Finance

and
Sustainability
Report based on proceedings at IBM Start
“
When one tugs at a single thing
in nature, he finds it attached
to the rest of the world.
John Muir, US author and naturalist, founder of The Sierra Club
Finance and Sustainability

Contents
Executive summary .................................................................................................................................................... ..3
Finance and Sustainability .......................................................................................................................................... ..3
Outline of the day’s agenda ....................................................................................................................................................3
What is sustainability? ................................................................................................................................................ ..5
Common themes from the Summit ............................................................................................................................. ..7
Collaboration is key to progress ..............................................................................................................................................7
Complexity requires systems thinking ....................................................................................................................................7
Data and metrics are the basis for finding solutions ..............................................................................................................7
Solutions require atypical personal and corporate behaviour ................................................................................................7
Summary of proceedings ........................................................................................................................................... ..9
Investors have not to date been concerned about sustainability issues ................................................................................9
Short-termism affects both sides ............................................................................................................................................9
There are a number of possible reasons for investor disinterest ...........................................................................................9
Lenders have thought less about sustainability than investors, but that is changing ...........................................................10
From a credit market perspective, climate change is a big financial risk .............................................................................10
The cost of carbon for example is an unknown factor ..........................................................................................................11
There is too much of a disconnect between owners of capital and companies ...................................................................11
Government must play a strong role in incentives, regulation and policy ............................................................................11
Collaboration too often becomes an excuse for inaction .....................................................................................................12
The cost versus compliance argument is false ......................................................................................................................12
The opportunity cost of inaction is too high .........................................................................................................................13
Most companies have still not identified the low hanging fruit ..........................................................................................13
Many sustainability projects are still proving to be a challenge to justify ............................................................................13
Sustainable companies have been proven to outperform markets ......................................................................................13
There is a long way to go in terms of reporting ....................................................................................................................14
The push for sustainability is creating new thinking and innovation ....................................................................................15
What constitutes value may change .....................................................................................................................................15
The pace of change may vary ...............................................................................................................................................16
Outcomes: developing the themes ............................................................................................................................. 19
The Start Innovation Jam ......................................................................................................................................................19
The IBM Summit at Start ............................................................................................................................................ 20
About The Bathwick Group ........................................................................................................................................ 21

Page 1
Finance and Sustainability

Executive summary
Only the most hardened climate deniers and sustainability  Climate change represents a major financial risk;
sceptics now argue that we can continue indefinitely to live inaction carries a reputational and operational risk.
and to consume as we do now. We are heading for deep  Government needs to play a strong role in incentives,
trouble and possibly for disaster, driven by our historic regulation and policy.
disregard for the scarcity of resources and the collateral
damage our progress has created.  Compliance can be an opportunity not a burden. In
many cases more onerous reporting requirements
The evidence is increasingly stark and the range of issues will help organisations to identify inefficiencies and
is broadening across all social, natural and economic potential risks.
systems. The problems are both massive and systemic; our
response must be worthy of that challenge.  Sustainability projects are still proving difficult to justify
in many cases, but companies with strong sustainability
More than 120 business, government, community leaders credentials have been proven to outperform their
and commentators attended the Finance & Sustainability peers.
day (Day 7) at the Summit. They concluded we need to
act faster and work together across industry and country
 The activities, intellectual property and products that
create value for organisations may change as the
boundaries; they left determined to make change happen.
perception of what constitutes value changes in the
Their debates and comments are covered in this report -
marketplace.
below are some of the key points that were made:
Investors have not previously been concerned about
sustainability issues but that is changing as potential
risks are more clearly understood.

