When I got the card from Walmart, I thought it looked a little unusual as the paper has bumps all over its surface. It reminds me of decorative art paper from specialty art stores. On the back side is instruction on how to grow the card. It is really quite simple, essentially:

• Tear the card into pieces
• Bury the pieces in a pot filled with soil
• Add water

I have not grown mine yet. But I love the card so much that I asked Walmart for the name of the card manufacturer, which turns out to be a Canadian company called Botanical PaperWorks. According to their web site, the seeds embedded in the paper will germinate and grow into a plant of flowers, herbs, or vegetables, depending on the seeds used in the paper. And the paper composts away in the soil. “Plantable paper is a biodegradable eco-paper that is made with post-consumer materials (no trees harmed for this paper!) and embedded with seeds.” You can see several photos of what the grown plants look like at Botanical PaperWorks’ web site.

In addition to a green environmental message, I also feel a card that grows conveys a sense of development, progress, nurture, and a promising future … perfect for sending out to clients. (Disclaimer: I have no relation with the card manufacturer.)

Photos by Carbon49

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While some ‘green’ businesses do little more than changing light bulbs and focus on greening their reputations, TD Bank take a long term view and green themselves slowly and steadily from the inside out. In this exclusive interview, TD Chief Environmental Officer Karen Clarke-Whistler explains how this long term approach is applied to real estate management and energy conservation.

TD is the second largest bank in Canada and sixth largest in North America. Their long term goal is to embed environmental thinking into all aspects of the business (see How to Embed Sustainability Into Corporate Culture), from internal operations and supplier relationships, to lending practices and investment (see TD’s views on asset management and sustainability). An approach to reach that goal—which I find very commendable—is to gain the knowledge internally first and then spread the best practices outwards. This approach is used in their current program on net-zero energy building. This is an ambitious challenge to retrofit or construct buildings like their bank branches to consume the same amount of energy that they produce.

With more than 1,100 branches in Canada and 1,250 branches in the U.S., TD operates a lot of buildings. Like other financial institutions, buildings are where much of the energy is consumed and therefore much of the carbon footprint is generated. And that is where lessons on energy conservation in buildings can be learned and best practices formed before the knowledge is applied to TD’s real estate lending practices and spread to their clients.

How does TD learn about net-zero energy building? As Karen Clarke-Whistler tells me, they put substantial resources into constructing two pilot branches. “Our first step is to construct a new build in Fort Lauderdale to test out the concept. This was built to LEED platinum standards and began operation in May 2011. However, most of our existing facilities require retrofit. Our 25-year-old London, Ontario branch is the pilot for retrofit.”

The two sites allow energy performance data to be collected under two different climates. A number of other factors were also considered. “We selected the London location by first identifying the TD sites across Canada that would be able to house the amount of solar panel capacity needed. We then looked at which of those sites had the ability to include a community focused component, such as an amphitheatre. Finally, we considered how power may be connected to the local utility’s electrical grid.” (See Solar System: Performance, Income, Payback Period.)

The retrofit system in the London branch began operation in October 2011. It has a ‘Green Energy Park’ available for the public to use. The local school next to the park can use the amphitheatre in the park to learn about sustainability. TD also provided the school with TV monitors to allow students to track the power generated by the solar panels (similar to how LoyaltyOne displays their solar power meters in their staff room).

The knowledge gained from the pilot branches will be used in other facilities. “We are assessing the pilots for performance. TD’s in-house architects will use this experience to develop our internal green building design standards which are used for building our facilities and learn how to scale these best practices for our operations.” In the future, the knowledge may be used in TD’s real estate lending practice and help clients make greener buildings themselves.

TD, who is part of the United Nations Principles for Responsible Investment Initiative (UN PRI), takes a long term and large scale approach to going green. Looking back, TD reached carbon neutral in 2010. At that time, TD was the first North American based bank and among the few banks in the world to reach that status. These days more and more financial institutions declare reaching carbon neutral, which is great. But many reached the goal primarily through purchasing carbon offsets. In 2010, 51% of TD’s carbon footprint was neutralized by carbon offsets. It is encouraging to see TD, who just released their 2011 Corporate Responsibility Report, did not rest there but are investing significant amount of time and resources to learn how to lower their long term energy consumption and greenhouse gas emissions. The learning from the net-zero energy building program should help TD reduce their greenhouse gas emissions further and therefore reduce the need to purchase carbon offsets in order to achieve carbon neutral.

Deep learning does take more time than changing light bulbs. TD devotes the time and resources to do it right.

