15 October 2015 Mosimann’s London

Rethinking Business: Resource Scarcity Creating value in a resource-constrained world

In partnership with

OVERVIEW

As populations continue to grow and urban transformation gathers pace, key globaldevelopment challenges must be addressed if the needs of future generations areto be met. Limited availability of natural resources, the long-term impact of climatechange and the inevitable strain on public infrastructures and services, will all haveprofound implications for society.

Intelligent planning and greater collaboration between business leaders, policymakers and other key stakeholders will be critical to manage today’s social,economic and environment concerns and to build a more sustainable future.Businesses are increasingly conscious of the need to integrate social responsibilityinto their core operating strategies, but how can this practically be achieved andwhat should be prioritised? How can corporations operate sustainably, driveprofitability and enhance their corporate reputation while also creating value andimproving resilience against risk?

Financial Times Live and Coca-Cola Enterprises are delighted to present aseries of high level roundtable events designed to encourage open debate onthe latest sustainability challenges and to discuss the risks, opportunities andnew partnerships which are emerging as a result.

Rethinking BusinessCreating a Sustainable Future

The Financial Times, Coca-Cola Enterprises and Forum for the Future gathered business leaders and senior policy makers for a forward-looking and insightful discussion on solutions to the resource scarcity challenge.

The event was the second in the Rethinking Business series held by the Financial Times in partnership with Coca-Cola Enterprises, which explores the shared challenges facing the business community. It was chaired by Andrew Jack, Head of Curated Content at the Financial Times.

THE CONTEXT

Although many businesses now acknowledge the need to address the resource scarcity issue, the scale of the problem can be overwhelming. Ben Kellard of Forum for the Future opened the discussion by outlining the challenge ahead: “Humanity is currently using resources at a rate 50 per cent faster than we can regenerate by nature… by the 2030s we’re projected to need more than two planets’ worth of resources to meet our needs”.

The challenge is heightened by the growth of the middle class in developing economies, which has an aspirational drive for the status that can be conferred by material goods, and a tendency to equate “recycled” products with being “second-hand” and inferior. Businesses face a challenging balancing act between increasing their capacity to sell to these new markets and dealing with resource constraints.

Conversely, in the west, the emergence of the millennial generation with more concern for sustainability issues offers a ray of hope. As Steffen Seehausen of Ardagh Group commented, new graduates joining the company seem to have “a different way of thinking”, less driven by financial reward and more interested in business ethics.

ACHIEVING SCALE

Ben Kellard of Forum for the Future noted that whilst there are some “great pilots happening” in moving towards a circular economy, “the challenge now is to really take that to scale”.

SummARy REpORTRethinking Business:

Resource Scarcity

As companies strive to increase the scope of their response to resource scarcity challenges, solutions can sometimes be counter-intuitive. Ideas such as “bring-back” recycling schemes seem logical, but may actually be more detrimental than beneficial by enabling a throwaway culture.

As Kirstie McIntyre of HP Inc noted, over the past 20 years the company has reduced the types of plastic used in its products from over 200 to just six, radically increasing its ability to recycle at a greater scale. Creating entirely recycled product ranges, therefore, may achieve less statistically than could be accomplished by focusing on partial recycling goals across a company’s entire product range.

RISK AND REWARD

HP Inc’s example is one in which cost-effectiveness and sustainability are not mutually exclusive aspects of production. Fluctuating commodity prices can make some recycled materials more expensive than virgin material, as is currently the case with plastics – which can make committing to recycled materials more problematic for manufacturers.

However, Estelle Brachlianoff of Veolia noted that the use of recycled materials can serve to “secure the supply chain and the price over a long period of time”, helping companies avoid fluctuating market prices for raw materials such as plastics and fossil fuels, and the need to change supply chains altogether to source wholly new materials.

This reduction in risk is already becoming a priority across certain businesses. With increased market competition for global customers, western producers cannot always match the prices of other suppliers, but can instead gain a commercial advantage by focusing on security and sustainability.

As Josh Hardie from Tesco confirmed, the issue of “price per kilo” is becoming less important for clients than the security of their supply chains: “Some of those problems are political, some are about infrastructure, but a huge number of them are about efficiency and sustainability issues.”

