B2W DIGITAL EMBEDDING SUSTAINABILITY INTO STRATEGYconsisting of the brands Americanas, Submarino, Shoptime, SouBarato, Digital Finance, Submarino Finance and B2W Services1. It offers

15.915LABORATORYFORSUSTAINABLEBUSINESSFINALREPORT

PREPAREDFOR:

B2WDIGITAL

EMBEDDINGSUSTAINABILITYINTOSTRATEGY

"Profitforacompanyislikeoxygenforaperson.Ifyoudon'thaveenoughofit,you'reoutofthegame.Butifyouthinkyourlifeisaboutbreathing,you'rereallymissing

something."–PeterDrucker

AnaCarolinaFreire|CamilaGoetze|EduardoHamel|MaricruzLarrea

15.915SUSTAINABILITYLABFINALREPORT

B2WDIGITAL-EMBEDDINGSUSTAINABILITYINTOSTRATEGY 2

Acknowledgments

The Laboratory for Sustainable Business (S-Lab) team – composed by Ana Carolina

Freire,CamilaGoetze,EduardoHamel,MaricruzLarrea-wouldliketothankourhostat

B2WDigital,MariannaAbdelhay,CharlesRepouxandBrunaSaboiafortheirgenerosity

and openness and for the trust placed in our team. The B2W project represented a

greatopportunitytodeepenourknowledgeonthee-commerceindustryaswellason

sustainabilityopportunitiesinthiscompetitiveindustry.

WewouldliketothankProfessorsJohnSterman,MatthewAmengualandJasonJayfor

thegreatlearningsthatwewilltakewithusaswemoveforwardwithourcareers.

We would specially like to thank our faculty mentor Ms. Bethany Patten, for the

knowledgeandinsightsprovidedduringthedurationoftheproject.



TableofContents Page

1. Introduction………………………………………………………………………………………………………….4

1.1. ProjectBrief

1.2. CompanyBackground

2. ProblemStatement……………………………………………………………………………………………….5

3. AnalyticApproach…………………………………………………………………………………………………6

3.1. Methodology-ProjectScope

3.2. MaterialityTools

3.3. Cost-Risk-RevenueFramework3.4. MethodforDefiningKeyInitiatives

4. CaseStudy:PackagingForSustainability…………………………………………………………..…13

4.1. B2WCurrentSustainabilityInitiatives

4.2. BestPracticesintheIndustry4.3. LowHangingFruit

5. ContextsandConditions……………………………………………………………………………...……..19

5.1. EngagingEmployees

5.2. CleaningMentalModels

5.3. UsingCreativeTensionandCreatingaCommonVision

5.4. EmbeddingSustainabilityintoStrategy

6. Limitations……………………………………………………………………………………………………….…24

6.1. FinancialEvaluation6.2. MisalignmentwithCorporateObjectives

6.3. InmaterialInitiatives



1. INTRODUCTION

1.1 PROJECTBRIEF

This project was about developing an industry materiality assessment as a strategicbusiness tool thatwill help B2WDigital identify and prioritize key initiatives thatwillhave an impact reducing costs, by the time sustainability gets embedded into thecompany strategy. The implementation of the proposed methodology as well as thebusinesstools,shouldbeofuseforanycompanythathasn’tdevelopedasustainabilitystrategyyet.Themethodologyshouldalsobevaluable forcompaniesthathasalreadystarted their sustainability journey but still hasn’t succeed at spreading the strategyacross the organization, from the bottom to the top and through all internal andexternal stakeholders. For the caseofB2W,a case studyabout theapplicationof theproposedapproachtopackagingisdescribed.

One interesting findingwhile researchingwithin B2Wwas that some functional areaswere already developing sustainable initiatives, with the caveat that it was for adifferentpurposethansustainability,sotheyarenotrecognizedassuch.Thisinsightledustodevelopthecasestudy,whichisnotonlyaboutpackaging,ithasalottodowithawarenessandcommunicationwithintheorganization.

1.2 COMPANYBACKGROUND

B2W Digital is the leading e-commerce company in Latin America with a portfolioconsisting of the brands Americanas, Submarino, Shoptime, SouBarato, DigitalFinance,Submarino Finance and B2W Services1. Itoffers more than 40 categories ofproductsandservicesthroughtheinternet,telesales,catalogs,TVandkioskdistributionchannels.B2Waimstobe“thelargestandbest-loveddigitalcompanyinLatinAmerica”.In order to pursue its vision, the Company has a management culture focused inmaximizing results,providequality services,offerawidevarietyofproductsandhavestrongbudgetarycontrolandfinancialdiscipline2.

B2W set up a sustainability department in 2007, looking for solutions to reduceenvironmental impact of their operations, (Green Company Project3). The ESGOfficerroleisbeingservicedbytheCOOandDirectorofCorporateAffairs,whoreportsdirectlytotheCEOandworkswithastaffof4peopledirectlyrelatedtosustainability.