Images of TD Fort Lauderdale branch used with permission from TD.

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Some of the biggest CEOs in Canada come together for the Walmart Green Student Challenge. I took this rare opportunity to ask them: Where is sustainability going for Canadian industries? Walmart, Coca-Cola, and Unilever already share best practices for their common goals in sustainability. Now they want to see more suppliers come on board.

The all-star judge panel for Walmart Green Student Challenge includes CEOs from Walmart Canada, Coca-Cola Canada, Unilever Canada, Maple Leaf Foods, and The David Suzuki Foundation. They come together at the Toronto Stock Exchange to hear five finalist teams of students present their next big green ideas. Prizes totalling $100,000 were awarded, including the first prize that went to Arthur Yip, Jake Yeung, and Alan Thai from University of Waterloo for their ‘integrated energy hub’ idea. The large scale concept is projected to bring benefits of $1.35 million per year over 20 years.

Walmart, Coca-Cola, and Unilever have numerous suppliers in product manufacturing, packaging, transportations, logistics, energy, waste management, and other areas. In the nearer time frame, what do the retail and consumer products giants like to see from their suppliers? What can suppliers do to deepen their relationships with them?

Walmart has three goals on sustainability and they would like help from their suppliers to achieve these goals. The goals are bold: (1) achieve 100% renewable energy use, (2) get down to zero waste, and (3) sell products that are sustainable both to people and to the environments.

As covered in Walmart Sustainability Report — Canadian Operation Details, a range of internal initiatives have been taking place in energy efficiency, waste reduction, and packaging reduction. Shelley Broader, President and CEO of Walmart Canada, says to me, ‘If you ask something of your suppliers, you need to start with asking it of your own company.’

But to hit those targets, internal effort alone is not enough. Walmart also need help from their suppliers. These include suppliers for products, logistics, transportation, and packaging. Walmart is actively sharing their sustainability best practices with their suppliers through their industry-leading ShareGreen initiative. And they would like to see their suppliers set similar goals and share their experiences back. One of their major suppliers, Coca-Cola, has been doing just that.

‘If you look at the key areas that Coca-Cola is after such as water usage, packaging, and energy, we all need to work together to achieve our goals. None of us can solve these issues on our own,’ says John Guarino, President of Coca-Cola Canada. ‘An element of our approach is transparency. Share what our goals are and what the best practices are and not try to hold them to ourselves.’ (See them in action in Coca-Cola: A Case Study in Sustainability.)

Broader echos the same approach. ‘If Walmart have something that is working economically and is good for the environment, we want to show them to Coca-Cola, Unilever, and Loblaw. It’s good for all of us to be better citizens. What I am looking for from Coke is different from what I ask from Unilever. Our suppliers also have their own aggressive goals on sustainability that we are responsible for helping them to achieve those.’

In other words, the retailer and manufacturers are knowledge-sharing partners on the journey of sustainability. And they would like to invite other suppliers to come on board.

Further up the supply chain is also involved. Unilever, itself a major supplier to Walmart, also collaborate with their own suppliers in order to reduce their environmental footprint and save costs. As an example, farmers are encouraged to switch from sprinklers to drip irrigation to dramatically reduce water usage, according to John LeBoutillier, President of Unilever Canada. Being a good community citizen is important to Unilever. They like seeing smaller family-owned farms prosper by working with Unilever. (See Unilever’s Triple Win Sustainability Strategy.)

At the other end of the product lifecycle is consumer usage. Unilever is mindful that the bulk of their products’ footprint comes from usage by consumers. How are consumers using their shampoos and conditioners? How long are their showers? How much water is being used to prepare their packaged foods? At what temperature does the water need to be to prepare those foods? These are concerns Unilever have as they drive their consumers towards a more sustainable lifestyle through the Unilever Sustainable Living Plan.

In the end we are all on the same planet. The three large multinational corporations are inviting suppliers, independent farmers, individual consumers, and others to join them on the journey of sustainability. Have you RSVP yet?

Photos courtesy of Partners in Project Green and Carbon49.

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Being added to external corporate social responsibility indices enhances a company’s reputation and can affect its share price, but not always in ways expected. This article examines how the stock prices of 121 companies changed after being added to or removed from the Calvert Social Index.

Socially responsible investing has been growing faster than the overall market over the last decade. According to Lipper, socially responsible mutual funds are growing while other diversified equity funds are shrinking. Companies in the Carbon Disclosure Leadership Index (CDLI) and Carbon Performance Leadership Index (CPLI) delivered double the total return of Global 500 companies between January 2005 and May 2011 (see CDP Canada 2011: Key Highlights).

