new business models for sustainability

New Business Models for Sustainability

International programGreen Sustainable EconomyUniversity College Aalborg

Menno de Lind van Wijngaarden

Program

n Sustainabilityn Business picking up the challengen Innovation for sustainability

n Social Entrepreneurshipn Circular economyn Base of the pyramid

What is sustainability?

Sustainability

n The problems at hand:n Pollutionn Resource depletion

n Natural ecosystemsn Resources

n Inequityn Population growthn Consumption growth

Sustainability approaches

n 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

Program



The role of business

The culprit?

The answer to the solution?

Business as driver of change?

n Quick in response to external threats n 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

From obligation to opportunity

1945-1960’s Pollution:

Denial or “part of progress

1970’s-1980’s End-of-Pipe regulation.

Pay to reduce negative

impact (trade-off)

1980’s-2000 Greening: pollution

prevention, product

stewardship (eco-

efficiency)

2000-present Beyond

greening: Clean

technology, Base of the

Pyramid

Perspectives on Business

Different perspectives of business in the sustainability context

Areas of Business InvestmentAreas of business investment in sustainability today

Sustainable value framework

Program



What is innovation?

The process of innovationn Idealized process of innovationn In real life innovation will not be this neatly categorized

Insight /Research

Development Design Market

Evaluation

Produc-tion

engineer-ing

Market / Pilot

testing

Full scale manufac-ture & launch

Innovation

Research and Development Commercialization

Innovation

The functions of a business model

Business ModelInvention

Value Creation

Value capture

Innovation and organization

n 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”

Corporate culture

n In general, firms with a strong record of innovation have a corporate culture that values and promotes:

n Outward-looking orientationn Facilitating communicationn Openness to new ideasn Challenging established ideasn Acceptability of failuren Promotion of evaluation and reflection

Program



Example of Social Entrepreneur

n Muhammad Yunusn Founder of the Grameen bank, it’s model of

microfinance inspired hundreds of banks to develop similar business models

n Received the Nobel peace price in 2006

Social entrepreneurship

n Growing phenomena, because…n Growing inequityn Weak institutions, retrieving governmentsn Scandals in corporate worldn Need for inspiration!

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 byn Social impact (Social return on investment)n Innovation (business model)n Market orientation (performance-driven,

competitive, co-operation across sectors.)

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

Philanthropy v.s. SE

Philanthropy Social Entrepreneurship

Spontaneous charity Reasoning about social return

Honoring sacrifice and justifying weak results

Need for talent and expertise to address challenges

Pure giving Business like approaches

Relieving suffering Solving the problem and its cause

Caring for people Empowering people

Dees, J. G. (2012)

n But not just a bipolar strategy;n Some problems ask for philanthropy, others for SEn Most SE start with charityn The two different cultures can also be aligned.

Program


n Social Entrepreneurshipn Circular economy

n The Natural Stepn Natural capitaln Cradle to Cradle

n Base of the pyramid

Circular economy

n Industry should move to closed loop systems in alignment with laws of nature:

n Circular Economy:n The Natural Stepn Natural Capitalismn Cradle to Cradle

The Naturel Step

n The Natural Step Karl-Henrik RobèrtThe Four System Conditions... . . . Reworded as The Four Principles of Sustainability

In a sustainable society, nature is not subject to systematically increasing:

To become a sustainable society we must...

1. concentrations of substances extracted from the earth's crust

1. eliminate our contribution to the progressive buildup of substances extracted from the Earth's crust (for example, heavy metals and fossil fuels)

2. concentrations of substances produced by society

2. eliminate our contribution to the progressive buildup of chemicals and 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); and

4. and, in that society, people are not subject to conditions that systemically undermine their capacity to meet their needs

4. eliminate our contribution to conditions that undermine people’s capacity to meet their basic human needs (for example, unsafe working conditions and not enough pay to live on).

http://www.youtube.com/watch?v=FFCNCQleCuk

Example

n 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.

n It is now the basis for their environmental program; step by step environmental impact reduction of all products.

Natural Capitalism 3 principles

• Buy the time to deal with the growing challenges facing the planet by using all resources far more

productively. (=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

Natural Capitalism

n Increase productivity of natural resourcesn Whole system designn Adopting innovative techniques

n Redesign production according to biological models

n Closed loop systemsn Zero waste

n Change the business modeln Not selling lifts/elevators, but “leasing vertical

transportation”

Example: Interface Inc. carpet

n Ray Anderson, CEOn Changed business

modeln From selling to leasingn Evergreen lease “Floor

Covering Service”

http://www.youtube.com/watch?v=OUG4JXE6K4A

Innovation of Business Models

n From waste as a cost to a waste as an assetn 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.

n From car lease to mobility servicesn 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.

