Sustainability - Draft

SustainabilityA TRIPLE BOTTOM LINE

STRATEGY

Mono-cropping is endangering genetic diversity

20 plants now supply 80% of humanity’s food

Source: IDRC Briefing

Did you know?!

Chronic Water shortages:2010 31 countries > 500 million

2013 36 U.S. States > 100 million2035 50 countries > 3 billion

Only 3% of earths water supply is drinkable and 95% of it is frozen

Source: Economist, Panjiva & Watersense

Did you know?!

Embedded water use 30xCanadian importation

1:6 1.8 million

Ogallala aquifer water source:

33% of Corn crops

30% of irrigated farmland

80% CO, KS, NE, NTX, OK, SD, WY drinking water supply

It is being pumped dry at the rate of 325 billion cubic meters

a yearSource: Kerr Center & U.S. EPA

Did you know?!

U.S. Gov’t study oil and gas supplies will not keep up with demand over next

twenty-five years. Translation alternative energy, energy reduction, energy

efficiency and rising energy prices.

If China begins to use the same amount of oil per capita as the U.S., China alone would consume 100% of the world’s oil production

2010: 12k cars per day2015: 150 million (18 million more than U.S.)

Source: WSJ, People’s Daily & Morning Star

Did you know?!

Major Non-Renewable Resources are depleting world-wide:

AntimonyBariumBismuthCobaltGalliumManganeseNickelPlatinumTitaniumZinc

What does this mean?

Computers, Communication, Healthcare and Solar power

Source: Annual Vital Signs Report World Watch Institute & U.S. Geological Association

Did you know?!

U.S. economy consumes in excess of 100 billion tons of raw materials per year in excess of 90% of this ends up as waste

Did you know?!

Various forms of waste—solid and liquid—including plastics and petro-chemical disbursed through the air and ground waters can travel thousands of miles and end up in:

soilwaterrainfall

impacting local health and eco-system survivability

Source EPA

Global population is ever increasing 9+ billion by 2050 (adding 2 to China’s)

Income is increasing world-wide; new middle class

Population + Income = Consumption

What is basis to "problems”

$430 billion annual advertising budget

4x increase China, India, Venezuela, Brazil, Argentina, South Korea, Taiwan,

Indonesia and Thailand

Top 20% Malaysians and Chileans have higher average incomes than German or Japanese counterparts

Source: AMA & Yankelovich

Did you know?!

Many Businesses & Organizations still operate with a world-view

that has not changed since

Industrial Revolution

The Business Paradigm

Natural resources >

Labor was <

The Paradigm

People limiting factors of production

In spite of our best labor efforts, economy as a whole is enormously inefficient:

Bad News: Increased waste

tonnage from 250 million in 1990 to over 500 million today

Good News: Capacity

Unknown News: ?

WASTE

U.S. Economy

4.5 lbs. per person per day = .821 tons per person per year

Source: US EPA

Current or Old Paradigm was"end-of-the-pipe"

remediation efforts

How do we manage waste ?!

Stewardship: Current growth model (indiscriminate consumption via obsolescence ) is not sustainable

What has this Paradigm resulted in?

Regardless of one’s “political” persuasion

How we operate is unsustainable (NJR)

Some Simple Facts

The Changing Paradigm

Natural resources <

Labor is >

Paradigm is Shifting

Natural resources limiting factors of production

Next “Industrial Revolution”, like the first, will be in

response to:

changing patterns of scarcity and influenced behavior

Natural Capital—Sustainability

The New Paradigm

Corporate Social ResponsibilityEquity(able)

EnvironmentalismGreenLean

Sustainable Development

Sustainability Another Word for:

Core to contemporary Sustainability are the

Four (E’s)

What is Sustainability?

1st E Ecology & Environment2ndE Economy & Employment

3rd E Equity & Equality (social)

4th E Education

4 E’s or Core to Sustainability

Fad

Movement

Revolution

Sustainability: How Real?

A definition:

Economic Development + Social Wellbeing + Environmental Protection = Sustainability

“Meet present needs without compromising the ability of future generations to meet their needs"(WECD, 1987).

