Rio+20 demonstrates that we’re “headed in the right direction”

As more than a week of activities at the United Nations Conference on Sustainable Development (Rio+20) concluded yesterday, I think everyone who contributed thought leadership, put their and their organization’s support behind conference goals, and supported the sessions should be happy with where the conference ended: that is, happy that change is happening and that we are headed in the right direction, but not, in my opinion, content to think the work is done.

As you know from our messages over the past week, Rio+20 set out to help shape new policies to promote global prosperity, reduce poverty, and advance social equity and environmental protection.  Along those lines, those of us who participated in a related conference over the past several days—the Rio+20 Corporate Sustainability Forum (CSF)—had three specific goals in mind:

• Set the stage for further growth for companies engaged in sustainable development
• Demonstrate that many solutions for sustainable development already exist
• Demonstrate concrete, tangible action on a massive scale

Integrating sustainability and the environment into an effective business education

Rio is an exciting cosmopolitan city but even this dynamic and festive city received a jolt of activity when 5,000 registrants arrived this week for the much-anticipated United Nations Conference on Sustainable Development (Rio+20). One of my first activities after I arrived was to take part in the “Principles for Responsible Management Education (PRME) Summit” which preceded the official opening of Rio+20. 

As many of you know, education is a primary global focus for corporate responsibility at Deloitte, so it was energizing to hear discussions around the future role of business management education in creating the society we all want and deserve. The PRME initiative is a partnership of a number of academic and public sector international organizations that support the notion of business schools having a unique niche at the forefront of innovation for sustainable development. These groups believe that action must be taken now to envision and implement a business education construct that adequately takes sustainability issues and the environment into consideration of how business gets done.

Ready Set Go! Rio+20 starts

And so it starts!  What an especially exciting time to be in Rio de Janeiro!  I am here for some of the numerous events being held over the next few days in conjunction with the 20th anniversary of the original Rio summit on the environment held here in 1993.  In fact, this week's much-anticipated event has been given the catchy name of "Rio+20," because of this milestone year.  The more formal name is the United Nations Global Compact Corporate Sustainability Forum and it kicks off this evening with an opening ceremony and reception.

Rio+20: Deloitte + Me, Contributing to the global sustainability dialogue

The world is quite literally coming together in Rio for a few days 20-22 June to build consensus on a more sustainable course for our planet.  The unifying event is the United Nations Conference on Sustainable Development, which has a much more catchy title: Rio+20.

Organized by the United Nations, Rio+20 will enable thousands of government participants as well as many from the private sector—including Deloitte—to play a critical role in creating some innovative business solutions with long-lasting social and environmental impact. A related event being held in Brazil’s second largest city in the days leading up to the UN Conference on Sustainable Development is the Rio+20 Corporate Sustainability Forum, which will focus more on the business contribution to sustainable development.  The number “20” is a reference to the years since the 1992 Earth Summit in Rio where many countries rallied for the first time around a blueprint for economic growth that would consider social equity and environmental issues. 

The future of renewable energy

The future of renewable energy has been cast into doubt this past year. Natural gas prices have dropped significantly due to new technology that enables formerly uneconomic resources to be reached, creating a lower price bar that renewable energy must meet. The global financial situation has caused many jurisdictions to reduce or eliminate subsidies for renewable power, which has slowed the expansion of projects. Combined with opposition in many regions to the construction of wind turbines, one could wonder if the enthusiasm for renewable energy was an unsustainable short-term phenomenon.

21st Century paradigm for water management: Business, social, and political implications

I believe increasing water scarcity is on a collision course with economic development, energy and food needs.

Without adequate water supplies, the world will not be able to feed an ever increasing population, manufacture products or generate electricity (hydro, nuclear and fossil fuels). Unlike energy, water is unique; there is no alternative.

