Ernst&young

Green Business Models

Setting the scene…

11 December 2013


Key statements

Green business models (GBM) contain a promisingeconomic as well as green potential

The elusiveness of the GBM concept is a significantbarrier for its further dissemination

History

► A relative recent phenomenon - with roots in the research community (SusProNet, EU Fifth Framework Programme)

► Significant increase in (popular) interest in the topic within the past five years

► Despite the substantial interest in the phenomenon, the level of green business model activity continues to be low

► Proliferation of studies of green business model potential and challenges in recent years


Studies of GBM – some examples

► EU Commission (2008): Promoting Innovative Business Models with Environmental Benefits

► FORA (2010): Green Business Models in the Nordic Region

► Nordic Innovation (2012): Green Business Model Innovation

► US Environmental Protection Agency (2009): “Green Servicizing” for a More Sustainable US Economy”

► Ellen MacArthur Foundation (2012 og 2013): Towards the Circular Economy (Vol. 1 og 2)

► OECD (2013): Why New Business Models Matter for Green Growth

► EU (2013): Exchange of good policy practices promoting Innovative/Green Business Models

► McKinsey & Company (2011): Resource Revolution


GBM potential

► Green business models have the potential to:

► Enhance company competitiveness / cost competitiveness of businesses (incl. cost savings for customers)

► Increase productivity► Create jobs► Lower environmental impacts / increased energy (resource)

efficiency► Serve as a catalyst for innovation► Support company branding ► Increase motivation amongst workers


Some definitions

► What is a green business model?

► “Green business models are business models which support the development of products and services (systems) with environmental benefits, reduce resource use/ waste and which are economic viable. These business models have a lower environmental impact than traditional business models” (FOR A 2010)

► “…the use of innovative technological or non-technological solutions and / or cooperation with other market actors, leading to increased economic or environmental efficiency, resulting in the achievement of a business model more 'decoupled' from environmental costs (European Commission, 2013)

► An innovative/new business model with positive economic and environmental benefits?


GBM classification

► Two main categories of green business models:

► Incentive models / product-service systems► A common denominator is the innovative division of risk between

the contracting parties, altered incentive structures, longer-term relations (strategic partnerships), and a general shift from sellingproducts to selling services /functions

► Lifecycle models / coordination benefit models► Models based on a holistic life cycle perspective, which includes

the entire value chain from the purchasing of resources to the re-use of products. Business models that exploit the proximity of agents (sharing models)


► Functional sales► ESCO (Energy Saving

Companies)► Chemical Management Systems

(CMS)► DBFO (Design Build Finance

Operate)

► Cradle-to-cradle► Industrial symbiosis► Sharing models► Take back agreements► Remanufacturing


Incentive models Lifecycle / coordinationbenefit models

GBMs – an overview

Recent policy initiatives

► GBM pilot program (financed by Fornyelsesfonden, now Markedsmodningsfonden)► Overall aim: advance the use of GBM in Danish companies► Five companies continued into phase 2 of the program in July 2013► Project period: October 2012 – July 2014

► Acceleratorprogram for GBM► Established by the Green Restructuring Fund, the Danish regions and

Bornholms regional municipality► Overall aim: advance the use of GBM in Danish companies► Provides financial support and advise on how to implement GBM► Applications are currently being reviewed (56 applications received) ► Phase 1 will be implemented in January 2014 and continues over a six

month period


Barriers

► Stretchy concept – makes it difficult to accumulate knowledge and lessonslearned

► Lack of knowledge and competencies to develop green business models (legal, financial, commercial, technical, and environmental) (incl. integration of competencies)

► A need for specifying and, perhaps more importantly, communicating exacteffects

► Investment in green business models considered a risky business

► Traditional mindsets (e.g. the shift away from ownership (product) to service)

► Lack of professional, cross-sectoral networks and supporting institutionalstructures


Contact information

Guri Weihe | Manager EY P/SGyngemose Parkvej 502860 SøborgDenmarkCell: +45 5158 2897 | Office: +45 7010 8050 |Mail: [email protected]: http://www.ey.com


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