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Sustainability Strategies by Renato Orsato
Sustainability Strategies by Renato Orsato
Sustainability Strategies by Renato Orsato
Sustainability Strategies by Renato Orsato
Sustainability Strategies by Renato Orsato
Sustainability Strategies by Renato Orsato
Sustainability Strategies by Renato Orsato
Sustainability Strategies by Renato Orsato
Sustainability Strategies by Renato Orsato
Sustainability Strategies by Renato Orsato
Sustainability Strategies by Renato Orsato
Sustainability Strategies by Renato Orsato
Sustainability Strategies by Renato Orsato
Sustainability Strategies by Renato Orsato
Sustainability Strategies by Renato Orsato
Sustainability Strategies by Renato Orsato
Sustainability Strategies by Renato Orsato
Sustainability Strategies by Renato Orsato
Sustainability Strategies by Renato Orsato
Sustainability Strategies by Renato Orsato
Sustainability Strategies by Renato Orsato
Sustainability Strategies by Renato Orsato
Sustainability Strategies by Renato Orsato
Sustainability Strategies by Renato Orsato
Sustainability Strategies by Renato Orsato
Sustainability Strategies by Renato Orsato
Sustainability Strategies by Renato Orsato
Sustainability Strategies by Renato Orsato
Sustainability Strategies by Renato Orsato
Sustainability Strategies by Renato Orsato
Sustainability Strategies by Renato Orsato
Sustainability Strategies by Renato Orsato
Sustainability Strategies by Renato Orsato
Sustainability Strategies by Renato Orsato
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Sustainability Strategies by Renato Orsato

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Sustainability has become a hot topic in the corporate strategy realm, and figuring out when and how and where to bring a green focus to business is critical. …

Sustainability has become a hot topic in the corporate strategy realm, and figuring out when and how and where to bring a green focus to business is critical.

During this 'We Read for You' session, Jaco Volschenk, senior lecturer at the University of Stellenbosch Business School (USB) and member of the South African Sustainable Energy Association presents Sustainability Strategies, a book that provides a well-grounded analysis of the rationale for more sustainable business models.

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  • Figure 1.1 The Scope of Corporate Environmentalism
  • Figure 1.2: Public and Private Profits
  • Figure 2.3: Sustainability Strategies
  • operational effectiveness - Cutting costs, Reducing risks
  • Figure 2.1: Competitive Environmental Strategies
  • Figure 7.1: Sustainable Value Innovation Strategy
  • The Stuart Oil Shale Project & Greenpeace Southern Pacific Petroleum (Australia) & Suncor Energy (Canadian oil sands experts)
  • Figure 4.1: Corporate Reputation and Leadership
  • The Stuart Oil Shale Project & Greenpeace Southern Pacific Petroleum (Australia) & Suncor Energy (Canadian oil sands experts)
  • Figure 7.1: Strategy Canvas of the Smart, Prius and Think
  • Transcript

    • 1.  
