Green Industry Conference Guangzhou

Sustainability and the global economy:

CEOs on transformation and success

Green Industry Conference

Guangzhou

Peter Lacy

Managing Director

Accenture Strategy & Sustainability Asia Pacific

November 2013

About Accenture Sustainability Services

---

We work with world

leaders to create value

for business, society and

the environment

As trusted advisors to some of the world’s best-known

companies, we bring significant expertise to support the

sustainability journey of our clients globally through strategy,

implementation and ongoing operational services :

• Over 200 client sustainability projects worldwide last year

• Over 1,300 sustainability practitioners globally

• Helping clients to move from sustainability strategy to

execution, delivering tangible business benefits with pace,

certainty, and strategic agility

Our in-house subject matter experts and research teams are at

the forefront of industry thinking in sustainability demonstrated

2

We are leading the

global discussion on

operationalising

sustainability through

partnerships with

globally recognised

institutions

We have deep

understanding of the

challenges across a wide

range of industries

We are uniquely positioned to draw upon our experience with

global business leaders and NGOs:

• UN Global Compact CEO Study, largest ever CEO study on

sustainability with more than 1,000 participating CEOs

• WBCSD Vision 2050, working with CEOs from 28 companies

• World Economic Forum Supply Chain Decarbonisation, working

with CEOs from the Logistics and Transport sector

the forefront of industry thinking in sustainability demonstrated

through industry Points-of-View

• Driving Value from Integrated Sustainability

• Seizing the Opportunities in a Low Carbon Economy

• The Emergence of Green Talent: Lessons from the Internet

Revolution

• Carbon Capture and Storage

Green Growth & New Business Models

Accenture works at the heart of the global debate on Green Growth & New Models

In 2012 our partnership with the World Economic Forum

enabled us to play a central role in supporting the design

and delivery of the ‘Green Growth Action Alliance’, and

opened new channels in new business models & the

circular economy.

Central focus of our work Activities

� In 2012 Accenture, was invited by the Forum to join the

‘Business 20’ (B20) taskforce on Green Growth and act as

its ‘Knowledge Partner’

� In this capacity it facilitated the development of

recommendations for G20 leaders , working closely with

over 15 major global clients

Facilitating the B20 Taskforce on Green Growth

� India: delivered financing structures to increase

investment for utility scale solar power

� Kenya: co-designing insurance products for the

geothermal sector

� Mexico: identifying investment vehicles to increase

private sector investment in clean energy

Delivered path breaking report on Green Finance

� With the World Economic Forum, Accenture and the YGL

community have led a new taskforce on new business

models and the circular economy

� The taskforce is leading research with circular economy

innovators to examine the emergence and impact of new

business models

Led new research into circular economy models

The Green Growth Action Alliance is a new public-private

partnership aimed at finding practical ways for the business

community to address the global shortfall in green

infrastructure investment

� The Alliance was launched at the G20 Summit in 2012,

with the support of G20 Heads of State

� The Alliance has over 50 members from both developed

and emerging markets

� The Alliance has been welcomed as one of two global

‘Mega-Partnerships’ (alongside SE4ALL) driving the global

green growth agenda

Accenture also lead the World Economic Forum’s Taskforce

on New Business Models & the Circular Economy.

The UN Global Compact-Accenture CEO Study on Sustainability

The CEO Study investigates the business imperative to achieve economic, social and

environmental sustainability while driving business success

Largest CEO study on sustainability ever conducted

• One-to-one interviews with 75+ CEOs

• Survey of 1,000 further CEOs globally, across 27 industries and

103 countries

• Largest-ever representation from Asia Pacific

CEO views on the past, present and future of sustainability

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CEO views on the past, present and future of sustainability

• Insights from CEOs on motivating factors and key stakeholders in

guiding their approach to sustainability

• Views on critical barriers and enablers in integrating sustainability

New visions on what will be required to harness sustainability as a

transformative force in the global economy

Indications of seven steps to sustainability and success

• Analysis of companies achieving both traditional business success

and sustainability leadership

• Views of leading CEOs suggest that successful companies

approach sustainability differently, with different motivations,

different stakeholders and different priorities for investment

Background and context: study participants

The UN Global Compact-Accenture CEO Study is the largest CEO study to date on

sustainability, representing the views of more than 1,000 CEOs worldwide

Study participants

One-to-one interviews

Study participants


100 in-depth interviews

including

77 CEOs, Chairs & Presidents77 CEOs, Chairs & Presidents

1,000 CEO survey respondents

across 27 industries and

103 countries

Health

Services

56

Consumer

Goods

273333

128

Energy ChemicalsIndustrial

Equipment

Automotive Insurance

26

48

64

Communications Utilities

61

3738

Infrastructure

& TS

Electronics

& High

Tech

Metals &

Mining

Banking

2316

5

Background and context: China study participants

This year’s Study incorporated a special focus on Asia Pacific, with more than 50

