Sustainability 24, 2013

Global Leaders Debate Setting the agenda for business sustainability

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Foreword by Pierre Nanterme, Chairman & CEO, Accenture

Each year Accenture hosts Sustainability 24, a unique virtual conversation connecting thousands of people, including business leaders, policy makers and academics, from more than 90 countries. Over the course of the day, speakers and participants exchange insights and ideas on how we can further embed sustainability into organizations and the global economy.

One theme coming across loud and clear from this year’s discussion is that we need to shift gears—both in scale and ambition—when it comes to sustainability. We need to move beyond pilot projects and small-scale successes, and focus on transforming organizations into sustainable businesses. Clearly, this is no small feat, which is why these conversations are so important.

At Accenture, we see the positive impact of sustainability in our work with clients, our ongoing research and in our partnerships with organizations like the World Business Council for Sustainable Development and the World Economic Forum’s Green Growth Action Alliance. We also continue to see sustainability climb higher on global agendas, and throughout Sustainability 24, leaders demonstrated how sustainable practices have helped them achieve efficiencies, cost savings and differentiation.

But there is much more to be done and the question remains: how can we scale up progress to transform our economies into truly sustainable ones?

In this publication you will find highlights and action points from a truly insightful day of discussions with organizations including Marks & Spencer, L’Oreal and WWF, academics from universities like Tsinghua University and policy influencers such as the UN Global Compact.

It is more important than ever for organizations to understand what “becoming sustainable” means, to continue the conversation and to take action. So whether your interest is green growth, energy efficiency, smart cities or re-shaping business through sustainability, I trust you will find the insights in this Sustainability 24 report relevant and helpful for your organization.

Sustainability 24

Pierre Nanterme Chairman & CEO, Accenture

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Government’s policy of “Energiewende” (which aims to abandon nuclear energy in just 10 years while reducing carbon emissions and expanding renewables generation and energy efficiency) rightly continues to attract the world’s attention as potentially the biggest technological, political and regulatory experiment taking place in an industrial country today.

As these examples illustrate, in many countries the sustainability debate has a particular emphasis, often driven by national imperatives. However, the particularities among countries weren’t, by any means, the only things we covered during our day of debate. We also looked closely at the key themes that are uniting everyone – business, governments and NGO’s – concerned with embedding sustainable practices into economies. We will cover some of these in detail throughout the report, but it is worth briefly drawing out here what the key themes were.

For business, one theme stood out: how to institute long-term change while generating a sufficient profit and improving competitiveness. The answers to this lie to a large extent in new and innovative business models that many progressive companies are adopting. In the Paris session we learned how companies have developed new product lines and services through sustainability – as a service model – and are using their sustainability credentials to differentiate themselves from their competitors. In some cases companies are beginning to see themselves not as product vendors but more as end-with-end service providers whose relationships to their customers and suppliers goes much deeper across the value chain. But that’s not all. Sustainable practices also need to be rolled-out across processes. The Barcelona session, for example, looked at how a truly sustainable supply chain can be good for business by heightening efficiencies and helping companies build trust with their customers in the process, heightening competitiveness at the same time. In London, meanwhile, the implications of recent World Economic Forum and Accenture research into engaging “tomorrow’s consumer” were discussed, with business strategy and innovation in mind. Consumers around the world (but especially young consumers in rapidly developing countries like China and India) are much savvier when it comes to sustainability and

they take the environmental implications of their buying choices increasingly seriously. More to the point, they’re willing and able to champion or to criticize a brand on its environmental credentials, using their technological nous and social media savvy (as well as traditional word-of-mouth) to do so. But as illustrated by the collaborative approach developed with the Guardian Sustainable Business, there’s a lot companies can do to engage these consumers and work with them to trigger behavioral shifts that enable more sustainable lifestyles, whilst at the same time creating business value.

Development was another key theme, with the Washington DC expert panel discussing how energy access can be expanded in emerging markets to facilitate access to economic development. The driver of this is highly likely to be effective partnership across and within sectors. This ties-in significantly with business strategy and the emergent trend of cross-sector convergence where NGOs, businesses and governments with the same aims form unlikely but effective coalitions to solve specific problems.

Lastly, we looked in detail at the increasing role of cities – a recurrent focus for the Sustainability agenda – as powerful catalysts for change. It was fitting that the San Francisco session was the one to focus specifically on the power of IT and data analytics in creating a sustainable environment whilst improving living standards for citizens. Something we at Accenture are very much part of.

This has been a very brief overview from me but there’s much more in the session outlines that follow. Also the dynamic debate on social media has reinforced my conviction that your organizations, collaborators and followers are all willing to participate in this ambition to identify and deploy sustainable solutions. The global broadcast may be over for another year but the debate is very much continuing. I’d like to thank all our partners and clients for their engagement and for the insights they have shared. Sustainability 24 has again brought home to me that the solutions are there and that we can indeed rise to the challenge of transforming our economy into an environmentally sustainable one and invent a new model of sustainable growth. I hope you’ll agree and will continue to be part of this initiative.

Foreword by Bruno Berthon, Global Managing Director, Accenture Strategy and Sustainability Practice

As Pierre Nanterme notes, the key theme from this year’s Sustainability 24 was timely, as the world had just surpassed the symbolic 400 parts per million of CO2. The theme was stark: how do we use sustainability innovation to transform organizations (and economies) at their cores, making them fully sustainable, through scaling the incremental changes and adopting key lessons learnt along the way.

Clearly the answer is multi-faceted and an effective strategy needs to plan for the particular emphases of certain economies and regions, as well as recognizing where challenges are universal. On the particularities, take the situation in China as an example, where we started the day and where the triple imperative of delivering sustainability, security and very high economic growth has become the strategic priority for this emerging economic superpower. Or take Singapore, where our panel discussed the early implications of new and far-reaching energy efficiency regulations that are making the country somewhat of a “living laboratory” for transforming energy management on a national scale. We also heard from colleagues and partners in Berlin where the Federal

Bruno Berthon Global Managing DirectorAccenture Strategy and Sustainability Practice

Sustainability 24 is an annual day long global debate linking leading thought leaders together from around the globe via the internet in a live open-to-everyone interactive broadcast. The 2013 debate took place on May 15th. May 15th, 2013 and session replays are available on the website. The next Sustainability 24 will be held on May 14th, 2014 and is free to all to view and participate. To find out more visit www.accenture.com/sustainability24.

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This report reflects the views of 62 executives and thought leaders from Accenture’s Sustainability 24, 2013, a daylong debate with a 12-hour on-line live broadcast, while also drawing on our growing body of sustainability-related research. In doing so, it collects the views of a large number of global experts across industry, civil society and government to capture the latest thinking on sustainability.

Some of the specific themes this report addresses include:

Sustainable strategies, innovation and business modelsHere we explore the scalable models of business and new forms of collaboration that are needed to take sustainability from pilot projects to mainstream activity. Also discussed are the new sustainability business services and innovations which are driving growth for leading organizations.

Sustainability and operational excellence, including supply chain and sustainable consumptionBy scrutinizing operations, supply chain transparency not only optimizes resource consumption, but also helps promote innovation. It can also boost the bottom line. Meanwhile, building human capital is essential as a means of underpinning sustainable growth.

Data analysis and effective sustainable resource management also is key to obtaining operational excellence and improving lives of city dwellers, customers and employees alike.

Energy and resource optimizationResource efficiency must be addressed by re-examining both consumer demand and global supply chain practices. Shifting the energy landscape is essential to providing universal access to reliable power sources, to accelerate energy efficiency improvements and to increase the share of power sourced from renewables.

Given the increasing risks of resource scarcity, future growth through a business-as-usual approach cannot work. The topic of the moment is how to scale promising sustainability-related models and pilot projects and bring them into the mainstream—whether it entails new models of shared ownership or closed-loop manufacturing processes or other best practices. These need to stop being standalone sustainability solutions, and simply become the best ways of doing business.

About this report

Legal notes and journalist biographies The summary articles that follow were produced by specialist writers commissioned by Accenture but reporting independently on each of the broadcast sessions. They therefore reflect the judgement and interests of the individual writers concerned.

In order to more effectively reflect the discussions, many of the contributions of the speakers have been summarized. Any direct quotations are noted as such.

All of the action points that follow each session summary represent the individual opinions of the writers concerned as to the ‘key asks’ of each of the sessions. They do not necessarily represent the view of Accenture as an organization.

Each of the session summaries refers only to the broadcast session of its title. Full length recordings of each of the sessions, as well as speaker biographies, can be found on Accenture’s website.

http://www.accenture.com/Microsites/Sustainability24/Pages/event-videos.aspx

Journalist biographiesSamuel Fenwick is a journalist and copywriter. He is currently Community Manager at E2B Group in London and is a former online editor of Global Technology Forum. He specializes in covering the energy industry (oil, natural gas, coal, nuclear and renewables).

Leon Kaye is the founder and editor of GreenGoPost.com. A consultant and business writer, he frequently writes about sustainability efforts in the Balkans, renewable energy, and water issues. He is based in California.

Ann Monroe is a freelance writer and journalist specializing in economics and sustainable development. Before turning to freelancing, Ann worked for Institutional Investor magazine, the Wall Street Journal and Newsweek Japan. She is also a contributor to MSN Money.

Edward Robinson is a freelance writer and communications consultant specializing in sustainable economics. He has previously worked for Green Alliance and for China Briefing magazine.

Terry Slavin is a freelance journalist and regular contributor to Guardian Sustainable Business. She writes about renewable energy, climate change, low-carbon transport and smart grids. She also edits the popular Green Alliance blog.

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About this report 3

Sustainability 24 Panelists 7

Sessions 9

Conclusion 43

Contents

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Karin IretonHead: Group Sustainability Management, Standard Bank

Sustainability 24 Panelists

Ynse de BoerManaging Director, Accenture Strategy & Sustainability Services, ASEAN, Accenture

Henk de BruinSVP, Global Head of Sustainability, Philips

Maurits GroenCo-Founder, Off-Grid Solutions

Wouter KoetzierGlobal Managing Director, Innovation, Accenture

Simon GilesIntelligent Cities Strategy Lead, Accenture

Christopher JurgensDirector, Global Partnerships, US Agency for International Development

Brian ChicksenVP: Safety & Health, AngloGold Ashanti

Juan AguirianoPresident, Asia-Pacific, DuPont Sustainable Solutions, DuPont Company (Singapore)

Julian HoAssistant Managing Director, Singapore Economic Development Board

Dr. Frank-Detlef DrakeVice President, Corporate Research & Development, RWE AG

Manfred FischedickVice-President, Wuppertal Institute

Gary HanifanManaging Director, Global Sustainable Supply Chain Services, Accenture

Liz CrossHead of Governance & Sustainability in Procurement, BT

Dexter GalvinHead of Supply Chain, CDP

Kenan Aksular Program Manager, CSR & Mobility, Athlon Car Lease International

Franck EstoquiéChief Marketing Officer, Michelin Solutions

Dick JonkerCorporate Strategy, Eneco

Christine Eibs Singer CEO, CES Global

Roger FordExecutive Director of Operations, Accenture Development Partnerships, Accenture

Bob FrelingExecutive Director, Solar Electric Light Fund

Thomas DorrFormer Under Secretary for Rural Development at the USDA, Dorr Associates

Scott CainFuture Cities Project Leader, Technology Strategy Board

Barbara KuxMember of the Managing Board, Siemens AG and Chief Sustainability Officer, Siemens AG

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Paul JamesDirector of the UN Global Compact Cities Programme, RMIT University

Richard Gillies Director of Plan A & M&S Energy, Marks and Spencer Plc

Peter LacyManaging Director, Accenture Strategy and Sustainability Services, APAC, Accenture

Jiebin HaoChief Executive Officer, Beijing Vantone Citylogic Investment Corp

Jo Confino Executive Editor, Guardian

Bruno BerthonGlobal Managing Director, Strategy & Sustainability Practice, Accenture

