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Corporate Responsibility

The Musk Paradox 620 450 Dave Knight

The Musk Paradox

There is a massive paradox smack in the middle of the business models of arguably the world’s most innovative man. It provides many lessons for businesses looking to innovate.

Musk has done more than most to disrupt the auto industry, to a point where total cost of ownership of electric vehicles is near price parity with internal combustion engine vehicles and Tesla’s market capitalisation is greater than GM and of Ford. Solar City, another Musk co- owned venture, is part of the renewables revolution that provides at least 5 times as many jobs in the US than the fossil fuel industry. He dabbles with brain-computer interfaces through Neuralink which he is backing. Musk open-sourced his teams design for Hyperloop Alpha, a concept to revolutionise intercity transportation. He decides his commute is frustrating, so sets up a company to tunnel under a freeway and within months has started building his time-saving tunnel – it’s just boring. The list goes on…

But it is his SpaceX venture that provides the big paradox. While most of his enterprises support efficiencies, clean energy and transformation to more sustainable economies, his quest for space travel and ultimately to set up a colony on Mars is doing the opposite. Granted he has disrupted the space industry and I take my hat off to the amazing advances that enable rockets to be reusable, landing back on earth, like a coordinated dance sequence.

However, his childhood ambitions of going to Mars are obscuring some obvious truths. The first is that Earth is beautiful, it is our single home, evolving continually, providing the ecosystem that enables humanity to survive – it is a fine place to live. Mars is beautiful in its own way, but not a great or easy place to live. If we want to continue to thrive as a species, we need to be focused on maintaining our life support systems on our single planet.

It is true that we seem to be doing our best to ruin them, but is the answer to create a back-door escape to another planet that at best, a handful of people could ever use? Our spirit of adventure will always push us to explore new frontiers, but creating a nice place to live on Mars will take millennia. Nine billion people will soon live on Planet Earth, there is no chance they can all go to Mars. After all, it has taken Planet Earth 4.7 billion years to reach the point we are at today. We humans have taken approximately 0.0000015% of this time – since 1950 – to bring our Planet to a point of crisis. It is time to put that right.

The lessons for strategic business innovation are that we need to point innovation in a direction that supports humanity thriving, not undermining it. We don’t need to ‘Save the Planet’ – it will be fine for a few billion years yet, we need to ‘Save Humanity’. Innovation should support business operations to work within our ecosystems ‘safe operating zone’. Strategic decision making can be informed by available tools, like: Ecological Footprinting; the Natural Capital Protocol; the Future-Fit Benchmark; or by simply aligning to the Sustainable Development Goals (SDG’s).

This is not wishful thinking – many leading business’ get this, and are adopting 100% renewable strategies (RE100), 100 businesses now have approved Science Based Targets and many more are developing truly clean products and services. Unilever is an example of a business, which is aligning its brands towards the SDG’s. Every brand must have a clear purpose that contributes to a social or environmental concern. Each product must contribute to at least one of its Sustainable Living Plan targets. If this threshold is not met, it will not pursue the product opportunity. This kind of thinking will help ensure that every business is enhancing our ability to survive, creating business opportunities for the future.

Musk is a man on a mission. While there is a paradox in his business strategies, we can learn from his immense abilities and ‘can do’ approach to innovate for sustainability and resilience. It is time to speed and scale up this process, to disrupt our fossil-fuelled ways of living and transform to the new green economy.

 

photo credit: By Tony Gray and Robert Murray [Public domain], via Wikimedia Commons (https://commons.wikimedia.org/wiki/File:SpX_CRS-2_launch_-_cropped.jpg)

Why Trump is the right man to lead us to a better world 750 499 Dave Knight

Why Trump is the right man to lead us to a better world

Every time I look at Twitter, I’ve found myself being drawn in, like a water circling towards a plughole, to comment on the many and varied decisions and policy statements of the world’s most powerful man. I’ve tried to keep a professional distance from politics and to focus my Tweets on a thread with a business sustainability relevance (which are many), but maybe I’m straying across the line, like a kayaker franticly paddling to avoid going down the plughole.

