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Keynote Address Slide at IMAC8
- 1. UTS BUSINESS SCHOOL UTSCRICOS PROVIDER CODE: 00099F Creating Sustainable Value NEW BUSINESS MODELS business.uts.edu.au PROF SUZANNE BENN IMAC8, Langkawi, 28 September, 2016
- 2. WHAT IS THEPROBLEM? WHY SUSTAINABILITY ? WHY SHOULD WE IN BUSINESS SCHOOLS CARE?
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- 9. business.uts.edu.au A Global Pictureof Pollution Worst air pollution?
- 10. Pollution in China Underthe Dome https://m.youtube.com/watch?v=MhIZ50HKIp0
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- 12. THE CASE OFPALM OIL
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- 14. Consumers have powerbut do they exert it? Dr Paul Burke: The biggest takeaway from our work is that people are not ethical/sustainable on each and every occasion – We need to better understand the reasons for why/when they will buy ethically and why they will not (see Burke et al. 2014). Half of all packaged products in supermarkets contain palm oil
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- 17. THE ANTHROPOCENE ‘A newgeological era arising from impact of human activity on the Earth system as a whole’
- 18. GOVERNANCE IN THEANTHROPOCENE ‘governance of planetary boundaries requires repeated, legitimate and inclusive assessments and a review of the architecture of international institutions. More attention should also be paid to innovations that are sensitive to the bonds between social and ecological systems’. See http://stockholmresilience.org/research/research-news business.uts.edu.au
- 19. What does thefuture hold? THE ROAD AHEAD LOOKS GRIM
- 20. We can't solveproblems by using the same kind of thinking we used when we created them Albert Einstein. For example: From resource efficiency to waste as a resource
- 21. UTS BUSINESS SCHOOL UTSCRICOS PROVIDER CODE: 00099F DRIVERS FOR CHANGE business.uts.edu.au
- 22. NETWORKS AS DRIVERSOF CHANGE: FOR BUSINESS AND BUSINESS SCHOOLS
- 23. FUTURE EARTH NETWORK UTSTEAM: Edwards, Giurco, Perey, Benn Dynamic Planet Global Sustainable Development Transformations towards Sustainability Sponsored by
- 24. Implementing sustainable productionand consumption will require a change in values and world views, a change in regulations, in business practices, and personal choices. We need to expose the fallacy that material consumption results in satisfaction and improved wellbeing. Dr Paul Shrivastava, Exec Director, Future Earth The Huff Post 13/10/15
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- 26. NETWORK: ENERGY EFFICIENCYIN ACCOUNTANCY & MANAGEMENT UTS TEAM: BENN, BROWN, CRITTENDEN, BROWN PARTNERS: UTS BUSINESS SCHOOL NSW GOVT OEH ERNST & YOUNG UNSW, MQ, UWS CIMA WESTPAC TAFE TEACHING CLASSES INTERACTIVE SEMINARS C-SUITE WEBINAR MODULAR 2-DAY COURSE INTEGRATED UNI OFFERINGS TRAINING NEEDS ANALYSIS EVALUATION
- 27. LEARNING AND TEACHING SUSTAINABILITYNETWORK http://sustainability.edu.au/ UTS TEAM: McGee, Angus-Leppan, Edwards, Benn 260 tertiary educators across Australia Multiple hits on key resources Site for collaborative research
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- 29. SUSTAINABLE DEVELOPMENT GOALS OnSeptember 25th 2015, countries adopted a set of goals to end poverty, protect the planet, and ensure prosperity for all as part of a new sustainable development agenda. Each goal has specific targets to be achieved over the next 15 years. Eg The agreement reached during the 21st Conference of the Parties of the United Nations Framework Convention on Climate Change, also called COP21, was a big one: world leaders would work to limit warming from climate change to 1.5°C above pre-industrial levels. See 1.5 degrees Conference, Oxford, UK, Sept 2016
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- 31. Systems thinking Intergenerational responsibility Socio economic justice Enough …… for all … … forever. AND CORPORATE SUSTAINABILITY OVERLAPS WITH CSR TRANSLATING SD INTO CORE CS CONCEPTS
- 32. TOP 10 AUSTRALIANCSR/ CS COMPANIES 2015 • ARUP • BHP Billiton • Disney • IAG • NAB • PwC Australia • Sydney Water • Telstra • Teachers Mutual Bank • Westpac business.uts.edu.au Source: Australian Centre for Corporate Social Responsibility
- 33. RETHINKING CORPORATE PURPOSE ‘Whencorporations are governed as if only maximisation of shareholder value matters, they are often forced to make decisions that are not always good for their long-term success. This narrow focus on short-term returns has affected the very core of corporate governance’. ‘About 6,000 large European Union companies will be required to report on ESG matters when the directive on non-financial reporting becomes effective in 2018’ Challenging shareholder value myth business.uts.edu.au