Ernst WorrellProfessor ‘Energy, Resources & Technological Change’, Utrecht University

Cecilia Strömblad BrännstenGlobal Project Manager, Garment collecting, H&M Hennes & Mauritz

Jean-Marc Ollagnier Group Chief Executive, Resources, Accenture

Andre VenemanCorporate Director, Sustainability & HSE, AkzoNobel

Kersti StrandqvistSenior Vice President Sustainability, SCA

Margaret ZeiglerExecutive Director, Global Harvest Initiative

Ron van der LansSenior Director Open Data, City of Amsterdam

Jessica LongLead, Donors & Emerging Governments, Accenture Development Partnerships, Accenture

Bruce WhitfieldRadio Presenter, PrimeTalent

Joanne YawitchChief Executive Officer, National Business Initiative, South Africa

Andrew TanChief Executive Officer, National Environment Agency, Singapore

Morné du PlessisChief Executive Officer, WWF South Africa

Gunter PauliFounder and Director, Author of the ‘Blue Economy’, ZERI Foundation

David RosenbergChief Executive Officer, AeroFarms

Roland TichyChief Editor, WirtschaftsWoche

Paul SimpsonChief Executive Officer, CDP

Fred LuckeyChairman, Field to Market

Stephanie RegagnonDirector, Sustainable Ag Portfolio, Monsanto

Conor RiffleHead of Cities, CDP

Andrew SmartGlobal Managing Director for Strategy, Resources, Accenture

Jonathan MetzgerChief of Party, Global Broadband & Innovations, NetHope

Calla OstranderClimate Action Program Manager, City of San Francisco

Ariane ThomasDirector for Strategic Development, Environment Health & Safety, L’Oreal

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Diana Verde Nieto Founder and CEO, Positive Luxury

Guanghai LiManaging Director, Accenture Sustainability Services, Greater China, Accenture

Tie LiDirector General, China Center for Urban Development

Ye QiProfessor, Tsinghua University

Ulrike Sapiro Director of Sustainability in Europe, The Coca-Cola Company

Panelists Moderator

Paul JamesDirector of the UN Global Compact Cities Programme, RMIT University

Jiebin HaoChief Executive Officer, Beijing Vantone Citylogic Investment Corp

Guanghai LiManaging Director, Accenture Sustainability Services, Greater China, Accenture

Tie LiDirector General, China Center for Urban Development

Ye QiProfessor, Tsinghua University

Peter LacyManaging Director, Accenture Strategy and Sustainability Services, APAC, Accenture

Melbourne Beijing Beijing Beijing Beijing Beijing

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China: Taking Innovative Action in the Transformation to a ‘New Resource Economy’Conversation 1To watch the full discussion replay please visit www.accenture.com/sustainability24.

The challenges faced by a newly urban Chinese civilization are truly global. In the new resource economy, time is precious.Edward Robinson

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Action Points

•Planners,businessesandmunicipalitiesinChinaneedtoscale-upsustainabledevelopmenttomeettheneedsofarapidlygrowing urban population. To have greatest impact, they need to embed sustainable practices as quickly as possible so by 2030 they can dramatically cut their footprint.

•China’smunicipalgovernmentandcitymayorsneedtodevelopthepracticaltoolsandmethodsforimprovingenvironmental sustainability – enacting what they have seen.

•Centralandlocalgovernmentneedtocultivatepublicprivatepartnerships,especiallyindeliveringonthepromiseof“Compact Cities” or “Vertical Cities”, which the private sector is currently leading on.

•Chinaneedstoprioritizetwocentralchallengeswhichcouldderailitssustainabledevelopment:inefficienturbandevelopment and rapid urban sprawl.

•Timeispreciousanddevelopersneedtoactnow.Thepaceofchangeissorapidthatanysustainabledevelopmentimprovements that can be embedded now will likely have an exponential impact in the future.

It all began in China. Well, 2013’s Sustainability 24 broadcast that is, and for good reason. As Accenture’s Managing Director for Strategy and Sustainability Services in APAC, Peter Lacy, noted, the Middle Kingdom is at the center both of the global sustainability challenge and the response to it. Where better to start the conversation?

The theme of the session was Sustainability Innovation, with a particular emphasis on urban development and the role of cities. As Ye Qi, professor at the renowned Tsinghua University noted: for the first time in its 5000 year history, China is no longer primarily an agricultural civilization but an urban one. For Qi, the implications of the growing lure of cities to the Chinese are highly significant, not just for China but also for the world.

Tie Li, the Director General of the China Centre for Urban Development, brought home the urgency by reminding the panel that, even with a modest urbanization growth assumption of 1 per cent per year, an expected 100 million more Chinese citizens are expected to move to cities from rural areas by 2020. Finding gainful employment for these people, plus the already large cohort of migrant workers, will be difficult enough on its own Li continued; doing it without harming the environment harder still. For Li there were three unanswered questions: 1) what policies does central government need to ensure this transition happens sustainably? 2) what specific policies are needed to improve urban efficiency

and halt rapid urban sprawl, and 3) how could city mayors, in the 127 cities in China with more than a million people, actually put into practice some of the sustainable practices they have seen in action in certain Western cities?

Paul James, from the United Nations Global Compact’s Cities Program, chimed in from Melbourne to bring a global perspective to the answers. James pointed to examples in Brazil particularly, where city authorities have looked at how they can help re-develop slums while tackling environmental issues in the process. An example was Porto Alegre, which has improved significantly its recycling and waste management by incentivizing the urban poor to take part in the collection and distribution of recycling. To James though, it was important that China “pulls back on growth to ensure it happens sustainably”. Although China does not deal with large urban slums on the scale of Brazil, the authorities and planners in China, according to James, need to stop seeing the solution to urban development as being just the building of new tower blocks. They need to think carefully about how they can bring people into the relationship and use cities “as a bridge to the future”.

For Jiebin Hao, the CEO of Beijing Vantone Citylogic Investment Corp, part of the answer to this challenge is “compact cities”. The two projects his company is working on (in Xi’an and Chengdu) work on the principle of comfortably housing and catering for up to 80,000 people in no more than 1 km2. Not easy you might think but,

to Hao, the private sector ambition is there. His vision is of innovative public private partnerships to bring the plans to life.

Accenture’s Managing Director for Sustainability Services in Greater China, Guanghai Li, wrapped up the session by insisting that China needs to change the way it grows. He cited three business models that were beginning to address this: the sharing economy, products as services and smart data (e.g. leasing schemes). He stated that all were beginning to contribute to what he called China’s New Resource Economy. The impetus for which was not only the depletion of natural resources but also the environmental externalities (e.g. Beijing’s air quality), which would reach dangerous levels on current trends.

The environmental and social challenges in China do appear to dwarf those of smaller economies and Ye Qi’s view that this is a global problem as well as a Chinese one is convincing. Where China goes next in its New Resource Economy will be a fascinating journey for us all to observe and engage with.

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WHAT CAN YOUR ORGANISATION DO TO HELP CHINA ACHIEVE SUSTAINABLE LONG-TERM GROWTH?

TOTAL COMMERCIAL

BUILDING FLOORSPACE SET TO RISE

1 GIGATON CO2

RESULTING IN PRODUCTION OF AN EXTRA

5BN M2 (2013)

24BN M2 (2030) 40%LESS FRESH WATER IS NOW USED

FOR PRODUCTION

A MAJOR CHINESEELECTRONICS

COMPANY

TO PURIFY FACTORYWASTEWATER

FOR REUSE

HAS INSTALLEDSEWAGE TREATMENT

SYSTEMS

MORE EFFICIENT USE OF WATER

But incremental change like this is not enough. We need radical, transformative action to provide a sustainable future.

BETTER INDUSTRIAL WASTE MANAGEMENT THIS COULD POWER 43 HOMES

There’s a huge urban expansion happening right now

China’s private car fleet is increasingly exponentially

NOW IS THE TIME TO ACT WHILE THERE’S A CHANCE TO MAKE A DIFFERENCEChina’s New Resource EconomySUSTAINABILITY TARGETSCHINESE GOVERNMENT HAS ALREADY SET IN ITS MOST RECENT FIVE-YEAR PLAN

Per unit of GDPNON-FOSSIL FUEL RESOURCES TO RISE 11.4%

Per unit of value-added industrial outputWATER CONSUMPTION TO DECREASE 30%

Per unit of GDPENERGY CONSUMPTION TO DECREASE 16%

Per unit of GDPCO2 EMISSIONS TO DECREASE 17%

REDUCING CARBON EMISSIONS

HONG KONG

SHANGHAI

14,000 TONSOF CARBON EMISSIONS IN 2012

THE CHINESE LOW CARBONMANUFACTURING PROGRAMME

HAS HELPED TO AVOID

BETWEEN HONG KONGAND SHANGHAI

53,700EQUIVALENT TO

RETURN FLIGHTS

BY 2030

60%MORE THAN HALF OF CHINA’S POPULATION EXPECTED TO BE LIVING AND WORKING IN CITIES

And business is starting to make changes too...

IN THE USA FOR ONE YEAR

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WHAT CAN YOUR ORGANISATION DO TO HELP CHINA ACHIEVE SUSTAINABLE LONG-TERM GROWTH?

TOTAL COMMERCIAL

BUILDING FLOORSPACE SET TO RISE

1 GIGATON CO2

RESULTING IN PRODUCTION OF AN EXTRA

5BN M2 (2013)

24BN M2 (2030) 40%LESS FRESH WATER IS NOW USED

FOR PRODUCTION

A MAJOR CHINESEELECTRONICS

COMPANY

TO PURIFY FACTORYWASTEWATER

FOR REUSE

HAS INSTALLEDSEWAGE TREATMENT

SYSTEMS

MORE EFFICIENT USE OF WATER

But incremental change like this is not enough. We need radical, transformative action to provide a sustainable future.

BETTER INDUSTRIAL WASTE MANAGEMENT THIS COULD POWER 43 HOMES

There’s a huge urban expansion happening right now

China’s private car fleet is increasingly exponentially

NOW IS THE TIME TO ACT WHILE THERE’S A CHANCE TO MAKE A DIFFERENCEChina’s New Resource EconomySUSTAINABILITY TARGETSCHINESE GOVERNMENT HAS ALREADY SET IN ITS MOST RECENT FIVE-YEAR PLAN

Per unit of GDPNON-FOSSIL FUEL RESOURCES TO RISE 11.4%

Per unit of value-added industrial outputWATER CONSUMPTION TO DECREASE 30%

Per unit of GDPENERGY CONSUMPTION TO DECREASE 16%

Per unit of GDPCO2 EMISSIONS TO DECREASE 17%

REDUCING CARBON EMISSIONS

HONG KONG

SHANGHAI

14,000 TONSOF CARBON EMISSIONS IN 2012

THE CHINESE LOW CARBONMANUFACTURING PROGRAMME

HAS HELPED TO AVOID

BETWEEN HONG KONGAND SHANGHAI

53,700EQUIVALENT TO

RETURN FLIGHTS

BY 2030

60%MORE THAN HALF OF CHINA’S POPULATION EXPECTED TO BE LIVING AND WORKING IN CITIES

And business is starting to make changes too...

IN THE USA FOR ONE YEAR

Panelists Moderator

Brian ChicksenVP: Safety & Health, AngloGold Ashanti

Karin IretonHead: Group Sustainability Management, Standard Bank

Morné du PlessisChief Executive Officer, WWF South Africa

Joanne YawitchChief Executive Officer, National Business Initiative, South Africa

Bruce WhitfieldRadio Presenter, PrimeTalent

Johannesburg Johannesburg Johannesburg Johannesburg Johannesburg

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Business Strategy and Stakeholders: Building Trust & Planning for UncertaintyConversation 2To watch the full discussion replay please visit www.accenture.com/sustainability24.

South African companies are finally seeing sustainability reporting as an opportunity not a threat. Ann Monroe

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Action points

•Organizationsandgovernmentsneedtoactquicker.Despitemovesintherightdirectiontheyareunderestimatingtheeffort needed and thus overshooting the Earth’s capacity to sustain human material consumption by 50%.

