Essec Business School

Professor Hamid Bouchikhi spoke with ESSEC Knowledge LIVE to discuss COP 23 and the critical role entrepreneurs must play in a more sustainable future.

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According to professor Hamid Bouchikhi, many large corporations are doing their best to cut CO2 emissions or reduce their ecological footprint in other ways. Nevertheless, they are stuck with environmentally unfriendly business models: think of energy producers and automakers.

At the same time, Hamid Bouchikhi argues that “the business side of the global conversation on sustainability is somehow hijacked by big corporations which are very active in international fora like within the UN Global Compact. Without dismissing big corporate efforts toward responsibility as mere greenwashing, it's important today to put the spotlight on responsible entrepreneurs who are implementing business models with built-in sustainability.”

ESSEC Knowledge: What is sustainable entrepreneurship and could you give us a few examples?

Hamid Bouchikhi: Sustainable entrepreneurship refers to business models that are designed to reduce the ecological footprint and improve people’s lives. The net impact of these business models is strongly correlated with how well they pursue the 3Ps of generating profit, improving people's well-being, and preserving the planet.

EK: What are the main challenges for sustainable inclusive development?

Hamid Bouchikhi: The main challenge facing responsible entrepreneurs is to maintain a balance between the logics of sustainability and profitability as they grow.

Aligning the interests of stakeholders (shareholders, employees, customers, suppliers, NGOs…) is an ongoing struggle for responsible entrepreneurs as one dimension, usually the pursuit of profit, can easily overshadow the others. 

EK: Can you cite some examples of sustainable entrepreneurship? 

HB: Because it is more difficult to transform an established company than to put sustainability at the core of a new venture, we must celebrate management teams that take sustainability seriously and reinvent their business model. Desso, a maker of commercial carpets, is a rare example of such an effort. The company’s business model was redesigned according the principles of the cradle-to-cradle concept.

Waste Concern, a business launched by two young engineers in Bangladesh in 1995, is a great illustration of how sustainable entrepreneurship can turn a problem (poorly collected and processed household waste) into a job creation machine and a source of profits through the production and commercialization of compost and, later, through biomass power generation.

EK: What are some concrete examples of what has been done to reduce climate change since COP 21 and the Paris Agreement?

HB: The most dramatic and impactful initiatives are happening in the car industry and, more broadly, in what we now called mobility. Norway (2025), France and the UK (2040), and China (time table under preparation) have announced the end of fossil fuel powered cars. Paris wants to ban fossil powered vehicles in 2030. Other big cities around the globe are preparing similar bold policy moves.

Volvo, owned by the Chinese Geely, has announced that, from 2019 on, every car made by the company will run at least in part on electric power. Experts doubt whether these ambitious policy objectives are realistic. Some worry about the availability of materials needed for mass manufacturing of batteries while others are skeptical about the net ecological footprint of electric cars. However, public policies around the globe are feeding an irreversible movement away from fossil fuel and toward alternatives to car ownership.

EK: What would be the impact on the Paris Agreement if the US withdraws?

HB: Let us remember that technically, the US is still a party to the Paris Agreement which it cannot exit before November 4, 2020.  A lot of things can happen in the meantime. 

The US is responsible for 18% of CO2 emissions. If the country does extricate itself from the agreement, the risk of course is a removal of incentives and reversal of policies on sustainability. However, the level of awareness in American society is quite high and may be irreversible. States have a say on environmental policies and some may not follow the federal government's example (California). Also, market dynamics may not be in favor of unfettered use of coal in power generation, a key promise in Mr. Trump’s election campaign. 

On the international front, the US would commit less funding for climate change related initiatives in the developing world. Also, China may have less incentives to stand by the commitments it made within the compromise it struck with the US to enable the breakthrough at COP 21. However, this is moderate risk as the Chinese Government is compelled to act by the very high level of pollution of its cities.

All in all, this may hopefully be a short term issue until the next election cycle in the US.

EK: Are governments doing enough to promote sustainability entrepreneurship?

HB: Public policies in energy, water, waste management, agriculture, food and other high stakes areas are creating a favorable environment for responsible entrepreneurs who want to do well by doing good. However, the business models implemented by these entrepreneurs are, often, less viable or profitable because of higher cost structures, scarcity of materials, or difficult access to funding.

To lower these hurdles and promote sustainability entrepreneurship, governments should create specific policies and incentives, very much in the same way that they support businesses which create jobs for under-privileged people or in economically disadvantaged parts of a country.

Governments must also display consistency in their policies. The abrupt decision of the French government, in 2010, to put an end to the solar energy support mechanism put many entrepreneurs in a difficult situation. Many will think twice before launching an environmentally friendly start-up whose success relies on a public policy.