creating sustainable corporate advantage through corporate environmental responsibility jose pd...
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Creating Sustainable Corporate Creating Sustainable Corporate
Advantage Advantage through through
Corporate Environmental Corporate Environmental
ResponsibilityResponsibility
Jose PDCorporate Policy and Strategy Area
Indian Institute of Management Bangalore
jmjjmj
Sustainability: Should Corporations Really Care ?
Factors That Drive Reputation& Competitive Advantage
Business Practices
Employee Treatment
Community SupportSocial responsibility factor
Traditional purchase driver
Quality
Service
Price
Environment
Stability
Convenience
Ford
• Recall Costs:
• Legal Costs*:
• Effects on
Sales:
• $1 billion
• $590 million
• 15%-20%
on Explorers
Firestone
• $390 million
• $360 million
• 40% Decrease
in Sept. & Oct.
*Legal costs: figures until end of 2000.
Source: University of Notre-Dame
Bridgestone
FordFord
Source: University of Notre-Dame
The European Contamination The European Contamination CrisisCrisis
The European Contamination The European Contamination CrisisCrisis
Recall cost Coca-Cola Enterprises an estimated $103 million dollars.
Source: University of Notre-Dame
Source: University of Notre-Dame
Royal Dutch Shell & Brent SparRoyal Dutch Shell & Brent SparRoyal Dutch Shell & Brent SparRoyal Dutch Shell & Brent Spar
Source: University of Notre-Dame
McSpotlight.Org
Tobacco Litigation & SettlementTobacco Litigation & Settlement
C o n f i d e n t i a l
Cell Phones or Gorillas ?
Cell Phones or Gorillas ?
Creating Creating Sustainable Sustainable Corporate Advantage …Corporate Advantage …Challenge #1Challenge #1
Using the Gorillas to sell the Cell Phones ?
Required Business Response
Environmental StewardshipEnvironmental StewardshipCorporate EnvironmentalismCorporate Environmentalism
(beyond compliance approaches)
Risk ManagementRisk Management(Evaluating Risk-Return Trade-
offs - perceived & Real)Market DevelopmentMarket Development
Strategic Environmental Exposure
Strategic Environmental Exposure
ProductTechnologyRegulationsCustomers
Stakeholders
Relevant Ecological
Environment
Stakeholder Environment
alExposure
CorporateEnvtl.
Exposure/Risk
Source: Jose, 1996
Transforming Risks to Competitive Advantages
Transforming Risks to Competitive Advantages
DuPont3MPatagoniaVolkswagonMonsanto
Reducing the Footprint at DuPont
Electronic MaterialsAgriculture ProductsLycraAuto FinishesCorianTyvek
High EarningsHigh Cash FlowHigh R&D/Capital
PETNylon
Conoco
Invest & Grow
Sell & Redirect
Improve & RepositionSVA lb
Pounds of Materials Used
Source: Stuart Hart, 1999
Invest & Grow
Mar
ket A
ttra
ctiv
enes
s
LO
HI
Environmental AttractivenessHI LO
1951-79
Agro-Chemicals
Ind. chemicals
Pharmaceuticals
Zinc Cells
Source: Jose, 1996
Mar
ket A
ttra
ctiv
enes
s
LO
HI
Environmental AttractivenessHI LO
1980-95
Agro-Chemicals
Ind. chemicals
Bio-fertiliser
Zinc Cells
Seeds
Tissue cultureDrip irrigation
Source: Jose, 1996
Mar
ket A
ttra
ctiv
enes
s
LO
HI
Environmental AttractivenessHI LO
2000 +Source: Jose, 1996
• Waste Management• Solar Energy• Afforestation• Land& Water Mgmt.
