Knowledge level 3– Organizational change and improvement

Material Package 3

1

Haley Knudson, Annik Magerholm Fet &

Martina Keitsch – NTNU Location, Date

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Methods for organizational change & improvement

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3.1 Environmental management systems (EMS)• Definition • Continuous improvement model - PLAN-DO-CHECK-ACT • Environmental management standards

3.2 Sustainability communication and reporting• Benefits of sustainability communication, reporting and metrics• Definition• The Global Reporting Initiative (GRI)• Integrated reporting• Reporting and the SDGs3.2.1 Key performance indicators (KPIs)

• Definition and requirements• Aspects and impacts• The GRI standard

3.2.2 Environmental performance evaluation (EPE)• Definition• ISO 14031• Indicator examples

3.3 Life cycle management (LCM)

• Introduction to life cycle thinking

• Definition

• Strategies and concepts in LCM

• Systems, procedures and process in LCM

• Tools for LCM

• Implementing LCM

3.4 Business models for sustainability (BMS)

• Structure

• Archetypes & Examples

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Methods for organizational change & improvement

3.1 Environmental management systems (EMS)

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Environmental management systems (EMS) – ISO 14001

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An EMS is a process for the management of the environmental aspects of a company in a holistic matter.

An EMS, “helps an organization to avoid, reduce or control the adverse

environmental impacts of its activities, products and services, achieve

compliance with applicable legal and requirements and with other

requirements to which the organization subscribes and assist in

continually improving environmental performance” (ISO 14001, 2004).

Key issues in an EMS

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Environmental policy

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A company’s environmental policy should be based on the following considerations:• accountability for the environment among staff at all levels;• advanced consideration of the environmental impact of all new

activities, products and methods;• taking all necessary measures to prevent and/or mitigate

pollution;• establishing procedure for the response pattern of any violation

of corporate environmental policy;• information for customers and the public on the environmental

aspects of the business; and,• measures to ensure that entrepreneurs within the industrial area apply

environmental standards that correspond to the company’s own.

Continuous improvement models

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• Environmental management standards

(ISO 14001, EMAS, Environmental Lighthouse)

• AccountAbility AA1000-standards

• Social Accountability SA 8000 standard

• International guidelines for social responsibility (ISO 26000)

• Global Reporting Initiative (GRI) guidelines

Plan

Do Check

Act

Continuous improvement

Relationship between PDCA and the ISO 14001:2015 framework

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As cited in Winther & Fet (2016)

What has to be planned?

• Policy

• Environmental Aspects

• Legal and other Requirements

• Objectives and Targets

• Environmental Management Program

Plan

Do

Check

Act

The PLAN-stage in an EMSDescription of activities and processes of a company

• Identifying stakeholders and their needs and requirements

• Considering environmental aspects and impacts

• Understanding the laws, regulations and standards the company must comply with

• Decision on environmental improvement objectives

Proposals for environmental improvement measures may refer to:

• Product and process changes• Changes in raw materials and auxiliaries• Changes in technology and practices• Alternative measures for waste reduction• Reuse or recycling• Energy conservation

Plan

Do

Check

Act

The DO-stage in an EMSFocuses on the implementation of measures for improving

environmental performance based on the identification and assessment of impacts in the Plan-stage

• Procedures for implementation, monitoring, control and documentation of progress should be established

• Requires that the organization shall determine and provide resources and competence needed for implementation of programs and procedures, ensuring continual improvement in environmental performance. Plan

Do

Check

Act

What has to be done?

• Structure/ Responsibility

• Training/ Competency

• Communications

• Environmental documentation

• Emergency preparedness and response

• Document control

• Operational control Plan

Do

Check

Act

The CHECK-stage in an EMS

Monitoring, verification and auditing

• Are objectives being met?

• Non-Conformance and Corrective and Preventative Action

• Records

• Environmental Audit

Plan

Do

Check

Act

The ACT-stage in an EMS

New actions for improvement…transition back into the PLAN-stage

• The organization’s reaction to any nonconformity between established environmental impacts and improvement measures throughout the project life cycle.

• Action must be taken to eliminate the causes of the nonconformities and to implement corrective measures.

Plan

Do

Check

Act

Standardization can be a door-opener

Benefits of standards:

• Systemized knowledge

• Common “playground” rules

• Common methods for data collection and reproduction

• Basis for agreements and cross border trade

• Recognized both nationally and internationally

• Transparency

A standard is a voluntary way of solving a problem and a “harmonization of best practice”

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ISO

TC1-TC206

TC207Environmental Management

SC1EMS

ISO14001ISO14004ISO14005

SC2Auditing

ISO14015

SC3Labelling

ISO14020ISO14021ISO14024ISO14025

SC4Performance evaluation

ISO14031ISO14032

SC5LCA

ISO14040ISO14044ISO14046ISO14047ISO14048ISO14049

SC6 (dissolved)Terms and definitions

SC7GHG

ISO14064ISO14065ISO14066ISO14067ISO14069

WG1Competency requirements

WG2GHG in the value chain

ISO14067-1

Quantification

ISO14067-2

CommunicationWG3

GHG of organisations

TC208-TC259

Environmental

management

Environmental

labelling

(Nordic Swan, EPDs, etc.)