- 34. ETHICAL AND IMPACTINVESTING AFR, p18, 14 October 2015 RESEARCH: ˃ Need for more rigorous standard based reporting ˃ Role for accounting bodies ˃ Pervasive short termism of fund managers UTS RESEARCHERS: Clarke, Cotton, Boersma, Klettner, Logue, Sainty, Williams
- 35. AT THE INTERFACEOF CORPORATE GOVERNANCE AND SUSTAINABILITY Research Background: • The global operating environment for business is increasingly complex and interconnected: globalisation, privatisation and deregulation present social, environmental and economic challenges. • Emerging from this regulatory vacuum – a series of evolving voluntary corporate responsibility and sustainability multi-stakeholder initiatives e.g. Global Reporting Initiative (GRI), UN Principles for Responsible Investment, UN Global Compact, Integrated Reporting etc. • Yet - major tensions and tradeoffs for corporations continue in aligning economic, social and environmental responsibilities Rosemary Sainty, UTS Business School , Founding Aust Rep to the UN Global Compact
- 36. Methodology: Focus oncompany Directors; qualitative study Preliminary Research Results: Reveal a complex interplay of institutional logics in board decision- making, as directors seek to balance competing interests and a dominant market logic at the interface, eg • maximising shareholder value vs. broader multi-stakeholder concerns, • short-term interests vs. long term value creation, • risk aversion vs. the need to innovate. In response, coalitions of actors that make up the CSR institutional infrastructure now seek to align their interests in sustainable development with the corporate interests of business sustainability through • emphasising a long term approach to value creation - financial, social and environmental. • challenging the social norm of shareholder primacy influencing the regulatory and policy environment business.uts.edu.au
- 37. KEY REFERENCES • Albaredaand Waddock (2016) ‘Networked CSR Governance: A Whole Network Approach to Meta-Governance’ Business and Society, doi: 10.1177/0007650315624205 • Steffan et al, (2008) ‘Anthropocene: Are Humans Now Overwhelming the Great Force of Nature?’ Ambio; 36, business.uts.edu.au
- 38. Rejection Non- Response Compliance Efficiency Proactivity Restorative Organisation Activism against sustainability Risk loss of business and reputation Inappropriate use of science BAU Risk loss of business and reputation Greenwash Implement environmental awareness Minimise risks Image building Developing awareness of supply chain risks Systematic EMS/ HRM INCREASED emphasis on reporting Risk avoidance particularly reputational risk Improved efficiency and engagement linked to supply chain Proactive and strategic High level interpersonal/ soft skills Focus on supply networks Structural redesign for flexibility Stakeholder management Transformative culture Redefine business relationships High levels of transparency, auditability & accountability upstream /downstream © Source: Benn, Dunphy and Griffiths, 3rd edition, 2014. PHASES OF SUSTAINABILITY Auditing Reporting Systems design Innovative capacity Partnering for renewal
- 39. WAVES OF SUSTAINABILITY 1STWAVE NON RESPONSIVENESS Instrumental perspective on employees and natural environment Culture of exploitation Opposition to government and green activists Community claims seen as illegitimate Financial and technological factors have primacy More ignorant than oppositional Seeks business as usual, compliant workforce Environmental resources seen as a free good Focuses on reducing risks of sanctions for failing to meet minimum legal and community standards Little integration between HR and environmental functions Emergence of supply chain compliance HR systems seen as means to higher productivity and efficiency Environmental management seen as a source of avoidable cost for the organisation Focus on innovation Seeks stakeholder engagement to innovate safe, environmentally friendly products and processes Advocates good citizenship to maximise profits and increase employee attraction and retention WORKING IN THE ANTHROPOCENE ˃Action networks for systematic change ˃Creating sustainable value ˃New business models From Benn et al, 2014 REJECTION COMPLIANCE EFFICIENCY STRATEGIC PRO-ACTIVITY THE SUSTAINING CORPORATION OPPOSITION IGNORANCE RISK COST COMPETITIVE ADVANTAGE TRANSFORMATION 2ND WAVE 3RD WAVE VALUE DESTROYERS VALUE CREATORS SUSTAINABLE BUSINESSVALUE LIMITERS VALUE CONSERVERS
