Creating Successful Sustainability Collaborations

David Guernsey to SEDC

David Guernsey to SEDC 09-24-2014

former: Senior Sustainability Manager UPSnow: Independent Sustainability ConsultantGuernsey.David@ExperientialSC.com

• Sustainability Today• Collaboration Imperative• Insights

Creating Successful Sustainability Collaborations

SUSTAINABILITY – WHAT IT IS & IS NOT

• New perspective on business model

• Open dialogue with stakeholders

• Inherently a change management process

• Sustainability done well builds capacity forlong-term value

• Balancing act of new concerns & issues

• Increasingly … recognized and valued by investors

Sustainability – Business DefinitionFor the business enterprise, sustainable development means adopting business strategies and activities that meet the needs of the enterprise and its stakeholders today while protecting, sustaining and enhancing the human and natural resources that will be needed in the future

What It Is Not

• Solely a PR exercise

• A few green initiatives

• A green wash

• A finite project

• A secret

3

Sustainability & Financial Performance

Value of an organization

Ocean Tomo – Intellectual Capital Equity

Mounting evidence of outperformance

S&P 500 vs. S&P GRI reporters – 2001 to 2011 [Bloomberg]

Moving beyond shareholder value to stakeholder value through ES&G Performance

Mechanisms of Value Creation

“What you can’tmeasure, you cannotmanage. What youcan’t manage, youcannot change.”

A mix of tangible, intangible and hard to measure!

Looking from the outside in = new perspective

Sustainability by Sector – Material Value & Risk

Supply Chain Value / Risk

New Market Value / Risk

Reputation Value

Operations Value / Risk

Innovation Value / Risk

Retail

Transport

Consumer Brands

MFG

Technology

Utilities

Universities

Sustainability Activities – Leading & Lagging

Sustainability is quickly becoming an expectation …

Major Activities of Leading Companies• Deep Supply Chain engagement • Wide Stakeholder engagement• Focused Employee engagement• Disclosure reporting for Carbon & Water• Full Lifecycle Assessment

• Global Enterprise Risk• Investor insight into financial

“grade” sustainability data• 3rd Party Assurance• Emergence of Integrated Reporting• Valuing Natural Capital

Challenges of Lagging Companies• Lack of Senior Mgmt support• Sustainability is marginalized …• Inability to create value from …

• Challenged by lack of data / mgmt of • Sustainability Context• See it as a Public Relations exercise?$

8

Sustainability Collaboration Imperative

Are we changing as fast as the world around us?

Leadership Risk mitigation Transparency is the new normal

Enlightened self-interest

Evolutionary advantage Road to resilient profit

Reputation New market opportunities Disruptive innovation on the doorstep

Challenge to status quo

Leveraging collective expertise Customers, employees and investors expect accountability

Our highly complex and intertwined global concerns require multi-disciplinary and multi-stakeholder relationships

Stakeholders: Companies, NGOs, Gov’t, Civil Society, Academia 9

SC Sustainability Collaboration Maturity ModelDimensions LEVEL 1 (BASIC/STARTING) LEVEL 2 (INITIAL/STANDARD) LEVEL 3 (INTERMEDIATE /

EXCELING)LEVEL 4 (ADVANCED) LEVEL 5 (MARKET LEADERSHIP)

Learning Receptive Shared Effort Shared Value Better Business

Sustainability ApproachWhat kind of approach best describes your firm's approach to sustainability in the supply chain internally, and in regard to its work?

Strategy & GovernanceWhat is the level of organizational commitment to utilizing sustainability as a business opportunity?

Sustainability ContextWhat is the nature of the sustainability issue(s) as related to the business initiative and what is the capacity of the organizations to manage it?

Organizational SupportHow is your business organized to capitalize on a sustainability engagement with customers?

Contract ManagementWith regard to sustainability practices, how sophisticated are the applied SC contract models for Value and Alignment between the 3PL and your select client firm?

Information Technology & ToolsHow well are the organizations utilizing technology and tools to manage metrics and gain insights into sustainability performance?

Network ManagementTo what degree do the organizations utilize network visibility and efficiency improvements to quantify and create sustainability related value?

Performance ManagementTo what degree are business & sustainability related metrics applied and utilized to enhance performance?

Resources & Waste ManagementWhat is the level of sophistication applied to the partnership with respect to the reduction of waste and utilization of resources in the supply chain?

Fuel & Emissions ManagementWhat is the level of sophistication applied to the partnership with respect to the reduction of GHG and local pollutant emissions in the supply chain? [Note: local pollution emissions of concern are NOx, SOx, HCs and PM]

Megatrends & MaterialityTo what degree have the organizations assessed and are they collectively acting to manage sector megatrend concerns and significant material aspects?

Risk ManagementTo what degree and perspective are organizational ES&G risks evaluated and acted upon within and between the organizations?

