Environmental Upgrading in Global Value Chains                The Perspective                      of          SUSTAINABIL...
Confused?        Alternative Energy                Emission Trading Schemes      Alternative Powertrains               End...
How can managers…• Prioritize eco-investments?• Align eco-investments with strategy?• Create competitive advantages?• Crea...
Practice                               - Reference-company programme at Lund                               University, Swe...
What are Sustainability Strategies?•Sustainability Strategies are choices available to managers to align environmental and...
A quick test…• Based on your personal experience:• When choosing an hotel to stay for working trip, does your  company che...
Why then …• Eco-excellence of organizational process should  generate competitive advantage?• Can a ISO 14001 certificatio...
Competitive Advantage   Competitive Environmental Strategies                          Lower costs                         ...
Sustainable Value Innovation                            Economic                   Environmental                          ...
Competitive Environmental         Sustainable Value Innovation                 Strategies                           Strate...
When does it Pay to be Green?• When: a clear time frame, and the context in which the  company operates• Pays: quantitativ...
Competitive Environmental Strategies                           existing market spacesSocial Innovation Centre
Competitive Advantage                         Competitive Environmental Strategies                         Lower costs    ...
Eco-differentiation Strategies                             Process            Product                            standards...
Green Clubs                                            GOVERNMENT                                        1. Government Reg...
Beyond Compliance                                                                                         Leadership      ...
Another question…• Are you wiling to pay more for eco-friendly products?• How much more?• When shopping, are you consisten...
The Case of               Palm OilSocial Innovation Centre
Flow Chart of                                                                                      Plantations            ...
Social Innovation Centre
Social Innovation Centre
Social Innovation Centre
Social Innovation Centre
Palm Oil Process flow chart    1. Holding (Ramp station)          Rejected bunches return to state or outsider (unripe; ro...
Palm Oil Process flow chart (cont.)                                                         Sand Trapping (Sand Trank)??  ...
Palm oil productivity per hectareSocial Innovation Centre   Source: Oil World 2008
Worldwide vegetable oil production                                          Source: Oil World, May, 2008Social Innovation ...
Comparative Cost of Production of SelectedOils (US$/tonne)                                  Source: MPOB (2005)Social Inno...
Asia and the EU are worlds major                                   importers of palm oil                                  ...
World palm oil production (tonnes)   X 1 million tonnesSocial Innovation Centre   Source: Oil World, MOPB, MPOC
Palm oil production (area)Source: Presentation at the "Developing Energy and Natural Resources, Building Sustainable Socie...
Malaysian Palm ProductionSocial Innovation Centre   Sources: Mr Chandran’s presentation - MPOB
Source: USDA 2008Social Innovation Centre
Social Innovation Centre                       Source: Corley , R.H.V.. How   much palm oil do we need?
Hummm....Social Innovation Centre
Social Innovation Centre
Social Innovation Centre
Social Innovation Centre
Social Innovation Centre
Source: Greenpeace GHGSocial Innovation Centre
NASA Images:       Deforestation in SumatraSocial Innovation Centre                  Source: http://earthobservatory.nasa....
1997: HAZE OVER INDONESIA. Uncontrollable fires in forests and peatlands during 1997released up to 2.57Gt of carbon, a vol...
Social Innovation Centre
Eco-activismSocial Innovation Centre
Social Innovation Centre
Social Innovation Centre
Social Innovation Centre
Social Innovation Centre
Social Innovation Centre
Social Innovation Centre
The Roudtable for Sustainable Paim OilSocial Innovation Centre
Source: RSPOSocial Innovation Centre
Social Innovation Centre
CertificationSocial Innovation Centre
CertificationSocial Innovation Centre
Supply chain certification system:‘Segregation’Social Innovation Centre
Supply chain certification system:‘Identity Preserved’Social Innovation Centre
Supply chain system:‘Book and Claim’Social Innovation Centre
Questions:• Is RSPO responding to the demands of stakeholders –  Greenpeace in particular?• Can palm oil become a “differe...
Competitive Environmental                       Strategies                           SummarisingSocial Innovation Centre
Lower Costs, Synergies   Cost Leadership                                          Carbon Credits           Market Entry   ...
Social Innovation Centre
BEYOND COMPETITION                            new market spacesSocial Innovation Centre
Sustainable Value Innovation                            Economic                   Environmental                          ...
