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This book is about developing sustainable businesses. The focus is on early stages – when a business is little more than an idea – and on innovation in an open environment, relatively unconstrained by organizational or other demands. Our setting is primarily the university, and especially the side of the university that nurtures new ideas to grow – sometimes into ventures, and sometimes into projects, but always with the intention of making an impact upon sustainable development – economic, ecological, and social development. All sustainable development starts with an idea of wanting to make a difference. If this difference can be packaged into an offering that some customer pays for, then suddenly the idea is utilizing a whole market economy to make this difference. However, ideas not targeting paying customers normally also have to be packaged in ways that satisfy user or customer needs. Sustainable business development thus can be seen as a way of making the world a better place, not primarily by top-down intervention – through government agencies or programs – but through a more bottom-up process of trying to satisfy human and other needs, by promoting and offering new utilities: customer utilities, societal utilities and business utility (i.e. creating reasons for others to invest money in your idea). Whether you are a practitioner, a student or a university employee, or engaging in your free time (i.e. being an engaged citizen) does not really matter. This book is written for anyone who believes in the power of the individual developing good ideas in networks, and who wishes to learn more about how to realize these ideas. The focus is on you – the idea developer, or if you like, the knowledge worker in the knowledge-economy – not on established firms, organizations, or financiers. After all, ideas especially in early stages depend upon the active engagement of individuals, regardless of where they are situated. If you are an employee, you might have larger initial resources to access but you would also have the duties and constraints of your organization to relate to. If you are acting in your free time, then you might not have the resources but you certainly have freedom to operate and to mobilize relevant networks. Most ideas depend upon a combination of individuals – some being more free but resource-constrained, and others representing structures and then also other levels of resources. This book is written to allow such an individual network-based open innovation perspective to flourish, pointing at opportunities, at useful tools and examples, and at the teamwork often necessary to release creative and accomplishing powers of the main resources of the new knowledge economy – ourselves and our nowadays global networks! We expect the reader of this book to be a reflective doer, someone who learns while doing, and who likes to be inspired by others. The majority of the examples in the book are written by the doers themselves. As editors we have asked the authors to add reflections, and then we have also added some reflections of our own in the final chapter. We believe that good real-life examples have a never-ending ability to allow improved reflections and learning. We encourage you as a reader to discuss and debate issues and examples in this book. We will aspire to develop this version of the book into new versions and perhaps complement it with even more interactive means of communication – such as a website. We hope you share the ambitions we have about increasing knowledge and skills for sustainable business development. Please therefore give your constructive comments for us to improve any content. The first part of the book focuses on frameworks and the second part on cases. We have tried to refer to the cases when appropriate as we introduce frameworks. The frameworks address sustainability, the challenges of so-called lock-ins, how to conduct early idea evaluation and development, utilizing group dynamics, and methods such as backcasting, scenario planning, LCA and patent analysis. The cases cover sustainable business development ventures, social entrepreneurship projects, and sustainable development and idea developments in established firm settings. The 2014 edition of the book is nearly identical to the 2013 edition with the exception of Chapter 2: Sustainability, which has been updated to include the 2013 and 2014 Fifth Assessment reports from the UN Intergovernmental Panel on Climate Change (IPCC) and a note on the 2013 UN Climate Change Conference in Warsaw 11-23 November 2013.
Content may be subject to copyright.
Frameworks for
Idea Evaluation
and Cases of
Realized Ideas
SUSTAINABLE
BUSINESS
DEVELOPMENT
Sverker Alänge and Mats Lundqvist (eds.)
Chalmers University Press
1
ISBN 978-91-87463-02-0 (printed version)
ISBN 978-91-87463-03-7 (internet version)
Copyright © 2013, 2014: The authors and Chalmers University
Press
All rights reserved
Published by Chalmers University Press
SE-412 96 Gothenburg, Sweden
Email: universitypress@chalmers.se
Cover Picture © Can Stock Photo Inc./SergeyNivens
Printed by
Chalmers Reproservice
Gothenburg, Sweden 2014
i
TABLE OF CONTENTS
TABLE OF CONTENTS ......................................................................................................................................... I
1 INTRODUCTION ............................................................................................................................................. 1
Part I - Frameworks
2 SUSTAINABILITY ............................................................................................................................................ 4
TOWARDS A FOCUS ON SUSTAINABIL ITY .................................................................................................................. 4
BUSINESS STRATEGIES FOR SUSTAINABILITY ............................................................................................................ 15
DEVELOPMENT OF TECHNOLOGY AND MARKETS FOR PRODUCTS THAT ARE ENVIRONME NTAL ............................................... 17
REFERENCES .................................................................................................................................................. 18
3 DISMANTLING LOCK-INS AND TRAGEDIES OF THE COMMONS .................................................................... 21
LOCK-INS ...................................................................................................................................................... 22
DEFINITIONS AND DELIMITATIONS ....................................................................................................................... 22
TRAGEDY OF THE COMMONS .............................................................................................................................. 23
A FRAMEWORK FOR AVOIDING THE TRAGEDY .......................................................................................................... 24
THE NOTION GOOD AND PRODUCT S PRIVATE GOOD.......................................................................................... 26
“COMMON GOOD AND ECO-ENVIRONMENTAL IMPROVEMENT .................................................................................. 27
EXTERNALIZING AND IN TERNALIZING COSTS ............................................................................................................ 29
HOW LOCK-INS DEVELOP (THE KNOWLEDG E PERSPECTIVE) ......................................................................................... 29
LOCK-INS AT THE THREE SYSTEM LEVELS ................................................................................................................ 32
SUMMARY OF LOCK-IN: .................................................................................................................................... 38
WHAT CAN A SMALL ECO-ENVIRONMENTALLY INTERESTED ENTREPRENEUR DO? .............................................................. 38
SOME FINAL REFL ECTIONS ................................................................................................................................. 40
REFERENCES .................................................................................................................................................. 41
4 A PACKAGING APPROACH FOR EVALUATING IDEAS ................................................................................... 43
INTRODUCTION............................................................................................................................................... 43
PROCESS PERSPECTIVES .................................................................................................................................... 44
OUR PACKAGING APPROACH .............................................................................................................................. 46
THE IDEA EVALUATION REP ORT ........................................................................................................................... 48
THE SUMMARY............................................................................................................................................... 49
THE IDEA DESCRIPTION..................................................................................................................................... 50
GENERATING VALUE VISIONS FOR SPECIFIED SITUATIONS OF USE .................................................................................. 51
NEXT STEPS ................................................................................................................................................... 58
PACKAGING FOR COMMUNICATION...................................................................................................................... 60
REFERENCES .................................................................................................................................................. 62
5 BACKCASTING WHAT IS A SUSTAINABLE FUTURE AND HOW DO WE REACH IT? ....................................... 63
DEFINING SU STAINABILITY ................................................................................................................................. 63
THE FOUR SYSTEM CONDITIONS ......................................................................................................................... 65
BACKCASTING ................................................................................................................................................ 66
SYSTEM CO NDITIONS FOR SUSTAINABILITY IN COMBINA TION WITH SCENARIO PLANNING .................................................... 67
REFERENCES .................................................................................................................................................. 69
6 SCENARIO PLANNING THE FUTURE NOW .................................................................................................. 70
ii
SUMMARY .................................................................................................................................................... 70
INTRODUCTION............................................................................................................................................... 71
PLANNING METHODS ....................................................................................................................................... 73
THE POSSIBLE FUTURE ...................................................................................................................................... 75
A PROPOSED PROCESS ...................................................................................................................................... 78
IN SUM: RUNNING A SCENARIO PL ANNING WORKSHOP ............................................................................................. 78
REFERENCES .................................................................................................................................................. 83
7 THE LIFE CYCLE PERSPECTIVE - A WIDER ENVIRONMENTAL PERSPECTIVE ON PRODUCTS AND SERVICES