•GovernmentsmustlookbeyondtheirfocusonmonitoringonlyGrossNationalProductasaguidetosuccessandlooktoamore balanced economic, environmental and socially beneficial metric.

•Leadersshouldensurethatsocialissuesareembeddedintheirorganizationalstrategy,cultureandpractices.Thisneedsproactive engagement with all key stakeholder groups.

•ThemanagementsofSouthAfricancompaniesneedtoworkwiththeirlaborforcesifrealchangeistohappen.Currentlythere is a misalignment of expectations.

•Companies(evencompetitors)needtoworktogetheriftheyaretoachievetheiraims.Manysustainableoutcomesareunachievable by individual entities acting in isolation.

Perhaps inevitably, given the manifold problems of the South African economy and society, this discussion of stakeholder issues quickly became political, thanks in good part to the probing questions of the moderator: radio presenter Bruce Whitfield.

Panelists agreed that sustainability is key to business success in Africa; as Brian Chicksen, Vice-President for Safety and Health at AngloGold Ashanti, put it: “it’s the only strategy which will allow the company access to the resources, talent and capital that it needs”.

But when Whitfield began pulling apart the issues, that rosy picture began to look a bit muddier. South Africa is Africa’s biggest economy, he noted, but it also has massive unemployment and poverty. And the mining industry, he pointed out, has a 150-year history of environmental destruction and societal concerns. Isn’t talk of sustainability, he asked, a matter of closing the barn door long after the horse had bolted? And given uncertain commodity prices and rapidly rising costs, can deep-level gold mining be sustainable even economically, let alone environmentally or socially?

Chicksen acknowledged that AngloGold is facing tough challenges. The company is addressing them, he said, by changing the conversation, moving from its traditional transactional approach, in which it defended a position, to a transformational one, in which it engages with a range of perspectives.

Whitfield also had tough questions for the other panelists. Banks are good

at looking forward, but do they look backward, he asked Karin Ireton, Head of Group Sustainability Management at Standard Bank. Absolutely, she said: “If you have somebody who’s been a sinner for 30 years and made the headlines for all the wrong reasons, it wouldn’t be an attractive company to finance”. But, she added, bankers can’t be policemen: “We can’t be substitutes for environmental authorities.”

Nor did Whitfield let WWF South Africa’s Chief Executive Officer, Morné du Plessis, off the hook. In a country where sustainability often boils down to “is my life sustainable,” he asked, does worthy, environmental sustainability talk have any relevance? In response, du Plessis argued that it’s a false dichotomy to set what’s good for the environment against what’s good for people. Environmental impacts often seriously impact human well-being too, he said, citing in particular South Africa’s extraordinarily high carbon intensity, one matched, he said, by only a few other countries.

Panelists agreed that the business practices of the last 100 years need to change drastically. For instance, the compact under which South African labor relations have operated for decades is now failing, said Joanne Yawitch, Chief Executive Officer of the National Business Initiative, because it’s unable to deal with the “complicated complex” of social and economic problems now facing workers. In dealing with these issues, she added, companies can’t fly solo. They need to work together.

Change is on its way, they said, but slowly. Ireton recalled periods in her career “when they looked at me and thought, ‘Oh; she’s going to make my life difficult’”. But now, she said, companies are beginning to see their sustainability reporting not as an onerous obligation, but as a chance to figure out how they can do things differently – and better.

But when Whitfield argued that most shareholders hardly glance at anything beyond directors’ remuneration, she agreed; “to produce real progress”, she said, “stakeholders need to take issues like sustainability more seriously and bring real pressure to bear”.

Panelists Moderator

Juan AguirianoPresident, Asia-Pacific, DuPont Sustainable Solutions, DuPont Company (Singapore)

Julian HoAssistant Managing Director, Singapore Economic Development Board

Andrew TanChief Executive Officer, National Environment Agency, Singapore

Ernst WorrellProfessor ‘Energy, Resources & Technological Change’, Utrecht University

Ynse de BoerManaging Director, Accenture Strategy & Sustainability Services, ASEAN, Accenture

Perth Singapore Singapore Amsterdam Singapore

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Total Energy Management: Transformation for Enterprise Energy EfficiencyConversation 3To watch the full discussion replay please visit www.accenture.com/sustainability24.

Energy efficiency pushes cost competitiveness in an increasingly constrained global market. But if you can’t track it you can’t improve it.Edward Robinson

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Action points

•ChiefExecutivesneedtoprovidestrategicleadershipandmaketheirenergymanagementgoalspublic.However,theyareonly part of the answer. Operators and middle managers need to be constantly looking for energy efficiency gains, which means they need to know exactly what the energy usage of their individual sectors is.

•Governmentsneedtoensurethattheyhelplimitthecommonhurdlesthatcompaniesfacewhentacklingenergymanagement (e.g. capital investments, business case development, etc.)

•Allstakeholdersmustunderstandwhythefocusisfirstlyonmeasurement.Whenitcomestoenergy,ifyoucan’tmeasureit, you can’t cut it.

•Companiesgloballyshouldrecognizethatenergyefficiencyoftenleadstoheightenedcostcompetitiveness.

•Managersneedtosharebestpractice.Bothinternallyandexternally.Internally,acultureofcollaborationcanreallyhelp–if you get managers duplicating the successes of others, sharing lessons and trying to go further, you’re in a good place.

“Chief Executive Officers should be re-branded as Chief Energy Officers”; at least according to Juan Aguiriano, President of Asia-Pacific at DuPont Sustainable Solutions. He should know, given that DuPont has saved around $6 billion on its energy bills over the last 20 years, and seen its annual bill fall by 5 per cent, while its production has grown by around 40 per cent, according to Aguiriano.

So, if you want an example of the much talked about goal of “decoupling energy use from growth”, DuPont is a good start.

What’s interesting, though, is that Aguiriano, joining the debate from Perth, Australia, was not alone in calling for more of a grass-roots approach to sustainability. Indeed there was seeming unanimity among the panel that “strategic drive” from senior leadership, although important, is only one of the many factors needed if corporations are to institute total energy management, the subject of the Singapore session of Sustainability 24.

There was a good reason for holding the energy efficiency session in Singapore. Last month, the government enacted the Energy Conservation Act, which requires energy intensive companies using over 54 terajoules of energy a year to report their energy usage, submit an energy efficiency improvement plan and appoint a Singapore Certified Energy Manager. As Andrew Tan, the Chief Executive Officer of Singapore’s National Environment Agency noted: “if you can’t track your energy usage, you can’t make interventions to improve”.

Why is Singapore pushing so hard on energy efficiency? As Andrew Tan outlined, “Singapore is energy disadvantaged…it imports most of its energy from abroad”. The Energy Conservation Act recognizes the need to move to a more holistic approach in improving energy efficiency in Singapore; beyond just voluntary schemes, energy labelling and minimum performance standards. Key to the success of the Act, in Tan’s view, will be the developing of benchmarks and the sharing of best practices and technologies. So, how does all this benefit Singapore? Julian Ho, Assistant Managing Director of the Singapore Economic Development Board, was clear: higher energy efficiency means greater cost competitiveness in the global market in which all Singapore- based companies serve and compete in. Over a fifth of the Singaporean economy is taken up by the manufacturing sector, Ho emphasized, and these companies know they need to be more efficient than ever to compete.

Ho’s concept of “pervasive sustainability” was possibly the leitmotif for the whole session. It’s the idea that in order to become a truly sustainable organization it’s no good just applying technology, you need to develop a corporate culture that is constantly aware of the energy performance of its organization and looking to improve it. Ho also added that pervasive sustainability should be seen as a culture not just at a firm level, but to also facilitate systems wide approach at an industry level. Indeed, for Ho, Singapore could become a global ‘living laboratory’ for energy efficiency with its

focus on governmental leadership and behavior change.

In speaking of DuPont’s success, Juan Aguiriano stressed that many of the easiest energy savings are small but when added up across the enterprise can be quite significant. That’s why it was crucial for DuPont that energy efficiency metrics were developed that would work across each of DuPont’s 135 global sites. “There’s no energy department. Energy efficiency needs to be driven by the operators…[you need a] sustainability metric that measures efficiency as more product for less energy”. Only then, Aguiriano insisted, will people really start to talk internally.

Ernst Worrell, Professor of Energy, Resources & Technological Change at Utrecht University, who joined the debate from Accenture’s Amsterdam office, agreed wholeheartedly that the human dimension and culture were important to achieving energy efficiency, noting at the same time, the strangeness of companies who spent around 20 per cent of their budget on energy and yet didn’t hire an energy manager.

To drive home the point that energy efficiency made business sense, Worrell cited recent research in which a team studied 17 Canadian cement plants. It found that the best performers on energy efficiency were also the best performers on business metrics. Boding well perhaps for the “Living Laboratory” of Singapore.

Panelists Moderator

Henk de BruinSVP, Global Head of Sustainability, Philips

Gunter PauliFounder and Director, Author of the ‘Blue Economy’, ZERI Foundation

David RosenbergChief Executive Officer, AeroFarms

Cecilia Strömblad BrännstenGlobal Project Manager, Garment collecting, H&M Hennes & Mauritz

Peter LacyManaging Director, Accenture Strategy and Sustainability Services, APAC, Accenture

Amsterdam Paris Pre Recorded Video Stockholm Beijing

17

Circular Business: Value Generation in a Resource Constrained WorldConversation 4To watch the full discussion replay please visit www.accenture.com/sustainability24.

Circular business models should be creators of value, not just cost reduction techniques. They can help companies compete as well as reduce their footprints.

Terry Slavin

18

Action points

•Companiesandinvestorsshouldgraspthatcirculareconomybusinessmodelsarebasedongeneratingvalueratherthanjust driving down costs. This can provide growth and differentiation opportunities for early adopters.

•Allorganizationsshouldexaminehowtheycanembracenewcirculareconomythinkingintotheirbusinessmodelsandoperations.

•Trulycircularbusinesseshavetotakedestructivepracticesoutoftheloop.It’snotenoughjusttoclosetheloop.

•Businessesshouldconsiderhowtheimpactofclimatechangecouldopenupmarketopportunitiesforthemiftheycanbemore resource efficient.

•Governmentsandinter-governmentalorganizationsshouldworkwithcompaniesandotherstakeholderstoenablevaluechains to take account of (and to put a value on) the ecological and social impacts of all products. Were this to happen, it would be a significant shift for many organizations.

The idea that the economy should be a circle, not a line, with the waste stream of one product used as feedstock for another, instead of generating ever-growing mountains of waste, goes back more than 30 years.

Yet it is getting urgent attention today amid the realization that we are already consuming 1.5 planets’ worth of the Earth’s resources,1 and the business model of ever-increasing sales of consumer goods cannot be sustained in a world set to reach 9 billion people by mid-century. To put it simply, the world may be heading for a major conflict between growth ambitions of policymakers and companies on the one hand, and the resource limits of the biosphere on the other.

According to a recent report Accenture produced with the World Economic Forum, 90 per cent of consumer products are built to be thrown away at the end of their lives.2 If we keep on the current path, the World Bank estimates that global waste will double between now and 2025.

Accenture looked at the savings that could be made in energy and metals alone by companies using resources more efficiently and came up with a price tag of US$2 trillion globally.3

New business models are emerging, such as companies selling services rather than physical assets like cars or lighting. Another new model is collaborative consumption, where people and businesses share cars, accommodation, household appliances etc. The huge strides in recycling technology have made “next life products” possible, where a company reconditions its products after first use and then sells them again to earn a second or third income.

But what will it take to transform these models into a standard way of doing business? That was the question Peter Lacy, Accenture’s Managing Director for Strategy and Sustainability Services in APAC, put to the experts assembled in Stockholm, Beijing, New York, Amsterdam and Paris. Gunter Pauli, one of the leading thinkers in the circular economy movement, said companies had to stop thinking about cutting costs to be competitive, and instead focus on adding value.

