF LOGIC

8 science-based System Conditions for a sustainable environment (3)

and a sustainable society (5)

25 KPIs with measureable goals that confirm the Key Transitions have been made

21 Key Transitions to meet the Design Constraints

8 Design Constraints for a truly sustainable business model

GOLD-STANDARD BENCHMARK FRAMEWORK

ESG

Gov

erna

nce

Environmental

Social

KPI PRINCIPLES • Sustainability context: Each KPI is rigorously connected to a

science-based design constraint for a truly sustainable business model •  Context-based: Fair share within regional thresholds •  Offsets: Possible for some KPIs •  Interim proxies: Metrics for currently unmeasurable KPIs

• Assurability: Measurable thresholds/goals; variety of metrics

• Materiality: Material to the environment and society à Material to company success à Material to investors

• Value chain: Include Tier 1 & 2 suppliers, and customers

• Comparability: Map to indicators in GRI and other standards

• Comprehensiveness: Each is necessary; all are sufficient

KPIs & GOALS

Governance / Financial (7) • Board oversight: ESG committee • Policies and systems: embed ESG principles • Procurement: heavy ESG weighting • Ethics: zero ethical violations • Disclosure: full, on ESG aspects • Public policy: transparent about lobbying • Financial performance: going concern

Environmental (8) •  GHGs: zero or better •  Energy: 100% renewable •  Water used: fair share or net zero •  Materials: 100% recycled/renewable •  Waste: net zero or better •  Land and water pollution: zero •  Air pollution: zero •  Land use: restorative

Social (10)

KPIs & GOALS

Governance / Financial (7) • Board oversight: ESG committee • Policies and systems: embed ESG principles • Procurement: heavy ESG weighting • Ethics: zero ethical violations • Disclosure: full, on ESG aspects • Public policy: transparent about lobbying • Financial performance: going concern

Environmental (8) •  GHGs: zero or better •  Energy: 100% renewable •  Water used: fair share or net zero •  Materials: 100% recycled/renewable •  Waste: net zero or better •  Land and water pollution: zero •  Air pollution: zero •  Land use: restorative

Social (10) • Stakeholder safety: zero harm • Stakeholder rights: for 100% of stakeholders • Stakeholder diversity: mirrors demographics • Stakeholder engagement: 80% annually? • Stakeholder development: 100% eligible • Employee remuneration: living wage? • Employee ESG pay link: 20%+ weight • Local economy: 80% of stakeholders are local? • Taxes paid: 100% of statutory obligations • Community benefits: positive social capital?

KPI PRINCIPLES • Sustainability context: Each KPI is rigorously connected to a

science-based design constraint for a truly sustainable business model •  Context-based: Fair share within regional thresholds •  Offsets: Possible for some KPIs •  Interim proxies: Metrics for currently unmeasurable KPIs

• Assurability: Measurable thresholds/goals; variety of metrics

• Materiality: Material to the environment and society à Material to company success à Material to investors

• Value chain: Include Tier 1 & 2 suppliers, and customers

• Comparability: Map to indicators in GRI and other standards

• Comprehensiveness: Each is necessary; all are sufficient

SYSTEMS CONDITIONS

http://www.naturalstep.org/the-system-conditions

1. systematically increasing concentrations of substances extracted from the Earth’s crust 2. systematically increasing concentrations of substances produced by society 3. systematic degradation of nature by physical means

In a sustainable society, nature is not subject to …

…and, 4. in that society, people are not subject to conditions that sytematically undermine their capacity to meet their needs:

4a. Wellness 4b. Influence 4c. Learning and Growth 4d. Equity 4e. Meaning

Quality of Life Well-being Happiness

DESIGN CONSTRAINTS

… and 4. does not subject people to systemic barriers to their… 4a. Wellness   4b. Influence 4c. Learning and growth 4d. Equity 4e. Meaning

Social Capital

Natural Capital

Human Capital

Financial Capital

1. an ongoing buildup over time of substances extracted from the Earth’s crust 2. an ongoing buildup over time of substances produced by society 3. systematic degradation of nature by physical means

A truly sustainable business does not contribute to …