Sustainable Marketing Lecture 2

Sustainable Marketing
Fall 2023
Lecture 2 – September 4, 2023

The Role of the Firm – Sustainable Business Models
Prof. Dr. Pascal Vuichard
© 2023. Sustainable Marketing 1

Objectives of Today’s Session
A closer look at the role of the firm.
1. Corporate Sustainability Disclosure with a

focus on Circularity
2. Corporate Action – step by step approach
and a focus on Low-Carbon Opportunities
for companies
3. Circular Economy deep-dive with the case

study of plastics

Agenda | Today
01 Sustainable Marketing News of the Week
02 Corporate Sustainability Disclosure
03 Corporate Ambition
04 Circular Economy Deep-Dive
05 Group Discussion Low-Carbon Marketing Pitch

Sustainable Marketing News of the Week

– What did you read/hear/see in the

media that relates to our course?







Recap last Week
establishment of such norms is extremely important as it provides clear and comparable communication to stakeholders on the business sustainability strategy and execution of that
strategy.
This allows potential investors, public bodies and NGOs to easily compare different companies and measure their progress in key areas relating to sustainability.
Moreover, these reporting standards help companies with defining materiality and thus priorities, creating accountability, identifying and managing long term risk and sharing information in
a transparent and uniform manner.

Recap Last Week
Recap:
§ Explain the greenhouse effect (natural vs
anthropogenic)
§ 36 GtCO2/year, 417 ppm, 1.5 to 2 degrees Celsius
§ Warming, precipitation, storms
§ Different GHG and their GWP
§ Which sector is the biggest contributor?

Corporate Sustainability Disclosure
§ An introduction

Corporate Sustainability Reporting
Understanding sustainability
THE TRIPLE BOTTOM LINE
Sustainable development is a development

PEOPLE that meets the needs of the present without
compromising the ability of future
generations to meet their own needs.
SUSTAINABILITY - Our Common Future, 1987,
UN World Commission on Environment and
PLANET PROSPERITY Development

Corporate Sustainability Reporting
Difference between CSR, ESG and Sustainability Reporting
CSR report ESG report Sustainability report
• Backward-looking • Focus on present • Focus on past, present, and

• Target audience: • Target audience: future
mainly pressure groups & media mainly investor • Target audience:
• Not align with business strategy • Compliance driven broad, including employee,
community groups
• Align with business strategy
DOING GOOD BEING GOOD

Discussion: Climate Change Science 🗣
Short term drivers:

Risk Reduction: By adopting sustainable practices with suppliers, companies can mitigate supply-chain risks such as regulatory risk and disruption risks. Some
critical areas of investments include air pollution, water waste, labor and modern slavery risks.
Customer Loyalty
Employee Relations
Product/Service Innovation
Media Coverage
Sales & Marketing
Operational Efficiency
Supplier Relations
Question:
Stakeholders Engagement
What are some of the

biggest drivers for
sustainability reporting?

Drivers of Corporate Sustainability Reporting
Improve Improve Meet

reputation Comply with performance customer Ease
regulations through demand pressure
reporting from civil
society
Mitigate
Attract environmental and
Assess investors social impacts
performance Account for
against regulations sustainability
performance and
activities
Maintain good Risk
relationship with management
Talent Keep the
license to stakeholders
retention
operate

What is currently required in Hong Kong?
HKEX ESG Subject Areas
A. Environmental B. Social
Aspects Aspects
A1) Emissions Employment and Labor Operating Practices Community

A2) Use of resources Practices
A3) Environment and B5) Supply chain
natural resources B1) Employment management B8) Community
A4) Climate change B2) Health and safety B6) Product investment
B3) Development and responsibility
training B7) Anti-corruption
B4) Labor standards