Generally speaking, being added to an external index amounts to an institutional endorsement and boosts a company’s stock price. The effects from being added to the S&P 500, for example, have been examined in various studies (Jain, Dhillon, Beneish). All confirmed that joining the index brings gains. Leaving the index brings losses.

Does the same also apply to indices in the area of corporate responsibility? Does joining the Calvert Social Index, widely used by many socially responsible mutual funds, boost a company’s stock price and leaving the index decrease it? During the six year period, from 2000 to 2005, 56 companies were added to the Calvert Social Index while 65 companies were removed. Each of the 121 companies’ stock prices was tracked by researchers at Villanova School of Business from the day before the addition or removal announcement through to 2 days after the announcement. The results were not all as expected.

The overall finding: Being added to a corporate responsibility index does not increase a company’s share price, but when a company is removed, its stock price takes a hit.

On first look, this appears to be a no-win situation. Your share price either remains the same or drops. Does this mean company should simply avoid to be added to any corporate responsibility index? It turns out, as is often the case, the background reasons are more interesting than the overall finding.

An announcement of addition to the index does not mean a company has changed overnight. It means the company has been demonstrating good corporate citizenship behaviour for one or more years in areas including environment, governance and ethics, human rights, community relations, etc. By the time a company joins the index, many great achievements had been made over a significant period of time. Naturally, they had also been communicating these achievements to the public through press releases and other communications. Rightfully so. These communications had been steadily lifting the stock price so that by the time they join the index, no further significant increase occurs. The research data does show that in the year prior to being added to the index, these companies delivered higher market-adjusted returns and more positive changes in operating performance than their deleted peers. So their stock prices did increase, just not during the index announcement.

The situation is quite different when it comes to removal from the index. A removal means the company, which had previously been a good corporate citizen, has stopped much of their good behaviour. But companies do not issue press releases when they stop doing something good. The general public does not notice something has changed until an external index announces the company no longer meets the criteria for their inclusion. Such announcement brings new information to the public. The market reacts to the new information and the stock price drops. In dollar terms, the average deleted firm in the study lost four million dollars in market capitalization on the day of and the day following the deletion announcement.

What is the take away from this? Focus not on the indices but on internal performance. Many studies have found that a company’s social performance and financial performance are linked (e.g. Waddock, Orlitzky, Schmidt, and Rynes). Firms that take actions to improve their social performance tend to also improve their operating performance, which leads to good financial performance. Focus on social and operating performance. Share your achievements with your stakeholders and your shareholders will thank you. Being added to an index is simply icing on the cake.

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You may have heard about the “Reality Sucks” General Motors campaign that launched last month across various college campus newspapers in the US. The ad was promoting GM’s college discount, enabling students to buy Chevrolet, Buick, or GMC cars at a discount. The ad depicts a young woman in a car, smiling, or perhaps smirking, at an embarrassed-looking cyclist who pulled up alongside her, with the text underneath saying, “Stop pedalling … start driving.”

This ad caused an outrage amongst the cycling community as well as student groups across the web and social media platforms. The criticisms especially focused on the ad’s message conflicting with GM’s environmental commitments and corporate responsibility statement, which ironically states: “… we will actively participate in educating the public about environmental conservation”. It seems the brand manager who worked on the campaign had not been communicating with their Corporate Social Responsibility (CSR) department.

Furthermore, from a marketing point of view, it’s clear that the brand manager had not done his research to understand and properly connect to this offering’s target audience. University bicycle subculture is ubiquitous and is embedded into the college lifestyle.  With prices at the pump rising, and with majority of students trying to pay their way through school, bicycles offer an inexpensive and fun method of transportation. Even the League of American Bicyclists points out “… obviously it’s been a while since GM execs and their creative teams set foot on campus.”

GM, to their credit, spent a long time responding to all the outrage messages they received via Facebook and Twitter and have apologized, changed the campaign and dropped the ad.

Brand Managers as Reputation Gatekeepers

Consumers expect brands to reflect socially and environmentally responsible business behavior (while also maintain quality and competitive prices). Discrepancies between a brand’s marketing message and a company’s corporate responsibility statement can tarnish a company’s hard to come by brand trust and consequently customer loyalty.

The 2011 GlobeScan Radar Report – a survey of consumer attitudes to company’s CSR performance – confirms that there is a large gap between consumer expectations and perception of industry CSR performance. GlobeScan suggests that the gap reflects silos within companies separating operational CSR and marketing and communications functions. Organizations that are integrating CSR effectively into brand platforms are winning consumer awareness.

