Business Sustainability Dec11

ISBS/Dec 2011 Prof. B.S.
Guha
Dec 2011
Business Sustainability
Who am I ?
Joined Philips India as a Management Trainee (1969) After O-J-T of 18 months, became a Section In-charge in a factory 18 months later, become Shop In-charge 24 months later, took over as I/C Engineering & Customer Support 18 months later, Project 2nd I/C for new Factory 18 months later, Manager Quality Control 42months later, Manager Innovation Group 42 months later seconded to Philips Germany 24 months later returned as Factory Manager, Luminaire Centre/Calcutta 36 months later took over as Plant Manager, Kalwa Lamp Factories/ Thane the largest Philips Production complex first Indian Manager 54 months later took over as SBU head- Professional Lighting/India 36 months later took over as Head, Corporate Purchasing/India for 12 months; Started (1998) up a joint-venture between Tata AutoComp & Yazaki Corp/Japan for Auto EDCS (C.E.O, Tata-Yazaki) and steered it for 60 months; Retired from Tata-Yazaki to start a career as a Teacher. (2003)
Business Sustainability 2
Dec 2011
The Sustainable MBA: the managers guide to Green Business Giselle Weybrecht ; (Times Knowledge
Series/Times Group Books & Wile; ISBN : 978-81-265-2770-0) References The Necessary Revolution - Peter Senge et al;
(Doubleday; ISBN : 978-0-385-51901-4)
The Fortune at the Bottom of the Pyramid - C.K. Prahalad;
(Wharton School Publishing, ISBN: 978 81 7758 776 0) Further Reading
Limits to Growth - Meadows, Donella, J. Randers and D. Meadows;

(New York Universe Books, 1972)
Beyond the Limits: - Meadows, Donella, J. Randers and D. Meadows;

(Chelsea Publishing Co.. 1992)
Cannibals with Forks: the Triple Bottom Line of 21st Century Business John Elkington
Dec 2011
Dec 2011
The Concern Concern

Are Earths resources in-exhaustible OR will they run inout some day? How will we get energy ? Minerals to make goods ? And food to eat ? Water to drink ? Finally, Air to breath ? Will nations live harmoniously? Will people within a nation be at peace ? Will there be equitable distribution of wealth? equitable What about Quality of life ? Can Economic Prosperity be ensured for development ?
Is the World and Life-style that we take for granted Lifebe there forever i.e. Human Sustainability?
Dec 2011
THIS
The Concern.... Contd. Concern....
Dec 2011

Or
Dec 2011
OK, but...
How urgent is it? How important is it? Is it both urgent and important? Who or what is responsible? Is there something that can be done? To do that something, what is the scale, time-frame and diversity of effort required? Are their Opportunities & Threats for Businesses? Does it, therefore require management involvement?
If the answer is Yes, then...

This course attempts to provide direction!
Dec 2011
Fundamental Question! How much human life can the Planet earth support?
The ecological footprint is a measure of human demand on the Earth's ecosystems: represents the amount of biologically productive land and sea area needed to
regenerate the resources a human population consumes AND to absorb/render harmless the corresponding waste.
Mother Earth!
Estimates how much of the Earth (or how many planet Earths!) it would take to support humanity if everybody lived a given lifestyle.
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One of the earliest concepts related to the issue of scale is that of carrying capacity. Biologists define carrying capacity as the maximum population of a given species that can survive indefinitely in a given environment.
Starting with low population and abundant resources, two types are seen: k-selection increase rapidly but tend to regulate by slowing down birth rate etc. to adapt to the resources available and finally reach a stable level; r-selection increase exponentially till resources are depleted and then mortality is the prime regulator. With resources replenished this cycle repeats in Boom or Bust cycle.
Dec 2011
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The I PAT formula in the 70s was an attempt to explain impact of human consumption in terms of three components:
population numbers, levels of consumption (which it terms "affluence", although the usage is different), and impact per unit of resource use (which is termed "technology", because this impact depends on the technology used)
Environmental Impact
I=PAT
Population affluence
Compounding Effect
Technology
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There have been a large number of published estimates for the human carrying capacity of the earth; they range from a low of half billion people to a staggering 800 billion. Many of these estimates are more ideologically based than determined by scientific principles.
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Dec 2011
Post-1950s the Developed World entered a great acceleration of growth and population (the Golden age of Capitalism):
technological innovations viz. plastics, synthetic chemicals and nuclear energy as well as fossil fuels continued to transform society.
Gathering environmental movement highlighted there were environmental costs associated with the many material benefits that were being enjoyed
Dec 2011
Documentation by American marine biologist & naturalist Rachel Carson in her path-breaking, revolutionary book: Silent Springs Environmentalism's concern with pollution & depletion of finite resources voiced in a series of hallmark books e.g Limits to Growth Sustainability
1962
1972
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Historically, humanity has responded to a demand for more resources by trying to increase supply. In 1972 the book Limits to Growth sent out shock waves around the world.
Using computer modeling, it warned of catastrophic consequences by 2100 if the then current rates continued:
growth in resource use, industrial output, food production and population expansion.
The only computer scenarios which indicated human welfare could be sustained were ones in which growth was reduced.
Dec 2011
The study team published both a 20 year and a 30 year follow up, adding measures and making improvements in their computer simulation model. These analyses came to the same conclusions as the original study that continued growth would lead to overshoot and catastrophe for human civilization.
In their original study in 1972 they warned that overshoot was a possibility In the 1992 report Beyond the Limits they argued that overshoot had already occurred in a variety of areas, and that their original warning were even more urgent.
Dec 2011

Uncontrolled Development, "Overshoot and Collapse"
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Sustainable Development
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Alex Steffans Summary - A short Video
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The Situation
In 1960 almost all countries in the world had the capacity to meet their own demand but
by 2000 most countries were able to meet their needs only by importing resources from other nations Environment & Ecology is a common resource !
By the late 20th century environmental problems were becoming global in scale.
the 1973 and 1979 energy crises demonstrated the extent to which the global community had become dependent on a non-renewable resource.
Dec 2011
The Situation.... Contd. Situation....
In parallel, greater concern for human values, lead by the formation of Amnesty International in mid-60s and carried world-wide by Globalization and the Information Revolution emerged. Failure of Communism as an economic model and widening disparities and inter-dependence only brought to sharper focus the growing differences in distribution of wealth and the need for a more comprehensive economic model. In the developed world, these led to the rise in importance of ethics and equity (and morality) in governance and consumerism.
Dec 2011

The growing unease and its investigation by UN (UNWCED: United Nations World Commission on Environment & Development a.k.a the Bruntland Commission, 1987) gave rise to most widely quoted definition of sustainability and sustainable development in the report Our Common Future :
Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.
The definition contains two key concepts:

Needs: in particular the essential needs of the worlds poor to which overriding priority should be given Limitations: imposed by the state of technology and social organizations on the environments ability to meet present and future needs
The definition as extended to Business:
for a business enterprise, sustainable development means adopting strategies and activities that meet the needs of the firm and its stakeholders today while protecting, sustaining and enhancing the human and natural resources needed for the future.
Dec 2011

The idea of sustainability is not new

societies in the past and over time had learnt to balance social, environmental and economic concerns.
At its core, sustainable development is about creating an interactive and appropriate balance between:

Social Equity: i.e. Human rights, peace, justice, gender equity, cultural diversity etc. Environmental protection: referring to natural environment i.e. Air, water, biodiversity, forests, energy etc. Economic development: understanding the limits and potential of economic growth factoring in poverty reduction, responsible consumption, corporate responsibility, employment and allied themes.
With Industrial Age we lost the balance, perhaps due to rapid development and convenience.

According to John Elkington, the movement built up on three pressure waves of public awareness:
Wave 1 brought an understanding of the issues and the finite limits to demand on natural resources. Business response was defensive. (60s mid 70s) Wave 2 - brought in the awareness for newness in technologies and alternatives, leading to industry initiatives towards sustainability. Business response became more competitive. (mid 70s mid 90s) Wave 3 focuses on the growing recognition that profound changes are needed to governance and in the globalization processes. Business will need to focus on long-term and market creation. (mid 90s current)
Dec 2011
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Wave 1 Milestones: Amnesty International formed (61) Silent Springs (62) Earth Day celebrated (70) Greenpeace founded (71) Arab Oil embargo (73) Wave 2 Milestones: OCED State of Environment report (78) Bhopal Disaster (84) Chernobyl Disaster (86) Our Common Future (87) Exon Valdez Disaster, Berlin Wall (89) Gulf War (91)
Wave 3 Milestones: Shell Nigeria, Brent Spar issues (95) Mad Cow Disease, UK/Nike sweatshops (96) Kyoto Protocol (97) GM Foods issues, UK/EU (98) Battle of Seattle /WTO (99) CSR on WEF Agenda (00) 9/11(01) BRIC in G8 Rounds (04) Meltdown US Economy (06) Copenhagen Summit (08)
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Sustainability Business Sustainability