Finance and Sustainability

Outline of the day’s agenda

KEYNOTES:
The Vision: Richard Gillies, Director of Plan A, Marks & Spencer
The CFO’s view: Andrew Griffith, CFO, BSkyB
The Tech view: Matt Brittin, MD UK&I, Google

DEBATES:
The impact on capital – equity
The impact on capital – debt
Deploying capital sustainably – creating & measuring value
Deploying capital sustainably – the cost & compliance balance

Page 3
Finance and Sustainability

Page 4
Finance and Sustainability

What is sustainability?
Sustainability: most people think it’s a good idea, some
ENVIRONMENTAL
people are passionate about it, some are truly ambivalent Manage
„
SOCIAL consumpƟon of
or even hostile to the notion, but everybody has a different Cohesiveness of CiƟes energy, water,
definition. It is therefore important that we establish a ECONOMIC „ CiƟzen centric health,
food, raw
definition to use as a baseline for this report. Sustainability, Sustainable Economy educaƟon and social materials
„ Balanced services
simply put, is the capacity to endure1. investment „ BeƩer distribuƟon of
Minimise
„

„ BeƩer risk services, jobs, housing wastage of

At a global level: we live on a planet that is a complex management „ Transport
scarce resources
inter-dependent set of eco-systems, and increasingly, „ Short term & infrastructure
socio-technical systems; sustainable behaviour is long term Work and society
Do more with less (£) Roles of business and
therefore that which ensures the environmental „

government
„ Outcomes that

balance is maintained, allowing human civilisation to maƩer „ Skills, behaviours,

continue to survive. „ Accountability careers

At a regional/national level: we must maintain
the economic structure of our society – markets,
businesses, profits, infrastructure and jobs; societal
stability in turn ensures the long-term demand for,
and the sustainable growth of, products and services.
Along with progressive social policies on equality
and well-being, sustainable markets, businesses and
societies aim to create long-term opportunity for all.
These three elements – economic, social, and
environmental (also referred to as profit, people, and
planet) – form the basis for the Triple-Bottom Line (TBL,
figure 1), a simple description of the elements involved.
The problem is that for many – particularly those of us
charged with delivering hard, short-term results – the
social and environmental appear to detract from the
economic; they are seen as blockers.
It is this central dichotomy that is often cited as the reason
for sustainability being a hard sell in business. But it
shouldn’t be; organisations and those leading them want
to survive and prosper as much as they ever did. The
only issue is to illustrate both the urgency of taking action
and the importance of all three factors in ensuring their
organisational and individual survival.
We find ourselves at a unique point in our history. Unlike
previous generations, we know that we are causing
irreparable damage to the planet and that, regardless of
arguments about the causes, significant changes in how
we live must be achieved.
for spend
Figure 1. One representation of the triple bottom line
We must discover how to deal with the biggest impacts
humans make on this planet, including:
 Population growth. Population growth is at the core
of the sustainability challenge. There were 1.75 billion
people on the planet in 1910; today there are 7
billion, and by 2050, the UN estimates that the global
population will peak at around 9 billion.
 Resource depletion. The development of the ‘Western’
lifestyle over the past 60 years has greatly exacerbated
the population problem – a lifestyle based on quantity
rather than quality, and on consumption as a validation
of our national and individual success. Powered by
cheap energy and mechanisation, it’s been easy and
we could afford it. But we have taken little notice of
the ‘collateral damage’, and as a result we are using up
the planet’s resources and damaging ecosystems at an
alarming rate.
 Unaccountable growth and consumption. The hidden
costs (or ‘externalities’) of some of our activities are
now recognised – not least the estimates of the cost
of climate change brought about by GHG emissions
from fossil fuel use over the past century. Lord Stern’s
estimate of 2% of GDP (£28bn annually in the UK alone)
to counter climate change is dwarfed by estimates of the
economic damage in prospect (for example the figure
of $20tn annually by 2100 by the German Institute for
Economic Research (DIW)).

1 The Bathwick Group’s definition, which separates the capacity to endure

(surviving) from sustainable development (thriving), which is growth
that has at most a neutral social and environmental impact.

