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IS THE NEW GREEN ECONOMY
GOOD FOR BU$INESS?
AFPA – The New Face of Agri-Processing
Calgary, May 2017
OUTLINE
• State of the world
• Five categories of initiatives
• The need for a better sustainability business case
• Business case for a green global economy
• Business case for a green company
• More comprehensive business case framework
• Weighting the justifications
NESTED INTERDEPENDENCIES
NESTED INTERDEPENDENCIES
Society and Business are wholly-owned subsidiaries
of the Environment
BUSINESS IMPACTS THE NESTS
BOOMERANG IMPACTS
OUTLINE
• State of the world
• Five categories of initiatives
• The need for a better sustainability business case
• Business case for a green global economy
• Business case for a green company
• More comprehensive business case framework
• Weighting the justifications
SOCIETY
WELLBEING
InitiativesCommunity,
Society-at-large
CUSTOMER
WELLBEING
Initiatives
FIVE CATEGORIES OF
SUSTAINABILITY INITIATITVES
SECURITY OF
SUPPLY
InitiativesMaterials, Water,
Waste elimination
CLIMATE
STABILITY
InitiativesEnergy, Carbon
EMPLOYEE
WELLBEING
Initiatives
OUTLINE
• State of the world
• Five categories of initiatives
• The need for a better sustainability business case
• Business case for a green global economy
• Business case for a green company
• More comprehensive business case framework
• Weighting the justifications
MOST CHANGE INITIATIVES FAIL
Jenny Davis-Peccoud, Paul Stone and Clare Tovey, “Achieving Breakthrough Results in Sustainability,”
Bain & Company, January 2017. Based on a survey of over 300 large companies engaged in sustainability efforts.
Achieved or exceeded the
expectations that were set
Settled for dilution of value and
mediocre performance
Failed to deliver, producing less
than 50% of expected results
Sustainability
Initiatives
All Change
Efforts
FOUR GUIDELINES FOR SUCCESSFUL
SUSTAINABILITY INITIATIVES
Jenny Davis-Peccoud, Paul Stone and Clare Tovey, “Achieving Breakthrough Results in Sustainability,” Bain &
Company, January 2017. Based on a survey of over 300 large companies engaged in sustainability efforts.
1. Make a public commitment
2. Lead by example at the top
3. Highlight the business case
4. Hardwire change through incentives and processes
OUTLINE
• State of the world
• Five categories of initiatives
• The need for a better sustainability business case
• Business case for a green global economy
• Business case for a green company
• More comprehensive business case framework
• Weighting the justifications
Capture
opportunities
BIG THREE JUSTIFICATIONS
Do the
right thing
Mitigate
risks of inaction
DO THE RIGHT THING – EMBRACE SDGs
www.un.org/sustainabledevelopment/sustainable-development-goals
Capture
opportunities
BIG THREE JUSTIFICATIONS
Do the
right thing
Mitigate
risks of inaction
CAPTURE OPPORTUNITIES – $12T
“Better Business, Better World,” Business and Sustainable Development Commission, Jan 2017.
Economic Bonus:
380M jobs
Capture
opportunities
BIG THREE JUSTIFICATIONS
Do the
right thing
Mitigate
risks of inaction
World Economic Forum (WEF), “Global Risks 2017,” January 2017.
Impact
Likelihood
High
High
RISKS – THREATS TO BUSINESS
Capture
opportunities
BIG THREE JUSTIFICATIONS
Do the
right thing
Mitigate
risks of inaction
Global
Economy Company
OUTLINE
• State of the world
• Five categories of initiatives
• The need for a better sustainability business case
• Business case for a green global economy
• Business case for a green company
• More comprehensive business case framework
• Weighting the justifications
SDGs ARE ESG GOALS
Environmenta
l
Social Governance
“Expect the Unexpected: Building business value in a changing world,” KPMG, 2012.
9 “GREEN GIANTS” ON REVENUE
Freya Williams, “Meet the nine billion-dollar companies turning a profit from sustainability,”
The Guardian, January 2016.
• Unilever, Tesla, Chipotle, Ikea, Nike,
Toyota, Natura, Whole Foods,
GE’s Ecomagination generated
> $1B from green product lines in
2014
• Collectively, these 9 companies
generate over $100B in annual
revenue from their green business
lines alone.
• Their stock outperforms a portfolio
of conventional competitors by
11.7% per year.
3M WASTE SAVINGS
3m.com/3M/en_US/sustainability-us/goals-progress//
Pollution Prevention Pays (3P)
Product reformulation, process modification, equipment redesign,
and recycling and reuse
“Fourth P”—People.
