1 00:00:00,070 --> 00:00:02,500 The following content is provided under a Creative 2 00:00:02,500 --> 00:00:04,019 Commons license. 3 00:00:04,019 --> 00:00:06,360 Your support will help MIT OpenCourseWare 4 00:00:06,360 --> 00:00:10,730 continue to offer high quality educational resources for free. 5 00:00:10,730 --> 00:00:13,340 To make a donation or view additional materials 6 00:00:13,340 --> 00:00:17,236 from hundreds of MIT courses, visit MIT OpenCourseWare 7 00:00:17,236 --> 00:00:17,861 at ocw.mit.edu. 8 00:00:26,730 --> 00:00:30,460 PROFESSOR: All right, so let's get started. 9 00:00:30,460 --> 00:00:33,720 OK, good afternoon. 10 00:00:33,720 --> 00:00:37,760 Finally spring here, so which means you want 11 00:00:37,760 --> 00:00:40,030 to be out, not inside a room. 12 00:00:40,030 --> 00:00:44,590 First, we're going to go over the strategy aspect. 13 00:00:44,590 --> 00:00:49,500 This will give us a chance to reflect the whole content we 14 00:00:49,500 --> 00:00:57,280 went through the whole term by maybe using the idea of setting 15 00:00:57,280 --> 00:01:00,850 up a strategy to try to connect the different sessions that 16 00:01:00,850 --> 00:01:03,540 kind of covered throughout. 17 00:01:03,540 --> 00:01:07,110 And also we're going to spend some time on the team 18 00:01:07,110 --> 00:01:08,510 project final deliverable. 19 00:01:08,510 --> 00:01:09,900 I know there's some questions. 20 00:01:09,900 --> 00:01:12,525 You're going to-- you're meeting with us if you haven't already 21 00:01:12,525 --> 00:01:13,920 meet already. 22 00:01:13,920 --> 00:01:15,790 And I want to answer those so you 23 00:01:15,790 --> 00:01:18,880 are prepared to work on the final report. 24 00:01:18,880 --> 00:01:23,510 And then on Wednesday, we're going to hear firsthand 25 00:01:23,510 --> 00:01:27,630 from EMC on how they think about sustainability strategy, 26 00:01:27,630 --> 00:01:29,210 the sustainability group. 27 00:01:29,210 --> 00:01:31,870 So the direct order [INAUDIBLE] the head people, 28 00:01:31,870 --> 00:01:33,010 they're going to come here. 29 00:01:33,010 --> 00:01:35,840 And you have a chance to validate and maybe 30 00:01:35,840 --> 00:01:37,980 get some of your questions answered 31 00:01:37,980 --> 00:01:41,250 on how a company actually makes these happen in a little bit 32 00:01:41,250 --> 00:01:42,040 larger scale. 33 00:01:42,040 --> 00:01:43,480 STUDENT: If you guys want to go online too, 34 00:01:43,480 --> 00:01:45,280 EMC has one of the better sustainability [INAUDIBLE] 35 00:01:45,280 --> 00:01:45,655 reporting. 36 00:01:45,655 --> 00:01:47,100 G on their website and look around 37 00:01:47,100 --> 00:01:48,558 at what kind of information they're 38 00:01:48,558 --> 00:01:50,689 disclosing so you can look at that relative to what 39 00:01:50,689 --> 00:01:51,730 your company [INAUDIBLE]. 40 00:01:51,730 --> 00:01:53,563 Because I would say they're sort of the game 41 00:01:53,563 --> 00:01:56,250 and also maybe some questions to think about Katie 42 00:01:56,250 --> 00:01:58,197 [? Sindel ?] who will becoming on Wednesday. 43 00:01:58,197 --> 00:02:00,280 PROFESSOR: Great, so that's [INAUDIBLE] little bit 44 00:02:00,280 --> 00:02:02,170 of the administrative aspect. 45 00:02:02,170 --> 00:02:05,508 So this paper-- who had read it before? 46 00:02:09,259 --> 00:02:10,889 Before we assigned it? 47 00:02:10,889 --> 00:02:14,374 So in the past-- in which context did you read it? 48 00:02:14,374 --> 00:02:18,795 STUDENT: It was for a McKinsey thing I was 49 00:02:18,795 --> 00:02:20,440 on like a while back-- 2007. 50 00:02:20,440 --> 00:02:21,845 PROFESSOR: OK, how about you? 51 00:02:21,845 --> 00:02:22,775 Where did you read it before? 52 00:02:22,775 --> 00:02:23,566 STUDENT: Oh, sorry. 53 00:02:23,566 --> 00:02:25,090 I thought [INAUDIBLE] class 54 00:02:25,090 --> 00:02:26,502 PROFESSOR: Oh, OK. 55 00:02:26,502 --> 00:02:27,960 This actually is a very good paper. 56 00:02:27,960 --> 00:02:30,710 [INAUDIBLE] this is actually the one 57 00:02:30,710 --> 00:02:33,520 I always go back to over time. 58 00:02:33,520 --> 00:02:37,080 Because it has some fundamental insights that I think 59 00:02:37,080 --> 00:02:38,550 is worth revisiting. 60 00:02:38,550 --> 00:02:43,170 This is, even though it's not written for supply chain 61 00:02:43,170 --> 00:02:46,990 necessarily-- it's not written for environmental supply chain 62 00:02:46,990 --> 00:02:47,490 either. 63 00:02:47,490 --> 00:02:49,800 It's really more general CSR. 64 00:02:49,800 --> 00:02:53,500 But I think some of the key aspects of this paper 65 00:02:53,500 --> 00:02:56,300 are, I think, critical when you have to make 66 00:02:56,300 --> 00:02:58,150 this happen in practice. 67 00:02:58,150 --> 00:03:01,590 This is very much connected to what we see and Alexis 68 00:03:01,590 --> 00:03:04,080 and I have been talking to people on, 69 00:03:04,080 --> 00:03:05,770 especially the pitfalls-- so how people 70 00:03:05,770 --> 00:03:09,970 address environmental aspects in their company and beyond. 71 00:03:09,970 --> 00:03:14,260 So why don't we start by who would like to kind of give me 72 00:03:14,260 --> 00:03:19,540 a summary of the premise, the basic premise, that Porter 73 00:03:19,540 --> 00:03:21,050 puts forward in this article? 74 00:03:25,220 --> 00:03:26,140 So we'll [INAUDIBLE] 75 00:03:26,140 --> 00:03:29,100 STUDENT: Well, you've got to say that just the CSR is not enough 76 00:03:29,100 --> 00:03:30,915 and that people are going to take 77 00:03:30,915 --> 00:03:32,600 the CSR as like the end-all and trying 78 00:03:32,600 --> 00:03:34,940 to put it in these indexes without really knowing 79 00:03:34,940 --> 00:03:36,154 all of the true information. 80 00:03:36,154 --> 00:03:37,570 So by doing that, they're actually 81 00:03:37,570 --> 00:03:40,107 kind of going away from their true goal, which 82 00:03:40,107 --> 00:03:41,766 is improvement in these areas. 83 00:03:41,766 --> 00:03:47,440 So it's kind of looking at what are different ways that 84 00:03:47,440 --> 00:03:49,689 aside from this generally accepted [INAUDIBLE] that we 85 00:03:49,689 --> 00:03:53,150 can use to get companies to focus more 86 00:03:53,150 --> 00:03:55,905 on the social aspect, social responsibility. 87 00:03:55,905 --> 00:03:57,430 PROFESSOR: OK, that's one. 88 00:03:57,430 --> 00:03:59,940 Would you like to add something to that? 89 00:03:59,940 --> 00:04:03,020 STUDENT: It advocates for moving from corporate social 90 00:04:03,020 --> 00:04:07,750 responsibility towards corporate social integration 91 00:04:07,750 --> 00:04:14,220 and also that sometimes this companies 92 00:04:14,220 --> 00:04:20,360 spread their resources too thin [INAUDIBLE] NGO demands 93 00:04:20,360 --> 00:04:25,360 or kind of external pressures that aren't necessarily that 94 00:04:25,360 --> 00:04:27,440 integral to their supply chain. 95 00:04:27,440 --> 00:04:31,180 [INAUDIBLE] perhaps have more of an impact 96 00:04:31,180 --> 00:04:35,478 if they focus on one area in particular. 97 00:04:38,382 --> 00:04:41,152 PROFESSOR: Let me see if I can get those three ideas here. 98 00:04:41,152 --> 00:04:45,750 One is the, I guess focus too much on the stakeholders. 99 00:04:45,750 --> 00:04:48,200 We'll talk a little bit more about that one. 100 00:04:48,200 --> 00:04:49,600 They integrate to the business I guess [INAUDIBLE] 101 00:04:49,600 --> 00:04:50,808 what you were saying as well. 102 00:04:50,808 --> 00:04:53,480 So [INAUDIBLE] the index traps is one of the stakeholders. 103 00:04:53,480 --> 00:04:58,880 And this is not a trivial problem. 104 00:04:58,880 --> 00:05:00,490 And let me just relate back-- I'm 105 00:05:00,490 --> 00:05:03,970 not sure I can tell the full company name yet. 106 00:05:03,970 --> 00:05:05,570 But soon we will. 107 00:05:05,570 --> 00:05:08,530 So we were talking about other major, major companies. 108 00:05:08,530 --> 00:05:10,600 And we were asking them, how do you 109 00:05:10,600 --> 00:05:14,990 start your green sustainability strategy? 110 00:05:14,990 --> 00:05:16,520 They said, we did this. 111 00:05:16,520 --> 00:05:20,330 We went to all the indexes that were out there that 112 00:05:20,330 --> 00:05:22,010 were ranking companies. 113 00:05:22,010 --> 00:05:26,890 We looked exactly at why they were ranking as well. 114 00:05:26,890 --> 00:05:29,580 And then we started addressing, they give us 115 00:05:29,580 --> 00:05:32,470 like a guiding post we wanted to achieve, want to be number 116 00:05:32,470 --> 00:05:34,350 one in all those indexes. 117 00:05:34,350 --> 00:05:38,490 And then we look at what was the feedback they were providing us 118 00:05:38,490 --> 00:05:40,650 and we work at it. 119 00:05:40,650 --> 00:05:43,590 And we're doing very well. 120 00:05:43,590 --> 00:05:46,464 They're ranked much better, of course, than before. 121 00:05:46,464 --> 00:05:47,880 But this is specifically addressed 122 00:05:47,880 --> 00:05:50,970 in this Porter article specifically advises 123 00:05:50,970 --> 00:05:52,910 against that. 124 00:05:52,910 --> 00:05:55,940 So it advises against it in multiple dimensions. 125 00:05:55,940 --> 00:05:58,100 One dimension is, you know, these indexes 126 00:05:58,100 --> 00:05:59,840 are convoluted, right? 127 00:05:59,840 --> 00:06:02,050 But there's a fundamental, I guess, 128 00:06:02,050 --> 00:06:06,040 problem is that this doesn't go beyond what your company does. 129 00:06:06,040 --> 00:06:07,990 It's what somebody else cares about, 130 00:06:07,990 --> 00:06:09,620 not what your company cares about. 131 00:06:09,620 --> 00:06:12,920 And the indexes, though they are the most visible part, that's 132 00:06:12,920 --> 00:06:16,100 not really is not going to be there to stay, I think, yeah? 133 00:06:16,100 --> 00:06:19,990 That's really the thing is it's not that it's bad to use them. 134 00:06:19,990 --> 00:06:22,440 It's just that if you think that's the ultimate goal, 135 00:06:22,440 --> 00:06:26,410 you will never be able to go the momentum beyond the CSR head. 136 00:06:26,410 --> 00:06:28,450 Whomever started this project, great. 137 00:06:28,450 --> 00:06:30,300 They're going to be able to move this ahead. 138 00:06:30,300 --> 00:06:33,730 But once this person leaves or the company changes, 139 00:06:33,730 --> 00:06:36,640 to this is going to be gone. 140 00:06:36,640 --> 00:06:37,850 This could be five years. 141 00:06:37,850 --> 00:06:39,430 This could be seven years. 142 00:06:39,430 --> 00:06:41,352 That's unknown, but that's, I think, 143 00:06:41,352 --> 00:06:42,560 one of the ultimate problems. 144 00:06:42,560 --> 00:06:45,170 So I want to list-- to tell that story. 145 00:06:45,170 --> 00:06:47,730 But focus too much on the stakeholder. 146 00:06:47,730 --> 00:06:52,300 And so you had a third idea but I forgot what it was. 147 00:06:52,300 --> 00:06:52,800 You forgot? 148 00:06:52,800 --> 00:06:53,793 STUDENT: I forget too. 149 00:06:53,793 --> 00:06:54,626 PROFESSOR: OK, good. 150 00:06:54,626 --> 00:06:56,980 That's good Anything else that you 151 00:06:56,980 --> 00:07:01,050 think were the key messages from this articles that 152 00:07:01,050 --> 00:07:03,755 are not those three? 153 00:07:03,755 --> 00:07:05,460 STUDENT: I thought the way he wrote down 154 00:07:05,460 --> 00:07:07,530 four different types of CRS. 155 00:07:07,530 --> 00:07:10,250 So there was the license to operate, 156 00:07:10,250 --> 00:07:14,970 the [INAUDIBLE] obligation, sustainability, and [INAUDIBLE] 157 00:07:14,970 --> 00:07:16,970 PROFESSOR: Yeah, I think taht's pretty good too. 158 00:07:16,970 --> 00:07:18,594 And the reason I think it's pretty good 159 00:07:18,594 --> 00:07:21,190 is because most of us, the first time we think through this, 160 00:07:21,190 --> 00:07:24,910 these are the four that come to mind of why a company do it. 161 00:07:24,910 --> 00:07:26,295 So one is a moral argument. 162 00:07:29,930 --> 00:07:33,070 The other one was the license to operate argument. 163 00:07:33,070 --> 00:07:37,940 The other one that is maybe the one that we even within MIT 164 00:07:37,940 --> 00:07:42,080 we talk about more is the sustainability argument. 165 00:07:42,080 --> 00:07:44,985 And the third one is the reputation. 166 00:07:50,750 --> 00:07:55,050 Who remembers why those four key claims are incomplete? 167 00:07:55,050 --> 00:07:56,550 It's not that they're wrong. 168 00:07:56,550 --> 00:08:01,150 It's that they were incomplete to capture the true motivation 169 00:08:01,150 --> 00:08:04,390 and meaning to drive and move change in an organization 170 00:08:04,390 --> 00:08:06,456 towards CSR or sustainability. 171 00:08:06,456 --> 00:08:08,080 So let's talk about the moral argument. 172 00:08:08,080 --> 00:08:10,750 What was the main problem of using 173 00:08:10,750 --> 00:08:15,070 a moral view of the world to say, this is what we should do? 174 00:08:15,070 --> 00:08:17,370 This is the good thing for us to do. 175 00:08:17,370 --> 00:08:20,518 This is why our business you do it. 176 00:08:20,518 --> 00:08:23,010 STUDENT: It wasn't very easily measurable. 177 00:08:23,010 --> 00:08:26,360 PROFESSOR: Number one is measurement, which is always 178 00:08:26,360 --> 00:08:27,670 going to be a challenge, right? 179 00:08:27,670 --> 00:08:30,680 So, measurement. 180 00:08:30,680 --> 00:08:33,589 So what was the problem with the moral-- 181 00:08:33,589 --> 00:08:35,630 what was the problem with the measurement aspect? 182 00:08:35,630 --> 00:08:37,296 Not easily measurable, that's one thing. 183 00:08:37,296 --> 00:08:39,220 But what does he mean by that? 184 00:08:39,220 --> 00:08:41,011 STUDENT: I think there are some things that 185 00:08:41,011 --> 00:08:44,850 are kind of like a [INAUDIBLE] a great area [INAUDIBLE] you 186 00:08:44,850 --> 00:08:48,770 do one thing, but you kind of destroy value in another area. 187 00:08:48,770 --> 00:08:51,719 And how do you actually get that to mesh? 188 00:08:51,719 --> 00:08:53,135 PROFESSOR: Yes, so the measurement 189 00:08:53,135 --> 00:08:55,150 is that we all as individuals, we probably 190 00:08:55,150 --> 00:08:56,780 have our own moral values. 191 00:08:56,780 --> 00:09:02,670 And when we decide, should I take that extra piece of coke-- 192 00:09:02,670 --> 00:09:05,070 I paid for one drink, I want to top it off. 193 00:09:05,070 --> 00:09:07,960 You put, like, a little bit more than you paid for. 194 00:09:07,960 --> 00:09:09,850 You do, like, a moral analysis, right? 195 00:09:09,850 --> 00:09:11,395 And you do it internally in the [INAUDIBLE], right? 196 00:09:11,395 --> 00:09:13,340 You say, well, you know, last time I had less. 197 00:09:13,340 --> 00:09:15,490 So maybe on average, I'm consuming 198 00:09:15,490 --> 00:09:17,057 the right amount of soda. 199 00:09:17,057 --> 00:09:18,640 And I'm OK with going back to the line 200 00:09:18,640 --> 00:09:20,540 and getting soda even though I paid for one drink. 201 00:09:20,540 --> 00:09:21,790 It's like a moral choice, hm? 202 00:09:21,790 --> 00:09:23,240 And you do it at the individual level. 203 00:09:23,240 --> 00:09:25,100 It's easy maybe to do those tradeoffs because they're not 204 00:09:25,100 --> 00:09:25,830 quantifiable. 205 00:09:25,830 --> 00:09:27,910 But if you go like a big company-- 206 00:09:27,910 --> 00:09:30,170 they use the example of Google-- you 207 00:09:30,170 --> 00:09:32,730 have two different moral choices, right? 208 00:09:32,730 --> 00:09:34,200 There's one-- openness. 209 00:09:34,200 --> 00:09:35,600 You want freedom. 210 00:09:35,600 --> 00:09:38,100 But on the hand, you also want to give access 211 00:09:38,100 --> 00:09:39,140 to people to technology. 212 00:09:39,140 --> 00:09:40,730 So how do you balance those two? 213 00:09:40,730 --> 00:09:42,790 And when you cannot measure things, 214 00:09:42,790 --> 00:09:46,980 it all becomes a choice that is of leadership or some sort. 215 00:09:46,980 --> 00:09:49,230 And you cannot translate that into business over time. 216 00:09:49,230 --> 00:09:49,730 That's one. 217 00:09:49,730 --> 00:09:51,500 The other thing is the moral compass 218 00:09:51,500 --> 00:09:54,820 changes-- changes from one place to the other, 219 00:09:54,820 --> 00:09:56,280 from one context to the other. 220 00:09:56,280 --> 00:09:57,910 How can a company be run that way? 221 00:09:57,910 --> 00:10:00,530 It's not that morality is not part of the business decisions, 222 00:10:00,530 --> 00:10:04,950 but rather making that the main driving force for CSR 223 00:10:04,950 --> 00:10:06,976 does not allow you to do trade offs property. 224 00:10:06,976 --> 00:10:09,350 That's kind of what his main argument was-- a measurement 225 00:10:09,350 --> 00:10:10,100 aspect. 226 00:10:10,100 --> 00:10:13,550 Lack of measurement is reality on moral decisions. 227 00:10:13,550 --> 00:10:15,360 But you cannot make the trade offs. 228 00:10:15,360 --> 00:10:17,970 And businesses are all about trade offs. 229 00:10:17,970 --> 00:10:20,450 That was one of his main I'd say counter arguments. 230 00:10:20,450 --> 00:10:21,560 So that's morality. 231 00:10:21,560 --> 00:10:24,580 License to operate-- 232 00:10:24,580 --> 00:10:26,610 STUDENT: He said that they don't take-- 233 00:10:26,610 --> 00:10:30,840 so as you're trying to look good in the eyes of the community 234 00:10:30,840 --> 00:10:36,170 you operate in, you are [INAUDIBLE] to their requests 235 00:10:36,170 --> 00:10:39,890 by you're not taking it into account how you operate 236 00:10:39,890 --> 00:10:41,830 and what your competitive advantages are. 237 00:10:41,830 --> 00:10:43,820 PROFESSOR: Yes, there's a dichotomy 238 00:10:43,820 --> 00:10:47,990 between your capabilities and what these community 239 00:10:47,990 --> 00:10:48,610 wants, right? 