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As with many people, I’ve found myself in disbelief about the nature, tone and approach of someone who is supposed to be the leader of the free world, taking us to a brighter future. While we can debate about the people who voted him in knowing what he stood for, we are where we are, and it is what it is.

So why am I now thinking he’s the right man to show us a path to a better future? I’ve long been concerned that business and their customers and global citizens have not been vocal enough – not standing up for what they believe in – what they feel is right deep down. By stripping the façade of respectability away from the narrow, neocon agenda, Trump is showing us what right-wing, exclusive, business at any cost, policies look like. He is showing us, as clear as day, what ‘winner takes all’, vested interest driven, capitalism looks like and we don’t like it.

Now, more than any other time in my life time, I feel we have to stand up, articulate and shout about our vision and plans for an inclusive, fairer, cleaner world. Stephen Hawking, in a recent BBC documentary, estimated that Humanity has 100 years left[1], Elon Musk’s obsession with finding an alternative home for humanity on Mars[2] (or another planet) shares Professor Hawking’s gloomy analysis. Without going too deep into the energy need and broader scientific challenges of trying to save humanity by enabling a handful of people to set up a new colony elsewhere, I would rather we focused much more attention on trying to maintain a reasonable lifestyle for 7+ billion and the coming generations on our single planet we already have, that we call home.

There are some strong signs that business realises that the Sustainable Development Goal’s and all they represent, are not just for window-dressing and greenwashing, but represent the real drivers of business success over the next 20 years. For example, the swift growth of the Renewable Energy 100 (RE100) companies[3], the development of microloans and other financial services for women and the steady march of the sharing economy are showing us there are newer, better ways to do business. The recent collapse of Trump’s business committees also demonstrates the rejection of inequality and hate.

Thanks to Trump, and some of the other despots like him, there is a new spirit emerging, a rejuvenated group of citizens, organisations and businesses who are prepared to stand up and shout about the future we want. They are prepared to challenge the rhetoric with sound science, humanity and care.

If the consequence of Mr Trump being in power is that he prompts the growth of a global movement with a clarion call for social justice, equality and a clean and productive planet, then perhaps it’s not so bad after all. System change needs a prompt – sometimes you need to shake the tree. So while Trump is trying to cut it down, its time for everyone else to plant the forest.

[1] BBC documentary, Expedition New Earth, shown June 15 2017

[2] https://www.space.com/37200-read-elon-musk-spacex-mars-colony-plan.html

[3] https://www.theclimategroup.org/news/re100-annual-report-2017

photo credit: Gage Skidmore <a href=”https://www.flickr.com/photos/22007612@N05/32984318012″>Donald Trump</a> via <a href=”https://photopin.com”>photopin</a> <a href=”https://creativecommons.org/licenses/by-sa/2.0/”>(license)</a>

5 Misconceptions About Sustainability Reporting Assurance 635 300 Dave Knight

5 Misconceptions About Sustainability Reporting Assurance

First, let’s clarify what assurance is.

In this context, assurance is a third-party review of the reliability of a sustainability or corporate responsibility report. It often includes the checking of the data and claims in these reports. Best practice also includes confirming the report focuses on the right things (material issues).

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The intention is to increase the clarity and trustworthiness of information, while improving the robustness of the methods used to gather it.

Assurance is what we are seeking to achieve, building stakeholder confidence and internal engagement by helping confirm that a report appropriately and reliably describes what’s happening within an organization.

However, because sustainability reporting is not yet a mature business practice, there are still misconceptions about the value assurance offers. Let’s take a look at five big ones:

1. Won’t assurance expose our vulnerabilities and turn off stakeholders?

This is an understandable — but unnecessary — concern for organizations that worry their data and systems won’t stand up to scrutiny.

Responding to sustainable development challenges and opportunities is a journey. As long as a company is making progress, it’s normal to have room for improvement. A good assurance process will reflect this journey.

