Profit with Purpose: Business models for sustainability David Bent 7 December 2010 Title slide option 1 – pink Forum illustration Main header = lower case purple Clarendon BT (size 30). Body text = green Helvetica 55 Roman (size 24). Name in bold, email address in normal.

What I’m going to tell you We’ve moved beyond ‘responsibility’ and ‘ethics’ to enlightened self-interest, because... Sustainability affects drivers of business value You can make a difference in your company and in the world

What are companies doing in practice?

Lesson: on-strategy – leverage core capabilities in core markets GE’s “Ecomagination is a business initiative to help meet customers’ demand for more energy-efficient products and to drive reliable growth for GE.” Source: link Revenue: $18b in 2009 Lesson: on-strategy – leverage core capabilities in core markets

Lesson: it is a journey with quick wins and longer investments M&S’s Plan A “Plan A is making a real difference to the environment and to our business. But now is the time for us to reach further and be even bolder by committing to a target to become the world’s most sustainable major retailer by 2015.” Sir Stuart Rose Lesson: it is a journey with quick wins and longer investments

Lesson: sustainability is about the future of your business Interface: Misson Zero from making carpets to selling floor-covering services founded Interface, a carpet company based on petroleum. CEO, Ray Anderson, had an epiphany that in the long-term his company was destroying nature vision for 2020: Mission Zero - eliminate any negative impact Interface has on the environment by 2020. rethought business: from making carpets to selling floor-covering services Lesson: sustainability is about the future of your business

Lesson: use it for innovation, motivation and access to markets Unilever “You have to decouple business growth from environmental impacts. That means a new business model. That’s why, at Unilever, we have set out a new vision for the company – the challenge of doubling our size whilst reducing our environmental footprint.” Paul Polman, CEO, Unilever Feb 2010 - link Lesson: use it for innovation, motivation and access to markets

Ariel – Turn to 30 campaign temperature of water rather than manufacture of washing powders & liquids 30 degrees ‘washers’ increased from 2% in 2002 to 17% in 2007 60,000t CO2e saved A total of 1 million households have turned to 30° resulting in an estimated 41% energy savings. 89% of consumers associate message with Ariel http://www.bitc.org.uk/resources/case_studies/pg_rm.html Lesson: use what you’ve already got 8

Worldwise: pet care products Full Circle is a groundbreaking sustainable product partnership created by Worldwise in collaboration with partners Walmart and Sam's Club. Inputs: recyclable waste materials used within Walmart and Sam's Club locations nationwide Outputs: select PoochPlanet and SmartyKat brand products that will improve life for you, your pet and the planet. Lesson: opportunities across all sectors and categories

Some lessons from leaders On-strategy – leverage core capabilities in core markets It is a journey with quick wins and longer investments Sustainability is about the future of your business Use it for innovation, motivation and access to markets Use what you’ve already got Opportunities across all sectors and categories

What does it mean?

Our situation today is far more challenging because in addition to shrinking forests and eroding soils, we must deal with falling water tables, more frequent crop-withering heat waves, collapsing fisheries, expanding deserts, deteriorating rangelands, dying coral reefs, melting glaciers, rising seas, more-powerful storms, disappearing species, and, soon, shrinking oil supplies. Although these ecologically destructive trends have been evident for some time, and some have been reversed at the national level, not one has been reversed at the global level. The bottom line is that the world is in what ecologists call an “overshoot-and-collapse” mode. Demand has exceeded the sustainable yield of natural systems at the local level countless times in the past. Now, for the first time, it is doing so at the global level. Forests are shrinking for the world as a whole. Fishery collapses are widespread. Grasslands are deteriorating on every continent. Water tables are falling in many countries. Carbon dioxide (CO 2) emissions exceed CO 2 fixation everywhere. In 2002, a team of scientists led by Mathis Wackernagel, who now heads the Global Footprint Network, concluded that humanity’s collective demands first surpassed the earth’s regenerative capacity around 1980. Their study, published by the U.S. National Academy of Sciences, estimated that global demands in 1999 exceeded that capacity by 20 percent. The gap, growing by 1 percent or so a year, is now much wider. We are meeting current demands by consuming the earth’s natural assets, setting the stage for decline and collapse. 2 In a rather ingenious approach to calculating the human physical presence on the planet, Paul MacCready, the founder and Chairman of AeroVironment and designer of the first solar-powered aircraft, has calculated the weight of all vertebrates on the land and in the air. He notes that when agriculture began, humans, their livestock, and pets together accounted for less than 0.1 percent of the total. Today, he estimates, this group accounts for 98 percent of the earth’s total vertebrate biomass, leaving only 2 percent for the wild portion, the latter including all the deer, wildebeests, elephants, great cats, birds, small mammals, and so forth.