The coming decade
Leaders of some of the world's most successful companies say the whole system of capitalism is at risk; there does seem to be consensus on what the big problems are:
1. 2. 3. 4. 5. 6. 7.
Unrestrained migration in numbers greater than the capacity to productively absorb the newcomers. Environmental degradation of food and water supplies, and many other aspects of quality of life. Failure of the rule of law; radical movements, terrorism/war which destroy the stability that markets need. Low levels of education, which limit worker productivity. The rise of state capitalism in response to free market shortcomings. Pandemics that disrupt trade and decimate labour. Inadequacy of existing institutions not just a matter of resources and competence; but also jurisdictions as nation-based institutions face global issues.
Dec 2011

Shifting Priorities
The economy is the The economy is a subsystem predominant system, with of society, which is itself a society and environment as subsystem of the biosphere. A supportive domains. gain in one is loss in the other.
Economy
Society
Environment
Early 20th Century

Sept 2011 Dec 2011 Business Sustainability Sustainability
Late 20th Century

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Currently prposed model is The three spheres: Social, The spheres: Environmental & Economic, represented by three overlapped, mutually reinforcing ellipses (World (World Summit, 2005) 2005)
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What would it take to get rid of disposable cups?

was a question Prof. Senge raised in the keynote address at the MIT Sustainable Summit . The responses include everyone from Starbucks & its competitors to paper manufacturers, food service providers, recyclers and municipal governments. To make progress on really tough sustainability issues is a massive undertaking in collaboration, Senge explained; whats more the parties that need to collaborate often arent naturally inclined to.
Dec 2011
Sustainability, thus, involves everyone:
Individual (be the change you want to see!) Local Communities ( to give the movement mass) Business & Industries ( for appropriate products & practices) Countries (for adequate governance)
No one person could destroy a species or warm the planet no matter how high (s)he tried. But that is what we are doing collectively! "Corporations are not responsible for the entire world's problem, nor do they have the resources to solve them all." Earth provides enough to satisfy every mans need, but not every ones greed!
Dec 2011
A universally accepted definition of sustainability is difficult because it is expected to achieve many things:
factual and scientific: a clear statement of a specific destination. The simple definition "sustainability is improving the quality of human life while living within the carrying capacity of supporting eco-systems conveys the idea of sustainability having quantifiable limits. call to action: a task in progress or journey, therefore a political process, so some definitions set out common goals and values e.g.The Earth Charter.
Dec 2011
Is this picture O.K. and sustainable?

Is it O.K. to look at individuals only ? 2005 Data
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In answering these simple questions, different dimensions need be considered:
Economic Development: There are large disparities leading to the three economic worlds Developed , Developing & Under-developed. Requires Political Settlement Social Equality: is a direct fall-out of the above! Environment & Ecological Protection: is by now selfevident.
Obviously, there are large differences of opinion with each nation/union prioritizing differently.
Environment & Ecology lends itself to a more scientific rigour: therefore, greater unified action , led the more economically developed. The threat to their affluence is greater from this factor!
Dec 2011
Incidental elements which strongly influence sustainability are:
Culture: shared values and attitudes that provide the framework by shaping our day-to-day behaviour. Governance: is the overarching principle that provides the context for sustainable development; promote the structure(s) at local, national and international levels, transparently and effectively.
The principles that guide responsibility and accountability: Precautionary principle: preventive measures even with the lack of full scientific evidence Proximity principle: disposal & treatment of waste as close to the point of generation, within technical feasibility Polluter-pays principle: cost of pollution should be covered by those causing it.
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The Environmental Protection Index (EPI), has been developed to quantify and numerically benchmark the environmental performance of a country's policies.
working as an index that can be used by policy makers, environmental scientists, advocates and the general public, comprising
ENVIRONMENTAL HEALTH POLICY (
6 Indicators)
ECOSYSTEM VITALITY POLICY (8 Indicators) PRODUCTIVE NATURAL RESOURCES (8 Indicators) CLIMATE CHANGE (3 Indicators)
Pilot study done in 2006.

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Three EPI reports have been released - the Pilot 2006, the 2008 and 2010 Environmental Performance Index.
In the 2010 scorecard, the top 5 countries (of 163) were:

Iceland,
Switzerland, Costa Rica, Sweden and Norway.
The US fell to the 61st position (as compared to 39th in the 2008 EPI), Brazil ranks 62nd , Russia 69th , China 121st , India ranks 123rd .
Sept 2011
One of the most significant developments on Environment was the Kyoto Protocol , Sept. 1997:
Is an international environmental treaty with the goal of achieving the "stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous interference with the climate system.
The target agreed upon was an average reduction of GHG emissions by 5.2% from 1990 levels by the year 2012.
The Protocol came into force on 16 Feb. 2005 and as of September 2011, 191 states have ratified the protocol.
USA signed yet to ratify, China has not proposed any emission cuts as binding.
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Green = Countries that have ratified the treaty Grey = Countries that have not yet decided Sept 2011 Brown = No intention to ratify at this stage. Sustainability Dec 2011 Business Sustainability
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The primary greenhouse gases in the Earths atmosphere are water vapour, carbon dioxide, methane, nitrous oxide & ozone.
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Top 3 (2005)
China 17% (5.8t/capita) US 16%(24.1t/capita) E U 11%(10.6t/capita) {India: 5% (2.1t/capita)}
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Per Capita, GHG emission
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The Situation .... Contd
The Kyoto Protocol climate pact is expiring in 2012.. The Copenhagen rounds were stormy: with major disagreements between developed and developing countries on emission caps..
Developing nations want an extension of the Kyoto Protocol with tougher norms for developed countries!
Australia-Norway are proposing agreement for a new pact, but no outcome expected before 2015..
Dec 2011 Business Sustainability
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Viewpoint: Developed Countries
Per Capita, GHG emission
Viewpoint: Developing Countries

The State of Ecology & Environment
Al Gores Presentation: An Inconvenient Truth
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The State of Economy
Robert Greenhill, Managing Director and chief business officer at the 09 World Economic Forum, said: "Twentieth century systems are failing to manage 21st century risks; we need new networked systems to identify and address global risks before they become global crises,"
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Global economy 'in no state to cope with new shocks'
Dec 2011
The State of Economy .... Contd
"Globalisation has generated sustained economic growth for a generation; it has shrunk and reshaped the world, making it far more interconnected and interdependent. But the benefits of globalisation seem unevenly spread a minority is seen to have harvested a disproportionate amount of the fruits. W.E.F Study, 2009 The United states wheels from a recession. A lot of people wonder what went wrong?
Greed in Wall Street, the War in Iraq and the unprecedented rate of change overlapping the world today thanks to globalization
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US Economy:
The Meltdown of US Economy:

Subprime mortgage crisis US Housing Bubble Jun07 Nov08, US Housing market correction 25% Energy Crisis reduction of Late 00 Recession: net worth! Auto Industry crisis of 08-10 US Govt. Interventions Troubled Assets Relief Program, 2008 Economic Stimulus Act, 2008 American Recovery & Reinvestment Act, 2009
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In Aug11, the US debt surpassed 100 percent of gross domestic product for the first time since World War II
WW II
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On August 5, 2011, Standard & Poor's credit rating agency downgraded the long-term credit rating of the United States government for the first time in its history, from AAA to AA+: "The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the Administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government's medium-term debt dynamics". According to the International Monetary Fund, the US joined a group of countries whose public debt exceeds their GDP. The group includes Japan (229%), Greece (152%), Italy (120%), Ireland (114%).

European sovereign debt crisis:
From late 2009 (Greece), fears of a sovereign-debt crisis developed with the situation becoming particularly tense in early 2010. The crisis has reduced confidence in other European economies. Ireland, with a government deficit in 2010 of 32.4% of GDP, Spain with 9.2%, and Portugal at 9.1% are most at risk.
Sovereigns listings by Standard & Poor's as of August 11
Green AAA Turquoise AA L/Blue A D/Blue BBB Purple BB Red B

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80% of World GDP: EU 26% ? US 23% BRIC 17% Japan 9%


The State of Society
The Earth Charter (2000):
a sustainable global society founded on respect for nature, universal human rights, economic justice, and a culture of peace. It outlines caring & respecting through ecological integrity, social and economic justice, democracy, nonviolence and peace and similar factors. (The Millennium Development Goals , time-lined for 2015.)
The State of Society .... Contd

1.
The Millennium Goals

Eradicate extreme poverty and hunger Achieve universal primary education Promote gender equality and empower women Reduce child mortality Improve maternal health Combat HIV/AIDS, malaria and other diseases Ensure environmental sustainability Develop a global partnership for development.
The Global Compact

Launched simultaneously as a policy platform and action framework for companies committed to sustainability & responsible business practices (in 130 countries, with over 4700 corporate & other stakeholders). The members support the Millennium Goals and focus on:
1. 2. 3. 4.
2.
3.
4. 5. 6.
7.
8.
Human Rights Labour Standards Environment AntiAnti-corruption

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Links of Business and Industry to Economics and Environment/Ecology are intuitively direct. Actions impacting these are: Consumption is influenced by Business/Industry by generating demand, often aiding consumers ability to pay. Business/Industry then leverage Financial Capital to use Natural , Human, Social & Technical capitals (resources!) to make and deliver required Products and Service. Thus the links to Society at large is at arms length left to Governments/Nations to provide resources with varying regulatory mechanisms.
Economy
Society
Environment
Therefore, what is Business/Management responsibility?

