RSM Sustainability Forum 2018
RSM Sustainability Forum 2018
Systems thinking: inspiration and business cases to challenge traditional models
Two important factors have the potential to ignite systemic change in business; responsible management and sustainable finance practices. The 2018 RSM Sustainability Forum on 13 April presented two keynote speakers and ten highly interactive workshops to crack real business cases that explored the options for businesses thinking about making the shift to a sustainable model. The Forum was hosted by Rotterdam School of Management, Erasmus University (RSM), and workshops were facilitated by leaders in sustainable business.
Igniting systemic change starts the process of welcoming new business models. It’s based on the concept of systems thinking, which sees business as part of a larger system. Sustainable finance considers how investing and lending interacts with economic, social and environmental issues, and responsible management considers the roles and responsibilities of business as a global force. In her opening speech to the audience of students and the wider RSM community, RSM’s Director for Positive Change, Eva Rood encouraged the audience to start thinking in terms of systems and to become aware of the interconnectedness of the worlds’ grand challenges – whilst also having an eye for business opportunities.
B Corp value
The first keynote speaker was Dr Jessica Thomas, Director of Business Sustainability Collaborative, an academic initiative that connects students, faculty and the business community. She gave a passionate speech about B corporations, or companies that want to add benefit to society. ‘B Corp’ status is to business what Fair Trade certification is to coffee.
The extensive assessment of companies that want to become B Corporations measures how they add and create value – not only financial value, but also societal and ecological value.
Just a day or so before the RSM Sustainability Forum, US corporation Danone announced that it had received B Corporation certification, and Jessica showed its celebratory video to the audience. This is a very exciting development and a daring move, said Dr Thomas. Many business and management students taking part in the Forum later commented that they found the idea of the B Corporation movement worth exploring more comprehensively.
Steering finance for sustainable development
Students of sustainable finance – a module in several of RSM’s master programmes – were particularly interested in the keynote presentation by Gianni Lorenzato, Senior Financial Advisor to the World Bank Group, as well as to the United Nations Development Programme (UNDP) and to GIZ, the German federal organisation for international sustainable development .
Lorenzato explained that there is a lot of greenwashing in the field of business sustainability and responsible investment. Many companies create captivating sustainability reports, but these are effectively a marketing tool and do very little to integrate sustainability into business models.
The same is true for financial institutions; they pledge to be responsible investors but in most cases it’s a box-ticking exercise, and sustainability is no real factor in their investment decisions. Gianni’s intervention was very pragmatic; instead of rhetorically asking for financial markets to become more sustainable he explained how to steer financial markets towards sustainable solutions, particularly to the benefit of disadvantaged populations.
As a finance professional who works with governments and non-bank financial institutions across the world every day, Gianni’s perspective was enlightening for participants. Students in particular got a real sense of how blended finance can really address poverty and climate issues in the field rather than in theory.
Award for top master theses
The afternoon schedule included recognition for student research, with the presentation of the KPMG-RSM Sustainability Master Thesis Award to MSc Supply Chain Management alumna Tatjana Mirosnicenko for her thesis entitled E-grocery: the effectiveness of content sharing on social media in promoting green slot choice behavior. Runner-up was MSc International Management/CEMS alumnus Thomas Behrendt for his thesis about episodic volunteering in the light of the gig economy.
ABN AMRO: Holistic overview to measuring non-financial capital
Hanna Zwietering is an investment manager at the ABN-AMRO Social Impact Fund (AASIF), which invests the bank’s own money as direct investments of between € 500,000 and € 1.5 million in social and sustainable enterprises to bring about real social change. That’s a laudable and positive principle. But the process of measuring non-financial impact is complicated and costly, because it requires access to a lot of data. For cost reasons, it might not always make sense to conduct baseline measurements at the beginning of an investment, so tracing progress can be an onerous task. Measuring financial and non-financial capital is done to provide a holistic overview of a business’ impact, and while non-financial impact is important, the prospective financial viability of the venture is key, especially at the venture capital and growth stage of investment.
The AASIF is currently one of the only funds that invests directly into social enterprises in the Netherlands. Its investments have so far proved successful and it aspires to expand in the near future. The fund intends to make investments in companies that are able to expand the general social enterprise market in the Netherlands and in other countries. The session was moderated by RSM Assistant Professor Dr Gianfranco Gianfrate.
Consultancy for sustainable production and trade aidenvironment hosted a breakout session to explore expanding into the Brazilian market using knowledge from its activities in Indonesia. Executive Director Annemieke Beekmans explained how the company’s current activities add value for international clients by connecting information from global regulations to create a more sustainable value chain, particularly in sourcing. aidenvironment is currently focusing on building its knowledge of soya, beef, and palm oil commodities.
