The big trends in sustainability for the next 24 months

Monday, February 06, 2012

18:00 - 20:30

Sustainability is fast-changing at the best of times, but the increasingly volatile economic conditions are adding a level of complexity to decision-making. As carbon slips down the agenda, resource scarcity and other factors are creating a range of new business models.

The February Forum looked at the big trends that will take sustainability into the board room over the next 24 months.

We had an expert panel made up of Unilever, BMW and Triodos Bank, with a strategic overview from Green Order’s Andrew Shapiro, and an audience of 160 people in London. The final vote found that it is “innovation in business models” that will lend the most importance to sustainability. 

The. speakers and topics:

- Organisations that understand how to collaborate will thrive - Karen Hamilton, Vice President, Sustainability, Unilever

- Sustainability is becoming the prime driver of innovation  - Dr Thomas Becker, Vice President of Government Affairs, BMW AG

- Organisations with social purpose are aligned with the emerging paradigm - Charles Middleton, Managing Director, Triodos Bank

- An overview of the relative strengths of the different drivers, with an “across-the-pond” twist - Andrew Shapiro, Founder and Partner, GO Ventures

Speakers

Andrew Shapiro GreenOrder & GO Ventures

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Charles Middleton Triodos Bank

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Dr Thomas Becker BMW Group

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Karen Hamilton Unilever

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Round Tables

Built Environment

As we move from mitigation to adaption, how should property owners adjust strategy? Chaired by Stefania Rosso, Senior Sustainability Consultant, SGS

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'CHALLENGES'
- Longer term flooding risks need to be considered - longer than business cycle
- Retrofit existing assets
- Short term holding buildings do not take into consideration adaption measures
- Needs some policy to drive change
- Implementation of adaption measures is more limited in existing assets but we do have fantastic examples of old buildings adapting to climate change

'SOLUTIONS'

- Buildings that flood when they're flooded
- Flash flooding - buildings required to have retention tanks to hold x% storm water
- Businesses considering adaption protect value of property - mitigation usually only benefits occupiers
- Include in decision making - ' what if energy price is 10x more expensive?' - may be more cost effective.

'RED FLAGS'
- Increased insurance premiums. Increased flood risk
- Energy performance certificate. Only a label?

'EXAMPLES'
- Vernacular architecture e.g British army building with high ceiling in 1940 in singapore
- Massive cooling systems eg. Toronto
- Innovative cooling systems developed by Arup

Supply Chain

Does resource price volatility build a case for shorter supply chains? Chaired by Paul Murphy, Sustainability Solutions Manager, PE International

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Resource price volatility is on the radar of senior executives. Ernst Young stated that in the first half of 2011 approx. 29% of profit warnings in the UK were due to resource price volatility compared with 15% in the same period of 2010. According to the Big 5 this issue is due to increase over the next 5 years. Our topic was to look at the correlation between resource price volatility and shorter supply chains.

We wanted to clarify the definition of “resource” – raw materials, energy, water, food and land and the drivers for price volatility -population growth, increased consumption, exhaustion of reserves, lack of substitution, natural disaster and geo political – conflict.

This highlighted the fact that price volatility is part of a wider issue of resource scarcity which has the following dimensions:
• Physical – with resources being not accessible: a depletion of reserves
• Economic - Price volatility due to market developments
• Geopolitical - Export controls / barriers and conflict regions

When considering resource price volatility and shorter supply chains, price volatility is not the only decision factor. A shorter supply chain will not necessarily provide the risk management needed. The starting point is for any organisation to have a clear understanding of the resource risks that apply to its supply chain. The main points of our discussion, the challenges and opportunities are highlighted below.

In conclusion the important questions to ask are how is your organisation going about understanding your supply chain, what risk indicators do you have in place, how are they being measured, how do you introduce life cycle thinking across the organisation and how is the agenda of sustainability and sustainable supply chains being embed within the organisation. Without this information it can be very difficult to manage any of the risks associated to price volatility let alone resource scarcity.