Life Cycle

Assessment

(LCA)

ISO:

• Develop voluntary standards

• Consensus based: meetings,

discussions, drafts, voting,

agreement?

• Stakeholder focus: through the

country representatives and through

liasons with other organisations

(e.g. ECOS, WRI)

• International, country representatives (Standards Norway, quasi-NGO)

ISOInternational

Organization for

Standardization

Environmental management standards

ISO 14001-6 Environmental management system

ISO 14020-25 Environmental labels and declarations

ISO 14031 -33 Environmental performance evaluation

ISO 14040-48 Life cycle assessment

ISO 14049 Water footprints products

ISO 14050 Vocabulary

ISO 14062 Env. Aspects in product standards

ISO 14063 Env. Communication -Guidelines and examples

ISO 14064 Greenhouse gas management

ISO 14067 Carbon footprints products

EMAS Eco Management and Audit Scheme

ISO19011 Guidelines for Auditing (environment and quality)

ISO Standards in the PDCA-

framework

Plan Do Check Act

Implementingenvironmental

management systems

Managing and measuring life cycle

environmentalaspects

Conducting audits and evaluating environmentalperformance

Communicatingenvironmental issues

to adjust

ISO 14001: EMS –Requirements forguidance and use

ISO 14040 series:Environmentalmanagement – Lifecycle assessment

ISO 14031:Environmentalperformanceevaluation

ISO 14033: Guidelinesfor quantitativeenvironmentalinformation

ISO 14004: EMS –General guidelines onprinciples and systems

ISO 14064 (parts 1,2,3):GHG accounting andverification

ISO 19011: Guidelinesfor quality and/or EMSauditing

ISO 14063:Environmental communicationguidelines

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(Adaptation from ISO, 2010)

ISO14001 Environmental management systems –Requirements with guidance for use

• Internationally agreed standard that sets out the requirements for an environmental management system

• Helps organizations improve their environmental performance through more efficient use of resources and reduction of waste, gaining a competitive advantage and the trust of stakeholders

• Following the Plan-Do-Check-Act framework, ISO 14001 outlines the general requirements of an EMS, and then breaks them down for each stage

• Companies can be certified as meeting the requirements of ISO 14001, communicating their commitment to the environment to stakeholders

• Helps demonstrate compliance with regulatory requirements

• Increase in leadership involvement and engagement of employees

• Improved company reputation

ISO (2015) Introduction to ISO 14001:2015 https://www.iso.org/publication/PUB100371.html

ISO 14001 Environmental management systems –General guidelines on principles, systems and support

techniques

Similar to ISO 14001, ISO 14004 also describes an EMS, but with less focus on what an EMS is and should include, and more on how the organization should develop, implement

and manage its EMS.•specific context of the organization

•needs and expectations of those involved in the organization, including shareholders and the surrounding society

•compliance obligations

•Importance of leadership - outlines the roles and responsibilities required for the management of a strong EMS

3.2 Sustainability communication & reporting

3.2.1 Performance indicators3.2.2 Environmental performance

evaluation (EPE)

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Sustainability CommunicationNot one unanimous definition.

By Godemann and Michelsen (2011):

• a process of mutual understanding dealing with the future development of society at the core of which is a vision of sustainability.

By Ziemann (2011),

• a global social process (and one that is accompanied by the mass media) that consists of the recursive order of contributions and arguments to the theme of a better ecological, economic and social life

By ISO 14063 (2006)

• A process that an organization conducts to provide and obtain information, and to engage in dialogue with internal and external interested parties to encourage a shared understanding on environmental issues, aspects and performance,

Benefits of sustainability communication

• improved relationship with stakeholders,

• advertisement of the organization’s sustainability performance,

• raised awareness for support of a sustainability culture within the organization and

• obtainment of valuable input in the work towards sustainability

In order to obtain these benefits, the communicating organization should apply the following principles:

Transparency, appropriateness, credibility, responsiveness and clarity

Why focus on sustainability metrics and reporting

Much effort has focused on developing mechanisms to enable the privatesector to manage, measure and report their sustainability performance.

Sustainability reporting became a formal part of the global agenda in2002 at the United Nations World Summit on Sustainable Development(WSSD), when governments from around the world committed “toencourage industry to improve social and environmental performancethrough voluntary initiatives including….…and public reporting onenvironmental and social performance”

Sustainability ReportingOften used synonymously with 'corporate sustainability

reporting,’ 'triple bottom line reporting,’ and ‘non-financial reporting.’

