Mastering the Triple Bottom Line - Presentation

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Mastering the Triple Bottom Line - Presentation

  1. 1. Capgemini Consulting's CEO Study 2008 ”Mastering the Triple Bottom Line” Presentation of Key findings 24.02.2009 v 0.9
  2. 2. The study is based on a structured approach and gives valuable insight on sustainability from a strategic perspective Background Our objective is to generate insight on how Norwegian companies approach sustainability from a strategic perspective The main focus is how to manage expectations from both shareholders and society to deliver financial, environmental and social performance Definitions Sustainability refers to how enterprises are striving to reach business objectives while taking responsibility and protecting society at large (also referred to as Corporate Social Responsibility) The Triple Bottom Line captures the essence of sustainability and refers to the balance in delivering results across three dimensions: financial, social and environmental Methodology The study is based on interviews with CEOs and Top Management of 55 Norwegian enterprises 8 sectors are represented: Manufacturing, Financial services, Retail, Distribution, Oil and Gas services, Energy, IT/Telecom and Property This is the largest study of its kind that has ever been conducted in Norway. This is the largest study of its kind that has ever been conducted in Norway. 1
  3. 3. Capgemini has conducted an in-depth study of sustainability on the basis of interviews with top management in a wide range of Norwegian companies Key findings: Sustainability has become a top priority Non-disclosure for CEOs Sustainability represents unprecedented business opportunities Environmental and social performance emerge as a major source of competitive advantage Mastering the Triple Bottom Line requires thorough and strategically founded execution Sustainability leaders have the potential to change the rules of the game 2
  4. 4. Key finding 1 Sustainability has become a top priority for CEOs “We experience a significant increase in demands on sustainability from our customers, especially within oil and gas” 3 - CEO, large Manufacturing company 3
  5. 5. The pressure on CEOs to deliver environmental and social results has increased dramatically in recent years 70% of CEOs experience significant increase Customer demands, cost savings and in demands to deliver on environmental compliance drive sustainability changes and social aspects To which extent do you experience increased demands to What are the commercial drivers behind changes in respect to deliver results on environmental, ethical and other social how you deal with sustainability? aspects in addition to economics? Sustainability has raised to become a top priority for CEOs Sustainability has raised to become a top priority for CEOs 4
  6. 6. Despite industrial differences, almost all CEOs believe that sustainability will have a significant impact on their business within the next 10 years Sustainability demands vary across sectors “To which extent do you experience increased demands to deliver results on environmental, ethical and other social aspects in addition to economics?” Oil & Gas Services Energy Property Manufacturing Distribution Retail FSI Telecom & IT Total average 1 2 3 4 5 Very Small Medium Large Very large small There is a lucrative opportunity to capitalise by taking a leading position on sustainability in Norway. There is a lucrative opportunity to capitalise by taking a leading position on sustainability in Norway. 5
  7. 7. Although some sustainability issues are important in all sectors, industrial sustainability challenges are distinctively different across sectors Energy : Distribution : Climate change Route planning Increasing energy Energy use operations demand Emissions and waste to Clean energy air and sea Environmental impact of Local sourcing operations (emissions Disposal of ships, and waste) vehicles etc Manufacturing : Oil & Gas Services : Energy use and efficiency HSE requirements from upstream companies Waste and hazardous materials Emissions to air and sea Water usage Supplier management Recycling and packaging Efficient resource management Scarcity of raw materials Sustainability issues listed across sectors : Stricter rules and Business Ethics and Labour standards in Good citizenship in local regulations for barriers of corruption developing countries community compliance 6
  8. 8. Although some sustainability issues are important in all sectors, industrial sustainability challenges are distinctively different across sectors Property : IT & Telecom : Energy use in buildings Environmental impact of Waste from household Telecom infrastructure and construction Short lifetime of Use of hazardous equipment materials and chemicals Owner rights and ”pirate distribution” Internet fraud Retail : Financial Services : Raise of the LOHAS Transparency segment Ethics in selling complex Energy efficiency in store design, transportation and financial products logistics Green and sustainable Recycling and investments environmental packaging Remuneration in capital Waste and hazardous materials market positions Sustainability issues listed across sectors : Work place issues, Emission and waste Diversity and equal Supplier sustainability Health Safety and control opportunities management Environment 7
  9. 9. Key finding 2 Sustainability represents major business opportunities across most sectors “This can be the oil-adventure of Norwegian generations to come ” - CEO, Norwegian Energy company 88
  10. 10. 80% of CEOs believe that sustainability create major market opportunities and that it will have a considerable impact on their business To which extent does an increased focus on sustainability create market opportunities for your business? ”It’s completely obvious that it will lead to market opportunities in the energy sector” CEO, Energy company “These trends [on sustainability] lead to enormous opportunities!” CEO, Oil & Gas services ”Certainly over time it will provide [market opportunities], but we don’t use it offensively today, in fear of bad publicity” CEO, Financial Service Firm “Sustainability provide opportunities because you are forced to think differently” CEO, Manufacturer There are major differences between the sectors, but business opportunities emerge across all of them. There are major differences between the sectors, but business opportunities emerge across all of them. 9
  11. 11. How closely sustainability is to the business core has a large influence to which extent sustainability represent market opportunities Sustainability driven business opportunities vary across sectors To which extent do an increased focus on sustainability create market opportunities for your business? Energy Property Telecom & IT Retail Distribution Oil & Gas Services Manufacturing FSI Total average 1 2 3 4 5 There are major differences among sectors, but business opportunities emerge across all of them. There are major differences among sectors, but business opportunities emerge across all of them.
