Route2 company introduction_25.07.11Presentation Transcript
ROUTE2 SUSTAINABILITY COMPANY INTRODUCTION ROUTE2 INTEGRATED SUSTAINABILITY INTEGRATES Route2Sustainability is an advisory company that works with SUSTAINABILITY organisations to link sustainability INTO DAY-TO-DAY to business performance, provide clarity to decision making and BUSINESS create value for your business. MANAGEMENT Route2 merges science, ﬁnance and strategy into a framework and tool-set that identiﬁes and determines the ﬁnancial materiality of issues & opportunities, then sets goals, evaluates investments and manages performance. The outcome: An informed strategy that enhances, not compromises, short and long term performance objectives and integrates sustainability into an organisation.
ROUTE2 SUSTAINABILITY COMPANY INTRODUCTION OVERVIEW KEY MESSAGES 1 Business is being challenged to 4 Route2 achieves alignment grow sustainably through a unique framework based on decades of experience: 2 Sustainability initiatives are not sustainability science and as effective as they might be: economics; business planning no common language; tenuous link to and investment analysis performance; low level of integration to core business functions 5 Route2 places your business on a sustainable footing: 3 Route2 aligns the pursuit of sustainability integrated not sustainability and value creation: separated from your core impact of environmental and business, enhancing not social pressures, expressed compromising both short and ﬁnancially, linked to performance; long term performance objectives integrating sustainability into core business functions
ROUTE2 SUSTAINABILITY COMPANY INTRODUCTION WORLD VIEW GLOBAL SQUEEZE An increasing global population chasing quantitative Route2 transforms the challenge growth and consuming finite resources is creating a of sustainable business into the global squeeze. opportunity it represents. A Route2 engagement aligns the goals of Depletion of resources, social disruptions and rising business value creation input prices are driving increased regulation, new taxes, and sustainability and leads to a and shifting consumer and stakeholder expectations. sustainable business through Add to that the pressure for greater ‘social responsibility’ innovation – in strategy, process and transparency and it is clear that the way we do and technology. business is changing. The message is to keep growing, but grow sustainably. THE WAY WE DO However, the idea of ‘sustainable growth’ is creating BUSINESS IS CHANGING confusion and conﬂ icting goals for business, limiting progress toward a sustainable business footing.
ROUTE2 SUSTAINABILITY COMPANY INTRODUCTION ‘COMPANIES THAT TAKE THE LEAD ON SUSTAINABILITY WILL BE MARKET MAKERS RATHER THAN MARKET TAKERS’ WORLD ECONOMIC FORUM
ROUTE2 SUSTAINABILITY COMPANY INTRODUCTION SUSTAINABILITY MAINTAINING CAPITAL STOCK, INDEFINITELY 4 CAPITALS BUILT CAPITAL REAL ECONOMY Tomorrow’s winners are the These stocks depreciate (through organisations that optimise the mix wear and tear) and appreciate MAN-MADE of revenue and cash ﬂow whilst (through investment and sometimes MATERIAL investing in capital stock such that it is use). Natural capital provides the maintained or enhanced, indeﬁnitely. basis for all human activities. HUMAN SOCIAL CAPITAL CAPITAL Route2 recognises four types From this platform human of productive capital stock, each capital, facilitated by social capital, INDIVIDUAL NETWORK & contributing directly and indirectly transforms raw materials, into CAPACITY CONNECTIONS to economic output: natural, human, built capital and intermediate social and built capital. Each stock goods (i.e. product components). NATURAL produces a ﬂ ow of functions, which CAPITAL input into production processes. This is the real economy. RAW WASTE OTHER ECO- MATERIALS ABSORPTION SYSTEM SERVICES
ROUTE2 SUSTAINABILITY COMPANY INTRODUCTIONNATURAL HUMAN CAPITAL CAPITAL SOCIAL CAPITAL BUILT CAPITAL
ROUTE2 SUSTAINABILITY COMPANY INTRODUCTIONNATURAL CAPITALNATURAL RESOURCES HUMAN SOCIAL BUILTThe stock of natural resources,renewable and non-renewable,both tangible assets as in rawmaterials such a minerals andintangible services such as carbon CAPITAL CAPITAL CAPITALdioxide absorption, soil formationand water puriﬁcation.In construction, think ofaggregates, sand and water.
