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Championing Sustainability … even if you’re not the CEO LSF / IRIS / W3 / EASO Talk-Back Speaker Series November 23, 2010 Bob Willard [email protected] www.sustainabilityadvantage.com The “Sustainability Imperative” Megatrend: “A fundamental shift in the competitive landscape that creates inescapable threats and game-changing opportunities ... profoundly affects companies’ competitiveness and even their survival.” 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.” David A. Lubin and Daniel C. Esty, “The Sustainability Imperative,” HBR May 2010 Significant CEO Mindset Shift CEOs Agree /Strongly Agree that sustainability should be …. 2010 Increase Over 2007 … fully embedded into company strategy and operations … discussed and acted on by boards … fully embedded into subsidiaries’ strategies and operations … embedded throughout the global supply chain … the basis for industry collaborations and multi-stakeholder partnerships … incorporated into discussions with financial analysts Survey of 766 worldwide CEOs, including 50 in-depth interviews UN Global Compact and Accenture study, “A New Era of Sustainability,” June 2010 Stakeholders Driving Sustainability Stakeholders who CEOs believe will have the greatest impact on the way they manage societal expectations Consumers Employees Governments Communities Regulators Media Investment Community Suppliers NGOs Boards Organized Labor Other Survey of 766 worldwide CEOs, including 50 in-depth interviews UN Global Compact and Accenture study, “A New Era of Sustainability,” June 2010 CEOs: Sustainability Drivers Top 3 drivers of CEOs’ action on sustainability issues Brand, trust, and reputation Potential for revenue / growth / cost reduction Personal motivation Consumer / customer demand Employee engagement and recruitment Impact of development gaps on business Governmental / regulatory environment Pressure from investors / shareholders Survey of 766 worldwide CEOs, including 50 in-depth interviews UN Global Compact and Accenture study, “A New Era of Sustainability,” June 2010 Sustainability 3-Legged Stool Sustainability Economic Leg Good Jobs Fair wages Security Infrastructure Fair Trade Environmental Leg 0 Pollution & Waste Renewable Energy Conservation Restoration Social Leg Working conditions Health services Education services Community & Culture Social justice Quality of Life / Genuine Wealth / Genuine Progress Corporate Sustainability 3-Legged Stool Sustainability = Sustainable Development (SD) = Environmental, Social, Governance (ESG) = Corporate Social Responsibility (CSR) = Corporate Responsibility (CR) = Green = Triple Bottom Line (TBL) = 3Es = 3Ps Economy - Profits Growth, Jobs, Taxes Products Services Environment - Planet Eco-efficiencies Eco-effectiveness Equity - People Employees Community / Culture World Smart Business 3-Legged Stool Asset Management Financial Capital Natural Capital Human Capital Built Capital Social Capital Sustainable Value Creation 5-Stage Sustainability Journey 5. Purpose/Passion Values-driven senior leader 4. Integrated Strategy Enhanced organizational value 3. Beyond Compliance Eco-efficiencies PR crisis Regulatory threat 2. Compliance Regulatory enforcement 1. Pre-Compliance Lead It Like Any Culture Change 1. Walk-the-talk as senior leaders Integrate into vision - mission – strategies Business strategy vs. philanthropy Earn credibility – Avoid “green-washing” hype Visible support – speeches, questions, actions 2. Educate / engage the whole company Solicit employee ideas - help 3. Align with measurement & reward systems 7-Step Sustainability Change Process Step 7: Embed and Align Step 6: Mobilize Commitment Step 5: Build Case(s) for Change Step 4: Develop Strategies Continuously Learn & Adapt Step 3: Assess Current Realities Step 2: Inspire Shared Vision(s) Step 1: Wake Up