New Business for Old Europe : the Business Contribution to SCP

1. New Business for Old Europe : the Business Contribution to SCP (book edited by A. Tukker and U. Tischner, Greenleaf Publishing) GIN 2006, 2-5 July, Cardiff, Wales Arnold Tukker Program Manager Sustainable Innovation TNO Project Manager SusProNet and SCORE!

2. Structure of the presentation • Relevance of decoupling and how to do it • The business contribution to SCP • Limits

3. Need for (radical) decoupling • Impact = Population x Affluence x T • Population: 6-9 billion (factor 1.5) • Affluence: will rise considerably (e.g. factor 4-5) • T must become a factor 4-10 more efficient • Sources of eco-efficiency: • Production side • Improving emission factors / end of pipe • Improved technology / radical technical change • Consumption side • More intensive use of products and materials (sharing, pooling) • Shifting expenditure to immaterial value • Improving the ‘happiness per Euro/$ spent’ • With food, mobility and housing being prioirties (>70% of impacts; EIPRO)

4. Sources of decoupling, consumption side (ctc. • ‘Immaterial consumption’ • Figure gives impact/Euro for total EU expenditure in 280 categories • Difference high/low is factor 4-6 • Top categories are food products • ‘Quality of life / Euro’ • UK: GDP rose factor 2 in 30 years • Life satisfaction not • Similar figures for Japan and other countries Source: EIPRO, EU DG JRC-IPTS, Summer 2005 Source: New Economics Foundation: A well-being manifesto (2004)

5. Conclusions • The potental for Factor x decoupling is there • Addressing the consumption part is relevant • ……but must be done smartly • No ‘limits to growth’ or ‘restricting consumption’, but • Organising patterns of consumption so that maximum quality of life is realised while using the same resources • …which is a question of macro-economic efficiency

6. So what is the role of business? • Traditionally: process and product improvement • End of pipe • Cleaner production • Cleaner products (‘ecodesign’) • Advanced: changing business models • ‘product service systems’ • ‘preparing for system innovations’ • And thereby also influencing patterns of consumption

7. Technological Value Architecture Network Uses Enables Delivers Value Proposition Devides cost and Generates Generates revenues revenues cost Reven ue Model Business modelling • Definition of a business model: “a description of how a company or a set of companies intend to create and capture value with a product or a service. A business model defines the architecture of the product or service, the roles and relations of the company, its customers, partners and suppliers, and the physical, virtual and financial flows between them” (Ballon and Arbanowski)

8. Considerations for changing business models • Changing business models is not a panacea • Companies have to consider the following factors: • Co-creating user value versus market risk • Tangible value • Intangible value • Minimizing system costs versus financial risk • Use of resources • Transaction costs • Capital costs, risk profile, and ambiguity of the offering • Other benefist versus investment and capability risk • Power in the value chain / potential to capture value • Speed of innovation, learning, and option value • Investment in new core capabilities, cannibalisation and loss of synergies

9. And these factors do not always play out positive • Consider the example of Product-Services • Product oriented serivices: product + service added • Use oriented services: leasing, sharing, pooling • Result oriented services: the a result is bought • Use oriented service • In principle more cost effective • But much lower intangible and tangible value (compare car sharing with a car) • Result oriented service • Can be much more effective and opens the door for fully new function fulfillment • But often needs totally new capabilities, has worse cash flow properties, lies all risks with provider, and the offering may be difficult to specify

10. The contradiction…

11. Systems perspective on SCP Production Interaction between demand and supply Consumption Domains Needs Consumer Market Sustainable consumption behaviour is a function of e.g.: • Needs, Opportunities and Abilities (Vlek et al.), or • Attitude, Social pressure and Behavioural control (Montalvo Corral) • User awareness hence needs to be understood in the user’s context ! Final user needs Production system (B2B) Leisure (B2C) Government Market (offer of public services and creation of infrastructure) Food (…….) Mobility Housing (B2G) Shaped by: • Attitude/Life style • Pressure/Life context • Behavioural control /Influence on life Adapted from: project Life Cycle Approaches to Sustainable Consumption, AIST, Japan WITH THANKS !

