Net Impact DFW - s+me! 2011 - Mitch Fine - The Business Case for Green


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Mitch Fine, financial analyst with Morgan Stanley Smith Barney, makes a presentation at Net Impact DFW's sustainability + me! event about the business case for Green.

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  • I am really glad to see you all hear today and I want to talk to you all about one of the most important aspects of sustainability. It’s important to me personally, because I am passionate about using the power and resources of business to make a difference in the world. It’s also important to YOU because without transforming business, we will not accomplish the many goals of sustainability. Business is BY FAR the most powerful and influential institution in all of our lives. If we don’t figure out a way of having business be a part of the solution, it will continue to be a part of the problem…probably the biggest part.
  • So I want to start with an overview of the business world today, as I see it every day. I work as a Sustainable Investing Specialist for one of the largest firms on Wall Street, with more than 18,000 financial advisors and nearly $2 trillion dollars in assets managed, so I have a pretty good view of what’s happening.
  • As I see it, We are living in very interesting times…It is very much a battle of two competing world views when it comes to business and sustainability.
  • The old paradigm is the one that has been the hallmark of capitalism for at least the past century. It’s what you probably think of when I say the word “Corporation”
  • There is little doubt that corporations have basically conducted business in an un sustainable manner. Made products, provided services that took more resources from the planet and left the consumers worse off for using them. (CLICK) Then, they use the profits to give some money to charity.
  • As opposed to the new way of looking at sustainability and the role of business in “being green” This is what the smart companies are doing. I believe that this factor will have more to do with whether a particular company survives the next decade or two than almost anything else.
  • It’s actually pretty simple. (Click) Building a profitable business… (Click) That is profitable… (Click) BECAUSE it is sustainable As opposed to doing unsustainable things, making a profit, and than giving some of that profit to charity…because what happens when the company has a bad quarter? There goes the profits and there goes the charity.
  • Like almost anything that you look at, there is really not a lot of Black and White…sustainability is a continuum that looks a lot like most other bell curves. Some companies are really bad at it, some companies are superstars, and then there are a bunch in the middle that are a little of both. Everyone in the Middle is committing “Random acts of green-ness”
  • This gives businesses three basic choices of what to do
  • Ignore the writing on the wall, pretend that there is not a problem, either refuse to take action or take action contrary to what everyone knows to be true.
  • Do business in the same old way (unsustainably). Make some profits. Give some of the profits to charity. Hope that it’s enough to keep Greenpeace off of your roof. (Click)
  • Or venture down the third path: Become profitable BECAUSE you are sustainable. Embrace sustainability as a driver of VALUE. That’s where the good stuff is.
  • There are a number of ways that becoming truly sustainable, or seeking to become authentically sustainable, can add VALUE to the company and thus be a positive economic factor. The most obvious is that it can REDUCE RISK. What are some of these types of RISK that we are hoping the corporation will avoid?
  • Of course, oil spills pose a significant risk to a company
  • Having unhappy employees is a very important risk; it also dramatically raises costs related to turnover and benefits, not to mention that an unhappy employee is very unlikely to be innovative or look for ways to help the company compete.
  • Product liability is a big risk. Some experts think that carbon might be the next asbestos
  • Bad governance is not a purely “green” issue, but it is a requirement for a company that is going to be considered “sustainable”. The risk that the company can simply implode, in fantastic and very public ways, is one that is very material.
  • And finally, reputational risk. Some companies are regarded very negatively by a large portion of the populace. Consumers look for reasons to avoid companies that they hate, and when something goes wrong, there is no goodwill to allow the company to recover. This is why Toyota was able to bounce back from a real potential disaster that the company faced with the safety issues in the past few years, but a company like Monsanto has almost no breathing room. People don’t want to give their dollars to companies that they hate.
  • Reducing costs is one of the most practical ways that sustainability drives true value. It’s a bottom line issue, financially. And companies of all sizes and in all businesses can do it.
  • This is a very common-sense creator of value. Sustainability is all about reducing waste, being more efficient, and looking for ways to make resources go further. It is no accident that Google spends more money on renewable energy technology than most oil companies. They identified their data centers as a huge cost for their business operations, and wanted to come up with a way to reduce costs.
  • Sustainability is something that is very, very difficult to fake. But it’s value in setting a business apart from its competition is immeasurable. One of my all time heroes is Ray Anderson, the founder and CEO of the largest commercial flooring company in the world. Before passing away a few months ago, he left us with some great examples of how sustainability makes an impact on your company.
  • Access to new markets is yet another critical advantage of being sustainable. There are billions of people at the “bottom of the pyramid” which represent trillions in potential revenues to companies that will pay attention and invest in them.
  • Rather than looking at something as a problem that we have to make go away, what if we looked at it as something to invest in, so that it becomes an asset and something that adds value? The Nike Foundation has a piece that is really powerful and I want to share it with you all…
  • If you have a daughter, or a wife, or a mother, or a sister, there is no way that you can remain mute when posed with facts of this kind. And there are 5 billion people at the “bottom of the pyramid” that are just untapped markets. The next fortunes will be made by companies that have the foresight to invest in them.
  • The last way that sustainability can add tremendous value is in terms of radical innovation.
  • Think about the magnitude of the effort to replace the current resource model of our world. Imagine undergoing the transformations to railroads, internal combustion engines, TV, space exploration, and the Internet ALL AT THE SAME TIME, within a period of about 20 years. Some estimate that this transformation will include 60% of the entire global economy.
  • So, now what? What do we do with this information? Well, it should at least be a factor to consider when investing. We can look for companies that are on the sustainable end of the spectrum and reward the ones that are doing good stuff as a CORE PART OF THEIR BUSINESS
  • Net Impact DFW - s+me! 2011 - Mitch Fine - The Business Case for Green