'CHALLENGES'
- Control of risk exposure/costs - by controlling s/chain. Being vertically integrated
- Use agriculture in non-food items, influences cost
- Influence of hedge funds/ investment decisions
- Premium cost of sustainability - customer needs to be willing to absorb costs
- Able to align interests to numerous suppliers to deliver sustainability and to collaborate to invest in sustainability up front
- Small suppliers access to market information
- Sufficient in house info about material in own s/chain? Able to adapt?
- LCA often deemed too complex and expensive
- Able to cost carbon for business plans/able to understand future liabilities
- Risk management, ensure cross-functional approach required
- Lack of understanding of some sectors eg. Electronics of their supply chain e.g complex make up of a circuit board

'SOLUTIONS'
- Olam and Nestle - joint investment in sustainable project so Nestle invests in the outcome by paying upfront rather than paying premium for end product.
- Olam bought products of their Ag commodities to shorten their supply chain. Decreases risks from resource price volatility
- InterfaceFLOR invested with a supplier in improving environmental profile of a thread - increased market opportunity for both if they get it right.
- Increased traceability of supply chain and carbon costs by Olam. Future proofing the business. Price reduction, cost reduction

'RED FLAGS'
- Transactions aren't just about price
- Don’t always focus on the negatives, look for opportunities to collaborate.
- Don’t just let procurement managers have the conversations. Involve business managers to create fusion.

Carbon Strategies

How do you keep carbon on the corporate agenda in a recession? Chaired by Mark Chadwick, CEO, Carbon Clear

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In the current climate of economic uncertainty, with a recession around the corner, many organisations are re-evaluating their priorities. Our table discussed the threat to carbon management resulting for shifts in priority, and the techniques that will help keep climate change programmes in the budget.

'CHALLENGES'
- Lack of exec/team buy in
- Not top of mind for customers
- Price of carbon/resources not high enough to drive change
- Lack of legislature, long term clarity
- Carbon not aligned with core biz model
- Competition resources e.g time, cash, people

'SOLUTIONS'
- Reputation/brand enhancement
- £ saver
- Innovation + value chain involvement
- New markets, new products

'EXAMPLES'
- BMW i-series products are cool!
- B&Q innovative products and solutions and exec leadership

'RED FLAGS'
- Falling oil price will halt/slow innovation in carbon management
- Rely on policy/the market to be the only drivers

Finance & Corporate Sustainability

How can stakeholders get the transparency they need about sustainability strategies? Chaired by Joe Flanagan, Principal Consultant, CICS

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There was a general consensus that the discussion topic was too narrow with the majority of stakeholders more concerned with the actual outcomes rather than the strategy itself. All agreed that transparency was a crucial aspect of any sustainability strategy and reporting but many of the contributors had experienced problems in developing a universal message suitable to all stakeholders; too much detail was discouraged some audiences and too little invited questions and suspicion from others. General conclusion was that a wide variety of messages and methods of delivery were required; from a detailed CSR report available on a corporate website to more ‘conversational’ approach through social networking media.

'CHALLENGES'
- Sustainability information is of interest to investors who are in it for the long term - challenge in the short term focus of many investors
- Consistency in discolsed data across organisations - cant compare!
- Diversity of stakeholder interests
- Need to ensure that context is understood whew KPI's are reported

'SOLUTIONS'
- Demonstrating value creation from investment in sustainability - new markets
- Understand the corporate vision and develop sustainability policy to support the delivery of this vision

'EXAMPLES'
- A good test of sustainability being imbedded is how far it is covered in the directors report not first in the sustainability report
- Key stakeholders can define the KPI's that they want to see. E.g MOD require quarterly sustainability KPI reports in common format from industry partners

'RED FLAGS'
- Too much disparate information in reports

Communications

How important is a social media strategy to sustainability?

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We discussed the role of social media in delivering sustainability strategies. Most participants still felt themselves somewhere near the bottom of the learning curve – joining conversations, broadcasting less newsy content, and managing feedback. More sophisticated use of social media is still rare – many corporates seem unsure why they are doing it, are flailing around with unsustained or unsustainable strategies, and have the derelict facebook pages and ultra-boring twitter feeds to prove it. Pointers? Think about using issue trackers to identify entry points; don't bother trying to go viral by being wacky; go where the relevant conversations already happen; and consider social media for employee engagement.

'EXAMPLES'
- Nestle have auto-response to certain terms seen on Twitter
- Coca-cola have certain people respond on Facebook - Not Faceless!
- Virgin used social media for communicating weather challenges - Appreciated!
- Pepsi uses facebook to determine where they should invest their money - Voting!