    • 2. Background to book <ul><li>Renato Orsato (Orssatto) </li></ul><ul><ul><li>INSEAD </li></ul></ul><ul><ul><li>Peer-reviewed articles in California Management Review, Journal of Industrial Ecology, among others </li></ul></ul><ul><li>Sustainability from a mostly environmental perspective </li></ul>
    • 3. Chapters <ul><li>Part I: Fundamentals </li></ul><ul><li>1. When does it pay to be green? </li></ul><ul><li>2. What are sustainability strategies? </li></ul><ul><li>Part II: Competitive environmentalism </li></ul><ul><li>3. Eco-efficiency </li></ul><ul><li>4. Beyond compliance leadership </li></ul><ul><li>5. Eco-branding </li></ul><ul><li>6. Environmental cost leadership </li></ul><ul><li>Part III: Beyond competition </li></ul><ul><li>7. Sustainable value Innovation </li></ul><ul><li>8. Sustainability strategies and beyond </li></ul>1 2 3 4 5 6 7 8
    • 4. PART I: FUNDAMENTALS 1 2 3 4 5 6 7 8
    • 5. Chapter 1: When does it pay to be green? <ul><li>Green as </li></ul><ul><ul><li>Commitment </li></ul></ul><ul><ul><li>Core competence </li></ul></ul><ul><li>Non-competitive strategies </li></ul><ul><ul><li>Co-opetition on aspects that companies do not differentiate on </li></ul></ul><ul><ul><li>Non-exclusive profit = not only private profit = Public profit </li></ul></ul><ul><li>Competitive strategies </li></ul><ul><ul><li>Zero sum game = your gain is someone else’s loss </li></ul></ul><ul><ul><li>Involves choice </li></ul></ul>1 2 3 4 5 6 7 8
    • 6. Environment Public Benefits Sustainability business models The Win-Win Scope of Sustainability Strategies Business as usual Business Private Profits E B Orsato, R. 2009. Sustainability strategies: When does it pay to be green? . Palgrave Macmillan: Houndmills, United Kingdom. 1 2 3 4 5 6 7 8
    • 7. Environment Public Benefits Sustainability business models Business Private Profits E B Zone E Non-rival Strategies Zone B Competitive Strategies Business as usual Orsato, R. 2009. Sustainability strategies: When does it pay to be green? . Palgrave Macmillan: Houndmills, United Kingdom. 1 2 3 4 5 6 7 8
    • 8. Chapter 2: What are sustainability strategies? Orsato, R. 2009. Sustainability strategies: When does it pay to be green? . Palgrave Macmillan: Houndmills, United Kingdom. 1 2 3 4 5 6 7 8 Competitive Environmental Strategies Sustainable Value Innovation Strategy Existing Markets New Market Spaces 5 1 4 3 2
    • 9. Chapter 2: What are sustainability strategies? <ul><li>It is not operational effectiveness, i.e. reducing costs or risk </li></ul><ul><li>It involves a choice of position for a product or service (Porter) or choice in what you do (RBV). </li></ul><ul><li>Some of the chapter spent on linking Position based & RBV </li></ul><ul><li>Competitive Environmental Strategies </li></ul><ul><ul><li>Not a stage model </li></ul></ul><ul><ul><li>Choice model (Typology) </li></ul></ul><ul><ul><li>Non-exclusive </li></ul></ul><ul><ul><li>Recognition that titles may be loaded in meaning </li></ul></ul>1 2 3 4 5 6 7 8
    • 10. Competitive Environmental Strategies STRATEGY 1 Eco-Efficiency STRATEGY 4 Environmental Cost Leadership STRATEGY 3 Eco-Branding STRATEGY 2 Beyond Compliance Leadership Competitive Advantage Competitive Focus Organizational Processes Products and Services Lower costs Differentiation Orsato, R. 2009. Sustainability strategies: When does it pay to be green? . Palgrave Macmillan: Houndmills, United Kingdom. 1 2 3 4 5 6 7 8