Participants worked in two groups to create recommendations for value propositions that could be offered to the Brazilian market. The session was moderated by RSM Associate Professor Frank Wijen.
- aidenvironment could – other than its current internal activities – provide an innovation network for its clients by connecting academia and corporations from different parts of the world through its vast network.
- aidenvironment should leverage current partnerships and its network to break into the Brazilian market. Rather than starting from scratch as a Dutch company, it should leverage connections with agribusinesses such as Cargill or Bunge, or even Dutch universities, to build legitimacy with local players and build its reputation.
- aidenvironment could establish a pilot office in Brazil. Rather than going ‘all-out’, this more sensible option would limit its risk and use less capital in comparison to building a fully fledged office. The company should ensure the office is well-located for transport to the Amazon and for its important stakeholders.
- aidenvironment should use local people as well as leveraging international knowledge. Participants recommended aidenvironment copy its Indonesia model that employs mostly local people; this helps build initial legitimacy as well as establishing long-term status in the eyes of local companies and government. It avoids the syndrome of ‘Westerners telling us what to do’ and the workforce can allow aidenvironment to better understand the local norms and non-formal regulations which govern business in Brazil.
ASN Bank: New metrics for judging investments
ASN Bank aims to drive sustainability in the financial world by only investing in responsible businesses and projects that contribute to a sustainable society such as wind energy, solar energy and social housing. Many of these projects help to combat climate change by generating renewable energy or conserving energy.
ASN’s start-up accelerator Voor de Wereld van Morgen (For the World of Tomorrow) supports projects that play a social, sustainable or cultural role. The accelerator has supported 595 start-ups including Fairphone, an ethically produced smartphone; and Seepje, which makes plant-based washing and cleaning products.
Two representatives of ASN Bank responsible for its sustainable investment portfolio, Roel Nozeman, Senior Advisor Biodiversity, and Emiel van Zwet, Account Manager for Financing Renewable Energy Projects led the session to devise future projects that might achieve systemic change and help ASN achieve its goals for climate neutrality and biodiversity. The session was moderated by RSM Assistant Professor Guido Berens.
Participants proposed using new metrics for judging investments, and suggested providing house-owners with advice and guidance for making their houses more sustainable. They suggested more intensive collaboration with parties like Vandebron (a locally sourced renewable energy supplier in Rotterdam) to support renewable energy, and the use of life-cycle analysis (LCA or cradle-to-grave analysis).
An increasing number of industries are seeing their own impact on biodiversity, and as a result, bank clients ask their banks to pay the same level of attention to these issues. ASN can still grow in this regard, through the participants.
ASN’s response to the suggestions was very positive, and the extended discussion in the room went beyond the information given in the presentations.
a.s.r. vermogensbeheer: Difficult comparisons
The breakout session led by Jos Gijsbers, Senior Portfolio Manager and Raquel Criado Larrea, Senior Portfolio Manager at investment fund management company a.s.r. vermogensbeheer addressed how four large, Dutch companies – Unilever, Reed-Elsevier, DSM and AkzoNobel – should be ranked according to their impact on Sustainable Development Goal number 13: Climate Action. The challenge? Use only the information published in the respective companies’ annual reports. In fact, the variety of qualitative information in annual reports makes it difficult to compare. The session was moderated by RSM’s Associate Professor Irma Bogenrieder
It’s impossible to directly invest in SDG 16 (peace, justice and strong institutions) and SDG 17 (partnerships for the goals), but many companies make an effort to contribute towards SDG 13 (climate action); the four companies under scrutiny in this session are included in this group.
During the breakout session, both of the groups ranked the four companies identically for their impact on SDG 13 climate action, based only on the contents of their respective annual reports:
And while both groups produced the ranking in the same order, the way in which they came to their decisions differed. The first group used three criteria:
- Transparency greenhouse emissions (bonus points if reported as a percentage change with baseline, because this is even more transparent)
- Accountability with regard to future investments
- Plans for climate action in terms of investments for the future and the level of detail of these plans.
The second group used three different criteria:
- Timeframe of planning (short term plans versus long term plans)
- Proactiveness on the company’s contribution to SDG 13
- Transparency of reporting was deemed to be the least important criteria, because companies can still be sustainable even if they don’t report it.
EY & Robeco: Real benefits from integrated reporting?
The breakout session led by Valerie Sydry, Assurance Professional at EY and Guido Moret, Active Ownership Specialist at Robeco was moderated by RSM Associate Professor Steve Kennedy and explored current approaches to – and dilemmas in – integrated reporting, which is a broad-based framework for business and investment decisions that are long term, inclusive and with purpose. The speakers were concerned particularly with the six types of capital.
RSM’s Dr Steve Kennedy said companies should understand the process of creating value. Guido Moret explained the different investment strategies such as those implemented by Robeco that are responsible, sustainable and have impact. Valerie Sydry showed the internal alignment of organisations within integrated reporting.
