FUTURE-PROOFING YOUR BU$INESS ISE/CHRMS Breakfast Seminar March 22, 2016

“Over the last 10 years, the ‘Sustainability Imperative’ has emerged, magnified by escalating public and governmental concern about climate change, industrial pollution, food safety, and natural resource depletion, among other issues.” David Lubin and Daniel Esty, HBR, May 2010.

NESTED INTERDEPENDENCIES

Society and Business are wholly owned subsidiaries of the Environment

BUSINESS IMPACTS THE NESTS

BOOMERANG IMPACTS

GREAT ACCELERATION DASHBOARD Will Steffan et al, “The Trajectory of the Anthropocene: The Great Acceleration,” Anthropocene Review, Jan Safe operating space

PLANETARY BOUNDARIES Johan Rockström, Will Steffan, et al, “Planetary Boundaries,” Science, January ? ? ? Global perspective (e.g. water) Static snapshot (e.g. climate change)

GLOBAL RISKS World Economic Forum (WEF), “Global Risks 2016,” January Impact Likelihood High

CLIMATE CHANGE RISKS Physical Damage: To company, suppliers, or customers Supply Insecurity: Higher cost of raw materials and resources Reputation with Customers: Backlash if do not react / help; lost revenue if rivals develop climate-friendly products & services first Threat to Market Value: Viewed as “material risk” by investors and banks; difficult to access capital Loss of Top Talent: Best people walk way Access to Markets: Complex, different regulations Regulatory “Price on Carbon:” Cap and trade or carbon taxes; mutual accountability for impacts throughout value chain Litigation: Lawsuits for GHG pollution Jonathan Lash and Fred Wellington, “Competitive Advantage on a Warming Planet,” HBR, March 2007.

“Expect the Unexpected: Building business value in a changing world,” KPMG, 2012

Bottom-Line Business Case “Expect the Unexpected: Building business value in a changing world,” KPMG, 2012 Opportunities could increase Profit by 51-81% Risks could decrease Profit by 16-36%

How would we recognize a truly sustainable, future-fit business if we saw one? How can we measure how far away any company is now from where it needs to be?? “Mirror, mirror …” TWO QUESTIONS

FOURTH BENCHMARK Required state Baseline year Other company Short- term goals Other company Company today Current state Future-Fit Company  PastFuture 

FUTURE-FIT BUSINESS BENCHMARK futurefitbusiness.org Fall 2014 – Public Draft 1 (Draft Goals) June 2015 – Public Draft 2 (Draft Goals & KPIs) 1Q 2016 – Release 1 (Goals and Indicators) Based on best-available science, it defines the necessary and sufficient set of aspirational goals and associated KFIs for any company that wants to be fit for the future on a more socially-stressed, and carbon-, water-, and resource-constrained, finite planet.

FUTURE-FIT BUSINESS If it were to operate forever, it would not only do no harm, it could do well by doing some net good. A Future-Fit Business creates value while in no way undermining – and ideally increasing – the possibility that humans and other life will flourish on Earth forever.

3-STEP METHODOLOGY 8 Science-Based System Conditions 8 Business Principles 21 Goals 3 Environmental System Conditions 3 Environmental Business Principles 10 Environmental Goals 5 Social System Conditions 5 Social Business Principles 11 Social Goals wiki.futurefitbusiness.org/overview

ENVIRONMENTAL SYSTEM CONDITIONS In a sustainable society, nature is not subject to systematically increasing … … concentrations of substances extracted from the earth’s crust … concentrations of substances produced by society … degradation by physical means (e.g. overharvesting, habitat destruction) “The Four System Conditions of a Sustainable Society,” The Natural Step, naturalstep.org/the-system-conditions.

SOCIAL SYSTEM CONDITIONS In a sustainable society, people are not subject to systemic barriers to people’s … Health: physical, mental, and emotional health; safety Influence: participation in decision making; voice Competence: knowledge; education; learning; growth Impartiality: equity; fairness; justice; respect Meaning: purpose; caring; values Merlina Missimer, Karl-Henrik Robèrt, Göran Broman, "Lessons from the field,“ Blekinge Institute of Technology, 2014, systemic-design.net/wp-content/uploads/2015/03/RSD3_Missimeretal.pdf.