This is achieved by ‘Primary Industries’ waste streams arising from a core business for other sources of revenue, Pauli argued. For example a coffee company, on top of generating income from its core product, could earn huge revenues from using its waste stream to grow mushrooms, a food with great nutritional value to society. Pauli added that the circular economy was not about closing loops, but about taking out the environmentally destructive elements. He pointed to innovations such as using wild-growing thistle to produce 6 derivatives including plastics, lubricants, herbicides and elastomers, seaweeds to replace water-thirsty cotton and produce animal feed at the same time. “We need to think not in terms of companies doing less bad, but companies doing more good.”

Swedish clothing retailer H&M is trying to close the loop in the fashion industry by collecting used clothes and recycling them into new clothes, reducing its use of virgin materials and researching alternatives to cotton and polyester. Cecilia Strömblad Brännsten, Global Manager of H&M’s garment collection project, said textile recycling technologies are not yet advanced

enough to be scalable, but there would be a first mover advantage in pioneering this approach. “We are seeing progress, and we want to be there when it happens”.

Dutch lighting giant Philips, meanwhile, is incorporating recyclability into its products’ design, using recycled plastics, providing lighting as a service, and refurbishing used products to earn a second income.

Henk de Bruin, Global Head of Sustainability for Philips, said one barrier is that investment is often made along a different part of the value chain from the one that realizes profits. But, de Bruin said, this can be overcome through “total cost of ownership” analysis to identify where funds should be reverted.

It was apparent from the discussion that the growing impact of climate change will be a major driver of circular business models. David Rosenberg, Chief Executive Officer of AeroFarms, which uses aeroponic growing technologies such as LED lights to grow crops in city warehouses, said extreme weather patterns (already playing havoc with global food production and driving up the price of food) will help his company’s comparative cost position. Further, his company’s circular business model and technology is driving radical increases in productivity, up as much as to a staggering 30 times the productivity of a field farm, according to Rosenberg.

Peter Lacy said he was encouraged by the discussion: “It feels like we are moving beyond the technical possibilities to really exploring at a macro and micro level how we can put this into the heart of economics and how markets work”.

Driving the circular economyPresent day business practices rely on:

increasing resource

consumption

to creategrowth...

Minerals

36.24GT

2010 2030

78.3GT

+118% Metals

7.87GT

2010 2030

11.63GT

+58% Fossil fuels

431EJ

2010 2030

567EJ

+32%

1960 20108

68

+687%

+240%

and current projections for consumption by 2030show increasing pressure on scarce resources...

GDP (Tr international $) Consumption (Bn tons)

Oil Copper

1988-2000 2000-2012

$22.4$4.4

1988-2000 2000-2012

$2085.2$392.9

(typical annual variation)

Linear business models mean increased consumptionLEADING TO MORE WASTE…

Changing this has tangible business benefits

Between 2012 - 2025

And it’s not beingreused efficiently,as currently only:

9.2Bn tons

17Bn tons

INDUSTRIAL+85%waste

1.3Bn tons2.2Bn tons

MUNICIPAL+69%waste

ELECTRONIC waste

10%recycled

15%recycled

of a $21Bnannual market

7%recycled

reduction ofproduct footprint

75-85%

10-15%

reduction ofproduct costs

reduction insupply chain

risks

an overall potential

saving of US $2Tr by 2030

price

1990 2012

Energy

price

1990 2012

Raw materials

BY RISING PRICES...Businesses are being impacted

driving variable costs and uncertainty...

And increasing price volatility

63

20

19

Market leaders are already

...if we adopted the business strategiesof a circular economy:

EMBRACING THESE PRINCIPLES:

OUTDOOR WEAR SUPPLIER

Has actively encouraged consumers not to buy new product by:

Hosting a forum for second hand sale and exchange of their products

EACH JACKET NOT SOLD SAVES:

Consuming 45 kWh of energyEmitting 9KG of CO2

Creating 0.2KG of wasteConsuming 135L of water

Offering a repair service for products

ELECTRONIC RETAILER

Collected and resold 1M itemsthat would have been discarded

resell to extend product’sworking life

AND HAVE ALREADY:

collect unwanted electronic products from consumers

RESOURCES

RESOURCEPROCESSING

FIRST STAGEMANUFACTURING

PRODUCTMANUFACTURING

RETAILER

CONSUMER

WASTE

Recycling 2.0

Recycling 2.0

Product transformation

Next life sales

Product as a service

Collaborativeconsumption

VEHICLE MANUFACTURER

Is designing their products for end of life and introducing

new reconditioning technologies:

Applying specially developed reconditioning techniques to restore worn parts

IN 2012:

73M KG of material reused from 2.2M end of life units

Completely disassembling end of life products to component level

by addressing the 1.3Bn tons of food wasted every year

550Bn cubic meters of unnecessary water use

COULD BE REDUCED:

$1Tr going straight to waste

ELECTRONIC RETAILER

What can your organisation do to succeed in the circular economy?

COFFEE RETAILER

Is trialling a biorefinery to turn food waste into materials

for plastic-making:

Copyright © 2013 AccentureAll rights reserved.

SOURCES: UNEP, World Bank, OECD, Exxon, Shell, Accenture, WEF, American Chemical Society, IMechE

ABOUT ACCENTURE SUSTAINABILITY SERVICES: Accenture is committed to helping forward-thinking organizations position sustainability as a key lever to long-term success. To find out more about how Accenture can help you meet your sustainability imperatives and chart a course toward high performance, visit www.accenture.com/sustainability, follow us on @actsustainably, or contact us at sustainability@accenture.com.

Produced by the Guardian to a brief agreed with Accenture. Paid for by Accenture

20

Panelists Moderator

Bruno BerthonGlobal Managing Director, Strategy & Sustainability Practice, Accenture

Richard Gillies Director of Plan A & M&S Energy, Marks and Spencer Plc

Ulrike Sapiro Director of Sustainability in Europe, The Coca-Cola Company

Diana Verde Nieto Founder and CEO, Positive Luxury

Jo Confino Executive Editor, Guardian

London London London London London

21

Sustainable Consumption: Engaging Tomorrow’s ConsumerConversation 5To watch the full discussion replay please visit www.accenture.com/sustainability24.

Business-as-usual on global consumption is not an option. The onus is on companies to scale-up their messaging on sustainable products without impacting on desirability. Ann Monroe

22

Action points

•Inordertobesustainable,companieshavetomakesustainabilityaspirationalandmoredesirable.

•Consumersthemselvesneedtoappreciatethatcurrentwants,needsanddesiresarenotcompatiblewithplanetarylimits(on a business-as-usual scenario).

•Bigcompaniesneedtotakeanentrepreneurialattitude;theymustn’tbeafraidtofailandtolearnfromtheirmistakes.

•UnderthescrutinyofFacebook,Twitterandothersocialmedia,businessesneedtobeevermoreopen,honestandtransparent when communicating the environmental credentials of their products.

When it comes to getting their sustainability message across to consumers, large companies are struggling. One reason: it’s only very recently that they’ve even started trying, noted panel moderator Jo Confino, Executive Editor of the Guardian. Although customers say they are concerned about sustainability, panelists noted that there’s also a massive disconnect between what makes a product sustainable and what makes it attractive to consumers.

“Take the palm oil issue”, said Richard Gillies, Director of Plan A and M&S Energy at Marks and Spencer Plc. “Everybody’s heard that it’s bad for the planet. But shoppers don’t buy palm oil”, he said. “They buy margarine, or soap, or biscuits…so little has yet been done on creating that demand-side signal”, he added. “Urging them to buy – or not buy – on the basis of a guilty conscience doesn’t work…consumers want products they believe will make their lives better, sexier or cheaper, not nobler”.

Coca-Cola has been trying to make its sustainability message simple, relevant and credible, said Ulrike Sapiro, Director of Sustainability in Europe at the Coca-Cola Company. That means overcoming what she called the “confusion and complexity” of the issue. Another key ingredient, she added, is to encourage consumer actions that, while “impactful and scalable”, are also simple. The first thing the consumer wants to know, she said, is “what is the direct reward to me”? When inevitably challenged about Coca-Cola’s sugary soft drinks, she highlighted that Coke is now producing more low-calorie drinks, encouraging

active lifestyles and posting calories counts on packages.

The one small-company representative on the panel - Diana Verde Nieto is the founder and Chief Executive Officer of Positive Luxury, a company that awards a trust mark to companies and brands that meet its environmental and social standards. She argued that big companies are underestimating consumers. “There’s an incredible desire from people to know more,” she said, “and brands should jump on it”. The key, she added, is using colloquial language consumers will understand.

Marks & Spencer had more success so far not communicating sustainability, said Gillies, with most of the company’s considerable achievements – like zero waste to landfill and 100% sustainable fish – being below consumers’ sightlines. Even when sustainability is visible, it’s not an effective sales tool, he added. For instance, Gillies said, buyers of the carbon-neutral suit he was wearing were much more attracted by the price – the suit is much cheaper than anything in its designer’s Savile Row shop – than by its long list of eco-attributes. It was created “for the customer, not with them,” he said. In terms of design-stage engagement, Gillies added, “we’ve still not yet cracked that engagement with the consumer”.

So far, most of the effective efforts at communicating sustainability to consumers have been pilot projects, said Bruno Berthon, Global Managing Director of Strategy and Sustainability Practice at Accenture. With atmospheric carbon dioxide already at 400 parts

per million and 3 billion new middle-class consumers expected to join the economy in the next 20 years, and if the next generation consumes the way we’ve been consuming for the last 50 years, “we are really in trouble”, he said. So companies need to scale up their messaging. But making frugality attractive to consumers is a big problem, and one that companies may actually not be all that eager to solve.

For all the panelists’ evident concern about reaching customers with a sustainable message, when Confino brought up what he called the elephant in the room – the simple fact that we can’t have sustainable consumption if companies keep seeking ever-increasing growth – it was clear there was no silver bullet, with few direct answers to the challenge being ventured.

London Sustainability Innovation WorkshopSustainable Consumption

Samuel Fenwick

Alongside the Sustainability 24 broadcast sessions, Accenture ran a series of in-depth, day-long innovation workshops at its offices in London and Beijing. The idea for the day was to bring sustainability and marketing professionals together for ‘open and frank’ discussions about what works, what doesn’t work and the next steps for sustainable businesses. What follows is a brief outline of the discussion in London which focused on the issue of sustainable consumption: what it means and how it can be achieved.

23

Action points

•“Justdoit”:Organizationsshouldplacesustainabilityatthecoreoftheiroperations,endingthepracticeofsettingupseparate sustainability departments.

•Marketersshouldseesustainabilityasacorepartofthebrand.

•Companiesandmarketersshouldusetransparentpracticestobuildgreateranddeepertrustbetweenthemandtheircustomers. Ceasing production of their least sustainable products would be a good start.

•Companiesshouldofferconsumerslowimpactproductsandserviceswhichtheycaneasilyintegrateintotheircurrentlifestyles and do not come at a price premium. Sustainability needs to be a core part of the product, not an optional extra coming at a price premium.

•Largercompaniesshouldlooktolearnlessonsfromnewenterprisesoperatingunderbusinessmodelsbasedaroundsharing, collaboration and renting.

•Marketersandadvertisingexecutivesshouldaimtoreversetherecenttrendofconspicuousconsumptionwhichtheyhelped create.

Don’t wait for regulators. Companies and consumers need to re-define value along more sustainable lines.

One of the problems that all companies (not just consumer goods companies) face is the association of value with volume in many of their own customers’ minds. For Justin Keeble, Accenture’s Managing Director of Sustainability Services for Europe, Africa and Latin America, marketers have a big role to play in breaking down this association. Keeble was not optimistic about the prospects of regulators leading the change of mind-set, arguing that there had been particularly weak action from them over the past decade. On this point there did seem to be some agreement, with Ulrike Sapiro, Director of Sustainability in Europe at the Coca-Cola Company, chiming in to say that she had experienced regular discussions with EU regulators holding the optimistic view that “if consumers are given data on carbon emissions, water use and resource use, sustainable consumption will work fine”.