....................................................................................................................................................................... 87
INTRODUCTION LIFE CYC LE LOGIC ...................................................................................................................... 87
LIFE CYCLE THINKING AND LIFE CYCLE ANAL YSIS TWO ENDS OF A SPECTRUM ................................................................ 89
AREAS OF APPLICATION .................................................................................................................................... 92
IN A NUTSHELL AND FURTHER RE ADING ................................................................................................................. 95
REFERENCES .................................................................................................................................................. 96
FUNCTIONAL UNIT EXERCISE ............................................................................................................................... 97
READING AN LCA REPORT ................................................................................................................................. 97
SOLUTIONS TO FUNCTIONAL UNIT EXERCISE ............................................................................................................ 98
8 PATENTABILITY AND FREEDOM TO OPERATE A PRACTICAL GUIDE FOR EARLY STAGES IDEAS................. 99
INTRODUCTION TO PATENT ANALYSIS FOR EARLY-STAGE VERIFICATION .......................................................................... 99
THE GENERAL SEARCH PROCESS ......................................................................................................................... 101
REFERENCES ................................................................................................................................................ 108
9 FRAMING THE CLAIM................................................................................................................................. 109
CHAPTER LEARNING IN SUMMARY ..................................................................................................................... 109
INTRODUCTION............................................................................................................................................. 110
CELLARTISTM ................................................................................................................................................ 112
REFLECTION AROUND THE DEVELOP MENTS .......................................................................................................... 114
FRAMING TH E CLAIM ...................................................................................................................................... 115
REFERENCES ................................................................................................................................................ 117
10 TEAM DYNAMICS FOR SUSTAINABLE BUSINESS DEVELOPMENT .............................................................. 119
USING CONFLICT........................................................................................................................................... 119
SETTING AND EXPLAINING DEFINITIONS ............................................................................................................... 123
REFERENCES ................................................................................................................................................ 125
Part II - Cases
11 REDUCING THE CARBON FOOTPRINT WITH BETTER CROP YIELDS THE ECOERA BIOSFAIR™ PLATFORM 127
INTRODUCTION............................................................................................................................................. 127
THE ORIGIN AL IDEA: AGROPELLETS PRODUCTION FROM CERTAIN TYPES OF AGRICULTURAL RESIDUES................................... 128
FUTURE USE ................................................................................................................................................ 129
COMPETENCE REQUIREMENTS AND POTENTIAL COLLABORATIO NS .............................................................................. 131
MAIN LEARNING FROM THE CASE...................................................................................................................... 134
THE LEARNING: THE NETWORK IS THE ULTIMATE INTELLECTUAL ASSET A ND STRONGER THAN THE O RIGINAL IDEA .................... 137
12 DEVELOPING MORE SUSTAINABLE MATERIALSCEFIBRA BIOCOMPOSITES ........................................... 138
THE IDEA .................................................................................................................................................... 138
iii
FUTURE USE ................................................................................................................................................ 139
THE PROCESS ............................................................................................................................................... 140
LEARNING FROM THE CASE .............................................................................................................................. 142
FINAL REFLECTION ......................................................................................................................................... 144
13 SUSTAINABILITY THROUGH ECONOMIC INCENTIVES VEHCO IT SOLUTIONS FOR TRUCK TRANSPORTS . 145
INTRODUCING VEHCO .................................................................................................................................... 145
IDENTIFYING THE KEY TO UNLOCKING THE MARKET ................................................................................................. 150
FINAL REFLECTION ......................................................................................................................................... 153
14 MAKING A PROFITABLE SOCIAL BUSINESS NETCLEAN TECHNOLOGIES .................................................. 154
THE COMPANY NETCLEAN TECHNOLOGIES ......................................................................................................... 154
THE START OF THE COMPANY ........................................................................................................................... 156
START-UP PHASES AND IMPORTANT LEARNING ...................................................................................................... 161
REFLECTIONS UPON SOME LEARNING CHALLENGES IN NETCLEAN ................................................................................ 174
15 SOCIAL ENTREPRENEURSHIP IN AFRICA SCHOOL PROJECTS AT CSE AND GIBBS .................................... 177
THE PROJECT CSE ‘07 ................................................................................................................................... 178
THE PROJECT CSE AND GIBBS ‘09 ................................................................................................................... 181
CONCLUSION S .............................................................................................................................................. 183
16 SOCIAL ENTREPRENEURSHIP IN THE GARMENT INDUSTRY: THE CASE OF DEM COLLECTIVE ................... 184
INTRODUCTION............................................................................................................................................. 184
THE SOCIAL ENTR EPRENEUR: THE CHANGE AGENT THAT WANTS TO BE IMITATED ........................................................... 185
SETTING AN EXAMPLE, PROPAGATING A CONTAGION .............................................................................................. 186
SOCIAL ENTR EPRENEURSHIP AND THE ROAD TO WARDS MORE S USTAINABLE BUSINESS PRACTICES ....................................... 187
17 CASE IKEA: A SMALL PERCENTAGE WITH BIG IMPACT ............................................................................. 190
INTRODUCTION............................................................................................................................................. 190
CULTIVATE SUSTAI NABILITY THINKING INTO THE BUSINESS ........................................................................................ 190
THREE LESSONS LEARNED ................................................................................................................................ 194
18 CONCEPT DEVELOPMENT IN LARGE CORPORATIONS AND IN SMALL TEAMS ........................................... 195
CARS, CONCEPTS AND PEOPLE .......................................................................................................................... 195
THE THERMAL CONCEPT CAR TCC .................................................................................................................. 196
THE VOLTAIR AE PROJECT ............................................................................................................................... 197
THE IMPORTANCE OF A CONFIDENT HOUSE CULTURE .............................................................................................. 201
THE PRECIOUS CONTRADICTION ........................................................................................................................ 205
OZ MARINE R&D AB .................................................................................................................................... 206
THE SEAT FOR THE FVL PROJECT ....................................................................................................................... 207
THE HOSPITAL BED ........................................................................................................................................ 209
SMALL COMPANIES ........................................................................................................................................ 210
MAIN LEARNINGS .......................................................................................................................................... 211
REFERENCES ................................................................................................................................................ 211
20 QUESTIONS AND REFLECTIONS ................................................................................................................ 213
SUSTAINABILITY ............................................................................................................................................ 214
SUSTAINABLE BUSINESS DEVELOPMENT .............................................................................................................. 215
1
1
1 INTRODUCTION
Sverker Alänge and Mats Lundqvist, Chalmers
This book is about developing sustainable businesses. The focus is on early stages when a
business is little more than an idea and on innovation in an open environment, relatively
unconstrained by organizational or other demands. Open innovation today is on many people’s
minds. However, literature on open innovation, sustainable business and idea development is still
mostly aimed at the large corporation rather than towards a more genuinely open setting. Our
setting is primarily the university, and especially the side of the university that nurtures new ideas
to grow sometimes into ventures, and sometimes into projects, but always with the intention of
making an impact upon sustainable development economic, ecological, and social development.
All sustainable development starts with an idea of wanting to make a difference. If this difference
can be packaged into an offering that some customer pays for, then suddenly the idea is utilizing
a whole market economy to make this difference. However, ideas not targeting paying customers
normally also have to be packaged in ways that satisfy user or customer needs. Sustainable
business development thus can be seen as a way of making the world a better place, not primarily
by top-down intervention through government agencies or programs but through a more
bottom-up process of trying to satisfy human and other needs, by promoting and offering new
utilities: customer utilities, societal utilities and business utility (i.e. creating reasons for others to
invest money in your idea).
