Business Sustainability

Characteristics of High Sustainability on Performance

- Assign responsibility to BOD for sustainability and form separate board of committee for sustainability - Establish a formal stakeholder engagement process - Measure and disclose more non-financial data (ESG) - Make executive compensation a function of environmental, social and external perception (customer satisfaction) metrics

Entrepreneurs

- Create Value - Are change agents in the economy - Exploit opportunities (to create value) - Mobilize resources for their objectives

TAKEAWAYS

- Earth has a finite carrying capacity - Over population and over consumption has led to ecological overshoot - Preserving the earth as a livable habitat requires action by individuals, communities and businesses - Solving the climate crisis will require systems thinking

Fun Facts

- Fair Trade producers earn approx, 4% of retail price of tea when selling in bulk - Africa's export concentration increased by 72 % between 1995 and 2011 - Producers earn approx. 16% of retail price of team when selling packaged tea - African producers would earn 3-5 times more when selling finished products rather than raw materials - Selling finished products breaks historical inequalities in terms of international trade

Limitations of Fair Trade

- Farmers engaged in FT programs only sell a fraction of their produce at FT prices (e.g. 5%) - Proportion of Fairly Traded products is < 1% in markets where FT products are offered - Historical inequalities in terms of international trade (raw materials vs value added production) are solidified in FT practice

Examples of Products

- Garments and Textiles - Snacks - Beverages - Natural Foods - Jams, Sauces & Condiments - Beauty and Health

Business Model Provides Rationale For:

- How and organization mobilizes the resources - How an organization transforms these resources into various types of value - How an organization delivers value to customers and other beneficiaries - How an organization captures value to sustain itself and grow

Drivers of the Threats

- Laws and regulations - Public sector finance - Business practices** - Private sector finance

3 Basic Types of Social Enterprises Models

- Leveraged Non-Profit - Social Business - Hybrid

Community Capital Corporations (C3's)

- May issue shares and dividends - Majority of profits must be directed towards social purpose - Dividends limited to 40% of annual profits - Must have 3 directors - Must provide annual "community contribution report"

Boundaries (Non-Profits, Charities, Business)

- NP may or may not have charitable status - NP without charitable status may: 1. Operate business within NP structure (subject to limitations) 2. Set up a separate NP or co-operative organization to run the business 3. Set up a separate for-profit business

Threats to Plant Earth

- Natural resource overexploitation - Pollution - Climate change

Leveraged Non-Profit

- Revenue from grants and donations - no commercial activity (may or may not have charity status) - Typically provide a public good, (e.g. education, clean water, health care) to the underserved - Must demonstrate impact in order to attract funding

Social Business

- Revenue generated entirely from commercial activity - economically self-sustaining - May compete with 'traditional business' - Often attract investors who are willing to accept below market returns exchange for value social/environmental benefits - Usually low profits back in their social mission rather than distribute to shareholders

Hybrid

- Revenue generated from a mix of grants, donations and commercial activity - Often provide a way for non-profit organizations to fill gaps in grant/donor funding - When successful commercially, may transform into a social business - May be able to attract social investors to support commercial activities

Human Rights -- Key Pillars

- Universal - Indivisible - Inalienable

Human Rights Principles

1. Businesses should support and respect the protection of internationally proclaimed human rights 2. Makes sure that they are not complicit in human rights abuses

Pillars of the framework on Business and Human Rights

1. PROTECT = states have duty to protect rights (legal obligations) 2. RESPECT = Business responsibility not to infringe on rights of others 3. REMEDY = Grievance mechanisms by States & Businesses to ensure human rights abuse claims are redressed (compensation, restitution, changes in laws, public apologies)

Five Stages of Sustainability Journey

1. Pre-Compliance 2. Compliance 3. Beyond Compliance 4. Integrated Strategy 5. Purpose and Passion (eg. Ben&Jerrys, The Body Shop, Patagonia)

INT. Bill of Rights

3 documents: - Universal Declaration of Human Rights - International Covenant on Civil and Political Rights (right to life, religion, speech) - International Covenant on Economic, Social and Cultural Rights (labour, health, education, living)

Stage 3 to 4

3.0: Eco-efficiencies in current products and processes 3.1: Improve value chain conditions and footprints 3.2: Create new eco-effective products, services and leases 3.3: Embed sustainable in governance and culture

Canadian Ecological Footprint

A measure of the earths resources that we use to produce, consume and absorb waste (3rd largest)

Advantage of Sustainability

A way to make a business more competitive in the marketplace

One More Goal

Access to Capital, Talent Wars, Productivity, Innovation, Quality, Risk Management, Supply Security (sustainable)

Who Has Human Rights

All human beings are born free and equal in dignity and rights.