According to Tom Berry, though, Kimberly-Clark’s head of Sustainability in Europe, the Middle East and Asia, we mustn’t overlook the importance of regulation. As he noted, with particular reference to white goods like fridges, when energy standards were introduced companies ceased production of the lowest rated products as they didn’t want their brands to become tarnished.

One theme that was brought up throughout the workshop was the feeling that a combination of rising commodity prices and resource depletion will mean that businesses and consumers will soon have to wake up to sustainability.

Zomo Fisher, from Accenture’s UK Sustainability Services practice, gave examples of a number of new businesses which are taking advantage of the way that the internet, smart phones and social media are making it easier for consumers to move away from ownership to new models such as leasing and collaborative consumption.He highlighted enterprises which offer car share schemes to their members, pet-sharing schemes and a business which rents out designer clothing.

Anuj Saush, EDF Energy’s Sustainability Strategy Lead Manager, reminded the workshop that, although business in general had made rapid strides as far as transparency is concerned, some have found ways to get round the system. He gave the example of fish caught in Scandinavian waters, which are then sent to China for filleting and skinning before being shipped back and labeled as products of Norway.

When challenged for specifics on how companies could create a future in which sustainable business was the norm, a range of different approaches were given. Some of their ideas were as follows:

•Ensuringthateverybrandhasapurpose beyond making money

•Increasingthenumberofparentsmanaging companies, as they have a greater stake in the well-being of future generations

•Incentivizeindividualswithinorganisations to achieve sustainability metrics in order to drive change

•EncourageCEOstobevocal,internallyand externally, about their support for and engagement in sustainability matters, and hold them accountable for achieving sustainability targets

•Usingtherapidadoptionoftechnology over the 1990s as a model for sustainability

•Creatingblueprintsofwhatsustainable consumption might look like to help provide an attractive vision that people can work towards

Drawing the workshop to a close, Aimie Chapple Accenture’s Managing Director - Client Innovation Lead in the UK and Ireland concluded that there were some exciting pilots happening around the world but organizations needed to look to scaling these now and assess how to make sustainable consumption an aspiration for consumers in the future. Tom Berry agreed, stating that there are a wealth of innovative ideas out there which need broader take up and backing.” Ulrike Sapiro added that when a similar debate took place a few years ago, it was “a mess of ideas” but now there was more clarity. The next step, no doubt, will be to move on from clear ideas to their rapid implementation.

24

25

Engaging tomorrow’s consumer

AS THE MIDDLE CLASSES GROW... particularly in Asia Pacific

PERCENTAGE OF GLOBAL MIDDLE CLASS IN ASIA-PACIFICthere will be more people than ever, consuming more products

This new world offers a growth opportunity FOR BUSINESSES

The challenge is that they’re online, connected, and ready to take brands to task for their shortcomings

Young people who post online about environmental and social issues

DEVELOPED MARKETS

DEVELOPING MARKETS

Rarely or never post comments

At least once a day

68%

25%

8%

29%

want favourite brands to help reduce

their carbon footprint

would spend more on a product that stated its carbon footprint

88%

51%

66%

27%

US MILLENNIALS CHINESE MILLENNIALSVS

Much of the environmental impact of a product occurs during consumer use, not during production:

is embedded in food after it leaves farms70% OF ENERGY

50% OF EMISSIONSfrom clothing result from washing and ironing

20202009

54%

66%

28%2030

ALMOST THE 2010 GDP OF THE UK AND FRANCE COMBINED

TOTAL INCREASE HOUSEHOLD INCOME CHINA/INDIA$4.6Tn FROM

2010/20

26

Engaging tomorrow’s consumer

AS THE MIDDLE CLASSES GROW... particularly in Asia Pacific

PERCENTAGE OF GLOBAL MIDDLE CLASS IN ASIA-PACIFICthere will be more people than ever, consuming more products

This new world offers a growth opportunity FOR BUSINESSES

The challenge is that they’re online, connected, and ready to take brands to task for their shortcomings

Young people who post online about environmental and social issues

DEVELOPED MARKETS

DEVELOPING MARKETS

Rarely or never post comments

At least once a day

68%

25%

8%

29%

want favourite brands to help reduce

their carbon footprint

would spend more on a product that stated its carbon footprint

88%

51%

66%

27%

US MILLENNIALS CHINESE MILLENNIALSVS

Much of the environmental impact of a product occurs during consumer use, not during production:

is embedded in food after it leaves farms70% OF ENERGY

50% OF EMISSIONSfrom clothing result from washing and ironing

20202009

54%

66%

28%2030

ALMOST THE 2010 GDP OF THE UK AND FRANCE COMBINED

TOTAL INCREASE HOUSEHOLD INCOME CHINA/INDIA$4.6Tn FROM

2010/20

Panelists Moderator

Dr. Frank-Detlef DrakeVice President, Corporate Research & Development, RWE AG

Manfred FischedickVice-President, Wuppertal Institute

Barbara KuxMember of the Managing Board, Siemens AG and Chief Sustainability Officer, Siemens AG

Jean-Marc Ollagnier Group Chief Executive, Resources, Accenture

Roland TichyChief Editor, WirtschaftsWoche

Dusseldorf Dusseldorf Munich St Charles Dusseldorf

27

The “Energiewende” or “Energy transformation”: A Blueprint for Sustainable Growth?Conversation 6To watch the full discussion replay please visit www.accenture.com/sustainability24.

“Energiewende” relies on a European super-grid and the acceptance of higher short-term prices for electricity. But low carbon price poses a serious problem.Terry Slavin

28

Action points

•Germany’sFederalGovernmentshouldcarefullyplanitstransitionsothatphasingoutnucleardoesnotundermineorjeopardize other critical targets including 40% cut in greenhouse gas emissions by 2020 and 80% by 2050.

•DespitelowpricesforatonofCO2 in the EU, Germany’s Federal policymakers must tackle the phenomena of dirty coal replacing relatively low-carbon-intensive nuclear power.

•PoliticiansatFederal-andState-levelneedtomakethecasetoGermancitizenswhytheyshouldaccepthighershort-termelectricity prices in order to pay for the “Energiewende”.

•TheGovernment(bothFederalandState)needstodomoretopushthebenefitsofenergyefficiencysoitcanfulfillitspotential.

•GermanFederalpoliticiansandbusinessleadersneedtoadvocateforapan-Europeanelectricitygridmoreextensively.

In 2011, when the German government, decided literally overnight, after Fukushima, to phase out nuclear power by 2022, filling the gap with energy efficiency and renewables, disbelieving heads were shaken in German head offices, other capitals of Europe, and around the world.

How can the continent’s industrial powerhouse hope to reach its goal of cutting its greenhouse gas emissions by 80 per cent by 2050 if it turns its back on a relatively low-carbon energy source producing a quarter of its electricity?

Germany gets attention because it is the biggest market for solar photovoltaics in the world, despite a less than ideal solar resource. Can it muster the technological, financial, and regulatory muscle to succeed with this far bolder experiment and become a role model for the world? Or are the contradictions too great, and is the German “Energiewende”, or “energy transformation”, doomed to failure?

This was the question Roland Tichy, Chief Editor of WirtschaftsWoche, the German weekly business magazine, put to a panel of experts in Dusseldorf, Munich and Chicago.

Dr Frank-Detlef Drake, Vice President of Corporate Research and Development for Germany’s second largest utility, RWE, said he thought it was technologically possible for Germany to shift to an electricity system largely powered by renewable energy. But he said the location-dependent cost and intermittent nature of wind and solar power meant the feasibility would be much higher if a pan-European approach was taken. “We should try to achieve the “Energiewende” as a European project - it is worth putting all our efforts into it”, Drake said

and added with regard to the massive investments required: “If we want other regions of the world to take our approach as a blueprint, we need to demonstrate that it is not only technologically, but also economically possible!”

There are plans for an integrated European energy market by 2014, and a €104bn overhaul of Europe’s transmission system to allow electricity to cross borders and to integrate renewable energy production from across Europe into the grid, along with high voltage transmission lines to prevent transmission losses.

Professor Dr. Manfred Fischedick, Vice President of the Wuppertal Institute for Climate, Environment and Energy, gave an impressive list of challenges: the technical issues of integrating large amounts of renewable energy into the energy system; the development of an appropriate grid including small scale (smart grid) and large scale options (pan-European super-grid); the investment challenges as companies develop new business models. He also outlined the policy challenges for governments and, crucially, the challenge of persuading consumers (who have seen costs for electricity increase by more than 30 per cent in the last ten years) in terms of their willingness to cover additional costs for the investment in Germany’s energy transformation and to invite them to have a part in the implementation process by themselves.

Barbara Kux, Member of the Managing Board and Chief Sustainability Officer of Siemens AG, said the phasing out of nuclear power leads to a reduction of 16% of the overall energy generation in Germany today – mainly base load.

To compensate for this, Germany theoretically would have to plant 22,000 additional wind turbines, doubling the existing number of units and capacity – but this energy source is quite volatile and cannot replace nuclear power on a 1:1 basis.

This shows the substantial challenge Germany is facing with its energy transformation. But there is the additional untapped potential that can be derived from energy efficiency.

According to a study of the ‘Deutsche Unternehmensinitiative Energieeffizienz’, half of the gap in energy generation could be solved through energy efficiency measures. “The energy we don’t use is the best energy we have and it will have a major impact on the business equation and business case for industries,” Barbara said.

For a successful implementation, a transformation program with clearly defined responsibilities is needed, combined with a new power market design to ensure affordability, reliability and the business case.

Fischedick said Energiewende is at the moment, just a policy concept: “We have to carefully assess the pathway and keep the flexibility to change course if we are going in the wrong direction”.

Jean-Marc Ollagnier, Accenture’s Group Chief Executive for the Resources Industry, said policymakers around the world are hoping Germany will succeed. “It’s a very ambitious and complex program,” he said. “Germany is well-suited to do it, but the level of complexity is raising questions”. He said if Germany does succeed then other countries might up their own games.

Panelists Moderator

Liz CrossHead of Governance & Sustainability in Procurement, BT

Dexter GalvinHead of Supply Chain, CDP

Ariane ThomasDirector for Strategic Development, Environment Health & Safety, L’Oreal

Andre VenemanCorporate Director, Sustainability & HSE, AkzoNobel

Gary HanifanManaging Director, Global Sustainable Supply Chain Services, Accenture

London London Paris Amsterdam San Francisco

29

Sustainable Supply Chain: Why it is Good Business

Conversation 7To watch the full discussion replay please visit www.accenture.com/sustainability24.

Reducing environmental impact across a whole supply chain requires customers and vendors to work together. Relationships and standardized information can help. Ann Monroe

30

Action points

•Organizationsneedtoformnewcoalitionsacrosstheentirevaluechainiftheyareseriousaboutcuttingtheenvironmental footprints of products.

•Intermediatesuppliersandfinalvendorsneedtostandardizetheinformationtheyusetomeasureandreportsustainability, saving time and aiding management.

•Companiesneedtoembarkonbigprogramsinsteadoffocusingonincrementalgains.

•Companiesanddesignersneedtobeinnovativeatdesignstagesothatscarcematerialscanbeeasilyre-used.

While some 80 per cent of Chief Executive Officers want sustainable supply chains, according to Gary Hanifan, Accenture’s Managing Director of Global Sustainability Supply Chain Services, only 54 percent believe they’ve actually got them. The panel’s reaction? The 26 percent who do not have sustainable supply chains – as well as the 20 percent who don’t seem to care – are missing a huge opportunity.

According to Andre Veneman, the Corporate Director of Sustainability, Health, Safety and Environment from Akzonobel (a major paints and coatings company), Akzonobel realized the importance of a sustainable supply chain about five years ago. The company’s own emissions, on which it was focusing, were just 20 percent of the total. “It’s good to make your own operations more efficient”, he said, “but the big fish is in the supply chain”. AkzoNobel’s case is not unusual. BT’s supply chain is responsible for 60-65 percent of its carbon emissions, said Liz Cross, Head of Governance and Sustainability in Procurement at BT: “In terms of where we need to go next, that’s a fairly clear signpost”.