- 40. THE CASE OFSENDLE http://sustainability.edu.au/material/teaching- materials/sendle-case-study/ https://vimeo.com/153707622
- 41. WHAT THIS MEANS: NEWAPPROACHES TO MANAGEMENT Human sustainability: emphasis on thriving, vitality and learning are key qualities. Co-creation of resources (Spreitzer and Porath, HBR, 2012). Ecological sustainability: emphasis on innovation and sustainable supply chain management (Benn et al, 2014). Emergence of new business models 4 1
- 42. UTS BUSINESS SCHOOL UTSCRICOS PROVIDER CODE: 00099F CIRCULAR ECONOMY business.uts.edu.au
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- 44. To … circulareconomy system flows
- 46. RESEARCH STREAM UPDATESJUNE 201546
- 47. RESEARCH STREAM UPDATESJUNE 2015
- 48. ROOTS OF THECIRCULAR ECONOMY http://www.ellenmacarthurfoundation.org/circular- economy/circular-economy/interactive-system-diagram The roots of the circular economy lie in at least five preceding schools of thought: regenerative design, the performance economy, cradle-to-cradle, industrial ecology and bio mimicry. https://www.theguardian.com/sustainable-business/10- things-need-to-know-circular-economy Ellen MacArthur Foundation (2013); Edwards & Benn (2014)
- 49. The current 'take-make-dispose'linear economy approach results in massive waste – according to Richard Girling's book Rubbish! published in 2005, 90% of the raw materials used in manufacturing become waste before the product leaves the factory while 80% of products made get thrown away within the first six months of their life Analysis by McKinsey estimates shifting towards circularity could add $1 trillion to the global economy by 2025 and create 100,000 new jobs within the next five years. https://www.theguardian.com/sustainable-business/10- things-need-to-know-circular-economy business.uts.edu.au
- 50. http://www.product-life.org/en/major-publications/the-product-life- factor *CE feature*: shiftto selling products as services (ref.Walter Stahel-Performance economy)
- 51. SOURCES OF VALUECREATION IN CE The inner circle The power of… Cascaded use across industries Circling longer Purity/ ease of separation
- 52. Source: Towards thecircular economy, p. 39
- 53. EXAMPLES OF ‘CIRCULAR’BUSINESS MODELS • Selling access to a services rather than to goods: e.g. laundry services rather than washing machines, or energy services rather than energy • Companies like Tata Motors/ Fuji Xerox that refurbish their own old products and then re-introduce them to the market with guarantees. • Removing the valuable parts of a used product in entirety for re- use • New recycling techniques that are opening up entirely new vistas for material re-use • The sharing economy. Think Airbnb or carpooling • Selling into different markets • Product re-design http://www.fastcoexist.com/3025966/how-clever-companies-are- using-circular-thinking-to-get-ahead
- 54. Eg: BMWi Sustainabilitydefines the product life cycle
- 55. THE CHALLENGE: Society needsto play an active role, too. We need to shift from optimising on lowest initial cost towards maximising the total value and total cost of ownership, while at the same time taking the health and wellbeing of people into account. Governments should change their tendering processes and implement requirements for circularity that can drive demand for new solutions. Customers and consumers should change their consumption patterns and move from owning to using products. And since the circular economy is inherently systemic, it can only succeed if all stakeholders co-design, co-create and co-own. Frans van Houten is CEO Royal Philips Direct from Davos, Jan 21, 2014
- 56. IMPLICATIONS FOR MANAGEMENT •Managers experience unique challenges and opportunities that differ at: individual, organisational & broader systems level • Go beyond eco-efficiency approaches to eco-productivity and eco-innovation • Leadership is significant in operating environments where there is a policy vacuum • Stewardship and the role of inter-organisational networks is important for a circular economy model to operate at the systems level. Dr Melissa Edwards, Prof Suzanne Benn & Dr Robert Perey Contact: [email protected]
- 57. OUR RESEARCH: BUSINESSMODELS FOR AN AUSTRALIAN CIRCULAR ECONOMY CLEAN Community Energy Dr Melissa Edwards, Prof Suzanne Benn & Dr Robert Perey Contact: [email protected] RESEARCH QUESTIONS: What are the drivers and barriers to the implementation of a circular model in Australia? How are Australian companies implementing aspects of a circular economy model in their current operations?
