NEDERLANDSE VERENIGING VAN COMMISSARISSEN EN DIRECTEUREN WORKSHOP

Transcription

1 NEDERLANDSE VERENIGING VAN COMMISSARISSEN EN DIRECTEUREN WORKSHOP 24 May

2 AGENDA Plenary presentation by Circle Economy Basic principles and business models of a circular economy and Netherlands as a Circular Hotspot Examples of circular innovations and business models FrieslandCampina, Interface, Fairphone, Valley Finance workshop by Circle Economy Governance workshop by Allen & Overy Bites and drinks

3 PLENARY PRESENTATION Netherlands as a Circular Hotspot

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5 INITIATORS

6 AMBASSADORS & PARTNERS

7 NETHERLANDS CIRCULAR HOTSPOT

8 SHARING INNOVATION #NLcircularhotspot 8

9 CAMPAIGN Vision Magzine NLCH

10 TRADEMISSION 140 PARTICIPANTS FROM 20 COUNTRIES

11 CIRCULAR HOTSPOT 2017 LUXEMBOURG

12 PLENARY PRESENTATION Basic Principles and Business Models in a Circular Economy

13 Source: Adapted from: The New Scientist. WRI, WHO, World Bank, OECD Factbook 2013 CONTINUED LINEAR INVESTMENT IS UNSUSTAINABLE Linear risks have adverse long-term effects on the economy, society and environment Population CO2 Concentration Ozone depletion Water use Species extinction Northern Hemisphere average surface temperature Foreign investment Loss of tropical rainforest & woodland Fisheries exploited GDP Paper Use Motor vehicles

14 THE CIRCULAR ECONOMY OFFERS A SOLUTION The circular economy is an economic system that is wastefree and resilient by design, mimicking natural ecosystems in the way we organise our society and businesses. By following circular strategies and principles, companies can ensure the highest level of economic and societal value is attained while minimising planetary impacts.

15 BASIC PRINCIPLES OF A CIRCULAR ECONOMY

16 BASIC PRINCIPLES OF A CIRCULAR ECONOMY Tesla opened all of its electric car patents to outside use in the spirit of collaboration and open source development

17 BASIC PRINCIPLES OF A CIRCULAR ECONOMY Airbnb is the world's largest accommodation provider, yet it owns no real estate, since it uses innovative sharing models

18 BASIC PRINCIPLES OF A CIRCULAR ECONOMY Levi s Water<Less jeans reduce the use of water in the finishing process by up to 96% for some styles, creating more with less.

19 BASIC PRINCIPLES OF A CIRCULAR ECONOMY KWS produces PlasticRoad, a road surface made from 100% recycled plastic which can itself be recycled, replacing asphalt.

20 BASIC PRINCIPLES OF A CIRCULAR ECONOMY Philips actively informs, engages with and enables employees to implement circular economy principles in the organization

21 BASIC PRINCIPLES OF A CIRCULAR ECONOMY Since the 1950s, Desko uses a buy-back scheme to sell and get back its furniture three times, so its furniture lifetime is expanded

22 WITH THE CIRCULAR ECONOMY VALUE IS PRESERVED

23 TAKE THE EXAMPLE OF A CAR

24 CIRCULAR BUSINESS MODELS Optimal Use Models Product as Service Lifetime Extension Sharing Platforms Takeback Circular Design Models repair/ maintain Value Recovery Models Product Design Process Design Circular Materials Retail reuse/ redistribute refurbish Recapture / Recovery Refurbish / Maintenance Recycling Assembly remanufacture Manufacturing recycle Extraction incinerate/ landfill Circular Support Models Management, Support

25 FRIESLANDCAMPINA X

26 INTERFACE X

27 Towards a restorative enterprise The circular economy in practice NCD / 24 th. Of May 2016 Geanne van Arkel Head of Sustainable Development

28 Inventor of the Heuga carpet tile Turnover $ 1 billion 3500 employees 110 countries 5 production locations Nasdac

29 Part 1: It starts with ambition

30 There is only one institution on earth large enough, powerful enough, pervasive enough, influential enough to really lead humankind in a different direction. And that is the institution of business and industry Paul Hawken

31 System Thinking in seven fronts 1 No Waste 2 Benign Emissions 3 Renewable Energy 4 Close the Loop 5 Resource-Efficient Transportation 6 Sensitize Stakeholders 7 Redesign Commerce

