Business models and technologies for a radically efficient world
Excellent thinking by Jeremy Grantham, McKinsey, the MacArthur foundation and others have made a compelling case for greater resource efficiency, but what do the business models look like? Our March Forum looked at the businesses that look extreme today, but may be normal tomorrow.
"The disruptive trend of car sharing & how GM is playing". Shelby Clark, Founder, RelayRides.
"Models that align business, customers and the environment". Rob Crumbie, Marketing Director, Recyclebank UK.
"How science can feed 9 billion people". Mike Bushell, Principal Scientific Advisor, Syngenta.
“Small technology leaps that can deliver dramatic change”. Paul Dickinson, Executive Chairman, CDP.
What does radical efficiency look like in the built environment?
The group brainstormed ideas on what radical efficiency might look like in the built environment. Most of the notes in the table below are high level ideas the table generated. The table did not delve too much into challenges and examples. The ideas ranged from regulation and fiscal policies to incentivise building owners, and the designers and construction companies to meet certain environmental standards in new and refurbished buildings. The role of institutional investors having investment criteria that drives change, and makes sustainability resource efficiency the de-fault position was discussed: As was the future role of IT to enable agile working, and the importance of recognising technology can only take efficiency so far, so radical efficiency means to include the behaviour change piece.
- Cultural Social Breakdown – ie Agile Working would not work everywhere
- Legislation to drive institutional investors to upgrade the building stock they have interests in
Incentivise business more - corporation taxation if a company shows efficiency + incentive essential challenge investment criteria
- Agile working - web based learning – ITC enable solutions
- Use of IT - behaviour change ie. printing, recycling, paper use. Could gain huge efficiencies if adopted.
- Limit population growth – politically a challenge
- Knock down all un-compliant buildings – so replacement building stronger enforcement of building regulation and codes – would send out a strong message
- Behaviour change in buildings - energy use - light + window opening - radical change in performance if we could get this right.
- Waste, water, energy, neutrality = sustainability standards - incentives for building owner if they met them.
- Driving social inequality – need solutions that promote community cohesiveness
Which companies are the leaders in managing resources in their supply chains, why?
Interesting roundtable again with an initial discussion on what radical resource efficiency may actually look like. A general consensus is that the step change needed is perhaps bigger than some of the business and speakers on the night were considering. In the table some good examples were provided. The usual suspects such as B&Q and M&S were mentioned, but also an SME (McGrath waste). The inclusion of the SME was a good reminder that we need solutions and leaders for these organisations too. The other interesting aspect was the sheer number of resource use issues; water, rare earth metals, land, oil, chemical fertilisers – and it went on!
- Length of time to market
- Chemicals being available world market market driven (InterfaceFLOR)
- Unintended consequences
- B&Q paint - first for a no solvent carpet tile xxx
- FSC garden (B&Q)
- M&S - leaders because Plan A promotes progress on multiple fronts
- Changed business model to reduce wastage, increasingly using renewable materials without sacrificing quality
- Hugely cut the amount of water and dye used in production of their jeans (Levis)
- Being the first company to fully understand and measure its externalities. Closing the loop, recycling their products into the supply chain. Removing environmentally intensive materials. (PUMA)
- For allowing other companies to use their innovations / solving development costs and time / securing their supply chain by reducing pollution and toxins in their dyes etc. (Levis)
- Changing their default offering with new phones by making a new phone charger an 'opt in', to reduce waste/duplication. (As part of their new plan) O2
- Developing leadership and setting ambitious targets (Nike, Unilever)
- Challenging status quo / education of client / education of children / transportations (McGrath - waste management)
Is energy efficiency now the only language for carbon reduction?
Our topic for the evening was “Is energy efficiency now the only language for carbon reduction?”. Implied in this question is a value judgment; that it would be a bad thing is energy efficiency had hijacked the carbon reduction discussion. We began by testing whether that value judgment was commonly agreed upon. Around the table we agreed that it would, indeed, be a bad thing… and so we set about seeking solutions to ensure that a wider carbon reduction discussion was had in organisations around the country.
Finally, during the clinic, the table participants decided to take on the challenging topic of domestic recycling. With high hopes, we sought a solution to harmonised recycling schemes and increasing uptake. Unfortunately, after 5 minutes of robust discussion we admitted defeat and that agreed that local community preference, long-term contractual agreements and politic pressures made harmonisation unlikely in the short term.
- Why does every borough recycle differently?
- Energy efficiency to narrow focus hides embedded carbon from view - what happens to old equipment
- Educate about carbon outside of energy consumption
- Broaden discussion to one of engagement - keeps a wider audience
- Tailor arguments to the specific audience. Not everyone responds in the same way
- A value chain carbon perspective can help maintain a larger view
- Connecting local actors to help each other e.g.: waste generates supplies waste to energy site
- Engaging with renewable energy onsite - engaging with staff
- British Gas implementation of smart metering - providing live and accurate energy consumption to customers
What is the case for carbon neutrality in 2012?
