Smarter Finance for a Sustainable Future: Report based on proceedings at IBM Start

8/7/2019 Smarter Finance for a Sustainable Future: Report based on proceedings at IBM Start

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Report based on proceedings at IBM Start

Finance

andSustainability


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When one tugs at a single thing

in nature, he fi nds it attached

to the rest of the world.

John Muir, US author and naturalist, founder of The Sierra Club


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Finance and Sustainability

Contents

Executive summary .................................................................................................................................................... ..3

Finance and Sustainability .......................................................................................................................................... ..3

Outline of the days agenda ....................................................................................................................................................3

What is sustainability? ................................................................................................................................................ ..5

Common themes from the Summit ............................................................................................................................. ..7

Collaboraon is key to progress ..............................................................................................................................................7

Complexity requires systems thinking ...................................................... ................................... ...........................................7

Data and metrics are the basis for finding soluons ..............................................................................................................7

Soluons require atypical personal and corporate behaviour ................................................................................................7

Summary of proceedings ........................................................................................................................................... ..9

Investors have not to date been concerned about sustainability issues ........................................................ ........................9

Short-termism affects both sides ............................................................................................................................................9

There are a number of possible reasons for investor disinterest .............................................................. .............................9

Lenders have thought less about sustainability than investors, but that is changing ...........................................................10

From a credit market perspecve, climate change is a big financial risk ........................................................ .....................10

The cost of carbon for example is an unknown factor ..........................................................................................................11

There is too much of a disconnect between owners of capital and companies .................................................... ...............11

Government must play a strong role in incenves, regulaon and policy ............................................................................11

Collaboraon too ofen becomes an excuse for inacon .....................................................................................................12

The cost versus compliance argument is false ......................................................................................................................12

The opportunity cost of inacon is too high .........................................................................................................................13

Most companies have sll not idenfied the low hanging fruit .................................................................... ......................13

Many sustainability projects are sll proving to be a challenge to jusfy ............................................................................13

Sustainable companies have been proven to outperform markets ............................................................... .......................13

There is a long way to go in terms of reporng ....................................................................................................................14

The push for sustainability is creang new thinking and innovaon ....................................................................................15

What constutes value may change .....................................................................................................................................15

The pace of change may vary ............................................................... ................................... .............................................16

Outcomes: developing the themes ............................................................................................................................. 19The Start Innovaon Jam ......................................................................................................................................................19

The IBM Summit at Start ............................................................................................................................................ 20

About The Bathwick Group ........................................................................................................................................ 21


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Executive summary

Only the most hardened climate deniers and sustainability

scepcs now argue that we can connue indefinitely to live

and to consume as we do now. We are heading for deeptrouble and possibly for disaster, driven by our historic

disregard for the scarcity of resources and the collateral

damage our progress has created.

The evidence is increasingly stark and the range of issues

is broadening across all social, natural and economic

systems. The problems are both massive and systemic; our

response must be worthy of that challenge.

More than 120 business, government, community leaders

and commentators aended the Finance & Sustainabilityday (Day 7) at the Summit. They concluded we need to

act faster and work together across industry and country

boundaries; they lef determined to make change happen.

Their debates and comments are covered in this report -

below are some of the key points that were made:

Investors have not previously been concerned about

sustainability issues but that is changing as potenal

risks are more clearly understood.


Outline of the days agenda

KEYNOTES:

The Vision: Richard Gillies, Director of Plan A, Marks & Spencer

The CFOs view: Andrew Griffith, CFO, BSkyB

The Tech view: Ma Brin, MD UK&I, Google

DEBATES:

The impact on capital equity

The impact on capital debt

Deploying capital sustainably creang & measuring value

Deploying capital sustainably the cost & compliance balance

Climate change represents a major financial risk;

inacon carries a reputaonal and operaonal risk.

Government needs to play a strong role in incenves,

regulaon and policy.

Compliance can be an opportunity not a burden. In

many cases more onerous reporng requirements

will help organisaons to idenfy inefficiencies and

potenal risks.

Sustainability projects are sll proving difficult to jusfy

in many cases, but companies with strong sustainability

credenals have been proven to outperform their

peers.

