Changing the System: The 10 Sustainability Challenges for Canadian Business in 2013
Canadian business leaders have reached a pivotal moment in their sustainability efforts. The period of low-hanging sustainability fruit is over. It is now time for leaders in the Canadian marketplace to raise the bar, reach high and wide, and create innovative sustainability opportunities. A group of Canadian business leaders met in September 2012 to identify the issues inside their organizations, in their value chains, in the marketplace, in government and in society that limit sustainable development. In a one-day roundtable, these leaders identified 10 issues facing Canadian businesses and phrased them as questions for the research community and other members of the business community to start answering. This report, published by the Network for Business Sustainability (nbs.net) and produced in part by Deloitte Canada, is the result of that meeting and presents the Top 10 sustainability challenges facing Canadian businesses. As the list illustrates, the principles that drove economic growth over the last sixty years clearly no longer suffice. Canadian business leaders are looking for new business models, new partnerships and new insights to illuminate the way forward.
changing the system The 10 Sustainability Challenges for Canadian Business in 2013 Inspiring new research and innovating Produced in part by new solutions letter from tima bansal, NBS We first assembled our Leadership Council to identify In its role as connector and catalyst, NBS looks business sustainability challenges in 2007. At the forward to helping these leaders and their time, business leaders were optimistic about the companies tackle the challenges ahead. By opportunities that lay ahead: The business case bringing together academic and industry experts for social responsibility was coming into focus. with similar visions but different knowledge and In the subsequent six years, most organizations experiences, we will produce frame-breaking new have experienced the proverbial win-win: they insights. We will reveal new business models that realized significant economic value by integrating benefit both business and society. The challenges sustainable business practices into their products, may be great, but that means the potential for services and overall operations. They were able to growth is also great. sell sustainability internally because short-term costs were rewarded with short-term gains. I hope managers are inspired to partner with researchers and tackle these challenges. And I Further progress, however, requires larger hope you enjoy reading this report. investments with longer time frames. To continue their journey to sustainable business, these leaders Sincerely, recognize the need to tackle system-wide challenges beyond the boundaries of their organizations. They see the need, for example, to educate consumers and convince them to consume responsibly. The need to work with government regulators to produce integrated public policies on environmental and social Tima Bansal, PhD issues. And the need to collaborate with unlikely Executive Director, Network for Business Sustainability partners, even competitors, to rewrite the rules for Professor, Richard Ivey School of Business supply chain management. These are not easy tasks. Canadian Business Sustainability Challenges 2013 2 letter from valerie chort, Deloitte Canadian business leaders have reached a pivotal Today’s sustainability challenges are the source of moment in their sustainability efforts. The period of tomorrow’s sustainability opportunities. Capitalizing low-hanging sustainability fruit is over. It is now time on these opportunities means we need to develop for leaders in the Canadian marketplace to raise innovative, collaborative and adaptive solutions, the bar, reach high and wide, and create innovative particularly in the areas of measurement, leadership, sustainability opportunities. new business models and education. As the challenges identified in this report and those I believe this report can help Canadian businesses over the previous five reports show, sustainability move towards finding solutions that will help is not an easy path to follow, let alone set. With advance Canada’s sustainability agenda. continued economic uncertainty, regulatory changes and commodity price fluctuation comes significant Sincerely, pressure to do more with less, invest only in high value projects, and accept lower risk investments. It is clear that Canadian business leaders are rethinking the way they approach sustainability in two key ways. Internally, leaders are searching for ways Valerie Chort to sustain the behaviours and performance achieved Partner & National Leader to date. This means refocusing on the sustainability Sustainability & Climate Change issues that matter most, using integrative approaches Deloitte to move beyond incremental gains, and adopting smarter tools to drive management and decision- making, such as full cost accounting and life-cycle assessments. Externally, leaders want to create greater sustainability impact on the marketplace. This means collaborating with industry peers on challenging issues, learning leading practices from other sectors, and engaging stakeholders up and down the value chain to generate shared performance improvements. Canadian Business Sustainability Challenges 2013 3 executive summary A group of Canadian business leaders met in 6. How should companies navigate issues September 2012 to identify the issues inside regarding Aboriginal rights and entitlements? their organizations, in their value chains, in the 7. How can Canadian organizations become marketplace, in government and in society that limit more innovative? sustainable development. In a one-day roundtable 8. How can companies embed social license facilitated by management researcher Tima Bansal, to operate into their strategy? these leaders identified 10 issues facing Canadian 9. How can business and society prepare businesses and phrased them as questions for the effectively for the impacts of climate change? research community and other members of the 10. How can companies respond to the proliferation business community to start answering: of voluntary and mandatory reporting requirements? The 10 Sustainability Challenges For Canadian Business in 2013 Over the next year, NBS will conduct a systematic 1. How can businesses contribute to effective, review (comprehensive research study) of Challenge integrated public policy on the right issues? #2: Collaboration. We will commission the best 2. How can companies best engage value academic team in the world to review the existing chain, industry and NGO partners to achieve body of knowledge, and from that review, we will sustainability goals? produce a practical guide for business leaders to 3. How can businesses help Canadians become engage value chain, industry and NGO partners informed, inspired and engaged in a national in sustainability. We will also convene a public dialogue about responsible consumption? forum to address Challenge #3: Civic Engagement. 