Dec 2011

Business Responsibility: the Reality

How has Business acted?

Great Success: The Golden Age of Capitalism. Side effects were unseen environmental, economic & social Finding stop-gap solutions and stopshifting the burden to experts Rather than work proactively with Governments to come up with innovative solutions, lobbyist employed to maintain statusstatus-quo.
Specialists e.g. Lobbyists intervene to reduce pressure Easier & Faster but symptomatic & short-term Pressure to meet tougher environmental standards DELAY Harder & take time but fundamental solutions Managers develop capacity for innovative solutions e.g. Better products
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explaining reality: Take-make-waste'
Take-Make-Waste solutions Easier & Faster but symptomatic & short-term Damage to Social & Environmental Systems DELAY Societal Needs Harder & take time but fundamental solutions Regenerative Solutions all life flourishes
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explaining reality: Take-make-waste'
Relocate plants to where regulations are more lax Easier & Faster but symptomatic & short-term Water Shortages Harder & take time but fundamental solutions Integrated watershed management
DELAY
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Responsibilities of business: Definition
Classical view: There is one and only one social responsibility of business to use its resources and engage in activities designed to increase its profits so long as they stay within the rules of the game, which is to say: engages in open and free competition without deception and fraud. Milton Freidman (1970) Contemporary View: A representative model was proposed by A.B. Carroll. (1980) managers have four areas of responsibility: Economic, Legal, Ethical and Social.
Shareholder Value
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A contemporary view of Business Responsibility
Stakeholder Value

driven by 7 closely linked revolutions many of which we see and recognize as full-blown and others formating even as we discuss the topic! The peoples attitudes and perceptions are radically changing inducing business & governments to govern cohesively and responsibly.
REVOLUTIONS 1.Markets 2.Values 3.Transparency 4.Life-cycle technology 5.Partnerships 6.Time 7.Corp. Governance
Dec 2011
The emerging paradigm (chrysalis economy) is
OLD PARADIGM Compliance Hard Closed Product Subversion Wider Exclusive

NEW PARADIGM Competition Soft Open Function Symbiosis Longer Inclusive

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Market: from local to global - for the foreseeable future, business will operate in markets that are more open to competition, both domestic and international; Values: the worldwide shift in human and societal values - entire societies can go into quicksand (e.g. the Jasmine Revolution), rollcall of companies that have crashed because of values-based crises: Enron, Arthur Andersen, Lehman Bros., Satyam & ....; Transparency: is well under way, is being fuelled by growing international transparency and will accelerate RTI in India, Swiss Bank disclosures, Wiki-leaks & .... In many respects, the transparency revolution is now out of control! Life-cycle technologies: riding on transparency, information on cradle-to-grave implications of products & services: managing the life cycles of technologies and products ( e.g. batteries, jumbo jets & oil rigs) will be a key emerging focus of 21st-century business.
Partners: acceleration of the rate at which new forms of partnership spring up between companies, and between companies and other organizations adversaries to partners e.g. Greenpeace & DuPont, WWF & Coke. Campaigning groups will need to work out ways of simultaneously challenging and working with the same industry e.g. Auto-emission norms; Time: business finds that current time is becoming ever wider. This involves the opening out of the time dimension, with more and more happening every minute of every day: online reporting requirements are key drivers towards this wide-time world. Sustainability agenda is pushing us in the other direction: requires thinking across decades, generations and even centuries! Corporate Governance: planning agenda for the business bottom-line is the responsibility of the Corporate Board. New spin is being put on the already energetic debate: engaging and balancing the multi-stakeholder demands.

Corporate Social Responsibility
Corporate social responsibility (CSR, also called corporate conscience, corporate citizenship, social performance, or sustainable responsible business) is a form of self-regulation integrated into a business model.
CSR-focused businesses promote the public interest by encouraging community growth and development and voluntarily eliminate practices that harm the public sphere, regardless of legality.
ISO 2600 is the recognized international standard for CSR. An approach for CSR that is becoming more widely accepted is a community-based development approach.
In this approach, corporations work with local communities to better themselves; building of a trade network with the community guaranteeing regular fair trade purchases.
Dec 2011
Corporate Social Responsibility ..Contd
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The State of Society .... Contd Sustainable Business

If it emerges at all, a sustainable global economy will emerge through an era of intense technological, economic, social and political metamorphosis . (Elkington, 2001).
Current patterns of wealth creation will generate worsening environmental and social problems - pressures will continuously build on both corporations & governments to make a transition to sustainable development. Four main types of company can be distinguished (or value webs) along the evolutionary path to a chrysalis economy namely, corporate locusts, caterpillars, butterflies and honeybees.
Sustainable Business.... Contd Business....

LOW IMPACT
REGENARATIVE (increasing returns) DEGENARATIVE (decreasing returns)
HIGH IMPACT HONEYBEES LOCUSTS
BUTTERFLIES CATERPILLARS
Locusts: Some corporations operate as destructive locusts throughout their life cycles; others only display locust-like behaviours occasionally, characterized by: the destruction of natural, human, social and economic capital; collectively, an unsustainable burn rate, potentially creating regional or even global impacts; a business model that is unsustainable over the long run; periods of invisibility, when it is hard to discern the impending threat;

LOW IMPACT
CATERPILLARS: are harder to spot than locusts because their impacts are more localized; their degenerative impacts may make it hard to see that they have a high potential for metamorphosis: generate relatively local impacts, most of the time; show single-minded dedication to the business task at hand; depend upon a high burn rate, although usually of forms of capital that are renewable over time; operate on a business model that is unsustainable when projected forward into a world of 8 to 10 billion people;

LOW IMPACT
BUTTERFLIES: are easy to spot, though most are comparatively small; they are conspicuous and have been abundantly covered in the media. Yet if every company in the world were to model itself on such companies, our economies would still not be sustainable not enough critical mass or hive strength: As a sustainable business model over reliance for expansion on financial markets and large corporate partners; a strong commitment to the corporate social responsibility (CSR) and sustainable development (SD) agendas; but a tendency to Dec 2011 Business Sustainability 71 define its position by reference to locusts and caterpillars;

LOW IMPACT
HONEYBEES: is the domain into which growing numbers of government agencies, innovators, entrepreneurs and investors will head in the coming decades - global economy would hum with the activities of corporate bees and the economic versions of hives. a sustainable business model, albeit based on constant innovation; a clear and appropriate set of ethics-based business principles; strategic sustainable management of natural resources; 2011 Decsociability and the evolution of powerful symbiotic partnerships; Business Sustainability 72
Sustainable business (green business) is thus an enterprise that has no negative impact on the global or local environment, community, society or economics and covers six essentials:
Triple Top-line Value: The TTL Establishes three simultaneous requirements of sustainable business activities
financial benefits for the company, natural world betterment, social advantages for employees and members of the local community with each of these three components recognized as equal in
status.
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Nature - Based Knowledge and Technology:
bio-mimicry based principal involves the conscious emulation of natural-world in terms of

growing our food, harnessing our energy, constructing things, conducting business, healing ourselves, processing information and designing our communities;
Products of Service to Products of Consumption:
Products of service are durable goods that are returned to the manufacturer and re-processed into a (new generation) of products when they are worn out. Products of consumption are shorter lived items made only of biodegradable materials.
Dec 2011
Solar, Wind, Geothermal and Ocean Energy: emphasizing the use of renewable energy sources Local-Based Organizations and Economies:
durable, beautiful and healthy communities with locally New life to: owned and operated businesses and Think Global, locally managed non-profit organizations, Act Local along with regional corporations and shareholders working together in a web of partnerships and collaborations. constant advancements and upgrade of Operational processes as the company does its business.
Continuous Improvement Process:
The continuous process of monitoring, analyzing, redesigning and implementing is used as conditions change and new opportunities emerge .
Dec 2011

What does all this have to do with Business now?

Everything! Because Businesses have to...

Reduce Cost: using less and wasting less does so Preserve resources: resources are increasingly hard to get need to conserve Keep up with legislation: laws governing businesses are becoming tougher e.g. Pollution, anti-dumping etc. antiEnhance Reputation: to build trust and loyalty with the It can be society triggered by Satisfy Customer & Stakeholder needs: by conforming to any of these laws and obtaining a licence to operate in this premises increasingly ethically conscious world. with great Differentiate: by increasing customer loyalty, particularly linkages! creating niches for cause-related groups causeCapitalize on new opportunities: improving living standards always provide this.
Dec 2011

Next: Recyclable Crates?

Reduce Cost Keep up with legislation Preserve Resource Enhance Reputation
Philips India used (ply)wood boxes to as primary packing for lighting equipment. G.O.I made wood/logging increasingly controlled forest protection. In the 80s, wood progressively became expensive. Philips switched to Cardboard took 2 years. Savings: 30% Per unit packing, wood /paper ratio is 3:1 by weight. Also with 1t wood, 3t of paper can be made; put together: 9x preservation! CB boxes used to advertise product & dealers started storing in showrooms Additional cost savings by volume reduction: Handling (products/truck), lower inventory & disposal costs!
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Sustainability
Actual reasons why management is getting involved are:
Sustainability is not totally new to any business, it is about being more with it and effective
Continuity is more important than a carefully crafted starting point; creation of habits leading to culture
Potentially high cost of inaction for both business and society.