The acvies, intellectual property and products that

create value for organisaons may change as the

percepon of what constutes value changes in the

marketplace.


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What is sustainability?

Sustainability: most people think its a good idea, some

people are passionate about it, some are truly ambivalent

or even hosle to the noon, but everybody has a differentdefinion. It is therefore important that we establish a

definion to use as a baseline for this report. Sustainability,

simply put, is the capacity to endure1.

At a global level: we live on a planet that is a complex

inter-dependent set of eco-systems, and increasingly,

socio-technical systems; sustainable behaviour is

therefore that which ensures the environmental

balance is maintained, allowing human civilisaon to

connue to survive.

At a regional/naonal level: we must maintain

the economic structure of our society markets,

businesses, profits, infrastructure and jobs; societal

stability in turn ensures the long-term demand for,

and the sustainable growth of, products and services.

Along with progressive social policies on equality

and well-being, sustainable markets, businesses and

sociees aim to create long-term opportunity for all.

These three elements economic, social, and

environmental (also referred to as profit, people, and

planet) form the basis for the Triple-Boom Line (TBL,

figure 1), a simple descripon of the elements involved.

The problem is that for many parcularly those of us

charged with delivering hard, short-term results the

social and environmental appear to detract from the

economic; they are seen as blockers.

It is this central dichotomy that is ofen cited as the reason

for sustainability being a hard sell in business. But it

shouldnt be; organisa

ons and those leading them wantto survive and prosper as much as they ever did. The

only issue is to illustrate both the urgency of taking acon

and the importance ofall three factors in ensuring their

organisaonal and individual survival.

We find ourselves at a unique point in our history. Unlike

previous generaons, we know that we are causing

irreparable damage to the planet and that, regardless of

arguments about the causes, significant changes in how

we live must be achieved.

1 The Bathwick Groups definiton, which separates the capacity to endure

(surviving) from sustainable development (thriving), which is growth

that has at most a neutral social and environmental impact.

We must discover how to deal with the biggest impacts

humans make on this planet, including:

Populaton growth. Populaon growth is at the core

of the sustainability challenge. There were 1.75 billion

people on the planet in 1910; today there are 7

billion, and by 2050, the UN esmates that the global

popula

on will peak at around 9 billion. Resource depleton. The development of the Western

lifestyle over the past 60 years has greatly exacerbated

the populaon problem a lifestyle based on quanty

rather than quality, and on consumpon as a validaon

of our naonal and individual success. Powered by

cheap energy and mechanisaon, its been easy and

we could afford it. But we have taken lile noce of

the collateral damage, and as a result we are using up

the planets resources and damaging ecosystems at an

alarming rate. Unaccountable growth and consumpton. The hidden

costs (or externalies) of some of our acvies are

now recognised not least the esmates of the cost

of climate change brought about by GHG emissions

from fossil fuel use over the past century. Lord Sterns

esmate of 2% of GDP (28bn annually in the UK alone)

to counter climate change is dwarfed by esmates of the

economic damage in prospect (for example the figure

of $20tn annually by 2100 by the German Instute for

Economic Research (DIW)).

ECONOMICSustainable Economy

Balanced

investment

Beer risk

management

Short term &

long term

Do more with less ()

Outcomes that

maer Accountability

for spend

SOCIALCohesiveness of Cies

Cizen centric health,

educaon and social

services

Beer distribuon of

services, jobs, housing

Transport

infrastructure

Work and society

Roles of business and

government

Skills, behaviours,

careers

ENVIRONMENTALManage

consumpon ofenergy, water,

food, raw

materials

Minimise

wastage of

scarce resources

One representaton of the triple boom lineFigure 1.


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Data and metrics are the basis for fi nding solutions

We generate enormous quanes of data within our

organisaons, much of which languishes in silos, unused

for lack of capacity, the right tools or skills to process and

analyse its meaning. The amount of data, and the number

of sources from which it comes, is spiralling upwards every

day; we cant hope to understand either the scale of the

challenge we face or the best routes to a soluon unless

we learn what we know, and how to gain valuable insights

from it.