CommunicationWhat is the sophistication level of sustainabilty related communications within and external to the organizations?

Early conformist approach: these organizations are loosely reactive

to clients sustainabil ity motivations and lack

appreciation of a triple bottom line perspective.

Mature conformist approach: these organizations are receptive

to clients sustainabil ity motivations and have joint

projects/initiatives underway, with l imited staff buy-in and

quantification of sustainabil ity related issues.

Engaged approach: these organizations have clearly documented supply chain

sustainabil ity initiatives, metrics and goals that they share with

each other, customers and other stakeholders.

Value chain approach: these organizations have shared

sustainabil ity initiatives, metrics and goals yielding performance

gains and mutual ROI from sustainabil ity initiatives.

Visionary approach: these organizations have recognized

leadership sustainabil ity strategies and supply chain

management practices with clear alignment across firms and

yielding new business opportunities.

Organizations incorporating basic sustainabil ity perspective in

communications with stakeholders.

Organizations are acting by way of recognition and stakeholder

concerns to develop a sustainabil ity report and other stakeholder communications.

Organizations produce sustainabil ity reports and

communicate regarding their shared efforts to stakeholders.

Organizations produce "mature" sustainabil ity reports and

communicate regarding economic and sustainabil ity related benefits of shared efforts to stakeholders.

Organizations communicate with stakeholders from an integrated

business perspective .6

Organizations are advanced sustainability reporters .7

Organizations apply NO introspective process to assess megatrend concerns or material

aspects of their business horizon.

Organizations have begun to identify business related ES&G3

externalities and are considering strategic actions.

Organizations have shared their learnings regarding megatrend

concerns and significant material aspects4 as they relate to their

shared business activities.

Acting collectively and strategically to respond to

megatrend concerns and issues of significant material impact to the

organizations.

Significant understanding of sector megatrend concerns and

significant material issues is contributing to development of

new or enhanced business models.

Organizations util ize a traditional risk management approach with

NO sustainabil ity related perspective.

Organizations util ize a traditional risk management approach and are cognizant of sustainabil ity

related issues with nascent risk management driven efforts to

mitigate them.

Organizations util ize traditional risk management and are delving

into the ES&G enterprise risk5

perspective. They are considering management approaches to

control their value chain risks.

Employing an Enterprise Risk management perspective to value

chain externalities. This approach yields a shared value / shared

risk perspective to the partnership.

Enterprise risk management strategy yields business horizon

insights that help steer the organizations to new business

opportunities and business model considerations.

Waste is wasted. No efforts to manage the reduction of wastes or

the util ization of resources from supply chain activities.

Basic returns mgmt system in place with NO recognition of

sustainabil ity related benefits. Waste and resource use are

reduced through solitary efforts.

Sophisticated returns mgmt system in place with recognition of

sustainabil ity related benefits. Waste and resource use are

quantified and reduced through collaborative efforts.

Sophisticated returns mgmt system with recognition & quantification

of business and sustainabil ity related benefits. A l ife cycle

approach is applied to minimize the creation of wastes and

util ization of resources.

Partnership perceives waste as financial loss and acts to enable

the return or use of SC waste as an economic resource through

broader collaborative engagements.

Organizations using minimal, if any, best practices to reduce fuel

use and emissions with l ittle acknowledgement of sustainabil ity

related benefits.

Organizations util izing industry best practices to reduce fuel use and emissions for cost reduction

with some acknowledgement of the associated sustainabil ity related

benefits.

Organizations are collaborating to implement tools and technologies

that reduce fuel use and emissions for cost reduction with

acknowledgement of the associated sustainabil ity related

benefits.

Application of technologies and processes to reduce fuel use and

emissions are quantified and contributing to cost reduction and

reduced SC risks for the partnership.

Application of new technologies, innovations and processes to

reduce fuel use and emissions are quantified and contributing to cost

reduction, reduced SC risks, and business growth from

sustainabil ity l ike-minded companies.

There is a lack of clarity regarding the need for technology and tools to capture sustainabil ity related

data.

Using some technology and tools to collect sustainabil ity data.

Leveraging technology and tools to collect sustainabil ity related

insights.

Technology and tools produce sustainabil ity related insights that are acted upon and create shared

value in the relationship.

Technology and tools used for the frequent monitoring, independent

verification, transparency and accuracy of resource usage and its

impact in the supply chain.

Network improvements driven solely from within organizations

for cost reduction only and no perspective on sustainabil ity

related benefits.

Network improvements driven as collaborative effort between

organizations for cost reduction with acknowledgement of

sustainabil ity related benefits.

Network improvements driven as collaborative effort between

organizations for cost reduction and efficiencies with

quantification of sustainabil ity related benefits supported by

metrics.

Collaborative effort to redesign networks for multiple business

benefits that create shared value. Sustainabil ity related benefits

quantified, supported by metrics and shared goals.