240 00:10:48,610 --> 00:10:51,015 So that's not taken into account. 241 00:11:00,990 --> 00:11:03,096 Also, this goes back-- he talks in there 242 00:11:03,096 --> 00:11:04,720 about different context as well, right? 243 00:11:04,720 --> 00:11:07,520 The context [INAUDIBLE]. 244 00:11:07,520 --> 00:11:10,000 Reputation-- this is the interesting one. 245 00:11:10,000 --> 00:11:12,310 Because actually, I spent a lot of time 246 00:11:12,310 --> 00:11:14,410 on trying to look for this information. 247 00:11:14,410 --> 00:11:19,900 What was the main argument against the reputation 248 00:11:19,900 --> 00:11:23,660 kind of bad approach for justifying CRS? 249 00:11:23,660 --> 00:11:24,410 Someone remembers? 250 00:11:29,867 --> 00:11:31,450 STUDENT: A lot of times, it can just-- 251 00:11:31,450 --> 00:11:32,410 PROFESSOR: Very quickly. 252 00:11:32,410 --> 00:11:33,910 STUDENT: --just a marketing campaign 253 00:11:33,910 --> 00:11:37,020 instead of like a true measure of what they're doing. 254 00:11:37,020 --> 00:11:38,080 Like, so they're just-- 255 00:11:38,080 --> 00:11:41,422 PROFESSOR: There's something more fundamental. 256 00:11:41,422 --> 00:11:42,880 It's true, it's a bit of marketing. 257 00:11:42,880 --> 00:11:45,330 But it's not proven. 258 00:11:45,330 --> 00:11:47,670 See, there's not even-- we are not 259 00:11:47,670 --> 00:11:50,530 able to find real evidence that this actually works, 260 00:11:50,530 --> 00:11:54,450 that this branding creates business value, which 261 00:11:54,450 --> 00:11:56,689 is very surprising. 262 00:11:56,689 --> 00:11:58,730 But it's surprising because in the companies that 263 00:11:58,730 --> 00:12:01,940 are willing to do it very well, it's 264 00:12:01,940 --> 00:12:05,650 hard to differentiate how much is brand, how much is business. 265 00:12:05,650 --> 00:12:09,500 How do you make that argument? 266 00:12:09,500 --> 00:12:12,770 And I think we tried several times, [? Alexis, ?] to find 267 00:12:12,770 --> 00:12:16,190 some good studies that show that being greener 268 00:12:16,190 --> 00:12:21,090 gives you better return over investment or business value. 269 00:12:21,090 --> 00:12:23,540 But actually, most of the studies have it reverse. 270 00:12:23,540 --> 00:12:25,800 They say, well, companies that are doing great, 271 00:12:25,800 --> 00:12:28,780 they tend to be greener, right, or more sustainable. 272 00:12:28,780 --> 00:12:30,900 But you can never find the other argument. 273 00:12:30,900 --> 00:12:33,100 So doesn't mean that there's no value in it. 274 00:12:33,100 --> 00:12:35,200 It's just hard to distinguish that value 275 00:12:35,200 --> 00:12:37,260 from the normal operation of the business. 276 00:12:37,260 --> 00:12:39,940 So even if you try to go that path, 277 00:12:39,940 --> 00:12:44,010 you will not ever get a good sense of how good value they 278 00:12:44,010 --> 00:12:45,790 will give you, which goes back to why 279 00:12:45,790 --> 00:12:47,080 will you even choose to do it? 280 00:12:47,080 --> 00:12:50,780 When the times get tough and you have to cut budgets, 281 00:12:50,780 --> 00:12:52,290 how can justify doing this? 282 00:12:52,290 --> 00:12:54,606 I mean, he always thinks on how businesses 283 00:12:54,606 --> 00:12:55,480 should do this later. 284 00:12:55,480 --> 00:12:58,660 So a little bit of the value of marketing 285 00:12:58,660 --> 00:13:01,604 is unclear value of brand. 286 00:13:01,604 --> 00:13:03,705 STUDENT: [INAUDIBLE] do it the opposite way 287 00:13:03,705 --> 00:13:06,920 that if you got attacked like in the case of Nestle 288 00:13:06,920 --> 00:13:09,000 and-- Nestle and Kit Kat situation when 289 00:13:09,000 --> 00:13:10,840 there was the Greenpeace attacks and we 290 00:13:10,840 --> 00:13:12,940 wanted to see the stop dip. 291 00:13:12,940 --> 00:13:17,731 And it maybe went down a few cents for one day 292 00:13:17,731 --> 00:13:18,355 and evened out. 293 00:13:18,355 --> 00:13:21,130 So unfortunately, even the reverse is not true. 294 00:13:21,130 --> 00:13:23,660 PROFESSOR: The only example we found which actually 295 00:13:23,660 --> 00:13:27,660 is the scary example, the only one was Nike, probably, 296 00:13:27,660 --> 00:13:28,910 back in the labor market. 297 00:13:28,910 --> 00:13:31,350 That's the only example that has been documented 298 00:13:31,350 --> 00:13:34,735 that is closer correlated between the attacks 299 00:13:34,735 --> 00:13:38,220 that they had on labor and the actual stock value. 300 00:13:38,220 --> 00:13:40,860 But there were other factors going on in that time. 301 00:13:40,860 --> 00:13:44,290 But that was enough to scare people across the world, which 302 00:13:44,290 --> 00:13:44,790 is good. 303 00:13:44,790 --> 00:13:45,700 I'm not saying this is a bad thing, 304 00:13:45,700 --> 00:13:47,320 but he argues that it's not enough. 305 00:13:47,320 --> 00:13:48,970 And then we go to sustainability. 306 00:13:48,970 --> 00:13:50,730 That-- what's the argument he uses 307 00:13:50,730 --> 00:13:53,603 for sustainability not being a good driving force? 308 00:13:53,603 --> 00:13:56,786 STUDENT: [INAUDIBLE] There's not a lot of basis for it 309 00:13:56,786 --> 00:14:02,250 and it can also lead to misunderstanding the long term 310 00:14:02,250 --> 00:14:04,126 cost for short term gains. 311 00:14:10,030 --> 00:14:12,350 PROFESSOR: So it's vague. 312 00:14:12,350 --> 00:14:16,110 So the definition is great, but what is the long term? 313 00:14:16,110 --> 00:14:18,190 I mean, how long is the long term? 314 00:14:18,190 --> 00:14:20,800 How am I trading off the long term? 315 00:14:20,800 --> 00:14:22,280 Is this 10 years? 316 00:14:22,280 --> 00:14:23,430 Is this 100 years? 317 00:14:23,430 --> 00:14:24,630 Is this 50 years? 318 00:14:24,630 --> 00:14:27,495 But I have to make decisions now and evaluate it now. 319 00:14:27,495 --> 00:14:29,370 And if I always have to make these trade offs 320 00:14:29,370 --> 00:14:33,410 long term and short term, the natural path 321 00:14:33,410 --> 00:14:36,420 is going to be postponed the long term. 322 00:14:36,420 --> 00:14:38,840 And you could just postpone it, postpone it, postpone it. 323 00:14:38,840 --> 00:14:41,990 And it's hard to make it, on a regular basis, 324 00:14:41,990 --> 00:14:44,310 a decision of the short term because it's so vague. 325 00:14:44,310 --> 00:14:46,630 Not know that it's the wrong framework, 326 00:14:46,630 --> 00:14:51,700 but it's too undefined. 327 00:14:51,700 --> 00:14:55,030 I think those more or less were the four arguments, roughly 328 00:14:55,030 --> 00:14:58,860 speaking, that were outlining in the wrong reasons 329 00:14:58,860 --> 00:15:00,700 to do stability. 330 00:15:00,700 --> 00:15:05,820 However, you talk to people, these are easier to explain. 331 00:15:05,820 --> 00:15:08,760 Look at it any CEO's pitch. 332 00:15:08,760 --> 00:15:11,610 All of them, if someone is in operations, 333 00:15:11,610 --> 00:15:14,730 they talk about this license to operate-- like risk [INAUDIBLE] 334 00:15:14,730 --> 00:15:16,250 a little bit of risk. 335 00:15:16,250 --> 00:15:18,350 Risk management is very easy to understand. 336 00:15:18,350 --> 00:15:19,933 If I don't do the right thing, they're 337 00:15:19,933 --> 00:15:23,360 going to kick me out of China or out of Brazil. 338 00:15:23,360 --> 00:15:26,050 That's a very, very natural way to do it. 339 00:15:26,050 --> 00:15:30,190 This also touches people. 340 00:15:30,190 --> 00:15:33,360 That's a good way to get a rallying cry for change. 341 00:15:33,360 --> 00:15:38,090 This, of course, is just as the overall-- I guess 342 00:15:38,090 --> 00:15:44,000 is the overall trend that you in general by NGOs and media 343 00:15:44,000 --> 00:15:46,280 and actually ourselves here in academia. 344 00:15:46,280 --> 00:15:49,700 And reputation is another risk argument. 345 00:15:49,700 --> 00:15:51,360 And it's very well understood. 346 00:15:51,360 --> 00:15:52,970 You can bring it into your company. 347 00:15:52,970 --> 00:15:55,054 But all of those four, he basically 348 00:15:55,054 --> 00:15:56,720 says those should not be the right ones. 349 00:15:56,720 --> 00:16:00,245 OK, so that's kind of the summary of the bad things that 350 00:16:00,245 --> 00:16:00,870 were happening. 351 00:16:00,870 --> 00:16:04,170 So he proposes a specific framework 352 00:16:04,170 --> 00:16:06,680 to try to think about this. 353 00:16:06,680 --> 00:16:10,900 So who would like to kind of give the idea of framework 354 00:16:10,900 --> 00:16:11,420 he proposes? 355 00:16:13,764 --> 00:16:14,680 [INAUDIBLE] remembers? 356 00:16:14,680 --> 00:16:16,280 Doesn't this table? 357 00:16:16,280 --> 00:16:23,390 I think the table is in page 18. 358 00:16:23,390 --> 00:16:27,290 It says how to prioritize social issues. 359 00:16:27,290 --> 00:16:31,255 And he talks about two types of CSR. 360 00:16:31,255 --> 00:16:34,820 Well, it's actually the other one-- it's page nine, probably, 361 00:16:34,820 --> 00:16:35,822 is a little bit better. 362 00:16:35,822 --> 00:16:41,020 Page nine, he talks about these generic social impacts, 363 00:16:41,020 --> 00:16:44,840 value chain social impacts, and social dimensions 364 00:16:44,840 --> 00:16:46,650 of competitive context. 365 00:16:46,650 --> 00:16:50,500 As you can, I always say Porter is really good with words. 366 00:16:50,500 --> 00:16:54,210 Social dimensions of competitive context-- pretty good. 367 00:16:54,210 --> 00:16:57,210 But those three once basically are 368 00:16:57,210 --> 00:16:59,970 the way he proposes you should think about this. 369 00:16:59,970 --> 00:17:03,310 So let me see-- who ventures to try to make sense 370 00:17:03,310 --> 00:17:04,740 of these three dimensions? 371 00:17:08,270 --> 00:17:09,042 Some one? 372 00:17:12,530 --> 00:17:14,784 Guesses? 373 00:17:14,784 --> 00:17:17,200 Sorry, [? Gosa? ?] We have someone [INAUDIBLE] [? Gosa? ?] 374 00:17:17,200 --> 00:17:19,722 Two people? 375 00:17:19,722 --> 00:17:21,430 No one is venturing yes, someone venture. 376 00:17:21,430 --> 00:17:22,730 Go ahead. 377 00:17:22,730 --> 00:17:23,560 Save the day. 378 00:17:32,220 --> 00:17:35,540 STUDENT: [INAUDIBLE] answer. 379 00:17:35,540 --> 00:17:38,340 PROFESSOR: The answer is no answer? 380 00:17:38,340 --> 00:17:42,932 [INAUDIBLE] So what he basically-- yeah, go ahead. 381 00:17:42,932 --> 00:17:55,326 STUDENT: [INAUDIBLE] say that there are [INAUDIBLE] should 382 00:17:55,326 --> 00:17:56,775 be more integrated. 383 00:17:56,775 --> 00:18:03,780 So a typical response [INAUDIBLE] 384 00:18:03,780 --> 00:18:09,760 to be more responsible and to be [INAUDIBLE] in a way 385 00:18:09,760 --> 00:18:15,760 [INAUDIBLE] dimension and something that 386 00:18:15,760 --> 00:18:20,600 goes beyond just the response to the sentiment of society 387 00:18:20,600 --> 00:18:27,446 [INAUDIBLE] to bring [INAUDIBLE] further in a [INAUDIBLE] way 388 00:18:27,446 --> 00:18:29,891 to operate [INAUDIBLE] responsibility [INAUDIBLE]. 389 00:18:29,891 --> 00:18:31,602 And I will give an example. 390 00:18:31,602 --> 00:18:36,970 Like, for example, there's a positive [INAUDIBLE] for me. 391 00:18:36,970 --> 00:18:39,450 It means that they have this strategy 392 00:18:39,450 --> 00:18:44,274 of not only, for example, being a zero carbon [INAUDIBLE] 393 00:18:44,274 --> 00:18:47,070 but they want to go beyond it and [INAUDIBLE] 394 00:18:47,070 --> 00:18:50,420 than they virtually consume in their [INAUDIBLE] homes 395 00:18:50,420 --> 00:18:52,604 and so have a net positive impact in the end. 396 00:18:52,604 --> 00:18:56,232 So for me, [INAUDIBLE] like this. 397 00:18:56,232 --> 00:18:57,940 PROFESSOR: So there we have-- on one end, 398 00:18:57,940 --> 00:18:59,620 we have the good citizenship, I guess. 399 00:18:59,620 --> 00:19:02,090 But what does he really mean here? 400 00:19:02,090 --> 00:19:04,600 Is it-- could you say that again? 401 00:19:04,600 --> 00:19:06,324 Maybe I missed. 402 00:19:06,324 --> 00:19:07,740 What is the position for a company 403 00:19:07,740 --> 00:19:08,800 in the good citizenship-- 404 00:19:08,800 --> 00:19:09,633 STUDENT: [INAUDIBLE] 405 00:19:12,130 --> 00:19:13,755 PROFESSOR: It's a little bit of saying, 406 00:19:13,755 --> 00:19:16,180 do nothing, but do nothing responsibly. 407 00:19:16,180 --> 00:19:18,240 So basically, do nothing. 408 00:19:18,240 --> 00:19:22,050 You know, just take a look at stuff. 409 00:19:22,050 --> 00:19:23,230 Just do the basics. 410 00:19:23,230 --> 00:19:25,020 Just stay there. 411 00:19:25,020 --> 00:19:26,270 Stay there. 412 00:19:26,270 --> 00:19:28,430 Definitely have a code of conduct 413 00:19:28,430 --> 00:19:30,242 on how to do labor practices. 414 00:19:30,242 --> 00:19:32,200 But you don't have to make these something very 415 00:19:32,200 --> 00:19:33,283 important in your company. 416 00:19:33,283 --> 00:19:35,320 You just have to make sure people understand 417 00:19:35,320 --> 00:19:38,490 what expectations are, have the minimal compliance 418 00:19:38,490 --> 00:19:40,965 in some sense, and just do the right thing. 419 00:19:40,965 --> 00:19:42,560 It's like what we do every day. 420 00:19:42,560 --> 00:19:44,460 Comply with the laws. 421 00:19:44,460 --> 00:19:47,202 Maybe you do not-- you're not looking actively 422 00:19:47,202 --> 00:19:48,660 to see how these laws are changing. 423 00:19:48,660 --> 00:19:50,350 You just do them. 424 00:19:50,350 --> 00:19:52,810 That's a bit on the left side. 425 00:19:52,810 --> 00:19:54,686 Why is this hard for companies to do? 426 00:19:54,686 --> 00:19:55,310 STUDENT: Sorry. 427 00:19:55,310 --> 00:19:56,166 PROFESSOR: Yes? 428 00:19:56,166 --> 00:19:58,150 STUDENT: [INAUDIBLE] I was saying, 429 00:19:58,150 --> 00:20:00,450 being like a good citizen means, like, 430 00:20:00,450 --> 00:20:04,400 trying to avoid adverse effects from the business. 431 00:20:04,400 --> 00:20:07,030 PROFESSOR: So just avoidance-- avoidance 432 00:20:07,030 --> 00:20:09,120 of effects on the business. 433 00:20:09,120 --> 00:20:14,890 So just make sure you don't end up in jail, eh? 434 00:20:14,890 --> 00:20:19,240 Which is-- this doesn't do for a good marketing campaign. 435 00:20:19,240 --> 00:20:21,759 So we're going to avoid to be in jail on labor issues. 436 00:20:21,759 --> 00:20:24,050 We're going to avoid to be in jail on carbon footprint. 437 00:20:24,050 --> 00:20:27,770 I mean, that's why companies don't talk about this that way. 438 00:20:27,770 --> 00:20:28,830 Because you have to. 439 00:20:28,830 --> 00:20:30,290 It's not that sexy. 440 00:20:30,290 --> 00:20:32,540 So that's on one spectrum. 441 00:20:32,540 --> 00:20:36,660 So this is a little bit of say no. 442 00:20:36,660 --> 00:20:37,765 Say no thanks. 443 00:20:40,840 --> 00:20:45,980 So say no, I'm not going to try to solve this problem. 444 00:20:45,980 --> 00:20:47,190 I am aware of it. 445 00:20:47,190 --> 00:20:50,010 I recognize it and I'm going to try 446 00:20:50,010 --> 00:20:52,290 to do what the basic [INAUDIBLE] but I'm really 447 00:20:52,290 --> 00:20:55,962 not going to spend resources or time trying to do this, hm? 448 00:20:55,962 --> 00:21:00,582 STUDENT: [INAUDIBLE] that is just avoiding the [INAUDIBLE] 449 00:21:00,582 --> 00:21:02,420 while doing [INAUDIBLE]. 450 00:21:02,420 --> 00:21:07,090 Because [INAUDIBLE] it's also [INAUDIBLE] 451 00:21:07,090 --> 00:21:12,630 to being to address consequences of [INAUDIBLE]. 452 00:21:12,630 --> 00:21:15,700 PROFESSOR: Yeah, so he talks about it in a little bit 453 00:21:15,700 --> 00:21:16,460 of the next stage. 454 00:21:16,460 --> 00:21:19,450 He says there's generic social impacts. 455 00:21:19,450 --> 00:21:21,640 And then he has these value chain social impacts. 456 00:21:21,640 --> 00:21:23,840 So there'll be some of those that will 457 00:21:23,840 --> 00:21:26,420 be closer to your business. 458 00:21:26,420 --> 00:21:27,885 So there's a few of them that may 459 00:21:27,885 --> 00:21:30,390 be not as distant as others. 460 00:21:30,390 --> 00:21:33,580 But the ones that are a bit closer, then definitely I 461 00:21:33,580 --> 00:21:35,030 want to mitigate. 462 00:21:35,030 --> 00:21:36,730 So in a little bit, then, they move 463 00:21:36,730 --> 00:21:39,640 to say, no thanks, to mitigate risk. 464 00:21:43,740 --> 00:21:44,530 But you're right. 465 00:21:44,530 --> 00:21:49,760 In some sense, you want to list them down and have some sort 466 00:21:49,760 --> 00:21:50,940 of conscious decision. 467 00:21:50,940 --> 00:21:52,890 And I think this is-- anyone that 468 00:21:52,890 --> 00:21:56,130 has studied strategy knows that strategy is not 469 00:21:56,130 --> 00:21:57,592 what you decide to do. 470 00:21:57,592 --> 00:21:59,050 It's what most of the time you make 471 00:21:59,050 --> 00:22:01,280 sure you are not going to do. 472 00:22:01,280 --> 00:22:03,920 I'm not going to try to-- it's hard sometimes to say, 473 00:22:03,920 --> 00:22:05,720 I'm not going to do this or that. 474 00:22:05,720 --> 00:22:09,250 But someone, when you have a good strategy your head, 475 00:22:09,250 --> 00:22:10,240 you know-- this issue? 