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Finance and Sustainability
Common themes from the Summit
Collaboration is key to progress
There are few challenges within organisations that can be
solved by an individual employee or a single department,
and few challenges in sustainability that can be addressed
by a single organisation operating in isolation. ‘We need
to collaborate more’ was a key conclusion of every day of
the Summit at Start; collaboration is the key to unlocking
creativity, finding new ways of approaching familiar
problems, and generating widely-accepted solutions. We
know however that few organisations collaborate well,
internally or externally. Over the past five years we’ve
analysed how and why this is so. Individual and corporate
insecurities, unhelpful reward systems and competitive
sensitivities are among the issues that combine to inhibit
openness and sharing of data and ideas.
Collaboration is about changing the way individuals think
and organisations respond, finding more effective business
process alignment, and encouraging trust and positive
behaviours. Achieving such change is at the heart of
finding the efficiencies, technologies, and market models
that will define a more sustainable future.
Complexity requires systems thinking
The complexities of organisations and markets are a barrier
to understanding and change. The developed world today
is a network of inter-dependent socio-technical systems,
in which changes of any type have systemic impacts that
are hard to foresee in the normal scope of an individual’s
role. Few people ever experience more than a small part
of the picture, and the decisions they take will only be
appropriate within the context of their understanding.
Creating predictive frameworks and more holistic decision
support models requires systems thinking – the process
of understanding how things influence one another
within the whole – which is an unusual set of skills. Few
organisations employ such skills, except perhaps in strategy
or technical design roles, but in an increasingly connected
world systems thinking is becoming important. We would
do well to recognise, nurture and value the appropriate
skills, as second- and third-level impacts are increasingly
coming to define the effectiveness, and therefore the
success, of most organisations.
Page 7
Data and metrics are the basis for finding solutions
We generate enormous quantities of data within our
organisations, much of which languishes in silos, unused
for lack of capacity, the right tools or skills to process and
analyse its meaning. The amount of data, and the number
of sources from which it comes, is spiralling upwards every
day; we can’t hope to understand either the scale of the
challenge we face or the best routes to a solution unless
we learn what we know, and how to gain valuable insights
from it.
Peter Drucker famously said “If it can’t be measured, it
can’t be managed”. In a sustainability context, if you don’t
have information on the impact of your operations and
your activity, you won’t be able manage that impact down.
Worse, you can’t enumerate and report success.
Solutions require atypical personal and corporate
behaviour
Of all the challenges we face in becoming more sustainable,
individual and organisational behaviour will perhaps
be the hardest to address. Personal and corporate
insecurities, consumption-oriented lifestyles, unhelpful
corporate cultures, a focus on the short term, and a lack
of awareness (or unwillingness to understand) inhibit our
ability to effect change. They make us believe that what
we do individually makes little difference, and help us to
hide behind competitive sensitivities to justify inaction.
Will it be more carrot or a bigger stick that will produce the
changes we need? Probably both, and applied without
fear or favour, according to delegates at the Summit.
Scottish philosopher David Hume wrote “All plans of
government, which suppose great reformation in the
manners of mankind, are plainly imaginary”. In other
words, good luck with changing human behaviour. In the
250 years since that was written, have we learned enough
and are we optimistic enough, to prove him wrong?
Finance and Sustainability
Summary of proceedings
The Finance and Sustainability day at the IBM Summit
covered two broad topics. One concerned the implications
of sustainability for equity and debt markets, and the
influence of those markets on corporate interest in
sustainability. The other looked at how sustainability
impacts corporate decision-making and investments in
the private sector, how companies measure the value of
sustainability, and how they manage cost and compliance
challenges.
Investors have not to date been concerned about
sustainability issues
“ I have never had a single question on
Stagecoach’s sustainability policy in 11
years of meeting investors.
Martin Griffiths, Finance Director, Stagecoach
plc
Climate change, energy costs and the global economic
downturn have impacted everybody – rather drastically
in the past twenty four months. While some global
organisations such as M&S, Google and HSBC have
demonstrated how strongly sustainable business practices
can be equally or more effective than ‘business as usual’,
the majority lag behind. How much does it matter?
During the summit itself, several CFOs and top executives
highlighted that many investors seem to be unconcerned.
Short-termism affects both sides
Delegates bemoaned both the lack of long-term
instruments in the UK, forcing capital looking for such
investments overseas, and the continued short-termism
of fund managers, and particularly pension funds.
Page 9
“ There are plenty of free-riders out there –
the investment industry has become more
short-term on average.
Paul Abberley, CEO, Aviva Investors
We have identified clearly the problems that short-term
thinking causes for companies in both the Summit
findings and in other research we have published, but it
was made clear by delegates that investors are similarly
afflicted. Delegates bemoaned both the lack of long-term
instruments in the UK, forcing capital looking for such
investments overseas, and the continued short-termism
of fund managers, and particularly pension funds.
Pension holders have the capability to switch funds easily
if they feel that managers are underperforming, which
drives competition for short-term results, even in the very
investors that should be focussed on the long term.
“ Short-termism is holding companies back;
investors should be asking questions about
sustainability, but they aren’t.
Jessica Fries, Director, A4S
There are a number of possible reasons for investor
disinterest
So how might we get investors to start asking the ‘right’
questions? Some delegates were of the view that it is a
matter of mandating Environmental, Social & Governance
– factors (ESG) reporting, while others felt that the demand
side should put more pressure on companies to encourage
greater disclosure and reporting. Both views might well
require legislative and/or policy action to make them a
reality.
Finance and Sustainability