Even if there is no immediate impact, inaction can lead to major issues in the future
Multiple, unforeseen benefits

Effect is strongest when embedded into culture ( like Quality!)
Dec 2011
Top driven initiatives, personal reasons or otherwise

To ensure triple-top line actions for green or sustainable business responsible companies have moved on to a holistic measurement encompassing results impacting:
People Planet Profit.
SustainAbilty
The reporting contained performance metrics to give:
The triple bottom line (abbreviated as "TBL" or "3BL") captures an expanded scope of values and criteria for measuring organizational success.
Dec 2011
Triple bottom line score-card means expanding the traditional reporting framework to take into account ecological and social performance in addition to financial performance. "People, planet and profit" clearly describes the triple bottom lines and the goal:
"People" (human capital) pertains to fair and beneficial business practices toward labour, the community and region in which a corporation conducts its business. "Planet" (natural capital) refers to sustainable environmental practices. A TBL endeavor reduces the ecological footprint by both controlling consumption and reducing waste.
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"Profit" is the economic value created (for the society in which it operates) by the organization after deducting the cost of all inputs, including the cost of the capital tied up. It differs from traditional accounting definitions of profit:
Current accounting practices do not take into account true or full cost of inputs since many of the social and environmental costs are not identified and measured being externalities. Provisioning omissions or errors for contingent and liability costs which could arise in the future. These are usually factored in on a probability of occurrence. Tragedy of the Commons misuse or overuse of resources commonly available to all for free (e.g. Fishing in the seas & oceans) making the resource scarce.
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One of the major drawbacks of the TBL framework is its inability to be applied in a monetary-based economic system.
Because there is no single way (in monetary terms) to measure the benefits to the society and environment as there is with profit, it does not allow for businesses to sum across all three bottom lines, making it difficult for businesses to recognize the benefits of using TBL for the company itself.
Many organizations, however, are using voluntary disclosures in their annual reports on the major Key Performance indicators for People & Planet.

Using the TBL Scorecard An Example:
99th Annual General Meeting ITC Limited Commemorating The ITC Centenary 100 Inspiring Years : One Mission India First
Chairman Y C Deveshwars Address


Using the TBL Scorecard
Missing Brands?
From Chairman Y C Deveshwars Address

Financial Performance In its 100th year, your Company continues its impressive record of financial performance. Gross Turnover for the year grew by 13.5% to Rs. 26,259.60 crores. Net Turnover increased by 16.3 % to Rs.18,153.19 crores. Pre-tax profits rose by 24.7% to Rs. 6,015.31 crores while Post-tax profits at Rs. 4,061 crores registered a growth of 24.4%. Earnings Per Share for the year stands at Rs. 10.73. Cash flows from Operations stood at an all time high of Rs. 6,620 crores for the year.

ITC : Financial Highlights 1996-2010* March 31,1996 Gross Income Profit After Tax Return on Net Assets (%) Net Assets Employed Net Worth Market Capitalization 5,188 261 28 1,886 1,121 5,571 March 31, 2010 26,863 4,061 41 14,957 14,064 1,14,000*
CAGR in Total Shareholder Returns in the period 19962010 : 24.3 %


Adding yet another feather to the cap has been the Platinum LEED rating achieved by your Companys iconic hotel ITC Royal Gardenia in Bengaluru for its leadership in green energy & environmental design.. Your Companys endeavour to continuously enhance its positive carbon footprint has also powered a progressive shift to renewable energy sources. It is a matter of pride that nearly 31 % of energy consumed by your Company today is from clean and renewable sources such as wind power. This magnitude of renewable energy consumption is praiseworthy given the large manufacturing base of your Company. ITCs low carbon growth strategy also places it in the forefront of corporations that contribute to the goals of the National Action Plan on Climate Change.

Environmental and Social Performance I have in the past drawn your attention to the outstanding performance of your Company in creating new benchmarks in the area of environmental and social responsibility. The accomplishments continue with your company achieving the status of being water positive for the 8th consecutive year, carbon positive for the 5th year in succession and also solid waste recycling positive for 3 years in a row. You will draw justifiable pride in the fact that your Company is the only enterprise in the world of its size to have achieved and sustained these three global environmental distinctions.

This stellar environmental performance is matched by your Companys initiatives to build social capital through extensive community engagement, specially in Indias rural areas. These initiatives have led to the creation of sustainable livelihood opportunities for over 5 million people, many of whom represent the poorest sections of our society. ITCs deep commitment to pursue a Triple Bottom Line strategy has earned it global and national recognition for the leadership it provides in responsible and sustainable business practices.
Comments on Y C Deveshwars Address

The companys longest-serving chairman, Deveshwar has repeatedly stressed the companys environmental record as a green company, and established a triplebottom line objective (offering financial, environmental and social returns) while also making the company carbon-neutral and water-positive. Among other diversifications, he has moved aggressively into a core Unilever territory like foods, and notched up a Harvard Business School case study with his e-choupal rural marketing initiative. But the company remains fundamentally dependent on the cigarette division for most of its profits, and in that sense the task of transforming the company remains an unfinished one.
Source: Business Standard, 27 Aug 2010

Using the TBL Scorecard
CNBC Interview of Mr. Y. C. Deveshwar
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Creating a Sustainability footprint

a) Global Initiatives b) Business Models
CO2e
The concern for carbon?
T
We are adding 5 billion tons every year!
8 billion tons go in, Fossil Fuel burning
800 billion tons (380 ppm)
CO2 in the atmosphere
3 billion tons go out, absorbed by land and oceans 93

Carbon Trade Contd

The Carbon trading is one of the fastest growing financial markets in the world. It is the most visible result of early regulatory efforts to mitigate climate change, and grew out of the Kyoto Protocol, 1997.
The protocol requires that by 2012, developed countries will achieve greenhouse gas emission reductions of at least 5% against baseline levels of 1990. The Protocol agreed on 'caps' or quotas on the maximum amount of Greenhouse gases for developed and developing countries, A tradable permit system has been effective in the industrial sector: trade (i.e. sell your allowance to buyers who exceed their quota ). Thus, Cap & Trade. ). hus,
Carbon Trade Contd
Participating countries set quotas on the emissions (1 unit = 1 tonne of CO2e) of installations run by local business and other organizations, generically termed 'operators'.
Countries manage this through their own national 'registries', which are required to be validated and monitored for compliance. (Certified or Verified Emission Reduction ) Businesses that are about to exceed their quotas can buy the CERs/VERs, privately or on the open market. This gives operators time to invest in/develop 'cleaner' processes & developing machinery/ practices Offsets are achieved by investing in sustainable practices: Clean Development Mechanism (CDM)
The primary goal is Carbon Offset rather than cap.
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Carbon Trade Contd
CDMs typically give financial support to projects that reduce the emission of greenhouse gases in the short or long-term.
The most common project type is renewable energy, such as wind farms, biomass energy, or hydroelectric dams.
popular carbon offset projects from a corporate perspective are energy efficiency & wind turbine projects
Others include the destruction of industrial pollutants or agricultural byproducts, destruction of landfill methane, and forestry projects.
Many companies offer carbon offsets as an incentive in the sales process for customers to mitigate the emissions related with their product or service.
Dec 2011
Carbon Trade Contd

The market is emerging strongly despite various global factors e.g. uncertainty with US regulatory efforts. With existing regulation, the emerging carbon trade has reached US $70 billion (52 billion) in 2008.

For the third consecutive year, China was the world leader with a 70% market share in terms of transacted volume. Brazil and India, at 8% market share each, transacted the highest volumes after China. Africa followed with 5% of the market. These figures do not account for US volumes since US is not a signatory to Kyoto Protocol, though there are some voluntary efforts
Dec 2011

Global Initiatives
Renewable Energy
Renewable energy commercialization involves the diffusion of 3 generations of renewable energy technologies dating back more than 100 years. Second-generation technologies are market-ready and are being deployed at the present time; they include solar heating, photo-voltaics, wind-power, solar thermal power stations & new forms of bioenergy. Third-generation technologies require continued R&D efforts in order to make large contributions on a global scale. E.g. Ocean energy, biomass gasification.
Dec 2011
Renewable Energy Contd

What is the scope?
Available renewable energy The volume of the cubes represent the amount of available geothermal, hydropower, wind and solar energy in TW, although only a small portion is recoverable. The small red cube shows the proportional global energy consumption!

Worldwide energy sources (TW) 2004
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Revenues: 10x in 12 years
Taking Off!!
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Second Generation in Solar
1000 MW: Operational; 2000 MW under Energy Construction; 18000MW Announced.
Solar energy is not available at night; modern energy systems usually assume continuous availability of energy. Thermal mass systems can store solar energy in the form of heat at domestically useful temperatures. Solar energy can be stored at high temperatures using molten salts. Salts are an effective storage medium because they are low-cost, have a high specific heat capacity and can deliver heat at temperatures compatible with conventional power systems.

