1. Sustainability Advantage: The Busine$$ Ca$e for Sustainability
PPPC Convention
Toronto
January 16, 2012
Bob Willard

2. Sustainable Promotional Products
Cause-related promotional products
Donation to charity of person’s choice
Carbon offsets
Matching grants

3. Definitions of Sustainability Sustainable Development (SD)
Meeting the needs of the present generation without compromising the ability of future generations to meet their own needs – Brundtland Commission, 1987 –
Sustainability
The possibility that human and other forms of life on earth will flourish forever.
– John Ehrenfeld, Professor Emeritus, MIT –
Enough - for all – forever.
– African Delegate to Johannesburg (Rio+10) –

4. Core Concepts of Sustainability
Futures Thinking Intergenerational responsibility
(Eco-)Systems Thinking Carrying capacity of the planet to absorb waste and support life
Social Justice Equity, Dignity, Basic services, Human rights, Stakeholder voices
Economic, Environmental, Social/Cultural responsibilities

5. 3-Legged Sustainability Stool
Environmental Leg
No Pollution & Waste
Renewable Energy
Conservation
Restoration
Economic Leg
Good Jobs
Fair wages Security
Infrastructure
Fair Trade
Social Leg
Working conditions
Health services
Education services
Community & Culture
Social justice
Quality of Life / Genuine Wealth / Genuine Progress

6. Corporate Sustainability 3-Legged Stool
Triple Bottom Line (TBL) = 3Es = 3Ps
= Sustainability = Sustainable Development (SD)
= Corporate Responsibility (CR)
= Environmental, Social, Governance (ESG)
= Corporate Social Responsibility (CSR) = Green
Environment - Planet
Eco-efficiencies
Eco-effectiveness
Economy - Profits
Growth Jobs, Taxes
Products
Services
Equity - People
Employees
Community / Culture World

7. Smart Business 3-Legged Stool Sustainable Value Creation
Asset Management
Natural
Capital
Economic / Financial
Capital
Built / Manufactured
Human Capital
Social Capital
Sustainable Value Creation

8. 5-Stage Sustainability Journey
5. Purpose/Passion Align with founder’s / CEO’s values
4. Integrated Strategy Enhance company value / prosperity
3. Beyond Compliance Save on eco-efficiencies Avoid PR crisis Avoid threat of new regulations
Animated version. See slide below for Notes.
2. Compliance Avoid fines, prosecution, bad PR
1. Pre-Compliance

9. The “Sustainability Imperative”
Megatrend: “A fundamental shift in the competitive landscape that creates inescapable threats and game-changing opportunities ... profoundly affects companies’ competitiveness and even their survival.”
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.”
David A. Lubin and Daniel C. Esty, “The Sustainability Imperative,” HBR May 2010

10. Significant CEO Mindset Shift
2010 Increase Over 2007
CEOs Agree /Strongly Agree that sustainability should be ….
… fully embedded into company strategy and operations
… discussed and acted on by boards
… fully embedded into subsidiaries’ strategies and operations
… embedded throughout the
global supply chain
… the basis for industry collaborations and multi-stakeholder partnerships
… incorporated into discussions with financial analysts
Survey of 766 worldwide CEOs, including 50 in-depth interviews
UN Global Compact and Accenture study, “A New Era of Sustainability,” June 2010

11. Stakeholders Driving Sustainability
Stakeholders who CEOs believe will have the greatest impact on the way they manage societal expectations
Consumers
Employees
Governments
Communities
Regulators
Media
Investment Community
Suppliers
NGOs
Boards
Organized Labor
Other
Survey of 766 worldwide CEOs, including 50 in-depth interviews
UN Global Compact and Accenture study, “A New Era of Sustainability,” June 2010

12. CEOs: Sustainability Drivers
Top 3 drivers of CEOs’ action on sustainability issues
Brand, trust, and reputation
Potential for revenue / growth / cost reduction
Personal motivation
Consumer / customer demand
Employee engagement and recruitment
Impact of development gaps on business
Governmental / regulatory environment
Pressure from investors / shareholders
Survey of 766 worldwide CEOs, including 50 in-depth interviews
UN Global Compact and Accenture study, “A New Era of Sustainability,” June 2010

