© 2010 IMD International. Not to be used or reproduced without permission. Rolling Out the BCS in SMS Companies Breaking down organizational hurdles

© IMD Aligning organizations behind sustainability strategies are deterred by combined internal and external barriers.  Ignorance/reluctance of key stakeholders (customers and financial markets) leading to  An incremental approach  Few radically innovative business models and products Perception amongst managers: “Laggards are punished but innovators are not rewarded”  Internal barriers to corporate sustainability are prevalent  Mindset  Organizational culture  Lack of appropriate processes and tools

© IMD Ignorance/reluctance of key stakeholders (customers and financial markets) is perceived as the key external barrier.  The more demanding stakeholders are about social and environmental issues, the more irrelevant for companies they are for companies (not the companies primary stakeholders)  NGOs, consumer organizations lacked leverage to push companies toward more sustainable business models and products more rapidly

© IMD : Organizational culture and manager’s mindset are the main barriers to roll out corporate sustainability Managers' mindset 19% Managers' lack of knowledge/expertise 14% Absence of appropriate tools and processes 12% Organizational culture 20% Opposition or lack of interest from investors 8% Lack of interest from customers 16% Other 4% Regulation (e.g. subsidies & low environmental/social standards) 7% N = 945 GM

© IMD : Global organizations are often frustrated getting things done in CSR Reported pain points of managing responsible value chains Engagement, change, reward Middle management buy-in Short-term mindsets Difficulties to integrate into business model Organization silos Difficulties to make the business case across departments and BUs CSM targets are not integrated within rewards and evaluation systems Knowledge Lack of systematic performance measurement and benchmarking Difficulties to build effective networks to support innovation Barriers to transforming markets/educating customers, consumers Lack of quantification tools of specific business cases and emerging risks Lack of adequate KPIs Resource leverage Poor cost effectiveness of green/responsible procurement Difficulties to push energy/resource savings to the next level High cost of innovation Low impact on brand leverage Responses from 22 global organizations participating in IMD’s Forum for Corporate Sustainability Management – April 2009

© IMD Internal barriers to sustainable agriculture are prevalent in the food & beverage industry  The greatest challenge? Breaking down mindsets of managers and filling knowledge gaps about the significant industry threats and business risks of unsustainable agriculture

© IMD SAI meeting - April 2009

© IMD SAI meeting – April 2009

© IMD CSM research on greening Chinese business 2003 – Study of managerial perceptions in 300 Chinese companies  SIGNIFICANT IMPACTS: 70% of environmental managers admitted moderate to heavy impact of corporate activities on the environment  LOW AWARENESS: Environmental Managers reported low awareness amongst colleagues of environmental/social impacts  LACK OF KNOWLEDGE/EXPERTISE: Apart from lack of capital, lack of managerial expertise (not so much technical)  DELAYS IN UPGRADING TECHNICAL EQUIPMENT: owing to lack of capital but also potential unemployment threats, thus implications for social stability  ENFORCEMENT: Regulation putting environment on the radar screen but enforcement and lack of expertise in ensuring enforcement lacking  REACTIVE: Government perceived as primary stakeholder therefore attitudes remained reactive. Few beyond compliance, pioneering activities

© IMD Promoting factors for corporate sustainability New business opportunities 11% Process and product innovations 8% Dialogue with stakeholders 9% Top management commitment & leadership 23% Individual stakeholder and institutional investor demands 8% Open organizational culture 2% Other 1% Public pressure 16% Increased competition on environmental and social issues in industry 10% Corporate values 11% Autonomy and internal scope 1% N = 123 SO

© IMD Business functions N = 2068 Manufacturing 23% HR & Corp Staff 30% Marketing/Sales 14% Other 2% R&D 25% Top Management 1% Finance/Control 4% EHS/Sustainability 1% Primary deterring role R&D 4% Manufacturing 13% HR & Corp Staff 10% Marketing/Sales 13% Finance/Control 28% Other 5% No Opposition 7% NR or N/A or Do not Know 20% Potential promoting role

© IMD Workshop challenge – breaking down organizational hurdles  What are the organizational hurdles currently deterring SMEs from effectively rolling out sustainability initiatives?