ROUTE2 SUSTAINABILITY COMPANY INTRODUCTION HUMAN CAPITAL INDIVIDUAL CAPACITYNATURAL SOCIAL BUILT The stock of knowledge, physical labor and reﬁned skills that transform natural resources (and previously produced intermediate goods and services) into economic CAPITAL CAPITAL CAPITAL goods and services. In construction think of laborers, carpenters and electricians.
ROUTE2 SUSTAINABILITY COMPANY INTRODUCTION SOCIAL CAPITAL CAPITAL NETWORKS & CONNECTIONSNATURAL HUMAN BUILT The stock of trust between people (social networks) in the workplace, in the community and with public bodies that determines the ease at which anything is accomplished. CAPITAL CAPITAL In construction think of the ease CAPITAL of interaction between architects, planners and builders.
ROUTE2 SUSTAINABILITY COMPANY INTRODUCTION BUILT CAPITAL INDIVIDUAL CAPACITY NETWORKS & CONNECTIONS MAN-MADE MATERIALSNATURAL HUMAN SOCIAL The stock of knowledge, The stock of trust between people The stock of property, plant, physical labor and reﬁned skills (social networks) in the workplace, equipment, infrastructure and that transform natural resources in the community and with public inventory through which economic (and previously produced inter- bodies that determines the ease at goods and services are produced, mediate goods and services) into which anything is accomplished distributed, consumed, disposed, CAPITAL CAPITAL CAPITAL economic goods and services. reused or recycled. In construction think of the ease In construction think of laborers, of interaction between architects, In construction think excavation carpenters and electricians. planners and builders. machines, trucks and bricks.
ROUTE2 SUSTAINABILITY COMPANY INTRODUCTION SUSTAINABILITY RECONNECTING THE FINANCIAL AND PHYSICAL Operating alongside and all connection with the real supporting the real economy is the financial economy. economy, this distortion is exaggerated causing signiﬁcant volatility. ECONOMIC Within this ﬁ nancial economy is another type of capital, Economic Understanding, accounting Capital, which is generated as the for and managing the ﬂows, real economy output is translated depreciation and appreciation into money. of these four capitals, is critical to removing the The real economy and the ﬁnancial distortion between the real economy are in tune when the pricing and ﬁnancial economy and of real economy goods and services key to sustainability and is aligned to their underlying value. Sustained Value creation. INDIVIDUAL If the pricing of real economy outputs CAPACITY is not right or missing then there is an imbalance. ACCOUNTING FOR THE FOUR CAPITALS IS KEY This mismatch creates distortion, which encourages organisation’s to TO SUSTAINABILITY inadvertently undermine the four AND SUSTAINED capital foundations weakening the VALUE CREATION RAW WASTE real economy itself. When ﬁnancial MATERIALS ABSORPTION products such as derivatives lose
ROUTE2 SUSTAINABILITY COMPANY INTRODUCTION VALUE BROADENING THE LENS The pursuit of value creation is that we broaden the lens – panning fundamental to resource allocation out from the typical focus on built and therefore decision-making capital to incorporate natural, within organisations. human and social capital. At Route2 value creation Applying a four capitals lens to value underpins our approach. We use creation is not easy, but the results familiar techniques to measure are clear: better scenario planning value creation and build classical and assumptions, better forecasts, discounted cash-ﬂ ow models to better overall decision-making support an organisation’s decision resulting in Sustained Value creation. making whether that is to evaluate investment decisions, inform APPLYING A FOUR CAPITALS ambition or input into incentive programmes. The difference is LENS TO VALUE CREATION
