A Stern warning…….. “The 1990s were very likely (90-99% chance) to have been the warmest decade since records began in 1861” “new and stronger evidence that most of the world’s warming over the last 50 years is attributable to human activities” “The world will warm by 3C (5.4F) even under emissions projections for 2050 that leading scientists consider optimistic” “…lead to an increase in heat and cold related death…increase epidemics and diseases following storms and floods… cause drought and famine for 400 million people…devastate wildlife… irreversibly damage natural systems” “Climate change is the greatest market failure the world has ever seen”
Population Growth CO 2 Concentration Total GDP Number of Extinctions Loss of Rainforest Spot the coincidence…….
“Business as usual is not an option” Drivers of change: –Culture –Desiring a new state –Information –Choices –Aspirations –Role models –New priorities –Innovation –Fear –Death and taxes!
and some barriers… The Tragedy of the Commons – G Hardin Governments don’t learn, only people learn. (Governments only react) The business of business is business The social responsibility of business is to make profits – M Friedman Climate change is bigger than God! - Annon
The new goal – “Sustainable Development” You cut, I’ll choose… “Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs” Our Common Future, 1987 (also known as the Brundtland Report)
Risks vs. rewards Value judgements: –Short term profit vs long term investment –Understanding new challenges –Valuing new opportunities –Pricing risks –Calling the market –Funding innovation –Anticipating legislation Is the reward model correct, or will our engine of success drive us over the edge?
The choices: Greenwash – we recycle paper and care for the planet – now where are my cheap flight tickets & my new Porsche Cayenne? Burden – More ****** red tape! Its not in the contract. Not my problem. What’s the point? I believe Channel 4’s The Great Climate Swindle programme. Opportunity – innovation, differentiation, risk management, solutions, competitive advantage, access to market, brand value etc. Where do we start?
Who controls the agenda? The brand? “Push” Product features Product sales Technical excellence Product service Emotional solutions Product profitability Desire to sell Supply Top down The consumer? “Pull” Needs/wants Satisfaction Expectations Customer service Rational solutions Customer/segment profitability Need for solutions vs. Demand Bottom up
Who is leading? –Tescos to pioneer carbon labelling for 70,000 products to fund £25,000,000 Sustainable Consumption Institute –Marks and Spencers to be carbon neutral within 5 years in a £200m eco-plan –Co-Op & Fairtrade – popular social contracts –Ford will invest £1 billion in technology to reduce fuel emissions –Toyota, Honda et al with hybrid cars –BP to invest $8 billion over ten years to produce electricity from solar, wind, hydrogen and natural gas and describe their goal as “to build a profitable, global and market leading low-carbon power business by 2015” –GE Capital “Ecomagination” = revenues of $8.5Bn in 2005 rising to $17Bn in 2007 from clean technologies in transport, energy, water, consumer goods –Governments Ban incandescent light bulbs Force through carbon cap & trade mechanisms Introduce “sustainable procurement”
Stern’s four solutions: 1.Reducing demand for emissions intensive goods and services 2.Increased efficiency, which can save both money and emissions 3.Action on non-energy emissions, such as avoiding deforestation 4.Switching to lower carbon technologies for power, heat and transport Stern acknowledges that the costs vary widely but the objectives will drive innovation and growth
What you can do with a £150Bn budget! “Sustainable Development – Securing our Future” 2005 Set sustainability targets on all Central Government departments To meet those targets; Government had to “Lead by example” – “Procuring our Future” and acquire goods in a sustainable manner to: –Enhance credibility –Achieve the goals of sustainable development
Government Estate targets By 2020: Climate change & Energy: –Reduce CO 2 emissions by 30% –Carbon Neutral by 2012 –Increase energy efficiency per m 2 by 30% Sustainable consumption & production: –Reduce waste arisings by 25% –Increase recycling figures to 75% of waste Natural resource protection –Biodiversity – SSSIs –Reduce water consumption by 25%
The business case: “The transition to a low-carbon economy will bring challenges for competitiveness but also opportunities for growth.” Sir Nicholas Stern, Ex Chief Economist World Bank, Stern Review for UK Government, Nov 2006 The Climate Change Bill –20% less carbon by 2010 –60% less carbon by 2050 IPCC……80% less carbon by 2050
Constructing the business case RISKS Climate change Fossil fuels & emissions Environmental taxes Legislation Reputation Supply chain standards Finite resources & “peak oil” Waste/”polluter pays” “Business as usual ” OPPORTUNITIES Culture change & new politics Carbon “footprinting” Cost savings Compliance & CSR Brand value, access to markets & capital Sustainable procurement “Renewables” & “low carbon” Accountability & innovation Early adopter & competitive advantage
The marketing strategy: Over the last decade marketing achieved growth through debt and obesity. This is not sustainable. The low hanging fruit of product differentiation for the next decade will be the environment Professor Paul Fifield, 2006 Visiting Professor in Marketing Strategy Southampton University School of Management
The spirit is willing! 65% of people in the UK claim only ever to buy energy-saving lightbulbs — yet these account for less than 20% of bulbs sold 76% say they recycle everything possible, yet only 22% of British household waste is recycled Populus and The Times, 2007
Directors need new skills… New standards and KPIs: –“Sustainable procurement” –CSR & “corporate accountability” –“Carbon footprinting”, carbon allowances, “cap and trade” Managing environmental risks: –Management Systems (e.g. ISO14001) Globalisation: –product differentiation, creating brand value Rising costs: –Raw materials, fuel, water, waste disposal, transport, cost of capital –Landfill tax, Packaging Regs, RoHS, WEEE, REACH, IPPC, ELVD
The 4 key Carbon steps to making a difference: 1.Calculate your carbon footprint 2.Assess your carbon related risks and opportunities 3.Adapt your business 4.Do it better than rivals Doing well by doing good isn’t enough!
Its worth it! Cost of wasted natural resources to UK Manufacturers = 7% of Profit Improvements in energy efficiency can save UK businesses and individuals £12billion per annum (Securing the Future, 2005) 13% of raw materials are waste in construction (Defra, 2007)
Where would you invest? Source: Harvard Business Review, 2007
Perception is all… “The louder he talked of his honour the faster we counted the spoons!” “If you fail to plan you plan to fail” “Knowledge exists to be imparted” Ralph Waldo Emerson
The last word! “A corporate focus on reducing greenhouse gases as quickly as possible is good business strategy.” “It will save money for our customers, make us a more efficient business and help position us to compete effectively in a carbon-constrained world.” Wal-Mart CEO, Lee Scott Can you afford not to?
Thank you for listening Any questions? Charles Burt The Olive Consultancy Ltd. www.consultolive.com Sustainability from start to profit