Whether you are a practitioner, a student or a university employee, or engaging in your free time
(i.e. being an engaged citizen) does not really matter. This book is written for anyone who
believes in the power of the individual developing good ideas in networks, and who wishes to
learn more about how to realize these ideas. The focus is on you the idea developer, or if you
like, the knowledge worker in the knowledge-economy not on established firms, organizations,
or financiers. After all, ideas especially in early stages depend upon the active engagement of
individuals, regardless of where they are situated. If you are an employee, you might have larger
initial resources to access but you would also have the duties and constraints of your organization
to relate to. If you are acting in your free time, then you might not have the resources but you
certainly have freedom to operate and to mobilize relevant networks. Most ideas depend upon a
combination of individuals some being more free but resource-constrained, and others
representing structures and then also other levels of resources. This book is written to allow such
an individual network-based open innovation perspective to flourish, pointing at opportunities, at
useful tools and examples, and at the teamwork often necessary to release creative and
accomplishing powers of the main resources of the new knowledge economy ourselves and our
nowadays global networks!
2
We expect the reader of this book to be a reflective doer, someone who learns while doing, and
who likes to be inspired by others. The majority of the examples in the book are written by the
doers themselves. As editors we have asked the authors to add reflections, and then we have also
added some reflections of our own in the final chapter. We believe that good real-life examples
have a never-ending ability to allow improved reflections and learning. We encourage you as a
reader to discuss and debate issues and examples in this book. We will aspire to develop this
version of the book into new versions and perhaps complement it with even more interactive
means of communication such as a website. We hope you share the ambitions we have about
increasing knowledge and skills for sustainable business development. Please therefore give your
constructive comments for us to improve any content.
The first part of the book focuses on frameworks and the second part on cases. We have tried to
refer to the cases when appropriate as we introduce frameworks. The frameworks address
sustainability, the challenges of so-called lock-ins, how to conduct early idea evaluation and
development, utilizing group dynamics, and methods such as backcasting, scenario planning,
LCA and patent analysis. The cases cover sustainable business development ventures, social
entrepreneurship projects, and sustainable development and idea developments in established
firm settings.
The 2014 edition of the book is nearly identical to the 2013 edition with the exception of Chapter
2: Sustainability, which has been updated to include the 2013 and 2014 Fifth Assessment reports
from the UN Intergovernmental Panel on Climate Change (IPCC) and a note on the 2013 UN
Climate Change Conference in Warsaw 11-23 November 2013.
3
PART I
FRAMEWORKS
4
2 SUSTAINABILITY
Sverker Alänge, Chalmers
Sverker is Associate Professor in Technology Management. His research interest is in innovation, sustainability,
entrepreneurship, and learning & change processes. He has long experience of working with change processes in
industry and at universities, both in Sweden and internationally. Present research projects are focused on
sustainable innovativeness, industrial design product development interactions, large-scale change processes in
industry, universities and innovation systems, and sustainable business development.
This chapter derives our current understandings of the concept of Sustainability. Sustainability
has only recently been clearly linked to business development. Its history dates back to the Sixties
and is today largely affected by concerns about climate change. The aim of this chapter is to
introduce you to the concept of Sustainability and give it sufficient background for you to
subsequently explore the promises of sustainable business development.
TOWARDS A FOCUS ON SUSTAINABILITY
In the first decades of the 21st Century it seems that a common understanding is evolving among
scientists, industrialists and politicians about the need for the world to deeply consider
sustainability. However, from this to potent political action on a global scale seems still to be a
step to dream about, as indicated by the watered-down summit texts from the recent UN
conferences on sustainability in Copenhagen 2009, Cancún 2010, Durban 2011, Doha 2012 and
Warsaw 2013.
However, there are actions taken by individual companies both to act as a good citizen and
increasingly also to develop ‘green’ business opportunities, there are customer groups creating
new sustainable demand, and there are legal systems being modified (e.g. the use of energy-
wasting traditional lamp-bulbs is being banned in the EU). But of course, there have been
important steps taken by pioneers much earlier. And more recently the strength of the
movements towards a sustainable perspective has been greatly reinforced by the fact that many
strong opinion-builders in industry, among researchers, politicians and in media have joined.
First, we will look back to some important input, starting in the 1960s and rapidly moving
towards the end of the 1980s until now.
5
WHAT HAS INFLUENCED PUTTING THE ISSUE OF SUSTAINABILITY ON THE
AGENDA?
Rachel Carson’s (1962) book ‘Silent Spring’, proposing that DDT could cause cancer in
humans, made a strong impression on many individuals and started a debate concerning modern
society’s negative impact on nature. The realization arose that scientific/technological
developments that had been seen as valuable for humanity also had negative impacts on humans,
such as mercury to protect seeds and DDT to fight mosquitoes carrying malaria. She was not
alone; there were others who actively discussed the future of the globe from a sustainability
perspective, including Georg Borgström who in the 1950-60s pointed at the Earth’s biological
limitations (e.g. Borgström 1965). In 1973 the British economist E.F. Schumacher published an
influential collection of essays called Small Is Beautiful: Economics As If People Mattered,
which focused on decentralization and small-scale production as a way of satisfying both human
and ecological needs.
The Club of Rome published in 1972 a book by a group of MIT researchers titled The Limits to
Growth (Meadows et al. 1972). Based on a system dynamics model, the MIT researchers
concluded that
“If the present growth trends in world population, industrialization, pollution, food
production, and resource depletion continue unchanged, the limits to growth on this
planet will be reached sometime within the next one hundred years. The most
probable result will be a rather sudden and uncontrollable decline in both population
and industrial capacity.” However, they also added that “It is possible to alter these
growth trends and to establish a condition of ecological and economic stability
that is sustainable far into the future. The state of global equilibrium could be
designed so that the basic material needs of each person on earth are satisfied and
each person has an equal opportunity to realize his individual human potential”.
(Abstract of The Limits to Growth, compiled by Eduard Pestel)
This book provided an important input into the debate about whether the modern economic
model has a limit or not. The researchers’ argument that in any closed system, such as the Earth,
exponential growth is impossible without sooner or later collapsing, was supported by computer
generated “stunning graphs, (of) what our fate was to be if we did not slow down” (Bishop
2006). The MIT team has since continued by publishing two more books providing additional
data to support their argument of unsustainability, introducing the concept of ‘overshoot’, which
means that we first exceed the limits, using up our resources in order to sustain growth, followed
by collapse when there are no resources left, even to sustain on the previous levels (Meadows et
al. 1992, 2002). In their most recent book they also utilize the 1990s concept ‘ecological
footprint’ (see Wackernagel & Rees, 1998) in order to make their point concerning overuse of
resources by human civilization as compared to the carrying capacity of the planet. The ecological
footprint is defined as the land (and water) area that would be required to support a defined
human population and material standard indefinitely.
In 1972, on a Swedish initiative, the first UN Conference on the Human Environment was
held in Stockholm. One major result was the Stockholm declaration with 26 common principles
“to inspire and guide people of the world in the preservation and enhancement of the human
environment” (UN 1972). Principle 1 stated that:
6
Man has the fundamental right to freedom, equality and adequate conditions of life,
in an environment of a quality that permits a life of dignity and well-being, and he
bears a solemn responsibility to protect and improve the environment for present and
future generations. In this respect, policies promoting or perpetuating apartheid,
racial segregation, discrimination, colonial and other forms of oppression and foreign
domination stand condemned and must be eliminated.
Another important principle was no. 21 that has become a basic legal principle for international
cooperation concerning environmental issues crossing national borders:
States have, in accordance with the Charter of the United Nations and the principles
of international law, the sovereign right to exploit their own resources pursuant to
their own environmental policies, and the responsibility to ensure that activities within
their jurisdiction or control do not cause damage to the environment of other States or
of areas beyond the limits of national jurisdiction.
Other outcomes of this first UN conference were an action plan for continued international
environmental cooperation and the establishment of the UNEP (United Nations Environment
Program). However, although being an important early step, the impact on international
cooperation concerning global environmental issues was limited in practice.