1http://www.b2wdigital.com/

2http://www.b2wdigital.com/en

3http://www.b2wdigital.com/en/relatorio-anual-2013/page/aspectos-ambientais



B2W published for the first time the Annual Sustainability Report4for the year 2014,disclosingtheeconomic,socialandenvironmentalperformanceoftheCompany,basedonG45versionofGRI6standards.During the sameyear,B2W joined theSustainabilityIndexCertification7(ISE)ofBM&FBOVESPA,8theBrazilianStockExchange,reflectingthecompany'scommitmenttosustainablepractices.

2. PROBLEMSTATEMENT

B2W executives claim that the corporation aspires to be the leading e-commercecompanybyembeddingsustainabilityasanintegralpartofthebusiness,andeffectivelycommunicating it to their customers. For this purpose, they set the dedicated ESGdivision,todrivethroughtheprocessfromwithin,withhelpofpartnerinstitutions,suchasMIT.

Aseveryorganizationstartingtoworkonsustainability,B2Wfacesnowadays financialandoperationalchallengesthatpreventsthemtopursuefasterresults.Strictallocationof resources and budgetary controls, plus an exigent payback policy, are on-goingpressurestoconsistentlyachieveoutstandingfinancialandoperationalresults.

Havingsaidtheforegoing,S-LabteamhasconcludedthatthemosteffectivewaytohelpB2Wistoprovidethemwithconcretetoolsfortopursueaggressivesustainabilitygoalsthat have positive and evident strategic benefits, are easy tomeasure and are visibleinternallyandexternally.

4http://www.b2wdigital.com/en/informacoes-aos-investidores/relatorios-anuais

5https://www.globalreporting.org/standards/g4/Pages/default.aspx

6http://www.globalreporting.org/

7http://www.bmfbovespa.com.br/en_us/products/indices/sustainability-indices/corporate-sustainability-index-ise-1.htm

8http://www.bmfbovespa.com.br/en_us/



Theproblemstatementissummarizedasfollows:

“B2WPRIDESITSELFONMAINTAININGLOWOPERATIONALCOSTSACROSSACTIVITYSTREAMS,BUTTHEYHAVENOTYETIDENTIFIEDHOWTOEXTRACTTHESAMEBENEFITTHROUGH

THEIRSUSTAINABILITYACTIVITIES.ITISIMPORTANTTHATB2WIDENTIFYTHESESAVINGSINORDERTOMAINTAINTHEIRREPUTATIONASWELLASDELIVERONTHEIRPUBLIC

COMMITMENTTOSUSTAINABILITY.”

Itisworthmentionthatasourworkevolved,andbasedonthediscussionswiththehostcompany, we have added an additional perspective in solving the problem. In ourselectionofkeyprojects,wedecidedtotake intoaccountsustainability initiativesthatwouldbeeasilyseenandappreciatedbyB2W’scustomers.

3. ANALYTICAPPROACH

3.1 METHODOLOGY–PROJECTSCOPE

Theprojectwasdivided infourstagesthatallowedtheteamtosmoothlyprogress,asshown below. In addition, conference calls and meetings with the host, andconversationswiththefacultymentorwereperformedperiodically.

STEP#1

Researchofmaterialityassessmenttoolsinordertodefinesustainabilitymaterialtopicsfor B2W as well as to understand its current materiality assessment processes andmappingtools.ThisshouldcompriselookingatassessmenttoolssuchasTheEmbeddingProject9andGlobalReportingInitiative10,inadditiontoresearchingdifferentmateriality

9https://www.embeddingproject.org/

10https://www.globalreporting.org/Pages/default.aspx



propositionsfortheindustryliketheoneprovidedbySASB,11andtheirpaperCorporateSustainability:FirstEvidenceonMateriality12.

STEP#2

Identify material issues based the research conducted in step 1. Use of MITCost/Revenue/Riskframeworkshowninfigure3,tocontextualizetheidentifiedmaterialissues into possible corporate strategies, and use it as a reference to select themostadequatekeyinitiativesforB2Waccordingtotheirstrategy.

STEP#3

Identifysustainabilitybestpracticesbybenchmarkingglobalfirmsthathavesuccessfullyintegrated sustainability into their broader company operations, while being able toreducecostsatthesametime.Inperformingthistask,wefocusedourattentiononthefollowingactionsormeasures:

1. InterviewMITprofessors,thehostkeystakeholdersandresearchdocumentationtoidentifysuitablebenchmarkingcandidates.

2. Perform benchmarking exercise on identified firms using metrics that arerelevanttoB2W,inparticularfromacostreductionperspective.

3. Identifytacticalchanges(e.g.projectmanagementtoolsandcriteria)tointegratemoreeffectivelysustainabilityintostrategywithinB2W.

STEP#4

Interviewkeystakeholderstoassessthecurrentstateofthecompanyandgainamorecomprehensive understanding of B2W’s business, their concerns and interests.Understand how potential sustainability initiatives may fit into their operations andexplorethemindepth.