Acknowledging that certain parts of the business or particular indicators are less developed than others demonstrates transparency. This will actually build stakeholders’ confidence and trust, rather than damage it.

2. Report assurance is just like auditing. We already verify our environmental data.

While auditing data is both valid and useful, it only covers part of the assurance spectrum.

Report assurance looks to confirm not only the validity of data but also an organization’s priorities. The process helps a company recognize whether or not it’s placing appropriate emphasis on what matters most to stakeholders—what is material.

More attention in terms of business strategy, decision-making and reporting can then be given to areas of greater materiality. This type of clarity, which is often combined with a risk and opportunity model, provides tremendous strategic value.

The best assurance processes mirror this thinking and place more emphasis on investigating the areas of higher materiality.

3. Broader report assurance is expensive. We don’t see the value.

Companies often spend large sums auditing their financial disclosures. As these companies are increasingly judged by more than just financial metrics, they will need to adopt similar practices and levels of assurance to ensure non-financial disclosures are just as accurate and reliable.

The management and reporting of sustainability activities is a key factor driving aspects of financial performance, making it both important and valuable. Furthermore, the scope of sustainability assurance services is variable, meaning it doesn’t have to be expensive.

A limited or moderate level assurance can be reasonably priced for the value provided.

4. Stakeholders don’t care about report assurance.

The recent Green Quadrant survey by Verdantix showed there were a range of drivers for commissioning assurance including giving confidence to internal stakeholders such as managers, board and the CEO.

Additionally, external stakeholders such as customers, NGOs and wider society often don’t trust business outright. The most recent Edelman Trust barometer for 2014 shows that only 54 percent of people in the U.S. trust business to do what is right.

Good quality reporting together with assurance helps build trust.

While some stakeholders don’t care specifically about assurance, they expect companies to manage and report on the things that do matter to them. The assurance process makes sure a company knows what those things are and provides a proxy for stakeholders concerns.

5. Very few companies are leveraging assurance in the United States. Why should we invest in it?

Assurance is increasingly being adopted to enhance business competitiveness and meet the changing expectations of society in the U.S. and abroad.

The 2013 KPMG survey of Corporate Responsibility Reporting showed steadily growing rates of assurance. Nearly 60 percent of the world’s largest 250 companies currently engage reporting assurance. We expect this trend to continue and for more sophisticated approaches to assurance to become commonplace in the U.S.

In certain sectors, industry bodies such as IPIECA (oil and gas) require assurance. And in others, like the Real Estate Investment Trust (REIT) sector, it’s quickly becoming the norm. In addition, many Indices and benchmarks award higher scores to those companies who assure their disclosures.

So, is it possible to provide 100 percent assurance that companies are performing exactly how they say and meeting the expectations of all their stakeholders?

Well … no, total assurance is not possible. However, a well-designed and executed assurance process can deliver significant value to organizations and their stakeholders. This, in turn, helps to professionalize companies’ efforts to play a key role in transitioning to a sustainable economy.

This article was originally written by Dave Knight for Sustainable Brands and can be found via this link – https://www.sustainablebrands.com/news_and_views/stakeholder_trends_insights/dave_knight/5_myths_about_sustainability_reporting

Mastering Materiality 800 450 Dave Knight

Mastering Materiality

The concept of materiality is cropping up everywhere. The last few years have seen it enshrined in a number of standards and frameworks notably the Global Reporting Initiative Guidelines; the International Integrated Reporting Framework; the AA1000 Accountability Principles Standard and the Sustainability Accounting Standards Board. Not all define the concept in the same way however and there are widespread variations in its application and the value it can leverage.

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I wanted to reflect on an Agrion event I moderated earlier last week. The event is part of a series of live streamed discussions bringing together thought leaders, practitioners and interested parties, this time in San Francisco, to discuss topical issues in the corporate sustainability space. I was joined by Gwen Migita VP Sustainability & Community Affairs at Caesars Entertainment Corporation and Deb Martin the Stakeholder Engagement Manager at SASB to discuss how materiality can deliver strategic value.

