1. Arnold.Tukker@tno.nl New Business for Old Europe : the Business Contribution to SCP (book edited by A. Tukker and U. Tischner, Greenleaf Publishing) Arnold Tukker Program Manager Sustainable Innovation TNO Project Manager SusProNet and SCORE! GIN 2006, 2-5 July, Cardiff, Wales

2. Arnold.Tukker@tno.nl Structure of the presentation Relevance of decoupling and how to do it The business contribution to SCP Limits

3. Arnold.Tukker@tno.nl Need for (radical) decoupling Impact = Population x Affluence x T  Population: 6-9 billion (factor 1.5)  Affluence: will rise considerably (e.g. factor 4-5)  T must become a factor 4-10 more efficient Sources of eco-efficiency:  Production side –Improving emission factors / end of pipe –Improved technology / radical technical change  Consumption side –More intensive use of products and materials (sharing, pooling) –Shifting expenditure to immaterial value –Improving the ‘happiness per Euro/$ spent’ With food, mobility and housing being prioirties (>70% of impacts; EIPRO)

4. Arnold.Tukker@tno.nl Sources of decoupling, consumption side (ctc. ‘Immaterial consumption’  Figure gives impact/Euro for total EU expenditure in 280 categories  Difference high/low is factor 4-6  Top categories are food products ‘Quality of life / Euro’  UK: GDP rose factor 2 in 30 years  Life satisfaction not  Similar figures for Japan and other countries Source: New Economics Foundation: A well-being manifesto (2004) Source: EIPRO, EU DG JRC-IPTS, Summer 2005

5. Arnold.Tukker@tno.nl Conclusions The potental for Factor x decoupling is there Addressing the consumption part is relevant ……but must be done smartly  No ‘limits to growth’ or ‘restricting consumption’, but  Organising patterns of consumption so that maximum quality of life is realised while using the same resources  …which is a question of macro-economic efficiency Intervention mechanismPotential reductions of impact per unit Quality of Life Reducing emission factors (end of pipe, cleaner production & products) -Small mass flows: several factors -Large mass flows: Limited Improving production (cleaner production & products OR system innovation) -Usually limited to intermediate, -Factor X in case of system innovation Enhancing use intensity-Factor 2 or more, depending on the sharing, pooling or function combination system Enhancing immaterial consumption-Factor 2 (if limited to changes within existing product and service categories) Enhancing the ratio Quality of life and consumer expenditure -Several factors?

6. Arnold.Tukker@tno.nl So what is the role of business? Traditionally: process and product improvement  End of pipe  Cleaner production  Cleaner products (‘ecodesign’) Advanced: changing business models  ‘product service systems’  ‘preparing for system innovations’  And thereby also influencing patterns of consumption

7. Arnold.Tukker@tno.nl Business modelling Definition of a business model: “a description of how a company or a set of companies intend to create and capture value with a product or a service. A business model defines the architecture of the product or service, the roles and relations of the company, its customers, partners and suppliers, and the physical, virtual and financial flows between them” (Ballon and Arbanowski) Technological Architecture Value Network Revenue Model Value Proposition Generates revenues Devides cost and revenues Generates cost Uses Enables Delivers

8. Arnold.Tukker@tno.nl Considerations for changing business models Changing business models is not a panacea Companies have to consider the following factors:  Co-creating user value versus market risk –Tangible value –Intangible value  Minimizing system costs versus financial risk –Use of resources –Transaction costs –Capital costs, risk profile, and ambiguity of the offering  Other benefist versus investment and capability risk –Power in the value chain / potential to capture value –Speed of innovation, learning, and option value –Investment in new core capabilities, cannibalisation and loss of synergies

9. Arnold.Tukker@tno.nl And these factors do not always play out positive Consider the example of Product-Services  Product oriented serivices: product + service added  Use oriented services: leasing, sharing, pooling  Result oriented services: the a result is bought Use oriented service  In principle more cost effective  But much lower intangible and tangible value (compare car sharing with a car) Result oriented service  Can be much more effective and opens the door for fully new function fulfillment  But often needs totally new capabilities, has worse cash flow properties, lies all risks with provider, and the offering may be difficult to specify