Social Innovation Centre
Social Innovation Centre
Electric Vehicles                           Thomas Edison and his EV in 1913Social Innovation Centre
- What´s the problem of EVs?- Do they have a chance now?  Social Innovation Centre
Social Innovation Centre
Social Innovation Centre
Social Innovation Centre
Social Innovation Centre
Social Innovation Centre
Better Place    90% of the journeys < 70Km            10% journeys > 70KmSocial Innovation Centre
Social Innovation Centre
Sustainable Value Innovation                              Lower economic costs and                                Environm...
Beyond the firm level….The Ecological Modernization             of    Organizational Fields                               77
The Ecological Modernization of Industry                                                   Organisational Commitments,    ...
Automakers’ motivations,                                                                  Competences & Constraints       ...
Grazie!                           renato.orsato@insead.edu                            www.renatoorsato.comSocial Innovatio...
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Environmental Upgrading in Global Value Chains The Perspective of SUSTAINABILITY STRATEGIES - Orsato's presentation (1)

  1. 1. Environmental Upgrading in Global Value Chains The Perspective of SUSTAINABILITY STRATEGIES Renato J. Orsato VIU-Duke Workshop, Venice, July 13-15, 2010
  2. 2. Confused? Alternative Energy Emission Trading Schemes Alternative Powertrains End of Life Management Bio-mimicry Food Miles Bio-fuels Forest Stewardship Council Bio-polymers Green Clubs Base of the Pyramid Global Reporting Initiative CERES Global Compact Clean Development Mechanism Industrial Ecology Cellulosic ethanol Industrial Symbiosis Climate Clubs ISO 14001 certification Climate Labels Life-cycle Assessment Down Jones Sustainability Index Product Declarations Design for Disassembling Product Stewardship Design for the Environment Process Certification ClubsEnvironmental Management Systems Product Service Systems Eco-activism Responsible Care Eco-industrial Parks Rainforest Action Network Eco-labels Reputational Value Eco-branding Voluntary Environmental InitiativesSocial Innovation Centre
  3. 3. How can managers…• Prioritize eco-investments?• Align eco-investments with strategy?• Create competitive advantages?• Create new market spaces?Social Innovation Centre
  4. 4. Practice - Reference-company programme at Lund University, Sweden. Six-months of work per company in 35 companies (2000-2004); - Global research (2004-2008). Theory Peer-reviewed articles in California Management Review, Journal of Industrial Ecology, Organization Studies, among others. Method Multi-case study and action-research. Sponsors Marie Curie Programme (2004-2007) INSEAD Social Innovation Centre (2007-2008).Social Innovation Centre 4
  5. 5. What are Sustainability Strategies?•Sustainability Strategies are choices available to managers to align environmental and social investments with the generic strategy of the company.Social Innovation Centre 5
  6. 6. A quick test…• Based on your personal experience:• When choosing an hotel to stay for working trip, does your company check whether the hotel has good environmental credentials? • ISO 14001 certification • Subscribes to Global Compact• When choosing an hotel for holidays, do you check for some of the above?Social Innovation Centre
  7. 7. Why then …• Eco-excellence of organizational process should generate competitive advantage?• Can a ISO 14001 certification generate competitive advantage?• Why?• When?Social Innovation Centre
  8. 8. Competitive Advantage Competitive Environmental Strategies Lower costs STRATEGY 4 STRATEGY 1 Environmental Cost Eco-Efficiency Leadership Differentiation STRATEGY 2 STRATEGY 3 Beyond Compliance Eco-Branding Leadership Organizational Processes Products and Services Competitive FocusSocial Innovation Centre 8
  9. 9. Sustainable Value Innovation Economic Environmental Costs Impacts STRATEGY 5 Sustainable Value Innovation Value for Contribution Customers to SocietySocial Innovation Centre 9
  10. 10. Competitive Environmental Sustainable Value Innovation Strategies Strategy 1 4 5 2 3 Existing Markets New Market Spaces Sustainability StrategiesSocial Innovation Centre