Peter Drucker famously said If it cant be measured, itcant be managed. In a sustainability context, if you dont

have informaon on the impact of your operaons and

your acvity, you wont be able manage that impact down.

Worse, you cant enumerate and report success.

Solutions require atypical personal and corporate

behaviour

Of all the challenges we face in becoming more sustainable,

individual and organisa

onal behaviour will perhapsbe the hardest to address. Personal and corporate

insecuries, consumpon-oriented lifestyles, unhelpful

corporate cultures, a focus on the short term, and a lack

of awareness (or unwillingness to understand) inhibit our

ability to effect change. They make us believe that what

we do individually makes lile difference, and help us to

hide behind compeve sensivies to jusfy inacon.

Will it be more carrot or a bigger sck that will produce the

changes we need? Probably both, and applied without

fear or favour, according to delegates at the Summit.

Scosh philosopher David Hume wrote All plans of

government, which suppose great reformaon in the

manners of mankind, are plainly imaginary. In other

words, good luck with changing human behaviour. In the

250 years since that was wrien, have we learned enough

and are we opmisc enough, to prove him wrong?

Common themes from the Summit

Collaboration is key to progress

There are few challenges within organisaons that can be

solved by an individual employee or a single department,

and few challenges in sustainability that can be addressed

by a single organisaon operang in isolaon. We need

to collaborate more was a key conclusion of every day of

the Summit at Start; collaboraon is the key to unlocking

creavity, finding new ways of approaching familiar

problems, and generang widely-accepted soluons. We

know however that few organisaons collaborate well,

internally or externally. Over the past five years weve

analysed how and why this is so. Individual and corporate

insecuries, unhelpful reward systems and compeve

sensivies are among the issues that combine to inhibit

openness and sharing of data and ideas.

Collaboraon is about changing the way individuals think

and organisaons respond, finding more effecve business

process alignment, and encouraging trust and posive

behaviours. Achieving such change is at the heart of

finding the efficiencies, technologies, and market models

that will define a more sustainable future.

Complexity requires systems thinking

The complexies of organisaons and markets are a barrier

to understanding and change. The developed world today

is a network of inter-dependent socio-technical systems,

in which changes of any type have systemic impacts that

are hard to foresee in the normal scope of an individuals

role. Few people ever experience more than a small part

of the picture, and the decisions they take will only beappropriate within the context of their understanding.

Creang predicve frameworks and more holisc decision

support models requires systems thinking the process

of understanding how things influence one another

within the whole which is an unusual set of skills. Few

organisaons employ such skills, except perhaps in strategy

or technical design roles, but in an increasingly connected

world systems thinking is becoming important. We would

do well to recognise, nurture and value the appropriate

skills, as second- and third-level impacts are increasingly

coming to define the effecveness, and therefore the

success, of most organisaons.


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Summary of proceedings

The Finance and Sustainability day at the IBM Summit

covered two broad topics. One concerned the implicaons

of sustainability for equity and debt markets, and the

influence of those markets on corporate interest in

sustainability. The other looked at how sustainability

impacts corporate decision-making and investments in

the private sector, how companies measure the value of

sustainability, and how they manage cost and compliance

challenges.

Investors have not to date been concerned aboutsustainability issues

I have never had a single queston on

Stagecoachs sustainability policy in 11

years of meetng investors.

Marn Griffiths, Finance Director, Stagecoach

plc

Climate change, energy costs and the global economic

downturn have impacted everybody rather drascally

in the past twenty four months. While some global

organisaons such as M&S, Google and HSBC have

demonstrated how strongly sustainable business pracces

can be equally or more effecve than business as usual,

the majority lag behind. How much does it maer?

During the summit itself, several CFOs and top execuves

highlighted that many investors seem to be unconcerned.

Short-termism affects both sides

Delegates bemoaned both the lack of long-term

instruments in the UK, forcing capital looking for such

investments overseas, and the connued short-termism

of fund managers, and parcularly pension funds.

There are plenty of free-riders out there

the investment industry has become more

short-term on average.