SOCIETAL WELLBEING FRAMEWORKS wiki.futurefitbusiness.org/overview Societal Wellbeing Frameworks Personal Wellbeing Frameworks TNS Social System Conditions UN Declaration of Human Rights OECD Better Life index Social Progress Index Kate Raworth’s “Social Doughnut” Canadian Index of Wellbeing Gallup World Poll BCG Sustainable EconomicDevelopment Assessment (SE) Max Neef’s Human Needs Maslow’s Hierarchy of Needs PERMA (Positive Emotion,Engagement, Relationships,Meaning, and Accomplishment)

F2B2 BUSINESS PRINCIPLES The business eliminates its contribution to … … pollution from mined substances … pollution from human-made substances. … environmental degradation by physical means The business protects the following for its human stakeholders. Their health (physical, emotional, mental) Their voice Their opportunity to learn and grow Their treatment with impartiality Their opportunity to lead meaningful lives wiki.futurefitbusiness.org/overview

FUTURE-FIT BUSINESS GOALS All renewable energy. All environmentally responsible and socially equitable water use. All materials from responsibly managed or recycled sources. Operational byproducts are repurposed. Operations emit no substances which cause harm. Operations emit no GHGS. Products emit no substances which cause harm. Products emit no GHGs. All products and packaging can be repurposed. Safeguard employee health. Pay at least a living wage. No discrimination. Fair employment terms. All concerns addressed. Informed about all impacts. All concerns addressed. (Suppliers are included within the company’s extended operations.) wiki.futurefitbusiness.org/overview Operations do not negatively impact areas of high conservation value. Ethical conduct Fair /right taxes paid. All lobbying for FF outcomes.

INCOME STATEMENT / PROFIT & LOSS STATEMENT Grow revenue Good company reputation / brand; Innovative products; Innovative services & financing Risk of eroding revenue growth Poor company reputation / brand; Outdated products; Missed services opportunities Save operating expenses Energy; Water; Materials; Waste; Maintenance; Travel; Insurance; Borrowing Risk of higher operating expenses Energy; Water; Materials; Waste; Maintenance; Travel; Insurance; Borrowing Engage employees Productivity & innovation; Attrition; Hiring Risk of disengaged employees Productivity & innovation; Attrition; Hiring Other risks Physical disruptions; Societal disruptions; Insecure supply; Compliance expenses; Litigation Expenses wiki.futurefitbusiness.org/overview CASE FOR FUTURE-FITNESS Higher market valueMARKET VALUERisk of lower market value AlignmentPURPOSE & VALUES ALIGNMENTRisk of misalignment

WHO FOR Companies: Adopt future-fit goals as aspirational /ultimate goals, and prioritize actions to close performance gaps Investors: Integrate KFIs into their methodologies to assess lowest-risk companies in which to invest their capital Raters and Standards Organizations: Integrate goals and KFIs into reporting and rating methodologies and algorithms Consultants (For-profits and NGOs): Integrate KFIs into proprietary assessment and improvement methodologies Business Schools: Business models for future-fit companies Policy Makers: Guidance for regulations and incentives

FUTURE-FIT BUSINESS BENCHMARK Free, open-source resource … maintained by the Future-Fit Foundation Benchmark, not another standard … “Intel Inside” other standards and frameworks First of five future-fit benchmarks … that will help re-imbed the necessary future-fit mindset in all sectors of society Based on best-available science, it defines the necessary and sufficient set of aspirational goals and associated KFIs for any company that wants to be fit for the future on a more socially-stressed, and carbon-, water-, and resource-constrained, finite planet.

GOAL TOPIC COMPARISONS wiki.futurefitbusiness.org/overview Common Sustainability Frameworks F2B2 Goals Global Reporting Initiative (GRI) B Corp Certification Assessment ISO CERES 21 st Century Corp WBCSD Action 2020 Priority Areas CK Global 100 Criteria SASB Material Issues DJSI RobecoSAM Questions Integrated Reporting UN Global Compact CDP – Carbon, Water, Forests UN SDGs Pivot Goals Database Transformational Company

RESOURCES futurefitbusiness.org

FUTURE-PROOFING YOUR BU$INESS ISE/CHRMS Breakfast Seminar March 22, 2016