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transcript
Capgemini Consulting's CEO Study 2008
”Mastering the Triple Bottom Line”
Presentation of Key findings
24.02.2009 v 0.9
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The study is based on a structured approach and gives valuable insight on sustainability from a strategic perspective
� Our objective is to generate insight on how Norwegian companies approach sustainability
from a strategic perspective
� The main focus is how to manage expectations from both shareholders and society to
deliver financial, environmental and social performance
Background
� Sustainability refers to how enterprises are striving to reach business objectives while
taking responsibility and protecting society at large (also referred to as Corporate Social
Responsibility)
� The Triple Bottom Line captures the essence of sustainability and refers to the balance in
delivering results across three dimensions: financial, social and environmental
Definitions
This is the largest study of its kind that has ever been conducted in Norway.This is the largest study of its kind that has ever been conducted in Norway.
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� The study is based on interviews with CEOs and Top Management of 55 Norwegian
enterprises
� 8 sectors are represented: Manufacturing, Financial services, Retail, Distribution, Oil and
Gas services, Energy, IT/Telecom and Property
Methodology
Capgemini has conducted an in-depth study of sustainability on the basis of interviews with top management in a wide range of Norwegian companies
Sustainability represents unprecedented business opportunities
Sustainability has become a top priority for CEOs
Environmental and social performance emerge as a major source of competitive advantage
Sustainability leaders have the potential to change the rules of the game
Mastering the Triple Bottom Line
requires thorough and strategically founded execution
Key findings:
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Non-disclosure
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Key finding 1
Sustainability has become a top priority for CEOs
“We experience a significant increase in demands on sustainability from our customers, especially within oil and gas”
- CEO, large Manufacturing company3
The pressure on CEOs to deliver environmental and social results has increased dramatically in recent years
To which extent do you experience increased demands to deliver results on environmental, ethical and other social
aspects in addition to economics?
What are the commercial drivers behind changes in respect to how you deal with sustainability?
Sustainability has raised to become a top priority for CEOsSustainability has raised to become a top priority for CEOs
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70% of CEOs experience significant increase in demands to deliver on environmental
and social aspects
Customer demands, cost savings and compliance drive sustainability changes
Despite industrial differences, almost all CEOs believe that sustainability will have a significant impact on their business within the next 10 years
There is a lucrative opportunity to capitalise by taking a leading position on sustainability in Norway.There is a lucrative opportunity to capitalise by taking a leading position on sustainability in Norway.
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“To which extent do you experience increased demands to deliver results on environmental, ethical and other social aspects in addition to economics?”
Sustainability demands vary across sectors
1 2 3 4 5
Total average
Telecom & IT
FSI
Retail
Distribution
Manufacturing
Property
Energy
Oil & Gas Services
Very
smallMedium Very largeSmall Large
Although some sustainability issues are important in all sectors, industrial sustainability challenges are distinctively different across sectors
Energy :
6
Distribution :
Manufacturing : Oil & Gas Services :
� Climate change
� Increasing energy
demand
� Clean energy
� Environmental impact of
operations (emissions
and waste)
� Business Ethics and
barriers of corruption
� Labour standards in
developing countries
� Good citizenship in local
community
� Stricter rules and
regulations for
compliance
� Route planning
� Energy use operations
� Emissions and waste to
air and sea
� Local sourcing
� Disposal of ships,
vehicles etc
� Energy use and efficiency
� Waste and hazardous
materials
� Water usage
� Recycling and packaging
� Scarcity of raw materials
� HSE requirements from
upstream companies
� Emissions to air and sea
� Supplier management
� Efficient resource
management
Sustainability issues listed across sectors :
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Property : IT & Telecom :
Retail : Financial Services :
� Emission and waste
control
� Diversity and equal
opportunities
� Supplier sustainability
management
� Work place issues,
Health Safety and
Environment
� Energy use in buildings
� Waste from household
and construction
� Use of hazardous
materials and chemicals
� Environmental impact of
Telecom infrastructure
� Short lifetime of
equipment
� Owner rights and ”pirate
distribution”
� Internet fraud
� Raise of the LOHAS segment
� Energy efficiency in store design, transportation and logistics
� Recycling and environmental packaging
� Waste and hazardous materials
� Transparency
� Ethics in selling complex
financial products
� Green and sustainable
investments
� Remuneration in capital
market positions
Although some sustainability issues are important in all sectors, industrial sustainability challenges are distinctively different across sectors
Sustainability issues listed across sectors :
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Key finding 2
Sustainability represents major
business opportunities across most sectors
“This can be the oil-adventure of
Norwegian generations to come ”
- CEO, Norwegian Energy company
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80% of CEOs believe that sustainability create major market opportunities and that it will have a considerable impact on their business
To which extent does an increased focus on sustainability createmarket opportunities for your business?
