Does it pay to be ”green”?

CBS Responsibility Day2010-09-01

Christian Erik Kampmann

Department of Innovation and Organizational Economics (INO)

CBS

cek.ino@cbs.dk

Change in perspective

Responsibility day Opportunity day

Is climate problem real?

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)

Cost of climate abatement

Does it pay to be green?The skeptic position

• Firms should serve shareholder value and not loose focus by chasing environmental objectives beyond compliance with public regulation

• Compliance = cost increase

• If it were profitable, firms would do it

The free-lunch position

• It pays to be green – resource conservation = lower costs

• move ahead of competition (and regulation pressures)

• Innovation for the environment = competitive advantage

• But firms don’t know that

.. but this assumes the pie is a fixed size, which it isn’t!

Nature is not efficient…

… but effective!

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!

Market spaces in terrestrial mobility

Individual Use Collective Use

VEHICLE USE

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Taxis

Public Transport

Busses, Trains, Light-rail, Metro

Cleaner FuelsAlternative Powertrains

SmallCars

RentalCars

Private Cars Internal Combustion Engines

Station Bikes

MobilityOperators

Car-sharingSchemes

BussesTrains

StationCars Smart Vans

Unexploited

Underexploited

Courtesy of Renato Orsato, INSEAD, all rights reserved.

Courtesy of Renato Orsato, INSEAD, all rights reserved.

• Founded in 2001

• 400.000 members

– Growth 40-100%/year

• 2009 revenues $130M

Zipcar

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

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

• Diversification into energy, education, fisheries, telecom, …

Nobel Laureate Muhammad Yunus,Founder

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!