Why does the earth matter

to entrepreneurs?
 Chapter 3

Entrepreneurship and
sustainable development
 Objectives
1. To appreciate the role of entrepreneurship in challenging and urgent times
2. To classify the types of climate change effects on entrepreneurs as well as
the opportunities hat arise within the Asia–Pacific context
3. To review important concepts in climate change economics that impact
entrepreneurial activity
4. To appreciate the various emerging frameworks in entrepreneurial
ecology
 But first

?
What “on Earth” does climate change possibly
have to do with entrepreneurship?

“We can't solve problems by using the

same
kind of thinking we used when we created
them”
• Albert Einstein
 Melting sea ice Entrepreneurship
in the Arctic
as if the planet
suffering climate change mattered
 There’s no avoiding it. Our planet is  Rapid population growth and migration,
burgeoning mega-cities, and ecological
 Increase in greenhouse gases refugees
 Fluorocarbons depleting the ozone  Cutting down the world’s tropical
layer forests, leading to erosion and flooding
 Acid rain and air pollutants  Mass extinction of species and the
 Shortages of freshwater resources associated loss of genetic resources
 Overfishing, habitat destruction and  Threats to human health from
pollution in the marine exposures to chemicals in production
environment processes, products and
 Crop loss and grazing depletion  Consumption activities
due
to desertification and erosion
 Why does the earth matter
to entrepreneurs?
• Rainforests are cut down
and burned off by small- and
large-scale entrepreneurs.
• Asian cities choke for
weeks during Indonesia’s
burning season.
For centuries, entrepreneurs have been
• Thousands of Indonesians
free to exploit the environment with are employed and many
impunity without thought of entrepreneurial families
sustainability are coming out of poverty
because of the enterprise.
Entrepreneurs contribute
to the planetary crisis
It is no exaggeration to say that
entrepreneur like Henry Ford (l) and
Thomas Edison (r) played major roles
in contributing to our current
dilemma and an entrepreneur
(perhaps one who commercialises
hydrogen autos) can help ease the
problem.
Negative Entrepreneurs are continuously disturbing the
Earth’s balance.
 Entrepreneurs in times of crisis
• Innovative ideas emerge during times of crisis.
• Recessions ‘clean the slate through creative destruction and
create lasting, positive change’.
• 50% of the fast-growing and largest companies of today were
founded during times of crisis.
• Launching a new company does not actually put companies
In the Chinese
at a disadvantage as many may suspect. language, the word
• The rate of entrepreneurship actually went up during the "crisis" is composed of
GFC. two characters,
one representing
• Crises act as a good ‘cold shower for the economic system’, danger and the other,
releasing capital and labour from dying sectors and opportunity.
allowing newcomers to recombine them in imaginative new
ways.
 Now we are engaged in a great climate war
• Entrepreneurs take share of the responsibility for global
warming, but they are also agents of change who may help to
turn the situation around.
• Climate change is the greatest and widest-ranging market
failure ever seen.
• ‘Fixing climate now (2007) would cost about 1 per cent of
Gross Domestic Product (GDP) per year. Doing nothing, say
many economic models, would cost the world the loss of 5 per
cent GDP per year – now and forever’, says the report.
• Business logic is music to our ears: ‘The benefits of strong,
early action on climate change outweigh the costs’. Sir Nicholas Stern, The Economics
– Economics of Climate Change 2007 (Stern Report) of Climate Change 2007
 Stern update: Better
Growth, Better Climate
(2014)
• There is no need to choose between
fighting climate change or growing the
world’s economy.
• Business can create growth and
reduce their carbon emissions.
• Innovation and investment make it
possible to tackle climate change at the
same time as improving economic
performance.
 Opportunity
space

• Deep analysis of
entrepreneurship
opportunity space
in climate change
 Opportunity
space

• Deep analysis of
Replace at entrepreneurship
2nd pages
opportunity space
in climate change
 Climate change
impacts in
Asia
• Already reported:
extreme precipitation,
damaging cyclones,
sea level rise, extreme
temperatures,
drought and
acidification of the
ocean.
 Climate change
impacts in
Australia
• Already reported:
extreme precipitation,
damaging cyclones,
sea level rise, extreme
temperatures,
drought and
acidification of the
ocean.
 Now

? What entrepreneurial
innovations can you
imagine that could help
solve the climate change
crisis?
 Planetary problems
that entrepreneurs face
today Popul-
ation

Energy Wate
r

Biodi-
Food
versit
y
 Population and

entrepreneurship
• World population
today is 7.8
billion
(approximately.)
• Each year we
add population
the size of
Egypt!

