What's in a word?

The English language is a source of constant fascination for me. Particularly, when a younger generation changes the meaning of words; leaving their elders in a temporary state of befuddlement. Examples abound. Do you remember when “bad” became “good?” As in he or she is baaad! Most recently, my 12-year old son has taken to calling things that are good to the extreme, “sick.”

Words need not spring from the street to change, or at least evolve.

 
From the Deloitte US 2009 Corporate Responsibility Report:
“It’s possible that the most intriguing word of the still young 21st century is sustainability. Early on, a business that was considered sustainable was one that could be expected to endure and sustain itself because it had a viable business proposition that represented more than fleeting value in the marketplace. During the post Sarbanes-Oxley era, sustainability became popular in reference to internal controls that were necessary to stay in business. Then, over the last five years, the growing wave of emphasis on the environment has made sustainability synonymous with greening and consideration of the consequences or impact that our actions have for our communities and the planet now and for generations to come.”

Somewhat vexing is the continued ebb and flow between corporate responsibility (CR) and corporate social responsibility (CSR). They often describe what appears to be the same thing. Do they mean the same thing? We don’t think so.

Is it an accident that Deloitte has a CR Policy? Not a CSR Policy? Ever wonder why?

I think it’s because at Deloitte, CR is a business imperative with bottom-line impact.  Eliminating the social allows focus on CR as a strategic business direction that’s consistent with our values and culture, but ultimately as smart as it is good. 

However, many admired organizations still use CSR, even some folks within Deloitte. Don’t they get it or are we missing something?  What do you think?

Jack McFadden, Corporate Responsibility Communications Director, Deloitte Services LP

As used in this document, “Deloitte” means Deloitte Financial Advisory Services LLP and Deloitte & Touche LLP, which are separate subsidiaries of Deloitte LLP. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries.  Certain services may not be available to attest clients under the rules and regulations of public accounting.

The Value of Water

What is the value of water?  March 22^nd is World Water Day and a good time to reflect on this question.  

For most businesses, the price of water remains relatively inconsequential compared to other operating costs. The real value of water for business is tied to intangibles such as brand, reputation, license to operate, business continuity and as a driver for innovation.

But there is another aspect of the value of water for business -- arguably the most important aspect -- that is tied to the social dimension of water.

Currently, some 1.1 billion people lack access to clean water, and more than 2.5 billion people lack access to safe sanitation.  The implications of these statistics for a steepening scarcity curve are staggering, particularly as demand for water increases globally in many major sectors – industrial, agricultural and domestic.  The business implications are similar to the implications for society:  increased competition for water and a workforce that lacks access to a basic resource.

Based on innovative ideas presented at the Hult Global Case Challenge, solutions can be identified to help solve the water scarcity issue. I participated as a judge a few weeks ago in the second annual Hult International Business School Global Case Challenge (courtesy of Jack Russi and Cathy Benko from Deloitte).

The competition is focused on addressing the global clean water crisis in partnership with Water.org, an organization founded by Gary White and Matt Damon, and The Clinton Global Initiative (CGI). In competitions held in Boston, San Francisco, London, Dubai, and Shanghai, the international competition “crowd-sourced” innovative ideas from some of the world’s top students. The Hult Global Case Challenge, as a CGI member, has committed to working with fellow CGI members to solve one of the world’s most pressing resource issues.

The winners of each Regional competition will compete in the Global Final in New York City on April 30, 2011, co-hosted by the CGI. At the final event, the participating teams will present their refined solutions to a panel of executive judges. Water.org will receive a USD $1 million donation from Hult International Business School, which can be used to help see the winning team’s solution implemented.

The Hult competition draws attention to the alarming and indefensible lack of access to clean water and sanitation among many populations.  It is driven by a global business school competition, and social issues can no longer be artificially divorced from economic and environmental issues. (The cornerstone of sustainability is, in fact, the integration of economic, social and environmental risks and opportunities.) 

Based upon the passion, creativity and commitment of the students participating in the Hult Global Case Challenge, I am confident new pathways to solving the water scarcity challenge will be identified.

William Sarni
Director, Deloitte Consulting LLP

Will Sarni is a Director with Deloitte Consulting LLP and leads Enterprise Water Strategy for Deloitte Sustainability Consulting.  He is an internationally recognized thought leader on sustainability and is the author of the book, Corporate Water Strategies (Earthscan 2011).