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- 59. UTS BUSINESS SCHOOL UTSCRICOS PROVIDER CODE: 00099F SHARING ECONOMY business.uts.edu.au
- 60. SHARED VALUE • Companiesmust lead in bringing business and society back together • Focus on shared value – creating economic value while also creating value for society • Re-conceive the interface between society and corporate performance (Porter and Kramer, 2011)
- 61. LEADERSHIP IN CREATINGSHARED VALUE ? A thorough understanding of how these trends will affect business and (the relationship with) stakeholders The ability to identify structural trends on operating markets Source; ethical leaders in action Source: Fair Trade Software
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- 66. Car sharing poweredby Vodafone platform
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- 69. UTS BUSINESS SCHOOL UTSCRICOS PROVIDER CODE: 00099F SUSTAINABLE ECONOMY business.uts.edu.au
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- 71. The sustainable economyaccording to… David Korten: the values based operating system http://livingeconomiesforum.org/the-new-economy Mackey and Sisodia: conscious capitalism http://www.forbes.com/sites/danschawbel/2013/01/15/john-mackey- why-companies-should-embrace-conscious-capitalism/ John Elkington: breakthrough capitalism http://www.breakthroughcapitalism.com/files/Breakthrough_Capitalism_ Progress_Report.pdf Jonathon Porritt; cooperative capitalism http://www.forumforthefuture.org/greenfutures/articles/jonathon- porritt-calls-%E2%80%9Ccooperative-capitalism%E2%80%9D Umair Haque: constructive capitalism http://www.corporateknights.com/article/capitalism- reconstructed?page=show
- 72. CONSCIOUS CAPITALISM business.uts.edu.au John Mackey,co-founder & co-CEO, Whole Foods Market, trustee, Conscious Capitalism, Inc. “Practicing Conscious Capitalism enriches your life and the lives of people you do business with. And it’s without a doubt, the most fun, enduring and profitable way to build a sustainable business.”
- 73. FOUNDER OF CONSCIOUSCAPITALISM business.uts.edu.au http://www.forbes.com/companies/whole- foods-market/
- 74. UTS BUSINESS SCHOOL UTSCRICOS PROVIDER CODE: 00099F SUSTAINABLE CONSUMPTION business.uts.edu.au
- 75. The major obstacleto moving to a post carbon economy is not the availability of technology but rather human factors: political, social and cultural.
