[MUSIC] So this is Mike Rosenberg on strategy and sustainability. We're in session six, on how to develop a sustainability strategy. This is segment three. We'll look at the importance of looking at the past, the present, and the future. So earlier in the introduction to this session, I talked about the path dependency, the idea that a person or a company is on a path. And the path started someplace, and is going someplace else. And to some degree, what we do in the future is conditioned by what we've done in the past. And history, in my view, matters quite a lot. If we think about the tobacco industry, for example, there was a very clear effort on the part of the tobacco companies in the 40s and 50s to say cigarettes were good for you. In fact, there's tremendous evidence that shows even when some companies were saying that cigarettes were good for you, they knew they were not good for you. Now, regardless of what you think about smoking or whether you smoke or not smoke, this is part of the history of tobacco companies. And they have to be clear that this is their history, and that conditions, to some degree, how they engage in civil society going forward. Tobacco, for example, is very heavily taxed, and it continues to be attacked by the anti-smoking people because of its malicious affects on our health. Typically, in many governments, there's actually a bit of a tension between the finance ministry, which needs the tax money, and the health ministry, which is paying the costs. And there's a huge political issue connected to this. But all of this is related to the past of tobacco companies, and how they engage is, to a large degree, determined by that history. If we look at the oil and gas business, they also engaged in a tremendous effort in the first part of the 1990s to say that global warming was not a problem, hiring academics like Robert Balling and Patrick Michaels to write books about why it's not a problem, putting advertisements in the newspapers. And trying to move public opinion away from a consensus on what to do. So when you think about these companies, they have to know about that. They have to somewhat interpret and interiorize that history as they think about what to do next. And this has to be done at the industry level, it has to be done at the firm level. And they have to think about what lessons did the firm learn, based upon what happened? And also, what are the stories and what are the myths? What is the reality of that? And in some cases, the men and women who were responsible for some of these events, they may no longer be with the firm. Maybe 30 years have gone by, but somehow, some of the stuff stays within the corporate culture. So it's very important to understand where we come from as we think about what to do next. Now, to know where we are [LAUGH] is a whole another effort. And I mentioned, a little bit, how complicated it is to really understand the carbon footprint of a company. If you look at the G4 sustainability reporting guidelines, the categories are labor practices, human rights, society, product responsibility, environmental impact, with a whole list of things in economic performance. Doing one of these reports uses huge amounts of data. It's very complex, and it can cost a lot of money. So as a company considers going into wait and see or show and tell, going in this direction is absolutely required. But it's really important to understand how hard it is and how complex it can be. And I'm sure some of you are involved in doing this work, and you have my my admiration for how hard it sometimes is to keep all this stuff straight. Now, if we look at the future, the question is, what will be the future for an industry, or for a region, or for a specific company? If you believe in magic, then this is one way to tell the future. [LAUGH] Another way it's forecasting. And forecasting typically looks at some parameter, and looks at what it might be in the future. So you can see in the chart, here's a parameter which has an optimistic, and a pessimistic, and a middle level scenario. The only problem with forecasting is it doesn't really work whenever it's talking about anything important. So I'd like each of you to think about the biggest events in business in the last 10 or 20 years in your country, or in your region, or in your industry. And then ask yourselves, how many of them were forecast? And sometimes, the answer is none. Cell phones, the collapse of the former Soviet Union, the financial crisis, wars that we're experiencing now in Afghanistan, the Middle East. Many of those were not forecast in strictly business terms. Now, they were imagined, and people talked about them. But the way to look at things like that is not through forecasting, it's through scenario planning. And the guys at Shell are very, very good at scenario planning. They have a whole team, which was founded many years ago by Pierre Wack. And if you go to Shell.com, you can see their scenarios. But scenario planning is about imagining what the world could look like, and then working backwards to see what your strategy should be. This, I think, is a very powerful tool for this issue of environmental sustainability, and I recommend it very strongly. [MUSIC]
