2013 Zedare Consulting 2013 Zedare Consulting SUSTAINABILITY & THE TRIPLE BOTTOM LINE IMPACT: HOW TO BEGIN Veda Ferlazzo Clark Zedare Consulting www.zedare.com VFClark@Zedare.com 617-428-3808 This whitepaper discusses the origins of sustainability planning and how to start in your company. See also 5-Step Sustainability Planning Process. 2013 Zedare Consulting
Sustainability & the Triple Bottom Line Impact: How to Begin Why Sustainability Planning? The need for corporate sustainability planning has gone far beyond obviously important environmental concerns. There is a clear business case evolving related to customer acquisition and maintenance, employee retention, and community involvement. For S&P 500 companies, the Governance Accountability Institute reports... over the longer time period, companies that manage their Sustainability/ESG (Environmental, Social, Governance) and report on their progress and initiatives tend to perform better in the capital markets and appear to be given a premium by investors. (See Exhibit 1.) It is helpful to be aware of the history and framework to understand the issue from the public company standpoint. In the mid-1990s, John Elkington (http://www.johnelkington.com/), a world authority on corporate responsibility and sustainability, originated the term the Triple Bottom Line or the 3Ps (profit, people, planet). This concept measures profits and shareholder value, and includes environmental and social costs and impacts. This has become an important tool for large companies and has provided the basis for ESG reporting. Worldwide standards have evolved through the Global Reporting Initiative (https://www.globalreporting.org/pages/default.aspx) begun in 1999, with the support of the United Nations Environmental Programme. More than 4000 companies from 60 countries follow the GRI Guidelines. 2012 appears to have been the tipping point for sustainability reporting for public companies. According to the Governance Accountability Institute s 2012 Corporate ESG/Sustainability/Responsibility Reporting Analysis, 2012 was the first year that over 50 percent of the S&P 500 companies reported on sustainability issues, compared to 20 percent in 2011. This significant change has implications for small to mid-sized private companies who aspire to be or are already in the supply chain for public companies. The Global Reporting Institute reports: Although SMEs are usually exempt from regulation, there has been a notable increase in the voluntary uptake of reporting by them. Sustainability reporting is perceived to enhance SMEs position in the market, for instance allowing access to multinationals supply chains. Some multinationals request suppliers to report on sustainability. (Carrots and Sticks, The Global 2013 Zedare Consulting info@zedare.com 617-429-3808 www.zedare.com 1
Reporting Institute, 2013.) In other words, in order to remain competitive, it is critical to have a Sustainability Plan as part of your strategic and annual planning process. Developing Your Sustainability Plan Deciding that your business is going to have a sustainability plan is an important first step. Developing your company s first sustainability plan does not have to be an overwhelming task. Approach your sustainability planning from the standpoint of continuous improvement journey: Where are we now? Where do we want to go? How will we get there? Develop a base plan and then work to improve on it every year as part of your annual planning process. Start by identifying current practices that have significant environmental or social impacts. Then, identify your sustainability objectives and how they have an effect on your business. Finally, develop the metrics to measure where your company currently stands and how much and how quickly you want to improve. Your customers and employees will help you ensure that your sustainability plan becomes an integral part of your business strategy and planning. Elements of the Plan Your sustainability plan should include the following elements: a vision and desired results; strategies appropriate for your company and industry; current environmental and resource impacts; stakeholder involvement; an action plan with targets, budgets, and timelines; and reporting to key stakeholders. Vision and desired results: Consider the vision a work in progress. It needs to long-term and expansive enough to make a difference. The vision could be very aggressive or might begin more modestly. As an example, Caterpillar sets forth an aggressive position in their vision statement (Caterpillar 2012 Sustainability Report). 2013 Zedare Consulting info@zedare.com 617-429-3808 www.zedare.com 2