11http://www.sasb.org/

12Khan,M.,Serafeim,G.,andYoon,A.-FirstEvidenceonMateriality.HBS-http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2575912



3.2 MATERIALITYTOOLS

Materiality is a fundamentalprincipleof financial reporting that recognizes that someinformation is relevant to investors inmaking decisions13.Materiality in sustainabilityassess the relative importance of specific environmental, social and governance (ESG)issuesfortheoverallstakeholdersofacompany.Thematerialityreportcontainsalltheorganization’s activities, impacts and achievements related to sustainability to becommunicatedtoshareholders14.

The use of sustainability accounting standards in disclosing material sustainabilityinformation benefits investors, companies, regulators, and the public. The negativesocial and environmental impacts of companies’ operations represent a financial riskthat isnotcurrentlyaccountedinafinancialreporting,thereforetheimportanceof itsassessment.Thecomprehensivenessofthereportanddefinitionofthematerial issuesvaryfromindustrytoindustryandfromcompanytocompany15.

The research of materiality assessment tools was focused on mainly three sources:Sustainability Accounting Standards Board (SASB)16, Global Reporting Initiative (GRI)17andInternationalIntegratedReporting(IR)18.

GRI(G4)

GRI’smethodconsiderssustainability reportingasa journey.Theirapproach is flexibleanddesigned tobeuniversallyapplicable toallorganizationsofall kinds, sectors,andgeographies. G419, their most current set of standards, includes references to otherwidelyrecognizedframeworks,suchasOECDGuidelinesforMultinationalEnterprises20,

13http://www.sasb.org/materiality/important/

14https://www.greenbiz.com/blog/2013/09/10/materiality-assessments-missing-link-sustainability-strategy

15http://www.sasb.org/wp-content/uploads/2013/10/SASB-Conceptual-Framework-Final-Formatted-10-22-13.pdf

16http://www.sasb.org/

17https://www.globalreporting.org/Pages/default.aspx

18http://integratedreporting.org/

19https://www.globalreporting.org/standards/g4/Pages/default.aspx

20http://www.oecd.org/corporate/mne/



the UN Global Compact Principles21, and the UN Guiding Principles on Business andHumanRights22.

GRI,differsfromSASBinthatitdoesnotprovideandindustryspecificapproach,insteadthey propose a comprehensive set of categories as shown in Figure 1, leaving thedecisionofwhatismaterialtoeachcompanyusingthetool.Ontheotherhand,GRIismore open, acknowledging that more stakeholders should be considered in theassessment, not only shareholders. The categories and aspects described in Figure 1proposesorganizationaleconomic,environmentalandsocialimpactsthatsubstantivelyinfluences the decisions of stakeholders. Key stakeholders, such as investors, marketregulators,civilsociety,suppliers,employeesandcustomers,haveavitalroletoplayinperforminganorganization’smaterialityassessment.

Figure1:GRI/G4categoriesandaspectsintheGuidelines.23

21https://www.unglobalcompact.org/what-is-gc/mission/principles

22https://g4.globalreporting.org/how-you-should-report/reporting-principles/principles-for-defining-report-content/materiality/Pages/default.aspx

23https://g4.globalreporting.org/how-you-should-report/reporting-principles/principles-for-defining-report-content/materiality/Pages/default.aspx



IR

IR’s main objective is to establish guiding principles and content, explaining thefundamentalconceptsthatunderpinthem,andadoptingintegratedthinkingasawayofbreakingdowninternalsilosandreducingduplication.IRdoesnotprescribespecifickeyperformanceindicators,measurementmethodsorthedisclosureofindividualmatters,once it recognizes the wide variation in individual circumstances of differentorganizations.Itfocusesonvaluecreation,asshowninFigure2,andinapproachingallstakeholders related to the company (employees, customers, suppliers, businesspartners,localcommunities,legislators,regulatorsandpolicy-makers)24.

SASB

SASB developed sustainability accounting standards that help publicly-listedcorporations disclosematerial factors in compliance with SEC requirements25offeringonline an open methodology that focuses on materiality from capital marketsstandpoint for 78industries in 5 dimensions: Environmental Capital, Social Capital,HumanCapital,BusinessModel&Innovation,andLeadership&Governance.

24http://integratedreporting.org/resource/international-ir-framework/

25Khan,M.,Serafeim,G.,andYoon,A.-FirstEvidenceonMateriality.HBS-http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2575912

Figure2-IR'sValueCreationProcess.



AccordingtoSASBthemainmaterialsustainabilityissuesforthee-commerceindustry26are:

1. Energymanagement:especiallyconcerningDataCenters’energyconsumption.2. Water andwastewatermanagement: especially concerning the cooling system

fortheDataCenters,incaseofwaterbased.3. Logistics(lifecycleimpactsofproductsandservices)4. Productpackaging5. DataSecurity&CustomerPrivacy6. Diversity&Inclusion7. Recruitment,Development&Retention

3.3 COST-RISK-REVENUEFRAMEWORK

Figure3showsMIT’sCost-Risk-Revenueframework,inspiredintheValueDriverModelofUnitedNationsGlobalCompact27. Itdefineshowsustainabilityinitiativesareabletocreate value to shareholders through three mechanisms: cost reduction, riskmanagement,andrevenuegrowth.