4. What corporate structures enable companies Bringing together researchers, business leaders and to deliver on sustainability goals? policymakers, the forum will start a national dialogue 5. How can companies keep their long-term on sustainability. sustainability agenda on track despite leadership changes? Canadian Business Sustainability Challenges 2013 4 introduction Who Produced This Report Although there are still many gains to be made What is “Business in environmental and social practices in most This report is published by the Network for Sustainability”? Canadian companies, the business leaders who Business Sustainability (NBS) and was produced helped produce this report have been at it for Business sustainability refers to with the help of Deloitte. NBS is a Canadian a while. And Canadian business leaders are business models and managerial non-profit organization dedicated to changing increasingly looking beyond their organizations decisions grounded in financial, management practice by giving business leaders to broader societal issues. Many say they have environmental and social concerns. authoritative resources on important sustainability “picked all the low-hanging fruit” with respect Sustainable companies: issues. Funded primarily by public grants from to their organizations’ environmental and social • Create long-term financial value. the Canadian government, NBS is located at impacts. Their companies have reduced emissions • Know how their actions affect the Richard Ivey School of Business (Western and gone paperless. They have reduced the environment and actively University) in London, Ontario and the Université packaging and hazardous substances associated work to reduce their impacts. du Québec à Montréal in Montreal. with their products. They have dramatically • Care about their employees, reduced the amount of water and energy they customers and communities Why We Wrote This Report consume and the amount of waste they produce. and work to make positive NBS’s goal is to advance Canada’s sustainability They have attracted highly engaged employees social change. agenda. Business leaders have articulated a who are strongly invested in sustainability. They • Understand these three desire to adopt new business models, to move have written supplier Codes of Conduct and elements are intimately away from the post-industrial economic paradigm found ways to monitor supplier performance. connected to each other. founded on the principle of “growth at all costs.” Compared to companies that focus They recognize the need for a new model that on short-term profits and make “decouples” economic growth from environmental decisions based solely on the bottom or social impacts. Canada itself is already showing line, sustainable companies think long- evidence of this “decoupling.” In 2010, the last term. They forge strong relationships year for which data are available, Canada’s per with employees and members of the capita emissions hit a historic low of 20.3 tonnes of community. They find ways to reduce carbon dioxide equivalent per person1. That same the amount of natural resources they year, Canada’s gross domestic product (GDP) grew consume and the amount of waste by 3.4 per cent – a greater annual growth than any and pollution they produce. As a in the preceding ten years2. result, sustainable companies thrive, surviving shocks like global recessions, worker strikes, executive scandals and boycotts by environmental activists. 1 Environment Canada. “Canada’s Greenhouse Gas Emissions: Monitoring, Reporting and Verification of Greenhouse Gas Sources and Sinks.” Retrieved from http://www.ec.gc.ca/ges-ghg/ Oct 17, 2012. 2 Industry Canada. “GDP and Growth in the Canadian Economy.” Retrieved from http://www.ic.gc.ca/eic/site/cis-sic.nsf/eng/h_00013.html Oct 17, 2012. Canadian Business Sustainability Challenges 2013 5 time to change the system With many operational and technical improvements Many of the initiatives these Canadian companies already achieved, these companies now face want to launch are large-scale projects or asset more formidable challenges. “We already have a investments with payback periods of years and business with a small environmental footprint, so it’s even decades. Not only is it difficult to get support increasingly difficult to find ways to further reduce for long-term projects, but the global economic our impact,” said Debbie Baxter, Chief Sustainability crisis has necessitated cuts to sustainability and Officer for LoyaltyOne. These companies are looking corporate social responsibility (CSR) departments beyond the boundaries of their own organizations across many organizations. Those cuts have changed to advance sustainable business practice. It is a how companies approach their environmental and significant undertaking. social initiatives: “Following the economic crisis, everyone is operating in an expense-constrained Business leaders are faced with the challenge of environment,” said Karen Clarke-Whistler, Chief educating individuals about responsible consumption Environment Officer of TD Bank. “In a climate of fiscal – at a time when consumer appetites seem restraint, sustainability cannot reside in a siloed CSR insatiable. They want to engage more effectively department. The business case for sustainability has with government bodies to generate legislation that to be made across the entire organization and built is coherent across multiple levels of government into organizational strategy.” – but don’t know the engagement approach that will ensure success. They feel the need to test new The path forward is unclear. The principles that drove business models but struggle to reconcile risk-taking economic growth over the last sixty years clearly no innovation with investors’ demands for quarterly longer suffice. Canadian business leaders are looking returns. They aim to “decouple” their companies’ for new business models, new partnerships and new growth from environmental and social impacts. insights to illuminate the way forward. They are keen to develop collaborative – rather than combative – relationships with environmental non- government organizations but lack clear models for mutually beneficial engagement. They see opportunities to effect industry-wide change but can’t convince sectoral competitors to work together. Canadian Business Sustainability Challenges 2013 6 NBS is committed to fostering those partnerships with your local Chamber of Commerce or industry and helping build that path by