'RED FLAGS'
- Nestles - Beward of 'backfire' - e.g Kit Kat. Be very aware of purpose (recovery: very professional, factual)
- Don't make the messages too branded, make it natural
- Avoid 'film' it rarely works. No one wants to watch/click a corporate film….unless a trailer displaying the length
- Don't use as an incentive/competitions feel a bit of a sell out. There is a balance.
- Balance of internal/external use. Alignment. Personal/business merge
- The challenge of managing the senior team: if they love social media too much
- Has to be authentic - not made up. It has to be real to work - or does it?!
- Legal risk - responding/representing the company.

'SOLUTIONS'
- IHG - (Holiday Inn etc) - CR Facebook page invaluable for stakeholder/audience identification.
- Nestle - Green Peace palm oil response (clooney viral etc)
- Standard Chartered - Photo Contest found to be more effective than video
- Coca-Cola - 'Personalised' responses to Facebook posts, real-time responses

Technology

What are the 10 technologies that make the most commercial and environmental sense? Chaired by David Frise, Head of Sustainability, HVCA

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We had a brief discussion on the plenary session speakers. The question was asked is sustainability easy if you have a strong balance sheet and powerful market position?

Our question was what are the 10 technologies that make the most commercial and environmental sense?

Energy seemed to be a particular pertinent area with;

• Nuclear and coal with Carbon Capture put forward as important because of the requirement for base load
• Energy storage to take advantage of renewables
• Bio fuels – but policy problems and always likely to cause displacement of food growth
• Tidal – as predictable
• Shale gas – right or wrong likely to play a part
• Fuel cell – always 3-4 years away
• Smartgrid
• Smart bundling – different industries sited together to aggregate loads where no infrastructure

Food
Important to be able to preserve food in a non refrigerated environment to reduce food waste
• Packaging technology – modified atmosphere technology for food preservation
• Radiation
• Multi layer packaging

Electronics – Do you extend life or make new products more energy efficient?

Computing
• Cloud
• Virtualisation

'CHALLENGES'
- Food Production
- Energy storage.
- Government policy
- Energy baseload
- Accounting/measuring sustainability
- Carbon Capture

'SOLUTIONS'
- Modified atmosphere packaging. Irradiation
- Tidal power generation
- Smart Grid. Virtualisation of IT servers - cloud
- Cloud computing (consolidation of services vs efficient data centres

'RED FLAGS'
- Consumer indifference

Energy Effeciency

What are the most exciting developments in energy efficiency strategies? Chaired by Simon Brown, Senior Account Manager, MITIE

Corporate Strategies

How should companies be measuring the value of their sustainability strategies? Chaired by Doug Johnston, Ernst & Young

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Companies today realise that a sustainability strategy can add value to their organization if they get it right. Whether it is through improving brand, managing risk more effectively, new revenue opportunities or ensuring compliance, sustainability now plays a role in most organizations. But how do companies know if they are succeeding or indeed delivering on their stated aims and objectives? How do those responsible for their organizations sustainability strategy communicate progress, both internally and externally? Fundamentally this is a question of measuring organizational value, which is why we asked, 'How should companies be measuring the value of their sustainability strategies?'.

'CHALLENGES'

- How to recognise non-financial value - e.g brand
- Not to undermine principles of sustainability
- Aligning sustainability objectives with business objectives
- Being able to measure non-financial objectives
- Incorporation of sustainability metrics into existing industry metrics for brand
- Balancing risk associated with sustainability and cost
- Allocation of limited capital between sustainable and non-sustainable projects.

'SOLUTIONS'

- Increasing value prior to IPO launch
- Using current/existing language to facilitate understanding

'RED FLAGS'

- Implementing initiatives without setting KPI's

'EXAMPLES'
- 37% of sales from innovative products. Beckitt, Benckiser
- New economics foundation - developing new measurement criteria
- 80% reduction in waste saved £2m
- British Airways - Green Fund

Energy Policy & Strategy

How can an organisation deal with rising energy costs whilst core business is in decline? Chaired by Caroline Pitt, Director Carbon Services, Utilyx

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This roundtable discussed how organisations can deal with rising energy prices. Reducing consumption reduces bills and exposure to changing prices. However, delivering reductions is easier said than done; common barriers are around achieving: senior level buy-in; funding technologies; and sustaining behavioural change. Approaches like share-of-savings contracts could help overcome financial barriers and onsite or renewable generation could give the organisation more control over its costs. However, there is often reluctance to try new approaches because they are considered too risky, an objection that can be particularly hard to overcome where energy is only a small proportion of operational costs.