476 00:22:10,240 --> 00:22:12,470 I know it's important, but I'm not going to try to tackle it. 477 00:22:12,470 --> 00:22:13,900 That's a little bit of what the [INAUDIBLE] is trying 478 00:22:13,900 --> 00:22:16,660 to put forward here is that you, even though it's 479 00:22:16,660 --> 00:22:20,635 hard to say no to one of these issues, you have to say no. 480 00:22:20,635 --> 00:22:23,760 Because you cannot solve them all. 481 00:22:23,760 --> 00:22:25,280 That's the one end. 482 00:22:25,280 --> 00:22:27,580 And then on the other end, we have the more-- 483 00:22:27,580 --> 00:22:29,220 we call strategic CSR. 484 00:22:29,220 --> 00:22:30,900 This is what he calls responsiveness, 485 00:22:30,900 --> 00:22:32,860 I guess responsive CSR. 486 00:22:32,860 --> 00:22:36,070 That is on the framework of try to say 487 00:22:36,070 --> 00:22:40,120 no to try to mitigate risk. 488 00:22:40,120 --> 00:22:43,240 And on the other hand, you have the strategic CSR aspects 489 00:22:43,240 --> 00:22:43,740 of it. 490 00:22:48,210 --> 00:22:53,350 Those are the ones that you have to say yes to. 491 00:22:53,350 --> 00:22:56,620 You say yes to in two different ways. 492 00:22:56,620 --> 00:22:59,900 One is the-- I think you were saying earlier-- 493 00:22:59,900 --> 00:23:03,510 is the one that tries to create new competitiveness 494 00:23:03,510 --> 00:23:05,992 dimensions as a company. 495 00:23:05,992 --> 00:23:09,590 I think they use Whole Foods as one example. 496 00:23:09,590 --> 00:23:10,860 This is my competitiveness. 497 00:23:10,860 --> 00:23:12,420 Like, my [INAUDIBLE] organic food 498 00:23:12,420 --> 00:23:14,660 and I'm engaged with consumers. 499 00:23:14,660 --> 00:23:16,570 I'm engaged with the community and I 500 00:23:16,570 --> 00:23:18,460 do everything just to position myself 501 00:23:18,460 --> 00:23:21,420 as a completely different retailer where people can find 502 00:23:21,420 --> 00:23:25,570 certain goods, where people can actually 503 00:23:25,570 --> 00:23:28,950 not only get their products, but help the community. 504 00:23:28,950 --> 00:23:31,420 And they attract a certain kind of market. 505 00:23:31,420 --> 00:23:33,870 And everything sustainability around Whole Foods 506 00:23:33,870 --> 00:23:36,785 is really tied to not only their values, 507 00:23:36,785 --> 00:23:39,795 but it's how they see themselves competing. 508 00:23:43,320 --> 00:23:47,730 Most people-- Whole Foods prides themselves 509 00:23:47,730 --> 00:23:50,450 that whenever there's a Whole Foods in a neighborhood, 510 00:23:50,450 --> 00:23:53,830 the real estate values increase. 511 00:23:53,830 --> 00:23:58,237 Because this is like a source of change, hm? 512 00:23:58,237 --> 00:23:59,320 And they compete that way. 513 00:23:59,320 --> 00:24:02,200 And every green environmental dimension 514 00:24:02,200 --> 00:24:05,010 is tied to that competitiveness. 515 00:24:05,010 --> 00:24:10,370 But they also very much so charge more. 516 00:24:10,370 --> 00:24:14,380 Now, most people cannot afford Whole Foods. 517 00:24:14,380 --> 00:24:18,900 So it's not the only value proposition that a retailer can 518 00:24:18,900 --> 00:24:21,760 have. [INAUDIBLE] other that are different-- scales 519 00:24:21,760 --> 00:24:23,830 and just other things we will talk about later. 520 00:24:23,830 --> 00:24:27,436 But that's the example of a strategic CSR. 521 00:24:27,436 --> 00:24:29,060 And there's another-- he actually talks 522 00:24:29,060 --> 00:24:30,570 about another example there. 523 00:24:30,570 --> 00:24:34,590 And we saw this-- we were talking with Siemens. 524 00:24:34,590 --> 00:24:38,860 And I think you can help me here with some of the Siemens 525 00:24:38,860 --> 00:24:39,940 vision. 526 00:24:39,940 --> 00:24:44,780 So Siemens, they do all kinds of electrical equipment 527 00:24:44,780 --> 00:24:47,130 for big power plants. 528 00:24:47,130 --> 00:24:53,330 So for them, green energy is the business of the future. 529 00:24:53,330 --> 00:24:55,700 So they decided, we're going to sell 530 00:24:55,700 --> 00:24:59,320 all kinds of hydro wind energy. 531 00:24:59,320 --> 00:25:03,430 And they put lots of effort into trying to sell this 532 00:25:03,430 --> 00:25:04,600 to other companies. 533 00:25:04,600 --> 00:25:07,050 But the only way you can sell this outside 534 00:25:07,050 --> 00:25:08,360 is if you use it inside. 535 00:25:08,360 --> 00:25:11,440 If you don't have good energy practices in your company, 536 00:25:11,440 --> 00:25:12,980 you cannot sell the product outside. 537 00:25:12,980 --> 00:25:17,870 So for them, it became quickly a transformation of the culture 538 00:25:17,870 --> 00:25:20,350 and trying to do a much better job with their own suppliers 539 00:25:20,350 --> 00:25:22,150 in energy management. 540 00:25:22,150 --> 00:25:23,690 Because that's the only way you can 541 00:25:23,690 --> 00:25:29,380 justify that future positioning of selling wind energy 542 00:25:29,380 --> 00:25:32,940 and selling the future energy solutions for the world. 543 00:25:32,940 --> 00:25:34,719 You have to sell new products and then 544 00:25:34,719 --> 00:25:36,260 you have to work on your supply chain 545 00:25:36,260 --> 00:25:39,080 to be as energy efficient as the products yo want to sell. 546 00:25:39,080 --> 00:25:42,640 So they kind of transformed their CSR and their supply 547 00:25:42,640 --> 00:25:45,875 chain environmental practices, focusing on energy reduction 548 00:25:45,875 --> 00:25:49,470 and energy savings, because this was fully aligned 549 00:25:49,470 --> 00:25:50,900 to how they wanted to compute. 550 00:25:50,900 --> 00:25:52,590 GE is also mentioned, [INAUDIBLE] 551 00:25:52,590 --> 00:25:53,920 imagination projects. 552 00:25:53,920 --> 00:25:55,400 You hear about GE. 553 00:25:55,400 --> 00:25:57,740 Same thing-- they see it as the future. 554 00:25:57,740 --> 00:26:00,350 People are buying these products so my company also 555 00:26:00,350 --> 00:26:02,830 has to be very good at mentioning energy use 556 00:26:02,830 --> 00:26:05,930 and saving energy throughout my manufacturing 557 00:26:05,930 --> 00:26:08,230 plants and my suppliers and my suppliers' suppliers. 558 00:26:08,230 --> 00:26:10,470 I need to be consistent because this helps 559 00:26:10,470 --> 00:26:12,740 my positioning of my brand. 560 00:26:12,740 --> 00:26:15,490 And also, these suppliers are going to be my customers. 561 00:26:15,490 --> 00:26:18,840 If I sell energy solutions and my supplier 562 00:26:18,840 --> 00:26:21,840 needs to improve their energy, they'll buy my products. 563 00:26:21,840 --> 00:26:25,379 So they had a bit of a virtue circle, I guess. 564 00:26:25,379 --> 00:26:26,420 Toyota is the same thing. 565 00:26:26,420 --> 00:26:31,470 Toyota, they mentioned here in the case in the article. 566 00:26:31,470 --> 00:26:34,080 Now, there is-- the other group they 567 00:26:34,080 --> 00:26:36,750 call here is called transform value chain 568 00:26:36,750 --> 00:26:43,190 activities to benefit society while reinforcing a strategy. 569 00:26:43,190 --> 00:26:44,980 That's a mouthful. 570 00:26:44,980 --> 00:26:46,792 What does it mean? 571 00:26:46,792 --> 00:26:49,125 STUDENT: I think-- well, it gives the example of Nestle. 572 00:26:49,125 --> 00:26:51,065 And he's just talking about fully integrating 573 00:26:51,065 --> 00:26:54,325 whatever your CSR priorities are into how 574 00:26:54,325 --> 00:26:56,160 you do business every day. 575 00:26:56,160 --> 00:26:57,850 And that's what Nestle does. 576 00:26:57,850 --> 00:26:59,500 They work with small farmers. 577 00:26:59,500 --> 00:27:02,740 And so their impact is fully integrated 578 00:27:02,740 --> 00:27:04,870 into their company strategy. 579 00:27:04,870 --> 00:27:07,600 PROFESSOR: So it's just, so what you do, do it well. 580 00:27:07,600 --> 00:27:08,725 And do it well sustainably. 581 00:27:08,725 --> 00:27:10,820 So Nestle is a great example. 582 00:27:10,820 --> 00:27:14,800 UPS-- who's working with UPS and FedEx in their-- so UPS, 583 00:27:14,800 --> 00:27:16,350 another great example. 584 00:27:16,350 --> 00:27:20,670 So UPS, they also have what-- the business 585 00:27:20,670 --> 00:27:27,890 of packaging on the distance is a very thin margin business. 586 00:27:27,890 --> 00:27:31,700 Every single decision you make that saves-- especially 587 00:27:31,700 --> 00:27:33,950 at the scale of Fedex or UPS or any of these packaging 588 00:27:33,950 --> 00:27:36,610 companies, any gallon of fuel you 589 00:27:36,610 --> 00:27:39,510 save in one route multiplied by the number of routes 590 00:27:39,510 --> 00:27:43,470 you run by every day multiplied by the number of routes 591 00:27:43,470 --> 00:27:46,950 per year, it's millions and millions of dollars of savings. 592 00:27:46,950 --> 00:27:49,730 And if you do it well, your business runs better. 593 00:27:49,730 --> 00:27:51,980 And what they have embraced sustainability 594 00:27:51,980 --> 00:27:54,100 is to connect it to that particular thing. 595 00:27:54,100 --> 00:27:56,540 We are going to save fuel to the nth degree 596 00:27:56,540 --> 00:27:58,580 in every single operation we do. 597 00:27:58,580 --> 00:28:00,630 And this connects with what they do very well. 598 00:28:00,630 --> 00:28:02,171 That is logistics and transportation. 599 00:28:02,171 --> 00:28:06,060 So that's kind of about another example of look at what you do 600 00:28:06,060 --> 00:28:08,600 and what you do that matters to you. 601 00:28:08,600 --> 00:28:11,230 You're going to do it as sustainably or whatever 602 00:28:11,230 --> 00:28:12,945 the dimension as possible. 603 00:28:12,945 --> 00:28:14,680 You're going to leverage what you're 604 00:28:14,680 --> 00:28:19,290 good at to try to expand and make it sustainable in some way 605 00:28:19,290 --> 00:28:20,350 or another. 606 00:28:20,350 --> 00:28:23,570 And transform that function into a competitive advantage. 607 00:28:23,570 --> 00:28:25,310 That's kind the idea that he has. 608 00:28:25,310 --> 00:28:26,610 There's a problem with all of this, though. 609 00:28:26,610 --> 00:28:28,068 We'll talk about the problem later. 610 00:28:28,068 --> 00:28:31,970 But that's the strategic CSR. 611 00:28:31,970 --> 00:28:33,800 It's strategic because you see a new market 612 00:28:33,800 --> 00:28:37,010 coming or strategic because you have core competence in the way 613 00:28:37,010 --> 00:28:39,180 you run your business. 614 00:28:39,180 --> 00:28:43,670 And because of that, you should spend time there 615 00:28:43,670 --> 00:28:44,910 and do it better. 616 00:28:44,910 --> 00:28:48,140 I think that that's the basics, the way 617 00:28:48,140 --> 00:28:51,330 I like to see his article. 618 00:28:51,330 --> 00:28:53,760 And if you ever go to a company or-- this 619 00:28:53,760 --> 00:28:55,409 is a good one to keep around. 620 00:28:55,409 --> 00:28:57,700 [INAUDIBLE] to go back to it and read it multiple times 621 00:28:57,700 --> 00:28:58,940 over your lifetime. 622 00:28:58,940 --> 00:29:04,100 So before you lose your access to the MIT libraries, 623 00:29:04,100 --> 00:29:05,420 have it print a copy. 624 00:29:05,420 --> 00:29:07,780 Or you have to pay-- how much is it? $6.99? 625 00:29:07,780 --> 00:29:10,720 Well, you'll have the budgets in the future. 626 00:29:10,720 --> 00:29:13,700 But let's look a little more about what-- anything else 627 00:29:13,700 --> 00:29:19,167 that I have not covered on the basic messages of this article 628 00:29:19,167 --> 00:29:21,250 that someone would like to highlight that maybe he 629 00:29:21,250 --> 00:29:24,160 mentions at the end? 630 00:29:24,160 --> 00:29:26,510 No? 631 00:29:26,510 --> 00:29:27,438 All right. 632 00:29:27,438 --> 00:29:29,830 STUDENT: I just wanted to make a comment. 633 00:29:29,830 --> 00:29:30,585 PROFESSOR: Yeah 634 00:29:30,585 --> 00:29:33,200 STUDENT: I'm taking a marketing class, a branding class right 635 00:29:33,200 --> 00:29:33,700 now. 636 00:29:33,700 --> 00:29:37,420 And the main takeaway I got from here that's 637 00:29:37,420 --> 00:29:39,940 synonymous with what we're learning in our branding class 638 00:29:39,940 --> 00:29:41,620 is DNA. 639 00:29:41,620 --> 00:29:44,700 What we see in a lot of different case studies 640 00:29:44,700 --> 00:29:48,318 we've read is that when a company doesn't incorporate 641 00:29:48,318 --> 00:29:51,126 the brand new message and the attributes 642 00:29:51,126 --> 00:29:54,695 of-- the key attributes of the company into their DNA, 643 00:29:54,695 --> 00:29:56,656 then they fall short and they're less 644 00:29:56,656 --> 00:29:58,690 competitive against other people who do it well. 645 00:29:58,690 --> 00:30:00,860 And so that's kind of what I see. 646 00:30:00,860 --> 00:30:03,346 He's actually saying that if you're 647 00:30:03,346 --> 00:30:06,330 going to position yourself and integrate yourself 648 00:30:06,330 --> 00:30:09,600 as this environmental conscious company, 649 00:30:09,600 --> 00:30:12,955 make sure you've intertwining within the DNA of your company 650 00:30:12,955 --> 00:30:19,686 and don't just do it to address some hot issue that's 651 00:30:19,686 --> 00:30:22,880 in the news at this point in time 652 00:30:22,880 --> 00:30:25,720 or that it sounds favorable because it's 653 00:30:25,720 --> 00:30:26,990 the flavor of the month. 654 00:30:26,990 --> 00:30:30,390 Make sure that you integrate it in everything that you do. 655 00:30:30,390 --> 00:30:33,835 And then that will have a huge benefit 656 00:30:33,835 --> 00:30:36,595 to your company in the short term and long term. 657 00:30:36,595 --> 00:30:40,070 PROFESSOR: Yeah, so there's also the DNA which 658 00:30:40,070 --> 00:30:44,310 when you hear people explaining it is kind of sounds funny. 659 00:30:44,310 --> 00:30:47,350 But it's really the crux. 660 00:30:47,350 --> 00:30:50,147 Now, what does he mean to make it happen? 661 00:30:50,147 --> 00:30:51,480 So this is very strategic level. 662 00:30:51,480 --> 00:30:53,230 We're going to talk a little bit about it. 663 00:30:53,230 --> 00:30:54,296 OK, great. 664 00:30:54,296 --> 00:30:56,170 Now put it into my DNA, how to put in my DNA. 665 00:30:56,170 --> 00:30:59,940 But let's look at a few things that are not here 666 00:30:59,940 --> 00:31:06,060 explicitly mentioned on the list that I believe are important. 667 00:31:06,060 --> 00:31:10,270 So even though he doesn't talk about this in this paper 668 00:31:10,270 --> 00:31:15,900 specifically, he really doesn't talk much about the life cycle 669 00:31:15,900 --> 00:31:18,110 view of products and services. 670 00:31:18,110 --> 00:31:21,620 Not that-- because it's [INAUDIBLE] CSR in general. 671 00:31:21,620 --> 00:31:24,590 So I think that's been much more developed since this 672 00:31:24,590 --> 00:31:26,320 was published. 673 00:31:26,320 --> 00:31:29,480 But this idea that you really need 674 00:31:29,480 --> 00:31:32,240 to think of the life cycle of a product or a service 675 00:31:32,240 --> 00:31:38,730 to try to inform this process I guess is a specific, I guess, 676 00:31:38,730 --> 00:31:41,380 tool or at least view of the world that 677 00:31:41,380 --> 00:31:42,880 helps inform this process. 678 00:31:42,880 --> 00:31:45,490 Because how do you inform which areas 679 00:31:45,490 --> 00:31:50,170 you can prioritize or not is not very well determined here. 680 00:31:50,170 --> 00:31:51,630 That's one thing. 681 00:31:51,630 --> 00:31:54,260 And as a consequence of that, if you remember 682 00:31:54,260 --> 00:31:56,550 from life cycle and all the things we've heard, 683 00:31:56,550 --> 00:31:59,360 is that most of the emissions of any single company, 684 00:31:59,360 --> 00:32:01,000 actually-- it doesn't matter which company you look at-- 685 00:32:01,000 --> 00:32:02,460 are not within your company, right? 686 00:32:02,460 --> 00:32:05,860 They're always in your suppliers or your customers, which 687 00:32:05,860 --> 00:32:09,919 creates a more importance to make those external connections 688 00:32:09,919 --> 00:32:10,960 as part of your strategy. 689 00:32:10,960 --> 00:32:13,310 I think he does mention it here in some places. 690 00:32:13,310 --> 00:32:15,950 But I think he was not as clear because of the scope 691 00:32:15,950 --> 00:32:19,340 of this particular paper. 692 00:32:19,340 --> 00:32:20,845 It was too CSR generic. 693 00:32:20,845 --> 00:32:22,720 When talking about environmental, even social 694 00:32:22,720 --> 00:32:25,914 aspects, most of the impacts are outside your company 695 00:32:25,914 --> 00:32:28,080 just because of the way the companies are structure. 696 00:32:28,080 --> 00:32:30,570 When you have a life cycle view, you 697 00:32:30,570 --> 00:32:33,330 have to put more emphasis in those external connections, 698 00:32:33,330 --> 00:32:35,800 more than maybe he tries to portray 699 00:32:35,800 --> 00:32:37,990 in this particular article, which 700 00:32:37,990 --> 00:32:39,520 is why we talk about supply chain, 701 00:32:39,520 --> 00:32:42,200 let's say, as an enabler of this strategy. 702 00:32:42,200 --> 00:32:43,940 But the priorities of the high level 703 00:32:43,940 --> 00:32:46,530 need to be connected to the same principles. 704 00:32:46,530 --> 00:32:49,470 But this lack of emphasis on the life cycle view on your supply 705 00:32:49,470 --> 00:32:51,580 chain I think is the one thing that I believe 706 00:32:51,580 --> 00:32:52,580 is a little bit lacking. 707 00:32:52,580 --> 00:32:55,630 But let's look at page five and take a look 708 00:32:55,630 --> 00:32:58,030 at that diagram of page five. 709 00:32:58,030 --> 00:33:01,485 I think that diagram of page five looks awfully familiar 710 00:33:01,485 --> 00:33:04,760 or at least should look awfully familiar except that ours 711 00:33:04,760 --> 00:33:05,430 is prettier. 712 00:33:05,430 --> 00:33:07,250 Actually, his is prettier. 713 00:33:07,250 --> 00:33:10,530 So you have all the functions of the firm, the same thing we had 714 00:33:10,530 --> 00:33:13,970 on our day one on the class. 