www.sustainabilityadvantage.com

bobwillard@sympatico.ca

THE BUSINESS CA$Efor the Sustainability Imperative

CANSEEYork University

November 2, 2013

“Capitalism is under siege … The purpose of a business must be

redefined around creating shared value (CSV)…

How to reinvent capitalism—and unleash a wave of innovation and growth”

Michael Porter and Daniel Kramer, HBR, Jan-Feb 2011

CAPITALISM 2.0Capitalism 1.0 Capitalism 2.0

Purpose of the Firm

Maximize shareholder value; Short-term

Maximizing stakeholder value:Short- and long-term

Legitimate capitals Financial Financial, Natural, Social, Human

Bottom lines Profit Profit, Planet, People

Strategic focus Growth; Consumption Stakeholder well-being

Negative impacts Externalized Internalized

Boundaries The firm The firm’s value chain

Transparency As little as possible Naked

Business model Sell products; Take-Make-Waste; Linear

Sell services; Borrow-Use-Return; Circular, Cradle to Cradle; Closed loop

Source of financial capital

Stock market; Big financial institutions; Absentee owners

Smaller financial institutions; Crowd sourcing; Customers; Employees; Local communities; Shared ownership

Market focus Global More local

Access to

capital

Talent wars

Productivity

Innovation

Quality

Risk

management

Supply

security

Profit

Share price

Brand value

Revenue

growth

Market share

Expenses

(SUSTAINABILITY) STRATEGIES

“SUSTAINABILITY”

ONE MORE GOALENABLERS vs.

# Strategi

es

MORE RIGOROUS BUSINESS CASE

4.Reduced materials

1. Increased revenue2. Reduced energy

6.Reduced turnover

5.Increased productivity

7.Risks to revenue and expenses

3. Reduced waste

4

3

10

1

6

4

95% rewrite;

recalibrated

7+7

Benefits

Revenue

PROFIT

4.Reduced materials

1. Increased revenue2. Reduced energy

6.Reduced turnover

5.Increased productivity

7.R

ed

uce

d r

eve

nu

e a

nd

in

crease

d e

xpen

ses

3. Reduced waste

Opportunities RisksIncome Statement

10%

9%

75%

25%

2%

20%

+51 to

+81%

-16 to -36%

Exp

en

ses

SUSTAINABILITY CAPITAL RESERVE

SUSTAINABILITY BUSINESS CASE

SOURCES OF FUNDS

Sustainability Capital Reserve

+ ONLY COUNT BENEFITS AFTER PAYBACK PERIODS

Other internal or external capital markets

Treat as a high-yield, low-risk investment

Existing budgets

Government grants and incentives

WHICH “BUSINESS CASE”?

http://sustainabilityadvantage.com/2012/10/10/sustainability-business-case-1-more-profit/http://sustainabilityadvantage.com/2012/10/23/sustainability-business-case-2/

http://sustainabilityadvantage.com/2012/10/30/sustainability-business-case-3-share-price/

Sustainability Business Case #1: More Profit

Sustainability Business Case #2: Better ROI

Sustainability Business Case # 3: Higher Share Price

HOW WOULD WE RECOGNIZE A TRULY SUSTAINABLE BUSINESS

IF WE SAW ONE?

CAPITALISM 2.0Capitalism 1.0 Capitalism 2.0

Purpose of the Firm

Maximize shareholder value; Short-term

Maximizing stakeholder value:Short- and long-term

Legitimate capitals Financial Financial, Natural, Social, Human

Bottom lines Profit Profit, Planet, People

Strategic focus Growth; Consumption Stakeholder well-being

Negative impacts Externalized Internalized

Boundaries The firm The firm’s value chain

Transparency As little as possible Naked

Business model Sell products; Take-Make-Waste; Linear

Sell services; Borrow-Use-Return; Circular, Cradle to Cradle; Closed loop

Source of financial capital

Stock market; Big financial institutions; Absentee owners

Smaller financial institutions; Crowd sourcing; Customers; Employees; Local communities; Shared ownership