  12. 12. By mapping initiatives discussed with CEOs in the study, market opportunities can be divided into five broad and distinct categories Energy Water Exploration and utilisation Rain forest 1 of scarce resources Species Minerals Oil Wind, Solar, CCS Waste Need for cleaner Biofuel 2 management technologies Clean SOx/NOx cleaning Recycling fuel Eco Health Sustainability The raise of the 3 features LOHAS segment Green Carbon Fairtrade materials neutrality Micro- Medicine Enabling the credits supply Low-cost 4 solutions unprivileged Sanitary Reuse solutions Water Competitive Differentiation Sustainability Exploring sustainability advantage 5 premiums leadership options Sustainability Talent Compliance innovation acquisition leadership
  13. 13. In coming years consumers will strongly consider sustainability issues in their buying decisions, but … Most important factors of sustainability Willingness to pay for sustainability recognised by consumers is limited, but growing … Most important sustainability issues in buying decisions 100 87 85 84 75 % of respondents 50 25 0 Energy and water Waste reduction Sustainable usage and control manufacturing features … most consumers are only willing to pay a small price difference for sustainability features !! … most consumers are only willing to pay a small price difference for sustainability features
  14. 14. By introducing three dimensions to the business context, new competitive space driven by sustainability emerge across all sectors Energy : Distribution : Renewable energy Reverse logistics Clean technologies Disposal of ships and New and green energy vehicles Green certificates Environmental Trading emission quotas technologies for NOX, Smart Metering options SOX, BWT, CO2 etc Manufacturing : Oil & Gas Services : Carbon capture and Cleaner technologies in storage value chain Increasing recovery factor New products from Decommissioning recyclable materials offshore platforms Green, Eco, Health and Cleaner technologies to Fairtrade products reduce emissions / waste Business opportunities across sectors : Energy efficient and Strategic differentiation Cleaner technologies in Local sourcing energy saving solutions and strategic innovation operations opportunities 13
  15. 15. By introducing three dimensions to the business context, new competitive space driven by sustainability emerge across all sectors Property : IT & Telecom : Green IT Energy efficient buildings Technological solutions Green materials addressing energy saving Energy saving solutions Digital communication to Waste handling systems replace/reduce travel Environmental certificates Using IT to educate unprivileged Retail : Financial Services : Green, Eco, Health and Sustainable investment Fairtrade products portfolios Emisson quotas to offer carbon neutral products Green funds Using recyclable materials Microcredits Environmental product Carbon indexes packaging Emission trading Business opportunities across sectors : Sustainable product Carbon neutral products Sustainable sourcing Product innovation attributes 14
  16. 16. Key finding 3 Environmental and social performance emerge as a major source of competitive advantage “Sustainability is the single biggest opportunity in 21st century, and will be the next source of competitive advantage” - H.Lee Scott, CEO Wal Mart 15
  17. 17. CEOs believe social and environmental initiatives can be leveraged to create competitive advantage According to CEOs; brand, risk and talent Reduced market access and increased costs are the most promising strategic levers are seen as the largest potential pitfalls In which way can social, ethical and environmental initiatives In which way can social, ethical and environmental initiatives also enhance your companies competitiveness? also damage your companies competitiveness? Small Medium Very high Sustainability performance may also represent competitive disadvantage – under certain circumstances the Sustainability performance may also represent competitive disadvantage – under certain circumstances the result could be denied market access or a non-competitive cost structure. result could be denied market access or a non-competitive cost structure.