Global Reporting Initiative (GRI)
establishment of such norms is extremely important as it provides clear and comparable communication to stakeholders on the business sustainability strategy and execution of that strategy.
This allows potential investors, public bodies and NGOs to easily compare different companies and measure their progress in key areas relating to sustainability.
Moreover, these reporting standards help companies with defining materiality and thus priorities, creating accountability, identifying and managing long term risk and sharing information in a transparent and uniform manner.
In 2022, 78% of the world’s biggest 250 companies by revenue (the G250) now adopt the GRI Standards for reporting (up from
73% in 2020).
100 series Universal Standards: identifying its material topics, and lay out important principles to use when preparing a report. The topic-specific GRI Standards are organized into
three series: 200 (Economic topics), 300 (Environmental topics), and 400 (Social topics)
73% of the world’s 250 largest companies prepare their sustainability reports using the GRI Standards
Sustainable Development Goals
In September 2015, all 193 Member States of the United Nations adopted 17 Sustainable Development Goals (SDGs), which laying
out a path to end poverty, protect the planet, and ensure that by 2030 all people enjoy peace and prosperity.
17 goals with
169 targets

Science Based Targets
Science Based Targets provide a pathway for companies to reduce their greenhouse gas (GHG) emissions in line with the 2015
Paris Agreement. The Science Based Targets initiative (SBTi) translates the Paris requirements into tangible emission-reduction
goals for businesses.

The global climate disclosure regulatory landscape is evolving
The Netherlands and UNDP strengthen collaboration to accelerate Circular Economy in Viet Nam's private sector. July 2023
Currently, only state- owned enterprises, public and listed companies are required to disclose sustainability information annually
---> Q: veried level of regulations b/w countries. Move to third-world countries and have factories over there
US
• SEC proposes climate change UK EU APAC
disclosure rule
• Mandatory TCFD • The European Parliament • Hong Kong, Singapore,
• SEC released two proposals reporting for large adopted the Corporate Japan and Malaysia
which aim to enhance companies in the UK Sustainability Reporting announced mandatory
disclosures on mutual funds,
beginning April 2022 Directive (CSRD) climate disclosures aligned
exchange-traded funds and with TCFD
similar vehicles that account • UK announced • The European Financial
for ESG intentions to Reporting Advisory Group • ASEAN Taxonomy Board
mandate ISSB (EFRAG) approved 12 (ATB) released the ASEAN
• Proposed rule requiring
qualifying federal European Sustainability Taxonomy for Sustainable
contractors to report Reporting Standards Finance (ASEAN Taxonomy)
greenhouse gas emissions (ESRS) on climate and
sustainability disclosures • China announced plans to
and establish science-based adopt ISSB
emissions reduction targets

The International Sustainability Standards Board (ISSB)
At COP26, the IFRS Foundation Trustees announced the creation of the International Sustainability Standards Board (ISSB). The ISSB
will deliver a global baseline of sustainability disclosures to meet capital market needs.

Building Blocks of the Global Baseline

Focus: Circularity Regulation (I)
§ The European Union currently

has the most comprehensive
circular economy action plan in
the world
§ Targeting the whole lifecycle of
products from design,
sustainable production and
consumption, to reducing waste
through circular feedback loops
(reuse, remanufacturing and
refurbishing).
§ As Europe’s major supplier of
manufactured goods and
commodities, Asia Pacific
corporates are also required to
report

Focus: Circularity Regulation (II)
§ From a regulatory perspective, circularity looks

unstoppable. More than 50 national roadmaps and
strategies have been launched globally.
§ The circularity landscape is also shifting across Asia Pacific.

In 2021, ASEAN announced its own circular economy
framework, with an implementation plan for the period
2023-2030 with a number of initiatives is now being
finalised.
§ On a national level, Japan, China, Vietnam and Indonesia all

have national circular economy policies/strategies.
§ Businesses will look deeper into their supply chain and

preferred suppliers will be those implementing a circular Source: https://circulareconomy.earth/?policy=cep
economy approach. Even Asia Pacific-based companies
currently unaffected by the CSRD - but which supply to
EU/international buyers - will need to future-proof their
business.