- 76. GLOBAL CONSUMPTION PATTERNS& IMPACTS • Each year, an estimated one third of all food produced – equivalent to 1.3 billion tonnes worth around $1 trillion – ends up rotting in the bins of consumers and retailers, or spoiling due to poor transportation and harvesting practices • If people worldwide switched to energy efficient lightbulbs the world would save US$120 billion annually • Should the global population reach 9.6 billion by 2050, the equivalent of almost three planets could be required to provide the natural resources needed to sustain current lifestyles See more on SDG Goal 12: Ensure sustainable consumption and production patterns
- 77. THE ROLE OFTHE CONSUMER Consumer attitudes and behaviors: • Consumers are increasingly concerned about environmental, social and economic issues, and increasingly willing to act on those concerns • Consumer willingness often does not translate into sustainable consumer behavior because of a variety of factors – such as availability, affordability, convenience, product performance, conflicting priorities, skepticism and force of habit (WBCSD, 2011)
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- 79. DELOITTE – FINDINGTHE GREEN IN TODAY’S SHOPPERS
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- 81. HOW CAN BUSINESSACT: MAINSTREAMING SUSTAINABLE CONSUMPTION The business case: Business approaches to sustainable consumption can be grouped into three broad categories: • Innovation – business processes for the development of new and improved products, services and business are shifting to incorporate provisions for maximizing societal value and minimizing environmental cost • Choice influencing – the use of marketing and awareness-raising campaigns to enable and encourage consumers to choose and use products more efficiently and sustainably • Choice editing – the removal of “unsustainable” products and services from the marketplace in partnership with other actors in society. Editing out consumers from the choice process (WBCSD, 2011). Examples include labelling of energy efficient washing machines or frigs. Problems with jevons paradox or the ‘rebound effect’ see • http://thinkprogress.org/climate/2011/02/16/207532/debunking-jevons- paradox-jim-barrett/
- 82. ALTERNATIVES TO GDP AlternativeCharacteristics Gross National Happiness http://www.grossnationalhappiness.com/ Genuine Progress Indicator http://rprogress.org/sustainability_indicators/genuine_progr ess_indicator.htm OECD Better Life Index http://www.oecdbetterlifeindex.org/ What are some aspects of ‘progress’ that the GDP does not measure?
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- 84. GENUINE PROGRESS INDICATOR Measures: •Income Distribution • Housework, Volunteering, and Higher Education • Crime • Resource Depletion • Pollution • Long-Term Environmental Damage • Changes in Leisure Time • Defensive Expenditures • Lifespan of Consumer Durables & Public Infrastructure • Dependence on Foreign Assets
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- 87. THE WORLD PYRAMIDAND BOP Per year more than $20,000 $ 1500~ $20,000 $ 1500~ $20,000 Less than $1,500 Less than $1,500 Tier 1 Tier2 Tier 3 Tier 4 Tier 5 1,500~1750 million people 4 billion people Taken from LOGO ‘Of the world's 7 billion inhabitants, around 4 billion live in low-income markets in the developing world’. See Prahalad, Hart 2004 etc
- 88. EXAMPLES Unilever: The Lifebuoyprogram (Unilever Sustainable Living Strategy) SCJohnson: pyrethrum products d.light: small scale solar panels THE CHAMKI FILM: business.uts.edu.au
- 89. CREATING VALUE THROUGHBOP Enterprise leaders must be able to answer the following questions: What is our value proposition, and how much and what type of value are we creating for the BoP? How can we understand and enhance our poverty alleviation impacts, especially if poverty has multiple dimensions? Poverty dimensions: economic, capability, and relationship T. London, http://stanfordpress.typepad.com/blog/2016/02/inclusiv e-capitalism.html From The Base of the Pyramid Promise, SUP, 2016 business.uts.edu.au
- 90. Hindustan UniLever LimitedCase • An illustration of the successful execution of this strategy comes from Hindustan UniLever Limited (HUL), a subsidiary of Unilever, widely considered the best managed company in India. Like most MNCs, for over 50 years it catered to the needs of the elite of India- the top of the pyramid. • A local firm, Nirma, challenged HUL in its detergent business, by creating a new business system - a new product formulation, new manufacturing process, distribution, packaging, and pricing. HLL like most MNCs, initially dismissed Nirma as a low end producer. • As Nirma grew rapidly, HUL realized both its new opportunity as well as its vulnerability. Nirma was attacking, in its detergent business, from the bottom of the pyramid. Taken from LOGO
- 91. Hindustan UniLever LimitedCase • HUL responded with its own offering for this market - drastically altering the traditional HLL business model. • HUL created a new product formulation which dramatically reduced the ratio of oil to water in the detergent, thereby reducing significantly the pollution associated with washing cloths in rivers and other public water systems. • They decentralized the production, marketing, and distribution of the product to take advantage of the abundant labor pool in rural India and quickly penetrate the thousands of small outlets where people at the bottom of the pyramid shop. • They reinvented the cost structure of the business, enabling the introduction of the product at a price point affordable to those at the bottom. Taken from LOGO
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