Chinese CEOs participating across the interview programme and survey research

Asia Pacific participants


Asia Pacific participants


Asia Pacific


187 CEO survey respondents187 CEO survey respondents

China


42 survey responses

6

Video: CEOs in their own words

7

Executive summary

The CEO Study examines CEO views on the past, present and future of sustainability…

CEOs are committed, but express a sense of frustrated ambition

• CEOs recognise the scale of the challenge: just 32% of CEOs believe that the

global economy is on track to meet the demands of a growing population.

• And just 33% believe that business is doing enough to address global

sustainability challenges.

• CEOs retain their belief that sustainability will be critical to success: 62% of

CEOs expect sustainability to transform their industry within five years.

of CEOs believe the global

economy is on track to

meet the needs of a

growing population

32%

8

CEOs expect sustainability to transform their industry within five years.

• And 76% believe that embedding sustainability into core business will drive

revenue growth and new opportunities.

believe that business is

doing enough to address

sustainability challenges

33%

growing population

CEOs see a ‘plateau effect’ in sustainability, driven by market failure

• CEOs perceive a failure to align global markets with sustainability outcomes,

and to incentivise and reward sustainability leaders.

• Many business leaders are struggling to quantify and communicate the value

of sustainability initiatives to their companies, or make the business case for

faster action.

• CEOs observe a ‘plateau effect’ in their efforts to embed sustainability into

their organisations.

• CEOs perceive difficulties in their relationship with investors and consumers,

which may be hindering their ability to make progress on sustainability.

Executive summary

…and on what it will take to harness sustainability as a transformative force in the economy

CEOs call for government action to provide an enabling environment

• CEOs believe that only with greater government intervention—at global,

national and local levels—can sustainability move from sporadic incremental

advances to a collective and transformative impact.

• There is strong and vocal support among CEOs for governments to play a

leading role in shaping the landscape for sustainability.

• 83% of CEOs see a need for governments to step up their efforts to provide

of CEOs report that they

can accurately quantify

the value of their

company’s sustainability

38%

9

• 83% of CEOs see a need for governments to step up their efforts to provide

an enabling environment for the private sector.

believe that government

policymaking and

regulation will be critical

to progress

83%

company’s sustainability

initiatives

Leading companies are not waiting for governments to act

• The advances of leading companies are demonstrating how business impact

can be scaled beyond incremental advances and efficiency gains.

• Our analysis suggests that CEOs of companies that combine sustainability

leadership with market-leading business performance approach

sustainability in markedly different ways.

• These companies more readily accept that the world is not on track to meet

the needs of a growing population, and that business is not doing enough;

they are more committed to engaging consumers, communities,

policymakers, investors and other stakeholders; and they see sustainability

as an opportunity for innovation, growth and value creation.

Industry focus: CEOs in the Chemicals industry

Long-standing commitment and innovation, but a ‘plateau effect’ in evidence

CEOs see sustainability as critical to future success in the industry

• 50% of chemicals industry CEOs believe that sustainability issues will be

“very important” to success – but only 37% think that the global economy is

on track to meet the demands of a growing population.

• Just 34% of chemicals industry CEOs think that the business is doing enough

to address global sustainability challenges.

CEOs still see sustainability transforming their industry

of chemicals industry

CEOs believe that

sustainability is a route to

87%

10

CEOs still see sustainability transforming their industry

• This year, fully 87% of CEOs in chemicals industry believe that sustainability

is a route to competitive advantage in their industry; 82% see sustainability

primarily as an opportunity for growth and innovation.

• 58% believe that sustainability will transform their industry within five years.

sustainability is a route to

competitive advantage

of CEOs in chemicals

industry believe that

sustainability will

transform their industry

within five years

58%But challenges remain in making the business case for action

• 68% of CEOs in chemicals industry report that they could set out in detail

their company’s strategy for seizing opportunities presented by sustainability

over the next five years.

• But only 37% report that they can accurately quantify the business value of

their current sustainability initiatives.