Corporate Ambition
§ Reacting to Sustainability Disclosure: from compliance to value creation

Different Starting Points: Sectoral Diversity
§ Sustainability risks can be different in different business

sectors
§ Material issues and stakeholders will therefore differ in each
sector
§ Value chain issues are more important in some sectors;
reputation and social licence to operate are significant in
others
§ Sectors are not mutually exclusive. For example:
o Most sectors have ESG issues related to buildings and

property
o Tourism includes transport, food, buildings & retail
o Retail includes air and sea transport

Carbon Intensity of Industries

Mean Carbon Intensity by Industry
Utilities
Materials
Energy
Consumer Staples
Information Technology
Consumer Discretionary
Real Estate
Communication Services
Financials
0 500 1000 1500 2000 2500 3000

Source: Trucost tonnes CO2e per USDmn revenue [2019]

Direct vs. indirect Emissions
Source: GHG Protocol

Direct vs. indirect Emissions

100 Scope 1 (direct)
90 Scope 2 (purch. electricity)
80 Scope 3 (up/downstream)
Share of emissions by scope [percent]
70
60
50
40
30
20
10
0
Comm Svcs Con sumer Disc Con sumer Staples Energy Fin an cials IT Materials Real Es tate Utilities
Source: Trucost

Mitigation Hierarchy for Carbon Emissions
Carbon sink
Additional
actions
Low Carbon
Carbon Journey
Residual Offset
Offset
Carbon emissions impact
emissions
Carbon Reduce Reduce Reduce
Carbon
emissions
emissions
(total
predicted Replace Replace Replace Replace
impact)
Carbon Avoid Avoid Avoid Avoid Avoid

source

Corporate Action on Sustainability
Transition to a Low-carbon Economy

Reach targets
Mid-term targets
Carbon Set Reduction Abatement
Benchmark Long-term Net
Profiling Targets Programs
Zero targets
Step 1 Step 2 Step 3 Step 4
• GHG Protocol • Understand the • Set near-term & • Evaluate reduction

• ISO 14064-1 ambitions and long-term potentials
• Scope 1, 2 & 3 plans from your reduction • Identify and develop
Assessment peers targets mitigation strategies
• Product Life • Adapt business models
Cycle • Adopt low-carbon
Assessments materials
• R&D for new low-
carbon opportunities
• Residual offsetting

Ways to reduce Sustainability Risk for Companies
'Sustainability risk' means an environmental, social or governance. event or condition that, if it occurs, could cause an actual or a. potential material negative impact on the value of the investment.
The goal of SRM is to make this alignment efficient enough to address potential risks and realize opportunities that come with sustainability.
Reducing carbon risk and operating cost through efficiency improvements
Source: https://www.lafargeholcim.com/sites/lafargeholcim.com/files/atoms/files/02272020-sustainability-lafargeholcim_fy_2019_data_report-en-update2.pdf

Ways to reduce Sustainability Risk for Companies
What can Airlines do?

Ways to diversify Sustainability Risk for Companies
Climate-driven
diversification
strategy? Air
France KLM
investing in trains
Source: https://earth.org/travelling-sustainably-again/

Capturing Low-Carbon Opportunities
Climate-friendly product innovation: Tesla Model 3 & solar roof

Product Innovation in the Airline Industry

RE100 is a global initiative bringing together the world's most influential businesses committed to 100% renewable electricity
#RE100 / #EV100: corporate renewable energy & electric mobility strategies
Asia-Pacific markets are among the most challenging in the world for businesses seeking to go renewable but also offer the biggest opportunities for clean investment and growth.
Although renewables are now the cheapest sources of energy in most markets, limited availability, regulatory complexity, and the high costs these cause are currently acting as barriers in these 10 most challenging markets.

Quick Discussion 🗣
Why do companies like IKEA engage in corporate

renewable energy strategies?
§ Public Relations / Image / CSR

§ Employee motivation
§ Reduction of Carbon Footprint / Environmental
Management
§ Making use of political incentives
§ Hedging Energy Price Risks
§ First step towards Diversification / Product innovation

RE100 – Corporate Renewable Energy
IKEA 2020:
132% of Electricity Consumption from Wind & Solar; Market
Entry PV Retailing
Source : https://www.there100.org/our-work/news/ingka-groups-journey-towards-100-renewable-energy

Not only Renewables and E-Mobility
§ 12 largest business themes in a

world economy heading for
climate neutrality
§ 2/3 of the economic prize in
APAC
Source: The report of the Business and Sustainable Development Commission, 2017

