Business models for doing well and doing good

Business models for doing well and doing good EMC Feb 11 2011 Prof. Morten Hansen

Agenda • What’s wrong with CSR today • Key issues, by industry • Business models for doing well and doing good – Taxonomy

What’s wrong with CSR • Generic list of 100 items – Not linked to core business • Not very important in company – VP of CSR/Sustainability • Resolving key business issue often requires huge changes in core business • CSR needs to be re-thought

Rethinking CSR • From 100 -list to core business strategy • From VP to CEO • From CSR to Porter’s “CSV”--Creating Shared value • From business models for making profits to business models for doing well and doing good; It’s all in the “and” • Requires 1) identifying core business issues, and 2) creating new business models

1. Identifying core business issue Question: What’s the single most important social/environmental issue that the company should be concerned with? Fast food and processed food Unhealthy food, leading to various diseases and medical problems Automobile Carbon emission: climate change and pollution Fashion Unhealthy body images, leading to unhealthy living and medical problems Education Access to good quality and affordable education Building/construction Environmental damage; high carbon footprint and resource-inefficient buildings Chemical industry Toxic products, incl. how they are produced Computer Hardware Waste

2. Creating a new business model (the hard part) • Product strategy • Process strategy • � People strategy

Product Strategy • Portfolio: product-market composition – Danone: shifting portfolio • Products themselves – Improvements (e. g. , food with less sodium) – Segmentation

Product market segmentation 1) Premium segment - Costs extra, willing to pay more - Benefit: direct personal (eg healthy food, status) or indirect (save the planet) - Greenerprinter: “Dark Green” - Danone, healthy yogurts - 10 -15% of a market

Product market segmentation 1) Light segment - Not willing to pay more, but will buy if social/environmental - Greenerprinter: “Light Green” - Customers will not offset extra costs

Product market segmentation 3) Good value, happens to be green/social Favorable economics for customer a) Pay more now, save more later - Hydro. Point, Prius b) Good value right away - Zipcar, bike rental in Paris c) Lower price, because green/social reduced costs - requires change in process

Process Strategy 1) Reduce resource use in company - Herman Miller chair 2) Product lifecycle approach - Reckitt Benckiser (detergent) 3) Supplier/Customer shared value - Improve total productivity (eg, from fair trade to better yield)

People Strategy 1) Sustainability => talent attraction - People want to work for leading companies - Is this really the case? 2) Better social model => talent attraction - Work/life balance, daycare center, good environment, etc. - SAS Institute (Best place to work)