Sustainability
CPA Canada (chartered professional accountants)
"There is a high degree of correlation and similarity between the seven IR Guiding Principles and the six MD&A Principles set out in the CPA Canada MD&A Guidance"
The Right to Development
-*inalienable human right* -every human person and all peoples are entitled to participate in, contribute to, and enjoy economic, social, cultural and political development, *in which all human rights and fundamental freedoms can be fully realized* also implies the full realization of the right of peoples to SELF-DETERMINATION, which includes the exercise of their inalienable right to full *sovereignty over all their natural wealth and resources*
What defines Entrepreneurs?
-Create value -Are change agents in the economy -Exploit opportunities (to create value) -Mobilize resources for their objectives
IIRC Guiding Principles underpinning IR preparation and presentation
-Strategic focus and future orientation -Connectivity of information -Stakeholder relationships -Materiality -Conciseness -Responsibility and completeness -Consistency and comparability
Likely material issues for auto industry
-Waste and hazardous materials management -labor relations -lifecycle impacts of products and services -product quality and safety -materials sourcing
UN Framework on Business & Human Rights
-adopted by UN human rights council in 2008 -widely accepted by states, corporations & civil society
process of due diligence components
-assessing actual and potential human rights impacts -integrating and acting upon the findings -tracking responses -communicating how impacts are addressed
High sustainability companies are more likely to...
-assign responsibility to BOD for sustainability and form a separate board committee for sustainability -make executive compensation a function of environmental, social, and external perception (customer satisfaction) metrics -establish a formal stakeholder engagement process -measure information related to key stakeholders; e.g. employees, customers, suppliers — and to increase credibility of these measures by using auditing procedures
Multi-Stakeholder Dialogues can help:
-avoid conflict -resolve conflict -jointly find/co-crerate new solution
7 sins of Greenwashing:
-hidden trade-off -no proof -vagueness -worshiping false labels -irrelevance -lesser of two evils -fibbing
The Sustainability Accounting Standards Board (SASB)
-independent US non profit -an advisory council informally advise their work
Convention number 169 (ILO 169)
-legally binding international human rights agreement which 22 countries have ratified. -outlines rights of indigenous communities to *control their own economic, social and cultural development* -requires states to *consult* before their land is interfered with for development purposes
High sustainability companies are...
-long-term oriented -measure and disclose more non-financial (Eg. ESG) data
Multi-stakeholder dialogues are increasingly used in practice to...
-reach out to relevant stakeholders -improve image and bottom-line -trend toward virtual and online dialogues
CORE SUSTAINABILITY CONCEPTS
-systems thinking -socioeconomic justice -intergenerational responsibility
Global Risks Landscape 2014
-water crises -climate change -unemployment and underemployment -income disparity -biodiversity loss and ecosystem collapse -food crises -natural catastrophes -chronic diseases
Indigenous Rights & Perceptions of Justice
-where indigenous 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 a license to operate -perceptions of fair treatment, or justice, consist of a combination of views about DISTRIBUTIVE, PROCEDURAL, & INTERACTIONAL justice
Standards for Sustainability Reporting
1. AccountAbility 1000 Framework 2. Global Reporting Initiative (GRI4) 3. SustainAbility Global Reporters Methodology
Ten Divides & Opportunities
1. Demographic 2. Financial 2. Nutritional 4. Resources 5. Environmental 6. Health 7. Gender 8. Educational 9. Digital 10. Security
Ceres
1. Lead to changes in SEC for ESG risks 2. Companies began partnering with NGO's
Sustainable Investment Strategies
1. Negative/exclusionary screening - The exclusion from a fund or portfolio of certain sectors, companies or practices, based on specific ESG criteria; 2. Integration of ESG factors - The systematic and explicit inclusion by investment managers of ESG factors into traditional financial analysis. 3. Corporate engagement and shareholder action - This strategy employs shareholder power to influence corporate behavior including through direct corporate engagement (i.e. communicating with senior management and/or boards of companies), filing or co-filing shareholder proposals, and proxy voting that is guided by comprehensive ESG guidelines. 4. Norms-based screening - Screening of investments against minimum standards of business practice based on international norms. 5. Positive/best-in-class screening - Investment in sectors, companies or projects selected for positive ESG performance relative to industry peers 6. Impact/community investing - Targeted investments, typically made in private markets, aimed at solving social or environmental problems. Impact investing includes community investing, where capital is specifically directed to traditionally underserved individuals or communities, or financing that is provided to businesses with a clear social or environmental purpose. 7. Sustainability themed investing-Investment in themes or assets specifically related to sustainability (for example clean energy, green technology or sustainable agriculture)
International Bill of Human Rights consists of 3 documents:
1. Universal Declaration of Human Rights (1948) 2. International Covenant on Civil and Political Rights (1966) -right to life, freedom of religion, speech, assembly 3. International Covenant on Economic, Social, and Cultural Rights (1966) -labor rights, rights to health, education, adequate standard of living
4 characteristics of the trend of CSR/sustainability reporting
1. Was a rapid rise in sustainable reporting but then hit a plateau 2. High amount of sustainable reporting in Europe 3. 97% of reports fail to properly report material sustainability factors 4. Trend towards integrated reports
How do you create a Sustainability Program?
