Session No.

532

Safety A Foundation for Sustainable Growth

Donald Reed, CFA
Ecos Corporation
Dr. Paul Tebo
DuPont Company
Wilmington, DE

The days are gone when business can create shareholder value in a vacuum. Today, the need to
better align with the values of society, and the need to continuously reduce environmental
impacts both at the manufacturing site and in the use and disposal of products, are increasingly
critical to the right to operate and the right to grow. This paper begins with a discussion of
several of the macro-trends shaping the business environment to make this the case.
Aligning shareholder value creation with societal values must go beyond the thought that if
the customer buys, there must be societal value. The newer and more powerful thought is that
this alignment will create market opportunities and growth. This paper provides a sustainability
strategy guide that can be used to evaluate current business offerings and shape future direction.
Moving from sustainable growth as a concept to sustainable growth as an integrated part of
all business strategies and actions takes a comprehensive and robust managing system. This
paper demonstrates that safety is a powerful model to do this. The progression from safety as a
core value to safety as both a source of value and as a managing system for sustainable growth is
shown using the safety-sustainability continuum and the full integration model.
At the June 2003 ASSE Conference, examples from DuPont and other companies will be
used to illustrate the concepts in this paper.

Macro-Trends Shaping The Business Environment Today

Societal and environmental conditions have always had an influence on markets. Historically,
this influence has been periodic in most industries and particularly important in industries
involving natural resource extraction or heavy environmental impact. Still, many corporate
strategists are not used to thinking about societal and environmental conditions as explicit market
forces.

A set of contemporary trends has greatly magnified the degree to which environmental and
societal conditions affect markets. These trends are familiar.
Trends that magnify the market impact of social and environmental conditions
increasing power of NGOs and civil society;
globalization, broadly defined;
connectedness customers, NGOs, public;
changing role of government;
the increasing influence of market forces and power of corporations; and,
acceptance of sustainability as a priority.
The increasing number, credibility and power of non-governmental organizations (NGOs) are
one of the lesser-told stories of the last few decades. The chart below depicts this rise.

Exhibit 1. NGOs are a Growing Force in Civil Society

30
25
20
Thousands of
International
NGOs

15
10
5

19
60
19
70
19
80
19
90
19
95
20
00

Source: The Economist. December 15. 1999

Increased globalization has become one of the most-used clichs in business. Here, we mean
not only trade liberalization, but also globalization in the scope of businesses and the sharing of
media and other communications around the world.
If globalization has become a clich, then so too is the connectedness that comes from being
linked by low-cost means of global interaction such as the Internet and email. Here, we note the
degree to which this has facilitated like-minded people around the globe to come together to
express themselves on societal and environmental issues as customers, investors, activists and
members of the body politic.

Another trend that magnifies the market impact of societal and environmental conditions is
the changing role of government. While far from universal, we note the general victory of the
market economy around the world in which governments role as the owner of assets and planner
of economic activity has diminished.
Likewise, the fifth trend is a product of the same transition. Market forces have taken on an
increased role relative to government decisions in determining much of that which is important in
the day-to-day lives of people. The rise in power of multi-national corporations corresponds
closely to this phenomenon.
While also not universal, the final magnifying force is the acceptance of sustainability and
related ideas as an ordinary part of the landscape of business strategy.
Taken as a whole, these forces essentially mean more people have greater expectations of
companies, more information about them, and the means to organize globally at an extremely low
cost and with very little friction. That means more companies experience the impact in more
profound ways.
This fundamentally changes the operating environment for companies. The new operating
environment has several distinguishing characteristics.
Qualities of the New Operating Environment
Create more complexity and risk
More complexity and risk
Changes subject to tipping points
Changes subject to tipping points
More opportunities for those who anticipate and/or hedge
More opportunities
for those
who anticipate
hedge
Corporations
face increasing
expectations
but also and/or
increasing
scrutiny and pressure
Corporations
but also increasing scrutiny and
Good
products and face
goodincreasing
science areexpectations
no longer enough
pressure
Good products and good science are no longer enough
Business typically felt they had enough to worry about with macro-economic conditions,
industry issues and competitive responses. Now they experience even greater complexity and
risk in an operating environment in which issues of society and the natural environmental can
also sway markets.
One of the key reasons for the increased risk and complexity is how many factors of public
sentiment are subject to the phenomenon of tipping points where changes are hard to note as
clear patterns until they move rapidly into becoming the norm. This topic is discussed at length
in Malcolm Gladwells 2002 book, The Tipping Point: How Little Things Can Make a Big
Difference.
The flip side of increased risk is greater opportunity. In the new operating environment, it is
necessary not only to hedge against sustainability risks, but also to build platforms that can enable
businesses to rapidly take advantage of abrupt changes in attitudes about social and
environmental issues.