Increasing global population, urbanization, energy and food demands coupled with declining water quality in certain regions has resulted in increased competition for water in the public and private sectors. The facts and trends highlight this increasing “scarcity” of water are as follows (Water Scarcity. The Water-Food-Energy-Climate Nexus. World Economic Forum 2011):

• Currently, about 884 million people worldwide don’t have regular access to safe drinking water and about 2.5 billion people lack access to sanitation. This has significant economic, social and political implications (www.water.org).
• Water withdrawals are expected to increase by about 50 percent by 2025 in developing countries and 18 percent in developed countries (www.water.org). As a result, projections indicate that about 47 percent of the global population will face water shortages by 2030 (www.oecd.org)
• Increased competition for water is driven by (Water Scarcity. The Water-Food-Energy-Climate Nexus. World Economic Forum 2011):

Building communities to fight climate change

With new carbon tax legislation recently passed by the government and much of the country suffering from severe drought in the past 10 years, climate change is an increasingly significant topic in Australia. During the past year, Deloitte has had the privilege of working with a sustainability organisation based in Canberra to help them develop systems and strategies to deliver information about new sustainability technologies to their member network in support of fighting climate change. As this organisation had previously relied heavily on traditional methods of knowledge sharing, our work focused on the driving both technology and cultural change for them.

The core scope of our work was to develop from scratch an external digital presence, which included the design and build of a technical application, content, and social media strategies and extranet for their member community. A key goal of the engagement was to establish a platform and a set of knowledge sharing engagement rules for all of the organisations’ stakeholders, which included such diverse groups as state and national governments, energy and mining companies, universities and environmental bodies. Evolving their member group from being solely information consumers to actively engaged participants was also a key focus.

Deloitte joins GRI at the launch of Focal Point USA

On 31 January members of Deloitte’s* Sustainability Services team joined in the launch of Focal Point USA, the new U.S. office of the Global Reporting Initiative (GRI), at the New York Stock Exchange. Focal Point USA aims to boost the number of U.S. companies reporting on sustainability performance in a consistent manner, to improve the quality of those reports, and to increase U.S. organizations’ input into developing new guidelines for sustainability reporting.

It’s clear that U.S. companies are putting an increased emphasis on their approach to sustainability reporting as evidenced by the sold out crowd and representation from large companies, NGOs and academics from across the country. Our clients are interested in bringing their reporting on non-financial performance to the same level of maturity as financial reporting in order to provide their stakeholders with a more comprehensive view of a company’s overall performance, taking environmental and social performance into consideration. The establishment of the GRI Focal Point USA is a key step in driving more frequent, accurate and robust reporting on sustainability performance in the U.S. and will be critical to the eventual move towards integrated financial and non-financial reporting.

Several important themes emerged during the event that further emphasized the importance of integrating sustainability into broader corporate strategy. There was robust discussion on the theme of “sustainability makes business sense” and the need to connect sustainability metrics with both individual and corporate goals and objectives. Another major theme was the role of the CFO in sustainability management and reporting. This is clearly an important focus for Deloitte as we work with thousands of CFOs on their companies’ financial reporting, compliance requirements, and stakeholder expectations. 

As with reliable financial reporting, there are many possible benefits for a company that implements assurance processes and reporting on sustainability activities. In addition, through a reliable sustainability reporting and assurance process, management demonstrates its desire to deliver accurate and useful information to its various stakeholders. Therefore, it is important that companies’ reporting on their ESG efforts become more uniform and reliable. 

As the move towards integrated reporting further materializes, it will be critical for us to help CFOs understand the financially material impact of their organizations’ environmental and social performance, and how to report on that performance in a consistent and meaningful way—supported by a roadmap for further integration into corporate strategy and continuous improvement. 

We look forward to the challenge and the opportunity!

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Eric Hespenheide is the Global Audit and Enterprise Risk Services Leader for Deloitte’s Sustainability & Climate Change Services Group.

*As used in this article, “Deloitte” means Deloitte & Touche LLP, a subsidiary of Deloitte LLP. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries.

