[MUSIC] We have previously discussed how digital transformation and the need for a radically more sustainable development require new ways of corporate planning and management. Just a quick reminder about what we need to pay attention to. Rapidly changing demands and new opportunities in part due to new technologies and business models. Larger parts of our business ecosystem so that their control, development and innovation will require more cooperation. Longer time perspectives and scenarios making experimentation and learning critical for success. Communication with more experts to understand more complex expectations. In 2019, the United Nations Global Compact performed a survey of what CEOs thought would shape future business conditions. More than three quarters of the CEOs surveyed believed that sustainability and trust will be critical in their industry over the next five years. Provided that this is the future your company will face, what are the fundamental actions your company need to take if you want to manage its sustainability issues effectively? There are many models that address these questions. I would like to present one that I've used myself and that is generally applicable. It was developed in 1994. The management consulting firm McKinsey together with the Royal Swedish Academy of Engineering sciences, and the NGO World Wide Fund for Nature, conducted a study of the best sustainability practices. They came up with five recommendations. The first one, identify and prioritize the sustainability issues and strategic importance to the company. In other words, make a materiality analysis. If you want to help to identify potential material issues, start by studying common mapping so sustainability issues that can be relevant for your industry. You can check the materiality maps for 18 different industries produced by the American Sustainability Accounting Standards Board. Work, the GRI lists or common sustainability topics for 52 different business activity groups. The SDG compass can also provide guidance for companies on how they can align their strategies with the 17 SDGs of agenda 2030. Second, decide on how actively the material issues should be managed. Some issues are best just monitored from a distance. Others may require exploration and experimentation. In addition, there are issues that should be actively developed in order to increase demand or even raise regulatory standards. To strengthen the competitive position of the company and its partners, this is especially true if the issues are important for society in general. In the reading section, you can find out more about various frameworks with sorting out different ways to address risks and a number of value creating opportunities. We will also talk more about sustainable offerings and other ways to create value in the lessons 8, 9, 10 and 11. Now, let's get back to the recommendations. The third recommendation is to secure that the chosen level of engagement is translated into practical action. Clearly, there is a need for compliance and risk management. Therefore, you're recommended to use management systems such as the ISO 14000 previously discussed. Also, you should apply continuous improvement and a process or plan, do, check, act. We will talk more about KPIs that are relevant in this context in the next lesson. However, the challenge here is to combine this kind of traditional risk and compliance control with long term development. Projects that are necessary to realize the opportunities resulting from the transformation we're discussing. These actions could include new market segmentation, design of new products and services, as well as new business model development. The fourth recommendation is to decide on how to manage existing and new partnerships as many actions will require cooperation and know-how outside your own organization's limit. Finally as a fifth step, it is important to decide on what and how to communicate. If you want to be attractive and relevant to investors and potential employees, you must explain how your business can be part of the solution to future challenges. This includes climate issues, resource management, and improved social conditions. You need to present your role as a business and how you can support development in society. You also need to have a clear plan and a continuous follow up, on how well you create social and environmental benefits throughout your business operations. Communication is also critical for managing stakeholder expectations. With a clear communication about your long term aspirational targets, you can rally your own teams more effectively and attract new business partners. An essential way of effective communication is the sustainability report. Such a report can give you an increased credibility among customers, investors, potential employees, as well as serve as a starting point for your company's product and communication when it comes to sustainability. Logic companies began producing environmental reports more than 20 years ago. Over time, these reports have come to cover more issues, especially issues related to social responsibility. Social sustainability and include employees, human rights, business ethics and corporate governance. And since the end of 2016 larger companies in Europe have been required to follow an EU directive to share non financial information. These requirements with sustainability reporting are partly supported by the principle that stakeholders should be better informed about the company's sustainability risks. However, most the time sustainability communications rather highlight the opportunities, the solutions, the results that you produced and expected to produce in the future. I previously mentioned the global reporting initiative, also known as GRI standards. This is the reporting standard most companies choose. It's been developed to make companies reporting comparable. Finally, let me repeat the five recommendations. Identify the material issues, decide on how actively to address them, define action plans, consider the need for competence and partnerships and develop a communication strategy. [MUSIC] >> You could say, when we look at how we can contribute to society overall, we, as an example, we looked at where do we have emissions in Sweden? And then we started looking at the different sectors, and in Sweden transport and heavy industries, that's where you have the largest emissions. Then we started to look at, okay, in these areas, where could electricity and other Vattenfall products and knowledge be of value? Where can we contribute? And then we started mapping into all these areas. And that has been sort of the roadmap for what partnerships that we have formed. And just to bring an example, in the heavy industry sector, cement and steel is the largest emitter, the next largest is cement. The third one is refineries and then you have like chemical industry and others. And now we have deliberately formed partnerships in steel and iron and that's where we have the hybrid project together with SSAB and LKB, aiming at fossil free steel. In the cement industry we working together with cement to produce and ensure that the processes are driven by fossil free fuels. [MUSIC].