The sharing economy involves short-term peer-to-peer transactions to share use of idle assets and services or to facilitate collaboration.
Sharing By reselling, giving, swapping, renting and lending help these

models extend the lifetime of resource-consuming goods, lower
Economy demand for replacements and cut waste by up to 20 percent.
Lean services is the application of lean manufacturing production methods in the service industry (and related method adaptations)
Lean service Across the service sector, lean management is being used to drive
dramatic reductions in waste and inventory.
Circular By taking a circular approach to design, manufacturing and reuse,

§ Buy-back scheme for
circular business models keep resources in play for as long as
Economy possible and recover and reuse spent materials.
customers
§ Second-hand stores

Big data & Green Data:

At least 20 billion devices are now connected to the internet
machine and the volume of data captured by business is surging.
§ Customised tariffs
It will make it possible to adjust each customer's
learning electricity demand.
§ Energy consumption
It will help reduce energy consumption in
buildings by 20%.
§ Smart waste management
It will optimise waste recovery and recycling
through the centralisation of data.
New social Businesses specifically set up for social or environmental

enterprise impact are proliferating.

Embedding Sustainability to Create Value
Source: The report of the Business and Sustainable Development Commission, 2017

Do it yourself is good – but also other options
Horizontal integration Vertical integration
In 2018, BP acquired Chargemaster for $170m, which operates 6,500

EV chargers in the UK
Source: https://www.greentechmedia.com/articles/read/bp-buys-chargemaster-britains-largest-ev-charging-company
In 2015, IKEA bought an 83,000 acre woodland in

northeastern Romania. IKEA purchased the forest
in order to manage wood sustainably at affordable
In 2019, Shell completed the acquisition of Sonnen, a German supplier prices.
of smart energy storage solutions for households. Source: https://www.thetimes.co.uk/article/ikea-buys-83000-
acre-forest-in-romania-to-make-furniture-7g6bgk9fphj
Source: https://www.greentechmedia.com/articles/read/oil-supermajor-shell-acquires-sonnen-for-home-battery-
expansion

Do it yourself is good – but also other options
Multiple integration
– Increasing energy efficiency of servers
– Acquisition of wind and solar parks (US, GER)
– Investment in new RE technologies
– $3.2 bn Acquisition of Nest
– Google PowerMeter
– „Advocacy“

Quick Discussion 🗣
Surging demand for zero-carbon technologies, materials, and services gives companies opportunities to build new green businesses.
The rest of this document discusses the three main types of opportunities that emerge for businesses to create value from the climate transition (Exhibit 1):
Reducing costs by reducing the company’s own emissions. This opportunity applies mainly to businesses in agriculture, oil and gas production, mining, energy and
water utilities, many manufacturing sectors, and transport—but also to other sectors that are transport-intensive, such as retail and wholesale, construction, and waste
collection.
Producing goods and services to feed the green capex revolution. This opportunity suggests major global growth plays for B2B companies—especially in sectors
where the UK already has a leading position, such as professional, scientific, information, communication, and financial services. Due to the large size of the global
market for capital goods, UK manufacturing and construction businesses can also benefit.
Enabling others in the value chain—suppliers and customers—to reduce their emissions. This opportunity is likely to grow as greenhouse gas (GHG) prices and
regulations mature and consumer attitudes shift. Sectors where green solutions could gain significant share include manufacturing—for example, of food, apparel, and
other consumer goods—as well as retail and hospitality.
Team Exercise (3 students per team):
§ Pick your favourite company and reflect upon…

§ …how the company is exposed to climate change
risk
§ …how it could capture opportunities emerging
from the transition to a low-carbon economy
Risks emerge from regulatory actions, such as carbon taxes and cap and trade systems, technological innovation that develop alternatives for
customers making existing products and services obsolete, changes in market preferences, such as consumers shifting purchases towards low carbon
products, and liability concerns, from litigation connected to the physical impacts of climate change. Opportunities arise from new products and services
that will be needed for the world to decarbonize (i.e., renewable energy, battery storage, hydrogen, plant-based protein, carbon capture and storage
etc.). The business analysis of climate-related risks and opportunities will be critical for the optimal allocation of resources inside organizations and
markets.

