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Implementing An All Encompassing Sustainability Strategy – The Key Challenges Jun09
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Implementing An All Encompassing Sustainability Strategy – The Key Challenges Jun09

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  • 1. Implementing an All-Encompassing Sustainability Strategy – The Key Challenges Christopher Shanahan Food Industry Analyst Chemicals, Materials and Food San Antonio, Texas USA June 4th, 2009
  • 2. Agenda • What is Sustainability? • The Current Economy and the State of Sustainability • Review of Sustainability Business Strategies Currently Adopted by Companies • Sustainability Strategies Assessment and Recommendations 2
  • 3. What is Sustainability? Objective Generation, Evaluation and Implementation of an Effective Sustainability Strategy • Sustain Profitability Margin • Sustain Competitive Advantage • Sustain Revenue Growth • Adopt strategies that will minimize/maximize the production of negative/positive externalities produced by the company over time • Minimize wasted inputs and unusable byproduct • Avoid/minimize use of non-renewable resources • Resources that have a virtually fixed amount (petroleum) • Resources that have a virtually fixed amount harvest rate > renewal rate (corn ethanol) 3
  • 4. What is Sustainability? Optimization of the bottom lines over time Yesterday’s Objective Today’s Objective Change in Bottom Line Change in Bottom Line Line tom ic Bot om E con e Economic Bottom Lin y sponsibilit Social Re Time s Social Responsibility warenes Environmental A Time Envi ronm enta l Aw aren ess 4
  • 5. What is Sustainability? Recognizing the interaction of the economic, social and environmental bottom lines over Economic Bottom Line = Maximize Profit + ∆ Yesterday < ∆ Today - - - + + Environmental Awareness = Minimize Social Responsibility = Waste and/or Negative Impacts on the Maximize/Minimize Environment Positive/Negative Impact on the Community 5
  • 6. The Current Economy State Reviewing the Recession Genesis and its Impact on Sustainability Policy Government’s Green Private Sector Response Defaults Lack of Trust in Financial Institutions • Cap and Trade Sub-Prime Mortgages Financial Institutions • $100bn toward more efficient Losses Lack of Capital private homes and government Suspension of for Companies Interbank Lending buildings Tightening Credit Markets $ • Development of wind and solar Banks Slow Lending Down power $ $ Lack of Lending for Small Business • Increased spending money on public transport • More fuel-efficiency under GM Slower Growth Lack of Retail Consumers Reduce Spending $ Credit bankruptcy plan • 30% increase in fuel efficiency $ standards Economy Slows Down/Contracts 6
  • 7. The Current Economy and the State of Sustainability What will happen in 2009…we have a better idea in 2010/11 Likely Independent of Economic Environment ? Note the flat growth in the number of companies choosing to report sustainability performance during the 2001/02 recession Likely Not Independent of Economic Environment Source: Global Reporting Initiative 7
  • 8. The State of Food Safety Sustainability The Changing Face of Food Safety in the United States Food Safety Standard Heightened Awareness of Confusion and Food Security Redundancies Changing Face of Food Safety in the US Mistrust of 3rd Party Growing Power of Auditors Retailers Source: Frost & Sullivan 8
  • 9. Sustainability Strategies Currently Adopted by Companies Using The Warm Glow to Drive Demand • Some consumers experience ‘a warm-glow’ when they buy a product with an icon that reports social responsibility or increased environmental awareness. • Thus, some people are willing to pay a greater premium for a given socially-beneficial, firm- provided, service • Consumers are motivated by the desire to receive praise and social acceptance, or avoid ridicule • Thus just like any other product, consumer motivation is driven by both altruistic and egotistic factors. 9