and Decide 7-Step Sustainability Change Process Step 7: Embed and Align Step 6: Mobilize Commitment Step 5: Build the Case(s) for Change Step 4: Develop Strategies Step 3: Assess Current Realities Step 2: Inspire Shared Vision(s) Step 1: Wake Up and Decide The 3 R’s of Justifying Sustainability RISKS + RESPONSIBILITIES + REWARDS BUSINESS CASE Based on Alan AtKisson, The IRIS Agreement, p. 127 Risks to Corporate Capitals / Assets: Big-5 Sustainability Storm Fronts Waste, Toxicity, and Health Poverty and Social Injustice Species Extinction and Overharvesting Food and Water Crises The 3 R’s of Justifying Sustainability RISKS + RESPONSIBILITIES + REWARDS BUSINESS CASE Based on Alan AtKisson, The IRIS Agreement, p. 127 Risks to Social Capital: Stakeholders’ Rising Expectations Species Extinction and Overharvesting Waste, Toxicity, and Health Poverty and Social Injustice (NGOs) Food and Water Crises Media Economists The Public Investors Customers Employees Competitors Risks to Reputation re Banks Corporate Responsibilities Governments Insurers Markets (Scientists) The 3 R’s of Justifying Sustainability RISKS + RESPONSIBILITIES + REWARDS BUSINESS CASE Based on Alan AtKisson, The IRIS Agreement, p. 127 One More Goal … or an Enabling Strategy? Profit Share price Growth Revenue Customer care Expense savings Competition Market share Leadership Governance Innovation Speed to market New markets Talent wars Productivity Motivation Brand image Managing risks Compliance Supply security The 3 R’s of Justifying Sustainability RISKS + RESPONSIBILITIES + SME Companies: At least 66% more profit REWARDS BUSINESS CASE Large Companies: At least 38% more profit Potential Improvements REPUTATION 1. Reduced recruiting costs -1% 2. Reduced attrition costs -2% 3. Increased employee productivity +6% 4. Eco-efficiencies: savings in energy, water, materials, waste handling -10% 5. Increased revenue / market share +5% 6. Lower insurance & borrowing costs -5% … yielding a profit increase of +66% The 3 R’s of Justifying Sustainability RISKS Climate Change & Energy Crises + (NGOs) Economists Employees RESPONSIBILITIES Investors Customers Governments Markets Insurers (Scientists) + REWARDS BUSINESS CASE At least 38% to 66% more Profit 7-Step Sustainability Change Process 7. Embed and Align 7 P R A C T I C E S 6. Mobilize Commitment 7 5. Build the Case(s) for Change D E R A I L E R S 4. Develop Strategies 3. Assess Current Realities 2. Inspire Shared Vision(s) 1. Wake Up and Decide 7 PARAD O X E S 7 Leadership Practices Embed and Align Get Credible, Stay Credible Mobilize Commitment Dialogue Collaborate, Educate, Network Build Case(s) for Change Meet Them Where They Are Develop Strategies Influence the Influencers Piggyback Existing Initiatives Practice “Planful Opportunism” Assess Current Realities Inspire Shared Vision(s) Wake Up and Decide True Dialogue Advocacy High Telling DIALOGUE Asserting Explaining Exploring each other’s assumptions to generate meaning Observing Asking Bystanding Sensing Clarifying Interviewing Low Low Inquiry High Based on Peter M. Senge et al., The Fifth Discipline Fieldbook, Doubleday, 1994 Collaborate, Educate, Network Government Agencies Suppliers NGOs Senior Executive Network Your Inner Circle Customers Networks in Other Departments Meet Them Where They Are Asset Management Natural Capital Economic / Financial Capital Built / Manufactured Capital Human Capital Social Capital Sustainable Value Creation Influence the Influencers Important Senior Leader “No” Important Senior Leader “Yes” Influencer “Yes” Influencer “Yes” You You Ineffective Approach Effective Approach 7 Leadership Practices Embed and Align Get Credible, Stay Credible Mobilize Commitment Dialogue Collaborate, Educate, Network Build Case(s) for Change Meet Them Where They Are Develop Strategies Influence the Influencers Piggyback Existing Initiatives