715 00:33:13,970 --> 00:33:18,390 And he has, like this inbound logistics on the left side 716 00:33:18,390 --> 00:33:19,970 as the function to bring things in. 717 00:33:19,970 --> 00:33:21,940 And he has as well some ideas that you 718 00:33:21,940 --> 00:33:24,430 have [INAUDIBLE] looking inside out aspect of it-- 719 00:33:24,430 --> 00:33:26,650 transportation, emissions, et cetera, et cetera. 720 00:33:26,650 --> 00:33:28,320 Then you have operations. 721 00:33:28,320 --> 00:33:29,559 You have emissions and waste. 722 00:33:29,559 --> 00:33:31,100 These are kind of the things that you 723 00:33:31,100 --> 00:33:33,770 think you should look for inside your company for inspiration 724 00:33:33,770 --> 00:33:36,100 of where to take action. 725 00:33:36,100 --> 00:33:38,230 You have [INAUDIBLE] logistics. 726 00:33:38,230 --> 00:33:40,920 He has packaging use and disposal. 727 00:33:40,920 --> 00:33:42,389 Then you have marketing and sales. 728 00:33:42,389 --> 00:33:43,305 This more advertising. 729 00:33:43,305 --> 00:33:45,770 And information is more about communication. 730 00:33:45,770 --> 00:33:47,800 And you have the after sale services 731 00:33:47,800 --> 00:33:50,950 and you have your disposal of obsolete products, 732 00:33:50,950 --> 00:33:55,047 handling of consumables, some of the dimensions to look at. 733 00:33:55,047 --> 00:33:56,630 Then you have the procurement function 734 00:33:56,630 --> 00:34:00,740 that, in the view of a company and the strategy 735 00:34:00,740 --> 00:34:02,540 specifically the way Porter likes 736 00:34:02,540 --> 00:34:05,070 to think about value chains, he sees procurement 737 00:34:05,070 --> 00:34:08,159 as a about supporting function for all these functions. 738 00:34:08,159 --> 00:34:09,860 And he lists on the right side-- he 739 00:34:09,860 --> 00:34:13,370 talks about use of particular inputs 740 00:34:13,370 --> 00:34:15,210 and have this bullet of utilization 741 00:34:15,210 --> 00:34:17,239 of natural resources. 742 00:34:17,239 --> 00:34:20,179 So all these kind of bullets here in this diagram 743 00:34:20,179 --> 00:34:23,940 are the area you should look for-- things 744 00:34:23,940 --> 00:34:26,110 to include in your strategy, I guess, 745 00:34:26,110 --> 00:34:27,820 and prioritize one over the other. 746 00:34:27,820 --> 00:34:31,980 So you could choose and work more on reducing of packaging. 747 00:34:31,980 --> 00:34:33,260 That's what you could do. 748 00:34:33,260 --> 00:34:35,530 All these are levers that you can somehow 749 00:34:35,530 --> 00:34:38,679 engage that are aligned with what you do as a company. 750 00:34:38,679 --> 00:34:40,670 And if you go through this list, you 751 00:34:40,670 --> 00:34:43,909 will see very quickly that there's some things that you 752 00:34:43,909 --> 00:34:47,170 see all over the place happening that make sense to companies. 753 00:34:47,170 --> 00:34:49,200 So let's start with one-- waste. 754 00:34:51,830 --> 00:34:56,570 waste-- why is waste always to work in every single company? 755 00:34:56,570 --> 00:34:59,650 Waste is money that you are throwing to the garbage. 756 00:34:59,650 --> 00:35:01,730 So whenever you can go to extract 757 00:35:01,730 --> 00:35:04,740 value of that waste-- always going to work. 758 00:35:04,740 --> 00:35:06,530 So this is kind of a natural connection 759 00:35:06,530 --> 00:35:08,280 with any environmental initiative 760 00:35:08,280 --> 00:35:09,250 you find in the planet. 761 00:35:09,250 --> 00:35:10,541 Doesn't matter which one it is. 762 00:35:10,541 --> 00:35:13,115 Even if your company does like zero interest 763 00:35:13,115 --> 00:35:16,490 in the environment, waste always connects with the environment-- 764 00:35:16,490 --> 00:35:17,310 always. 765 00:35:17,310 --> 00:35:18,990 So that's always a natural-- you see 766 00:35:18,990 --> 00:35:21,195 that highlighted in your reports of your companies-- 767 00:35:21,195 --> 00:35:25,980 you know, zero waste plants, zero waste to landfill. 768 00:35:25,980 --> 00:35:27,990 Waste is always one of those areas. 769 00:35:27,990 --> 00:35:31,270 And that's just because that connects to operations 770 00:35:31,270 --> 00:35:32,720 very directly. 771 00:35:32,720 --> 00:35:37,157 That also is usually not measured the first time around. 772 00:35:37,157 --> 00:35:38,490 The company has not measured it. 773 00:35:38,490 --> 00:35:40,000 And you start measuring and people 774 00:35:40,000 --> 00:35:42,050 can relate to dimensions because they work with materials 775 00:35:42,050 --> 00:35:42,800 every single day. 776 00:35:42,800 --> 00:35:45,910 And you can put targets that are very aggressive. 777 00:35:45,910 --> 00:35:48,470 And you can also put a vision that everyone understands-- 778 00:35:48,470 --> 00:35:50,890 that is, zero waste. 779 00:35:50,890 --> 00:35:55,102 So if you see of any company that is doing tangentially 780 00:35:55,102 --> 00:35:56,560 trying to get this started, you see 781 00:35:56,560 --> 00:35:58,630 some sort of waste initiative. 782 00:35:58,630 --> 00:35:59,180 Again, why? 783 00:35:59,180 --> 00:36:04,810 Because any plant manager, any distribution center manager, 784 00:36:04,810 --> 00:36:08,820 anyone that manages anything that is physical waste, 785 00:36:08,820 --> 00:36:11,190 you can also relate it to. 786 00:36:11,190 --> 00:36:13,410 That's always a good way for companies to start. 787 00:36:13,410 --> 00:36:14,550 The problem is it's not connected 788 00:36:14,550 --> 00:36:15,925 to the whole strategy, but that's 789 00:36:15,925 --> 00:36:17,950 always another thing you find that I think 790 00:36:17,950 --> 00:36:20,800 is very easy to measure, which gives me 791 00:36:20,800 --> 00:36:24,815 to the other one that is next to it on outbound packaging. 792 00:36:24,815 --> 00:36:27,004 Packaging is another way of waste. 793 00:36:27,004 --> 00:36:29,170 It's waste that happens once you ship your products. 794 00:36:29,170 --> 00:36:30,461 It's visible to your customers. 795 00:36:30,461 --> 00:36:32,990 That's an easy way to start. 796 00:36:32,990 --> 00:36:35,330 Transportation impacts also on the bottom line. 797 00:36:35,330 --> 00:36:36,730 I'm looking at those. 798 00:36:36,730 --> 00:36:38,920 Those our people see less miles traveled. 799 00:36:38,920 --> 00:36:40,170 That's less cost. 800 00:36:40,170 --> 00:36:42,740 Less fuel consumption-- that's less fuel. 801 00:36:42,740 --> 00:36:44,560 That's also less cost. 802 00:36:44,560 --> 00:36:46,100 Bury, resell your [INAUDIBLE] that's 803 00:36:46,100 --> 00:36:48,560 less distance, which is less cost and also emission. 804 00:36:48,560 --> 00:36:51,010 So you see that those ones over there 805 00:36:51,010 --> 00:36:54,760 are the ones that connect easily with your business 806 00:36:54,760 --> 00:36:58,860 but not necessarily connect easily with your strategy. 807 00:36:58,860 --> 00:37:04,490 That's why companies have that always because people grasp it. 808 00:37:04,490 --> 00:37:07,600 But that doesn't mean according to the whole framework, 809 00:37:07,600 --> 00:37:11,849 those are the issues to put emphasis on. 810 00:37:11,849 --> 00:37:14,140 The fact that you can do them doesn't mean you have to. 811 00:37:14,140 --> 00:37:14,640 Go ahead. 812 00:37:18,400 --> 00:37:20,930 STUDENT: Here. 813 00:37:20,930 --> 00:37:21,790 I have a question. 814 00:37:21,790 --> 00:37:22,415 PROFESSOR: Yes. 815 00:37:22,415 --> 00:37:24,970 STUDENT: It's how to determine the boundaries 816 00:37:24,970 --> 00:37:26,810 of your responsibility as a company. 817 00:37:26,810 --> 00:37:29,310 Because especially when you manage a supply chain, 818 00:37:29,310 --> 00:37:32,230 there are a lot of levels of vendors. 819 00:37:32,230 --> 00:37:34,240 There are a lot of suppliers that at the end, 820 00:37:34,240 --> 00:37:35,770 you don't know who's supplying you 821 00:37:35,770 --> 00:37:40,622 and you don't know if they are compliant with those, 822 00:37:40,622 --> 00:37:42,330 whether it's [INAUDIBLE] for the company. 823 00:37:42,330 --> 00:37:44,990 So how to determine those boundaries 824 00:37:44,990 --> 00:37:47,340 of the responsibility of the company. 825 00:37:47,340 --> 00:37:49,380 PROFESSOR: So let's talk about that. 826 00:37:49,380 --> 00:37:50,840 Someone has a thought. 827 00:37:50,840 --> 00:37:52,640 How do you determine your boundaries? 828 00:37:52,640 --> 00:37:55,440 STUDENT: Well, we're doing auto companies 829 00:37:55,440 --> 00:37:58,000 and Ford is taking care of this. 830 00:37:58,000 --> 00:38:01,240 So they draw the boundary at their tier one suppliers. 831 00:38:01,240 --> 00:38:03,550 And they say, we want all of our tier one suppliers 832 00:38:03,550 --> 00:38:10,890 to comply with the ISO 14001 standards for shipping 833 00:38:10,890 --> 00:38:11,850 emissions. 834 00:38:11,850 --> 00:38:15,190 And then they've sort of thrown-- not really thrown 835 00:38:15,190 --> 00:38:16,670 out the level two and level three, 836 00:38:16,670 --> 00:38:20,720 but they're doing studies with the level three and saying, 837 00:38:20,720 --> 00:38:24,770 we're seeing if we can figure out what our level three 838 00:38:24,770 --> 00:38:26,760 it suppliers are doing. 839 00:38:26,760 --> 00:38:28,240 But it's not really the focus. 840 00:38:28,240 --> 00:38:30,250 The focus is the tier one. 841 00:38:30,250 --> 00:38:32,890 They provide training to the tier one 842 00:38:32,890 --> 00:38:34,767 on their environmental management system. 843 00:38:34,767 --> 00:38:36,600 So they're actively involved in the tier one 844 00:38:36,600 --> 00:38:40,805 and sort of peripherally involved in anyone beyond that. 845 00:38:40,805 --> 00:38:42,430 PROFESSOR: So let's [? pick a little ?] 846 00:38:42,430 --> 00:38:44,800 on Ford and the auto companies. 847 00:38:44,800 --> 00:38:48,500 So based on what you have read on Ford, what do you think 848 00:38:48,500 --> 00:38:50,545 is their strategic imperative for sustainability 849 00:38:50,545 --> 00:38:52,202 and environment? 850 00:38:52,202 --> 00:38:55,590 STUDENT: Well, they hit it as far 851 00:38:55,590 --> 00:38:58,360 as marketing for their vehicles. 852 00:38:58,360 --> 00:39:03,720 And then besides that-- so it seems 853 00:39:03,720 --> 00:39:07,210 like they're getting heavily driven by the Carbon Disclosure 854 00:39:07,210 --> 00:39:07,710 Project. 855 00:39:07,710 --> 00:39:10,690 Because pretty much everything that is on their sustainability 856 00:39:10,690 --> 00:39:13,070 website is almost a copy and paste 857 00:39:13,070 --> 00:39:15,320 from what they put into the Carbon Disclosure Project. 858 00:39:15,320 --> 00:39:19,100 So I think they've been getting some external pressures 859 00:39:19,100 --> 00:39:19,790 recently. 860 00:39:19,790 --> 00:39:22,690 And as far as their corporate strategy 861 00:39:22,690 --> 00:39:27,120 goes with stuff that's not being marketed to the customer, 862 00:39:27,120 --> 00:39:30,069 they're sort of convincing investors 863 00:39:30,069 --> 00:39:31,860 that they're starting to do the right thing 864 00:39:31,860 --> 00:39:34,740 and being a good corporate citizen 865 00:39:34,740 --> 00:39:37,410 and starting to incorporate environmental stuff 866 00:39:37,410 --> 00:39:39,990 in their strategic CSR. 867 00:39:39,990 --> 00:39:43,050 But it's hard to determine. 868 00:39:43,050 --> 00:39:44,590 It's kind of hard to figure them out 869 00:39:44,590 --> 00:39:47,910 because they really only give you 870 00:39:47,910 --> 00:39:53,330 the politicians' line of, we're doing this because it's good 871 00:39:53,330 --> 00:39:57,020 and we're looking, like, all the way down to conflict minerals 872 00:39:57,020 --> 00:39:58,470 for our sources. 873 00:39:58,470 --> 00:40:01,870 PROFESSOR: So from your point of view, then, 874 00:40:01,870 --> 00:40:03,300 should they spend more time-- I'll 875 00:40:03,300 --> 00:40:04,674 get back to you, to the question. 876 00:40:04,674 --> 00:40:07,672 But should they spend more time looking at 877 00:40:07,672 --> 00:40:08,630 their suppliers or not? 878 00:40:08,630 --> 00:40:11,373 I mean, I know you're not the Ford CEO, but-- 879 00:40:11,373 --> 00:40:14,190 STUDENT: I mean, for a company that's as large as them, 880 00:40:14,190 --> 00:40:16,650 I think it would be extremely difficult and very cost 881 00:40:16,650 --> 00:40:19,930 intensive for them because they have tens of thousands 882 00:40:19,930 --> 00:40:20,600 of suppliers. 883 00:40:20,600 --> 00:40:23,782 And trying to track down every single one, I think, 884 00:40:23,782 --> 00:40:25,060 would be insane. 885 00:40:25,060 --> 00:40:29,740 But they have a few level ones and they are directly 886 00:40:29,740 --> 00:40:30,790 involved with those. 887 00:40:30,790 --> 00:40:34,840 And then the amount of suppliers exponentially 888 00:40:34,840 --> 00:40:37,720 grows when you leave tier one. 889 00:40:37,720 --> 00:40:39,400 Like, as soon as you get to tier two, 890 00:40:39,400 --> 00:40:41,132 it goes up by order of magnitude and then 891 00:40:41,132 --> 00:40:42,715 another order of magnitude after that. 892 00:40:42,715 --> 00:40:47,000 And they think they have 10 tiers of suppliers. 893 00:40:47,000 --> 00:40:51,140 So to track down everyone down to level 10 I think 894 00:40:51,140 --> 00:40:52,410 is impossible. 895 00:40:52,410 --> 00:40:55,840 PROFESSOR: So I'll ask [INAUDIBLE] of questions 896 00:40:55,840 --> 00:40:58,570 if you remember [INAUDIBLE]. 897 00:40:58,570 --> 00:41:03,155 What was the life cycle impact of a car in use versus-- 898 00:41:03,155 --> 00:41:03,780 do yo remember? 899 00:41:03,780 --> 00:41:07,690 It was like 60% or 70%. 900 00:41:07,690 --> 00:41:11,840 70% of the emissions of the life cycle of a car 901 00:41:11,840 --> 00:41:16,080 happens during use, which means the number one 902 00:41:16,080 --> 00:41:20,360 issue of your car company should be fuel use. 903 00:41:20,360 --> 00:41:23,080 Design better vehicles-- that should be all your energy. 904 00:41:23,080 --> 00:41:25,210 The rest is important. 905 00:41:25,210 --> 00:41:29,715 Those 30% is important but is not critical to achieving, 906 00:41:29,715 --> 00:41:32,980 let's say, significant impact over time. 907 00:41:32,980 --> 00:41:35,150 So this is one way to answer your question 908 00:41:35,150 --> 00:41:36,250 and this is two ways. 909 00:41:36,250 --> 00:41:39,050 One is where these companies are trying 910 00:41:39,050 --> 00:41:41,683 to put most of their effort is in designing products 911 00:41:41,683 --> 00:41:43,779 that are more efficient. 912 00:41:43,779 --> 00:41:44,820 That's where they should. 913 00:41:44,820 --> 00:41:45,620 I'm not saying they're doing. 914 00:41:45,620 --> 00:41:46,760 That's what they should be. 915 00:41:46,760 --> 00:41:48,940 Because you can achieve both things. 916 00:41:48,940 --> 00:41:51,645 You could achieve a better sales, better market, 917 00:41:51,645 --> 00:41:53,270 but also that's where your impacts are. 918 00:41:53,270 --> 00:41:56,180 I mean, if you really care about the environment as Ford, 919 00:41:56,180 --> 00:41:58,450 you should pretty much say, you know what? 920 00:41:58,450 --> 00:41:59,920 My number one priority in the world 921 00:41:59,920 --> 00:42:01,330 is to make the most efficient cars. 922 00:42:01,330 --> 00:42:02,500 We [? say you ?] sometimes do [INAUDIBLE] I 923 00:42:02,500 --> 00:42:04,770 think they have this-- you showed it last time. 924 00:42:04,770 --> 00:42:07,440 They have all this zero efficiency car or energy, 925 00:42:07,440 --> 00:42:10,170 yep-- zero emissions car. 926 00:42:10,170 --> 00:42:12,150 And that's where they are aiming for. 927 00:42:12,150 --> 00:42:14,575 And this immediately answers how deep 928 00:42:14,575 --> 00:42:18,350 you should work in your supply chain. 929 00:42:18,350 --> 00:42:21,502 Because if that's not your number one place, 930 00:42:21,502 --> 00:42:23,210 you should definitely do the right thing. 931 00:42:23,210 --> 00:42:24,880 What is the minimum thing you should do? 932 00:42:24,880 --> 00:42:28,480 You should mitigate risk in your supply chain, 933 00:42:28,480 --> 00:42:30,850 kind of comply on the things that people are asking. 934 00:42:30,850 --> 00:42:33,510 And that's why you probably will see that they will go straight 935 00:42:33,510 --> 00:42:35,400 to the minimum number of questions 936 00:42:35,400 --> 00:42:37,295 that the CDP report asks them to do. 937 00:42:37,295 --> 00:42:38,920 Because you want to do the right thing. 938 00:42:38,920 --> 00:42:40,000 I mean, sure-- you're going to save money. 939 00:42:40,000 --> 00:42:41,362 It's good for you as a company. 940 00:42:41,362 --> 00:42:42,570 It resonates with your brand. 941 00:42:42,570 --> 00:42:46,050 You cannot sell a brand that is zero emissions if in your whole 942 00:42:46,050 --> 00:42:47,610 factory you have a bunch of waste. 943 00:42:47,610 --> 00:42:50,490 And also this is related to cost reductions maybe. 944 00:42:50,490 --> 00:42:52,140 So all these things kind of immediately 945 00:42:52,140 --> 00:42:55,260 tells you my focus is the product that's 946 00:42:55,260 --> 00:42:56,530 where the impacts are. 947 00:42:56,530 --> 00:43:00,300 Maybe what I should focus in my supply chain are things that 948 00:43:00,300 --> 00:43:03,510 have direct impact, put my resources there-- 949 00:43:03,510 --> 00:43:08,100 some resources, and but try to cover all the network of OEMs 950 00:43:08,100 --> 00:43:11,770 that supply my car. 951 00:43:11,770 --> 00:43:15,130 So this is kind of a-- I'm kind of backtracking 952 00:43:15,130 --> 00:43:18,150 on the question, but the answer is not 953 00:43:18,150 --> 00:43:19,730 tied to how big you should go. 954 00:43:19,730 --> 00:43:21,920 It's where your impacts are or whatever 955 00:43:21,920 --> 00:43:23,110 is the main purpose you do. 956 00:43:23,110 --> 00:43:26,040 If your impacts are in the use phase, 957 00:43:26,040 --> 00:43:29,969 then maybe you should not spend that much time. 958 00:43:29,969 --> 00:43:31,510 I mean, do not ignore your suppliers. 