Shared Value and Sustainable Entrepreneurship

Increasing shared value through sustainable entrepreneurship

Corporate social responsibility Innovation Smart ventures

Edward Erasmus MA University of Aruba

Faculty of Accounting, Finance and Marketing March 11, 2013

Outline presentation • The myth of infinite growth • Sustainability • Sustainable entrepreneurship • Corporate Social Responsibility • Shared Value • Aruba’s challenges • New forms of ‘preneurship’ for Aruba

The myth of infinite resources

• Every society clings to a myth by which it lives… • Ours is the myth of infinite economic growth

The myth of infinite resources

• God provided infinite land, food and resources for Europeans to exploit…

Discovery of America

The myth of infinite resources

• Science will solve all of the world’s problems

Renaissance

The myth of infinite resources

Industrial revolution

It fueled rapid economic progress

“Global economic activity (GDP) has increased by a factor of 40 since the start of the Industrial Revolution.” ~Intergovernmental Panel on Climate Change (IPCC), Special Report on Emissions Scenarios, 2001

The myth of infinite resources

Cross border exchange of… Goods….

People….

Culture…

Capital…

…and cross border exchange of…

Information….

Dramatic increase in production capacity

Era of unlimited choice…

More than we can process or consume…

How many t.v. channels do you have in your cable package?

More than we can process or consume…

How many apps for the iPhone?

The digital revolution…..

The downside….

In the next 40 years the pressure on Earth’s ecosystems will increase dramatically

The competition for FOOD, WATER, LAND and ENERGY will intensify.

Addressing sustainability

• Firstly seriously discussed in the 1980s • Led by the United Nations • Focus on critical issues of environment and

development • Strengthen international cooperation • Population, food security, the loss of species

and genetic resources, energy, industry, and human settlements are all interrelated

Sustainable Development

“Development which meets the needs of the present, without compromising the ability of future generations to meet their own needs.”

- Our Common Future The Brundtland Commission Report (1987)

The world is using the equivalent of one and a half planet to support life on Earth

“Our consumption of the Earth’s natural resources is depleting the

planet’s ability to replenish itself - and to sustain life on earth.”

- WWF Global Report

• 3/4 of the world’s fisheries are over-fished • Half of the world’s original forest has been

destroyed. Additional 2% lost every year. • Species extinction is currently 1,000x the

natural evolutionary rate • 1/4 of all the birds and mammals on earth

are in danger of extinction. • Climate change is already happening, and

poses a threat unlike any other facing civilization.

So what does it all mean for a small country like Aruba?

Our current challenges… • Real GDP per capita remained virtually flat since 1990. • Uneven income distribution. • Population density: 550 inhabitants per square kilometer. • Individuals aged 60+ will double between now and 2025. • 42% of Aruba’s population is currently chronically obese. • A public health care deficit that is growing. • Educational performance below expectations. • Increased crime and other social problems. • Huge government deficits.

Finding the right balance…

We should strive to maintain a delicate balance between our need to improve lifestyles and feeling of well-being on one hand, and preserving natural resources and ecosystems, on which we and future generations depend on the other hand.

Improvement of lifestyles

and well-being

Balance

Preserving natural

resources and

ecosystems

So where do we go from here?...

It’s more than obvious that a new economic, social and environmental (strategic) model needs to be implemented……

Sustainability should be the primary focus

Nos Aruba 2025 Abo dicidi awe, nos Aruba di mañan

Why Nos Aruba 2025?

• To involve the broad community in creating together a vision for Aruba’s future.

• Stimulate sustainable development. • National Integrated Strategic Plan (NISP). • To stimulate coordination and dialogue

between all stakeholders.

Discovery Dream Design Destiny

The process…

Discovery of the Positive Core

Dream of the desired future

Design of the ways this can be brought

about

Destiny - Building the plan to achieve

this future

The Sustainability Challenge….

Principles • We integrate economic, social, community and environmental

priorities. • We respect and live within the natural resources and limits of

our island. • We must achieve a diversified and dynamic economy (beyond

tourism). • We honor our culture and values • We make decisions based on meeting the present needs without compromising the needs of future generations. • Everyone — individuals, families, communities, businesses and government — has accountability for achieving a sustainable

Aruba.

Some great initiatives as a result of Nos Aruba 2025

However, more needs to be done…

(maatschappelijk verantwoord ondernemen)

Unsustainable business models never pay off in the end….

An outdated approach to business and value creation

• Companies have overlooked the wellbeing of their customers the depletion of natural resources vital to

business the viability of key suppliers “the economic distress of the

communities in which they produce and sell”

New leadership calls for a new approach to conducting business Visionary leaders think ‘sustainable’….

• Environmental resources are limited and are quite sensitive to everything that we do.

• We are starting to experience the effects of the actions of generations that came before us.

To make sure that future generations will not experience worse, we need to be aware of the ideals and requirements of sustainability….

Think sustainable….

Corporate Social Responsibility (maatschappelijk verantwoord ondernemen)

…..the integration of business operations and values, whereby the interests of all stakeholders including investors, customers, employees, the community and the environment are reflected in the company's policies and actions.

Also known as: sustainable entrepreneurship

Sustainable enterprises

1. Incorporating principles of sustainability into each of their business decisions.

2. Supplying or consuming environmentally friendly products or services that replaces demand for non green products and/or services.

3. Greener than traditional competition. 4. Enduring commitment to environmental principles

in their business operations.

Why practice CSR?

• Companies have learned the hard lesson that without a sustainable society, there is no sustainable business….

• So in instead of focusing on short-run returns • Companies focus on contributing to long-

term societal well-being in which everybody can develop and grow.

