business sustainability dec11

Business Sustainability 1

BUSINESS SUSTAINABILITY

Dec 2011

ISBS/Dec 2011Prof. B.S.Guha

Dec 2011 Business Sustainability 1

ISBS/Dec 2011Prof. B.S.Guha

Business Sustainability 2Dec 2011

Joined Philips India as a Management Trainee (1969) After O-J-T of 18 months, became a Section In-charge in a factory 18 months later, become Shop In-charge 24 months later, took over as I/C Engineering & Customer Support 18 months later, Project 2nd I/C for new Factory 18 months later, Manager Quality Control 42months later, Manager Innovation Group 42 months later seconded to Philips Germany 24 months later returned as Factory Manager, Luminaire Centre/Calcutta 36 months later took over as Plant Manager, Kalwa Lamp Factories/ Thane the

largest Philips Production complex – first Indian Manager 54 months later took over as SBU head- Professional Lighting/India 36 months later took over as Head, Corporate Purchasing/India for 12 months; Started (1998) up a joint-venture between Tata AutoComp & Yazaki Corp/Japan

for Auto EDCS (C.E.O, Tata-Yazaki) and steered it for 60 months; Retired from Tata-Yazaki to start a career as a Teacher. (2003)

Who am I ?


Books & Reference Reading “The Sustainable MBA: the manager’s guide to Green

Business” – Giselle Weybrecht ; (Times Knowledge Series/Times Group Books & Wile; ISBN : 978-81-265-2770-0)

References “The Necessary Revolution” - Peter Senge et al;

(Doubleday; ISBN : 978-0-385-51901-4) “The Fortune at the Bottom of the Pyramid” - C.K. Prahalad;

(Wharton School Publishing, ISBN: 978 81 7758 776 0)Further Reading “Limits to Growth” - Meadows, Donella, J. Randers and D. Meadows;

(New York Universe Books, 1972) “Beyond the Limits”: - Meadows, Donella, J. Randers and D. Meadows;

(Chelsea Publishing Co.. 1992) “Cannibals with Forks: the Triple Bottom Line of 21st Century

Business” – John Elkington

Dec 2011


The Concern:

Taking a view of a Sustainable Future

Dec 2011


The Concern Are Earth’s resources in-exhaustible OR will they run out

some day? How will we get “energy” ? Minerals to make “goods” ? And food to eat ? Water to drink ? Finally, Air to breath ?

Will nations live harmoniously? Will people within a nation be at peace ? Will there be equitable distribution of wealth? What about “Quality of life” ?

Can “Economic Prosperity” be ensured for development ? Is the World and Life-style that we take for granted be there

forever i.e. Human Sustainability? 5


THIS The Concern.... Cont’d.


The Concern.... Cont’d.

Or


OK, but... How urgent is it? How important is it? Is it both urgent and important?

If the answer is ‘Yes’, then... Who or what is responsible? Is there ‘something’ that can be done? To do that ‘something’, what is the scale, time-frame

and diversity of effort required? Are their ‘Opportunities’ & ‘Threats’ for Businesses? Does it, therefore require management involvement?

This course attempts to provide direction!Dec 2011



How much human life can the Planet earth support? The ecological footprint is a measure of

human demand on the Earth's ecosystems: represents the amount of biologically productive land and sea area needed to

regenerate the resources a human population consumes

AND to absorb/render harmless the corresponding waste.

Estimates how much of the Earth (or how many planet Earths!) it would take to support humanity if everybody lived a given lifestyle.

The Concern.... Cont’d.Fundamental Question!

Mother Earth!



10

One of the earliest concepts related to the issue of scale is that of carrying capacity. Biologists define carrying capacity as the maximum population of a given species that can survive indefinitely in a given environment.

Starting with low population and abundant resources, two types are seen:k-selection – increase rapidly but tend to regulate by slowing down birth rate etc. to adapt to the resources available and finally reach a stable level;r-selection – increase exponentially till resources are depleted and then mortality is the prime regulator. With resources replenished this cycle repeats in Boom or Bust cycle.


The I PAT formula in the 70‘s was an attempt to explain impact of human consumption in terms of three components: population numbers, levels of consumption (which it terms "affluence",

although the usage is different), and impact per unit of resource use (which is termed

"technology", because this impact depends on the technology used)

I = P × A × T

Population ‘affluence’ Technology

Environmental Impact

Compounding Effect



There have been a large number of published estimates for the human carrying capacity of the earth; they range from a low of half billion people to a staggering 800

billion. Many of these estimates

are more ideologically based than determined by scientific principles.

?The Concern.... Cont’d.


Post-1950s the Developed World entered a great acceleration of growth and population (the Golden age of Capitalism): technological innovations viz. plastics, synthetic

chemicals and nuclear energy as well as fossil fuels continued to

transform society. Gathering environmental movement

highlighted there were environmental costs associated with the many material benefits that were being enjoyed


14Dec 2011

Documentation by American marine biologist & naturalist Rachel Carson in her path-breaking, revolutionary book: Silent Springs

Environmentalism's concern with pollution & depletion of finite resources voiced in a series of hallmark books e.g Limits to Growth

Sustainability

1962

1972


http://upload.wikimedia.org/wikipedia/en/b/ba/Silent_Spring_Book-of-the-Month-Club_edition.JPG

http://upload.wikimedia.org/wikipedia/en/b/b6/Cover_first_edition_Limits_to_growth.jpg


Historically, humanity has responded to a demand for more resources by trying to increase supply.

In 1972 the book “Limits to Growth” sent out shock waves around the world. Using computer modeling, it warned of catastrophic

consequences by 2100 if the then current rates continued: growth in resource use, industrial output, food production and population expansion.

The only computer scenarios which indicated human welfare could be sustained were ones in which growth was reduced.



The study team published both a 20 year and a 30 year follow up, adding measures and making improvements in their computer simulation model. These analyses came to the same conclusions as the original study – that continued growth would lead to overshoot and catastrophe for human civilization. In their original study in 1972 they warned that overshoot

was a possibility In the 1992 report “Beyond the Limits” they argued that

overshoot had already occurred in a variety of areas, and that their original warning were even more urgent.



Uncontrolled Development, "Overshoot and Collapse"



Sustainable Development The Concern.... Cont’d.


Alex Steffan’s Summary - A short Video



The Situation:

Where are we today?

Dec 2011


In 1960 almost all countries in the world had the capacity to meet their own demand but by 2000 most countries were able to meet their

needs only by importing resources from other nations

Environment & Ecology is a ‘common resource’ !

By the late 20th century environmental problems were becoming global in scale. the 1973 and 1979 energy crises demonstrated

the extent to which the global community had become dependent on a non-renewable resource.

The Situation


In parallel, greater concern for ‘human values’, lead by the formation of Amnesty International in mid-60’s and carried world-wide by Globalization and the Information Revolution emerged.

Failure of Communism as an economic model and widening disparities and inter-dependence only brought to sharper focus the growing differences in distribution of wealth and the need for a more comprehensive economic model.

In the developed world, these led to the rise in importance of ethics and equity (and morality) in governance and consumerism.

The Situation.... Cont’d.

Business SustainabilityDec 2011

The growing ‘unease’ and its investigation by UN (UNWCED: United Nations World Commission on Environment & Development a.k.a the Bruntland Commission, 1987) gave rise to most widely quoted definition of sustainability and sustainable development in the report “Our Common Future” :

“Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.”

23

The Situation.... Cont’d.Sustainability: Definition


The definition contains two key concepts: ‘Needs’: in particular the essential needs of the

world’s poor – to which overriding priority should be given

‘Limitations’: imposed by the state of technology and social organizations on the environment’s ability to meet present and future needs

The definition as extended to Business: ‘for a business enterprise, sustainable development

means adopting strategies and activities that meet the needs of the firm and its stakeholders today while protecting, sustaining and enhancing the human and natural resources needed for the future.’

Dec 2011

Sustainability: DefinitionThe Situation.... Cont’d.


The idea of sustainability is not new societies in the past and over time had learnt to balance

social, environmental and economic concerns. At its core, sustainable development is about creating an

interactive and appropriate balance between: Social Equity: i.e. Human rights, peace, justice, gender

equity, cultural diversity etc. Environmental protection: referring to natural

environment i.e. Air, water, biodiversity, forests, energy etc. Economic development: understanding the limits and

potential of economic growth factoring in poverty reduction, responsible consumption, corporate responsibility, employment and allied themes.

With Industrial Age we lost the balance, perhaps due to rapid development and ‘convenience’.



According to John Elkington, the movement built up on three ‘pressure waves’ of public awareness: Wave 1 – brought an understanding of the issues and

the finite limits to demand on natural resources. Business response was defensive. (60’s – mid 70’s)

Wave 2 - brought in the awareness for newness in technologies and alternatives, leading to industry initiatives towards sustainability. Business response became more competitive. (mid 70’s – mid 90’s)

Wave 3 – focuses on the growing recognition that profound changes are needed to governance and in the globalization processes. Business will need to focus on long-term and market creation. (mid 90’s – current)


Business Sustainability 27Dec 2011Sept 2011 Sustainability 27

Wave 1 Milestones: Amnesty International

formed (‘61) ‘Silent Springs’ (‘62) Earth Day celebrated (‘70) Greenpeace founded (‘71) Arab Oil embargo (‘73)

Wave 2 Milestones: OCED ‘State of

Environment’ report (‘78) Bhopal Disaster (‘84) Chernobyl Disaster (‘86) ‘Our Common Future’ (‘87) Exon Valdez Disaster,

Berlin Wall (‘89) Gulf War (‘91)

Wave 3 Milestones: Shell Nigeria, Brent Spar

issues (‘95) ‘Mad Cow’ Disease,

UK/Nike ‘sweatshops’ (’96) Kyoto Protocol (‘97) GM Foods issues, UK/EU

(’98) ‘Battle of Seattle’ /WTO

(‘99) CSR on WEF Agenda (’00) 9/11(‘01) BRIC in G8 Rounds (‘04) Meltdown US Economy

(‘06) Copenhagen Summit (’08)



Leaders of some of the world's most successful companies say the whole system of capitalism is at risk; there does seem to be consensus on what the big problems are:1. Unrestrained migration in numbers greater than the capacity to

productively absorb the newcomers.2. Environmental degradation of food and water supplies, and many

other aspects of quality of life.3. Failure of the rule of law; radical movements, terrorism/war which

destroy the stability that markets need.4. Low levels of education, which limit worker productivity.5. The rise of state capitalism in response to free market shortcomings.6. Pandemics that disrupt trade and decimate labour.7. Inadequacy of existing institutions – not just a matter of resources

and competence; but also jurisdictions as nation-based institutions face global issues.