Global Initiatives
Background
Recycling & Regeneration
Products require consumers! Todays consumers are:

Conscience-focused & demand good-governance Want ethical business processes Are independently informed Require service more than ownership Ready to access goods through non-traditional channels
Manufacturer Distributor Dealer Retailer Manufacturer Intermediary(s) Consumer Consumer
Consumers
Consumer
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Recycling & Regeneration.... Contd

Life-cycle
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Recycling involves processing used/ spent articles & waste into useable products to prevent destruction of potentially useful materials to:

reduce the consumption of fresh raw materials, reduce energy usage, reduce air pollution (incineration) and water pollution (from landfill) by reducing need for "conventional" "conventional" waste disposal, and lower GHG emissions as compared to virgin production. Recycling is a key component of modern waste reduction.
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The Bottle Box(TM) The Bottle Box(TM) is the first ever product from the true bottle-tobox recycling process. The unique and innovative ECO-CHIC designs are made from 100% post consumer recycled PET bottles.
Nike claimed making thePET bottles Each shirt uses up to 8 shirts has prevented nearly 13 million plastic bottles from going into landfill sites
In South Africa, nine World Cup sides wore shirts made entirely from recycled plastic bottles
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Electronic waste, e-waste, escrap, or Waste Electrical and Electronic Equipment (WEEE) describes loosely discarded, surplus, obsolete, or broken electrical or electronic devices. The informal processing of electronic waste in developing countries causes serious health and pollution problems. Some electronic scrap components, such as CRTs, contain contaminants such as lead, cadmium, beryllium & mercury and other toxic materials.
Canon strives to recycle products and parts that are not suitable for reuse as materials in the manufacture of new products. Plastics collected from Canon products during 2009 for reuse in new products totaled 2,087 tons. Canon strive to make their products 75 % recyclable by mass (for re-use and material recycling) and 85 % recoverable by mass (including thermal recycling). Canon markets the "Refreshed" series of remanufactured products for the Japan market. The iR 6570N-R highspeed monochrome MFD, launched in 2009, achieved an average parts reuse ratio of 91% in terms of weight
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Global Initiatives
Inclusive Growth
Two Statements:
a sustainable global society founded on respect for nature, universal human rights, economic justice, and a culture of peace. Earth Charter, 2000 ....a minority is seen to have harvested a disproportionate amount of the fruits. W.E.F Study, 2009
Reflection:
Why is it that all our technology, managerial knowhow and investment capacity, we are unable to make even a minor contribution to the problem of pervasive global poverty and disenfranchisement? Prof.
C.K.Prahald, 2006
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Inclusive Growth . Contd
Start with a new approach: a clean sheet of paper:

If we stop thinking of poor as victims or as burdens and start . recognizing them as resilient, creative entrepreneurs and Bottom ? value-conscious consumers a whole new world of opportunity will open up. OR Why don't we call the world's 4 billion impoverished people . the Global Majority rather than Bottom of the Pyramid . vibrant partners to be embraced, partners in whose future Bottom ! . everyone else's are inextricably linked?
Dominant (but questionable) logic:
Poor cant afford our products: they are not target customers The have no use for products sold in developed countries Only developed countries pay for technological innovation Intellectual excitement & long-term growth is in developed markets Dec 2011 Business Sustainability 110
Inclusive Growth . Contd

Fortune at the bottom of the pyramid
Traditional approach to stimulate BOP consumption via philanthropy, direct or indirect, and free does not create sustainable business; it only gives the donor a feel-good.

Reflects the shifting the burden approach of the old Empowerment gives livelihood, charity gives first-aid!
Creating this BOP sustainable model is based, on 3 As:
Affordability: without sacrificing efficacy or quality Access: time & distance matter most; BOP customers cant spend on travel : time/costs and opportunity loss (of income) Availability: Cash on hand at that instant is important, if they cannot buy X they will buy Y; they cannot defer buying decisions (there are many claimants for that surplus!). Switching costs are thus negligible.
Dec 2011
Fortune at the bottom of the pyramid ....Contd
Trust plays a big role in creating business. Without collateral, money is not forthcoming. Businesses assume that the default rate among the poor will be higher. Practice proves the reverse is true!
The default rate in Grameen Bank, dealing in microfinance, is 1.5% among 2,500,000 customers; in ICICI Bank the rate is less than 1% for 200,000 customers in micro-finance. The logic is very clear: for the BOP customer the alternative finance is 50 times more expensive and certainly underhand if not underground.
personal loans from recognized banks can be obtained @ 17% p.a interest; for the BOP customer, without creditworthiness, the money-lender will lend @ 600% p.a. Prahalad called this Poverty Premium.

E.g. e-Choupal (ITC initiative)
ITC built a system that changed the economics:

Traditional mandis required the farmers to sell to buyers through auction, who in turn sold it to processors like ITC. The buying intermediaries cartelized to the disadvantage of both the farmers and the processors. ITC used information age technologies to ensure fair and steady supply of quality produce, starting with soya beans. Net Savings: to the farmer Rs.270/mT; to ITC Rs.300/mT.
The real benefits of e-Choupal are more than the costreduction in the supply-chain/system. It addressed four friction points arising from distortions (against the farmers): universal
Access to information Right of choice Ability to enforce contracts Social standing Business Sustainability
human rights, economic justice
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A Presentation by ISBS students
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Seeing Systems
First step: learn to see the larger system in which we live and work.
Look beyond the events and superficial fixes to see the deeper structures and forces at play Think out of the self-created boxes; do not allow artificial boundaries to limit thinking
Second step: make strategic choices based on natural and social limits
Mimic how growth happens in the real world
Third Step: create self-reinforcing cycles of innovation

Dec 2011
Getting started :Concepts, Forces & Factors
Recognizing multiple stakeholders:

Investor
Recognizing forces acting on industry:
Porters 6force model
Supplier
Society
Customer
Employee
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Getting started :Concepts, Forces & Factors Many companies have done much to improve their
social and environmental consequences of their activities, yet these efforts have not been as productive as they could have been: - First, they put the business against society when clearly they are interdependent - Then, they pressure managers to think of Corporate social responsibility in generic ways instead of the way most appropriate to the firms strategy.
Michael Porter
Getting started :Concepts, Forces & Factors Lets start with what is legal, but always go on to what we would feel comfortable about being printed on the front page of our local paper; and never proceed forward simply on the basis of the fact that other people are doing it. Warren Buffet
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Many models have been developed to provide ways to understand sustainability, balancing the three factors: The 5-Capital Model, looks at different capital (rather than resources!)required to produce goods & services:

Dec 2011
Natural Capital: any stock or flow of energy and raw material that produce goods or services; Human Capital: peoples health, knowledge, skills and motivation; Social Capital: concerns institutions which help maintain and nurture human capital e.g. Families, educational institutes, Trade Unions etc. Manufactured Capital: consist of material goods and fixed assets which contribute to operations Financial Capital: enables other types of capital to created, owned or traded. However, it has no real value by itself.
The Natural Step framework is derived from system thinking i.e. recognizing what is happens in one part of a system affects every other part.
Understanding the broader system within which the issues are contained Takes an upstream approach and addresses problems at the source Developing effective, durable and total solutions to the environmental and social problems of this century Creating a sustainable world means creating new ways for people to live and thrive while keeping the planets ecosystems and the global tissue healthy and able to sustain us and the future generations
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Sustainability is journey takes time, never ends!
Like excellence or quality, there is no definite destination or terminus
Starting point: where does the business now stand?
Not yet on board..

No requirement or even contrary to current practice: rejection Lip service and sloganeering: do the barest minimum Seen as an avoidable cost : conservation if convenient
Getting on board...
Risk avoidance and cost cutting: short term horizon Indirect benefits and Opportunities: longer term drive
Dec 2011
Strategic integration & continuous improvement

Accounting Entrepreneurship Economics
Finance
Strategy
Marketing
Operations Ethics Organizational Behaviour
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Elements of Business: Accounting
1t of Carbon can be traded in EU @ $20; 1ha of rain forest stores 500t of carbon = $ 10,000 (value). Yet million acres of forests are being cut to make agricultural land @ $200/ha! Why destroy at a loss of $ 9800/ha? No easy answer - but do we need to (re)look ?
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Role of accounting: 1. Identifying the full cost of products & services 2. Determining which issues are priority 3. Measuring progress towards goals 4. Measuring impact on Society 5. Verifying the accuracy 6. External reporting on programs
Dec 2011
Tools of the trade: 1. Full or True Cost Accounting 2. Materiality 3. Key Performance Indicators 4. Measuring Social Impact 5. Assurance 6. Publicly disclosing the 3BL scores not financial alone.
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Full or True Cost accounting:

