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Implementing an All-Encompassing Sustainability Strategy – The Key Challenges Christopher Shanahan Food Industry Analyst Chemicals, Materials and Food San Antonio, Texas USA June 4th, 2009
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
2
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)
3
What is Sustainability? Optimization of the bottom lines over time
Today’s Objective Change in Bottom Line
Change in Bottom Line
Yesterday’s Objective
e Economic Bottom Lin
ic nom o c E
Line m o t Bot
Social Re
y sponsibilit
Time Social Responsibility Envi
ss Awarene l a t n e m Environ
Time ronm
enta
l Aw aren ess
4
What is Sustainability? Recognizing the interaction of the economic, social and environmental bottom lines over Economic Bottom Line = Maximize Profit +
∆ Yesterday < ∆ Today -
-
-
+ Environmental Awareness = Minimize Waste and/or Negative Impacts on the Environment
+ Social Responsibility = Maximize/Minimize Positive/Negative Impact on the Community 5
The Current Economy State Reviewing the Recession Genesis and its Impact on Sustainability Policy
Government’s Green Response
Private Sector Defaults
Lack of Trust in Financial Institutions
Sub-Prime Mortgages
Financial Institutions Losses
Lack of Capital for Companies
Tightening Credit Markets
$
Suspension of Interbank Lending
Banks Slow Lending Down
$
$
Lack of Lending for Small Business
Slower Growth
Consumers Reduce Spending
$
$ Economy Slows Down/Contracts
• Cap and Trade • $100bn toward more efficient private homes and government buildings • Development of wind and solar power • Increased spending money on public transport
Lack of Retail Credit
• More fuel-efficiency under GM bankruptcy plan • 30% increase in fuel efficiency standards
6
The Current Economy and the State of Sustainability What will happen in 2009…we have a better idea in 2010/11
Likely Independent of Economic Environment
?
Note the flat growth in the number of companies choosing to report sustainability performance during the 2001/02 recession
Likely Not Independent of Economic Environment
Source: Global Reporting Initiative
7
The State of Food Safety Sustainability The Changing Face of Food Safety in the United States
Food Safety Standard Confusion and Redundancies
Heightened Awareness of Food Security
Changing Face of Food Safety in the US
Mistrust of 3rd Party Auditors
Growing Power of Retailers
Source: Frost & Sullivan
8
Sustainability Strategies Currently Adopted by Companies Using 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, firmprovided, 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.
9
Sustainability Strategies Currently Adopted by Companies Effectively Communicating Your Sustainability Practices Involves the Entire Supply Chain Without a clear industry icon… Finished Good Manufacturer
Distributors and Retailers
Final Consumers
We Are Still Green
Are We Green?
Is this Green?
Raw Material Supplier
Finished Good Manufacturer
Distributors and Retailers
Final Consumers
We Are Still Green
We Are Still Green
We Are Still Green
We Are Still Green
Raw Material Supplier
We Are Still Green
With a clear industry icon…
3rd Party Verified
Product Flow
Source: Frost & Sullivan
$ and Feedback Flow 10
The Current Economy and the State of Sustainability When Adopting Sustainability Strategies Can Lead to Unintended Economic Consequences • 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.
ZeaChem: the “Food vs. Fuel” Debate is Null and Void with New Sustainable Technology Factory Yield 1st Generation (Corn Ethanol) 3rd Generation Cellulosic – ZeaChem Process
End User Benefits
2.7 Gallons per Bushel
5,670 Mile/ac/yr
135 Gallons per Bone Dry Tons
28,350 Mile/ac/yr Source: ZeaChem 11
Sustainability Strategies Currently Adopted by Companies The 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
12
Sustainability Strategies Assessment and Recommendations Define the Problem and System
Identify Strategic Options
v Identify End Markets and Potential
Identify Market Dynamics and Constraints
Non-renewable Inputs Renewable Inputs Non-
Construct and Run the Model
Select Optimal Plan of Action based on Model Results
Complex Business Universe
Social Social Benefits Benefits
Sustainable Production System
Implement Plan of Action
SUPPLY SUPPLY == Output Output
The more Green we are the more Green we make
Market Demand
Waste Waste
Initial Initial Investments Investments
+
Production Production Costs Costs
+
Marketing Marketing and and Logistic Logistic Costs Costs
<
Total Total Revenues Revenues
Profit Source: Frost & Sullivan
13
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)
14
Your Feedback is Important to Us What would you like to see from Frost & Sullivan? •Growth
Forecasts?
•Competitive
•Emerging
•Strategic
Structure?
Trends?
Recommendations?
•Other?
