Environmental Engineering Reference
In-Depth Information
BACKGROUND
was not environmental but economic purposes.
Serious industrial accidents raised public concern
on industrial safety. To this respect, corporate
responsibility took its roots in safety issues and
made progressively its way to environment and
broader sustainable development concerns in the
90s. To address this, norms, regulations and vol-
untary initiatives started to develop, and progres-
sively, the questions of the corporate impacts on
environmental and society became unavoidable.
Businesses face now a huge challenge: how to
remain competitive in a fast evolving and highly
uncertain context in which environmental issues
become more and more strategic? In particular,
climate change may provide the main exogenous
driver to radical changes in the way to conceive
the generation of financial value (the business
model) in the near and medium future. Indeed,
exhaustion of fossil energy resources and energy
security issues back the political momentum to
strengthen policies and measures to shape a new
economic paradigm and shift to low carbon pro-
duction and consumption patterns.
The challenges raised by the prospects of a
low carbon economy- at a 2050 horizon- imply
that green business model will need to be widely
spread and generalized. What are the requirements
for businesses to anticipate and evolve so as to
remain competitive in a low-carbon economy?
Provided that each economic sector is highly
specific (in terms of assets, technology, regulation,
market consumer, value creation etc.), a sector by
sector approach is necessary to isolate the impact
of external and internal factors that will trigger
the incentives to reshape business models. This
will allow to build a diagnosis on how business
are considering the transition to a low-carbon
economy and to what extent they are facing this
issue. It aims to build on specific experiences to
illustrate the conditions for the creation of new
economic models and how to make them emerge.
Environment and the Need
for Renovated Strategies
In a basic sense, a business model describes the
rationale of how a company generates financial
value from an economic activity and sustains
it. To this respect, the strategy of the firm since
the eighties consists in analyzing the traditional
Porter's five forces. Michael Porter provides a
framework to better identify the context in which
industry operates. It identifies five main determi-
nants of the competitive intensity of a sector and
how they influence corporate strategy. It includes
the degree of rivalry, barriers to entry, risks of
substitution (in products and services), power of
suppliers and buyers' power (Porter, 1980). In
this approach, the main company objective is to
shape comparative advantages out of the analysis
of these five forces, to build its model upon them
and sustain it. Porter identifies three strategies
to take an advantage on the market: low costs,
differentiation or focalization. In this approach,
the competitive environment plays a key role in
framing corporate strategy and the performance
level it can reach.
This framework was especially workable in
the 80s in a quite stable environment. Richard
d'Aveni (1995) shows that little after, companies
were submitted to a profound modification of their
competitive market environment, defining it as a
new era of “hyper competition”. This translates
into a far more complex and unstable environment
with the emergence of new sectors in technology,
internet or computing sciences; the liberalization
of markets and the globalization of firms. Changes
are accelerating, upsetting traditional business
models. The leaderships are continuously called
into question and no comparative advantage is
definitely acquired. In this new configuration, the
company is compelled to adopt proactive strate-
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