959 00:43:31,510 --> 00:43:32,382 Make them better. 960 00:43:32,382 --> 00:43:34,715 But it's not where you should try to go all the way down 961 00:43:34,715 --> 00:43:38,250 STUDENT: [INAUDIBLE] They might have design principles 962 00:43:38,250 --> 00:43:40,600 that they can help make the car use less gas 963 00:43:40,600 --> 00:43:45,350 or less-- be lighter and drive farther. 964 00:43:45,350 --> 00:43:47,780 But in the case of, like, the Booth's shampoo, 965 00:43:47,780 --> 00:43:51,010 Booth's is a pharmacy chain in Europe 966 00:43:51,010 --> 00:43:52,785 and they found out when they looked 967 00:43:52,785 --> 00:43:55,240 through life cycles [INAUDIBLE] shampoo that the largest 968 00:43:55,240 --> 00:43:56,610 impact is in the use. 969 00:43:56,610 --> 00:43:59,440 And so they decided they want to do consumer campaigns 970 00:43:59,440 --> 00:44:02,280 about taking shorter showers, using less heat, 971 00:44:02,280 --> 00:44:06,430 and obviously changing consumer behavior around your shower. 972 00:44:06,430 --> 00:44:08,380 It's not a very easy to change. 973 00:44:08,380 --> 00:44:11,780 So I think they thus since dropped that kind of campaign, 974 00:44:11,780 --> 00:44:13,250 realizing that they can only affect 975 00:44:13,250 --> 00:44:16,120 their own internal operations and some of their suppliers 976 00:44:16,120 --> 00:44:18,440 as opposed to the downstream impacts. 977 00:44:18,440 --> 00:44:19,440 PROFESSOR: So yeah. 978 00:44:19,440 --> 00:44:21,490 So there was a couple comments and then I'll keep talking. 979 00:44:21,490 --> 00:44:23,531 STUDENT: --going to say is a point of comparison. 980 00:44:23,531 --> 00:44:27,850 I'm [INAUDIBLE] BMW and most of the marketing 981 00:44:27,850 --> 00:44:31,050 material on their own website and others [INAUDIBLE] BMW, 982 00:44:31,050 --> 00:44:34,500 it's all about the cars [INAUDIBLE] 983 00:44:34,500 --> 00:44:36,557 or the technology that they're developing to make 984 00:44:36,557 --> 00:44:37,640 their cars more efficient. 985 00:44:37,640 --> 00:44:41,020 A lot of that's driven by just German engineering but also 986 00:44:41,020 --> 00:44:46,215 a lot of legislation that is taking effect in Europe. 987 00:44:46,215 --> 00:44:47,715 But another thing that's interesting 988 00:44:47,715 --> 00:44:51,400 is they have an electric car sharing program 989 00:44:51,400 --> 00:44:54,580 that they started up in Europe and now in the US. 990 00:44:54,580 --> 00:44:57,010 And so they're really drilling it 991 00:44:57,010 --> 00:45:01,167 on the use phase, which is where they have the most impact. 992 00:45:01,167 --> 00:45:02,625 So they're doing a pretty good job. 993 00:45:02,625 --> 00:45:04,410 PROFESSOR: And also I think I do not want 994 00:45:04,410 --> 00:45:05,830 to underestimate your insight. 995 00:45:05,830 --> 00:45:08,960 That is, these supply chains are massive, you know? 996 00:45:08,960 --> 00:45:12,560 The car supply chain is just incredibly complex. 997 00:45:12,560 --> 00:45:15,150 They have no idea really where these things are. 998 00:45:15,150 --> 00:45:17,260 And they have really very little resources 999 00:45:17,260 --> 00:45:21,280 to try to spend time on going after that information. 1000 00:45:21,280 --> 00:45:23,130 So they are hoping that by putting 1001 00:45:23,130 --> 00:45:26,920 some pressure in tier one, this will propagate down somehow. 1002 00:45:26,920 --> 00:45:31,100 And I think they-- the list of priorities they're 1003 00:45:31,100 --> 00:45:33,750 doing I think is the right. 1004 00:45:33,750 --> 00:45:36,920 Tier one is probably how far they should go. 1005 00:45:36,920 --> 00:45:39,100 Now, let's look at another company. 1006 00:45:39,100 --> 00:45:39,810 Who else is-- 1007 00:45:39,810 --> 00:45:45,665 STUDENT: [INAUDIBLE] so I know in many industries 1008 00:45:45,665 --> 00:45:51,265 this is not even close, but what if the place where 1009 00:45:51,265 --> 00:45:54,180 you can help where there's more of an impact, 1010 00:45:54,180 --> 00:45:59,330 you're already very close to being as efficient as possible? 1011 00:45:59,330 --> 00:46:03,860 So I mean, I'm assuming that [INAUDIBLE] 1012 00:46:03,860 --> 00:46:05,060 this is not the case. 1013 00:46:05,060 --> 00:46:08,250 But in super efficient, putting more resources 1014 00:46:08,250 --> 00:46:13,620 into that type of research would yield much less results than, 1015 00:46:13,620 --> 00:46:15,940 for example, trying to work with your supply chain. 1016 00:46:15,940 --> 00:46:19,430 So how do you even determine where 1017 00:46:19,430 --> 00:46:23,344 you're reaching a limit of what your levels are? 1018 00:46:23,344 --> 00:46:24,760 STUDENT: Well, my take on it would 1019 00:46:24,760 --> 00:46:27,500 be most companies have an area that they can address. 1020 00:46:27,500 --> 00:46:31,489 And so they might say their most controlled 1021 00:46:31,489 --> 00:46:33,780 might be their logistics system or their transportation 1022 00:46:33,780 --> 00:46:34,120 network. 1023 00:46:34,120 --> 00:46:35,530 And they can say they've already optimized that. 1024 00:46:35,530 --> 00:46:36,905 There's nothing else they can do. 1025 00:46:36,905 --> 00:46:38,990 But there's usually-- there's no company that 1026 00:46:38,990 --> 00:46:41,150 can't go to the next level hotspot 1027 00:46:41,150 --> 00:46:43,880 that they can start addressing. 1028 00:46:43,880 --> 00:46:45,770 Some companies we've talked to have 1029 00:46:45,770 --> 00:46:48,270 done what they call a materiality assessment where 1030 00:46:48,270 --> 00:46:51,060 they look at things that are material to the business 1031 00:46:51,060 --> 00:46:54,140 and then they assess the impacts on each of those given 1032 00:46:54,140 --> 00:46:59,100 their products or their operations or their employee 1033 00:46:59,100 --> 00:46:59,600 engagement. 1034 00:46:59,600 --> 00:47:04,080 And they pick all these spots and they can kind of-- they 1035 00:47:04,080 --> 00:47:07,860 can kind of rank how they address each of those, trying 1036 00:47:07,860 --> 00:47:09,740 to address the hotspots of their products 1037 00:47:09,740 --> 00:47:12,198 or their own internal operations and then maybe [INAUDIBLE] 1038 00:47:12,198 --> 00:47:13,975 down that materiality assessment on how 1039 00:47:13,975 --> 00:47:17,010 they address those impacts. 1040 00:47:17,010 --> 00:47:21,065 I don't know if any-- has anyone seen a a materiality assessment 1041 00:47:21,065 --> 00:47:22,320 as they come through? 1042 00:47:22,320 --> 00:47:23,200 Nothing out there? 1043 00:47:23,200 --> 00:47:25,010 OK, interesting. 1044 00:47:25,010 --> 00:47:27,280 PROFESSOR: So I want to hear from another of the case 1045 00:47:27,280 --> 00:47:28,550 studies you're working on in terms 1046 00:47:28,550 --> 00:47:30,341 of how did you go to into your supply chain 1047 00:47:30,341 --> 00:47:33,186 or have you observed in the companies you're working with. 1048 00:47:36,930 --> 00:47:38,791 Roberto? 1049 00:47:38,791 --> 00:47:40,290 STUDENT: I was working because we're 1050 00:47:40,290 --> 00:47:42,936 doing Chevron and Exxon/Mobile. 1051 00:47:42,936 --> 00:47:44,810 PROFESSOR: So your splicing is kind of short. 1052 00:47:44,810 --> 00:47:45,516 STUDENT: Yeah. 1053 00:47:45,516 --> 00:47:47,182 And it's pretty obscure. 1054 00:47:47,182 --> 00:47:53,622 So one area we can look at is shipping, ocean shipping, 1055 00:47:53,622 --> 00:47:56,574 of crude oil from one location to another. 1056 00:47:56,574 --> 00:47:59,034 Which, of course, there's a lot of impact on that. 1057 00:47:59,034 --> 00:48:04,960 But aside from that, everything else is just within the plan. 1058 00:48:04,960 --> 00:48:08,420 STUDENT: I'm doing Toyota alongside of BMW [INAUDIBLE]. 1059 00:48:08,420 --> 00:48:12,675 And they have the halo effect of their previous five billion, 1060 00:48:12,675 --> 00:48:14,430 how many cars have they sold. 1061 00:48:14,430 --> 00:48:17,300 Yet they get hammered with-- the CDP scores are pretty low. 1062 00:48:17,300 --> 00:48:22,690 And I think that actually having a car that is so successful, 1063 00:48:22,690 --> 00:48:27,160 an image, reputation that is good in that market actually 1064 00:48:27,160 --> 00:48:28,770 keeps them from doing better. 1065 00:48:28,770 --> 00:48:30,830 And as a result, they fall behind companies 1066 00:48:30,830 --> 00:48:34,290 that have cars that typically are a lot more gas guzzling. 1067 00:48:34,290 --> 00:48:39,190 So I think you can have an issue where a reputation 1068 00:48:39,190 --> 00:48:42,030 gain somewhere actually prevents you from going further 1069 00:48:42,030 --> 00:48:45,180 in other areas. 1070 00:48:45,180 --> 00:48:47,380 PROFESSOR: I want to hear from somebody else. 1071 00:48:47,380 --> 00:48:48,334 Which-- yep. 1072 00:48:48,334 --> 00:48:50,660 STUDENT: We're Nestle and Hershey's. 1073 00:48:50,660 --> 00:48:52,510 I presented this a little while ago, 1074 00:48:52,510 --> 00:48:58,300 but Nestle has a couple of supplier tiers [INAUDIBLE] 1075 00:48:58,300 --> 00:49:02,349 to [INAUDIBLE] and today require their tier one-- 1076 00:49:02,349 --> 00:49:04,890 like, their direct suppliers-- to comply with their suppliers 1077 00:49:04,890 --> 00:49:07,250 code-- just in and of itself a little vague. 1078 00:49:07,250 --> 00:49:09,496 But then the vast majority of their suppliers, 1079 00:49:09,496 --> 00:49:11,162 like, for their commodities, they really 1080 00:49:11,162 --> 00:49:13,972 have no control or traceability over where 1081 00:49:13,972 --> 00:49:15,609 those products are coming from. 1082 00:49:15,609 --> 00:49:17,900 PROFESSOR: So let's talk about-- that's a great example 1083 00:49:17,900 --> 00:49:21,820 and I'm glad you brought up food. 1084 00:49:21,820 --> 00:49:25,100 And let's talk about food in many ways. 1085 00:49:25,100 --> 00:49:28,160 So I just-- so I just-- full disclosure. 1086 00:49:28,160 --> 00:49:30,510 So Starbucks is a partner of our center, 1087 00:49:30,510 --> 00:49:34,600 which a partner means they give us money for research. 1088 00:49:34,600 --> 00:49:36,480 But this is part of the work we've 1089 00:49:36,480 --> 00:49:38,380 done before going to research with them. 1090 00:49:38,380 --> 00:49:41,370 But I'll talk about Starbucks. 1091 00:49:41,370 --> 00:49:44,700 The same with Unilever, same with Nestle. 1092 00:49:44,700 --> 00:49:47,640 And they have actually the imperative 1093 00:49:47,640 --> 00:49:50,160 of trying to go as deep as possible in their supply chain 1094 00:49:50,160 --> 00:49:51,402 as they can. 1095 00:49:51,402 --> 00:49:53,080 And let me explain a little bit why. 1096 00:49:53,080 --> 00:49:58,480 So let's talk about Starbucks, right? 1097 00:49:58,480 --> 00:50:08,190 So Starbucks coffee-- this is supply chain that is very much 1098 00:50:08,190 --> 00:50:13,230 goes to fragmented on sourcing side-- lots of small farmers. 1099 00:50:13,230 --> 00:50:15,807 Similar like Palm Oil, similar-- many of those are like this. 1100 00:50:15,807 --> 00:50:16,890 Bananas are not like this. 1101 00:50:16,890 --> 00:50:19,390 But there's a few big manufacturers. 1102 00:50:19,390 --> 00:50:22,820 [INAUDIBLE] this one is small parcel manufacturers. 1103 00:50:22,820 --> 00:50:29,180 And Starbucks, a little bit on the way they see their business 1104 00:50:29,180 --> 00:50:31,930 is that we are providing our customers 1105 00:50:31,930 --> 00:50:34,390 with like a third home and third place. 1106 00:50:34,390 --> 00:50:36,450 They have some sort of wording along those lines. 1107 00:50:36,450 --> 00:50:38,860 And coffee for us is an experience, 1108 00:50:38,860 --> 00:50:42,040 an experience that we want to transmit to our customers. 1109 00:50:42,040 --> 00:50:45,710 And that experience cannot be complete unless we can tell 1110 00:50:45,710 --> 00:50:50,121 our customers that our product is the best product ever, 1111 00:50:50,121 --> 00:50:50,620 right? 1112 00:50:50,620 --> 00:50:53,590 And the best product ever, from their point of view, 1113 00:50:53,590 --> 00:50:54,760 has multiple dimensions. 1114 00:50:54,760 --> 00:50:57,182 It's, of course, quality, right, the product, number one. 1115 00:50:57,182 --> 00:50:58,640 Safety-- you don't want to get ill. 1116 00:50:58,640 --> 00:51:00,037 And you have a place that is nice 1117 00:51:00,037 --> 00:51:02,620 where you can enjoy your coffee and have friends and so forth. 1118 00:51:02,620 --> 00:51:05,097 But the other dimension they are completely conscious about 1119 00:51:05,097 --> 00:51:09,110 is we need to make sure that you are paying premium 1120 00:51:09,110 --> 00:51:11,460 for this experience and we want to make sure 1121 00:51:11,460 --> 00:51:18,271 that we make our suppliers as prosperous as possible for two 1122 00:51:18,271 --> 00:51:18,770 reasons. 1123 00:51:18,770 --> 00:51:20,270 One, because it's the image we sell, 1124 00:51:20,270 --> 00:51:22,780 but the other one is that if we do not make them prosperous, 1125 00:51:22,780 --> 00:51:26,540 we're not going to have the best quality coffee ever. 1126 00:51:26,540 --> 00:51:29,910 Because if you take corners and you don't wash your beans well 1127 00:51:29,910 --> 00:51:34,000 and you do not plan the best coffee in the world 1128 00:51:34,000 --> 00:51:36,499 and you move to another plantation and you-- then 1129 00:51:36,499 --> 00:51:38,165 you lose the best coffee in the company. 1130 00:51:38,165 --> 00:51:41,440 I mean, it's somehow embedded to you. 1131 00:51:41,440 --> 00:51:43,700 Unilever has a similar view of the world 1132 00:51:43,700 --> 00:51:48,620 is-- we sell fish sticks. [INAUDIBLE] it's no fish, 1133 00:51:48,620 --> 00:51:50,370 no fish sticks. 1134 00:51:50,370 --> 00:51:53,402 I sell fish sticks for you to eat. 1135 00:51:53,402 --> 00:51:55,360 But if there's no fish, there's no fish sticks. 1136 00:51:55,360 --> 00:51:59,610 So I have to care about how people catch the fish-- maybe 1137 00:51:59,610 --> 00:52:01,730 not in the short term, but in the long term. 1138 00:52:01,730 --> 00:52:05,640 So this immediately makes you be much more aware on not only 1139 00:52:05,640 --> 00:52:09,320 the whole seller that you buy your products from, but rather 1140 00:52:09,320 --> 00:52:11,500 try to go as deep as possible. 1141 00:52:11,500 --> 00:52:15,790 So in their cases, both Starbucks, Unilever, Nestle 1142 00:52:15,790 --> 00:52:17,860 are trying to do the best we can on some 1143 00:52:17,860 --> 00:52:22,080 of their key commodities to try to go as deep as possible. 1144 00:52:22,080 --> 00:52:25,320 Now, Starbucks, because their ethos was a little bit more 1145 00:52:25,320 --> 00:52:28,412 on the sustainability aspect, on the shared value 1146 00:52:28,412 --> 00:52:30,620 aspect of your supply chains from the very beginning, 1147 00:52:30,620 --> 00:52:35,900 they actually have much better progress on that area. 1148 00:52:35,900 --> 00:52:38,470 So they instituted the CAFE Practices. 1149 00:52:38,470 --> 00:52:40,648 STUDENT: [INAUDIBLE] CAFE Practices 1150 00:52:40,648 --> 00:52:44,920 where they have actually a supply chain certification 1151 00:52:44,920 --> 00:52:47,830 group that goes into the farmers and actually certifies 1152 00:52:47,830 --> 00:52:51,750 that the farmers are trying to use less pesticides if they're 1153 00:52:51,750 --> 00:52:55,130 organic and using less water, making sure they're 1154 00:52:55,130 --> 00:52:57,302 paid above minimum wage. 1155 00:52:57,302 --> 00:52:58,760 And then Starbucks Social has a lot 1156 00:52:58,760 --> 00:53:00,051 of different training programs. 1157 00:53:00,051 --> 00:53:04,240 Because one of their greatest problems is farming 1158 00:53:04,240 --> 00:53:07,050 is becoming less of a desirable occupation around the world. 1159 00:53:07,050 --> 00:53:09,060 That's not just a coffee problem but a chocolate 1160 00:53:09,060 --> 00:53:11,640 problem and a tea problem. 1161 00:53:11,640 --> 00:53:15,500 And so kind of ensuring that the farmers have 1162 00:53:15,500 --> 00:53:18,681 good quality of life so that they continued to grow coffee 1163 00:53:18,681 --> 00:53:20,680 and they have a sustainable source of the coffee 1164 00:53:20,680 --> 00:53:21,596 that they're sourcing. 1165 00:53:21,596 --> 00:53:23,610 So they have auditors that go around the world 1166 00:53:23,610 --> 00:53:25,510 and they work with farmers when they 1167 00:53:25,510 --> 00:53:28,970 have a gap that they're able to improve their practices 1168 00:53:28,970 --> 00:53:29,640 in that area. 1169 00:53:29,640 --> 00:53:32,040 So they started up the program, I forget, in 2008. 1170 00:53:32,040 --> 00:53:37,550 And they said they're going to get to 95% 25 2015. 1171 00:53:37,550 --> 00:53:39,312 And so they're about 93% of the way 1172 00:53:39,312 --> 00:53:41,870 that all these farmers are certified around the world. 1173 00:53:41,870 --> 00:53:43,120 They're a third party auditor. 