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”It’s completely obvious that it will lead to market opportunities in the energy
sector”
CEO, Energy company
“These trends [on sustainability] lead to
enormous opportunities!”
CEO, Oil & Gas services
”Certainly over time it will provide [market opportunities], but we don’t use it
offensively today, in fear of bad publicity”
CEO, Financial Service Firm
“Sustainability provide opportunities because you are forced to think
differently”
CEO, Manufacturer
There are major differences between the sectors, but business opportunities emerge across all of them.There are major differences between the sectors, but business opportunities emerge across all of them.
How closely sustainability is to the business core has a large influence to which extent sustainability represent market opportunities
1 2 3 4 5
Total average
FSI
Manufacturing
Oil & Gas Services
Distribution
Retail
Telecom & IT
Property
Energy
To which extent do an increased focus on sustainability create market opportunities for your business?
Sustainability driven business opportunities vary across sectors
There are major differences among sectors, but business opportunities emerge across all of them.There are major differences among sectors, but business opportunities emerge across all of them.
By mapping initiatives discussed with CEOs in the study, market opportunities can be divided into five broad and distinct categories
Exploration and utilisation of scarce resources
1
Need for cleaner technologies
2
The raise of the LOHAS segment
3
Enabling the unprivileged
4
Exploring sustainability leadership options
5
Energy
Minerals
WaterRain forest
SpeciesOil
CCS
Cleanfuel
Wind, Solar,Biofuel Waste
managementSOx/NOxcleaning Recycling
Eco
Fairtrade
Health SustainabilityfeaturesGreen
materialsCarbonneutrality
Micro-credits
Reuse
Medicinesupply Low-cost
solutionsSanitarysolutions Water
Differentiation
Sustainabilityinnovation
Competitiveadvantage Sustainability
premiumsTalentacquisition
Complianceleadership
In coming years consumers will strongly consider sustainability issues in their buying decisions, but …
… most consumers are only willing to pay a small price difference for sustainability features !… most consumers are only willing to pay a small price difference for sustainability features !
