Gil Friend - opening keynote - NewMetrics 2013

Recognized by the Guardian as one of the top 10 sustainability consultants in the world. He's on the advisory board for SASB and again has been thinking alongside us about this topic for a long time. So he's a very adept person to be leading today's conversation and I welcome him to the podium.

Good morning, everybody. Glad to be here with you. Let me start by just giving some appreciation. We want to give special thanks to Energy Points and Avila and Credit360. These are the main sponsors of this conference. This conference wouldn't be possible without their support, so thank you all for that. Also, another thank you to native energy. This event is carbon neutral by virtue of the efforts of offsets from native energy and electricity has been offset by wind made. Wind made. All energy and carbon impact from the event and the venue itself and from all your travel and all your hotel usage has been taken into consideration. In that. Coanne's asked me to say a few words to set some context and let me just give you some background on myself first. I'm CEO of Natural Logic. We're a strategic advisory firm. We advise major brands on creating and capturing value at the intersection of profit, risk, brand and purpose. And I'm not going to talk a lot about that here. We can talk during the day about that. But one of the things that's been central to us in all of our work over the past 14 years has been measuring what matters. Because, you know, as everybody knows, what gets measured gets managed. Everybody knows that, right? You all know that it's not true. What gets measured can get managed. You know, what's not going to get measured isn't going to get managed well. So at least there's the possibility there. But, but that begs the question of what should we be measuring? What are the kind of measures that make a difference? And so one of the questions I just want to leave in the air through the course of this morning, in the next couple of days, taught to me as a pivotal question by my mentor, Bob Dunham, is for the sake of what Bob says that that's the background question in every human conversation, certainly in every business conversation, someone makes a request of you, you promise to fulfill that request. In the background you is hopefully a shared understanding of why is this important to us for the sake of what are we asking and performing these actions, sometimes that isn't clear or isn't shared. So I'd like us to hope over the course of these couple of days that we get that more clear in our conversations as we look at what's important to measure for the sake of what? One of the things that this is for the sake of is developing a common language, a lingua franca that ties together all of our efforts so that we can have shared focus and shared commitments and shared agendas. Some of it very much is about disclosing value. Whatever value means to you, whatever value means to your organization. How do we get a handle on what that is and where that is and how do we track toward it and maximize that? We'll have conversations about both hard and soft metrics. You know, hard carbon emissions, soft metrics, employee engagement. Well, it turns out a lot of recent research is showing that the soft metrics are as significant as the hard metrics as a driver of value in organizations. They're more challenging to get at with precision, but they're enormously potent in their leverage. But let me zoom out for a moment and say when you look at the state of sustainability today, for all the progress that we've seen and sustainable brands highlights that day after day, there's enormous innovation around the world. I think if we were going to tell the truth, we'd have to say we're not winning. And it's hard for me to say this. I'm usually the optimist in the room. Those of you who know me have heard that from me for years. But we're in a very challenging situation. I moderated a strategy session in New York yesterday led by Nike and some other companies looking at the state of climate in particular sustainability in general. And there was some gloom in the room. There's some real frustration about seeing how well organized the opposition, the extremely well funded climate denial machine has been and how ineffective by comparison, or at least un unified and unfocused we've been at the level of international agreements, national policy, certainly in the United States. And you know, coal is beleaguered in the United States, but it's growing in China. And the International Energy Administration has told us that we need to keep 80% of all fossil fuels in the ground to have a prayer of stabilizing the climate. And I guarantee you that the owners of those assets are not going to go quietly into that good night. There's a big fight ahead on that. We see enormous growth steadily year after year in the attention that CEOs are giving to the sustainability issue. But now there's questions about whether that's lip service or not. Recent study from released by the Global Compact Accenture said that 78% of CEOs see sustainability initiatives as a route to growth and innovation. Great. 79% see it as a route to competitive advantage for their companies. Great. But only 45%, down from 54% last year, see it as extremely important to their business. Even lower in Europe. 34% in Europe. So is this lip service from CEOs or a serious focus toward action? 33% say that their company's actions are sufficient. 