Music and leadership

I attended a most interesting WEF Summer Davos session lead by Concert Violinist Miha Pogačnik, an associate of the German Institute for the Development of Intercultural Relations through the Arts.  Pogačnik pointed out in his opening comments that business leaders these days used more and more terms which are connected with the emotional—right— side of the brain i.e. passion, inspiration, performance, creativity, etc. He explained this concept with a simple statement:

“Unless you put your heart into the things you do, you will get very sick.”

To me, leadership is indeed all about passion, and it is one of the strongest emotions of mankind. Great leaders are those who inspire great dreams by focusing on just a few basic values. 

Pogačnik took us on a journey that identified the similarities of the change management process lead by a successful leader to the composition of a classical music masterpiece. He acknowledged the following five steps as common to both processes:
- Stage 1 – The mind purification process whereby the mind is freed from all buzz, and becomes ready to concentrate on the big task ahead. This phase corresponds to focusing on the big picture versus being absorbed by operational routines.
- Stage 2 – The identification of the “brand” for the composition, which uncovers the basic themes, and which in turn will direct the journey.
- Stage 3 – The confrontation with change, which involves a stormy process of dissemination, discussion, initial rejection, and other chaotic situations.
- Stage 4 - The ‘refocus’ stage, where sanity and serenity return and where all attention is centered on the ultimate goals and basic values.
- Stage 5 - The final phase in which all opposites are brought together, and where “TRUST” is created.

I found the concept of comparing the business strategy setting and execution with classical music composition most intriguing. After all, several masterpieces have survived hundreds of years and many generations – just imagine if we were able to do that in the business world.

What were my reasons for attending this session?

First, I am always interested in listening to a new and different perspective. At Deloitte that’s what we try to deliver for our firms’ clients.

But, on a lighter note, although the meeting’s dress code is business casual, over 75 percent of all participants usually appear in full business suits, including ties. I happened to be tie-less that day.  And guess what?  About 75 percent of the participants in this session were tie-less as well. In addition, I had overheard a discussion at the bar the night prior between Pogačnik and another delegate, in which he said, “Life is about value added, not about numbers”.  After overhearing this statement, I think I subconsciously decided to leave my tie on the rack the next morning…

Below is an interesting quote from Pogačnik that I wanted to share:
 “If you focus on the money, the money will be gone quickly, but if you focus on the values, the money comes by itself”.

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Ludo De Keulenaer is DTTL Global Managing Partner, Brand.

Further insights on Summer Davos CEO roundtable

As the China Managing Partner of Business Development and Public Affairs, I found the Deloitte and Talents magazine breakfast roundtable extremely insightful.  The following are my strongest impressions from listening to the open sharing of experiences by business leaders of many of Tianjin's top enterprises.

Although there is common acknowledgement that regulatory risk is the biggest current and medium term challenge, different industries face different specific risks.  That is why it is so important that our national industry practices and our enterprise risk management advisory specialists continue to work closely together to assist clients.

As we have seen in recent times, even the most established businesses are exposed to many risks that they have not been able to anticipate nor have solutions for. Executives with whom I chatted during the Roundtable expressed concern about there being so many unknown risks.  I shared with them the approach that Deloitte advises which is to control what you can and have a structured approach to do that. The top enterprises of Tianjin attending the Roundtable have strong growth potential to become major national enterprises in the near future, and to realize this potential they must prepare to operate in increasingly complex markets within and beyond China. This is a major step and calls on them to develop capabilities and obtain experience that they may not currently have. 

Also, in chatting with the executives, I learned that even though we had open and intense sharing during the one hour Roundtable, there were many more experiences and questions they wanted to discuss had there been more time to do so. This being the case, we will be following up with a number of participants to see how we can provide further information or ideas in response to these. 

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Jennifer Xie is a Managing Partner of Business Development & Public Affairs for Deloitte China.Jennifer leads initiatives related to key government relationships business development, brand and communications. Jennifer is also an executive member of the Marketplace Council at Deloitte China.