ROUTE2 SUSTAINABILITY COMPANY INTRODUCTION LINKAGE SCIENCE-FINANCE Route2 use science as the starting your organisation’s strategic direction. Execution of KEY METHODS INCLUDE point to understand and quantify this wider strategy, with appropriate planning and the association between, and the performance management processes enhanced by Input-Output Analysis [IOA] economic functions performed by, our analysis, will deliver sustained value. the four capitals. Material & Energy Flows Analysis [MEFA] Route2 have a combined twenty years worth of Process Analysis [PA] The economic valuation of your experience in developing these linkages - linking organisation’s use of and investment natural science and economic valuation - Life Cycle Analysis [LCA] in the four capital functions provides linking investment analysis to business planning and Impact-Pathway Analysis [IPA] linkage to ﬁnance – and the many value creation. This deep expertise combines to form aspects of business planning. a unique, comprehensive (four capitals – direct, Economic Valuation [EV] The four capital stock and ﬂows upstream & downstream) and ﬂ exible framework Scenario Planning (SP) understood in ﬁnancial terms enhance (sector neutral, country to business unit to product) scenario planning and ﬁnancial entitled Sustained Value Management. Discounted Cash-Flow Modeling [DCF] forecasts that more readily inform
ROUTE2 SUSTAINABILITY COMPANY INTRODUCTION MEASURE MANAGE MOVE MESSAGE OUR OFFER SUSTAINED VALUE MANAGEMENT [SVM] IS ROUTE2’S FOUR-MODULE FRAMEWORK COMPRISING MEASURE, MANAGE, MOVE AND MESSAGE . The four modules aren’t necessarily sequential, as each engagement requires a tailored set of solutions and tools. SUSTAINED VALUE MANAGEMENT
ROUTE2 SUSTAINABILITY COMPANY INTRODUCTION OUR OFFER SUSTAINED VALUE MANAGEMENT MEASURE MANAGE MOVE MESSAGE Measure is core to our approach. Manage is how we integrate Move supports an organisation Message supports engagement Identifying where and how value is sustainability into an organisation. to implement solutions. with employees, customers, created across the four capitals. consumers and stakeholders. Speaking the language of the Route2 can identify established We measure at all levels from organisation merges sustainability and cutting edge solutions and By demonstrating issue or national level to organisation to into the traditional business planning provide an organisation with the opportunity materiality, product. Quickly focusing efforts and processes. Manage establishes, tools to evaluate, programme quantifying beneﬁts of a diverse resources on where the value lies. cements and maintains the link and measure the progress of your set of sustainability initiatives or between sustainability and an investments. Move is about reporting against progress our DELIVERABLES organisation’s value. executing the programme to realise approach assists organisation’s your Sustained Value goals. report and communicate their • Identiﬁcation and quantiﬁcation of DELIVERABLES sustainability, plans and progress. material ﬁnancial, environmental DELIVERABLES and social issues and opportunities • Multi-year financial plans DELIVERABLES (P&L’s, balance sheet, cash-ﬂow) • Identification and evaluation • Top and bottom line performance of solutions • Sustainability metrics impact on business • Goals and metrics • Cost-benefit and ROI analysis • Sustainability labels • Risks and opportunities • Agenda development to existing corporate goals • Project planning and • Integrated reporting • Performance management tools performance management • Peer-set and portfolio performance
ROUTE2 SUSTAINABILITY COMPANY INTRODUCTION VALUETHE COMPONENTS OF INCOME, CASH-FLOW AND THE BALANCE SHEET INTERACT TO OVER CREATING SUSTAINED VALUETIME CREATE OR DESTROY SUSTAINED VALUE = RESULT INCOME NET PROFIT FREE BENEFITS FLOWING FROM ALL FOUR CAPITALS CASH-FLOW SUSTAINED VALUE OPERATING COSTS COSTS FLOWING FROM ALL FOUR CAPITALS OTHER CASH DISCOUNT INCL. INVESTMENT, DEPRECIATION OF RATE ALL FOUR CAPITALS RISK ADJUSTED FINANCING & TAX COSTS COST OF CAPITAL
ROUTE2 SUSTAINABILITY COMPANY INTRODUCTION VALUETHE COMPONENTS OF INCOME, CASH-FLOW AND THE BALANCE SHEET INTERACT TO OVER CREATING SUSTAINED VALUETIME CREATE OR DESTROY SUSTAINED VALUERoute2’s approach enhances each of the drivers of value resulting in sustained value creation = RESULT INCOME NET PROFIT FREE BENEFITS FLOWING FROM ALL FOUR CAPITALS CASH-FLOW SUSTAINED • Continued right to trade • Brand appreciation, increased market share VALUE • Innovation, new markets OPERATING COSTS COSTS FLOWING FROM ALL FOUR CAPITALS • Less exposure to resource scarcity / cost inflation • Less exposure to regulatory burdens • Lower risk, lower insurance costs OTHER CASH DISCOUNT INCL. INVESTMENT, DEPRECIATION OF RATE ALL FOUR CAPITALS RISK ADJUSTED FINANCING & TAX COSTS COST OF CAPITAL • Lower risk, lower financing costs • Improved stakeholder interaction, lower tax costs
