BUILDING SUSTAINABLE BUSINESSES FIT FOR A SUSTAINABLE WORLD 52 Future Proofing // BUILDING BUSINESSES FIT FOR THE FUTURE We know that the businesses that will be capable of operating in the world of tomorrow are the ones that imagine and plan for their future success today. In practical terms this means planning and preparing for different eventualities, spotting and responding to market opportunities and remaining ahead of the curve in our innovations of business strategy, products and value chains. It also means encouraging our leaders to think about a time horizon that they are not traditionally accustomed to and about issues that they may not have considered in conventional business planning. The overarching objective of any future proofing exercise is to enable long-term business success. We do this by: • Understanding the trends and factors that will influence this success, including those related to the stability of the supply chain and demand for new value propositions • Identifying potential External Factors that could cause a disruption or threat to operations or business models • Developing mitigation, adaptation or transformational strategies to take account of these risks • Identifying opportunities for value-driven innovation. These may be new products and services, or new ways of operating • Developing the capacity of senior decision makers to manage effectively in an increasingly uncertain and volatile operating and financial environment. We believe that this will enable us to build sustainable businesses capable of staying a step ahead of our competitors by effectively preparing for disruption in industries. As the pace of change accelerates, we will no longer have the luxury of simply reacting to change to guarantee long-term success. We expect that sustainable businesses will have to be prepared in advance for different eventualities and it will be those who have a plan and financing model in place to be the winners of the future. Why we must think about tomorrow, today A difficult reality to face is that not all of our businesses or products will be successful in the long term. Some of them will simply go out of fashion, others will face more fundamental disruption from new solutions, and some will be unviable given the future legal, manufacturing and operating environment. These changes rarely happen overnight, but if our Group strategy does not plan for them today, we will be left with businesses that become financially unviable or do not meet our values and thus damage our reputation as a global conglomerate. If it is true that only sustainable businesses can operate successfully in a sustainable world, then future proofing our businesses means making them resilient to, and if possible, proactively shaping the changes that are happening around us. Many of the trends we see such as climate change have the ability to apply severe future pressure to our competitiveness and therefore our business sustainability. The two are very much interdependent and as we have noted, the issues are complex and the impacts are often interconnected. Future proofing through scenario planning helps us to explore these interrelationships and complexities. As the lifecycle curve shows, it was in the early 1980s that the first steps were made to understand the implications of environmental degradation. Crucially however, businesses were not included in these discussions primarily led by the United Nations and therefore the effects, of and to business operations, were not considered. This hindered the business community truly understanding and engaging with broader non- financial risks and impacts over the course of the last few decades. Chronic risks are now beginning to be recognised and we are playing catch-up as programmes to manage business performance at an international and national level are only just coming in to effect. These will increase in number over time.