Most important sustainability issues
in buying decisions
87 85 84
0
25
50
75
100
Energy and water
usage
Waste reduction
and control
Sustainable
manufacturing
features
% of respondents
Most important factors of sustainability recognised by consumers
Willingness to pay for sustainability is limited, but growing …
By introducing three dimensions to the business context, new competitive space driven by sustainability emerge across all sectors
Energy :
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Distribution :
Manufacturing : Oil & Gas Services :
� Renewable energy
� Clean technologies
� New and green energy
� Green certificates
� Trading emission quotas
� Smart Metering options
� Reverse logistics
� Disposal of ships and
vehicles
� Environmental
technologies for NOX,
SOX, BWT, CO2 etc
� Cleaner technologies in
value chain
� New products from
recyclable materials
� Green, Eco, Health and
Fairtrade products
� Carbon capture and
storage
� Increasing recovery factor
� Decommissioning
offshore platforms
� Cleaner technologies to
reduce emissions / waste
� Energy efficient and
energy saving solutions
� Strategic differentiation
and strategic innovation
� Cleaner technologies in
operations
� Local sourcing
opportunities
Business opportunities across sectors :
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Property : IT & Telecom :
Retail : Financial Services :
� Energy efficient buildings
� Green materials
� Energy saving solutions
� Waste handling systems
� Environmental certificates
� Green IT
� Technological solutions
addressing energy saving
� Digital communication to
replace/reduce travel
� Using IT to educate
unprivileged
� Green, Eco, Health and Fairtrade products
� Emisson quotas to offer carbon neutral products
� Using recyclable materials
� Environmental product packaging
� Sustainable investment
portfolios
� Green funds
� Microcredits
� Carbon indexes
� Emission trading
� Carbon neutral products � Sustainable sourcing� Sustainable product
attributes� Product innovation
By introducing three dimensions to the business context, new competitive space driven by sustainability emerge across all sectors
Business opportunities across sectors :
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Key finding 3
Environmental and social performance emerge
as a major source of competitive advantage
“Sustainability is the single
biggest opportunity in 21st
century, and will be the next
source of competitive
advantage”
- H.Lee Scott, CEO Wal Mart
CEOs believe social and environmental initiatives can be leveraged to create competitive advantage
Sustainability performance may also represent competitive disadvantage – under certain circumstances the result could be denied market access or a non-competitive cost structure.
Sustainability performance may also represent competitive disadvantage – under certain circumstances the result could be denied market access or a non-competitive cost structure.
In which way can social, ethical and environmental initiatives also enhance your companies competitiveness?
In which way can social, ethical and environmental initiatives also damage your companies competitiveness?
According to CEOs; brand, risk and talent are the most promising strategic levers
Reduced market access and increased costs are seen as the largest potential pitfalls
Small Medium Very high
CEOs believe there are limited contradictions between financial performance and sustainability, but we believe trade-offs will emerge as ambitions increase
To what degree is it an area of conflict between providing the owners’ maximum rate of return as well as taking environment,
society and ethics into consideration?
Addressing sustainability will always involve trade-offs, but with the right prioritisation significant returns can be leveraged – also on the financial bottom line.
Addressing sustainability will always involve trade-offs, but with the right prioritisation significant returns can be leveraged – also on the financial bottom line.
CEOs do not see a substantial
contradiction between financial performance and sustainability
However, we believe a high ambition
level will create significant trade-offs
Meeting society’s basic expectations on sustainability is a necessity to operate in the
market place …
… but a robust correlation between sustainability performance and financial performance has
not been established.
We believe significant trade-offs will emerge as companies increase their level of ambition on the environmental and social bottom lines!
If the right initiatives are taken, there is a significant potential for positive returns - also
on the financial bottom line.total average ranking of 1.9
1 2 3 4 5
Small Medium Large
Energy
1 2 3 4 5
Retail
1 2 3 4 5
Manufacturing
1 2 3 4 5
FSI
1 2 3 4 5
Distribution
1 2 3 4 5
Property
1 2 3 4 5
Oil & gas services
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Sustainability leaders have the
potential to change the rules of the game
High
All represented industries report from “moderate” to “very high on sustainability driving an increase in demands and new market opportunities
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Even though the tendency is that all industries are strongly affected by this development, there are clear differences on strategic impact sustainability impose on the represented industrial sectors.
Even though the tendency is that all industries are strongly affected by this development, there are clear differences on strategic impact sustainability impose on the represented industrial sectors.
Increased Sustainability Dem
ands
Very Lo
wLimite
dMod
erate
High
Very High
Very Low Limited Moderate High Very High
Financial
Services
Manu-
facturing
Oil & Gas
Services
Property
Distribution Retail
IT/
Telecom
Energy
Sustainability Driven Market Opportunities
Financial
Services
Manufacturing
Oil & Gas
Services
Property
Distribution Retail
IT/
Telecom
Energy
Moderate High Very High
Sustainability Driven Market OpportunitiesMod
erate
Very High
Increased Sustainability Dem
ands
Differences in demands and opportunities create various strategic playgrounds for different industries
Potential for game changing strategies
Attractive positions for sustainability leadership
Enhance value chain performance and
increase standards to put competition on defence
Energy
Distribution RetailProperty
Protect reputation and
increase standards to put competition on defence
Oil & Gas
services
IT/TelecomFinancial
services
Manufacturing
Strategic Playgrounds
Where market opportunities is seen as ”very high” and demands
to deliver social and environmental performance are ”high”,
sustainability becomes strongly linked to business core, and
hence a strategic parameter for creating business performance.
