Global Drivers for Sustainable Business September 2012

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Presentation I've prepared for a number of upcoming conferences. It is based on more than 80 interviews with managers, heads of sustainability and CEOs.

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Global Drivers for Sustainable Business September 2012

  1. 1. Global Drivers / Trends in SustainableBusinessSeptember 2012Toby Webb, Founder, Ethical Corporation and Stakeholder IntelligenceToby.webb@stakeholderintel.com / tobywebb.blogspot.com
  2. 2. Research Background Based on interviews with more than 80 senior managers, NGO representatives and academics around the world Research conducted May-August 2012 Telephone, email and face-to-face interviews with heads of sustainability, CSR, corporate responsibility and external affairs Also based on CEO interviews, including: Unilever, Coca- Cola Enterprises, Kingsfisher, Desso, O2 and others
  3. 3. A word on terminology…and attitudes CSR is Corporate Social Responsibility CR is Corporate Responsibility: Designed to incorporate environmental concerns Sustainable development is a global trend and concern Sustainable business is both a business contribution to sustainable development AND a holistic management approach Sustainability often seen only as Green in the USA: Less social Ethics often something companies speak about in terms of compliance, but its links to CR/Sustainability are strong (anti- corruption and bribery)
  4. 4. Macro political & economic trends Economic stagnation in the West: Weak political leadership Volatile times in BRIC nations: Growth slows & Biz expands (retail in India) New opportunities in the CIVETS? (Colombia, Indonesia, Vietnam, Egypt, Turkey, South Africa) Rising social unrest around the world: Middle East, India, China, but also EU, Asia too Africa rising: Over 500 African companies have $100 million + annual turnover. About 150 have $1 billion+
  5. 5. What this means for business with global exposure: Populist governments in tough times demand action from business Consumers and suppliers become frightened and risk averse: seek reassurance from trusted Brands and Partners Populations and supply chains unstable: Middle East, Pakistan, Bangladesh (But even UK: Supermarkets carry 72 hours of food supply) Wages rise in China: Attention on Bangadesh & Burma (infrastructure, institutional challenges)
  6. 6. Macro economic and environmental trends Resource constraints more obvious (Soil erosion, rare earth elements, water shortages, agricultural commodity availability) Political populism breeds supply chain volatility (Argentina: Gas. Russia: Wheat. USA: Corn. Germany: Energy) Economic troubles mean supply uncertainty (South Africa: Mining)
  7. 7. Macro economic and environmental trends Environmental and Energy challenges affect sourcing trends (China) and future planning (Climate Change impacts) Demographic changes: Aging societies and product and service demand Urbanisation drives regulatory and infrastructure change - and opportunity
  8. 8. Business trends: Why Corporate Power is a Concern 1,000 companies responsible for half of the total market value of the worlds more than 60,000 publicly traded companies. "They virtually control the global economy" - Professor Robert Eccles, Harvard Business School 1980: World’s largest 1,000 companies made $2.64 trillion in revenue, or $6.99 trillion in 2010 dollars, adjusted using the consumer price index They employed nearly 21 million people directly A total market capitalization of close to $900 billion ($2.38 trillion in 2010 dollars), or 33 percent of the world total
  9. 9. Business trends: Why Corporate Power is a Concern By 2010 the world’s largest 1000 companies made $32 trillion in revenue They employed 67 million people directly Total market cap: $28 trillion Equal to 49 percent of total world market cap(down from 64 percent in 2000, at the peak of the Internetbubble and before the financial crisis of 2008)
  10. 10. Business trends: Why Corporate Power is a Concern Substantial concentration within the top 1000 Eighty-three companies account for one-third of the groups $32 trillion in revenue Top 172 companies account for half of annual global corporate revenue 172nd largest corporation, Rosneft Oil, has revenue equivalent to GDP of 74th largest country, Uruguay
  11. 11. Why Corporate Sustainability will become essential“If companies are to continue such rapid growth indeveloping markets they might need to bring inmore than goods and services, such as civil-societyupgrades where theyre most needed: housing,health and education”“Market opportunity, peer pressure, investorpressure, and brand reputation are doing for thesecompanies what otherwise might be accomplishedonly through regulation”Professor Robert Eccles, Harvard Business School
  12. 12. Why Corporate Sustainability will become essential Many of the largest businesses now take Corporate Sustainability very seriously Many claim to have "embedded" it: they are wrong. They are at the start of their journey But they will do so voluntarily or be forced to do so by pressure or regulation 9 billion people will mean scarcer resources. Companies will need to fight for their piece of the pie