In its Corporate Social Responsibility Guide for Business, International Institute for Sustainable Development points out that “the effect of a tarnished reputation often extends far beyond that one firm: entire sectors and, indeed, nations can suffer”.  Firms frequently expend considerable time and money attempting to regain their reputation, with mixed results.

Brand managers are recognized as gate keepers for internal and external communications and messaging affecting their brands, but they are not spending enough time understanding how their brand fits into the broader corporate responsibility and sustainability commitments.

There is a powerful opportunity for brand managers to collaborate with operational sustainability colleagues to identify innovative ways of not only enhancing the product, but also differentiating, and telling a compelling brand story.

Social Media Shaping Brand’s Public Perception

According to a 2010 Nielson study, social network websites account for over 22% of all time spent on the Internet. These platforms are shaping the public perception of a brand. They can start vital communication campaigns that can either build or destroy a brand’s reputation.

As the GM example indicates, when a brand makes a claim that is contradictory to their corporate responsibility commitments, and also contradictory to their target market’s values, the trust is broken.  The League of American Bicyclists expresses that sentiment: “If you are a student looking to add tens of thousands of dollars of long term debt, care little about the environment, and want to lump two tons of steel around campus while paying through the nose for insurance, gas, and parking…General Motors has got a perfect deal for you. Bonus: it’ll make you fat and unhealthy! All you have to do is give up that dorky bicycle that’s easy to use, practically free, gets you some exercise and is actually fun to ride.”

Effective CSR/Brand Integration Winning Consumer Awareness

Compare the GM campaign with a Zipcar campaign also targeting college students.

The brand manager for this campaign understands that it is a hassle for students to own a car on campus. This campaign also addresses financial barriers, and clearly connects Zipcar’s corporate responsibility commitments with the value proposition of this offer by stating that choosing to not own a car and drive Zipcars reduces demand for on-campus parking, alleviates congestion, and is a sustainable alternative transportation solution that reduces your carbon footprint.

Is it working? Zipcar’s membership in its North American market has doubled from 200K members in 2008 to 400K in 2010. With an impressive 30% membership growth 2011 third quarter, it now exceeds half million members in North America. And, the potential of much greater penetration levels increases, as the popularity of car sharing rises in North America.

I welcome your thoughts and feedback on this topic. Please join the conversation by adding your ideas to the comments section, or connect and continue the conversation on Twitter.

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I love reading sustainability reports. The sheer variety of approaches to reporting, content, presentation, design, quality and creativity is as great as the number of companies which report. Sustainability reporting has become a true differentiator and not only because of a report’s existence (which is now, for the larger companies at least, at “license to operate” level) but also because of the way a company reports.

A while back, I posted tips on How to Read Sustainability Reports, and these remain valid today. A quick refresher:

• Start with an open mind—Don’t let prior impressions of the company color an open-minded impression of the report content.
• People write reports, not companies—Remember that people are always doing their best.
• Read the opening remarks by the Big Chief—The CEO sets the tone for what’s in the report.
• Choose how you read—Decide if you want to read bestseller-style or pickn’mix.
• Seek materiality—Check out if the company has reported on the most important issues.
• Be copy-paste and delete aware—How much info is fresh.
• Look for consistency (and inconsistency) in data—Does it all add up?
• Give feedback, ask questions, make comments, get engaged—Help them make it better.
• Give some leeway to first timers—The first is always the toughest.
• Always eat ice cream when reading reports—OK, I didn’t say this, but I meant it.

These days, I am reading and reviewing more reports than ever, and getting more feedback than ever from companies whose reports I review. Last month, I started writing an exclusive series of in-depth report reviews for the Sustainable Business Forum under the title: Reporting: How They Do It. In this series, I go beyond a short overview and go for the jugular, aiming to bring out the best and less-best practices of a range of corporate sustainability reports while opening up some avenues for further exploration. It’s easy to make a bad report good. It’s less easy to make a great report outstanding. So, in addition to the 10 tips above, I will add some new ones, based on experiences of writing the How They Do It series.

Don’t be fooled by diagrams, tables, images and charts: In my review of Showa Denko Group’s 2011 CSR Report, I was challenged to find enough data of substance that would justify the presence of a host of charts and diagrams which give the impression of a highly structured approach to CSR. In the same way as its claims to have “referenced” ISO26000 and other guidelines without referring to them in the body of the report, I found the diagrams and charts to be graphically interesting but left me wondering where the golden nuggets of true data is hidden.