Paul Abberley, CEO, Aviva Investors

We have idenfied clearly the problems that short-term

thinking causes for companies in both the Summit

fi

ndings and in other research we have published, but itwas made clear by delegates that investors are similarly

afflicted. Delegates bemoaned both the lack of long-term

instruments in the UK, forcing capital looking for such

investments overseas, and the connued short-termism

of fund managers, and parcularly pension funds.

Pension holders have the capability to switch funds easily

if they feel that managers are underperforming, which

drives compeon for short-term results, even in the very

investors that should be focussed on the long term.

Short-termism is holding companies back;

investors should be asking questons about

sustainability, but they arent.

Jessica Fries, Director, A4S

There are a number of possible reasons for investordisinterest

So how might we get investors to start asking the right

quesons? Some delegates were of the view that it is a

maer of mandang Environmental, Social & Governance

factors (ESG) reporng, while others felt that the demand

side should put more pressure on companies to encourage

greater disclosure and reporng. Both views might well

require legislave and/or policy acon to make them a

reality.


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Several contribung factors were idenfied for the failure

of fund managers to pay aenon to sustainability issues:

Lack of training: the CFA does not include sustainability

issues, though there are moves afoot to try to change

that;

Lack of movaon: if investors arent pushing for more

sustainable behaviour or reporng, it is one less reason

to make the effort to change. If we find a company

exploing an externality thats ok if we think they can

get away with it said one delegate;

Some models of invesng e.g. quant equity processes

dont need to anything much about the company they

are trading. High frequency traders, for example, dont

even know the companys name, just the cker.

It was suggested that if companies stepped up and

voluntarily provided the informaon in depth, investors

would have to start pressing for it from others that werent.

It may not happen unl a crical mass of companies provides

enough informaon that the investors see value because

they are able to draw comparisons. If that happens then

its not hard to see how more comprehensive reporng

could become the norm in the near future.

Lenders have thought less about sustainability than

investors, but that is changing

It would appear from delegate contribuons that the

lending community has not yet begun to consider the

long-term impact of unsustainable acvity. There is a

belief that this will change as risks become understood

and are seen to increase, which could happen very soon.

Greed and fear are key drivers for equity

and debt markets respectvely. On the

greed side, performance has not matched

the rhetoric, and the fear is now startng to

appear.

Mike Wilkins, Head of Global Carbon Markets,

Standard & Poor

Although the introducon of the Emissions Trading Scheme

(ETS) for example was a sort of phoney war (with caps

set too high and recession leading to a fall in demand), a

dramac shif in atudes is coming, and fear is a strong

driver for both investors and lenders.

From a credit market perspective, climate change is a big

fi nancial risk

For many financial instuons, sustainability criteria are

gaining weight in project financing decisions, parcularly

in a downward global economy.

Ratngs agencies and banks are looking

more closely at the risks. And people are

drawing beer connectons between

sources of risk and their own boom lines.

John Godfrey, Legal & General

And theyre recognising other, simpler to understand risks,

and their relave importance in the long-term performance

of a company. Like the difference between building andlosing a reputaon, it takes less to bring a company down

that it takes to grow it further and there is a sufficient

range of recognised and emerging ESG (environmental,

social and governance) risks to get the aenon of many

financial instuons.

Risk is more important than opportunity when we look at ESG factors, we are

working out what would cause a company

to trip up.

Paul Abberley, CEO, Aviva Investors


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The cost of carbon for example is an unknown factor

Standard & Poors Carbon Exposure survey looks at

the impact of carbon legislaon (and emissions trading

schemes) on 514 companies and found that up to now

there has been lile or no impact on companies, with

the possible excepon of ulies. But many CFOs are

worried about 2012 onward, when many commentators

are forecasng that a 2012 carbon price of 12/tonne will

rise to 45/tonne or more by 2020 which means the

cost of compliance would rise by a factor offive over the

ten years from today. Companies would have to invest

more in hedging, and re-double efforts to increase energy

efficiency.

Carbon is stll too cheap; but it may not be

for long.

John Godfrey, Legal & General

There is too much of a disconnect between owners of

capital and companies

There is too ofen a gulf between owners of capital and

the companies the analogy used in the Summit was that

of the absentee landlord. The concept of engagement

and stewardship is important; the new Stewardship Code

may be an important step in closing that gap, but some

delegates argued that the Codes comply or explain

approach is too weak, and stronger regulaon should be in

place, parcularly in regard to pension fund investment.