Dec 2011

The Situation.... Cont’d.The coming decade


Economy

Society Environment

Shifting Priorities

“Early 20th Century” “Late 20th Century”

The economy is a subsystem of society, which is itself a

subsystem of the biosphere. A gain in one is loss in the other.

The economy is the predominant system, with society and environment as

supportive domains.



Currently prposed model is “The three spheres”: Social, Environmental & Economic, represented by three overlapped, mutually reinforcing ellipses (World Summit, 2005)



“What would it take to get rid of disposable cups?” was a question Prof. Senge raised in the keynote address at the MIT Sustainable Summit .

The responses include everyone from Starbucks & it’s competitors to paper manufacturers, food service providers, recyclers and municipal governments.

To make progress on really tough sustainability issues is a “massive undertaking in collaboration,” Senge explained; “what’s more the parties that need to collaborate often aren’t naturally inclined to.”



Sustainability, thus, involves everyone: Individual (‘be the change you want to see!’) Local Communities ( to give the movement ‘mass’) Business & Industries ( for appropriate products &

practices) Countries (for adequate governance)

No one person could destroy a species or warm the planet no matter how high (s)he tried. But that is what we are doing collectively!”

"Corporations are not responsible for the entire world's problem, nor do they have the resources to solve them all."

“Earth provides enough to satisfy every man’s need, but not every one’s greed!”



A universally accepted definition of sustainability is difficult because it is expected to achieve many things: factual and scientific: a clear statement of a

specific “destination”. The simple definition "sustainability is improving the quality of human life while living within the carrying capacity of supporting eco-systems” conveys the idea of sustainability having quantifiable limits.

call to action: a task in progress or “journey”, therefore a political process, so some definitions set out common goals and values e.g.The Earth Charter.



2005 Data

Is this picture O.K. and ‘sustainable’?Is it O.K. to look at

individuals only ?

A US citizen

requires 4x the

global average!



In answering these ‘simple’ questions, different dimensions need be considered: Economic Development: There are large disparities –

leading to the three economic worlds ‘Developed’ , ‘Developing’ & ‘Under-developed’. Requires ‘Political Settlement’

Social Equality: is a direct fall-out of the above! Environment & Ecological Protection: is by now self-

evident. Obviously, there are large differences of opinion – with

each nation/union prioritizing differently. Environment & Ecology lends itself to a more scientific rigour:

therefore, greater ‘unified action’ , led the more economically developed. The threat to their ‘affluence’ is greater from this factor!

Dec 2011



Incidental elements which strongly influence sustainability are:

Culture: shared values and attitudes that provide the framework by shaping our day-to-day behaviour.

Governance: is the overarching principle that provides the context for sustainable development; promote the structure(s) at local, national and international levels, transparently and effectively. The principles that guide responsibility and accountability:

Precautionary principle: preventive measures even with the lack of full scientific evidence

Proximity principle: disposal & treatment of waste as close to the point of generation, within technical feasibility

Polluter-pays principle: cost of pollution should be covered by those causing it.

Dec 2011



The Environmental Protection Index (EPI), has been developed to quantify and numerically benchmark the environmental performance of a country's policies. working as an index that can be used by policy makers,

environmental scientists, advocates and the general public,

comprising ENVIRONMENTAL HEALTH POLICY ( 6 Indicators)

ECOSYSTEM VITALITY POLICY (8 Indicators)

PRODUCTIVE NATURAL RESOURCES (8 Indicators)

CLIMATE CHANGE (3 Indicators)

Pilot study done in 2006.


Business Sustainability 38Dec 2011Sept 2011 38Sustainability


http://en.wikipedia.org/wiki/File:Overall_EPI_Score_by_Country_Quintile_2006.png

Business Sustainability 39Sept 2011

Three EPI reports have been released - the Pilot 2006, the 2008 and 2010 Environmental Performance Index. In the 2010 scorecard, the top 5 countries (of

163) were: Iceland,

Switzerland, Costa Rica, Sweden and

Norway. The US fell to the 61st position (as compared to

39th in the 2008 EPI), Brazil ranks 62nd , Russia 69th , China 121st , India ranks 123rd .



One of the most significant developments on Environment was the ‘Kyoto Protocol’ , Sept. 1997: Is an international environmental treaty with the goal

of achieving the "stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous interference with the climate system”. The target agreed upon was an average reduction of GHG

emissions by 5.2% from 1990 levels by the year 2012. The Protocol came into force on 16 Feb. 2005 and as

of September 2011, 191 states have ratified the protocol. USA signed yet to ratify, China has not proposed any emission cuts as binding.



Green = Countries that have ratified the treaty Grey = Countries that have not yet decided Brown = No intention to ratify at this stage.



The primary greenhouse gases in the Earth’s atmosphere are water vapour, carbon dioxide, methane, nitrous oxide & ozone.


http://en.wikipedia.org/wiki/Water_vapor

http://en.wikipedia.org/wiki/Carbon_dioxide

http://en.wikipedia.org/wiki/Methane

http://en.wikipedia.org/wiki/Nitrous_oxide

http://en.wikipedia.org/wiki/Ozone


Top 3 (2005)China – 17% (5.8t/capita)US – 16%(24.1t/capita)E U – 11%(10.6t/capita) {India: 5% (2.1t/capita)}



Per Capita,GHG emission



The Kyoto Protocol ‘climate pact’ is expiring in 2012..

The Copenhagen rounds were stormy: with major disagreements between ‘developed’ and ‘developing’ countries on emission caps.. Developing nations want an

extension of the Kyoto Protocol with tougher norms for developed countries!

Australia-Norway are proposing agreement for a new pact, but no outcome expected before 2015..

The Situation .... Cont’d

?



Viewpoint: Developed Countries

Viewpoint: Developing Countries

Per Capita,GHG emission

http://en.wikipedia.org/wiki/File:Overall_EPI_Score_by_Country_Quintile_2006.png


Al Gore’s Presentation: “An Inconvenient Truth”


The State of Ecology & Environment


The Situation .... Cont’dThe State of “Economy”

Robert Greenhill, Managing Director and chief business officer at the ‘09 World Economic Forum, said: "Twentieth century systems are failing to manage 21st century risks; we need new networked systems to identify and address global risks before they become global crises,"

?Global economy 'in no state to cope with new shocks'


"Globalisation has generated sustained economic growth for a generation; it has shrunk and reshaped the world, making it far more interconnected and interdependent. But the benefits of globalisation seem unevenly spread – a minority is seen to have harvested a disproportionate amount of the fruits.“ W.E.F Study, 2009

The United states wheels from a recession. A lot of people wonder what went wrong? Greed in Wall Street, the War in Iraq and the unprecedented rate of change overlapping the world

today thanks to globalization

The State of Economy .... Cont’d


Jun’07 – Nov’08, 25% reduction of net worth!

US Economy: The ‘Meltdown’ of US Economy:

Subprime mortgage crisis US ‘Housing Bubble’ US Housing market correction Energy Crisis Late ‘00 Recession:

Auto Industry crisis of ’08-’10 US Govt. Interventions

Troubled Assets Relief Program, 2008 Economic Stimulus Act, 2008 American Recovery & Reinvestment Act, 2009

Sept 2011 Sustainability 50



In Aug’11, the US debt surpassed 100 percent of gross domestic product for the first time since World War II


WW II


On August 5, 2011, Standard & Poor's credit rating agency downgraded the long-term credit rating of the United States government for the first time in its history, from AAA to AA+: "The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the Administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government's medium-term debt dynamics".

According to the International Monetary Fund, the US joined a group of countries whose public debt exceeds their GDP. The group includes Japan (229%), Greece (152%), Italy (120%), Ireland (114%).


http://en.wikipedia.org/wiki/International_Monetary_Fund


European sovereign debt crisis:

From late 2009 (Greece), fears of a sovereign-debt crisis developed with the situation becoming particularly tense in early 2010.

The crisis has reduced confidence in other European economies. Ireland, with a government deficit in 2010 of 32.4% of GDP, Spain with 9.2%, and Portugal at 9.1% are most at risk.



Green AAA Turquoise AA L/Blue A D/Blue BBB Purple BB Red B

Sovereigns listings by Standard & Poor's as of August ‘11

80% of World GDP:EU 26% ?US 23%BRIC 17%Japan 9%



The Earth Charter (2000): “a sustainable global society founded

on respect for nature, universal human rights, economic justice, and a culture of peace.”

It outlines caring & respecting through ecological integrity, social and economic justice, democracy, non-violence and peace and similar factors.

(‘The Millennium Development Goals’ , time-lined for 2015.)

The Situation .... Cont’dThe State of ‘Society’


The Millennium Goals “The Global Compact”1. Eradicate extreme poverty

and hunger2. Achieve universal primary

education3. Promote gender equality

and empower women4. Reduce child mortality5. Improve maternal health6. Combat HIV/AIDS, malaria

and other diseases7. Ensure environmental

sustainability8. Develop a global partnership

for development.

