environment as a strategic issue and the role of the board. october 5, 2007 sirpa juutinen...
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Environment as a strategic issue and the role of the board.
October 5, 2007Sirpa Juutinen
Environmental risks, standards, activities, responsibilitiesChair of the Year
Slide 2Environment as a strategic issue on board agenda?PricewaterhouseCoopers
October 6, 2007
Corporate Involvement in Society: A strategic Approach (by Michael E.Porter and Mark R. Kramer (Harvard Business Review, Dec 2006))
Generic Social Impact
Value Chain Social Impacts
Social Dimensions of Competitive Context
Good Citizenship Mitigate harm from value chain activities
Responsive CSR
Transform value chain activities to benefit society while reinforcing strategy
Strategic philantrophy that leverages capabilities to improve salient areas of competitive context.
Strategic CSR
1 Corporate Responbility aspects as part of the strategy
OperationalEffectiveness
OperationalEffectiveness Strategic
Positioning
StrategicPositioning
Slide 3Environment as a strategic issue on board agenda?PricewaterhouseCoopers
October 6, 2007
The Board is interested in mega trends – both in terms of risks and opportunities
Low-carbon economy
Slide 4Environment as a strategic issue on board agenda?PricewaterhouseCoopers
October 6, 2007
Toyota:Eco-innovation the New Market Differentiator
Eco-Product Programme
Use of recyclable materials
Zero waste to landfill
Phase out substances of environmental concern
Toyota Prius
Launched: Japan 1997, USA 2000 & UK 2004
CO2 emissions are 32% lower than normal petrol powered cars
In NZ hit the zero waste to landfill target
Market performance
Total global sales as of April 2006 : 504,700
Global profit increased by 39%, to £3.2 billion in Q2 of 2006
GM and Ford losses of $3.4mill & $254 million in the same period
Company Examples
Source: Jonathan Porrit, Forum for the Future
Slide 5Environment as a strategic issue on board agenda?PricewaterhouseCoopers
October 6, 2007
Sustainability And (Shareholder) Value
FCFF:Free cash flow to the firmWACC:Weighted average costs of capital
2 Corporate Responbility reporting
Slide 6Environment as a strategic issue on board agenda?PricewaterhouseCoopers
October 6, 2007
Extended Rule Base – what to include in it
Main input comes from market and from stakeholders
Market
CompetitorsGeographic
location
Sosio-politicalenvironment
Stakeholders
InternalEmployeesSuppliers
Customers
ExternalShareholdersRegulators Customers
Corporate Strategy and Objectives Rule BaseRule Base
Slide 7Environment as a strategic issue on board agenda?PricewaterhouseCoopers
October 6, 2007
Environment in the Reports of the Board of Directors – a review of the 50 biggest Finnish companies
Well reported
Something
No information 20%
40%
40%
Slide 8Environment as a strategic issue on board agenda?PricewaterhouseCoopers
October 6, 2007
Case Rautaruukki – a risk approach
“… Rautaruukki is committed to the principles of sustainable development. The environmental risks arising from operations are assessed as part of planning when modernising production processes or building new ones. Internal environmental risks were mapped at 30 operating sites during 2006. Environmental due diligence studies to assess the standard of environmental protection were carried out at sites acquired in conjuction with acquisitions.…”
Slide 9Environment as a strategic issue on board agenda?PricewaterhouseCoopers
October 6, 2007
Case Ahlstrom – a risk approach
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…“
Slide 10Environment as a strategic issue on board agenda?PricewaterhouseCoopers
October 6, 2007
Case Kemira Growhow – a compliance approach
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Slide 11Environment as a strategic issue on board agenda?PricewaterhouseCoopers
October 6, 2007
Case Fortum – a strategic approach
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Slide 12Environment as a strategic issue on board agenda?PricewaterhouseCoopers
October 6, 2007
The role of the Board is to ensure that….
Market
CompetitorsGeographic
location
Sosio-politicalenvironment
Stakeholders
InternalEmployeesSuppliers
Customers
ExternalShareholdersRegulators Customers
Corporate Strategy and
ObjectivesRule BaseRule Base
The role of the Board is to decide on…
all (environmental) facts and weak signals together with risks have been identified and that they have been interpreted in wide enough contex.
all relevant stakeholders have been identified, prioritized and weak signals listened to.
the corporate strategy and objectives, the desired risk appetite, and depending on these, the relevant content of the Rule Base.
Slide 13Environment as a strategic issue on board agenda?PricewaterhouseCoopers
October 6, 2007
The Rule Base has to be proactive and the compliance processes need to be well integrated
Reactive Rule Basenot integratedcomplianceprocesses
“Grasshoppers”
Reactive Rule Basenot integratedcomplianceprocesses
“Grasshoppers”
“Ants”“Ants”
Extended, proactive Rule Base
and integrated compliance processes
“Agility champions”
Extended, proactive Rule Base
and integrated compliance processes
“Agility champions”
Extended, proactive Rule Base,
separate compliance processes
“Peacocks”
Extended, proactive Rule Base,
separate compliance processes
“Peacocks”
Degree of integration
Rul
e B
ase
Ext
end
Reactive Rule Base, integrated compliance processes
Differentiation
1 Corporate Responbility aspects as part of the strategy
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