Government must play a strong role in incentives,regulation and policy

For those who are against government intervenon, it

surely is me to realise that there is no such thing as a pure

laissez-faire economy; indeed many would argue that too

much laissez-faire is what has led us to this point. Some of

the suggesons for change during the summit included:

Increased regulaon in the public sector by imposing

eco-credenal requirements for government contracts

Private sector regulaon that provides clear carrotsand scks to force businesses towards sustainability

a.k.a. codes of pracces with teeth

Public policy iniaves designed to nudge both

corporate organisaons and private individuals to act

more responsibly

Wider public awareness on the risk of inacon

Public figures to lead by example and walk the talk.

The Stewardship Code, published by the

Financial Reportng Council (FRC) in July 2010,

aims to enhance the quality of engagement

between insttutonal investors and companies to

help improve long-term returns to shareholders

and the efficient exercise of governance responsi-bilites. Engagement includes pursuing purposeful

dialogue on strategy, performance and the

management of risk, as well as on issues that are

the immediate subject of votes at general

meetngs.

The Code sets out good practce on engagement

with investee companies to which the FRC believes

insttutonal investors should aspire. It provides an

opportunity to build a critcal mass of UK and

overseas investors commied to the high quality

dialogue with companies needed to underpin good

governance. By creatng a sound basis of

engagement it should create a much needed

stronger link between governance and the

investment process, and lend greater substance to

the concept of comply or explain as applied by

listed companies.

There were a number of discussions about the effecveness

of providing informaon and feedback to companies and

even about the psychology of coercion. The net result is

that the government should create a balance of carrots

and scks, but, crucially, be prepared to properly enforce

the scks when they are defined.


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Telling people that 90% of their peers pay

the full amount of tax is a bigger incentveto people than telling them theyll go to jail

if they dont.

Richard Ward, Beer Regulaon Execuve,

Department of Business Informaon and Skills,

UK Government

Nevertheless, several delegates argued against government

interference, precisely because it limits their ability to find

and exploit new business models.

Prescriptve regulaton that says not only

what to do but how to do it limits our ability

to create value from change.

Richard Hookway, CFO, Refining & Markeng, BP

plc

Collaboration too often becomes an excuse for inaction

The nature and effecveness of collaboraon was

discussed in many forms. On a naonal level, there has

been a renewed interest in public-private partnerships

(PPPs), despite a long and chequered history of failed

iniaves. On an internaonal level, discussion ranged

around global coalions. While there have been some

successes, we cannot connue to wait and rely on global

or even regional agreements as the soluon to the issues

at hand.

Regulaton is required, and incentves

needed, but that should not stop us actng

alone.

Andrew Griffith, CFO, BSkyB

Both companies and naonal governments must act

independently and exhibit leadership for their own good

and to encourage others to take the necessary steps and

be prepared to work together when there is sufficient

consensus to do so.

In pursuit of a perfect soluton, we shouldnt

wait for a global coaliton. We have an

opportunity to demonstrate leadership to

the world.

Richard Ward, Beer Regulaon Execuve,

Department of Business Informaon and Skills,

UK Government

The cost versus compliance argument is false

Whenever regulaon is discussed, there inevitably follows

an argument about the costs of compliance. As a number

of delegates pointed out, the argument is ofen a false one.

Like any enforced change or negave market environment,

necessity ofen becomes the mother if invenon.

Cost versus compliance is a false dichotomy.

When Sarbanes-Oxley came in it cost

millions in increased costs; but as the new

controls helped to beer identfy risks and

operatng problems, we ended up saving

more than we spent.

Richard Hookway, CFO, Refining & Markeng, BPplc

In any case, non-compliance is generally not an opon

for any company, and parcularly not for those that are

publicly quoted.

If you think the cost of compliance is high,

try non-compliance.


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Richard Gillies from Marks & Spencer drew parcular

aenon to this issue, idenfying that his companys ability

to keep finding quick and easy wins (and sharing the credit

with anyone that wanted it) has been a major contributor

to their ability to execute the harder, more long-term

investments required for their Plan A sustainability

iniave.