  18. 18. CEOs believe there are limited contradictions between financial performance and sustainability, but we believe trade-offs will emerge as ambitions increase CEOs do not see a substantial However, we believe a high ambition contradiction between financial performance level will create significant trade-offs and sustainability To what degree is it an area of conflict between providing the Meeting society’s basic expectations on owners’ maximum rate of return as well as taking environment, society and ethics into consideration? sustainability is a necessity to operate in the market place … Energy 1 2 3 4 5 Retail … but a robust correlation between sustainability 1 2 3 4 5 performance and financial performance has Manufacturing not been established. 1 2 3 4 5 FSI 1 2 3 4 5 We believe significant trade-offs will emerge as Distribution companies increase their level of ambition on 1 2 3 4 5 the environmental and social bottom lines! Property 1 2 3 4 5 Oil & gas If the right initiatives are taken, there is a services 1 Small 2 3 Medium 4 5 Large significant potential for positive returns - also total average ranking of 1.9 on the financial bottom line. Addressing sustainability will always involve trade-offs, but with the right prioritisation significant returns Addressing sustainability will always involve trade-offs, but with the right prioritisation significant returns can be leveraged – also on the financial bottom line. can be leveraged – also on the financial bottom line. 17
  19. 19. Sustainability leaders have the potential to change the rules of the game
  20. 20. All represented industries report from “moderate” to “very high on sustainability driving an increase in demands and new market opportunities Very High Oil & Gas Very High Services Oil & Gas Services Increased Sustainability Demands Increased Sustainability Demands Manu- Property Energy facturing High Distribution Retail Property Energy Moderate Financial Manufacturing High Services IT/ Telecom Distribution Retail Limited Financial Moderate Services IT/ Telecom Very Low Very Low Limited Moderate High Very High Moderate High Very High Sustainability Driven Market Opportunities Sustainability Driven Market Opportunities Even though the tendency is that all industries are strongly affected by this development, there are clear Even though the tendency is that all industries are strongly affected by this development, there are clear differences on strategic impact sustainability impose on the represented industrial sectors. differences on strategic impact sustainability impose on the represented industrial sectors. 19
  21. 21. Differences in demands and opportunities create various strategic playgrounds for different industries Strategic Playgrounds Comments Potential for game changing strategies Where market opportunities is seen as ”very high” and demands to deliver social and environmental performance are ”high”, Energy sustainability becomes strongly linked to business core, and hence a strategic parameter for creating business performance. Attractive positions for sustainability leadership Where the degree of sustainability driven opportunities and increasing demands are seen as ”high”, sustainability is not as Property Distribution Retail directly linked to core business, but there are significant sustainability potential and risks related to underperformance. Enhance value chain performance and Moderate business opportunities, but high increase in increase standards to put competition on defence demands indicate strong regulatory regimes related to Manufacturing Oil & Gas production, manufacturing and operating environment. Being services sustainable is business critical, affecting licence to operate. Protect reputation and Sectors rating increase in demands and market opportunities increase standards to put competition on defence as “moderate” should still assess how sustainability impacts competitive advantage. Ignoring sustainability represents Financial services IT/Telecom significant risks, while mastering it protects reputation and can create new market opportunities in niche markets. Despite differences, we believe sustainability can offer promising benefits within all industry sectors. Despite differences, we believe sustainability can offer promising benefits within all industry sectors.
  22. 22. We can categorise the sustainability leadership according to two dimensions; Market Driven Leadership and Compliance Driven Leadership Sustainability Leadership Comments Retail Market Driven Leadership: • Developing new products and achieving Energy market differentiation Property • Changing the rules of the game Market Driven Leadership Distribution Manufacturing Compliance Driven Leadership IT/Telecom • The potential of outperforming competitors by driving the sustainability practices forward Oil & Gas within regulated industries services Financial services • Increasing the gap and thus competitive advantage Compliance Driven Leadership
  23. 23. The rules of the game are changing, and mastering the Triple Bottom Line is emerging as a prerequisite for success CEOs in our study confirm our belief that sustainability will have a profound impact Four Generic Sustainability Positions on business- and operating models in Expected Impact on Financial Performance the future Mastering the dynamics of the Triple Superior Bottom Line is about playing a new Returns 1 Sustainability game where the importance of leadership environmental and social performance 2 increases dramatically Performance Successful Financial adaptor In order to balance all three dimensions, businesses must carefully consider risks Mastering the 3 and opportunities within their current Triple Bottom Line 4 Over business context and operating model Non- investoing compliant The companies that excel in mastering Negative the Triple Bottom Line, enabling strategic Returns integration of sustainability issues with core capabilities, will also prevail in the Environmental and Social Performance market place Companies that are able to grasp the system within which they operate, and the limits and requirements the Companies that are able to grasp the system within which they operate, and the limits and requirements the system imposes, will be the ones to flourish in the future business environment (John Ehrenfeldt ––Sustainability by design). system imposes, will be the ones to flourish in the future business environment (John Ehrenfeldt Sustainability by design). 22