Several contributing factors were identified for the failure
of fund managers to pay attention to sustainability issues:
 Lack of training: the CFA does not include sustainability
issues, though there are moves afoot to try to change
that;
 Lack of motivation: if investors aren’t pushing for more
sustainable behaviour or reporting, it is one less reason
to make the effort to change. “If we find a company
exploiting an externality that’s ok – if we think they can
get away with it” said one delegate;
 Some models of investing e.g. “quant equity” processes
don’t need to anything much about the company they
are trading. High frequency traders, for example, don’t
even know the company’s name, just the ticker.
It was suggested that if companies stepped up and
voluntarily provided the information in depth, investors
would have to start pressing for it from others that weren’t.
It may not happen until a critical mass of companies provides
enough information that the investors see value because
they are able to draw comparisons. If that happens then
it’s not hard to see how more comprehensive reporting
could become the norm in the near future.
Lenders have thought less about sustainability than
investors, but that is changing
It would appear from delegate contributions that the
lending community has not yet begun to consider the
long-term impact of unsustainable activity. There is a
belief that this will change as risks become understood
and are seen to increase, which could happen very soon.
“ Greed and fear are key drivers for equity
and debt markets respectively. On the
greed side, performance has not matched
the rhetoric, and the fear is now starting to
appear.
Mike Wilkins, Head of Global Carbon Markets,
Standard & Poor
Although the introduction of the Emissions Trading Scheme
(ETS) for example was a sort of “phoney war” (with caps
set too high and recession leading to a fall in demand), a
dramatic shift in attitudes is coming, and fear is a strong
driver for both investors and lenders.
From a credit market perspective, climate change is a big
financial risk
For many financial institutions, sustainability criteria are
gaining weight in project financing decisions, particularly
in a downward global economy.
“ Ratings agencies and banks are looking
more closely at the risks. And people are
drawing better connections between
sources of risk and their own bottom lines.
John Godfrey, Legal & General
And they’re recognising other, simpler to understand risks,
and their relative importance in the long-term performance
of a company. Like the difference between building and
losing a reputation, it takes less to bring a company down
that it takes to grow it further – and there is a sufficient
range of recognised and emerging ESG (environmental,
social and governance) risks to get the attention of many
financial institutions.
“
Risk is more important than opportunity –
when we look at ESG factors, we are
working out what would cause a company
to trip up.
Paul Abberley, CEO, Aviva Investors