While there are positive aspects to corporations facing increasing expectations, there are also
hazards. Leading among these is increasing scrutiny and pressure particularly around
transparency and public disclosure.
It used to be that a company was generally in good standing with society if it offered good
products that offered good value to direct customers. Likewise, if a company had good science, it
would end up producing good products. Those days seem a distant memory. These are no longer
enough. A company can offer good products backed by good science and still get rejected by
civil society if it fails to understand the underlying dynamics.

Aligning Shareholder and Societal Value Creation

One key to creating financial value in the new operating environment is to align societal and
shareholder value, that is, the mutual self interest of society and the business. This makes for
more robust business strategy, because it aligns the success of the business with the success of the
community.
The Sustainability Strategy Guide below illustrates the idea. In the new operating
environment, business strategies that add a great deal of shareholder value without adding enough
societal value (the lower right-hand quadrant) are necessarily unsustainable. The societal and
environmental market forces will systematically reduce the shareholder value created or the
business will figure out how to create more societal value. For example, the mining industry has
come under pressure to do less environmental damage and create more long-term benefits for
those living near the mine site, reducing direct returns in this historically high-return sector.

Exhibit 2. Align Shareholder and Societal Value.

Copyright Ecos Corporation 2003

Likewise, a strategy that adds considerable societal value, but insufficient shareholder value
(the upper left-hand quadrant) will come under systematic pressure from investors to increase
shareholder value. An example of this situation is philanthropy that is financially significant, but
unrelated to the business success.
Some industries generate only modest societal benefit and also insufficient shareholder value
(the lower left-hand quadrant). An example might be traditional wood products, a capitalintensive, low margin business with competitive pressures from excess capacity. Pressure exists
to improve financial returns and reduce environmental impact.
While there are a number of examples of businesses and strategies that add considerable
societal value and shareholder value (the upper right-hand quadrant), the pharmaceuticals
industry is particularly interesting. Saving lives and treating diseases are obviously of high
societal value and the industry is one of the most profitable. Nonetheless, there is considerable
pressure for drug companies to add more societal value by offering the latest treatments for major
diseases such as AIDS for less than market cost in the developing world.

Using Safety To Build Sustainable Growth

One way to visualize the progression from reactive to proactive is the safety-sustainability
continuum developed by the Ecos Corporation after years of working with a number of
companies.

SAFE COMPANIES TRAJECTORY

Exhibit 3. The Safety-Sustainability Continuum.

SUSTAINABILITY THE ASPIRATION POINT

The positive footprint company adds
social, economic and environmental
Sustainable market
value and safety
development
Environmentally restorative products
Zero footprint (e.g. No and processes
accidents, waste, pollution
Safety enhancing products & processes
SAFE/SUSTAINABLE GROWTH
THE CHECKPOINT
Closed loop production
Safe communities
Environmentally safe
Safe products
Precautionary principle to guide safe
Eco-efficiency R&D
Safe processes
WORKPLACE SAFETY & HEALTH THE ENTRY POINT
Copyright Ecos Corporation 2002

The path towards a more sustainable corporation moves a company to the upper part of the
continuum versus being pushed along the lower part. The activities in the lower part of the
continuum have become necessary but not sufficient. Value creation occurs all along the path,
but operating in the upper half of the continuum enhances top line growth.
A clear example of this comes from DuPont, where safety has long been a core value. Now,
safety has become one of the five key growth platforms. This Safety and Protection platform
includes products that keep people and infrastructure safe, such as Kevlar and Nomex, and
also a growing business in safety know-how.
Safety is powerful as a core value, because it is very focused on people. Safety is also an
excellent managing system for companies where it is a core value.
Safety:
is easily understood by all levels within the organization,
is highly personal,
shows company commitment for the individual, and
requires robust metrics and managing processes.
Exhibit 4 shows a generic culture change model. Within DuPont, where safety and health has
been a core value for 200 years, all elements of the pyramid are solidly in place. Using this as a
model, DuPont has strengthened the integration of environmental stewardship over the past
decade. By continually asking the question what would it look like in safety? the company
has integrated environmental excellence as a lasting core value.

In a similar fashion, DuPont is using this model to focus its efforts on further integrating
sustainable growth as the core direction for the company and its diverse portfolio of businesses.
Exhibit 4. Steps to Full Integration.

Heroes
&
Rewards
Goals &
Metrics
Training
Frameworks, & Tools
Broad
Communications
& Employee
Involvement/Ownership
Business/Line
Ownership & Accountability
Integrated, Inspiring Vision
& Clear Business Value
CEO Commitment/Felt Leadership

In Closing
Successful business in the 21st century will require the adoption of strategies and actions that
more closely align with important societal values and needs, and also continuously reduce
environmental impacts. Top line growth will be the business result.
To fully integrate sustainable growth strategies and actions into mainstream business practices
requires a robust and comprehensive managing system. Our experience is that safety provides
this system where safety is a company core value.