For most large companies that are working seriously to cut emissions, “cutting supply-chain emissions is not only much more cost-effective”, according to Dexter Galvin, Head of Supply Chain at CDP, “it’s also a lot easier to do”. Once they’ve picked the low-hanging fruit, he explained, further reductions in the company’s own emissions can be so expensive that they require sign-off by the

Chief Financial Officer and often a lengthening of the company’s pay-back period expectations.

Panelists agreed, though, that picking that fruit requires much closer relationships with suppliers. And – since value chains move both upstream and downstream – “requires closer relationships” with customers as well. When AkzoNobel initially set up key supplier agreements, which shared a great deal of confidential information, officials worried about “opening up our jewel box” to other companies, Veneman said. But it’s an even trade: those companies are also opening their jewel boxes. And according to Veneman, it has helped the company come up with bundled solutions to offer customers greener products.

Addressing sustainability in the supply chain can also help mitigate continuity risks, noted Ariane Thomas, Director for Strategic Development, Environment, Health and Safety at L’Oreal. In choosing suppliers, L’Oreal focuses on business continuity. It has developed scorecards in areas like energy and resource efficiency and assesses its suppliers in business reviews twice a year, Thomas continued.

To see how much it could achieve by working with suppliers on sustainability across the board, BT recently launched a pilot “better future supplier forum”. Almost immediately, Cross said, the company realized that its suppliers could save 30,000 tons of carbon in just the first six to twelve months.

Close relationships with suppliers can also help companies deal with pressure from non-governmental institutions, Veneman argued. When some environmental groups complained to AkzoNobel about supplying products to paper-goods companies that source their pulp from virgin forests, the company addressed the problem not by breaking its relationship with the companies, but by leveraging it to get its customers to improve their supply chains, explained Veneman.

But since every company is involved in a web of supply chains, they can only be integrated into each other’s sustainability programs if information is standardized, said Galvin, who is working with 65 major global companies, with a total $1 trillion of spend, to make that happen. For instance, he said, one of CDP’s member companies last year got 28 separate requests for information from its customers. Had it not been for CDP’s standardization program, that would have meant filling out 28 separate complex documents asking only slightly different questions.

Panelists Moderator

Kenan Aksular Program Manager, CSR & Mobility, Athlon Car Lease International

Franck EstoquiéChief Marketing Officer, Michelin Solutions

Dick JonkerCorporate Strategy, Eneco

Paul SimpsonChief Executive Officer, CDP

Kersti StrandqvistSenior Vice President Sustainability, SCA

Wouter KoetzierGlobal Managing Director, Innovation, Accenture

Amsterdam Paris Amsterdam London Stockholm Amsterdam

31

Innovative business growth: How sustainability is re-shaping businesses for the futureConversation 8To watch the full discussion replay please visit www.accenture.com/sustainability24.

Sustainable transformation often requires shifting from products to ‘solutions’. But internal competition and “silo-thinking” can hamper innovation. Terry Slavin

32

Action points

•Companies’seniormanagementneedtobuy-inandyouneedaverystrongbusinesscaseifmoresustainablepracticesaregoing to transform a business model.

•Managersandinvestorsmustmeasuretheprogressofthenewbusinessmodelnotjustinfinancial,butalsosocialandenvironmental metrics. This can bring brand advantage and service and product differentiation.

•Allcompaniesneedtomeasuresustainabilitygainsaccurately,oftendevisingnew,innovativemetricsinordertodoso.

•Seniormanagersneedtofindwaysaroundthecultureofcompetitionbetweenbusinessunitswithinasinglecompany. This is often a major barrier to innovation. Managers and sales teams need to shift the emphasis away from single products and towards integrated solutions.

•Leadersneedtoensurethatorganizationalsiloscanbeovercomethrougheffectivegovernanceandoperationalmodels.

What makes more financial and environmental sense: shifting 200 tons of African rock to unearth a kilogram of gold or finding the same amount sifting through three tons of European electronic waste?

By answering that simple equation a Belgian company extracted itself from the metals and mining industry and transformed itself into an “urban miner” and one of the largest recyclers of precious metals in the world.

This was one of the inspirational case studies heard by a panel in Paris that explored how sustainability concerns for the future, are leading companies to reshape their business models so they can turn climate change from a risk into an opportunity.

Speaking from London, Paul Simpson, Chief Executive Officer of CDP, a not-for-profit that provides the global system for over 4000 of the world’s largest companies to manage and disclose their environmental impacts to their investors, said he saw three new “meta-issues” driving companies to innovate in this area: an increase in government regulation, changes in technology, and increasing demand from consumers.

But to succeed, Simpson believes there needs to be strong buy-in from senior management and a clear business case. It is also important to measure and report progress in environmental and social as well as financial terms – sustainability’s classic “triple bottom line”. “That can give you benefits including brand advantage, as well as service and product differentiation [that] can help you become even bigger winners in the market” said Simpson.

Sweden’s SCA (maker of the Tena brand, female incontinence pad) has opened a Global Innovation Centre in China focused on helping the Chinese cope with the health challenges of a 35 per cent increase in population aged over 65 in the next few years. “We are creating value for shareholders but also for society,” said Kersti Strandqvist, SCA’s Senior Vice President Sustainability.

But a major shift is emerging - from providing products to providing services, and to providing end-to-end solutions for customers. The panel heard from Michelin (the French tire company) that created a Business Unit (Michelin Solutions), in order to develop, manage and distribute services around tires and sell tires as a service / solution. Speaking from Paris, Franck Estoquié, Chief Marketing Officer of Michelin Solutions, emphasized that Sustainability was a source of new innovative services including their EFFIFUEL(tm) offering. With this service, Michelin Solutions enters contracts with Fleet Managers, guaranteeing to decrease their fuel consumption over set time periods. “We are selling kilometres and litres of fuel saved, rather than tires” said Estoquié. He also pointed out that even a two per cent decrease in fuel use by a truck could add up to an eight ton reduction in CO2 emissions per year.

To succeed, he said, companies need to be close to their customers, be agile in adapting to a fast-moving market, and operate within an ‘ecosystem’ that gives them access to competence they don’t have internally.

It is as important to have the right ecosystem internally as it is externally.

Eneco (a major Dutch energy company) expanded into energy services after realizing that it needed to build a business model based on saving, rather than selling, energy. Dick Jonker, Manager of Corporate Strategy at Eneco, and joining the debate from Amsterdam, said the big hurdle is convincing the company’s business units, each driven by profit and loss metrics, to cooperate with each other instead of compete: “We have to think about integrated solutions for customers, not simple products”.

But the rewards of this service-oriented business model can be great. Kenan Aksular, Corporate and Social Responsibility and Mobility program manager for the Dutch car lease company Athlon, said its approach of providing mobility services, such as facilitating car sharing rather than simply leasing cars to its corporate clients, opened up a far bigger potential market. “Only 20% of the employees of our customers have company cars, but 100% have mobility needs”, Aksular said.

Companies don’t have to invest large amounts in research and development to innovate. Wouter Koetzier, Accenture’s Global Managing Director for Innovation, said there was huge value to be mined simply by companies making the best use of their resources and reusing existing technological solutions.

“The potential value, and also the sustainability and social value from being able to collaborate better (like we are doing in this webcast) with thousands of people online, is enormous,” Koetzier said.

Panelists Moderator

Christine Eibs Singer CEO, CES Global

Roger FordExecutive Director of Operations, Accenture Development Partnerships, Accenture

Bob FrelingExecutive Director, Solar Electric Light Fund

Maurits GroenCo-Founder, Off-Grid Solutions

Jonathan MetzgerChief of Party, Global Broadband & Innovations, NetHope

Christopher JurgensDirector, Global Partnerships, US Agency for International Development

New York Washington Washington Amsterdam Washington Washington

33

Energy Access for Development Impact

Conversation 9To watch the full discussion replay please visit www.accenture.com/sustainability24.

The expansion of renewable energy is not a technical problem but a distribution problem. New Business models show huge promise for reaching the poorest and most remote communities.Leon Kaye

34

Action points

•Bothpublicandprivatesectorsneedtoworktogethertomovetheworld’spoorawayfrommoredangerousandpollutingsources of fuel (such as charcoal and kerosene) and towards more sustainable technologies.

•Companiesandgovernmentsneedtofindscalabledistributionmodelsthatcandelivernewtechnologies.With$38billionspent on kerosene annually in the developing world, there is clearly a market for renewable energy in the world’s poorest communities.

•Theenergysectorneedstolearnfrombusinessmodelsoutsideitsownsector,whichoffercompellingideasonhowtoprovide low-cost renewable electricity to the world’s poor.

•Companiesandinvestorsshouldconsidernewfinancialmodelswhichcanallowstart-upsandentrepreneursatthemostlocal levels to expand access to renewables without the punishing barriers of high amounts of capital.

2.8 billion people across the world still use wood and charcoal for fuel and 1.3 billion lack access to electricity. This puts limits on economic growth in much of the developing world. At the same time, the emerging middle class demand for more energy in the coming years brings risks of increased pollution and environmental degradation. Renewable sources of energy, therefore, are crucial to sustainable development and offer opportunities to lift the “bottom of the pyramid” out of poverty. Cross-sector partnerships can expand access to renewables but the upfront costs often require prohibitive amounts of capital. Innovative business models, however, can skirt such barriers.

Bob Freling, Executive Director of Solar Electric Light Fund (an NGO harnessing micro-finance to expand the global poor’s access to solar electricity) says partnerships are key to expanding energy access to families and communities. “By working together with other organizations”, said Freling, “we could accomplish a lot more than just addressing energy alone”. Energy affects all facets of life, including health, education, micro-enterprise and food security, so it is important NGOs partner with other non-profits, as well as the private sector, to improve access for the world’s poor.

Such collaboration can catalyze new innovations that will transform the way organizations distribute energy to those who currently go without it. Christine Eibs Singer, CEO of CES Global (advisor on public private partnerships focused on universal energy access) insists energy could follow the path of mobile

banking and telephony. Since the cost of installing systems such as solar is far beyond what most families can afford, a pay-as-you-go model for electricity from renewable sources can provide energy to the world’s 1.3 billion citizens without electricity.

“A telecoms company cannot be just a telecoms company”, says Jonathan Metzger, Chief of Party at NetHope (a non-profit organization that uses public-private partnerships to deliver information technology solutions across the world). Metzger pointed to the Indigo system in Kenya, which combines solar and mobile technologies and allows customers to get mobile phone coverage and charge their cell phones as part of the services that must be provided if the network is going to be effective and utilized.

Maurits Groen, Co-Founder of The Wakawaka Foundation, an organization that develops, manufactures and distributes low cost solar-powered lamps and chargers, argued that entrepreneurs in the low-cost renewable energy space should look to Unilever for inspiration. The global consumer goods giant found success in markets like India by selling small sachets of products for example, laundry detergents, in amounts consumers could easily afford.

Affordable access to renewables is far more than electrification in poor communities and rural areas. Solar-powered pumps, combined with drip irrigation, results in higher crop yields and therefore more economic opportunities for poor farmers, many of whom are women. Radios powered

by solar cells make it possible to listen to educational programs in classrooms. And rural hospitals off the energy grid can replace expensive diesel generators with solar cells, allowing the delivery of critical health services with increased reliability at a lower cost.

But Singer noted that the financing of such programs presents challenges to entrepreneurs requiring access to capital and financial services. “How do we bundle these disparate interventions at the local level and bring them together so that they are financially attractive to the financial partners we need to engage?” she asked.

More disruptive technologies that will help transform lives in poor countries will surely emerge; but figuring out how to fund them so they can scale is a challenge NGOs and companies in all sectors are still working on.