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Finance and Sustainability
The cost of carbon for example is an unknown factor
Standard & Poor’s Carbon Exposure survey looks at
the impact of carbon legislation (and emissions trading
schemes) on 514 companies and found that up to now
there has been little or no impact on companies, with
the possible exception of utilities. But many CFOs are
worried about 2012 onward, when many commentators
are forecasting that a 2012 carbon price of £12/tonne will
rise to £45/tonne or more by 2020 – which means the
cost of compliance would rise by a factor of five over the
ten years from today. Companies would have to invest
more in hedging, and re-double efforts to increase energy
efficiency.
“ Carbon is still too cheap; but it may not be
for long.
John Godfrey, Legal & General
There is too much of a disconnect between owners of
capital and companies
There is too often a gulf between owners of capital and
the companies – the analogy used in the Summit was that
of the “absentee landlord”. The concept of engagement
and stewardship is important; the new Stewardship Code
may be an important step in closing that gap, but some
delegates argued that the Code’s ‘comply or explain’
approach is too weak, and stronger regulation should be in
place, particularly in regard to pension fund investment.
Government must play a strong role in incentives,
regulation and policy
For those who are against government intervention, it
surely is time to realise that there is no such thing as a pure
‘laissez-faire’ economy; indeed many would argue that too
much laissez-faire is what has led us to this point. Some of
the suggestions for change during the summit included:
 Increased regulation in the public sector by imposing
eco-credential requirements for government contracts
 Private sector regulation that provides clear carrots
and sticks to ‘force’ businesses towards sustainability
a.k.a. codes of practices with teeth
Page 11
 Public policy initiatives designed to nudge both
corporate organisations and private individuals to act
more responsibly
 Wider public awareness on the risk of inaction
 Public figures to lead by example and ‘walk the talk’.
The Stewardship Code, published by the
Financial Reporting Council (FRC) in July 2010,
aims to enhance the quality of engagement
between institutional investors and companies to
help improve long-term returns to shareholders
and the efficient exercise of governance responsi-
bilities. Engagement includes pursuing purposeful
dialogue on strategy, performance and the
management of risk, as well as on issues that are
the immediate subject of votes at general
meetings.
The Code sets out good practice on engagement
with investee companies to which the FRC believes
institutional investors should aspire. It provides an
opportunity to build a critical mass of UK and
overseas investors committed to the high quality
dialogue with companies needed to underpin good
governance. By creating a sound basis of
engagement it should create a much needed
stronger link between governance and the
investment process, and lend greater substance to
the concept of ‘‘comply or explain’’ as applied by
listed companies.
There were a number of discussions about the effectiveness
of providing information and feedback to companies – and
even about the psychology of coercion. The net result is
that the government should create a balance of carrots
and sticks, but, crucially, be prepared to properly enforce
the sticks when they are defined.
Finance and Sustainability

Both companies and national governments must act

“ Telling people that 90% of their peers pay

the full amount of tax is a bigger incentive
to people than telling them they’ll go to jail
if they don’t.
Richard Ward, Better Regulation Executive,
Department of Business Information and Skills,
UK Government
Nevertheless, several delegates argued against government
interference, precisely because it limits their ability to find
and exploit new business models.
independently and exhibit leadership – for their own good
and to encourage others to take the necessary steps – and
be prepared to work together when there is sufficient
consensus to do so.
“ In pursuit of a perfect solution, we shouldn’t
wait for a global coalition. We have an
opportunity to demonstrate leadership to
the world.
Richard Ward, Better Regulation Executive,
Department of Business Information and Skills,
UK Government

“ Prescriptive regulation that says not only
what to do but how to do it limits our ability
to create value from change.
Richard Hookway, CFO, Refining & Marketing, BP
plc
The cost versus compliance argument is false
Whenever regulation is discussed, there inevitably follows
an argument about the costs of compliance. As a number
of delegates pointed out, the argument is often a false one.
Like any enforced change or negative market environment,
necessity often becomes the mother if invention.

Collaboration too often becomes an excuse for inaction

The nature and effectiveness of collaboration was
discussed in many forms. On a national level, there has
“ Cost versus compliance is a false dichotomy.
been a renewed interest in public-private partnerships
When Sarbanes-Oxley came in it cost
(PPPs), despite a long and chequered history of failed
millions in increased costs; but as the new
initiatives. On an international level, discussion ranged controls helped to better identify risks and
around global coalitions. While there have been some operating problems, we ended up saving
successes, we cannot continue to wait and rely on global more than we spent.
or even regional agreements as the solution to the issues
Richard Hookway, CFO, Refining & Marketing, BP
at hand. plc

“ Regulation is required, and incentives

In any case, non-compliance is generally not an option
for any company, and particularly not for those that are
publicly quoted.
needed, but that should not stop us acting
alone.
Andrew Griffith, CFO, BSkyB
“ If you think the cost of compliance is high,
try non-compliance.

