Transforming business for tomorrow’s world

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Sukhdev presents in his new book "Corporation 2020" a number of strategic challenges for sustainable business and recognizes the need for a fundamental transformation of the economy.

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  • We need to take the word “sustainability” seriouslyExternalities of top 3000 companies at US$2.15 trillionWe are losing an estimated 6% of global GDP every year due to the private sector’s environmental externalitiesHowever, there are also massive positive externalities that some companies are creating, for which they get no creditLeadership won’t take us all the wayEven good leaders have to work within a system that places short-term financial returns above all.BP as an example --- completely legalCaused US$34 to $670 billion in environmental damages
  • Accounting for externalitiesNew taxation structuresRemove US$650b in annual subsidies for fossil fuelsTax the bads, not the goodsLimited leverageAccountable advertising
  • There are four basic qualities that I believe will be salient in the corporation of the future. They are Institute, Goal Alignment, Capital Factory, and Community. I will take each one in turn to explain what I mean by each of these terms.
  • Strengthens social fabricEmpowers women economically (1.2 million sales agents)Allowing part-time work reduces a labor market bottleneckRipple effects on children’s and household welfare
  • Transforming business for tomorrow’s world

    1. 1. www.corp2020.com @corp2020 Stockholm, 28th January 2013 Can Today’s Corporation Deliver Tomorrow’s Economy? Pavan Sukhdev Founder & Author, Corporation 2020 Study Leader, TEEB, & UNEP Goodwill Ambassador
    2. 2. www.corp2020.com @corp2020 …20111989… “A Green Economy is defined as one that results in improved human well-being and social equity, whilst significantly reducing environmental risks and ecological scarcities.” Source: Towards a Green Economy, UNEP, 2011
    3. 3. www.corp2020.com @corp2020 Source : T-21 Model, Green Economy Report, 2% of GDP invested in Greening vs 2% more in BAU
    4. 4. www.corp2020.com @corp2020Is “Green Economy” possible without “greening” the Private Sector? (eg: USA) U.S. Gross Value Added, By Sector 7.1% 5.5% Private Business 12.5% Households 74.9% Nonprofit institutions serving households Government Total = GDP (US$14,526.5 billion) U.S. Nonfarm Employees 16.7% Private 83.3% Government
    5. 5. www.corp2020.com @corp2020 “Green Economy” is the right economic vehicle to achieve Sustainable Development www.unep.org/greeneconomy “Corporation 2020” is the right economic agent to achieve a Green Economy www.corp2020.com @corp2020
    6. 6. www.corp2020.com @corp2020 “Corporation 1920”• Four Defining Behaviours – Pursuit of Size – Active Lobbying – Unethical Advertising – Unlimited Leverage….
    7. 7. www.corp2020.com @corp2020 Pursuit of Size…
    8. 8. www.corp2020.com @corp2020 Pursuit of Size…
    9. 9. www.corp2020.com @corp2020 …Leading to explosive growth in trade
    10. 10. www.corp2020.com @corp2020 “Corporation 1920”• Four Defining Behaviours – Pursuit of Size – Active Lobbying – Unethical Advertising – Unlimited LeverageResulting in Negative Externalities…..
    11. 11. www.corp2020.com @corp2020 Why do we need change?• Negative externalities of top 3,000 companies estimated at US$2.15 trillion per annum Source: Trucost for UNPRI, 2010.
    12. 12. www.corp2020.com @corp2020 Why do we need change?• We are approaching or have exceeded several “planetary boundaries”
    13. 13. www.corp2020.com @corp2020 What will drive change? Macro Issue Micro Driver Micro Solution Culture of Ethics & Consumerism Excessive Demand Accountability in Fuelled by Advertising Marketing/ Advtg LimitUnderpriced Supply Unlimited leverage Leverage/capital adequacy/etc. Underpriced Resource Taxes resourcesResource Depletion replace corporate (Low royalties / taxes perverse subsidies) Measure & DisclosePublic Capital Losses Externalized costs Externalities
    14. 14. www.corp2020.com @corp2020 Limiting Leverage• Tools for limiting leverage: – Capital adequacy ratios for “TBTF” corporations – Consortium banking (info sharing between banks) – Segregate lending/clearing institutions from investment/ insurance (re-visit Glass-Steagall?) – Limit tax-deductibility of interest beyond caps – Constrain leverage from M&As – Re-align performance bonus systems
    15. 15. www.corp2020.com @corp2020 http://sharequotes.us/robson-walton-biography.html Rob Walton Chairman, Walmart
    16. 16. See Interview with Rob Walton onwww.corp2020.com @corp2020 www.corp2020.com Limiting Leverage …to see why Wal-mart went public…