Universal

All human beings possess them; no distinction based on gender, nationality, sexual orientation, religion, culture, etc

Distribution Justice

Allocation of risk and benefits fair?

Boundaries (Cont')

BC Society Act: 1. Society must not be created for "the purpose of carrying on a business, trade, industry, or profession for profit" 2. Carrying on a business, trade, industry, or profession as an incident to the purposes of society is not prohibited - Charities may carry on business/commercial activities that directly accomplish or advance the organizations charitable missions - CRA distinguishes between "related" and "unrelated" business

Business Charitable Program

Business is a charitable program in its own right-- community economic development

Business Model

Describes the rationale of how an organization creates, delivers, and captures value (i.e. economic, social, or other forms of value)

Business & Human Rights Perceptions of Justice Framework

Distributional Justice Procedural Justice Interactional Justice

Indivisible

Economic, civil, social, political and cultural rights are INTERDEPENDENT and form one integral whole which cannot be divided (eg. gvmt cannot pick and choose what they'll protect and support)

Corporate Engagement and Shareholder Action (SI.Strategy)

Employs shareholder power to influence corporate behaviour including through direct corporate engagement (communicating with senior mgmt or BOD)

5 Stages of a Product

Extraction, Production, Distribution, Consumption, Disposal

What Are Human Rights

Few of the many: Life, liberty, security, privacy, property, no torture, no discrimination, freedom of speech, trade unions, culture, marriage, etc.

WEEK 5

Human Rights Right to Development Capabilities Approach & UN Business and Human Rights Framework Apply UN Framework to Case

Inalienable

Human rights cannot be given away, sold or renounced

I = P*A*T

I: the impact on the environment resulting from consumption P: the population number A: the consumption per capita (affluence) T: the technology factor

Naturalites (market segmentation)

Interest in protecting environment mainly by a product of internalized personal drive to be healthy and is namely reflected in their consumption of green products and services

WEEK 1

Intro and Ecological Footprint/Overshoot

Sustainable Investing

Investment approach making reference to environmental, social, and governance (ESG) factors i the selection and management of investors

Positive/Best-In-Class Screening (SI.Strategy)

Investment in sectors, companies or projects selected for positive ESG performance relative to industry peers

Sustainability Themed Investing (SI.Strategy)

Investment in themes or assets specifically related to sustainability (for example, clean energy, green technology or sustainable agriculture)

What is 'Right to Development'

Is an inalienable human right by virtue of which every human person are entitled to participate in economic, social, cultural, and political development

Sustainability

Is meeting the needs of the present without compromising the ability for future generations to meet their own needs

Procedural Justice

Is the decision making process fair? (Eg. did I have the power to change or influence the process leading to distribution of benefits or risks)

WEEK 2

Markets and Institutional Investors

Conventionals (market segmentation)

Not particularly environmentally conscious in attitude, although their behaviours sometimes indicate otherwise--they are practical consumers whose energy conversation and recycling efforts can make them a viable target for some marketers

Unrelated Business

Not permitted with charitable structure nature of the business is not connected to charity purpose

Nutritional (ten divides)

Opportunities: Address the needs of those with too little food--and too much

Health (ten divides)

Opportunities: Create markets that encourage healthy lifestyles and enable equal access to healthcare

Environmental (ten divides)

Opportunities: Create markets that protect and enhance the environment

Digital (ten divides)

Opportunities: Develop inclusive technology that enables all levels of society to tackle each of these divides more effectively

Gender (ten divides)

