1. Integrating Sustainability Into Business Strategies and OperationsBy
Bill Blackburn
October 22, 2009
The Conference Board
European Council on
Corporate Responsibility and Sustainability
Brussels, Belgium
William Blackburn Consulting, Ltd.
Web:
Phone:
© Copyright 2009: William R. Blackburn
How many of you would go to the drive through of a fast food restaurant, consume the burger and malt on the road, then toss the bag out onto the roadside? Seems highly irresponsible now, but for those of us old enough to remember the 60s, we can tell you it was common practice then. Why don’t we do that now? Because public awareness and expectations changed, the definitions of right and wrong changed, and business changed too. No longer is it acceptable to pollute rivers to the point they catch fire. Now we find ourselves in the midst of more change in public expectations about corporate environmental and social behavior—the most profound change I have witnessed in the 3 ½ decades I’ve been involved in this area. We can see evidence of that change all around us. New Green terms are creeping into our language--like climate change, post consumer waste, social responsibility, corporate citizenship, sustainable development, and our term for today—sustainability. Sustainability and sustainable are terms commonly associated with “Green.”. As we will see, it involves a combination of economic, environmental and social responsibility. More and more we are hearing about sustainability in the news.

2. Study Participants Alcan, acquired by Rio Tinto
Aveda part of Estee Lauder

3. The Sustainability Handbook– The Complete Management Guide to Achieving
Social, Economic and Environmental Responsibility (order thru
The Drivers
The Efficient Enablers
The Pathway
The Evaluators
A champion/leader with mgmt support
Approach for selling the organization on sustainability
Accountability mechanisms
Organizational structure
Deployment and integration
Vision and policy
Operating system standards
Strategic planning for aligned priorities
Indicators and goals
Measuring and reporting progress
Stakeholder engagement and feedback

4. TCB Sustainability Framework Elements
Organization
Mission, Vision and Values
Goal Setting & Strat Planning
Deployment, Integration, Alignment & Accountability
Management Systems
Stakeholder Engagement
Partnerships with NGOs and Government
Supply Chain Programs

5. TCB Executive Action Reports 2008
Going Green: Corporate Commitment to Sustainability Takes on a Greater Role (EA 260)
Managing Great Expectations: Reshaping Engagement Strategies to Address Stakeholders’ Citizenship and Sustainability Concerns (EA 262)
Company Approaches to Green Products and Services: What’s Working and What’s Not (EA 271)
Paper 1: What is Sustainability, and why are organizations investing more resources to address it; what are obstacles?
Obstacles: 1) Breath and complexity; 2) pace of business; 3) fear of transparency, modesty about self-promotion. 4) no powerful drivers felt

6. Some Additional EA Report Participants
Xerox—interviewed for all 3 EAs
Cargill—interviewed for first EA (drivers and obstacles)
Others—completed written survey for first EA (drivers and obstacle)

7. Why are companies (even small ones) going Green??

8. Top Reasons For Increased Focus on Sustainability by Companies (Source: 2007 Conference Board study of 16 major corporations. )
Reputation, brand
Stakeholder pressure (esp. customers)
Reduce waste (and costs), increase productivity
Employee morale, motivation and recruitment
Peer pressure (competitors, high-visibility companies)

9. Sustainability Issues in Tough Economic Times
Financial viability of the organization, its suppliers and key customers
Waste/energy reduction (cost)
Cost-efficient products
Employee relations, safety
Ethics
Support for the unfortunate

10. Two Benefits for Organizations in Proactively Seeking Sustainability
Long-term financial viability
Loyalty of key stakeholders
DuPont, Dow and 3M saved $1 billion from P2
GE $50 million from safety, Intel $30 mil from contractor safety programs.
Baxter $800 million cumulative over 12 years
Raytheon saved $10 mil in electricity costs in 2007 from energy reduction efforts

11. Business Needs the Loyalty of Key Stakeholders to Be Successful
Other
Companies
Investors
Our
Company
Government
Communities
Carbon Disclosure Project
Customers
Rating
Groups
Activists
General
Public