Typically, costs are classified as direct material, labour, R&D and overheads, Thus the impact of/on environment and society is hidden/ distributed, making it difficult for operating managers to identify Or not considered at all since they are external i.e. not legally attributable to the business.
E.g. Who pays for restoration of land dug-up in mineral mining process? The mining company only pays for leasing and extraction.
Materiality:
Conventionally, any issue which has impact of 5% (thumb rule) on net profit is considered significant i.e. Material However, many issues are material in the eyes of different stakeholders - particularly considering the longer term e.g. changing legislation Peer businesses may deem many issues to be material e.g. Access to life-saving drugs in Pharma industry
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Key Performance Indicators:

Obviously, accounting has to go beyond the routine financials and use metrics related to all goals/objectives The measurement need not be perfect or accurate/quantitative: approximately right is better than precisely wrong! Must satisfy/make sense to stakeholders who want these reports
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Measuring Social Impact:

Social return on investment (SROI) is a tool to asses the environmental, social & economic value, in monetary terms, created by any investment; However, the market valuation of social benefits is imperfect - thus SROI provides an approximate value for guiding program effectiveness. Both positive and negative impacts , directly attributable to the firms initiatives, need be factored in.
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Elements of Business: Economics Economics guides the understanding of incentives which govern unsustainable behaviour in order to replace them with those that support more sustainable behaviour:
Rise of Consumer societies about 60% of GDP is accounted for by Consumer spending. Resources required to support this is putting pressure of Earths eco-system. Policies to foster sustainable consumption is under consideration by UNEP & UN Dept. Of Economic & Social Affairs through the Marrakech Process.
Dec 2011
Elements of Business: Economics
Management of shared resources A commons is a geographical area not owned by anybody, thus resources there are shared by everybody e.g. Seas (and fishing), Air etc. People misuse these common, freely available resources till exhaustion: the tragedy of the commons. There is still a long way to go to resolve this issue. Regulatory Instruments The regulatory framework in which (global) companies work is becoming extensive, complex and confusingly diverse! Legislation and enforcement can cause many complications in view of compliance for products/ processes/ services.
Dec 2011
Externalities are an important consideration since cost/ benefits to the Company is often different from those to the Society e.g. If cost for polluting is not borne by the polluter, then there is no economic incentive to be non-polluting. If cost/benefits are incorrectly quantified, Private players cannot make appropriate calculations about economic justification for the activity. In a sense, externalities are a form of market failure since amount of activity under free market conditions result in inefficient use of resources.
Dec 2011
Market-Based Instruments using this route is seen to be very effective in reversing the negative trend s via incentives. About $3.5 billion of regulated biodiversity offsets take place annually, projected $10 billion in 2020! Three broad types of instruments are in use:
1) Price based instruments: comprising Taxes, Subsidies, Charges, Deposit-refund (e.g. soda bottles) systems for ecological impacts. 2) Quantity based instruments: Tradable permits (e.g. Carbon Trade), Quota (e.g. fishing) and Offsets (e.g. clean development mechanism). 3) Market friction instruments: using product differentiation in form of eco-labelling (e.g. no animal testing) and certification.
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Market-Based Instruments (contd) These instruments provide industries a tool for regulating their effort since language of money is readily understood. However, market dynamics are not easy to forecast and these alone may not provide the long-term solution. Emerging Markets Developing world accounts for > 50% of the Worlds GDP, up from 39% in 1990! Emerging market companies can be classified as:
1) Fully-fledged globalizers: comprising old / established companies which have attained global status e.g. Tata, CEMEX 2) Regional Players: Are emerging players trying to make a mark globally; usually starting with neighbouring countries

Emerging Markets (contd) 3) Global Sourcers: Selling locally but sourcing globally to overcome local resource constraints e.g. HPCL 4) Global Sellers: based at home but seeking to expand sales by accessing global markets. 5) Multi-regional niche players: are small, niched firms operating across multiple regions leveraging their uniqueness. Together, they are important to sustainability since they provide Talent, Resources, New Consumers, Growth opportunity and innovative business models.
Challenges, Trends & new Ideas The global world is faced with
1) Uncertainty: Country policies and speed of implementation/ harmonization. In this there will be Free Riders who do not take their fair share of responsibility. 2) Determining the trade-offs: How much are we willing to pay and for what term ? For what result? Therefore, how far are we willing to go? 3) Determining what Optimum means: At our current level of knowledge, there is no zero pollution/depletion. What is now optimum? Therefore, how to incentivize effort?
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Challenges, Trends & new Ideas (contd) Emerging trends and Ideas include:
1) Alternative trading system: Co-operatives, Collective Consumerism 2) New Economic models: From fast to just growth - no bubbles! Cradle to Cradle , B.O.P etc. 3) Cost of inaction: Preventive actions cost but what about inaction ? 4) From free to fee: Pay for actions e.g. Plastic shopping bags
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Collective Consumerism
A short film by Rachel Botsman on emerging Consumer trends.
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Cradle-toCradle-to-Cradle
In the Cradle to Cradle model, all materials used in industrial or commercial processes - such as metals, fibers, dyes - are seen to fall into one of two categories:
Technical nutrients are strictly limited to non-toxic, non-harmful synthetic materials that have no negative effects on the natural environment; they can be used in continuous cycles as the same product without losing their integrity or quality. In this manner these materials can be used over and over again instead of being downcycled into lesser products, ultimately becoming waste. Biological Nutrients are organic materials that, once used, can be disposed of in any natural environment and decompose into the soil, providing food for small life forms without affecting the natural environment.
Dec 2011
Concept: a shoe that is mass produced using the C2C model.
The sole is made of "biological nutrients" while the upper parts might be made of "technical nutrients." Once manufactured, shoes are distributed to retail outlets where the customer buys the shoe at a fraction of the price they would normally pay for a shoe of comparable aspects: the customers are only paying for the service (the materials in the shoe) for the period of time that they will be using it When they outgrow the shoe or it is damaged, they return it to the manufacturer. The manufacturer separates the sole from the upper parts (separating the technical and biological nutrients), the biological nutrients arenever dies! natural environment The Shoe returned to the while the technical nutrients are used to create the upper of another shoe.
Dec 2011
Cradle-toCradle-to-Cradle
A short film by William McDonough
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Elements of Business: Entrepreneurship

Large companies grab eyeballs , but 90% of global business transactions are carried out by SMEs they employ about 60% of the global workforce, are fastest growing and account for a major share of the exports. A study credits SMEs with less than 20 employees with 95% of the significant innovations in the last century!
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But SMEs are non-responsive to Sustainability: in fact are a major part of the problem! Being small, individual companies do not see their impact, collectively ....! And governments/agencies in most countries pay scant or less attention/are lenient. SMEs are in the radar field now and will need to act. They have the potential to make significant contribution. Can react better to emerging opportunities in sustainable product/services Innovate to access underserved markets: size and reach less of a constraint.

Issues & Trends (problems are opportunities!): New Ventures: have to address social/ environmental ventures and entrepreneurs address opportunities not profits! Such fields are opening rapidly e.g. Microfinance, Healthcare etc. Intra-prenuers: increasingly large companies are fostering social initiatives within the company, driving it down and across the organization. Employees with insider-outsider mindset and approach could lead such movements e.g. Unilevers Shakti Amma movement. Social Entrepreneurship.
Social Entrepreneurship
Video clips from Fortune at the Fortune bottom of the Pyramid Prof. C.K. Pyramid Prahlad

Retailing: Casa Bahaia (Brazil) FMCG: Annapurna Salt (multiNational) Healthcare: Arvind Netralaya (India) Rehabilitation: Jaipur Foot (India)
Dec 2011
Elements of Business: Ethics & Corp. governance

Issues & Trends (problems are opportunities!): New Ventures: have to address social/ environmental ventures and entrepreneurs address opportunities not profits! Such fields are opening rapidly e.g. Microfinance, Healthcare etc. Intra-prenuers: increasingly large companies are fostering social initiatives within the company, driving it down and across the organization. Employees with insider-outsider mindset and approach could lead such movements e.g. Unilevers Shakti Amma movement. Social Entrepreneurship.
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SUSTAIN: DICTIONARY
SUSTAINABILITY
To endure without yielding: withstand To keep up or maintain Synonyms: Aid, Carry, Endure, Keep, Preserve, Support Is being used more in the sense of human sustainability on planet Earth;
The most widely quoted definition is sustainable
development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.
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Gro Harlem Brundtland, ex-Prime Minister of Norway,

Chairperson of the UN World Commission on Environment & Development (Bruntland Commission), author of the report Our Common Future (the March 20, 1987) from which the definition is taken.
The idea of sustainability is age-old; societies over time have learnt to balance social, environmental and economic concerns. At its core, sustainable development is about creating an interactive and appropriate balance between:
Social Equity: i.e. Human rights, peace, justice, gender equity, cultural diversity etc. Environmental protection: referring to natural environment i.e. Air, water, biodiversity, forests, energy etc. Economic development: understanding the limits and potential of economic growth factoring in poverty reduction, responsible consumption, corporate responsibility, employment and allied themes.
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Shifting Priorities
Economy
Society
Envmental
Industrial Age
New Age
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Frequently used model is The three spheres represented by three overlapped, The spheres mutually reinforcing ellipses (World Summit, 2005) (World 2005)
Bearable
Sustainable
Viable
Equitable
The Earth Charter (2000), result of a call from the World Commission on Environment and Development for a universal declaration to guide transition to sustainable development:
Steered by Mikhail Gorbachev & Maurice Strong (Chairman of the Rio Earth Summit), captures a 10-year dialogue about common goals and shared values; It outlines caring and respecting through ecological integrity, social and economic justice, democracy, nonviolence and peace and similar factors. a sustainable global society founded on respect for nature, universal human rights, economic justice, and a culture of peace. Founded an action plan The Millennium Development Goals , time-lined for 2015.
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THE MILLENNIUM GOALS