35

Energy Access for Development Impact

DAMAGE TO HEALTH FROM SMOKY FUELS

ANNUAL DEATHS FROM DISEASES CAUSED BY INDOOR SMOKE2 MILLION

ANNUAL DEATHS FROM MALARIA660,000

INTO CONTEXTTO PUT THIS

AND THE KEY TO SUCCESSFUL SOLUTIONS IS TO FIND SCALABLE MODELS

THAT CAN ADAPT TO LOCAL CONDITIONS AND FUNDING NEEDS.

ENERGY ACCESS IS A GLOBAL ISSUE,

Successful solutions that are working that can be taken to scale

IF THESE COSTS COULD BE SAVED, HUGE SUMS WOULD BE AVAILABLETO SPEND ON MORE SUSTAINABLE, RENEWABLE SOLUTIONS

FUEL-BASED LIGHT SOURCES GENERATE

2.3M TONSOF CO2 EMISSIONS PER YEAR

EQUIVALENT TO 6 MILLION+

TRANSATLANTIC FLIGHTS

THERE ARE ALSO ENVIRONMENTAL AND FINANCIAL COSTS...

...but, higher set up costs are a barrier to potential users

INSTALLATION RUNNING COST

DIESEL GENERATOR $2K $1.4K

SOLAR PV SYSTEM $14K $0.5K

The cost of providing sustainable energy will be relatively low...

CURRENT OVERALL GLOBAL INVESTMENT

IN THE ENERGY SECTOR 2.85%

THE COST OF DELIVERING ENERGY TO

THOSE WITHOUT:

291 MILLION+CHILDREN GO TO PRIMARY SCHOOLS WITHOUT ACCESS TO ELECTRICITY

PRIMARYSCHOOLS WITHOUT

ELECTRICITYTHIS WOULD BEENOUGH TO BUY

SOLAR LAMPS370 MILLION

ANNUALLY, THE DEVELOPINGWORLD SPENDS

ON POOR QUALITYENERGY SOLUTIONS

$37BN

36

Energy Access for Development Impact

DAMAGE TO HEALTH FROM SMOKY FUELS

ANNUAL DEATHS FROM DISEASES CAUSED BY INDOOR SMOKE2 MILLION

ANNUAL DEATHS FROM MALARIA660,000

INTO CONTEXTTO PUT THIS

AND THE KEY TO SUCCESSFUL SOLUTIONS IS TO FIND SCALABLE MODELS

THAT CAN ADAPT TO LOCAL CONDITIONS AND FUNDING NEEDS.

ENERGY ACCESS IS A GLOBAL ISSUE,

Successful solutions that are working that can be taken to scale

IF THESE COSTS COULD BE SAVED, HUGE SUMS WOULD BE AVAILABLETO SPEND ON MORE SUSTAINABLE, RENEWABLE SOLUTIONS

FUEL-BASED LIGHT SOURCES GENERATE

2.3M TONSOF CO2 EMISSIONS PER YEAR

EQUIVALENT TO 6 MILLION+

TRANSATLANTIC FLIGHTS

THERE ARE ALSO ENVIRONMENTAL AND FINANCIAL COSTS...

...but, higher set up costs are a barrier to potential users

INSTALLATION RUNNING COST

DIESEL GENERATOR $2K $1.4K

SOLAR PV SYSTEM $14K $0.5K

The cost of providing sustainable energy will be relatively low...

CURRENT OVERALL GLOBAL INVESTMENT

IN THE ENERGY SECTOR 2.85%

THE COST OF DELIVERING ENERGY TO

THOSE WITHOUT:

291 MILLION+CHILDREN GO TO PRIMARY SCHOOLS WITHOUT ACCESS TO ELECTRICITY

PRIMARYSCHOOLS WITHOUT

ELECTRICITYTHIS WOULD BEENOUGH TO BUY

SOLAR LAMPS370 MILLION

ANNUALLY, THE DEVELOPINGWORLD SPENDS

ON POOR QUALITYENERGY SOLUTIONS

$37BN

Panelists Moderator

Thomas DorrFormer Under Secretary for Rural Development at the USDA, Dorr Associates

Fred LuckeyChairman, Field to Market

Stephanie RegagnonDirector, Sustainable Ag Portfolio, Monsanto

Margaret ZeiglerExecutive Director, Global Harvest Initiative

Jessica LongLead, Donors & Emerging Governments, Accenture Development Partnerships, Accenture

Chicago St Louis St Louis Washington Washington

37

Driving Business Growth While Solving the Global Food ChallengeConversation 10To watch the full discussion replay please visit www.accenture.com/sustainability24.

Feeding a hungry world will not succeed without the cooperation of all agricultural stakeholders: large and small.Leon Kaye

38

Action points

•Theagriculturalsectormustsignificantly invest in research and development and develop new innovations for a world that will eat differently and look different in the coming decades.

•Consumersandpolicymakersneedtorecognizethatfeedingagrowingworldisnotjustaboutproductionbutaboutconsuming fewer resources including nutrients, water and even land.

•CountriesseekingtostrengthentheirfoodsecuritycannotdosothroughthetraditionalUScommodity-basedmodebut,instead,must view agriculture through a value-added lens in order to guarantee economic opportunities for large and small farmers.

•Theworld’slargestfoodcompaniesmustworkcloselywithfarmersatthefurthestreachesoftheirsupplychainsonavarietyof issues, from guaranteeing the most resilient seeds to providing the latest technologies to help them harvest their crops.

•Companies,governmentsandsmall-holderfarmerscanmakeuseof“bigdata”andtechnologywhichcouldhavesignificant roles in transforming the agricultural sector in the way they have changed other industries.

•Governmentsmustfosteraregulatoryenvironmentfitfora21stcenturyagriculturalsystem,sofarmersandcompanieshave a framework under which they can sustainably and responsibly grow food for a growing population.

No industry requires a more transformational shift than the agricultural sector: after all, the planet needs to be able to feed a projected nine billion people by 2050. Food companies will most likely confront the challenge of securing more sustainable and transparent supply chains as consumers in established and emerging markets are more concerned about the origins of food products. Meanwhile, regions of the world now more integral to global food production, such as Africa and Latin America, are home to millions of small holder farmers that large multinational companies cannot simply dismiss. Climate change, diminishing resources and the emerging middle class’ demand for higher quality food ingredients will vex both businesses and governments in the decades ahead.

The problems seem too complex for one stakeholder group to take on alone. As Fred Luckey, Chairman of Field to Market (a multi-stakeholder alliance of agribusinesses, food companies and conservation organizations) observed, “The bottom line is, without all the involved supply chain and expert parties at the table we can’t reach actionable consensus. And, without consensus we can’t make progress”. Multinational organizations are uniquely positioned to compare and contrast best practices across the world, while governments generally have more of a local orientation.

Margaret Zeigler, Executive Director of the Global Harvest Initiative, an alliance of multinationals and large NGOs, noted that much of the world still relies on small farmers and they cannot be left

out of the conversation. They face challenges to their land tenure during the current “global land rush” and are in need of innovative mechanizations for harvesting their crops and are struggling to find labor as younger generations move to cities, according to Zeigler. “As a private sector industry, we have to talk more about adapting to the needs of small holder farmers”, she added, emphasizing that, of the 500 million small farmers worldwide, 43 per cent of them are women and they are particularly vulnerable to agriculture’s changing landscape.

Changes within the global agricultural system will require everyone within the agricultural supply chain to produce more with less. Monsanto is one company working proactively with stakeholders to find new ways to increase crop yields while reducing land, energy and water usage. “Companies like ours are uniquely positioned to impact sustainability and food security”, said Stephanie Regagnon, Monsanto’s Director of Sustainable Agricultural Portfolio.

Nevertheless these companies, even with their knowledge and experience, must collaborate with other stakeholder groups in order to enhance the world’s food security, build stakeholder trust and bolster agricultural supply chains. An example of such cooperation is Water-Efficient Maize for Africa (WEMA), a public-private partnership that is focused on developing and distributing drought-resistant and pest tolerant seeds, royalty-free, to farmers in sub-Saharan Africa.

Former US Under-secretary of Agriculture, Thomas Dorr, emphasized the need for nations to revamp their food production systems. According to Dorr, the American agricultural model is a success story in many ways, evolved over decades and was fueled by domestic demand and a focus on commodities such as wheat, corn and livestock. For Dorr, the issue is that “as these emerging middle class economies grow, they don’t have time or capacity to build a commodity-driven system. But they will have resources to secure what they cannot produce”.

It would be helpful if Governments would ensure more thoughtful trade policies to develop opportunities so that countries can feed their people while creating other crops to export to other markets. Plus the same governments would do well to ensure a strong legal system so that the same small land holders’ property rights are secure.

Solving the Global Food ChallengeGlobal demand for food is increasing

60% higher than in 2012

By 2030UN predicts demand for food will be

And what people eat is changing

GLOBAL MEAT CONSUMPTION GROWING BY 60Mt

in Asia-Pacific

2010 2020

235Mt 235Mt 34Mt

26Mt

To meet demand, the world needs to produce more food and waste less so that the total available is 70-100% greater by 2050

We need a sustainable solution to balance out the combined burdens of:

A UK report suggests that food waste, if given to pigs as feed rather than incinerated...

ENERGY INPUT

CARB/PROTEIN CALORIE OUTPUT

10kcal

1kcal

40kcal

1kcal

BEEF CORNVS

REQUIRES ABOUT 100 TIMES MORE WATER

than producing 1kg of grain protein

Producing 1kg of animal protein

In addition, climate change is already impacting the security of supply

1

23

US1

versus average 31% 2000-2010

DROUGHT SEPT 2012

PASTURECONDITION

US58%poor

SOMALIA2

Maize price increaseof 275%

DROUGHT 2010-2011

$200

2010 2011

$750

THAILAND3

Damage to 4.74M acresof agricultural land

FLOODING 2011

FARM LANDTHAI

12.5%

These shifts in consumption have a considerable

ENVIRONMENTAL IMPACT:

HOW CAN YOUR ORGANISATION DRIVE BUSINESS GROWTH

WHILE SOLVING THE GLOBAL FOOD CHALLENGE?

Decreasingproductivitydue to climatechange

ChangingconsumptionIncreasing

population

CITIZENSUK

11M

COULD PROVIDE:800,000T of pork per yearENOUGH FOR

39

Solving the Global Food ChallengeGlobal demand for food is increasing

60% higher than in 2012

By 2030UN predicts demand for food will be

And what people eat is changing

GLOBAL MEAT CONSUMPTION GROWING BY 60Mt

in Asia-Pacific

2010 2020

235Mt 235Mt 34Mt

26Mt

To meet demand, the world needs to produce more food and waste less so that the total available is 70-100% greater by 2050

We need a sustainable solution to balance out the combined burdens of:

A UK report suggests that food waste, if given to pigs as feed rather than incinerated...

ENERGY INPUT

CARB/PROTEIN CALORIE OUTPUT

10kcal

1kcal

40kcal

1kcal

BEEF CORNVS

REQUIRES ABOUT 100 TIMES MORE WATER

than producing 1kg of grain protein

Producing 1kg of animal protein

In addition, climate change is already impacting the security of supply

1

23

US1

versus average 31% 2000-2010

DROUGHT SEPT 2012

PASTURECONDITION

US58%poor

SOMALIA2

Maize price increaseof 275%

DROUGHT 2010-2011

$200

2010 2011

$750

THAILAND3

Damage to 4.74M acresof agricultural land

FLOODING 2011

FARM LANDTHAI

12.5%

These shifts in consumption have a considerable

ENVIRONMENTAL IMPACT:

HOW CAN YOUR ORGANISATION DRIVE BUSINESS GROWTH

WHILE SOLVING THE GLOBAL FOOD CHALLENGE?

