Fortune Favours the Brave - A £100 billion opportunity in innovation and sustainable growth for UK plc #fortunefavoursthebrave
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Fortune Favours the Brave A £100 billion opportunity in innovation and sustainable growth for UK plc #fortunefavoursthebrave Copyright © Marks & Spencer and Accenture, 2013
02 / 71 Copyright © Marks & Spencer and Accenture, 2013
Fortune Favours the Brave 03 / 71
Contents
Contents and Acknowledgements
Foreword 04 The authors would like to thank the following business leaders who gave up their Additional Thanks
Executive Summary 06 time and helped inform the messages in this Report. While the views expressed The authors wish to thank the Ellen
in this study do not reflect the totality of opinions received from all contributing MacArthur Foundation for providing
1.0 Introduction 15 executives, their participation and guidance has been critical. data to support the section on the
2.0 New Areas for Innovation 18 Circular Economy in this Report.
3.0 Capturing the Prize 52 Andy Wood Chris Sullivan Colin Matthews
4.0 A Call to Action 64 Chief Executive, Chief Executive, Chief Executive Officer, In addition the authors would like to
Adnams plc Corporate Banking Heathrow Airport
thank Mike Barry and Adam Elman
Appendices 66 Division, RBS Group Holdings Limited
from Marks & Spencer; James Arnott,
Authors Estelle Brachlianoff Ian Cheshire Ian Livingston Melissa Barrett, Bruno Berthon,
Chief Executive Officer, Group Chief Executive, Chief Executive, Aimie Chapple, Camilla Drejer, Oliver
Richard Gillies Veolia Environmental Kingfisher plc BT Group
Grange, Rod Kay, Nijma Khan, Peter
Director Plan A, Services (UK)
Marks & Spencer Lacy, Hannah Mansour, Aimy Ngo
Carmel McQuaid John Hayes Keith Williams Marc Bolland from Accenture; Victoria Gilbert, Gail
Sustainability Manager, Chief Executive, Chief Executive Officer, Chief Executive, Greengross, Patrick O’Meara from
Marks & Spencer Axis British Airways Marks & Spencer
BITC and also Peter Bragg, Niall Dunne,
Justin Keeble
Managing Director,
Jonathan Garrett, Matt Gorman,
Accenture Sustainability Services, Mark Allen Matt Brittin Nicolas Petrovic Marcela Navarro and the team at
Europe, Africa and Latin America Chief Executive, Vice President Chief Executive Officer, Dragon Rouge.
Harry Morrison Dairy Crest Northern & Central Eurostar
Director, Europe, Google
Accenture Sustainability Services
Zomo Fisher Olly Benzecry Paul Drechsler Paul Sheffield
Further Information & References
Senior Consultant, Managing Director Chief Executive, Chief Executive,
Accenture Sustainability Services UK & Ireland, Wates Group Limited Kier Group plc The Sustainable Business
Accenture
Toolkit is available on the BITC
Project Advisers Paul Walsh Dr Ralf Speth Stephen Howard
website at
Chief Executive, Chief Executive Officer, Chief Executive, sustainablebusiness.bitc.org.uk
Alan Knight Diageo Jaguar Land Rover Business in the
Marketplace Sustainability Director, Community
Business in the Community Join the conversation:
Emma Price-Thomas #fortunefavoursthebrave
Steven Holliday Tony Lenehan
Marketplace Sustainability Manager, Chief Executive, Chief Executive Officer,
Business in the Community National Grid Styles&Wood
Designed by
Dragon Rouge
Copyright © Marks & Spencer and Accenture, 2013
Foreword 04 / 71 Foreword UK businesses have the opportunity to unlock £100 billion a year in value from five opportunities for innovation. Companies in the UK face a complex and fast-changing landscape. Consumer values are shifting and businesses need to work hard to win trust and build community support. At the same time resource constraints and environmental concerns put pressure on supply chains and profitability. Faced with these challenges, there is a compelling need for innovation. We must accelerate progress in order to meet the changing hopes, needs and aspirations of customers, while operating in a way that wider society deems acceptable, now and in future generations. The commercial imperative for action is clear. Our research shows that UK businesses have the opportunity to unlock around £100 billion a year in value from new innovation opportunities that address social and environmental challenges1. By designing higher quality sustainable products, adapting the way of doing business, innovating in supply chains and engaging communities, business can better meet customer needs simultaneously creating value as well as environmental and social benefit. In other words become sustainable businesses. Copyright © Marks & Spencer and Accenture, 2013
Foreword 05 / 71
Foreword
Through consultation with Chief Executive Officers across different Marc Bolland
industries in the UK, we have identified five opportunity areas Chief Executive,
Marks & Spencer
for innovation. In order to support businesses to tap into these
opportunities and drive sustainable growth, we are launching
the Business in the Community Sustainable Business Toolkit
alongside this report. The toolkit provides essential resources
for companies to start the journey of change – to ‘Think,
Test and Deliver’ a better approach to business that creates Olly Benzecry
value for shareholders, employees and communities alike. Managing Director UK & Ireland,
Accenture
Marks & Spencer, Accenture and Business in the Community are
grateful for the time and insight of all those who have contributed
to our research and supported development of this report.
Stephen Howard
We encourage businesses to take forward the messages in Chief Executive,
this report, and use the Business in the Community Sustainable Business in the Community
Business Toolkit. We are confident that the creative power
of business can address the challenges of today and unlock
a more prosperous and sustainable future for us all.
