Lecture 1
Trends in sustainability
Moving from…
• Company towards supply chain
• Environment towards the human (do we take care of our communities/ employees?)
• Check the box towards making an impact (shift from just fulfilling requirements but also
reporting on the impact)
• Top-down toward bottom up approach when it comes to sustainability
• Nice-to-have towards need-to-have
• Agenda moved CSR director towards CFO
The quest for purpose
Þ In search of the “why”
Þ Sustainability as a source of purpose (talent attraction & retention, p.40)
Þ Purpose statement formulation
• Interface: Zero
• Tony’s Chocolonely’s Slave-free Chocolate
Why do firms care about sustainability?
• Increasing revenues (can we save costs to reduce our energy bill?)
• Reputation/ public trust: companies are scared to have a bad reputation
• Attracting talent (young people want to work for companies with a purpose)
• Saving costs/ bonus
The corporate social responsibility hierarchy (exam question)
Economic responsibility
Þ Need to also produce an acceptable return for investors and employees (Unilever)
Legal responsibility
Þ Need to act within the framework of laws and regulations drawn up by the government
and judiciary (what about Shell and Nigeria?)
Ethical responsibility
Þ To do no harm to its stakeholders and within its operating environment (an Oath?!)
Discretionary responsibility
Þ Companies have more pro-active strategic behaviors that benefit themselves or society
or both (Unilever soap in rural India, Tony Chocolonely, etc.)
,4 Archetypes (exam question)
1. Traditional: Inherent risks (tobacco, weapons), compliance driven and focus on
reporting to regulatory affairs
2. Communicative: Opportunity seizing is complicated because sustainability measures are
costly. Focus on risk reduction and compliance (ex: automotive, insurance)
3. Opportunistic: Opportunities offered by sustainability (energy/renewables)
4. Transformational: Companies that have embraced sustainability in a holistic fashion >
sustainability programs are more closely tied to business programs
Materiality Assessment
Þ Sustainability is a broad concept involving many different issues
Þ A materiality assessment helps to identify and prioritize the sustainability issues that
matter most to a business and their stakeholders – such as consumers, customers
(retailers) and employees and they expect the business to act upon.
Þ Identifying these issues helps to keep businesses alert to stakeholder concerns and
expectations as well as to issues it believes presents the greatest risk and opportunities
for the business
Prioritizing among stakeholders
Þ High motivation to act and high potential to act
Materiality assessment matrix (on exam)
Þ Shows the CSR topics/ actions important to consumers/ stakeholder’s vs the impact on
the business
Þ It depicts the issues that the company and its stakeholder consider as most important
Þ Identifying these issues keeps the business alert to stakeholders’ concerns/ expectations
and issues that present the greatest risk and opportunities to the business
, Þ ‘Material aspects’ = those in the upper right hand quadrant of the matrix when mapped
against the importance attached to any given issues according to its significance to the
business (x-axis) and stakeholders (y-axis)
a) High materiality: Major significance to business and stakeholders > ‘Material aspects’
• Focus on areas for activity
• Detailed disclosure
b) Medium materiality: Significant/ moderate importance to business and stakeholders
• Important areas for activity
• Disclosure
c) Limited materiality: Moderate significance to business and stakeholders
• Watch list
• Discretionary disclosure
Ex: Novozymes Materiality Matrix
Stakeholders need other information to make decisions from:
• Customers
• Employees
• Investors
• MPs
• Media
, • Our regulators (government)
• Environment al partners
• Community groups
• Local authorities
• Contractors and suppliers
Six-steps approach to generate a materiality matrix
1. Select and assess relevant stakeholders
2. Define a long list of sustainability topics (risks)
3. Rank the topics and create a short list
4. Rate the business impact in terms of risks and opportunities
5. Construct a concept of Materiality matrix
6. Get sign-off by senior management and document the process
Identification of important stakeholders
Financial steps do not tell the whole story
Trends in sustainability
Moving from…
• Company towards supply chain
• Environment towards the human (do we take care of our communities/ employees?)