Opportunities: Enable and empower women to participate equally and fairly in society and the economy

Resources (ten divides)

Opportunities: Enable development that uses the earths resources in a sustainable way

Financial (ten divides)

Opportunities: Help the have-nots become bankable, insurable and entrepreneurial

Educational (ten divides)

Opportunities: Provide the mechanisms to transfer and share knowledge and learning that empowers all levels of societies

Demographic (ten divides)

Opportunities: To meet the needs of billions of people affected by market failures in both developing and developed countries

Security (ten divides)

Opportunities: Work to promote security and reduce conflict base on inequality and exclusion

People, Plant, Profit

People: Social Performance Plant: Environmental Performance Profit: Economic Performance

Related Business

Permitted within a charitable structure nature of the business is linked and subordinate or the charity's purpose or run by volunteers

Unconcerneds (market segmentation)

Portion of the population that exhibits little sense of environmental responsibility, regard for social issues, or inclination for healthy living

Enablers

Profit, Share Price, Brand Value, Revenue Growth, Market Share, Expenses, ROI (they are not sustainable)

Norms-Based Screening (SI.Strategy)

Screening of investments against minimum standards of business practice on international norms

Drifters (market segmentation)

Shifting commitment to many issues, including sustainability. Are the youngest segment and are steered by the latest trends. More likely to view price as a roadblock to green living. While sustainability remains a trendy issue, this group is a prime target.

LOHAS (market segmentation)

Strong attitudes regarding personal and planetary health, which are widely reflected in their behaviour. Heavy users of green products. Exclude a strong influence over others

Integration of ESG Factors (SI.Strategy)

Systematic and explicit inclusion by investment managers of environmental, social and governance factors into traditional financial analysis

Impact/Community Investing (SI.Strategy)

Targeted investments, typically made in private markets. Impact investing includes community investing, where capital is specifically directed to traditionally underserved individuals or communities or financing that is provided to businesses with clear social or environmental purpose

Bio-Capacity or Re-Generative Capacity

The earths ability to renew its resources (water, forests, air)

Negative/Exclusionary Screening (SI.Strategy)

The exclusion from a fund or portfolio of certain sectors, companies or practices based on specific ESG criteria

Natural Capital

The worlds stock of natural assets which include geology, soil, air, water and all living things

Social Entrepreneurship

They play a role of "change agents" - By adopting a mission to create and sustain social value (not just private) - Recognizing and relentlessly pursing new opportunities to serve that mission - Engaging in a process of continuous innovation, adaptation and learning - Acting boldly without being limited by resources currently in hand - Exhibiting heightened accountability to the constituencies served for the outcomes created

Ecosystem Collapse

When a resource is depleted to the point that it is unable to regenerate itself

Indigenous Rights & Perceptions of Justice

Where indigo. people have the right to be consulted with, and provide or withhold consent, perceptions of justice matter in order for business to gain and/or maintain license to operate Perceptions of fair treatment, or justice, consist of a combination of view about distributive, procedural and interactional justice

Types of Businesses By CRA

i. Business is charitable program ii. Related Business iii. Unrelated Business (i+ii) = Can operate within non-taxable charity structure (iii) = Outside charity structure Taxable

TAKEAWAYS

• Learn about consumer market trends related to the growing demand for sustainable products and services (LOHAS) • Understand different types of sustainable investing strategies and appreciate the sheer volume of assets under management • Know the results of comparing the financial performance of high-sustainability vs. low- sustainability companies & • The business case for sustainability speaks to CEOs who don't appreciate the need for sustainability in other ways. • Look at cost savings, revenue sources and reducing risk to build the business case. • There are specific tools you can use to calculate business savings.

TAKEAWAYS

• Protect, Respect & Remedy: UN Business and Human Rights Framework • Due Diligence for Human Rights • ILO 169 & UNDRIP • Perceptions of Justice framework

TAKEAWAYS

• Understand the key pillars of human rights (universal, indivisible, inalienable) • Be aware of foundational human rights instruments and their history - (a.k.a. International Bill of Human Rights) Be able to... • Describe the Right to Development • Explain the Capabilities Approach to Development