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Is green the new black? Charles Burt MEnvSci AIEMA Managing Director The Olive Consultancy 17.10.07. www.consultolive.com Slide 2 The agenda Whats new? How to respond? Who is in control? The business case for green Delivering the strategy Marketing the advantage Slide 3 The human cost so far Slide 4 Past comfort zone history: Slide 5 Its no longer business as usual! Slide 6 Clear evidence of changes afoot! Slide 7 A Stern warning.. The 1990s were very likely (90-99% chance) to have been the warmest decade since records began in 1861 new and stronger evidence that most of the worlds warming over the last 50 years is attributable to human activities The world will warm by 3C (5.4F) even under emissions projections for 2050 that leading scientists consider optimistic lead to an increase in heat and cold related deathincrease epidemics and diseases following storms and floods cause drought and famine for 400 million peopledevastate wildlife irreversibly damage natural systems Climate change is the greatest market failure the world has ever seen Slide 8 Recent world population growth in context: Slide 9 Global population prediction Slide 10 Population Growth CO 2 Concentration Total GDP Number of Extinctions Loss of Rainforest Spot the coincidence. Slide 11 Business as usual is not an option Drivers of change: Culture Desiring a new state Information Choices Aspirations Role models New priorities Innovation Fear Death and taxes! Slide 12 and some barriers The Tragedy of the Commons G Hardin Governments dont learn, only people learn. (Governments only react) The business of business is business The social responsibility of business is to make profits M Friedman Climate change is bigger than God! - Annon Slide 13 The new goal Sustainable Development You cut, Ill choose Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs Our Common Future, 1987 (also known as the Brundtland Report) Slide 14 Risks vs. rewards Value judgements: Short term profit vs long term investment Understanding new challenges Valuing new opportunities Pricing risks Calling the market Funding innovation Anticipating legislation Is the reward model correct, or will our engine of success drive us over the edge? Slide 15 Operational exposure to climate change: Slide 16 Non-financial value at stake: Slide 17 The problem for cheap flights Index of end user greenhouse gas emissions 1990 to 2002. (HM Government (Dec 2004). Review of UK Climate Change Programme. DOE, London) Slide 18 From the FT Financial Times 01.10.05. Slide 19 The USA is beginning to get the message! Slide 20 Watch for the U-turn! Slide 21 Who has to try hardest? Slide 22 The choices: Greenwash we recycle paper and care for the planet now where are my cheap flight tickets & my new Porsche Cayenne? Burden More ****** red tape! Its not in the contract. Not my problem. Whats the point? I believe Channel 4s The Great Climate Swindle programme. Opportunity innovation, differentiation, risk management, solutions, competitive advantage, access to market, brand value etc. Where do we start? Slide 23 Choice or mandate? Marketing: Information Aspiration Need Service Price Benefit Solution Amenity Advantage Choice Control Government: Fiscal Blunt Reactive Interventionist Unilateralist Partisan Populist Short term Fickle Bureaucratic Unpredictable Slide 24 Who controls the agenda? The brand? Push Product features Product sales Technical excellence Product service Emotional solutions Product profitability Desire to sell Supply Top down The consumer? Pull Needs/wants Satisfaction Expectations Customer service Rational solutions Customer/segment profitability Need for solutions vs. Demand Bottom up Slide 25 Who is leading? Tescos to pioneer carbon labelling for 70,000 products to fund 25,000,000 Sustainable Consumption Institute Marks and Spencers to be carbon neutral within 5 years in a 200m eco-plan Co-Op & Fairtrade popular social contracts Ford will invest 1 billion in technology to reduce fuel emissions Toyota, Honda et al with hybrid cars BP to invest $8 billion over ten years to produce electricity from solar, wind, hydrogen and natural gas and describe their goal as to build a profitable, global and market leading low-carbon power business by 2015 GE Capital Ecomagination = revenues of $8.5Bn in 2005 rising to $17Bn in 2007 from clean technologies in