Practice “Planful Opportunism” Assess Current Realities Inspire Shared Vision(s) Wake Up and Decide 7 Leadership Paradoxes 7 P R A C T I C E S Embed and Align Mobilize Commitment Build the Case(s) for Change Develop Strategies Assess Current Realities Inspire Shared Vision(s) Wake Up and Decide You Have to Do It Yourself; You Can’t Do It Alone Motivators Inhibit Commitment Things Need to Get Worse Before They Can Get Better To Get “Hard Results,” Work on the “Soft Stuff” One Person’s Dream Is Another Person’s Nightmare Go Slow to Go Fast Go Small to Go Big Do it Yourself; You Can’t Do It Alone “Never doubt that a small group of thoughtful, committed citizens can change the world; indeed, it's the only thing that ever has.” ― Margaret Mead Whole Company Kindred Spirits You Kindred Spirits Their Networks Their Networks All Industries All Whole Industries Industry The World? Whole Industry Whole Company “Give me a lever long enough and a fulcrum on which to place it, and I shall move the world.” ― Archimedes Go Small to Go Big Small Moves Big Shifts “You can get away with anything if you call it a pilot” 7 Leadership Paradoxes 7 P R A C T I C E S Embed and Align Mobilize Commitment Build the Case(s) for Change Develop Strategies Assess Current Realities Inspire Shared Vision(s) Wake Up and Decide You Have to Do It Yourself; You Can’t Do It Alone Motivators Inhibit Commitment Things Need to Get Worse Before They Can Get Better To Get “Hard Results,” Work on the “Soft Stuff” One Person’s Dream Is Another Person’s Nightmare Go Slow to Go Fast Go Small to Go Big 7 Potential Derailers Embed and Align Displaying Hubris Mobilize Commitment Mishandling Office Politics Build the Case(s) for Change Being a “Problem Child” 7 P R A C T I C E S Develop Strategies Failing to Produce Results Assess Current Realities Succumbing to Stress Inspire Shared Vision(s) Wake Up and Decide Changing Everything at Once Getting Off to a Bad Start 7 PARAD O X E S Sustainability Champion’s Guidebook 7 Get Credible, Stay Credible Step 7 Embed and Align Step 6 Mobilize Commitment Dialogue P R A C T I C E S Step 5 Build the Case(s) for Change Collaborate, Educate, Network Step 4 Develop Strategies Meet Them Where They Are Step 3 Assess Current Realities Piggyback Existing Initiatives Step 2 Inspire Shared Vision(s) Influence the Influencers Practice “Planful Opportunism” Step 1 Wake Up and Decide You Have to Do It Yourself; You Can’t Do It Alone Motivators Inhibit Commitment Go Slow to Go Fast Go Small to Go Big Displaying Hubris 7 Mishandling Office Politics Being a “Problem Child” Failing to Produce Results Succumbing to Stress Changing Everything at Once Getting Off to a Bad Start D E R A I L E R S To Get “Hard Results,” Work on the “Soft Stuff” One Person’s Dream Is Another Person’s Nightmare Things Need to Get Worse Before They Can Get Better 7 PARAD O X E S Troubleshooting Complex Change Vision Skills Incentives Resources Action Plan Change Skills Incentives Resources Action Plan Confusion Incentives Resources Action Plan Anxiety Resources Gradual Action Plan Change Vision Vision Skills Vision Skills Incentives Vision Skills Incentives Action Plan Resources Frustration False Starts Kevin Brady, Five Winds International, based on “A Framework for Thinking About Systems Change,” by Knoster, Villa, and Thousand In Summary … Lead it like any culture change Can protect & enhance organizational value Sustainability is smart business Relevant to existing business priorities Important stakeholders’ expectations are rising Many willing, helpful partners and networks Opportunity for leadership … by example The New Economy • • • • • • • • Low-carbon economy vs. fossil fuel-based economy Local supply chains vs. global supply chains Services vs. products “Dematerialization” vs. physical goods, processes, or travel using “virtual” alternatives