Sharing Recipes for Staying Competitive – Sustainability

Copyright © 2008 Accenture All Rights Reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture.

Sharing Recipes for Staying Competitive - SustainabilityECRThailand, October 2008

John Jackson, Accenture

Copyright © 2008 Accenture All Rights Reserved.

Accenture’s 2 moments of truth

Identify Industry Drivers

Synthesize Drivers to Client

High Performance

Current State

Understanding High Performance

Enabling High Performance

Descriptive Prescriptive

• We examine more than 6,000 companies, including more than 500 that meet our criteria as high performers.

• Our understanding includes the specific drivers of high performance across 34 industries

Diagnose Gaps

Connect to Solutions/ Offerings

Complete Transformation Journey


Our High Performance research programme has been recognized by the Harvard Business Review as one of the most important thought leadership initiatives

“[Accenture] now matches McKinsey’s share of the thought leadership market with 9% of the total”

Source: White Space (Arkimeda)

Harvard Business Review recognized Accenture’s High Performance Companies viewpoint as Top-10 research in the area of business performance

Source: Harvard Business Review Jul-Aug 2005

Accenture High Performance Business Framework


High Performance = Outperforming Industry Peers to Create Enterprise Value

Long-Term Perspective

• Economic cycles

• Industry cycles

• Leadership generations

Performance Dimensions

• Growth

• Profitability

• Future positioning

• Longevity

• Consistency

4


We know what it takes to be a high performer…our understanding is based on analysis of over 6,000 companies.


Sustainability is not the driver of high performance, but leaders create value by aligning around three key building blocks.


Changing business context is making it more difficult by impacting both supply and demand.

The battle for resources & sustainabilityThe new map of innovation

Emerging consumers

War for talent

The flow of capital

Economic openness

Size & reach of multinationals

Technology


Expectations are reshaping industry strategies and operating models as we reach a global tipping point.

• Knowledge of specific consequences is growing and becoming mainstream

• Governing bodies are mandating action at various levels

• Institutional investors are demanding visibility into climate change-related activities

• Major banks are factoring carbon risks into their lending, valuation and underwriting criteria

• Employees and potential employees are favoring employers who take action

• Leading companies are naming Chief Climate / Sustainability Officers

• Customers are favoring suppliers who take action

Addressing climate change is increasingly viewed as “pro-growth”


Shoppers are concerned… in Asia as much as in the West.

Level of environmental

concern

Level of effort required in my

country

Individuals must address climate

change

Individuals who already take

concrete action

98%81%

78%

85%

90%76%

73%

82%

82%63%

54%

71%

93%84%86%

86%

73%

72%

63%

81%

China

UK

Germany

Average 14 Countries1

US

Source: Accenture End-Consumer Survey on Climate Change, 2007Note 1: Nordic, France, Ger, Italy, Neth., Spain, UK, Canada, US, Japan, Australia, Brazil, India,

China


And they will take action.

Source: Accenture End-Consumer Survey on Environmental Issues in Retail, January 2008. (Survey of ~600 shoppers in Beijing, Shanghai, Guangzhou, Xian, Changsha and Wuhan.)

Purchase products with less packaging

Do not use plastic bags

Purchase re-cycled products

None, consciously

63%

46%

40%

28%

24%

21%

17%

Returning recyclable goods

Frequent environmentally friendly retailers

Purchase locally sourced products

Use public transport / avoid travelling by car

8%

“What actions do you take personally, to address environmental concerns?”


~45% of China’s shoppers ‘buy green’.

“Did you consciously purchase any environmentally friendly products in the last 60 days? What products did you purchase?”


Don't know, 10%No, 40%

Yes, 45%

No response, 5%

154

122114

67

47 42

0

50

100

150

200

Fre

sh fo

od

Ho

use

ho

ldg

oo

ds(

Incl

din

gco

sme

tic)

Ho

use

ho

lda

pp

lian

ce

Pa

cka

gin

gm

ate

ria

l

Co

stu

me

Fu

rnitu

re

Top three categories

# of 591 respondents


China’s shoppers lack information.

“Why don’t you purchase more environmentally friendly products?”


Note 1: Interviews with Chinese grocery retailers, March 2008.

205

31 23 90

50

100

150

200

250

No

gre

en

ma

rk

To

oe

xpe

nsi

ve

No

su

chp

rod

uct

sa

vaila

ble

Oth

ers

• Shoppers claim retailers don’t provide information about a product’s ‘greenness’.

• Retailers agree – they claim they do not have reliable data from suppliers in order to make green claims1

• Only 5% say it is because:

– Environmentally friendly products are too expensive

– No ‘green products’ are available at all


However, most shoppers are still price-oriented.


“When choosing your retailer, how important are the following considerations?”

