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CAPITALISM 2.0:How Would We Recognize It If We Saw It?
[email protected] www.sustainabilityadvantage.com
TSSSFebruary 7, 2013
2002
2005
2012
Characteristics of a sustainable enterprise?
Most sustainable enterprises?
MY BACKBURNER QUESTIONS
2009
MIRROR MIRROR …Top 5 most sustainable companies on the
planet?
1. Patagonia - 10
2. Interface – 20
3. Toyota – 1
4. Vancity – 2
5. GE – 1
6. Seventh Generation – 7
7. AutoShare, ZipCar – 2
8. Suncor – 2
9. Arcelor Metal Dofasco – 2
10. Marks & Spencer - 1
Thoughts from our TSSS audience on Feb. 7, 2013…
SAM RANKING
• “Sustainability leaders” in 58 sectors
• Used by DJSI• Assesses over 2,000
corporations
http://www.sam-group.com/ … 2012 results
FORTUNE MAGAZINE RANKING
• “Most admired companies”
• Chosen by businessmen
http://money.cnn.com/magazines/fortune/most-admired/2012/full_list/… 2012 results
Rank Top 10
1 Apple
2 Google
3 Amazon.com
4 Coca-Cola
5 IBM
6 FedEx
7 Berkshire Hathaway
8 Starbucks
9 Procter & Gamble
10 Southwest Airlines
Reputation Attributes
Innovation
People management
Use of corporate assets
Social responsibility
Quality of management
Financial soundness
Long-term investment
Quality of products/services
Global competitiveness
NEWSWEEK RANKING
• “Green rankings”• Helped by Trucost• Look at Global 500 &
U.S. 500
http://www.thedailybeast.com/newsweek/2012/ … 2012 results
Category Wt’g
Environmental Impact 45%
Environmental Management
45%
Environmental Disclosure
10%
100%
Rank Top 10 Global
1 Santander Brasil
2 Wipro
3 Bradesco
4 IBM
5 National Bank Australia
6 BT Group
7 Munich Re
8 SAP
9 KPN
10 Marks & Spencer
GLOBAL 1003,500 global public companies
Compared to what is needed e.g. Factor Four improvements
Key Performance Indicators
1.Energy productivity2.Carbon productivity3.Water productivity4.Waste productivity5.Innovation capacity6.% Taxes paid7.CEO-to-Average-Worker
Pay8.Pension fund status9.Safety performance10.Employee turnover11.Leadership diversity12.Clean capitalism pay link
http://www.global100.org/; 2013 list
GLOBAL 100: CANADA
http://www.global100.org/; 2013 list
Top in Canada21. Teck Resources 40. Barrick Gold 57. CN Railway 60. TELUS 71. Nexen 79. Enbridge 81. Suncor Energy 85 Sun Life Financial 87. Royal Bank 88. Cenovus Energy
2002
2005
2012
Characteristics of a sustainable enterprise?
Most sustainable enterprises?
MY BACKBURNER QUESTIONS
2009
Stage 4 vs. Stage 5?
1. Pre-Compliance
2. Compliance
4. INTEGRATED STRATEGY
5. PURPOSE & PASSION
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.” Lubin and Esty, HBR May 2010
“Expect the Unexpected: Building business value in a changing world,” KPMG, 2012
“Capitalism is under siege … The purpose of a business must be
redefined around creating shared value (CSV)…
How to reinvent capitalism—and unleash a wave of innovation and growth”
Porter and Kramer, HBR Jan-Feb 2011
CAPITALISM 2.0
Capitalism 1.0 Capitalism 2.0
Purpose of the Firm
Maximize shareholder value; ROI; Growth
Creating shared stakeholder value, including the Environment
Legitimate capitals Financial Financial, Natural, Human, Social
Bottom lines Profit -first Profit, People, Planet
Environmental and social impacts
Externalized Internalized
Accountability boundaries
The Firm The Firm’s value chain, over its products’ life cycles
Transparency As little as possible Naked
Business model Take-Make-Waste; Linear
Borrow-Use-Return; Circular
Source of financial capital
Stock market; Big financial institutions; Absentee owners
Stock market; Smaller financial institutions; Customers; Employees; Local communities
Market focus Global Local
DOWN-TO-EARTH ECONOMY
Wall Street’s Organizing Principles
Nature’s Organizing Principle
View of natural capital
Limitless free resource, to be exploited
Finite valuable resource, to be respected and restored
Resource control Monopolized Shared
Growth Infinite growth of money and consumption
A stage in life’s endless regenerative cycles
Efficiency measures Returns on financial capital
Returns on social and natural capital
Primary performance indicators
Growth in financial returns, assets
Life’s abundance, health, resilience, and creative potential
Primary dynamic Competition to maximize self-interest
Cooperation to optimize self- and community-interest
Timeframe Immediate return Sustained yield over time
Based on David Korten, “The Down-To-Earth Economy,” Yes! Magazine, Winter 2013
THE REAL WORLD
NESTED DEPENDENCIES
Human Economy
Human Society
Environment
Enough, for all, forever.