Copyright © Marks & Spencer and Accenture, 2013
06 / 71
Executive
Summary In a tough global economic environment, “We need to make
UK companies are seeking to future- sustainability part
proof their businesses and to identify of our targets and
new options for growth. an intrinsic part of
The economic situation is compounded by pressing social our Brands.”
and environmental issues: a lack of trust in business; youth Marc Bolland, Chief Executive,
unemployment coupled with skills shortages; and the depletion Marks & Spencer
of natural resources on which business depends. Leading Chief
Executive Officers (CEOs) recognise that innovation is essential
to addressing these challenges and achieving long-term success.
Five key innovations identified in this report provide the
potential to catalyse direct economic and commercial benefits:
“Everybody wants a
–– Productivity gains worth an estimated £100 billion each racing car – But even
year in the UK2. a racing car can be fuel
–– Access to rapidly growing markets already worth almost efficient. We need to
£200 billion annually3 in the UK alone.
make sustainability
By capturing these opportunities businesses can increase desirable, appealing
competitiveness and deliver sustainable growth whilst and relevant, and by
simultaneously addressing customer needs, improving
environmental performance, creating jobs and supporting
responding to customer
social progress. wants, UK business will
have more impact.”
Marc Bolland, Chief Executive,
Marks & Spencer
Executive Summary 07 / 71
Capturing these opportunities will likely require a major shift “Traditional approaches
in business thinking. Companies may need to go beyond
Corporate Social Responsibility (CSR), sustainability reporting and
to sustainability aren’t
philanthropy to ground sustainability performance at the heart sufficient – they’re not
of business strategy. Companies that wish to achieve sustainable sufficiently positive
growth should align their core purpose and vision with the delivery to be motivating and
of positive societal and environmental outcomes.
don’t provoke the level
At the same time businesses must work harder to engage their of change required.”
customers by making sustainable lifestyles an accessible, easy
Ian Cheshire, Group Chief Executive,
and better choice. Sustainability is too complicated for most Kingfisher plc
customers today, and companies have a key role in educating and
enabling customers whilst improving quality of life at the same
time. This shift together with innovation in how businesses drive
supply chain efficiency and resilience can unlock the path to a “Real material
more dynamic UK economy. change will only
Without building and maintaining adequate social and natural
come from innovation
capital, businesses will struggle to grow and function in the way that enhances the
they do today. The new generation of business leaders need to customer value
unlock the innovation potential and creative drive of business proposition whilst
to deliver growth in a very different economic environment.
driving sustainability
outcomes.”
Olly Benzecry, Managing Director UK &
Ireland, Accenture
Copyright © Marks & Spencer and Accenture, 2013
Executive Summary 08 / 71
New areas for innovation
Five innovation areas offer the potential to transform business “There is real power
in the UK by delivering more sustainable growth, making in seeing that people
sustainable lifestyles accessible and aspirational for customers, at the top are taking
creating positive social outcomes and building lasting value. action – it inspires
In the UK alone the market for Future growth potential is high. These innovations now need to people to follow.”
these opportunities is already For example, over the past five be scaled effectively to catalyse
Chris Sullivan, Chief Executive,
worth almost £200 billion years, clean technology and prosperity and growth for the Corporate Banking Division, RBS Group
annually, with the potential for circular economy services have UK economy and commercial
productivity improvements of grown an estimated 24% and returns for business in both the
around £100 billion a year 4. 18%, respectively5. short and long term.
Shared value #sharedvalue
Companies can build the conditions for their Shared value approaches catalyse direct
own success by focusing on the convergence of productivity gains through improved employee £3bn-£29bn
Potential
interests with society, promoting community engagement and reduced churn and indirect productivity
prosperity, improving skills and enhancing health. returns through enhanced reputation and trust. gains29
More with less #resourceefficiency
Companies can drive cost savings and mitigate Clean technology companies can directly
environmental concerns through more rapid contribute to economic recovery by building £119bn £61bn
Current Potential
adoption of resource efficiency and deployment skills and creating a potential 40,000 jobs market size39 productivity
of emerging clean technologies. each year 6. gains40
Copyright © Marks & Spencer and Accenture, 2013
Executive Summary 09 / 71
New areas for innovation
Circular economy #circulareconomy
Companies can cut costs, improve margins and Improved recycling technologies, growing
preserve natural capital by closing the loop on regulation and volatile commodity prices £13bn £15bn-£18bn
supply chains through product design, extending create a compelling business case for retaining Current Potential
asset life, re-use and recycling. ownership of valuable materials and creating market size54 productivity
gains55
circular business models.
New consumption models #newbizmodels
Companies can grow recurring revenue Technology and social media have driven
streams and help customers to live lower resurgence in sharing and service-based £27bn
impact lives by enabling ‘collaborative business models, creating a market already Current
consumption’, by delivering ‘products as a worth an estimated 1% of private sector market size67
service’ and through developing compelling turnover in the UK7.
new customer propositions.
Transparency & customer engagement #transparency
Companies can build loyalty and drive Enhanced traceability enables better resource
productivity gains through embedding planning and risk management and the market £33bn £3bn
sustainable supply chain standards and for ‘ethical’ goods and services has achieved Current Potential
transparently sharing information on product an average 14% year-on-year growth over the market size77 productivity
gains78
origins with customers. past decade8.