    17. 17. www.corp2020.com @corp2020 Accountable Advertising• Two principles – Treat all consumers equally, irrespective of market – Disclose advertising policies & practices, eg: • Annual “Accountable Advertising Report”• Four strategies – Disclose life span of product on packaging and in ads – Disclose countries of origin – Disclose the “footprint” of the product on its packaging (GHG emissions, freshwater, etc) – Recommend how to dispose of product
    18. 18. www.corp2020.com @corp2020 Jochen Zeitz Executive Chairman, Puma
    19. 19. www.corp2020.com @corp2020 Accountable Advertising : PUMA
    20. 20. See Interview with Jochen Zeitz onwww.corp2020.com www.corp2020.com @corp2020 …to see why PUMA disclosed its Externalities…
    21. 21. www.corp2020.com @corp2020Disclosing Externalities : PUMA PUMA Press Release, November2011
    22. 22. www.corp2020.com TEEB for Business @corp2020 Coalition: Measuring, Valuing, Disclosing Externalities WBCSD… TEEB for GRI… Business IIRC, SASB, & CEF… Coalition Accountancy CDP, WDP… & Network Regulators Quantifying Standardizing & Disclosing Usage, Discovering Valuing Impacts in Depend-encies & Impacts “One Report” ImpactsEmissions /tCOe Economic Costs of Framework forFreshwater / CuM Emissions, Integrated ReportingForests LUC / Ha Freshwater of All Externalities…Pollution / … Use, Deforestatio incl Social & HumanWaste / … n, Capital.. Pollution, Waste …(Value Chain Impacts“Cradle to Gate”)
    23. 23. www.corp2020.com TEEB for Business @corp2020 Coalition: Measuring, Valuing, Disclosing Externalities TEEB for Business Coalition • Incorporated as a company limited by guarantee* • Incorporated in Singapore Board Advisory Group • Jochen Zeitz (Puma) • Michael Izza (ICAEW) (Company) • Juan Costa-Climent (E&Y) Board • Herman Mulder (GRI) • Peter Bakker (WBCSD) • Fernando Rodes (Havas) • Pavan Sukhdev (GIST Advisory) (Chair)Founder Member Reps - Observer Reps – organisations Ordinary Member Reps – Co-opted board members:Members of the company – for whom legal ownership is ordinary members of the 1. Pavan Sukhdev, Study Leaderknown as Founder Members - complicated but who have been Coalition elect five board TEEBand therefore its legal instrumental partners are offered members for a three year period 2. Gerard Ee (Chair) (Member ofowners, all have permanent a permanent board seat as Parliament, Singapore)board seats: observers: 3. Sanjeev Sanyal (Senior Economist1. ICAEW • CBD Deutsche Bank Singapore)2. WBCSD • UNEP3. GRI • World Bank/IFC4. WWF • Accounting for5. CI Sustainability6. IUCN • UK Government (Defra) * A company limited by guarantee is a structure that means7. IIRC • Others? European there are no shares in the company; its members are guarantors8. Global Initiatives Commission; Singapore rather than shareholders. There is therefore no need for share Economic Development transfers as members join or leave the company. Board; other donor gov’ts
    24. 24. www.corp2020.com @corp2020 What will define a “Corporation 2020”?• Four Characteristics –Goal Alignment with Society –Capital Factory –Institute –Community
    25. 25. www.corp2020.com @corp2020 Corporation as “Institute” : Infosys World-class Training for 30,000 p.a.
    26. 26. www.corp2020.com @corp2020 Infosys Externalities Disclosure Financial Statements Y/e March 2012 Source: Annual Report, 2011-12
    27. 27. www.corp2020.com @corp2020 Corporation as “Community” : Natura Greater Economic Security for Women http://totallybeautyaddict.fr/mon-jolieapero-chez-natura-brasil/ Source: http://www.managementexchange.com/story/innovation-in-well-being
    28. 28. www.corp2020.com @corp2020 In Summary : Reforms for “Corporation 2020” to become the DNA of Business Accountable Advertising : Making advertising responsible & accountable via norms & standards Limiting Leverage : Introducing rules & limits to govern financial leverage Resource Taxation : Replacing Corporation Tax (profits) with Taxes on Resource Use & Extraction Disclosing Externalities : Measuring & disclosing all major corporate externalities (+ve & -ve)From : www.corp2020.com Source: Why Corporation 2020?, Island Press, 2012
    29. 29. www.corp2020.com @corp2020 Planks Disclosing Resource Accountable LimitedStages Externalities Taxation Advertising LeverageResearch &Ideation GRI, IIRCOutreach GRI, IIRC,& Advocacy WBCSD, ? ? ? AFS, B4EInstitutionalChampionship ? ? ?Implement-ation ? ? ?(Funding & UK (Defra)Proj. Mngmt.) SING (EDB)
    30. 30. www.corp2020.com @corp2020 Thank You ! www.corp2020.com Pavan Sukhdev Founder, Corporation 2020& UNEP Goodwill Ambassador

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