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

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Presentation on theme: "CAPITALISM 2.0: How Would We Recognize It If We Saw It? TSSS February 7, 2013."— Presentation transcript:

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

2 Characteristics of a sustainable enterprise? Most sustainable enterprises? MY BACKBURNER QUESTIONS 2009

3 MIRROR MIRROR … Top 5 most sustainable companies on the planet? 1.Patagonia Interface – 20 3.Toyota – 1 4.Vancity – 2 5.GE – 1 6.Seventh Generation – 7 7.AutoShare, ZipCar – 2 8.Suncor – 2 9.Arcelor Metal Dofasco – 2 10.Marks & Spencer - 1 Thoughts from our TSSS audience on Feb. 7, 2013…

4 SAM RANKING “Sustainability leaders” in 58 sectors Used by DJSI Assesses over 2,000 corporations … 2012 results

5 FORTUNE MAGAZINE RANKING “Most admired companies” Chosen by businessmen results RankTop 10 1Apple 2Google 3Amazon.com 4Coca-Cola 5IBM 6FedEx 7Berkshire Hathaway 8Starbucks 9Procter & Gamble 10Southwest 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

6 NEWSWEEK RANKING “Green rankings” Helped by Trucost Look at Global 500 & U.S … 2012 results CategoryWt’g Environmental Impact45% Environmental Management 45% Environmental Disclosure 10% 100% RankTop 10 Global 1Santander Brasil 2Wipro 3Bradesco 4IBM 5National Bank Australia 6BT Group 7Munich Re 8SAP 9KPN 10Marks & Spencer

7 GLOBAL 100 3,500 global public companies Compared to what is needed e.g. Factor Four improvements Key Performance Indicators 1.Energy productivity 2.Carbon productivity 3.Water productivity 4.Waste productivity 5.Innovation capacity 6.% Taxes paid 7.CEO-to-Average-Worker Pay 8.Pension fund status 9.Safety performance 10.Employee turnover 11.Leadership diversity 12.Clean capitalism pay link list

8 GLOBAL 100: CANADA list 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

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

10 1. Pre-Compliance 2. Compliance 4. INTEGRATED STRATEGY 5. PURPOSE & PASSION SUSTAINABILITY JOURNEY 3. Beyond 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 “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 1.0Capitalism 2.0 Purpose of the Firm Maximize shareholder value; ROI; Growth Creating shared stakeholder value, including the Environment Legitimate capitalsFinancialFinancial, Natural, Human, Social Bottom linesProfit -firstProfit, People, Planet Environmental and social impacts ExternalizedInternalized Accountability boundaries The FirmThe Firm’s value chain, over its products’ life cycles TransparencyAs little as possibleNaked Business modelTake-Make-Waste; LinearBorrow-Use-Return; Circular Source of financial capital Stock market; Big financial institutions; Absentee owners Stock market; Smaller financial institutions; Customers; Employees; Local communities Market focusGlobalLocal

15 DOWN-TO-EARTH ECONOMY Wall Street’s Organizing Principles Nature’s Organizing Principle View of natural capitalLimitless free resource, to be exploited Finite valuable resource, to be respected and restored Resource controlMonopolizedShared GrowthInfinite growth of money and consumption A stage in life’s endless regenerative cycles Efficiency measuresReturns 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 dynamicCompetition to maximize self-interest Cooperation to optimize self- and community-interest TimeframeImmediate returnSustained yield over time Based on David Korten, “The Down-To-Earth Economy,” Yes! Magazine, Winter 2013

16 THE REAL WORLD

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

18 TRULY SUSTAINABLE ENTERPRISE Human Economy Human Society Environment A truly sustainable enterprise creates positive economic, environmental, and social value. 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 ESG CRITERIA “Mount Sustainability” Breakout Group Discussion Question: List 5 ESG criteria that you would use to assess whether or not a company is a truly sustainable enterprise.

21 ESG CRITERIA 1."Noble purpose" – but how do we measure this, what is/are the metric(s) 2.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 3.Fair wages and distribution of wealth throughout value chain – inputs/outputs 4.No waste in network/ecosystem – if there is a product with waste must have way to reuse – closed loop process/concept Breakout Group Idea Harvesting:

22 ESG CRITERIA 5.Degree of community/stakeholder engagement – sliding scale from hierarchy to cooperative (includes employees and broader community) 6.Is it a ‘learning organization’ with ‘permission to fail’ 7.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 Breakout Group Idea Harvesting:

23 ESG CRITERIA 8.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' 9.100% of compensation for everyone in company not simply tied to shareholder value but aligned 100% to stakeholder value 10.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? Breakout Group Idea Harvesting:

24 ESG GOLD STANDARD CRITERIA 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 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

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

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 % 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 International Integrated Reporting Council (IIRC) Reports will include material sustainability impacts, and show how the company creates value in the form of financial, manufactured, human, intellectual, and natural capitals. Will create the globally accepted International Framework that includes financial, governance, management commentary, and sustainability reporting. 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)

29 SASB Sustainability Accounting Standards Board (SASB) 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

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

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


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