Within Cost Reduction the strategies for sustainable business are divided in betweenResourceEfficiency(e.g. leaneruseofenergy,useofwater,andproductionofwaste),Waste as Input (e.g. circular economy), and Labor Productivity (e.g. betterwages andsocial dimension). Whereas in Risk Management the strategies are Legal/Regulatory(e.g. potential of carbon tax), Social/Reputational (e.g. riskofhaving sweat shopsandboycotts), and Economic/Operational (e.g. non-sustainable supply chain). Finally,

26http://www.sasb.org/materiality/sasb-materiality-map/

27https://www.unglobalcompact.org/take-action/action/value-driver-model

Figure3-Cost-Risk-RevenueFramework(Source:SustainabilityInitiative,MIT)



Revenue Growth approaches strategies to drive the brand: Market Access,Differentiation,andEnablingOthers.28

3.4 METHODFORDEFININGKEYINITIATIVES

Afterextensive readingandresearch, thedefinitionof thekeysustainability initiativesforB2Wwasperformedbasedonthefollowingmethodology:

1. MATERIALITY:readingdifferentMaterialityAssessmenttools:SASB,IR,GRI.2. BENCHMARKING: other company’s best practices in sustainability: within e-

commerce industry (Amazon, Etsy, Alibaba, Novica, Ebay) and in other relatedindustries(e.g.retail).

3. BRAINSTORMING:Comprehensive listofpossible sustainability initiatives fore-commerceindustryextractedfromitems1and2.

4. COST-RISK-REVENUEFRAMEWORK:Analysisofsustainabilityinitiativesina‘Cost-Risk-RevenueFramework’perspective,understandingwhatvalueeachinitiativewouldbringtothecompany.

5. DEFINITION OF KEY INITIATIVES: the definition of the key initiatives was aproductofthefourstepsbelow:

i. RankofinitiativeslistedinFigure4basedinthevaluecreationcapabilityin the largest number of subjects within the Cost-Risk-Revenueframework.

ii. Selection of two initiatives based on critical thinking and consideringthose that B2W would probably relate the most. B2W’s problemstatementisclearindefiningitsmainobjectiveasfindingasustainabilityinitiative that can create value to shareholders through cost reduction.Along the project development the host also has emphasized theimportance of reaching their customers’ heart through this sameinitiative, therefore adding another component to our analysis. Thechoseninitiativeswouldhavetobegroundedincostreductionbutwouldalso have to become a strategy to build brand loyalty throughdifferentiation.The selectionof thekey initiatives, therefore, takes intoconsiderationthosethatwouldbringthebiggestimpactforthecompanyin both cost reduction and differentiation according to our bestjudgment.

iii. ValidationwithB2Wofthetwoinitiativesselected.

28http://www.sustainablebrands.com/digital_learning/webinar/organizational_change/promise_systems_approach_sustainability



Figure2-SASB'se-commercematerialissuesdistributedinCost-Risk-ManagementFramework(Source:B2WMITteam)

4. CASESTUDY:PACKAGINGFORSUSTAINABILITY

Itisnoteasytofindexampleofsustainablepracticeswithaclearcontextoftheimpact.Companiesdisclosepartoftheinformationoftheirinitiativestoshowcasethemtothestakeholdersbuttoprotecttheirstrategy,theinformationthatwouldhelpunderstandthecompletereachitiswithhold.Nevertheless,inordertounderstandtheecosystemofsustainability in different industries it is necessary to look for these examples. Eachcompany is responsible when looking at examples of initiatives taken by others totranslate that into their own reality since the impact candiffer fromone company toanotherdependingonthecurrentstateofeach.Ine-commerce,asinotherindustries,packaging isoneoftheareasthat involvesacomplexgroupofstakeholders inthefulllifecycleofapackage.Itisimportanttohaveaclearunderstandingonwhoisinvolvedandtowhatextent,inordertodesignasustainablepackaging.

The Sustainable Packaging Coalition29 has identify 8 parameters to measure thesustainabilityofapackaging,withamaincoreindicatorsforeachofthem.Thelistcanbeagoodtooltoidentifywhatarethemainissuestobeaddressbyacompany,whichareprioritiesandwhytoselectsomeoverothers.

29http://www.sustainablepackaging.org/



Source:www.sustainablepackaging.org/Uploads/Resources/design_guidelines_sp.pdf

Foranydivisioninchargeofpackaging,themainconcernistheunitcostperpackage.Inthecontextofe-commercetherearesomeeasytofindsustainable initiativesthatcanbevisibletoclientsandat thesametimehelpreducecosts.Fromthe informationwehaveavailableofB2WtheyareworkingonTotalCostofPackaging,PackagedProductWastage, Recycling Packaging and Reuse of Packaging. Probably they are alsoimplementinggoodpractices inWorkandCommunity Impactbutwedidnothavetheopportunitytoreviewthem.