Many sustainability projects are still proving to be a

challenge to justify

In the medium-term and beyond, companies must

go further to recognise that carbon dependence is an

off-balance sheet liability. They must also recognise that

achieving longer-term sustainability goes well beyond

carbon savings. Such investments are not only harder

to jusfy but harder to implement, measure and reward,

parcularly as the short term KPIs of most senior execuves

are not aligned with longer term sustainability goals.

Long-term projects also involve cultural changes,

improved business pracces, supply chain management

and innovaon all of which require investment, and the

involvement of mulple groups within (and ofen outside)an organisaon, working in concert. Many companies

connue to believe that such investments are unaffordable,

parcularly in a me of economic pressure.

Sustainable companies have been proven to outperform

markets

The Bathwick Groups research in 2008-9 outlined the

factors that such companies tend to share:

Long-term decision-making and investment

Early idenficaon of new opportunies

Flexible and adapve to change

Focus on efficiency measures

Strong governance and reporng systems

Enhanced risk management (strategic and operaonal)

Effecve reputaon protecon and enhancement

The opportunity cost of inaction is too high

Energy prices and post-Kyoto uncertaines are significant

risks to any organisaon. These two factors should be

enough to catalyse governmental acon and prompt

businesses to operate more sustainably. Yet most

organisaons fail to adequately idenfy and quanfy

future risks. In addion to being unhealthy in the

medium- to long-term, it will become increasingly

difficult to jusfy inacon or to argue against accusaons

of poor governance as investors, rangs agencies, and

commentators pay more aenon to the more widely

recognised risk potenalies.

Ask yourself some simple questons what

would the impact on your business be if

the cost of energy trebled?

The soluon need not be too complicated, even for smaller

companies unused to carrying out extensive scenario

planning. Relavely simple quesons can ensure that

adequate aenon is given to potenal downsides and

stress-test a strategy effecvely, though many companies

seem unwilling to commit the me and resources to do

so.

Most companies have still not identifi ed the low hanging

fruit

In the short term, the simple equaon Carbon = Cost

makes energy and resource efficiency easy to jusfy as it

immediately impacts the boom line. But even companies

that have made and are aggressively pursuing that

connecon have not yet realised that there are a range of

other opportunies available to them for sub-12 month

payback sustainability projects.

Never underestmate the depth of the easy

wins.Richard Gillies, Director of Plan A, Marks &

Spencer plc


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One facet that the successful companies profiled in

the research shared is an understanding that ignoring

sustainability challenges poses a greater risk of incurring

higher future costs and penales that markets and

legislators may impose on companies that are socially andenvironmentally irresponsible.

Several other consulng and finance companies have also

published research over the last three years showing that

companies that integrate sustainability into their core

funcons consistently outperform the market even in

these constrained mes.

The Goldman Sachs Sustain list chooses

companies that we think are going to be

able to sustain profitability into the future,

over the long term. Stocks outperformed

by 35% showing that ESG factors are

increasingly important.

Andy Howard, Equity analyst, Goldman Sachs

In fact it is not too hard to see why many of the disciplinesthat flow from focussing on sustainability have a generally

beneficial effect on an organisaons business processes

and efficiency.

M&Ss Plan A summarised:

- It makes financial sense

- It challenges you to innovate- It manages your future risk

- It motvates your people

- and its fun.

Richard Gillies, Director of Plan A, Marks &

Spencer plc

Companies such as M&S have shown that the business

benefits of sustainable pracces extend further than simple

carbon saving, delivering a significant uplif to profits

directly aributable to sustainability-related acvity.

We delivered 50m to the boom line in

2009 from Plan A.


Spencer plc

More than one delegate pointed out that most companies

target of only achieving compliance with the prevailing

regulaon and legislaon was not good enough, and

would increasingly separate the average performers from

the out-performers in the coming years.

Compliance is entry-level; simply being

compliant will not provide you with the

licence to be credible, compettve,

influental, or a high performer.