• Bio fertilizer
Mar
ket A
ttra
ctiv
enes
s
LO
HI
Environmental AttractivenessHI LO
Source: Jose, 1996
Environmental AttractivenessM
arke
t Att
ract
iven
ess
LO
HI
HI LO
• R&D, Innovation• Resource Substitution• Pollution Control
• P
rodu
ct D
iffe
r en t
i at i
o n•
Co s
t Re d
u cti
on• F
o cu s
Source: Jose, 1996
Sustainability Approaches: Chemical Industry
Conoco DuPont Pioneer Hi-Bred Dow Dow-Elanco
Solutia Monsanto Multiple Acquisitions Ciba-Geigy Sandoz Novartis ICI Astrazeneca
Chemicals Hoechst Chemicals Rhoune-Poulenc Aventis
Today . HC Divestiture
Yesterday . HC Investments
Today . Life Science Invst.
Source: Stuart Hart, 1999
Novo Nordisk
Creating Creating SustainableSustainable Corporate Advantage … Corporate Advantage …Challenge #2Challenge #2
Riding the Wave Vs
Changing the Trend-line?
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
0 100 200 300 400 500 600 700 800
DEVELOPING COUNTRIES AVG.IndiaChina Thailand
WORLD AVERAGE
Mexico
Argentina
South KoreaTaiwan
Greece Portugal
Spain New Zealand
Italy
Australia
United KingdomFranceBelgium
NorwayDenmark
Germany
Canada
Japan
Switzerland
USA
GDP per Capita [US$]
Brazil
Sustainability Approaches for Automobiles ?
Ownership Density - Vehicles per 1000
MORE DEVELOPED COUNTRIESAVG.
Source: Dr. Ulrich Eichhorn (2001)
General Motor’s VisionGeneral Motor’s Vision
John F. Smith, Jr.Chairman, General Motors Corporation
January 8, 1997
““No car company will be able to thrive in No car company will be able to thrive in the future with 100% dependency on the future with 100% dependency on
internal combustion engines. But there internal combustion engines. But there is still no single alternative to currentis still no single alternative to current
technology. All of the technologies are technology. All of the technologies are still evolving. So our still evolving. So our strategystrategy is to develop is to develop
a portfolio of options.”a portfolio of options.”
Riding vs. Bucking the TrendsRiding vs. Bucking the Trends
Popln in MillionsTier 175-100
Tier 2-31500-1750
Tier 4
4000
Purchasing Power
> $2,000
> $ 1,500
> $1,500-2,000
Source: Prahlad & Hart, 1999
Environmental Challenges Facing Indian IndustryEnvironmental Challenges Facing Indian Industry
Envt. not seen as a source Comp. Advantage
Trade-off Between Cost & Competitiveness Market Barriers Market Failure: Policy Distortions &
Subsidies Organizational Barriers Dominance of Small & Medium Scale
Sectors
Creating Creating SustainableSustainable Corporate Advantage … Corporate Advantage …Challenge # 3Challenge # 3
Managing to Create Value:For ALL
The Social ContractSociety’s Expectations of Business Performance
So
cial
Per
form
ance
: E
xpec
ted
an
d A
ctu
al
1960s 1990sTime
Social Social ProblemProblem
Business’s Actual Social Performance
Social Social ProblemProblem
Stakeholder MapsStakeholder Maps
FIRM
Local Communities
Special Interest Groups
Flora & fauna
Future Generations
Politicians
Environmentalists
Employees
Government
Media
Competitors Industry
Traders
What’s right works. It really does. Cynics will tell you it doesn’t, but they’re wrong. Over the long term what’s right works
James Burke
Creating Creating SustainableSustainable Corporate Advantage … Corporate Advantage …Challenge # 4Challenge # 4
The Challenge of the Triple Bottom Line
EconomicEconomicPerformancePerformance
EnvironmentalEnvironmentalPerformancePerformance
SocialSocialPerformancePerformance
Source: SustainAbility
The Sustainability ChallengeThe Sustainability Challenge
Human &Physical Capital
Envtl.Assets
Envtl. Mainten.InvestmentInvestment
Consumption
Economic System Ecological Support System
+
+ + +
+
+
Residuals
Economic Output
_+
Source: Klaus North, 1996