Decreasingproductivitydue to climatechange

ChangingconsumptionIncreasing

population

CITIZENSUK

11M

COULD PROVIDE:800,000T of pork per yearENOUGH FOR

40

Panelists Moderator

Scott CainFuture Cities Project Leader, Technology Strategy Board

Ron van der LansSenior Director Open Data, City of Amsterdam

Calla OstranderClimate Action Program Manager, City of San Francisco

Conor RiffleHead of Cities, CDP

Simon GilesIntelligent Cities Strategy Lead, Accenture

London Amsterdam San Francisco London London

41

Open Data & Analytics: Accelerating Citizen-Focused Sustainable CitiesConversation 11To watch the full discussion replay please visit www.accenture.com/sustainability24.

Cities should be at the forefront of harnessing the information we need to be more sustainable. Provided they share the data properly.Leon Kaye

42

Action points

•Municipalleadersshouldembracethegrowingdemandforopendataandanalyticsbecausetheresultwillbenewinnovation solutions that can help tackle issues from traffic gridlock to bottlenecks in the local energy grid.

•EntrepreneursshouldcontinuetomineopendatatofindITsolutionsthatwerepreviouslyunheardof–theyhaveahugeroleto play.

•Municipalleadersmustensurethatasmuchdataaspossibleisshared;withtheirpeersinlocalgovernmentaswellaswiththe private sector.

•NationalGovernmentsshouldbehaveastrustedconvenersonthereleaseofmoredata.Theyshouldworktoensuretheyget the maximum out of companies, individual citizens and the third sector, all of which can integrate new data with other sets of data already available to the public; potentially creating new jobs.

•Citiesshouldensurethatstandards-basedlanguages(suchasXBRL)makeitpossibleforopendatatobecomeeasilyaccessible to the public, allowing for more seamless transparency.

The open data movement will leave a profound effect on cities’ abilities to deliver services to their citizens. But while increased public availability of more data sets, from energy use to traffic patterns, will help cities boost their overall efficiency and transparency, opportunities also exist for urban environments to become more sustainable as urbanization surges in both developed and developing countries. Two cities leading this transformation on how open data and analytics allow governments to engage with citizens are Amsterdam and San Francisco.

“If you understand what’s going on and have better information, then you have better choices”, says Calla Ostrander, Climate Action Program Manager for the City of San Francisco. According to Ostrander, disclosure of such data goes beyond environmental sustainability; transparency is also about good governance and the increased effectiveness of delivering necessary municipal services. And in a city with a strong entrepreneurial culture, such as San Francisco, companies can layer such data on top of their own data (or data sets they have culled from other firms) and develop new applications that, in turn, create new jobs.

Panelist Ron van der Lars, Senior Director of Open Data with the City of Amsterdam, said cities have an incentive to release their data publicly. For van der Lars, companies can develop applications from which cities would eventually benefit as they use such systems based on their data. But, he

insisted, greater transparency is about more than public-private collaboration. In fact, to van der Lars, other municipal agencies can learn from newly released data previously sitting on another agency’s “data island”, formally shielded from other users who now can mine the information for the public good.

In an age of municipal budget cuts, data offers opportunities for cities to do more with less. Scott Cain, the Future Cities Project leader for Technology Strategy Board, a UK Non-Governmental Organization advocating the stimulation of business-led innovation, believes cities and the private sector can design cutting-edge solutions to deliver much needed services to citizens. “Rather than innovate internally”, Cain said, the question is “how can we open up to the community of innovators that are out there and have them think how we can best provide services in new, interesting and different ways”?

When it comes to the disclosure of all this data, “open is the new black,” said Conor Riffle, Head of Cities for CDP, the Non-Governmental Organization housing the world’s largest collection of self-reported climate, water and forest data. Openness is just the start: currently all this data across the world is released in various formats, and the lack of standardization poses challenges for governments and companies alike. But, Riffle explained, standardization will not occur without clean and strong protocols, and in the end, “everyone needs to know what everyone else is doing”.

A future with clearer and more transparent municipal data is exciting but, as Ostrander warned, the overall focus must be on solutions. Traffic data can help companies deliver new apps that decrease taxis’ waiting time before picking up passengers. The proliferation of new data sets can reveal interesting correlations such as trees and their relation to public safety. As citizens around the world are forced to do more with less, cities can indeed serve as protagonists in the quest to leverage information to create a more sustainable world.

With the ever-increasing pressure of rapidly growing populations and middle classes in developing markets and carbon footprint expansion, businesses are increasingly realizing that sustainability has to become core to the way they do business. One can no longer ignore the fact that the atmosphere has reached 400 ppm of CO2 for the first time in about 3 million years, indicating that we’re not slowing emissions. Further to this, the UN indicates that 47 out of 50 key sustainability indicators have worsened over the past few years. The scope, scale and speed of the sustainability challenge ahead is clear.

However, as Paul Simpson, CEO of CDP put it “we’re still in a system of disjointed incrementalism” and the pace of change is still too slow because of the constraints in the system. These include the focus on creating short term profit that business leaderships are held to. Incremental change now needs to become mainstream and we need to move faster.

Companies that started off with incremental changes (e.g. in energy efficiency) and saw how this could transform their organisation – changing cultures and behaviours within the workforce and realising significant benefits at the same time, know now that greater change is needed.

Traditionally, sustainability conversations used to focus on risk and cost reduction. Nowadays the focus is on innovation and transformation but to implement this will take confidence and willingness to do whatever it takes.

To meet sustainability challenges, systemic changes in business, from strategy to planning, to design and implementation as well as the dissemination of best practices are needed. Strong leadership and a holistic approach will be critical in this.

The impact of changing entire systems and the complex interdependence

between different parts of the business, extended to suppliers and customers make transformational changes extremely challenging. The test is to see how well companies can adjust to doing business differently and collaborating with unusual partners, which will add the necessary dynamism for change. Examples are new business models such as shared ownership (e.g. of cars) or leasing of recyclables (e.g. light bulbs). This means including behavioural economists, anthropologists, psychologists in the debate, to see how changes can be affected.

Certain elements are critical for successful sustainability innovation and transformation:

Leadership: Executive commitment and buy-in is not negotiable in attaining sustainability innovation and transformation goals. But it should go beyond the CEO speaking about sustainability to sustainability being so embedded in all aspects of the business that everyone champions the transformation. This is especially true for new generation of business leaders who most probably grasps the issues better.

The redefinition of value: That which goes beyond commodities to looking at what is really adding value; profit, commodity prices etc. can no longer be the only measure of business’ success.

Partnerships and collaboration: A greater openness and willingness to collaborate across non-traditional boundaries, even collaborating with competitors is critical to address the complexities. Building trusting sustainable relationships with stakeholders is critical to maintaining licence to operate and ultimately the bottom line.

Readiness to innovate: It can no longer be “business as usual”. Change is inevitable and needed. Companies that adapt well to change and innovation

will survive. Examples are companies that are moving from a selling product-centric business models to selling a service models (e.g. leasing products).

Circular economy focus: Innovation and transformation through moving from a linear take-make-waste system to a circular process of production. It takes a commitment to transform.

Technology: Data analytics and integrated reporting are helping to drive a broader definition of value, and linking both environmental and societal impact to business value. Being able to put a number on this is helping organisations drive execution, and helping overcome the inertia to change. One area where this is proving very successful is in energy management. The Convergence Economy also creates opportunities for the creation of new business models.

Sustainability for all: With the complexity and technicality of most current sustainability conversations, people are not emotionally connecting to the subject even though they might understand some of it on an intellectual level. Making sustainability accessible to wider audiences, by involving the communicators, marketers, psychologists and the like is critical to increasing adoption rates and customer demand for sustainable goods and services.

The time has come for business, government and other stakeholders to come together with a public voice and show the impacts of sustainability innovation and transformation in both smaller and larger companies. Smaller companies need to have a platform to share successes together with big business.

It could be said, looking back on the sustainability journey so far, that it has been like watching a child grow up. You don’t see the change every day, but when you look back over the past 15 years there has been an extraordinary shift: the journey from CSR to sustainability.

Conclusion

43

44

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References 1 Global Footprint Network

2 World Bank “What a Waste: a global review of solid waste management” March 2012

3 World Economic Forum “More with Less: Scaling Sustainable Consumption and Resource Efficiency”(In collaboration with Accenture) January 2012

InfographicsProduced by the Guardian to a brief agreed with Accenture. Paid for by Accenture.

p11. China’s New Resource EconomyAccenture, EIA, China Dream initiative, USA census 2011, UN, McKinsey, China Association of Automobile Manufacturers, Asia Business Council, Go 3 Project, Sony, World Wildlife Foundation (WWF)

p19. Driving the circular economyUNEP, World Bank, OECD, Exxon, Shell, Accenture, WEF, American Chemical Society, IMechE

p25. Engaging tomorrow’s consumerFAO, The Carbon Trust, The Economist, OECD, Accenture, World Bank, bbmg, Edelman

p35. Energy Access for Development ImpactOECD, Practical Action.org, WHO, UN Environment Programme, US Department of Agriculture, Energy Saving Trust, Accenture, United Nations, IFC, Siemens, INBAR, UN SEFA.

p39. Solving the Global Food ChallengeUN FAO, UN EFP, OECD, Cornell University, American Journal of Clinical Nutrition, University of Twente, US DA, Ministry of Agriculture Thailand, Accenture, Simon Fairlie

DisclaimerThis document is intended for general informational purposes only and does not take into account the reader’s specific circumstances, and may not reflect the most current developments. Accenture disclaims, to the fullest extent permitted by applicable law, any and all liability for the accuracy and completeness of the information in this document and for any acts or omissions made based on such information. Accenture does not provide legal, regulatory, audit, or tax advice. Readers are responsible for obtaining such advice from their own legal counsel or other licensed professionals.

AcknowledgementsMany people contributed to the debate and discussion that is the basis of this report and we thank them for their input. A special word of thanks goes to our speakers for driving the debate and discussion, our partners that assisted in ensuring the success of Sustainability 24, and the Accenture teams from around the world for their contributions.

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About Sustainability 24Sustainability 24 is the day when Accenture places business sustainability solidly on the global agenda through facilitating debate and discussion regarding the opportunities and challenges of business sustainability. This year’s theme was “Sustainability Innovation – Scaling for Transformation”. The highlight of the day, a 12-hour online broadcast, brought together global thought leaders to discuss how to move beyond pilot projects and small scale successes, and focus on transforming organizations into sustainable businesses. In doing that, businesses can harness innovation, drive growth and achieve high performance. With 51 speakers and 11 moderators, joining the discussion from 17 broadcast locations, and an additional 23 client events and 2 innovation workshops held in London and Beijing, the day truly brought the sustainability agenda to the fore. More than 4200 delegates also attended the online broadcast. Participants in Sustainability 24 included thought leaders from business, government, non-governmental organizations, academic institutions and various other stakeholders. The discussions were extended to various social media channels as well.

The next Sustainability 24 event will take place on May 14th 2014. The 2013 session replays and additional information can be found at www.accenture.com/sustainability24 or by following @actsustainably or by joining the Facebook group: “Accenture Sustainability Services”.

About Accenture Sustainability ServicesAccenture Sustainability Services helps organizations achieve substantial improvement in performance and value for their stakeholders. We help clients leverage their assets and capabilities to drive innovation and profitable growth while striving for a positive economic, environmental and social impact. We work with clients across industries and geographies to integrate sustainability approaches into their business strategies, operating models and critical processes. Our holistic approach encompasses strategy, design and execution to increase revenue, reduce cost, manage risk and enhance brand, reputation and intangible assets. We also help clients develop deep insights on sustainability issues based on our ongoing investments in research, including recent studies on consumer expectations and global executive opinion on corporate sustainability and climate change.

To find out more about how Accenture can help you meet your sustainability imperatives and chart a course toward high performance, visit www.accenture.com/sustainability. Please also join our on-going conversation about sustainability, business and policy by following us on Twitter @ActSustainably and on Facebook at www.facebook.com/accenturesustainabilityservices.

About AccentureAccenture is a global management consulting, technology services and outsourcing company, with approximately 261,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$27.9 billion for the fiscal year ended Aug. 31, 2012. Its home page is www.accenture.com.

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