1174 00:53:43,120 --> 00:53:47,257 So it's not Starbucks going out to these farms in Costa Rica 1175 00:53:47,257 --> 00:53:48,090 and certifying them. 1176 00:53:48,090 --> 00:53:50,050 So then you have third party auditors 1177 00:53:50,050 --> 00:53:53,690 that they then report to Starbucks who kind of has 1178 00:53:53,690 --> 00:53:55,970 the overall deal with them. 1179 00:53:55,970 --> 00:53:58,420 PROFESSOR: So they have a database 1180 00:53:58,420 --> 00:54:01,120 with all their suppliers that [? our ?] CAFE already did, 1181 00:54:01,120 --> 00:54:01,620 right? 1182 00:54:01,620 --> 00:54:02,670 This database is pubic. 1183 00:54:02,670 --> 00:54:05,240 Actually, in theory, you can go into the CAFE Practices 1184 00:54:05,240 --> 00:54:05,740 website. 1185 00:54:05,740 --> 00:54:06,906 STUDENT: You can request it. 1186 00:54:06,906 --> 00:54:08,200 PROFESSOR: You can request it. 1187 00:54:08,200 --> 00:54:10,880 It's not public published but it's public of view requested. 1188 00:54:10,880 --> 00:54:12,505 They may say no, but you can ask again. 1189 00:54:12,505 --> 00:54:16,690 And maybe eventually, they give you some information. 1190 00:54:16,690 --> 00:54:19,250 So they have gone deep, deep, deep in your supply chain-- 1191 00:54:19,250 --> 00:54:22,490 as deep as they can do with the resources they have. 1192 00:54:22,490 --> 00:54:24,250 And the resources Alexi was outlining 1193 00:54:24,250 --> 00:54:25,950 is we set up the practices. 1194 00:54:25,950 --> 00:54:28,990 We ask our buyers of coffee that unless you 1195 00:54:28,990 --> 00:54:30,680 are willing to pay a little bit more 1196 00:54:30,680 --> 00:54:32,580 for coffee that is CAFE certified so you have 1197 00:54:32,580 --> 00:54:35,440 the incentive and you're going to eventually make this happen. 1198 00:54:35,440 --> 00:54:37,540 We do not force our suppliers to sell to us. 1199 00:54:37,540 --> 00:54:39,030 They can sell to other people. 1200 00:54:39,030 --> 00:54:41,880 So the CAFE practices are not only for Starbucks suppliers. 1201 00:54:41,880 --> 00:54:43,712 Same with Unilever and the Palm Oil. 1202 00:54:43,712 --> 00:54:45,920 I guess you went through all the Palm Oil discussions 1203 00:54:45,920 --> 00:54:47,130 so I will not repeat it. 1204 00:54:47,130 --> 00:54:52,330 But Unilever is now trying to go directly to Palm Oil. 1205 00:54:52,330 --> 00:54:54,290 Straight-- no commodity pricing. 1206 00:54:54,290 --> 00:54:58,290 Let's avoid that, let's say, that lack of transparency. 1207 00:54:58,290 --> 00:55:01,460 Because it's so important to us that we'd rather 1208 00:55:01,460 --> 00:55:03,110 pay a little bit more because this 1209 00:55:03,110 --> 00:55:05,290 is what We need to care about. 1210 00:55:05,290 --> 00:55:06,840 So it's a little bit of how deep. 1211 00:55:06,840 --> 00:55:08,256 In this case, it went really deep. 1212 00:55:08,256 --> 00:55:10,180 Because this is-- food supply chains, 1213 00:55:10,180 --> 00:55:13,720 especially agricultural ones, are very critical for them 1214 00:55:13,720 --> 00:55:14,734 as a business. 1215 00:55:14,734 --> 00:55:16,400 So this would be a sense of how deep you 1216 00:55:16,400 --> 00:55:18,920 go is a function of where you are impacts are 1217 00:55:18,920 --> 00:55:21,150 and where your interests are and your risks are 1218 00:55:21,150 --> 00:55:23,610 as well as a company. 1219 00:55:23,610 --> 00:55:25,544 Anything else on that question? 1220 00:55:25,544 --> 00:55:26,710 That's a very important one. 1221 00:55:26,710 --> 00:55:30,243 Any other of your companies that you-- is either different? 1222 00:55:30,243 --> 00:55:31,149 No? 1223 00:55:31,149 --> 00:55:32,950 All right, good. 1224 00:55:32,950 --> 00:55:37,830 So let me then get you back to a couple of slides 1225 00:55:37,830 --> 00:55:41,070 that we set up at the beginning. 1226 00:55:41,070 --> 00:55:51,780 And I will try to give you-- this 1227 00:55:51,780 --> 00:55:54,280 was the first slide that when we started the course, 1228 00:55:54,280 --> 00:55:55,980 we kind of went through it. 1229 00:55:55,980 --> 00:56:04,220 So [INAUDIBLE] All right, so these 1230 00:56:04,220 --> 00:56:05,980 were the way we structured the course. 1231 00:56:05,980 --> 00:56:09,630 Let me kind of try to explain why we did that work now 1232 00:56:09,630 --> 00:56:11,947 that you have a better sense of what the strategy is. 1233 00:56:11,947 --> 00:56:14,280 The strategy is actually to say no to many of the things 1234 00:56:14,280 --> 00:56:15,400 that we have here. 1235 00:56:15,400 --> 00:56:17,690 That's what a company should do. 1236 00:56:17,690 --> 00:56:21,190 One is to understand that just because of the nature of how 1237 00:56:21,190 --> 00:56:24,380 businesses have been developed, you 1238 00:56:24,380 --> 00:56:26,980 have to somehow take this life cycle 1239 00:56:26,980 --> 00:56:28,499 view of your product, which means 1240 00:56:28,499 --> 00:56:30,290 you have to not only think about the things 1241 00:56:30,290 --> 00:56:31,664 you control and buy from, and you 1242 00:56:31,664 --> 00:56:34,810 have to somehow make sure you keep in your radar 1243 00:56:34,810 --> 00:56:37,410 how you use and recover your products. 1244 00:56:37,410 --> 00:56:39,160 Let me give you an interesting example 1245 00:56:39,160 --> 00:56:44,990 today which goes back to how companies do their businesses. 1246 00:56:44,990 --> 00:56:47,020 Do know what the espresso-- the company that 1247 00:56:47,020 --> 00:56:48,977 does these automated things? 1248 00:56:48,977 --> 00:56:51,060 So we have a friend of mine from the Netherlands-- 1249 00:56:51,060 --> 00:56:52,560 and also I have an espresso machine. 1250 00:56:52,560 --> 00:56:54,420 He has an espresso machine as well. 1251 00:56:54,420 --> 00:56:55,470 Pretty crazy-- we're talking about this. 1252 00:56:55,470 --> 00:56:56,415 Oh, [INAUDIBLE] great. 1253 00:56:56,415 --> 00:56:59,152 So are you part of their recycling program? 1254 00:56:59,152 --> 00:57:00,526 Espresso has a recycling program? 1255 00:57:00,526 --> 00:57:02,050 Yeah, they have one. 1256 00:57:02,050 --> 00:57:03,830 It's very important to Europe. 1257 00:57:03,830 --> 00:57:06,170 When you get all your packages, you get like a bag. 1258 00:57:06,170 --> 00:57:09,060 And you put your used bags and they recycle it for you. 1259 00:57:09,060 --> 00:57:11,350 Because these instant-- the packages 1260 00:57:11,350 --> 00:57:15,040 of coffee that you process your machine 1261 00:57:15,040 --> 00:57:17,070 are designed to be high quality. 1262 00:57:17,070 --> 00:57:19,380 But they cannot be processed in the US for recycling. 1263 00:57:19,380 --> 00:57:21,465 So they're waste and they're lots of waste 1264 00:57:21,465 --> 00:57:22,340 and in Europe either. 1265 00:57:22,340 --> 00:57:24,670 So basically, they have the whole program 1266 00:57:24,670 --> 00:57:28,740 for espresso customers is highly advertised in Europe 1267 00:57:28,740 --> 00:57:30,240 on the closed loop. 1268 00:57:30,240 --> 00:57:33,940 And here in the US, is there somewhere 1269 00:57:33,940 --> 00:57:37,330 in the website that is not the core thing? 1270 00:57:37,330 --> 00:57:40,710 And now they have-- just to tell you that even this view, 1271 00:57:40,710 --> 00:57:44,710 you have to have a market that cares, right? 1272 00:57:44,710 --> 00:57:47,374 So even if you think of the best process in the US, 1273 00:57:47,374 --> 00:57:49,040 people maybe don't care about recycling. 1274 00:57:49,040 --> 00:57:50,050 So it's too expensive. 1275 00:57:50,050 --> 00:57:52,200 We know how hard it is to set up those systems. 1276 00:57:52,200 --> 00:57:54,970 So in Europe, that's much more developed. 1277 00:57:54,970 --> 00:57:56,850 Anyway, so the first business to understand 1278 00:57:56,850 --> 00:58:00,084 that you have to decide in this system is not easy. 1279 00:58:00,084 --> 00:58:01,250 And we know that's not easy. 1280 00:58:01,250 --> 00:58:05,366 And you're required to either partner with a third party 1281 00:58:05,366 --> 00:58:06,740 and you have the scale like we're 1282 00:58:06,740 --> 00:58:09,349 talking in [INAUDIBLE] and the connection with the customer. 1283 00:58:09,349 --> 00:58:11,890 You may be able to do this by yourself, but most of the time, 1284 00:58:11,890 --> 00:58:14,050 you'll probably have to do, leverage 1285 00:58:14,050 --> 00:58:16,610 a separate supply chain may be expensive at the beginning. 1286 00:58:16,610 --> 00:58:18,310 But over time, it will get better. 1287 00:58:18,310 --> 00:58:19,706 But if you need to own this, this 1288 00:58:19,706 --> 00:58:21,080 is going to be a little bit hard. 1289 00:58:21,080 --> 00:58:23,780 So that's understanding a little bit of the challenges of these 1290 00:58:23,780 --> 00:58:26,060 because this is very less studied in general 1291 00:58:26,060 --> 00:58:28,910 in most companies-- was one of our goals. 1292 00:58:28,910 --> 00:58:31,990 Started using the life cycle view of the world. 1293 00:58:31,990 --> 00:58:33,980 Then we really went into understanding 1294 00:58:33,980 --> 00:58:37,860 how to make the measurements of, at least in some degree, how 1295 00:58:37,860 --> 00:58:41,630 a measurement is done on the use of resources, 1296 00:58:41,630 --> 00:58:43,191 the life cycle assessment. 1297 00:58:43,191 --> 00:58:43,690 Why? 1298 00:58:43,690 --> 00:58:45,310 Because measurement is the only way 1299 00:58:45,310 --> 00:58:49,890 you can eventually make decisions at some point. 1300 00:58:49,890 --> 00:58:53,467 Doesn't matter how committed you are. 1301 00:58:53,467 --> 00:58:55,300 At some point, you have to make a trade off. 1302 00:58:55,300 --> 00:58:57,420 Should I do this or do that? 1303 00:58:57,420 --> 00:59:02,830 I love the talk from Seventh Generation. 1304 00:59:02,830 --> 00:59:04,130 I thought it was great. 1305 00:59:04,130 --> 00:59:07,780 Should you should use these bags that 1306 00:59:07,780 --> 00:59:10,750 are worse off for the environment, 1307 00:59:10,750 --> 00:59:14,800 or should we use our laundry detergent containers? 1308 00:59:14,800 --> 00:59:17,740 That's a really concrete decision 1309 00:59:17,740 --> 00:59:18,950 you do every single day. 1310 00:59:18,950 --> 00:59:22,580 If you have no measurement, you cannot make the decision well. 1311 00:59:22,580 --> 00:59:24,190 They know that what they're doing 1312 00:59:24,190 --> 00:59:28,740 is worse for the environment on an individual unit basis. 1313 00:59:28,740 --> 00:59:31,020 But they also know that if they don't offer that, 1314 00:59:31,020 --> 00:59:32,980 they will not be in the shelf. 1315 00:59:32,980 --> 00:59:36,470 So as a whole, it's better to be bad on one product 1316 00:59:36,470 --> 00:59:37,980 but better as a business. 1317 00:59:37,980 --> 00:59:40,160 And that decision can only be made 1318 00:59:40,160 --> 00:59:42,262 if you have the information. 1319 00:59:42,262 --> 00:59:43,970 Otherwise, you will never be able to make 1320 00:59:43,970 --> 00:59:47,610 the decisions bad or good or conscious or not. 1321 00:59:47,610 --> 00:59:50,000 That's why life cycle assessment, understanding life 1322 00:59:50,000 --> 00:59:52,290 cycle analysis, and try to bring it 1323 00:59:52,290 --> 00:59:57,895 as close as possible to product design is very important. 1324 00:59:57,895 --> 00:59:59,520 That's what we including in this class. 1325 00:59:59,520 --> 01:00:01,061 Even though it's a supply chain class 1326 01:00:01,061 --> 01:00:03,850 and this is a whole course on life cycle assessment, 1327 01:00:03,850 --> 01:00:06,780 you need to understand that to be able to make real product 1328 01:00:06,780 --> 01:00:08,990 decisions and real supply chain decisions, 1329 01:00:08,990 --> 01:00:13,710 you have to somehow get into grabbing this information. 1330 01:00:13,710 --> 01:00:16,920 This is what Nike did very well. 1331 01:00:16,920 --> 01:00:20,200 After the whole process and labor and they 1332 01:00:20,200 --> 01:00:22,600 embraced sustainability, they created 1333 01:00:22,600 --> 01:00:25,390 a Nike considered index for their products 1334 01:00:25,390 --> 01:00:28,100 and they did life cycle analysis of materials. 1335 01:00:28,100 --> 01:00:30,290 And they tried to inform their decisions 1336 01:00:30,290 --> 01:00:32,710 as best as possible-- measurements 1337 01:00:32,710 --> 01:00:35,150 so people can make the decisions of the moment of making 1338 01:00:35,150 --> 01:00:37,250 that trade off. 1339 01:00:37,250 --> 01:00:41,350 That was the idea of getting carbon life cycles thinking 1340 01:00:41,350 --> 01:00:43,550 into the course. 1341 01:00:43,550 --> 01:00:47,510 And the other [? rest ?] of the course was a little bit more 1342 01:00:47,510 --> 01:00:51,120 focused on the other stakeholders that 1343 01:00:51,120 --> 01:00:58,510 push you one way or the other to make the moral case, make 1344 01:00:58,510 --> 01:01:02,009 the reputational case through a tax or partnership, right? 1345 01:01:02,009 --> 01:01:04,050 These are the stakeholders that actually push you 1346 01:01:04,050 --> 01:01:08,240 a lot towards this thinking. 1347 01:01:08,240 --> 01:01:10,164 This is stakeholders. 1348 01:01:10,164 --> 01:01:11,330 You need to understand them. 1349 01:01:11,330 --> 01:01:14,490 You need to somehow understand them and engage them 1350 01:01:14,490 --> 01:01:18,990 but engage them not to agree with them on those cases, 1351 01:01:18,990 --> 01:01:21,910 but to try to use them to inform eventually 1352 01:01:21,910 --> 01:01:23,280 how to make those products. 1353 01:01:23,280 --> 01:01:25,320 This is why you need to really understand 1354 01:01:25,320 --> 01:01:26,800 where policy is going. 1355 01:01:26,800 --> 01:01:28,580 We saw the policy talk. 1356 01:01:28,580 --> 01:01:31,540 Policy unfortunately is going nowhere. 1357 01:01:31,540 --> 01:01:34,340 This is not going to be a policy discussion. 1358 01:01:34,340 --> 01:01:36,320 We know that policy is very convoluted. 1359 01:01:36,320 --> 01:01:37,790 It's going to be lagging always. 1360 01:01:37,790 --> 01:01:39,956 So as a company, if you really want to be strategic, 1361 01:01:39,956 --> 01:01:42,170 you need to be more about either understanding 1362 01:01:42,170 --> 01:01:46,682 where the interests are of your customers, 1363 01:01:46,682 --> 01:01:48,390 where you can find competitive advantage, 1364 01:01:48,390 --> 01:01:50,860 where you can tie that to cost savings, something like that. 1365 01:01:50,860 --> 01:01:53,110 But if you post, it's going to move very, very slowly. 1366 01:01:53,110 --> 01:01:55,370 You can drive policy a little bit further ahead, 1367 01:01:55,370 --> 01:01:58,240 but you saw the process of Mercury. 1368 01:01:58,240 --> 01:02:00,540 And that's the easy one. 1369 01:02:00,540 --> 01:02:04,554 The CO2 greenhouse gas policy discussion is stalled forever 1370 01:02:04,554 --> 01:02:05,970 and it will take many, many years. 1371 01:02:05,970 --> 01:02:07,970 That's not a reason not to do anything about it, 1372 01:02:07,970 --> 01:02:09,440 but you have to be very much aware 1373 01:02:09,440 --> 01:02:13,340 that really effective policymaking is not 1374 01:02:13,340 --> 01:02:16,680 in the foreseeable future unless there's some big disaster. 1375 01:02:16,680 --> 01:02:19,130 If something terrible happens and lots of people 1376 01:02:19,130 --> 01:02:22,720 die for something that can be connected with climate change, 1377 01:02:22,720 --> 01:02:23,220 trust me. 1378 01:02:23,220 --> 01:02:25,210 Next day, you have regulation. 1379 01:02:25,210 --> 01:02:26,920 But right now, the way things are moving, 1380 01:02:26,920 --> 01:02:28,900 you saw the mercury processes. 1381 01:02:28,900 --> 01:02:30,176 How many [INAUDIBLE] in total? 1382 01:02:30,176 --> 01:02:30,676 12? 1383 01:02:30,676 --> 01:02:31,700 14? 1384 01:02:31,700 --> 01:02:35,350 From the science consensus to getting all the things-- 1385 01:02:35,350 --> 01:02:38,730 and you saw that all this is just really compromises. 1386 01:02:38,730 --> 01:02:41,333 It's never going to give you to taking specific action. 1387 01:02:41,333 --> 01:02:43,690 So you have to be very aware of that. 1388 01:02:43,690 --> 01:02:47,050 And you saw the view of the NGOs which, of course, 1389 01:02:47,050 --> 01:02:50,380 they are really committed usually to the moral argument. 1390 01:02:50,380 --> 01:02:52,419 That's their main driving force. 1391 01:02:52,419 --> 01:02:53,960 They believe this is the right thing. 1392 01:02:53,960 --> 01:02:56,950 They are the conscience of humanity 1393 01:02:56,950 --> 01:03:00,630 and they want to move companies to do the moral thing. 1394 01:03:00,630 --> 01:03:02,690 And companies need to push all the time. 1395 01:03:02,690 --> 01:03:05,160 I want to do the moral thing, but that's not 1396 01:03:05,160 --> 01:03:06,970 where my strengths are. 1397 01:03:06,970 --> 01:03:09,200 The best way is to try to do something in between. 1398 01:03:09,200 --> 01:03:10,880 OK, good, so we've [INAUDIBLE] us 1399 01:03:10,880 --> 01:03:14,240 to how to make this happen in a company. 1400 01:03:14,240 --> 01:03:18,060 So this is the talk I give to executives when they ask 1401 01:03:18,060 --> 01:03:19,760 me, oh, so give me a process. 1402 01:03:19,760 --> 01:03:22,439 People like, like, five step process or three checklist 1403 01:03:22,439 --> 01:03:22,980 or something. 1404 01:03:22,980 --> 01:03:24,980 But ultimately, it's something like this, right? 1405 01:03:24,980 --> 01:03:26,650 It's what we were talking earlier. 1406 01:03:26,650 --> 01:03:31,520 It's that you have to understand the pressures of your business 1407 01:03:31,520 --> 01:03:33,540 which we have talked to ad nauseam. 