Hence, the starting point for the modern sustainability movement can be traced back to the more
recent UN Brundtland Commission’s (1987) report ‘Our Common Future’. The following
quote from the report, Sustainable development is development that meets the needs of the present without
compromising the ability of future generations to meet their own needs, has been widely spread and has
influenced the definition and direction of the sustainability movement. Another important
statement in the report was that “Humanity has the ability to make development sustainable”.
On a global scale the UN has been an organizing actor for other important landmarks in the
development towards sustainability through a series of UN conferences.
The Rio Conference in 1992 stated that Human beings are at the centre of concerns for
sustainable development. They are entitled to a healthy and productive life in harmony with
nature.” In connection with this conference, also the Agenda 21 was launched as
an action program. While most program points were societal, there was also one
section on improvement of industry, covering the “improvement of production systems
through technologies and processes that utilize resources more efficiently and at the same time
produce less wastes” However, it was also a short comment on the need for
innovation and entrepreneurship: “Similarly, facilitating and encouraging inventiveness,
competitiveness and voluntary initiatives are necessary for stimulating more varied, efficient and
effective options. One program area suggested the support of ‘Responsible
Entrepreneurship’, by encouraging the concept of stewardship in the
management and utilization of natural resources by entrepreneurs, and by
increasing the number of entrepreneurs engaged in enterprises that subscribe to
and implement sustainable development policies. The rationale was that:
“Entrepreneurship is one of the most important driving forces for innovations,
increasing market efficiencies and responding to challenges and opportunities.
Small and medium-sized entrepreneurs, in particular, play a very important role in
the social and economic development of a country. Often, they are the major
means for rural development, increasing off-farm employment and providing the
transitional means for improving the livelihoods of women. Responsible
entrepreneurship can play a major role in improving the efficiency of resource use,
reducing risks and hazards, minimizing wastes and safeguarding environmental
qualities.” (Agenda 21, 30.17)
7
The Kyoto Protocol from 1997 provides a means for establishing environmental goals
that individual countries can agree upon to follow. By November 2009 there were 189
countries that had ratified and followed the Kyoto protocol although the world’s major
polluters, China and the USA, were not among them. The Kyoto protocol also
introduced the Clean Development Mechanism (CDM) which stimulates sustainable
development and emission reductions, by letting an industrialized country implement
emission-reduction projects in developing countries and earn saleable certified emission
reduction credits, each equivalent to one tonne of CO2, which can be counted towards
meeting the Kyoto targets. For example, a CDM project activity might involve a rural
electrification project using solar panels.
The Johannesburg World Summit on Sustainable Development in 2002 was one
further step of developing the consciousness in the international community. The
understanding of sustainable development was broadened and strengthened as a result of
the Summit, particularly the important linkages between poverty, the environment and
the use of natural resources. Governments agreed to and reaffirmed a wide range of
concrete commitments and targets for action to achieve more effective implementation
of sustainable development objectives. Energy and sanitation issues were critical elements
of the negotiations and outcomes to a greater degree than in previous international
meetings on sustainable development. One contribution to this conference from
Chalmers was a paper by Christian Azar and John Holmberg analyzing what happens
when a national economy gets richer. They found that some common sustainability-
related issues are taken care of through self-organization in local communities, e.g. water
and sanitation. Other sustainability issues, however, get worse when a community
becomes better off, such as polluting the environment through increased CO2 emissions,
due to a tendency to buy more and larger cars.
The UN ‘Intergovernmental Panel on Climate Change’ (IPCC) in 2007 was a major
initiative to involve a very large number of scientists from many countries for the purpose
of reviewing and assessing the most recent scientific, technical and socio-economic
information produced worldwide relevant to the understanding of climate change.
Thousands of scientists contributed on a voluntary basis; one of them was Chalmers
professor Christian Azar. IPCC published its very influential report on climate change in
2007 and was also rewarded with the Nobel Peace Prize that year. In this report it was
made clear that human activities during the past 150 years have had major impact on
climate change and estimations were made of future impact if no action is taken (see
further below).
In 2009 there were high hopes for a global agreement on limiting environmental impact
during the UN Climate Change Conference in Copenhagen in December 2009. The
immediate result was, however, very meagre as the world’s two major polluters, China
and the USA, were reluctant to put their signatures on a document and make major
commitments.
8
The UN Climate Change Summit in Cancún 2010 aimed to reach an agreement on a
global level. However, at the conference there was a clear divide between rich and poor
countries and a threat that even countries who have signed the Kyoto Protocol would
leave it, because some of the major polluters have still not signed the accord, such as
China, India and the US. After considerable disagreement, the conference ended in a
compromise agreement which makes the next step, the UN Climate Change Summit in
Durban in 2011, even more challenging. However, for the first time, the Cancún
Agreement commits both rich and developing nations to curbing greenhouse gas
emissions. There is also an agreement on establishing a Green Climate Fund to provide
financial aid to poorer countries for their contributions to remedy climate change.
The UN Climate Change Conference in Durban 2011 did not succeed to reach a
global agreement on how to limit the impact on nature, but an agreement, the Durban
platform, including all countries was reached to start a process of developing a
legally binding agreement, which should be prepared by 2015 and is supposed to take
effect in 2020. This means that the time-table to get all countries in the world involved in
taking active measures has been postponed for 8 years, which according to Stern (2006)
will substantially increase global costs to remedy climate effects. According to Rockström
(2011) this delay will most probably result in a substantial increase in the Earth’s global
average temperature instead of the Kyoto Protocol goal of a maximum increase of 2
degrees, this might result in somewhere between 3-4 degrees, which might have
devastating effects on the global economy. One reason that no immediate step could be
taken to include all countries in a developed version of the Kyoto Protocol was that the
conference was characterized by a divide between the industrialized countries and the
large rapidly industrializing countries. China, India and Brazil were of the opinion that the
industrialized countries should limit their emissions immediately while they as
industrializing countries should be allowed to increase their emissions in order to develop
their economies further before they assume a more strict control of their emission
increase. The Kyoto Protocol, which terminates in 2013, was further weakened by
Canada making a decision to leave the agreement. However, until 2020 the EU countries
keep their goal of lowering the CO2 emissions by 20%. Another outcome of the
conference was the launching of the Green Climate Fund to provide support to
developing countries to limit or reduce their greenhouse gas emissions and to adapt to
the impacts of climate change. The goal for the fund is to distribute US$ 100 billion per
year.
In the 2012 UN Climate Change Conference in Doha no agreement seemed possible.
However, the delegates continued negotiating after the planned closure of the conference
and an agreement was reached to extend the life of the Kyoto Protocol, which had been
due to expire at the end of 2012, until 2020. The conference also reified the 2011
Durban Platform, i.e. the process of developing a successor the Kyoto Protocol.
Another step forward was the ‘Loss and Damage mechanism’ that regulates richer
nationsfinancial responsibility for damage in developing countries, caused by the richer
nations’ failure to reduce carbon emissions and thus contributing to climate change.
9
The main contribution of the 2013 UN Climate Change Conference in Warsaw was a
decision to establish an international branch (the Warsaw mechanism) to help poorer
countries deal with loss and damage caused by extreme weather events and slow onset
events such as rising sea levels (UN 2013). The conference was otherwise characterized
by substantial disagreements between participants and difficulties in reaching agreements
on how to proceed towards a global agreement scheduled for 2015 in Paris. The Warsaw
conference concluded, by urging individual nations to take steps towards the climate goal
of limiting the temperature increase to 2 degrees above the current levels and to bring
their experiences and transparent plans to the table ahead of the planned Paris
conference.
Hurricane Katrina in 2005 destroyed large parts of New Orleans and raised the awareness of
climate change, not least because of intensive coverage on television. Other major natural
catastrophes, e.g. the South Asian floods in 2007, also contributed to a growing awareness that
the climate might have changed.