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Finance and Sustainability

The opportunity cost of inaction is too high

Energy prices and post-Kyoto uncertainties are significant
risks to any organisation. These two factors should be
enough to catalyse governmental action and prompt
businesses to operate more sustainably. Yet most
organisations fail to adequately identify and quantify
future risks. In addition to being unhealthy in the
medium- to long-term, it will become increasingly
difficult to justify inaction or to argue against accusations
of poor governance as investors, ratings agencies, and
commentators pay more attention to the more widely
recognised risk potentialities.
Richard Gillies from Marks & Spencer drew particular
attention to this issue, identifying that his company’s ability
to keep finding quick and easy wins (and sharing the credit
with anyone that wanted it) has been a major contributor
to their ability to execute the harder, more long-term
investments required for their ‘Plan A’ sustainability
initiative.
Many sustainability projects are still proving to be a
challenge to justify
In the medium-term and beyond, companies must
go further to recognise that carbon dependence is an

“ Ask yourself some simple questions – what

would the impact on your business be if
the cost of energy trebled?
The solution need not be too complicated, even for smaller
companies unused to carrying out extensive scenario
planning. Relatively simple questions can ensure that
adequate attention is given to potential downsides and
stress-test a strategy effectively, though many companies
seem unwilling to commit the time and resources to do
so.
off-balance sheet liability. They must also recognise that
achieving longer-term sustainability goes well beyond
carbon savings. Such investments are not only harder
to justify but harder to implement, measure and reward,
particularly as the short term KPIs of most senior executives
are not aligned with longer term sustainability goals.
Long-term projects also involve cultural changes,
improved business practices, supply chain management
and innovation – all of which require investment, and the
involvement of multiple groups within (and often outside)
an organisation, working in concert. Many companies
continue to believe that such investments are unaffordable,
particularly in a time of economic pressure.

Sustainable companies have been proven to outperform

Most companies have still not identified the low hanging
markets
fruit
The Bathwick Group’s research in 2008-9 outlined the
In the short term, the simple equation ‘Carbon = Cost’
factors that such companies tend to share:
makes energy and resource efficiency easy to justify as it
immediately impacts the bottom line. But even companies  Long-term decision-making and investment
that have made and are aggressively pursuing that
 Early identification of new opportunities
connection have not yet realised that there are a range of
other opportunities available to them for sub-12 month  Flexible and adaptive to change
payback sustainability projects.
 Focus on efficiency measures

“ Never underestimate the depth of the easy




Strong governance and reporting systems

Enhanced risk management (strategic and operational)

 Effective reputation protection and enhancement
wins.
Richard Gillies, Director of Plan A, Marks &
Spencer plc

Page 13
Finance and Sustainability

One facet that the successful companies profiled in

the research shared is an understanding that ignoring
sustainability challenges poses a greater risk of incurring
higher future costs and penalties that markets and
legislators may impose on companies that are socially and
environmentally irresponsible.
Several other consulting and finance companies have also
published research over the last three years showing that
companies that integrate sustainability into their core
functions consistently outperform the market – even in
these constrained times.
“ We delivered £50m to the bottom line in
2009 from Plan A.
Richard Gillies, Director of Plan A, Marks &
Spencer plc
More than one delegate pointed out that most companies’
target of only achieving compliance with the prevailing
regulation and legislation was not good enough, and
would increasingly separate the average performers from

“ the out-performers in the coming years.

The Goldman Sachs Sustain list chooses

companies that we think are going to be
able to sustain profitability into the future,
“ Compliance is entry-level; simply being
over the long term. Stocks outperformed compliant will not provide you with the
by 35% showing that ESG factors are licence to be credible, competitive,
increasingly important. influential, or a high performer.
Andy Howard, Equity analyst, Goldman Sachs

There is a long way to go in terms of reporting

In fact it is not too hard to see why many of the disciplines
Measuring returns on sustainable investments is not
that flow from focussing on sustainability have a generally
always easy. Many companies start off by reporting
beneficial effect on an organisation’s business processes
resource consumption levels and future targets; others
and efficiency.
have started to work with industry bodies and suppliers
to develop common standards. The Carbon Disclosure

“ M&S’s Plan A summarised:

Project is a good example. However, significant progress
is required in order to get us to a point of being able to
compare apples to apples.
- It makes financial sense
-
-
-
It challenges you to innovate
It manages your future risk
It motivates your people
“ Creating a separate little box to tick slightly
- … and it’s fun. misses the point; ESG considerations should
not be separate – they need to be part of
Richard Gillies, Director of Plan A, Marks &
Spencer plc an overall understanding of the company.
Andy Howard, Equity analyst, Goldman Sachs

Companies such as M&S have shown that the business

In addition to external reporting, businesses are also
benefits of sustainable practices extend further than simple
finding the need to create a common language internally to
carbon saving, delivering a significant uplift to profits
encourage a change of employee attitudes. Small changes
directly attributable to sustainability-related activity.