Copyright © Marks & Spencer and Accenture, 2013
Executive Summary 10 / 71
Capturing the prize
Unlocking the value from these five areas “Business has a key
of innovation demands that business leaders opportunity today
move beyond the current CSR and reporting- to reinvent itself –
focused approaches to sustainability. driving transformative
These approaches have provided a solid foundation of change to help solve
measurement and transparency and supported a better tomorrow’s major
understanding of the inter-connectedness between business, challenges.”
society and the environment. However, we now need to increase
the pace and scale of action. Estelle Brachlianoff, Chief Executive
Officer, Veolia Environmental
Services (UK)
Businesses can begin by assessing the implications of
environmental and social trends on their market and identify their
contribution to delivering a more prosperous and sustainable “We need to move
future. Companies that wish to achieve sustainable growth should away from CSR
align their core purpose and vision with the delivery of positive
societal and environmental outcomes: doing good becomes
and transform our
good business. Finally investment can be channelled to test and businesses to be
scale the new innovations identified in this report, with a goal of better aligned with
delivering commercial returns and improved outcomes for society. sustainability as a
The UK is well placed to lead the transition to a more sustainable
core goal.”
future and has key competitive advantages including a track Steven Holliday, Chief Executive,
record of innovation and academic excellence; high-tech National Grid
engineering and information technology capability; depth of
professional services and financial-sector expertise and engaged
consumers who are demanding a better way of doing business.
Copyright © Marks & Spencer and Accenture, 2013Executive Summary 11 / 71
Capturing the prize
The Business in the Community “Sustainability has
Sustainable Business Toolkit,
launched alongside this report,
moved from something
provides essential resources for that’s feel good, to
companies and business leaders, something that’s far
to start the journey of change – more integrated with
to ‘Think, Test and Deliver’
a better approach to business.
what is required for
our future success.”
For many companies the
Paul Walsh, Chief Executive,
journey will start with small Diageo
steps. However, with a clear
vision and through testing
new ideas, companies can
create options to scale-up
and deliver the transformational “Business can use
change required. The challenges action on sustainability
may be significant but the to restore its
commercial opportunity is
clear. Bold leadership is required.
reputation and trust.”
Andy Wood, Chief Executive,
Adnams plc
Copyright © Marks & Spencer and Accenture, 2013Executive Summary 12 / 71
About us and our approaches to sustainability
Marks & Spencer deliver quality products for our of setting bold targets, driving
Marks & Spencer is one of the customers without quality raw innovative solutions and sending
UK’s leading retailers selling materials. We’ve switched to a signal about the potential for
stylish, high quality, great value more sustainable sources for closed-loop textiles.
clothing and home products, as many raw materials. However,
well as outstanding quality food, we also realised it wasn’t just The launch of Plan A in 2007
responsibly sourced from around about sourcing raw materials and its expansion in 2010 was
2,000 suppliers globally. Over the responsibly but also how we our response to changing social
last 129 years M&S has grown could prevent waste and recover and environmental issues. Plan
from a single market stall to materials too, ensuring that A has made our business more
become an international multi- precious resources are used efficient, more rewarding and
channel retailer. We now operate again and again. It’s a year since more engaged. Find out more at:
in over 50 territories worldwide M&S launched ‘shwopping’ – www.corporate.
and employ almost 82,000 an initiative that encourages marksandspencer.com/
people. Remaining true to our customers to bring old items of howwedobusiness
founding values of Quality, Value, clothing into the store. The goal
Service, Innovation and Trust, is to reduce the one billion items
we work hard to ensure our of clothing sent to UK landfill
offer continues to be relevant each year by creating a closed
to our customers. loop where all garments are re-
used and recycled – currently
We launched Plan A in 2007 through a partnership with the
because we recognised that the global poverty campaign Oxfam.
way business worked had to Within six months of launch,
change. One area in particular the first M&S coat made from
is how we source raw materials recycled wool brought back
and products. Our business is from Oxfam was on sale in the
all about quality and we cannot shops. This illustrates the power
Copyright © Marks & Spencer and Accenture, 2013Executive Summary 13 / 71
About us and our approaches to sustainability
Accenture Sustainability investments in research, Our Skills to Succeed programme
Services including recent studies on draws on one of Accenture’s
Accenture Sustainability Services consumer expectations and core competencies – training
helps clients achieve substantial global executive opinion on talent – to help address the
improvement in performance corporate sustainability and need for skills that open doors
and value for their stakeholders. climate change. to employment around the
We help clients leverage their world. It is a key aspect of how
assets and capabilities to drive At Accenture we know that a we embed sustainability into
innovation and profitable growth successful company strategy is our business. By 2015, we plan
while striving for a positive one that is informed by the world to equip 500,000 people globally
economic, environmental around it and which considers with the skills to get a job or build
and social impact. We work the social and natural resources a business. Find out more at:
with clients across industries on which business depends. www.accenture.com/
and geographies to integrate We see significant growth sustainability
sustainability approaches opportunities for organisations
into their business strategies, that are able to better meet
operating models and critical market demand for high quality
processes. products and services that are
good for society and the planet.
Our holistic approach We also know that companies
encompasses strategy, design can secure future growth
and execution to increase through building shared value
revenue, reduce cost, manage with communities.
risk and enhance brand,
reputation and intangible assets.
We also help clients develop
deep insights on sustainability
issues based on our ongoing
Copyright © Marks & Spencer and Accenture, 2013Executive Summary 14 / 71
About us and our approaches to sustainability
Business in the Community “There’s a business case
Business in the Community stands for responsible business.
We are a unique business movement – the largest business-led
for sustainability and
charity of its kind – committed to building resilient communities, an ethical case, what
diverse workplaces and a more sustainable future. We work locally, people don’t always
nationally and internationally with members to transform businesses realise is that the two
and transform communities. We believe that responsible leadership
is the ability to balance doing both.
are mutually inclusive.”
John Hayes, Chief Executive,
We ask our members to work with us on specific campaigns that Axis
impact in the workplace, marketplace and community. We offer a
range of services that challenge, support and inspire members and
help transform their businesses.