Former vice president Al Gore’s ‘An Inconvenient Truth: The planetary emergency of global
warming and what we can do about it’, published in 2006, also received considerable media
coverage in combination with Gore’s intensive touring the world to deliver his message. His
work to raise the awareness of global warming provided him with the Nobel Peace Prize in 2007,
shared with the UN IPCC.
In 2006 the Stern Review on the Economics of Climate Change was presented by the
economist Nicholas Stern for the UK government. This became a very important document
because it quantified the impact of climate change and it pointed at the economic rationale for
changing now instead of in many years to come. According to Stern:
There is still time to avoid the worst impacts of climate change, if we take
strong action now. The scientific evidence is now overwhelming: climate change
is a serious global threat, and it demands an urgent global response. … Hundreds of
millions of people could suffer hunger, water shortages and coastal flooding as the
world warms. Using the results from formal economic models, the Review estimates
that if we don’t act, the overall costs and risks of climate change will be
equivalent to losing at least 5% of global GDP each year, now and forever.
If a wider range of risks and impacts is taken into account, the estimates of
damage could rise to 20% of GDP or more. In contrast, the costs of action
reducing greenhouse gas emissions to avoid the worst impacts of climate change
can be limited to around 1% of global GDP each year.
The investment that takes place in the next 10-20 years will have a profound effect
on the climate in the second half of this century and in the next. Our actions now
and over the coming decades could create risks of major disruption to economic
and social activity, on a scale similar to those associated with the great wars and
the economic depression of the first half of the 20th century. And it will be difficult
or impossible to reverse these changes. ... Because climate change is a global
problem, the response to it must be international.
The costs of stabilising the climate are significant but manageable; delay
would be dangerous and much more costly. The risks of the worst impacts of
climate change can be substantially reduced if greenhouse gas levels in the
atmosphere can be stabilised between 450 and 550 ppm CO2 equivalent (CO2e).
…This is a major challenge, but sustained long-term action can achieve it at costs
that are low in comparison to the risks of inaction. Central estimates of the annual
costs of achieving stabilisation between 500 and 550 ppm CO2e are around 1% of
global GDP, if we start to take strong action now.”
10
In June 2008 Nicholas Stern increased the estimate of cost to reduce the CO2 to 2% of GDP to
account for faster than expected climate change. Stern’s quantifications supplemented earlier
indicator-based argumentation and helped politicians to realize its importance by pointing directly
to the effects on economic development.
So what were the major findings from the UN (2007) ‘Intergovernmental Panel on Climate
Change’ (IPCC) that was published one year after the Stern Review and was the result of input
from more than 1,000 scientists around the world?
Observed changes in climate and their effects
Warming of the climate system is unequivocal, as is now evident from observations of
increases in global average air and ocean temperatures, widespread melting of snow and
ice and rising global average sea level.
Observational evidence4 from all continents and most oceans shows that many natural
systems are being affected by regional climate changes, particularly temperature
increases. {1.2}
Global GHG emissions due to human activities have grown since pre-industrial times,
with an increase of 70% between 1970 and 2004 (Figure SPM.3).5 {2.1}
Carbon dioxide (CO2) is the most important anthropogenic GHG. Its annual emissions grew by
about 80% between 1970 and 2004. The long-term trend of declining CO2 emissions per unit of
energy supplied reversed after 2000. {2.1}
Global atmospheric concentrations of CO2, methane (CH4) and nitrous oxide (N2O) have
increased markedly as a result of human activities since 1750 and now far exceed pre-
industrial values determined from ice cores spanning many thousands of years. {2.2}
Advances since the TAR (Third Assessment Report) show that discernible human
influences extend beyond average temperature to other aspects of climate. {2.4}
Human influences have: {2.4} very likely contributed to sea level rise during the latter half of the 20th
century; likely contributed to changes in wind patterns, affecting extra-tropical storm tracks and
temperature patterns; likely increased temperatures of extreme hot nights, cold nights and cold
days; more likely than not increased risk of heat waves, areas affected by drought since the 1970s and
frequency of heavy precipitation events.
There is high agreement and much evidence that with current climate change mitigation
policies and related sustainable development practices, global GHG emissions will
continue to grow over the next few decades. {3.1}
The IPCC Special Report on Emissions Scenarios (SRES, 2000) projects an increase of global
GHG emissions by 25 to 90% (CO2-eq) between 2000 and 2030 (Figure SPM.5), with fossil fuels
maintaining their dominant position in the global energy mix to 2030 and beyond. More recent
scenarios without additional emissions mitigation are comparable in range.8,9 {3.1}
Continued GHG emissions at or above current rates would cause further warming and
induce many changes in the global climate system during the 21st century that would very
likely be larger than those observed during the 20th century (Table SPM.1, Figure SPM.5).
{3.2.1}
There is high confidence that neither adaptation nor mitigation alone can avoid all
climate change impacts; however, they can complement each other and together can
significantly reduce the risks of climate change. {5.3}
Risks to unique and threatened systems. There is new and stronger evidence of observed
impacts of climate change on unique and vulnerable systems (such as polar and high mountain
communities and ecosystems), with increasing levels of adverse impacts as temperatures increase
further. An increasing risk of species extinction and coral reef damage is projected with higher
confidence than in the TAR as warming proceeds. There is medium confidence that approximately 20
to 30% of plant and animal species assessed so far are likely to be at increased risk of extinction if
increases in global average temperature exceed 1.5 to 2.5°C over 1980-1999 levels. Confidence
11
has increased that a 1 to 2°C increase in global mean temperature above 1990 levels (about 1.5 to
2.5°C above preindustrial) poses significant risks to many unique and threatened systems
including many biodiversity hotspots. Corals are vulnerable to thermal stress and have low
adaptive capacity. Increases in sea surface temperature of about 1 to 3°C are projected to result in
more frequent coral bleaching events and widespread mortality, unless there is thermal adaptation
or acclimatisation by corals. Increasing vulnerability of indigenous communities in the Arctic and
small island communities to warming is projected. {5.2}
Risks of extreme weather events. Responses to some recent extreme events reveal higher
levels of vulnerability than the TAR. There is now higher confidence in the projected increases in
droughts, heat waves and floods, as well as their adverse impacts. {5.2}
Distribution of impacts and vulnerabilities. There are sharp differences across regions and
those in the weakest economic position are often the most vulnerable to climate change. There is
increasing evidence of greater vulnerability of specific groups such as the poor and elderly not
only in developing but also in developed countries. Moreover, there is increased evidence that
low-latitude and less developed areas generally face greater risk, for example in dry areas and
megadeltas. {5.2}
Aggregate impacts.
Compared to the TAR, initial net market-based benefits from climate
change are projected to peak at a lower magnitude of warming, while damages would be higher
for larger magnitudes of warming. The net costs of impacts of increased warming are projected
to increase over time. {5.2}
Risks of large-scale singularities. There is high confidence that global warming over many
centuries would lead to a sea level rise contribution from thermal expansion alone that is
projected to be much larger than observed over the 20th century, with loss of coastal area and
associated impacts. There is better understanding than in the TAR that the risk of additional
contributions to sea level rise from both the Greenland and possibly Antarctic ice sheets may be
larger than projected by ice sheet models and could occur on century time scales. This is because
ice dynamical processes seen in recent observations but not fully included in ice sheet models
assessed in the AR4 could increase the rate of ice loss. {5.2}
Many impacts can be reduced, delayed or avoided by mitigation. Mitigation efforts and
investments over the next two to three decades will have a large impact on opportunities
to achieve lower stabilisation levels. Delayed emission reductions significantly constrain
the opportunities to achieve lower stabilisation levels and increase the risk of more severe
climate change impacts. {5.3, 5.4, 5.7}
There is high agreement and much evidence that all stabilisation levels assessed can be
achieved by deployment of a portfolio of technologies that are either currently available
or expected to be commercialized in coming decades, assuming appropriate and
effective incentives are in place for their development, acquisition, deployment and
diffusion and addressing related barriers. {5.5}
Finally, the IPCC (2007) presents a relatively vague estimate of economic impact, but with
estimates of impact on GDP in 2030 and 2050. The main significance of the IPCC (2007) was
that the UN and policy makers all over the world now had a report where a large majority of
influential scientists had participated and agreed upon climate impact. It also expressed the belief
that “many impacts can be reduced, delayed or avoided by mitigation … to achieve lower
stabilisation levels”.
