New Business Model Flashcards
What is circular economy?
The circular economy is a continuous positive development cycle that preserves and enhances natural capital, optimises resource yields, and minimises system risks.
Background: Walter Stanel, an architect and industrial analyst was the first to vision an economy in loops in his report to the EU Commission “The potential for subsituting Manpower for Energy”.
Cradle to cradle approach (no waste) >< Cradle to grave (take, make, use, dispose)
What are the basic principles of a Circular Economy ?
What is the Cradle to Cradle approach ?
- Each resource has an economic value, as in nature, the “waste” of some becomes the raw material of others. Value chains must incorporate recycled or reused materials wherever possible. All materials are infinitely recyclable (at least in theory), products must be designed with the idea of being able to easily reuse or recycle its components (avoiding toxic chemical elements) ► Systemic approach “Cradle to Cradle”.
- Short supply chain and local solutions will be favoured (reduction of the number of intermediaries and limitation of transport).
- The energy used comes from renewable or sustainable sources.
- Decoupling: consume less material for the production of a unit of wealth. Factor X is the reduction of material used for the production of a wealth unit.
- Human activities are “restorative” for ecosystems and contribute positively to the health and well-being of citizens.
- Prices should reflect the actual cost of manufacturing (integration of negative environmental and social externalities).
What are the 4 main goals of a circular economy?
- product-life extension
- long-life goods
- reconditioning activities
- waste prevention
What is the Functional Service / Performance Economy?
It is the idea of selling services rather than products, replacing the ownership notion by licensing technologies.
What are the components of the Lansink Ladder?
From most favoured option to least favoured option:
- Reduce and conserve materials
- Encourage cyclical use of resources and shift incentives to stop wasting
- Manufacturers design products for sustainability and take-back
- Reuse
- Recycle
- Regulate disposal
What are the opportunities of a Circular Economy?
- Economic: new business models
- Environment: no more waste
- Social: new jobs
CASE STUDY: Washing machines
- Increasing level of household equipment 50% (1970) — > 97% (2019)
- The average lifespan without failure keeps decreasing
- People usually buy a new one if the repair price > 30% of the new price
What are the 5 Circular Business Models
- The classic long-life model: Primary revenue stream from sales of high-grade products with a long useful life. Long lifespan of the product + service and repair (eg: L’increvable, Kewlox).
- The hybrid model combination of a durable product and short-lived consumables. Main revenues coming from repeated sales of the fast-cycling consumables. Long lasting product (low price), replacement parts (to guarantee quality) and service/repair (eg: Ricoh).
- The gap-exploiter model exploits “lifetime value gaps” or leftover value in product systems. Main revenue stream from selling products, parts and services based on the mixed product life of components (eg: 2nd hand market).
- The access model provides product access rather than ownership. Main revenue stream from payments for product access. Sharing instead of owning, new considerations: freedom, accessibility, time.
- The performance model delivers product performance rather than the product itself. Primary revenue stream from payments for performance delivered. Products that are in use for what they do, rather than for what they are. Provider owns and maintains the product (eg: Rolls Royce/Michelin).
CASE STUDY: SEB
- Non-repairable innovations are dismissed by the executive committee. - Warranty for 10 years
- Temporary rental
CSR in finance: what is the Social Responsible Investment (SRI)?
► The SRI’s goal is to integrate sustainable development into financial management.
ESG (environmental, social and governance) is a generic term used in capital markets and used by investors to evaluate corporate behaviour and to determine the future financial performance of companies. ESG factors are a subset of non-financial performance indicators which include sustainable, ethical and corporate governance issues such as managing the company’s carbon footprint and ensuring there are systems in place to ensure accountability.
► Today, nearly 1000 institutional investors, holding $6 trillion in assets, have decided to funding fossil fuels !
What are some reporting and CSR management tools?
- Environmental management system
- Materiality matrix
- Creating integrated value indicators
(NOT FOR EXAM) ISO14001
From the International Organization for Standardization, trough ISO 14001 scheme, the company decides to manage its environmental responsibilities in a systematic manner that contributes to the environmental pillar of sustainability.
Intended outcomes of an environmental management system include:
- enhancement of environmental performance
- fulfillment of compliance obligations
- achievement of environmental objectives
► ISO14001 is applicable to any organization, regardless of size, type and nature, and applies to the environmental aspects of its activities, products and services that the organization determines it can either control or influence considering a life cycle perspective.
How to communicate with stakeholders ?
- Formal or informal meetings
- Individual interviews
- Conferences, workshops, round tables
Why communicate with stakeholders ?
- Build potential partnerships to achieve certain goals
- Remove conflicts of interest
- Help thinking to improve the organization’s impacts
What is the materiality matrix?
“A materiality matrix enables a company to decide which CSR initiatives to invest in. The total value created by a CSR initiative can broadly be broken down into business and societal values.”
- Business value refers to the favorable stakeholder behaviours resulting from the initiative such as purchasing the company’s products, investing in the company, or otherwise helping the company reach its goals.
- In contrast, societal value refers to the direct social benefits (such as healthier lifestyles) and / or environmental benefits (increased recycling) that result from the CSR initiative.
► The matrix plots CSR issues in terms of these two dimensions: the importance or attractiveness of the issue to stakeholders and the importance of the issue to the company in terms of the likely influence of the initiative on business success.