Launched simultaneously as a policy platform and action framework for companies committed to sustainability & responsible business practices (in 130 countries, with over 4700 corporate & other stakeholders). The members support the Millennium Goals and focus on:

1. Human Rights2. Labour Standards3. Environment4. Anti-corruption

The State of ‘Society’ .... Cont’d


Links of Business and Industry to ‘Economics’ and ‘Environment/Ecology’ are intuitively direct. Actions impacting these are: ‘Consumption’ is influenced by Business/Industry by

generating demand, often aiding consumers’ ability to pay.

Business/Industry then leverage ‘Financial Capital’ to use ‘Natural , Human, Social & Technical capitals’ (resources!) to make and deliver ‘required’ Products and Service.

Thus the links to Society at large is at ‘arms length’ – left to Governments/Nations to provide resources with varying regulatory mechanisms. Therefore, what is Business/Management responsibility?


Economy

Society Environment


How has Business acted? Great Success: ‘The Golden

Age of Capitalism’. Side effects were ‘unseen’ –

environmental, economic & social

Finding stop-gap solutions and shifting the burden to experts

Rather than work proactively with Governments to come up with innovative solutions, ‘lobbyist’ employed to maintain status-quo.

Business Responsibility: the Reality

Pressure to meet tougher environmental standards

‘Specialists’ e.g. Lobbyists intervene to reduce pressure

Managers develop capacity for innovative solutions e.g.

Better products

Easier & Faster but symptomatic & short-term

Harder & take time but fundamental solutions

DELAY



explaining reality: ‘Take-make-waste'

Societal Needs

‘Take-Make-Waste’ solutions

Regenerative Solutions –all life flourishes



DELAY

Damage to Social & Environmental Systems


Business Sustainability 60Dec 2011Dec 2010 Business Sustainability 60

Water Shortages

Relocate plants to where regulations are more lax

Integrated watershed management



DELAY

The State of ‘Society’ .... Cont’dexplaining reality: ‘Take-make-waste'


The State of ‘Society’ .... Cont’dResponsibilities of business: Definition

Classical view: “ There is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as they stay within the rules of the game, which is to say: engages in open and free competition without deception and fraud”. Milton Freidman (1970)

Contemporary View: A representative model was proposed by A.B. Carroll. (1980) – managers have four areas of responsibility: Economic, Legal, Ethical and Social.

Shareholder Value


A contemporary view of Business Responsibility


Stakeholder Value


The emerging paradigm (‘chrysalis economy’) is driven by 7 closely linked ‘revolutions’ – many of which we see and recognize as full-blown and others formating even as we discuss the topic! The peoples’ attitudes and perceptions are radically changing – inducing business & governments to govern cohesively and ‘responsibly’.

REVOLUTIONS OLD PARADIGM NEW PARADIGM1.Markets Compliance Competition2.Values Hard Soft3.Transparency Closed Open4.Life-cycle technology Product Function5.Partnerships Subversion Symbiosis6.Time Wider Longer7.Corp. Governance Exclusive Inclusive



Market: from local to global - for the foreseeable future, business will operate in markets that are more open to competition, both domestic and international;

Values: the worldwide shift in human and societal values - entire societies can go into quicksand (e.g. the Jasmine Revolution), roll-call of companies that have crashed because of values-based crises: Enron, Arthur Andersen, Lehman Bros., Satyam & ....;

Transparency: is well under way, is being fuelled by growing international transparency and will accelerate – RTI in India, Swiss Bank disclosures, Wiki-leaks & .... In many respects, the transparency revolution is now ‘out of control’!

Life-cycle technologies: riding on transparency, information on ‘cradle-to-grave’ implications of products & services: managing the life cycles of technologies and products ( e.g. batteries, jumbo jets & oil rigs) will be a key emerging focus of 21st-century business.

Dec 2011



Partners: acceleration of the rate at which new forms of partnership spring up between companies, and between companies and other organizations – ‘adversaries’ to partners e.g. Greenpeace & DuPont, WWF & Coke. Campaigning groups will need to work out ways of simultaneously challenging and working with the same industry e.g. Auto-emission norms;

Time: business finds that current time is becoming ever ‘wider’. This involves the opening out of the time dimension, with more and more happening every minute of every day: online reporting requirements are key drivers towards this wide-time world. Sustainability agenda is pushing us in the other direction: requires thinking across decades, generations and even centuries!

Corporate Governance: planning agenda for the business ‘bottom-line’ is the responsibility of the Corporate Board. New spin is being put on the already energetic debate: engaging and balancing the multi-stakeholder demands.

Dec 2011



Corporate social responsibility (CSR, also called corporate conscience, corporate citizenship, social performance, or sustainable responsible business) is a form of self-regulation integrated into a business model. CSR-focused businesses promote the public interest by

encouraging community growth and development and voluntarily eliminate practices that harm the public sphere, regardless of legality.

ISO 2600 is the recognized international standard for CSR. An approach for CSR that is becoming more widely

accepted is a community-based development approach. In this approach, corporations work with local communities to better

themselves; building of a trade network with the community - guaranteeing regular “fair trade” purchases.

The State of ‘Society’ .... Cont’d“Corporate Social Responsibility”


“Corporate Social Responsibility” …..Cont’d


“If it emerges at all, a sustainable global economy will emerge through an era of intense technological, economic, social and political metamorphosis .”

(Elkington, 2001). Current patterns of wealth creation will generate worsening environmental and social problems - pressures will continuously build on both corporations & governments to make a transition to sustainable development.

Four main types of company can be distinguished (or ‘value webs’) along the evolutionary path to a chrysalis economy – namely, corporate ‘locusts’, ‘caterpillars’, ‘butterflies’ and ‘honeybees’.

The State of ‘Society’ .... Cont’d“Sustainable Business”


LOW IMPACT HIGH IMPACT

REGENARATIVE(increasing returns) BUTTERFLIES HONEYBEES

DEGENARATIVE(decreasing returns) CATERPILLARS LOCUSTS

Dec 2011

Locusts: Some corporations operate as destructive locusts throughout their life cycles; others only display locust-like behaviours occasionally, characterized by:• the destruction of natural, human, social and economic capital; • collectively, an unsustainable ‘burn rate’, potentially creating regional or even global impacts;• a business model that is unsustainable over the long run;• periods of invisibility, when it is hard to discern the impending threat;

“Sustainable Business”.... Cont’d

HAVE TO BE STOPPED





Dec 2011

CATERPILLARS: are harder to spot than locusts because their impacts are more localized; their degenerative impacts may make it hard to see that they have a high potential for metamorphosis:• generate relatively local impacts, most of the time;• show single-minded dedication to the business task at hand;• depend upon a high ‘burn rate’, although usually of forms of capital that are renewable over time;• operate on a business model that is unsustainable when projected forward into a world of 8 to 10 billion people;


HAVE TO BE HELPED

TO EVOLVE





Dec 2011


BUTTERFLIES: are easy to spot, though most are comparatively small; they are conspicuous and have been abundantly covered in the media. Yet if every company in the world were to model itself on such companies, our economies would still not be sustainable – not enough ‘critical mass’ or ‘hive strength’:• As a sustainable business model over reliance for expansion on financial markets and large corporate partners;• a strong commitment to the corporate social responsibility (CSR) and sustainable development (SD) agendas; but a tendency to define its position by reference to locusts and caterpillars;

HAVE TO BE HELPED

TO GENERATE MASS





Dec 2011


HONEYBEES: is the domain into which growing numbers of government agencies, innovators, entrepreneurs and investors will head in the coming decades - global economy would hum with the activities of corporate bees and the economic versions of hives.• a sustainable business model, albeit based on constant innovation;• a clear – and appropriate – set of ethics-based business principles;• strategic sustainable management of natural resources;• sociability and the evolution of powerful symbiotic partnerships;


Sustainable business (green business) is thus an enterprise that has no negative impact on the global or local environment, community, society or economics and covers six essentials: Triple Top-line Value: The TTL Establishes three

simultaneous requirements of sustainable business activities financial benefits for the company, natural world betterment, social advantages for employees and members of the local

community – with each of these three components recognized as equal in

status.



Nature - Based Knowledge and Technology: bio-mimicry based principal involves the conscious

emulation of natural-world in terms of growing our food, harnessing our energy, constructing things, conducting business, healing ourselves, processing information and designing our communities;

Products of Service to Products of Consumption: Products of service are durable goods that are returned to

the manufacturer and re-processed into a (new generation) of products when they are worn out.

Products of consumption are shorter lived items made only of biodegradable materials.



Solar, Wind, Geothermal and Ocean Energy: emphasizing the use of renewable energy sources

Local-Based Organizations and Economies: durable, beautiful and healthy communities with locally

owned and operated businesses and locally managed non-profit organizations, along with regional corporations and shareholders

working together in a web of partnerships and collaborations.

Continuous Improvement Process: constant advancements and upgrade of Operational

processes as the company does its business. The continuous process of monitoring, analyzing,

redesigning and implementing is used as conditions change and new opportunities emerge .


New life to: “Think Global,

Act Local”


What does “all this” have to do with Business ‘now’? Everything! Because Businesses have to...

Reduce Cost: using less and wasting less does so Preserve resources: resources are increasingly hard to get –

need to conserve Keep up with legislation: laws governing businesses are

becoming tougher e.g. Pollution, anti-dumping etc. Enhance Reputation: to build trust and loyalty with the

society Satisfy Customer & Stakeholder needs: by conforming to

laws and obtaining a ‘licence to operate’ in this increasingly ethically conscious world.

Differentiate: by increasing customer loyalty, particularly creating niches for cause-related groups

Capitalize on new opportunities: improving living standards always provide this.


It can be triggered by any of these premises – with great linkages!

77Dec 2011Sustainability

Philips India used (ply)wood boxes to as primary packing for lighting equipment. G.O.I made wood/logging increasingly controlled – forest protection.

