Sustainability's next frontier

Sustainability's next frontier: Walking the talk
on the sustainability issues that matter most
Webinar
19 December 2013

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Copyright©2012byTheBostonConsultingGroup,Inc.Allrightsreserved.
Presenters
David Kiron Ph.D. is executive editor of
MIT Sloan Management Review’s Big
Ideas Initiatives.
David Kiron Holger Rubel
Holger Rubel is Senior Partner and
Managing Director in the Frankfurt office
of the The Boston Consulting Group, and
Global Sustainability Lead.

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Introduction to the BCG-MIT Sloan Management Review
partnership on corporate sustainability
The BCG-MIT SMR Partnership
Joint undertaking
Started in 2009
Focuses on how challenges and
opportunities of sustainability affect
corporate strategy
2013 study fifth in the series
201120102009 2012
Core of the study is the sustainability survey:
• >5,300 executives, managers and thought
leaders responded
• 118 different countries represented
• Companies from 1 to more than 100,000
employees
Beside the survey the study incorporates
insights from interviews, case studies and
academia
2013
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Although a large majority of companies rate sustainability as
necessary to be competitive – today or in the future ...
"Is pursuing a sustainability-oriented strategy
necessary to be competitive?"
Source: BCG-MIT SMR 2013 Sustainability Survey (based on commercial data-set with 1,847 responses); BCG analysis.

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... most companies still aren't profiting from their
sustainability efforts
"How do you believe your company's sustainability
actions have affected profitability?"

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One reason: they are unable to convert their efforts into value
"Has your company developed a clear
business case for sustainability?"

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More tangible sustainability issues (e.g., employees, energy
efficiency) perceived as more significant
Those issues rather on the distant horizon (e.g.
climate change) score much lower
"What are the significant social, environmental
and economic issues for managers?"

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The significant sustainability issues also vary across industries
Social issues
"What are the significant social issues for
managers?"

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The significant sustainability issues also vary across industries
Environmental issues
"What are the significant environmental issues
for managers?"

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But there is a substantial disconnect between thought and
action on the significant sustainability issues

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Based on thought and action, we identified three groups of
companies: All rate sustainability issues as significant ...
... but only "Walkers" fully or largely address them,
whereas "Talkers" don't

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"Walkers" close the gap between thought and action by forging
ahead along various fronts

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Closing that gap pays off!
(with resource-intensive industries on top)
Source: BCG-MIT SMR 2013 Sustainability Survey (based on commercial data-set with 1,847 responses); Orbis; BCG analysis.

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From paper manufacturer to fiber innovator
US paper manufacturer Domtar is a prime example of a walker
Domtar developed BioChoice Lignin in 2013
• US-based $6+ billion paper manufacturer
faces a daunting sustainability threat:
Producing paper in a world that wants to
become paperless!
• Domtar discovered new opportunities from its
ability to sustainable source and manage the
tree-fiber supply chain
• Domtar explored lignin as an alternative to
petroleum and fossil fuels in e.g. adhesives,
agricultural chemicals, coatings, and resins
• Domtar successfully launched BioChoice
Lignin in May 2013 resulting in financial
success, public awareness and favourite
talent recruitment
Source: Interview data; BCG research and analysis

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Similarly, Avis Budget anticipated change in future mobility
behavior with its acquisition of Zipcar in 2013
From traditional car renting to car sharing
Avis Budget Group acquired Zipcar in 2013
• Zipcar is a membership-based car sharing
service providing automobile reservations to
its members, billable by the hour or day
• Zipcar members can reserve a car on-line or
over the phone and then open it with their
Zipcards
• Compared to car-owners, Zipcar members
save more than $500 per month
• Every car shared can replace 15 to 20
owned cars and eliminate the need for up
to three parking places

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Even arch rivals can exploit synergies when dealing with
sustainability issues in a collaborative manner
Ocean Spray partnered with its competitor Tropicana to reduce transportation costs,
delivery distances and CO2 emissions
Ocean Spray cut transportation costs by >40% -
Greenhouse gas emissions cut by 65%
Challenges and opportunities
• Tropicana, to supply its markets in the
Northeast, ships orange juice by train from
Florida to New Jersey. After the boxcars were
unloaded, Tropicana was paying to send them
back — empty!
• Ocean Spray had recently established a new
distribution center in Florida to meet growing
demands for its products in the southern U.S.
One Solution
• One of Tropicana’s logistics suppliers realized
that the companies could partner to fill the
empty trains
• The supplier offered to set up a road-and-rail
line for Ocean Spray that included a
competitive price for Tropicana’s empty
boxcars

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Companies don't have to go it alone – and shouldn't!
In 2011 they launched a new platform for
corporate sustainability leadership –
The Global Compact LEAD
The United Nations Global Compact
(UNGC) is dedicated to promote
corporate sustainability
New platform for corporate sustainability
leadership with >50 participants
• Founded in 2000, under guidance of the United
Nations
• Largest global corporate sustainability initiative:
>12,000 signatories in 145 countries
• Endorsed by CEOs and Boards of world's
largest organizations, e.g. Unilever, Coca-Cola
• Extensive network with private, public
organizations and academia
• Participants of UN Leaders Summit in 2013
incl. Queen of Belgium, Gordon Brown, Kurt
Bock (Chairman of the Board BASF SE) etc.

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The five key take-aways from this year's sustainability study
Companies seem to have harvested the low-hanging fruits of sustainability and struggle
to move to the next level of corporate sustainability
Focusing on the issues that matter most is key to achieve the next level – and it pays off!
However, there is a substantial disconnect between thought and action on the material
sustainability issues
Companies can close that gap and walk the talk on the material sustainability issues by:
• Having a sustainability strategy
• Top management support
• Developing a sustainability business case
• Measuring sustainability performance
• Business model innovation
Companies don’t have to go it alone – and shouldn't!
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