Follow the tough issues: Companies that report on how they are approaching sticky challenges, rather than just doing nice things, gain in credibility. In my review of Merck’s 2010 Sustainability Report, I make the point that the company underwent a 17% downsizing following a merger with Schering Plough. This represents thousands of people that were laid off. While we can debate the responsibility of business in job creation, rather than job elimination, what is more important is the way a company manages downsizing. I would have expected to read quite a lot in the Merck report about this tough issue which I suspect took up significant amounts of management time in the reporting period and affected the entire organization and external communities. Absence of disclosure begs questions and reduces credibility.

Examine how companies are setting targets: Sometimes targets can seem extremely challenging but when you take a look at the fine print, you realize that they may be less impressive than you thought. This is one point I mentioned in my review of Procter and Gamble’s 2010 Sustainability Report. The company has a target to increase the proportion of Sustainable Innovation Products, having sold $40 billion of those during the past 3 years. Reading the fine print, I noticed that Sustainable Innovation Products fit the bill if they meet a 10% improvement in just one design parameter from a selection of energy, water, transportation, amount of material used, and renewable energy or materials. Overall, such Sustainable Innovation Products appear to be a very low percentage of P&G’s total sales, and a 10% improvement on one parameter per product seems to me to be rather a soft target. Sustainable Innovation sounds much more impressive than what the fine print reveals.

If a report wins an award, perhaps it deserves it: While there are many different approaches to evaluating quality of reports, sometimes those that win reporting awards do deserve it. Such was my experience when reading and reviewing the De Beers 2010 Sustainability Report that recently won the ACCA South Africa Reporting Awards. In fact, I decided to review that report precisely because it won the award (wouldn’t we all like to know the winning formula?). Without knowing which other reports were also-rans, I did find the De Beers report impressive on many counts and worthy of recognition.

Look at what a company is doing for its people: One of the things I found most impressive in my review of the Ferrero 2010 CSR Report was a strong heritage of family values which infuses the corporate culture in a way which respects and cares for people including a large group of retirees. Sustainability begins at home and rests on embedding a culture that supports employees becoming champions of sustainability actions and ambassadors of sustainability messages. If this doesn’t happen, sustainability simply doesn’t gel. Companies that devote energy to reporting extensively on sustainability-minded employee practices are ones which are apparently doing it right. (See How To Embed Sustainability Into Corporate Culture.)

Check for impact: It’s not enough to define material issues and not enough to describe what actions a company is taking to improve its own sustainability and that of the planet. A sustainability report should be about impacts, not just about actions. You are probably tired of hearing me say this. Almost all the reports I read and review are totally disproportionate in the amount of space used to recount activities versus space assigned to describing impacts. Almost all of them leave us guessing as to how a range of noble actions actually made a difference. This is not surprising. Assessing sustainability impact is not a task for the faint-hearted, and there is no single methodology that takes precedence. However, reporting is, in general, getting more professional and the better reporters are moving to a higher plane where stakeholder engagement, materiality analysis and impact evaluation are gaining ground.

I dare say the above list of 16 tips is still not exhaustive. Reading sustainability reports does have its pitfalls (mainly because writing them has its pitfalls). However, every single report has value and careful reading both on and between the lines, combined with a healthy level of optimism, skepticism, and criticism should help good reporters get better and better reporters get great.

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PricewaterhouseCoopers published a report in February 2011 called “Creating value from corporate responsibility: Does your reported data get the respect it deserves?” (PDF). Today there is more emphasis than ever on companies’ environmental and social performance—in addition to traditional financial results. Companies are disclosing unprecedented amounts of information, promoting their corporate responsibility goals and commitments. More enterprise value can be generated by those efforts with stronger operational discipline.

From the KPMG and SustainAbility report “Count me in: The readers’ take on sustainability reporting” (PDF), the future of sustainability reporting includes continuous stakeholder dialogue linked to the core business agenda.

Reporting standards like the Global Reporting Initiative and mechanisms such as third-party assurance have helped improve the content and quality of reports. AccountAbility’s AA1000 Stakeholder Engagement Standard (PDF) is a generally applicable framework for the design, implementation, assessment and communication of quality stakeholder engagement. The AA1000 principles provide great guidance on the underlying reporting processes and are firmly embedded in the proposed integrated reporting framework.

