WEF report executive summary for webcast

Lawrence Hutter transcript

Hello, my name is Lawrence Hutter and I am the Global managing partner for Deloitte’s Consumer Business industry group. Over the past two years we have been working in collaboration with the World Economic Forum to deliver their Sustainable Consumption Initiative. The initiative aims to develop practical ideas and new forms of collaboration to place sustainability at the heart of business models.

The results of phase one of this study were shared at the Annual Meeting of the World Economic Forum at Davos in January 2009, and set out to present the business case for sustainability and highlight the potential impact that rising prices of resources would have on consumer industry companies. The report outlines a series of actions consumer businesses should begin to address to move the industry to a more sustainable future and emphasises that a more fundamental, transformational shift in the way the world produces, consumes and manages value chains is needed. Phase one of the report is available to download from our website, details of which will be available at the end of this webcast.

Recently, we successfully reported back on phase two of this study at the Annual Meeting of the World Economic Forum at Davos 2010. Today, I am going to share with you the outputs and key findings of this report entitled: A roadmap for Sustainable Consumption.

The objective of this report is to offer immediate, practical ideas on how companies can partner across industry boundaries to begin to realize that vision now. We believe companies that take the lead on sustainability will be market makers rather than market takers.

The key findings that came out of phase two of the study were the need to engage with consumers in a meaningfully way on the sustainability agenda, the need to use sustainability as a primarily lens for innovation in product and service, the need for core business models to be rethought and finally that the need for collaboration all along the value chain. At its heart also lies the need to reevaluate value to move away from a focus on stuff to experience and experience that can be appreciated by consumers in a sustainable way.

As we know the world is at a tipping point. Populations are rising; the world’s population is forecast to rise to 9 billion individuals by 2050 perhaps more significantly by 2030 we expect 2bn to join the global middle class. The availability of natural resources is diminishing. Global economic health is based on consumption and without fundamental changes; our global economy is at risk.

A prosperous future depends on innovative new products and business models that achieve transformative efficiency – and create new market opportunities.

Sustainability matters to business because it reduces exposure to volatile and rising resource prices. Embracing models of sustainable consumption across the value chain will provide stronger resilience against external shocks.

Principles of sustainability are increasingly being incorporated into the regulatory environment. If businesses wish to flourish in this environment, they must make themselves active participants in its construction.

The biggest drivers of corporate sustainability investments are consumer concerns, employee interest and government legislation. Businesses need an effective long-term strategy to engage with consumers and with employees.

Consumers increasingly want to be able to make internal choices, demanding not only more sustainable products and services, but also greater transparency over sourcing and content of existing ones.

The challenge of sustainable consumption presents opportunities for many businesses to enhance value creation and innovation within society. And in the end, sustainable consumption matters to business because there will be winners and losers in the new economy, and those that move most swiftly are likely to reap the greatest benefits.

In order to build a future of sustainable consumption, we need to focus on 5 fundamental areas:

  • Innovation: Sustainability will be a primary enabler of innovation and should be at the core of the design of products and services and the development of new business models and platforms.
  • Collaboration: New forms of collaboration between business partners, along entire value chains, and with key stakeholder groups will be needed.
  • Investment: To catalyse a prosperous future, businesses need to look beyond short-term pressures and focus on investment for the long term, working to build understanding among investors of the value at stake in long-term planning.
  • Values: To become relevant in shaping a better future for society, new value-based frameworks are needed to align behaviours in more productive and innovative ways.
  • Leadership: As business leaders, we choose to lead from the front, because we see that the cost of inaction to our businesses far outweighs the cost of action.

Four practical, achievable steps will help vanguard companies start this process, highlighting the obstacles that must be overcome and the opportunities that can be seized by businesses, leaders and citizens in the process:

The first step is to firm up the foundation, as the current leading business practices of today become standard business practice and sustainability strategy is integrated into business.
Secondly rebuilding business, in which sustainability is integrated throughout the business, new business models are piloted and demonstrated as being viable.
Thirdly, new value chains, is the beginning of a major shift to new business models, in which sustainability is integrated across value chains and entire chains are moving towards zero net waste.
The final step leads to balanced systems, in which innovation drives sustainable value chains and value is redefined for all stakeholders.

To unlock these opportunities, organizations need to fundamentally change the way they think and act. As business leaders we need to make the journey towards sustainability as tangible as possible. Leaders need to sign up to clearly defined targets and performance metrics for measuring their success in achieving sustainability.

We need to engage all levels of our business. Embracing sustainability needs to start at the level of the board, introducing it as a core component of strategy, seen as a critical determinant of future growth and profitability.

There needs to be a change in our business models. Mainstreaming sustainability in a business requires a cross-functional programme with the right people, a robust governance structure and a clear mandate to drive sustainability throughout the organization.

We need a shift in corporate culture and values to reflect the objectives of achieving genuine sustainability. As sustainability will be vital for future growth, activity should focus on driving sustainability through innovation by establishing design incubators to test initiatives in a safe environment.

We need to engage all internal stakeholders. Managing and implementing change will require internal stakeholder engagement and communications initiatives to build sustainability into the culture’s DNA and create support and demand for sustainable ways of working.

Sustainable practices need to be implemented across and along value chains. The key will be building collaborative partnerships based on trust and mutually beneficial aims, and establishing standard metrics for measuring sustainability and success.

The framework shown here helps businesses align their operating model with changes in their Customer Value Proposition and Profit Model. The framework shows the key components of the operating model, which can be updated to identify specific actions.

In addition to our individual commitments to sustainability, we seek collectively to leverage the platform offered by the World Economic Forum to explore and develop practical collaborations around key actionable partnerships.

The project has brought together leaders in the sustainability space and provided opportunities to share leadership and best practices. Partner companies involved have been able to, for example:

  • Establish a vision for a sustainable tomorrow to help guide long-term company strategy
  • Promote better understanding of systemic complexities and the interactions of stakeholders along product value chains
  • Build appreciation and trust on sustainability among key stakeholders, including consumers and policy-makers
  • Understand the role of consumers and policy in shaping the future business landscape on sustainability and the true costs of resources

We believe we have the potential to create new business models that build lasting prosperity for the many and not just for the few; that make wise use of natural resources; that internalize social and environmental capital; and that focus on innovation to thrive in a low-carbon, dematerialized economy driving smarter consumption.

Within this report are many specific and sensible ideas which will help change big aspirations into real action. Commitment to these principles and actions will set the foundation for transformational change.

We see a tremendous challenge ahead, and success should not be celebrated before progress can be measured and results are shown. But we also see a great opportunity to be part of this fundamental change and hope you do too.

This is a high level overview of the report, we encourage you to read these reports and join the action. You can download both the reports discussed in this webcast from our website at www.deloitte.co.uk/drivingsustainableconsumption - I hope you find them interesting and insightful and they assist in your move towards a more sustainable future for your organisation. If you have any questions regarding this study or around sustainability in general please get in touch with one of our team who will be very happy to help.

Thank you for listening.