Page 14
Finance and Sustainability
in the script can lead to wider behavioural change. And
the insights gained can provide the impetus for finding
the new opportunities we have already discussed, and
form the basis for new measurement and productivity
frameworks.
“ A lot of value comes from understanding a
broader information set.
Jessica Fries, Director, A4S
The Prince’s Accounting for Sustainability Project (A4S) is
working to create standards and more effective methods
of reporting sustainability-related criteria.
Every publicly listed company is required to
file an annual report on its financial performance
in compliance with, in most cases, either IFRS or
GAAP. Many companies also voluntarily produce
CSR or sustainability reports, but there is significant
variance in relevance and quality, as there are no
global standards for measuring and reporting on
environmental, social and governance (ESG)
performance.
The Prince’s Accounting for Sustainability Project
(A4S) and the Global Reporting Initiative (GRI)
recently formed the International Integrated
Reporting Committee (IIRC) to address the
challenge. The IIRC brings together a cross section
of representatives from civil society and the
corporate, accounting, securities, regulatory, NGO,
IGO and standard-setting sectors, to develop a
framework for information about an organization’s
total performance, prospective as well as
retrospective, to meet the needs of the emerging,
more sustainable, global economic model.
Page 15
“To make our economy sustainable we
have to relearn everything we have learnt from
the past. That means making more from less and
ensuring that governance, strategy and
sustainability are inseparable” said Professor
Mervyn King, Chairman of the GRI. “Integrated
Reporting builds on the practice of Financial
Reporting, and Environmental, Social and
Governance - or ESG - Reporting, and equips
companies to strategically manage their operations,
brand and reputation to stakeholders and be better
prepared to manage any risk that may compromise
the long-term sustainability of the business.
The push for sustainability is creating new thinking and
innovation
The effort expended in finding ways to make an organisation
more sustainable, both internally and throughout its supply
chain, often gives rise to new and innovative ways of doing
things. It can also identify white space opportunities which
may not have been considered if the impetus to invent and
discover new growth opportunities had not existed.
In addition to driving innovation and finding new ways of
doing business, a sustainable and committed organisation
is more likely to attract and retain talent from across
the spectrum. Many studies have shown that more than
two-thirds of an organisation’s employees feel positively
towards their employer if they have a strong sustainability
track record. And a similar proportion would actively avoid
working for an organisation that did not.
What constitutes value may change
But the value that a company generates today will
change over time. A century ago, there were hundreds
of companies selling horse-related equipment, and few
people could afford a car; forty years ago, the majority of
Nokia’s revenues came from paper and rubber products,
yet within 20 years of moving into telephony, the company
had attained a number one position globally in the market,
and in another ten had sold a billion mobile phones.
Finance and Sustainability

“ What we sell is value; but how value is

“ The market is about to embark on a
interpreted today is different from how it sustainability revolution. We are working
was interpreted in the past… and how it hard to prepare for it. Are you?
will be in the future. Richard Gillies, Director of Plan A, Marks &
Richard Gillies, Director of Plan A, Marks & Spencer plc
Spencer plc

IBM is planning a range of ongoing projects and work in

this area, some of which are outlined in the next section.
The best place to be positioned as markets, customers,
and cultures evolve is in the vanguard, finding new value.

The pace of change may vary

Ending on a predictable but relevant note of urgency, many
delegates exhibited both excitement at the sustainability
challenges that they face today and discomfort with the
pace of change in their own organisations.