Sustainability reporting according to UNEP,

“the practice of measuring and disclosing sustainability information

alongside, or integrated with, companies’ existing reporting practices.

Sustainability information can be understood as any information having

to do with how companies use and affect financial, natural and human

resources, and how their corporate governance is conducted.”

Sustainability reporting according to the Global Reporting Initiative (GRI) :

Sustainability reporting can help organizations to measure, understand

and communicate their economic, environmental, social and

governance performance, and then set goals, and manage change

more effectively. A sustainability report is the key platform for

communicating sustainability performance and impacts – whether

positive or negative.

(GRI, 2017)

What is a sustainability report?

• A report published by a company or organization about the economic,

environmental and social impacts caused by its everyday activities.

• Also presents the organization's values and governance model, and

demonstrates the link between its strategy and its commitment to a

sustainable global economy (GRI, 2017).

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Benefits of sustainability reporting

• It enables any type of organization to measure, manage and communicate its performance

• Information about a company's activities is of interest to stakeholdersand is communicated with them

• It contributes to building trust and risk- and reputation management

• Sustainability reports can also work as a benchmarking tool, where performance comparisons can be conducted internally, externally and over time.

Reporting regimes

• National regulations

• International regulations

• Independent organizations

• GRI

• Carbon Disclosure Project

Important reporting initiatives

• UNEP stands behind the Global Reporting Initiatives (GRI), established in 1997

• For OECD it became a key priority in 98 to include environmentalconsiderations into the working of economic systems and to address some of the social consequences for better integration.

• The WBCSD is a coalition of 160 companies united by a shared commitment to sustainable development. Eco-efficiency is at the heart of its philosophy.

The Global Reporting Initiative (GRI)

• International independent organization that helps businesses, governments and other organizations understand and communicate the impact of business on critical sustainability issues such as climate change, human rights, corruption and many others.

• First global framework for comprehensive sustainability reporting, encompassing the "triple bottom line" of economic, environmental, and social issues.

• 1st version: 2000, 2nd version: 2002, 3rd version G3: 2006, 4th version G4: 2010, 5th version “GRI standards”: 2016

The GRI recommends a 5-step process to start reporting

1. Map the organization's major impacts and develop an action plan,

2. identify key stakeholders and talk to them,

3. use stakeholder engagement to conduct an internal assessment, with management, to get an indication as to which topics are the most important for the organization to report on,

4. check processes and systems, monitor activities, record data, set performance goals and follow up,

5. write the report and communicate it.

Integrated reporting

“An integrated report is a single document that presents and explains a company’s financial and nonfinancial—environmental, social, and

governance (ESG)—performance” (Eccles & Saltzman, 2011).

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Drivers for integrated reporting:

• Increasing requirements for ESG disclosure from governments and market regulators

• Growing recognition of the connection between risk and ESG factors, and resulting appreciation for sustainability reporting from investors and stakeholders (GRI, 2016).

Sustainability reporting and the SDGs

The SDGs depend on commitment from governments, but also call upon the need for private sector contribution:

• SDG target 12.6 exemplifies this idea by “encouraging companies, especially large and transnational companies, to adopt sustainable practices and to integrate sustainability information into their reporting cycle”.

The SDGs provide a common framework for sustainability/ non-financial reporting. As a result, the SDGs and reporting are intimately linked.

(WBCSD, 2015)

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From the WBCSD (2015) report, “Reporting matters”:

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Principles:Overarching concepts that inform the SDG relevance to business (WBCSD, 2015)

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Content:Information that will guide the implementation of the SDGs(WBCSD, 2015)

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3.2.1 Performance indicators

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For all types of reporting, indicatorsare needed.

• The term “indicator” stems from the Latin verb indicare, meaning to disclose or point out, to announce or make publicly known, to estimate or put a price on.

• Indicators provide information in more quantitative form than words or pictures alone, and in a simpler form than complex statistics or other kinds of economic or scientific data.

• Indicators are not an end in themselves, but tools to build support for needed change and guide the actions of management.

• Indicators communicate information about progress toward stated goals.

Note: ”indicators” are now referred to as “disclosures” in the GRI Standards

Requirements of an indicator

An indicator must:

• reflect changes over a period of time keyed to the problem,

• be reliable and reproducible, and

• be calibrated in the same terms as the policy goals or targets they are linked to.

An environmental indicator must

• be understandable, prevention oriented and reflect the impact,

• reflect the goals one seeks to achieve, and

• give information that is meaningful for the interested parties.

The information expressed through indicators can be indexed, aggregated, or weighted as appropriate.

Aspects and impacts

Environmental aspect: element of an organization’s activities or products or services that can interact with the environment (ISO 14001:2004)

Environmental impact

Environmental impact: any change to the environment, whether adverse or beneficial, wholly or partially resulting form an organization’s environmental aspects (ISO 14001:2004)

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THE GRI-INDICATOR FRAMEWORK

Provide guidance to reporters on selecting generally applicable and organisation specific indicators, as well as integrated sustainability indicators. Forward-looking indicators and targets for future years are also included.