Collaborative efforts to redesign networks for multiple business

benefits creates shared value and insights that drive recognized

leadership, brand value and new business opportunities.

Organizations2 util ize own business metrics with NO

sustainabil ity perspective.

Organization(s) util ize own business metrics with

sustainabil ity perspective.

Organization(s) util ize shared business metrics with

sustainabil ity perspective.

Organization(s) util ize shared business metrics with

sustainabil ity perspective and shared value approach.

The application of business and sustainabil ity metrics yield

business insights that lead to new opportunities for business models

and innovation opportunities.

Organizational sustainabil ity perspective is nascent. Issues and opportunities are not being acted

upon.

Organizational sustainabil ity perspective is seen as an ad-hoc

opportunity with l imited staff support. Limited sustainabil ity engagements with SC partners.

Middle management support for sustainabil ity efforts.

Collaborative engagement with some strategic SC partners. Coordinated planning and

execution.

Senior management supporting sustainabil ity as a practice that

enables improved customer relationships and value added

benefits

Senior management supporting sustainabil ity as a recognized

business driver, opportunity and risk management practice that

enables business growth

Sustainabil ity issues of the organizations are benefiting from

the collaborative engagement.

Sustainabil ity issues benefiting significantly. Organizations are transparent about shared value.

Contracts include sustainabil ity related joint metrics of success.

Periodic performance reviews include senior management. The application of key sustainabil ity practices to create value in the relationship has generated new

business opportunities from leadership efforts.

Lone stranger approach Ad-hoc resource(s) Dedicated lead resource Dedicated group

Organizational sustainabil ity mandate with dedicated team and full integration into all aspects of

business

Sustainabil ity issues of the organizations not defined,

understood or owned.

Sustainabil ity issues of the organizations are documented,

understood and owned.

Sustainabil ity issues are managed and understood as drivers of

economic value and market growth opportunity. Organizations are

transparent about cost and environmental benefit.

LSP1 receiving sustainabil ity related requests for information from clients. Answering poorly if

answering at all .

LSP receiving requests for information and sustainabil ity

related contractual requirements from clients. Meeting some

sustainabil ity related customer requirements.

LSP recognizes opportunity in responding well to information

requests and meeting many contractual requirements.

LSP has systems in place to meet and respond to customers

requirements. Contracts include shared value (recognition /

incentives) for sustainabil ity related performance.

A model developed for Logistics Quarterly2014 - 3PL Sustainability Study & Awards Program

Organization(s) utilize shared business metrics with sustainability perspective and shared value approach.

10

Learning ReceptiveShared Effort

Shared Value

Better Business

Sustainability Approach Re act ive to V i s ionar y

Strategy & Governance Nasce nt to Inte gr ate d

Sustainability Context The bus ine ss conne ct ion to g loba l i s sue s

Organizational Support Ad hoc to fu l l Inte gr at ion

Contract Management Abse nt to shar e d va lue & r i sk

Information Tech & Tools Tr anspar e nt and ins ight fu l f low of in for mat ion

Network Mgmt S tage s o f S C networ k e nhance me nt

Performance Mgmt Evo lut ion o f metr i cs & ins ights

Resources/Waste Mgmt Pr ogr e ss ion to a c i r cu lar e conomy appr oach

Fuel/Emissions Mgmt C ost sav ings to compet i t i ve advantage

Megatrends/Materiality Running b l ind to long- te r m bus ine ss

Risk Mgmt S hor t - s ighte d to e nte r pr i se pe r spe ct ive

Communication Impr ov i se d to advance d susta inab i l i ty r e por te r s

SC Sustainability Collaboration Maturity Model

11

Collaboration Insights from the INSIDE

Sustainability dept. has a modest & directed budget

Find a center of gravity Look for CFO insights

Sustainability context (multi-dimensional)

Getting past the gatekeeper Scale for “what if”

Verification & transparency are fundamental

Know the hurdlesUse external sector pressures (with finesse)

Sustainability Dept Across Functions Senior Mgmt

Step by Step

Learn

• Sustainability transforming business• Recognize it as a journey• Get to know sustainability minded companies

Engage & Support

• Utilize exploratory dialogue• Build capabilities to support data needs

Leverage

• Engage in sustainability initiatives with shared objectives• Align objectives and goals to create shared value• Build a Better Business

Canadian Tar Sands Activism

NGO Activist Contact• Get a letter• Do your homework• Consider a path and confirm

ISSUE• Like finding green electrons?• Brand / customer campaign• Highly complex environmental /

social / financial / security / human implications

How did UPS respond• Acknowledge issue• Open a dialogue• Engage U.S industry experts

& stakeholders

BSRFuture of Fuels

Workgroup

Example: Effective Industry Collaboration

14

On the Scent

Sustainability collaboration does not have to be the exclusive domain of large leadership companies