This roundtable discussed different perspectives on, and challenges to reaching, carbon neutrality. We established the focus for many companies is to reduce their carbon footprint, whether that’s driven by a need to mitigate rising energy prices or to demonstrate commitment to customers. We touched on the appetite for buying carbon offsets in 2012; although the carbon price is lower, it is hard to justify activities that don’t meet payback thresholds. Other challenges around the case for neutrality included: whether reporting and disclosure is sufficiently accurate and transparent enough; and the tension between short- and long-term returns, particularly amongst shareholder.
- Investor Engagement
- Allocating funds to offsets when money is tight
- Capital for onsite generation
- Expertise to choose investments
- Biofuels & renewables to reduce footprint
- Onsite generation
- Thinking ahead & collaborating
- Making long-term commitments
- Focus on narrow measurement like carbon
- Inconsistency of approach
- Lifestyle choices
- Collaborative technology advancement to share upfront costs
- Skanska: can bonuses be linked to carbon?
What does #McStories and other examples tell us of the relationship between social media and sustainability?
The recent #McStories debacle highlighted the perils brands face when using social media. But surely the opportunities social media offers outweighs the risk? That was the overall sentiment shared by a very engaged and well-informed rountable about the merits of using social media for sustainability comms. Authenticity, transparency collaboration and community were themes that ran through the entire discussion along with a general agreement that social media and social technologies were going to reshape how companies do business in the future whether the majority of companies are prepared for it now, or not.
- Buy in. Highlight opportunity
- Joined up
- Custom Complaints
- No control over medium
- Scale 2 speed!
- Resource issue
- Hashtags. Specific discussion. Niche consumers. Collaborate.
- Information, trust. Stuff I care about
- Joined up. Two way street of communication
- Visualise where media is taking us
- Platform of learning
- Joining the dots
- Green washing
- Never shut the door
- Any investment you can’t ignore
How can businesses encourage customers to be more efficient with resources?
Encouraging customers to change their behaviour is a delicate issue. Rewards and incentives seem the obvious approach - and this was a key theme for the main speakers - but our table was not convinced.
Are we asking the right questions and have we properly defined sustainability? These questions were debated at length and the group was concerned that we might be incentivising the wrong actions simply because they seemed right and promised radical change.
We concluded that small steps are best and making the right choice easy for customers is the key. That will depend on intelligent integration of energy saving and communications technologies.
- Definitions of sustainability. How can we, as individual sustainability drivers, encourage sustainability amongst our peers
- Emissions trading will drive up cost of carbon so that it will be passed to customers - so they will drive the choices
- Tax - should we force rather than encourage? Use tax to drive change. CRC change is hitting bottom lines
- Education, vision and engagement of business communities and people
- Local power generation, central power is inefficient as it throws away hear - cities already have district schemes
- Recycling / incentives, generating consumption? Passing rising costs to customers
- Clearly measuring consumption of energy, waste, water and other resources and having that independently verified. This date is of benefit in terms of improved PR, reduced consumption
- Incentive and guilt - it works at home!
- Integration of solutions for wider benefit. Use measurement - power drill used for only 7 minutes - to communicate need for change
- IE - by identifying IT waste; remove the unwanted and fine tune the existing set up
- Influence model in 6 levels: Motivation, Ability (top row) | Personal, social, structural (columns)
- Flex working day - Telefonica UK - shut down their HQ - sending 2,500 home or elsewhere to work flexibly. But energy levels still high as other buildings optimised to have people and our people just turn on their inefficient home heating.
- Unilever recruitment policy - making choices based on how people will get to work to improve resource use
- Cloud computing is producing shared resources which improves efficiencies
- Leaving sustainable solutions in their own box, integration is best. We can' influence our customers in their sustainability behaviour, a delicate area.High risk
- Working from home could create more energy use because people do short trips in their community and turn their heating on at home
- The ideas are all about creating new businesses that drive more consumption and support population growth - need to be more radical and move away from consumption to reduction
- Rewards can backfire and people do one thing and think they have done their bit, so don't go on to do more
What are the energy efficiency business models that are radical today, but will be normal tomorrow?
Many enlightened business leaders struggle to "cross the chasm" to change their business models. What are the key elements of a successful sustainable business model change process?
What are the best opportunities to change our business models with our customers and how can we encourage that change quickly?
The group discussed how it can implement better business models with customers quickly. We identified a range of issues – the most relevant being the need to change fiscal incentives and the disconnect between procurement, sustainability and waste teams in client organisations. If we can help our customers’ whole organisation to see the benefits our new models will sell themselves.