ROUTE2 SUSTAINABILITY COMPANY INTRODUCTION VALUETHE COMPONENTS OF INCOME, CASH-FLOW AND THE BALANCE SHEET INTERACT TO OVER CREATING SUSTAINED VALUETIME CREATE OR DESTROY SUSTAINED VALUERoute2’s approach enhances each of the drivers of value resulting in sustained value creation = RESULT INCOME NET PROFIT FREE BENEFITS FLOWING FROM ALL FOUR CAPITALS CAP CASH-FLOW SUSTAINED • Continued right to trade • Brand appreciation, incre creased market share VALUE • Innovation, new mark arkets OPERATING COSTS COSTS FLOWING FROM ALL FOUR CAPITA ITALS • Less exposure to resource sca scarcity / cost inflation • Less exposure to regula • Lower risk, lower in ulatory burdens r insurance costs OTHER CASH DISCOUNT INCL. INVESTMENT, DEPRECIATION OF RATE ALL FOUR CAPITALS RISK ADJUSTED FINANCING & TAX COSTS S • Greater insight, smarter investment COST OF CAPITAL • Lower risk, lower financing costs • Better solutions, better return on investment • Improved stakeholder interaction, lower tax costs • Enhanced scenario planning, better cash management
ROUTE2 SUSTAINABILITY COMPANY INTRODUCTION VALUETHE COMPONENTS OF INCOME, CASH-FLOW AND THE BALANCE SHEET INTERACT TO OVER CREATING SUSTAINED VALUETIME CREATE OR DESTROY SUSTAINED VALUERoute2’s approach enhances each of the drivers of value resulting in sustained value creation = RESULT INCOME NET PROFIT FREE BENEFITS FLOWING FROM ALL FOUR CAPITALS CAP CASH-FLOW SUSTAINED • Continued right to trade • Brand appreciation, incre creased market share VALUE • Innovation, new mark arkets OPERATING COSTS COSTS FLOWING FROM ALL FOUR CAPITA ITALS • Less exposure to resource sca scarcity / cost inflation • Less exposure to regula • Lower risk, lower in ulatory burdens r insurance costs OTHER CASH DISCOUNT INCL. INVESTMENT, DEPRECIATION OF RATE ALL FOUR CAPITALS RISK ADJUSTED FINANCING & TAX COSTS S smarter investmen ment COST OF CAPITAL • Greater transparency, • Lower risk, lower financing costs sts • Better solution better ions, resulting in higher return on in investment investor confidence • Improved stakeholder intera eraction, lower tax costs • Enhanc scenario nced • Lower risk, lower plan anning, better cash discount rate management
ROUTE2 SUSTAINABILITY COMPANY INTRODUCTION PLAN PERFECT BUILD DO HOW WE WORK We recognise our clients as the dedicated experts they are. When clients state “understand our organisation and objectives”, “transfer your capabilities”, “breakdown the challenge into manageable phases”, we listen. We only ask executives to visibly OUR APPROACH support the project and to foster collaboration as far as resources allow.
ROUTE2 SUSTAINABILITY COMPANY INTRODUCTION HOW WE WORK OUR APPROACH PLAN PERFECT BUILD DO 1. PLAN 2. BUILD 3. PERFECT 4. DO This is where we understand our This is where we work efﬁciently to This is where we perfect the This is where we safeguard the client objectives and our client’s undertake the work however, we do project output through workshops, continual meeting of our client available resources. not disappear (unless instructed to) teleconferences and if necessary in objectives long after project person meetings. completion. We also familiarise ourselves with Our objective is to work as effectively the organisation and sustainability as possible to meet our client’s The result is work that delivers on During this handover stage, we programme. We then develop a challenges. We continually request objectives, achieved through the support clients to integrate the work project plan that reﬂects our under- and listen to feedback. collective experience and ideas of into their organisation’s systems standing, clearly lays out what needs the collaboration. Prior work is and processes. We remain ‘on call’ to be done, by when and by who - wasted unless this step is successful to update and refresh as required. which we then all sign up to. We therefore work hard to meet our objectives