Market focus Global More local

THE FOURTH BENCHMARK

X1Baseline

year

Other companies

PerformanceToday

2Company

Goal

3

GO

AL

LIN

E(S

)4

Gold-standard benchmark

Material, science-based KPIs and Goals for a

Truly Sustainable Business Company X

FIVE BENEFITS

1. It addresses the confusion factor

2. It creates a sense of urgency

3. It raises the bar and sparks innovation

4. It identifies true leaders and best practices

5. It helps identify material ESG issues

SEVEN REASONS THAT IT’S TIME

1. Leading companies are ready

2. Important stakeholders are ready

3. Capitalism is ready

4. Business case is stronger than ever

5. Opportunity to harmonize with ESG standards

6. We’re running out of runway

7. It is doable

TRULY SUSTAINABLE BUSINESS

Economy

Society

Environment

If it were to operate forever, it would not only do no harm;

it would do well by doing some net good.

… contributing to the possibility that human and other life will flourish

on our planet, forever

… throughout its value chain/network

A truly sustainable business

creates positive environmental,

social, and economic value

WHERE

WHY

WHAT

X

METHODOLOGY / FLOW OF LOGIC

8 science-based System Conditions

for a sustainable environment (3)

and a sustainable social system (5)

18 KPIs with measureable goals that confirm the company is performing within the Design Constraints

8 Design Constraints for a truly sustainable business model

SYSTEM CONDITIONS

http://www.naturalstep.org/the-system-conditions

1. concentrations of substances extracted from the Earth’s crust,2. concentrations of substances produced by society,3. degradation of nature by physical means,

In a sustainable society, nature is not subject to systematically increasing …

…and 4. people are not subject to systemic barriers to their …4a. Wellness: physical, psychological, emotional and

spiritual wellness; safety 4b. Influence: participation in decision making; voice 4c. Learning: increasing competence; growth 4d. Equity: impartiality; respect; diversity; fairness; justice4e. Meaning: purpose; making a difference

ORGANIZING FRAMEWORK

ESG

Gov

ernan

ce

Environmental

Social

KPIs & GOALS

Governance / Profit (6)•Board oversight: ESG committee•Policies and systems: embed ESG principles •Ethics: zero ethical violations•Disclosure: full disclosure on ESG aspects•Transparency: transparent about lobbying•Financial performance: going concern

Environment / Planet (6)•GHGs: zero or better•Energy: 100% renewable •Water used: sustainable share or net zero•Materials: 100% recycled/renewable•Waste / Pollution: zero or better•Ecosystems services: restorative?

Society / People (6)•Employee remuneration: fair living wage?•Human capital: enhanced annually?•Local economy: strengthened annually?•Community well-being: enhanced annually?•Social license to operate: enhanced annually?•Customer well-being: enhanced annually?

Towards a Gold-standard Benchmark for a Truly Sustainable Businesshttp://www.naturalstep.ca/sites/default/files/gold-standard-benchmark-latest-version.pdf

CAPITALISM 2.0Capitalism 1.0 Capitalism 2.0

Purpose of the Firm

Maximize shareholder value; Short-term

Maximizing stakeholder value:Short- and long-term

Legitimate capitals Financial Financial, Natural, Social, Human

Bottom lines Profit Profit, Planet, People

Strategic focus Growth; Consumption Stakeholder well-being

Negative impacts Externalized Internalized

Boundaries The firm The firm’s value chain

Transparency As little as possible Naked

Business model Sell products; Take-Make-Waste; Linear

Sell services; Borrow-Use-Return; Circular, Cradle to Cradle; Closed loop

Source of financial capital

Stock market; Big financial institutions; Absentee owners

Smaller financial institutions; Crowd sourcing; Customers; Employees; Local communities; Shared ownership

Market focus Global More local

www.sustainabilityadvantage.com

bobwillard@sympatico.ca

THE BUSINESS CA$Efor the Sustainability Imperative

CANSEEYork University

November 2, 2013