Business Challenges Lecture 06 2024-2025 PDF

Business Challenges TEACHING WEEK 6 THE FUTURE OF SUSTAINABLE BUSINESS MANAGEMENT  Today Do you remember? Creating shared value Sustainable reporting Current trends 2  ANNOUNCEMENT 3 Excel office hours...

Business Challenges TEACHING WEEK 6 THE FUTURE OF SUSTAINABLE BUSINESS MANAGEMENT  Today Do you remember? Creating shared value Sustainable reporting Current trends 2  ANNOUNCEMENT 3 Excel office hours Monday 14 October 14.00-15.00 in OV 2.07 Tuesday 15 October 15.00-16.00 in OV 3.69 4  DO YOU REMEMBER? 5  Ecological footprint A measure of how much area of biologically productive land and water an individual, population or activity requires to produce all the resources it consumes and to absorb the waste it generates, using prevailing technology and resource management practices. The Ecological Footprint is usually measured in global hectares (gha). Source: www.footprintnetwork.org 6  Alternative measures Ecological Footprint: how many earths does it take to produce the goods and services necessary to support our current lifestyle? Earth Overshoot Day: the date when humanity’s demand for ecological resources and services in a given year exceeds what earth can regenerate in that year. 7  Eco-efficiency vs. eco-effectiveness 8  What is a circular economy? A circular economy aims to redefine growth, focusing on positive society-wide benefits. It entails gradually decoupling economic activity from the consumption of finite resources and designing waste out of the system. 9 Enviu, Reweave Impact Report 2023 10  THE FUTURE OF SUSTAINABLE BUSINESS MANAGEMENT Study pp. 141-148, 330-338, 352-358 in book 11  CREATING SHARED VALUE 12  Creating Shared Value Michael Porter & Mark Kramer Harvard Business Review, Jan-Feb 2011 13  What about CSR? Michael Porter & Mark Kramer Harvard Business Review, Jan-Feb 2011 14  Why think beyond profit? Why should businesses think beyond profit… … and help solving societal issues? Why not leave this to governments, NGOs or society itself? 15  Why think beyond profit? 1. Businesses and society are intertwined Businesses need (and pay for) factors of production Businesses are influenced by events in society 2. Businesses have the resources to act Businesses have large financial funds Businesses have expertise to tackle problems 3. Creating shared value is beneficial to both sides Not dividing existing value, but creating more value Social value will lead to benefits for company as well 16  New type of capitalism Core aspect of capitalism – unlimited growth – needs to be adjusted Companies still can (and have to) aim for growth (to stay innovative, ensure jobs and support community) … … but growth should be expressed in value (not in profit) 17  New type of capitalism Transition from financial to value-based thinking:  Look actively for opportunities that satisfy social needs  Look for the ‘why’ rather than the ‘what’  Look for opportunities in non-traditional markets  Create new products and new business models 18  Carroll’s Pyramid 2.0  Hourglass 19  Carroll’s Pyramid 2.0 Company still needs to fulfil its economic, legal and ethical responsibilities Shared value creation is not a marginal activity like philanthropy once was Company should find a balance between value creation and various responsibilities 20  How to create shared value? 21  Rethinking products When developing a new product, businesses traditionally look at: − Market demand − Production costs − Potential competition One key question should be added: − What need is the product fulfilling and is it doing this in the best possible way? 22  Source: https://www.weforum.org/agenda/2022/01/5-circular-economy-business-models- 23 competitive-advantage/  Rethinking markets Approaching new target groups, e.g. low-income families − Usually not the primary target group − Low individual buying power − High collective buying power (since group is quite large) − Concept of social enterprises 24  Source: https://www.stratrix.com/bottom-of-the-pyramid/ 25  Redefining productivity Creating shared value often leads to cost savings … − Lower use of energy and other resources − Higher employee productivity … and additional value creation in the long run − Offering fair prices to suppliers results in overall higher quality in whole value chain 26  Source: https://www.skillsyouneed.com/ps/saving-energy.html 27  Building clusters By clustering resources, expertise and opportunities, companies can create more value together − All partners in value chain are needed to deliver products − Technology is changing faster than ever 28  Example: Unilever 29  SUSTAINABLE REPORTING 30 31  What is sustainability reporting? Sustainability reporting is a form of non-financial reporting that enables companies to convey their progress toward goals on a variety of sustainability parameters, including environmental, social and governance (ESG) metrics, as well as risks and impacts they may face, at the moment or in the future. Source: 32 https://www.gep.com/knowledge-bank/glossary/what-is-  Importance of sustainable reporting Source: https://incorpadvisory.in/blog/importance-of- sustainability-reporting-for-big-companies/ 33  CSRD On 28th November 2022, the Council of the EU adopted the CSRD. Aims to end greenwashing, strengthen the EU’s social market economy, and lay the groundwork for sustainability reporting standards. Effective from 2024 for large companies and from 2026 for SMEs. 34  Double materiality Both financial and non-financial factors can contribute to company's performance and risk profile. 35 Source: https://blog.worldfavor.com/csrd-what-is-the-double-materiality-assessment  Example: Seafood company Source: https://blog.nexioprojects.com/what-is-double-materiality-how- 36 does-it-fit-in-with-csrd-requirements  Other organizations The information of these organizations (pp. 332-338) is useful for your applied research poster, but you don’t need to study this for the exam!  TCFD ( replaced by IFRS)  CDP  GRI  ISSB 37  TRENDS IN SUSTAINABILITY 38  Current trends 1. Increased use of renewable energy  including nuclear energy 2. More recycling efforts in companies  recycling is good, but waste elimination is better 3. Improved transport and infrastructure  transport by train is only more sustainable under certain conditions 39  Current trends (2) 4. Increase in reusing and purchasing of second-hand products  B2C can use second-hand market to dispose of unwanted, new stock 5. Increase in the use of more sustainable materials  change in lifestyle has more impact 6. Development of better climate positive technology  digitalization and AI increase demand for energy 40  WHAT’S NEXT? 41  What to do this week?  Study this week’s reading material  Prepare homework for this week’s seminar  Work on Excel and come to office hour for questions All material and instructions are available on Brightspace 42