12. Example of change to SCP (Mobility) Incremental Car energy label: 10-20% Car sharing system: factor 2 II I Consumption Production III IV Low transport-need environment (Floridsdorf, Vienna): Factor 4-10 Radical

13. Example of governance of change (Mobility) What Sustainability gains Governance Approaches • Car energy label (incremental) Marginal (<50%) Awareness raising • Car sharing system (redesign) Factor 2 (50%) Awareness raising + offers of (more) sustainable solutions Awareness raising + offers of (inherent) sustainable solutions+ adapting context and framework conditions • Low-transport environment (system innovation) Substantial (>>50%) Context and framework conditions A system is the the combination of: Interaction between demand and supply Consumption structure Production structure

14. ..If you want system change, involve expertise covering the system Context and framework conditions A system is the the combination of: Interaction between demand and supply Consumption structure Production structure Specialists: Knowledge field Domain KC2: (Strategic) designers KC1: Business developers KC3:Consumer scientists KC5: Mobility KC6: Agriculture/Food KC7: Energy/industry, e.g. consumer electronics KC4: Policy innovation scientists

15. Conclusions • SC, and not just CP is essential for reaching Factor 4-10 goals • Realising SC needs a system approach • An interplay between producers and consumers…. • And not by business alone • …within a context framed by • Rules of the game in markets • Existing infrastructures, social norms, habits, and other historical ideosyncracies • Which implies that directions of change cannot be chosen freely • Policies for SCP imply hence involvement of • Actors along the production consumption chain • Actors that can influence institutions • In sum, a system innovation approach

16. Postscript I: Sustainable Consumption Research Exchanges (SCORE !) • Some basics • Co-ordination action under EU FP6 • 8 core institutes, 20 members; supportive to a few 100 practitioners • 2005-2007; 1 Million Euro, start in October 2005 • Philosophy: • For implementing SCP you need knowledge from • Business • Design • Consumer behaviour • Innovation at system level • Focus at the 3 priorities mobility, food, housing • Develop ideas and a testing/learning plan for them

17. SCORE (continued) • SCORE froms an EU-based platform for SCP • Funded base to support a broad network (100-200 persons) • Exchange moments every 5 months • Structural framework to work out SCP concepts in the main consumption domains with all relevant disciplines • SusProNet and SCORE work on ‘landing’ their communities into a professional society (e.g. GIN, ERSCP….or IS4IE??)

18. Focus per Event

19. Key results to be generated Main header Result • Generating and disseminating best practice Describing best practice how to organize user awareness to reach sustainable consumption (3 sectors, 3 levels of change, interplay between 4 knowledge fields)* Dissemination across EU-25 via workshops, conferences, reports • Programming research Exchange and (informal) co-ordination of research among participants, with a focus on EU-25 but with links world-wide (over 150 fte research capacity) Developing input in the form of a structured overview of research needs in FP6/FP7 and UNEP’s SCP program • Platform for input into policy • Input of 1) and 2) into the following potentially relevant policy platforms: • EU’s IPP and Resource policy: insight in the role of ‘soft’ informative instruments such as labelling, product declarations, etc. • EU’s ETAP: insight in ‘willingness to consumer behaviour change’ in 3 relevant sectors • EU and UNEP SCP policy platforms • Permanent network building • Building a structural ‘Sustainable solution’ community covering SCP in collaboration with existing structures in Advisory Board (GIN, Prepare) Levels of change in consumption: • Via awareness • Via awareness+new solutions • Via awareness+new solutions+ framework changes Knowledge fields: • Business development • Strategic solution design • Consumer behaviour • Policy instruments for innovation & information *Example sectors: • Transport • Agro-food • Energy&electronics

20. Realising SCP: How to differentiate • Different countries have different challenges • Typology of Hart, Millstein and Prahalad may be useful • Consumer economies (1 bio people) • Emerging economies (1 bio people) • Bottom of the pyramid economies (4 bio people living on 1-2$ a day)

21. The challenge of system innovation differs remarkably per world region Adapted from: Hart&Milstein, Sloan Management Review, Fall 1999, and C.K. Prahalad, The Fortune at the Bottom of the Pyramid, 2005

22. Synthesis: towards a Framework for the Framework of Programs on SCP

23. Postscript : the Oslo Declaration • Initiated during the last workshop of the project ‘Life cycle approaches to Sustainable Consumption’ • Project led by Dr. Inaba of AIST, SNTT • Funded by Japanese government • February 2005, Oslo • Wide-felt problem of researchers: • Research agenda’s are technical • Ignore the social and institutional components so essential for SCP • Decision to initiate the ‘Oslo Declaration on Sustainable Consumption’ • Reference to WSSD and 10 Year Program on SCP • Reference to an implementation gap: little progress in WSSD +3 • Call for action world wide • Outline for a research agenda on SCP • Published on www.oslodeclaration.org • Present situation: • Now signed by 250 researchers (and counting) • Offered to various governments; lately on 25 August to all relevan members of the European Commission for consideration in the development of the EU’s 7th Framework Program on Research