connecting visionary association as topics for educational workshops business leaders with global management scholars. and seminars over the coming year. Find non-profit Every year, NBS convenes a group of Canadian organizations, universities and colleges that can partner business leaders – our Leadership Council – whose with you to start addressing them. companies are actively pursuing sustainability. These business leaders identify the issues inside Academic Researchers their own organizations, in their value chains, in Study the issues that matter to managers. Business the marketplace, in government and in society that leaders rely on sound insights to inform their decision- limit their sustainable development. These issues making: these Challenges provide a roadmap to the establish the annual “Canadian Business Sustainability topics of most interest to practitioners. Where scholarly Challenges.” NBS then conducts rigorous academic publications already address business challenges, NBS research on the top Challenges, producing practical, gathers and synthesizes the best evidence. Many of objective decision-making resources for business the issues, however, have yet to be explored thoroughly leaders. The resulting resources are available for free by academia. We encourage researchers worldwide to to business leaders worldwide via the NBS website: investigate these important management questions and www.nbs.net. to share them with colleagues in other disciplines. Who Should Read This Report This report is for business leaders, academic researchers, government representatives and other societal change agents with the capacity and desire to change the way organizations do business in Canada. Business Leaders Start the conversation about sustainability. Whether you’re the CEO of a TSX-listed company or the founder of a family-run small business, every business leader has the capacity to drive change. Think about the Challenges raised in this report as they relate to your own organization. Build some of the issues into your long-term planning. Raise the Challenges Canadian Business Sustainability Challenges 2013 7 sustainability challenges for 2013 Producing the List of Challenges Council members not in attendance included: Paul Berto, Director of Corporate Communications The Sustainability Challenges emerged from a and External Affairs, The Home Depot Canada; one-day roundtable of 15 senior business leaders Mona Frendo, Director, Policy Co-ordination and who gathered in Toronto on September 25, 2012. Regulatory Affairs, Industry Canada; and Carmen These business leaders included Debbie Baxter, Turner, Leader, Sustainability and Community Chief Sustainability Officer, LoyaltyOne; Paula Engagement, Teck. Brand, Director, Integrated Decision Making Division, Environment Canada; Grete Bridgewater, Director, The roundtable was facilitated by Tima Bansal, a Environmental Programs, Canadian Pacific; Karen professor of strategic management at the Richard Clarke-Whistler, Chief Environment Officer, TD Ivey School of Business (Western University) and Bank Group; John Coyne, Vice President, Legal Executive Director of the Network for Business & External Affairs and General Counsel, Unilever Sustainability. Bansal led the group through the Canada; David Dougall, Director of Accessibility process of sharing and capturing Canada’s business & Sustainability, Research In Motion; Tim Faveri, sustainability challenges, ranking them in importance Director, Sustainability and Responsibility, Tim and then prioritizing the ones that should be closely Hortons Inc.; Brenda Goehring, Corporate Safety, investigated by researchers. The following list Health & Environment, BC Hydro; Deborah represents the outcome of that discussion. Kaplan, Sustainability Principal, SAP Canada; Peter MacConnachie, Senior Sustainability Issues Management Specialist, Suncor Energy; Matthew McCulloch, Director, Consulting Group, Pembina Institute; Chris McDonell, Manager, Aboriginal and Environmental Relations, Tembec; John Page, Director, Ethics, Environment and Corporate Social Responsibility, TELUS Corporation; Luc Robitaille, Corporate Director Environment, Holcim (Canada) Inc.; Jane Sadler Richards, Butyls Global Specialist, Sustainable Development, LANXESS Inc. 2013 Leadership Council Members Canadian Business Sustainability Challenges 2013 8 canadian business sustainability challenges The 10 Sustainability Challenges for Canadian Business in 2013 1 2 3 4 5 How can How can How can What corporate How can businesses companies best businesses help structures enable companies keep contribute engage value Canadians become companies their long-term to effective, chain, industry informed, inspired to deliver on sustainability integrated public and NGO partners and engaged in a sustainability goals? agenda on track policy on the to achieve national dialogue despite leadership right issues? sustainability goals? about sustainability? changes? 6 7 8 9 10 How should How can How can How can How can companies Canadian companies business and companies navigate issues organizations embed social society prepare respond to the regarding become more license to effectively for proliferation of Aboriginal innovative? operate into the impacts of voluntary and rights and their strategy? climate change? mandatory entitlements? reporting requirements? Canadian Business Sustainability Challenges 2013 9 1 CHALLENGES How can businesses contribute to effective, integrated public policy on the right issues? Building sound public policy on makes it impossible for companies to environmental issues is undeniably educate consumers about responsible “How do you create complex. But the uncertainty created by use of their products and services. For resilient business governments’ failure to act compounds example, in different cities in the same companies’ existing planning challenges. province, consumers might be expected strategy despite Canadian companies still await decisions to recycle the same paper coffee cup four a lack of clear, from government regarding issues like different ways: in one city, both the cup carbon pricing, a national cap-and-trade and lid are recyclable; in another, both integrated public policy? system for greenhouse gas emissions or the lid and cup are recyclable but through We want to be ahead feed-in tariffs for new energy generation different streams; in another city, the cup sources within individual provinces. They is recyclable but not the lid; and in the last of the curve instead also await clarity around the intersection city, both cup and lid must go to landfill. of reacting to sudden of environmental policy with energy, economic and social policy. As a result “How do you create resilient business regulatory changes.” of this inertia, companies refrain from strategy despite a lack