Panel, Conference Presentation
Business Sustainability: Chasing the Triple Bottom Line
Milken InstituteRobin Hu, Achal Agarwal, Sophia Cheng, Hiromichi Mizuno, Pier Luigi Sigismondi, Peter Wayman, Christopher, Mr Lee, Benway Prosser, Andrew Cross
- Panel Composition: The discussion featured four industry leaders: Hiromichi Mizuno (Executive Managing Director/CIO, Government Pension Investment Fund of Japan), Pierluigi Sigismondi (President, Southeast Asia/Australasia, Unilever), Sophia Chang (CIO, Cathay Financial Holdings, Taiwan), and Archo Agarwal (President, Asia Pacific, Kimberly-Clark).
- Mizuno's ESG Strategy: The Government Pension Investment Fund (GPIF) allocated approximately $10 billion to three new ESG indices constructed with MSCI and FTSE to concretize "long-termism" for Japanese companies.
- This initiative aims to reduce communication friction between investors and companies regarding sustainability planning.
- Mizuno noted a shift in Japanese corporate perception, moving from concerns that ESG reduces competitiveness to realizing it aligns with the traditional "multi-stakeholder" business model.
- Unilever's Integrated Business Model:
- Financial Impact: Unilever targets achieving twice the growth of its business while simultaneously reducing environmental impact and increasing social impact.
- Revenue Growth: The "Lifebuoy" brand has grown 17% above market rates over the last five years in Indonesia, driven by hygiene education reaching 112 million people.
- Cost Savings: A program to eliminate landfill waste saved $200 million in internal industrial costs.
- Material Innovation: Piloting technology in Indonesia to recycle plastic sachets reduces raw material costs by 20% compared to virgin plastic.
- Energy Efficiency: A renewable energy agreement in the Philippines saves €2 million annually by utilizing geothermal sources.
- Kimberly-Clark's Brand & Operational Synergy:
- Brand Equity: In Korea, the "Keep Korea Green" tree-planting initiative achieved 90% brand awareness, contributing to Kimberly-Clark being the fourth most admired company and Kleenex the #1 brand.
- Crisis Response: During the haze period in Singapore, "haze-free" positioning drove direct business benefits for Kleenex.
- Talent Attraction: Sustainability commitments are cited as a key factor in attracting top talent, particularly among younger generations.
- 2022 Aspirational Goals: The company committed to improving the well-being of 25 million people, reducing the natural footprint of forest/fiber products by 50%, and achieving zero waste in factories and post-consumer recycling.
- Cathay Financial Holdings' ESG Integration:
- Policy Shift: Transformed its CSR committee into a Sustainability Committee in 2014 and became the first Taiwan bank to join the Equator Principles.
- Investment Allocation: Invested over $300 million in renewable energy, positioning itself as Taiwan's largest investor in this sector.
- Social Impact: Serves as the largest underwriter of micro-insurance policies in Taiwan and the largest custodian for charity trusts.
- Market Participation: Secured inclusion in the DJSI Emerging Markets index in 2015.
- Millennial Influence & Consumer Behavior:
- Talent & Consumption: Millennials are driving shifts in both consumption patterns (avoiding unhealthy products like Coca-Cola) and employment choices (rejecting industries with negative externalities).
- Pricing Willingness: While 57% of global consumers (and 88% in India) say they will boycott or prefer brands based on social/environmental practices, the consensus is that premium pricing is rarely realized; sustainability must be margin-accretive to succeed.
- Ben & Jerry's Case Study: The brand grows at double digits in Europe and North America despite a declining market by campaigning on social issues, proving that strong mission alignment drives total shareholder returns.
- Measurement & Standardization Challenges:
- SROI Variance: Social Return on Investment (SROI) metrics currently lack standardization, showing results ranging from $1:1 to $1:11 for the same project, often turning reporting into a PR exercise rather than an empirical evaluation.
- Certification Debate:
- Unilever rejected B Corp certification for its global entity due to bureaucratic complexity, preferring to acquire B Corp-aligned companies (e.g., Seventh Generation) to maintain agility.
- Kimberly-Clark relies on specific, relevant certifications like FSC (Forest Stewardship Council) for product-level communication.
- Cathay Financial emphasizes the adoption of international frameworks (Equator Principles, PRI, PSI) over single-label certification.
- Capital Market Dynamics & The Kraft-Heinz Bid:
- Polarity of Time Horizons: Sigismondi described the tension between short-term shareholder pressure and long-term sustainability as an unsolvable polarity requiring navigation rather than resolution.
- Strategic Correction: The failed Kraft-Heinz acquisition served as a "wake-up call," accelerating Unilever's cost-reduction program to deliver immediate financial results while maintaining a long-term vision.
- Investor Expectations: GPIF urges asset managers to integrate ESG factors into decisions and engage directly with companies, though it acknowledges investors are currently "behind the curve" in pricing sustainability compared to consumers.
- Supply Chain & SME Engagement:
- Local Sourcing: Unilever prioritizes local production to reduce logistics costs and carbon footprint, citing a study showing imported Fiji water can have a lower carbon footprint than US-purified water due to renewable energy sources in Fiji.
- Small Business Strategy: GPIF focuses on engaging large companies to set standards for their supply chains rather than directly targeting SMEs, while Kimberly-Clark applies step-by-step sustainability obligations to suppliers to avoid crushing them with compliance costs.
- Forward-Looking Statements:
- The panel agreed that the future of business requires a system where consumers, investors, and companies align on values to minimize negative externalities.
- Mizuno predicted that if all actors move in the same direction, asset managers will be able to generate higher returns by investing in sustainable companies that capture value from socially conscious consumers.
- The consensus is that sustainability must no longer be a cost center but a driver of innovation, cost reduction, and brand equity.