SustainabilityA Competitive Advantage In

Your Career

“Every single pressing social and global issue of our time is a business opportunity”

(Peter Drucker)

Financial Executives InternationalCraig Raben, P.E., LEED AP

September 2, 2010

Agenda

- An Unsustainable Path

- What Is Sustainability

- Business Implications

- The Sustainable Business

- Implications For Financial Executives

Growing Concerns

- Energy Sources

- Water Use

- Food Supply

- Natural Resources

- Inequality

- Toxics

Causing Symptoms With Synergistic Effects- Climate Change

- Public Health

- Habitat

- Security

- Biodiversity

- Migration

Exacerbated By- Globalization - Population Growth

Increasing Public Awareness and Action

An Unsustainable Path

What Is Sustainability?

“The ability to meet today’s global economic, environmental and social needs

without compromising the opportunity of future generations to meet theirs.”(UN Brundtland Commission, 1987)

Why Its A Business Issue?-63 Of 100 Largest Economic Entities Are Corporations (Werbach, 2009)

-Growing Market Demand

-Becoming More Mainstream

-Finding Correlation Between Sustainability And Improved Results

Majority Yet To Establish A Clear Business Case

Sample Business Implications

All Industries Impacted

Highest Opportunity And Risk (Esty, 2006)

Organizational Characteristics

- High Brand Exposure

- Big Environmental Impact

- Dependent on Natural Resources

- Exposure To Regulations

- Increasing Potential For Regulation

- Competitive Market For Talent

- Low Market Power

- Established Environmental Reputation

List Is For Environmental, Similar List For Social

Perspectives

Limited

- Milton Friedman: Social Responsibility Of Business Is To Increase Its Profits

- Regulatory Compliance

Functional

- Managed By Silos (i.e. EHS, HR etc)

- Approaches Are Often Independent

Strategic

- Aligned And Integrated

- Group Responsibility

The Sustainable Business

“A company’s ability to achieve its business goals and increase long-term shareholder value by integrating economic, environmental and social opportunities

into its business strategies.” (Wirtenberg, 2007)

What Works: Common Traits

1. Stakeholder Engagement -Visioning Exercises

-Involved In Defining Sustainability

2. Aspirations - Long Term Perspective

3. Aligned With Overall Strategy -Comprehensive Approach Illustrating Value

4. Integrated Throughout - Visible Management Support

- Organizational Culture vs. Functional Silo

5. Communications - Transparent

- Balanced

The Sustainable Business (Cont.)

What Works: Common Experiences

1. Drives Innovation- Different “Lens”

- New Processes

2. Strengthens Culture- Everyone Has Skin In The Game

- Emotional Connection and Purpose

3. Finding More Opportunity Than Expected

4. Tangible Bottom-line And Top-line Impacts

Gaining Competitive Advantage

Recent Trends Of Interest

- Corporate Strategy Integration

- Behavioral Interviewing

- Management Education

- SEC Reporting

- Shareholder Resolutions

- Grants, Rebates And Incentives

- Regulatory Developments

- Investment Indices And Analyst Reports

- Supplier And Customer Expectations

Opportunity To Differentiate For You And Your Org.

Senior Financial Executive Role

A Senior Financial Executive Plays A Critical Role

Potential Areas For Contribution

-Change Management

-Performance Metrics

-Efficiency And Innovation

-Project Support

-Employee Engagement

-Ethics And Governance

-Rewards And Incentives

-Voluntary Standards

-Internal Audit

-Investor Relations

-Vendor Oversight

-Accounting Practices

-Charitable Giving

-Risk Management

-Mergers And Acquisitions

-Capital Expenditures

-Measurement And Reporting

(McKinsey: “Valuing Social Responsibility Programs”, 2009)

(McKinsey: “Valuing Social Responsibility Programs”, 2009)

Example Key Issues - Finance

Structural Considerations (Hitchcock, 2007)

- Negative Impacts Are Often Externalized

- No Standard Performance Metrics Or Reporting

- No Valuation On Nature

- Limited Role of Risk Avoidance And Intangibles In Decision Making

- Internal Accounting Methods (Silo vs. Systems Approach: ABC, LFC, LFA)

Reporting

- Sustainability Reporting Is Largely Voluntary, But In Some Cases Expected

- Stand Alone Reports Imply Non-Strategic

- State, Country, International And NGO Level Requirements And Approaches

Example Key Issues (Cont.)

Communications

- Distrust Regarding Company Intentions, High Scrutiny

- Often Need To Discuss Metrics Other Than Financial

- Avoid Greenwashing

- Balance And Transparency

Standards, Expectations And Regulations

- Lack Of Clarity, Still Evolving

- Participate In Development, Partnerships With Stakeholders

- Wide Range Of Voluntary, Local, National, Industry, International etc.

Great Opportunity To Gain Skills And Differentiate

Useful Resources

- U.N. Environment Program – Finance Initiative

- Global Reporting Initiative

- World Business Council For Sustainable Development

- World Resources Institute

- American Institute Of CPAs

- Corporate Sustainability Websites

Summary

- An Unsustainable Path

- Growing Awareness, Concern And Action

- A Business Issue

- Trends And Implications For Finance Executives

- Key Issues Currently With Clarity Needed Near-Term

Opportunity To Develop New Skills And Differentiate

SustainabilityA Competitive Advantage In

Your Career

“Every single pressing social and global issue of our time is a business opportunity”

(Peter Drucker)

Financial Executives InternationalCraig Raben, P.E., LEED AP

September 2, 2010