Sustainability

Borneo (diesel to hydro) Tigray Region (women agriculture) Curitiba, Brazil (bus system 8-1.9) Bavaria, Germany (solar 9k) Adele, Australia (solar city) India (biogas and time) NYC (1 Yr &1k Bldg Supers) U.S. Gov’t (green leasing) USGBC (green property mgt cert) Madison, WI (local dollars) MIT, Oberlin, UNC, Furman, Stanford, Liberty,

Bates, etc. Alexandria VA School system (healthy schools) State NC (project green 156) Faith Based Organizations (social entrepreneur)

What’s Going On Out There

U.S. States RPS Targets

A definition:

An alignment of an organizations’ products, services & processes with

expanded stakeholder expectations resulting in a re-definition of profit.

Profit= economic +environmental + social value

realized through optimal utilization of natural & social capital

Corporate Sustainability

Mattel Corporation (logistics programs) Safeway Stores (Renewable energy) Wal-Mart (Green Products, renewable energy) Nike (new product design) Fruit of Loom (waste water) Lowes (LfP GBM) Marriott (CY Design) KKR & EDF (Portfolio Best Practices) UMMC Hospital System (weekend audits) UPMC (healthy children) Grove Park Inn (waste) Carnhagan Car Wash (water reuse) Shorebank (Community model) Bank of America SC/NC (100+ cool roof) South G’ville Fire Dept (water re-harvesting) Jarden Process Solutions (packaging) Cox Wood (renewable energy) Hartness Intl (LCM)

What’s Going On Out There

The concept of sustainability is gaining traction

Customers Supply-chain (up/down) Employees Regulators Other Stake-holders

Any miscalculation or misjudgment can have serious

repercussions

Sustainability

New Paradigm emerging realization that:

• waste reduction• energy efficiency

• pollution prevention • product innovation (naturally)

• social responsibility-equity

make economic and social sense!

What is driving Sustainability?

Some argue it’s just a re-badging or extension of Lean manufacturing

Continuous improvement: increasing efficiency, reducing waste, easing environmental impact, and boosting workplace safety

Is Sustainability Something New?

Others argue lean is precursor to sustainability Much larger context and external issues:

resources & constraints government regulation societal intervention & responsibility marketing strategies expanded profit definition shareholder value/linkage

Is Sustainability Something New?

Ignore---no top manager in CJO role

Adhere---doing minimally required

Lip Service---remedially oriented

Strategic---strategic positioning

How are Businesses dealing with Sustainability ?

Modest Efforts in terms of compliance, employee volunteerism and corporate philanthropy

Motivating force for change in processes & positioning Core drivers/practices to insure value

Moving from a passive cost-based mind set to building

StrategicAdvantage

Strategic Positioning via Sustainability

Two Legs and One of Three Outcomes

Do it Better or Do it Different

Increase Revenues, Decrease Costs or Build Good Will

Strategic Advantage

It can be price, quality, service, innovation, technology, process, affinity, etc.

Outcomes

One strategy that can leverage all (3) outcomes:

Increase revenues

Decrease costs

Build value

Ideal Strategic Advantage

By addressing both sides of the Sustainability Equation

ProductionAnd

Consumption

Sustainability Strategy: How is Strategic Advantage being built?

Minimally define and alter Eco-footprint

as well as Innovative business processes, products/services and life cycles

Production Side

Strategy 1x lower operating cost/cost-structures

to 3X build value

Re-thinking sustainable consumption in terms of “experience”:

(3) three broad categories1st Innovation

2nd Choice Influencing3rd Choice Editing

Consumption Side

Moving from Strategy 1x lower costs to

2X generate new revenues

Consumers Choices Defined by Innovation, Editing and Influence

Extended Producer Responsibility or Product Stewardship

More than 21 States have joined together to enact 50 product stewardship laws

addressing 7 products in the United States

→ No one size or approach fits all business cases

→ Strategy is half the game execution is the other half

→ Societal case doesn’t always equal business case

→ Opportunity still trumps responsibility

→ Finding or driving systemic value requires more than low-level fruit

→ Measuring and reporting can create culture

→ Management as process versus a program insures change

How is Sustainability defined & implemented: The Furman Strategic Framework Approach