There is a long way to go in terms of reporting

Measuring returns on sustainable investments is not

always easy. Many companies start off by reporng

resource consumpon levels and future targets; others

have started to work with industry bodies and suppliers

to develop common standards. The Carbon Disclosure

Project is a good example. However, significant progress

is required in order to get us to a point of being able to

compare apples to apples.

Creatng a separate lile box to tck slightly

misses the point; ESG consideratons should

not be separate they need to be part of

an overall understanding of the company.

Andy Howard, Equity analyst, Goldman Sachs

In addion to external reporng, businesses are also

finding the need to create a common language internally toencourage a change of employee atudes. Small changes


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in the script can lead to wider behavioural change. And

the insights gained can provide the impetus for finding

the new opportunies we have already discussed, and

form the basis for new measurement and producvity

frameworks.

A lot of value comes from understanding a

broader informaton set.

Jessica Fries, Director, A4S

The Princes Accounng for Sustainability Project (A4S) isworking to create standards and more effecve methods

of reporng sustainability-related criteria.

Every publicly listed company is required to

file an annual report on its financial performance

in compliance with, in most cases, either IFRS or

GAAP. Many companies also voluntarily produce

CSR or sustainability reports, but there is significant

variance in relevance and quality, as there are no

global standards for measuring and reportng on

environmental, social and governance (ESG)

performance.

The Princes Accountng for Sustainability Project

(A4S) and the Global Reportng Initatve (GRI)

recently formed the Internatonal Integrated

Reportng Commiee (IIRC) to address the

challenge. The IIRC brings together a cross secton

of representatves from civil society and the

corporate, accountng, securites, regulatory, NGO,

IGO and standard-seng sectors, to develop a

framework for informaton about an organizatons

total performance, prospectve as well as

retrospectve, to meet the needs of the emerging,

more sustainable, global economic model.

To make our economy sustainable we

have to relearn everything we have learnt from

the past. That means making more from less and

ensuring that governance, strategy and

sustainability are inseparable said Professor

Mervyn King, Chairman of the GRI. Integrated

Reportng builds on the practce of Financial

Reportng, and Environmental, Social and

Governance - or ESG - Reportng, and equips

companies to strategically manage their operatons,

brand and reputaton to stakeholders and be beer

prepared to manage any risk that may compromise

the long-term sustainability of the business.

The push for sustainability is creating new thinking and

innovation

The effort expended infinding ways to make an organisaon

more sustainable, both internally and throughout its supply

chain, ofen gives rise to new and innovave ways of doing

things. It can also idenfy white space opportunies which

may not have been considered if the impetus to invent and

discover new growth opportunies had not existed.

In addion to driving innovaon and finding new ways of

doing business, a sustainable and commied organisaon

is more likely to aract and retain talent from across

the spectrum. Many studies have shown that more than

two-thirds of an organisaons employees feel posively

towards their employer if they have a strong sustainability

track record. And a similar proporon would acvely avoid

working for an organisa

on that did not.

What constitutes value may change

But the value that a company generates today will

change over me. A century ago, there were hundreds

of companies selling horse-related equipment, and few

people could afford a car; forty years ago, the majority of

Nokias revenues came from paper and rubber products,

yet within 20 years of moving into telephony, the company

had aained a number one posion globally in the market,

and in another ten had sold a billion mobile phones.


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Page 16


What we sell is value; but how value is

interpreted today is different from how it

was interpreted in the past and how it

will be in the future.


Spencer plc

The best place to be posioned as markets, customers,

and cultures evolve is in the vanguard, finding new value.

The pace of change may vary

Ending on a predictable but relevant note of urgency, many

delegates exhibited both excitement at the sustainability

challenges that they face today and discomfort with the

pace of change in their own organisaons.

Given the conversatons today about scarce

resources (metals, water, etc.), the pace of

populaton growth, and so on, the rate of

change may become very rapid.

Trevor Maynard, Head of risk management,

Lloyds of London

The pace of change is difficult to predict. The market may,

or may not, be approaching a number ofpping points legislave, customer senment-driven, climate-oriented,

and economic the list is extensive. Exactly how quickly

those pping points are reached, and how quickly market

condions will change as a result, is unknown. A number

of speakers and delegates were convinced that at least

some of those points are imminent however, and it seems

appropriate to end this proceedings report on that note.

