International Life Cycle Partnership To bring science-based life cycle approaches into practice worldwide UNEP/SETAC Life-Cycle Initiative Life Cycle Management Capability Maturity Model (LCM-CMM) Building Capacity for Sustainable Value Chains

ALIGNING IMPROVEMENTS WITH BUSINESS STRATEGY

WHAT IS COMPANY STRATEGY? Vision - why the organization exists, the market need it will provide. Mission - what the organization is going to do to achieve vision, kinds of activities. Strategy – how it will undertake mission to achieve advantage over competitors by either doing different activities or doing similar activities differently Source: Collis, D. J., & Rukstad, M. G. (2008). Can you say what your strategy is? Harvard Business Review, 86(4),

VALUE PROPOSITION Defines –Benefit the company will provide –To which market segments –And how the company’s offering will be uniquely superior to offerings of competitors What attributes does customer use to evaluate competitive offerings?

MAKING A BUSINESS CASE Economic –Income inequality –Outsourcing jobs –Trade imbalances Environmental –Climate change- extreme weather, rising sea, 90°F days, crop damage –Peak oil, price volatility –Air quality- respiratory illness, asthma –Resource depletion- e.g. rare earths –Toxic chemicals –Water scarcity, quality –Land use –Biodiversity & species extinctions Social –Child, forced labor –Supply chain mgmt in developing economies –Socially responsible investors –Fair trade ROIC Margin Invested Capital Revenue Cost of Sales Working Capital Fixed Capital CAPTURING VALUE EXTERNAL DRIVERS Products / Customers – New products & services, brand value – Market restrictions – Taxes- e.g. carbon tax Factories/ Communities – License to operate, ease of permitting – Improved process efficiency – Employee morale, productivity – Taxes, fines, liabilities Supply Chain – Public campaigns, supply interruptions – Liability for clean up – Access to quality suppliers Public/ Communications – Access to capital – Recruitment & retention – Reputation, brand value, stock P/E ratio IMPACT ON COMPANY

BUILD SHAREOWNER VALUE StakeholderPotential Sources of Shareowner Value Investors Access to socially responsible investor capital; potentially lower weighted average cost of capital (WACC) Employees Hiring and retention of talent; Improved employee morale and productivity Customers Brand loyalty and reputation; goodwill and intangible value; collaboration in developing new products Business partners Access to strategic resources and capabilities Unions Improved labor relations and conflict resolution Value chain associates Cost- reduction/ value enhancing collaboration throughout the value chain Regulatory authorities Validation of specific product/ service quality levels; lobbying regulations in company’s favor; increased flexibility with regulators Governments Favorable fiscal and industry- specific environmental and social policies Local communities and citizens Mutual support and accommodation; “license to operate”; reasonable treatment with respect to local taxes and service fees Non- governmental organizations (NGO) Constructive collaboration with individual organizations and groups; favorable public opinion environment; “license to operate”

PORTER’S FIVE FORCES Potential Entrants Substitutes Suppliers Buyers Industry Rivalry among existing firms Bargaining power of suppliers Bargaining power of buyers Threat of new entrants Threat of substitute products Michael E. Porter. "The Five Competitive Forces that Shape Strategy", Harvard Business Review, January 2008, p

Primary Activities Inbound Logistics Operations Outbound Logistics Marketing & Sales Service Procurement Human Resource Management Technology Development Procurement SUPPORTSUPPORT ACTIVITIESACTIVITIES Margin VALUE CHAIN ANALYSIS Framework for identifying or developing distinct competencies Porter, Michael E. Competitive advantage: Creating and sustaining superior performance. Simon and Schuster, 2008.

STRATEGY & SOCIETY Firm strategy, structure, and rivalry Related and Supporting Industries Demand Conditions Factor Conditions Porter, M. E. & Kramer, M.R (2006). Strategy & Society: The Link Between Competitive Advantage and Corporate Social Responsibility. Harvard Business Review, December,

COMPETING FOR THE FUTURE What is the basic value proposition? How have we segmented the market? What kind of customers do we serve? Where are our customers? Where in business system do we make profit? Where do margins come from? What has determined size of margins? What are major cost & price drivers? How alert are we to new value delivery models? How easily could investment programs be re- oriented? How easily could the infrastructure be changed? Which constituencies would most resist change? What do we believe we know how to do well? What physical infrastructure supports us? What kind of skills predominate in our company? What is the trajectory of our development spend? CONCEPT OF SERVED MARKET What customers and needs are we NOT serving? FLEXIBILITY & ADAPTIVENESS CONFIGURATION OF SKILLS AND ASSETS REVENUE AND MARGIN STRUCTURE What is our VULNERABILITY to the ‘new rules of the game’? Might customers’ needs be better served by an ALTERNATE CONFIGURATION of skills and assets? Could profits be extracted at a DIFFERENT POINT in the value chain? Hamel, G. & Prahalad, C.K. (1994). Competing for the future. Harvard Business School Press. Boston, MA

MATURITY ASSESSMENT Fix Gaps – Build Key Strengths

PROJECT ALIGNMENT Value Proposition Key ActivitiesProject DescriptionFinancial Outcomes Key ResourcesEnvironmental Outcomes Brief description identifying attributes customer uses to evaluate alternative products that are relevant to project ( or relevant internal goals) Key activities & skills for successful implementation of strategy that will be addressed by the project Near term performance objectives for the project with attention to how these align with value proposition Description of activities to implement project with attention to how these align with key activities & resources Organizational systems and structures addressed by project & critical to success Near term non – financial benefits of project

EXAMPLE – Project #2 Install heat recovery on wash line Value Proposition Key ActivitiesProject DescriptionFinancial Outcomes Key ResourcesEnvironmental Outcomes Will support customer desire for reliable, cost – effective suppliers; supprt eco- label requirements Project analysis; procedures for collecting, quality assurance of process data Direct cost savings; <3 year payback Install equipment to improve energy efficiency, may help reduce water consumption Project will also develop outline for formal energy mgmt. system; develop data systems for eco- labels $ for capital equipment Training for financial analysis of projects Reduced fuel consumption; GHG reductions

WORKSHEET #9 -Project Alignment Value Proposition Key ActivitiesProject DescriptionFinancial Outcomes Key ResourcesEnvironmental Outcomes