the sustainability frontier: where are you on the journey? beth davis-sramek, ph.d. university of...
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The Sustainability Frontier: Where are you on the Journey?
Beth Davis-Sramek, Ph.D.
University of Louisville
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Why the focus on sustainability?
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Why Even Bother?
"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 it stays within the rules of the game..”
Milton Friedman, New York Times Magazine, 1970
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“Rules of the Game”
Organizations must conform to the rules and belief systems prevailing in the environment to earn the organization legitimacy
Formal Institutions Informal Institutions
Premise
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The Rules of the Game are Changing: Ex: The Palm Oil Controversy
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The Rules of the Game are Changing: Ex: The Palm Oil Controversy
Source: RSPO.org
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The Rules of the Game are Changing: Ex: The Palm Oil Controversy
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The Rules of the Game are Changing: Ex: Palm Oil Controversy Response
Fortune, Dec 2014
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Perhaps More Compelling…NOW:-- Global population of 7 Billion-- 2 Billion people in global middle class -- More than half of the world’s population live in cities-- There are 34 “megacities” (more than 10M inhabitants)
BY 2030:-- 3 Billion MORE people will be joining the global middle class-- There will be 41 “megacities”
Tremendous opportunity – resource/risk management is KEY.
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Forces of Change
“Expect the Unexpected:
Building business value in a changing world,”
KPMG, 2012
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Sustainability defined…
“Meeting the needs of the present generation without compromising the ability of
future generations to meet their own needs.”
“Enough, for all, forever.”
“The simultaneous pursuit of economic prosperity, environmental quality and social
equity. Companies aiming for sustainability need to perform not against a single, financial bottom
line but against the triple bottom line.”
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Sustainability and the Triple-Bottom Line
People Planet
Profits
Sustainable Businesses are
RESILIENT, and they create:
Economic valueHealthy ecosystemsStrong communities
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Sustainability and the Triple-Bottom Line
People
Planet
Profits
Strategy
Mission & Objectives
Sustainable Businesses are
RESILIENT, and they create:
Economic valueHealthy ecosystemsStrong communities
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The Sustainability
Journey
Pre- Compliance
Compliance
BeyondCompliance
Purpose&
Passion
Integrated Strategy
“The Next Sustainability Wave,” Bob Willard, 2005
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1. Pre-Compliance
Nike, 1997 Annual Report: We are not here to eliminate poverty and famine or lead the war against violence and crime. Our critics say that the world is going to hell in a Nike sports bag. Then, again, for the most part, our critics aren’t athletes.
The Sustainability Journey
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2. Compliance Avoid fines, prosecution, bad PR
The Sustainability Journey
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2. Compliance
The Sustainability Journey
3. Beyond Compliance
3.0 Improve company eco-efficiencies and brand
3.1 Improve supply chain conditions and footprints
3.2 Create new eco-effective products, services, leases
3.3 Embed sustainable governance
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The Sustainability Journey
3. Beyond Compliance
3.0 Improve company eco-efficiencies and brand
3.1 Improve supply chain conditions and footprints
3.2 Create new eco-effective products, services, leases
3.3 Embed sustainable governance
Wal-Mart Mission Statement: We save people money so they can
live better.http://corporate.walmart.com/global-responsibility/
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2. Compliance
The Sustainability Journey
3. Beyond Compliance
4. Integrated Strategy
Nike, 2011 Annual Report: I believe that any company doing business today has two simple options: embrace sustainability as a core part of your growth strategy, or eventually stop growing.
Nike Profile, TODAY: NIKE, Inc. fosters a culture of invention. We create products, services and experiences for today’s athlete while solving problems for the next generation.
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2. Compliance
The Sustainability Journey
3. Beyond Compliance
4. Integrated Strategy
Patagonia Mission Statement: Build the best product, cause no
unnecessary harm, use business to inspire and implement solutions to
the environmental crisis.
Purpose&
Passion
Endangered Species Chocolate
Promise: 10% of our net
profits are donated annually to current
10% GiveBack Partners
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The Sustainability Journey: Where are we now?
And the Survey Says…..
“New Business Models: Shared Value in the 21st Century,” The Economist Intelligence Unit, October 2014.
David Kiron, Nina Kruschwitz, Holger Rubel, Martin Reeves and Sonja-Katrin Fuisz-Kehrbach, “Sustainability’s Next Frontier,” MIT Sloan Review, December 2013.
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Motivators for Sustainability
• 66%: there is a strong causal link between a company’s commitment to embed sustainability goals and its long-term (5-10 years) financial performance
• 70%: having a sustainability strategy is a prerequisite for the company’s long-term growth
• 48%: sustainability practices are a source of competitive advantage
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Obstacles for Sustainability
• 52%: immediate financial goals are more urgent
• 44%: absence of a business case
• 31%: no consensus on ultimate sustainability goals
• 30%: inadequate budget
• 27%: insufficient clarity concerning responsibilities of the company
• 26%: lack of clarity on legal or regulatory obligations to meet sustainability standards
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Are companies putting more focus on sustainabiliy issues? Yes…
67% say social and and environmental issues are “significant” or “very significant”
BUT…
40% say their companies are largely addressing them, and 10% say their companies fully tackle them.
THOUGHT ACTION
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Little progress to establish a business case…
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Defining Talkers vs. Walkers
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Organizational Capabilities for Sustainability
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Moving from Talking to Walking
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Most Influential
Stakeholders
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More Collaboration
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Sustainability’s Next Frontier
People
Planet
Profits
Strategy
Mission & Objectives Power in numbers through systemic
sustainability collaborations
Addressing global sustainability challenges is beyond the capabilities of even the largest company.
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Four Models of Sustainable Collaborations
PLAYERS
FO
CU
S
Ope
rati
onal
pro
cess
esO
utco
mes
Companies acrossthe value chain
Companies and Nonbusiness stakeholders
Develop industry benchmarks and standardized systems for measuring environmental performance across the value chain
Institute "payment for ecosystem services" models in which firms invest in funds that compensate local communities for improvingconservation and protectionoutcomes
Identify and share industrywide operational processes that protect the environment or protect human rights
Initiate extended collaborationsTo engage businesses and noncorporate stakeholdersin the pursuit of operationalinnovations and best practicesthat create shared value
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Enabling Successful Collaborations• Start with a small, committed group• Link self-interest to shared interest• Monetize system value• Create a clear path to quick wins• Acquire independent project management
experience• Build in structured competition• Nurture a culture of trust
The Collaboration Imperative, HBR, April 2014
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Sustainability is no longer a nice-to-do.
It’s a must-do.