implementing an all encompassing sustainability strategy – the key challenges jun09
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Implementing an All-Encompassing
Sustainability Strategy – The Key
Challenges
Christopher ShanahanFood Industry Analyst
Chemicals, Materials and Food
San Antonio, Texas USA
June 4th, 2009
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Agenda
• What is Sustainability?
• The Current Economy and the State of
Sustainability
• Review of Sustainability Business
Strategies Currently Adopted by
Companies
• Sustainability Strategies Assessment
and Recommendations
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What is Sustainability?
Objective ���� Generation, Evaluation and Implementation of an Effective Sustainability
Strategy
• Sustain Profitability Margin
• Sustain Competitive Advantage
• Sustain Revenue Growth
• Adopt strategies that will minimize/maximize the production of
negative/positive externalities produced by the company over time
• Minimize wasted inputs and unusable byproduct
• Avoid/minimize use of non-renewable resources
• Resources that have a virtually fixed amount (petroleum)
• Resources that have a virtually fixed amount
���� harvest rate > renewal rate (corn ethanol)
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What is Sustainability?Optimization of the bottom lines over time
Ch
an
ge
in
Bo
tto
m L
ine
Time
Economic Bottom Line
Social Responsibility
Environmental Awareness
Ch
an
ge
in
Bo
tto
m L
ine
Time
Economic Bottom Line
Social Responsibility
Environmental Awareness
Yesterday’s Objective Today’s Objective
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What is Sustainability?Recognizing the interaction of the economic, social and environmental bottom lines over
Economic Bottom Line = Maximize Profit
Social Responsibility = Maximize/Minimize
Positive/Negative Impact on the Community
Environmental Awareness = Minimize Waste and/or Negative Impacts on the
Environment
-
--
+
++
∆ ∆ ∆ ∆ Yesterday < ∆∆∆∆ Today
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The Current Economy State Reviewing the Recession Genesis and its Impact on Sustainability Policy
Defaults Lack of Trust in Financial Institutions
Tightening Credit Markets
Banks Slow Lending Down
Slower Growth
Financial InstitutionsLosses
Lack of Lending forSmall Business
Lack of RetailCredit
Consumers Reduce Spending
Economy Slows Down/Contracts
Sub-Prime Mortgages
$
Lack of Capitalfor Companies
Suspension of Interbank Lending
$
$
$
$
Defaults Lack of Trust in Financial Institutions
Tightening Credit Markets
Banks Slow Lending Down
Slower Growth
Financial InstitutionsLosses
Lack of Lending forSmall Business
Lack of RetailCredit
Consumers Reduce Spending
Economy Slows Down/Contracts
Sub-Prime Mortgages
$
Lack of Capitalfor Companies
Suspension of Interbank Lending
$
$
$
$
• Cap and Trade
• $100bn toward more efficient private homes and government buildings
• Development of wind and solar power
• Increased spending money on public transport
• More fuel-efficiency under GM bankruptcy plan
• 30% increase in fuel efficiency standards
Private SectorGovernment’s Green
Response
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The Current Economy and the State of Sustainability What will happen in 2009…we have a better idea in 2010/11
Source: Global Reporting Initiative
Note the flat growth in the number of
companies choosing to report
sustainability performance during the
2001/02 recession
Likely Independent of Economic Environment
Likely Not Independent of Economic Environment
??
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Source: Frost & Sullivan
The State of Food Safety Sustainability The Changing Face of Food Safety in the United States
Changing Face of Changing Face of
Food Safety in the Food Safety in the
USUS
Food Safety Standard Food Safety Standard
Confusion and Confusion and
RedundanciesRedundancies
Mistrust of 3Mistrust of 3rdrd Party Party
AuditorsAuditors
Growing Power of Growing Power of
RetailersRetailers
Heightened Awareness of Heightened Awareness of
Food Security Food Security
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Sustainability Strategies Currently Adopted by CompaniesUsing The Warm Glow to Drive Demand
• Some consumers experience ‘a warm-glow’ when they buy a product with an icon that reports social responsibility or increased environmental awareness.
• Thus, some people are willing to pay a greater premium for a given socially-beneficial, firm-provided, service
• Consumers are motivated by the desire to receive praise and social acceptance, or avoid ridicule
• Thus just like any other product, consumer motivation is driven by both altruistic and egotistic factors.