In the 80’s, wood progressively became expensive. Philips switched to Cardboard – took 2 years. Savings: 30%

Per unit packing, wood /paper ratio is 3:1 by weight. Also with 1t wood, 3t of paper can be made; put together: 9x preservation!

CB boxes used to advertise product & dealers started storing in showrooms

Additional cost savings by volume reduction: Handling (products/truck), lower inventory & disposal costs!

Reduce Cost

Preserve Resource

Keep up with

legisla-tion

Enhance Reputa-

tion

Next: Recyclable Crates?



Actual reasons why management is getting involved are: Sustainability is not totally new to any business, it is

about being more ‘with it’ and effective Continuity is more important than a carefully crafted

starting point; creation of habits leading to culture Potentially high cost of inaction for both business and

society. Even if there is no immediate impact, inaction can lead to

major issues in the future Multiple, unforeseen benefits

Effect is strongest when embedded into culture ( like Quality!)

Top driven initiatives, personal reasons or otherwise

Dec 2011



To ensure triple-top line actions for ‘green’ or sustainable business – responsible companies have moved on to a holistic measurement encompassing results impacting:

People Planet

Profit.The reporting contained performance metrics to give:

The triple bottom line (abbreviated as "TBL" or "3BL") captures an expanded scope of values and criteria for measuring organizational success.

SustainAbilty ©



Triple bottom line score-card means expanding the traditional reporting framework to take into account ecological and social performance in addition to financial performance.

"People, planet and profit" clearly describes the triple bottom lines and the goal: "People" (human capital) pertains to fair and

beneficial business practices toward labour, the community and region in which a corporation conducts its business.

"Planet" (natural capital) refers to sustainable environmental practices. A TBL endeavor reduces the ecological footprint by both controlling consumption and reducing waste.

Dec 2011



"Profit" is the economic value created (for the society in which it operates) by the organization after deducting the cost of all inputs, including the cost of the capital tied up. It differs from traditional accounting definitions of profit: Current accounting practices do not take into account ‘true’

or ‘full’ cost of inputs since many of the social and environmental costs are not identified and measured – being ‘externalities’.

‘Provisioning’ omissions or errors for contingent and liability costs which could arise in the future. These are usually factored in on a probability of occurrence.

‘Tragedy of the Commons’ – misuse or overuse of resources commonly available to all for ‘free’ (e.g. Fishing in the seas & oceans) making the resource scarce.

Dec 2011



One of the major drawbacks of the TBL framework is its inability to be applied in a monetary-based economic system. Because there is no single way (in monetary terms)

to measure the benefits to the society and environment as there is with profit, it does not allow for businesses to sum across all three bottom lines, making it difficult for businesses to recognize the benefits of using TBL for the company itself.

Many organizations, however, are using voluntary disclosures in their annual reports on the major Key Performance indicators for ‘People’ & ‘Planet’.

Dec 2011



99th Annual General Meeting ITC Limited Commemorating The ITC Centenary 100

Inspiring Years :One Mission – India First

Chairman Y C Deveshwar’s Address

An Example:

“Sustainable Business”.... Cont’dUsing the TBL Scorecard

http://www.itcportal.com/sets/chairman_frameset.htm


Missing Brands?


http://www.itcportal.com/products-microsite/001
































Financial Performance In its 100th year, your Company continues its impressive record of financial performance. Gross Turnover for the year grew by 13.5% to Rs. 26,259.60 crores. Net Turnover increased by 16.3 % to Rs.18,153.19 crores. Pre-tax profits rose by 24.7% to Rs. 6,015.31 crores while Post-tax profits at Rs. 4,061 crores registered a growth of 24.4%. Earnings Per Share for the year stands at Rs. 10.73. Cash flows from Operations stood at an all time high of Rs. 6,620 crores for the year.

From Chairman Y C Deveshwar’s Address



ITC : Financial Highlights 1996-2010*

March 31,1996

March 31, 2010

Gross Income 5,188 26,863

Profit After Tax 261 4,061

Return on Net Assets (%) 28 41

Net Assets Employed 1,886 14,957

Net Worth 1,121 14,064

Market Capitalization 5,571 1,14,000*

CAGR in Total Shareholder Returns in the period 1996-2010 : 24.3 %



Environmental and Social Performance I have in the past drawn your attention to the outstanding performance of your Company in creating new benchmarks in the area of environmental and social responsibility. The accomplishments continue with your company achieving the status of being ‘water positive’ for the 8th consecutive year, ‘carbon positive’ for the 5th year in succession and also ‘solid waste recycling positive’ for 3 years in a row. You will draw justifiable pride in the fact that your Company is the only enterprise in the world of its size to have achieved and sustained these three global environmental distinctions.



This stellar environmental performance is matched by your Company’s initiatives to build social capital through extensive community engagement, specially in India’s rural areas. These initiatives have led to the creation of sustainable livelihood opportunities for over 5 million people, many of whom represent the poorest sections of our society. ITC’s deep commitment to pursue a Triple Bottom Line strategy has earned it global and national recognition for the leadership it provides in responsible and sustainable business practices.


Comments on Y C Deveshwar’s Address“The company’s longest-serving chairman, Deveshwar has

repeatedly stressed the company’s environmental record as a green company, and established a triple-bottom line objective (offering financial, environmental and social returns) while also making the company carbon-neutral and water-positive. Among other diversifications, he has moved aggressively into a core Unilever territory like foods, and notched up a Harvard Business School case study with his e-choupal rural marketing initiative. But the company remains fundamentally dependent on the cigarette division for most of its profits, and in that sense the task of transforming the company remains an unfinished one.”

Source: Business Standard, 27 Aug 2010



CNBC Interview of Mr. Y. C. Deveshwar


Creating a Sustainability footprint

a) Global Initiativesb) Business Models


Creating a Sustainability footprintGlobal Initiatives

Carbon Trade CO2e

93

CO2 in the atmosphere 800 billion tons (380 ppm)

We are adding 5 billion tons every year!

The concern for “carbon”?T

8 billion tons go in, FossilFuel burning

3 billion tons go out, absorbed by land and oceans


The Carbon trading is one of the fastest growing financial markets in the world. It is the most visible result of early regulatory efforts to mitigate climate change, and grew out of the Kyoto Protocol, 1997.

The protocol requires that by 2012, developed countries will achieve greenhouse gas emission reductions of at least 5% against baseline levels of 1990.

The Protocol agreed on 'caps' or quotas on the maximum amount of Greenhouse gases for developed and developing countries,

A tradable permit system has been effective in the industrial sector: trade (i.e. ‘sell’ your allowance to ‘buyers’ who exceed their quota ). Thus, ‘Cap & Trade’.

Carbon Trade… Cont’d


Participating countries set quotas on the emissions (1 unit = 1 tonne of CO2e) of installations run by local business and other organizations, generically termed 'operators'. Countries manage this through their own national

'registries', which are required to be validated and monitored for compliance. (Certified or Verified Emission Reduction )

Businesses that are about to exceed their quotas can buy the CERs/VERs, privately or on the open market.

This gives operators time to invest in/develop 'cleaner' processes & developing machinery/ practices

The primary goal is “Carbon Offset” rather than cap. ‘Offsets’ are achieved by investing in sustainable

practices: “Clean Development Mechanism (CDM)”



CDM’s typically give financial support to projects that reduce the emission of greenhouse gases in the short or long-term. The most common project type is renewable energy,

such as wind farms, biomass energy, or hydroelectric dams. popular carbon offset projects from a corporate

perspective are energy efficiency & wind turbine projects Others include the destruction of industrial pollutants or

agricultural byproducts, destruction of landfill methane, and forestry projects.

Many companies offer carbon offsets as an incentive in the sales process for customers to mitigate the emissions related with their product or service.



The market is emerging strongly despite various global factors e.g. uncertainty with US regulatory efforts.

With existing regulation, the emerging carbon trade has reached US $70 billion (€52 billion) in 2008. For the third consecutive year, China was the world

leader with a 70% market share in terms of transacted volume.

Brazil and India, at 8% market share each, transacted the highest volumes after China. Africa followed with 5% of the market.

These figures do not account for US volumes since US is not a signatory to Kyoto Protocol, though there are some voluntary efforts



Renewable energy commercialization involves the diffusion of 3 generations of renewable energy technologies dating back more than 100 years.

Second-generation technologies are market-ready and are being deployed at the present time; they include solar heating, photo-voltaics, wind-power, solar thermal power stations & new forms of bio-energy.

Third-generation technologies require continued R&D efforts in order to make large contributions on a global scale. E.g. Ocean energy, biomass gasification.

Creating a Sustainability footprintGlobal InitiativesRenewable Energy


Renewable Energy …Cont’d

Available renewable energy The volume of the cubes represent the amount of available geothermal, hydropower, wind and solar energy in TW, although only a small portion is recoverable. The small red cube shows the proportional global energy consumption!

What is the scope?


Worldwide energy sources (TW) 2004



Taking Off!!

Revenues: 10x in 12 years



Solar energy is not available at night; modern energy systems usually assume continuous availability of energy. Thermal mass systems can store solar energy in the form of heat at domestically useful temperatures. Solar energy can be stored at high temperatures using molten salts. Salts are an effective storage medium because they are low-cost, have a high specific heat capacity and can deliver heat at temperatures compatible with conventional power systems.