“Sustainability is no
In today’s rapidly changing and increasingly resource constrained longer an option. It
world – which will need to provide for 9 billion people by 2050 needs to be business as
– it has never been more important for companies of all sizes to usual. Sustainability has
understand how and why sustainability is central to their long-
term success and prosperity. There is an unprecedented need for
become part of what
companies to work together to identify how business services will customers expect from
evolve over the next two decades and beyond. business as standard.”
We are enormously grateful to M&S and to the support Accenture Nicolas Petrovic, Chief Executive
Officer, Eurostar
has provided, to help us articulate an imperative for action and for
the practical tools that have been developed that demonstrate some
of the opportunities for those who help create a sustainable future.
Find out more at:
http://www.bitc.org.uk
Copyright © Marks & Spencer and Accenture, 201315 / 71
1.0
Introduction
Current attempts by business to address
sustainability challenges have delivered tangible
progress at the national scale.
Greenhouse gas emissions from UK businesses have dropped by 30%
since 19909. However despite the success to date, a step change is
required, to deliver progress at a larger scale and higher speed than
current initiatives, policies or strategies will achieve (See Appendix 1
for a summary of major challenges).
For example, long-term and youth unemployment in the UK are
now at their highest level in over 10 years10 with nearly a quarter of
16-24 year olds inactive and without a job11. Obesity is at a record
high12 and has knock on implications for health in an aging society.
Furthermore, increasing and volatile prices of natural resources and
raw materials are cutting into profit margins of some companies, and
adding to supply chain risk, whilst 90% of products are still disposed
of within 6 months of purchase13. If we continue on our ‘business-as-
usual’ path, by 2050 we would need 2.5 times the planet’s natural
resources to support a population of 9 billion people14.1.0 Introduction 16 / 71
We are already living off our future capital, and current trends “Over time
are unlikely to be sustainable in the long-term.
sustainability
Many companies have responded to sustainability concerns challenges pose a real
through CSR programmes characterised by: a strong focus on public threat to company
reporting; incremental improvements in operational efficiency; and profits – especially
a philanthropic approach to social challenges. For many businesses
this approach has provided a good starting point and it remains an
from energy price
essential foundation for responsible business. However, CSR-driven increases, and the
programmes can have key limitations, as they may: growing occurrences
of 1-in-100 year severe
–– Add costs, as programmes are frequently bolted-on to the
core business. weather events.”
–– Ignore whether a company’s core purpose, products and Andy Wood, Chief Executive,
services are compatible with long term trends and social Adnams plc
and environmental needs.
–– Create tension between shareholder value creation and the
needs of society.
–– Fail to address the needs and changing demands of the
mass market.
–– Under-utilise the creative and competitive energy of business
to innovate, unlock new value, and build a better future.
Copyright © Marks & Spencer and Accenture, 20131.0 Introduction 17 / 71
Seizing the opportunity of more sustainable business asks that “As responsible
companies re-think their business operations and strategy
beyond the boundaries of CSR. Leaders will want to consider the
businesses we need
balance between short term gains and long term value through to make sustainability
understanding global trends, assessing core strengths and simple for all
identifying their potential contribution to improving societal stakeholders. Most
and environmental outcomes.
customers today
Above all companies must dare to innovate and to test and scale find it difficult to
new approaches which can drive growth and future prosperity. articulate what ‘good’
sustainability looks like.
A consistent approach
to the adoption of
industry standards and
a considered approach
to education and
training can really make
the difference here.”
Tony Lenehan, Chief Executive Officer,
Styles&Wood
Copyright © Marks & Spencer and Accenture, 201318 / 71
2.0
New
In responding to the world’s major challenges,
innovators are emerging, offering new and
alternative models for success and disrupting
established industries.
These models have the potential to transform business towards
truly sustainable growth and pave the way for a more dynamic
Areas for UK economy, where profits are maintained whilst minimising the
environmental impact, maximising the benefit for society and
Innovation enabling sustainable lifestyles.
Five high priority areas of innovation have been identified through
discussion with UK CEOs, and by examining leading research,
reports and case studies. These innovations can change how
businesses engage with their customers, and how companies
make and deliver products and services through their supply chain,
potentially yielding significant commercial and sustainability gains.2.0 New Areas for Innovation 19 / 71
Building efficient and resilient supply chains can enable businesses “Infinite resource
to become more competitive, to remain within environmental
constraints and to enhance their license to operate through
intensive growth is
stronger community links. simply not possible,
and we are already
Key areas for innovation include: living off our future
–– Shared value: focusing on the convergence of interests between
business and society to build community prosperity, improve
capital. We need to
skills and health and create the conditions for commercial success. think now about how
–– More with less: reducing input resource use, improving the business services will
efficiency of industrial processes, using cleaner technologies evolve in the next two
and minimising waste.
–– Circular economy: closing the loop on supply chains through decades and beyond.”
product design, extending asset life, re-use and recycling. Ian Cheshire, Group Chief Executive,
Kingfisher plc
Engaging the customer on sustainability brings a suite of new
opportunities to build loyalty, grow new revenue streams and
disrupt established business models.
Key areas for innovation include:
–– New consumption models: delivering enhanced customer
propositions including ‘products as a service’ and enabling the
sharing of goods via ‘collaborative consumption’.
–– Transparency & customer engagement: embedding ethical
and sustainable practices across the supply chain and sharing
information on product origins with customers.
Copyright © Marks & Spencer and Accenture, 20132.0 New Areas for Innovation 20 / 71
Today, significant opportunity exists to continue to scale up these
solutions. UK businesses have the potential to achieve around £100
billion a year from productivity improvements, if these innovations
are implemented across the board15, whilst at the same time
generating positive societal and environmental benefits such as
employment opportunities and emissions reduction. Over 40,000
jobs could be created annually in the environmental and clean
technology sector alone16.