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Raw Material Supplier
Sustainability Strategies Currently Adopted by CompaniesEffectively Communicating Your Sustainability Practices Involves the Entire Supply Chain
Source: Frost & Sullivan
Distributors and
Retailers
Final ConsumersFinished Good
Manufacturer
We Are Still
GreenAre We
Green?
Is this
Green?
Distributors and
RetailersFinal Consumers
Finished Good
Manufacturer
Raw Material Supplier
We Are Still
GreenWe Are Still
Green
We Are Still
Green
We Are Still
Green
3rd Party Verified
Without a clear industry icon…
With a clear industry icon…
We Are Still
Green
Product Flow
$ and Feedback Flow
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The Current Economy and the State of Sustainability When Adopting Sustainability Strategies Can Lead to Unintended Economic Consequences
Factory Yield End User Benefits
1st Generation (Corn Ethanol) 2.7 Gallons per Bushel 5,670 Mile/ac/yr
3rd Generation Cellulosic – ZeaChem
Process135 Gallons per Bone Dry Tons 28,350 Mile/ac/yr
ZeaChem: the “Food vs. Fuel” Debate is Null and Void with New Sustainable Technology
Source: ZeaChem
• The bioethanol industry was believed to have been a motivating factor in increased corn production and
increases in grain product prices in late 2007 through 2008
• Increased speculation that farmers had a new incentive to switch away from other crops such as wheat and
soybeans � Industry experts believe that speculative activity rooted in is accounting for approximately 20 to
30 percent of price growth during this period
• Summary: In an effort to move away from resources that have a virtually fixed amount of
global inventories such as petroleum, consumption moved to renewable sources at such
a fast rate that the resource effectively became a nonrenewable resource in the short
run, as shown in the growth in market prices.
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Sustainability Strategies Currently Adopted by CompaniesThe Objective is to Offer a Product that Consumers will Buy No Matter What…
• Invest in marketing strategies that focuses on your
core product offering
• Exploit opportunities from consumer feedback
• Have a complete 360 degree perspective on your
market’s external environment
• Establish partnerships with other suppliers
• Adopt proactive product and service
differentiation strategies � understand the
consumer’s motivation for buying your product
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Sustainability Strategies Assessment and Recommendations
vDefine the
Problem and System
Identify Strategic Options
Identify End Markets and
Potential
Identify Market Dynamics and
Constraints
Construct and Run the Model
Select Optimal Plan of Action
based on Model Results
Implement Plan of Action
Source: Frost & Sullivan
Total RevenuesTotal Revenues
SUPPLY = OutputSUPPLY = Output
<+ +Initial InvestmentsInitial Investments
Renewable InputsRenewable Inputs
WasteWaste
Market
Demand
Complex Business UniverseComplex Business Universe
Marketing and Logistic CostsMarketing and Logistic CostsProduction CostsProduction Costs
NonNon--renewable Inputsrenewable Inputs
Social
Benefits
Social
Benefits
Sustainable
Production
System
Profit
The more Green we
are the more
Green we make
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Next Steps
Request a proposal for a Growth Partnership Service to support you and your team to accelerate the growth of your company. ([email protected])1-877-GoFrost (1-877-463-7678)
Join us at our annual Growth, Innovation, and Leadership 2009: A Frost & Sullivan Global Congress on Corporate Growth, September 13-16 2009, Hyatt Scottsdale Resort & Spa at Gainey Ranch, Scottsdale, AZ(www.gil-global.com)
Register for the next Chairman’s Series on Growth:Growth Acceleration System: Leveraging the Growth Diagnostic Blueprint (July
9th) (http://www.frost.com/growth)
Register for Frost & Sullivan’s Growth Opportunity Newsletter and keep abreast of innovative growth opportunities(www.frost.com/news)
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Please inform us by taking our survey.
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For Additional Information
Melinda Meyer
Director of Sales, NA - Chemicals,
Materials & Food
(210) 348-1000
Johanna Haynes
Corporate Communications
Chemicals, Materials & Food
(210) 247-3870
Steve LeeStrategic Account ManagerChemicals, Materials and Food, Asia Pacific(65) 6890 [email protected]