These reports and conferences were also further reinforced by media. In interviews conducted at
Swedish large companies in 2004-2007, managers commented that they were aware of the Stern
review (2006) and the IPCC (2007), but also that television programs such as the BBC Series
Planet Earth” (2006) had made a major impact on their view of sustainability.
In 2013-14, work groups of scientists within the UN ‘Intergovernmental Panel on Climate
Change’ (IPCC) have published new data and new analyses of the world situation. Once again
scientists have focused on establishing what they can agree upon with high confidence looking at
12
the data from different disciplines and from all continents on Earth. IPCC (2013) to a large
extent confirmed the previous report’s findings and added further details and confidence to the
on-going process of climate change influenced by human activities.
Human influence on the climate system is clear. This is evident from the increasing
greenhouse gas concentrations in the atmosphere, positive radiative forcing, observed warming,
and understanding of the climate system (2-14).
Human influence has been detected in warming of the atmosphere and the ocean, in changes in
the global water cycle, in reductions in snow and ice, in global mean sea level rise, and in changes
in some climate extremes. This evidence for human influence has grown since AR4 (IPCC 2007).
It is extremely likely that human influence has been the dominant cause of the observed warming
since the mid-20th century. (10.3-10.6, 10.9)
Cumulative emissions of CO2 largely determine global mean surface warming by the late 21st
century and beyond. Most aspects of climate change will persist for many centuries even if
emissions of CO2 are stopped. This represents a substantial multi-century climate change
commitment created by past, present and future emissions of CO2. (12.5)
One major difference in relation to the IPCC (2007) is that the IPCC (2014a) puts a major
emphasis on management through adaptation (and mitigation) and that it focuses on risk in order
to support decision-making in the context of climate change. It also stresses that people and
societies may perceive or rank risks and potential benefits differently, given diverse values and
goals. The earlier emphasis on providing firm climate data in order to establish rules and
regulation on a global scale has, partly due to the meagre results of recent UN Climate
Conferences, been replaced by a belief that national laws and regulation can be important steps
forward. The importance of local actors, including companies in the private sector and NGOs, is
also emphasized to a larger extent, in comparison to the earlier IPCC (2007).
The IPCC (2014a) summarizes that:
Human interference with the climate system is occurring and climate change poses risks for
human and natural systems. The assessment … evaluates how patterns of risks and potential
benefits are shifting due to climate change. It considers how impacts and risks related to climate
change can be reduced and managed through adaptation and mitigation. The report assesses
needs, options, opportunities, constraints, resilience, limits, and other aspects associated with
adaptation.
The IPCC (2014a) presents the following Principles for Effective Adaptation:
Adaptation is place and context specific, with no single approach for reducing risks
appropriate across all settings
(high confidence).
Adaptation planning and implementation can be enhanced through complementary
actions across levels, from individuals to governments
(high confidence).
National
government can coordinate adaptation efforts of local and subnational governments … Local
government and the private sector are increasingly recognized as critical to progress in
adaptation, given their roles in scaling up adaptation of communities, households, and civil
society and in managing risk information and financing (medium evidence, high agreement).
A first step towards adaptation to future climate change is reducing vulnerability and
exposure to present climate variability
(high confidence).
Adaptation planning and implementation at all levels of governance are contingent on
societal values, objectives, and risk perceptions
(high confidence).
Decision support is most effective when it is sensitive to context and the diversity of
decision types, decision processes, and constituencies
(robust evidence, high
agreement).
13
Existing and emerging economic instruments can foster adaptation by providing
incentives for anticipating and reducing impacts
(medium confidence).
Constraints can interact to impede adaptation planning and implementation
(high
confidence).
Poor planning, overemphasizing short-term outcomes, or failing to sufficiently anticipate
consequences can result in maladaptation
(medium evidence, high agreement).
Limited evidence indicates a gap between global adaptation needs and the funds
available for adaptation
(medium confidence).
Significant co-benefits, synergies, and tradeoffs exist between mitigation and adaptation
and among different adaptation responses; interactions occur both within and across
regions
(very hig h confidence).
The IPCC (2014a) presents the key risks for each continent, the polar regions, small islands and
the Ocean followed by adaptation issues & prospects. It also provides an estimate for risk &
potential for adaptation for three time frames: present, near-term (2030-2040), and long-term
(2080-2100) with two different estimates of temperature increase: 2 and 4 degrees. Here, long-
term risk levels even with high level of adaptation seems to become critical if the temperature
increases by 4 degrees: for Africa in terms of reduced crop productivity associated with heat and
drought stress, for Asia in terms of increased risk of heat-related mortality, for Australasia in
terms of composition and structure of coral reef systems, for North America in terms of wildfire-
induced loss of ecosystem integrity, and for the Ocean a reduced biodiversity, fishery abundance
and coastal protection.
The IPCC (2014b) focuses on mitigation which is defined as “…the human intervention to reduce the
sources or enhance the sinks of greenhouse gases”. IPCC (2014b) assesses literature on the scientific,
technological, environmental, economic and social aspects of mitigation of climate change. It also
assesses mitigation options at different level of governance and in different economic sectors,
and the societal implications of different mitigation policies, but does not recommend any
particular option for mitigation.
“The ultimate objective … is to achieve … stabilization of greenhouse gas concentrations in
the atmosphere at a level that would prevent dangerous anthropogenic interference with the
climate system. Such a level should be achieved within a time frame sufficient to allow
ecosystems to adapt naturally to climate change, to ensure that food production is not
threatened and to enable economic development to proceed in a sustainable manner.”
IPCC (2014b) point out that effective mitigation depends on various factors, including finding
ways to deal with issues of justice and fairness, value judgements and ethical considerations,
conflicting societal goals, risk and uncertainty:
Effective mitigation will not be achieved if individual agents advance their own interests
independently. Issues of equity, justice, and fairness arise with respect to mitigation
and adaptation. Countries’ past and future contributions to the accumulation of GHGs in the
atmosphere are different, and countries also face varying challenges and circumstances, and have
different capacities to address mitigation and adaptation. The evidence suggests that outcomes
seen as equitable can lead to more effective cooperation.
Many areas of climate policy making involve value judgements and ethical
considerations. Social, economic and ethical analyses may be used to inform value
judgements and may take into account values of various sorts, including human wellbeing,
cultural values and non-human values.
14
Climate policy intersects with other societal goals such as those related to human health,
food security, biodiversity, local environmental quality, energy access, livelihoods, and equitable
sustainable development, creating the possibility of co-benefits or adverse side-effects.
Climate policy may be informed by a consideration of a diverse array of risks and
uncertainties, some of which are difficult to measure. The design of climate policy is
influenced by how individuals and organizations perceive risks and uncertainties and
take them into account. People often utilize simplified decision rules such as a preference for
the status quo. Individuals and organizations differ in their degree of risk aversion and the
relative importance placed on near-term versus long-term ramifications of specific actions.
However, IPCC (2014b) points out what will happen without any mitigation and what is needed
in terms of changes in energy systems and land use in order to keep the temperature increase to
less than 2°C, and also highlights the urgency of not delaying mitigation efforts:
Without additional efforts to reduce GHG emissions beyond those in place today,
emissions growth is expected to persist driven by growth in global population and
economic activities. Baseline scenarios, those without additional mitigation, result in
global mean surface temperature increases in 2100 from 3.7 to 4.8°C compared to pre-
industrial levels. (high confidence)
Mitigation scenarios in which it is likely that the temperature change caused by
anthropogenic GHG emissions can be kept to less than 2°C relative to pre-industrial
levels are characterized by atmospheric concentrations in 2100 of about 450 ppm CO2eq
(high confidence).