Parameter CoreIndicatorTotalMaterialUseMaterialUseReductionMaterialWaste

TotalLifeCycleEnergyIntensityRenewableEnergyProportion

LifeCycleWaterConsumptionLifeCucleWaterUsedfromStressedSources

ToxicantsConcentrationToxicantsMigration

MaterialUse

EnergyUse

WaterUse

MaterialHealth



Source:www.sustainablepackaging.org/Uploads/Resources/spc_indicator_metrics_framework.pdf

4.1 IDENTIFIEDB2WCURRENTSUSTAINABLEINITIATIVES

B2W is trying to achieve cost savings by reducing the volume of the packaging andcardboard,andbyusingmaterialsthatcanbemorecosteffective.

B2Whas9DCs,ofthose3areverylowinpackaginguse,and20%ofthecommercializedproducts do not use any packaging at all. In October 2015 the company acquired 3machinestorecycletheboxesoftheinboundmerchandisetobereusedinthefillingoftheoutboundpackaging.Previoustohavingthemachines,B2Wwouldpayathirdpartytogototheirdistributioncenters(DCs)tocollecttheboxesoftheinboundmerchandise,andtheywouldinvestinproductstobeusedinthefillingoftheirpackaging.Duetothepositiveresults incostreduction,B2Wisaddinganadditionalmachinetotheprocess.AccordingtoB2W,itisonlyeconomicallyviabletohavearecyclingmachineatDCsthathandleenoughvolume tomake the investmentviable.The recyclingmaterial today isserving60%ofthepackagedparcels.

Parameter CoreIndicatorToxicEmissionsLifeCycleGHGEmissionsAirEmissionsWaterEmissions

TotalCostofPackagingPackagedProductWastageLifeCycleEmbodiedEnergyProduction

ProductSafetyRecyclingPackagingReuseofPackagingLandfillingofPackagingPachakingEnergyRecoveryRate

ChildLaborForcedorCompulsoryLaborFreedomofAssociationsand/orCollectiveBargainingDiscriminationExessiveWorkingHoursRemunerationOccupationalHealthSafetyPerformanceResponsibleWokplacePractices

CommunityImpact

WorkerImpact

CleanProductandTransportation

CostPerformance



B2Whastriedinthepasttousesmartresistancepackaging,whichoptimizetheamountofmaterialuseaccordingtothecontentofthepackage;unfortunately,themetricswerenotwell implementedasmany itemswerereporteddamagedduringshippingandtheinitiativewascancelled.However,B2Wisimplementingasmartboxpackagingsolutionfor all individual shippingwhich has proven to be a successful practice, and they arelookingtoextendthistogroupingparcels.Theinitiativeconsistsofadjustableboxesthatcorrespond to the size of the product, minimizing the amount of material used,thereforeallocatingmorepackagestoeachshippingtruck.

4.2 GOODPRACTICESINTHEINDUSTRY

Therearemanyexamplesofcostreductionachievedbyimprovingpackagingtechniquesthatothercompanieshaveusedtobuildon theirbrandproposition. In2006Walmartannounceda5-YearPlantoreducepackaging.Theoutcomeinsavingsonemissionswas667,000metrictonsofCO2,areductionof323,800tonsofcoal,andadecreasein66.7milliongallonsoffuel30.

Another example is Amazon, which has announced a number of incentives andprograms to reduce the environmental impact of their operations. Frustration-FreePackaging is a service and at the same time a certification that aims to eliminatecomplicated packaging, and replace it with 100% recyclable materials, packaged in asingle box, thus eliminating the vendors’ shipping box. Since launch, the programhascertifiedover200,000itemsgloballyfromover2,000leadingbrands31.EnvironmentallyFriendlyPackaging isaneffort toswitchtheshippingcontainertocorrugatedmaterialthat is 43% recovered fiber content, and introduce packaging material for U.S.fulfillmentthatis100%recyclableandmadefrom50%recycledcontent,alongwithair-filledpillowsthatare100%recycledandnon-toxic32.

Smart Way from EPA helps companies that ship goods or carry goods to improveefficiencybymeasuring,benchmarkingandstreamliningfreightsupplychainoperations.Ithasachieved$24.9billiondollarsinsavedfuelcostsbysaving170.3millionbarrelsofoil,72.8millionmetrictonsofCO2reductions,1,458,000tonsofmono-nitrogenoxidesreductionsand72,000 tonsofparticulatematter reductions33. Itprovides certificationandalogothatcanbevisibleforclients.

30http://corporate.walmart.com/_news_/news-archive/2006/09/22/wal-mart-launches-5-year-plan-to-reduce-packaging

31http://www.amazon.com/b?ie=UTF8&node=5521637011

32http://www.amazon.com/b?node=13786321

33https://www3.epa.gov/otaq/smartway/forcountries/index.htm



When thinking about logistics of packaging we should also expand to consider howproducts are shipped by plane. An interesting example is the initiative that FedEx isimplementingfor2017inpartnershipwithRedRockBiofuelstodeliverpackagesusingfuel intheirplanesmadefromforestwaste.Theyaredevelopingaprocessingplanttoconvertwoodbiomass intoarenewable,drop-indieseland jet fuels34withthegoalofproducing 48 million gallons of blend aviation fuel from biomaterial discarded fromtimberandsawmillsandrecyclingmaterials.

