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03/05/2020

New economic paradigm!

Patrick Bungard
Prof. René Schmidpeter

Original source: https://reporting-times.com/app/uploads/2020/05/CCR_Reporting_Times_16_CH_gelb.pdf

 

Companies are at a crossroads: transformation or stagnation? The current crisis shows that a new management mindset and integrated management and measurement of sustainability have the potential to fundamentally reshape our economy in the post-crisis period.

 

Economic thought leaders see the transformation of our economy extremely accelerated by the current events of the Corona crisis. Even before the crisis, the declaration of 181 American CEOs (including leading companies such as Apple, Amazon, General Motors and Walmart) fundamentally changed the way we view our economic system. Instead of the profit maximization pursued for decades, comprehensive value creation for all stakeholders as well as a positive impact on society were demanded as the primary corporate goal. As early as fall 2019, the leading managers thus fundamentally questioned the previous business paradigm of “shareholder value”.

Empirical studies show that companies that integrate key sustainability issues into their business model are more successful. Business potential such as improving the employer brand, increasing the attractiveness of a company on the financial market, or simply the comprehensive market potential of sustainable products has made its way into the executive floors and strategy departments. And politicians are also proactively shaping a new economic framework. The European Union’s “Green Deal” is leading more and more companies towards greater sustainability.

In order to successfully deal with these “new” stakeholder demands, a “sustainable corporate transformation” is needed. The crisis shows impressively that the often propagated oppositional thinking between profit and societal interests (currently: protection of life and health) quickly reaches its limits. Successful entrepreneurs are already demonstrating how to overcome the classic dichotomy between economic success and sustainable development. They develop integrated management approaches that measure and control the effects of the company with the aim of creating equal value for all stakeholders along the entire value chain.

Case study 1: The Porsche Sustainability Index (PNI)

With the development of the Porsche Sustainability Index (PNI), the automotive group is positioning itself to base its business activities in the future on a clear and individual understanding of sustainability and to resolve existing contradictions between sustainable business models and the creation of economic added value and growth. The aim is not only to avoid negative effects on society, but also to place a clear focus on creating positive effects.

The basic idea of the PNI is to measure and manage sustainability holistically, to create an own understanding of sustainability, to integrate external sustainability standards and to decouple value creation from negative environmental impacts.

Through the iterative development process of the PNI and the associated involvement of all relevant departments of Porsche, it creates a common understanding of sustainability within the company. The PNI consists of targets for the fields of action “Innovative Mobility”, “Reliable Partner” and “Go to Zero”. The fields of action are closely linked to the dimensions of sustainability “Economy”, “Social” and “Ecology” described above and are oriented towards the Porsche value chain. Within the framework of a “9x9 Matrix”, the PNI uses selected strategic parameters to map the most important aspects of the company’s understanding of sustainability. The KPIs are representative of their subject area and represent a quantifiable part of Porsche’s sustainability activities.

Case study 2: Breeze Technologies - Artificial Intelligence Against Air Pollution

In addition to pioneering companies such as Porsche, it is above all the company founders who exemplify a new corporate paradigm. They are developing business models that pave the way for markets worth billions and bring with them enormous leverage at the social level. This new generation of “founders” is characterized primarily by the fact that the company is thought of in terms of its social impact and its purpose.

One example of this generation of new companies is the start-up Breeze Technologies, which is building its business model around the issue of air pollution. Air pollution is the greatest environmental health threat of our time. According to the latest estimates, it kills 7 million people per year and costs the global economy USD 5 trillion annually. Breeze tries to counteract this proactively. Using its own low-cost air quality sensors, Breeze collects pollution data, creates a hyperlocal map of air quality and compares it with a catalog of more than 3500 air pollution control actions. The potential effects on humans are calculated automatically. An artificial intelligence then recommends the most efficient interventions for local challenges, which can increase the effectiveness of air quality plans tenfold.

Conclusion

We are all currently experiencing major changes together - a change that we can shape positively. It is now time to invest in sustainable economic structures, responsible decisions and sustainable recycling management. After all, in addition to the Corona crisis, climate change and the loss of biodiversity are other major challenges for humanity - which we can solve with a new economic thinking. 

 

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