Subjects: The groupings of economic, environmental and social issues

Topics: The general subsets of indicators that are related to a specific category. A given category may have several aspect

Disclosures (i.e. indicators): The specific measurements of an individual aspect that can be used to track and demonstrate performance

What’s in the GRI

Standards?Universal standards

• GRI 101 Foundation – Starting point for using the standards

• GRI 102 General disclosures – Contextual information about the organization

• GRI 103 Management approach – The management approach for each material (important) topic

Topic-specific standards

• GRI 200 Economic – Specific disclosures for each material economic topic

• GRI 300 Environmental – Specific disclosures for each material environmental topic

• GRI 400 Social – Specific disclosures for each material social topic

GRIindicators example

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3.2.2 Environmental performance evaluation (EPE)

Definitions (ISO 14031)

Environmental performance

• results of an organization’s management of its environmental aspects

Environmental performance evaluation (EPE)

• process to facilitate management decisions regarding an organization’s environmental performance by selecting indicators, collecting and analysing data, assessing information againstenvironmental performance criteria, reporting and communicating, and periodically reviewing and improvementing of this process

Definitions (ISO 14031)Environmental performance indicator (EPI)

• specific expression that provides information about an organization’s environmental performance

Management performance indicator (MPI)

• environmental performance indicator that provides information about the management efforts to influence an organization’s environmental performance

Operational performance indicator (OPI)

• environmental performance indicator that provides information about the environmental performance of an organization’s operations

Key performance indicator (KPI)

• indicator of performance deemed by an organization to be significant and giving prominence and attention to certain aspects

Environmental Performance Indicators –EPI (ISO 14031)

INFORMATION INTERESTED

PARTIES

THE

ORGANIZATION

(EPIs)

The Management

of the

Organization

(MPIs) THE

CONDITION

The Operations

of the

Organization

(OPIs) OUTPUTS

OF THE

ENVIRONMENT

(ECIs)

INPUTS

(Materials,

Energy &

Services)

Physical

Facilities and

Equipment

(Products,

Services,

Wastes &

Emissions)

Supply Delivery

Management performanceindicators (MPIs)

environmental performance indicator that provides information about the management activities to influence an organization’s

environmental performance

• Compliance with laws and regulations

• Integration of EMS in other management systems

• Stakeholder dialogue

• Qualification of workers

Examples of MPIs I

Conformance

• degree of compliance with regulations;

• degree of conformance of service providers with requirements and expectations specified by the organization in contracts;

• number of resolved and unresolved identified corrective actions that have been resolved or that are unresolved

Financial performance

• costs (operational and capital) that are associated with a product’s or process’ environmental aspects;

• return on investment for environmental improvement projects;

• savings achieved through reductions in resource usage, prevention of pollution or waste recycling;

• sales revenue attributable to a new product or a by-product designed to meet environmental performance or design objectives;

• research and development funds applied to projects with environmental significance;

Examples of MPIs II

Implementation of policies and programs

• number of achieved objectives and targets;

• number of organizational units achieving environmental objectives and targets;

• degree of implementation of specified codes of management or operating practice;

• number of prevention of pollution initiatives implemented;

• number of levels of management with specific environmental responsibilities;

• number of employees that have environmental requirements in their job descriptions;

• number of employees participating in environmental programs (e.g., suggestion, recycle, clean-up initiatives, reward and recognition, or others);

Examples of MPIs III

Community relations

• number of inquiries or comments about environmentally related matters;

• number of press reports on the organization’s environmental performance;

• number of environmental educational programs or materials provided for the community;

• resources applied to support of community environmental programs;

• number of sites with environmental reports;

• number of sites with wildlife programs;

• progress on local remediation activities;

• number of local cleanup or recycling initiatives, sponsored or self-implemented;

Operational performanceindicators (OPI)

environmental performance indicator that provides information about the environmental performance of an

organization’s operations

• Raw material usage

• Emissions to air

• Discharges to water and soil

• Waste

• Noice and vibrations

• Risks

Examples of OPIs I

Materials:

• quantity of materials used per unit of product;

• quantity of processed, recycled or reused materials used;

• quantity of packaging materials discarded or reused per unit of product;

• quantity of auxiliary materials recycled or reused;

Energy:

• quantity of energy used per year or per unit of product;

• quantity of energy used per service or customer;

• quantity of each type of energy used;

• quantity of energy generated with by-products or process streams;

Examples of OPIs II

Services supporting the organization’s operations

• amount of hazardous materials used by contracted service providers;

• amount of cleaning agents used by contracted service providers;