  13. 13. The Role of Investors The top 500 fund managers have over $42 trillion in assets under management The top 10 fund managers account for one-third of this amount; the top 50 for two-thirds This means that a small number of institutional investors might wring great change from businesses. They’re making progress:
  14. 14. The Role of Investors 8 from 10 of worlds largest pension funds have signed UNs Principles for Responsible Investment. (Assets: $30 trn) Many such investors support Integrated Reporting. Increasingly so do Governments in Europe and Emerging Markets. Integrated reporting (practice of issuing financial and ESG data in one document) helps companies understand where new initiatives might come from, and helps investors understand whether a company sees how the world is changingSource: Robert Eccles, Harvard Business School
  15. 15. Corporate Responsibility trends: Corporate reputation vulnerability: Big brands are easy targets Social Media and the rise of the empowered citizen campaigner Regulatory trends: Disclosure of biz impacts and performance (carbon, water, bribery, health & safety, risk exposure) Investor demands: Seeking surety around risk and management quality Talent retention & motivation v. related to sustainability
  16. 16. Corporate Responsibility trends: Global consumer knowledge: Consistency in behaviour, pricing and quality matters across markets Supplier power shift: Will rising demand and wages shift the balance? Sustainability and new opportunity: Build trust, drive resilience, save money, serve new markets, create new services, innovate new products, partner with others, create sustainable demand 47% of companies surveyed say increased revenues and/or their position in the current market through CR measures (KPMG 2011)
  17. 17. Seven long-term challenges and opportunities: 1. B2B collaboration on sustainability, with competitors, partners and suppliers 2. The business case, particularly around internal and external behavioural change 3. Engaging with campaign groups 4. Corporate reputation and new/evolving media 5. Company strategy and process, product, design and manufacturing innovation 6. Business contributions to tackling bribery and corruption 7. Corporate contributions to development, policy and institutional frameworks
  18. 18. A VERY fast moving agenda…A week’s worth of headlines Cameroon: Report raises concerns that Herakles Capitals palm oil plantation will displace local farmers, destroy livelihoods Nintendo says its partners agree not to use conflict minerals in production of consoles Google blocks YouTube anti-Muslim movie trailer in Egypt, Libya, India, Indonesia & Afghanistan amid criticism of censorship. Google refuses to restrict worldwide access to anti-Islam film, saying this would violate companys global free speech policy World Food Programme & MasterCard create new “digital food” delivery systems, by providing people with electronic voucher transfers to buy food from local shops & markets US Congress considering "Internet freedom" legislation to keep US companies from selling technology to repressive govtsAll headlines from Business-Humanrights.org newsletter 19/09/2012
  19. 19. A VERY fast moving agenda…A week’s worth of headlines Cameroon: Report raises concerns that Herakles Capitals palm oil plantation will displace local farmers, destroy livelihoods Nintendo says its partners agree not to use conflict minerals in production of consoles Google blocks YouTube anti-Muslim movie trailer in Egypt, Libya, India, Indonesia & Afghanistan amid criticism of censorship. Google refuses to restrict worldwide access to anti-Islam film, saying this would violate companys global free speech policy World Food Programme & MasterCard create new “digital food” delivery systems, by providing people with electronic voucher transfers to buy food from local shops & markets US Congress considering "Internet freedom" legislation to keep US companies from selling technology to repressive govtsAll headlines from Business-Humanrights.org newsletter 19/09/2012
  20. 20. Why Mission, Vision and Values Matter Corporate purpose and values key to attracting & retaining talent CEOs are now statesmen and political operators: Their values are the companys values. Tone from the top is vitally important: A purely commercial corporate vision will not embed sustainability. You cant have your cake and also eat it: Two sets of values will not work. Think about who this is for. Your people need one simple, recurring message to drive motivation and change Lots of companies have not integrated sustainability into purpose. This is a key strategic error. You will fail if you do not correct this eventually… The opportunity is there to be taken!
  21. 21. Companies to watch: Ethical Corp advisory board picksFord, McKesson, Ingersoll-Rand, Siemens,Aviva, Puma, Wheb Partners, Triodos,Honeywell, Avalon Rare Metals, Toyota, PaxScientific, BASF, M&S, Unilever, Carillion,Reckitt Benckiser, BMW, Aerofarms, Esquel,Natura, Patagonia, Unilever, Kingfisher, O2,Bupa,Google, Mars, Wal-Mart, Interface,Coca-Cola Enterprises, Apple, Phillips, GE,Sainsburys, SAB Miller, Vodafone
  22. 22. Further resources: www.ethicalcorp.com Tobywebb.blogspot.co.uk Business-humanrights.org Harvard Business School Research / blogs Doughty Centre for Corporate Responsibility Academy of Business in Society Research

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