“ Given the conversations today about scarce

resources (metals, water, etc.), the pace of
population growth, and so on, the rate of
change may become very rapid.
Trevor Maynard, Head of risk management,
Lloyds of London

The pace of change is difficult to predict. The market may,

or may not, be approaching a number of tipping points –
legislative, customer sentiment-driven, climate-oriented,
and economic – the list is extensive. Exactly how quickly
those tipping points are reached, and how quickly market
conditions will change as a result, is unknown. A number
of speakers and delegates were convinced that at least
some of those points are imminent however, and it seems
appropriate to end this proceedings report on that note.

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Finance and Sustainability

Outcomes: developing the themes

The Start Innovation Jam

The IBM Summit at Start was “one of the most significant
events of its kind that has ever taken place in this country”
according to Charles Hendry, the Minister of State for
Energy & Climate Change.The Summit brought together
key stakeholders from many communities, and created a
momentum amongst attendees to do something to make
a difference. The journey towards a sustainable economy
will be a long one, and the Summit was always intended
to be the start of a process rather than a single, albeit
impressive, event. As a continuation of that process, IBM
has announced that it will be hosting a ‘Start Innovation
Jam’ in April of 2011.
An Innovation Jam is an online text-based discussion forum
for conducting a large-scale brainstorming event. Diverse
groups of individuals are connected via a web browser to
discuss and develop actionable ideas for business-critical
or urgent societal issues. The key word is ‘actionable’. The
purpose of this Jam is to take what was learned from the
Summit, and turn it into a bank of actionable ideas. This
is about how – the Summit identified a number of urgent
needs to which we need to find solutions: we need to
encourage collaboration between differing constituencies,
but how do we make it happen? How do we start to change
individual and corporate behaviours? How do we engage
with younger people and how do we act NOW to make a
difference? The Jam aims to answer these questions and
in doing so kick off hundreds of projects that will generate
real solutions and provide inspiration for a thousand
more.
The Jam will be facilitated by IBM in conjunction with the
Start organisation and many of the other Start partners.
They will be inviting everyone who attended the 2010
Summit, their partners and clients, and many others who
wish to join them on the journey.

Page 19
Finance and Sustainability

The IBM Summit at Start

Start is an initiative established by HRH The Prince of UK. Over 1,000 of the UK’s most influential people joined
Wales, that aims to create a vision of a more sustainable forces with some of IBM’s global experts to create a new
future, and seeks to promote sustainability through simple, constituency around economic, social and environmental
positive and aspirational messages. sustainability.
IBM is one of the founding partners, and is the exclusive Charles Hendry, the UK Minister of State for Energy and
partner for Business to Business engagement. In September Climate Change said that the IBM Summit at Start was
2010 IBM led a Business Summit – nine invitation-only “one of the most significant events of its kind that has ever
days that covered key topics on the sustainability agenda taken place in this country”; this document, written by
for business. Its starting point was simple: “ask not what The Bathwick Group, reports the output from the summit,
you can do for sustainability – ask what sustainability can with a specific focus on Day 6, Finance & Sustainability.
do for you”.
Business engagement in the broad sustainability agenda
is crucial if we are to make progress. Business led the
industrial revolution, it led the digital revolution and all the
signs are that it will drive the sustainability revolution too.
Each day of the summit saw senior business leaders, public
sector officials, NGOs, academics and commentators come
together in London’s Lancaster House to make a difference
to how sustainability is perceived and positioned in the

Page 20
About The Bathwick Group
The Bathwick Group is a research-based consulting company that helps clients address their most pressing needs in
strategic planning and go-to-market execution.
Sustainability & the future economy:
Defining the future – risks and opportunities; strategic modelling and benchmarking, future-proofing to mitigate strategic
risks, and identification of new market opportunities
The future of business & organisational performance:
Focused on collaboration and disruptive platforms; solving client challenges rapidly by combining external experts and IP
protection mechanisms to expedite solutions to important challenges
The application and future of information technologies:
Focused on infrastructure (futures and cloud computing) and interaction (including social media) in business. Future-proofing
strategy and effectiveness audits for enterprise IT leaders, cloud assessments, data audits, and benchmarking
IT industry futures:
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www.bathwickgroup.com
Document number: BG-EV-W-00074UK-EN-00