Hi, I'm John Byrd, and welcome to week two of the MOOC, Become a Sustainable Business Change Agent. This week we're going to have two lecturers on why a company should become sustainable. And then we'll talk about why they aren't. As you begin to formulate your proposal for change, you need to identify a reason that the change helps your company. This is making the business case for sustainability. In this lecture and the next one, I'll describe some of the most common ways that sustainability helps companies. Not all of these will apply to any specific case, maybe only one supporting reason will apply. But that can be enough to make the change attractive to decision makers in your company. Sustainable business is all about reducing waste and using less energy, materials, water, and so on. These reductions translate into cost savings. They can provide a financial reason for making sustainability changes. In a few weeks, we'll look at how to quantify these savings when we have a module on financial analysis. Reducing energy and material use has a second benefit. It reduces the risk of price changes or supply shocks. If the price of energy goes up, a company that uses less won't suffer as large an increase in its bills as a less frugal company. Being careful about using resources saves money and makes a company a little more resilient, or able to withstand shocks. Being sustainable also reduces another type of risk. For many companies, much of their value is in their reputation or their brand value rather than in their factories and their machines. For example, in mid-2016, all of Apple's stock was worth about $585 billion. Of that, analysts estimate that about 245 billion, so not quite half, was the value of Apple's brand, not its factories, not its machines, its brand. Sustainability with its long-term and life cycle thinking helps companies avoid making mistakes that can tarnish the reputation, reduce their brand value. Here's a list of the most valuable global brands as of 2015. The brand values are in millions of dollars. The sum of brand values of these 14 companies is $1.42 trillion. You can see why companies should want to protect their brands. Consider a toy maker that saves money by using a low cost overseas manufacturer and then doesn't provide much oversight of the manufacturing process. Just before Christmas, someone discovers that the toys are painted with lead paint. Suddenly, no one wants to buy the toys for fear their children will put the toys in their mouths and swallow some lead and be poisoned. A sustainable company would specify what ingredients or materials could be used in its products. And it would monitor production or contract with a reliable manufacturer. Or think about Wells Fargo Bank. It apparently pushed employees very hard to open new accounts and sell products. Too hard because they cheated and the company's now paying a $185 million fine, and the CEO resigned. A sustainable company would create a culture of performance that encourages people to work hard but not to cheat. Remember our discussion on short-term decision making? In the short term, it might increase profits to push employees very hard. But it almost [COUGH] never is good as a long-term strategy. Wells Fargo found that out. Being sustainable usually means that companies won't have a problem complying with regulations. In fact, sustainability usually implies performance beyond mere compliance. Remember when we talked about resilience, and reducing a company's vulnerability to disasters? Sustainability can also reduce companies' vulnerability to embarrassment, fines, and a loss of its reputational capital. Sustainability experts sometimes talk about a company's social license to operate. This isn't a real license. It's something that communities or customers confer on a company. The notion began in the mining industry where large projects needed community support to be approved and implemented. If a company couldn't convince nearby communities that it would carry out the project in environmentally and socially sensitive ways, and that the project would benefit the community, then communities would sometimes fight projects and prevent them from being implemented. The idea of the social license to operate is now spreading beyond the extractive industries to other companies. Communities want to say about how business might impact them. If companies don't have a good track record, then it's going to be very hard for them to convince communities to trust them. In order to grow and thrive, a company has to be able to ask communities if it can enter and do business. Sustainability helps companies protect their legitimacy, so they can grow and expand. Sustainability can also help companies attract and retain talented employees. I once heard a televised press conference in which the chief operating officer of a large company said the company was becoming sustainable because with its current reputation, when it was out recruiting at colleges the best students, the ones they wanted, and needed in order to grow and compete wouldn't even talk to them. You can understand the students' attitude. Who wants to work for a company that's constantly being criticized for its treatment of workers at home and abroad, or that doesn't follow environmental rules or laws? People want to be proud of the work they do, not embarrassed, or ashamed, to tell people who they work for. Since you're taking this class, you probably want to make a difference in the world. There are a lot of people like you. So companies need to have a mission and goals that resonate with you and people like you. It's not enough to do a few token things related to social responsibility or sustainability. There has to be authentic engagement and opportunities that employees value and feel make a difference. In the next lecture, we'll talk about other ways that sustainability can help your company. Thanks.
