The document discusses whether it pays for businesses to be environmentally sustainable, noting that while some argue it increases costs, others believe it can lead to competitive advantages from resource conservation and innovation; it provides examples of companies like Zipcar, Xerox, and Grameen Bank that have found business opportunities and models focused on sustainability; and concludes that addressing environmental challenges will require both technical and business innovation.

1. Does it pay to be ”green”?
CBS Responsibility Day
2010-09-01
Christian Erik Kampmann
Department of Innovation and
Organizational Economics (INO)
CBS
cek.ino@cbs.dk

2. Change in perspective
Responsibility day Opportunity day

3. Is climate problem real?

4. Numbers in perspective
Cost of cleaning up after the financial crisis*
11.900.000.000.000 $
Copenhagen Accord support goal for annual
climate mitigation (from 2020)
100.000.000.000 $
Or 0.8% of cost of financial crisis
*) Bailout and liquidity programs, global, as of Aug. 2009 (source: IMF)

5. Cost of climate abatement

6. Does it pay to be green?
The skeptic position The free-lunch position
• Firms should serve shareholder • It pays to be green – resource
value and not loose focus by conservation = lower costs
chasing environmental • move ahead of competition (and
objectives beyond compliance regulation pressures)
with public regulation • Innovation for the environment =
• Compliance = cost increase competitive advantage
• If it were profitable, firms • But firms don’t know that
would do it
.. but this assumes the pie is a fixed size, which it isn’t!

7. Nature is not efficient…
… but effective!

8. Business innovation case #1
Personal mobility
• The challenge of transportation and CO2
abatement
– 97% oil dependent, 60% of world oil cons., 23% of
global CO2 emissions, 28% of global energy cons.
• Solutions have tended to focus on improving
vehicle technology
– Smaller cars, lighter cars, cleaner cars
– Alternative fuels
• An alternative view: focus on the use of
vehicles!

9. Market spaces in terrestrial
mobility
Private Property 1 Underexploited
2
VEHICLE OWNERSHIP
Private Cars
Internal Combustion Engines Rental
Taxis
Cars
Small Cleaner Fuels Car-sharing
Cars Alternative Schemes
Powertrains Busses
Trains
Mobility
Operators
4
Public Property
Unexploited
3
Public Transport
Station
Cars Smart Vans
Busses, Trains,
Light-rail, Metro
Station
Bikes
Individual Use Collective Use
VEHICLE USE
Courtesy of Renato Orsato, INSEAD, all rights reserved.

10. Zipcar
• Founded in 2001
• 400.000 members
– Growth 40-100%/year
• 2009 revenues $130M
Courtesy of Renato Orsato, INSEAD, all rights reserved.

11. Business innovation case #2
Xerox – servicizing and
sustainability
• Moved on to radical business model
– ”Take-back” scheme (disposal)
– Renewal program (leasing model)
– Machines are disassembled, upgraded,
reconfigured, reassembled, and resold
at new-machine prices
• Benefits
– Xerox: cost, barriers to imitation, loyal
customers
– Customers: No worry about disposal
or obsolesence

12. Business case #3:
Grameen Bank – base of
pyramid innovation
• Founded 1976
• Micro-credit and community
development bank
• Solidarity lending (peer pressure,
value-based conduct)
• Owned by borrowers (7.4 M in
2007), 97% are women
• 2.468 branches covering 43.681
villages (2007)
• Cumulatively distributed $6.6B in
loans (2007)
• >98% recovery rate of loans Nobel Laureate
Muhammad Yunus,
• Diversification into energy, Founder
education, fisheries, telecom, …

13. Conclusion
• Environmental problems present huge
challenges but also huge opportunities
• Technical innovation is needed for
sure…
• … but business innovation has an
equally important role to play…
• … and that’s where you all come in!