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Aroadwell-traveled—Howfamilybusinessesareguidingthesustainabilityjourney|1

Aroad

well-traveled

Howfamilybusinessesareguidingthesustainabilityjourney

April2023

/privateenterprise

02

ExecutiveSummary

03

Whythe

sustainability

journeyisa

once-in-a-lifetimeopportunity

10

Putting

sustainability

onthestrategic

fasttrack

11

01

Foreword

04

Connectingthepast,presentandfuture

05

Navigatingalongandwindingroad

Tableof

06

Goingdowntheroad

08

Lessons

the

07

Eightkeysfor

unlockingthe

sustainabilityof

yourbusiness

09

Whyfollow

thefamily

business

routeto

sustainability?

Acknowledgments

andcontacts

Foreword

In1993,JohnElkingtoncoinedtheterm‘triple

bottomline’.Hedescribeditasasystemchange,andonethatwouldleadtothetransformation

ofcapitalism.Itencouragedcompaniestostop

concentratingsolelyontheirprofitsandtoincludegoalsintheirbusinessstrategiesforimprovingthelivesofpeopleandthehealthoftheplanet.Atthetime,thenotionof‘creatingsharedvalue’wasa

radicalnewwayforcompaniestothinkabouttheirbusinessobjectivesandperformance.

Italsomarkedthebeginningofthedeclineof

shareholdercapitalismandtheriseofstakeholdercapitalism.Theexpectationwasthatcompanieswouldservesocietyasawhole—notonlytheirownersandshareholders.

Fastforward30years.

Stakeholdercapitalismhasgonemainstreamwiththeriseofthesustainabilityagenda.Itistop-of-

mindacrossthebusinessworldineverysector.Theprinciplesofsharedvalueareatitscore,butthereisoneimportantdifferencethat’srisingquickly

intoday’senvironment—andthat’stheneedforurgentaction.

Thepandemicmadesustainabilityevenmore

relevant.Itincreasedtheneedforbusiness

familiestoprotecttheirbusinessesbyexaminingtheefficiencyoftheiroperatingpracticesandbybuildingdeeperandstrongerrelationshipswiththeircommunitiesandtheiremployees.Inmanyways,sustainabilityisbecomingabasisfora

licensetooperate.

Organizationsofeverytypearebeingchallengedontheroletheyplayandtheimpactthey’rehavingontheworldaroundthem.Manygovernments

arepushingcompaniestoproceedwithhaste,offeringincentivestoencourageactionsthatareclimate-smartandcontributetolong-termsocialequityandeconomicsustainability.

Customersarealsodemandingit,andthey’re

readytofollow(andbeloyalto)companiesthatareabletodemonstratethepositiveimpactthattheirbusinessesarehavingonpeopleandtheplanet.

Butnoonecansolvetheworld’sbiggestenvironmentalandsocietalissuesalone.It

requiresinnovativethinking,boldideasanduniqueexperiencesfrombusinessesandindustriesof

everytypeandsize.

Fortunately,formanyfamilybusinesses,the

roadtosustainabilityisalreadyonethatiswell-

traveled.Thefundamentalsofsharedvalueare

familiarterritory,andthey’rewoventhroughout

thefamilycapitalismbusinessmodel.Whiletheymaybetakingavarietyofroutesandreachingnewmilestonesatdifferentstagesoftheirjourneys,

theprogresstheyhavemadesofarshouldbe

instructiveandaninspirationfororganizationsofeverytype.

Thisiswhywebelievethatthereisaonce-in-a-lifetimeopportunityforfamilybusinessestotakealeadershiproleinguidingothersontheirsustainabilityjourneys.

Formanycompanies,

theirsustainabilityactionsarealreadybeginningtohaveanimpactontheir

businesses.Thosethat

haveBCorporothertypesofcertificationfortheir

socialandenvironmentalprogressarewitnessinggreateraccesstocapitalandbetteremployee

recruitmentandretention.

Aroadwell-traveled—Howfamilybusinessesareguidingthesustainabilityjourney|3

FFoorreewwoorrdd

Executive

Summary

Whythe

sustainability

journeyisa

once-in-a-lifetime

opportunity

Connecting

thepast,

present

andfuture

Navigating

alongand

windingroad

Goingdown

theroad

Eightkeysfor

unlockingthe

sustainability

ofyour

business

Lessonsfrom

theroad

Whyfollow

thefamily

business

routeto

sustainability?