Second Generation in Solar Energy 1000 MW: Operational; 2000 MW under Construction; 18000MW Announced.


http://en.wikipedia.org/wiki/File:Holaniku.png

http://en.wikipedia.org/wiki/File:PS20andPS10.jpg

http://upload.wikimedia.org/wikipedia/commons/6/64/Dish_Stirling_Systems_of_SBP_in_Spain.JPG







Background Products require ‘consumers’! Today’s consumers are:

Conscience-focused & demand good-governance Want ethical business processes Are independently informed Require ‘service’ more than ‘ownership’ Ready to access goods through non-traditional ‘channels’

Manufacturer

Distributor

Dealer Retailer

Consumers

Manufacturer

Intermediary(s)

Consumer Consumer

Consumer


Recycling & Regeneration


‘Life-cycle’

Dec 2011

Recycling & Regeneration.... Cont’d


Recycling involves processing used/ spent articles & waste into useable products to prevent destruction of potentially useful materials to:

reduce the consumption of fresh raw materials,

reduce energy usage, reduce air pollution (incineration) and water pollution (from landfill)

by reducing need for "conventional" waste disposal, and lower GHG emissions as compared to virgin production.

Recycling is a key component of modern waste reduction.


http://www.google.co.in/imgres?imgurl=http://www.allsurfacedesign.com/Portals/0/c2c_sil_RGBlg.jpg&imgrefurl=http://www.allsurfacedesign.com/Environmental/CradletoCradle/tabid/88/Default.aspx&h=436&w=450&sz=75&tbnid=xWj5ZZgqZ_nC3M:&tbnh=123&tbnw=127&prev=/images?q=cradle+to+cradle&zoom=1&hl=en&usg=__v_GFA5uctpgXXsKPPst1EtCeFlU=&sa=X&ei=qP98TILDO46kvgOvq4i7Ag&ved=0CDIQ9QEwBQ

http://upload.wikimedia.org/wikipedia/commons/7/7b/Recycling_symbol.svg


The Bottle Box(TM)The Bottle Box(TM) is the first ever product from the true bottle-to-box recycling process. The unique and innovative ECO-CHIC designs are made from 100% post consumer recycled PET bottles.


In South Africa, nine World Cup sides wore shirts made entirely from recycled plastic bottles

Each shirt uses up to 8 PET bottlesNike claimed making the shirts has prevented nearly 13 million plastic bottles from going into landfill sites

http://www.canstockphoto.com/bottled-water-2302444.html

http://www.canstockphoto.com/eco-what-2831060.html

http://www.google.com/imgres?imgurl=http://upload.ecvv.com/upload/Product/20095/China_Recycled_PET_satin_fabric2009521914423.jpg&imgrefurl=http://www.ecvv.com/product/2017537.html&h=451&w=600&sz=52&tbnid=fm0c_1Lln7SuwM:&tbnh=101&tbnw=135&prev=/images?q=PET+recycled+product+photos&zoom=1&q=PET+recycled+product+photos&usg=__524a1Fw5n5NY-9l87OuKGWRRkJk=&sa=X&ei=WXWETKzbMsPQceuwsdAL&ved=0CBsQ9QEwAA


Electronic waste, e-waste, e-scrap, or Waste Electrical and Electronic Equipment (WEEE) describes loosely discarded, surplus, obsolete, or broken electrical or electronic devices.

The informal processing of electronic waste in developing countries causes serious health and pollution problems.

Some electronic scrap components, such as CRTs, contain contaminants such as lead, cadmium, beryllium & mercury and other toxic materials.



http://upload.wikimedia.org/wikipedia/commons/3/30/Ewaste-pile.jpg


Canon strives to recycle products and parts that are not suitable for reuse as materials in the manufacture of new products. Plastics collected from Canon products during 2009 for reuse in new products totaled 2,087 tons.

Canon strive to make their products 75 % recyclable by mass (for re-use and material recycling) and 85 % recoverable by mass (including thermal recycling).

Canon markets the "Refreshed" series of remanufactured products for the Japan market. The iR 6570N-R high-speed monochrome MFD, launched in 2009, achieved an average parts reuse ratio of 91% in terms of weight



Two Statements: “a sustainable global society founded on respect for

nature, universal human rights, economic justice, and a culture of peace.” Earth Charter, 2000

“....a minority is seen to have harvested a disproportionate amount of the fruits.” W.E.F Study, 2009

Reflection: “Why is it that all our technology, managerial know-

how and investment capacity, we are unable to make even a minor contribution to the problem of pervasive global poverty and disenfranchisement?” Prof. C.K.Prahald, 2006

“Inclusive Growth”



Start with a new approach: ‘a clean sheet of paper’: “If we stop thinking of poor as victims or as burdens and start

recognizing them as resilient, creative entrepreneurs and value-conscious consumers – a whole new world of opportunity will open up.”

“Why don't we call the world's 4 billion impoverished people the Global Majority rather than Bottom of the Pyramid - vibrant partners to be embraced, partners in whose future everyone else's are inextricably linked?”

Dominant (but questionable) logic: ‘Poor can’t afford ‘our’ products: they are not target

customers’ ‘The have no use for products sold in developed countries’ ‘Only developed countries pay for technological innovation’ ‘Intellectual excitement & long-term growth is in developed

markets’

“Inclusive Growth” …. Cont’d

.

.

Bottom !

Bottom ?

.

.

OR


Traditional approach to stimulate BOP consumption via philanthropy, direct or indirect, and ‘free’ does not create sustainable business; it only gives the donor a ‘feel-good’. Reflects the ‘shifting the burden’ approach of the old Empowerment gives livelihood, charity gives ‘first-aid’!

Creating this BOP sustainable model is based, on 3 “A’s”: Affordability: without sacrificing efficacy or quality Access: time & distance matter most; BOP customers can’t

spend on travel : time/costs and opportunity loss (of income) Availability: Cash on hand at that instant is important, if they

cannot buy ‘X’ they will buy ‘Y’; they cannot defer buying decisions (there are many claimants for that surplus!). “Switching costs” are thus negligible.

“Inclusive Growth” …. Cont’dFortune at the bottom of the pyramid


“Trust” plays a big role in creating business. Without ‘collateral’, money is not forthcoming. Businesses assume that the default rate among the poor will be higher. Practice proves the reverse is true! The default rate in Grameen Bank, dealing in micro-

finance, is 1.5% among 2,500,000 customers; in ICICI Bank the rate is less than 1% for 200,000

customers in micro-finance. The logic is very clear: for the BOP customer the

alternative finance is 50 times more expensive and certainly underhand if not underground. ‘personal loans’ from recognized banks can be obtained @

17% p.a interest; for the BOP customer, without credit-worthiness, the money-lender will lend @ 600% p.a. Prahalad called this “Poverty Premium”.

Fortune at the bottom of the pyramid ....Cont’d


E.g. e-Choupal (ITC initiative) ITC built a system that changed the ‘economics’:

Traditional ‘mandis’ required the farmers to sell to buyers through auction, who in turn sold it to processors like ITC.

The buying intermediaries cartelized to the disadvantage of both the farmers and the processors.

ITC used ‘information age technologies’ to ensure fair and steady supply of quality produce, starting with soya beans.

Net Savings: to the farmer Rs.270/mT; to ITC Rs.300/mT. The real benefits of e-Choupal are more than the cost-

reduction in the supply-chain/system. It addressed four ‘friction’ points arising from distortions (against the farmers): Access to information Right of choice Ability to enforce contracts Social standing

“…universal human rights,

economic justice…”




A Presentation by ISBS students


First step: learn to see the larger system in which we live and work. Look beyond the events and superficial fixes to see

the deeper structures and forces at play Think out of the self-created boxes; do not allow

artificial ‘boundaries’ to limit thinking Second step: make strategic choices based on

natural and social limits Mimic how growth happens in the real world

Third Step: create self-reinforcing cycles of innovation

Dec 2011

Seeing Systems

Creating a Sustainability footprintBusiness Models


Recognizing multiple stakeholders:

Investor

Society

Employee

Customer

Supplier

Dec 2011

Getting started :Concepts, Forces & Factors Recognizing forces

acting on industry:Porter’s 6-

force model

Creating a Sustainability footprint ....Cont’dBusiness Models


“ Many companies have done much to improve their social and environmental consequences of their activities, yet these efforts have not been as productive as they could have been:- First, they put the business against society when clearly they are interdependent- Then, they pressure managers to think of Corporate social responsibility in generic ways instead of the way most appropriate to the firm’s strategy.”

Michael Porter

Getting started :Concepts, Forces & Factors



‘ Let’s start with what is legal, but always go on to what we would feel comfortable about being printed on the front page of our local paper; and never proceed forward simply on the basis of the fact that other people are doing it.’

Warren Buffet

Dec 2011

Getting started :Concepts, Forces & Factors



Many models have been developed to provide ways to understand sustainability, balancing the three factors:

The 5-Capital Model, looks at different ‘capital’ (rather than resources!)required to produce goods & services: Natural Capital: any stock or flow of energy and raw

material that produce goods or services; Human Capital: people’s health, knowledge, skills and

motivation; Social Capital: concerns institutions which help maintain

and nurture human capital e.g. Families, educational institutes, Trade Unions etc.

Manufactured Capital: consist of material goods and fixed assets which contribute to operations

Financial Capital: enables other types of capital to created, owned or traded. However, it has no real value by itself.

Dec 2011



The Natural Step framework is derived from ‘system thinking’ i.e. recognizing what is happens in one part of a system affects every other part. Understanding the broader system within which the

issues are contained Takes an upstream approach and addresses problems at

the source Developing effective, durable and ‘total’ solutions to the

environmental and social problems of this century “Creating a sustainable world means creating new ways

for people to live and thrive – while keeping the planet’s ecosystems and the global tissue healthy and able to sustain us and the future generations”

Dec 2011



Sustainability is journey – takes time, never ends! Like excellence or quality, there is no definite

destination or terminus Starting point: where does the business now

stand? ‘Not yet on board..’

No requirement or even contrary to current practice: rejection Lip service and sloganeering: do the barest minimum Seen as an ‘avoidable cost’ : ‘conservation if convenient’

‘Getting on board...’ Risk avoidance and cost cutting: short term horizon Indirect benefits and Opportunities: longer term drive

Strategic integration & continuous improvementDec 2011



Elements of Business: refitting the pieces

Dec 2011

Entrepreneurship

Strategy

Operations

Ethics

Accounting

Economics

MarketingFinance

Organizational Behaviour

Creating a Sustainability footprint ....Cont’d


Elements of Business: Accounting

Creating a Sustainability footprint ... Cont’d.