1. create your sustainability plan 2. develop your sustainability strategy 3. determine scope by reporting framework or rating agency 4. determine scope by materiality 5. complete your analysis of your footprint (GHG, water, waste, poverty reduction, social impact, etc) 6. What is your management framework? 7. Metrics for measurement 8. Develop your own KPI
Create your sustainability plan
1. determine sustainability strategy 2. determine scope- what is material to your sustainability effort? 3. complete footprint analysis 4. determine management program framework 5. develop metric and tracking tool
Global Risks of highest concern 2014- World Economic Forum
1. fiscal crises in key economies 2. structurally high unemployment/underemployment 3. water crises 4. severe income disparity 5. failure of climate change mitigation and adaptation 6. more extreme weather events 7. global governance failure 8. food crises 9. failure of major financial mechanism/institution 10. profound political and social instsbility
how to embed sustainability into an organization
1. integrate into mission, vision and values 2. set goals - (develop KPI's- key performance indicators) 3. traning and developing 4. incent 5. integrate into your product and process
Five-stage sustainability journey
1. pre-compliance 2. compliance 3. beyond compliance 4. integrated strategy 5. purpose & passion
Stage 3 to Stage 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, leases 3.3: Embed sustainable in governance and culture
parts of the profit/loss statement
Benefits: increased profits increased productivity reduced materials reduced energy reduced waste reduced employee turnover Risks: decreased revenue increased expenses
What country has the largest % of LOHAS consumers?
Canada
Sectoral Human Rights Initiatives
Companies joined together with involvement of NGOs, govt's and/or international organizations to enter into voluntary initiatives to address HR issues. - Equator Principles - Global Reporting Initiative - Kimberley Process - Fair Labor Association - Electronics Industry Citizenship Coalition - Extractive Industries Transparency Initiative - Global Network Initiative - Voluntary Principles on Security & Human Rights
High Sustainability companies
Companies that make serious efforts to incorporate sustainability into their strategies and management practices. Significantly outperform their counterparts over the long-term, in stock market AND accounting performance
What is a Business Model?
Describes the rationale of how an organization creates, delivers, and captures value (i.e. economic, social, or other forms of value).
5 dimensions of sustainability issues on SASB
Environment Social Capital Human Capital Business Model & Innovation Leadership & Governance
GSIA
Global Sustainable Investment Alliance. Defines a national market by the country where the sustainable investing assets are managed
Fundacion Paraguaya school key elements of success
Hardware: -low cost infrastructure -resort hotel Software: -power of mission -crisis atmosphere -ability to rely on micro-finance operation -type of students selected -structure that created accountability
Indigenous / First Nation Rights
ILO 169 (1989) - right to control own economic, social and cultural development (States must Consult) UN Declaration on Rights of Indigenous Peoples (2007) - states required to gain Free, Prior & Informed Consent
due dilligence
In order to identify, prevent, mitigate and account for how they address their adverse human rights impacts, business enterprises should carry out human rights due diligence.
GRI 4
Includes principles on the framework and guidance for reporting on certain issues. - Content: how to establish materiality, stakeholder inclusiveness, sustainability context and completeness - Quality: how to achieve balance, comparability, accuracy, timeliness, reliability and clarity - Boundaries: how to determine how much reporting to do on which issues
What does IIRC stand for?
International Integrated Reporting Council
Develop your sustainability strategy
Key resources key activities partners + key stakeholders cost structure type of intervention channels surplus segments value proposition revenue
Different types of business models
Leveraged NP Hybrid NP Social Enterprise / for profit
Why are we interested in Social Entrepreneurship
Many... economic environmental geopolitical societal technological issues that neither gov'ts, businesses or NFP organizations have been able to address on their own.
SUSTAINABLE DEVELOPMENT
Meeting the needs of the present generation without compromising the ability of future generations to meet their own needs.
Lohas market sectors
Personal health green building eco tourism natural lifestyles alternative transportation alternative energy
What is SOCIAL Entrepreneurship?
Play the role of CHANGE AGENTS in the social sector by: -adopting a mission to create and sustain social value (not just private value) -recognizing and relentlessly pursuing new opportunities to serve that mission -engaging in a process of continuos innovation, adaptation, and learning -acting boldly without being limited by resources currently in hand -exhibiting heightened accountability to the constituencies served and for the outcomes created
Triple Bottom Line all 3 is "the sweet spot"
Profit: ROI research and development growth cost savings People: education equal opportunity standard of living health and wellness Planet: natural resources use organic agriculture pollution prevention biodiversity
UN Framework on Business & Human Rights: Pillars
Protect (state) Respect (corporation) Remedy (state&corporation)
B Corps (benefit corporations)
Purpose-driven. create benefit for all stakeholders: shareholders, employees, community, and environment
Examples of ecosystem services
Supporting: underpin the other services Provisioning: goods and products obtained Cultural: non-material benefits Regulating: natural processes like climate regulation etc.