  • 10. Sustainability Strategies Currently Adopted by Companies Effectively Communicating Your Sustainability Practices Involves the Entire Supply Chain Without a clear industry icon… Raw Material Supplier Finished Good Distributors and Final Consumers Manufacturer Retailers We Are Still We Are Still Is this Are We Green Green Green? Green? With a clear industry icon… Raw Material Supplier Finished Good Distributors and Final Consumers Manufacturer Retailers We Are Still We Are Still We Are Still We Are Still Green Green Green Green 3rd Party Verified Product Flow Source: Frost & Sullivan $ and Feedback Flow 10
  • 11. The Current Economy and the State of Sustainability When Adopting Sustainability Strategies Can Lead to Unintended Economic Consequences • The bioethanol industry was believed to have been a motivating factor in increased corn production and increases in grain product prices in late 2007 through 2008 • Increased speculation that farmers had a new incentive to switch away from other crops such as wheat and soybeans Industry experts believe that speculative activity rooted in is accounting for approximately 20 to 30 percent of price growth during this period • Summary: In an effort to move away from resources that have a virtually fixed amount of global inventories such as petroleum, consumption moved to renewable sources at such a fast rate that the resource effectively became a nonrenewable resource in the short run, as shown in the growth in market prices. ZeaChem: the “Food vs. Fuel” Debate is Null and Void with New Sustainable Technology Factory Yield End User Benefits 1st Generation (Corn Ethanol) 2.7 Gallons per Bushel 5,670 Mile/ac/yr 3rd Generation Cellulosic – ZeaChem 135 Gallons per Bone Dry Tons 28,350 Mile/ac/yr Process Source: ZeaChem 11
  • 12. Sustainability Strategies Currently Adopted by Companies The Objective is to Offer a Product that Consumers will Buy No Matter What… • Invest in marketing strategies that focuses on your core product offering • Exploit opportunities from consumer feedback • Have a complete 360 degree perspective on your market’s external environment • Establish partnerships with other suppliers • Adopt proactive product and service differentiation strategies understand the consumer’s motivation for buying your product 12
  • 13. Sustainability Strategies Assessment and Recommendations v Select Optimal Define the Identify End Identify Market Identify Strategic Construct and Run Plan of Action Implement Plan of Problem and Markets and Dynamics and Options the Model based on Model Action System Potential Constraints Results Renewable Inputs Non-renewable Inputs Non- Complex Business Universe Social Social Benefits Benefits The more Sustainable Green we Production are the SUPPLY = Output SUPPLY = Output Market more System Demand Green we make Waste Waste Initial Investments Initial Investments + Production Costs Production Costs + Marketing and Logistic Costs Marketing and Logistic Costs < Total Revenues Total Revenues Profit Source: Frost & Sullivan 13
  • 14. Next Steps Request a proposal for a Growth Partnership Service to support you and your team to accelerate the growth of your company. (myfrost@frost.com) 1-877-GoFrost (1-877-463-7678) Join us at our annual Growth, Innovation, and Leadership 2009: A Frost & Sullivan Global Congress on Corporate Growth, September 13-16 2009, Hyatt Scottsdale Resort & Spa at Gainey Ranch, Scottsdale, AZ (www.gil-global.com) Register for the next Chairman’s Series on Growth: Growth Acceleration System: Leveraging the Growth Diagnostic Blueprint (July 9th) (http://www.frost.com/growth) Register for Frost & Sullivan’s Growth Opportunity Newsletter and keep abreast of innovative growth opportunities (www.frost.com/news) 14
  • 15. Your Feedback is Important to Us What would you like to see from Frost & Sullivan? •Growth Forecasts? •Competitive Structure? •Emerging Trends? •Strategic Recommendations? •Other? Please inform us by taking our survey. Frost & Sullivan’s Growth Consulting can assist with your growth strategies 15
  • 16. For Additional Information Steve Lee Strategic Account Manager Melinda Meyer Chemicals, Materials and Food, Asia Pacific Director of Sales, NA - Chemicals, (65) 6890 0914 steve.lee@frost.com Materials & Food (210) 348-1000 Melinda.Meyer@frost.com Johanna Haynes Corporate Communications Chemicals, Materials & Food (210) 247-3870 Johanna.hayes@frost.com 16

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