of clear, integrated GReTe BRidGeWATeR investing in new technologies and training public policy?” said Grete Bridgewater of director, environmental Programs CANAdiAN PACiFiC staff in new standards and procedures – or Canadian Pacific. “We want to be ahead they are forced to make educated guesses of the curve instead of reacting to sudden regarding the ultimate impacts of policy. regulatory changes.” In areas where governments have “It’s not an issue of how companies should overcome inertia and created energy, deal with climate change – it’s about how economic and social policies, those to deal with governments not sending clear policies often conflict with each other signals on climate change policy,” said Luc at the municipal, provincial and federal Robitaille of Holcim (Canada). “It’s hard to levels. Not only does such conflict invest in equipment and training if we don’t place large human resource demands know which way the government will move on companies trying to comply with and when.” multiple and conflicting policies – it also Canadian Business Sustainability Challenges 2013 10 2 CHALLENGES How can companies best engage value chain, industry and NGO partners to achieve sustainability goals? Effective collaboration can help accelerate A number of industry initiatives prove “It’s not enough for sustainability across a value chain or that organizations can partner to industry. Companies can do everything address sustainability challenges. individual companies possible to improve their environmental Examples include the Forest to commit to a life- and social impacts within their operations, Stewardship Council and the Marine but their absolute measure of sustainable Stewardship Council internationally cycle perspective. performance depends upon the actions and Responsible Care and Canada’s Those companies need of suppliers, distributors and all other Oil Sands Innovation Alliance (COSIA) members of their value chains. Business nationally. Established in March 2012, support from partners leaders are frustrated at failed or COSIA represents a public pledge by up and down the value nonexistent partnerships with industry 12 of the largest companies operating peers or environmental organizations: in the oil sands to actively share chain to improve the “Big brands need to share best practices intellectual property and expertise to sustainability of their and solve mutual sustainability problems,” reduce their industry’s environmental said Tim Faveri of Tim Hortons. “If impacts. This includes innovations products and services.” other organizations see no value in related to tailings ponds, water JohN CoyNe collaborating – and they’re buying from management, land reclamation Vice President, Legal & external the same suppliers as us – how can we and greenhouse gas emissions. Affairs and General Counsel advance the sustainability agenda?” UNiLeVeR CANAdA Research Topic: Collaboration in 2013, NBS will investigate how organizations can engage value chain, industry and NGo partners in sustainable goals. With a Guidance Committee consisting of academic experts and Canadian business leaders, NBS will find the best research team in the world and lead them through a comprehensive review of the leading research on this topic. For more information on how NBS develops authoritative resources on the issues that matter to business, read the section “Addressing the Challenges” on page 22. Canadian Business Sustainability Challenges 2013 11 3 CHALLENGES How can businesses help Canadians become informed, inspired and engaged in a national dialogue about sustainability? Canada lacks a national identity when have a responsibility to provide it comes to sustainability, and a number sustainable products and services, “The average consumer of factors are to blame. There is a lack of consumers also have a role to likely doesn’t know what consumer understanding and engagement: play when it comes to responsible people are confused about the term consumption,” said Luc Robitaille of ‘responsible consumption’ “sustainability” and how it relates to them: Holcim. As a 2009 report on Socially is or how to treat issues “How do we connect our customers Conscious Consumerism revealed, to sustainability?” asked John Page of consumers are largely unwilling to buy like energy holistically. TELUS. “Most people buy phones based products or services based on their They may realize their on price and features – not on whether environmental or ethical features. It’s the materials were sourced sustainably unclear whether this disinterest in car needs gas or their or the phone can be recycled after use.” sustainable products is a symptom of phone battery is dead, a culture obsessed with low price or of “The average consumer likely doesn’t an inability to link personal behaviour but they don’t connect know what ‘responsible consumption’ to societal impacts. Regardless of the those things to personal is or how to treat issues like energy cause, the result isn’t encouraging: holistically,” said Peter MacConnachie of companies can make all the responsible behaviours or to broader Suncor Energy. “They may realize their car products they want, but if consumers issues such as the full needs gas or their phone battery is dead, won’t buy them, nothing will change. but they don’t connect those things to life-cycle impact of the personal behaviours or to broader issues There is also a lack of national thought product and its use.” such as the full life-cycle impact of the leadership related to sustainability. PeTeR MACCoNNAChie product and its use.” Although environmental advocate David Senior Sustainability issues Suzuki has been voted Canada’s Most Management Specialist There is also a lack of engagement by Trusted Person the last three years in SUNCoR eNeRGy individual Canadians: “While companies a row,3 a single person or organization 3 Reader’s Digest. Most Trusted Canadians: 2011 Trust Poll Results. Retrieved from http://www.readersdigest.ca/magazine/2012-trust-poll/most-trusted-canadians-2011-trust-poll-results October 16, 2012. Canadian Business Sustainability Challenges 2013 12 alone cannot shape the collective reform? Can we learn from Unilever’s identity: At a time when the views of successful spearheading of the Marine pop stars and celebrities garner more Stewardship Council to drive civic attention and credibility than views of engagement? How did countries like scientists and economists, who are England establish a national dialogue thought leaders and what should they around disposal of nuclear waste in be saying? the early 2000s? What can we learn from the South African Peace and Canadian companies need help Reconciliation Council that ended establishing a national dialogue on the apartheid or Canada’s Truth and issue of sustainability. They envision a Reconciliation