Country focus: China

Among CEOs in China:

believe the global economy is on track to meet the needs of a growing

population.67%

believe that business is doing enough to address sustainability challenges.57%

11

report that they can accurately quantify the value of their company’s

sustainability initiatives.64%

believe that sustainability is a route to competitive advantage in their industry. 90%

believe that government policymaking and regulation will be critical to progress.90%

Source: UN Global Compact-Accenture CEO Study 2013; survey data based on 42 responses in China

CEOs do not believe that global economy is on track, and do not believe

that business is doing enough

Just 32% of CEOs believe that the global economy is on track, and just 33% believe that

business is doing enough to address sustainability challenges

To what extent do you agree: the global economy is on

track to meet the demands of a growing population

within global environmental and resource constraints.

Strongly agree

4%

Strongly disagree

10%3%

Strongly agree

5%

Strongly disagree

To what extent do you agree: business as a whole is

making sufficient efforts to address global sustainability

challenges

12Source: UN Global Compact-Accenture CEO Study 2013; survey data based on 1,000 responses

37%

Neither agree

nor disagree

21%

Agree28%

Disagree

30%Agree

29%Neither agree

nor disagree

33%Disagree

Sustainability remains a top agenda item, although it is clear that short

and medium-term traditional economic and business concerns are top

In 2010, 54% of CEOs reported that sustainability would be “very important” to the

future success of their business; in 2013, the figure drops to 45%.

How important are sustainability issues to the future success of your business?

Very important54%

45% CEOs in China are more convinced than their

global peers on the importance of

sustainability for the future success of their

business


Unimportant1%

1%

Neither important

not unimportant 5%

6%

Important39%

48%

2010

2013

0%

Unimportant 0%

Neither important

not unimportant

45%

55%

Important

Very important

CEOs’ perception of the importance of sustainability varies by industry…

demonstrating both the maturity of the ‘challenge’ & the ‘opportunity’

Business leaders in the banking and utilities sectors display universal recognition of the

importance of sustainability to their companies

How important are sustainability issues to the future success of your business?

Important Very important

Infrastructure &

Transportation98%50% 48%

Banking 100%39% 61%

Utilities 100%39% 61%


Electronics &

High Tech88%46% 42%

Industrial Equipment 92%54% 38%

Energy 94%35% 59%

Consumer Goods 94%41% 53%

Automotive 95%52% 43%

Communications 96%63% 33%

Metals & Mining 97%43% 54%

Chemicals 97%47% 50%

Transportation98%50% 48%

CEOs continue to make the business case for sustainability, with

market-facing motivations rising in importance

Business leaders identify the potential for revenue growth & cost reduction, and

consumer demand, as fast-rising motivators for action on sustainability

Brand, trust &

reputation

Potential for revenue

growth & cost reduction

Consumer/customer

69%72%

49%44%

47%

Which factors are currently driving you, as a CEO, to take action on sustainability issues?

CEOs in China see brand, trust & reputation,

and consumer demand as the principal

factors driving action on sustainability


15%

12%

42%

31%

24%

29%

12%

Consumer/customer

demand

Governmental/regulatory

environment

Employee engagement

& recruitment

Impact of development

gaps on business

Pressure from investors/

shareholders

47%39%

Personal motivation41%

38%

27%

2013

2010

Note: Percentage represents the proportion of CEOs numbering each issue among their top three choices

21%

29%

Brand, trust & reputation

Potential for revenue

growth & cost reduction

Consumer demand

Governmental environment

Employee engagement

Impact of development gaps

Pressure from investors

81%

55%

62%

Personal motivation 5%

26%

19%

CEOs see consumers and governments growing in importance in

influencing their approach to sustainability

Investors and NGOs, amongst others, have remained relatively static in their influence

on business leaders’ approach to sustainability

Communities28%

Governments 39%42%

Employees 45%46%

Consumers 58%64%

50%

39%

32%

Over the next five years, which stakeholder groups do you believe will have the greatest impact?

CEOs in China are more likely than their

global peers to regard board and suppliers as

key stakeholders

Consumers 62%


Suppliers

NGOs

Organised labour

Boards 14%17%

Media 25%19%

Regulators 26%22%

Investment community 22%23%

Communities 28%28%

17%

15%

4%

15%

15%

7%

29%

7%

25%

19%

24%

16%

5%

27% 2010

2013

2007


Suppliers

NGOs

Organised labour

Boards 29%

Media 10%

Regulators 17%

Investment community 24%

Communities 7%

Governments 50%

Employees 55%

Consumers 62%

36%

5%

5%

CEOs identify barriers to progress including a lack of financial resources,

competing priorities and the lack of a link to business value

CEOs identify the lack of a clear link to business value as the fastest-rising barrier in

preventing faster progress on sustainability

Which barriers keep you, as a CEO, from implementing an integrated and strategic company-wide approach to environmental,

social and corporate governance issues?