Corporate Action on Sustainability – System View
Source: IEA Net Zero by 2050

Corporate Action on Sustainability – Solutions at Hand
The building blocks of the

energy revolution are ready:
• Solar as a primary energy

source is 250% more
efficient than coal
• A heat pump is 300% more
efficient than a gas boiler
• An electric vehicle is 400%
more efficient than an ICE

Corporate Action on Sustainability – Solutions at Hand
Meanwhile:
• Renewables have all the
growth through 2030
o Rystad: solar PV
capacity will increase
eightfold from 0.8 TW
today to 6 TW in 2030
o BNEF: EVs can grow 20-
fold from 16M to 360M
o Forecasts of electrolyzer
capacity are of up to
100 GW, up from 0.3
GW today

Corporate Action on Sustainability – Challenges Remain
Scaling up low-carbon mobility
Source: IEA Net Zero by 2050

Are EVs actually helping the cause?

Are EVs actually helping the cause?

Back to the Solutions at Hand – We live in an exciting Decade
• All major economic sectors

will experience tipping
points this decade and move
inexorably towards being
100% electric
• That moment has already
come for electricity, which is
35% of fossil fuel usage - and
for light vehicles

Corporate Action on Sustainability – Can we do it fast enough?
We've done this many times

before: exponential growth of
wind, solar and batteries will
continue

Circular Economy
§ Deep-Dive

Circular Economy – Introduction
Wasted opportunities in today’s economy The linear economy
30% of food Cars sit unused

is wasted 92% of the time
TAKE MAKE WASTE
Oﬃce is used 86% of plastic

50-65% of packaging is
the time not recycled

Current responses don’t work Losses
USD 80-120 billion is the

value of plastic packaging
material lost every year.
Climate
change
Ocean
Biodiversity pollution
Treating the symptom, not the cause
loss
Land
degradation

Current responses don’t work 3 Key Principles of the Circular Economy
Design out waste Keep products Regenerate

TAKE MAKE and pollution and materials natural systems
RESTORE REGENERATE
in use

Beneﬁting the environment, society, and business
48% ↓ 18% ↑ Over USD 1 trillion per year can

greenhouse gas emissions in household disposable be gained from materials savings
by 2030 income by 2030

Circular Economy – Case Study Plastics
The rise of plastics and the environmental consequences
§ As of the 1950s plastics boomed together with the rise of consumer goods
§ Given their low cost and versatility, plastic started to replace steel in cars, paper in packaging and wood in furniture
§ If we do not act, plastic debris will outweigh fish in the ocean by 2050

400
million tons
plastics
produced per
year

1 Plastics manufacturing
• Virgin plastic is made from fossil fuels
• One ton of virgin plastic production equals 1.5-2.5 tons of
CO2 emissions
2 Managing plastics waste

• Landfill (doesn’t biodegrade though)
• Recycling
• Incineration
3 Impact on natural environment – land &

ocean
• Microplastics can also affect ocean’s ability to
absorb carbon

The current situation
§ The top 3 sectors are packaging, electronics and buildings & construction

Four compatible pathways for plastic circularity

BASF ReciChain – marking plastics with a barcode resistant to

manipulations and mechanical recycling. It creates a digital twin and
captures to the information for tracking of closed-loop recycling


§ Plastic isn’t as simple as you may think.

Each one of them is different from the
others. Some of them are reusable,
others produce hazardous material after
several uses.
§ 1, 2,4 & 5 are most interesting from a

recycling point of view

Relative
Recyclability HIGH MEDIUM LOW
§ Not all used plastics can be easily recycled; some are easily recyclable, others need more sophisticated and intricate
handlings in their recycling process.

Mechanical Recycling Process
§ In this process, only the thermoplastic polymers can be

used, because they can be re-melted and reprocessed into
end products.
§ The mechanical recycling does not involve the alteration of
the polymer during the process. This process is represented
by a physical method, in which the used plastic will be
formed by cutting, shredding, and washing into granulates,
flakes or pellets of appropriate quality for manufacturing,
and then melted to make the new product by extrusion.
§ More than 99% of the world’s recycling today is done in this
manner.