ROUTE2 SUSTAINABILITY COMPANY INTRODUCTION HOW WE WORK BY HAVING A COMPREHENSIVE, OBJECTIVE AND FLEXIBLE APPROACH, ROUTE2 IS ABLE TO DEVELOP SECTOR EXAMPLES SOLUTIONS THAT DELIVER LASTING VALUE REGARDLESS OF SECTOR OR MATURITY OF THE SUSTAINABILITY PROGRAMME. SEE BELOW FOR A SNAPSHOT OF SOME OF THE CHALLENGES WE CAN SOLVE CITRUS EXPORTER BEVERAGE PRODUCER COMMERCIAL BANK SECTOR AGRICULTURE Grower and exporter of fresh produce committed to creating a thriving local community but aware of signiﬁcant environmental pressures jeopardising the sustainability and performance of their business. QUESTION APPROACH BENEFIT What are the material • Perform quantiﬁ ed four capital full • Achieve an objective and compre- environmental and social issues value chain assessment (direct plus hensive assessment of market & facing our business over the next up- and down-stream operations) non-market costs / benefits 5 years and how will these impact the ﬁnancial performance of our • Assess the ﬁnancial materiality of • Quickly focus resources on the business and the businesses we identiﬁ ed environmental and social material issues / opportunities support locally? issues and isolate the value drivers • Enhance scenario development and • Develop scenario-based 5-year financial planning ﬁnancial plans for the business (P&L, balance sheet, cash-ﬂ ow) incorporating value driver insights
ROUTE2 SUSTAINABILITY COMPANY INTRODUCTION HOW WE WORK BY HAVING A COMPREHENSIVE, OBJECTIVE AND FLEXIBLE APPROACH, ROUTE2 IS ABLE TO DEVELOP SECTOR EXAMPLES SOLUTIONS THAT DELIVER LASTING VALUE REGARDLESS OF SECTOR OR MATURITY OF THE SUSTAINABILITY PROGRAMME. SEE BELOW FOR A SNAPSHOT OF SOME OF THE CHALLENGES WE CAN SOLVE CITRUS EXPORTER BEVERAGE PRODUCER COMMERCIAL BANK SECTOR MANUFACTURE Regional bottler of a portfolio of CSD brands with good understanding of their material sustainability issues with clear set of sustainability goals but struggling to integrate sustainability into the broader business QUESTION APPROACH BENEFIT How do we bring our business • Develop multi-year, multi-scenario • Gain competitive advantage over leaders into the sustainability ﬁnancial plans (P&L, cash-ﬂow) peer group programme in order to ensure to demonstrate ﬁnancial impact of that we deliver on our internal achieving sustainability goals • Implement good practice across and external commitments? the business • Identify key value drivers; Develop performance metrics and relevant • Embed sustainability into company goals / hurdle rates culture • Understand current executive bonus scheme and capital expenditure approval process • Recommend performance metrics for integration into current schemes and processes
ROUTE2 SUSTAINABILITY COMPANY INTRODUCTION HOW WE WORK BY HAVING A COMPREHENSIVE, OBJECTIVE AND FLEXIBLE APPROACH, ROUTE2 IS ABLE TO DEVELOP SECTOR EXAMPLES SOLUTIONS THAT DELIVER LASTING VALUE REGARDLESS OF SECTOR OR MATURITY OF THE SUSTAINABILITY PROGRAMME. SEE BELOW FOR A SNAPSHOT OF SOME OF THE CHALLENGES WE CAN SOLVE CITRUS EXPORTER BEVERAGE PRODUCER COMMERCIAL BANK SECTOR SERVICE Commercial bank that understands broad environmental and social risks and opportunities within its customer base but not clear how these risks / opportunities may impact performance of its loan book now and in future QUESTION APPROACH BENEFIT How exposed is our current loan • Perform high level assessment of current • Gain information advantage through book to the material environmental loan book (sector level only) to isolate deeper understanding of risk / and social risks and opportunities, ‘hotspots’ / ‘sweetspots’ within portfolio opportunities faced by current and how do we best address that prospective credit customers exposure now and how could we • Identify and quantify ﬁ nancial impact • Enhance credit approval process (data, mitigate against these risks of material environmental and social metrics, hurdle rates) and T&Cs of going forward? issues / opportunities (within loans (conditions, covenants, etc) representative sample) • Determine appropriate client • Determine risk levels (and clearly engagement based on environmental identify drivers of risk) to loan book and social risks • Understand current credit approval process and terms & conditions of loans
ROUTE2 SUSTAINABILITY COMPANY INTRODUCTION tasked with Route2 is at it’s bes t when ds. ans we rin g you r spe cifi c nee n for you. Challenge us to ﬁnd a solutio nab ilit y.c om cha lle nge us@ rou te2 sus tai .co m ww w.r out e2s ust ain abi lity CONTACT CHALLENGE US