So what learning came out of the event?

Materiality is not a new concept.
We reflected on the fact that this is not new. Materiality within sustainability management grew out of the realization in Europe over ten years ago that for sustainability to be taken seriously by business decision makers it needed to professionalize and talk the language of business. And in this case it meant that it learnt and borrowed from the accountancy and legal professions – what issues are disclosed in the mix of corporate information that may substantially alter the decision of a reasonable investor to invest in a company or not.

Varying, yet complimentary approaches to materiality
Having come over from Europe to live in the US seven months ago, it is interesting to see how fast the US is now taking this on board. Deb shared SASB’s vision of having a series of industry specific standards that define the material issues that will enable investment analysts to more easily compare performance, spot risks and highlight opportunities. It should foster competition in a way that improves the signals that guide a transition to a more sustainable economy. SASB is not hanging around, there are 80+ standards planned with 18 currently available for use and 26 in development over the last 16 months.

However the reasonable investor is not the only interested party and companies have to balance the interests of a wide range of stakeholder groups. Gwen shared the process behind Caesars determination of what issues are most material for the entertainment group. This included ranking the significance of a range of potential issues drawn from the GRI G4 guidelines and expanded to include issues of direct relevance to the sector such as responsible gaming. This was then added to a number, representing the influence on stakeholder assessments and decisions, to arrive at the overall materiality picture. In this case materiality is concerned with what could alter the decision of broader stakeholders. Caesars has to understand and respond to the expectations of many groups and it places more weight on the opinions of the stakeholders critical to its operations.

Embed materiality into your core business strategy for optimal benefit
Sustainability reports, SEC filings, and other disclosures are only a reflection of what is happening within an organization and how it considers its risk and opportunity profile. Getting the most value from materiality process depends on it being embedded into and informing core business strategy. The panel agreed that whilst this isn’t always happening, the silos are moving closer.

The IIRC framework for example, encourages organizations to map their material aspects across their value chain. Companies are also applying the concept at multiple levels. DNV GL is working with companies to explore materiality at a supply chain/commodity level and others, such as Rio Tinto, at corporate and regional levels. Conglomerates or portfolio investors may need to have a number of analyses to adequately understand what will drive value and present risks.

Present materiality outcomes in a way that speaks to your stakeholders
Examples of the way the information is presented were also shared.  Cisco, for example, presents its materiality process outcomes on a matrix which also shows the degree of influence or control it has over the issue. Until 2010, SAP presented its materiality complete with a slider control, which enabled the user to change the time when the materiality review was completed and track changes in issues and relevance across a number of years. It’s more recent approach uses business model filters and value drivers to focus in on those issues that really matter. Girvaudan, the French spice company and Nestlé use other visual guides to show how issues are trending.

How the leaders are leveraging materiality
Attendees at the event questioned whether these processes adequately represented the global sustainability context, in particular the scale of many environmental challenges and the speed of response required if we are to alter current trajectories. The panel reflected that there are some ways to do this but it is not generally easily achieved. For example, GRI expects reasonably estimable sustainability impacts are included through the consideration of the latest science or involvement of experts. Others are using ecosystem evaluation methods to improve their understanding of the financial implications. These are helping, but predicting the future is not an exact science.

Leading companies are leveraging their approaches beyond reporting. They are using them to consider not only the risks to their business but also the opportunities for revenue growth and sustainable innovation. They are using materiality in a dynamic way to feed into strategic decision making, enterprise risk management and sustainable innovation. They are applying the concept at multiple levels and focusing in on what it means for how they act and respond.

This article was originally written by Dave Knight, for Sustainable Brands, when he led DNV GL’s USA Sustainability practice and can be found via this link – https://purplechannelltd-public.sharepoint.com/Pages/Blog.aspx?Paged=TRUE&p_PublishedDate=20140508%2014%3A57%3A00&p_ID=19&PageFirstRow=11&&View=%7BB1126BAD-1836-4073-8CDA-8D77387EF356%7D

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