What is Integrated Reporting? Integrated Reporting combines the different strands of reporting—financial, management commentary, governance and remuneration, and sustainability reporting—into a coherent whole that explains an organization’s ability to create and sustain value. According to KPMG’s “Road to Integrated Reporting” (PDF), a key aspect of integrated reporting is that it addresses those resources (referred to as Capitals) which the business consumes and creates — financial, manufactured, human, intellectual, natural and social.

Integrated Reporting can reduce the reporting burden on organizations and help investors and other stakeholders gain clearer understanding of the information. Much of this information could be moved to an online environment, reducing clutter in the primary report, which will focus only on the matters that the organization considers most material to long-term success.

Key Benefits of Integrated Reporting: The informative Harvard Business School article on the book “One Report: Better Strategy through Integrated Reporting” (Amazon.ca) by Robert G. Eccles and Michael P. Krzus states four key benefits of integrated reporting:

1. Greater clarity about the relationship between financial and non-financial key performance indicators
2. Better management decisions
3. Deeper engagement with the broad stakeholder community
4. Lower reputational risk

One Report challenges management to be much more granular about how they are “doing well (for shareholders) by doing good (for stakeholders)”, says Krzus, who spoke in the Carbon Economy Summit in Toronto in 2010.

Experience from South Africa: According to the KPMG and SustainAbility report, South African organizations have shown a positive start in the adoption of integrated reporting. Integrated reporting became a requirement for Johannesburg Securities Exchange listed entities effective from years commencing on or after March 1, 2010. Several experiences are worth noting. Integrated reporting has helped businesses to be better understood and managed. Organizational change was a key requirement. The biggest challenge was the efficient gathering of non-financial information. A full implementation of integrated reporting could take three to five years.

Vancity shows Canadian leadership: Vancity, the largest English-speaking credit union in Canada, is a benchmark for many global companies aspiring to be sustainable leaders. Their 2006-2007 Accountability Report was short-listed for Best Sustainability Report award from the Ceres-ACCA North American Awards for Sustainability Reporting. Their 2008-2009 Accountability report won the Globe Sustainability award.

The next milestone for Vancity is its participation in the International Integrated Reporting Committee’s Integrated Reporting Pilot Programme. “We’re keen to push the agenda and bring the co-operative perspective to the table,” says Joanne Westwood, Manager of Accountability Reporting at Vancity, in an exclusive interview. “We also want to learn from the IIRC and the experiences of the participants to take our reporting practices to the next level.”

Now that we’ve talked about the benefits, what is involved for a company to adopt integrated reporting?

Phase One: Prepare the organization for engaging with stakeholders: A company should first understand what information is needed by their stakeholders, then perform an information gap analysis to arrive at an optimal level of transparency in consultation with the board. For an example, see BASF Report 2010.

Phase Two: Adopt integrated reporting: Once the company has started engaging with their stakeholders, Mike Krzus suggests seven steps for the adoption of IR:

1. Get CEO and board support
2. Appoint an executive to drive the process
3. Identify material financial and nonfinancial performance measures
4. Develop explicit causal models about the relationship between financial and nonfinancial performance
5. Determine the content of the first integrated report along with a plan for further improvement and development
6. Redesign the company’s website to be able to support integrated reporting
7. Engage and seek feedback from all stakeholders

Deloitte’s report “Integrated Reporting: A Better View?” (PDF) includes 11 practical steps similar to those suggested by Krzus. One of its key recommendations is to use a formal process to determine relevant KPIs that are aligned with the organizational profile and strategy. Leveraging existing activities and risk and strategy personnel would be a smart move.

Westwood shared with us Vancity’s experience, “integrated reporting is a journey, one that will expose areas of your business that are not managed in an integrated way as well as gaps or inconsistencies in your business strategy or operations. It will be a catalyst for dialogue and process. It will be a catalyst for performance improvement. Ultimately, it will add immense value to your organization and stakeholders.”

If you would like to be part of a discussion forum focused on solving the challenges related to integrated reporting, please write to stakeholdersolutions@gmail.com.

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The director of CDP North America Zoe Tcholak-Antitch leads the launch event with a panel that includes first time CDP reporter Tim Hortons. As a consumer facing business, brand reputation is always the “Big Elephant” in the room, says Tim Faveri, Tim Hortons Director of Sustainability and Responsibility. “Anything that has to do with brand reputation, we must look carefully into it.”

Both the panel discussion and the presentation by Losel Tethong, Canadian Sustainability Lead of Accenture, brought out many interesting points. I have summarized a few notable highlights here.

Businesses who lead in carbon performance delivered twice the financial return compared to their peers. Companies in the Carbon Disclosure Leadership Index (CDLI) and Carbon Performance Leadership Index (CPLI) delivered approximately double the total return of Global 500 companies between January 2005 and May 2011.