The estimated current UK market size of these areas is nearing £200
billion (6% of private sector turnover) with high growth rates that
have consistently beaten the UK average17. Clean technology has
seen 24% growth and circular economy services such as recycling
and recovery have seen 18% growth over the past 5 years alone18.
This Chapter explains the five innovation areas in more detail,
highlighting the various opportunities, the size of the prize for
UK businesses and the broader environmental and social benefits.
Copyright © Marks & Spencer and Accenture, 201321 / 71
2.1
Shared value:
Many companies are recognising that their future
success depends on supporting vibrant, healthy and
economically resilient communities which provide
both their workforce and their customer base.
Businesses contribute to their own success by creating jobs
“We aim to use our
scale and know-how
to support the wider
business community
and to help unlock the
Building a and educating people in the communities in which they operate, economic potential of
and by improving standards of health and quality of life. women as business
prosperous
workforce This ‘shared value’ concept provides a cornerstone for social
owners.”
and community innovation, and is helping companies recognise that there is a large Chris Sullivan, Chief Executive,
degree of convergence between their commercial goals and the Corporate Banking Division, RBS Group
#sharedvalue wider needs of civil society.New Areas for Innovation 22 / 71
2.1 Shared value: Building a prosperous workforce and community
Size of the prize
Shared value is an untapped source Business value levers
of opportunity for business. Maximising the upside
Revenues Intangible benefit
Firstly, securing value for shareholders necessitates that companies –– Increased revenues from sales –– Stronger and healthier workforce,
of products and services that supply chain and employees
reduce risk by demonstrating long-term sustainable growth and improve health and well-being –– Enhanced trust, brand and loyalty
More certain, short-term
returns. One way this can be achieved is through skilling the wider
Less certain, long-term
by customers
workforce beyond the usual company boundaries, and improving the
health and living standards of local communities: employers need a
healthy, educated talent pool to ensure the future long-term viability Costs Risks
and competitiveness of the company. –– Savings from enhanced –– Long-term, secured value
productivity and improved for shareholders and other
employee retention stakeholders
In East London, outsourcing company MITIE has advocated this –– Switching to more cost-effective –– Protection of license to operate
approach by developing the ‘Real Apprentice’ programme. This is local suppliers
a mentoring scheme in partnership with JobCentrePlus that gives –– Savings from outsourcing
unemployed citizens of all ages the crucial experience and skills Minimising the downside
they need to get into long-term employment19. The Real Apprentice
Source: Accenture 2013
programme fulfilled both MITIE’s business needs for local, sustainable
supplies of talent and needs of the local area for economic
regeneration20. The scheme currently has a 75% success rate of
getting the graduate apprentices into further employment21.
Copyright © Marks & Spencer and Accenture, 2013New Areas for Innovation 23 / 71
2.1 Shared value: Building a prosperous workforce and community
Size of the prize
Businesses are also working with the public sector to improve “You can’t create jobs
social outcomes. For example, in Norwich, Chapelfield shopping
centre has developed a work experience programme that employs
that don’t exist, but
serving prisoners. Prisoners considered to be safe working within you can level the
the community have the opportunity to spend eight weeks at the playing field for those
shopping centre, gaining skills ranging from building maintenance, who don’t have the
customer service, recycling and painting and decorating22. Only 5%
of the work experience prisoners who have been released have
best chance in life.
reoffended, whilst nationally, just under 50% of those released There’s a business
are reconvicted within one year23. benefit in broadening
access as you may
Secondly, significant cost savings and productivity improvements can
be achieved from engaging employees to take an active role in the discover people with
community and by encouraging social entrepreneurship. Employees better talent.”
currently in a job where they feel they are contributing to positive
Paul Sheffield, Chief Executive,
environmental or social outcomes are more satisfied compared to Kier Group plc
those who don’t feel they’re making an impact, by a 2:1 ratio24. An
estimated £3-£29 billion in potential cost savings for UK businesses
are possible from reducing hiring costs and developing a more active
and engaged workforce25, corresponding to a potential increase in
productivity by 16% and a reduction in employee turnover by 2%26.
Copyright © Marks & Spencer and Accenture, 2013New Areas for Innovation 24 / 71
2.1 Shared value: Building a prosperous workforce and community
Size of the prize
And finally, by better understanding the needs of society, businesses
can focus their products and services to help solve environmental
and social challenges, which can lead to revenue enhancement
£3bn-
and a greater market share. For example, in developing countries
where health challenges are widespread there is real opportunity
£29bn
to improve community health and generate commercial returns by
growing the healthcare market. Novo Nordisk’s Changing Diabetes
programme has trained over 220,000 physicians in China, who
each treat about 230 patients annually27. Through better diagnosis, Potential
productivity
more patients are screened for diabetes and those diagnosed put gains29
on life-saving medication. As a result, people are getting access to
the medical help required while Novo Nordisk’s insulin market share
has jumped from 40% to 63% in China, largely through greater
awareness of patient needs28.
Copyright © Marks & Spencer and Accenture, 2013New Areas for Innovation 25 / 71
2.1 Shared value: Building a prosperous workforce and community
Sustainability benefits
The benefits from convergent thinking and shared value creation “Industry isn’t doing
can be long-lasting and can fundamentally improve socio-economic
outcomes for civil society:
enough to employ
talented young
–– The health of the workforce and the community can be improved, individuals. Only
through better alignment of the commercial goals of the company 12 of the top 32
and the needs of wider society.