1408 01:03:33,540 --> 01:03:36,420 And you have to make this decision that 1409 01:03:36,420 --> 01:03:41,280 is, say no to some things and don't go them. 1410 01:03:41,280 --> 01:03:43,205 Somehow, do not do them. 1411 01:03:43,205 --> 01:03:47,500 And not do them means do the minimum, do the right thing, 1412 01:03:47,500 --> 01:03:49,860 or do the things [? where ?] to mitigate your risk 1413 01:03:49,860 --> 01:03:52,200 and pick a few that you really want to do well. 1414 01:03:52,200 --> 01:03:54,470 And that's a kind of-- and to do that property, 1415 01:03:54,470 --> 01:03:57,280 you have to measure somehow. 1416 01:03:57,280 --> 01:03:59,560 And once you do that measurement, 1417 01:03:59,560 --> 01:04:03,100 then you really set goals and targets, 1418 01:04:03,100 --> 01:04:08,540 which these set goals and targets is the one thing that I 1419 01:04:08,540 --> 01:04:11,190 unfortunately cannot teach you. 1420 01:04:11,190 --> 01:04:13,850 Because I don't know how to do it. 1421 01:04:13,850 --> 01:04:16,660 I wish I could tell you what's the best goal to do. 1422 01:04:16,660 --> 01:04:19,370 10% reduction of waste per years? 1423 01:04:19,370 --> 01:04:20,645 Zero waste by 2020? 1424 01:04:20,645 --> 01:04:22,240 I mean, what is the best goal? 1425 01:04:22,240 --> 01:04:24,170 So Alexis, you have a better advice 1426 01:04:24,170 --> 01:04:26,151 to our esteemed students? 1427 01:04:26,151 --> 01:04:28,150 STUDENT: Talking it through companies, you know. 1428 01:04:28,150 --> 01:04:30,087 They assess where they're at currently, 1429 01:04:30,087 --> 01:04:31,462 what quantities-- if you're going 1430 01:04:31,462 --> 01:04:36,120 to look at waste management, they look at how they-- a lot 1431 01:04:36,120 --> 01:04:38,820 of companies will do a pilot and see how they can do it 1432 01:04:38,820 --> 01:04:41,430 within the first year and look at what the competitors are 1433 01:04:41,430 --> 01:04:44,350 proposing and other people in the industry 1434 01:04:44,350 --> 01:04:45,940 and if they're the first of the type. 1435 01:04:45,940 --> 01:04:47,940 The one thing that I've read in a lot of reports 1436 01:04:47,940 --> 01:04:51,050 is that, you know, we're putting high goals out here. 1437 01:04:51,050 --> 01:04:53,369 We may not hit them, so better go high. 1438 01:04:53,369 --> 01:04:55,160 Then it's almost worse if you put low goals 1439 01:04:55,160 --> 01:04:56,810 because then you'll get critiqued for not shooting 1440 01:04:56,810 --> 01:04:57,160 high enough. 1441 01:04:57,160 --> 01:04:58,710 So you're never really going to win, 1442 01:04:58,710 --> 01:05:01,572 but they go through a large assessment 1443 01:05:01,572 --> 01:05:03,780 of what they think they can do internally and looking 1444 01:05:03,780 --> 01:05:05,940 at competitors and kind of gauging it that way. 1445 01:05:05,940 --> 01:05:11,017 STUDENT: What are thoughts about levels of today or levels of-- 1446 01:05:11,017 --> 01:05:11,850 PROFESSOR: Go ahead. 1447 01:05:11,850 --> 01:05:14,200 Yeah, have some thoughts, but you have some thoughts as well? 1448 01:05:14,200 --> 01:05:15,960 STUDENT: I'm just wondering if that's a good way to start. 1449 01:05:15,960 --> 01:05:17,240 PROFESSOR: Yeah, so that's a good way to start. 1450 01:05:17,240 --> 01:05:18,710 So let me just position this. 1451 01:05:18,710 --> 01:05:22,590 If you look at any company, they have these vision goals, right? 1452 01:05:22,590 --> 01:05:25,815 Which just put clear to the company 1453 01:05:25,815 --> 01:05:27,190 where are your priorities, right? 1454 01:05:27,190 --> 01:05:30,710 We're going to have a zero emissions car by 2050, right? 1455 01:05:30,710 --> 01:05:34,020 Maybe 2049, maybe 2030, whatever the number is. 1456 01:05:34,020 --> 01:05:40,380 So you definitely need to have this idea of that vision target 1457 01:05:40,380 --> 01:05:42,380 that tends to be super aggressive. 1458 01:05:42,380 --> 01:05:42,980 Why? 1459 01:05:42,980 --> 01:05:45,104 Because that just tells you where your priority is. 1460 01:05:45,104 --> 01:05:46,900 That's a way to say, this matters to me. 1461 01:05:46,900 --> 01:05:48,562 This is why I want to do it. 1462 01:05:48,562 --> 01:05:50,520 And that's what you see in all the CSR reports. 1463 01:05:50,520 --> 01:05:51,850 That's the number one. 1464 01:05:51,850 --> 01:05:55,500 The next one they do is like Alexis said. 1465 01:05:55,500 --> 01:05:58,370 And this goes back to the process 1466 01:05:58,370 --> 01:06:02,850 of setting goals and targets in any organization. 1467 01:06:02,850 --> 01:06:06,280 Who here has experience in a company doing 1468 01:06:06,280 --> 01:06:09,445 financial targets for sales? 1469 01:06:09,445 --> 01:06:10,422 Who has done it? 1470 01:06:10,422 --> 01:06:12,130 Who has been part of a process for sales? 1471 01:06:12,130 --> 01:06:13,660 How is that done? 1472 01:06:13,660 --> 01:06:15,590 How does it happen when you, like a company-- 1473 01:06:15,590 --> 01:06:17,750 I'm the CEO of a company and I need 1474 01:06:17,750 --> 01:06:20,480 to go next quarter or next year for my guidance 1475 01:06:20,480 --> 01:06:21,730 for Wall Street. 1476 01:06:21,730 --> 01:06:23,590 And I need to set up goals and targets. 1477 01:06:23,590 --> 01:06:24,450 How do I do that? 1478 01:06:24,450 --> 01:06:26,880 STUDENT: Well, we would just have like an annual operating 1479 01:06:26,880 --> 01:06:29,680 plan process where basically they would bring it 1480 01:06:29,680 --> 01:06:32,135 all the representatives from all the sales divisions 1481 01:06:32,135 --> 01:06:33,700 and they would come in and say here's 1482 01:06:33,700 --> 01:06:36,284 our major-- they could come in one by one, like, all the adds, 1483 01:06:36,284 --> 01:06:38,408 and say, here are the customers that fall under us. 1484 01:06:38,408 --> 01:06:39,840 Here's what we think. [INAUDIBLE] 1485 01:06:39,840 --> 01:06:41,548 we forecast the business that we're going 1486 01:06:41,548 --> 01:06:43,085 to do based on XYZ reasons. 1487 01:06:43,085 --> 01:06:44,460 So therefore, [INAUDIBLE] number. 1488 01:06:44,460 --> 01:06:46,340 And they would roll all that up into one. 1489 01:06:46,340 --> 01:06:48,865 And operation [INAUDIBLE] 1490 01:06:48,865 --> 01:06:50,740 PROFESSOR: So they get a meeting and everyone 1491 01:06:50,740 --> 01:06:51,573 comes with a number. 1492 01:06:51,573 --> 01:06:54,560 And that guys went back to his team beforehand and said, guys, 1493 01:06:54,560 --> 01:06:56,200 I have a meeting tomorrow with the CEO. 1494 01:06:56,200 --> 01:06:57,840 How much are we going to sell? 1495 01:06:57,840 --> 01:06:59,740 And the guy asked the other guy how much I'm going to sell. 1496 01:06:59,740 --> 01:07:01,490 Eventually, someone that really knows what happens 1497 01:07:01,490 --> 01:07:03,160 says, oh yeah, have 20 customers. 1498 01:07:03,160 --> 01:07:05,080 I predict my 20% growth. 1499 01:07:05,080 --> 01:07:06,630 I see these opportunities. 1500 01:07:06,630 --> 01:07:08,330 And they roll it up and then they 1501 01:07:08,330 --> 01:07:09,886 could make some guesses, right? 1502 01:07:09,886 --> 01:07:12,260 And they just-- I rounded up the number [INAUDIBLE] good. 1503 01:07:12,260 --> 01:07:13,920 The CEO says it doesn't look good enough. 1504 01:07:13,920 --> 01:07:15,544 You have to do better than this, right? 1505 01:07:15,544 --> 01:07:16,964 And the CEO says 10% more. 1506 01:07:16,964 --> 01:07:17,880 You say, I don't know. 1507 01:07:17,880 --> 01:07:19,050 Yes, you do it and then you do it. 1508 01:07:19,050 --> 01:07:20,000 And next year, they do it, right? 1509 01:07:20,000 --> 01:07:21,791 And that's-- and that's the way it happens. 1510 01:07:21,791 --> 01:07:24,105 And I'm kind of a little bit excited [INAUDIBLE]. 1511 01:07:24,105 --> 01:07:25,480 But this is roughly what happens. 1512 01:07:25,480 --> 01:07:28,050 I mean, you can make all the nice frameworks you want. 1513 01:07:28,050 --> 01:07:29,300 You [INAUDIBLE] to the target. 1514 01:07:29,300 --> 01:07:31,550 But this explains what happens. 1515 01:07:31,550 --> 01:07:33,810 Someone cares about this number. 1516 01:07:33,810 --> 01:07:36,880 They force you to think about what's the best way to do it. 1517 01:07:36,880 --> 01:07:38,435 And you go back to your team and try 1518 01:07:38,435 --> 01:07:40,810 to find some sort of middle ground between what you think 1519 01:07:40,810 --> 01:07:43,880 is doable, what you really think you can do, 1520 01:07:43,880 --> 01:07:46,630 and your manager and the CEO tries to stretch you 1521 01:07:46,630 --> 01:07:47,920 beyond that limit. 1522 01:07:47,920 --> 01:07:50,344 So you do not just set a number that makes no sense. 1523 01:07:50,344 --> 01:07:52,510 Because everyone's going to put a number that I know 1524 01:07:52,510 --> 01:07:53,880 I'm going to meet. 1525 01:07:53,880 --> 01:07:55,160 And the CEO knows this. 1526 01:07:55,160 --> 01:07:58,422 And because of that, he says, I want double of that. 1527 01:07:58,422 --> 01:08:00,060 And you play the game of tension. 1528 01:08:00,060 --> 01:08:01,050 And you miss one year. 1529 01:08:01,050 --> 01:08:05,030 You don't get the bonus and make sure you do a better job. 1530 01:08:05,030 --> 01:08:06,926 That process is exactly the same process 1531 01:08:06,926 --> 01:08:09,680 you should go for environment targets, right? 1532 01:08:09,680 --> 01:08:11,370 It's exactly the same process. 1533 01:08:11,370 --> 01:08:16,026 I mentioned at the end of this long rant one important thing. 1534 01:08:16,026 --> 01:08:18,710 Your bonus is set to this, right? 1535 01:08:18,710 --> 01:08:20,560 So that means money. 1536 01:08:20,560 --> 01:08:22,660 But some sort of incentive is set to this process. 1537 01:08:22,660 --> 01:08:29,810 If there's no incentive or penalty, nothing gets done. 1538 01:08:29,810 --> 01:08:33,160 So you can get, in the short term, some things. 1539 01:08:33,160 --> 01:08:36,742 But in other things, you need to provide specific targets. 1540 01:08:36,742 --> 01:08:38,200 So this is where, again, we go back 1541 01:08:38,200 --> 01:08:41,250 to-- you want to do carbon footprint emissions? 1542 01:08:41,250 --> 01:08:45,370 You have to tie it to something that the person can do. 1543 01:08:45,370 --> 01:08:49,270 For example, if you want to reduce 20% of your emissions 1544 01:08:49,270 --> 01:08:52,180 or go to the same level of emissions as 2020 1545 01:08:52,180 --> 01:08:55,540 based on the 2001 baseline, then you 1546 01:08:55,540 --> 01:08:58,220 have to connect those emissions to something 1547 01:08:58,220 --> 01:08:59,918 you can take action on-- energy use. 1548 01:08:59,918 --> 01:09:00,418 Right. 1549 01:09:00,418 --> 01:09:03,904 STUDENT: Don't you run the risk, though, of kind of, 1550 01:09:03,904 --> 01:09:10,387 I don't know, questioning the integrity of the process? 1551 01:09:10,387 --> 01:09:12,470 Because then you could have engineering in the way 1552 01:09:12,470 --> 01:09:14,390 you're reporting or measuring. 1553 01:09:14,390 --> 01:09:17,000 And if you tie some sort of financial incentive 1554 01:09:17,000 --> 01:09:20,040 to the goals, then there is the potential 1555 01:09:20,040 --> 01:09:23,890 to have a lot of effort to have good results on paper but maybe 1556 01:09:23,890 --> 01:09:26,719 not necessarily to be driving more [? real results. ?] 1557 01:09:26,719 --> 01:09:28,760 STUDENT: PROFESSOR: So that's talk about-- that's 1558 01:09:28,760 --> 01:09:30,630 a really good point. 1559 01:09:30,630 --> 01:09:33,950 So the companies that are successful at this, 1560 01:09:33,950 --> 01:09:36,260 they-- somehow the measurement systems 1561 01:09:36,260 --> 01:09:39,130 need to be as reliable as possible to avoid that problem. 1562 01:09:39,130 --> 01:09:42,609 Because if yo don't have a good way to measure the progress, 1563 01:09:42,609 --> 01:09:44,500 then you can fudge the numbers. 1564 01:09:44,500 --> 01:09:46,250 So you have to connect it back to whatever 1565 01:09:46,250 --> 01:09:48,640 metric of your business you can get 1566 01:09:48,640 --> 01:09:50,870 actual reliable information on. 1567 01:09:50,870 --> 01:09:53,290 And I think that's why the leading companies, I think 1568 01:09:53,290 --> 01:09:55,580 that's why they do better is that, sure, we 1569 01:09:55,580 --> 01:09:57,830 want to do carbon footprint and we do with [INAUDIBLE] 1570 01:09:57,830 --> 01:10:00,700 this big [INAUDIBLE] protocol CDP report. 1571 01:10:00,700 --> 01:10:03,090 But somehow as they go down, they 1572 01:10:03,090 --> 01:10:06,720 tie this to number of miles driven on my car, number 1573 01:10:06,720 --> 01:10:10,760 of kilowatt hours of my-- so that process of kind of somehow 1574 01:10:10,760 --> 01:10:13,180 connecting these goals and measurement systems, 1575 01:10:13,180 --> 01:10:15,781 that I think is the hard part that companies take a long time 1576 01:10:15,781 --> 01:10:16,280 to develop. 1577 01:10:16,280 --> 01:10:18,480 Because information you need to measure 1578 01:10:18,480 --> 01:10:19,540 you may not be capturing. 1579 01:10:19,540 --> 01:10:22,120 So you have to build, let's say, that knowledge internally 1580 01:10:22,120 --> 01:10:23,260 and then eventually try it. 1581 01:10:23,260 --> 01:10:23,870 But I agree. 1582 01:10:23,870 --> 01:10:27,330 If you do have some sort of connection to the real business 1583 01:10:27,330 --> 01:10:32,420 operations, you cannot really set credible targets and tie it 1584 01:10:32,420 --> 01:10:32,920 to money. 1585 01:10:32,920 --> 01:10:34,340 And I'll give you another example. 1586 01:10:34,340 --> 01:10:36,256 I know you have a question before we move to-- 1587 01:10:36,256 --> 01:10:39,640 STUDENT: [INAUDIBLE] measurement like in the Palm Oil case 1588 01:10:39,640 --> 01:10:43,405 and also with Chevron to do third party verifications 1589 01:10:43,405 --> 01:10:48,668 of things just to verify before they award incentives 1590 01:10:48,668 --> 01:10:52,240 or peform the bonuses or whatever. 1591 01:10:52,240 --> 01:10:56,860 PROFESSOR: So not all the-- so not 1592 01:10:56,860 --> 01:10:59,370 all the performance gives bonuses, 1593 01:10:59,370 --> 01:11:02,160 but they do have an impact on your evaluation. 1594 01:11:02,160 --> 01:11:04,860 So let's suppose you don't have to try as a bonus something, 1595 01:11:04,860 --> 01:11:07,030 but you have to meet certain criteria. 1596 01:11:07,030 --> 01:11:08,530 And if you don't meet them, you know 1597 01:11:08,530 --> 01:11:09,988 there's a risk that your job is not 1598 01:11:09,988 --> 01:11:12,160 going to be there for you in two, three, four years. 1599 01:11:12,160 --> 01:11:13,227 No one expects so. 1600 01:11:13,227 --> 01:11:15,560 I mean, that was your question-- was that your question? 1601 01:11:15,560 --> 01:11:16,690 STUDENT: I'm just saying-- 1602 01:11:16,690 --> 01:11:17,690 PROFESSOR: As a comment. 1603 01:11:17,690 --> 01:11:21,882 STUDENT: Yeah, one way to ensure that the system isn't being 1604 01:11:21,882 --> 01:11:23,460 exploited is that companies-- 1605 01:11:23,460 --> 01:11:24,120 PROFESSOR: Yeah, third party. 1606 01:11:24,120 --> 01:11:25,080 STUDENT: --use third part-- 1607 01:11:25,080 --> 01:11:26,320 PROFESSOR: Yeah, absolutely. 1608 01:11:26,320 --> 01:11:28,030 So third party verification is one way 1609 01:11:28,030 --> 01:11:30,050 to try to achieve that balance and make 1610 01:11:30,050 --> 01:11:31,620 sure you have a third-- especially as you go deeper 1611 01:11:31,620 --> 01:11:32,495 in your supply chain. 1612 01:11:32,495 --> 01:11:35,254 But I do want to emphasize that to be serious-- 1613 01:11:35,254 --> 01:11:37,420 I"m not saying that these companies are not serious, 1614 01:11:37,420 --> 01:11:41,040 but to be able to fully embed it to your business capabilities 1615 01:11:41,040 --> 01:11:45,150 as a company, somehow you need to set goals and targets that 1616 01:11:45,150 --> 01:11:47,700 are tied to ways that are credible measures. 1617 01:11:47,700 --> 01:11:50,900 You cannot just be do your- everyone does their estimation 1618 01:11:50,900 --> 01:11:52,482 of CO2, right? 1619 01:11:52,482 --> 01:11:55,740 It needs to be, I have a CO2 calculator 1620 01:11:55,740 --> 01:11:59,190 that is somewhere in my system that I can click a button 1621 01:11:59,190 --> 01:12:01,170 and know how things are going. 1622 01:12:01,170 --> 01:12:04,542 If I cannot do that, then this is your CSR report that happens 1623 01:12:04,542 --> 01:12:05,500 at the end of the year. 1624 01:12:07,919 --> 01:12:09,710 Let me just differentiate what I just said. 1625 01:12:09,710 --> 01:12:11,180 So everyone can come after the fact 1626 01:12:11,180 --> 01:12:14,585 that I can do an estimation of CO2, hire MIT, hire Stanford, 1627 01:12:14,585 --> 01:12:17,470 and I can go in and spend six months, right, and do-- 1628 01:12:17,470 --> 01:12:19,670 this how much CO2 you save. 1629 01:12:19,670 --> 01:12:22,040 Great, but that doesn't mean that the company is 1630 01:12:22,040 --> 01:12:23,330 doing anything right. 1631 01:12:23,330 --> 01:12:26,550 If you're a manager, you have to get a report every semester, 1632 01:12:26,550 --> 01:12:28,200 every quarter, and this is how we're 1633 01:12:28,200 --> 01:12:29,537 doing so you can take action. 1634 01:12:29,537 --> 01:12:30,995 And the only way you can do that is 1635 01:12:30,995 --> 01:12:34,500 to connect that measurement of environmental performance 1636 01:12:34,500 --> 01:12:36,500 to something that you are collecting in your day 1637 01:12:36,500 --> 01:12:41,420 to day operation, whatever it is-- energy use, again, 1638 01:12:41,420 --> 01:12:45,120 number of tons of miles you sold to waste disposal. 1639 01:12:45,120 --> 01:12:46,090 Something, right? 