Employee suggestion program generated
$1.9B in first-year savings over 39 years (1975-2012)
OVER $1B IN ENERGY SAVINGS
, "Power Forward, How American Companies Are Setting Clean Energy Targets and Capturing Greater Business
Value,“ report by Ceres, WWF, Calvert Investments, and David Gardiner & Associates, June 2014.
• UPS saved $200M / year
• Cisco Systems saved $151M / year
• PepsiCo saved $120 million / year
• United Continental saved $104M / year
• General Motors saved $73M / year
• IBM saved $34M / year
• 60% of Fortune 100 companies have set targets for renewable
energy or greenhouse gas reductions.
• 53 of Fortune 100 companies that report on their targets have
collectively saved $1.1B annually and reduced their yearly CO2
emissions by more than 58M metric tons.
60-employee manufacturing company
58% reduction in electricity usage
90% 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
“Manufacturer finds lighting energy efficiency convenient,” Green Manufacturer, March 1, 2010
42 projects between 2006-2008
Increased profits by 76%
Paul Rak, CEO VeriForm
“Profit Improvement”
Business Case
“Expect the Unexpected: Building business value in a changing world,” KPMG, 2012
Risks could
decrease Profit by 16-36%
Opportunities could
increase Profit by 51-81%
OUTLINE
• State of the world
• Five categories of initiatives
• The need for a better sustainability business case
• Business case for a green global economy
• Business case for a green company
• More comprehensive business case framework
• Weighting the justifications
Market value
Asset value
Cash flow
ROI
Innovation
Access to capital
Purpose / Mission
Profit
Revenue growth
Expenses
Reputation
Risk management
Talent wars
Productivity
(SUSTAINABILITY) INITIATIVES
MEET THEM WHERE THEY ARE
Capture
opportunities
Mitigate risks of inaction
Mitigate risks of taking action
Market value improvement
R
E
P
U
T
A
T
I
O
N
Asset value
improvement
Mitigate
risks
Do the
right thing
Revenue
growth
Operational
expense savings
Human Resources
expense savings
I
N
N
O
V
A
T
I
O
N
Purpose and Values activation
Cost-Benefit Analysis
ROIPayback Period, IRR,
NPV, Profit Increase
1 2 3 4 5
BenefitsCosts
Onetime Investments
… Net Benefits …
... Ongoing …
... Ongoing …
BUSINESS CASE ELEMENTSJUSTIFICATIONS
SOCIETY
WELLBEING
InitiativesCommunity,
Society-at-large
CUSTOMER
WELLBEING
Initiatives
FIVE CATEGORIES OF
SUSTAINABILITY INITIATITVES
SECURITY OF
SUPPLY
InitiativesMaterials, Water,
Waste elimination
CLIMATE
STABILITY
InitiativesEnergy, Carbon
EMPLOYEE
WELLBEING
Initiatives
OUTLINE
• State of the world
• Five categories of initiatives
• The need for a better sustainability business case
• Business case for a green global economy
• Business case for a green company
• More comprehensive business case framework
• Weighting the justifications
Capture
opportunities
WEIGHTING THE JUSTIFICATIONS
Purpose-
Weighted
Opportunity-
Weighted
Risk-
Weighted“Black Box”
High Low Low
Low High Medium
Medium Medium HighMitigate
risks
Do the
right thing
Decision makers’ hidden weightings
Announced
Decision
OUTLINE
• State of the world
• Five categories of initiatives
• The need for a better sustainability business case
• Business case for a green global economy
• Business case for a green company
• More comprehensive business case framework
• Weighting the justifications
NEED TO INTEGRATE FINANCE, RISK,
AND SUSTAINABILITY EFFORTS
Lucy Nottingham, “Unlock Growth by Integrating Sustainability,” Marsh & McLennan Companies’ Global Risk
Center, GreenBiz, and Association for Financial professionals (AFP), 2016.
“Finance, enterprise risk, and
sustainability leaders must integrate
their efforts to provide real value in
helping their organizations respond to
evolving risks and capture
competitive advantages.”
“If the sustainability team doesn’t understand the financial metrics
and financial implications of sustainability initiatives, it simply
won’t be able to work effectively across the organization”
BRIDGING THE LITERACY DIVIDE
Capture
opportunities
Do the
right thing
Mitigate
risks
Bu
siness &
Acco
un
ting
Lite
racy
Access to
Capital
War for
talent
Risk
management
Scie
nce &
Su
stain
ab
ilit
y
Lit
era
cy
Do-some-
good goals
IS THE NEW GREEN ECONOMY
GOOD FOR BU$INESS?
AFPA – The New Face of Agri-Processing
Calgary, May 2017