    1. 8. All Corporations right now Image/PR Centric Value Creation Not Sustainable Sustainable The Vast Middle Shallow Substance Random Acts of Green-ness
    2. 12. Jason Gary Clayton Bailey Brandon Morton
    3. 14. How Sustainability Creates Value It Reduces Risk
    4. 15. Common “Extra-Financial” Risks Environmental Risks
    5. 16. Common “Extra-Financial” Risks Employee Relations
    6. 17. Common “Extra-Financial” Risks Product Impact/Liability
    7. 18. Common “Extra-Financial” Risks Governance
    8. 19. Common “Extra-Financial” Risks Reputational
    9. 20. How Sustainability Creates Value #2: It Reduces Costs
    10. 21. Reduction of Energy $ = better bottom line
    11. 22. How Sustainability Creates Value #3: It’s the best differentiator
    12. 24. How Sustainability Creates Value #4: Access to New Markets
    13. 25. Invest vs “A Problem to Solve” The Nike Foundation… Invest and get a huge financial payback…
    14. 27. Let’s Invest in Girls The Right thing to do + A Great Investment, too
    15. 28. How Sustainability Creates Value #5: Radical Innovation
    16. 29. Radical Innovation <ul><li>Replace 60% of the global economy within 20 years. </li></ul><ul><li>Biggest transformation in the human history. </li></ul>
    17. 30. How is all of this playing out right now? <ul><li>What Recession? </li></ul><ul><li>Comprehensive Shift </li></ul><ul><li>Deeper and Wider </li></ul><ul><li>Incremental until tipping point is reached </li></ul><ul><li>Communication is the biggest issue </li></ul><ul><li>B-Corps </li></ul>
    18. 31. How do you use this? <ul><li>Insight into management effectiveness + ability </li></ul><ul><li>Value-added activity might =positive returns </li></ul><ul><li>Might also decrease risk </li></ul><ul><li>Best chance to catch lightning in a bottle </li></ul>
    19. 32. What can you do RIGHT NOW? <ul><li>Vote your proxy: $3-4 trillion of proxies end up in the garbage. </li></ul><ul><li>Take a look at where your money spends the night. </li></ul><ul><li>Reward companies that do the right thing </li></ul>