The panellists asked the audience at the session to address three topics of integrated reporting, and answered participants’ questions through the process:
- Does integrated reporting offer real benefits for information provision over the alternatives? Do stakeholders, and in particular investors value it? Most participants thought not because there are some credibility issues. Transparency shows trustworthiness. Investors need tangible results.
- Does integrated reporting support organisations’ internal changes towards sustainability? Participants were sceptical about the potential of integrated reporting to support internal changes. Involvement is important, and the people involved are important, so communication is important, and so is organisational structure and alignment.
- What is the connection between integrated reporting and societal value? Integrated reporting is important for societal value, but there was discussion on whether it was ‘all talk’ rather than a sustainable action.
Global Alliance for Improved Nutrition (GAIN): Schools and food systems
Jordania Valentim, Partnerships Manager and Herbert Smorenburg, Senior Manager Netherlands Office (and recipient of an RSM Distinguished Alumni Award for his work at Unilever) work for the Global Alliance for Improved Nutrition (GAIN) to fight malnutrition through partnerships with public and private sectors. The workshop presented a food systems challenge in Ethiopia for participants to solve using their business knowledge, and was moderated by RSM’s Positive Change director, Eva Rood.
GAIN focuses on excluded populations and the urban malnourished using the ‘Dutch diamond’ approach that involves government, knowledge institutions, business, and civil society organisations.
The case presented a challenge to help a business development manager for the ingredients division of an international dairy co-op. In this business case, the co-op has been asked to help the Ethiopian government to improve the local dairy sector, starting with a dairy programme in schools.
Ethiopia has 100 million citizens and a growing GDP. Its main source of income and employment is agriculture, which produces 41 per cent of GDP and employs 80 per cent of the population, the vast majority on smallholdings. Ethiopia has a severe malnutrition problem but has a high number of cows per capita; milk is a nutrient-dense food, scientifically linked to reduction of stunting in children.
However, cows have a low milk yield due to poor quality feed, and the cold chain transport network is poor. The agricultural sector is highly controlled.
After two hours of consultation time, three teams pitched their proposals to the workshop.
Team One addressed society and government interests by proposing that children become dairy ambassadors in their families, and dairy co-operatives should facilitate milk plans by employing local women. The pitch included investments in education and building small co-operatives with families and encouraging milk consumption to build a self-sustaining system, with initial funding from international donors and government.
Team Two proposed a ‘Get Smart Milk’ initiative for schools that could be sold to government at a low price to create the market and subsidised by NGOs. Growing demand would kick-start local supplies provision as well as increase sales for dairy co-operatives.
Team Three proposed asking for funds to invest in factories that take locally sourced milk and transform it into yoghurt, which is equally nutritious as milk but has a longer shelf life. It could be distributed to schools as a nutritious drink by adding whey, or yoghurt could be sold, and an educational programme about its health benefits and how to cook with it would involve parents. Profits would be reinvested into the system.
Gemeente Rotterdam: Transforming schools
Ard den Outer, a Strategic Advisor at the municipality of Rotterdam’s city development department led the session and outlined the city’s plan to transform 572 elementary school buildings into sustainable buildings. Participants discussed options for finance and cash flow from multiple contributors, as well as the preferred approach. They also learned more about how governmental organisations operate and what they do regarding sustainable development. RSM associate professor Dr Maciej Szymanowski acted as a moderator of the session.
The City of Rotterdam’s sustainability programme works on a healthy and future-proof Rotterdam. This includes healthier air, more green space, dry feet, sustainable buildings, cleaner energy at lower costs and more jobs in the city, port and industry. Transforming school buildings will also improve the learning environment because Rotterdam’s size and industry means it contributes up to 20 per cent of the Netherlands’ CO2 emissions; the municipality feels responsibility for addressing this. Such a national impact also the city can create a considerable positive impact with a shift towards more sustainable projects.
Regarding funding, the shared fund model – suitable for sustainability projects – impressed some participants. Here, both the schools and the municipality receive the funding but also share the same risks, making it an attractive model for partnerships of two (or more) kinds of partners. The model supports collaboration and engagement, and it could be that other areas such as Den Haag could join the fund too. Yet such close collaboration can also be a potential for conflict. The Rotterdam schools fund will be based on a similar funding model for social housing activities that already exists on a national level.
Participants argued that the optimal financial model depends on regulations, laws and the economic environment. These factors may vary, so the optimal financial model is not a static decision. But regulations have been stable for the past few years, explained Ard den Outer, and will probably remain so. Participants still agreed that the shared fund model was the most suitable for this project, but spent a short time considering new investment models, including blockchain.