Putting

sustainability

onthe

strategicfast

track

Acknowledgments

andcontacts

Foreword

Followingaprovenpath

Toexplorethevariousroutestosustainability

thatfamilybusinessesaretaking,KPMGPrivate

EnterpriseandtheSTEPProjectGlobalConsortiumconductedpersonalinterviewsandledgroup

discussionswithfamilybusinessleadersacrosstheworld.Theirstoriesareinsightfulandpracticalandaresupportedbyadetailedanalysisofthe

sustainabilityperformancedatafromourpreviousglobalsurveyof2,439familybusinessleaders.

Werecognizethattheroadtosustainabilityisrarelyastraightline.Thereareoftentwistsandturns,smalldetours—eventheoccasionalU-turns—alongtheway.Thismaybealongandwindingroad,butwe

believetheuniquecharacteristicsandexperiencesoffamilybusinessesofferaninvaluableandpracticalguideforotherleaderstofollowontheirown

sustainabilityjourneys.

AndreaCalabrò

STEPProjectGlobalConsortiumAcademicDirector

Director,IPAGEntrepreneurship&FamilyBusinessCenter

IPAGBusinessSchool

TomMcGinness

GlobalLeader

FamilyBusiness

KPMGPrivateEnterpriseKPMGInternationalandPartner,KPMGintheUK

Aroadwell-traveled—Howfamilybusinessesareguidingthesustainabilityjourney|4

FFoorreewwoorrdd

Executive

Summary

Whythe

sustainability

journeyisa

once-in-a-lifetime

opportunity

Connecting

thepast,

present

andfuture

Navigating

alongand

windingroad

Goingdown

theroad

Eightkeysfor

unlockingthe

sustainability

ofyour

business

Lessonsfrom

theroad

Whyfollow

thefamily

business

routeto

sustainability?

Putting

sustainability

onthe

strategicfast

track

Acknowledgments

andcontacts

Foreword

ExecutiveSummary

Foreword

Executive

Summary

Whythe

sustainability

journeyisa

once-in-a-lifetime

opportunity

Connecting

thepast,

present

andfuture

Navigating

alongand

windingroad

Goingdown

theroad

Eightkeysfor

unlockingthe

sustainability

ofyour

business

Lessonsfrom

theroad

Whyfollow

thefamily

business

routeto

sustainability?

Putting

sustainability

onthe

strategicfast

track

Acknowledgments

andcontacts

Executive

summary

Thereisawidelyadoptedviewofsustainabilityas‘meetingtheneedsofthepresentwithout

compromisingtheabilityoffuturegenerationstomeettheirownneeds’.

Thisisalreadyafamiliarconceptamongfamilybusinesses,manyofwhichoperatewithasenseofdutytocreateandpreserveahealthy,diverseandresilientworldfortheir

childrenandtheirgrandchildren.Formany,investingin

sustainabilityandoperatinginasustainablewayisnotonlyviewedasthe‘rightthingtodo’,butit’salsobecominganessentialengineoftheircompanies’growth.

Sustainabilityconversationsarehighontheagenda

acrosstheworld.Manyofthediscussionsatthe

2023annualmeetingoftheWorldEconomicForuminDavos,forexample,reflectedasenseofurgencyto

acceleratesustainabilityprogressacrossindustriesandgeographies.Formany,thisisaresponseto

ever-increasingstakeholderscrutinyandregulatory

reportingrequirements.Itrequiresgooddata,crediblemetricsandrobustdigitalsolutions,anditismaking

digitalizationanimportantenablertocompanies’

strategiesastheytransitiontoamoresustainablefuture.

Thosecompaniesthatareabletoanticipateandmeettheserisingenvironmentalandsocietalexpectationsarealsomorelikelytoimprovetheirreputations,attractandretaintoptalentandgeneratenewbusiness

opportunities.Sustainabilityisnowabusiness

imperative,asmuchasitisastewardshipone,andthosecompaniesthatfailtoadaptmaystruggletocompeteinanew,low-carbonworld.