2.7

3.1

3.4

3.6

3.7

4.6

0 1 2 3 4 5 6

Availability of environmentally friendlyproducts

Environmental record

Location and convenience

Products

Customer service

Price

Average score.

Responses ranked from 1 to 6 (6 being the most important)


Yet they expect to pay a little more.

“What would you be prepared to pay for a more environmentally friendly product (food, apparel and appliances)?”


4%7%

10%

22%

45%

10%

2%

9%

16%

28%

40%

5%

19%

25%

32%

5%2%

2%

13%

3%

Food

Apparel

Householdappliance

Over 50% more

30- 50% more

10-30% more

Nothing more5-10% more

1-5% more

Expect it to be less

For all products, most respondents’ acceptable price 1~10% more expensive than the price for a similar, less environmentally friendly product.

Customers are prepared to pay a greater premium for environmentally friendly household appliances than apparel or food.


And they expect you to tackle these issues…


“Who would you trust to give you guidance on how to make a difference?”

2.7

2.7

3.1

3.4

4.2

5.1

0 1 2 3 4 5 6

IndependentNGO

Academia

Enterprise

Generalpublic

Media

Government

Average score.Responses ranked from 1 to 6 (6 being the

most important)

“Whose responsibility is it to tackle environmental problems?”

2.4

2.4

2.5

4.1

4.3

5.4

0 1 2 3 4 5 6

Media

General public-personal

Independent NGO

Academia

Enterprise

Government

Average score.Responses ranked from 1 to 6 (6 being the

most important)


Retailer DC

Supplier / Consolidator

DC

Milling & Processing

Centres

Stores

Packaging

Farms

Supplier / Consolidator

DC

Office/

Travel

Retailers have Indirect Control and little or no visibility of flow, process or data

Retailers have Direct Control and very good visibility of process and operating data

kWh / unit

kg-km per item

39%

29%

14%

12%3%

Total CarbonFootprint

And they expect you to tackle these issues…TOGETHER.

Raw Materials

Production & Packaging

PackagingMaterials

Storage & DistWaste & RecyclingHead Office


Sustainable development has become a burning platform for the Retail & Consumer Goods high performers.

Less Certain / Long TermLess Certain / Long Term

Certain / Short-termCertain / Short-term

Red

uce n

egative

Red

uce n

egative

Increase p

ositive

Increase p

ositive

Grow Revenue – new/differentiated products & services• Consumers in emerging markets including fast growing

middle class and ‘Bottom of the pyramid’ (4 billion people with an economy of $13 trillion PPP)

• Green and fair trade products are still a niche opportunity (£285m market UK in 2006 for the latter) but can command premium prices

• New products such as Health and wellness product lines respond to modern lifestyle demands and growing obesity issues (health and wellness product global sales expected to reach US$127 billion by 2010)

Reduce Cost – increase resource efficiency, lower emissions• Reductions in operational costs, for example through

Carbon and energy management, and waste management

Manage Risk – regulatory and operational

• Increasing global, national and regional regulation (Kyoto Protocol & post EU ETS targets phase II (2012))

• Management of stakeholder and investor expectations (The Carbon Principles, Dow Jones SI, FTSE 4 Good)

• Collaboration with local governments and communities is fundamental to secure licence to operate, especially in emerging markets

• Sustainable sourcing extends the supply chain beyond tier 1 suppliers

• Eco-labelling is in its infancy but is being piloted by CGS companies and retailers

Build intangible assets – brand reputation, networks

• War for Talent - attract and retain high calibre sustainability-conscious employees (75% of MBA students from top schools were willing to accept 10-20% lower salary to work for a ‘responsible’ company)

• Reputation - building and maintaining consumer trust


Sustainable Market Focus & Position… for your company or for your brands.

“Whole Foods, Whole People, Whole Planet”

“Pao de Acucar Verde”

Enabling Consumers to be Green


Distinctive Capabilities…imbedding sustainability in your processes and practices

Energy conservation infrastructure

Supply Chain Efficiency

Network consolidation to reduce carbon footprint

Eco-labelingGlobal Mass Retailer

European Electronics Retailer


Performance Anatomy...culture, leadership, people.

Accenture Development Partnerships and Eco-teams

China Computer Recycling

Do No Evil


Revenues: New products, brand and marketing etc

How will you turn sustainability trends into competitive advantage?

Less Certain / Long TermCertain / Short-term

Red

uce n

egative

Increase p

ositive

Intangible assets: Reputation, networks, license to operate / innovate etc

Risks:Regulatory, physical, supply chain, product etc

Cost reduction: Eco-efficiency, productivity gains etc

Strategic Framework for Sustainability

Sources: Accenture Research, Dan Esty - ‘Green to Gold’

Go it alone

Competitive Strategy options

Collaborate in partnerships

and clusters

Collaborate at an industry level

Shape regulation and policy

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