Scenarios reaching atmospheric concentration levels of about 450 ppm CO2eq by 2100
(consistent with a likely chance to keep temperature change below 2°C relative to pre-
industrial levels) include substantial cuts in anthropogenic GHG emissions by mid-
century through large-scale changes in energy systems and potentially land use (high
confidence).
Delaying mitigation efforts beyond those in place today through 2030 is estimated to
substantially increase the difficulty of the transition to low longer-term emissions levels
and narrow the range of options consistent with maintaining temperature change below
2°C relative to pre-industrial levels (high confidence).
The IPCC (2014b) states that both efficiency enhancements and behavioral changes are key
mitigation strategies. However, a comment is also made about the importance of technology
policy as a complement to mitigation, i.e. to stimulate innovation through either publicly funded
R&D or procurement. In line with IPCC (2014a) the report also emphasizes that the private
sector can play an important role, adding that it also can take part in financing mitigation efforts.
Efficiency enhancements and behavioural changes, in order to reduce energy demand
compared to baseline scenarios without compromising development, are a key mitigation
strategy in scenarios reaching atmospheric CO2eq concentrations of about 450 or 500
ppm by 2100 (robust evidence, high agreement). Near-term reductions in energy demand are an
important element of cost-effective mitigation strategies, provide more flexibility for reducing
carbon intensity in the energy supply sector, hedge against related supply-side risks, avoid lock-in
to carbon-intensive infrastructures, and are associated with important co-benefits.
Behaviour, lifestyle and culture have a considerable influence on energy use and
associated emissions, with high mitigation potential in some sectors, in particular when
complementing technological and structural change (medium evidence, medium agreement).
Emissions can be substantially lowered through changes in consumption patterns (e.g., mobility
demand and mode, energy use in households, choice of longer-lasting products) and dietary
change and reduction in food wastes. A number of options including monetary and non-
monetary incentives as well as information measures may facilitate behavioural changes.
Technology policy complements other mitigation policies (high confidence). Technology policy
includes technologypush (e.g., publicly funded R&D) and demandpull (e.g., governmental
procurement programmes).
15
In many countries, the private sector plays central roles in the processes that lead to
emissions as well as to mitigation. Within appropriate enabling environments, the private
sector, along with the public sector, can play an important role in financing mitigation (medium
evidence, high agreement).
BUSINESS STRATEGIES FOR SUSTAINABILITY
At least since the Brundtland Commission’s (1987) report ‘Our Common Future’, the issue of
sustainability has been on the public agenda, but not always on the corporate agendas. However,
what industrial and service firms do ‘matters’ for sustainability. This can be observed in terms of
the direct impact of their production processes, including raw materials use and
distribution/transportation of products, as well as the firms’ indirect influence on the use and later
destruction/recycling of their products in society. In addition, firms as actors in society impact
the social domain including health, child labor and social equity.
Inspired by the Brundtland Commission, there have been several attempts to develop approaches
to analyze the needs of, and to envision strategies towards, a future sustainable society. Several
sustainability approaches have focused on the societal level, e.g. in the Netherlands where the
sustainability demands for technological, cultural and structural changes in society were addressed
from different stakeholder perspectives. However, in a paper looking back on 10 years of
development, Vergragt (2001) commented that while the involvement of private companies in
innovation processes is essential, the bulk of Dutch industrial companies is still in the earlier
stages of development towards sustainability (i.e. primarily focusing on cleaning up production
processes and not on eco-design of products and services).
Nonetheless, today there are examples from various countries of industrial firms taking corporate
social responsibility and sustainability seriously. For example, based on an empirical study of
Canadian firms in the oil, mining and forestry industries, Bansal (2005) found that the
commitment to a sustainable development had increased over time, fuelled primarily by a greater
concern for social equity. Recent natural disasters (e.g. Hurricane Katrina) have contributed to
an increased general interest in global warming, in combination with specific efforts to influence
the public domain. One such example is former vice president Al Gore’s (2006) ‘An
Inconvenient Truth: The planetary emergency of global warming and what we can do about it’,
which has had considerable impact reaching many individuals and groups in several countries,
through television, seminars and a book. This mass-media exposure has, according to Gore, a
major purpose of influencing politicians through the general public, but of course also managers
in industrial firms develop new insights.
There were fewer approaches that directly addressed the need for corporations to develop
strategies in line with the demands of a future sustainable society. The Natural Step was one
such approach that from the early 1990s succeeded in having an impact on the way business
firms develop their undertakings (Holmberg & Robert 2000, Nattrass & Altomare 1999).
Holmberg (1998) outlines the steps for a backcasting approach to strategy development in
business firms, based on system conditions for sustainability. Other researchers focused on
ecological auditing as a way to develop sustainable businesses (e.g. Callenbach et al. 1993), or
16
on Corporate Social Responsibility (e.g. Garriga & Melé 2004). Probably the most commonly
used tool in order to estimate ecological impact is Life Cycle Analysis, which in many
companies has become a standard methodology used in connection with product development in
order to identify ecological impact (e.g. Rex 2008).
A major breakthrough in the academic business/strategy discipline took place in 2006 when the
doyen of strategy research, Harvard Business School professor Michael Porter, received the 2006
McKinsey Award for the most significant HBR article during the year an article in which he
and his co-author Mark Kramer are arguing for companies to create competitive advantage by
integrating social and environmental issues into their core strategy, i.e. making
sustainability a natural part of strategy. They stated that NGOs, governments, and companies
must stop thinking in terms of ‘corporate social responsibility’ and start thinking in terms of
‘corporate social integration’ in order to find shared values between society and corporations. To
analyze this potential for shared value, Porter & Kramer (2006) developed a framework based on
Porter’s well-established strategy analysis tools: mapping the social impact of the ‘value chain’ and
using the ‘diamond framework’ to analyze the social influences on competitiveness. Hence, to put
these principles into practice, a company must integrate a social perspective into the core
frameworks it already uses to understand competition and guide its business strategy. According
to Porter & Kramer the essential test of CSR is not whether a cause is worthy, but whether it
presents an opportunity to create shared value that is, a meaningful benefit for society that is
also valuable to the business.
However, there are also other strategy development tools that can be used, and which also to
some extent have been used, to include sustainability issues in strategy development. Not least,
the tools developed to cope with discontinuous or disruptive change can be useful, i.e. to help
strategizing when there is a high degree of uncertainty concerning the conditions for the future.
System Dynamics has been used to analyze complex interactions in the market and learning
processes on different system levels (de Geuss 1988, 1996; Senge 1990). Another starting point
has been to focus on disruptive technologies and observe the difficulty that previously successful
firms have had when there is a major technology shift (Christensen 1997), and to develop tools
and approaches for firms to analyze such shifts (Christensen et al. 2003, 2004). Because of the
difficulty of knowing what the future has in store, one approach that has been advocated is to
keep strategy alternatives open as long as possible by developing an understanding of the
uncertainty and managing a portfolio of real options on the contingent elements of alternative
optimal strategies (Raynor 2007).
Scenario Planning is an approach that has been relatively widely used by industrial firms, most
notably in the oil industry (Van der Heijden 1996) in order to create pictures of plausible futures
for decision-makers. There are several variants of scenario planning the most common way is a
deductive approach where four equally possible developments are outlined to form the basis for
strategy processes (Van der Heijden 1996). Based on this understanding, a strategy which is
working and robust under all four scenarios is developed. It has been argued that “robust
strategies tend to result in mediocre, if acceptable, results under most circumstances and standout
performance in none. (Raynor 2007, p.231.) However, scenarios should be seen as an input for
strategic conversation which can both expand and focus the thinking of decision-makers in
17
corporations, and the concept of equally possible developments and robustness has a role in this
conversation. While primarily used for corporate strategy development, scenario planning has
been used for several other applications and in creative combinations. For example, Carlsson-
Kanyama et al. (2003) integrated the participative approach from scenario planning into a back-
casting exercise in five European cities, i.e. for society’s development (see further the section on
Scenarios).
