1. How Would We Recognize It If We Saw It?
CAPITALISM 2.0:
How Would We Recognize It If We Saw It?
TSSS February 7, 2013

2. MY BACKBURNER QUESTIONS
2012
2009
2005
2002
Most sustainable enterprises?
Characteristics of a sustainable enterprise?

3. Top 5 most sustainable companies on the planet?
MIRROR MIRROR …
Top 5 most sustainable companies on the planet?
Thoughts from our TSSS audience on Feb. 7, 2013…
Patagonia - 10
Interface – 20
Toyota – 1
Vancity – 2
GE – 1
Seventh Generation – 7
AutoShare, ZipCar – 2
Suncor – 2
Arcelor Metal Dofasco – 2
Marks & Spencer - 1

4. http://www.sam-group.com/ … 2012 results
SAM RANKING
“Sustainability leaders” in 58 sectors
Used by DJSI
Assesses over 2,000 corporations
… 2012 results

5. FORTUNE MAGAZINE RANKING Reputation Attributes
“Most admired companies”
Chosen by businessmen
Rank
Top 10 1
Apple 2
Google 3
Amazon.com 4
Coca-Cola 5
IBM 6
FedEx 7
Berkshire Hathaway 8
Starbucks 9
Procter & Gamble 10
Southwest Airlines
Reputation Attributes
Innovation
People management
Use of corporate assets
Social responsibility
Quality of management
Financial soundness
Long-term investment
Quality of products/services
Global competitiveness
results

6. http://www.thedailybeast.com/newsweek/2012/ … 2012 results
NEWSWEEK RANKING
“Green rankings”
Helped by Trucost
Look at Global 500 & U.S. 500
Rank
Top 10 Global 1
Santander Brasil 2
Wipro 3
Bradesco 4
IBM 5
National Bank Australia 6
BT Group 7
Munich Re 8
SAP 9
KPN 10
Marks & Spencer
Category
Wt’g
Environmental Impact
45%
Environmental Management
Environmental Disclosure
10%
100%
… 2012 results

7. Key Performance Indicators
GLOBAL 100
3,500 global public companies
Compared to what is needed e.g. Factor Four improvements
Key Performance Indicators
Energy productivity
Carbon productivity
Water productivity
Waste productivity
Innovation capacity
% Taxes paid
CEO-to-Average-Worker Pay
Pension fund status
Safety performance
Employee turnover
Leadership diversity
Clean capitalism pay link
list

8. http://www.global100.org/; 2013 list
GLOBAL 100: CANADA
Top in Canada
21. Teck Resources
40. Barrick Gold
57. CN Railway
60. TELUS
71. Nexen
79. Enbridge
81. Suncor Energy
85 Sun Life Financial
87. Royal Bank
88. Cenovus Energy
list

9. MY BACKBURNER QUESTIONS
2012
2009
2005
2002
Stage 4 vs. Stage 5?
Most sustainable enterprises?
Characteristics of a sustainable enterprise?

