Green Business Models in the Nordic region

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1 Green Business Models in the Nordic region
15th October 2010 Markus Bjerre Project manager, FORA

2 Green Paper: Green Business Models in the Nordic region
Initiative by Danish chairmanship of the Nordic Council of Ministers 2010 as part of the “Green Valley of Europe”-vision First initial investigation on green business models in the Nordic region Results summarised in a Green Paper to be presented on the next meeting of the Nordic Council of Ministers the 25th October 2010 Indsæt præsentationens titel via sidehoved og sidefod

3 There is an untapped potential!
Main conclusions of the Green Paper Green business models has the potential of solid business cases and jobs on a growing market significant lower environmental impacts catalyst for innovation company branding (both suppliers and customers) increase motivation amongst workers, and thereby attracting and sustaining the brightest minds an international stronghold in the Nordic region Knowledge gap about the benefits and real costs among customers, suppliers, finance institutions, and public authorities Indsæt præsentationens titel via sidehoved og sidefod

4 First initial investigation on Nordic green business models
Methodology Initial desk research and qualifying discussions with relevant actors Identification of the most prevalent green business models in the Nordic region. Identification and interviews of 25 case companies and 5 experts on economic and environmental benefits, barriers and drivers and their recommendations for a further dessimination. Workshop : Discussion and qualification from 50 Nordic and international representatives from companies, industry organisations, experts and authorities Indsæt præsentationens titel via sidehoved og sidefod

5 Nordic companies and experts
Magnus Enell Adj. Professor IIIEE, Lund University Matthias Lindahl Ass. Professor Linköping University Oksana Mont Lund University Markku Anttonen Prj. Manager Aalto University Ole Helby Petersen Research Ass. AKF

6 Five green business models
Most prevalent models in the Nordic region according to experts and existing literature ESCO – Energy Saving COmpanies CMS – Chemical Management Systems Functional sales - generic model for all green business models DBFO - Design, Build, Finance and Operate Sharing Indsæt præsentationens titel via sidehoved og sidefod

7 Functional sales A generic model with common caracteristics for all green business models. The provider offers the customer to pay for the functionality /result of the product instead of buying the product itself. Case: Volvo Aero in Sweden produces airplane engines. Customers buy the power of the engines (‘power by the hour’) instead of buying the engine itself. Volvo has incentives to optimize and maintain the engines to ensure life-cycle cost effectiveness and thereby reduce the environmental impact (less fuel consumption). Indsæt præsentationens titel via sidehoved og sidefod

8 ESCO - Energy Saving COmpanies
The most widely disseminated green business model in the Nordic region. The provider energy optimizes companies and public buildings and in return gets paid by part of the savings achieved. The customer has no up front payment. Case: Danfoss Solutions in Denmark guarantees energy savings for industrial companies and is paid according to performance. The customers are compensated if savings are less than guaranteed. Indsæt præsentationens titel via sidehoved og sidefod

9 CMS – Chemical Management Systems
A green business model in the chemical services industry The provider supply and manage chemicals and related services for the customer through a strategic, long-term contract . The provider is typically remunerated in some form of the customers output. This gives the provider the incentives to reduce the input products. Case: AGA Gas in Sweden reduces their customers’ chemical procurement costs by reducing their use of chemical products and getting better procurement deals from their suppliers. Indsæt præsentationens titel via sidehoved og sidefod

10 DBFO - Design, Build, Finance and Operate
A green business model typically desseminated in the construction industry The provider is involved by long term contract (typically years) in the construction, maintenance and operation phase of the project like a building or a road . This gives the provider the incentives to improvethe quality of the construction project so that the life-cycle costs are lowered. Case: Allfarveg AS in Norway has engaged in a 27 years contract to design, build, finance, operate and maintain the 38 km long road E39 Lyngdal-Flekkefjord for the Norwegian Public Roads Administration (NPRA). Performance payment gives Allfarveg the incentives to innovate e.g. they have used brighter stones in the road asphalt, as it leads to less need for light intensity to light up the road, and a 30 pct. saving in the electricity costs. Indsæt præsentationens titel via sidehoved og sidefod

11 Sharing The basic idea is that instead of private ownership, the product is shared among a number of users whenever the individual users need access to the product. The economic benefits of this model are less evident than in the other business models, but the sharing of products may pave the way for new products to the market. Case: Move About in Norway provides car-sharing incl. insurance, reservation portal, washing and cleaning and a mobility service package for a fixed monthly price. The electric cars are exempted from parking fees and congestion charges and the cars are entitled to use bus lanes. Corporate customers see the economic advantages and the environmental branding value of sharing the cars. Indsæt præsentationens titel via sidehoved og sidefod

12 How do we close the knowledge gap?
Companies and experts recommends… Increase awareness Support the sales position of the suppliers Promote the potential for financial institutions Promote the use in public procurement and regulation Develop common Nordic standard contract paradigms Indsæt præsentationens titel via sidehoved og sidefod

13 Next Nordic steps It is recommended that…
Nordic Council of Ministers will continue to focus on the area and support and promote the dissemination of green business models A Nordic High Level Policy Group will be established NICe (Nordic Innovation Centre) will play a central role in the implementation of new initiatives. Indsæt præsentationens titel via sidehoved og sidefod

14 Thanks! The Green Paper on green business models in the Nordic region will be published the 25th of October 2010 on Markus Bjerre Project manager, FORA 14 Indsæt præsentationens titel via sidehoved og sidefod