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SustainAbility.com London | New York | San Francisco Setting, Tracking and Integrating High-Impact Sustainability Goals Targeting Value March 2018

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SustainAbility.comLondon|NewYork|SanFrancisco

Setting,TrackingandIntegratingHigh-ImpactSustainabilityGoals

TargetingValue

March2018

RebeccaO’Neill

SustainAbility isathinktankandstrategyconsultancy workingtoinspiretransformativebusinessleadershiponthesustainabilityagenda.

SeniorManager

Welcome

#TargetingValue

MarkWeickLeadDirector,Sustainability

andEnterpriseRiskManagement

TheDowChemicalCompany

HilaryParsonsHeadofCreatingShared

ValueEngagement,

Nestlé

MeetthePanelists

Agenda

ProjectOverview1.

WhyGoals?2.

StateofPlay3.

BarrierstoProgess4.

MaximizingValue&Impact5.

SharingAmbition,DisclosingProgress6.

TheFutureofGoalSetting7.

SeeChange

HowTransparencyDrivesPerformance

SustainabilityIncorporated

IntegratingSustainabilityintoBusiness

ClosingtheSustainability-InvestorRelationsGap

TheImportanceofEngagingInvestorRelations

TargetingValue

TransparentlySettingandTrackingImpactfulGoals

EngagingStakeholdersResearch

CoreTheme

• Outlinethebusinesscase forsettinggoals,andrelatedopportunitiesandrisks

• Exploretheexistinglandscape ofgoals

• Identifylessonslearned aboutmaximizingvaluecreationandimpactthroughgoals

• Provideguidanceonhowtocreatebusinessvalueanddeliverpositiveimpacttosocietybysetting,trackinganddisclosingongoals.

Objectives

• Literaturereview

• 20+interviewswithcorporatepractitioners,NGOs,consultanciesandthoughtleaders

• Surveyof16EngagingStakeholdersNetworkmembercompanies

• Createddatabaseofsustainabilitygoalsfromtop65Fortune500companiesfromfood,energyandfinancesectors

Methodology

Whetherandhowgoalsettingcreatesvalueanddrivesimpact

WhyGoals?DriversthatmotivatecompaniestosetCSgoals:

• Driveperformanceontheissue

• Breakdownabigchallengeintosomethingmanageable

• Alignwithmethodsoftrackinggeneralbusinessperformance

• Motivateemployeesandensurecompanyaccountability

• Strengthenreputationandtrust

• Competewithpeers

• Driveinnovation

• Meetorexceedregulatorystandards

• Addressmoralimperatives

0% 10% 20% 30% 40% 50% 60% 70%

Increasesemployeeengagement

Content/narrativeforannualsustainabilityreporting

Improvedbusinessperformance

Drivesinnovationtoenablecompanytoachievegoals

Strongeraccountabilitywith internalstakeholders

Improvesbusinessreputation

Strongeraccountabilitywithexternalstakeholders

Drivesintegrationofsustainabilityintothebusiness

WhyGoals?Thebusinessvalueofsettingsustainabilityperformancegoals

MarkWeickLeadDirector,Sustainability

andEnterpriseRiskManagement

TheDowChemicalCompany

HilaryParsonsHeadofCreatingShared

ValueEngagement,

Nestlé

Whygoals?PanelistDiscussion

Leading the Blueprint Delivering Breakthrough Innovations

Advancing a Circular Economy Valuing Nature Safe Chemistry for a Sustainable Planet

Engaging for Impact: Communities, Employees, Customers

World-Leading Operations Performance

2025SustainabilityGoals

TheNestlé Approach

EnhancingqualityoflifeandcontributingtoahealthierfutureOurpurpose

ValuesrootedinrespectOurvalues

ForindividualsandfamiliesEnablinghealthierandhappierfamilies

• Offeringtastierandhealthierchoices• Inspiringpeopletoleadhealthierlives• Building,sharingandapplying

nutritionknowledge

Tohelp50millionchildrenleadhealthierlives

ForourcommunitiesEnablinghealthierandhappierfamilies

• Enhancingrurallivelihoods• Respecting&promotinghumanrights• Promotingdecentemploymentand

diversity

Tohelpimprovethelivesof30millionpeoplelivingincommunitiesdirectlyaffectedbyourbusinessactivities

FortheplanetEnablinghealthierandhappierfamilies

• Caringforwater• Actingonclimatechange• Safeguardingtheenvironment

Tostriveforzeroimpactinouroperations

Wherewemakeimpact

41socialcommitments

Howweimpact

Our2030ambition

StateofPlay

Evolvingandvariednatureofgoals1.

Growingfocusonimpact2.

Shifttowardcontext-basedandsystemschange3.

Variabletimeframes4.

Greaterintegrationintocorebusiness5.

Thecurrentlandscapeofcorporatesustainabilitygoalsreveals:

BarrierstoProgress

“ ““Wewanttosethigh-impactgoalsbutfinditdifficult.”

“Ourcompanycultureleadsustobeinginthemiddle,notleadingwithbigaspirationalgoals.”

“Weaspiretobenetpositiveincertainareasatsomepoint,butthat’scomplicated,andwe’renotquiteabletotacklethatyet.”