12. Building Stakeholder Loyalty
Transparency
Credibility
Stakeholder
Loyalty
Stakeholder
Engagement
Strategic communications (reporting; engagement); no “greenwash”
Working in the “discomfort zone” on the toughest issues
“See ourselves as others see us”
Econ, Env, Soc
Performance

13. Large corporations are beginning to see the strategic importance of sustainability.
e.g., Wal-Mart vice president of strategy & sustainability, 2005; senior vp, 2007
Some years ago a McKinsey study funded by Wal-Mart showed it had lost 8% of shoppers due to its bad social and environmental reputation
Company also began to see they could drive down costs while boosting green reputation.
2007 made position senior vp.

14. Wal-Mart Packaging Initiatives
Environmental Sustainability Packaging Summit
45 major packaging suppliers
2,000 attendees
Sustainable Packaging Value Network
200 global packaging leaders from government, academia, NGOs, and industry
5% Packaging Reduction Goal
60,000 suppliers
$11 billion savings ($3.5 billion to Wal-Mart)

15. 1. Organization Often led by vp or director
Special sustainability/CSR function (Av, JP, Al, Ab)
EHS (BMS, DC, H)
Pubic Affairs/Communications (CC, P)
EHS and Communications (Bx, FP)
Most CEOs take an active role (esp., CC, Al)
Multifunctional team
Formal (strategy, reporting, goal setting) (Bx, CC, JP, H)
Hybrid with multiple teams (BMS)
Exec Committee (Av)
Informal (reporting) (Others)

17. 2. Mission, Vision and Values
Policy
Bristol-Meyers Squibb Pledge
UN Global Compact (Al, CC, P)
Model Sustainability Policy (EA 260—16 companies)
Broad areas of focus
Coke’s Manifesto for Growth (“5Ps”)
JC Penney “CARES”
“Alcan 8” priorities
Hospira’s 5 sustainability areas of focus
Baxter’s 3 sustainability areas of focus
Coke: people, portfolio, partners, planet, profit
JC Penney: community, associates, responsible sourcing, environment, sustainable products

18. What is sustainability??

19. General Definition of Sustainability 2R’s (Blackburn 2007)
Respect: respect for people and other living things
Resources: the wise use of economic and natural resources
---for the purpose of furthering the long-term well-being of the organization and society.
Write this down:

20. Sustainable Products & Services
Improve the efficient use of natural and economic resources along the product life cycle
Provide greater respect and accommodation for the needs of people and other living things along the product life cycle

21. Sustainability vs Other Terms??
Sustainable Development
Sustainable Growth
Social Responsibility/ CSR
Corporate (Global) Citizenship
Corporate Responsibility
Green
ISO Social Responsibility

22. A Corporate Commitment to Sustainability (A Sample Sustainability Policy)
It is within the best interests of our company and society as a whole that our company move along the path to sustainability. To that end, we will strive to achieve the following vision of performance:
1. Economic success: the wise use of financial resources
a. Company Economic Prosperity
Our business is positioned to survive and prosper economically.
b. Community Economic Prosperity
We are helping our community survive and prosper economically.

23. 2. Social responsibility: respect for people
a. Respect for Employees
We treat our employees in a respectful, fair, non-exploitative way, especially with regard to compensation and benefits; promotion; training; open, constructive dialogue with management; involvement in decision-making; working conditions that are safe, healthy and non-coercive; rights of association, collective bargaining and privacy; employment-termination practices; and work-life balance.
b. Diversity, Fair Hiring Practices
We promote diversity and use hiring practices that are fair, responsible, non-discriminatory, and non-exploitative for our employees, board members, and suppliers.
c. Responsible Governance
We manage our risks properly, use our economic power responsibly and operate our business in a way that is ethical and legal.
d. Respect for Stakeholders
We are transparent, respectful and fair to local populations, investors, suppliers and other stakeholders outside our organization who may be affected by our operations. We work collaboratively with our communities, governments and supply chain to enhance the well-being of others.
e. Fair Dealing With Customers
We are honest and fair with our customers, competing fairly for their business, anticipating their needs, respecting their privacy, and providing them safe and effective products and services under the conditions we promise.