Cradle to Cradle

The Next Industrial Revolution?

Waste = Food Principle

http://nl.wikipedia.org/wiki/Bestand:Hazard_X.svg

http://nl.wikipedia.org/wiki/Bestand:Hazard_N.svg

http://nl.wikipedia.org/wiki/Bestand:Hazard_T.svg

http://commons.wikimedia.org/wiki/File:Hazard_C.svg

http://commons.wikimedia.org/wiki/File:Hazard_O.svg

http://en.wikipedia.org/wiki/File:Radiation_warning_symbol.svg

Waste = Food

n Design producs and processes in such a way:n that resources remain available for human

use or the natural environmentn That they are save for the environment and

can be reused: Waste = Foodn Non renewables are valuable resource for

technosphere (food for process)n Non reusables are decomposable in the

biosphere (food for organisms)

Cradle to cradle book

n Cradle to cradle: remaking the way we make things

n Written by Architect McDonough and chemist Braungart

n Published in 2002

resource

raw material

component

assembly

consumption

disposal

Cradle to Grave Cradle to Cradle

resource

raw material

component

assembly

consumption

disposal

Cradle to Cradle

n In contrast to Cradle to Grave conceptn Reduce, reuse, recycling (3 R’s)

n Reducing: ‘poisoning’ at a slower raten Reuse: products are not designed for this

purposen Recycling: down cycling and potentially

dangerous

Cradle to Cradle

n Focus on:n Design, start from the root of the problemn Biological processes, like ecological

systemsn Not Eco-efficiency (3 R’s) but Eco-

effectivenessn Waste = Food principle

n Biological nutrients and technical nutrients

What about the book?

n Do you notice something about the physical appearance of the book?

The Book itself

n No Paper, but synthetic resinsn Non toxic, recyclable (up cycle)n Superior durability and performancen Waterproofn Ink can be washed of

• As an example of their concept: the book is a ‘technical nutrient’

C2C in Business

n Ideas has followers among “big business”:n Nike, Ford Motor Company, Herman Miller n 2 documentaries in NL attracted attention of

business

Example of certified C2C

n Diapers fully recyclable, compostable and flushable

n No use of chlorine, plastics, latex, perfumes, inks and dyes.

n It takes up 500 years to biodegrade for a normal disposable diaper in a landfill

C2C in the Netherlands

n Happy Shrimp Farmn Heat exchange system with E.ON Power Plantn Biological filter bedn No damage to marine ecosystems

http://www.happyshrimp.nl/

Happy Shrimp Farm

n Went bankrupt 23-06-2009n Shrimps didn’t grow fast enough, harvests too

smalln 2 partners are in conflictn 600.000 debt at ING bank

Program



Bottom of the Pyramid


n Concept of C.K. Prahaladn 4 billion people at bottom of economic

pyramid, with income less then $ 1.500 PPPn Can be seen as a latent market of goods and

servicesn Aggregated there is a huge potential


n Removal of poverty penalty (=high prices due to, local monopolies, inadequate access, poor distribution, strong traditional intermediaries)

n Find access to BOP market (urban easier than rural areas)

n Create capacity to consume (e.g. single serve packaging)


n Three A’sn AFFORDABILITY (single serve package)n ACCESS (high intensity of distribution)n AVAILABILITY (consumption when capacity is

there)

BOP market requirements

n Innovativen High price performancen Conserving resourcesn Focus on functionalityn Deskilled work / operationn Education of customersn High performance / endurance

Critique on BoP

n By co-author Stuart Hartn Too many same products at lower prices, no

new approachn environmental unsustainable products and

services “dumped” on BoP marketn Poor are not just consumers, should be

considered as partners in mutual learning

From Bottom to Base

New Business Models

n Conclusions:n Business as a driver for change, when primed for

innovation.n Government and regulating authorities needed for

leveling playing field, stimulation of innovationn Circular economy principles needed for

environmental solutionsn Base of the Pyramid, social entrepreneurship for

social solutions

Thank you

Be the change that you want to see in the world.

Mohandas Gandhi