Commission, which is citizenry aware of and committed to addressing the issue of Indian Residential sustainable living. They wonder what we Schools for First Nations people? can learn from cities like Guelph, Ontario or from institutions like the University of “Canada succeeded in making recycling British Columbia that have successfully an accepted norm in the home in the – and legitimately – branded themselves late 1990s,” said Debbie Baxter of as places in which people care about LoyaltyOne. “What are the tools we can the environment. What was the catalyst use and the leaders we can engage to for British Columbia’s citizens forum on ignite people’s commitment to cycling, first-past-the-post voting and electoral carpooling or responsible consumption?” Taking Action: Civic Engagement in 2013, NBS will help industry leaders tackle the issue of informing and engaging Canadians in the topic of sustainability. With a Guidance Committee consisting of academic experts and Canadian business leaders, NBS will convene forums and engage global Thought Leaders to establish a national dialogue on sustainable business practice. For more information on how NBS convenes industry and academic experts, read the section “Addressing the Challenges” on page 22. Canadian Business Sustainability Challenges 2013 13 4 CHALLENGES What corporate structures enable companies to deliver on sustainability goals? Building sustainability into an organization can mean very different things to is no easy task. Sustainability or different people. Employees have “One of our key Corporate Social Responsibility different opinions about how important challenges is to effectively (CSR) remains largely siloed in many sustainability is and struggle to companies, the responsibility of a understand how it applies to their communicate the single department or even a single roles: “In addition to educating and company’s vision of employee. Even when sustainability is engaging senior executives, we are more widely integrated into companies’ building sustainability into our product sustainability such that business units, communication remains development,” said David Dougall everyone, regardless of a challenge: “One of our key challenges of Research In Motion. “How do we is to effectively communicate the engage our engineers in sustainability- their role, understands company’s vision of sustainability,” said by-design and help them see how it and embraces that vision.” Jane Sadler Richards of LANXESS, “such strengthens their work?” JANe SAdLeR RiChARdS that everyone, regardless of their role, Butyls Global Specialist, understands and embraces that vision.” Even if you reach every employee today Sustainable development John Coyne of Unilever Canada agreed: with your organization’s sustainability LANxeSS iNC. “How do you reach the factory workers, message, your work is not finished. sales people and marketing people in Succession and recruitment represent a 100,000-person organization? It’s an ongoing challenges to a company- impressive logistical challenge.” wide commitment to sustainability: “It’s difficult to maintain the vision The quest to spread sustainability and the momentum for change as throughout a company is further people retire or take new positions, or complicated by the movement’s as we hire new employees,” said Jane plethora of definitions. Sustainability Sadler Richards. Canadian Business Sustainability Challenges 2013 14 NBS conducted a comprehensive Sustainability is challenging for study on Embedding Sustainability companies with a franchise model in Organizational Culture in 2010. because the lines of authority are weaker The research has been well received between sustainability leaders and store by many Canadian organizations owners, and opportunities for education large and small, but the process of are harder to consistently apply: “The changing corporate culture does not vast majority of our 4,000+ restaurants happen overnight: “It’s difficult to are owned and managed by franchisees, move sustainability forward in a large not corporate headquarters,” said Tim organization,” agreed Karen Clarke- Faveri of Tim Hortons. “Working with Whistler of TD Bank. “It’s not hard to individual restaurant owners to implement have a great idea. It’s hard to execute on sustainability initiatives is paramount. that idea – especially in a big company.” What are best practices for doing that?” Canadian Business Sustainability Challenges 2013 15 5 CHALLENGES How can companies keep their long-term sustainability agenda on track despite leadership changes? CEO tenure is growing increasingly short. because they are perceived as cost “We often see companies In 1979, the average tenure of a Fortune centres. In this case, sustainability 500 CEO was eight years. In 2012, the champions find themselves having to that get new leadership at average tenure is four years4. The high make the business case repeatedly to head office. As a result, turnover of senior leaders dramatically every new leader. affects a company’s sustainability existing executives have to program, whose projects often have “In our consulting role, we often see make the business case payback periods of many years or companies that get new leadership even decades. And new leaders can at head office. As a result, existing for sustainability all over significantly affect a company’s strategy. executives have to make the business again to the new CEO, Consider the case of Unilever CEO Paul case for sustainability all over again to Polman, who is a staunch supporter of the new CEO,” said Matt McCulloch of or a Canadian company sustainability. Polman abolished quarterly the Pembina Institute. “Or a Canadian may be a sustainability financial reporting and told hedge funds company may be a sustainability leader they weren’t welcome as investors. He domestically but struggle to extend their leader domestically but committed to “decoupling” Unilever’s sustainability focus into their sister or struggle to extend their growth from its environmental footprint, parent organizations in other countries.” doubling the company’s revenue by sustainability focus into 2020 while simultaneously halving its Regardless of whether a new leader their sister or parent environmental impact. supports or dismisses sustainability, his or her arrival disrupts an organization’s organizations in other New leaders that don’t embrace the current sustainability agenda. What countries.” sustainability goals of previous leaders, can companies do to ensure their however, may choose to eliminate CSR sustainability agenda persists despite MATT MCCULLoCh departments or senior sustainability jobs leadership changes? director, Consulting Group PeMBiNA iNSTiTUTe 4 Bansal, Tima. “Older CEOs Invest in the Future.” Network for Business Sustainability, Retrieved from