transport, energy, water, consumer goods Governments Ban incandescent light bulbs Force through carbon cap & trade mechanisms Introduce sustainable procurement Slide 26 Why BP is engaged! Slide 27 Sterns four solutions: 1.Reducing demand for emissions intensive goods and services 2.Increased efficiency, which can save both money and emissions 3.Action on non-energy emissions, such as avoiding deforestation 4.Switching to lower carbon technologies for power, heat and transport Stern acknowledges that the costs vary widely but the objectives will drive innovation and growth Slide 28 What you can do with a 150Bn budget! Sustainable Development Securing our Future 2005 Set sustainability targets on all Central Government departments To meet those targets; Government had to Lead by example Procuring our Future and acquire goods in a sustainable manner to: Enhance credibility Achieve the goals of sustainable development Slide 29 Government Estate targets By 2020: Climate change & Energy: Reduce CO 2 emissions by 30% Carbon Neutral by 2012 Increase energy efficiency per m 2 by 30% Sustainable consumption & production: Reduce waste arisings by 25% Increase recycling figures to 75% of waste Natural resource protection Biodiversity SSSIs Reduce water consumption by 25% Slide 30 The business case: The transition to a low-carbon economy will bring challenges for competitiveness but also opportunities for growth. Sir Nicholas Stern, Ex Chief Economist World Bank, Stern Review for UK Government, Nov 2006 The Climate Change Bill 20% less carbon by 2010 60% less carbon by 2050 IPCC80% less carbon by 2050 Slide 31 Constructing the business case RISKS Climate change Fossil fuels & emissions Environmental taxes Legislation Reputation Supply chain standards Finite resources & peak oil Waste/polluter pays Business as usual OPPORTUNITIES Culture change & new politics Carbon footprinting Cost savings Compliance & CSR Brand value, access to markets & capital Sustainable procurement Renewables & low carbon Accountability & innovation Early adopter & competitive advantage Slide 32 The marketing strategy: Over the last decade marketing achieved growth through debt and obesity. This is not sustainable. The low hanging fruit of product differentiation for the next decade will be the environment Professor Paul Fifield, 2006 Visiting Professor in Marketing Strategy Southampton University School of Management Slide 33 The spirit is willing! 65% of people in the UK claim only ever to buy energy-saving lightbulbs yet these account for less than 20% of bulbs sold 76% say they recycle everything possible, yet only 22% of British household waste is recycled Populus and The Times, 2007 Slide 34 Directors need new skills New standards and KPIs: Sustainable procurement CSR & corporate accountability Carbon footprinting, carbon allowances, cap and trade Managing environmental risks: Management Systems (e.g. ISO14001) Globalisation: product differentiation, creating brand value Rising costs: Raw materials, fuel, water, waste disposal, transport, cost of capital Landfill tax, Packaging Regs, RoHS, WEEE, REACH, IPPC, ELVD Slide 35 The 4 key Carbon steps to making a difference: 1.Calculate your carbon footprint 2.Assess your carbon related risks and opportunities 3.Adapt your business 4.Do it better than rivals Doing well by doing good isnt enough! Slide 36 One brands message: Slide 37 No smoke and mirrors! Slide 38 Its worth it! Cost of wasted natural resources to UK Manufacturers = 7% of Profit Improvements in energy efficiency can save UK businesses and individuals 12billion per annum (Securing the Future, 2005) 13% of raw materials are waste in construction (Defra, 2007) Slide 39 Where would you invest? Source: Harvard Business Review, 2007 Slide 40 Perception is all The louder he talked of his honour the faster we counted the spoons! If you fail to plan you plan to fail Knowledge exists to be imparted Ralph Waldo Emerson Slide 41 The last word! A corporate focus on reducing greenhouse gases as quickly as possible is good business strategy. It will save money for our customers, make us a more efficient business and help position us to compete effectively in a carbon-constrained world. Wal-Mart CEO, Lee Scott Can you afford not to? Slide 42 Thank you for listening Any questions? Charles Burt The Olive Consultancy Ltd. www.consultolive.com Sustainability from start to profit