24. 3. Environmental responsibility: respect for life; the wise management and use of natural resources
a. Resource Conservation
We conserve our use of natural resources to the extent practicable.
b. Waste Prevention and Management
We reduce to the extent practicable the volume and degree of hazard of the wastes we generate from our operations, and handle them in a safe, legal and responsible way to minimize their environmental effects.
c. Environmental Risk Control and Restoration
We minimize the risk of spills and other potentially harmful environmental incidents, restore the environment where damaged by us, and enhance it to better support biodiversity.
d. Supply Chain Impacts
We work with others in our supply chain to help assure environmental impacts and risks associated with our products and services are reduced and properly controlled.
e. Collaboration With Communities
We collaborate with our communities to protect and improve the environment.

25. 3. Goal Setting & Strat Planning
Sustainability objectives issued separately from strat plans (DC, Ab)
Covered in business unit plans (Al, BMS, FP, P)
Covered directly in companywide business plan
Coke’s 5Ps frame the annual and 10-year company plans
JC Penney’s annual plan refers to CSR commitment
Baxter’s old balanced scorecard strat plan

26. Companywide Balanced Scorecard
Employee
Objectives
Build the best global team in our industry
Financial
(Investor/Lender)
Deliver significant shareholder return
Supply Chain
(Customer/Supplier)
Create sustainable
win-win
customer relationships
Citizenship
(Community/
Government)
Improve lives in local
global communities
Share talent and learning across the company to improve business results
Achieve profitable, sustainable, and capital-efficient growth targets in sales, earnings per share, cash flow and margins
Consistently evaluate and meet agreed customer and product-quality requirements
Establish the company as a community leader
Ensure frequent, open two-way feedback and communication
Invest targeted funds in R& D and capital projects to drive long-term sustainable growth while balancing short-term commitments
Continually identify unmet needs of current and future customers
Facilitate the participation of employees in their communities
Attract, develop and retain the best talent to achieve current and future results
Deliver superior shareholder returns that exceed the average for our industry
Develop and launch innovative products and services to meet customer, product-quality and financial needs
Reduce waste and achieve targeted improved efficiencies in energy, packaging and water use
Create an environment that motivates, develops and rewards individuals for living the company’s shared values and achieving results
Improve cost efficiency by achieving targets for days sales outstanding, inventory turns, and costs of supplies and travel
Increase global access to our products so as to improve the quality of lives
Ensure safety in the workplace
Increase the number of foundation grants to new organizations, especially those in new locations

27. Sustainability Issues Balanced Scorecard Objectives
Alignment of Sustainability Issues With Stakeholder-Based Balanced Scorecard Objectives
Sustainability Issues
Balanced Scorecard Objectives
Employee
Financial
(Investor/
Lender)
Supply Chain
(Customer/
Supplier)
Citizenship
(Community/
Government)
Economic
(Wise use of economic resources) X
Social
(Respect for people)
Environmental
(Respect for living things; wise use of natural resources)

28. Some Observations About Sustainability
Sustainability is not about one thing.
The business case for sustainability is really the business case for a process that looks at sustainability trends and issues and prioritizes among the opportunities and threats to an organization to select those for action that contribute the most value.

29. Common Organizational Threats & Opportunities
-Legal
-Financial
-Reputational
-Competitive
-Operational
-Productivity, cost
-Employee relations
-Reputation
-License to operate, community appeal
-Sales, new markets, customer appeal
-Innovation, new products and services

30. 40% of the World Will Live in Water-Scarce Regions by 2025
Next 40 years ave supply of fresh water will be cut by 1/3
Threatens survival and food supply, hydro power
Source: WRI, UNEP, WBCSD, Tomorrow’s Markets—
Global Trends and Their Implications for Business, 2002;
Jeff Seabright, Coca Cola Presentation, TCB, May 31, 2007.
<0.5
4.0-10
>10
Extreme
Scarcity
Scarcity
Stress
Adequate
Abundant
Surplus
Ocean/
Inland Water
No Data
1000 m³/person/year