http://nbs.net/older-ceos-invest-in-the-future/ Oct 1, 2012. Canadian Business Sustainability Challenges 2013 16 6 CHALLENGES How should companies navigate issues regarding Aboriginal rights and entitlements? Canadian companies lack clear ecosystems, we learn new things “Working with First direction regarding the responsibilities about forest stewardship we of companies or governments to wouldn’t otherwise know.” Nations and Metis Aboriginal communities. While legal communities that precedents are being set in court But many companies are left to challenges, public policy does not navigate the issue of Aboriginal possess generations necessarily align with those legal rights and title alone. By building of wisdom about local decisions. Policy lags in establishing a clearer understanding of the a mutually-beneficial framework on Aboriginal perspective of sustainability, ecosystems, we learn which companies and Aboriginal companies can build relationships new things about forest groups can engage. with Aboriginal communities based on mutual respect and trust. Some stewardship we wouldn’t Many businesses experience very organizations are adopting leading otherwise know.” positive interactions with Aboriginal initiatives such as the Progressive groups that produce benefits for Aboriginal Relations program – ChRiS MCdoNeLL Manager, Aboriginal and both parties. For example, in 2001 a voluntary assessment and environmental Relations Tembec was the first Canadian public certification program that helps TeMBeC company to commit to achieving Canadian businesses build progressive FSC certification for all its direct relationships with First Nations and managed forests. That certification Aboriginal businesses, communities involves ongoing consultations and and people. Such relationships are positive collaborations with local not only likely to lead to positive First Nations communities: “Forestry engagement within the Aboriginal is an applied science – you have to community, they are also likely to make decisions in the absence of full reveal new approaches to sustainability knowledge,” said Chris McDonell of and stakeholder engagement outside Tembec. “Working with First Nations the Aboriginal community. and Metis communities that possess generations of wisdom about local Canadian Business Sustainability Challenges 2013 17 7 CHALLENGES How can Canadian organizations become more innovative? A 2012 report from the Conference and re-imagine their business “People look to us – the Board of Canada ranked Canada 14th models. The issue remains, out of 17 countries for its capacity to however, that firms are caught leaders in sustainability innovate5. Canadian companies are not between conflicting mandates to – to identify the next taking the risks required to generate maintain the status quo and to do innovations, and it’s not surprising. something new – even as their staff big thing. We invest Large companies have investors that and budgets shrink. time to determine what demand quarterly earnings as well as big brands that represent massive “People look to us – the leaders in that innovation frontier investments of time and resources. sustainability – to identify the next for sustainability in our That leaves little room for failure and big thing” said Debbie Baxter of few slack resources for experimentation. Loyalty One. “At LoyaltyOne, we company could be.” In an era of razor-thin margins and invest time to determine what that deBBie BAxTeR just-in-time manufacturing, it’s hard to innovation frontier for sustainability Chief Sustainability officer justify investing in creative pursuits with in our company could be.” LoyALTyoNe unguaranteed paybacks. NBS’s report on Innovating for Sustainability reveals ways companies can reduce their impact on the environment, create positive social change that’s also good for business, 5 Conference Board of Canada, “How Canada Performs: Innovation Report Card” Retrieved from http://www.conferenceboard.ca/hcp/Details/Innovation.aspx Oct 10, 2012. Canadian Business Sustainability Challenges 2013 18 8 CHALLENGES How can companies embed social license to operate into their strategy? Social license to operate refers to For many business leaders, social “The challenge for community members’ tacit willingness license to operate has changed in to allow a company to operate in recent years: “Maintaining a company’s business leaders their region. While the term originated social license to operate used to mean today is establishing with the mining sector, social license engaging stakeholders and consulting is critical for nearly all businesses. them on projects that affected them,” sustainability as ‘the Maintaining social license is a said Brenda Goehring of BC Hydro. way we do business.’ strategic imperative, so sustainability “Increasingly, however, it means managers wonder how they can generating shared benefits for both the Sustainability can no frame sustainability as a way to company and its affected stakeholders.” longer be just a ‘nice manage risk and create efficiencies: “The challenge for business leaders to do.’” today is establishing sustainability as JohN PAGe ‘the way we do business’,” said John director, ethics, environment and Page of TELUS. “Sustainability can Corporate Social Responsibility TeLUS no longer be just a ‘nice to do’.” Canadian Business Sustainability Challenges 2013 19 9 CHALLENGES How can business and society prepare effectively for the impacts of climate change? The physical impacts of climate change is a recurrent theme in business “Climate change is will redefine entire industries, such as conversations and is starting to agri-food, tourism and insurance – not overlap with other sustainability a recurrent theme in to mention the industries that rely on issues, such as carbon policy, business conversations them. What will climate change mean water quality and sustainable for companies and for society? Climate supply chains.” and is starting to overlap change was one of the Leadership with other sustainability Council’s first research topics. In The conversation about climate 2009, NBS studied the risks and change needs to broaden so issues, such as carbon opportunities associated with climate people see the connection policy, water quality and change across major sectors and the between their day-to-day actions ways companies could adapt to it (see and the broader issue. They need sustainable supply chains.” NBS’s Climate Change report). But to understand how choices and PeTeR MACCoNNAChie despite widespread acceptance of the actions today affect the future. Senior Sustainability issues reality of climate sciences, the broader Management Specialist public remains largely unengaged and SUNCoR eNeRGy apathetic about the issue. “Climate change – global warming caused by human-generated