    • 11. Value for Customers STRATEGY 5 Sustainable Value Innovation Economic Costs Contribution to Society Environmental Impacts Orsato, R. 2009. Sustainability strategies: When does it pay to be green? . Palgrave Macmillan: Houndmills, United Kingdom. 1 2 3 4 5 6 7 8
    • 12. PART II: COMPETITIVE ENVIRONMENTALISM STRATEGY 1 Eco-Efficiency STRATEGY 4 Environmental Cost Leadership STRATEGY 3 Eco-Branding STRATEGY 2 Beyond Compliance Leadership 1 2 3 4 5 6 7 8
    • 13. Chapter 3: Eco-efficiency <ul><li>So is eco -efficiency different to resource productivity ? </li></ul><ul><ul><li>Lean thinking can lead to breakthrough innovations & radical improvements. </li></ul></ul><ul><ul><li>Industrial symbiosis (SI) </li></ul></ul><ul><ul><li>Emission reductions could become an additional revenue stream. </li></ul></ul>STRATEGY 1 Eco-Efficiency STRATEGY 4 Environmental Cost Leadership STRATEGY 3 Eco-Branding STRATEGY 2 Beyond Compliance Leadership 1 2 3 4 5 6 7 8
    • 14. Lean thinking <ul><li>“ To hell with your competitors; compete against perfection by identifying all activities that are muda (waste) and eliminating them” (Hawkin, Lovins & Lovins in Orsato p. 62) </li></ul>STRATEGY 1 Eco-Efficiency STRATEGY 4 Environmental Cost Leadership STRATEGY 3 Eco-Branding STRATEGY 2 Beyond Compliance Leadership Traditionally sold as animal feed <ul><ul><li>Can be used to grow mushrooms </li></ul></ul><ul><ul><li>Spent grain from breweries </li></ul></ul>1 2 3 4 5 6 7 8
    • 15. Industrial symbiosis <ul><li>Manufacturing processes = parts of bigger system of production and consumption (Industrial Ecology) </li></ul><ul><li>Waste becomes raw material – as you reduce waste, costs reduce </li></ul>STRATEGY 1 Eco-Efficiency STRATEGY 4 Environmental Cost Leadership STRATEGY 3 Eco-Branding STRATEGY 2 Beyond Compliance Leadership Result of organic collaboration rather than planned infrastructure 1 2 3 4 5 6 7 8 US-based Eco-Industrial Parks (EIPs) (p 52) SUCCESS FAILURE Kalundborg Eco Park, Denmark (p 51) Guitang Group, China LESSONS Liability for other’s waste in US Political, financial, operational, behavioural barriers MBAs taught to focus on core competence Natural alliances (bottom-up) better than Top down public programs
    • 16. Making strategy 1 pay <ul><li>Lean manufacturing </li></ul><ul><ul><li>Industrial markets (B2B) </li></ul></ul><ul><ul><li>High processing costs </li></ul></ul><ul><ul><li>High levels of waste/by-products </li></ul></ul><ul><li>Industrial symbiosis </li></ul><ul><ul><li>Agriculture </li></ul></ul><ul><li>Emission reduction </li></ul><ul><ul><li>Energy intensive </li></ul></ul>STRATEGY 1 Eco-Efficiency STRATEGY 4 Environmental Cost Leadership STRATEGY 3 Eco-Branding STRATEGY 2 Beyond Compliance Leadership 1 2 3 4 5 6 7 8
    • 17. Chapter 4: Beyond Compliance Leadership <ul><li>In some industries (such as resource intensive) </li></ul><ul><ul><li>Reputation = licence to operate </li></ul></ul><ul><ul><li>Reputational risk very big = biggest driver of Environmental initiatives </li></ul></ul><ul><ul><li>Have to assure stakeholders that the company does more than what’s required. </li></ul></ul><ul><ul><ul><li>The Stuart Oil Shale Project & Greenpeace = poor stakeholder dialogue </li></ul></ul></ul><ul><ul><ul><li>Shell in the North Sea & Greenpeace </li></ul></ul></ul><ul><ul><li>What the company says about itself carries no weight. </li></ul></ul>STRATEGY 1 Eco-Efficiency STRATEGY 4 Environmental Cost Leadership STRATEGY 3 Eco-Branding STRATEGY 2 Beyond Compliance Leadership 1 2 3 4 5 6 7 8