Next Nature Network
Peterson and Control Union (P&CU) is 100 year-old family-owned, non-listed international company with a long-term vision and a global network of independent service companies offering sustainable development services from its workforce of 4,000 people. It operates throughout the supply chain, in agriculture, energy, forestry, sustainability and textiles, and its activities include logistics, quality, risk management and sustainability label certifications. Consumers buy not from the farmer but from a store, and farmers need to be able to show consumers they are sustainable, which is the part of the process facilitated by Peterson and Control Union in more than 200 programmes for fertilisers and fishing for example, as well as cotton.
The business case presented to the breakout workshop was set in the cotton industry, but its principle could apply to other agricultural industries. Cotton is produced globally, processed in the East, and traded as final product to end-consumers in the West. The new 'conscious consumer' struggles to obtain sustainability details about the products, and traders and producers find it hard to obtain suppliers of materials that comply with these demands. Participants constructed a business case that covered treatment of raw materials, exploring technologies and how to strengthen the business.
Manufacturers respond to consumer demands by developing voluntary standards for sustainability. Peterson and Control Union measures the deviations of these sustainability standards.
The workshop participants split into two groups to consider the business case for sustainable textiles and clothing from two different views; the challenge from the cotton farmer’s perspective, and from the retailer’s perspective.
The group considering the business case from the retailer’s perspective developed the idea of the ‘conscious QR code’ that links to the products origins; where the product comes from, and what standards it meets. P&CU already has the data and the technology. Participants assessed that such an innovation would raise awareness for sustainability and would make participating producers more popular. Costs have not yet been ascertained but it could be piloted.
It would be essential to gather data from the whole market and not just from P&CU clients. That means opening up the platform for competitors’ use – which would help to ensure there are no gaps in data gathered from the whole production. Would this be wise from a business perspective? It could be beneficial to have such transparency from producers being allowed to add their own data to the platform because P&CU would be bound by client confidentiality. The alternative – for every business to have their own platform – would not have the same potential for success because it would allow gaps in quality and layout, which would be confusing for consumers.
The second group of participants considered the farmer’s perspective and came up with the idea of geo-consulting to address farmers’ information deficit; this includes information about harvest and yield, any water/irrigation regimes and pesticides used.
P&CU already has access to this information, and by combining satellite data and farmers’ own field observations, P&CU could communicate optimum activities to the farmer; this is information to which farmers in developing countries don’t often have access, but with it, they could reduce costs and become more efficient. The scheme could be funded by the World Bank.
P&CU has already tried consulting on an agricultural level using drones over banana fields in the Philippines; the business model results in a payment for P&CU when the farmer becomes more successful, and such schemes usually work with organisations such as the World Bank.
True Price: Real price of sustainability
Social enterprise True Price devises open-source methodologies to measure the sustainability of products and services across value chains. It helps organisations quantify, value, and improve their impact on society. Reinier de Adelhart Toorop, Project Manager and Associate Roland van Keeken led a case discussion session that explored the practicality of sustainability, and how to calculate the real price of sustainability. The session was moderated by RSM lecturer Thijs Geradts.
The case presented to the breakout session involves petrochemical firm AkzoNobel and its pulp and performance chemicals. In this business case, the firm has long-term sustainable goals but is under pressure from activist shareholders to produce value in the short term. It looks at financial, natural, human, and social capital and the entire value chain, and attaches economic value to other types of capital to be able to judge the impact of the product. Participants listened to four proposals for intervention and considered their impact on financial profits, natural capital, effectiveness and feasibility. The four interventions were to source bio-based methanol, substitute natural gas for hydropower, efficient use of electricity, and using low footprint sulphuric acid.
Teams considered the proposals’ environmental impact and how well they fit with AkzoNobel’s general strategy, as well as return on investment and level of risk.
Three teams each gave a pitch for their preferred option, and participants reported they had learned more about the calculations involved in making such decisions and how to determine the value of natural capital. And they also learned that a pitch benefits from a declaration of the result at the beginning, to grab and keep the audiences’ attention.
The outcome of the pitches was that a focus on efficiency rather than investment in this case creates the most value for economic and natural capital, although other options expose the company to less risk and would present a better way to preserve or enhance the firm’s reputation.
Rotterdam School of Management, Erasmus University (RSM) is one of Europe’s top 10 business schools. RSM provides ground-breaking research and education furthering excellence in all aspects of management and is based in the international port city of Rotterdam – a vital nexus of business, logistics and trade. RSM’s primary focus is on developing business leaders with international careers who can become a force for positive change by carrying their innovative mindset into a sustainable future. Our first-class range of bachelor, master, MBA, PhD and executive programmes encourage them to become critical, creative, caring and collaborative thinkers and doers. Study information and activities for future students, executives and alumni are also organised from the RSM office in Chengdu, China. www.rsm.nl
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