Risk: In Business Project Management, it isn’t a game

For me, the word risk used to invoke images of the classic board game, where players competed for world domination by building armies and invading opponents’ territories.  Players would draw cards to divide the global regions, and then roll the dice when attacking and defending the game’s political borders.  Developing a strategy – such as fortifying your borders, forming alliances and avoiding being spread too thin – is an important element of the game.  For instance, knowing that Oceania is the safest continent to protect and that Europe is the most difficult (a lesson we learned from Kramer and Newman) can give you an advantage over the other players.   While the outcome of the game of Risk is largely dependent on luck – luck of the draw, roll of the dice, and playing your cards right - it is still important to have a good strategy.

Now, when I think about risk, I think about the risk management challenges my clients, and those my Deloitte colleagues, face every day.  I think about the uncertainty and complex problems organizations must overcome when conducting business and planning for the future. 

I moderated a Dbrief this month on the strategies related to large-scale capital project management and investment.  A recurring theme my colleagues (Charles Alsdorf, Glen Justis and Joe Messick) and I identified during the development of the Dbrief was the risks impacting capital planning.  Such risks include:

• Market Risks (e.g., volatile GDP, inflation, commodity pricing, rising interest rates)
• Climate Risks (e.g., global climate change, seasonal weather patterns)
• Regulatory and Policy Risks (e.g., federal budget uncertainties, political unrest, and changes to environmental, infrastructure, healthcare, education and tax policies, priorities and funding)
• Competitor Risks (e.g., actions and responses)
• Customer Risks (e.g., demand, willingness to pay, managing expectations)
• Technical Risks (e.g., effectiveness, reliability, new technologies, standard protocols, R&D)

As you can see, there is a lot for organizations to think about relevant to risk when planning large-scale capital expenditures.  Fortunately, Deloitte’s capabilities go beyond simply listing the risks an organization must account for.  Deloitte has an “army” of leaders, skilled practitioners, industry specialists and game changers focused on risk management strategies.  Deloitte has developed models and identified key attributes for organizations to manage their risks, including:

• Organization and Governance: Leadership, standards, policies and defined team roles
• Business Process: Scheduling, work flow, reporting, project controls, and quality assurance
• Communication: Documentation, report dissemination, feedback, KPIs, progress tracking

Risk management is only a single aspect to successful capital project management.  Benefit analysis, quantifying project robustness, modeling and simulation, portfolio optimization, funding and defining strategic value are other key factors to large-scale capital project management decision making - factors you’ll see outlined in our Dbrief.  Successful risk management can facilitate successful project execution.  And in business, risk is not a game.

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Marlene Motyka
Principal
Deloitte Financial Advisory Services LLP Power & Utilities Leader

As used in this document, “Deloitte” means Deloitte Financial Advisory Services LLP and Deloitte & Touche LLP, which are separate subsidiaries of Deloitte LLP. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries.  Certain services may not be available to attest clients under the rules and regulations of public accounting.

Planting Down Roofs

  
In the course of your day how often do you look up at the skyline? Food, water, and shelter are the three elements of basic survival, and yet we do not spend much time thinking about shelter. Unless we are without it, it’s broken, or we are on an architecture tour, we tend to ignore the rooftops that populate our lives. With a few notable exceptions, like the movement from thatch to tiles to prevent fire hazards in 1212, based on an edict by King John of England, the evolution of roof technology isn’t that exciting. Things are changing however, and it’s time to start looking up, and thinking green.

A green roof (i.e., vegetated roof or roof garden) is a roof with vegetation planted over a waterproofing membrane. In Europe, green roofs are already abundant, yet their popularity is just beginning to grow  in the United States — particularly in crowded urban settings and cities. In Washington D.C., universities, advocacy groups, Federal Agencies, and condominiums are installing green roofs. Chicago has built one for its city hall, Philadelphia has installed them on schools, and Los Angeles on restaurants. They offer many substantial environmental and economic benefits, including:

• Reduction in a building’s energy, heating and cooling costs
• Minimization of storm water runoff,  city sewer fees, and the urban heat island effect
• Filtration of pollutants and heavy metals from rain water and from ambient air, including CO₂
• Extension of the life of a building’s roof
• LEED credits

What do green roofs mean in relationship to Deloitte?  Recommending that our clients consider installing green roofs on buildings is one example of the many ways we can help our clients achieve their sustainability objectives.  Helping our clients reach their greening goals is one objective I keep in mind while developing and defining the Energy & Natural Resource Management service offerings, as part of the Sustainability & Climate Change IMO. I’m not suggesting that we literally get our hands dirty and plant gardens on top of our client’s roofs, but we should be talking to our clients about how to take advantage of the benefits. And while it may seem backwards, starting at the top, by greening their roof, may be a great foundation for the rest of their sustainability efforts.