  11. 11. When does it Pay to be Green?• When: a clear time frame, and the context in which the company operates• Pays: quantitative and qualitative data, as well as the tangible and intangible value created by the eco- investment• Green: a clear definition of the type eco-investmentSocial Innovation Centre 11
  12. 12. Competitive Environmental Strategies existing market spacesSocial Innovation Centre
  13. 13. Competitive Advantage Competitive Environmental Strategies Lower costs STRATEGY 1 STRATEGY 4 Environmental Cost Eco-Efficiency Leadership Differentiation STRATEGY 2 STRATEGY 3 Beyond Compliance Eco-Branding Leadership Organizational Processes Products and Services Competitive FocusSocial Innovation Centre 13
  14. 14. Eco-differentiation Strategies Process Product standards standards STRATEGY 2Upstream DownstreamActivity System activity system STRATEGY 3 ISO 14001Social Innovation Centre 14
  15. 15. Green Clubs GOVERNMENT 1. Government Regulations - National and International Laws - Various regulatory frameworks for recycling, emissions, etc. 2. Business- 6. Gov-NGOs Government Initiatives Initiatives 7. Multipartite Initiatives Global -Emissions and Reporting -recycling - EMAS - UN Global Compact Initiative targets BUSINESS - Climate Leaders NGOs -US Climate Action I 3. Business -SO 26000 5. Civil Regulation Self-Regulation made by NGOs - Industry Codes of Conduct 4. Business-NGOs - Principles for -Responsible Care Partnerships environmental, social - ISO 14001 - CERES and human rights - WBCSD - Climate Group - Climate SaversSocial Innovation Centre
  16. 16. Beyond Compliance Leadership Beyond Compliance Leader Non-Compliance Average laggard VEIs - Green Clubs Negative Positive Reputation From ToBeyond Compliance Sustainability leader in the industryAvoiding Negative Reputation Building Positive ReputationReactive and Defensive ReflexiveStakeholder opposition and confrontation Stakeholder criticism, negotiation and dialogueConsumer boycotts Consumer engagement Social Innovation Centre
  17. 17. Another question…• Are you wiling to pay more for eco-friendly products?• How much more?• When shopping, are you consistent with your ecological commitments, or convenience, quality and price come first?• Curiosity: do you know what products contain palm oil?Social Innovation Centre
  18. 18. The Case of Palm OilSocial Innovation Centre
  19. 19. Flow Chart of Plantations Palm Oil Smallholders Mill Transport & Shipping Product Retailers Manufacturers Refiners & Blenders Ingredient ManufacturersSocial Innovation Centre Source: RSPO
  20. 20. Social Innovation Centre
  21. 21. Social Innovation Centre
  22. 22. Social Innovation Centre
  23. 23. Social Innovation Centre
  24. 24. Palm Oil Process flow chart 1. Holding (Ramp station) Rejected bunches return to state or outsider (unripe; rotten; empty) 2. Transferring (Transfer Carriage) 3. Sterilization (Sterilizer) Water: Input - water from boiler Output - sterilizer condensate (to deoling)Social Innovation Centre
  25. 25. Palm Oil Process flow chart (cont.) Sand Trapping (Sand Trank)?? 4. Thereshing (Theresher) Empty bunch5. Digesting (Digester) 6. Pressing (Press) 7. Screening (Vibrating Screen) Fine Fibers and crude oil are separated Palm oil and palm kernel oil are separatedSocial Innovation Centre
  26. 26. Palm oil productivity per hectareSocial Innovation Centre Source: Oil World 2008
  27. 27. Worldwide vegetable oil production Source: Oil World, May, 2008Social Innovation Centre
  28. 28. Comparative Cost of Production of SelectedOils (US$/tonne) Source: MPOB (2005)Social Innovation Centre
  29. 29. Asia and the EU are worlds major importers of palm oil China Other 18% 16% India Africa Asia 13% 12% 55% Pakistan 6% EU Other Asia 16% 19% Source: Oil World, May, 2008Social Innovation Centre
  30. 30. World palm oil production (tonnes) X 1 million tonnesSocial Innovation Centre Source: Oil World, MOPB, MPOC
  31. 31. Palm oil production (area)Source: Presentation at the "Developing Energy and Natural Resources, Building Sustainable Society" workshop on August 29, Tokyo (apud Oil World, May, 2008) Social Innovation Centre
  32. 32. Malaysian Palm ProductionSocial Innovation Centre Sources: Mr Chandran’s presentation - MPOB
  33. 33. Source: USDA 2008Social Innovation Centre
  34. 34. Social Innovation Centre Source: Corley , R.H.V.. How much palm oil do we need?