10. Arnold.Tukker@tno.nl The contradiction… PSS typeAdvantagesDisadvantages 1: Product oriented services Easy to implement Close to core business In general only incremental environmental benefits achievable 2: Use oriented services (particularly renting, sharing and pooling) Medium environmental benefits (Factor 2) More conscious use since per use full costs are charged Low tangible added value: getting access takes time and effort Low intangible added value: product ownership is often valued higher by consumers (less relevant for B2B) 3: Result oriented services (particularly functional results) Imply often radical new ways of function fulfilment (Factor x potential) Risks/ liabilities for reaching the result are taken over by the provider Results cannot always be agreed upon or measured in operational terms Customer loses power over means

11. Arnold.Tukker@tno.nl Systems perspective on SCP Sustainable consumption behaviour is a function of e.g.: a)Needs, Opportunities and Abilities (Vlek et al.), or b)Attitude, Social pressure and Behavioural control (Montalvo Corral) -User awareness hence needs to be understood in the user’s context ! Final user needs Leisure Food (…….) Mobility Housing Production system (B2B) Consumer Market Government Market (offer of public services and creation of infrastructure) (B2C) (B2G) ProductionConsumption Domains Needs Interaction between demand and supply Shaped by: Attitude/Life style Pressure/Life context Behavioural control /Influence on life Adapted from: project Life Cycle Approaches to Sustainable Consumption, AIST, Japan WITH THANKS !

12. Arnold.Tukker@tno.nl Example of change to SCP (Mobility) Production Consumption Radical Incremental I II III IV Car energy label: 10-20% Car sharing system: factor 2 Low transport-need environment (Floridsdorf, Vienna): Factor 4-10

13. Arnold.Tukker@tno.nl Example of governance of change (Mobility) What Sustainability gains 1.Car energy label (incremental) Marginal (<50%) 2.Car sharing system (redesign) Factor 2 (50%) 3.Low-transport environment (system innovation) Substantial (>>50%) Governance Approaches Awareness raising Awareness raising + offers of (more) sustainable solutions Awareness raising + offers of (inherent) sustainable solutions+ adapting context and framework conditions A system is the the combination of: Production structure Consumption structure Interaction between demand and supply Context and framework conditions

14. Arnold.Tukker@tno.nl..If you want system change, involve expertise covering the system A system is the the combination of: Production structure Consumption structure Interaction between demand and supply Context and framework conditions KC1: Business developers KC3:Consumer scientists KC2: (Strategic) designers KC4: Policy innovation scientists Specialists: Knowledge field Domain KC5: Mobility KC6: Agriculture/Food KC7: Energy/industry, e.g. consumer electronics

15. Arnold.Tukker@tno.nl Conclusions SC, and not just CP is essential for reaching Factor 4-10 goals Realising SC needs a system approach  An interplay between producers and consumers….  And not by business alone  …within a context framed by –Rules of the game in markets –Existing infrastructures, social norms, habits, and other historical ideosyncracies  Which implies that directions of change cannot be chosen freely Policies for SCP imply hence involvement of  Actors along the production consumption chain  Actors that can influence institutions  In sum, a system innovation approach

16. Arnold.Tukker@tno.nl Postscript I: Sustainable Consumption Research Exchanges (SCORE !) Some basics  Co-ordination action under EU FP6  8 core institutes, 20 members; supportive to a few 100 practitioners  2005-2007; 1 Million Euro, start in October 2005 Philosophy:  For implementing SCP you need knowledge from –Business –Design –Consumer behaviour –Innovation at system level  Focus at the 3 priorities mobility, food, housing  Develop ideas and a testing/learning plan for them

17. Arnold.Tukker@tno.nl SCORE (continued) SCORE froms an EU-based platform for SCP  Funded base to support a broad network (100-200 persons)  Exchange moments every 5 months  Structural framework to work out SCP concepts in the main consumption domains with all relevant disciplines  SusProNet and SCORE work on ‘landing’ their communities into a professional society (e.g. GIN, ERSCP….or IS4IE??)

18. Arnold.Tukker@tno.nl Focus per Event Workshop 1General platform for exchange of views how to realise sustainable consumption structures between the 33 Participants and Partners, from their own knowledge background. Conference 1Goals: Launch the network in the EU arena Provide a broad platform for conceptual exchange Provide a broad platform for SC case presentation s Workshop 2WS2-4 are organised giving consumption domains centre stage. WS2 starts with discussing 5-10 SCP cases per domain from the 4 knowledge perspectives, analysing success- and failure factures, re- design potential, and danger of rebound effects Workshop 3WS3 abstracts the lessons of WS2 to a higher level, leading to concepts models and case typologies of successful implementation approaches for sustainable consumption in relation to user awareness Conference 2Conference 2 validates the results of the project and forms a first outreach to policy, industry, certification organisations and other bodies relevant for implementation Dissemination eventThe dissemination event is meant to disseminate the full lessons of the project to all relevant extermal parties.