1t of Carbon can be traded in EU @ $20; 1ha of rain forest stores 500t of carbon = $ 10,000 (value). Yet million acres of forests are being cut to make agricultural land @ $200/ha! Why ‘destroy’ at a loss of $ 9800/ha? No easy answer - but do we need to (re)look ?


Role of accounting:1. Identifying the full cost

of products & services2. Determining which

issues are priority3. Measuring progress

towards goals4. Measuring impact on

Society5. Verifying the accuracy6. External reporting on

programs

Tools of the trade:1. Full or True Cost

Accounting2. ‘Materiality’3. Key Performance

Indicators4. Measuring ‘Social

Impact’5. Assurance6. Publicly disclosing the

3BL scores – not financial alone.

Dec 2011

Elements of Business: AccountingCreating a Sustainability footprint ... Cont’d.


Full or True Cost accounting: Typically, costs are classified as direct material,

labour, R&D and ‘overheads’, Thus the impact of/on environment and society

is hidden/ distributed, making it difficult for operating managers to identify

Or not considered at all since they are ‘external’ i.e. not legally attributable to the business. E.g. Who pays for restoration of ‘land’ dug-up in

mineral mining process? The mining company only pays for leasing and extraction.

Dec 2011



Materiality: Conventionally, any issue which has impact of

5% (thumb rule) on net profit is considered significant i.e. ‘Material’

However, many issues are ‘material’ in the eyes of different stakeholders - particularly considering the longer term e.g. changing legislation

Peer businesses may deem many issues to be ‘material’ e.g. Access to life-saving drugs in Pharma industry

Dec 2011



Key Performance Indicators: Obviously, accounting has to go beyond the

routine financials and use metrics related to all goals/objectives

The measurement need not be ‘perfect’ or accurate/quantitative: ‘approximately right’ is better than ‘precisely wrong’!

Must satisfy/make sense to stakeholders who want these reports

Dec 2011



Measuring Social Impact: ‘Social return on investment’ (SROI) is a tool

to asses the environmental, social & economic value, in monetary terms, created by any investment;

However, the market valuation of social benefits is imperfect - thus SROI provides an approximate value for guiding program effectiveness.

Both positive and negative ‘impacts’ , directly attributable to the firm’s initiatives, need be factored in.

Dec 2011



Economics guides the understanding of incentives which govern unsustainable behaviour in order to replace them with those that support more sustainable behaviour:

Rise of Consumer societies about 60% of GDP is accounted for by Consumer spending. Resources required to support this is putting pressure of Earth’s eco-system. Policies to foster ‘sustainable consumption’ is under consideration by UNEP & UN Dept. Of Economic & Social Affairs through the “Marrakech Process”.

Dec 2011

Elements of Business: EconomicsCreating a Sustainability footprint ... Cont’d.


Management of shared resources A ‘commons’ is a geographical area not owned by anybody, thus resources there are shared by everybody e.g. Seas (and fishing), Air etc. People misuse these common, freely available resources till exhaustion: ‘the tragedy of the commons’. There is still a long way to go to resolve this issue.

Regulatory Instruments The regulatory framework in which (global) companies work is becoming extensive, complex and confusingly diverse! Legislation and enforcement can cause many complications in view of compliance for products/ processes/ services.

Dec 2011



Externalities are an important consideration since cost/ benefits to the Company is often different from those to the Society e.g. If cost for polluting is not borne by the polluter, then there is no ‘economic’ incentive to be non-polluting. If cost/benefits are incorrectly quantified, Private players cannot make appropriate calculations about economic justification for the activity.In a sense, externalities are a form of market failure since amount of activity under free market conditions result in inefficient use of resources.

Dec 2011



Market-Based Instruments using this route is seen to be very effective in reversing the negative trend s via incentives. About $3.5 billion of ‘regulated biodiversity offsets’ take place annually, projected $10 billion in 2020!Three broad types of instruments are in use:

1) Price based instruments: comprising Taxes, Subsidies, Charges, Deposit-refund (e.g. soda bottles) systems for ecological impacts.2) Quantity based instruments: Tradable permits (e.g. Carbon Trade), Quota (e.g. fishing) and Offsets (e.g. ‘clean development mechanism’).3) ‘Market friction’ instruments: using product differentiation in form of eco-labelling (e.g. ‘no animal testing’) and certification.

Dec 2011



Market-Based Instruments (cont’d)These instruments provide industries a tool for regulating their effort since ‘language of money’ is readily understood. However, market dynamics are not easy to forecast and these alone may not provide the long-term solution.

Emerging Markets ‘Developing’ world accounts for > 50% of the World’s GDP, up from 39% in 1990! Emerging market companies can be classified as: 1) Fully-fledged globalizers: comprising old / established companies which have attained global status e.g. Tata, CEMEX2) Regional Players: Are emerging players trying to make a mark globally; usually starting with neighbouring countries

Dec 2011



Emerging Markets (cont’d)3) Global Sourcers: Selling locally but sourcing globally to overcome local resource constraints e.g. HPCL4) Global Sellers: based at ‘home’ but seeking to expand sales by accessing global markets.5) Multi-regional niche players: are small, niched firms operating across multiple regions leveraging their uniqueness.Together, they are important to ‘sustainability’ since they provide Talent, Resources, New Consumers, Growth opportunity and innovative business models.

Dec 2011



Challenges, Trends & new Ideas The ‘global’ world is faced with

1) Uncertainty: Country policies and speed of implementation/ harmonization. In this there will be ‘Free Riders’ who do not take their fair share of responsibility.2) Determining the trade-offs: How much are we willing to pay and for what ‘term’ ? For what result? Therefore, how far are we willing to go?3) Determining what ‘Optimum’ means: At our current level of knowledge, there is no ‘zero’ pollution/depletion. What is now ‘optimum’? Therefore, how to incentivize effort?

Dec 2011



Challenges, Trends & new Ideas (cont’d) Emerging trends and Ideas include:

1) Alternative trading system: Co-operatives, ‘Collective Consumerism’ 2) New Economic models: From ‘fast ‘ to ‘just’ growth - no ‘bubbles’! ‘Cradle – to – Cradle’ , B.O.P etc.3) Cost of ‘inaction’: Preventive actions cost – but what about ‘inaction’ ?

4) From ‘free’ to ‘fee’: Pay for actions e.g. Plastic shopping bags

Dec 2011



Collective Consumerism

A short film by Rachel Botsman on emerging Consumer trends.



“Cradle-to-Cradle”In the Cradle to Cradle model, all materials used in

industrial or commercial processes - such as metals, fibers, dyes - are seen to fall into one of two categories: Technical nutrients are strictly limited to non-toxic, non-harmful

synthetic materials that have no negative effects on the natural environment; they can be used in continuous cycles as the same product without losing their integrity or quality. In this manner these materials can be used over and over again instead of being downcycled into lesser products, ultimately becoming waste.

Biological Nutrients are organic materials that, once used, can be disposed of in any natural environment and decompose into the soil, providing food for small life forms without affecting the natural environment.




Concept: a shoe that is mass produced using the C2C model. The sole is made of "biological nutrients" while the upper parts

might be made of "technical nutrients." Once manufactured, shoes are distributed to retail outlets

where the customer buys the shoe at a fraction of the price they would normally pay for a shoe of comparable aspects: the customers are only paying for the service (the materials

in the shoe) for the period of time that they will be using it When they outgrow the shoe or it is damaged, they return it

to the manufacturer. The manufacturer separates the sole from the upper parts

(separating the technical and biological nutrients), the biological nutrients are returned to the natural environment while the technical nutrients are used to create the upper of another shoe.

The Shoe never ‘dies’!




Cradle-to-Cradle

A short film by William McDonough



Large companies grab ‘eyeballs’ , but – 90% of global business transactions are

carried out by SMEs they employ about 60% of the global

workforce, are fastest growing and account for a major

share of the exports. A study credits SMEs with less than 20

employees with 95% of the significant innovations in the last century!

Dec 2011

Elements of Business: EntrepreneurshipCreating a Sustainability footprint ... Cont’d.


But SMEs are non-responsive to Sustainability’: in fact are a ‘major part of the problem’!

Being small, individual companies do not see their impact, collectively ....!

And governments/agencies in most countries pay scant or less attention/are lenient.

SMEs are ‘in the radar field’ now and will need to act. They have the potential to make significant contribution.

Can react better to emerging opportunities in sustainable product/services

Innovate to access underserved markets: size and reach less of a constraint.

Dec 2011



Issues & Trends (‘problems are opportunities’!): New Ventures: have to address social/

environmental ventures and entrepreneurs address ‘opportunities’ not ‘profits’! Such fields are opening rapidly e.g. Microfinance, Healthcare etc.

‘Intra-prenuers’: increasingly large companies are fostering social initiatives within the company, driving it down and across the organization. Employees with ‘insider-outsider’ mindset and approach could lead such movements e.g. Unilever’s ‘Shakti Amma’ movement.

‘Social Entrepreneurship’.Dec 2011



Video clips from “Fortune at the bottom of the Pyramid” – Prof. C.K.

Prahlad

Retailing: Casa Bahaia (Brazil) FMCG: Annapurna Salt (multi-

National) Healthcare: Arvind Netralaya (India) Rehabilitation: Jaipur Foot (India)

‘Social Entrepreneurship’


Issues & Trends (‘problems are opportunities’!): New Ventures: have to address social/

environmental ventures and entrepreneurs address ‘opportunities’ not ‘profits’! Such fields are opening rapidly e.g. Microfinance, Healthcare etc.