Deloitte (Deloitte Fiscal 2011 Corporate Responsibility Report Our Shared Journey) puts forth a broad vision, tied to their strategic plan. Strategies for achieving results: There are many issues to consider in each of three arenas. E - environmental and energy issues S - social and/or societal issues G - traditional and emerging corporate governance issues, which intersect with economic issues All elements are required by the Global Reporting Initiative (GRI) Guidelines. Comprehensive plans will have some elements of each. Depending on your current practices assessment, customer base, various stakeholder groups, your plan may include some elements in each category. Environmental/resource impacts: Environmental and resources impacts are often the easiest areas to identify and address. Assessment your company s baseline practices to understand your company s biggest impacts and areas for improvement and them measure improvement over time. Consider some of the following areas as outlined by GRI: Materials: Total materials used by weight or volume and environmental impact. Percentage of materials used that are recycled input materials. Energy: Direct energy consumption by primary energy source. Energy saved due to conservation and efficiency improvements. Initiatives to provide energy-efficient or renewable energy based products and services, and reductions in energy requirements as a result of these initiatives. Water: Total water withdrawal by source and significant impact. Percentage and total volume of water recycled and reused Emissions, effluents, and waste and initiatives to reduce: Total direct and indirect greenhouse gas emissions by weight. Emissions of ozone-depleting substances by weight. NOx, SOx, and other significant air emissions by type and weight. Total water discharge by quality and destination. Total weight of waste by type and disposal method. Total number and volume of significant spills. 2013 Zedare Consulting info@zedare.com 617-429-3808 www.zedare.com 3
Products and services: Initiatives to mitigate environmental impacts of products and services. Percentage of products sold and their packaging materials that are reclaimed Transport and initiatives to reduce: Significant environmental impacts of transporting products and other goods and materials used for the organization's operations, and transporting members of the workforce. For a complete list of ESG performance indicators, see The 5-Step Sustainability Planning Process. Stakeholder engagement: Your stakeholders want to help decide your areas of focus. Customers, vendors, employees, shareholders, and community all have ideas about what your company s plan might include. Engaging some or all of them in the process will help establish and prioritize key areas of focus. Engaging employees by creating a planning team, with senior leadership support, to set the direction, create the plan, and champion the efforts will help ensure the plan will be implemented. Dow Chemical has taken an expansive approach to stakeholder engagement (Dow Chemical 2012 Sustainability). Action plan, including metrics and budget: Action plans include specific targets and plans for all ESG strategies that are appropriate for your company and industry. As an example, for energy efficiency initiatives that will have a positive effect on your profitability, a plan might be comprised of the following: Area Current Annual Assessment 2014 Target 5-Year target Natural Gas Consumption 586,000 cubic ft Reduce by 4% Reduce by x4% Energy Use xxxx kwh Reduce by x% Reduce by xx% Water Use xxx gallons Reduce by 5% Reduce by x5% Waste Generation xxx tons to landfills Reduce by 10% Reduce by x10% Recycling Toxins Transportation of employees xxx tons office materials Reduce by 3% Reduce by x3% xxx lbs Greenhouse Reduce by Reduce by 300,000 Gas Emissions 100,000 lbs lbs annually xxx single occupancy mileage Reduce by 5% Reduce by x5% Product transportation xxx miles/revenue $ Increase 5% Increase by x5% Planned FY 2014 Actions Process improvement Renewable energy Recycle process water for reuse Composting programs Paper Elimination Program Process improvement Commuter program Packed Weight reduction Responsible Party Joe Smith Joe Smith Budget 2013 Zedare Consulting info@zedare.com 617-429-3808 www.zedare.com 4
PwC had set a goal of reducing their carbon footprint by 20% by 2012, and met that target in 2011. (PwC 2012 US Corporate Responsibility Update) 2013 Zedare Consulting info@zedare.com 617-429-3808 www.zedare.com 5
Heineken has set some targeted goals in four specific areas (Heineken Sustainability Report 2012). 2013 Zedare Consulting info@zedare.com 617-429-3808 www.zedare.com 6
Staples has set targets such as these (Staples Soul 2012): It may be that your initial focus is environmental issues. Or, you may need to address social issues if your manufacturing is outsourced. Depending on your industry, governance and transparency issues may be important to your customer base. Other plans may include such things as a review of vendor practices; a review of materials used in your products to identify more sustainable options; community activities; or more clarity in reporting to stakeholders. Clear Imperative for Sustainability Planning There is a clear imperative for every company to engage in sustainability planning. The social, economic, and environmental benefits outweigh the small burden on your company. And, once you have started, this may become the simplest piece of your planning process. 2013 Zedare Consulting info@zedare.com 617-429-3808 www.zedare.com 7
EXHIBIT 1 2013 Zedare Consulting info@zedare.com 617-429-3808 www.zedare.com 8