like videoconferencing or online shopping Responsible consumption / thrift vs. over-consumption Low / No-growth model vs. “grow or die” model New ownership models: employees, customers, co-ops, social venture funds, government funding New company purposes: “For-Benefit / B-companies,” “Social enterprises,” “Fourth sector,” “Hybrid organizations” CEO #1 Challenge: Complexity Gap CEOs biggest challenge: Rapid escalation of complexity 79% anticipate more complexity in next 5 years; 50% doubt their ability to manage it • • • • • • Complexity Drivers / Systems-level challenges: Interconnected economies, enterprises, societies and governments; more government regulations New economic environment: more volatile, uncertain, complex, and structurally different Global climate change Geopolitical issues surrounding energy and water supplies Vulnerabilities of supply chains for food, medicine, talent Sobering threats to global security Based on face-to-face interviews with 1,541 CEOs worldwide, Nov 2009 - Jan 2010 IBM CEO Survey, “Capitalizing on Complexity,” May 2010 Ranking of Most Sustainable Co’s The Global 100 Most Sustainable Corporations in the World Most proactive in managing 11 environmental, social and governance (ESG) KPIs Energy productivity Water productivity Carbon productivity Waste productivity Leadership diversity CEO-to-average-worker pay Top 5 in the World 1. 2. 3. 4. 5. General Electric PG & E TNT N.V. H&M Hennes & Mauritz Nokia Taxes paid Sustainability Leadership Sustainability pay link Innovation capacity (R&D) Transparency / Disclosure Best 9 in Canada 16. Enbridge 25. Encana 40. Suncor 59. Nexen 65. Transcanada 50. Sun Life Financial 68. T-D Bank 71. Royal Bank 88. Telus http://www.global100.org/ Ranking of Sustainable Canadian Cities Ecological Integrity Economic Governance & Infrastructure Social Security Empowerment & Built Envir’t Well-Being Corporate Knights 4th Annual Sustainable Cities Rankings, Issue 30, Winter 2010 College Sustainability Report Card 2011 Ranks 322 colleges and universities in U.S. and Canada with largest endowments – 95% of all endowments Ranked in 9 categories 1. Climate and energy use 2. Green building 3. Food and recycling 4. Transportation 5. Administration 6. Student involvement 7. Endowment transparency 8. Shareholder engagement 9. Investment priorities 2011 Results 16% earned “A” level grades 55% earned “B” level grades 23% earned “C” level grades 6% earned “D” level grades http://www.greenreportcard.org/ Beyond Grey Pinstripes, 2009-2010 Biennial survey and ranking of 149 B-schools on integration of social and environmental stewardship into curricula and research Criteria Availability of relevant courses (25%) Student exposure / Course time (25%) Relevant courses on for-profit impacts (25%) Faculty research (25%) Rankings 1. York (Canada) 2. Michigan (USA) 4. Stanford (USA) 5. Notre Dame (USA) 7. RSM Erasmus (NED) 8. NYU (USA) 10. Columbia (USA) 31. McGill (Canada) 3. Yale (USA) 6. UC Berkeley 9. IE Bus School (Spain) 34. Concordia (Canada) http://www.beyondgreypinstripes.org/ Principles for Responsible Management Education (PRME) Promotes corporate responsibility (CR) and sustainability in business education Launched by UN in June 2007 Endorsed by more than 336 business schools and universities from around the world (Nov 2010) 1. 2. 3. 4. 5. 6. 6 Principles of PRME Teach students to work in a more inclusive, global economy Incorporate CR into academic activities and curricula Teach responsible leadership Research how corporations create sustainable value Partner with business executives on CR challenges Dialogue with all groups on critical CR issues http://www.unprme.org/ Championing Sustainability … even if you’re not the CEO LSF / IRIS / W3 / EASO Talk-Back Speaker Series November 23, 2010 Bob Willard [email protected] www.sustainabilityadvantage.com