- Customer surveys are often hindered by the fact that they may answer differently from one day to the next. Difficult to measure performance / trends in this context.
- Business & public sector procurement functions are in a sense unconnected to sustainability or Business Process Development. Incentives are price driven, not business model driven
- level playing fields for international trade, vis a vis tax, regulation and pricing
- Radical change will need targeted regulatory and tax/fiscal policies to shove, not nudge
- Promote car sharing with petrol vouchers brought by hitchhikers
- Companies should build / foster cohorts of customers to act together e.g. Virgin
- Government could lead the way through its procurement
- Lobbying for import / export tariffs to reflect environmental sustainability e.g. lower tariffs for sustainably-sourced palm oil
- Cross rail - setting strong specs and sticking with them for resource efficiency
- Divisions between procurement, sustainability and marketing
Selling access instead of ownership (e.g. RelayRides) - should big companies see this as a threat or an opportunity?
Our table looked at the trend of collaborative consumption, and asked the question of whether it is a risk or an opportunity for big businesses. It followed on from the Plenary presentation by Shelby Clark, CEO of US-based Relay Rides, which has taken equity investment from General Motors. Is this a trend we are going to see more of in the coming months or years? A lot of our conversation focused on how radical the collaborative consumption trend is, which in turn determines the extent to which it is threat or an opportunity to big corporates. And collectively, the table struggled to see it as a force to be reckoned with today – we went round the table at the end and asked everyone to choose between “side show” and “megatrend”, and overwhelmingly people went for “side show”. The two obstacles that the participants felt needed to be overcome are;
a) People are still attached to the status of ownership
b) It needs to be a better solution than what we have at the moment – it will not be driven by a desire to “do good”
We found many instances where collaborative consumption is not so new, such as holiday homes and renting dinner jackets. We recognised that the arrival of the internet, and the ability to rate each other, could be a game changer. The biggest driver seems to be financial crisis, which could start to drive a market for sharing bigger ticket items, but we couldn’t see a case for sharing power drills. If and when it becomes a big trend, companies should look to collaborate, like GM has done.
A special thanks to Andre for taking such good notes.
- Owning a power drill is "convenient- it's in the box when I need it, no need to ask someone
- For some goods we don't actually want to have the "use", but we buy the "status" (cars)
- We like to own stuff
- Housing: renting instead of owning seems to be dependant on local conditions (taxes, what's common)
- Communities shift from taking place on the town's market place to the internet
- For renting you need to sell a functional unit, e.g. a car, not tyres, an office, not carpet
- No company will cannibalize themselves- radical can only be done by someone who has nothing to lose
- Rating are crucial for sharing communities- everybody (sharers and users) wants a good rating
M&S: clothing collection and creating new clothes
- DIY: community help systems: "A" paints "B's" roof, "B" mows "C's" garden, "C" watches out/ takes care of "A's" dog. No money, no taxing wash
- Why are there no "apple press services" going around the community to prevent apples from rotting on the tree?
- E-books are an additional market, not instead of books. It comes down to customer experience and customer segmentation
- Air B&B: not because it's green, but because it's making economic sense (I can pay higher mortgages and thus have a nicer house)
- SWISH: clothes exchange via tokens + fundraising. Reuse instead of recycling
- Sharing as advantage: having higher quality items
- Interface: sell product and sell maintenance (cannibalize the cleaners).
- Is sharing just a niche? (It must be perceived as the better solution to gain scale)
What are the options when it comes to triggering radical resource efficiency in the supply chain?
In the plenary we had examples of resource efficiency through innovation in agriculture, car sharing and video conferencing. Our table concluded that it would take a collaborative approach that considered all the interconnected elements of the supply chain to be successful – and that examples of this are not common. We noted that car/tool hire have been business models for many years and have not effected radical efficiency gains.
There were examples from the table including Sainsbury's who will roll out a supplier carbon efficiency programme and establish supplier forums to enable collaborative working and to share best practice.
- Role of emerging & developing economies
- Questioning the status quo - getting buy in from entire organisation from technical to leadership staff
- Using a systems approach to address efficiency - needs collaborative efforts accross the supply chain
- Involve staff in the common goal ro reduce costs and keep jobs
- Collaboration between larger companies to help fund key suppliers to be more efficient & lower carbon footprint
- Systems approach is critical - collaboration is important but rare
- Scaling up successful case studies - from pilots to the entire supply chain
- Reduce amount of materials used by moving up the waste hierarchy
- Work with reputation - what is important to the consumer?
- Syngenta - efficiency solutions
- Farm development
- Need to think about the system as a whole when condensing the supply chain
- Ensure you strike the right balance when making decisions on resource efficiency
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