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New business models for sustainability


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workshop at International Program Green Sustainable Economy at UCN Aalborg, 2013. Contribution from Hogeschool Utrecht, HU University of Applied Sciences Utrecht

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New business models for sustainability

  1. 1. New Business Models forSustainabilityInternational programGreen Sustainable EconomyUniversity College AalborgMenno de Lind van Wijngaarden
  2. 2. Programn Sustainabilityn Business picking up the challengen Innovation for sustainability n Social Entrepreneurship n Circular economy n Base of the pyramid
  3. 3. What is sustainability?
  4. 4. Sustainabilityn The problems at hand: n Pollution n Resource depletion n Natural ecosystems n Resources n Inequity n Population growth n Consumption growth
  5. 5. Sustainability approachesn Mitigation strategies “If we act now we can save the world as we know it” n E.g. CO2 offset, Emission Trading Schemesn Adaptation strategies “ be ready for a big disruption” n E.g. low carbon strategies, zero footprint
  6. 6. Programn Sustainabilityn Business picking up the challengen Innovation for sustainability n Social Entrepreneurship n Circular economy n Base of the pyramid
  7. 7. The role of businessThe culprit?The answer to the solution?
  8. 8. Business as driver of change?n Quick in response to external threatsn Know-how in-house, industrial networks, in public-private partnerships.n Capital available for investmentn Pressure over suppliersn Influence over customersn Round tables, covenants, standardizations with competition
  9. 9. From obligation to opportunity 1970‟s-1980‟s 1980‟s-2000 End-of-Pipe Greening: regulation. pollution Pay to reduce prevention, negative product impact (trade- stewardship off) (eco- efficiency) 2000-present Beyond greening: Clean 1945-1960‟s technology, Pollution: Base of the Denial or “part Pyramid of progress
  10. 10. Perspectives on Business Different perspectives of business in the sustainability context
  11. 11. Areas of Business Investment Areas of business investment in sustainability today
  12. 12. Sustainable value framework
  13. 13. Programn Sustainabilityn Business picking up the challengen Innovation for sustainability n Social Entrepreneurship n Circular economy n Base of the pyramid
  14. 14. What is innovation?
  15. 15. The process of innovation n Idealized process of innovation n In real life innovation will not be this neatly categorized Produc Full scale Market / Insight / Develop Market -tion manufac Design PilotResearch ment Evaluation engineer -ture & testing -ing launchResearch and Development Commercialization Innovation
  16. 16. Innovation
  17. 17. The functions of a business model Value Creation Invention Business Model Value capture
  18. 18. Innovation and organizationn How can you foster innovation in your organization?n Business should have “ absorptive capacity” n “the ability of a firm to recognize the value of new, external information, assimilate it and apply it to commercial ends”
  19. 19. Corporate culturen In general, firms with a strong record of innovation have a corporate culture that values and promotes: n Outward-looking orientation n Facilitating communication n Openness to new ideas n Challenging established ideas n Acceptability of failure n Promotion of evaluation and reflection
  20. 20. Programn Sustainabilityn Business picking up the challengen Innovation for sustainability n Social Entrepreneurship n Circular economy n Base of the pyramid
  21. 21. Example of Social Entrepreneurn Muhammad Yunusn Founder of the Grameen bank, it‟s model of microfinance inspired hundreds of banks to develop similar business modelsn Received the Nobel peace price in 2006
  22. 22. Social entrepreneurshipn Growing phenomena, because… n Growing inequity n Weak institutions, retrieving governments n Scandals in corporate world n Need for inspiration!
  23. 23. What is Soc. Entrepreneurship?n Relative new research field therefore broad definition.n „a process involving the innovative use and combination of resources to pursue opportunities to catalyse social change and/or address social needs.‟ (Mair and Marti, 2006)n Often a focus on the entrepreneur (the change agent); personality, qualities, values and visions.n Characterized by n Social impact (Social return on investment) n Innovation (business model) n Market orientation (performance-driven, competitive, co-operation across sectors.)
  24. 24. Example • Restaurant chain „Fifteen‟ • Founded by Jamie Oliver in 2002 • Each restaurant recruits unemployed and under-qualified young people, aged between 18 and 24, from the local area and trains them to become qualified chefs through an Apprentice Program. • 220 have graduated since the start and more than 90 per cent of apprentices stay in the business. •The profit of the restaurants goes into the chef apprenticeship scheme
  25. 25. Philanthropy v.s. SEPhilanthropy Social EntrepreneurshipSpontaneous charity Reasoning about social returnHonoring sacrifice and justifying Need for talent and expertise toweak results address challengesPure giving Business like approachesRelieving suffering Solving the problem and its causeCaring for people Empowering people Dees, J. G. (2012)  But not just a bipolar strategy;  Some problems ask for philanthropy, others for SE  Most SE start with charity  The two different cultures can also be aligned.
  26. 26. Program Sustainability Business picking up the challenge Innovation for sustainability  Social Entrepreneurship  Circular economy  The Natural Step  Natural capital  Cradle to Cradle  Base of the pyramid
  27. 27. Circular economy Industry should move to closed loop systems in alignment with laws of nature: Circular Economy:  The Natural Step  Natural Capitalism  Cradle to Cradle
