Reflections on current developments in business thinking on Sustainability PRME Principle 1 : Purpose Nick Main Global Leader, Sustainability and Climate Change Services Global Chief Sustainability Officer © 2011 Deloitte LLP. Private and confidential. “We will develop the capabilities of students to be future generators of sustainable value for business and society at large and to work for an inclusive and sustainable economy”

What's happening in Sustainability Drivers from regulation to voluntary Changing consumer expectations It’s moving from narrow to broad and from a side to a central business growth issue – Environmental Carbon and climate change Water Ecosystems Resource Management – Social Global inequity Aging population Emerging Eastern markets, cultures and social institutions Confrontation of diverse values and identities Melt down of values and identities in the North West? – Economic Its everywhere: – Developed & Developing markets (BRICs) Its long term not short © 2011 Deloitte LLP. Private and confidential.

Who is leading and why 3 Government: Set rules: regulation and incentives Civil society: Set standards of acceptable behavior Campaign outside the legislative framework Business: Increase the delivery of products and services that find a balance point © 2011 Deloitte LLP. Private and confidential.

Not every business leads.... Number of companies Sustainability maturity Reluctant observers of regulations Leading Somewhat willing 20% 70% 10% (Unilever, SC Johnston, Nike,...) Corporate responsibility seen as PR Sustainability seen as a more serious add on (customer benefit, for instance) Strategy fully aligned to sustainability © 2011 Deloitte LLP. Private and confidential.

What are the leaders thinking ‘ Corporate Responsibility’ and ‘business sustainability’ are no longer bolt-ons Best practice is purpose-driven strategy, aligned with values & tactics, for profit Bottom of the pyramid markets are legitimate commercial targets There is a search for profit with purpose In a broader context – What should be the relationship between business and wider society? – What does it mean – rights & responsibilities – to be a corporate citizen? – How can we balance shareholder and other stakeholder interests? © 2011 Deloitte LLP. Private and confidential. 'The responsibility of great companies is to find that balance between profitability and benevolence and a social conscience. Governments are not going to be able, around the world, to fulfil the needs of the people. The gap between the haves and the have-nots is growing, and that is not a good recipe for success. It’s not a choice anymore'. Howard Schultz, Starbucks

Hypothesis: Business should be based on the broad foundation of an ethical good: the delivery of benefits (products and services) that improve the quality of human existence, in the context of a resource constrained world Strategy must proceed from the WHY not the What or the How Business innovation has driven widespread improvements to the lives of many people and places worldwide, over the last 200 years. Our raison d’être as Business is to build on that legacy, in a responsible, sustainable way © 2011 Deloitte LLP. Private and confidential.

The most fundamental question in business is WHY? The conventional discourse of business focuses on the Who, What and How But the true driver for change is in our emotions not our intellect Getting the WHY right is the ignition key that inspires transformation at every level of personal and organisational performance Purpose is at the heart of both Organisational and Personal identity. 7 © 2011Deloitte LLP. Private and confidential.

Aligning Societal Purpose with Values & Strategy builds a business that in turn builds society A philosophy of business and life PURPOSE Business Definition Organisational Values Organisational Beliefs What is considered of fundamental importanceWhere the firm operates Why the firm exists 8 © 2011 Deloitte LLP. Private and confidential.

The scope of ReImagining Business Activities to achieve strategic goals Implications of Purpose for Strategy Implementation Plan & KPI Refresh WHO? WHAT?HOW? WHY? 9 © 2011 Deloitte LLP. Private and confidential.

What would a ReImagined Business School Look like? 10 © 2011 Deloitte LLP. Private and confidential. ‘Corporate Responsibility’ has been a sub-theme in discrete courses within business schools rather than embedded in every element of the curriculum There is little real understanding of the strategies required to transform business to meet the new challenges of a resource constrained economy Business schools must equip students to: – Understand the Why at every level of Management & Organisation – Meet the new Challenge of the How, the Who and the What Students should be able to articulate their own purpose in societal terms – Understanding of what benefits to humanity a business exists to provide – Analytical tools for a new level of organisational and stakeholder engagement – Renewed focus on the Ethics of Business Strategy should focus on the transformational nature of sustainability, in the organisational DNA – What do we need to do for maximum impact (strategy) – How do we organise ourselves to deliver this (culture & organisational design) – Who will drive the delivery (leadership and behaviour)

Inspire Collective Action A common purpose invites Cohesion, Teamwork and Community Inspire Collective Action A common purpose invites Cohesion, Teamwork and Community Build trust with society Everyone is clear what the firm is trying to achieve in society, & why Build trust with society Everyone is clear what the firm is trying to achieve in society, & why Increase Opportunity Strategy defines opportunity – when purpose drives strategy, opportunities expand/context for strategic & tactical decisions evolves Increase Opportunity Strategy defines opportunity – when purpose drives strategy, opportunities expand/context for strategic & tactical decisions evolves Attract, motivate and retain employees Personal Professional and Social Drives can be Seamlessly connected/ Basis for extraordinary effort Attract, motivate and retain employees Personal Professional and Social Drives can be Seamlessly connected/ Basis for extraordinary effort Conclusion : Getting the Purpose – the WHY – right helps Business to: Avoid moral hazard Every decision and activity is connectable to the purpose of the firm Avoid moral hazard Every decision and activity is connectable to the purpose of the firm 11 © 2011 Deloitte LLP. Private and confidential.

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