what an environmentalist sees We will need to change how we live and work! The challenge is enormous and urgent.

what an astute business person sees We will need to change how we live and work! The opportunity is enormous and coming.

shift: from ‘responsibility’ mindset... Society impact Business Message to business: “you should act responsibly” Business response: “well, the business of my business is business, but if I have to protect my reputation here’s some CSR-as-PR to placate you”

shift:...to a ‘sustainability’ mindset Society impact impact Business Society Message to business: “you need to act sustainably for business reasons” Business response: “well, seeing as the business of my business is business, I have to engage with this in a strategic way”

What I’ve told you We’ve moved beyond ‘responsibility’ and ‘ethics’ to enlightened self-interest, because... Sustainability affects drivers of business value You can make a difference in your company and in the world

“Profit with Purpose” linking back to the purpose of the RSA “1754 – William Shipley … founds a new society, based on the idea of using 'premiums' to support improvements in the liberal arts and sciences, and to stimulate enterprise for the common good.”

Big questions remain on “sustainable business models” Forum’s working definition: “the rationale of how an organisation creates, delivers and captures value in a genuinely sustainable manner” How can you innovate and create sustainable business models? How can you find your business case? How can you increase the win-win – where the business case overlaps with the ‘societal case’? …and more

The task of our generation Previous generations have overcome enormous challenges We get to put world society on a sustainable footing

thank you David Bent | d.bent@forumforthefuture.org 020 7324 3662 forumforthefuture.org | registered charity no. 1040519 Please match your end slide to your chosen title slide. Main header = lower case purple Clarendon BT (size 30). Body text = green Helevtica 55 Roman (size 24). Name in BOLD, email address in regular. Please include the registered charity number.

Climate change good news… “It is possible to restrict warming to 2C or less during the 21st century with at least 50% probability… Informing Choices, 2009 UK Met Office emphasis added

Climate change …bad news “It is possible to restrict warming to 2C or less during the 21st century with at least 50% probability… …with emissions reductions of 5% per year but peak emissions would have to happen by about 2020” Informing Choices, 2009 UK Met Office emphasis added

Business people talk as if there is a spectrum of responsibility Responsibility Spectrum CORE PERIPHERY Compliance Strategy & Operations CSR activities Philanthropy Choice None Wide, constrained by: Resources & capabilities (“path-dependency”) Competitive context Lots, but uses resources from core activities that otherwise would generate returns Very large Social responsibility of business: to make profit Compliance allows profit to be made Can have productivity benefits Yes, though may create an unsustainable future be the wrong strategy / tactic Can legitimate “business-as-usual” But not enacting a competitive advantage Can legitimate “business-as-usual” But not enacting a competitive advantage Difficult to justify not responding An exciting opportunity case Resistance to “shoulds” triggered here Can justify not responding

today’s rules won’t apply tomorrow Sustainability will drive the strategic context for business over the coming decade In some cases, already is Fundamental services and resources from the natural world will become more expensive Rising expectations of business role mean new regulation, new consumer behaviour, new supply chain norms and new investor pressure and more Opportunity for bold action now “what should my strategy be, given sustainability?” NOT “what should my sustainability / CSR strategy be?”