1.
THE GLOBAL COMPACT
2.
3.
4. 5. 6.
7.
8.
Eradicate extreme poverty and hunger Achieve universal primary education Promote gender equality and empower women Reduce child mortality Improve maternal health Combat HIV/AIDS, malaria and other diseases Ensure environmental sustainability Develop a global partnership for development.
Launched simultaneously as a policy platform and action framework for companies committed to sustainability & responsible business practices (in 130 countries, with over 4700 corporate & other stakeholders). The members support the Millennium Goals an focuses on: 1. Human Rights 2. Labour Standards 3. Environment 4. Anti-corruption
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The Ecological Footprint, a resource management tool that:

measures land and water use required to produce the resources consumed and to absorb wastes, using the prevailing technology for the given life-style. can drilled down from planet to country, region, city, business and individual level. Consumption is a complex multiplicative result of three factors: population size, affluence (or lifestyle) and technology (IPAT i.e. Impact = p x a x t) Current estimates: it takes 1 year and 4 months for the planet to regenerate what is used in a single year; i.e. We require 1.33 planet earths to support us! We are in overshoot and headed for a catastrophe.
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Peter Senge: Director, Center for Organizational Learning/MIT Sloane School of Management
What would it take to get rid of disposable cups? a question Prof. Senge raised in the keynote address at the MIT Sustainable Summit . The responses include everyone from Starbucks, its competitors to paper manufacturers, food service providers, recyclers and municipal governments. To make progress on really tough sustainability issues is a massive undertaking in collaboration, Senge explained; whats more, the parties that need to collaborate often arent naturally inclined to.
Dec 2011
Earth provides enough for every mans need , but not for every mans greed. Mahatma Gandhi
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What does sustainability have to do with business? Everything! Because Businesses have to...
Reduce Cost: using less and wasting less does so Preserve resources: resources are increasingly hard to get need to conserve Keep up with legislation: laws governing businesses are becoming tougher e.g. Pollution, anti-dumping etc. Enhance Reputation: to build trust and loyalty with the society e.g. ITC
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Satisfy Customer & Stakeholder needs: by conforming to laws and obtaining a licence to operate in this increasingly ethically conscious world. Attract Employees & Investors: being clean, green and fair does so, e.g. Tata Group Differentiate: by increasing customer loyalty, particularly creating niches for cause-related groups e.g. Body Shop toiletries (against animal testing) Capitalize on new opportunities: improving living standards always provide this e.g. fortune at the bottom of the pyramid , Electric cars etc.
According to John Elkington, the sustainability movement built up on three pressure waves:
Wave 1 brought an understanding of the issues and the finite limits to demand on natural resources. Business response was defensive. Wave 2 - brought in the need for newness in technologies and alternatives, leading to industry initiatives towards sustainability. Business response became more competitive. Wave 3 focuses on the growing recognition that profound changes are needed to governance and in the globalization processes. Business will need to focus on long-term and market creation.
www.environmentalleader.com
Dec 2011
The Third Wave
}
The Second Wave
TIME
00: CSR & SD on WEF Agenda 99: The Battle of Seattle 98: GM Food controversy: EU & UK 95-97: Shell Nigeria, Mad Cow Disease, Nike sweatshops, Kyoto Protocol 92: UN Earth Summit, Brazil, The Earth Charter 91: Gulf War 87-90: Our Common Future, Green Consumer movement, Exxon Valdez disaster, Berlin Wall
86: Chernobyl Disaster 84: Bhopal Disaster 78: 2nd oil shock, OECD State of Envr. report 73: Arab Oil Embargo, Watergate Scandal
The First Wave
} 70-72: Earth Day, Greenpeace founded, Limits to Growth

69: Friends of Earth Founded 61/62: Amnesty Intl. & WWF founded, Silent Spring
Regulatory limits
Dec 2011
Elkingtons Waves
IMPACT
Explaining reality
How did we get where we are?

Great Success: The Golden Age of Capitalism. Side effects were unseen environmental, economic & social Finding stop-gap solutions and shifting the burden to experts Rather than work proactively with Governments to come up with innovative solutions, lobbyist employed to maintain status-quo.
Specialists e.g. Lobbyists intervene to reduce pressure Easier & Faster but symptomatic & short-term Pressure to meet tougher environmental standards DELAY Harder & take time but fundamental solutions Managers develop capacity for innovative solutions e.g. Better products
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explaining reality: shifting the burden

Relocate plants to easier locations Easier & Faster but symptomatic & short-term Water Shortage Harder & take time but fundamental solutions Integrated watershed management
DELAY
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The Iceberg: Increased opportunities for learning

Events React
Patterns/Trends: Anticipate
Whats been happening? Have we seen this before?
Systemic Structures:Design
What forces are at play contributing to these?
Mental Models: Transform

What about our thinking that allows these to persist?
Continuous Improvement
The Deming Wheel
A P A S Customer Requirement
Q System
P D
TIME
Continuous Improvement approach to Sustainability

Own Status?
Communicate; Monitor; Scale up; Improve
Expertise available? Impact? Culture? Projects? Issues?

Status with others?
Keep it going
Regulations? Voluntary measures? Industry Practices? Bench marking Business Drivers? Business case? Available tools? Priority/scale/budget?
Put a plan in place

SMART targets; Structure; Training & tools; Pilot projects
Dec 2011
Where to go? Engage & get support.
CEO commitment; Internal cooperation; Stakeholder engagement; Networking.

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A few pointers for the assessment:
Different initiatives or even the same ones will progress at different pace within the same organization Sustainability itself is in flux, constantly evolving in complex ways so does an organization. Need to check if:
Saying one is when really is not (Greenwashing) How is the organization walking the talk: priorities, reporting and publicizing
Doing just enough, reactively Doing about the same as others in the Country/Line-of-business OR is the organization taking a lead
Are the initiatives internationally at par Are the initiatives globally bench-markable?
Dec 2011
Like with other excellence models, is there a full hearted push from the top management.
Getting started on the journey: Responsibilities
Responsibilities of business:
Classical view: There is one and only one social responsibility of business to use its resources and engage in activities designed to increase its profits so long as they stay within the rules of the game, which is to say: engages in open and free competition without deception and fraud. Milton Freidman (1970) Contemporary View: A representative model was proposed by A.B. Carroll. (1980) managers have four areas of responsibility: Economic, Legal, Ethical and Social.
Dec 2011
Ethics: consensually accepted standards of behaviour for an occupation, trade or a profession:

Utilitarian approach actions and plans are judged by their consequences. Behaviour should result in the greatest good at least cost. Likely that some stakeholders are minimized. Individual Rights approach - fundamental rights of humans should be respected in all decisions. Can get distorted (selfish) when a strong individual view-point prevails. Justice approach - proposes that decision makers be equitable, fair and impartial for distributing costs and benefits. However, can lead to conflict in cases where compensatory justice is applied e.g. Reservation.
Dec 2011
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Morality: precepts of personal behaviour that are based on religious and/or philosophical grounds
Leads to moral relativism that no decision is better than another given the difference in personal interpretation. Could lead to confusion in determining ethical behaviour; enables people to justify behaviour as long as it is not illegal.
Law: refers to formal codes that permit or forbid behaviours and may not enforce ethics or morality.
Dec 2011
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Dec 2011
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Many companies have done much to improve their

social and environmental consequences of their activities, yet these efforts have not been as productive as they could have been: - First, they put the business against society when clearly they are interdependent - Then, they pressure managers to think of Corporate social responsibility in generic ways instead of the way most appropriate to the firms strategy.
Michael Porter
Within each company, sustainability can be seen as a jigsaw puzzle! The chosen sustainability strategy sits in the middle and provides the other considerations to get involved in this issue. The corner-pieces are Ethics, Entrepreneurship, Organizational behaviour and Economics All of these are tied-in by Operations, Marketing, Finance and Accounting.
Dec 2011
Business Process Mapping: Elements
Entrepreneurship: Identifying and exploring new business solutions both inside and outside the organization. Economics: Helps understand the larger environment in which the business works and impacts. Explores mechanisms to internalize cost to society and optimize contributions to social & economic development . Strategy: Ensures the right approach is taken for a particular company and it is implemented as a organized effort that mobilizes everyone.
Dec 2011
Ethics: Without good management, strong governance, ethical values and open/ transparent relationships with all stakeholders sustainability issues/policies/ goals can go nowhere! Organizational Behaviour: Translating policy into action and creating a workplace where sustainability is embedded in the culture and every aspect of employees life-cycle from recruitment to retirement.
Dec 2011
Marketing: In designing and promoting more sustainable offerings and inspiring change. Operations: Taking responsibility for all the impacts, social, environmental and economic, across the life-cycle of the companys offerings. Finance: Plays a key role in sending signals that can enable companies to invest in longerterm opportunities; requires effective management of economic, social & environmental impacts.
Dec 2011
Business Process Mapping: Value Creation