Chemical Recycling Process
§ Chemical recycling is defined as the process in which

polymers are chemically converted to monomers through a
chemical reaction.
§ The resulted monomers can be used for new
polymerisations to reproduce the original or a related
polymeric product.
§ The chemical recycling process is not yet fully developed
and for this reason, only a few companies are involved due
to high investment costs and the need for expert
personnel. At this moment, numerous methods are under
investigation; for example, the gasification and pyrolysis
methods are under extensive research to establish the
suitable conditions.

Trading recycled plastics:
§ Making the market more liquid

§ Plastics as a commodity
§ Circularity within each jurisdiction will not be possible –
trade needs to be possible with clear quality standards
§ Creating jobs and new business models

Circularity relies on the

collaboration of the entire
ecosystem, which means
that the pathways will only
have the desired impact if
they have the buy-in of all
stakeholders.

Conclusions for Today

Conclusions for Today
Conclusion: The Role of the Firm
§ Climate change creates opportunities and risks for

business
§ Businesses proactively pushing low-carbon solutions can
grasp new market opportunities
§ Firms who think slowing down climate policy is in their
best interest might want to think about the consequences
of climate disruption
§ We have the solutions at hand – now it is about scaling
fast enough
§ Challenges on efficient use of resources, scaling recycling
capacities and closing the circularity gap remain

Group Discussion
§ Low-Carbon Marketing Pitch

Group Discussion – Low-Carbon Marketing Pitch
§ Discussion in groups
o Chosen sustainable product
o Aspects of the pitch presentation
o Geographical focus
o Etc.

Other Information
§ Contact Details

Contact Details
ANY QUESTIONS? PLEASE DO REACH OUT
LECTURER:
Prof. Dr. Pascal Vuichard
pvuichard@ust.hk


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Sustainable Marketing

Lecture 2 – September 4, 2023

Prof. Dr. Pascal Vuichard

© 2023. Sustainable Marketing 1

1. Corporate Sustainability Disclosure with a

3. Circular Economy deep-dive with the case

© 2023. Sustainable Marketing 2

01 Sustainable Marketing News of the Week

02 Corporate Sustainability Disclosure

04 Circular Economy Deep-Dive

05 Group Discussion Low-Carbon Marketing Pitch

© 2023. Sustainable Marketing 3

© 2023. Sustainable Marketing 4

Sustainable Marketing News of the Week

– What did you read/hear/see in the

© 2023. Sustainable Marketing 5

© 2023. Sustainable Marketing 6

© 2023. Sustainable Marketing 7

© 2023. Sustainable Marketing 8

© 2023. Sustainable Marketing 9

© 2023. Sustainable Marketing 10

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© 2023. Sustainable Marketing 14

THE TRIPLE BOTTOM LINE

Sustainable development is a development

© 2023. Sustainable Marketing 15

Difference between CSR, ESG and Sustainability Reporting

CSR report ESG report Sustainability report

• Backward-looking • Focus on present • Focus on past, present, and

DOING GOOD BEING GOOD

© 2023. Sustainable Marketing 16

Short term drivers:

What are some of the

© 2023. Sustainable Marketing 17

Improve Improve Meet

© 2023. Sustainable Marketing 18

HKEX ESG Subject Areas

A1) Emissions Employment and Labor Operating Practices Community

© 2023. Sustainable Marketing 19

© 2023. Sustainable Marketing 21

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§ The European Union currently

© 2023. Sustainable Marketing 26

§ From a regulatory perspective, circularity looks

§ The circularity landscape is also shifting across Asia Pacific.

§ On a national level, Japan, China, Vietnam and Indonesia all

§ Businesses will look deeper into their supply chain and

© 2023. Sustainable Marketing 27

© 2023. Sustainable Marketing 28

§ Sustainability risks can be different in different business

o Most sectors have ESG issues related to buildings and

© 2023. Sustainable Marketing 29

Carbon Intensity of Industries

0 500 1000 1500 2000 2500 3000

© 2023. Sustainable Marketing 30

Direct vs. indirect Emissions

Source: GHG Protocol

© 2023. Sustainable Marketing 31