2014 Kaleidoscope Conference Algonquin College May 13, 2014 THE GOOD NEWS ABOUT THE NEW SU$TAINABILITY IMPERATIVE sustainabilityadvantage.com

CORPORATE SUSTAINABILITY TRIPLE BOTTOM LINE Economy Environment Equity Profits / Planet / People /

CORPORATE SUSTAINABILITY GREEN +CSR Economic Environmental Social

CORPORATE SUSTAINABILITY ESG Governance Environmental Social

CORPORATE SUSTAINABILITY ASSET MANAGEMENT Financial / Manufactured Capital Natural Capital Human / Social Capital

AC S-E-E FRAMEWORK

THE REAL “REAL WORLD”

NESTED INTERDEPENDENCIES

1. Pre-Compliance 2. Compliance 4. INTEGRATED STRATEGY 5. PURPOSE & PASSION FIVE-STAGE SUSTAINABILITY JOURNEY 3. Beyond Compliance

“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-June 2010

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

Access to capital Talent wars Productivity Innovation Quality Risk management Supply security Profit Share price Brand value Revenue growth Market share Expenses ROI (SUSTAINABILITY) STRATEGIES “SUSTAINABILITY” ENABLERS vs. ONE MORE GOAL

Revenue PROFIT 4.Reduced materials 1. Increased revenue 2. Reduced energy 6.Reduced turnover 5.Increased productivity 7.Reduced revenue and increased expenses 3. Reduced waste OpportunitiesRisksIncome Statement 10% 9% 75% 25% 2% 20% +51 to +81% -16 to -36% Expenses SUSTAINABILITY CAPITAL RESERVE SUSTAINABILITY BUSINESS CASE

Company Data Profile Small Professional Services Large, Manufacturing & Distribution Revenue $1,000,000$500,000,000 Energy expense $20,000$10,000,000 Materials and water expense $50,000$150,000,000 Total salary / payroll expense $300,000$150,000,000 Profit $70,000$35,000,000 Average salary $50,000$40,000 Number of employees 63,750 Potential profit increase51%81% Potential profit at risk-16%-36%

60-employee manufacturing company 58% reduction in electricity usage 90% reduction in natural gas usage Reduced annual CO 2 emissions by 115 tonnes Invested $46,186 to yield energy savings of $89,152 Average pay-back period of 6.3 months Increased profits by 76%. “Manufacturer finds lighting energy efficiency convenient,” Green Manufacturer, March 1, projects between

GREEN BUILDING BENEFITS: TO WHOM? Adapted from Cleland Robertson, Lead Manager, Sustainable Construction & Infrastructure Group, Sustainable Business Solutions, PwC Chile. Based on World Green Building Council. Reduced downtime Lower operating costs Lower maintenance costs Easier financing Rapid ROI Higher market value Slower depreciation Higher occupancy rate Lower refurbishment costs Corporate image / prestige Compliance with regulations Lower design and construction costs Faster sales Increased productivity

GREEN BUILDINGS: PRODUCTIVITY World Green Building Council, “The Business Case for Green Buildings,” March 2013

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

Revenue at risk Risk from poor reputation on energy and carbon management Risk from poor reputation on water management Risk from poor reputation on materials and waste management Risk from poor reputations of suppliers or customers Risk from poor reputation on eco-system damages Risk from less competitive prices Risk from sudden disruptions in the value chain 5% Potential Revenue Erosion % Rev. at Risk % Probability within 5 yrs 5% 2% 5% 10% 25% 20% 5% 10% 1% 10% 5% RISKS TO REVENUE

Potential increase in expenses Risk of higher cost of energy Risk of a price on carbon ($20/T x 300T/$1M Rev.) Risk of higher cost of waste Risk of higher cost of water and materials Risk of higher cost of capital (Debt = 30% of Rev.) Risk of higher employee voluntary turnover Risk of lower employee productivity 10% Potential Escalating Expenses % Potential Impact % Probability within 5 yrs 100% 5% 0.60% 5% 75% 25% 70% 75% 25% 11% to 31% 1% 10% Impact on profit from revenue and expense risks -16% to -36% RISK OF ESCALATING EXPENSES

GLOBAL RISKS year outlook 31 global risks with the potential to cause significant negative impact across entire countries and industries Five classifications: Economic, Environmental Societal Geopolitical Technological All are interconnected. World Economic Forum (WEF), “Global Risks 2014,” January 2014.

RISK LIKELIHOODS AND IMPACTS World Economic Forum (WEF), “Global Risks 2014,” January 2014.

RISK INTERCONNECTIONS World Economic Forum (WEF), “Global Risks 2014,” January 2014.Global Risks 2014

1.80% increase in world energy demand, with 85% from fossil fuels; 50% increase in GHGs (685 ppm) 2.Urban air pollution / ground-level ozone is top cause of mortality, ahead of dirty water and lack of sanitation. 3.Global biodiversity declines by a further 10%, mature forests shrink by 13%. 4.Global water demand increases by some 55%; competing demands put water use by farmers at risk; 40% of the global population live in river basins under severe water stress OECD RISKS BY 2050 OECD, “Environmental Outlook to 2050.”

New companies will be more resilient, robust, and able to thrive in fast-changing times” Andrew Winston, The Big Pivot, HBR Press, 2014 “ A weakening of the pillars of our planetary infrastructure —a stable climate, clean air and water, healthy biodiversity, and abundant resources— is costing business real money” If this hotter, scarcer, more transparent, and unpredictable world is the new normal, then how must companies act to ensure a prosperous future for all, including themselves? … That’s the Big Pivot … and it’s nonnegotiable.”

Assess current realities 7-STEP CHANGE PROCESS Wake up and decide Build case(s) for change Inspire shared vision(s) Develop strategies Mobilize commitment Embed and align changes Continuously Learn and Adapt

2014 Kaleidoscope Conference Algonquin College May 13, 2014 THE GOOD NEWS ABOUT THE NEW SU$TAINABILITY IMPERATIVE sustainabilityadvantage.com