Physical facilities and equipment 1

• number of pieces of equipment with parts designed for easy disassembly, recycling and reuse;

• number of hours per year a specific piece of equipment is in operation;

• number of emergency events (e.g., explosions)

Examples of OPIs IIISupply and delivery

• average fuel consumption of vehicle fleet;

• number of freight deliveries by mode of transportation per day;

• number of vehicles in fleet with pollution abatement technology;

• number of business trips saved through other means of communication;

Products:

• number of products introduced in the market with reduced hazardous properties;

• number of products which can be reused or recycled;

• percentage of a product’s content that can be reused or recycled;

;

Examples of OPIs IVEmissions

• quantity of specific emissions per year;

• quantity of specific emissions per unit of product;

• quantity of waste energy released to air;

• quantity of air emissions having ozone depletion potential;

• quantity of air emissions having global climate change potential.

Wastes

• quantity of waste per year or per unit of product;

• quantity of hazardous, recyclable or reusable waste produced per year;

• total waste for disposal;

• quantity of waste stored on site

Methodology for establishing EPIs

• Define system boundaries

• environmental analysis

• stakeholder analysis

• first draft EPIs

• hearing

• establishment of EPIs

• reporting

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3.3 Life cycle management (LCM)

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Introduction to life cycle thinking

It is essential to consider a product’s environmental, social and economics impact over its entire life cycle

• Moving beyond traditional focus on manufacturing processes and production site

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Remmen et al, 2007

Product life cycle

Life cycle thinking requires working and collaborating outside company boundaries

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Remmen et al, 2007

Life cycle management defined

Life cycle management (LCM)

“a product management system aiming to minimize environmental and socio-economic burdens association with an organization’s product of

product portfolio during its entire life cycle and value chain” (Remmen et al, 2007)

Characteristics

• A business management concept

• Makes life cycle thinking operational for companies

• Requires a holistic view

• Recognizes the many interdependencies across a value chain

• Takes environmental and social benefits into account along with economic value creation (Sonnemann et al, 2015)

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LCM connects many concepts & tools

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Remmen et al, 2007

Strategies and concepts

• Making the business case for sustainability – shared value creation (social, environmental and economic)

• Life cycle thinking – the long term perspective (L2 & 4)

• Corporate sustainability and CSR (L4)

• Cleaner production (L1/2)

• Dematerialization

• Eco-efficiency

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Systems, processes and procedures

• Environmental management systems (ISO 14001) (L3)

• Sustainability communication and reporting (L3)

• Stakeholder engagement

• Eco-labelling and certification (L2)

• Design for environment/ sustainability (L2)

• Impact assessment

• Sustainable procurement

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Tools and techniques

• Life cycle analysis (LCA) and Life cycle costing (LCC) (L2)

• Material flow analysis (MFA) (L1)

• Input-output analysis (I/O)

• Cleaner production assessment (CP) (L1/2)

• Auditing (environmental, social and financial) (L3)

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Implementing LCM

Important that LCM is a policy decision made and followed up by top management

• Implemented and communicated within and across an organization

• Supported by necessary resources and training

• Directed toward specific and strategic goals

• Progress measured and followed up on

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Key drivers

External factors

• Market requirements

• National, regional and international policy and regulation

Internal factors

• See increased product sustainability as means to cut costs and increase efficiency

• Opportunity for competitive advantage

• Increased brand value and reputation

• Improved stakeholder relationships

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LCM across an organization

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Remmen et al, 2007

Look familiar?Steps for LCM implementation

1. Set policies and goals

2. Engage stakeholders

3. Assess organization’s current performance and where they want to be

4. Select specific areas for improvement and indicators for measurement

5. Make improvements

6. Report on the results

7. Evaluate progress and make changes where necessary

8. Implement changes and begin next round of environmental and social improvements

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PLAN

DO

CHECK

ACT

3.4 Business models for sustainability (BMS)

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What is a business model?

• The reflection of a firm’s strategy (Casadesus-Masanell & Ricart, 2010; Richardson, 2008; Seddon et al., 2004; Shafer et al., 2005)

• A conceptual tool to help understand how a firm does business (Osterwalder & Pigneur, 2005; Bocken, et al., 2014)

• “The story of how the company exploits business opportunities to create, deliver and capture value” (Jørgensen & Pedersen, 2015, 67)

• Describes the rationale of how an organization creates, delivers and captures value, and provides the organizational and financial ‘architecture’ of a business and its understanding of its customers and their needs (Teece, 2010)

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Three main elements

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Value proposition

Product/ service, customersegments and relationships

Value creation & delivery

Key activities, resources, channels, partners,

technology

Value capture

Cost structure and revenuestreams

Bocken, et al. (2014, p. 43)

The product or service provided to

the customer to helpthem solve a

problem or carry outa task or job

The company’s keyresources and

activities necessaryfor delivering the

product or service to the customers

How the companyacheives profitability

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What do you offer to the customer?