greenhouse gases – is not an isolated issue,” said Peter MacConnachie. “It Canadian Business Sustainability Challenges 2013 20 10 CHALLENGES How can companies respond to the proliferation of voluntary and mandatory reporting requirements? From global reporting standards to programs to reduce the impacts we “[Reporting] requires a industry-specific measures, companies are do have.” spending significant time and resources significant investment reporting on their sustainability programs. Many investors and analysts require of human resources This is leading to “reporting fatigue” on the different data to assess companies’ part of organizations. Companies complete environmental and/or social and that time could be mandatory measurement and reporting for responsibility. One analyst or index more effectively used regulatory bodies on Environmental Health may focus on ethical business practices, and Safety issues such as hazardous another on diversity and yet another on implementing programs waste, permits, safety incidents and environmental performance. Canadian to reduce the impacts spills. They may publish their own annual companies want some kind of simplified or semi-annual Social Responsibility, or standardized reporting function we do have.” Corporate Responsibility or Sustainability for sustainability. They want to help BReNdA GoehRiNG reports. And many large organizations investors and analysts ask the right Corporate Safety, (and, increasingly, small organizations) questions about sustainability metrics health & environment BC hydRo report through international, voluntary that are material. And they ultimately sustainability standards such as the Global want to spend more time pursuing Reporting Initiative, Carbon Disclosure sustainability activities than measuring Project, Dow Jones Sustainability Index, and reporting on them. Bloomberg, SustainAlytics, FTSE4Good and Asset4. “We’ve issued eight annual sustainability reports to date, but this year we want “We’re maxed out, trying to report to do something different,” said Grete on everything we do – whether it’s Bridgewater of Canadian Pacific. “We required from a regulatory perspective or want to understand what investors are voluntary,” said Brenda Goehring of BC looking for and deliver what they need. Hydro. “It requires a significant investment We’re eager to help educate them of human resources and that time could about the questions that are material be more effectively used implementing to our business.” Canadian Business Sustainability Challenges 2013 21 addressing the challenges How NBS Will Address the Challenges Finding New Ways to Connect As in past years, the Leadership Council identified Academia and Industry the Sustainability Challenges that are most important 2013 marks an opportunity to change the way we do things. for researchers to study. NBS focuses on two of the “For the last five years, we have focused on conducting top challenges every year. For 2013, the Leadership the world’s most rigorous research on issues that matter Council selected the second and third challenges to to business,” said Bansal. “We have an opportunity now research: Collaboration and Civic Engagement. (The first to expand our work to include not only research but also challenge – a lack of clear, effective Public Policy – is still insights from practice.” a major gap for Canadian companies, but in 2011 NBS conducted a comprehensive review of all the academic Starting with the 2013 Challenges, NBS is committed to literature on the topic. See the Executive Report. The building current practices from leading companies into next step requires action by government.) its rigorous research findings. “It takes a few years for academic research to emerge on a given issue,” said Karen NBS issues a call for proposals to find the best Clarke-Whistler of TD Bank. “And in that time, companies research team in the world capable of addressing the on the front lines have forged their own paths through trial Collaboration issue. We will form a guidance committee and error.” consisting of Leadership Council members and academic advisors to ensure the research ends up being both “Looking in the rearview mirror isn’t going to give us the scientifically rigorous and relevant to industry. We will quantum leap forward we need,” agreed Debbie Baxter of also convene academic and industry thought leaders LoyaltyOne. to address the issue of Civic engagement. NBS sees an opportunity to build innovative new models of collaboration between academia and industry. Over the next year, NBS will commit to conducting its backward-looking research more quickly and layering it with more current sources and practices. We will connect industry thought leaders with leading academics interested in solving the same problems. And we will convene peer-to-peer learning workshops in which industry leaders and academics can discuss current practices, in the context of the most recent research. “I like the idea of trying a new, creative model. We have great thinkers at the table,” said Grete Bridgewater. Canadian Business Sustainability Challenges 2013 22 “The change in NBS’s research process is symptomatic Going Forward: how Business Leaders Can of the overall mood of business leaders today,” said Address the 2013 Challenges Professor Bansal. “They are tired of making incremental • Raise awareness of these Challenges by sharing steps forward and are hungry for major change. I’m the report with peers and with members of your excited about the possibilities of what academic and professional associations and industry associations. industry thought leaders can achieve together.” • Embrace a mindset shift. Continue picking the “low- hanging fruit” that remains in your organization to Going Forward: how Researchers Can Address reduce your environmental impacts. But know that, the 2013 Challenges to become truly sustainable, companies of the future • Research. Share these Challenges with colleagues will aim not to minimize their harm on people and the in management and related disciplines (engineering, environment but to create positive societal impact. • Seek out credible resources to inform your decision- psychology, etc.). Investigate any of the current or past Challenges in your own research. Share making and organizational planning. Build partnerships the Challenges with students looking for research with academic experts and their institutions. • Commit to taking risks and fostering innovation questions. Contact NBS if you are conducting research in the area of these Sustainability in your organization. • Seek out examples of other leaders, and tell their Challenges (email@example.com). • education. Raise these Sustainability Challenges stories and yours to employees, customers and in classroom discussions. Invite business leaders peers