0% 10% 20% 30% 40% 50% 60%

Lackofexpertiseneededtoachievethem

Lackofbudgettosupportachievingthem

Wehavenotfacedbarrierstosettinghigh-impactgoals

Lackoforganizationwithincompany

Lackofincentive

Other

Executivepushback

Departmental/middlemanager(orlower)pushback

Lackofdata

Lackofcomfortwithsettinggoaldon’tknowhowto achieve

BarrierstoProgressBarrierstosettinghighimpactgoals

• Communicateinternally• Set“comfortable”initialgoalsandthenincreaseambition

• Acceptthatit’soktomisshighlyaspirationalgoals

• Weighrisksofbeingtooconservativewithgoals

• Factorinlikelybusinesschanges• Revisegoalswhennecessary

Fearoffailing

• Emphasizethebusinessbenefitsofachievingthegoal

• Findalliesacrossthecompany

Lackofinternalbuy-in

• Partnerwithinternalandexternalexperts

• Identify whichdatayoudo haveontheissue

• Investindatacollectionandundertakeresearchtounderstandissues

Inadequatedataorweakdatacollectionmethodology

BarrierstoProgressOvercomingthebarriers

Managingwhencompanyperformanceaffectsagoal

• Financialcontextaffectedabilitytoachieveenergyefficiencygoal

• Twooptions:

• Adjustthegoaltoalessambitiousandpossiblyattainablelevel,or

• Keepthegoalandacceptthefailure

CaseStudy:Dow

“Wekeptthegoalbecauseitexpressedambitionandkeptusaccountable.We’vedecidedthatwewanttobeoutthereontheedgeleadingevenifthatmeanswemightmisssomethings.”

MarkWeickDirectorofSustainabilityPrograms

MarkWeickLeadDirector,Sustainability

andEnterpriseRiskManagement

TheDowChemicalCompany

HilaryParsonsHeadofCreatingShared

ValueEngagement,

Nestlé

StateofplayandbarriersPanelistDiscussion

MaximizingValue&Impact

22

14

58

18

33

209

30 3

Busi

ness

Val

ue

High-impact goals

Impact on issue

Mostgoalsfallinthemiddleofthespectrum,andmorehighimpactgoalsareneeded.

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Other(pleasespecify)

Groundedinwhatisachievable

Strongincentives

Long(butdefined)timeframe

Short-termmilestones

FocusontherightKPIforimpactmeasurement

Aspirationalvision

Strongtheoryofchange

Focusoncompanymaterialissue/Integrationintobusinessstrategy

MaximizingValue&ImpactAttributesofgoalsthatsuccessfullygeneratebothbusinessvalueandexternalimpact

Process GoalAttribute

Startwithmaterialissues Material

Understandthecontext Context-based

Partnerinternally Integrated

Setambition Visionary

Developtheoryofchange Providesclearpathtoimpact

Definethemetric Measurable

Agreedeadline(s) Time-bound

Engageexternalstakeholders Informedbystakeholders

MaximizingValue&ImpactBestpracticesforsettinggoalsthatdrivevalueandimpact

Thewrong goalsarecounterproductive.Ifyousettheright goalsandgroundtheminscience,youcreateanorthstartosteertheentireorganizationby.

GeoffKendallCEO&Co-FounderFuture-FitFoundation

• Ensuresthatgoalssupportcorebusinessstrategy

• Trendtowardcompaniesfocusingtheirattentiononfewerkeyareasinsteadoftryingtosetgoalsforallissuesthecompanymayimpact

• Enablescommitmenttoambitiousgoals

MaximizingValue&ImpactStartwithmaterialissues

“Tomakelonglasting,positivesocietalimpact,thenensurethegoalsmakegoodcommercialsenseand,whereverpossible,arepartofthecorebusinessandcorestrategy.”

KatieHysonVPofCitizenshipandReputationBarclays

• Identifytheultimateendgoalforthatsystemchallenge

• Determinewhatthatcontextmeansforthegoalthecompanyistryingtoset

• Helpsdetermineappropriateanddefensiblelimitstothecompany’sinvolvementinimpactingtheissue

MaximizingValue&ImpactUnderstandthecontext

• Goalsthatcreatethemostvaluearegenerallythoseembeddedintoandacrossthebusiness

• Engagingwiththerightdecision-makersacrossthecompanyisessentialto:

• Buildingbuy-inontheneedtosetagoal• Accessingtheexpertiseneededtodesignandpursueit

• Drivingaccountabilitythroughoutthebusiness

MaximizingValue&ImpactPartnerinternally

Cascadinggoalstoalllevelsofthecompany

• Setnetzerogoalsongreenhousegasemissions,wasteandwater

• Tooabstracttobemeaningfultoemployees

• Brokedownlargegoalsintosmallertargetsacrossbusinessunits

• Strengthenedconnectiontocompanyvision

CaseStudy:Swire

“Ifyoustarttoexplaintopeople,‘Hereistheoverarchingobjective.Hereiswhatitlookslikeatagranularlevelforyouandwhatyoucandotobepartofthemission,’thenthatcanhavemeaningfulresults.”

