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Greening Business
The document discusses the business case for companies to improve resource efficiency and reduce environmental risks and impacts. It outlines that sustainable companies have higher returns and growth. Specific benefits mentioned include lower costs, new market opportunities, improved brand image and risk management. Case studies of companies saving millions through energy efficiency and waste reduction are provided. Next steps recommended include identifying risks and opportunities, stakeholder engagement, strategy development and implementation.
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Greening Business
- 1. Grow, Profit andReduce Risk Through Radical Resource Efficiency
- 2. Agenda Business CaseCost/Benefit Comparison Specific Issues Solutions Recommended Next Steps
- 3. Business Case: You’re in Good Company ” The time to consider the policy dimensions of climate change is not when the link between greenhouse gases and climate change is conclusively proven, but when the possibility cannot be discounted.” John Browne, BP Chairman “ I am convinced that we can build a global plan of action on climate change in ways that create more economic opportunities than risks. Actually, there is no other option.” Alain Belda, Alcoa Chairman and CEO “… climate change is a serious emerging risk…” Clement Booth, Allianz SE Executive Board Member
- 4. Business Case: BoostShareholder Value Sustainable companies have: 4% higher ROI 9% higher sales growth 17% higher income growth “Social & environmental risk management has significant positive impact on long-term market value” 1 73% SRI funds earned top marks “Stakeholder Superstars” = 43% return vs. 19% for S&P 500 FTSE 250 Co’s. w/ ethical code outperformed on economic & market value-added 3 Corp. governance, share price performance / volatility, and profitability 3 linked
- 5. Business Case: OperationalBenefits Access to capital New market development Resource utilization Brand image / customer retention Lower risk Operational efficiency Productivity Innovation Employee productivity ‘ Human Capital’ leverage Improved decision-making Enhanced leadership Workforce attraction/retention Organization effectiveness Teamwork
- 6. Driving Forces Consumerconcerns Market-related forces Reputational risk Legal/Regulatory Trends Investor demands Call for increased transparency Externalities incorporated into pricing Social pressures (NGO, community and investors) Technological Change Long-term business strategy Company values
- 7. Financial Benefits $1Bsavings & 1B tons emissions prevented $100-200 million sales required to offset anticipated electricity cost increases, saving ~ $9M/yr 204% ROI = $110M/yr from energy-saving projects $3B energy costs , 72% greenhouse gas emissions >$500M energy savings $10M annual energy efficiency cost savings But Wait! There’s More… 3M
- 8. Benefits (cont’d) Interface:$400M Efficiency savings Southern Co’s: $108M/yr Thermal efficiency savings Greenville Tube: 15% Productivity 30% Energy efficiency 15% Scrap $77,000/yr saved; 5-month payback Southwire: 40% Electricity use 60% Gas use 2-year payback Calculate IRR
- 9. Costs Resource Product 94% waste before product sold 4.8% waste within 6 weeks 1.2% Source: Robert Ayres, Industrial Metabolism
- 10. Versus… Emissions towater Emissions to air Total incoming material Hazardous waste To landfill (non-hazardous) Material & energy recycling Finished product
- 11. Electricity Flow (Quadrillion BTUs) Costs (cont’d)
- 12. Evolving Business Behaviouron Sustainability Issues
- 13. Escalating Degree ofImpact
- 14. CEO Buy-in Mostimportant business case factors Highest value-add from sustainability
- 15. Risks and OpportunitiesProtecting and enhancing reputation, brand equity and trust Attracting, motivating and retaining talent Managing and mitigating risk Improving operational and cost efficiency Ensuring licence to operate Developing new business opportunities – new products and services, new markets, new alliances, new business models Creating a more secure and prosperous operating environment. VALUES AND VALUE: Communicating the Strategic Importance of Corporate Citizenship to Investors. RichardSamans , Klaus Schwab GENEVA, JANUARY 2004
- 16. Hierarchy of ImpactDecrease energy use “ Green” the supply chain Decrease material use Reuse materials Recycle Boost efficiency
- 17. Specific Next Steps1. IDENTIFY RISKS AND OPPORTUNITIES Manage social risks; maintain license to operate; increase brand value, access to capital, market share; facilitate reporting 2. ENGAGE 'SIGNIFICANT' STAKEHOLDERS Governments; customers, communities; affected by operation; employees; minorities; others 3. DEFINE STRATEGY TO IMPROVE IMPACT Target s pecific operations, stakeholder issue, business unit & geographic regions 4. DEVELOP INDICATORS & IMPLEMENT Key priority areas based on stakeholder engagement 5. MANAGE AND IMPROVE IMPACT Collect data & evaluate progress against agreed objectives
- 18. Additional Activities Bringtop management on board Customize the business case Establish benchmarks and measure progress Educate employees and create cross-functional teams Employ life-cycle analysis Develop BU-specific strategies Involve suppliers and customers Seek outside perspectives and expertise Celebrate successes and share lessons learned
- 19. Activities (cont’d) Identifyprofitable improvements, evaluate trade-offs and select strategies Catalog organizational, policy, and market barriers and act to overcome them Align sustainability goals with core business objectives Identify specific actions with timelines and deadlines Assess client-specific regulatory issues and tailor business decisions to anticipate evolving regulations Craft communications to educate, enroll and inspire
- 20. Greening Your BottomLine Achieving Triple Bottom Line Benefits
- 21. External Drivers Legal/RegulatoryTrends Market-related forces Externalities incorporated into pricing Growing demands to consider second and third-order impacts Social pressures (NGO, community and investors) Technological Change