so others can learn from them. • Fund a research project through NBS. to speak to classes on how these Challenges affect their organizations and how they are addressing them. Consider building the 2013 and past Sustainability Challenges into curriculum design and sharing them with colleagues and administrators who can do the same. Canadian Business Sustainability Challenges 2013 23 about the network for business sustainability A Canadian non-profit, the Network for Business NBS is funded by the Social Sciences and Humanities Sustainability produces authoritative resources Research Council of Canada, the Richard Ivey School on important sustainability issues with the goal of of Business (at Western University), the Université du changing management practice. We unite thousands Québec à Montréal, our Leadership Council, Industry of researchers and business leaders worldwide who Association Council and SME (small and medium believe passionately in research-based practice and enterprise) Council. practice-based research. This report was funded in part by the Social Sciences and Humanities Research Council of Canada About NBS’s Leadership Council NBS’s Leadership Council is a group of Canadian sustainability leaders representing diverse sectors. At an annual meeting, these leaders identify their top priorities in business sustainability – the issues on which their organizations need authoritative answers and reliable insights. Their sustainability priorities inform NBS research projects. Canadian Business Sustainability Challenges 2013 24 Thanks to Deloitte This report was produced and distributed with the help of Deloitte. Deloitte has a strong and growing global Sustainability practice, with more than 800 partners and professionals from more than 50 countries across the globe. For more than a decade, Deloitte’s Sustainability team applies its unique integrated systems approach across the areas of governance, workplace, workforce, supply chain, operations, products and information technology to help organizations make the connection between sustainability and economic performance. They draw on the extensive experience of their risk management, consulting, financial advisory, tax and audit professionals to drive a client-centric approach to protecting and creating economic, environmental and social value. Their approach is built on deep knowledge of industries and sectors, focused technical credentials, and a broad complement of time-tested methods and capabilities. About Deloitte (www.deloitte.ca) Deloitte refers to one or more of Deloitte Touche Deloitte, one of Canada’s leading professional services Tohmatsu Limited, a UK private company limited by firms, provides audit, tax, consulting, and financial guarantee, and its network of member firms, each advisory services. Deloitte LLP, an Ontario limited of which is a legally separate and independent entity. liability partnership, is the Canadian member firm of Please see www.deloitte.com/about for a detailed Deloitte Touche Tohmatsu Limited. Deloitte operates description of the legal structure of Deloitte Touche in Quebec as Deloitte s.e.n.c.r.l., a Quebec limited Tohmatsu Limited and its member firms. liability partnership. The information contained herein is not intended to substitute for competent professional advice. Canadian Business Sustainability Challenges 2013 25 appendices Appendix A: Past Challenges Challenges from 2008 to 2012 NBS started identifying Canadian companies’ sustainability challenges in 2008. To date, our Leadership Council has identified 43 Challenges; the Challenges have been mostly internally focused (72 per cent) (i.e. focused on their organizations rather than on society), and the majority have focused on how to implement sustainability (63 per cent) as opposed to how to define sustainability and its importance or how to measure it. Since 2008, NBS has investigated the two (or three, in 2010) Challenges every year that the companies identified as being most important and that represented questions academia could answer. These investigations spawned valuable reports, webinars, workshops, presentations and planning exercises for business leaders and sustainability managers worldwide. To date, NBS has researched the following issues. 2012 2. How companies can build a durable, enduring corporate 1. How sustainability can drive innovation (and vice-versa) culture of sustainability. Executive Report within companies. Executive Report 3. How to promote and ensure sustainability within supply 2. How companies can mobilize citizens to take chains. Executive Report more sustainable actions – i.e. to create social change. Executive Report 2009 1. Building adaptation to climate change into business 2011 strategy. Executive Report 1. The outcome-based government policies that effectively 2. Determining whether consumers consider social address sustainability issues. or environmental attributes when making purchases. Executive Report Executive Report 2. How individuals make decisions regarding social and environmental issues. Executive Report 2008 1. Tools to help managers make the business case 2010 for sustainability. Executive Report 1. How to measure and value a firm’s ecological impacts (e.g. 2. Best practices for community engagement. ecological footprint). Executive Report Executive Report Canadian Business Sustainability Challenges 2013 26 Appendix B: Progress Report on 2012 Projects In 2012, NBS conducted “systematic reviews” of the two most important Challenges: Innovating for Sustainability and How Business Can Drive Social Change. Systematic reviews are comprehensive literature reviews that synthesize the existing body of research. First popularized in evidenced-based medicine, systematic reviews observe a rigorous methodology designed to eliminate researcher bias and promote transparency and replicability. The final reports for the Innovation and Social Change systematic reviews are available in Fall 2012 and Winter 2013, respectively. They will be complemented by a series of executive reports, workshops, webinars, slide decks and other resources for managers. NBS also continues to scour management journals for new research on each of the past Challenges, layering these updates onto the systematic review findings and disseminating them bi-weekly to our more than 3,000 subscribers. Canadian Business Sustainability Challenges 2013 27 Network for Business Sustainability Réseau entreprise et développement durable c/o Richard Ivey School of Business École des Sciences de la Gestion Western University Université du Québec à Montréal 1151 Richmond Street London, Ontario, Canada N6A 3K7 1290, rue Saint-Denis Montréal, Québec, Canada H2X 3J7 nbs.net 519-661-2111, x88980 514-987-3000, x7898 nbs.net/fr 20 copies Certified EcoLogo, Processed Chlorine Free and FSC Recycled