48%

50%

37%

45%44%

Competing strategic priorities

Lack of financial resources

No clear link to business value

51%


14%13%

12%8%

12%

33%

Extending strategy through subsidiaries

Lack of support from top management

Lack of knowledge

Lack of recognition from investors

Difficulty due to operating environment

Implementing strategy across business functions

48%

Extending strategy through the supply chain

No clear link to business value

48%

30%21%

33%22%

17%27%

22%

Global

China


Successful companies are not waiting for government action

Leading companies are combining sustainability impact with business performance

through a new approach focused on growth, innovation and value creation

High performance and

sustainability leadership• Our analysis compares the business and

sustainability performance of 77 of the

largest companies that responded to

this year’s survey.

• Using Accenture’s methodology to

Transactional Transformational

Bu

sin

ess

pe

rfo

rma

nce

Outperforming industry

peers; ad hoc efforts on

sustainability motivated

by short-term financial

case

Combining market-leading

financial performance with

sustainability leadership;

turning sustainability

to business advantage


• Using Accenture’s methodology to

assess high-performing companies,

based on eight metrics of current

performance and future positioning,

and an aggregate of the four leading

sustainability indices, we isolated four

distinct segments among companies’

approach to sustainability as a route to

impact and value creation.

• The “Transformational” quadrant gives

a sample of 21 companies that are

combining sustainability leadership

with market outperformance in their

industry.

Notional Vulnerable

Bu

sin

ess

pe

rfo

rma

nce

Sustainability leadership

by short-term financial

case

turning sustainability

to business advantage

Underperforming

industry peers on

sustainability and on

traditional business

metrics of success

Externally recognised

sustainability leader, but

efforts may not be rewarded

through superior business

performance

Seven Steps to Sustainability and Success

This year, unique insights from CEOs have identified seven themes that are enabling

companies to achieve value creation and impact on global sustainability challenges

Realism &

context

Understanding and appreciation of the scale of global sustainability

challenges—and the opportunities they present.

Growth &

differentiation

Sustainability as an opportunity to stand out with consumers & customers;

to access new markets and segments with new products and services.

Value & Measurement, monitoring and management of sustainability metrics;

19

Value &

performance

Measurement, monitoring and management of sustainability metrics;

quantification of business value; and tracking of impact on sustainability.

Technology &

innovation

Investing in technology-led solutions to sustainability challenges; generating

advantage through new technologies, e.g. circular economy models.

Partnerships &

collaboration

Partnerships within and across industries and sectors to find new solutions

for sustainability.

Engagement &

dialogue

Understanding the needs and wants of all stakeholders; establishing two-

way dialogues to negotiate the role of business in sustainability.

Advocacy &

leadership

Leadership in shaping the business contribution to global challenges;

willingness to advocate for market incentives that change the game.

Copyright © 2013 Accenture All rights reserved.

Seven Steps: Case studies

These Transformational Leaders are already exhibiting these seven themes through

strategies that combine sustainability leadership with business success

��Realism &

context

Novozymes analyse future trends in resource supply to innovate solutions

that cut costs and improve environmental performance for customers

��Growth &

differentiation

Novartis launched a for-profit social initiative in India in 2007 to provide a

new health services delivery model and increased sales 25-fold in 30 months.

��Value &

performance

Heineken have invested in Economic Impact Assessments to understand the

economic impact of operations in nineteen key markets.

20Copyright © 2013 Accenture All rights reserved.

�� performance economic impact of operations in nineteen key markets.

��Technology &

innovation

China’s Broad Group has evolved from air conditioning to become an energy

service company and manufacturer of sustainable prefabricated buildings.

��Partnerships &

collaboration

Novo Nordisk has partnered with governments and healthcare providers to

revolutionise care and treatment for diabetes in emerging markets.

��Engagement &

dialogue

Through engaging with customers on innovation, Philips has grown new

markets for lighting solutions, which account for one-third of their revenues.

��Advocacy &

leadership

The Sustainable Apparel Coalition (SAC) is working to reduce the

environmental and social impacts of apparel and footwear products.

For more information:

www.accenture.com/sustainability

Copyright © 2013 Accenture All rights reserved.

www.accenture.com/sustainability

[email protected]

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Green Industry Conference Guangzhou