1st What shade of green is best ?Internal/External considerations, goals & alignment

 2nd When & How best to move into this area ?Shift bench-marks & stakeholder engagement

  3rd What to target? How to measure and report?Issues mapping and SMS Reporting

  4th What processes or tools to use? How best to think and act to insure on-going success?Footprints, audits, value-streams, systems thinking and process management

How is Sustainability defined & implemented: The Furman Strategic Framework

Foot printing, Auditing & Value-Stream assessment

Life-cycle Management Sustainable Product-Service-Process Design Process & Label Certification Green Product Marketing Environmental Managerial Accounting

Sustainability Business Tools/Processes

Activity or Area: Energy

Current State (Bench-mark)

Sustainable State

Foot Printing, Mapping, Auditing & Value-Streams

Identify Measure

Item Source Rate Usage Consumption Qty Cost

Future (Minimization/Reduction)Conservation

Efficiency Management

Item Solution Savings Solution Savings Solution Savings

Renewable Energy

Item Solution Cost Savings

Life Cycle Analysis: Product Decisions, Design & Management

McDonough & Braungart Biomimicry Institute

Process and Label Certification

400+ Labels world-wide and growing

Green Product & Service Marketing

Managerial Accounting ProcessesActivity Based Cost AccountingConsultancyCertificationReporting Practices

Green Accounting & Reporting

☼ Lower risk (lower costs)Operationally Financially

☼ Increase opportunities (drive revenues)New products/servicesNew target marketsHigher margin products/services

☼ Build a stronger balance sheet (increase leverage) Good will

TransparencyBrand/ReputationCorporate valuation

☼ Laws and Regulation (increasing)Proactive versus Reactive

What is the business case for a Sustainability strategy?

Sustainability Business Case

Impact Areas Revenue and Cost Impact Business Value

Productivity: Reduce waste Increasing resource efficiencies Enhance safety Employee morale Reducing risks

Re-structure cost structures:Reduce consumption resources Utilizing more natural materials Better working environment Decreasing liabilities Investing in future

Drive

Operating costs Decrease structuresResource usage Minimize or Eliminate Down-time Increasing productivityMotivation Increasing productivityRisk factors Decrease costsValue Investing & managing natural capital

Innovation: Product, service or process Do it better Do it different

Efficient & Competitive Effective & Strategic Advantage

Drive

Sales Existing/New customersMargins Decrease operating costsProduct Basis to new product, service & processes

Reputation:

Build Brand Brand Strengthened

Drive Sales Increase Yield/dividendsCash flow Decrease interest costsProfit Enhance business valuation Societal Will Enhance market/business

“Green Organization” concept is evolving Program: Strategy:Feeling Good Measuring Good Recycling Life-cycle Decision makingNice to do Need to doImage Building Brand IntegrationTelling the Customer Teaching the CustomerIgnore natural cycles Mimic natural cyclesHuman Resources Human CapitalOrganization as machine Organization as brainShareholder StakeholderCSR Adherence Embedding CSR

Sustainability Tactic or Strategy

Sustainability: CPA Roles and Competencies

•Strategy and Performance Measurement

•Emissions Allowance Accounting

•Systems and Controls

Sustainability Accounting

•Climate Change and Carbon Reporting

•Sustainability Reporting

•Integrated Reporting

Sustainability Reporting

•Assurance on GHG Statements

•Assurance on Sustainability Reports

•Tax and Advisory Services

Assurance, Tax & Other

Services

PublicPractic

e

BIG

Revenues Operating Costs

Good Will/Valuation

SustainabilityTriple Bottom Line Strategy

THREAT OR OPPORTUNITYTACTIC OR STRATEGY

Ignoring sustainability trends can impede ability to achieve let alone compete.

Do you have a plan?!

Sustainability