‘Intra-prenuers’: increasingly large companies are fostering social initiatives within the company, driving it down and across the organization. Employees with ‘insider-outsider’ mindset and approach could lead such movements e.g. Unilever’s ‘Shakti Amma’ movement.

‘Social Entrepreneurship’.Dec 2011

Elements of Business: Ethics & Corp. governanceCreating a Sustainability footprint ... Cont’d.


Sustainability: Definitions

SUSTAIN: DICTIONARY SUSTAINABILITY

To endure without yielding: withstand

To keep up or maintain Synonyms: Aid, Carry,

Endure, Keep, Preserve, Support

Is being used more in the sense of human sustainability on planet Earth;

The most widely quoted definition is “sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.”

Dec 2011


The idea of sustainability is age-old; societies over time have learnt to balance social, environmental and economic concerns.

At its core, sustainable development is about creating an interactive and appropriate balance between: Social Equity: i.e. Human rights, peace, justice, gender

equity, cultural diversity etc. Environmental protection: referring to natural

environment i.e. Air, water, biodiversity, forests, energy etc.

Economic development: understanding the limits and potential of economic growth factoring in poverty reduction, responsible consumption, corporate responsibility, employment and allied themes.Dec 2011

Sustainability: viewpoints


Economy

Society Env’mental

Sustainability: viewpointsShifting Priorities

“Industrial Age” “New Age”


Frequently used model is “The three spheres” represented by three overlapped, mutually reinforcing ellipses (World Summit, 2005)

Bearable

Equitable

Viable

Sustainable



The Earth Charter (2000), result of a call from the World Commission on Environment and Development for a ‘universal declaration’ to guide transition to sustainable development: Steered by Mikhail Gorbachev & Maurice Strong (Chairman

of the Rio ‘Earth Summit’), captures a 10-year dialogue about common goals and shared values;

It outlines caring and respecting through ecological integrity, social and economic justice, democracy, non-violence and peace and similar factors.

“a sustainable global society founded on respect for nature, universal human rights, economic justice, and a culture of peace.”

Founded an action plan ‘The Millennium Development Goals’ , time-lined for 2015.

Dec 2011



Sustainability: viewpointsTHE MILLENNIUM GOALS “THE GLOBAL COMPACT”

1. Eradicate extreme poverty and hunger

2. Achieve universal primary education

3. Promote gender equality and empower women

4. Reduce child mortality5. Improve maternal health6. Combat HIV/AIDS, malaria

and other diseases7. Ensure environmental

sustainability8. Develop a global partnership

for development.

Launched simultaneously as a policy platform and action framework for companies committed to sustainability & responsible business practices (in 130 countries, with over 4700 corporate & other stakeholders). The members support the Millennium Goals an focuses on:1. Human Rights2. Labour Standards3. Environment4. Anti-corruption

Dec 2011


The Ecological Footprint, a resource management tool that: measures land and water use required to produce the

resources consumed and to absorb wastes, using the prevailing technology for the given life-style.

can drilled down from planet to country, region, city, business and individual level. Consumption is a complex multiplicative result of

three factors: population size, ‘affluence’ (or life-style) and technology (IPAT i.e. Impact = p x a x t)

Current estimates: it takes 1 year and 4 months for the planet to regenerate what is used in a single year; i.e. We require 1.33 planet earths to support us!

We are in overshoot and headed for a catastrophe.

Dec 2011



“What would it take to get rid of disposable cups?” a question Prof. Senge raised in the keynote address at the MIT Sustainable Summit . The responses include everyone from Starbucks, its competitors to paper manufacturers, food service providers, recyclers and municipal governments.

To make progress on really tough sustainability issues is a “massive undertaking in collaboration,” Senge explained; “what’s more, the parties that need to collaborate often aren’t naturally inclined to.”

Peter Senge: Director, Center for Organizational Learning/MIT Sloane School of Management

Sustainability: a ‘tough’ problem



Earth provides enough for every man’s need , but not for every man’s greed.

Mahatma Gandhi


Sustainability: Business imperative

What does sustainability have to do with business? Everything! Because Businesses have to...

Reduce Cost: using less and wasting less does so Preserve resources: resources are increasingly

hard to get – need to conserve Keep up with legislation: laws governing

businesses are becoming tougher e.g. Pollution, anti-dumping etc.

Enhance Reputation: to build trust and loyalty with the society e.g. ITC

Dec 2011


Sustainability: Business imperative Satisfy Customer & Stakeholder needs: by

conforming to laws and obtaining a ‘licence to operate’ in this increasingly ethically conscious world.

Attract Employees & Investors: being clean, green and fair does so, e.g. Tata Group

Differentiate: by increasing customer loyalty, particularly creating niches for cause-related groups e.g. ‘Body Shop’ toiletries (against animal testing)

Capitalize on new opportunities: improving living standards always provide this e.g. ’fortune’ at the bottom of the pyramid , Electric cars etc.

Dec 2011


According to John Elkington, the sustainability movement built up on three ‘pressure waves’: Wave 1 – brought an understanding of the issues

and the finite limits to demand on natural resources. Business response was defensive.

Wave 2 - brought in the need for newness in technologies and alternatives, leading to industry initiatives towards sustainability. Business response became more competitive.

Wave 3 – focuses on the growing recognition that profound changes are needed to governance and in the globalization processes. Business will need to focus on long-term and market creation.

www.environmentalleader.com



’78: 2nd oil shock, OECD ‘State of Envr.” report

’84: Bhopal Disaster

’86: Chernobyl Disaster

} ’87-90: Our Common Future, Green Consumer movement, Exxon Valdez disaster, Berlin WallThe Second Wave

’91: Gulf War’92: UN Earth Summit, Brazil, The Earth Charter

’95-97: Shell Nigeria, “Mad Cow” Disease, Nike ‘sweatshops’, Kyoto Protocol}

’98: GM Food controversy: EU & UK’99: “The Battle of Seattle”

’00: CSR & SD on WEF Agenda

The Third Wave

Elkington’s Waves

’69: Friends of Earth Founded

’61/62: Amnesty Intl. & WWF founded, Silent Spring

} ’70-72: Earth Day, Greenpeace founded, Limits to Growth

’73: Arab Oil Embargo, Watergate Scandal

The First Wave

Regulatory ‘limits’

T I M

E

I M P A C T


How did we get where we are? Great Success: ‘The Golden

Age of Capitalism’. Side effects were ‘unseen’ –

environmental, economic & social

Finding stop-gap solutions and shifting the burden to experts

Rather than work proactively with Governments to come up with innovative solutions, ‘lobbyist’ employed to maintain status-quo.

Dec 2011

Creating a Sustainability footprintExplaining reality

Pressure to meet tougher environmental standards

‘Specialists’ e.g. Lobbyists intervene to reduce pressure

Managers develop capacity for innovative solutions e.g.

Better products



DELAY


Creating a Sustainability footprintexplaining reality: shifting the burden

Water Shortage

Relocate plants to easier locations

Integrated watershed management



DELAY


Events “React”

Patterns/Trends: “Anticipate” What’s been happening? Have

we seen this before?

Systemic Structures:“Design”What forces are at play contributing to these?

Mental Models: “Transform”What about our thinking that

allows these to persist?

The Iceberg: Increased opportunities for learningCreating a Sustainability footprint



TIME

CustomerRequirement

P

DS

A

P

DS

A

QSystem

The Deming “Wheel”

Continuous Improvement



Own Status?

Status with

others?

Where to go?

Engage & get

support.

Put a plan in place

Keep it going

Expertise available?Impact? Culture?Projects? Issues?

Regulations? Voluntary measures? Industry Practices?

Bench marking

Business Drivers? Business case? Available tools?

Priority/scale/budget?

CEO commitment; Internal cooperation;

Stakeholder engagement;Networking.

SMART targets; Structure;

Training & tools;Pilot projects

Communicate;Monitor; Scale up;Improve

Continuous Improvement approach to Sustainability

P

DS

A


Creating a Sustainability footprint A few pointers for the assessment:

Different initiatives or even the same ones will progress at different pace within the same organization

‘Sustainability’ itself is in flux, constantly evolving in complex ways – so does an organization. Need to check if: Saying one is when really is not (‘Greenwashing’) How is the organization ‘walking the talk’: priorities, reporting

and publicizing Doing just enough, reactively Doing about the same as others in the Country/Line-of-business

OR is the organization taking a lead Are the initiatives internationally at par Are the initiatives globally bench-markable?

Like with other excellence models, is there a full hearted push from the top management.

Dec 2011



Responsibilities of business: Classical view: “ There is one and only one social

responsibility of business – to use its resources and engage in activities designed to increase its profits so long as they stay within the rules of the game, which is to say: engages in open and free competition without deception and fraud”. Milton Freidman (1970)

Contemporary View: A representative model was proposed by A.B. Carroll. (1980) – managers have four areas of responsibility: Economic, Legal, Ethical and Social.

Dec 2011

Getting started on the journey: Responsibilities



Ethics: ‘consensually accepted standards of behaviour for an occupation, trade or a profession’: Utilitarian approach – actions and plans are judged by their

consequences. Behaviour should result in the greatest good at least cost. Likely that some stakeholders are minimized.

Individual Rights approach - fundamental rights of humans should be respected in all decisions. Can get distorted (selfish) when a strong individual view-point prevails.

Justice approach - proposes that decision makers be equitable, fair and impartial for distributing costs and benefits. However, can lead to conflict in cases where ‘compensatory justice’ is applied e.g. Reservation.

Dec 2011




Morality: ‘precepts of personal behaviour that are based on religious and/or philosophical grounds’ Leads to ‘moral relativism’ – that no decision is better

than another given the difference in personal interpretation.

Could lead to confusion in determining ethical behaviour; enables people to ‘justify’ behaviour as long as it is not illegal.

