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Does it pay to be ”green”?
CBS Responsibility Day2010-09-01
Christian Erik Kampmann
Department of Innovation and Organizational Economics (INO)
CBS
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
VEH
IC
LE O
WN
ER
SH
IP
Priv
ate
Prop
erty
Pu
blic P
ro
perty
1 2
34
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!