19. Arnold.Tukker@tno.nl 3.Platform for input into policy Key results to be generated Main header 1.Generating and disseminating best practice 2.Programming research Result Describing best practice how to organize user awareness to reach sustainable consumption (3 sectors, 3 levels of change, interplay between 4 knowledge fields)* Dissemination across EU-25 via workshops, conferences, reports Exchange and (informal) co-ordination of research among participants, with a focus on EU-25 but with links world-wide (over 150 fte research capacity) Developing input in the form of a structured overview of research needs in FP6/FP7 and UNEP’s SCP program Input of 1) and 2) into the following potentially relevant policy platforms: EU’s IPP and Resource policy: insight in the role of ‘soft’ informative instruments such as labelling, product declarations, etc. EU’s ETAP: insight in ‘willingness to consumer behaviour change’ in 3 relevant sectors EU and UNEP SCP policy platforms 4.Permanent network building Building a structural ‘Sustainable solution’ community covering SCP in collaboration with existing structures in Advisory Board (GIN, Prepare) Levels of change in consumption: 1.Via awareness 2.Via awareness+new solutions 3.Via awareness+new solutions+ framework changes *Example sectors: 1.Transport 2.Agro-food 3.Energy&electronics Knowledge fields: 1.Business development 2.Strategic solution design 3.Consumer behaviour 4.Policy instruments for innovation & information

20. Arnold.Tukker@tno.nl Realising SCP: How to differentiate Different countries have different challenges Typology of Hart, Millstein and Prahalad may be useful  Consumer economies (1 bio people)  Emerging economies (1 bio people)  Bottom of the pyramid economies (4 bio people living on 1-2$ a day)

21. Arnold.Tukker@tno.nl The challenge of system innovation differs remarkably per world region Adapted from: Hart&Milstein, Sloan Management Review, Fall 1999, and C.K. Prahalad, The Fortune at the Bottom of the Pyramid, 2005 Type of EconomyExample countriesMain sustainability challenge 1. ConsumerUS, Japan, Western Europe Radical decoupling Dramatically lowering resource use while maintaining economic output (‘Factor 10’) 2. EmergingChina, S-E Asia, South America Leapfrogging to sustainable structures of consumption and production without copying Western examples first 3. Bottom of the pyramid Many countries in Africa Ensuring basic needs Developing dedicated solutions for the ‘Bottom of the pyramid’; providing a basis for sustainable growth

22. Arnold.Tukker@tno.nl Synthesis: towards a Framework for the Framework of Programs on SCP Parameter 1: priority areasParameter 2: Economy types and main agenda’s Leads to: 1.Food 2.Mobility 3.Energy use 1.Consumer: radical decoupling 2.Emerging: leapfrogging 3.BOP: ensuring basic needs 9 main agenda’s Organisation per main agenda Who to involveElements to be addressed per main agenda Domain specialists (food, mobility or energy use) Experts and practitioners on: -Business management -Design -Consumer / user behavior -System innovation and policy 1.Development of conceptual understanding of how to realise change 2.Gathering and analysing existing examples of change 3.Experimenting with change 4.Translating experiences developed in outlines for ‘managing’ change

23. Arnold.Tukker@tno.nl Postscript : the Oslo Declaration Initiated during the last workshop of the project ‘Life cycle approaches to Sustainable Consumption’  Project led by Dr. Inaba of AIST, SNTT  Funded by Japanese government  February 2005, Oslo Wide-felt problem of researchers:  Research agenda’s are technical  Ignore the social and institutional components so essential for SCP Decision to initiate the ‘Oslo Declaration on Sustainable Consumption’  Reference to WSSD and 10 Year Program on SCP  Reference to an implementation gap: little progress in WSSD +3  Call for action world wide  Outline for a research agenda on SCP  Published on www.oslodeclaration.orgwww.oslodeclaration.org Present situation:  Now signed by 250 researchers (and counting)  Offered to various governments; lately on 25 August to all relevan members of the European Commission for consideration in the development of the EU’s 7 th Framework Program on Research