13. The “Iceberg” of Company Value
1978
1981
1998
2009
25%
Tangibles / Financials
29%
83%
95%
Intangibles
/ Non-Financials
/ Reputation / Goodwill 5%
17%
71%
75%
Market Value / Capitalization
Sources: For 2009, Hollender, Orgain, and Nunez, “The Business Case for Sustainability” [accessed July 30, 2011], Kaplan Eduneering/Seventh Generation Sustainability Institute, February 2010; for 1998 and 1981, Roberts, Keeble, and Brown, “The Business Case for Corporate Citizenship,” Arthur D. Little, 2002, p. 1; for 1978, Stewart, “Accounting Gets Radical,” Fortune, April 16, 2001.

14. The “Perfect Storm” Threatens Financial and Social Capitals
Species Extinction and Overharvesting
Climate Change and Energy Crisis
Waste, Toxicity, and Health
25%
Tangibles / Financials
Food and Water Crises
Poverty and Social Injustice
(NGOs)
(Scientists)
Intangibles
/ Non-Financials
/ Reputation / Goodwill
Governments
Global Markets
Social license to operate
Media
Banks
The Public
Competitors
Employees
Communities
Investors
Customers
Insurers
Market Value / Capitalization
Boards
Economists

15. CEOs: Sustainability Drivers
Top 3 drivers of CEOs’ action on sustainability issues
Brand, trust, and reputation
Potential for revenue / growth / cost reduction
Personal motivation
Consumer / customer demand
Employee engagement and recruitment
Impact of development gaps on business
Governmental / regulatory environment
Pressure from investors / shareholders
Survey of 766 worldwide CEOs, including 50 in-depth interviews
UN Global Compact and Accenture study, “A New Era of Sustainability,” June 2010

16. Top 10 Business Priorities for 2011
Forrester's survey of 2,691 executives in Europe, North America, and Asia, “Forrsights Business Decision-Makers Survey, Q ”

17. One More Goal … or an Enabling Strategy?
Profit
Share price
Growth
Revenue
Market share
New markets
Customer care
Expenses
Talent wars
Productivity
Innovation
Brand image Quality
Risks
Compliance
Governance
Supply security
“Sustainability”
Enabling Strategies

18. Income / Profit & Loss Statement
Revenue / Sales
Expenses
Cost of goods sold (COGS)
Selling, general, and administrative (SG&A)
Interest, taxes, depreciation, and amortization (ITDA)
Profit / Net Income 18

19. Wouldn’t it be nice if someone …
…determined what real companies have achieved from their sustainability-related revenue enhancement and expense saving initiatives, by researching books, articles, press releases, surveys, research papers, case studies, etc.
…sorted the benefits into generic categories
…monetized the benefits and normalized them to revenue
…projected profit improvements for typical companies, if they were to simply do what leading companies have already done, within the next 3 to 5 years
5. …made it easy to tailor the business case for a particular company with an open source simulator 19

20. 7 Business Case Benefits Sustainability Capital Reserve
Opportunities
Income Statement
Risks
1. Increased Revenue 9%
Revenue
2. Reduced energy expenses
75%
3. Reduced waste expenses
20%
Reduced risks to revenue and expenses
Reduced material and water expenses
10%
Expenses
Increased employee productivity / innovation 2%
Reduced employee turnover expenses
25%
Sustainability Capital Reserve
+51 to +81%
Profit
-16 to -36% 20

21. Two Sample Typical Companies
Company Data Profile
Small Professional Services Company
% of Revenue
Large Manufacturing & Distribution Corporation
Revenue
$1,000,000
$500,000,000
Energy expense
$20,000 2%
$10,000,000
Materials and water expense
$50,000 5%
$150,000,000
30%
Total salary / payroll expense
$300,000
Profit
$70,000 7%
$35,000,000
Average salary, including benefits
$40,000
Number of employees 6
3,750
Potential Profit Increase
51%
81%
Potential Profit at Risk
-16%
-36% 21

