Transcript Corporate Strategy & The Environment

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Creating Sustainable Corporate Advantage
through
Corporate Environmental Responsibility
Jose PD
Corporate Policy and Strategy Area
Indian Institute of Management Bangalore
Sustainability:
Should Corporations
Really Care ?
Factors That Drive Reputation& Competitive Advantage
Quality
Business Practices
Service
Employee Treatment
Price
Social responsibility
factor
Community Support
Environment
Stability
Traditional
purchase driver
Convenience
Firestone
Ford
• Recall Costs:
• $390 million
• $1 billion
• Legal Costs*:
• $360 million
• $590 million
• Effects on Sales:
• 40% Decrease
• 15%-20%
in Sept. & Oct.
on Explorers
*Legal costs: figures until end of 2000.
Source: University of Notre-Dame
Ford
Bridgestone
Source: University of Notre-Dame
The European Contamination Crisis
Recall cost Coca-Cola Enterprises an
estimated $103 million dollars.
Source: University of Notre-Dame
Source: University of Notre-Dame
Royal Dutch Shell & Brent Spar
Source: University of Notre-Dame
McSpotlight.Org
Tobacco Litigation & Settlement
C o n f i d e n t i a l
Cell Phones or Gorillas ?
Creating Sustainable Corporate Advantage …
Challenge #1
Using the Gorillas to sell the
Cell Phones ?
Required Business Response
Environmental Stewardship
Corporate Environmentalism
(beyond compliance
approaches)
Risk Management
(Evaluating Risk-Return Tradeoffs - perceived & Real)
Market Development
Strategic Environmental Exposure
Product
Technology
Regulations
Customers
Stakeholders
Relevant
Ecological
Environment
Stakeholder
Environmental
Exposure
Corporate
Envtl.
Exposure/
Risk
Source: Jose, 1996
Transforming Risks to Competitive Advantages
DuPont
3M
Patagonia
Volkswagon
Monsanto
Reducing the Footprint at DuPont
Invest & Grow
SVA
lb
Invest & Grow
Electronic Materials High Earnings
Agriculture Products High Cash Flow
Lycra
High R&D/Capital
Auto Finishes
Corian
Tyvek
Improve & Reposition
PET
Nylon
Sell & Redirect
Conoco
Pounds of Materials Used
Source: Stuart Hart, 1999
HI
Market Attractiveness
HI
LO
Agro-Chemicals
Ind. chemicals
Pharmaceuticals
Zinc Cells
LO
Source: Jose, 1996
1951-79
HI
LO
Market Attractiveness
HI
Agro-Chemicals
Ind. chemicals
Zinc Cells
Bio-fertiliser
Seeds
Drip irrigation
Tissue culture
LO
Source: Jose, 1996
1980-95
HI
Market Attractiveness
HI
• Waste Management
• Solar Energy
• Bio fertilizer
• Afforestation
• Land& Water Mgmt.
LO
Source: Jose, 1996
2000 +
LO
HI
Market Attractiveness
HI
LO
Source: Jose, 1996
LO
HI
Market Attractiveness
HI
LO
Source: Jose, 1996
LO
• R&D, Innovation
• Resource Substitution
• Pollution Control
Sustainability Approaches: Chemical Industry
Today
.
Yesterday .
HC Divestiture
HC Investments
Conoco
Solutia
Chemicals
Chemicals
DuPont
Dow
Monsanto
Ciba-Geigy
Sandoz
ICI
Hoechst
Rhoune-Poulenc
Today
.
Life Science Invst.
Pioneer Hi-Bred
Dow-Elanco
Multiple Acquisitions
Novartis
Astrazeneca
Aventis
Novo Nordisk
Source: Stuart Hart, 1999
Creating Sustainable Corporate Advantage …
Challenge #2
Riding the Wave
Vs
Changing the Trend-line?
Sustainability Approaches for Automobiles ?
GDP per Capita [US$]
40,000
Switzerland
35,000
Denmark
Norway
Japan
30,000
USA
Germany
Belgium
France
United Kingdom
MORE DEVELOPED COUNTRIES
AVG.
Italy
Canada
Australia
25,000
20,000
Taiwan
15,000
South Korea
Spain
Greece
10,000
5,000
China
India
0
0
New Zealand
Portugal
Argentina
WORLD AVERAGE
Brazil
Mexico
Thailand
DEVELOPING COUNTRIES AVG.
100
200
300
400
500
600
700
800
Ownership Density - Vehicles per 1000
Source: Dr. Ulrich Eichhorn (2001)
General Motor’s Vision
“No car company will be able to thrive in
the future with 100% dependency on
internal combustion engines. But there
is still no single alternative to current
technology. All of the technologies are
still evolving. So our strategy is to develop
a portfolio of options.”
John F. Smith, Jr.
Chairman, General Motors Corporation
January 8, 1997
Riding vs. Bucking the Trends
Purchasing Power
> $2,000
> $1,500-2,000
> $ 1,500
Tier 1
Popln in Millions
75-100
Tier 2-3
1500-1750
Tier 4
4000
Source: Prahlad & Hart, 1999
Environmental Challenges Facing Indian Industry
Envt. not seen as a source Comp. Advantage
Trade-off Between Cost & Competitiveness
Market Barriers
Market Failure: Policy Distortions & Subsidies
Organizational Barriers
Dominance of Small & Medium Scale Sectors
Creating Sustainable Corporate Advantage …
Challenge # 3
Managing to Create Value:
For ALL
The Social Contract
Social Performance:
Expected and Actual
Society’s
Expectations
of Business
Performance
Social
Problem
Social
Problem
Business’s
Actual Social
Performance
1960s
1990s
Time
Stakeholder Maps
Flora & fauna
Future Generations
Local Communities
Special Interest G
Media
Politicians
Government
FIRM
Industry
Competitors
Traders
Employees
Environmentalists
What’s right works. It really does. Cynics
will tell you it doesn’t, but they’re wrong.
Over the long term what’s right works
James Burke
Creating Sustainable Corporate Advantage …
Challenge # 4
The Challenge of the Triple Bottom Line
Economic
Performance
Environmental
Performance
Social
Performance
Source: SustainAbility
The Sustainability Challenge
Ecological Support
System
Economic System
+
+
Human &
Physical
Capital
+
_
Residuals
Envtl.
Assets
Economic Output
+
+
Investment
+
+
Envtl. Mainten.
Investment
Consumption
Source: Klaus North, 1996