Law: ‘refers to formal codes that permit or forbid behaviours and may not enforce ethics or morality.’

Dec 2011




Dec 2011



Business Process Mapping“ Many companies have done much to improve their

social and environmental consequences of their activities, yet these efforts have not been as productive as they could have been:- First, they put the business against society when clearly they are interdependent- Then, they pressure managers to think of Corporate social responsibility in generic ways instead of the way most appropriate to the firm’s strategy.”

Michael Porter

Dec 2011


Business Process Mapping Within each company, ‘sustainability’ can be

seen as a jigsaw puzzle! The chosen sustainability strategy sits in the

middle and provides the other considerations to get involved in this issue.

The corner-pieces are Ethics, Entrepreneurship, Organizational behaviour and Economics

All of these are tied-in by Operations, Marketing, Finance and Accounting.

Dec 2011


Business Process Mapping

Entrepreneurship: Identifying and exploring new business solutions both inside and outside the organization.

Economics: Helps understand the larger environment in which the business works and impacts. Explores mechanisms to internalize ‘cost to society’ and optimize contributions to social & economic development .

Strategy: Ensures the right approach is taken for a particular company and it is implemented as a organized effort that mobilizes everyone.

Dec 2011

Business Process Mapping: Elements



Ethics: Without ‘good’ management, strong governance, ethical values and open/ transparent relationships with all stakeholders – sustainability issues/policies/ goals can go nowhere!

Organizational Behaviour: Translating policy into action and creating a workplace where sustainability is embedded in the culture and every aspect of employees’ life-cycle from recruitment to retirement.

Dec 2011




Marketing: In designing and promoting more sustainable offerings and inspiring change.

Operations: Taking responsibility for all the impacts, social, environmental and economic, across the life-cycle of the company’s offerings.

Finance: Plays a key role in sending signals that can enable companies to invest in longer-term opportunities; requires effective management of economic, social & environmental impacts.

Dec 2011



Business Process Mapping: Value CreationTomorrow

Today

Internal External

DRIVERS:• Disruption• Clean Tech.• Footprint

Strategy: Clean Technology develop the sustainable competencies of the futurePayoff: Innovation & Repositioning

Strategy: Pollution PreventionMinimize the waste & emissions from operationsPayoff: Cost and Risk reduction

Strategy: Product StewardshipIntegrate stakeholder views into business processPayoff: Reputation & legitimacy

SustainableValue

DRIVERS:• Pollution• Material Use

• Waste

DRIVERS:• Climate Change

• Resources• Poverty

DRIVERS:• Civil society• Transparency• Connectivity



e.g. DuPont Transformation DuPont - 206 year old, US$ 29 Billion Chemical

Giant Inventors - Nylon, Lycra, Teflon, cellophane etc. Greenpeace vilified DuPont (1989) as ‘worlds no.1

polluter’ for their product Freon, starting the transformation with CEO Edgar

Wollard’s remark “.. but I can assure you in future the colour of the company will be some shade of green” and adding ‘Chief Environmental Officer’ to the CEO term (with ‘Chief Executive Officer’) charged with ‘corporate environmentalism’.

Dec 2011



e.g. DuPont Transformation (Ref; The Necessary Revolution)

In 2005, Business Week ranked DuPont no.1 in their list of ‘Top Green Companies’. CERES has ranked DuPont no.1 in US & no.2 in the world for meeting the business challenge for climate change.

Today, DuPont is focused on biotechnology, chemistry and natural systems as opposed to synthetic ones Before the Greenpeace assault, DuPont had seriously started the

migration away from petro-chemical based competence to new, environment friendly products.

They recognized that soon those products (synthetic & polymer) would become commoditized and unprofitable

Paul Tebo, VP- Health, Safety & Environment used the sustainable value matrix to develop the strategic thinking

Dec 2011



Business Process Mapping: Value Creation

e.g. DuPont Transformation Honouring stakeholders’ demand ‘Show

what you are doing today! Don’t talk to us about grand visions of the future until we see proof of your engagement and commitment now’

DuPont set out aggressive targets (global) in 1990, results in 2004: air-bourn carcinogens down by 90% Hazardous waste down 40% Total energy use down 5% (with 40% growth) –

cost savings US$ 3 billion! Learning: interventions to reduce carbon

footprint carry low risk and they represent real cash savings not just optimistic forecasts

Lower left quadrant

Dec 2011

Strategy: Pollution Prevention

Minimize the waste & emissions from operations

Payoff: Cost and Risk reduction

Inte

rnal

Today

DuPont have extended their cost & risk reduction goals for 2015 (2004 base):

• -15% GHG emission• -50% air carcinogens• -30% water consumed



e.g. DuPont Transformation Engaging outside stakeholders was not

usual and mostly defensive to ‘combative’; but Tebo saw the need to engage them including Greenpeace. Gilding, the then E.D. of Greenpeace was brought into DuPont to dialogue with top management

This, and similar engagements, created co-ownership and focus on problem-solving.

Learning: scientists/professionals seriously listening to people get a view-point which allows them to focus differently and find innovative solutions – for societal use, which is the initial starting point in any case! Societal partnerships are essential.

Lower right quadrant

Dec 2011

Exte

rnal

Today

Business executives wrongly believe that people without P/L responsibilities do not realize ‘pressures’ that insiders face! Similarly, NGO’s & Govts. think that Companies live for P/L only!

Strategy: Product Stewardship

Integrate stakeholder views into business processPayoff: Reputation &

legitimacy



e.g. DuPont Transformation When a company looks to long-term future,

the shift in focus is dramatic. Focus away from petro-chemical base to

organic chemistry & bio-technology, mimicking life: ‘towards the way nature does things’

DuPont focused on 3 ‘mega sustainable trends’: Drive for renewable energy & materials Demand for greater safety & security Need for increased food production Currently, DuPont makes components for

Solar Panels, Bio-fuel based on corn (with BP), ‘Tyvek’ building insulation to save heating related energy, ‘Sonara’ a starch based fibre for cloth/furnishing.

Upper left quadrant

Dec 2011

Inte

rnal

TodayDuPont have an ambitious goal of doubling investment in R&D programs with direct, quantifiable environmental benefits for customers and consumers.

Strategy: Clean

Technology develop the sustainable

competencies of the futurePayoff: Innovation &

Repositioning



e.g. DuPont Transformation It is now that companies ask the question “

How are we going to our products and services to the larger world ? Shift our view about global social & environmental issues? Reach people who need to improve their quality of life?” The ability to reach out to under-served

population (‘bottom of the pyramid’) begins with products that meet basic human needs.

Products and services need to address imbalances created in energy, food, water and such areas.

DuPont have targeted 35% revenue from products introduced in 5 years – many of which are bio based.

Upper right quadrant

Dec 2011

Exte

rnal

TodayDuPont have a nature inspired strategy with bold goals (target 2015 ):

• Add annual revenues of US$ 2bln from greener products

• Double revenues from non- depletable resources .

Strategy: Sustainability Vision

Create a shared roadmapFor meeting unmet

Needs.Payoff: Sustainable growth

trajectory


Business Process Mapping: Value Creatione.g. Aravind Eye Care ( Ref: Fortune at the bottom of the Pyramid)

Motivated by the vision to eradicate all needless blindness in India, Aaravind embarked on a series of innovations to bring world-class eye care to the poorest people of rural India.

Began in 1976 with a modest 11-bed private clinic is now a manufacturing centre for synthetic lens, sutures and pharmaceuticals related to eye care; an institute for training & research; eye bank; PG program (MS Degree) in Ophthalmology and a centre for community outreach programs.

It is now the largest (3.6 million eye surgeries/year) the most productive (2600 surgeries/doctor/year; national average 400) and boasts of world-class outcome rates.

Financially self sustainable (2002: Income Rs. 39 cr., expenses Rs. 18 cr., surplus Rs. 21 cr.)

Dec 2011


Business Process Mapping: Value Creatione.g. Aravind Eye Care ( Ref: Fortune at the bottom of the Pyramid)

Aravind System straddles the full chain with Awareness and check-up camps, reaching patients, organizing finance,: patients who can pay, pays for another! pre-surgical preparation, transportation to the hospital, Surgical process, Providing lens, sutures and related medicine post-operative care, reaching them home, prognostic care.

“Despite our efforts, only about 7% target population is coming to our hospitals. We have to increase this.”

Dec 2011


The Sustainability Scorecard The three “responsibilities” of Sustainability

Dec 2011

The triple bottom line (abbreviated as "TBL" or "3BL", and also known as "people, planet, profit") captures an expanded spectrum of values and criteria for measuring organizational (and societal) success.SustainAbilty ©


The Sustainability Scorecard:Triple Bottom Line

Some recent trends and ideas: The ‘blended value’ initiative to ‘bring it together’ Voluntary disclosures e.g. Carbon Disclosure Project

which collects and disseminates information on climate change and GHG emissions from the world’s largest companies (3000 in ’08) to investors.

Recognizing unrecognized assets e.g. carbon trade and recreational opportunities from unused forested land – Elgin Air Force Base, Florida/USA: 400,000 acres of pine forests Timber sales: $1.2 million annually Fee revenue for recreational use: (est.) $8-12 million/year

Dec 2011


Engaging Stakeholders

Dec 2011

Business Sustainability 189Dec 2011Dec 2010 Business Sustainability 189

“What would it take to get rid of disposable cups?” a question Prof. Senge raised in the keynote address at the MIT Sustainable Summit . The responses include everyone from Starbucks, its competitors to paper manufacturers, food service providers, recyclers and municipal governments.

To make progress on really tough sustainability issues is a “massive undertaking in collaboration,” Senge explained; “what’s more, the parties that need to collaborate often aren’t naturally inclined to.”

Peter Senge: Director, Center for Organizational Learning/MIT Sloane School of Management

Engaging Stakeholders

business sustainability dec11

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sustainabilitydec

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friction points