4.3 OPPORTUNITIES

The initiatives conducted today by B2W, although they fit into sustainable initiatives,theyhavenotbeenframedintosustainableinitiativesbutpracticesforcostreduction.These initiatives are an opportunity for the department in charge of sustainability atB2Wtointernallyalignthecompanytothebenefitsofsustainableprograms.Withthesavingsachievedbyutilizingrecycledmaterialinthefillingofthepackagingitispossibleto prove the cost reductions and to incentivize other departments to review theirprocessesinordertodetectwhatadditionalsustainableinitiativescanhelpthemreducecosts.Forexample,thereisanopportunitytopushforazerowastestrategy.

Anotheraspecttotakeintoconsiderationisthevalueofcommunicatingthesustainableinitiatives to clients in order to improve client satisfaction and loyalty. The newtechniquesinpackagingimplementedbyB2Warenotcurrentlyadvertisedtotheclientsandthisisabigopportunitytoshowcasetheirgoodpracticesandappealtotheheartsoftheirconsumers.

B2WisconsideringthedirectcostreductionwhencalculatingtheirROIinitiatives,butisnot yetmeasuring their savings in carbon emission and energy and fuel,which couldproveimportantvaluetoshareholdersandtheirclients.

SmartWay35haveaninternationalprogramthatcouldbeaninterestingpartnershipforB2W.Both improving their logisticspractices andobtaininga certification that canbevisibletotheirclients.

There are opportunities for B2W to implement simple rules that can impact inefficiencies of fuel utilization and reduction in CO2 emissions. Tim Greiner, PureStrategies36Co-founderandManagingDirector,indicatedtousthatStapleswasabletohavesignificantsavingsinfuelbyintroducingagovernortotheirtrucksthatwouldnot

34http://about.van.fedex.com/blog/biofuels-take-flight-with-fedex-infographic/

35https://www3.epa.gov/smartway/

36http://purestrategies.com/



allowthemtogoabove55milesperhour37.ThisisaninitiativethatcouldbereplicatedbyB2Wintheirownfleetandonrestricted3rdpartyvehicles.

ForinternationalinboundproductsB2Wshouldanalyzewhatpartnercanbestalignwiththeir sustainable initiatives. Looking into practices like the one that FedEx isimplementing.

Source:http://about.van.fedex.com/wp-content/uploads/2015/12/FedEx-BioFuel-Infographic.pdf

37http://www.cbsnews.com/news/5-ways-staples-is-getting-greener/



5. CONTEXTANDCONDITIONS

Whenwediscoveredthatsomeareaswerealreadyexecutinghighimpactsustainability

initiatives,withnoassociationtosustainabilitybutforoperationalefficiencypurposes,it

was impressive to observe the excitement of the managers towards the new

perspectives.Thisfactputustothinkharderaboutthewaycompanieslearnsandgrows

together. Peter Senge38in his book “The Fifth Discipline”39provides detailed insights

about how companies looses these abilities over time and also how to revert those

patterns. The answer is not short and no subject of this paper, but we see have

identifiedsomeofthetraditionalbehaviorsthatmaybeholdingB2Wfromexpandand

flourishfasttowardsamoresustainablestate.Thisideahasstrongimplicationsonthe

success of sustainability initiatives for companies. The difficulties to address

sustainabilityinitiativesmaynotbethelackofwillingness,commitmentorresourcesto

advancethroughthesustainabilitypath,itmaybethedifficultyofhavingsustainability

strategypenetratetheorganization.Helpingtheinformationflowacrossfunctionscould

bethebalmcompaniesneedtomoveforward.

ForMITteam,thisalsorepresentsagreatlearningopportunitythatslightlychangedthe

scopeof ourwork and thewaywe approached the solution to theproblem.Wehad

originallyanticipatedthatwewouldinvestmostofourtimediscussingabouteachofthe

sustainabilityinitiativesandhowtheywouldimpactB2Windifferentways,butwefeel

ourhostisinabetterpositiontorolluptheirsleevesandputtheirhandsinsomemud.

Butasstatedbefore,sustainabilityisnotgoingtohappenunlessB2Wisabletoengage

inopenand candid conversations. Tobeable to apply theapproachdescribed in this

report, it isnecessary to improve the conditions for sustainability initiatives in several

ways.

5.1 ENGAGINGEMPLOYEES

Consumer Behavior class at MIT teaches us that that human beings need to be

motivatedtoworktowardsanobjective.Thecloserwearefromourtarget,thestronger

38http://mitsloan.mit.edu/faculty-and-research/faculty-directory/detail/?id=41415

39https://www.solonline.org/page/FifthDiscipline



themotivationwillbe.Accordingtothisprinciple,thehardestmotivationalefforthasto

bemadeatthebeginning,whenthereisabsolutelynoprogressonthatenterprise.This

initial effort must be done to break the inertia and activate people to start a

motivationaljourneytowardsthecompletionofthetask.