How is the valueproposition created?

aka, VALUE CREATION &

DELIVERY

aka, VALUE CAPTURE

How is revenuecreated?

Who is the customer?

Modified from «The Business Model Navigator» (Gassmann & Frankenberger, 2014), http://ec.europa.eu/information_society/newsroom/cf/dae/itemdetail.cfm?item_id=17059&newsletter=126

Value proposition

Solving customers’ problems

“[a]n industry is a customer-satisfying process, not a goods-producing process”

(Levitt, 1960, 19 as cited in Jørgensen & Pedersen, 2015, 70)

• A product or service that helps customers to do a job or solve a problem more effectively, reliably, conveniently or affordably at a given price

• What problem does the product or service solve for the customer?

• What customer need does the product or service solve?

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Value creation & delivery

Utilizing resources and activities to deliver the greatestvalue to the customer

• the combination of the company’s resources and activities thatcreate and deliver the product or service to the customer

• How the company meets their needs, solves their problems or does a job for them

• Different resources create different values – allows somecompanies to become more profitable or competitive thanothers

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Value captureBalancing costs and income

• How the company manages or structures the balance between itscosts (associated with delivering value to the customer) and itsincome (the price customers are willing to pay for their deliveredvalue)

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Business models for sustainability(BMS)

• An emerging concept in business management literature

• A way to link sustainable innovation to the business model of a firm

• A means for business management to operationalize sustainableactivities across its supply chain

• Research is quickly expanding, and asserts the need for theincorporation of stakeholder interests and social and environmentalvalues into a firm’s strategy (Stubbs & Cocklin, 2008; Boons & Lüdeke-Freund, 2013; Bocken, et al., 2013)

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Defining a BMSA business model for sustainability helps describing, analyzing, managing, and communicating:

i. a company’s sustainable value proposition to its customers, and all other stakeholders,

ii. how it creates and delivers this value,

iii. and how it captures economic value while maintaining or regenerating natural, social, and economic capital beyond its organizational boundaries.

(Schaltegger, et al., 2015, p. 4)

Incorporating the value of natural resources, the environment and society into the way the firm creates and delivers value

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Value proposition in a BMS

The value proposition in a BMS extends beyond its goal of highest economic return (e.g. lowest production cost regardless of resource use), and provides environmental and social value in addition to its economic value.

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Value creation & delivery in a BMS

Sustainable value creation and delivery is based on sustainable supply chain processes that reduce ecologic or societal pressure, and may allow the seizing of new opportunities, revenue streams and markets

e.g. through recycling and closed-loop systems, or creating new markets based in sustainable and efficient design or production

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Value capture in a BMS

Sustainable value capture recognizes the value awarded to the firm in performing in an environmentally and socially beneficial way that meets economic, environmental and social needs, and produces more than monetary profit.

Customers may be willing to pay a higher price for the product or service because of the sustainable way it creates value, and firms may even see an increase in profit

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Ways the company has innovated to create sustainable value:

• 25% of employees are young people who have dropped out ofthe labor market due to drug use, convictions or mental disabilities

• Full transparency of where products are manufactured

• 1% of company’s revenue (not profit) is used for humanitarianand charitable projects

• Climate neutral production

• Recycle materials (collection schemes for used products)

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EXAMPLE:

Jørgensen & Pedersen, 2015

Casts light through an increase in positive externalities:

• Provides jobs to those who need them

• Contributes 1% to humanitarian projects

• Products promote a healthy lifestyle

Reduces shadow by decreasing negative externalities:

• Climate neutral production

• Products last several seasons

• Deposit scheme for exchange of products, old products reused

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EXAMPLE OF CASTING LIGHT & REDUCING SHADOWS:

Jørgensen & Pedersen, 2015

Classifying different BMS:Archetypes

Bocken, et. al. (2014) classify different business models for sustainability based on the way(s) the models seek to propose, create and capture ecological value.

Archetypes are grouped by the model’s main type of innovation –

technical, social or organizational

(as originally categorized in Boons & Lüdeke-Freund, 2014)

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94

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BMS classified by impact

SustainAbility (2014) “Model behavior: 20 business model innovations for sustainability” http://sustainability.com/our-work/reports/model-behavior/

BMS archetypes

Bocken, et al. (2013)

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TECHNICAL ARCHETYPESCharacterized by technical innovation in the production processes, design or materials of the product or service to create sustainable

(socially and environmentally friendly) value for the business

For example, design or manufacturing processes that use resources and energy more efficiently

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Archetype 1: Maximize material productivity and energy efficiency

• Definition – Do more with fewer resources, generating less waste, emissions and pollution

• Dematerialization of product and packaging

• Lean manufacturing: minimizing waste in production processes

• Low-carbon manufacturing

• Increased functionality (to reduce the total number of products required)