'CHALLENGES'
- Risk aversion - concern over trying new ideas
- Lack of senior level engagement eg. Due to size of energy bills
- what to do to convince stakeholders sustainability = efficiency

'SOLUTIONS'

- Collaboration to build trust over time and introduce new ideas and innovations
- Improved data and meeting to inform decision
- Find meaningful route to easy engagement to change behaviour

'EXAMPLES'
- Refit model - TFL and Honeywell share of savings contract

Resource Efficiency

How can government stimulate innovation? Steve Creed, Director, WRAP

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The discussion highlighted the challenges that government face in striking the right balance between short-term political motivation and maintaining a long-term direction of travel when trying to stimulate innovation. The group felt that Government interventions/initiatives need to be clearly targeted, timely and consistent to be effective. The recent feed-in tariffs changes were highlighted as a poor example. Other topics discussed ranged across both the consumption side (labelling to mobilise consumer demand stimulating technical innovation e.g. energy labelling on white goods) and the supply side (outcome based public tenders, Environment Agency cited as benchmark).

'CHALLENGES'
- Commodity price volatility & the delivery of sustainable development in the short-medium term
- Consumer behaviour - surveys suggest environment is low on their list of priorities

'SOLUTIONS'
- Outcome based tenders
- Government sets requirement for sustainability in green investors bank funded project
- Funding for innovation hubs
- Partnerships/joint ventures to help solve big issues e.g PFI
- Labelling for consumers

'RED FLAGS'
- Inconsistent government policy
- Sudden policy changes undermine government
- Changes in policy - lack of stability
- Public policies and financial incentives that are too quick to change
- Out of date policy - ID - 15 years on from ??

Plenary roundtable - 1

How do you draw the line between collaboration and competition? Chaired by David Butter, Green Monday Advisory Board

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Our table built on Karen Hamilton’s excellent presentation on collaboration within Unilever’s Sustainable Living Plan ( USLP).
We have all learned to compete. Now we have to ‘unlearn’ adversarial competition and relearn collaboration. This requires different skills and a different mindset; 1) collaborating with our competitors - ‘Co-petition’, or As Sir Martin Sorrell at WPP calls it: ‘Kiss and Punch’ 2) collaborating along the whole of the supply and demand chain 3) engaging and co-creating with all stakeholders, from NGOs to governments to customers and communities. But where to draw the line? Our advice was to start at a high level - the sprit, values, Zeitgeist - focussing on mutual interest, respect, a world view. It’s not easy - but we recognised that there is no other way. Good things happen to those who collaborate. Going it alone is not an option.

'CHALLENGES'

- Different world view (organisational opposition)
- Clash on approaches
- You have to be first
- We are apes, they succeed by collaborating
- Companies seen to be hiding behaviour to hide inconvenient truth
- Big companies are just seen as ticking the box
- Going it alone is a huge obstacle
- Competition vs collaboration
- Legislation hasn’t changed since 1844
- Your views on the other companies could be too negative
- Ideas are great, but need to evolve (Fairtrade on our doorsteps?)
- Nobody will listen to us
- Seen to be backward looking
- Major obstacle: metrics around guidelines of business. Eurozone rules
- We are too small. They are too big
- Companies work at different speeds
- Capacity isnt big enough

'SOLUTIONS'
- Intelligent collaboration for mutual interest. Complimentary skills
- Certificate schemes eg MSC, FSC . Palm oil roundtable (collaboration etc raises good practice)
- Sharing content for material advantage e.g Green Futures and guardian sustainable business Pearson & Nokia/Vodafone
- Cooperatives: the rise of the 'John Lewis Economy' Is there a new mood for collaboration? Co-op = zeitgeist
- If you understand something, compete. If not, collaborate.

