1. Sustainability-Related Risks and Opportunities for Business Bob Willard www.sustainabilityadvantage.com Business Education For the Long Run April 23, 2004

2.  Terminology / Stages  Emerging Business Risks  Emerging Business Opportunities  The catch  7 benefit areas  What if’s Agenda

3. Economy / Profits Sustainable business  Profits  Taxes, R&D  Jobs  Expenditures  Training  Fair trade  Core values Terminology Environment / Planet Eco-Efficiency  Manufacturing efficiencies  Operations efficiencies  Product efficiencies  Smart design  Cradle-to-cradle, take-back  Beyond compliance  Restorative to nature Equity / People Ethical business Internal employees  Human rights  Health & Safety  Empowerment  Respect, Caring Local community Rest of the world Sustainable Development (SD) Corporate Social Responsibility (CSR) Sustainability Triple Bottom Line (TBL) 3Es / 3Ps Corporate Responsibility (CR)

4. 5 Sustainability Stages 5. Purpose / Passion ------------------------------- 4. Integrated Strategy 3. Beyond Compliance 2. Compliance 1. Pre-Compliance

5. 5 Sustainability Drivers 3 First Wave Drivers 1.Founder / CEO’s personal passion … values based 2.PR crisis … reputation / brand value / image hit 3.Regulatory pressure... actual or threatened 2 Emerging Drivers 1.“Perfect Storm” of threats to license to operate 2.Compelling, relevant business case

6. “Perfect Storm” of Business Risks 10 Market Forces 5 Business Risks 5 Mega-Issues5 Demanding Stakeholders Climate ChangeGreen Consumers Market Risks Balance Sheet Risks Operating Risks Capital Cost Risks Sustainability Risks + Difficult access to capital Pollution & Health Activist Shareholders Globalization Backlash Civil Society / NGOs Energy Crunch Government Regulators Erosion of TrustFinancial Sectors

7. 10 Market Forces 5 Mega-Issues5 Demanding Stakeholders Climate ChangeGreen Consumers Pollution & Health Activist Shareholders Globalization Backlash Civil Society / NGOs Energy Crunch Government Regulators Erosion of TrustFinancial Sectors Sea Change Of Rising Expectations

8. A Perfect Storm … of Opportunities Innovation Productivity Growth Brand Image Competitive Advantage $aving$ Revenue Business Value 10 Market Forces 5 Mega-Issues5 Demanding Stakeholders Climate ChangeGreen Consumers Pollution & Health Activist Shareholders Globalization Backlash Civil Society / NGOs Energy CrunchGovernment Regulators Erosion of Trust Financial Sectors

9. Potential profit increase: 38% + Energized employees + Improved corporate image + Competitive advantage + Positioned for the future Benefits to “SD Inc.”

10. 1. Show senior leadership  Include SD in vision / mission / strategies  Avoid “green-washing” hype  Visibly support SD: speeches, questions, actions 2. Educate the whole company  Visibly sponsor and support the sessions 3. Establish an “SD Profit Center”  Led by a top person  Reinforces that it is business strategy vs. a compliance or philanthropy issue The Catch

11. 1.Reduced recruiting costs 2.Reduced attrition costs 3.Increased employee productivity 4.Reduced expenses in manufacturing 5.Reduced expenses at commercial sites (energy, water, consumables) 6.Increased revenue / market share 7.Reduced risk, easier financing 7 Benefit Areas Usual focus

12. 1.Reduced recruiting costs -1% 2.Reduced attrition costs -2% 3.Increased employee productivity +10.5% 4.Reduced expenses in manufacturing -5% (-2.5%) 5.Reduced expenses at commercial sites -20% (energy, water, consumables) 6.Increased revenue / market share +5% 7.Reduced risk, easier financing -5% 7 Benefit Areas … % Improvement … yielding a Profit increase of +38%

13. 7 Benefit Areas … Relative Sizes

14. 1.Reduced recruiting costs -1% 2.Reduced attrition costs -2% 3.Increased employee productivity +10.5% 4.Reduced expenses in manufacturing -5% (-2.5%) 5.Reduced expenses at commercial sites -20% (energy, water, consumables) 6.Increased revenue / market share +5% 7.Reduced risk, easier financing -5% 7 Benefit Areas … % Improvement … yielding a Profit increase of +38%

15. 1.Reduced recruiting costs -1% 2.Reduced attrition costs -2% 3.Increased employee productivity +10.5% 4.Reduced expenses in manufacturing -5% (-2.5%) 5.Reduced expenses at commercial sites -20% (energy, water, consumables) 6.Increased revenue / market share +5% 7.Reduced risk, easier financing -5% What if … … yielding a Profit increase of +38% +2% +35%

16. 1.Reduced recruiting costs -1% 2.Reduced attrition costs -2% 3.Increased employee productivity +10.5% 4.Reduced expenses in manufacturing -5% (-2.5%) 5.Reduced expenses at commercial sites -20% (energy, water, consumables) 6.Increased revenue / market share +5% 7.Reduced risk, easier financing -5% What if … … yielding a Profit increase of +38% +4% +23%

17. 1.Reduced recruiting costs -1% 2.Reduced attrition costs -2% 3.Increased employee productivity +10.5% 4.Reduced expenses in manufacturing -5% (-2.5%) 5.Reduced expenses at commercial sites -20% (energy, water, consumables) 6.Increased revenue / market share +5% 7.Reduced risk, easier financing -5% What if … … yielding a Profit increase of +38% +2% +4% +20%

18. Sustainability-Related Risks and Opportunities for Business Bob Willard www.sustainabilityadvantage.com Business Education For the Long Run April 23, 2004

19. 5 Inhibiters to Next Wave 1. Lack of support from senior leaders  Too busy … doing enough … too shy … not our problem … too hard to change … credibility issue 2. Fear of backlash  Green-washing accusations … open the floodgates … guilt-by-association … skeletons in our closet 3. Lack of pressure from important people  Boards … investors … customers 4. Weak business case  WIIFM … short-term … perverse subsidies … payback period 5. Mindset  Negative baggage … insulting … MBA legitimacy

20. 5 Signs of Hope 1.Awakening financial markets 2.Sustainability reporting advances 3.B-school attention Beyond Grey Pinstripes … Net Impact 4.Shareholder activism 5.More compelling business case + sustainability indicators in GDP

21. Mental Models Typical business viewSustainable view