The market is about to embark on a

sustainability revoluton. We are working

hard to prepare for it. Are you?


Spencer plc

IBM is planning a range of ongoing projects and work in

this area, some of which are outlined in the next secon.


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Outcomes: developing the themes

The Start Innovation Jam

The IBM Summit at Start was one of the most significant

events of its kind that has ever taken place in this country

according to Charles Hendry, the Minister of State for

Energy & Climate Change.The Summit brought together

key stakeholders from many communies, and created a

momentum amongst aendees to do something to make

a difference. The journey towards a sustainable economy

will be a long one, and the Summit was always intended

to be the start of a process rather than a single, albeit

impressive, event. As a connuaon of that process, IBM

has announced that it will be hosng a Start Innovaon

Jam in April of 2011.

An Innovaon Jam is an online text-based discussion forum

for conducng a large-scale brainstorming event. Diverse

groups of individuals are connected via a web browser to

discuss and develop aconable ideas for business-crical

or urgent societal issues. The key word is aconable. The

purpose of this Jam is to take what was learned from the

Summit, and turn it into a bank of aconable ideas. This

is about how the Summit idenfied a number of urgentneeds to which we need to find soluons: we need to

encourage collaboraon between differing constuencies,

but how do we make it happen? How do we start to change

individual and corporate behaviours? How do we engage

with younger people and how do we act NOW to make a

difference? The Jam aims to answer these quesons and

in doing so kick offhundreds of projects that will generate

real soluons and provide inspiraon for a thousand

more.

The Jam will be facilitated by IBM in conjuncon with the

Start organisaon and many of the other Start partners.

They will be inving everyone who aended the 2010

Summit, their partners and clients, and many others who

wish to join them on the journey.


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Page 20


The IBM Summit at Start

Start is an iniave established by HRH The Prince of

Wales, that aims to create a vision of a more sustainable

future, and seeks to promote sustainability through simple,posive and aspiraonal messages.

IBM is one of the founding partners, and is the exclusive

partner for Business to Business engagement. In September

2010 IBM led a Business Summit nine invitaon-only

days that covered key topics on the sustainability agenda

for business. Its starng point was simple: ask not what

you can do for sustainability ask what sustainability can

do for you.

Business engagement in the broad sustainability agendais crucial if we are to make progress. Business led the

industrial revoluon, it led the digital revoluon and all the

signs are that it will drive the sustainability revoluon too.

Each day of the summit saw senior business leaders, public

sector officials, NGOs, academics and commentators come

together in Londons Lancaster House to make a difference

to how sustainability is perceived and posioned in the

UK. Over 1,000 of the UKs most influenal people joined

forces with some of IBMs global experts to create a new

constuency around economic, social and environmentalsustainability.

Charles Hendry, the UK Minister of State for Energy and

Climate Change said that the IBM Summit at Start was

one of the most significant events of its kind that has ever

taken place in this country; this document, wrien by

The Bathwick Group, reports the output from the summit,

with a specific focus on Day 6, Finance & Sustainability.


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About The Bathwick Group

The Bathwick Group is a research-based consulng company that helps clients address their most pressing needs in

strategic planning and go-to-market execuon.

Sustainability & the future economy:

Defining the future risks and opportunies; strategic modelling and benchmarking, future-proofing to migate strategic

risks, and idenficaon of new market opportunies

The future of business & organisatonal performance:

Focused on collaboraon and disrupve platorms; solving client challenges rapidly by combining external experts and IP

protecon mechanisms to expedite soluons to important challenges

The applicaton and future of informaton technologies:

Focused on infrastructure (futures and cloud compung) and interacon (including social media) in business. Future-proofing

strategy and effecveness audits for enterprise IT leaders, cloud assessments, data audits, and benchmarking

IT industry futures:

Markeng strategy, customer analysis and deep research, sales acceleraon and business partner enablement soluons

www.bathwickgroup.com


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Documents

Smarter Finance for a Sustainable Future: Report based on proceedings at IBM Start