Tomorrow
Strategy: Clean Technology develop the sustainable competencies of the future Payoff: Innovation & Repositioning Strategy: Sustainability Vision Create a shared roadmap For meeting unmet Needs. Payoff: Sustainable growth trajectory
DRIVERS: Disruption Clean Tech. Footprint Internal DRIVERS: Pollution Material Use Waste
DRIVERS: Climate Change Resources Poverty External DRIVERS: Civil society Transparency Connectivity
Sustainable Value
Strategy: Pollution Prevention Minimize the waste & emissions from operations Payoff: Cost and Risk reduction
Strategy: Product Stewardship Integrate stakeholder views into business process Payoff: Reputation & legitimacy
Today
DuPont - 206 year old, US$ 29 Billion Chemical Giant Inventors - Nylon, Lycra, Teflon, cellophane etc. Greenpeace vilified DuPont (1989) as worlds no.1 polluter for their product Freon, starting the transformation with CEO Edgar Wollards remark .. but I can assure you in future the colour of the company will be some shade of green and adding Chief Environmental Officer to the CEO term (with Chief Executive Officer) charged with corporate environmentalism.
Dec 2011
In 2005, Business Week ranked DuPont no.1 in their list of Top Green Companies. CERES has ranked DuPont no.1 in US & no.2 in the world for meeting the business challenge for climate change. Today, DuPont is focused on biotechnology, chemistry and natural systems as opposed to synthetic ones
Before the Greenpeace assault, DuPont had seriously started the migration away from petro-chemical based competence to new, environment friendly products. They recognized that soon those products (synthetic & polymer) would become commoditized and unprofitable Paul Tebo, VP- Health, Safety & Environment used the sustainable value matrix to develop the strategic thinking
Dec 2011
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Honouring stakeholders demand Show what you are doing today! Dont talk to us about grand visions of the future until we see proof of your engagement and commitment now DuPont set out aggressive targets (global) in 1990, results in 2004:
air-bourn carcinogens down by 90% Hazardous waste down 40% Total energy use down 5% (with 40% growth) cost savings US$ 3 billion!
Lower left quadrant
Strategy: Pollution Prevention Minimize the waste & emissions from operations Payoff: Cost and Risk reduction
Internal
Today DuPont have extended their cost & risk reduction goals for 2015 (2004 base): -15% GHG emission -50% air carcinogens -30% water consumed 180
Learning: interventions to reduce carbon footprint carry low risk and they represent real cash savings not just optimistic forecasts
Dec 2011
Engaging outside stakeholders was not usual and mostly defensive to combative; but Tebo saw the need to engage them including Greenpeace. Gilding, the then E.D. of Greenpeace was brought into DuPont to dialogue with top management This, and similar engagements, created co-ownership and focus on problemsolving. Learning: scientists/professionals seriously listening to people get a view-point which allows them to focus differently and find innovative solutions for societal use, which is the initial starting point in any case! Societal partnerships are essential.
Dec 2011
Lower right quadrant

Strategy: Product Stewardship Integrate stakeholder views into business process Payoff: Reputation & legitimacy
External
Today Business executives wrongly believe that people without P/L responsibilities do not realize pressures that insiders face! Similarly, NGOs & Govts. think that Companies live for P/L only!
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When a company looks to long-term future, the shift in focus is dramatic.
Upper left quadrant

Strategy: Clean Technology develop the sustainable competencies of the future Payoff: Innovation & Repositioning
DuPont focused on 3 mega sustainable trends:

Drive for renewable energy & materials Demand for greater safety & security Need for increased food production Currently, DuPont makes components for Solar Panels, Bio-fuel based on corn (with BP), Tyvek building insulation to save heating related energy, Sonara a starch based fibre for cloth/furnishing.
Internal
Focus away from petro-chemical base to organic chemistry & bio-technology, mimicking life: towards the way nature does things
Today
DuPont have an ambitious goal of doubling investment in R&D programs with direct, quantifiable environmental benefits for customers and consumers.
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Dec 2011
The ability to reach out to under-served population (bottom of the pyramid) begins with products that meet basic human needs. Products and services need to address imbalances created in energy, food, water and such areas. DuPont have targeted 35% revenue from products introduced in 5 years many of which are bio based.
External
It is now that companies ask the question How are we going to our products and services to the larger world ? Shift our view about global social & environmental issues? Reach people who need to improve their quality of life?
Upper right quadrant

Strategy: Sustainability Vision Create a shared roadmap For meeting unmet Needs. Payoff: Sustainable growth trajectory
Dec 2011
Today DuPont have a nature inspired strategy with bold goals (target 2015 ): Add annual revenues of US$ 2bln from greener products Double revenues from nondepletable resources .
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Motivated by the vision to eradicate all needless blindness in India, Aaravind embarked on a series of innovations to bring world-class eye care to the poorest people of rural India. Began in 1976 with a modest 11-bed private clinic is now a manufacturing centre for synthetic lens, sutures and pharmaceuticals related to eye care; an institute for training & research; eye bank; PG program (MS Degree) in Ophthalmology and a centre for community outreach programs. It is now the largest (3.6 million eye surgeries/year) the most productive (2600 surgeries/doctor/year; national average 400) and boasts of world-class outcome rates. Financially self sustainable (2002: Income Rs. 39 cr., expenses Rs. 18 cr., surplus Rs. 21 cr.)
Dec 2011
Aravind System straddles the full chain with

Awareness and check-up camps, reaching patients, organizing finance,: patients who can pay, pays for another! pre-surgical preparation, transportation to the hospital, Surgical process, Providing lens, sutures and related medicine post-operative care, reaching them home, prognostic care.
Despite our efforts, only about 7% target population is coming to our hospitals. We have to increase this.
Dec 2011
The three responsibilities of Sustainability
SustainAbilty
The triple bottom line (abbreviated as "TBL" or "3BL", and also known as "people, planet, profit") captures an expanded spectrum of values and criteria for measuring organizational (and societal) success.
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Some recent trends and ideas:
The blended value initiative to bring it together Voluntary disclosures e.g. Carbon Disclosure Project which collects and disseminates information on climate change and GHG emissions from the worlds largest companies (3000 in 08) to investors. Recognizing unrecognized assets e.g. carbon trade and recreational opportunities from unused forested land Elgin Air Force Base, Florida/USA:
400,000 acres of pine forests Timber sales: $1.2 million annually Fee revenue for recreational use: (est.) $8-12 million/year
Dec 2011
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Dec 2011
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Peter Senge: Director, Center for Organizational Learning/MIT Sloane School of Management
What would it take to get rid of disposable cups? a question Prof. Senge raised in the keynote address at the MIT Sustainable Summit . The responses include everyone from Starbucks, its competitors to paper manufacturers, food service providers, recyclers and municipal governments. To make progress on really tough sustainability issues is a massive undertaking in collaboration, Senge explained; whats more, the parties that need to collaborate often arent naturally inclined to.
Dec 2011 2010
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ISBS/Dec 2011 Prof. B.S.

The Fortune at the Bottom of the Pyramid - C.K. Prahalad;

(Wharton School Publishing, ISBN: 978 81 7758 776 0) Further Reading

Limits to Growth - Meadows, Donella, J. Randers and D. Meadows;

Beyond the Limits: - Meadows, Donella, J. Randers and D. Meadows;

The Concern Concern

The Concern.... Contd. Concern....

The Concern.... Contd. Concern....

The Concern.... Contd. Concern....

If the answer is Yes, then...

This course attempts to provide direction!

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The Concern.... Contd. Concern....

The Concern.... Contd. Concern....

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Alex Steffans Summary - A short Video

The Situation.... Contd. Situation....

The Situation.... Contd. Situation....

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The definition contains two key concepts:

The definition as extended to Business:

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The idea of sustainability is not new

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Sept 2011 Dec 2011

Sustainability Business Sustainability

The Situation.... Contd. Situation....

The Situation.... Contd. Situation....

Early 20th Century

Late 20th Century

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What would it take to get rid of disposable cups?

The Situation.... Contd. Situation....

Sustainability, thus, involves everyone:

The Situation.... Contd. Situation....

The Situation.... Contd. Situation....

Is this picture O.K. and sustainable?

Sept 2011 Dec 2011

Sustainability Business Sustainability

The Situation.... Contd. Situation....

In answering these simple questions, different dimensions need be considered:

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Incidental elements which strongly influence sustainability are:

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 Pilot study done in 2006.

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Sept 2011 Dec 2011

Sustainability Business Sustainability

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The Situation.... Contd. Situation....

The Situation.... Contd. Situation....

The Situation.... Contd. Situation....

Is this picture O.K. and sustainable?

Pilot study done in 2006.

The emerging paradigm (chrysalis economy) is