Thisiswhyfamilybusinessesmayhavea‘first-mover

advantage’onthepathtosustainability.Thecommitmenttocreatevalueforalloftheirstakeholdershascrosseda

multitudeofgenerations.Itisdeeplyembeddedinfamilies’valuesandwoventhroughouttheirbusinessmodels.

believethatfamilybusinessesthat

successfullyengagewithalltheirstakeholdersonsustainabilityjourneywillnotonlysurvivebut

Itruly

this

bemay

prosper.Thosethatdon’tstepuparelikelygoingtoleftbehind.Forme,thechoiceforcompanies bepreciselythatbinary!

Everyoneisatadifferentstage,andthereisnoright

or

familybasedthe

wrongwayforward.ButIalsotrulybelievethatbusinesseshavebeenlivingandprosperingoncoresustainabilityprinciplesacross

generations,andtherearemanylessonsthateveryonecantakeawayfromtheirexperiences.

Tom

GlobalKPMGKPMG

McGinness

Leader,FamilyBusiness

PrivateEnterprise

Internationaland

Partner,KPMGintheUK

Aroadwell-traveled—Howfamilybusinessesareguidingthesustainabilityjourney|5

Foreword

Executive

Summary

Whythe

sustainability

journeyisa

once-in-a-lifetimeopportunity

Connecting

thepast,

present

andfuture

Navigating

alongand

windingroad

Goingdown

theroad

Eightkeysfor

unlockingthe

sustainability

ofyour

business

Lessonsfrom

theroad

Whyfollow

thefamily

business

routeto

sustainability?

Putting

sustainability

onthe

strategicfast

track

Acknowledgmentsandcontacts

Keepingthedestinationinmind

Somecompanies,especiallysmallerbusinesses,

haveconcernsregardingtheshort-termeconomic

feasibilityandcostsofsustainability.Nevertheless,

manyarebeginningtotakethefirststeps,withtherisingexpectationsandencouragementofmanydifferent

stakeholders.

Theaspirationtoleaveameaningfulandlastinglegacy

hasalwaysbeenpresent.Familybusinessesrecognizethatadoptingsustainabilityprinciplesandpracticesistheonlywayforwardtocreatetheworldtheywantforfuturegenerations.

Inthisenvironmentfamilybusinessleaderswho

contributedtoourresearchtypicallydescribethree

interconnectedgoalsformaintainingthesustainabilityoftheirbusinesseswhilealsocontributingtoamoresustainableworld:

1.Maintainingtheeconomicprosperityandlong-termsocial,environmentalandreputationalsustainabilityoftheirbusinessesforthebenefitofcurrentandfuturegenerations

2.Integratingresponsibleenvironmentalandsocialpracticesintheirbusinesses

3.Takingaleadershiproleinsupportingpeople

andplanetinitiativesoutsidethebusinessvia

philanthropiceffortssuchascharitabledonations,grantsdistributedthroughfamilyfoundationsandphilanthropicinvestinginfamilyoffices.

Family

business

success

factors

Executive

Summary

43percentof2,439familybusinesssurveyrespondentsreported

highlevelsofsustainabilityanddigitalizationbasedoneightkeysuccessfactors:

Highly-structuredgovernance

1

2

3

4

5

6

Activenon-familymember

involvement

Dispersedfamilyownership

Increasednumberoffemaleboardmembers

Digitalizationasasustainabilityenabler

Sustainabilityisastep-by-stepjourney,andit’s

importanttohaveaclearideaoftheoveralldirectionoftravelthatthebusinessandthefamilywantstofollow.Institutionscanplayacriticalroleinmakingthejourneyeasierbyhelpingtosetappropriate

standardsforsociety;byensuringthatregulationsarenotoverlycomplex;andthatbusinessescanactindependentlywithouthavingtorelyonpotentiallycostlyexpertisefromoutsidetheirbusinesses.

AlejandroEscribá-Esteve

FullProfessorofManagement

UniversitatdeValència

Charismaticortransformational

7

Strongentrepreneurialmindset

8

Forward-lookingorientation1

leadership

1

STEPProjectGlobalConsortium&KPMGPrivateEnterprise,“Theregenerativepoweroffamilybusinesses—transgenerationalentrepreneurship

”,2022.