Taking action towards low carbon growth is important if business is to protect itself against risks such as resource scarcity and create more sustainable business models that generate long term shareholder value.

More Canadian companies than ever reported their greenhouse gas emissions. Canada’s leading corporations have clearly signalled their willingness to disclose. The highest number of Canadian companies responded to the Investor CDP Information Request in 2011. This represents a response rate of 54%, a significant increase from the 2010 response rate of 46%.

Canadian businesses pursue commercial opportunities through climate innovation. Companies are taking a strategic approach to climate change and are taking action to seize commercial value from its effects.

Canadian businesses generate new revenue from climate change. 54% of respondents indicated they were providing products or services to aid third parties in reducing their GHG emissions.

Canadian businesses build brand value from climate change. Respondents stated that communications about their climate-friendly practices and emission-reducing actions could increase brand value.

Canadian businesses reduce cost and mitigate the risk of rising energy prices. 91 out of the 108 respondents reported a cumulative 425 emission reduction activities that were either underway or completed, demonstrating that companies are planning and implementing energy reduction initiatives to reduce this growing operational expense. Energy efficiency initiatives in operations and building services were among the most popular activities, while transportation-related initiatives were commonly cited. (See case studies on Coca-Cola, Sears, Unilever, Fairmont.)

Climate change has gone beyond compliance, it’s become a business strategy. The majority of Canadian respondents are already integrating climate change into overall business strategy. 75% of the Canadian respondents reported having integrated climate change into their overall business strategies, confirming a commitment to long-term, sustainable growth amidst regulatory uncertainty and the physical effects of a changing climate.

And saving the most interesting for last …

Google Finance now shows CDP ratings. Environmental, Social and Governance (ESG) data has appeared on the Bloomberg Terminal for a number of years now, forming part of core financial analysis. But recently it has gone even more mainstream. The section “Key stats and ratios” in Google Finance (both Canada and U.S.) now shows a public company’s CDP rating along side traditional indicators like net profit margin, operating margin, etc. It goes to show … carbon is important and investors are watching.

The full CDP Canada 2011 report is available here (PDF).

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Sustainability version 1.0

Building a responsible corporate image was one of the first business cases for sustainability initiatives. Managing reputation of a company amongst customers and other stakeholders was the mandate of Sustainability 1.0.

Often labelled as green washing, many corporations portrayed themselves as environmentally responsible without much evidence and by masking environmental wrongdoings. The focus was to create a perception and legitimacy that the business is performing activities in line with societal and environmental values.

The “Sustainability Leadership Report—Measuring Perception vs. Reality” (PDF) released by Brandlogic and CRD Analytics shows how some corporations focus more on building green reputations than on their green performance.

Sustainability version 2.0

Sustainability 2.0 focuses on non-financial performance (sustainability) reporting. Organizations like GRI and CDP have established global standards for quantifying and reporting requirements. I would call the increasing corporate focus on reporting sustainability performance data as Sustainability 2.0.

The 2010 accountability statement (PDF) of Vancity, Canada’s largest credit union, is a great example of leadership in integrated reporting (financial and non-financial data) across the globe.

Sustainability version 3.0

So, what is Sustainability 3.0? It is a state in which employees in an organization realize the importance of sustainable business practices and make decisions while coordinating with relevant stakeholders.

The key challenge for Sustainability 3.0 is engagement. Realization of top level strategies comes when every employee is engaged in the journey. The engagement of stakeholders will allow strategy implementation to be more effective. Engagement is the key to Sustainability 3.0.

That’s the corporate sustainability initiatives in 3 versions, based on maturity. In addition to the above mentioned reports by McKinsey, Brandlogic, and CRD Analytics, another major report released recently is the “14th Annual Global CEO Survey” by PricewaterhouseCoopers. As I read these reports, I see three key challenges emerge for sustainability 3.0 that will be faced by corporations in the coming years.

Key Challenge 1: Creating change leaders for total engagement

The McKinsey study states that 94% of the respondents say their companies have integrated sustainability into strategic planning. The next stage—Sustainability 3.0—is to catalyze key employees to translate C-suite strategic commitment into organization-wide action. How do we create change leaders, or tribal leaders, who will enable such a transformation within their organizations? Building an enduring corporate culture of sustainability in the business organization where all employees are highly engaged in the formulation and implementation of sustainability initiatives is a key challenge for sustainability in businesses.

Challenge: How can we create change leaders or influencers at all levels of organization to promote sustainability?