  28. 28. The Naturel Step  The Natural Step Karl-Henrik RobèrtThe Four System Conditions... . . . Reworded as The Four Principles of SustainabilityIn a sustainable society, nature is To become a sustainable society we must...not subject to systematicallyincreasing:1. concentrations of substances 1. eliminate our contribution to the progressive buildup of substancesextracted from the earths crust extracted from the Earths crust (for example, heavy metals and fossil fuels)2. concentrations of substances 2. eliminate our contribution to the progressive buildup of chemicals andproduced by society compounds produced by society (for example, dioxins, PCBs, and DDT )3. degradation by physical means 3. eliminate our contribution to the progressive physical degradation and destruction of nature and natural processes (for example, over harvesting forests and paving over critical wildlife habitat); and4. and, in that society, people are 4. eliminate our contribution to conditions that undermine people‟snot subject to conditions that capacity to meet their basic human needs (for example, unsafe workingsystemically undermine their conditions and not enough pay to live on).capacity to meet their needs
  29. 29. Example After receiving criticism on formaldehyde off- gassing , use of PVC, paper and chlorine use for catalogue, IKEA decided to work with The Natural Step in 1992. It is now the basis for their environmental program; step by step environmental impact reduction of all products.
  30. 30. Natural Capitalism 3 principles• Buy the time to deal with the growing challengesfacing the planet by using all resources far moreproductively. (=eco-efficiency)• Redesign how we make all products andprovide services, using such approaches asbiomimicry and cradle to cradle.• Manage all institutions to be restorative ofhuman and natural capital
  31. 31. Natural Capitalism Increase productivity of natural resources  Whole system design  Adopting innovative techniques Redesign production according to biological models  Closed loop systems  Zero waste Change the business model  Not selling lifts/elevators, but “leasing vertical transportation”
  32. 32. Example: Interface Inc. carpet  Ray Anderson, CEO  Changed business model  From selling to leasing  Evergreen lease “Floor Covering Service”
  33. 33. Innovation of Business Models From waste as a cost to a waste as an asset  Recycling factory in Kampala, Uganda pays cash p. kilo plastics, has lead to numerous local initiatives, 43 people working in the factory, hundreds make a living collecting. The clean end products are sold to China for fibers of fleece and carpets. The environment benefits too. From car lease to mobility services  Athlon car lease, the biggest lease company of the Netherlands closed a deal with the Dutch Railway, NS. It offers now clients a car lease plus NS Business Card. Athlon wants to become a mobility broker in 2020.
  34. 34. Cradle to CradleThe Next Industrial Revolution?
  35. 35. Waste = Food Principle
  36. 36. Waste = Food Design producs and processes in such a way:  that resources remain available for human use or the natural environment  That they are save for the environment and can be reused: Waste = Food Non renewables are valuable resource for technosphere (food for process) Non reusables are decomposable in the biosphere (food for organisms)
  37. 37. Cradle to cradle book  Cradle to cradle: remaking the way we make things  Written by Architect McDonough and chemist Braungart  Published in 2002
  38. 38. Cradle to Grave Cradle to Cradle resource resource raw material disposal raw material component assembly consumption component consumption disposal assembly
  39. 39. Cradle to Cradle  In contrast to Cradle to Grave concept  Reduce, reuse, recycling (3 R‟s)  Reducing: „poisoning‟ at a slower rate  Reuse: products are not designed for this purpose  Recycling: down cycling and potentially dangerous
  40. 40. Cradle to Cradle  Focus on:  Design, start from the root of the problem  Biological processes, like ecological systems  Not Eco-efficiency (3 R‟s) but Eco- effectiveness  Waste = Food principle  Biological nutrients and technical nutrients
  41. 41. What about the book? Do you notice something about the physical appearance of the book?
  42. 42. The Book itself No Paper, but synthetic resins Non toxic, recyclable (up cycle) Superior durability and performance Waterproof Ink can be washed of• As an example of theirconcept: the book is a„technical nutrient‟
  43. 43. C2C in Business Ideas has followers among “big business”: Nike, Ford Motor Company, Herman Miller 2 documentaries in NL attracted attention of business
  44. 44. Example of certified C2C Diapers fully recyclable, compostable and flushable No use of chlorine, plastics, latex, perfumes, inks and dyes. It takes up 500 years to biodegrade for a normal disposable diaper in a landfill
  45. 45. C2C in the Netherlands Happy Shrimp Farm Heat exchange system with E.ON Power Plant Biological filter bed No damage to marine ecosystems
  46. 46. Happy Shrimp Farm Went bankrupt 23-06-2009 Shrimps didn‟t grow fast enough, harvests too small 2 partners are in conflict 600.000 debt at ING bank
  47. 47. Program Sustainability Business picking up the challenge Innovation for sustainability  Social Entrepreneurship  Circular economy  Base of the pyramid
  48. 48. Bottom of the Pyramid
  49. 49. Bottom of the Pyramid Concept of C.K. Prahalad 4 billion people at bottom of economic pyramid, with income less then $ 1.500 PPP Can be seen as a latent market of goods and services Aggregated there is a huge potential
  50. 50. Bottom of the Pyramid Removal of poverty penalty (=high prices due to, local monopolies, inadequate access, poor distribution, strong traditional intermediaries) Find access to BOP market (urban easier than rural areas) Create capacity to consume (e.g. single serve packaging)
  51. 51. Bottom of the Pyramid Three A‟s  AFFORDABILITY (single serve package)  ACCESS (high intensity of distribution)  AVAILABILITY (consumption when capacity is there)
  52. 52. BOP market requirements Innovative High price performance Conserving resources Focus on functionality Deskilled work / operation Education of customers High performance / endurance
  53. 53. Critique on BoP By co-author Stuart Hart  Too many same products at lower prices, no new approach  environmental unsustainable products and services “dumped” on BoP market  Poor are not just consumers, should be considered as partners in mutual learning
  54. 54. From Bottom to Base
  55. 55. New Business Models Conclusions:  Business as a driver for change, when primed for innovation.  Government and regulating authorities needed for leveling playing field, stimulation of innovation  Circular economy principles needed for environmental solutions  Base of the Pyramid, social entrepreneurship for social solutions
  56. 56. Thank youBe the change that you want to see in the world. Mohandas Gandhi