Aroadwell-traveled—Howfamilybusinessesareguidingthesustainabilityjourney|6

Executive

Summary

Despitetheadditionalcostsandresourcesthatmayberequired,manyfamilybusinesseshaveunderscored

theimportanceofshiftingthethinkingawayfrom

sustainabilityasanadditionalcostofdoingbusiness

andtowardsaninvestmentinthefuture.Aswithany

investment,theyhaveemphasizedhowanyinvestmentinsustainabilitymustdeliverimpactandresultsand

makeeconomicsenseinorderforbusinessleaderstobe

ablestandupandsustaintheiractionsoverthelongterm.

Eventhoughthesustainabilityjourneyoftenbeganwith

targetedplanstocomplywithregulationstoreducea

company’scarbonfootprintorminimizewaste,amajor

shiftisalreadytakingplacetowardsamorestrategic

approachthatintegratessustainabilityobjectivesinthe

long-termbusinessstrategy.Asonefamilybusiness

leaderemphasized,itisn’tjustaboutcreatingeconomic,

environmentalorsocialvalue,butalsoaboutcreatingfamilyvaluefortoday’sgenerationandforthosetocome.

Makingsustainabilitybusiness

asusual

Withthesethreegoalsinmind,therearemanypotential

routesalongthesustainabilityjourneytoconsider.The

familybusinessleaderswhocontributedtheirinsights

tothisreportprovidedawealthofexamplesofthepaths

they’vehavechoseninmakingsustainabilitycentral

towhattheynowconsidertobe‘businessasusual’.

Whiletheirroutesmaydiffer,allhavesharedapassion

andasenseofurgencytoputsustainabilityatthetop

oftheiragendasandseizenewopportunitiestofurther

strengthentheirreputationsandmaketheiroperations

moreefficient.

Opportunitiesdon’tcomewithoutchallenges,however,

andtheprimaryconcernsamongfamilybusinessesare

generallyrelatedtotheincreasedcostofretrofittingtheir

operationsandtheresourcesthatarerequiredtofulfill

increasingregulatoryandstrategicrequirements.New

regulationsoftenhavemoreextensivedatacapabilities,

andsustainabilityreportingwilllikelyrequireadditionalIT

resourcesandinfrastructureformeasuring,controlling

andmanagingtheenvironmentalandsocialimpactof

companies’efforts.

Managingsustainabilityinaregulatoryenvironment

Therearemanyinnovativewaysofsupporting

sustainabilityinfamilybusinesses.Eventhough

Forfivegenerations,ourfamilyhasoperated

withaclearpurpose:toenrichthelivesofour

customersandourcommunities.Thatpurposehasbeendrivenbyastrongcultureofsharedvalues.Together,ourpurposeandvalueshavebeenthe

foundationofourbusinessmodelanda325-yearhistoryofsustainability.Weareuncompromisinginmakingsurethatfoundationcontinuestobeunshakable.

JonathanNeame

ChiefExecutive

ShepherdNeame—TheoldestandlargestindependentbreweryintheUK

they’regenerallyaheadofthegame,governmentregulationscanbeaburden.Toomuchbureaucracyandredtapedoesn’tactuallysupportthe

sustainabilitygoalsoffamilybusinesses.Ibelievethesebusinessesneedtomaketheirvoicesheardbynotonlytalkingabouttheirgoalsbutthestepsthey’retakingtoachievethem.

Dr.DanielMitrenga

ExecutiveBoardMember

DIEFAMILIENUNTERNEHMER&DIEJUNGENUNTERNEHMER—Representingtheeconomicandpoliticalinterestsoffamilybusinessesand

young

entrepreneurs

Aroadwell-traveled—Howfamilybusinessesareguidingthesustainabilityjourney|7

Foreword

Executive

Summary

Whythe

sustainability

journeyisa

once-in-a-lifetime

opportunity

Connecting

thepast,

present

andfuture

Navigating

alongand

windingroad

Goingdown

theroad

Eightkeysfor

unlockingthe

sustainability

ofyour

business

Lessonsfrom

theroad

Whyfollow

thefamily

business

routeto

sustainability?

Putting

sustainability

onthe

strategicfast

track

Acknowledgments

andcontacts

Executive

Summary

Seizingsustainabilityasacompetitiveadvantage

Key

takeaway

Thevalueofa

sustainabilityfocuscaninclude:

Somefamilybusinessleadershaveemphasizedhow

sustainabilityisalreadywovenintothefabricoftheir

company’sculture,makingitakeyfactorinattracting

andretainingtop-performingemployees.Theseare

companiesthathaverecognizedthattoday’syounger

generationsarechoosingtoworkonlyforcompanies

thatoperateethicallyandtakegoodcareofpeopleandtheplanet.Increasingly,thisismakingmanycompanies’sustainabilityperformanceanimportantfactorinwinningthehighlycompetitivewarfortalent.