 
Greg Aliff
U.S. Energy & Resources Leader
Deloitte LLP

A Midas touch - turning sustainability programs into gold

As I mentioned in my previous blog post, sustainability reporting is a growing trend with implications beyond just greening your workplace. It’s also about the pursuit of benefits from cost savings to meeting stakeholder expectations and more! A key lesson for many, long-term gains don’t need to come at the risk of short-term profits. 

What are some benefits of successfully implemented sustainability programs? 
Cost savings. Perhaps the most intuitively attractive benefit is cost and efficiency savings. However, for industries with high carbon intensity due to energy use, cutting waste of any kind is an economic imperative. The cost-saving know-how you gain through streamlining operations might present opportunities to turn your savings into new revenue streams.

Whoever figures out how to squeeze the most “bang” from their increasingly expensive resource “buck” will gain immediate advantage. Whether you start with energy, water, waste or raw materials, the metrics used to identify and reward savings, along with the systemic knowledge gained from tracking efficiency, may well illuminate new opportunities. Imagine if every product design not only had an accounting for its upfront value and cost, but also for the potential value and cost of any waste products and the future value of recycling its raw materials. The math might look a little different.

Competitive advantage. Sustainability and revenue growth need not be mutually exclusive. Traditional market factors such as brand image, price, value and production scale are impacting the environmental and social credentials of a given product. And in so doing, companies are establishing new market niches and upending traditional competitive logic. This bottom-up, supply and demand-based approach emerged from a combination of increased consumer awareness, greater public demand to understand the hidden (environmental) costs of products, and the realization that a product’s story can be just as important as its tangible qualities.

Accountability to shareholders. Investors are becoming a key driver of sustainability activities, establishing powerful groups and developing increasingly relevant measurements intended to persuade companies to disclose their triple bottom line risks and opportunities. Many institutional investors are demanding greater transparency and accounting for sustainability and climate change impacts. 

 

Indeed the competition is fierce in achieving listing on the Dow Jones Sustainability or FTSE4Good Indexes. While disclosure and reporting can win over some powerful investors, a more significant impact may be the initiation of a holistic approach to internal accounting. Once a company begins tracking environmental and social performance with the same degree of acumen reserved for its finances, it is expected that goals will become harder to renege on and progress will be more closely scrutinized. Sustainability reporting is under the microscope and the non-disclosure of material social and environmental progress within those reports could negatively impact an organization’s reputation.

Regulatory compliance. In the hopes of minimizing the potential impact on compliance with any new law, agile companies seek to position themselves ahead of new requirements, and collaborate with policymakers to ensure that their early or voluntary actions are recognized. Many companies appear to see a business case in beating the curve. A top-down regulatory approach often elicits a defensive reaction. But rather than consider shifting operations to another jurisdiction, some companies have found oversight to be a catalyst for innovation, learning to identify and design as much of the “waste” out of their operations as possible. The goal, then, becomes: How do I make this burden a competitive advantage?

A new mindset. The cross section of companies realizing early and increasing returns from their efforts in sustainability is diverse in industry, motives and execution. A key ingredient for success is an emphasis on building an organizational culture of accountability. For many companies that view sustainability as a secondary imperative compared with short-term financial performance, or for those that don’t sense a clear opportunity in their industry, it will take vision, commitment and leadership to motivate organization-wide change and innovation. Holistic, systems-based thinking is beginning to replace the assumptions that may incorrectly define sustainability as a trade-off or an add-on. Moving from an approach that treats the sustainability “suite” as a collection of risks to one that regards it as a toolbox of potential rewards takes time, but the most significant risks are those of inaction – a high cost in missed opportunities and stifled innovation.

Eric Hespenheide

Partner, Deloitte & Touche LLP