Source:MIT15.847ConsumerBehaviorlecture.

After conversations with B2W managers, they figured out they had already made

progress towards important sustainability goals, which dramatically increased their

motivation tomove forwarddown thatpath. This shouldbeenoughof an impulse to

start moving the organization forward, and as long as sustainability employees keep

settingnewobjectives,engagingotherareasfornewprojectsandinternallypromoting

sustainability.

Takeaway:Helppersonnelconnecttheircurrentprojectsandjobstosustainabilityinitiatives,enablingtheactivationofthemotivationtowardsthesenewobjectives.

5.2 CLEANINGMENTALMODELS

Mental models make people believe strongly in ideas that may not be correct.

Sustainabilityisavictimofmentalmodelsinsideorganizationsintwoways.First,most

executives and employees tend to think that sustainability initiatives will bring no

MOTIVATION

0%

100%

Baseline Activated Progress Completion PostCompletion



economic benefit for the company, only additional costs. Second, people think that

sustainabilityisaboutbeingkindtotheplanetandthemothernature,andfailtoseeit

isallaboutsurvivaloftheircompanies(andsourceofincome)andtheirownexistence

asindividuals,aswellastheirdescendants.Realityisthatmostsustainabilityinitiatives

can have positive ROI through reducing costs, mitigating risks or increasing the

willingnesstopay,andrealityisthatalltheharmwedototheenvironmentaffectsus,

butsometimeswedon’twanttoseeit.

Aninterestingtooltohelppeopleidentifyandoverridetheirownmentalmodelsisthe

“LadderofInference”,describedinPeterSenge’s40book,“TheNecessaryRevolution”41,

atoolthat isthoughttoallMITstudentsthattakesLeadershipLab42elective.Thetool

describeshowhumanscreatetheirfirstbeliefsaboutreality,basedonobservabledata

40PeterSengeisaSeniorLecturerinLeadershipandSustainabilityattheMITSloanSchoolofManagement.http://mitsloan.mit.edu/faculty-and-research/faculty-directory/detail/?id=4141541http://www.amazon.com/gp/product/B0018QSO94/ref=dp-kindle-redirect?ie=UTF8&btkr=1

42http://mitsloan.mit.edu/actionlearning/labs/l-lab.php



processedthroughtheirownbackgroundandperceptionsofwhatthetruthis.Lateron,

weusethatknowledgetoquicklyjumpintoinferenceswhenweareexposedtosimilar

dataagain,creatingaself-reinforcing loopoverourperceptions thatgraduallycreates

ourmentalmodels.

The ladder is ametaphor of how ourmindworks. People able to suspend their own

assumptions can see howothers drawdifferent conclusion to the sameobservations,

because their background andmeanings (cultural and personal) are different. Teams

that canavoid toquickly jump into inferencesbasedon theirownmentalmodelswill

enjoy more objective and productive discussions that will open them to unlimited

learning.

Takeaway:Usetoolstohelppeopleinsidetheorganizationunderstandhowtheymaybedrawingintowrongconclusions,basingtheirthinkinginmentalmodels.

5.3 USINGCREATIVETENSIONANDCREATINGACOMMONVISION

Ithasbeenidentifiedlongagothatcompaniesthatsurvivesforlongtimearethosewho

can learn continuously, setting new frontiers and

repositioning themselves away from the reach of

followers and competitors. Peter Senge43, in his

bookTheFifthDiscipline44,described this situation

using a very simple and yet compelling analogy.

Creative tension is generated when a vision is

generated and shared across the company, while

tellingthetruthaboutthecurrentreality.Thatgap

between both, common vision and current state

willcreatethetensionthatcanbeclosedovertime

43PeterSengeisaSeniorLecturerinLeadershipandSustainabilityattheMITSloanSchoolofManagement.http://mitsloan.mit.edu/faculty-and-research/faculty-directory/detail/?id=41415

44https://www.solonline.org/page/FifthDiscipline

Source:TheNecessaryRevolution.



byoneoftwomethods:(1)activelymovingcurrentrealitytowardsthesharedvisionor,

(2)relaxingthevisiontocomeclosertocurrentreality.Companiescapableofsustaining

orraisingtheirvisionswhilekeepingtheawarenessaboutcurrentrealityalive,arethe

onesthatwillcontinuemovingforwardandthriving.

5.4 EMBEDDINGSUSTAINABILITYINTOSTRATEGY

The Embedding Project45describes with clarity that organizations, in order to be

successful in driving sustainable initiatives, must embed, or integrate, “sustainability

across thebusiness to thepoint that isno longeranadd-onbut simply theway todo

business”.

Source:Theembeddingproject.

Traditionally, a company that is working to launch a new product to market, will

integrate all disciplines in the process tomake sure all aspects are considered: R&D,

manufacturing, sourcing,packaging, sales,marketingand finance, inorder to createa

complete and compelling story around the product before launching the product.