3% say they strongly agree with that statement. So clearly there's a massive gap on the ground in what companies are doing. The insurance industry has a particularly cogent and important view on these issues. A study just released this last week said that more than 600 cities around the world are at serious risk for climate related events. You look at Superstorm Sandy last year at 80 to 100 billion dollars worth of damage. Last estimate that I saw. What happens when we get two of those in one season or three or five? What happens when the hundred year events happen every ten years or the thousand year events happen every three or four years? This is very salient to the insurance industry. And yet in our work at sasb, the Sustainability Accounting Standards Board, we're looking very carefully at the challenge of fiduciary responsibility. What should be reported? There is a risk if companies don't report certain information, but there's also a risk if they do. What is the standard for relevance for fiduciary duty? This is unsettled territory and I would note since the topic of fiduciary duty came up this morning, the notion that the sole responsibility of directors of corporations is to maximize return to shareholders is only 40 years old. This is not settled tradition in the business world. This came to us with the work of Milton Friedman in the early 1970s. Those of you who run companies know that there are many ways that value is generated. And yet we have this cultural lock in around something that is a very narrow perception of where that comes from. In fact, those of us who have been working in this field, many of you in this room know that sustainability represents potentially the biggest business opportunity of the century. In our work with clients, major brands that we've worked with Coke and eBay and HP and Levi's and Steelcase and Sunpower and many others, we have found documented on the ground massive opportunities of value, in some cases as large as the company's existing global revenue. Now that's not easily accessed. That requires a profound redesign of the business proposition from top to bottom. But at least as a possibility, that scale of impact is there. And many of the actions that you would take to maximize value and the actions you would take to mitigate climate change are in fact the same. So the argument that says we can't afford to do this presumes that sustainability is at the expense of profit. If that's the case, it's a rational business strategy to delay those investments as long as possible till you're compelled by regulation or markets or what have you to do it. If in fact these strategies are profitable, the rational business strategy is to accelerate them and harvest the advantage now. Build brand, build profit, reduce risk, and dare I say, serve purpose and build meaning in an organization through the same set of actions. So, you know, so the question that we are faced with through all that is, well, what's good enough? How much is good enough? And, you know, this is the kind of question that the GRI grapples with, that SASB grapples with. These are, you know, massive laundry lists of potential metrics which are a good universe for consideration, but in fact, not what anyone's going to manage to. What you're going to manage to is always going to be a much shorter list. But when I think of the question of what's good enough, I think of Tesla, which all of you know is hot, hot automobile property, selling more cars in California than all the other luxury brands combined. But one notable metric from there, announced just a few weeks ago, is that Tesla hit perfect scores on every safety rating for the Transportation Safety Board. Five out of five on everything. And people thought that was pretty cool. I thought it was remarkable. Not that they did it, but that nobody else ever has. It's clearly not impossible. But I think what the difference was that Elon Musk said to his company, we're going to hit perfect scores on all these. Design a car that does that. And I imagine that everybody else said, we're going to do as well as we can within the constraints of engineering and financials and the competitive market situation. Maybe four is good enough, maybe three and a half is good enough in our competitive niche in the marketplace. Well, the hell with that. What if perfect is good enough? What does it take to do that? And one of the things that it takes is designing is declaring in your own minds what that is, what the aspiration is, what the goal is, and then doing what business does so well, orchestrating resources and know how and capital in order to produce the goal that's been aimed at. And, you know, this is part of the answer to the. For the sake of what? Because what we do as human beings is that we create worlds when we speak. We certainly create worlds when we make promises. So it comes down to the kinds of promises that we make. And the question for the metrics conversation is what kind of metrics will reveal that will reveal what we're committed to, what we care about, and where we're going? What kind of metrics are generative that actually create possibility that we can step into as individual people and as companies that reveal true progress and that generate potent and effective action toward that progress, toward the goals that we share. So for me, for the sake of what comes down to a simple statement and a very tall challenge, our job together in the sustainability movement is not to sustain things, as Bill McDonough says, it's not to keep things at the level that they are now. How boring is that? But it's to reinvent the economy of an entire planet, this planet, and to do that in one generation, to do that in a way that builds wealth inclusively. And the challenge for the metrics conversation is to do that in a way that provides a clear line of sight that connects every single person in your company with the actions that they take and the impacts of those actions and the contribution of those impacts to the goals that we all share together.