32 Our absolute GHG emissions reduced by 90% in Scherpenzeel from 1996 to 2014.

33 Sustainability is financing itself

34 Part 2: It works throughout the value chain

35 Embedding sustainability in your product

36 Look at the context! Glue free installation system, Based on gekko-feet

37 Performance based economy Providing an inspiring interior design, a pleasant working environnement and a better indoor climate. Since 1995 Carpet take-back program ReEntry Since 1996 Evergreen Lease concept

38 Product-service systems

39 Part 3: It is about creating sustainable value through crosssectoral cooperation

40 Connect! Co-innovation thanks to crosssectoral cooperation

41 Open Loops Re-designing the supply chain with Net-Works A circular inclusive business model Net-Works enables fishing communities in developing countries to sell waste nets back into a global supply chain

42 The best are every where! A way of working that connects ideas, people + resources, removing barriers to progress, and enabling to achieving goals together

43 Why do you start? Radical transparancy Sustainable business is the only way to thrive Economy is on the verge of a transformation Circular and inclusive business models, adressing Sustainable Development Goals Open innovation and cross-sectoral cooperation Speed of change is continuously increasing The winners of the future have the ability to adapt to change! Create internal and external engagement

44 Geanne van Arkel Head of Sustainable Development

45 FAIRPHONE X

46 FINANCE WORKSHOP The workshop will provide a better understanding of the financing needs for organisations moving towards a circular economy. An interactive case study will highlight ways for companies and financial institutions to work together to develop new financial solutions.

47 CIRCULAR BUSINESS MODELS Optimal Use Models Product as Service Lifetime Extension Sharing Platforms Takeback Circular Design Models repair/ maintain Value Recovery Models Product Design Process Design Circular Materials Retail reuse/ redistribute refurbish Recapture / Recovery Refurbish / Maintenance Recycling Assembly remanufacture Manufacturing recycle Extraction incinerate/ landfill Circular Support Models Management, Support

48 BUNDLES OPTIMAL USE MODEL: PRODUCT AS A SERVICE Washing Machine as a Service Bundles leases circularly designed Miele washing machines with an attached device that monitors how it is used Customers are charged based on how much they wash and are rewarded if they use the machines optimally The time that the machine is out of order or not working properly is deducted, incentivising Bundles to deliver the best service possible However financing is a challenge!

49 TRADITIONAL LINEAR MODEL Miele produces and sells each machine for 1000 Households buy and own machines to use What are the benefits and challenges of a linear model?

50 TRADITIONAL LINEAR MODEL Miele produces and sells each machine for 1000 Households buy and own machines to use BENEFITS Short payback period Ownership is with the end consumer No complicated financing needed CHALLENGES Machines expensive to own, so cheaper machines are bought Assets are not optimised End-of-life is not considered

51 PRODUCT AS A SERVICE LEASE MODEL Miele produces and sells each machine for 1000 Bundles buys and leases machines and also repairs, maintains Households lease and pay per use of machines What are the benefits and challenges of an operating lease model?

52 PRODUCT AS A SERVICE LEASE MODEL Miele produces and sells each machine for 1000 Bundles buys and leases machines and also repairs, maintains Households lease and pay per use of machines BENEFITS More expensive but more durable machines become more accessible Assets are optimised over lifetime Transparency of cost of ownership CHALLENGES Ownership not with end consumer No end-of-life to retain residual value Hard to scale without working capital Longer payback period due to lease

53 PRODUCT AS A SERVICE LEASE MODEL WITH AN INVESTOR Miele produces and sells each machine for 1000 Bouwinvest, a real estate investor, owns the washing machines Bundles is a service company to provide washing as a service Households rent from Bouwinvest and pay per wash What are the benefits and challenges of a financial lease model?