–– Jobs can be created in the UK or abroad, contributing to local
building contractors
economic development (for example through smarter use of in the UK employ
local suppliers which could help mitigate against potential future apprentices, and 80%
supply chain failure). of apprenticeships
–– Standards of education and skills can be enhanced through
programmes such as apprenticeships, academies and training are with companies
programmes, developing transferrable skills and bringing people with less than
out of unemployment (see Case study 1 for an example). 10 employees.”
John Hayes, Chief Executive,
Axis
Copyright © Marks & Spencer and Accenture, 2013New Areas for Innovation 26 / 71
2.1 Shared value: Building a prosperous workforce and community
Case study 1
Accenture’s Skills to Succeed programme 30
Skills to Succeed is Accenture’s corporate citizenship
initiative which focuses on shared value creation
through advancing employment and entrepreneurship
opportunities in both mature and emerging markets.
Skills to Succeed draws on one of Initiatives under the programme
Accenture’s core competencies – include working with Plan
training talent – to help address International to provide training
the need for skills that open and career opportunities to
doors to employment around young people in Thailand and
the world. At the same time, Indonesia in industries such as
Skills to Succeed harnesses the information technology and
combination of financial support business process outsourcing,
and the pro bono contributions and with Youth Business
of time and Accenture employee International to provide young
skills to make a difference in people in Brazil with improved
communities. Launched in 2009, tools and mentoring to assist
the programme aims to equip them in becoming entrepreneurs.
500,000 people around the
world with the skills to get a job Accenture’s goal through the
or build a business. programme is to respond to
the major societal challenge
of youth unemployment and
inequality, creating shared value
that improves both Accenture’s
brand and builds a future source
of talent for the industry.
Copyright © Marks & Spencer and Accenture, 201327 / 71 Copyright © Marks & Spencer and Accenture, 2013
28 / 71
2.2
More with less:
Successful companies are decoupling growth
from resource extraction and environmental
externalities, securing resilient and competitive
supply chains and operations.
Rising and volatile costs of raw materials and resources, combined
Driving productivity with an uncertain economic environment, have squeezed UK
manufacturers: profitability of UK-based manufacturing companies
through resource was under 5% at the end of 2012, compared to 11% in 200731.
efficiency Companies face increasing pressure to optimize their operations and
supply chains and to use fewer inputs per unit of economic output.
#resourceefficiency
Resource efficiency programmes designed to cut energy
consumption, minimise raw material inputs and reduce waste drive
significant cost savings and environmental benefits. Many companies
are now turning to innovative clean technologies to cut their impact
further and build resource independence, for example using reverse
osmosis to secure long-term potable water supplies or innovative
forms of off-grid renewable energy.
Clean technology suppliers are central to driving growth. In the UK
a healthy clean technology sector is currently growing at an average
4.5% per annum, with higher rates of growth in wind, solar and
alternative fuel technologies32. Almost 1 million people are employed
in the UK in this sector, and over 25,000 new jobs were created
between 2010 and 201133. The sector is estimated to contribute
4% towards UK private sector turnover in 2012 with £119 billion
in sales34.New Areas for Innovation 29 / 71
2.2 More with less: Driving productivity through resource efficiency
Size of the prize
From an operational perspective, cost reduction is
one of the major business drivers for implementation
of resource efficiency programmes and clean
technologies such as renewable energy.
Production costs have the potential to be reduced significantly £119bn
over the long term, increasing margins and competitiveness. Current
For technology manufacturers, development and marketing of market size39
innovative renewable and clean technology solutions (see Case study
2a for the example of Siemens) can also provide attractive revenue
and market growth opportunities.
Resource efficiency in the supply chain can also generate a
substantial prize, as evidenced by the Better Cotton Initiative
(Case study 2b). Efficiency in transport can also realise savings:
Marks & Spencer was able to reduce their clothing delivery
£61bn
vehicle fleet by 25% and achieve a 30% fuel efficiency improvement
through optimizing the loading of goods and improving logistics
fleet management35.
Potential
productivity
gains40
Copyright © Marks & Spencer and Accenture, 2013New Areas for Innovation 30 / 71
2.2 More with less: Driving productivity through resource efficiency
Size of the prize
Beyond direct energy and resource cost savings, resource efficiency Business value levers
improvements can also create a substantial regulatory saving Maximising the upside
through reducing disposal costs (such as landfill taxes), and carbon Revenues Intangible benefit
tax liabilities. –– New low-impact products and –– Reduced environmental impacts
services (carbon, water, waste, etc.)
–– Sales from new and alternative –– Job creation
UK businesses could save £25 billion each year through no or low
More certain, short-term
Less certain, long-term
technologies –– Enhanced trust, brand and
cost resource efficiency measures alone, particularly from smarter –– Entering new markets reputation
usage of raw materials and minimising waste (£20 billion a year)36.
£4 billion a year in savings is possible from energy efficiency and £1
Costs Risks
billion from water efficiency37. Extending payback thresholds to over
–– Operational efficiency savings –– Mitigation of resource price
a year could realise a further £36 billion in savings a year 38. –– Resource use savings (energy, volatility
water, etc.) –– Reduced reliance on finite
–– Reduction in taxes and liabilities resources
(e.g. carbon, landfill) –– Readiness for future regulations
Minimising the downside
Source: Accenture 2013
Copyright © Marks & Spencer and Accenture, 2013New Areas for Innovation 31 / 71
2.2 More with less: Driving productivity through resource efficiency
Sustainability benefits
If resource efficiency measures are realised in the UK “We have invested in a
they could amount to a reduction in carbon emissions project with Solena to
by 13% for the UK economy as a whole (90 MtCO2)41, turn household waste
supporting Government and wider EU targets to
into jet fuel. We will
reduce emissions in-line with climate change goals.
