new commitments yield new markets

New Commitments Yield New Markets

Sustainable Enterprise Summit

March 17, 2004

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

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

Panelists

• Madeleine Jacobs, Head of Sustainable Development, ABN AMRO

• Thomas Jorling, Vice President, Environmental Affairs, International Paper

• Sofie Beckham, Forestry Manager, IKEA Trading Americas

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?

Format

• All three will address the first two questions– Discussion

• All three will speak about the future– Discussion

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Thomas JorlingVice President

Environmental Affairs

New CommitmentsYield New Markets

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• mandatory / regulatory • VOC, NOX, SO2

• voluntary / external • CCX, EPA-climate leaders

• voluntary internal • endangered species banking, wetlands mitigation banking

THREE DRIVERS OF COMMITMENTS

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• 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

WHY MOVE TO “CAP AND TRADE” AND OTHER MARKET MECHANISMS

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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 O&M 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

WRI Sustainable Enterprise SummitWashington, March 17, 2004

Madeleine JacobsHead of Sustainable Development

ABN AMRO

New Commitments Yield New Markets

for Financial Institutions

Our Sustainability Learning Curve

Value Creation

Loss

Avoidance

Value

Destruction

Innocence

Wake-U

p

Call

Case S

pecif ic D

efence

Proactive

External

Dialogue

Deve lop ing Inte rnal

Standards

Freeport

APP

Dialog with FOE

Forestry dialog

Mining policy

O&G policy

Equator Principles

Com

mon

Sector

Base line

SD business Strategy

Pursuing

th e B

usiness Case

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 withEnvironmental & Social standards and processes Based on IFC/World Bank guidelines/policies With 20 Banks adopting, a de facto industry standard

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

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

© Inter IKEA Systems B. V. 2000

Sofie Beckham, IKEA Trading Americas March 17, 2004

Social & Environmental Responsibility in a

Competitive Marketplace

WRI SummitNew Commitments Yield New Markets



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- NGO’s and other external groups have increased our awareness of important issues.



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.

Question 1: IKEA Business Motivations



Question 2: Challenges, obstacles and impediments

Communication-Internal/external

Resources-New competencies and tools needed

Varying global conditions-Different countries, different conditions

Questions and Answers

Final Question

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



Question 3: Future of Sustainability Commitments

Stores

Products & Materials

Transport & Warehousing

Suppliers

ForestryGood Housekeeping

Deepening commitmentsPartnerships will increaseSystems thinking/New tools



Question 3: Future of Sustainability Commitments

Product recovery

Product tracing

Consumption



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.

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

Questions and Answers

Thank You

new commitments yield new markets

Documents

environmental achievement

environmental benefit

natural systemsmore

epa requirements

reality of markets

epa rules

challenges obstacles

capital spending