  35. 35. Hummm....Social Innovation Centre
  36. 36. Social Innovation Centre
  37. 37. Social Innovation Centre
  38. 38. Social Innovation Centre
  39. 39. Social Innovation Centre
  40. 40. Source: Greenpeace GHGSocial Innovation Centre
  41. 41. NASA Images: Deforestation in SumatraSocial Innovation Centre Source: http://earthobservatory.nasa.gov/IOTD/view.php?id=2457
  42. 42. 1997: HAZE OVER INDONESIA. Uncontrollable fires in forests and peatlands during 1997released up to 2.57Gt of carbon, a volume equivalent to up to 40% of the mean annual global carbon emissions from fossil fuels during the period.Social Innovation Centre Source: Greenpeace
  43. 43. Social Innovation Centre
  44. 44. Eco-activismSocial Innovation Centre
  45. 45. Social Innovation Centre
  46. 46. Social Innovation Centre
  47. 47. Social Innovation Centre
  48. 48. Social Innovation Centre
  49. 49. Social Innovation Centre
  50. 50. Social Innovation Centre
  51. 51. The Roudtable for Sustainable Paim OilSocial Innovation Centre
  52. 52. Source: RSPOSocial Innovation Centre
  53. 53. Social Innovation Centre
  54. 54. CertificationSocial Innovation Centre
  55. 55. CertificationSocial Innovation Centre
  56. 56. Supply chain certification system:‘Segregation’Social Innovation Centre
  57. 57. Supply chain certification system:‘Identity Preserved’Social Innovation Centre
  58. 58. Supply chain system:‘Book and Claim’Social Innovation Centre
  59. 59. Questions:• Is RSPO responding to the demands of stakeholders – Greenpeace in particular?• Can palm oil become a “differentiated commodity”, in the same fashion the Fair Trade coffee did?• Are client organizations willling to pay for differentiated palm oil?• Can products be eco-branded on the basis of the palm oil content (RSPO certification)?Social Innovation Centre 59
  60. 60. Competitive Environmental Strategies SummarisingSocial Innovation Centre
  61. 61. Lower Costs, Synergies Cost Leadership Carbon Credits Market Entry Synergies $Eco-investment Low Costs STRATEGY 1 STRATEGY 4 Upstream Downstream Activity System Activity System Differentiation $$$ STRATEGY 2 STRATEGY 3 Enhanced Processes Products Reputation Enhanced Reputation Price-Premiums Outcomes Social Innovation Centre
  62. 62. Social Innovation Centre
  63. 63. BEYOND COMPETITION new market spacesSocial Innovation Centre
  64. 64. Sustainable Value Innovation Economic Environmental Costs Impacts STRATEGY 5 Sustainable Value Innovation Value for Contribution Customers to SocietySocial Innovation Centre 64
  65. 65. Social Innovation Centre
  66. 66. Social Innovation Centre
  67. 67. Electric Vehicles Thomas Edison and his EV in 1913Social Innovation Centre
  68. 68. - What´s the problem of EVs?- Do they have a chance now? Social Innovation Centre
  69. 69. Social Innovation Centre
  70. 70. Social Innovation Centre
  71. 71. Social Innovation Centre
  72. 72. Social Innovation Centre
  73. 73. Social Innovation Centre
  74. 74. Better Place 90% of the journeys < 70Km 10% journeys > 70KmSocial Innovation Centre
  75. 75. Social Innovation Centre
  76. 76. Sustainable Value Innovation Lower economic costs and Environmental impacts Costs New Business Models New customers SVI and markets New Value Propositions Value Higher value for customers and contribution to societySocial Innovation Centre 76
  77. 77. Beyond the firm level….The Ecological Modernization of Organizational Fields 77
  78. 78. The Ecological Modernization of Industry Organisational Commitments, Competences & Constraints Market Demand & Environmental Patterns of Utilisation Policies & Programs Social Integration Circuits of Political Ecology Competitive Forces Interest Groups & & Collaboration Organisations System Integration Positioning of Industrial Ecology Related Businesses Conditions Organisational Field (Orsato 2001)Social Innovation Centre
  79. 79. Automakers’ motivations, Competences & Constraints + Automakers invest increasing resources in battery technology - ICE-related competences limit support to EVs inside the firms - The financial crisis of 2008 limts EV investments. Market Demand & Environmental Patterns of Utilisation Policies & Programs + Fleet operators become interested in EVs to + EVs became a means of reaching Kyoto reduce their CO2 emissions. targets for CO2 reductions. + Toyota Prius allows a large number of users to + Governments introduced tax incentives and experiment (hybrid) EV drive. subsidies By 2010, a favourable momentum is created around EVs and the Interest Groups Competitive Forces & Collaboration circuits of political & Organisations ecology start favouring EV developments. + Public support for EVs increases + The alliance between Better Place and Renault-Nissan, and the aggressive approach of the Chinese BYD stir EV - Shareholders try to deter ZEV legislation competition. Positioning of Industrial Ecology Related Businesses Conditions + The prospects of mass-market for EVs provokes a + Electric utilities started joint projects for the race for the development of batteries deployment of infrastructure for EV recharge - Suppliers of ICE-related parts do not support EV + V2G technology can help utilities to solve the developments problem of frequency regulation and energy storageSocial Innovation Centre
  80. 80. Grazie! renato.orsato@insead.edu www.renatoorsato.comSocial Innovation Centre

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