    • 18. Voluntary Environmental Initiatives (or VEIs) <ul><li>Green clubs (VEIs) provide a way to reduce risk </li></ul><ul><ul><li>Reputation insurance (p. 74) </li></ul></ul><ul><ul><li>Not much evidence that CERES, GRI or Global compact provide reputational advantages </li></ul></ul>STRATEGY 1 Eco-Efficiency STRATEGY 4 Environmental Cost Leadership STRATEGY 3 Eco-Branding STRATEGY 2 Beyond Compliance Leadership 1 2 3 4 5 6 7 8
    • 19. Process certification <ul><li>Process carries more credibility </li></ul><ul><li>In 1990s ISO & Environmental Management Systems brought hope of competitive advantage (CA) </li></ul><ul><li>BUT </li></ul><ul><ul><li>ISO 9000 = quality indicates a private benefit to consumer </li></ul></ul><ul><ul><li>ISO 14000 = environmental protection is a public benefit </li></ul></ul><ul><li>For B2B this can carry weight, but unlikely in in B2C </li></ul><ul><ul><li>Would you choose a hotel based in ISO 14000? </li></ul></ul><ul><li>Yet </li></ul><ul><ul><li>Industry leaders can create CA by lobbying for stricter regulations </li></ul></ul><ul><ul><li>GM and Ford announced in 1990 that paint </li></ul></ul><ul><ul><li>suppliers should be ISO 14000 certified </li></ul></ul>STRATEGY 1 Eco-Efficiency STRATEGY 4 Environmental Cost Leadership STRATEGY 3 Eco-Branding STRATEGY 2 Beyond Compliance Leadership 1 2 3 4 5 6 7 8
    • 20. Negative Positive Reputation Beyond Compliance Leadership VEIs - Green Clubs Beyond Compliance Non-Compliance laggard Leader Average Orsato, R. 2009. Sustainability strategies: When does it pay to be green? . Palgrave Macmillan: Houndmills, United Kingdom. 1 2 3 4 5 6 7 8 Consumer engagement Consumer boycotts Stakeholder criticism, negotiation and dialogue Stakeholder opposition and confrontation Reflexive Reactive and Defensive Building Positive Reputation Avoiding Negative Reputation Sustainability leader in the industry Beyond Compliance To From
    • 21. Making strategy 2 pay <ul><li>In conclusion </li></ul><ul><ul><li>These companies can invest in Eco-efficiency but because of reputational risks, beyond compliance should be the focus </li></ul></ul><ul><li>VEI </li></ul><ul><ul><li>Effective in managing risk </li></ul></ul><ul><ul><li>Reputation of club impacts credibility </li></ul></ul><ul><ul><li>Joining early reduces costs for companies while putting pressure on others </li></ul></ul><ul><li>STAKEHOLDER DIALOGUE/ENGAGEMENT A MAJOR REQUIREMENT </li></ul>STRATEGY 1 Eco-Efficiency STRATEGY 4 Environmental Cost Leadership STRATEGY 3 Eco-Branding STRATEGY 2 Beyond Compliance Leadership 1 2 3 4 5 6 7 8
    • 22. Chapter 5: Eco-Branding <ul><li>What is different for differentiation on environmental attributes? </li></ul><ul><ul><li>Normally a brand appeals mostly to private benefits </li></ul></ul><ul><ul><li>Not only private benefits embedded in eco product </li></ul></ul><ul><ul><li>Also public benefits such as biodiversity, water recycling, CO 2 - reduction </li></ul></ul><ul><ul><li>Consumer needs to be informed about issues. </li></ul></ul><ul><ul><li>Consumer must believe the benefit is worth paying for and is real </li></ul></ul>STRATEGY 1 Eco-Efficiency STRATEGY 4 Environmental Cost Leadership STRATEGY 3 Eco-Branding STRATEGY 2 Beyond Compliance Leadership 1 2 3 4 5 6 7 8