31. Sample SWOT Analysis for Sustainability Issue: Water
Threat
Opportunity
Strength
Weakness
Possible Objectives
Depletion of Fresh Water Resources
1. Water
shortage
could
jeopardize
operations
2. Some
competitors
have long-term
water rights
conservation
projects can
save money,
help secure
supply
2. More on-site
water treatment
and reuse
are possible
3. May be able
to secure long-
term water rights
in some
locations
1.Some water
projects
underway
2. Internal
engineering
expertise
1. No long-term water rights secured in some growth regions
2.Some communities serving our factories have poor water supply infrastructure
1. Investigate water risks on site-by-site basis and develop actions to address them
2. Consider more aggressive water treatment, reuse and conservation programs using internal engineers
3. Explore securing long-term water supplies in high risk areas while respecting community needs

32. Sustainability Trends: Conditions and Responses
Opposition to Globalization
Extended Producer Responsibility
Green Products
Green Marketing/Labeling
Green Product Certification
Rise in Socially Responsible Investing
Investor Concerns about Corporate Governance
Increased Demands for Transparency/ Public Reporting
Growing Power of NGOs/CSOs
Increasing Global Terrorism
Over-consumption of Resources
Obesity; Poor Food Nutrition
Fossil Fuel Depletion
Climate Change
Deforestation
Threats to Biodiversity
Fresh Water Depletion/Water Contamination
Wetlands Destruction
Fish Depletion
Coral Reef Destruction
Spread of Hazardous Pollutants
Declining Soil Quality
Ozone Depletion
Declining Corporate Credibility
Growth in Global Business Competition
Speed of Communications/ Digital Divide
Widening Prosperity Gap (Health, Income, Services)
Population Growth
Serious Disease
Mental Health Problems
Increased Immigration; Lower Fertility in Industrialized Nations
Hunger and Malnutrition
Child and Forced Labor
Education Needs for the Disenfranchised
Urbanization
No of TNCs jumped 10x in 30 years
51 of world’s largest companies aren’t countries but companies
10% have access to internet; 50% haven’t used a phone
Extended Producer Resp: proactively control risk; hazards info, responsible for harm; take back
Light brings heat brings change; surge in reporting; stockholder resolutions
150% increase in International NGOs in 20 years

33. How do these sustainability trends affect organizations??

34. Sustainability Trends Drive Response (and Goals) of Organizations
Climate Change
Fossil Fuel Depletion
Energy Conservation
Carbon Footprinting
Recycling
Recycled Content
Dematerialization
Over Consumption
of Resources
Changing Population
Profile
Diversity Programs

35. No. of Companies with Goals on Subject Per Conf Bd. Study (total=11)
Source: W. Blackburn, Frameworks for
Integrating Citizenship and Sustainability…,
Report 1446, (2009), available at

36. 4. Deployment, Integration, Alignment & Accountability
Developing and testing rollout tools
Field implementation
Integration — building the new into the familiar

38. 4. Deployment, Integration, Alignment & Accountability
Developing and testing rollout tools
Field implementation
Integration — building the new into the familiar
Alignment —balancing organization-wide consistency with cultural accommodation

39. Baxter-did with management systems

40. 4. Deployment, Integration, Alignment & Accountability
Developing and testing rollout tools
Field implementation
Integration — building the new into the familiar
Alignment —balancing organization-wide consistency with cultural accommodation
Accountability —connecting execution with personal objectives
Clear objectives, transparency on performance, and consequences—rewards and pain

41. 5. Management Systems EHS: ISO 14001 (Ab, H, FP) and OHSAS 18001
Mandatory certifications by Al, Bx
EHS and quality (P, CC)
EHS and security (DC)
EHS and product responsibility (BMS)

42. Continual Improvement Cycle
(Sustainable quantum leap in performance?)
Collect Data to
Measure Performance
Implement
Plan
Identify Strengths
and Gaps
Benchmarking and stakeholder engagement for quantum leap.
Plan Priorities for
Addressing Gaps
Report Data
Solicit Stakeholder
Feedback

43. Majority Use Global Reporting Initiative Sustainability Reporting Guidelines
Global multistakeholder
consensus
Model indicators/metrics
Reporting process

44. Seven Reasons Why Management Systems Fail to Deliver Superior Performance
Management issues
Organization is not really interested in gaining performance improvement.
System focuses on continuous improvement rather than absolute performance versus benchmarks (“sustainable quantum leaps”).
Management is lulled into believing its certified management system can operate with little help and excessively cuts number or skill-level of those administering it.

