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DRIVING THE MARKET FOR RENEWABLE ENERGY FROM THE DEMAND SIDE Business role in the aftermath of Copenhagen s failure By Dr. Tania Braga, Research Associate CSM, and Dr. Aileen Ionescu-Somers, Deputy Director
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DRIVING THE MARKET FOR RENEWABLE ENERGY FROM THE DEMAND SIDE Business role in the aftermath of Copenhagen s failure By Dr. Tania Braga, Research Associate CSM, and Dr. Aileen Ionescu-Somers, Deputy Director CSM February 2010 IMD Chemin de Bellerive 23 PO Box 915, CH-1001 Lausanne Switzerland Tel: Fax: Renewable energy is indubitably one of the key answers to the two-pronged challenge facing the world s energy future declining oil supplies and climate change. However, in spite of potential business opportunities in the renewable energy market, the current use of clean energy is still limited and the private sector has not yet fulfilled its potential to take a leadership role in speeding up the development of the sector. In April 2009, when the Forum for Corporate Sustainability Management (CSM) IMD s research and learning center that involves a partnership of companies and organizations 1 opened the floor during an event for discussions around climate change and the energy future, one of the key emerging findings was that the corporate world was waiting to see what would happen in Copenhagen. Amongst the many companies there, it was apparent that no giant steps were immediately forthcoming within the industries they represented. Over the past year, leading business voices expressed a view that a strong regulatory framework on carbon emissions was a key prerequisite for development of the world s renewable energy markets 2. They reasoned that without clarity and stability in the regulatory and legislative framework and without a price on carbon, confidence for investing in renewable energy could be fundamentally undermined, moving the sector back a generation. Companies prepared to invest in renewable energy technologies required long-term certainty, which only a strong global agreement at Copenhagen could provide. With governments failure to provide a strong and binding agreement at Copenhagen, questions have arose regarding the way forward for business. Will business leaders again wait for the next round of UN negotiations around a global framework on climate change? Or will business choose the road of action in the aftermath of Copenhagen? What is the role for corporate leadership in driving the market for renewable energy? The CSM carried out a recent case based investigation focused on climate change innovation introduced in companies belonging to WWF s Climate Savers partnership. The study of multiple cutting edge examples shows that business can make a positive difference, in many 1 2 E.g. The Copenhagen Call issued by over 500 global business leaders at the close of the World Business Summit on Climate Change on May 26, 2009 and Champions of the Low Carbon Economy Why CEOs are Ready for a Global Climate Agreement jointly published by the UN Global Compact and Dalberg Global Development Advisors in late IMD - Business role in the aftermath of Copenhagen s failure Page 2/5 different industrial sectors, by driving the market for renewable energy from the demand side. Even without a broad regulatory framework, corporations can create conditions to reduce the risk of investments in renewable energy. It can be as simple as creating a sustained demand through mid- to long-term partnerships with energy suppliers or by coming out with innovative products and business models. Companies partnering with WWF within the Climate Savers partnership can seek to emulate examples of innovative action in this area. Tetra Pak the world leader in the supply of processing and packaging solutions for milk, juices, soups and other liquids worked with the Chinese government and a local energy company to fully power its new plant in Hohot (China) using renewable energy (wind power). The supply of renewable energy coming from additional capacity at the local level was one of the main criteria to choose the location of the new Chinese plant. The company is paying a premium price for the energy and has negotiated a transparent and traceable mechanism with the Chinese government to ensure that the renewable energy they use for the new plant is also new to the grid. 3 Novo Nordisk the world leader in diabetes care have partnered with Dong Energy to develop a business model creating a reliable commercial basis for expansion of the Scandinavian renewable energy market. Through this partnership, Dong Energy boosts energy savings in Novo Nordisk s industrial plants. The healthcare company earmarks the resultant financial benefits to purchasing energy from Dong new wind farms, creating a win-win situation for both players. As a result, Novo Nordisk has not only laid the foundations to secure its own future supply of renewable energy, but it has also helped Dong Energy to create an innovative business model that has been successfully rolled out with other partners and has financed the construction of new off-shore wind farms in Denmark. 4 Nokia Siemens Network one of the top three telecommunications equipment suppliers in the world developed a breakthrough technology for a Flexi Multiradio base station 5 with low energy consumption. The innovative base station can run independently on the electricity grid, 3 Case study: IMD Breaking down alignment barriers: Tetra Pak pulls together allies to reach climate goals. 4 Case study: IMD Developing an innovative business model: Novo Nordisk and Dong Energy driving the market for renewable energy in Denmark. 5 A base station is a wireless communications unit installed at a fixed location to enable the functioning of mobile phones, wireless internet and other gadgets using communications technologies like GSM, WCDMA and WiFi. IMD - Business role in the aftermath of Copenhagen s failure Page 3/5 powered by small-scale renewable energy generators. The network company has set up partnerships with major solar and wind power companies to provide a turnkey solution that facilitates the deployment of mobile networks in remote areas. 6 In summary, taking a reactive approach and expecting predictability from governments in renewable energy market development is not the only option open to business leaders. After all, introducing innovation as well as developing markets using breakthrough initiatives, speed, responsiveness to uncertainty and constant adaptation to external challenges are all areas where the private sector has a lot of know-how. Why not bring these to bear on the challenge of facing climate change and ensuring the future supply of world s energy? The above-mentioned companies have proved that it is possible to do so, but without breaking the bank The Forum for Corporate Sustainability Management at IMD will be hosting a two-day Roundtable on April 15 and 16 on integrating sustainability into marketing and sales. 6 Case study: IMD Nokia Siemens Networks: connecting business growth and emissions reductions. IMD - Business role in the aftermath of Copenhagen s failure Page 4/5 RELATED PROGRAMS ORCHESTRATING WINNING PERFORMANCE - The global business program for individuals and teams Program Directors Bettina Buechel and Seán Meehan - For individuals and teams who seek the latest management thinking and practical, innovative solutions for their business - Anticipate global business trends - Boost your performance, broaden your perspectives and expand your global network - Design the program that suits you IMD - Business role in the aftermath of Copenhagen s failure Page 5/5
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