    • 23. Labelling <ul><li>One way to present information is through eco-labels </li></ul><ul><ul><li>Eco-labels facilitate consumer choice </li></ul></ul><ul><ul><li>But is the consumer willing to pay? </li></ul></ul><ul><li>Product labels </li></ul><ul><ul><li>Type I: Multi-party agreement on criteria and 3 rd party certification </li></ul></ul><ul><ul><li>Type II: Packaging, etc. (Provided by manufacturer) </li></ul></ul><ul><ul><li>Type III: Measureable data - Life Cycle Analysis </li></ul></ul><ul><li>Seems to be more effective to avoid disadvantages than generating CA </li></ul>STRATEGY 1 Eco-Efficiency STRATEGY 4 Environmental Cost Leadership STRATEGY 3 Eco-Branding STRATEGY 2 Beyond Compliance Leadership 1 2 3 4 5 6 7 8 Type I Type II Type III
    • 24. From Eco-labelling to Eco-branding <ul><li>Coop Sverige – Ӓ nglamark </li></ul><ul><ul><li>Products perform as well as products in categories </li></ul></ul><ul><ul><li>Difficult to imitate </li></ul></ul>STRATEGY 1 Eco-Efficiency STRATEGY 4 Environmental Cost Leadership STRATEGY 3 Eco-Branding STRATEGY 2 Beyond Compliance Leadership 1 2 3 4 5 6 7 8
    • 25. Making strategy 3 pay <ul><li>Can create CA when </li></ul><ul><ul><li>Uncontroversial information about environmental performance is available </li></ul></ul><ul><ul><li>The differentiation is difficult to imitate </li></ul></ul><ul><ul><li>Customers are willing to pay for costs of ecological differentiation </li></ul></ul><ul><ul><li>Ideally , private and public benefit should converge </li></ul></ul><ul><li>B2C shows potential </li></ul><ul><ul><li>B2B less potential as B more rational (less emotional) </li></ul></ul><ul><li>Orsato seems sceptical of affluence leading to eco-behaviour, instead stating that it seems to lead to higher material intensity…but “we cannot deny the potential”. </li></ul>STRATEGY 1 Eco-Efficiency STRATEGY 4 Environmental Cost Leadership STRATEGY 3 Eco-Branding STRATEGY 2 Beyond Compliance Leadership 1 2 3 4 5 6 7 8
    • 26. Chapter 6: Environmental Cost Leadership <ul><li>Most difficult of strategies </li></ul><ul><ul><li>Not only lowest cost, but also lowest environmental impact </li></ul></ul><ul><li>Ecolean packaging/ pouches </li></ul><ul><ul><li>25% cheaper than competitors </li></ul></ul><ul><ul><li>No FDA approval required </li></ul></ul><ul><ul><li>When incinerated it reduces acidity of fumes </li></ul></ul><ul><ul><li>Yet the company does not market this – consumer won’t pay. </li></ul></ul><ul><li>Other instances </li></ul><ul><ul><li>IKEA’s flat packaging reduces transport cost and emissions </li></ul></ul><ul><ul><li>Biofuels </li></ul></ul>STRATEGY 1 Eco-Efficiency STRATEGY 4 Environmental Cost Leadership STRATEGY 3 Eco-Branding STRATEGY 2 Beyond Compliance Leadership 1 2 3 4 5 6 7 8
    • 27. Servicising <ul><li>Convert functional product to service </li></ul><ul><ul><li>Water heating instead of geyser </li></ul></ul><ul><ul><li>Xerox photocopiers </li></ul></ul><ul><li>Decouples economic growth from consumption </li></ul><ul><ul><li>Throw away society </li></ul></ul><ul><li>Barriers </li></ul><ul><ul><li>Culture shock to let others work in your processes </li></ul></ul><ul><ul><li>Not easy to identify economic gains </li></ul></ul><ul><ul><li>If core competence is manufacturing – won’t be keen </li></ul></ul><ul><ul><li>Consumers have ingrained perceptions </li></ul></ul><ul><ul><ul><li>Servicising ignores emotional attachments </li></ul></ul></ul><ul><ul><ul><li>such as status </li></ul></ul></ul>STRATEGY 1 Eco-Efficiency STRATEGY 4 Environmental Cost Leadership STRATEGY 3 Eco-Branding STRATEGY 2 Beyond Compliance Leadership 1 2 3 4 5 6 7 8