Key Challenge 2: Communicating the value proposition

The PricewaterhouseCoopers study suggests that companies could save costs by minimizing business risks, improving operational efficiencies, and improving employee retention, morale and productivity. CEOs across the globe also believe that there are business opportunities arising by creating sustainable innovative products and services. Despite strong business cases, the C-suite still hesitates in accepting sustainability as a business value proposition. Probably the same kind of resistance existed when new concepts such as “Quality” was introduced, which eventually led to widespread adoption of “Total Quality Management (TQM)”.

Challenge: How can the value proposition of sustainability be communicated so that it becomes a cultural norm or policy within businesses?

Key Challenge 3: Co-creating policies for growth

Any provincial or federal election adds uncertainty towards sustainability initiatives in businesses. Public consultations to formulate policies to mitigate recession and climate change risks can be more effective by having a shared agenda across the public, private and NGO sectors.

Even though governments across the globe are coming up with regulatory policies, the private sector will have to work closely with the public sector, NGOs, and other stakeholders to arrive at common shared agendas. Half of the CEOs surveyed by PwC are optimistic that a shared agenda would be more effective than it has been in the past.

Challenge: How can businesses, governments, and other stakeholders co-create policies that promote socially responsible growth?

What’s your view on the future of sustainability: Sustainability 3.0? What other challenges do you foresee in businesses for the implementation of sustainability initiatives in the future? Share your comments below.

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82% of consumers have good green intentions, but only 16% are dedicated to fulfilling these intentions, according to an Ogilvy study. This puts 66% in what is called the ‘Middle Green’, a group that is neither active environment crusaders nor anti-greens. These are the massive middle, the everyday mainstream consumers.

The big question is ‘Why don’t mainstream consumers turn their green intentions into green actions and what can be done about it?’ This is what Ogilvy & Mather tried to find out. ’If we are to motivate a mass green movement, perhaps those of us most committed to the green movement need to stop trying to get the masses to see things our way and instead get better at seeing things their way.’

OgilveyEarth, the sustainability practice of the Manhattan based multinational marketing firm, conducted a research by surveying 1,800 Americans, trying to understand why there is a disconnect between consumer intentions and actions and how we can help bridge this gap.

The 129-page research report (PDF) contains many fascinating insights. While the research was conducted in America, I think the findings and recommendations are quite applicable to most Western societies.

I have summarized 12 key points that can help middle-of-the-road mainstream consumers turn their green intentions into green actions:

1. Make green normal: Mainstream consumers are reluctant to go green because they don’t want to be seen as ideological crusaders. Going green attracts unwanted attention from their families, friends, colleagues, and neighbours as if they have adopted a new identity and that they no longer belong to the main group. Marketers should make consumers feel like everybody’s doing it. Show them numerous cases where other people just like them are also going green. Make middle-of-the-road mainstream consumers feel going green is normal behaviour, not oddball behaviour.
2. Make it personal: Don’t focus on the benefits for the planet or future generations, but on the benefits for them personally, e.g. less toxin going into their body
3. Make green choice the default: Green is not an optional extra. Don’t ask consumers choose to go green. Green should be the default choice. For example, make no plastic shopping bag the default, allow consumers to pay extra for one. They don’t need to choose to be green because green is the default, they need to choose to be non-green.
4. Remove price premium: Where possible, remove the price premium for green products. The message should be green is normal, not just for the rich.
5. Bribe shamelessly: Offer treats along the way of their behavioural change, e.g. prizes, kudos, rewards, gold stars, public recognition.
6. Punish wisely: Small doses of guilt and shame can motivate behavioural changes, especially if they are also reminded of the green options available to them.
7. Don’t stop innovating: Make better stuff. Consumers are reluctant to sacrifice performance for sustainability.
8. Lose the crunch: Green marketing needs to be more mainstream hip than off-the-grid hippie. Market green as one of the secondary features instead of the leading feature: ‘Great performance, also friendly to the environment.’ Many consumers assume products with a primary focus on being green to have subpar performance, cost more, and are geared towards hippies.
9. Turn eco-friendly into ego-friendly: Green marketing often has a feminine image. Girly green needs a manly counterpart.
10. Make it tangible: Toyota Prius displays real time fuel economy information on the dashboard.
11. Make it easy to navigate: Design labels to be simple and clear. Consumers are often confused and suspicious to environmental claims.
12. Tap into hedonism over altruism: Project an experience and image that is fun and exciting to be in a sustainable world rather than projecting it as an act of ‘charitable’ contribution.

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