54 PRODUCT AS A SERVICE LEASE MODEL WITH AN INVESTOR Miele produces and sells each machine for 1000 Bouwinvest, a real estate investor, owns the washing machines Bundles is a service company to provide washing as a service Households rent from Bouwinvest and pay per wash BENEFITS Same as in operating lease Financing from real-estate investor enables scaling of model Access to existing customers CHALLENGES Ownership with real-estate investor doesn t ensure optimisation of assets No end-of-life to retain residual value Hard to scale without working capital Longer payback period due to lease

55 OTHER FINANCIAL SOLUTIONS What are some ideas for financial structures that: encourage greater ownership across the chain enable transparent communication and collaboration between parties link multiple incentives between parties guarantee stability of all parties involved and guarantee consistent long-term cash flow ensure end-of-life recovery of residual value provide insurance to isolate financial and credit risks

56 GOVERNANCE WORKSHOP

57 Governance in the Circular Economy Christiaan de Brauw 24 May 2016 Allen & Overy 2016

58 Content Introduction: some legal aspects of new business models Introduction: governance parameters relevant for Circular Economy business models Dutch stakeholder model Strategy of the company domain board Short-termism 58

59 Introduction: some legal aspects of new business models Exclusive use or access to service Ownership of products Services Products, e.g. operational lease Phillips lighting: selling 20 years of light selling lightbulbs Ongoing relationship one-off e.g. access to (leased) infrastructure, information sharing Contractually securing expected cash-flows becomes key But: some old school legal title issues remain, e.g. bankrupcy accession ( natrekking ) 59

60 Introduction: relevant governance parameters for new Circular Economy business models New business models sustainable, circular, cost efficiency elements To be reflected in the company s strategy and governance/organisation Long-term view long term value creation (also in society) e.g. from one-off sale to service relationship time to earn back initial investments Cooperation of all stakeholders not only shareholders and employees, but also suppliers, customers and finance providers no predominant (short-term) shareholder results (resisting circular investments) 60

61 Dutch stakeholder model offers right framework Board to act in interest of company and its business: promote sustainable success of the business i.e. long-term value creation for all stakeholders Take into account the interests of all stakeholders, not only shareholders, e.g.: employees, suppliers, customers, finance providers and creditors, and relevant other interested parties, possibly society at large Stakeholder dialogue ( polderen ) 61

62 Dutch company s strategy domain board Management Board determines the strategy, under supervision of the Supervisory Board Shareholders have no right to prior consultation accountability to shareholders afterwards Possibility of protective measures to secure the Board s long-term mission against hostile takeover and shareholder activism Mylan/Teva

63 Problem of Short-termism in a listed environment Shareholder focus more and more on short term results Rapid change of shareholder base Increased hedge fund activity wolf packs Reduced governance protection in many jurisdictions in shareholder model jurisdictions e.g. Delaware: annual elections of the full board Permanent election season often no effective protective measures 63

64 Dutch Corporate Governance Code Focus on continuity company/business and long term value creation and careful weighing of all stakeholder s interests including non-financial aspects, environment, social and personnel matters, respecting human rights and combatting corruption and bribery Importance sustainability sustainability integral part of company strategy includes the chosen circular economy approach Culture/tone at the top 64

65 Corporate Social Responsibility (CSR) Dutch Corporate Governance Code Revised Version DCGC CSR is an integral part of the daily operations of a company (Mandatory) reporting of CSR sustainability report 65

66 Governance of large companies and Circular Economy Key structure governance remains One tier board: executive & non-executive directors Two tier board: Managing Board & Supervisory Board Employee consultation, e.g.: works council advice? co-determination: 1/3 of Supervisory Board members in large (structure) company regime 66

67 Governance of circular start-ups/sme s in their lifecycle Circular companies already have circular model in DNA Private company by founder and informal investors (Conditions for) subsidies by the government (EU plan) Next (venture) financing rounds Sale to a large company: Buying innovation? Initial public offering (IPO)? 67

68 Some practical considerations to implement Circular Economy business models Adjust company s strategy to incorporate changed business model allow weighing all stakeholders interests and effective cooperation long-term approach also in shareholder jurisdictions (± convergence long term shareholder value with interest other stakeholders) Reflect in programs, compliance and (reporting on) CSR / stakeholder dialogue Tone at the Top / Culture top to choose and support changed strategy focus on sustainable/circular goals, cooperation all stakeholders Internal organisation Chief Sustainability Officer: executive term ( CSO ) Sustainability Governance (council/department/ committee) Adjust appraisal/compensation structure Bonus, performance criteria 68

69 Questions? The wise man doesn t give the right answers, he poses the right questions. - Claude Levi-Strauss 69

70 THANK YOU