SummARy REpORT

Companies who successfully manage to reduce their risk in this way are of far more interest to potential investors and financiers. Simon Wilde of Macquarie Capital commented that sustainability professionals can only benefit from learning “the language of risk” as “you will make a much better case to me as your banker and actually as your shareholder if you’re de-risking your business”.

THE pOLICy LANDSCApE

The attendees agreed that a crucial factor in the success of circular sustainability initiatives is the role of government legislation. However, as Kirstie McIntyre commented, there are times at which ethically praiseworthy but “unrelated pieces of regulation work against each other”. Whilst the Waste Electrical and Electronic Equipment Directive (WEEE) keeps electronics out of landfill sites, for example, the Restriction of the Use of Certain Hazardous Substances directive (RoHS) reduces a company’s ability to effectively recycle those products.

Quentin Drewell from Accenture noted that the desire is there from businesses to have the right legislation in place to support large-scale change. According to a joint Accenture and United Nations Global Compact Survey¹ on sustainability involving 1,000 CEOs, NGOS and academics, “CEOs want more rather than less regulation in the environmental space. What’s important is that it’s a level playing field for everybody”

The ideal solution to these issues seems to be an impossible one: a centralised global authority capable of enforcing globally integrated legislation. For the time being, however, there is hope to be found in the fact that legislation in one country can sometimes create a chain effect, if it affects manufacturers with global operations.

Above all, said Mark Walker of Zipcar, it is necessary for businesses to engage more regularly with governments, to better inform the policy making process.

BEHAVIOuRAL CHANGE AND CuSTOmER puLL

One major conclusion now being reached by businesses is that the green consumer, who prizes sustainability over cost, constitutes only a small minority of the market. Marketing initiatives regarding a product’s ecological credentials have shown minimal return. In Denmark, public pressure even led to the government scrapping its eco-initiative 200 per cent sales tax on non-electronic cars. As Ron Lewis of Coca-

Rethinking Business: Resource Scarcity

Cola Enterprises commented: “There are very few people who are going to pay for sustainable LEGO, or sustainable packaging from Coke, or a sustainable printer. You have to make it convenient, and that’s hard for one individual organisation to do.”

Above all, consumers are looking for convenience and affordability. Yet, as Mark Walker from Zipcar commented, “in consumerist society, growth is fuelled by upgrades”, and a “culture of craving” which means that customers are demanding more products in shorter time spans. Sustainability initiatives, therefore, need to be the prerogative of the business, not consumer demand. Quentin Drewell asserted that “making the circular economy easy and fun is the way that this needs to go.”

This might include product sharing schemes; service contracts versus one-off purchases; replacing planned obsolescence with durable products where more profit can be made from software upgrades. As Julie Hill of WRAP commented, within this consumer environment, the core challenge for companies is “to provide novelty, with a smaller and smaller amount of resource.”

BuSINESS puSH OR CONSumER puLL?

The limited reality of a truly ‘green’ consumer leads to a key question: is there an obligation for businesses to push the sustainability agenda ahead of consumer demand? As Steffen Seehausen commented, current “business conduct” is still about “cost savings” and “the bottom line”. “Our new graduates are very much purpose-oriented: not merely driven by financial reward but strongly focused on business ethics”.

In one recent example of business pushing sustainability ahead of consumer demand, internal research led to Tesco removing buy-one-get-one-free offers on products that resulted in higher amounts of waste. Josh Hardie commented: ‘This internal decision was a more rapid means of achieving change than the “consumer pull angle” of getting customers “more engaged with cooking and use of leftovers”.

FuTuRE-ORIENTED BuSINESS pLANNING

So, how can businesses make sustainability affordable and convenient for the customer? Although there is no catch-all solution, there are some promising trends occurring. As Quentin Drewell highlighted, companies are now starting to realise that “they are focusing 100 per cent of their time producing new products, which might just account for 5 per cent of the total volume of their product which is out there.

SummARy REpORT

What if they can focus more attention on generating revenue from the 95 per cent of stuff which is already out there in the market?” This process requires companies to increase collaboration up and down the supply chain, and engage not simply with their logistical providers, but also their competitors.