10. SUSTAINABILITY JOURNEY
5. PURPOSE & PASSION
4. INTEGRATED STRATEGY
3. Beyond Compliance
Animated to do a gradual build, when clicked.
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Excerpt from “The Next Sustainability Wave,” as context for the discussion.
The Stage 3 to Stage 4 Transformation and the Stage 5 Difference
The leap from Stage 3 to Stage 4 on the sustainability journey requires linking market opportunities with corporate responsibilities: creating positives like innovative products and services for the world’s poor while eliminating negatives like pollution, waste, and child labor; creating new
value like sanitation, health, safe food, clean water, and new jobs while eliminating non-value; seeing partnerships with diverse stakeholders in the
market as a source of innovative solutions; seeing sustainability as an engine for growth as well as risk mitigation.
Stage 3 is about incremental, continuous improvements in eco-efficiency. Stage 4 is about discontinuous, leapfrogging breakthroughs. It is about
creative destruction of existing manufacturing process and product design, and breakthroughs in new products, services, markets, and processes. It is a transformation from Stage 3, not a transition.
Transformations are not trivial. Moving from Stage 3 to Stage 4 requires internalizing sustainability notions in profound ways, both personally and
organizationally. Environmental considerations move from the Environmental Affairs or Environment, Health, and Safety (EHS) department into the boardroom. Social considerations move from the Community Relations or Corporate Donations department into the strategy function. Sustainability-based thinking, perspectives, and behaviors are integrated into everyday operating procedures and the culture of the
organization.36 When these migrations happen, the metamorphosis is underway. The payoff is tapping into the revenue, innovation, and
productivity side of the sustainability business case rather than just the risk mitigation and cost-savings side.
What about Stage 5? Stage 5 is very different, but simultaneously very similar. About 90% of what Stage 4 and Stage 5 companies do looks the same. They both deploy business strategies that respect the environment, the community, and the ongoing business health of the firm. Motivations differ. Stage 4 companies “do the right things” so that they are successful businesses. Stage 5 companies are successful businesses so that they can continue to “do the right things.” The line between Stage 4 and Stage 5 in [the slide] denotes this significant difference.
The distinction is not meant to be a value judgment. Frankly, if we got to the tipping point of companies using sustainability as a management
discipline at Stage 4, I would be delighted. I am less concerned with the righteousness of motivations than I am with results.
2. Compliance
1. Pre-Compliance

11. “Over the last 10 years, the ‘Sustainability Imperative’ has emerged, magnified by escalating public and governmental concern about climate change, industrial pollution, food safety, and natural resource depletion, among other issues.”
Lubin and Esty, HBR May 2010

12. “Expect the Unexpected: Building business value in a changing world,” KPMG, 2012

13. Porter and Kramer, HBR Jan-Feb 2011
“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”
Porter and Kramer, HBR Jan-Feb 2011

14. CAPITALISM 2.0 Capitalism 1.0 Capitalism 2.0 Purpose of the Firm
Maximize shareholder value; ROI; Growth
Creating shared stakeholder value, including the Environment
Legitimate capitals
Financial
Financial, Natural, Human, Social
Bottom lines
Profit -first
Profit, People, Planet
Source of financial capital
Stock market; Big financial institutions; Absentee owners
Stock market; Smaller financial institutions; Customers; Employees; Local communities
Market focus
Global
Local
Environmental and social impacts
Externalized
Internalized
Accountability boundaries
The Firm
The Firm’s value chain, over its products’ life cycles
Transparency
As little as possible
Naked
Business model
Take-Make-Waste; Linear
Borrow-Use-Return; Circular

15. DOWN-TO-EARTH ECONOMY
Wall Street’s Organizing Principles
Nature’s Organizing Principle
View of natural capital
Limitless free resource, to be exploited
Finite valuable resource, to be respected and restored
Resource control
Monopolized
Shared
Growth
Infinite growth of money and consumption
A stage in life’s endless regenerative cycles
Timeframe
Immediate return
Sustained yield over time
Efficiency measures
Returns on financial capital
Returns on social and natural capital
Primary performance indicators
Growth in financial returns, assets
Life’s abundance, health, resilience, and creative potential
Primary dynamic
Competition to maximize self-interest
Cooperation to optimize self- and community-interest
Based on David Korten, “The Down-To-Earth Economy,” Yes! Magazine, Winter 2013

16. THE REAL WORLD

17. NESTED DEPENDENCIES Enough, for all, forever. Environment
Human Society
Human Economy X
Enough, for all, forever.

18. TRULY SUSTAINABLE ENTERPRISE
Environment
Human Society
A truly sustainable enterprise creates positive economic, environmental, and social value.
Human Economy X
If it were to operate forever, it would not only do no harm; it would do well by doing some good.