1640 01:12:46,090 --> 01:12:48,554 And someone has to figure out how that number connects 1641 01:12:48,554 --> 01:12:49,970 with the environmental goal you're 1642 01:12:49,970 --> 01:12:54,450 trying to achieve and set that target to that metric. 1643 01:12:54,450 --> 01:12:56,780 This process is what is difficult. 1644 01:12:56,780 --> 01:13:01,050 And that's why the measurement is kind of the tricky part 1645 01:13:01,050 --> 01:13:04,200 because companies are not used to measure. 1646 01:13:04,200 --> 01:13:06,330 And if you do not do that, the only thing 1647 01:13:06,330 --> 01:13:10,670 you have is a great CSR reporting machine. 1648 01:13:10,670 --> 01:13:12,920 You are not really changing your business 1649 01:13:12,920 --> 01:13:15,120 or your suppliers' businesses. 1650 01:13:15,120 --> 01:13:18,140 You have a great CSR reporting, which is needed. 1651 01:13:18,140 --> 01:13:19,490 It's a precondition. 1652 01:13:19,490 --> 01:13:20,520 Unless you know how to do it yourself, 1653 01:13:20,520 --> 01:13:21,570 you cannot put it in your metric. 1654 01:13:21,570 --> 01:13:22,480 You have to trust it. 1655 01:13:22,480 --> 01:13:24,074 You have to develop the expertise. 1656 01:13:24,074 --> 01:13:25,490 You have to have the right people. 1657 01:13:25,490 --> 01:13:28,432 You have the SAP systems to be rolled out whatever you use it. 1658 01:13:28,432 --> 01:13:29,390 Someone needs to do it. 1659 01:13:29,390 --> 01:13:31,410 If you don't have it, you cannot do it. 1660 01:13:31,410 --> 01:13:32,749 And this goes back to suppliers. 1661 01:13:32,749 --> 01:13:34,540 And we'll talk about suppliers in a second. 1662 01:13:34,540 --> 01:13:36,915 But is there any questions or comments about what I said? 1663 01:13:36,915 --> 01:13:39,397 I want to make sure this is clear. 1664 01:13:39,397 --> 01:13:41,730 STUDENT: A lot of the incentive is based on stock price. 1665 01:13:41,730 --> 01:13:43,521 Companies don't really give out big checks. 1666 01:13:43,521 --> 01:13:45,740 They give out 20 shares or whatever. 1667 01:13:45,740 --> 01:13:47,890 And there's a conflict between getting that share 1668 01:13:47,890 --> 01:13:50,237 price to increase and doing the right thing. 1669 01:13:50,237 --> 01:13:51,945 For companies that have target incentives 1670 01:13:51,945 --> 01:13:54,660 that are stock driven, do you have any suggestions 1671 01:13:54,660 --> 01:13:57,154 for setting goals and targets? 1672 01:13:57,154 --> 01:13:58,820 PROFESSOR: That's where-- the only thing 1673 01:13:58,820 --> 01:14:01,550 I like there is the Dow Jones sustainable index even though I 1674 01:14:01,550 --> 01:14:03,540 hate that index. 1675 01:14:03,540 --> 01:14:06,170 It's a great index because at least people connect it 1676 01:14:06,170 --> 01:14:07,726 to stock prices in a more direct way. 1677 01:14:07,726 --> 01:14:09,850 Even though the connection is because of sales MIT, 1678 01:14:09,850 --> 01:14:13,240 the majority is revenue-- like, 30% of [INAUDIBLE] is revenue. 1679 01:14:13,240 --> 01:14:15,060 But they have at least some metrics 1680 01:14:15,060 --> 01:14:17,750 that are environmental transparency that people try 1681 01:14:17,750 --> 01:14:19,760 to connect with stock prices. 1682 01:14:19,760 --> 01:14:22,890 I have to say that public companies have 1683 01:14:22,890 --> 01:14:26,500 a really hard time to make these aspirational goals 1684 01:14:26,500 --> 01:14:28,670 because they're not connected to value directly. 1685 01:14:28,670 --> 01:14:32,130 This long term, short term trade off 1686 01:14:32,130 --> 01:14:35,980 that prevents them of embedding a good sustainability practice 1687 01:14:35,980 --> 01:14:37,380 is very hard. 1688 01:14:37,380 --> 01:14:40,280 Let me give you the other answer. 1689 01:14:40,280 --> 01:14:44,310 Who was talking here? 1690 01:14:44,310 --> 01:14:47,630 Seventh Generation said that, although they're not 1691 01:14:47,630 --> 01:14:48,660 publicly traded. 1692 01:14:48,660 --> 01:14:51,240 They said, our shareholders know they're 1693 01:14:51,240 --> 01:14:54,470 getting lower return of reinvestment than other. 1694 01:14:54,470 --> 01:14:58,340 And they buy our stock with that understanding, that? 1695 01:14:58,340 --> 01:15:03,310 Unilever shareholders know that Unilever is making some trade 1696 01:15:03,310 --> 01:15:06,200 offs for the long term and they're buying their stock. 1697 01:15:06,200 --> 01:15:08,680 Now, the promise and the belief is 1698 01:15:08,680 --> 01:15:12,110 that they're going to recover that value over the long run. 1699 01:15:12,110 --> 01:15:14,626 But ultimately speaking, I do not 1700 01:15:14,626 --> 01:15:16,500 think there's a good connection you can make. 1701 01:15:16,500 --> 01:15:17,980 Allow me to be totally honest. 1702 01:15:17,980 --> 01:15:22,270 I have not seen it that you can make a real concrete connection 1703 01:15:22,270 --> 01:15:24,780 between stock price and sustainability 1704 01:15:24,780 --> 01:15:25,852 in the short term. 1705 01:15:25,852 --> 01:15:27,310 What I've heard the argument, which 1706 01:15:27,310 --> 01:15:29,930 I think is a real argument, is a company that 1707 01:15:29,930 --> 01:15:33,860 can develop this kind of system is a company 1708 01:15:33,860 --> 01:15:36,620 that must have a really sophisticated management, which 1709 01:15:36,620 --> 01:15:39,100 means this company must be run by smart people, which 1710 01:15:39,100 --> 01:15:41,860 means this company must be making some good money. 1711 01:15:41,860 --> 01:15:43,846 But this is a very indirect argument. 1712 01:15:43,846 --> 01:15:44,970 It's not a direct argument. 1713 01:15:44,970 --> 01:15:45,790 Oh, you did this? 1714 01:15:45,790 --> 01:15:47,040 You can get money back. 1715 01:15:47,040 --> 01:15:50,310 It's more, if you're willing to pull this off and not 1716 01:15:50,310 --> 01:15:54,250 crash your business, that means that you are really well run 1717 01:15:54,250 --> 01:15:56,310 management company and we believe 1718 01:15:56,310 --> 01:15:59,430 that you are going to be able to achieve other things. 1719 01:15:59,430 --> 01:16:01,501 Because besides all your complexity, 1720 01:16:01,501 --> 01:16:03,750 you have been able to embed sustainability in your day 1721 01:16:03,750 --> 01:16:04,500 to day operations. 1722 01:16:04,500 --> 01:16:06,445 Is that-- it's kind of a poor answer. 1723 01:16:06,445 --> 01:16:08,100 STUDENT: --Wall Street is going to let you get away 1724 01:16:08,100 --> 01:16:09,230 with it for so long, right? 1725 01:16:09,230 --> 01:16:10,646 PROFESSOR: Yeah, for so long, yes. 1726 01:16:10,646 --> 01:16:13,520 At some point, that's kind of an argument of capabilities 1727 01:16:13,520 --> 01:16:16,538 more than an argument of delivering results is just, 1728 01:16:16,538 --> 01:16:17,996 you should be able to do this well. 1729 01:16:17,996 --> 01:16:19,871 STUDENT: Just to quickly build on this today, 1730 01:16:19,871 --> 01:16:25,162 we actually had the CEO of-- I'm going to remember 1731 01:16:25,162 --> 01:16:27,080 the name of the company in a little while. 1732 01:16:27,080 --> 01:16:29,690 They were investing not in sustainability 1733 01:16:29,690 --> 01:16:31,945 in the green part by [? Mosely ?] 1734 01:16:31,945 --> 01:16:35,060 and investing in their employees and paying them 1735 01:16:35,060 --> 01:16:36,020 higher-- Costco. 1736 01:16:36,020 --> 01:16:38,480 PROFESSOR: Costco-- Costco is big. 1737 01:16:38,480 --> 01:16:42,010 STUDENT: --while still offering low prices to customers. 1738 01:16:42,010 --> 01:16:44,550 And he was mentioning-- like, he was talking 1739 01:16:44,550 --> 01:16:47,046 about his experience of having a really hard time 1740 01:16:47,046 --> 01:16:48,545 at the beginning when they initially 1741 01:16:48,545 --> 01:16:53,150 went public because people in Wall Street didn't understand. 1742 01:16:53,150 --> 01:16:58,230 But they kept true to their strategy and that now, 1743 01:16:58,230 --> 01:17:01,460 their stock price has gone up significantly. 1744 01:17:01,460 --> 01:17:05,440 And people who buy their stock and trade it and it's 1745 01:17:05,440 --> 01:17:07,800 actually a very valuable stock. 1746 01:17:07,800 --> 01:17:09,780 But then it does take time. 1747 01:17:09,780 --> 01:17:12,490 If your entire strategy is long term, 1748 01:17:12,490 --> 01:17:16,390 you kind of wait for Wall Street to understand it [INAUDIBLE] 1749 01:17:16,390 --> 01:17:17,250 and into it. 1750 01:17:17,250 --> 01:17:20,284 But if you have a strategy, it does work. 1751 01:17:20,284 --> 01:17:22,060 You wait for them, though. 1752 01:17:22,060 --> 01:17:25,673 PROFESSOR: I think that's the-- yeah, I agree. 1753 01:17:25,673 --> 01:17:27,590 I think that's possible. 1754 01:17:27,590 --> 01:17:28,700 Yes, it's always possible. 1755 01:17:28,700 --> 01:17:30,490 Let me actually say two more things 1756 01:17:30,490 --> 01:17:33,160 on setting goals and targets. 1757 01:17:33,160 --> 01:17:38,240 So I'm trying to emphasize this point. 1758 01:17:38,240 --> 01:17:40,230 Supplier selection-- let's talk about when 1759 01:17:40,230 --> 01:17:42,122 you want to go to your tier one suppliers 1760 01:17:42,122 --> 01:17:43,330 and make them greener, right? 1761 01:17:43,330 --> 01:17:46,840 And you want to really make them part of your strategy. 1762 01:17:46,840 --> 01:17:50,380 If there's no measure in your scorecards to your supplier 1763 01:17:50,380 --> 01:17:54,910 selection, this means nothing. 1764 01:17:54,910 --> 01:17:57,960 So when the buyer is sitting in the table 1765 01:17:57,960 --> 01:18:01,860 and he has to make a decision on which supplier to select 1766 01:18:01,860 --> 01:18:08,530 and there's no metric there that says sustainability, trust me. 1767 01:18:08,530 --> 01:18:10,730 That person is going to do their best effort. 1768 01:18:10,730 --> 01:18:14,490 Now, the problem is if you have never done it, 1769 01:18:14,490 --> 01:18:15,534 how do you start? 1770 01:18:15,534 --> 01:18:17,200 How do you start putting a metric there? 1771 01:18:17,200 --> 01:18:19,790 You have to give people-- educate them first. 1772 01:18:19,790 --> 01:18:23,280 You have to first-- I recommend you to measure this, right? 1773 01:18:23,280 --> 01:18:25,640 It's not part of our evaluation process. 1774 01:18:25,640 --> 01:18:27,129 You do that for two or three years. 1775 01:18:27,129 --> 01:18:29,420 You first understand your capability of your suppliers. 1776 01:18:29,420 --> 01:18:30,677 You have to get to know them. 1777 01:18:30,677 --> 01:18:31,760 You get their information. 1778 01:18:31,760 --> 01:18:33,801 That's why the CDP report actually is quite good. 1779 01:18:33,801 --> 01:18:35,360 You have a structured processes. 1780 01:18:35,360 --> 01:18:37,550 They start knowing, you know, we should mention your 1781 01:18:37,550 --> 01:18:38,490 [INAUDIBLE]. 1782 01:18:38,490 --> 01:18:38,991 Oh really? 1783 01:18:38,991 --> 01:18:40,115 OK, let me start measuring. 1784 01:18:40,115 --> 01:18:41,520 And the next year they come back. 1785 01:18:41,520 --> 01:18:43,390 I still do not know how to do it. 1786 01:18:43,390 --> 01:18:44,700 The next year, they come back. 1787 01:18:44,700 --> 01:18:47,020 And eventually, they get good at measuring. 1788 01:18:47,020 --> 01:18:48,410 You do the same for waste. 1789 01:18:48,410 --> 01:18:50,510 You do the same for the things you care about. 1790 01:18:50,510 --> 01:18:54,110 You have to somehow teach them what it takes 1791 01:18:54,110 --> 01:18:57,244 to measure what you care about. 1792 01:18:57,244 --> 01:18:58,910 Once they have that in a few iterations, 1793 01:18:58,910 --> 01:19:01,630 then you can really start putting it in a contract. 1794 01:19:01,630 --> 01:19:04,810 And I think if you see what companies have done-- 1795 01:19:04,810 --> 01:19:06,640 whom I was talking recently? 1796 01:19:06,640 --> 01:19:12,220 Yes, this may not be public yet. 1797 01:19:12,220 --> 01:19:14,650 So they have been asking for their sustainability 1798 01:19:14,650 --> 01:19:16,880 metric from their suppliers for five years. 1799 01:19:16,880 --> 01:19:19,720 And next year is going to be mandatory. 1800 01:19:19,720 --> 01:19:22,710 It's going to be a requirement for buying products. 1801 01:19:22,710 --> 01:19:25,440 It's a big CPG company-- huge. 1802 01:19:25,440 --> 01:19:28,560 And they have done all the traditional greenhouse gas 1803 01:19:28,560 --> 01:19:30,760 metrics, waste metrics, traditional ones. 1804 01:19:30,760 --> 01:19:32,680 And they have always said information for you 1805 01:19:32,680 --> 01:19:34,452 to look into that information. 1806 01:19:34,452 --> 01:19:36,410 Starting next year, it's going to be mandatory. 1807 01:19:36,410 --> 01:19:39,270 And if yo don't have it, you're not our supplier. 1808 01:19:39,270 --> 01:19:41,770 And in five years, they're going to reduce by 20%. 1809 01:19:41,770 --> 01:19:45,360 So I'm pointing out is that there's a first phase where you 1810 01:19:45,360 --> 01:19:47,120 just ask for the information. 1811 01:19:47,120 --> 01:19:51,720 So people build their own metric systems you cannot expect them 1812 01:19:51,720 --> 01:19:53,770 to be sustainable if you have never measured. 1813 01:19:53,770 --> 01:19:56,350 So by asking your supplies for the information, 1814 01:19:56,350 --> 01:19:59,580 even though it's not in the scorecard of selection, 1815 01:19:59,580 --> 01:20:02,340 you start this cycle for them. 1816 01:20:02,340 --> 01:20:04,810 This is what matters to me. 1817 01:20:04,810 --> 01:20:06,540 When I'm buying from you, I want you 1818 01:20:06,540 --> 01:20:08,450 to tell me how much energy you use, 1819 01:20:08,450 --> 01:20:10,370 how much waste you generate. 1820 01:20:10,370 --> 01:20:11,620 Oh, it matters to you? 1821 01:20:11,620 --> 01:20:13,690 So I better start measuring it. 1822 01:20:13,690 --> 01:20:16,820 You somehow start creating this cycle with your suppliers. 1823 01:20:16,820 --> 01:20:20,710 But only the moment where you change this cycle into, 1824 01:20:20,710 --> 01:20:24,730 I bring it into your procurement organization 1825 01:20:24,730 --> 01:20:29,210 as a decision making process like price, quality, safety, 1826 01:20:29,210 --> 01:20:31,530 CO2 reduction. 1827 01:20:31,530 --> 01:20:36,680 Only at that time it really becomes part of your business. 1828 01:20:36,680 --> 01:20:39,350 Otherwise, it's just good wishing. 1829 01:20:39,350 --> 01:20:40,860 That is a long process. 1830 01:20:40,860 --> 01:20:43,284 So what I just said is a five year cycle, 1831 01:20:43,284 --> 01:20:45,200 especially when you talk about a large company 1832 01:20:45,200 --> 01:20:46,590 with many, many suppliers. 1833 01:20:46,590 --> 01:20:49,710 Great example of these-- Natura in Brazil. 1834 01:20:49,710 --> 01:20:54,287 They have specific targets for the supplies of CO2 reduction. 1835 01:20:54,287 --> 01:20:55,370 They have their templates. 1836 01:20:55,370 --> 01:20:58,590 This is how you fill it out, how much energy you do. 1837 01:20:58,590 --> 01:21:00,472 This is exactly what you expect from them. 1838 01:21:00,472 --> 01:21:02,055 And this is exactly how much reduction 1839 01:21:02,055 --> 01:21:03,840 I expect from you year to year. 1840 01:21:03,840 --> 01:21:07,090 And if you don't get it, you're no longer my supplier. 1841 01:21:07,090 --> 01:21:09,135 But this took some time, even though they're 1842 01:21:09,135 --> 01:21:13,680 a very sustainable company as a whole. 1843 01:21:13,680 --> 01:21:15,850 And this is what you do internally. 1844 01:21:15,850 --> 01:21:17,790 And of course, always you have to stay 1845 01:21:17,790 --> 01:21:21,120 in tuned with your moral compass, your partner that 1846 01:21:21,120 --> 01:21:25,630 tell you which are the issues that you think, 1847 01:21:25,630 --> 01:21:28,370 which areas of the world you have to be worried about that 1848 01:21:28,370 --> 01:21:30,390 could have more regulation, right? 1849 01:21:30,390 --> 01:21:32,030 How can you make sure your reputation-- 1850 01:21:32,030 --> 01:21:34,880 you have to defend all those dimensions. 1851 01:21:34,880 --> 01:21:40,270 So this is, I think, how you can develop long term strategy. 1852 01:21:40,270 --> 01:21:42,250 So we have to wrap up now. 1853 01:21:42,250 --> 01:21:46,940 But on Wednesday, we're going to hear someone from a company 1854 01:21:46,940 --> 01:21:48,661 hopefully tell them how they did it. 1855 01:21:48,661 --> 01:21:50,160 So keep some of these things in mind 1856 01:21:50,160 --> 01:21:52,639 to see if we can identify these patterns going or not. 1857 01:21:52,639 --> 01:21:53,930 I think some of them are there. 1858 01:21:53,930 --> 01:21:54,590 Others are not. 1859 01:21:54,590 --> 01:21:57,990 So we'll see how good they are in their strategy. 1860 01:21:57,990 --> 01:22:01,990 Ask tough questions and that I wanted to do more guidance, 1861 01:22:01,990 --> 01:22:02,995 but I talk a lot. 1862 01:22:02,995 --> 01:22:05,120 For the team project-- so what we want in your team 1863 01:22:05,120 --> 01:22:08,760 project is to not only both of you dividing your companies, 1864 01:22:08,760 --> 01:22:11,310 but actually comparing them, discussing 1865 01:22:11,310 --> 01:22:13,900 what makes them better, and eventually trying 1866 01:22:13,900 --> 01:22:16,180 to make an assessment is, is this company 1867 01:22:16,180 --> 01:22:19,362 that has a higher ranking in CDP deserve this or not? 1868 01:22:19,362 --> 01:22:21,820 And this is why they deserve it based on some of the things 1869 01:22:21,820 --> 01:22:23,720 we've talked so far, all right? 1870 01:22:23,720 --> 01:22:26,930 OK, thank you so much and I will see you on Wednesday