X
TRULY SUSTAINABLE ENTERPRISE
Human Economy
Human Society
Environment
A truly sustainable enterprise creates positive economic, environmental, and
social value.X
If it were to operate forever,it would not only do no harm;
it would do well by doing some good.
GOLD STANDARD FRAMEWORK
ESG
Gov
ernan
ce
Environmental
Social
ESG CRITERIA
“Mount Sustainability”
Breakout Group Discussion Question:
List 5 ESG criteriathat you would use to assess whether
or nota company is a truly sustainable
enterprise.
ESG CRITERIA
1. "Noble purpose" – but how do we measure this, what is/are the metric(s)
2. Do consumers as well as investors understand the implications of supporting the company? Criteria for this could be direct or indirect, e.g. whether company is effective in educating/communicating investors/consumers to understand these effects/implications
3. Fair wages and distribution of wealth throughout value chain – inputs/outputs
4. No waste in network/ecosystem – if there is a product with waste must have way to reuse – closed loop process/concept
Breakout Group Idea Harvesting:
ESG CRITERIA
5. Degree of community/stakeholder engagement – sliding scale from hierarchy to cooperative (includes employees and broader community)
6. Is it a ‘learning organization’ with ‘permission to fail’
7. PUMA – Is it possible to estimate what the environmental impact of all our supply chain operations are and convert that into a financial number – eg material resources, carbon, water – if these costs are considered what was seen as a profitable company can easily be seen as a losing company. Puma was a leader in assessing actual costs when by internalizing what were previously seen as externalities - they 'gave themselves a bill' for environmental costs
Breakout Group Idea Harvesting:
ESG CRITERIA
8. Need to be positive on all three legs of ESG or is there allowance to be negative/neutral on 1-2, if positive on other(s) – parallel to this is carbon trading –> can you 'buy yourself out?' of being 'bad'
9. 100% of compensation for everyone in company not simply tied to shareholder value but aligned 100% to stakeholder value
10. Equity: i.e. no one is exploited through activities/operations of company – could be evaluated on many levels including legal, living wage if we dream big, let's look at company's whole value chain, not just the company (Big question – where does accountability end? How much is enough? When is enough enough?) And, if they ‘do too much good’, and put themselves out of business, then the G leg of the stool is broken, right?
Breakout Group Idea Harvesting:
ESG GOLD STANDARD CRITERIA
Governance / FinancialFinancially sustainableEthical business practicesDiverse senior leadershipTransparent / Engaged stakeholdersSustainable business model, policies, & systemsSustainable value chain / Life-cycle accountabilitySustainability champion / Leader of transformation
Environmental Carbon positiveEnergy positiveWater positiveMaterials positiveWaste positiveProvides services (vs. products)Restorative to ecosystems
Social Fair share of taxesLabor rights & safe working conditionsFair employee remunerationFamily-friendly benefitsEngaged employeesLocal workers, purchases, & investmentsProducts & services build social capital
2002
2005
2012
Characteristics of a sustainable enterprise?
Most sustainable enterprises?
Correlation with
market value?
MY BACKBURNER QUESTIONS
2009
Stage 4 vs. Stage 5?
MARKET PERFORMANCE
Robert G. Eccles et al, “The Impact of a Corporate Culture of Sustainability on Corporate Behavior and Performance,” HBS working paper 12-035, Nov. 25, 2011.
http://www.hbs.edu/research/pdf/12-035.pdf..
REPORTING COMPANIES OUTPERFORM
• 53% of S&P 500 companies are published sustainability- or CSR-type reports in 2011, up from 20% in 2010
• 63% follow the Global Reporting Initiative (GRI) framework
• Between 2007 and 2011, companies that reported on their sustainability efforts outperformed the broad S&P 500 Index
Governance and Accountability Institute, “2012 Corporate ESG / Sustainability / Responsibility Reporting: Does It Matter?” December 2012
IIRC
International Integrated Reporting Council (IIRC) http://www.theiirc.org/
Reports will include material sustainability impacts, and show how the
company creates value in the form of financial, manufactured, human, intellectual, and natural capitals.
Will create the globally accepted International <IR> Frameworkthat includes financial, governance, management commentary,
and sustainability reporting.
• December 2013: Version 1.0 of the Framework• Q1-Q4 2014: Pilot Program with the Business Network (80
companies) and the Investor Network (30 investors)
SASB
Sustainability Accounting Standards Board (SASB) http://www.sasb.org/
Will develop industry-specific standards to measure and disclose ESG performance on the top 10 material sustainability issues,
for mandatory Form 10-K filings with the SEC.
A complete set of standards covering all 10 sectors and 89 industries will be available in Q2 2015.
GISR
Global Initiative for Sustainability Ratings http://ratesustainability.org/resources/
Will create a world class corporate sustainability ratings standard,
to embed sustainability into the capital markets worldwide
CAPITALISM 2.0:How Would We Recognize It If We Saw It?
[email protected] www.sustainabilityadvantage.com
TSSSFebruary 7, 2013