22. 5 Sources of Funds
Existing budgets: maintenance, advertizing, marketing, communications, education
Government grants and incentives, especially for early movers
Sustainability Capital Reserve
Other internal capital or external capital markets
Treat as an investment, rather than as a cost: high yield, low risk
Benefits are only counted after their 1 to 5 year payback period 22

23. The “Tipping Point”
5. Purpose & Passion Align with founder’s / CEO’s values
20%
4. Integrated Strategy Enhance company value / prosperity
3.3: Embed sustainable governance
3.2: Create new eco-effective products, services, leases
3.1: Improve supply chain conditions and footprints
3.0: Improve company eco-efficiencies and sustainability brand
3. Beyond Compliance Capture eco-efficiencies; Avoid PR and regulatory risks
Animated to do a gradual build, when clicked.
*****************************************
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.
*********************************************
Except from “The Sustainability Champion’s Guidebook,” with more context
Transforming From a Stage 3 Company to a Stage 4 Company
[The slide] depicts the sustainability journey for large, publically-traded companies. Corporate sustainability champions usually focus on leading their companies through the intermediary stages between Stages 3 and 4.
Stage 3.0: Improving working conditions and capturing eco-efficiencies within the company’s internal operations and processes, especially energy efficiencies and carbon footprint reductions.
Stage 3.1: Working with suppliers to improve working conditions and capture eco-efficiencies within suppliers’ operations and processes.
Stage 3.2: Working with stakeholders to create innovative sustainable products and services that creatively replace today’s unsustainable ones and strategically position the company to capture new markets.
Stage 3.3: Revamping the company’s governance system to ensure it aligns with sustainability principles.
Stage 4: Rebranding the company as a sustainable enterprise, with sustainability deeply integrated into its business strategies and culture.
This guidebook shows how to progress through those stages in a way that works for the company’s executives, employees, and important stakeholders. The change process transforms resource-depleting, pollution-spewing, unsustainable companies that are pushing nature ever closer to collapse and generating a gaping divide between the rich and poor that increasingly defies all conceptions of fairness. It enables companies to adopt an exciting, sustainable, winning, and circular, cradle-to-cradle model of commerce. Sustainability marries philanthropic and ecological motivations with bottom-line motivations. It is smart business.
2. Compliance
1. Pre-Compliance

24. Question 0-5 years 5-10 years 10-15 years More than 15 years Never
How long do you think it will be before we reach the sustainability tipping point in the business community?
0-5 years
5-10 years
10-15 years
More than 15 years
Never

25. Time Until Sustainability Tipping Point3%
10%
17%
44%
26%
Source: Environmental Leader, “Time Until Sustainability Tipping Point is Reached, View of Global CEOs (% of respondents)” in Environmental and Energy Data Book Q2 2011, July 2011, p. 26. Based on survey of 1,251 companies, in UN Global Compact Annual Review 2010.

26. Corps Are Investing in Sustainability
The growth of investment in sustainable business programs will be between % higher in 2013 than in Spending on sustainability programs by Australian, Canadian, U.K. and U.S. companies with over $1B in sales will hit $60B in (Verdantix, based on spending patterns of 2,500 global firms, March 2011)
MIT Sloan and the Boston Consulting Group winter 2011 research report, “Sustainability: The ‘Embracers’ Seize Advantage,” Feb. 2011

27. Sustainable Promotional Products
Cause-related promotional products
Donation to charity of person’s choice
Carbon offsets
Matching grants

28. In Summary … Sustainability is smart business
Relevant to current organizational priorities
Important stakeholders’ expectations are rising
New market forces & risks are in play
Large companies have a ripple effect on suppliers
Promotional products are symbolic gestures
Opportunity for leadership … by example
Many willing, helpful, unusual partners

29. Sustainability Advantage: The Busine$$ Ca$e for Sustainability
PPPC Convention
Toronto
January 16, 2012
Bob Willard