'RED FLAGS'
- # of agility/speed between organisations = missed opportunity
- Damage your value due to bad perception in association
- Do it first but let others reap the benefits
- Clash on approaches - style - toolkits
- Loss of win/win balance. Lack of respect
- Clash on perception on each other's proposition

'EXAMPLES'
- Atkins - drawing on strengths of multiple companies to deliver a dream team of client
- Green Futures - sharing content for mutual benefit
- WPP- Martin Sorrel - 'Kiss and punch' knowing when to kiss the competition and when to punch
- Retail and FMCG - Evolution q certification schemes
- Anglian Water - collaborate on consumer perception/ behavioural shift but not on detail on product. Service offering.

Plenary roundtable - 3

What does having "social purpose" mean for a company? Chaired by Jim Woods, Green Monday

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The issue of social purpose is rising up the agenda, evolving from what might have been considered to be a technical CSR issue to a core business issue. Our table recognised that a number of companies do genuinely have a social purpose, and they see long term commercial benefits as a result. We discussed Facebook’s IPO letter, which stated they have a “social mission” to create a more connected and transparent society, but there was little enthusiasm round the table that this really added up to a genuine social purpose. There was a greater appetite to believe that they want to change the world, but that does not necessarily mean for the better! Most of our conversation focused on the belief that investors do not value social purpose, creates a disconnect that can mean issue for management teams.

'CHALLENGES'
- Most mainstream investors do not value social purpose in the business: it is often at odds with a short term holding strategy
- Increasingly, enlightened management teams seem to be getting ahead of shareholders on social issues
- Can social purpose be measured? Environmental benefit is fairly measurable. Economic benefit more so (excluding externalities)
- There is a problem around the language. Still very financially orientated.
- The UK government is a long way from creating a legal framework that puts a value on social benefit

'SOLUTIONS'
- Create a shareholder structure that stops external investors from interfering in the running of the business (Facebook IPO)
- Tell investors that you do not want short term investors (Unilever)
- Try to explain the value of social purpose to investors (M&S)
- Scandinavian government’s tax more & re-invest more in society, which may be a model for the UK to learn from
- Co-operatives get round the problem by aligning their stakeholders

'EXAMPLES'
- Unilever identifies the social objectives but acknowledges that it does not know the solutions – this encourages others to collaborate
- Green clothing company Howies bought itself back from Timberland in order to have a freer “green” rein – wrote a great letter
- Welsh Water have not share ownership
- Bupa has no share ownership, which makes a big difference when it comes to sustainability

Ecosystems & Natural Capital

How can Environmental Profit & Loss accounting help to build more successful business models? Chaired by Neil McIndoe, Director of Partnerships, Trucost

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A company can use Environmental P&L accounts to put a monetary value on the environmental impacts along the entire supply chain of their business. It is an important tool for companies that wish to understand and respond to the operational, strategic and reputational implications of the environmental externalities that are inherent in every business.
It provides a tool to build resilience into business models and to highlight areas where product and service redesign could be considered. By demonstrating to stakeholders that the company is accounting for its environmental impacts it can enhance reputation and brand value.

'CHALLENGES'
- Length/size of process. Who accounts for the slug pellets or where the responsibility lies? What should we be measuring?

'SOLUTIONS'
- Wessex water - 'striking the balance'
- Veolia, biodiversity assessment WRC
- Sainsbury's integrated reporting
- SAB Miller water footprint
- Puma environmental profit and loss accounting
- Network rail biodiversity management plans for net loss.

'RED FLAGS'
- High risks involved in adopting academic models on measuring ecosystem services to industry standards. Who picks up the costs?

'EXAMPLES'
- Puma profit and loss account.
- SAB Miller - reduce the water impact of beer production

Communications

Please provide your 3 choices in the box below and in the event of a cancellation on one of those tables we’ll do our best to accommodate you.

Venue Detail

Bank of America Merrill Lynch: King Edward Hall

King Edward Hall | 2 King Edward Street | London | EC1A 1HQ

Directions

Bank of America's offices are a very short walk from St Paul's tube station (Central Line). Exit the station at Cheapside/Newgate Street. Go past the BT centre, with it on your right-hand side and take the first available right down Edward Street. Continue down this road for 80m and the entrance to the venue is on your left-hand side.

Do not go to the main reception desk at their offices when you arrive. You are looking for an entrance that leads you directly into the King Edward Hall.