Please inform us by taking our survey. Frost & Sullivan’s Growth Consulting can assist with your growth strategies 15
For Additional Information
Steve Lee Strategic Account Manager Chemicals, Materials and Food, Asia Pacific (65) 6890 0914 [email protected]
Melinda Meyer Director of Sales, NA - Chemicals, Materials & Food (210) 348-1000 [email protected]
Johanna Haynes Corporate Communications Chemicals, Materials & Food (210) 247-3870 [email protected]
16
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
2
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)
3
What is Sustainability? Optimization of the bottom lines over time
Today’s Objective Change in Bottom Line
Change in Bottom Line
Yesterday’s Objective
e Economic Bottom Lin
ic nom o c E
Line m o t Bot
Social Re
y sponsibilit
Time Social Responsibility Envi
ss Awarene l a t n e m Environ
Time ronm
enta
l Aw aren ess
4
What is Sustainability? Recognizing the interaction of the economic, social and environmental bottom lines over Economic Bottom Line = Maximize Profit +
∆ Yesterday < ∆ Today -
-
-
+ Environmental Awareness = Minimize Waste and/or Negative Impacts on the Environment
+ Social Responsibility = Maximize/Minimize Positive/Negative Impact on the Community 5
The Current Economy State Reviewing the Recession Genesis and its Impact on Sustainability Policy
Government’s Green Response
Private Sector Defaults
Lack of Trust in Financial Institutions
Sub-Prime Mortgages
Financial Institutions Losses
Lack of Capital for Companies
Tightening Credit Markets
$
Suspension of Interbank Lending
Banks Slow Lending Down
$
$
Lack of Lending for Small Business
Slower Growth
Consumers Reduce Spending
$
$ Economy Slows Down/Contracts
• Cap and Trade • $100bn toward more efficient private homes and government buildings • Development of wind and solar power • Increased spending money on public transport
Lack of Retail Credit
• More fuel-efficiency under GM bankruptcy plan • 30% increase in fuel efficiency standards
6
The Current Economy and the State of Sustainability What will happen in 2009…we have a better idea in 2010/11
Likely Independent of Economic Environment
?
Note the flat growth in the number of companies choosing to report sustainability performance during the 2001/02 recession
Likely Not Independent of Economic Environment
Source: Global Reporting Initiative
7
The State of Food Safety Sustainability The Changing Face of Food Safety in the United States
Food Safety Standard Confusion and Redundancies
Heightened Awareness of Food Security
Changing Face of Food Safety in the US
Mistrust of 3rd Party Auditors
Growing Power of Retailers
Source: Frost & Sullivan
8
Sustainability Strategies Currently Adopted by Companies Using 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, firmprovided, 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.
9
Sustainability Strategies Currently Adopted by Companies Effectively Communicating Your Sustainability Practices Involves the Entire Supply Chain Without a clear industry icon… Finished Good Manufacturer
Distributors and Retailers
Final Consumers
We Are Still Green
Are We Green?
Is this Green?
Raw Material Supplier
Finished Good Manufacturer
Distributors and Retailers
Final Consumers
We Are Still Green
We Are Still Green
We Are Still Green
We Are Still Green
Raw Material Supplier
We Are Still Green
With a clear industry icon…
3rd Party Verified
Product Flow
Source: Frost & Sullivan
$ and Feedback Flow 10
The Current Economy and the State of Sustainability When Adopting Sustainability Strategies Can Lead to Unintended Economic Consequences • 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.
ZeaChem: the “Food vs. Fuel” Debate is Null and Void with New Sustainable Technology Factory Yield 1st Generation (Corn Ethanol) 3rd Generation Cellulosic – ZeaChem Process
End User Benefits
2.7 Gallons per Bushel
5,670 Mile/ac/yr
135 Gallons per Bone Dry Tons
28,350 Mile/ac/yr Source: ZeaChem 11
Sustainability Strategies Currently Adopted by Companies The 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
12
Sustainability Strategies Assessment and Recommendations Define the Problem and System
Identify Strategic Options
v Identify End Markets and Potential
Identify Market Dynamics and Constraints
Non-renewable Inputs Renewable Inputs Non-
Construct and Run the Model
Select Optimal Plan of Action based on Model Results
Complex Business Universe
Social Social Benefits Benefits
Sustainable Production System
Implement Plan of Action
SUPPLY SUPPLY == Output Output
The more Green we are the more Green we make
Market Demand
Waste Waste
Initial Initial Investments Investments
+
Production Production Costs Costs
+
Marketing Marketing and and Logistic Logistic Costs Costs
<
Total Total Revenues Revenues
Profit Source: Frost & Sullivan
13
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)
14
Your Feedback is Important to Us What would you like to see from Frost & Sullivan? •Growth
Forecasts?
•Competitive
•Emerging
•Strategic
Structure?
Trends?
Recommendations?
•Other?
Please inform us by taking our survey. Frost & Sullivan’s Growth Consulting can assist with your growth strategies 15
For Additional Information
Steve Lee Strategic Account Manager Chemicals, Materials and Food, Asia Pacific (65) 6890 0914 [email protected]
Melinda Meyer Director of Sales, NA - Chemicals, Materials & Food (210) 348-1000 [email protected]
Johanna Haynes Corporate Communications Chemicals, Materials & Food (210) 247-3870 [email protected]
16
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