PhilippeLacampFormerHeadofSustainableDevelopment

• Whatisconsideredambitiousvariesdependingonthespecifics

• Startwithmaterialpriorities;thenlookattherelatedSDGsforcontextandinspiration

• Settinghighlyambitiousgoalsischallenging– pickingoneissueareaisagoodwaystart

MaximizingValue&ImpactSetambition

“Goalsthataresetsohighthatthecompanyupfrontdoesn’tknowexactlyhowtoachievethemwillspurcreativityandinnovationwithintheorganization,ascomparedtogoalswherethecompanycanfollowamorelineartrajectoryandaddafewmorepercentagepoints.”

OleLundChief,LeadershipProgramsUNGC

• Todevelopatheoryofchange,sustainabilityteamsneedtoworkwithbusinesspartnerstoexplore:

• Whatultimateimpactthecompanyneedstomaketoplayitspartinaddressingtheissue

• Whatleversthecompanycaninfluencedirectlyorindirectlytobringaboutthatresult

• Explorehowthecompany’sbusinessmodelaffectstheissue,bothpositivelyandnegatively

MaximizingValue&ImpactDevelopatheoryofchange

Transparency Trust Collaboration SystemsChange

• Whendefiningthemetric,focusontheoutcomeneeded

• Partnerwithsubjectmatterexpertstodevelopthemostappropriatemetrics

• Avoidconfusingreachwithimpact

MaximizingValue&ImpactDefinethemetric

• Bestpracticeinvolvessettingalonger-termgoalbasedoncontext,andthenoutliningthekeymilestonesthatshowtheshort–andmedium-termsteps

MaximizingValue&ImpactAgreedeadlines(s)

“Youneedtofindthebalancebetweenamassiveseismicshiftinthewaythebusinessoperatesthatislonger-termandalsosmallerstepsalongthatbreakdownprogress,forexampleinto1-5yeargoals.Otherwisethe2030or2050goalcanbetoofarawayforpeopletoknowwhattodoaboutthatonadailybasis.”

JustinSmithGroupHeadofSustainabilityWoolworth’s

• Canleadtomorestrategicthinkingaroundgoalsetting

• Oftenenlightensthecompanytoneworbetterwaysthecompanycanimpactanissue

• Engagingstakeholdersdemonstratesthatacompanyisbeingthoughtfulinitsgoalsettingapproach

• Itcanbeawaytotestexternalperceptionsofagoalbeforefinalizingit

MaximizingValue&ImpactEngageexternalstakeholders

MarkWeickLeadDirector,Sustainability

andEnterpriseRiskManagement

TheDowChemicalCompany

HilaryParsonsHeadofCreatingShared

ValueEngagement,

Nestlé

MaximizingvalueandimpactPanelistDiscussion

SharingAmbition,DisclosingProgress

• Publishgoalsinaconsistent,easy-to-accesslocation

• Disclosedetailssuchasbaselineyear,targetyear,metric,contextandscope

• Updateprogressregularly

• Pursueassurance

• Clarifyandcommunicatebusinessbenefitofthegoals

• Speakfromthetop

• Acknowledgechangesandadmitfailure

• Considerdifferentaudiences

“Transparencycanbeadouble-edgedswordbecauseaudiencesperceiveinformationdifferently.Forexample,whatmightbeimpressivetothesustainabilitycommunityintermsofagoalthatrequiresasignificantinvestmentinbiofuelswithlittleimmediatereturn,maynotsitwellwithinvestors.”

Ourcoretransparencyrecommendationsforcompaniesregardinggoalsare:

Consistentlytrackingandreportingoutagainstgoals

• Easynavigationtoallgoalsbytheme

• Timelineandprogressclearlycommunicated

• Narrativearounddetailsofgoals,includingwhengoalchanged

CaseStudy:Nestlé

“Notonlyisclearreportingofourobjectiveshelpfulforourstakeholders,itsupportsourinternalreportingmechanismsaswell.”

HilaryParsonsHeadofCreatingSharedValueEngagement

MarkWeickLeadDirector,Sustainability

andEnterpriseRiskManagement

TheDowChemicalCompany

HilaryParsonsHeadofCreatingShared

ValueEngagement,

Nestlé

SharingambitionPanelistDiscussion

TheFutureofGoalSetting

Approachtogoalsettingmustcontinuetoevolvetogenerategoalsthatare:2.

• Context-based• High-impact• High-ambition

Goalsthatcontributetosystem-widechangeandsolvingglobalchallengeswillrequiresystem’sthinking,partnershipsandlarge-scalecooperation3.

Companiesmustgetsmarteraboutimpact–makingnotjustenough impact,buttheright impact1.

MarkWeickLeadDirector,Sustainability

andEnterpriseRiskManagement

TheDowChemicalCompany

HilaryParsonsHeadofCreatingShared

ValueEngagement,

Nestlé

FutureofgoalsettingPanelistDiscussion

TargetingValueSettingTracking&IntegratingHigh-ImpactSustainabilityGoals

AVAILABLENOW:sustainability.com

sustainability.com

[email protected]

UK:+44(0)2072696900

US:+15109825003

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