Where the degree of sustainability driven opportunities and
increasing demands are seen as ”high”, sustainability is not as
directly linked to core business, but there are significant
sustainability potential and risks related to underperformance.
Moderate business opportunities, but high increase in
demands indicate strong regulatory regimes related to
production, manufacturing and operating environment. Being
sustainable is business critical, affecting licence to operate.
Sectors rating increase in demands and market opportunities as “moderate” should still assess how sustainability impacts competitive advantage. Ignoring sustainability represents significant risks, while mastering it protects reputation and can create new market opportunities in niche markets.
Despite differences, we believe sustainability can offer promising benefits within all industry sectors.Despite differences, we believe sustainability can offer promising benefits within all industry sectors.
Comments
We can categorise the sustainability leadership according to two dimensions; Market Driven Leadership and Compliance Driven Leadership
Compliance Driven Leadership
Marke
t Driv
en Lea
dership
Sustainability Leadership
Energy
Distribution
Oil & Gas
services
IT/Telecom
Financial
services
Market Driven Leadership:
• Developing new products and achieving
market differentiation
• Changing the rules of the game
Compliance Driven Leadership
• The potential of outperforming competitors
by driving the sustainability practices forward
within regulated industries
• Increasing the gap and thus competitive
advantage
Comments
Manufacturing
Retail
Property
� CEOs in our study confirm our belief that
sustainability will have a profound impact
on business- and operating models in
the future
� Mastering the dynamics of the Triple
Bottom Line is about playing a new
game where the importance of
environmental and social performance
increases dramatically
� In order to balance all three dimensions,
businesses must carefully consider risks
and opportunities within their current
business context and operating model
� The companies that excel in mastering
the Triple Bottom Line, enabling strategic
integration of sustainability issues with
core capabilities, will also prevail in the
market place
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The rules of the game are changing, and mastering the Triple Bottom Line is emerging as a prerequisite for success
Companies that are able to grasp the system within which they operate, and the limits and requirements the system imposes, will be the ones to flourish in the future business environment (John Ehrenfeldt – Sustainability by design).
Companies that are able to grasp the system within which they operate, and the limits and requirements the system imposes, will be the ones to flourish in the future business environment (John Ehrenfeldt – Sustainability by design).
Finan
cial
Perform
ance
Environmental and Social Performance
Mastering the
Triple Bottom Line
Superior
Returns
Negative
Returns
Successful
adaptor
Sustainability
leadership
Over
investoingNon-
compliant
1
2
3
4
Four Generic Sustainability Positions
Expected Impact on Financial Performance
Sustainability Position vs Economic Slowdown?
In view of the survey findings and the current economic climate, we still see long term opportunities in taking a clear position on sustainability
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Key findings:
Sustainability represents
unprecedented business
opportunities
Sustainability has become a top
priority for CEOs
Environmental and social
performance emerge as a major
source of competitive advantage
Sustainability leaders have the
potential to change the rules of the
game
Mastering the Triple Bottom Line
requires thorough and
strategically founded execution
Declining markets
and challenges related
to cost structure
Taking a leading
position on
sustainability
Struggling to maintain the strategic
focus and priorities on long term
growth areas within existing core
business
Struggling to reduce existing cost base and turning fixed costs into variable costs, without deteriorating cash flow from core areas – reducing the relative
competitive advantage
What companies will be best positioned to outperform
competition as soon the market rebound from slowdown and
decline – realising fast and profitable growth…?
99 of the most sustainable companies, on the Dow Jones Sustainability Index, has outperformed its peers by 15 % during the last six months of economic downturn.