  24. 24. In view of the survey findings and the current economic climate, we still see long term opportunities in taking a clear position on sustainability Key findings: Sustainability Position vs Economic Slowdown? Sustainability has become a top priority for CEOs Taking a leading Declining markets Sustainability represents position on and challenges related unprecedented business sustainability to cost structure opportunities Environmental and social • Reducing costs • Prices on Struggling to maintain the strategic performance emerge as a major • Increasing energy and raw demands materials are focus and priorities on long term source of competitive advantage growth areas within existing core • Core element of decreasing strategy • Reduced will business • Compliance and ability to Mastering the Triple Bottom Line issues still vital pay a price Struggling to reduce existing cost base • Securing market premium and turning fixed costs into variable requires thorough and access • Reduced costs, without deteriorating cash flow strategically founded execution • Access to funding from core areas – reducing the relative resources competitive advantage Sustainability leaders have the What companies will be best positioned to outperform potential to change the rules of the competition as soon the market rebound from slowdown and game decline – realising fast and profitable growth…? 99 of the most sustainable companies, on the Dow Jones Sustainability Index, has outperformed its peers 99 of the most sustainable companies, on the Dow Jones Sustainability Index, has outperformed its peers by 15 % during the last six months of economic downturn. by 15 % during the last six months of economic downturn. 23
  25. 25. Need for business response 24
  26. 26. We find that most of our clients struggle to respond strategically on the new business climate driven by sustainability Identified business needs The complex landscape of sustainability issues Identify sustainability impact of business climate Environmental responsibility Social responsibility Eco-efficiency Transportation Use of human resources Community Waste Energy use Use of dangerous Workplace health & safety development Understand current social and Inclusive society control Water use materials Product Access Human rights environmental performance Recycling & product take Education back stewardship Culture Equal Emissions opportunities Diversity Climate Economic responsibility change Value creation Profitability Minorities Explore sustainability Efficiency Corruption and Quality goods leadership options bribery Innovations Job creation Marketing & advertising Responsible Supply chain standards accounting Sustainable Review business strategy and Pricing growth formulate TBL ambitions Eco-luxury Prioritise TBL initiatives As corporations now also have to be competitive in the environmental and social dimensions – the basis of As corporations now also have to be competitive in the environmental and social dimensions – the basis of competition is changing and the role of executives is getting more complex. competition is changing and the role of executives is getting more complex.
  27. 27. On the highest level, the strategy formulation contain the same steps, but the analyses and outcome are distinctively different The TBL perspective Society Environment “CSR can be much more than just a cost, constraint, or charitable deed. Approached strategically, it generates opportunity, innovation, and competitive advantage for corporations—while solving pressing Economy social problems”- M. Porter & R. Kramer 2007 Capgemini Consulting’s strategy development framework Analysis of Identification and Define internal assessment of assumptions and capabilities and risks and strategic context industry context opportunities Monitor & review progress Implementation Strategy Implementation planning development Analysis of market conditions, competitive arenas and the organisations potential for developing Analysis of market conditions, competitive arenas and the organisations potential for developing competitive advantage provide the basis for the strategic direction. competitive advantage provide the basis for the strategic direction. 26
  28. 28. Most strategic sustainability options fall within the categories of five generic strategies Five generic strategies Effort and impact Locating the core – Positioning your Core Business in the 5 industry value system 5 Industry impact 4 Developing the core 2 3 – Differentiating the Core Business 2 Elaborating the Core Business 1 – Growing the core; making the core 1 Strategic re - orientation business larger The generic strategies can be Extending the Core Business categorised based on potential – Extending the corporate strategic 3 to change the competitive scope rules in the industry and change and effort required to Reconceiving the Core Business implement the strategy – Consolidate and rationalise the 4 business We believe that within most sectors there will be niche markets where differentiated sustainability We believe that within most sectors there will be niche markets where differentiated sustainability strategies can have large impact or even game changing potential. strategies can have large impact or even game changing potential. Sources: H. Mintzberg
  29. 29. Capgemini service offering is adapted to different needs and maturity levels, but all offerings have a strategic perspective on sustainability Key findings: Sustainability has become a top priority Four typical project approaches for CEOs Sustainability represents unprecedented Potential for value creation business opportunities Full scale Environmental and social performance emerge as a major source of competitive strategy- advantage Strategy process TBL review opportunity TBL health scan Mastering the Triple Bottom Line check requires thorough and strategically founded execution Project scope Sustainability leaders have the potential to change the rules of the game 28
  30. 30. Contact: Anders Rygh Capgemini Consulting Principal | Head of Business Strategy and M&A Tel: +47 24 12 80 00 Mobil: +47 95 11 81 33 Anders.rygh@capgemini.com 29

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