1. THE BUSINESS CA$E for sustainability
Bob Willard

2. Sustainability 3-Legged Stool
Sustainable Development (SD)
Corporate Social Responsibility (CSR)
Corporate Responsibility (CR)
Triple Bottom Line (TBL)
Environment - Planet
Eco-efficiencies
Eco-effectiveness
Restorative
Economy - Profits
Growth Jobs Taxes
In your original, slide 2 and 4 were the same
Equity - People
Employees
Community World

3. Smart Business 3-Legged Stool
ASSET MANAGEMENT
Natural
Capital
Financial
Capital
Manufactured
Human
Capital
Social

4. 5-Stage Sustainability Journey
5. Purpose/Passion
Values-driven founder / CEO
4. Integrated Strategy
Enhanced business value
3. Beyond Compliance Eco-efficiencies/
PR crisis/
Regulatory threat
2. Compliance
Regulatory enforcement 1. Pre-Compliance
We are still looking at making the ‘road’ work stronger. Perhaps by adding arrows from 5 to 4 etc.What are your thoughts?

5. Motivations vs. Behaviors
5. Purpose/Passion
Means: Be a successful company End: Contribute to better world
4. Integrated Strategy
Means: Contribute to
a better world
End: Be a successful
company

6. 5-Stage Sustainability Journey
5. Purpose/Passion
Values-driven founder / CEO
4. Integrated Strategy
Enhanced business value
3. Beyond Compliance Eco-efficiencies/
PR crisis/
Regulatory threat
2. Compliance
Regulatory enforcement 1. Pre-Compliance
We are still looking at making the ‘road’ work stronger. Perhaps by adding arrows from 5 to 4 etc.What are your thoughts?

7. Company Value “Iceberg”
Balance Sheet
This is an extra slide that shows an iceburgh with type overlay
Market Capitalization

8. Company Value “Iceberg”
Balance Sheet
Tangibles
Financials
Intangibles
Nonfinancials - Brand Image
Reputation - Stakeholder Relationships
Moving forward, with a lot more time, we would like to get abetter iceburg and replace the triangle with a photo/graphic image and have the type superimposed on the ice
Market Capitalization

9. Company Value “Iceberg”: 1981 Intangibles - Nonfinancials
Balance Sheet
83%
Tangibles - Financials
Intangibles - Nonfinancials
17%
Market Capitalization
Arthur D. Little, The Business Case for Corporate Citizenship , 2002

10. Company Value “Iceberg”: 1998 Intangibles - Nonfinancials
29%
Tangibles
Financials
Intangibles - Nonfinancials
71%
Arthur D. Little, The Business Case for Corporate Citizenship , 2002

11. Sea of Demanding Stakeholders
Financials
Economists
NGOs
Employees
Global Markets
Media
The Public
Nonfinancials
Investors
Customers
Banks
Insurers
Competitors
Governments
Scientists

12. Two-Part Business Case
OPPORTUNITIES
Financials
Economists
NGOs
Employees
Global Markets
Media
RISKS
The Public
Nonfinancials
Investors
Customers
Banks
Insurers
Competitors
Governments
Scientists

13. The Perfect Storm Sudden, unexpected, dea s t i n g
Oct. 27 – Nov. 1, 1991
3 weakening weather fronts
1.Hurricane Grace (former)
2.Cold front from Great Lakes
3.Warm front from Sable Island
Fed on each other’s energies
Worst storm in history …100’ waves
Sudden, unexpected, dea s t i n g v

14. Mega-Issue Storm Clouds
Pollution & Health
Other …
Climate Crisis
Water Crisis
Pandemics
Energy Crisis
Erosion of Trust
Economists
NGOs
Employees
Global Markets
Media
RISKS
The Public
Investors
Customers
Banks
Insurers
Competitors
Governments
Scientists

15. Awakened Public - Consumers
The “Goracle factor”
+ Hurricane Katrina + Weird weather + Gas prices
+ IPCC reports + …(other awakeners)
70-80% of consumers say they are switching to “green” companies; 20% actually did in 2006
LOHAS sector:
$200B in $420B by $845B by 2015

16. Economist Warnings: Stern Review
Former World Bank chief economist, Nicholas Stern; quantifies
warnings in 1997 Economists’ Statement on Climate Change
1. Cost of climate change mitigation is; 1% Benefits of $2.5T; of annual global GDP if we act now by 2050 if act now; global depression; % if we act later if we do nothing
3. Must stabilize GHGs using carbon taxes
and / or a cap-and-trade system

17. Carbon Disclosure Project
Q. Commercial - regulatory - physical risks to value from climate change? Opportunities? Strategies?
2003
2006
Institutional Investors 35
225
Value of Assets Held
$4.5T
$31T
Companies Surveyed
FT500
1,800
A. Carbon-intensive manufacturers could lose 40% of their market value; Banks could lose 29% of value

18. Investor Network on Climate Risk (INCR)
65 institutional investors, $4T in assets;
Ask SEC to require listed companies to disclose climate change risks in their financial performance (June 06);
Climate Watch List of worst 10 GHG emitter companies get shareholder resolutions on climate change (Feb 07);
Capital to Capitol report: Request that Congress cut GHGs 60-90% below 1990 levels by 2050 (Mar 07)

19. European Union Leadership Pollution & health regulations
Restriction on Hazardous Substances (RoHS)
Waste from Electrical and Electronic Equipment (WEEE)
End of Life Vehicles Directive (ELVD)
Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH)
Energy-using Products (EuP)
Climate Change Plan By 2020, reduce CO2 20% below 1990 level
Big retailers taking action Tesco, Marks & Spencer, Asda