Nobody would consider developing a new product without the involvement of

manufacturing,orfinance,thatisjustthewaycompaniesdobusiness.Sustainability,in

mostcompanies,wouldnotbeand integratedpartof this initiative, itwouldprobably

45https://embeddingproject.org/



beacontributortoprovideanoutsiderperspectiveonsomespecificaspects,thatmay

ormay not be taken into consideration.What embedding sustainability into strategy

means,isthatsustainabilitymustbejustanotherpiecesofthepuzzle.

Takeaway:sustainabilitymustbeplacedatthesamelevelandwiththesamespecificweightasotherfunctionstobecomethewaytodobusiness,notanadd-on.

6. LIMITATIONS

We’ve discovered that companies have some limitations to the applicability of the

framework previously described. These limitations are not strictly related to

sustainabilitybutare theheritageof a long lasting traditionof financial results as the

onlymeasureofcorporatesuccessandrewardtotheexecutives.Sustainabilityprojects

thatrequiresresources,willbelimitedbythesameprinciples,thetoolsthatcompanies

usetodifferentiategoodprojectsfromnotsogoodprojects.

6.1 FINANCIALEVALUATION

Paybacksareusuallyshort.24monthsandsometimes12months,asinthecaseofB2W.

LowinvestmentandhighROIinitiativesaregoodtopassthisfilterandgetbudget,but

plenty of sustainability initiatives will require a different rule. Initiatives that will

mitigaterisksorbuildreputationarehardtoevaluate.Howdoyoucalculateacashflow

coming from the fact that consumers respect your brandmore than the competition,

whenatthesametimeMarketingisalsoinvestinginadvertising?Ishardtoallocateonly

a fraction of positive outcomes coming from sustainability initiatives that build

reputation,andputthatintermsofNPV.Withthisapproach,thereisnowaytheCFO

will approve budget for such projects, and so, sustainability is doomed to simple and

quickactions.Sustainabilityofficershavethedutytobringthisconversationtotheright

audience,theCEOorthecompanydirectors, tocreateandalternativewaytoallocate

budgetforinitiativesthathavehardtomeasureimpactandlongertermreturns.



Takeaway:sustainabilityinitiativesmustnotbeevaluatedwiththesameruleasothercorporateinvestmentprojects,becausethecorporatepolicywilldiscardmaterialandprofitableactionsthatarehardertomeasureintraditionaltermsCorporationsshouldtakealongerterm

approachtosustainability.

6.2 MISALIGNMENTWITHCORPORATEOBJECTIVES

Ithasbeencommentedinthisreportthatsomeoftheprojectsinwhichcompanieswill

naturallyengage,arehighimpactsustainabilityinitiatives,andthatsustainabilityofficers

should take advantage of such natural alignment on order to promote, engage and

measure.Butonce thoseprojects are finishedand furtheroperational efficiencies are

hard to obtain, sustainability initiatives will have a difficulties finding sponsors,

resources and focus, as long as their objectives are not perfectly aligned with the

corporation’s. Sustainability officers must convince the company directors that

sustainability measures will be key for investors and stakeholders’ interests and so,

sustainability shouldbepartof thecorporateobjectivesandexecutive rewards. Ithas

been proposed by Professor Robert Eccles46, faculty of Harvard Business School, that

companies that and performs well in material sustainability initiatives, financially

outperformsimilarcompaniesthatdon’tperforminmaterialsustainabilityprojects.

Takeaway:directorsmustbepersuadedtoincludesustainabilitymeasuresaspartofthecorporateobjectivesandexecutiveincentives,withtheargumentthatthiswillhelpthe

companyoutperformitcompetitors.

6.3 IMMATERIALINITIATIVES

Materialityisanoutstandingconcepttodiscusswhichsustainabilityinitiativesmustbe

engaged. It brings objectivity to the conversation and a common language across

executivesand investorsandmake iteasiertounderstandeachother.Butmateriality,

46http://www.hbs.edu/faculty/Pages/profile.aspx?facId=126059



purelydefinedandanaccountingconcept(whichisthesamedefinitionusedbySASB),

failstoleaveroomforinitiativesthatwillnothaveasignificant[material]impactonthe

10-K.Asarguedbefore, sustainabilityalsoacknowledges that thereare initiatives that

mayhaverelevant impactsthatarehardtomeasuremonetarily,that looktopromote

diversity,employee satisfaction, reputationor riskmitigation,and thatmaybecritical

forabusinessbutstilldon’thavematerialimpactfromtheaccountingpointofview.Itis

important for sustainability officers to broaden the scope of sustainability benefits to

othermetricsthatopenthedoorforexecutingalargerarrayofprojects.

Takeaway:Materialityisanextraordinarytooltomeasurerelevancyofsustainabilityinitiatives,but

don’tgetstuckonittoavoiddiscardinggreatinitiativesthatarenotmaterial.

Documents

B2W DIGITAL EMBEDDING SUSTAINABILITY INTO STRATEGYconsisting of the brands Americanas, Submarino, Shoptime, SouBarato, Digital Finance, Submarino Finance and B2W Services1. It offers