The evolution of responsibility

1970s Shareholders

1980s Philanthropy

Late 1990s Stakeholders Engagement

Late 2000s Responsible

Competitiveness

Late 1990s Stakeholders Engagement

Late 1990s Stakeholders Engagement

Late 1990s Stakeholders Engagement

Late 1990s Stakeholders Engagement

Late 1990s Stakeholders Engagement

1980s Philanthropy

Early 1990s Corporate

Governance

Early 2000s Corporate

Accountability Late 1990s

Stakeholders Engagement

1970s Shareholders

1980s Philanthropy

Late 1990s Stakeholders Engagement

The evolution of responsibility

1970s Quality

management

Late 2000s Sustainable markets

Early 1990s Environmental management

Early 2000s Triple bottom line

1980s Health & safety

Late 1990s Health, safety &

environment

Focus CSR

People

Planet

Profit

CSR towards a new approach?

Corporate Social Responsibility Philanthropic Risk-based Image-driven Specialized Standardized Marginal Western

Corporate Sustainability & Responsibility Collaborative Reward-based Performance-driven Integrated Diversified Scalable Global

CSR towards a new approach? CSR can only be resilient if it is part of the DNA of an organisation, i.e. CSR will only survive the vagaries of fickle markets, fluctuating profits, financial crises and leadership whims if it is totally embedded in the corporate culture, strategy and governance systems”

– Wayne Visser, 2008

Environmental Integrity

Societal Contribution

Good Governance

Value Creation

CSR

Let’s start from the very beginning....

Porter and Kramer How to reinvent capitalism – and unleash a wave of innovation and growth

Harvard Business Review 2011

Companies must bring business and society back together

• Shared value – creating economic value in a way that also creates value for society by addressing its needs and challenges.

• “Business must reconnect company success with social progress.”

Entrepreneurship on Aruba

Aruba entrepreneurs

• Competition oriented (no differentiation) • Same products in same markets • Fear of trying out new things • Lack of motivations (comfort zone) • Technically challenged (so much more

out there)

Basic conclusion

A change in the fundamental entrepreneurial thinking on Aruba should happen quickly, otherwise the small and medium business sector will autodestruct itself through far-going cannibalization…

Innovation and sustainable entrepreneurship is the key…

Developing smart ventures • Innovation • Sustainability • Diversification • Productivity (resource efficient) • Smart growth • High-skilled jobs • Driven by technology • Shared value

New forms of ‘-preneurs’

• Aruba government economic policy is geared towards the development of new entrepreneurial ventures.

Key areas in Aruba that require entrepreneurial innovation

Ecopreneuers

Sociopreneuers

Creativepreneurs

Globopreneurs

New forms of ‘-preneurs’

Entrepreneurial areas

Ecopreneurs

Ecological entrepreneurs • Commercial ventures

geared towards solving ecological and environment problems

Ecopreneurs

Waste separation and export of recyclable products (paper, plastic, aluminum, etc.)

Waste separation plant Barcadera Free Zone

Ecopreneurs (in Aruba)

https://www.facebook.com/dogoodaruba

Ecopreneurs (in Aruba)

https://www.facebook.com/dogoodaruba

Entrepreneurial areas

Sociopreneurs

Social entrepreneurs • Entrepreneurs with

innovative business solutions to society’s most pressing social problems.

Sociopreneurs

https://www.facebook.com/dogoodaruba

Sociopreneurs (Aruba) Green Vibes Sustainability, Land & Energy NV.

Entrepreneurial areas

Creativepreneurs

Creative entrepreneurs • One who undertakes the

creation/production and distribution of an original creative work and is able to create wealth through an established business venture.

Creativepreneurs

Creative industries taking over...

Added value: approximately € 7.1 billion in the Netherlands

Creativepreneurs (in Aruba)

Entrepreneurial areas

Globopreneurs

Global entrepreneurs • Developers and/or

distributors of products and services destined for export (competing in the global market space).

Globopreneurs

Export expands the economic pie, generates flow of foreign currency, attracts new technologies and creates new forms of employment.

Globopreneurs (in Aruba)

• Utilizing Aruba’s unique socio-economic resources and geo-political position within the Kingdom of the Netherlands to develop new economic opportunities.

• Positioning Aruba as a strategic hub (gateway) for European businesses doing business in Latin America.

Globopreneurs (in Aruba)

• Moving towards a knowledge-driven economy.

• Attracting foreign investment with focus on innovation and sustainability.

• Synergy free zone, airport and harbor.

We share an awesome responsibility, you and I, a responsibility that transcends this time and this place.

Final thought…

Instead of thinking “outside the box”, just

get rid of the box…

Paper assignment

Edward M. Erasmus, MA e.erasmus@fzanv.com edward.erasmus@ua.aw Facebook: http://www.facebook.com/edwardmerasmus Twitter: http://www.twitter.com/em_erasmus LinkedIn: http://www.linkedin.com/in/edwardmerasmus Blog: http://edwardmerasmus.wordpress.com

Acknowledgements • Government of Aruba, Ministry of Economic Affairs, Social Affairs and

Culture: The Green Gateway: http://www.freezonearuba.com/docs/The-Green-Gateway-Economic-Vision-and-Policy.pdf

• Green Aruba: http://www.greenaruba.org/ • Lindgren, Anders. Six Forces. Shaping our Present and Future Lives.

www.slideshare.com: anderslindgren4u • Nos Aruba 2025: http://www.nosaruba2025.aw • Porter, Michael and Mark R. Kramer, Creating Shared Value:

http://hbr.org/2011/01/the-big-idea-creating-shared-value