New Commitments Yield New Markets

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New Commitments Yield New Markets

• Sustainable Enterprise Summit
• March 17, 2004

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A sense of where we are

• In the past 20 years
• Economic output up 75
• Energy use up 40
• Meat consumption up 70
• Auto production up 45
• Paper use up 90
• Advertising up 100
• World population up 35

• Meanwhile
• 75 of marine fisheries are fished to capacity or
  overfished 5 in 1960
• Water supplies per person dropped by a third
  between 1970 and 1990
• A Nevada-sized area of forest is lost every year
• Roughly half of the people in the world live on
  less than 2 a day

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Premise of this Panel

• Unprecedented growth of demand for natural
  resources
• Rapidly accelerated pressure on natural systems
• More people competing for their fair share
• Something has to give
• Somebody has to lead
• There are real business opportunities and
  advantages for those who commit to lead the way

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Panelists

• Madeleine Jacobs, Head of Sustainable
  Development, ABN AMRO
• Thomas Jorling, Vice President, Environmental
  Affairs, International Paper
• Sofie Beckham, Forestry Manager, IKEA
  Trading Americas

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Questions

• What are the business motivations that persuaded
  your corporation to make these commitments?
• What have been the most significant challenges,
  obstacles, or impediments to putting these
  commitments into practice?
• What do you think the future of sustainability
  commitments will be in your industry?

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Format

• All three will address the first two questions
• Discussion
• All three will speak about the future
• Discussion

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New Commitments Yield New Markets
Thomas Jorling Vice President Environmental
Affairs
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THREE DRIVERS OF COMMITMENTS

• mandatory / regulatory
• VOC, NOX, SO2
• voluntary / external
• CCX, EPA-climate leaders
• voluntary internal
• endangered species banking, wetlands
  mitigation banking

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WHY MOVE TO CAP AND TRADE AND OTHER MARKET
MECHANISMS

• To learn and gain experiences with the emerging
  techniques that offer the promise of
  cost-effective pollution control beyond current
  standards - these include VOC, NOX, SO2 and
  perhaps soon - CO2
• To participate at the earliest possible stages of
  the development of these mechanisms to help
  influence the shape and content to assure
  practicality and feasibility
• To test the reality of markets in natural
  resources (i.e. endangered species, conservation
  easements, wetlands mitigation)
• As a natural resource/forest land based industry
  these markets not only offer environmental
  achievement but also ways of unlocking value from
  assets

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CHALLENGES / OBSTACLES TO THESE EMERGING
MECHANISMS

• Exploring and testing the new while spending is
  still being driven by the old i.e. capital
  spending is dominated by EPA rules, no discretion
  not to spend compliance required even though
  high cost little benefit
• Maintaining existing environmental infrastructure
  both OM and capital sucks up resources at a
  time when global competitiveness is keen
• Conflicting public policy and law many EPA
  requirements result in more greenhouse gas
  emissions with no comparative assessment that
  such result is worth the environmental benefit
  from the requirement
• Rules that require incremental reductions across
  all systems at high cost lock in old technology
  and discourage new technology

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WRI Sustainable Enterprise SummitWashington,
March 17, 2004
New Commitments Yield New Markets for Financial
Institutions

• Madeleine Jacobs
• Head of Sustainable Development
• ABN AMRO

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Our Sustainability Learning Curve
SD business Strategy
Value Creation
Equator Principles
OG policy
Mining policy
Forestry dialog
Loss Avoidance
APP
Dialog with FOE
Freeport
Value Destruction
Proactive External Dialogue
Wake-Up Call
Developing Internal Standards
Common Sector Baseline
Case Specific Defence
Innocence
Pursuing the Business Case
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The Equator Principles

• Voluntary declaration among leading group of
  Project Finance Banks
• Establishes a common framework for
  commercial Banks
• Will provide loans only to borrowers
  complying with Environmental Social standards
  and processes
• Based on IFC/World Bank guidelines/policies
• With 20 Banks adopting, a de facto industry
  standard

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The SD Business Rationale for Financial
Institutions

• Our LT success is linked to core competencies
  that underpin
• our role as a Bank
• Trust
• Client Satisfaction
• Risk Management
• Employee Satisfaction Attraction

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Challenges in the implementation of commitments

• Building the Business Case
• Translating SD into a focused business strategy
• Making dilemmas tangible/enabling people at the
  front
• Compliance
• Dealing with emerging markets clients with
  standards still lagging

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WRI Summit New Commitments Yield New Markets
Social Environmental Responsibility in a
Competitive Marketplace
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Question 1 IKEA Business Motivations

• DRIVERS
• The IKEA vision- Create a better everyday life
  for the many people.
• Past challenges/milestones- IKEA must be
  proactive towards social and environmental issues
  to ensure our long-term future.
• External groups- NGOs and other external groups
  have increased our awareness of important issues.
  

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Question 1 IKEA Business Motivations

• ADVANTAGES
• Raw material security- IKEA must be proactive to
  have supply!
• Eco-efficiencies- Efficient raw material use has
  a positive effect on costs.
• Marketplace differentiation- Consumer awareness
  of social and environmental issues is growing.

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Question 2 Challenges, obstacles and impediments

• Communication-Internal/external
• Resources-New competencies and tools needed
• Varying global conditions-Different countries,
  different conditions

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Questions and Answers
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Final Question

• What do you think the future of sustainability
  commitments will be in your industry?

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Question 3 Future of Sustainability Commitments

• Deepening commitments
• Partnerships will increase
• Systems thinking/New tools

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Question 3 Future of Sustainability Commitments

• Product recovery
• Product tracing
• Consumption

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We have only just begun, we still have a long way
to go!!!
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THE FUTURE

• Likely to be an extended period of policy
  gridlock and impasse until inefficiencies build
  to an inescapable need to change
• That need will result from (or produce) a
  convergence between
• Development of systems and processes (including
  those based on markets) that are coherent,
  cost-effective and efficient
• Examples of results from innovation pilot
  demonstrations involving governments and NGOs
• Rapid development of transforming technology,
  especially in climate / environment friendly
  energy production, water cleaning, etc.
• Growing spirit of partnership rather than
  adversarial relations among stakeholders

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• Some of this will be driven by what appears to
  be a unifying concept sustainability.
• Sustainability recognizes that environmental,
  economic and social welfare conditions all have
  to be addressed if 9 billion people can satisfy
  their basic aspirations for a decent quality of
  life without degrading the life supporting
  biosphere.

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New Roles and Opportunities for the Financial
Sector

• We are entering an era where we rebalance
  priorities of the 90s- toward governance and
  people/planet
• A more active role for Banks as part of society,
  working towards balanced solutions jointly with
  public sector and industry clients
• SD will become a critical internal success factor
  for Banks
• New markets and products
• SRI funds, sell and buy side research (focus on
  governance people/planet)
• Brownfield lending, Renewable Energy funding,
  Emissions trading
• Corporate Finance and Project Finance Advisory

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Questions and Answers
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Thank You