Research suggests that water use could also be have a plant in East
reduced by approximately 25% in the commercial London that relies
sector, 28% in the agricultural sector and 10% in the on large quantities
industrial sector 42. of waste and can
currently produce a
Further indirect benefits from clean technology and resource
efficiency include reduced airborne pollution (e.g. from fossil-fuel
small amount of fuel –
based power and transport), which is partially responsible for over 2% of our needs, but
1 million lost working days in the UK every year from breathing with a possible goal of
and lung problems43. Reduced environmental pollution in the form getting to 10%.”
of water-borne and land-based toxicity may be another potential
indirect benefit. Keith Williams, Chief Executive Officer,
British Airways
The UK currently holds 6th place, behind the USA, China, Japan,
India and Germany in terms of market share in the clean technology
sector. Based on forecasted growth trends in UK sales, over 40,000
jobs could be created in the UK each year to 201544. This could create
demand for skills, secure international competitiveness and much-
needed, resilient growth in the next few years.
Copyright © Marks & Spencer and Accenture, 2013New Areas for Innovation 32 / 71 2.2 More with less: Driving productivity through resource efficiency Case study 2a Delivering financial performance and sustainable development at Siemens 45 Siemens has anchored sustainability into its organisation, and takes a proactive role in contributing to sustainable development through innovation. Last year, Siemens generated Renewable energy technologies, €33.2 billion in revenues from the smart grid applications and products and solutions in their other green technologies Environmental Portfolio – 42% contributed the remainder of of their Group revenue, enabling the environmental revenues. their customers to cut their CO2 Investment in R&D is core to emissions by an estimated 332 this strategy – 5.4% of their million tonnes. The demand for revenues are spent on R&D, green technologies is driving the and this percentage has been company’s growth. 70% of the steadily increasing over the last revenue from their Environmental few years. Through this effort the portfolio is from energy-efficient company has demonstrated an Source: Cliff Flickr products and solutions, including improvement in efficiency of its smart building technologies and products by 8% since 2010. advanced infrastructure such as combined-cycle power plants. Copyright © Marks & Spencer and Accenture, 2013
New Areas for Innovation 33 / 71
2.2 More with less: Driving productivity through resource efficiency
Case study 2b
The Better Cotton Initiative: reducing supply
chain risk through enhanced resource efficiency 46
The Better Cotton Initiative (BCI) helps producers
adopt better management practices in growing cotton.
Using less water, less pesticides For Marks & Spencer, BCI means
and fewer fertilisers is clearly farmers are more likely to
good for the environment as grow cotton rather than other
well as a way to improve the crops; and because they’re
efficiency of the farming system. disconnected from major
Marks & Spencer have learnt increases in input costs and
that farmers who follow the BCI shortages, Marks & Spencer can
model are more efficient and can secure cotton sources for the
reduce their input costs47. The future. This helps ensure that
latest results from a joint project their market for buying cotton is
with WWF that BCI farmers are more stable, and greater stability
over 30% more profitable than means fewer price fluctuations
comparable non-BCI farmers48. for supply chains.
What’s more, BCI has
empowered cotton farmers to
trade independently, removing
local middlemen who take a cut
of the business49. Empowerment
connects the farmers more
intimately to their final customer
and reduces costs along the
whole supply chain50.
Copyright © Marks & Spencer and Accenture, 201334 / 71 Copyright © Marks & Spencer and Accenture, 2013
35 / 71
2.3
Circular
In the period since the industrial revolution, business
has been dominated by a linear model of production
and consumption, in which goods are manufactured
from raw materials, used, and then discarded.
In contrast, a circular economy is one that is both restorative and
economy: regenerative by intention and design. Circular forms of production
and consumption are an age-old model but are currently often
Closing the loop limited to high value categories of goods. Companies are now finding
that ‘closing the loop’ on the supply chain through improved product
#circulareconomy design, extending asset life, re-use and recycling can deliver tangible
commercial and sustainability gains across a wider range of goods
and materials. Closed-loop systems reduce the need for extraction
and processing of new resources, and lessen the associated impacts
on the natural environment.
In the same way that new and alternative consumption models can
create societal benefits, in the form of reducing household costs for
durable goods, closed-loop thinking and design can improve quality
and value by extending the useful life of goods, enabling their re-use
and re-sale, thereby saving money for businesses and cutting costs
for consumers.New Areas for Innovation 36 / 71
2.3 Circular economy: Closing the loop
Size of the prize
Moving to a circular model of production “Closed loop recycling
has significant business benefits in the UK, is ambitious, but
across different sectors. achievable. The
aluminium used in
£13bn
Value can be realised from various changes in behaviour, for example:
–– Circling goods within the system for longer by enhancing their our vehicles contains
durability and reusability.
–– Cascading the use of materials more effectively through different Current up to 50% recycled
sectors and products (for example, using fibres in textiles, market size54 content, and includes
upholstery, and finally insulation materials). scrap aluminium from
–– Ensuring that material streams remain uncontaminated and of our manufacturing
high quality, enabling their longevity.
–– Tightening the circle by minimising initial material use.
operations.”