Technical archetype

Bocken et al, 2013, pg. 48

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Archetype 2:Create value from waste • Definition – the concept of ‘waste’ is

eliminated by turning waste streams into useful and valuable input to other production streams and making better-use of underutilized capacity

• Shared ownership and collaborative consumption (e.g. car leasing)

• Extended producer responsibility

• Circular economy, Closed loop, Cradle-2-cradle

Technical archetype

Bocken et al, 2013, pg. 49

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Example - closing the loop

• Material used to create theproduct is continually recycledthrough the production system

• Novelis – Aluminum recycling company

• Sources recycled aluminum as input for products

• Coordinates collection schemes for its products so they are recycled and used again as input into the next round of products

• Example products: Rolled aluminum – cans, automobile production

• https://youtu.be/6MFHZyeZuEI

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Archetype 3: Substitute with renewables and natural processes

• Definition – Reduce environmental impacts and increase business resilience by addressing resource constraints associated with non-renewable resources and current production systems

• Move from non-renewable to renewable energy sources

• Solar and wind power based energy innovations

• Local renewable energy solutions

Technical archetype

Bocken et al, 2013, pg. 50

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SOCIAL ARCHETYPESDepend on social innovation to offer sustainable value, e.g. through a

change in the functionality they offer the consumer or a change in consumer behavior.

Social archetypes aim ultimately to restructure consumption and production patterns, or to involve the needs of stakeholders in design

and production

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Archetype 4: Deliverfunctionalityrather thanownership

• Definition – Provide services thatsatisfy users’ needs without having to own physical products

• Product includes maintenance and extended warantee

• Product or service is rented, leased or shared

• Pay per use of product or service

Social archetype

Bocken et al, 2013, pg. 50

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Example - product as a serviceKaer – Air conditioning as a service (Singapore)

• Designs, builds and operates air conditioning systems for commercial and industrial buildings

• Provides increased energy efficiency and cost savings to customers

• Building owners buy chilled water from Kaer on a pay per use basis at a fixed rate

• Kaer takes on all future costs – maintenance, repair, electricity bills

• Shifts responsibility for energy efficiency from building owners to the company

• Can optimize the system to minimize energy use, cutting costs for building owners and lowering the amount of energy consumed, increasing their profits

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Example - product sharing & pay per use

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Archetype 5: Adopt a stewardship role

• Definition – Proactively engaging with all stakeholders to ensure their long-term health and well-being• Biodiversity protection• Consumer care – promoting

consumer health and well-being• Ethical trade (Fair Trade)• Radical transparency about

environmental or social impacts• Resource stewardship

• Note similarities with shared value creation strategies (Kramer & Porter, 2011)

Social archetype

Bocken et al, 2013, pg. 51

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Example –stewardship (upstream)

Better Cotton Initiative (BCI)

BCI aims to transform cotton production worldwide by developing Better Cotton as a sustainable mainstream commodity.

To achieve this mission, BCI works with a diverse range of stakeholders across the cotton supply chain to promote

measurable and continuing improvements for the environment, farming communities and the economies of cotton-producing

areas.

http://bettercotton.org/brands-and-growers-talk-responsible-cotton-new-video/

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Archetype 6: Encouragesufficiency

• Definition – Solutions that actively seek to reduce consumption and production

• Consumer education

• Demand management

• Product durability and longevity (e.g. Stormberg’s design for clothing to last more than one season)

• Market places for second hand goods

• Premium branding/ limited availability

• Responsible product distribution/ promotion

Social archetype

Bocken et al, 2013, pg. 52

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Organizational archetypes

Based in organizational innovation, such as a restructuring of ownership or increased involvement of stakeholders

Incorporate innovative processes into the organization of a firm

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Archetype 7: Re-purpose thebusiness for society/ environment

• Definition – Prioritizing delivery of socialand environmental benefits rather thaneconomic profit maximization, throughclose integration between the firms and local communities and otherstakeholder groups. The traditionalbusiness model where the customer is the primary beneficiary may shift• Not for profit• Hybrid businesses, social enterprise• Alternative ownership:

cooperatives, (farmers) collectives• Social and biodiversity regeneration

initiatives • Home based, flexible working

Organizational archetype

Bocken et al, 2013, pg. 53

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Example – social enterprise

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Grameen Danone Foods (Bangladesh) is guided by four objectives :

1. To develop a product that has high nutritional value and is affordable for the poorest individuals

2. To improve the community’s living conditions by creating jobs that raise the living standard and enhance the social fabric and the region.

3. To protect the environment and conserve resources

4. To ensure a sustainable activity while seeking profitability

• Grameen Danone Foods’ primary aim is to have a positive social impact ; its pursuit of profitability is based solely on criteria such as improving public health, creating jobs, reducing poverty and protecting the environment.

• Profits earned by the company are re-invested in expanding and running the business.