- 22. From Efficiency toEffectiveness Enhance recyclability & durability Minimize energy, water, materials & land use Minimize emissions, discharges, disposal & toxics Use renewable resources Enhance value Provide product as service Create new markets Reduce consumption Reduce impact
- 23. Enhance recyclability &durability Provide product as service Create new markets Industry Maturity Sector Sophistication Regulatory/Consumer Profile Minimize energy, water, materials & land use Minimize emissions, discharges, disposal & toxics Use renewable resources
- 24. Action Steps AssessCurrent State Gauge Risks & Opportunities Evaluate Options Weigh Benefits & Costs Set Targets Formulate Strategy Assess Plan Engage Manage External Relations Engage the Organization
- 25. Examples (cont’d) XeroxInterface Carpet Southern Company Greenville Tube Southwire Sales exceed forecasts $250M one-year savings $140M 4-year savings $108M/yr savings productivity up 15% energy effic. up 30% 15% scrap reduction five-month payback 40% electricity use cut 60% gas use cut But Wait! There’s More…
- 26. Life Cycle ManagementOverview
- 27. LCM - Areasof Focus Ref: Wuppertal Institute
- 28. Stakeholder Relationships FullyRealized Minimal Ref: wuppertal Comply with requirements Deficient provide information no feedback incorporated Unilateral exchange information and experiences Bilateral interactive dialogue with stakeholder groups to realize a common goal Consultative ongoing stakeholder discussion participatory decision-making Collaborative
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- 30. Measurement & ReportingINITIATIVES UN Global Compact Global Reporting Initiative Sarbanes-Oxley UK Ethical Trading Initiative Coalition for Environmentally Responsible Economies Zero Emissions Research Initiative CRITERIA Transparency Inclusiveness Auditability Completeness Relevance Accuracy Neutrality Comparability Clarity Timeliness
- 31. $ value ofEcological Services IF you could buy them!
- 32. Pollution Prevention BenefitsEnvironmentally proactive companies have: 4% higher ROI 9% higher sales growth 17% higher operating-income growth Improve operational efficiency Increase innovation Improve risk management Better access to information Enhance reputation and credibility Leverage ‘Human Capital’
- 33. Benefits: Case StudiesIBM - > $500 million in energy savings in the 1990s Johnson & Johnson - $10 million annual energy efficiency cost savings Raytheon - $100-200 million of un-forecasted sales required to offset anticipated electricity cost increases, saving ~ $9M/yr Dow Chemical’s Louisiana division energy-saving projects averaged 204% audited ROI, paying Dow’s shareholders $110M/yr DuPont saves ~ $31M/yr But Wait! There’s More…
- 34. Examples (cont’d) Xerox- first fully digitized copie, 90% remanufacturable and 97% recyclable. Sales exceeded forecasts. remanufacturing and and waste reduction saved Xerox $250 million in one year. Interface Carpet - $140 million in sustainable waste reductions over 4 years Southern Company’s improvements in thermal efficiency saved $108M/yr Greenville Tube Corporation - boosted productivity 15% and energy efficiency 30%, reduced scrap 15%, and saved $77,000 a year with a five-month payback Southwire cut electricity use 40%, gas by 60%
- 35. SRI in theU.S. $2.2 trillion total U.S. SRI assets > one of every nine dollars under management SRI assets have 40% faster growth than than all U.S. managed investment assets 75% of SRI funds > $100 million in assets earned top scores from Morningstar and/or Lipper Analytical Services
- 36. Changing Viewpoint Moststudies show environmental stock market performance correlation Management quality leading determinate of share performance Environmental performance: excellent proxy for management quality
- 37. Changing Viewpoint Environmentand social issues are among the most complex challenges facing management issues, stakeholders and non-financial measures High level of technical, market and regulatory uncertainty Success in this high complexity area implies ability to excel in other business areas, earning superior returns
- 38. Sustainability Issues Impacton the Bottom Line Aventis – Starlink Corn Union Carbide – Bhopal Exxon – Valdez Sandoz – Pollution of the Rhine Royal Dutch/Shell – Brent Spar, Nigeria Nike – “Sweatshops” Monsanto – Genetically Modified Foods Ford – Bridgestone tire recall on “Explorer” Norsk Hydro – Utkal Project in India ABB - Bakkun dam in Malaysia GE – PCB in the Hudson River Elf Aquitaine – Erika tanker wreckage Need dollars here
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- 40. Corporation of theFuture © Interface
- 41. Financial Institutions ABN-AMRO ABP Investments Alliance Capital Management Bank Julius Baer Bank Sarasin BNP Paripas BP Investment Management Brown Brothers Harriman Capital Guardian Cazenove Fund Management Collins Stewart (CI) Ltd. Contra Costa County Employees’ Retirement Association Daiwa Securities Dreyfus Investment Advisors Frontier Capital Management Green Cay Asset Management Glenmede Trust Hermes Pensions Management (British Telecom Pension) IBK Capital Corp. ING/Aeltus Investment Management Legg Mason Funds Management Lombard Odier & Cie Mellon Equity Neuberger Berman (Lehman Brothers) Rockefeller & Co. Schroders Investment Management Soci é t é G é n é rale SNS Asset Management Swiss Re State Street Global Advisors T. Rowe Price UBS Investment Bank World Bank Innovest investment research has been used by: Partial Client List
- 42. Questions What areyour reputation and brand image worth?
- 43. Footnotes 1 Taylor Nelson (2001) European Survey on SRI and Financial Community (302 financial analysts and fund managers across Europe) 2 > $100 million assets 3 In place for > 5 yrs. 4 Beyond the Numbers Corporate Governance: Implication for Investors Deutsche Bank Research Report. April 2004 5 Citizens, consumers, public authorities and investors