christian kampmann: does it pay to be green?
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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
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
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!
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