Dr Ralf Speth, Chief Executive Officer,
Jaguar Land Rover
£15bn-
£18bn
Potential
productivity
gains55
Copyright © Marks & Spencer and Accenture, 2013New Areas for Innovation 37 / 71
2.3 Circular economy: Closing the loop
Size of the prize
Adoption of a circular model could yield net material cost savings Business value levers
of an estimated £15-£18 billion a year in the UK consumer goods Maximising the upside
industry, representing approximately 20% of all the material input Revenues Intangible benefit
costs, spanning different sectors including packaged and fresh food, –– New, re-designed product lines –– Job creation in new sectors
beverages, apparel and personal consumer products51. –– Collection and reverse logistics –– Reduced environmental
externalities
More certain, short-term
Less certain, long-term
–– Improved customer interaction
Food waste as an example could create profits of £113 per tonne and loyalty
of waste in the UK (£1 billion a year), based on savings from roll-out –– Enhanced brand
of anaerobic digestion, avoided landfill costs and revenues in the
Costs Risks
form of feed-in-tariffs from electricity generation52. In the clothing
–– Raw material and resource –– Reduced exposure to price
sector, approximately £850 per tonne of clothing in net profit cost savings volatility and supply risks
could be generated in the UK from enabling re-use and recycling – –– Reduced costs of production –– Improved regulatory compliance
–– More resilient economy
contributing a further £1 billion in savings UK wide53.
Minimising the downside
Source: Accenture 2013
Copyright © Marks & Spencer and Accenture, 2013New Areas for Innovation 38 / 71
2.3 Circular economy: Closing the loop
Sustainability benefits
Circular models of consumption require new kinds of skills and services, “We are integrating
for example in logistics, processing, recovery and re-sale, and have sustainability into our
the potential to bring the UK into a leading position globally whilst design process and
promoting social development and education in regions of lower income. closing the loop on
Counties in the East of England, The environmental benefits, Programmes that have focused packaging.”
the Midlands, the Northwest, particularly from retention on encouraging both recycling
Ian Livingston, Chief Executive,
and Yorks and Humber currently and regeneration of natural and re-use have been successful
BT Group
act as the ‘powerhouse’ for resources, from a circular in achieving environmental
waste management, recovery economy are significant and the savings, for example Marks &
and recycling, but significant market is still under-developed. Spencer reduced the number
opportunity exists to expand Circular economic approaches of carrier bags customers use “We need to encourage
this market further. The circular can achieve a possible 50- by 78% over 5 years since the UK businesses to use
economy has created over 90% reduction in a product’s introduction of carrier bag
100,000 jobs in the UK (83% environmental footprint58. By charging. Using closed-loop
more recyclate. The
of which are outside London), ‘cascading’ used textiles from thinking, they were also able to UK does need more
in over 5,000 companies, one phase to another, re-using ensure every carrier bag is made reprocessing facilities,
servicing a market size of £13 them in different applications from 100% recycled material but businesses are still
billion56. Employment in the (e.g. upholstery to insulation), that is sourced from their own
waste management, recovery could generate 1 million tonnes waste streams (thereby cutting not making the most
and recycling sectors is growing CO2 savings and reduce water costs)60. of avoiding landfill by
at 3% a year nationally, and is use by 16 million cubic metres in using other available
expected to create at least 3,500 the UK alone59.
jobs annually in the next
options.”
few years57. Estelle Brachlianoff, Chief Executive
Officer, Veolia Environmental
Services (UK)
Copyright © Marks & Spencer and Accenture, 2013New Areas for Innovation 39 / 71
2.3 Circular economy: Closing the loop
Case study 3
Patagonia’s Common Threads Initiative:
encouraging re-use, repair and recycling 61
Outdoor clothing retailer Patagonia’s business
model is designed for a circular economy.
By selling high quality, premium- and sends all recyclable Patagonia has backed up this
priced products, customers are product to Tejin, a Japanese supply chain innovation with
incentivised to retain their goods manufacturer of synthetic fibres, direct consumer messaging.
for longer, rather than purchase for remanufacturing. Polyester Their 2012 ‘Don’t Buy This
frequent replacements from rival is one of the main materials Jacket’ campaign made a
companies that offer cheaper used in their products, for which bold statement to customers
alternatives. Customers are also Patagonia believe they have now by asking them only to buy
offered repair services for the ‘closed the loop’ completely – no the products that they need,
duration that they own new polyester-based compounds thereby encouraging sustainable
the product. are procured for the manufacture consumption. Over 56,000
of Patagonia’s products. customers have now signed
Patagonia also encourages Patagonia’s R&D department are Patagonia’s pledge to reduce,
their customers to recycle primarily focused on ‘designing- repair and recycle products
their clothes at the end of their out waste’, ensuring that every they own.
useful life by sending them new product is highly recyclable.
back to the company who As of 2011, all of Patagonia’s
then strip all useful material clothing is now 100% recyclable.
from the product and re-use Patagonia claims this has created
them in the manufacture of large savings and has enabled
new garments. To achieve them to hedge against rising
this, Patagonia has invested oil prices and reduce other raw
in research and technology, material costs significantly.
Source: Lisa Picard Flickr
Copyright © Marks & Spencer and Accenture, 201340 / 71
2.4
New
Consumers are changing the way they purchase
and use products and services and are altering
the way they interact with companies.
In the same way that YouTube changed the way we watched TV,
and the development of mobile phones fundamentally altered our
communication methods, the ‘share economy’ disrupts the industrial
consumption model of companies producing and people consuming. In the future
models: ownership of goods will be less important and everyone can be
both consumer and producer, creating efficiencies and new
Changing business models.
the customer
proposition From large marketplaces such as eBay and Gumtree, to peer-to-
peer accommodation like Airbnb, new consumption models, enabled
almost entirely through on-line channels and social media, are acting
#newbizmodels as a new disruptive force. Technology is driving the reinvention of the
‘leasing’ approach at greater scale across a wider range of markets.You can also read