There is an opportunity to change the type of service provided to the consumermarket. As noted by Kirstie McIntyre, “a business-to-business customer is very comfortable in buying things on a service-based contract. The business-to-consumer market is completely different.” If companies can change this B2C culture, then they could achieve greater “return on investment on durable goods” rather than on products with a shorter shelf life.

What is clear, above all, is that companies need to be open to investing in new business models. This may be in the form of new start-ups, or the creation of brand new business models within the existing company. As concluded by Adam Elman of Marks and Spencer, “companies will have to look at new business models – the traditional model of ‘dig stuff out of the ground, manufacture, sell and dispose’ will not work in the long term.”

¹ United Nations Global Compact and Accenture, “The UN Global Compact-Accenture CEO Study on Sustainability 2013: Architects of a better World”, September 2013, https://www.accenture.com/us-en/insight-un-global-compact-ceo-study-sustainability-2013.aspx

Rethinking Business: Resource Scarcity

Andrew JackHead of Curated ContentFinancial Times

Andrew Jack is Head of Curated Content at the Financial Times, overseeing products including FirstFT, a daily global briefing of the best news and analysis from across the web. Before this he was Deputy Editor of the Analysis section of the FT since 1990. He was previously Pharmaceuticals Correspondent, Moscow Bureau Chief, Paris Correspondent, Financial Correspondent, General Reporter, and

Corporate Reporter. He authored Inside Putin’s Russia and The French Exception. Mr Jack led the Financial Times’ coverage that won the 2011 Communications Award of the American Society of Tropical Medicine and Hygiene. He received the Media Award of the European Organisation for Rare Diseases, a Stop TB Award for Excellence in Reporting, and a Kaiser Family Foundation mini-fellowship in global health reporting. He graduated from Cambridge University with an honours degree in Geography and was the Joseph Hodges Choate Memorial Fellow at Harvard University in 1988-89.

CHAIR

Financial Times Live (FT Live) is the global conferences and events division of the Financial Times Group. Chaired by senior journalists from the Financial Times Group, the summits, conferences, awards and strategic forums organised by FT Live gather the world’s brightest minds and most influential decision-makers.

Exclusive on-stage interviews, stimulating presentations and lively panel debates – available on multiple content platforms – provide the cutting-edge insights, unique personalities and peer audience engagement that have the power to transform finance, business, politics, society and culture.

live.ft.com

The Financial Times provides essential news, comment, data and analysis for the global business community. It has a combined paid print and digital circulation of over 700,000. FT education products now serve two thirds of the world’s top 50 business schools.

www.ft.com

For more updates, please see our Facebook page: www.facebook.com/FinancialTimes

Financial Times Live group:http://on.ft.com/linkedin

SOciAL MediA

For live updates from the event and to participate on Twitter:www.twitter.com/ftlive

t

v

ą

ORGANISERSRethinking Business:

Resource Scarcity

coca-cola enterprises, inc. (cce) is the leading Western European marketer, producer, and distributor of non-alcoholic ready-to-drink beverages and one of the world’s largest independent Coca-Cola bottlers. CCE is the sole licensed bottler for products of The Coca-Cola Company in Belgium, continental France, Great Britain, Luxembourg, Monaco, the Netherlands, Norway, and Sweden. We operate with a local focus and have 17 manufacturing sites across Europe, where we manufacture nearly 90 percent of our products in the markets in which they are consumed. Sustainability is core to our business, and we have been recognised by leading organizations in North America and Europe for our progress in water use reduction, carbon footprint reduction, and recycling initiatives.

www.cokecce.com

ORGANISERS

We are an independent non-profit working globally since 1996 with business, government and other organisations to solve complex sustainability challenges.

Our focus is changing the food and energy systems throughout the value chain to build a sustainable way that gives everyone access to healthy, nutritious food. We also work in other sectors such as shipping, finance and digital technology. We create the powerful coalitions and collaborations needed to resolve the complex problems that get in the way of creating a sustainable future.

We apply futures analysis, system innovation and sustainable business practices to transform systems and embed change.

www.forumforthefuture.org

Rethinking Business: Resource Scarcity

Financial Times LiveOne Southwark BridgeLondon SE1 9HLUK

T: +44 (0) 20 7775 6653E: ftlive@ft.com

live.ft.com/rethinking-business/resourcelive.ft.com