• Check the box towards making an impact (shift from just fulfilling requirements but also
reporting on the impact)
• Top-down toward bottom up approach when it comes to sustainability
• Nice-to-have towards need-to-have
• Agenda moved CSR director towards CFO
The quest for purpose
Þ In search of the “why”
Þ Sustainability as a source of purpose (talent attraction & retention, p.40)
Þ Purpose statement formulation
• Interface: Zero
• Tony’s Chocolonely’s Slave-free Chocolate
Why do firms care about sustainability?
• Increasing revenues (can we save costs to reduce our energy bill?)
• Reputation/ public trust: companies are scared to have a bad reputation
• Attracting talent (young people want to work for companies with a purpose)
• Saving costs/ bonus
The corporate social responsibility hierarchy (exam question)
Economic responsibility
Þ Need to also produce an acceptable return for investors and employees (Unilever)
Legal responsibility
Þ Need to act within the framework of laws and regulations drawn up by the government
and judiciary (what about Shell and Nigeria?)
Ethical responsibility
Þ To do no harm to its stakeholders and within its operating environment (an Oath?!)
Discretionary responsibility
Þ Companies have more pro-active strategic behaviors that benefit themselves or society
or both (Unilever soap in rural India, Tony Chocolonely, etc.)
,4 Archetypes (exam question)
1. Traditional: Inherent risks (tobacco, weapons), compliance driven and focus on
reporting to regulatory affairs
2. Communicative: Opportunity seizing is complicated because sustainability measures are
costly. Focus on risk reduction and compliance (ex: automotive, insurance)
3. Opportunistic: Opportunities offered by sustainability (energy/renewables)
4. Transformational: Companies that have embraced sustainability in a holistic fashion >
sustainability programs are more closely tied to business programs
Materiality Assessment
Þ Sustainability is a broad concept involving many different issues
Þ A materiality assessment helps to identify and prioritize the sustainability issues that
matter most to a business and their stakeholders – such as consumers, customers
(retailers) and employees and they expect the business to act upon.
Þ Identifying these issues helps to keep businesses alert to stakeholder concerns and
expectations as well as to issues it believes presents the greatest risk and opportunities
for the business
Prioritizing among stakeholders
Þ High motivation to act and high potential to act
Materiality assessment matrix (on exam)
Þ Shows the CSR topics/ actions important to consumers/ stakeholder’s vs the impact on
the business
Þ It depicts the issues that the company and its stakeholder consider as most important
Þ Identifying these issues keeps the business alert to stakeholders’ concerns/ expectations
and issues that present the greatest risk and opportunities to the business
, Þ ‘Material aspects’ = those in the upper right hand quadrant of the matrix when mapped
against the importance attached to any given issues according to its significance to the
business (x-axis) and stakeholders (y-axis)
a) High materiality: Major significance to business and stakeholders > ‘Material aspects’
• Focus on areas for activity
• Detailed disclosure
b) Medium materiality: Significant/ moderate importance to business and stakeholders
• Important areas for activity
• Disclosure
c) Limited materiality: Moderate significance to business and stakeholders
• Watch list
• Discretionary disclosure
Ex: Novozymes Materiality Matrix
Stakeholders need other information to make decisions from:
• Customers
• Employees
• Investors
• MPs
• Media
, • Our regulators (government)
• Environment al partners
• Community groups
• Local authorities
• Contractors and suppliers
Six-steps approach to generate a materiality matrix
1. Select and assess relevant stakeholders
2. Define a long list of sustainability topics (risks)
3. Rank the topics and create a short list
4. Rate the business impact in terms of risks and opportunities
5. Construct a concept of Materiality matrix
6. Get sign-off by senior management and document the process
Identification of important stakeholders
Financial steps do not tell the whole story