Manyfamilybusinesseshavealsorecognizedthe

commercialimperativeofdemonstratingthetangible

Financialcapitalbenefitsdueto

increasedcustomerattractionandretention

impactoftheirsustainabilitypriorities,whichoftenmakethedifferenceintheirsuccessfulbidstowinnewworkandtoattractandretainloyalcustomers.

Socialcapitalbenefitsby

upholdingareputationformakingtheworldabetterplace

Humancapitalbenefitsfrom

attractingandretainingthebestemployees

Costreductionsfromoperatingresponsiblyandusingtheirownresourcessustainably

Accesstolimitedsourcesofcapital

bybeingmoreattractivetofuturebusinesspartners,investorsandbankers

Untilrecently,manyfamilybusinesseshavehadarelativelyinformalapproachtosustainabilitywithafocusondoingwhat’srightfortheiremployees,customersandcommunities.Butnowthere’s

greaterrecognitionthattheirsustainabilityactionsareactuallypotentialdifferentiatorswiththepowertocreatemeasurablecompetitiveadvantages.

Becausemanyfamilybusinesseshaveoperatedasresponsible,sustainableenterprisesfor

generations,theyhavetendedtoberelatively

quietabouttheireffortsandtheirimpact.In

Riskmitigationthrough

environmentalandsocietalstewardship

today’senvironment,Istronglyencouragefamilybusinessestobemorevocalaboutwhattheyaredoing—andhavebeendoingformanyyears(andoftendecades).Theirgenuineimpactandbold

ambitionshavebeenwell-earnedandshouldberecognized.

AlanBarr

NationalKPMGPrivateEnterpriseLeader

Partner,KPMGinSouthAfrica

Aroadwell-traveled—Howfamilybusinessesareguidingthesustainabilityjourney|8

Foreword

Executive

Summary

Whythe

sustainability

journeyisa

once-in-a-lifetime

opportunity

Connecting

thepast,

present

andfuture

Navigating

alongand

windingroad

Goingdown

theroad

Eightkeysfor

unlockingthe

sustainability

ofyour

business

Lessonsfrom

theroad

Whyfollow

thefamily

business

routeto

sustainability?

Putting

sustainability

onthe

strategicfast

track

Acknowledgments

andcontacts

Whythe

sustainability

journeyisa

once-in-a-lifetimeopportunity

Whythe

sustainabilityjourneyisa

once-in-a-lifetimeopportunity

Aroadwell-traveled—Howfamilybusinessesareguidingthesustainabilityjourney|9

Foreword

Executive

Summary

Whythe

sustainability

journeyisa

once-in-a-lifetimeopportunity

Connecting

thepast,

present

andfuture

Navigating

alongand

windingroad

Goingdown

theroad

Eightkeysfor

unlockingthe

sustainability

ofyour

business

Lessonsfrom

theroad

Whyfollow

thefamily

business

routeto

sustainability?

Putting

sustainability

onthe

strategicfast

track

Acknowledgments

andcontacts

Thegrowingsustainabilityagenda

Macroeconomicfactors—inflation,risinginterestrates,recessionaryandcompetitivethreats—areconvergingwithnever-beforesocialchanges.Manyoftheseissuesemergedalongsidethepandemic.

Improvingemployeehealth,wellbeingandworkingconditions;increasingtheaccesstosafefoodandwaterforpeopleeverywhere;mitigatinghuman

rightsconcernsandremovingsocialinequities—allarerevolutionizingandexpandingthesocialand

environmentalsustainabilityagenda.

Muchlikethedigitalrevolution,thesustainability

revolutionpromisestotransformthewaytheworld

thinksandacts.Butalso,muchlikethedigitalrevolution,manycompaniesaresimplymovingtooslowly,taking

anincrementalapproachtosustainabilityatatime

whentheworldisdemandingstrongleadershipandanacceleratedpacetowardsamoresustainablefuture.

Astheoriginatorofthe‘triplebottomline’remarkedina2018HarvardBusinessReviewarticle,“We

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