45. Seven Reasons Why Management Systems Fail to Deliver Superior Performance
Evaluator (auditor) issues
Evaluators over-emphasize documentation, under-emphasize field interviews aimed at the effectiveness of deployment down at the point of decision-making and action.
Evaluators judge the system on what it is likely to provide, not what it has consistently provided.
Evaluators lack good professional judgment of system outputs (compliance, risk management, productivity).
Evaluators fail to spot and address overarching root causes for inadequate performance.

46. 6. Stakeholder Engagement
Surveys and questionnaires
Workforce surveys (nearly all)
Customer surveys (JP, DC, Av)
Supplier questionnaires (many)
E-tools
Employee blog (CC)
Stakeholder webcast (Ab)
Engagement processes
CERES multi-stakeholder engagement (Bx, CC)
Formal community engagement processes (Al, FP)
Advisory boards
Employee (P)
Community advisory panels (P, DC)
Other external stakeholder advisory boards (CC, Bx)
Director of stakeholder engagement (CC)
Nearly all are strengthening.

47. 7. Partnerships with NGOs and Government
Healthcare (Ab, BMS, P, Bx, H)
Water (CC, FP), climate change (Al, Bx, BMS)
Employee volunteerism (P, H, Av)
Education on relevant skills (Al, Bx, DC, FP)
EPA voluntary programs (Bx, BMS, P, JP)
Customer-oriented partnerships (JP, FP, H, BMS, Bx, CC)
Supplier-oriented partnerships (Av, CC)
Healthcare: AIDs programs
Volunteerism: P sponsors employees to assist NGOs in 30 countries
FP: works with colleges to prepare disadvantages people for jobs with utilities
EPA: Energy Star, Green Supplier Network, Climate Leaders, SmartWay Transport Partnership
Customer partnerships: JP After School Roundup, to fund after school programs for needy children
Supplier: Aveda gets natural ingredients from indigenous tribes; teams w/ NGOs and others to help make their communities sustainable

48. 8. Supply Chain Programs Risk-based programs Approach
Requirements or guidelines document (supplier codes of conduct by 8 of 11)
Evaluation process
Questionnaires (Bx, BMS); self assessments (DC, JP)
Expert site evaluations (BMS, Ab, CC, Av, JP, CC)
Communications and networking forums (Bx, JP) and CSR awards (JP)
Downstream collaboration (Av-spas, CC-bottlers)
Downstream: Aveda spas during Earth Month;
CC, bottlers council, standards, metrics, community programs , report

49. Putting It All Together
Visible top management support
Effective, operational or functional champion/leader
Good teamwork
Vision of what is to be achieved
Desire to continuously improve
Integration into plans, policies and procedures, practices and decision-making
Staying current on emerging issues
Connecting with internal and external stakeholders (employees, communities, customers, NGOs, governments)

50. The Sustainability Handbook– The Complete Management Guide to Achieving
Social, Economic and Environmental Responsibility (order thru
The Drivers
The Efficient Enablers
The Pathway
The Evaluators
A champion/leader with mgmt support
Approach for selling the organization on sustainability
Accountability mechanisms
Organizational structure
Deployment and integration
Vision and policy
Operating system standards
Strategic planning for aligned priorities
Indicators and goals
Measuring and reporting progress
Stakeholder engagement and feedback

51. William Blackburn Consulting, Ltd.
Web:
Phone:
Book: The Sustainability Handbook—
The Complete Management Guide
to Achieving Social, Economic and
Environmental Responsibility
(See Web site)