    • 28. Making strategy 4 pay <ul><li>B2B </li></ul><ul><ul><li>Compete on price </li></ul></ul><ul><li>Commodities </li></ul><ul><ul><li>Fuel (bio-fuel) </li></ul></ul>STRATEGY 1 Eco-Efficiency STRATEGY 4 Environmental Cost Leadership STRATEGY 3 Eco-Branding STRATEGY 2 Beyond Compliance Leadership 1 2 3 4 5 6 7 8
    • 29. PART III: BEYOND COMPETITION 1 2 3 4 5 6 7 8
    • 30. Chapter 7: Sustainable Value Innovation (SVI) <ul><li>Car industry as example </li></ul><ul><li>Red Ocean </li></ul><ul><ul><li>Breakeven for models at 100k to 150k units p.a. </li></ul></ul><ul><ul><li>Plant capacity needs to run at 65% to be viable </li></ul></ul><ul><ul><li>Operating margin typically 3.5% </li></ul></ul><ul><li>Polluting industry </li></ul><ul><ul><li>80% of a car’s emissions is during its use </li></ul></ul><ul><ul><li>2.4 of every 100 litres is used to transport the driver (p 158) </li></ul></ul><ul><li>Car industry aims to overcome pollution in 3 ways </li></ul><ul><ul><li>Smaller cars </li></ul></ul><ul><ul><li>Cleaner fuels </li></ul></ul><ul><ul><li>Alternative powertrains </li></ul></ul><ul><li>None of these provide CA </li></ul>1 2 3 4 5 6 7 8
    • 31. SVI in car industry <ul><li>Station cars Liselec </li></ul><ul><ul><li>50 cars in 7 stations </li></ul></ul><ul><ul><li>Individual public transport </li></ul></ul><ul><ul><ul><li>Stations avoid cost of parking areas </li></ul></ul></ul><ul><ul><ul><li>Electricity utilities sees EV as future consumers </li></ul></ul></ul><ul><ul><ul><li>Regulators supports less traffic </li></ul></ul></ul><ul><li>Better place </li></ul><ul><ul><li>PPP with Israel govt to provide transport in “transportation islands” </li></ul></ul><ul><ul><li>Similar to mobile phone contract </li></ul></ul><ul><ul><ul><li>Low cost of car </li></ul></ul></ul><ul><ul><ul><li>Subscription to service provider = battery replacement, maintenance, etc. </li></ul></ul></ul><ul><li>Car sharing (Mobility & Zipcar) </li></ul><ul><ul><li>80 000 members & 2000 cars </li></ul></ul><ul><ul><li>Book vehicle on internet for round-trip use </li></ul></ul><ul><ul><li>(2hrs/taxi < CSO < 2 days/ rental) </li></ul></ul><ul><ul><li>Lower cost plus access to multiple types of vehicles </li></ul></ul><ul><ul><li>30% of members delayed buying a new car or sold car </li></ul></ul>1 2 3 4 5 6 7 8 Marginal, but exponential growth
    • 32. Orsato, R. 2009. Sustainability strategies: When does it pay to be green? . Palgrave Macmillan: Houndmills, United Kingdom. 1 2 3 4 5 6 7 8 Smaller car Alternative drivetrain
    • 33. Chapter 8: Sustainability Strategies and Beyond <ul><li>Being green requires some specialisation = choice </li></ul><ul><li>Being green can align with stakeholder expectations </li></ul><ul><li>When it pays is > Whether it pays </li></ul><ul><li>Sustainability strategy needs to align to corporate strategy </li></ul><ul><ul><li>Wall Mart </li></ul></ul>1 2 3 4 5 6 7 8
    • 34. In conclusion: About the book <ul><li>Anecdotal </li></ul><ul><ul><li>Book by its own admission does not provide a clear explanation of the answer to the central question. </li></ul></ul><ul><ul><li>But a VERY strong conceptual framework </li></ul></ul><ul><li>Multiple South African cases can extend the context of Orsato </li></ul><ul><li>A very significant contribution to management of green issues </li></ul><ul><ul><li>Does a lot to show how it relates to Position based and RBV . </li></ul></ul>

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