Recently a growing number of prominent researchers have repositioned themselves into
addressing central issues connected with sustainability. Senge et al. (2008) point at the “Necessary
Revolution: how individuals and organizations are working together to create a sustainable
world”. C.K. Prahalad and co-authors (Nidumolu et al. 2009) ask “Why sustainability is now the
key driver of innovation” indicating that there is no alternative to sustainable development: “In
the future, only companies that make sustainability a goal will achieve competitive advantage.
That means rethinking business models, as well as products, technologies, and processes.” They
develop a 5-stage model of sustainability challenges, competences and opportunities starting from
(1) viewing compliance as opportunity, (2) making value chains sustainable, (3) designing
sustainable products and services, (4) developing new business models, and finally (5) creating
next-practice platforms. They conclude their article by stating “That will happen only when
executives recognize a simple truth: Sustainability = Innovation.”
Porter & Reinhardt (2007) further emphasize the direct link between climate change and business
strategy: “Companies that persist in treating climate change solely as a corporate social
responsibility issue, rather than a business problem, will risk the greatest consequences. …the
effects of climate on companies’ operations are now so tangible and certain that the issue is best
addressed with the tools of the strategist, not the philanthropist.”
DEVELOPMENT OF TECHNOLOGY AND MARKETS FOR PRODUCTS THAT ARE
ENVIRONMENTAL
Another clear indicator of a major change can be seen in the marketplace. Even in the
traditionally conservative automobile industry a major change is occurring, where innovation has
become central for business success. Toyota Prius III was no.1 in Japan, and Honda’s hybrid was
no.4 on the Japanese market in 2009. The 2010 Car of the Year in the US, Ford Fusion, is also
available in a hybrid version, as well as in diesel versions. During the past year almost all
manufacturers have launched cars consuming 4.5 liters per 100 km, and Volkswagen which has
been leading this development is once again launching a diesel model that uses less than 3 liters
per 100 km (they launched their first 3-liter diesel Polo in 1998, although with an advanced
gearbox that has been a constant headache).
Sustainability is increasingly being used as a starting principle for innovation and development.
Jeffrey Immelt, the CEO of GE, has made it very clear: whatever is being developed at GE is
based on or stimulated by a sustainability vision. “At GE, we are taking a new approach to
solving some of our customers’ toughest environmental challenges. We call it ecomagination.
(GE homepage.) GE is also changing the way it innovates in the world. “Rather than follow its
18
historical path of developing high-end products and adapting them for emerging markets, GE is
developing local technologies in these regions and then distributing them globally. (See Immelt
et al. 2009.)
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3 DISMANTLING LOCK-INS AND TRAGEDIES OF THE
COMMONS
Mats Williander, Viktoria Institute and Chalmers
Mats is currently a research leader at the Viktoria Institute in Gothenburg, a non-profit IT-research institute
focusing on automotive and transport informatics. He holds an M.Sc. in Electrical Engineering (Chalmers
University of Technology, 1980), an MBA (School of Business, Economics and Law at University of
Gothenburg, 1992) and a Ph.D. in Technology Management (Chalmers University of Technology, 2006). He
has more than 30 yearsindustrial experience from several business sectors such as the car industry, microwave
business, IT consulting, manufacturing and the energy sector. He has had positions in R&D, business
development, business strategy and management.
Matsmain research interest is in Innovation for Sustainable Development, which also was the focus for his
dissertation.
Most of us are affected by “thought models” that lock us into mindsets and behaviors that create
inertia for change. We may remain for long periods of time in this state without any need for
significant changes. But the lock-in can become a threat to the individual, the organization or the
society that is locked-in when the context in which one “operates” changes faster than one can
unlock. The inertia to change inhibits sufficiently rapid adaptation. From an evolutionary
perspective, such inhibitions can be life-threatening. Many examples can be given where
individuals, companies and societies die off because of inabilities to adapt caused by lock-ins in
mental models unsuitable for the contextual changes they experience (cf. Diamond, 2006).
This lock-in effect may be one important explanation for why society, despite our knowledge
regarding human-caused environmental degradation, climate change and the extinction rate of
other life forms, seems so reluctant to do something about it.
It may also be one important explanation for why companies seem reluctant to change their
product offerings despite the insight that those who do in directions that solve the
environmental challenges in ways appreciated and valued by their customers will experience
“one of the biggest business opportunities in the history of commerce” (Hart and Milstein,
1999:25).
Lock-in can appear at all three system levels of society: the individual level, the organizational
level and the societal level. Each of these three levels’ lock-ins pose threats and opportunities for
the entrepreneur.
This article tries to dismantle these lock-ins and the tragedies of the commons that seem to be
consequences of these lock-ins. The focus is the entrepreneur and it is discussed how the threats
22
can be addressed and opportunities exploited in ways that will benefit the entrepreneur’s
business.
LOCK-INS
What is a lock-in? In short, one can say that it is “an act or instance of becoming unalterable,
unmovable or rigid” or a “commitment, binding or restriction”1. The use of the QWERTY
keyboard is an almost global illustration of a lock-in. The QWERTY keyboard layout was
originally designed to slow down the writing speed of users, so as to prevent the mechanical parts
in the first typewriters from jamming with each other. The widespread production, habitual use
and expectation of this keyboard layout makes it almost impossible to change despite what, these
days, is its obviously inferior layout. The lock-in develops inertia for change.
Mostly, we are affected by contemporary “thought models” that lock us infashions, standards,
social status attributes, perceptions of society, contemporary things worth striving for and so
forth. Lock-ins are not new. Mankind has believed that the Earth is flat, that the Earth is in the
centre of the universe, and that the sun orbits around the Earth. It has not been trivial to change
these beliefs and thought models. Some, like Galileo Galilei, even got arrested when claiming that
these thought models were wrong2. Lock-ins may occur on the individual, the organizational, and
the societal level in any age.
DEFINITIONS AND DELIMITATIONS
The following text in this chapter will elaborate on lock-ins and inertia to change, from an eco-
environmental perspective and with the aim to build insights on how entrepreneurs can build
eco-environmentally sustainable businesses and capitalize on eco-environmentally sustainable
offerings. In order to pursue this aim, we need to understand some basic notions like tragedy of the
commons, the notion of good and two dimensions of good, namely private good and common good. In
addition, the notions of externalization and internalization, including their effects, must be explained.
1 www.dictionary.com 2009-12-19 entering ”lock-in”
2 From http://en.wikipedia.org/wiki/Galileo_Galilei: Galileo's championing of Copernicanism was controversial
within his lifetime, when a large majority of philosophers and astronomers still subscribed (at least outwardly) to
the geocentric view that the Earth is at the centre of the universe. After 1610, when he began publicly supporting
the heliocentric view, which placed the Sun at the center of the universe, he met with bitter opposition from
some philosophers and clerics, and two of the latter eventually denounced him to the Roman Inquisition early in
1615. Although he was cleared of any offense at that time, the Catholic Church nevertheless condemned
heliocentrism as "false and contrary to Scripture" in February 1616,[10] and Galileo was warned to abandon his
support for it which he promised to do. When he later defended his views in his most famous work, Dialogue
Concerning the Two Chief World Systems, published in 1632, he was tried by the Inquisition, found "vehemently
suspect of heresy," forced to recant, and spent the rest of his life under house arrest.
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TRAGEDY OF THE COMMONS