20. Western Regional Climate Action Initiative:
US States’ Leadership
Western Regional Climate Action Initiative:
5 west-coast states led by California
cap-and-trade system by mid-2008; promote renewable energy and energy efficiency; advocate for national climate policies
Regional Greenhouse Gas Initiative (RGGI):
10 east-coast states; cap-and-trade system for power plants
33 States: Climate Registry of baselines
20 States: Renewable energy targets

21. Climate Protection Agreement:
US Cities’ Leadership
Climate Protection Agreement:
522 city mayors; Kyoto at city level - 7% below 1990 levels
Led by Mayor Nickels of Seattle
Many are members of C40 large cities,
led by London’s Mayor Livingston; $5B for retrofits

22. US Corporations’ Leadership
Big Corporations Wal-Mart, GE, Home Depot, DuPont …
Combat Climate Change (3C) Initiative
18 US energy corps want national cap-and-trade system
US Climate Action Partnership (USCAP)
10 major corps + 4 NGOs; want cap-and-trade system
and 15% GHG reduction in 15 years

23. Unusual Drivers of Sustainability
National Security
Alternative energy: $6B sector in US by 2008; $167B by 2015
War for Talent
Sustainability reputation:
70% of NA grads seek companies with good CSR reputations
Revenue Pressure
Carbon trading: $29.8B global market in 2006; set to double in 2007
Sarbanes Oxley
Sustainability reporting:
Global Reporting Initiative guidance on reporting risks; 64% of Global 250 do sustainability reports

24. Two-Part Business Case
OPPORTUNITIES
Financials
Economists
NGOs
Employees
Global Markets
Media
RISKS
The Public
Nonfinancials
Investors
Customers
Banks
Insurers
Competitors
Governments
Scientists

25. One More Goal … or an Enabling Strategy?
Profit
Share price
Growth
Revenue
Customer care
Expense savings
Competition
Market share
Leadership
Governance
Innovation
Speed to market
New markets
Talent wars
Productivity
Motivation
Brand image
Managing risks
Compliance
Supply security

26. Sustainability Investing is Not a Sacrifice
Sustainability indices equal or outperform the market:
DJSI, Jantzi, FTSE4GOOD
SRI Funds Growing: US SRI assets grew 258% from 1995 to $2.3T in 2005
Freshfields Report:
Dispels the myth that laws prevent fiduciaries from considering CSR issues; in fact, the law sometimes requires them to
DJSI
Jantzi Social Index

27. Typical Large Company Benefits
Revenue $44,000,000,000
Profit $3,000,000,000
Workforce 120,000
Avg. Employee Salary $60,000
Avg. Manager Salary $70,000
Potential profit increase: +38%
+ Energized employees + Improved corporate image
+ Competitive advantage + Positioned for the future

28. Lead It Like Any Culture Change
1. Walk the talk as senior leaders
Integrate into vision - mission - strategies
Business strategy vs. philanthropy
Avoid “green-washing” hype
2. Educate the whole company
Solicit employee ideas - help
3. Align with measurement & reward systems

29. 7 Benefit Areas 1. Reduced recruiting costs 2. Reduced attrition costs
3. Increased employee productivity
4. Reduced expenses in manufacturing
5. Reduced expenses at commercial sites
6. Increased revenue - market share
7. Lower insurance & borrowing costs
… yielding a profit increase of +38%
Usual
focus

30. Potential Improvements
1. Reduced recruiting costs
2. Reduced attrition costs
3. Increased employee productivity
4. Reduced expenses in manufacturing
5. Reduced expenses at commercial sites
6. Increased revenue - market share
7. Lower insurance & borrowing costs
… yielding a profit increase of +38%
-1%
-2%
+10%
-5%
-20%
+5%

31. What if … ? 1. Reduced recruiting costs -1% 2. Reduced attrition costs
3. Increased employee productivity
4. Reduced expenses in manufacturing
5. Reduced expenses at commercial sites
6. Increased revenue - market share
7. Lower insurance & borrowing costs
… yielding a profit increase of +38%
+35%
-1%
-2%
+10%
-5%
-20%
+5% +2%

32. What if … ? 1. Reduced recruiting costs -1% 2. Reduced attrition costs
3. Increased employee productivity
4. Reduced expenses in manufacturing
5. Reduced expenses at commercial sites
6. Increased revenue - market share
7. Lower insurance & borrowing costs
… yielding a profit increase of +38%
+23%
-1%
-2%
+10% +4%
-5%
-20%
+5%

33. What if … ? 1. Reduced recruiting costs -1% 2. Reduced attrition costs
3. Increased employee productivity
4. Reduced expenses in manufacturing
5. Reduced expenses at commercial sites
6. Increased revenue - market share
7. Lower insurance & borrowing costs
… yielding a profit increase of +38%
+20%
-1%
-2%
+10% +4%
-5%
-20%
+5% +2%

34. Two-Part Business Case
OPPORTUNITIES
Financials
Economists
NGOs
Employees
Global Markets
Media
RISKS
The Public
Nonfinancials
Investors
Customers
Banks
Insurers
Competitors
Governments
Scientists

35. The “Tipping Point”? 20% 5. Purpose/Passion 4. Integrated Strategy
Values-driven founder / CEO
4. Integrated Strategy
Enhanced business value
3. Beyond Compliance Eco-efficiencies/
PR crisis/
Regulatory threat
2. Compliance
Regulatory enforcement
1. Pre-Compliance
20%
We are still looking at making the ‘road’ work stronger. Perhaps by adding arrows from 5 to 4 etc.What are your thoughts?

36. In Summary … Sustainability is smart business
New market forces - risks are in play
Public expectations are rising
Talk business language
Show relevance to existing priorities
You are not alone; find partners
Opportunity for leadership

37. THE BUSINESS CA$E for sustainability
Bob Willard