19. GOLD STANDARD FRAMEWORK
ESG
Governance
Environmental
Social

20. Breakout Group Discussion Question:
ESG CRITERIA
Breakout Group Discussion Question:
List 5 ESG criteria
that you would use to assess whether or not
a company is a truly sustainable enterprise.
“Mount Sustainability”

21. ESG CRITERIA Breakout Group Idea Harvesting:
"Noble purpose" – but how do we measure this, what is/are the metric(s)
Do consumers as well as investors understand the implications of supporting the company? Criteria for this could be direct or indirect, e.g. whether company is effective in educating/communicating investors/consumers to understand these effects/implications
Fair wages and distribution of wealth throughout value chain – inputs/outputs
No waste in network/ecosystem – if there is a product with waste must have way to reuse – closed loop process/concept

22. ESG CRITERIA Breakout Group Idea Harvesting:
Degree of community/stakeholder engagement – sliding scale from hierarchy to cooperative (includes employees and broader community)
Is it a ‘learning organization’ with ‘permission to fail’
PUMA – Is it possible to estimate what the environmental impact of all our supply chain operations are and convert that into a financial number – eg material resources, carbon, water – if these costs are considered what was seen as a profitable company can easily be seen as a losing company. Puma was a leader in assessing actual costs when by internalizing what were previously seen as externalities - they 'gave themselves a bill' for environmental costs

23. ESG CRITERIA Breakout Group Idea Harvesting:
Need to be positive on all three legs of ESG or is there allowance to be negative/neutral on 1-2, if positive on other(s) – parallel to this is carbon trading –> can you 'buy yourself out?' of being 'bad'
100% of compensation for everyone in company not simply tied to shareholder value but aligned 100% to stakeholder value
Equity: i.e. no one is exploited through activities/operations of company – could be evaluated on many levels including legal, living wage  if we dream big, let's look at company's whole value chain, not just the company (Big question – where does accountability end? How much is enough? When is enough enough?) And, if they ‘do too much good’, and put themselves out of business, then the G leg of the stool is broken, right?

24. ESG GOLD STANDARD CRITERIA
Environmental
Carbon positive
Energy positive
Water positive
Materials positive
Waste positive
Provides services (vs. products)
Restorative to ecosystems
Social
Fair share of taxes
Labor rights & safe working conditions
Fair employee remuneration
Family-friendly benefits
Engaged employees
Local workers, purchases, & investments
Products & services build social capital
Governance / Financial
Financially sustainable
Ethical business practices
Diverse senior leadership
Transparent / Engaged stakeholders
Sustainable business model, policies, & systems
Sustainable value chain / Life-cycle accountability
Sustainability champion / Leader of transformation

25. MY BACKBURNER QUESTIONS
2012
2009
2005
2002
Correlation with market value?
Stage 4 vs. Stage 5?
Most sustainable enterprises?
Characteristics of a sustainable enterprise?

26. MARKET PERFORMANCE
Robert G. Eccles et al, “The Impact of a Corporate Culture of Sustainability on Corporate Behavior and Performance,” HBS working paper , Nov. 25,

27. REPORTING COMPANIES OUTPERFORM
53% of S&P 500 companies are published sustainability- or CSR-type reports in 2011, up from 20% in 2010
63% follow the Global Reporting Initiative (GRI) framework
Between 2007 and 2011, companies that reported on their sustainability efforts outperformed the broad S&P 500 Index
Governance and Accountability Institute, “2012 Corporate ESG / Sustainability / Responsibility Reporting: Does It Matter?” December 2012

28. IIRC
Will create the globally accepted International <IR> Framework that includes financial, governance, management commentary, and sustainability reporting.
Reports will include material sustainability impacts, and show how the company creates value in the form of financial, manufactured, human, intellectual, and natural capitals.
December 2013: Version 1.0 of the Framework
Q1-Q4 2014: Pilot Program with the Business Network (80 companies) and the Investor Network (30 investors)
International Integrated Reporting Council (IIRC)

29. Sustainability Accounting Standards Board (SASB) http://www.sasb.org/
Will develop industry-specific standards to measure and disclose ESG performance on the top 10 material sustainability issues, for mandatory Form 10-K filings with the SEC.
A complete set of standards covering all 10 sectors and 89 industries will be available in Q
Sustainability Accounting Standards Board (SASB)

30. GISR
Will create a world class corporate sustainability ratings standard, to embed sustainability into the capital markets worldwide
Global Initiative for Sustainability Ratings

31. How Would We Recognize It If We Saw It?
CAPITALISM 2.0:
How Would We Recognize It If We Saw It?
TSSS February 7, 2013