99 of the most sustainable companies, on the Dow Jones Sustainability Index, has outperformed its peers by 15 % during the last six months of economic downturn.
• Reducing costs
• Increasing demands
• Core element of strategy
• Compliance issues still vital
• Securing market access
• Access to resources
• Prices on energy and raw materials are decreasing
• Reduced will and ability to pay a price premium
• Reduced funding
Need for business response
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We find that most of our clients struggle to respond strategically on the new business climate driven by sustainability
Economic responsibility
Social responsibilityEnvironmental responsibility
Water use
Recycling & product take back
Corruption and bribery
Community development
Minorities
Supply chain
Efficiency
Profitability
Responsible accounting
Human rights
Culture
Quality goods
Workplace health & safetyWaste
control
Emissions
Energy use
Product stewardship
Use of human resources
Equal opportunities
Job creation Marketing & advertising standards
Diversity
Pricing
Climate change
Eco-efficiency
Value creation
Innovations
Eco-luxury
Sustainable growth
Transportation
Use of dangerous materials Inclusive society
EducationAccess
The complex landscape of sustainability issues
As corporations now also have to be competitive in the environmental and social dimensions – the basis of competition is changing and the role of executives is getting more complex.
As corporations now also have to be competitive in the environmental and social dimensions – the basis of competition is changing and the role of executives is getting more complex.
Identify sustainability impact of business climate
Understand current social and environmental performance
Explore sustainability leadership options
Review business strategy and formulate TBL ambitions
Prioritise TBL initiatives
Identified business needs
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“CSR can be much more than just a cost, constraint, or charitable deed. Approached strategically, it
generates opportunity, innovation, and competitive advantage for corporations—while solving pressing
social problems”
On the highest level, the strategy formulation contain the same steps, but the analyses and outcome are distinctively different
Society
Economy
Environment
Define assumptions and strategic context
Analysis of internal
capabilities and industry context
Identification and assessment of risks and
opportunities
Strategy development
Implementation planning
Implementation
Monitor & review progress
Capgemini Consulting’s strategy development framework
The TBL perspective
Analysis of market conditions, competitive arenas and the organisations potential for developing competitive advantage provide the basis for the strategic direction.
Analysis of market conditions, competitive arenas and the organisations potential for developing competitive advantage provide the basis for the strategic direction.
- M. Porter & R. Kramer 2007
Most strategic sustainability options fall within the categories of five generic strategies
Locating the core
– Positioning your Core Business in the industry value system
Developing the core
– Differentiating the Core Business
Elaborating the Core Business
– Growing the core; making the core business larger
Extending the Core Business
– Extending the corporate strategic scope
Reconceiving the Core Business
– Consolidate and rationalise the business
Five generic strategies
We believe that within most sectors there will be niche markets where differentiated sustainability strategies can have large impact or even game changing potential.
We believe that within most sectors there will be niche markets where differentiated sustainability strategies can have large impact or even game changing potential.
Sources: H. Mintzberg
5
2
1
3
4
Industry im
pact
Strategic re - orientation
1
2
3
4
5
Effort and impact
� The generic strategies can be categorised based on potential to change the competitive rules in the industry and change and effort required to implement the strategy
Capgemini service offering is adapted to different needs and maturity levels, but all offerings have a strategic perspective on sustainability
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Key findings:
Sustainability represents unprecedented business opportunities
Sustainability has become a top priority for CEOs
Environmental and social performance emerge as a major source of competitive advantage
Sustainability leaders have the potential to change the rules of the game
Mastering the Triple Bottom Line requires thorough and strategically founded execution
TBL opportunity
scan
Strategy review
Full scale strategy-process
Project scopePotential for value creation
Four typical project approaches
TBL health check
Contact:
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Tel: +47 24 12 80 00Mobil: +47 95 11 81 33
Anders.rygh@capgemini.com
Anders RyghCapgemini ConsultingPrincipal |Head of Business Strategy and M&A