Key Pillars of Human Rights
Universal: all human beings possess them; no distinction based on gender, nationality, sexual orientation, religion, culture etc. Indivisible: economic, civil, social, political and cultural rights are INTERDEPENDENT and form one integral whole which cannot be divided (i.e. governments can't pick and choose which rights they will protect or support) Inalienable: human rights cannot be given away, sold, or renounced
What is Integrated Reporting?
a concise communication about how an organization's strategy, governance, performance and prospects, in the context of its external environment, lead to the creation of value in the short, medium and long term. CAPTURES FINANCIAL AS WELL AS ENVIRONMENTAL AND SOCIAL INFO
What is the IIRC?
a global coalition of regulators, standards setters, companies, institutional investors, NGOs, accounting bodies and accounting firms. Expects that integrated reporting will become the reporting norm worldwide. Their framework is the leading international source of guidance on integrated reporting. It provides Guiding Principles and Content Elements- not key performance indicators, metrics or benchmarks
Sustainable Investing
an investment approach making reference to environmental, social and governance (ESG) factors in the selection and management of investments.
Evidence of Financial Impact
captures both anecdotal and quantitative studies as evidence in 3 month process
Forest Stewardship Council (FSC)
certification system for sustainable management of forest lands
Marine Stewardship Council (MSC)
certifies sustainable fishing policies and practices
Why provide sustainability reports?
communicate non-financial information to key stakeholder groups. -transparency -risk management -staff motivation -regulatory compliance -marketing
Sustainability in business benefits from natures path talk
cost savings social charter product innovation brand strategy and differentiation regulatory review and increased scrutiny risk avoidance to be effective, team members must be engaged
The capabilities approach to development
development is seen as a process of expanding people's human capabilities. to understand development, don't ask how much money a person is worth, but what people are able to do and be fundamental capabilities people need in order to live a life they themselves would see as "worth living."
What does the SEC require (US securities and exchange commission)
disclosure of material issues in Form 10-K, 20-F and other filings used by investors
The parties involved in consumerism according to the story of stuff
government. (not environmental activists, consumers, etc)
'Material' In Canada
if its omission or misstatement would be likely to influence or change the decision of a reasonable investor to invest in the company. Often discussed in MD&A.
Naturalites
interest in environment byproduct of personal drive to be healthy. consume green products and services
Human Rights that pertain to business
life security- no slavery/servitude no discrimination privacy property participation in govt. social security work equal pay for equal work just remuneration trade unions rest & leisure protection of knowledge duty to respect rights & freedoms of others
unconcerneds
little sense of environmental responsibility, social issues, healthy living
Key revenue streams for fundacion paraguay a school "business"
livestock resort hotel small store agriculture community youth service academics dairy industry other income
Forward-Looking Impact
make adjustment to issue to raise importance (potential for system disruption etc)
common sustainability management frameworks?
most common: RISK ASSESMENT/AVOIDANCE- for supply chains and business model 2nd most common: EMPLOYEE ENGAGEMENT - driven by HR, to improve employee retention and recruitment Finally: PUBLIC RELATIONS & MARKETING - recognition and brand building is the driver of management
High sustainability companies are more likely to...
outperform their counterparts in stock market performance AND accounting performance
conventionals
practical consumers, not particularly environmentally conscious in attitude although behaviour sometimes indicates otherwise. energy conservation, recylcing
UN global compact: 2 Human rights principles
principle 1- businesses should support and respect the protection of internationally proclaimed human rights principle 2- make sure that they are not complicit in human rights abuses
the UN Declaration on Rights of Indigenous Peoples (2007) (UNDRIP)
required states to gain free, prior and informed consent before using land owned or occupied by indigenous peoples.
Evidence of Interest (five-factor test)
search source documents using keywords for each sustainability issue to arrive at a profile of the intensity for issues in a given industry
What is a management framework?
set of POLICIES & TOOLS that inform the business decisions that drive the sustainability strategy, 1. Accountability 2. Ownership of initiatives 3. Reporting/analysis processes
drifters
shifting commitment to sustainability. young, steered by trends. price is roadblock.
ISO 14000
standard certifies a company's facilities against a set of environmental process management protocols.
LOHAS segment
strong attitudes regarding personal and planetary health. heavy users of green products.
Business Sustainability
the achievement of economic viability while operating within the capacity, or contributing to the integrity, of social and ecological systems.
Ecosystem services
the benefits that humans obtain from ecosystems, and they are produced by interactions within the ecosystem
Sustainability
the long-term maintenance of systems according to economic, social, and environmental considerations
Business & Human Rights Perceptions of Justice Framework
• Distributional Justice: is the allocation of risks and benefits fair? • Procedural Justice: is the decision making process fair (i.e. did I have the power to change or influence the process leading to distribution of particular benefits or risks)? • Interactional Justice: is the interpersonal treatment of people affected by decisions fair (i.e. Was information shared adequately/truthfully? Were people treated with dignity and respect?) horizontal: protect, respect, remedy vertical downward: diet just, proc just, interact just
"first-generation" sustainability indicators
• Employee turnover • Energy • Greenhouse gas emissions (GHGs) • Injury rate • Pay equity • Waste • Water