Archetype 8: Develop scale-up solutions

• Definition – Delivering sustainablesolutions at a large scale to maximizebenefits for society and the environment

• Collaborative approaches (sourcing, production, lobbying)

• Incubators and entrepreneur support models

• Licensing, franchising

• Open innovation (platforms)

• Crowd sourcing/ funding

Organizational archetype

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Group work

Identify the value proposition, value creation & delivery and value capture for the example companies presented:

1. Novelis – Aluminum recycling

2. Kaer – Optimizes air-conditioning systems

3. Zipcar – cars available for rent when you need them

4. Better Cotton Initiative – cotton production

5. Grameen Danone Foods – High nutrition yogurt

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BMS discussion

• Take a moment to discuss strengths and weaknesses of business models for sustainability

• Do you think this research will ease companies’ transition to creating, delivering and capturing sustainable value?

• How?

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Weaknesses of current BMS research

• There is no one size fits all model, as each company has its ownunique combination of resources and make up of stakeholders

• The literature currently takes a normative perspective, whichmakes it difficult for firms to practically implement the theorywithin their individual company

• Companies may be overwhelmed with theory

• In many cases, day-to-day operations have to be managed whiletransitioning to a more sustainable model

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Literature & References

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Environmental management systems (EMS)

• INTERNATIONAL ORGANIZATION FOR STANDARDIZATION (ISO) (2015) Introduction to ISO 14001:2015. ISO: Geneva.

• INTERNATIONAL ORGANIZATION FOR STANDARDIZATION (ISO) (2010) Environmental management: The ISO 14000 family of international standards. ISO: Geneva.

• WINTHER, A and FET, AM (2016) Chapter 7: Sustainability management principles. In: Winther & Fet, Sustainability Challenges in the Oil & Gas Industry, Norwegian Petroleum Academy: Oslo.

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Communication & Reporting• SCHALTEGGER, S. and HERZIG, C (2011). Managing and accounting for health, safety and

the environment: the case of the mechanical engineering company Bisma Jaya, Indonesia. Issues in Social and Environmental Accounting, 5 (12), pp. 82-105.

• WORLD BUSINESS COUNCIL FOR SUSTAINABLE DEVELOPMENT (WBCSD) (2015) Reporting matters: Redefining performance and disclosure. WBCSD 2015 Report

• WORLD BUSINESS COUNCIL FOR SUSTAINABLE DEVELOPMENT (WBCSD) (2003) Sustainable development reporting: Striking the balance. WBCSD 2003 Report.

Integrated reporting

• ECCLES, RG and SALTZMAN, D (2011) “Achieving sustainability through integrated reporting,” Stanford Social Innovation Review, Summer 2011.

• GLOBAL REPORTING INITIATIVE (GRI) (2016) Forging a path to integrated reporting: Insights from the GRI Corporate Leadership Group on Integrated Reporting. GRI Report, 2016.

Performance indicators and EPE

• JASCH, C (2000) “Environmental performance evaluation and indicators,” Journal of Cleaner Production, Vol. 8, p. 79-88.

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Business models for sustainability (BMS)

• BOCKEN, NMP, ET AL. (2014) “A literature and practice review to develop sustainable business model archetypes,” Journal of Cleaner Production, Vol. 65, p. 42-56

• BOONS, F AND LÜDEKE-FREUND, F (2013) “Business models for sustainable innovation: state-of-the-art and steps toward a research agenda,” Journal of Cleaner Production, Vol. 45

• JØRGENSEN, S AND PEDERSEN, LJT (2015) Responsible and profitable: Strategies for sustainable business models. Cappelan Damm Akademisk, 2015.

• SCHALTEGGER, S, HANSEN, EG and LÜDEKE-FREUND, F (2015) “Business models for sustainability: Origins, present research, and future avenues,” Organization & Environment, Vol. 29, p. 3-10

• TEECE, DJ (2010) “Business models, business strategy and innovation,” Long Range Planning, Vol. 43, p. 172-194

Archetypes and examples

• BOCKEN, NMP, ET AL. (2014) “A literature and practice review to develop sustainable business model archetypes,” Journal of Cleaner Production, Vol. 65, p. 42-56

• BUSINESS AND SUSTAINABLE DEVELOPMENT COMMISSION (2016) “Breakthrough business models: Exponentially more social, lean, integrated and circular"

• SUSTAINABILITY (2014) “Model behavior: 20 business model innovations for sustainability”

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Life cycle management (LCM)

• REMMEN, A, JENSEN, AA AND FRYDENDAL, J (2007) Life cycle management: A business guide to sustainability. UNEP Report, 2007.

• SONNEMANN, G ET AL. (2015) Life cycle management: Implementing sustainability in business practice. In: Sonneman, G and Margni, M (eds.) Life cycle management, Part of the series LCA Compendium – The complete world of life cycle assessment. Springer, p. 7-21

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