• At the dawn of agriculture, about 8000 B.C., only 10,000 years ago, the population of the world
was approximately 5 million, about the size of today’s metropolitan Sydney.
Population opportunities for entrepreneurs
• Overpopulation
Ageing Yout
h • drinking water
• dental care, hearing • recruitment
aids • fashion • waste management
• orthopaedics and • cheap cars • air and water
cardiology. • environmental pollution
• nostalgia products products • fighting infectious
• food preparation • media and diseases
labour-saving gaming • improving food
technologies • creative and varieties
• regenerative education • renewable
medicine • communications energy
• age-related devices • family planning
drugs
• Planet faces a severe water crisis.
• Though water is scarce, the crisis is actually one of Water and
water governance – caused by the ways in which
we mismanage water – rather than supply.
• Impacts entrepreneurship
– Waterborne disease
– Polluted environment
– Sanitation
– Industry and irrigation.
• Engineering entrepreneurs developed aqueducts
and
artificial lakes
• Agri-preneurs have created high-yielding crops and
animals that consumed astonishing amounts of water,
called embodied water.
– 15 500 litres of water to make 1 kg of beef
 Opportunities for
hydro-preneurs—
• not!
Business opportunities exist in:
– drinking water and sanitation
– water ‘embedded’ in production
– collection, storage and transportation
– Desalination
– toilets
– conservation (reduction in use).
• (Avoid bottled water!)
Biodiversity and entrepreneurship
Biodiversity opportunities for entrepreneurs
 Food and

• Major changes in where and when entrepreneurship

food is produced on the
planet's surface.
• Agriculture is responsible for nearly one-third of global
greenhouse gas (GHG) emissions.
• Wheat in Northern Europe; Wine in Norway
• Wealthy countries like the UK, Germany and Canada may
well have warmer, wetter growing conditions, while other
regions (such as developing countries in the tropics) are
likely to suffer droughts and floods.
Summers in 2081–2100:
Likelihood they will be
the warmest on
record
 Australia’s food
security in
doubt have
• Temperatures
become so extreme that
BOM added incandescent
purple for temperatures
over 50 degrees
• Australians are the highest
emitters of CO2.
Entrepreneurs and fossil fuels
• Think about the entrepreneurial inventions
that depend on fossil fuels.
– airplanes, cars, electrical power plants, paper,
plastic, rockets, steam engines, steel and
electric lights.
• 85% of energy met by fossil fuels.
• 23 tonnes of plants to produce each litre of
petrol you pump into your ute.
 Climate change economics
for entrepreneurs
• Entrepreneurs need to know some basic
principles of climate change economics
• The field looks at how economic activity (
including entrepreneurial activity) that
affects the environment.
• Climate change economics seeks
– economic solutions to minimise harm to the
Example: Pollution as environment
market failure.
– allowing maximum economic benefit
 Climate change economics --
Tragedy of the
commons
• Examples: Resource-based problems over-
irrigation, habitat destruction, over-fishing and
traffic congestion.
• Each shepherd wants to put as many sheep as
possible onto common land even if the land is
damaged as a result.
• Where there is potential for individual profit,
activity must be regulated.
 Climate change economics --
Incentives
• Sometimes entrepreneurs are
unable to act sustainably
• Why should they take costly
sustainable actions when the
competitors do not?
• Entrepreneurial sustainability may
be punished rather than rewarded.
Climate change economics --
Prisoner’s Dilemma
• Two suspects are arrested by the
police, who have weak cases
against both of them.
• They hold the suspects in
separate cells and tell each that if
they inform on the other, they will
get leniency (patience,
endurance)
• If not, they are told, they will get
harsh prison terms.
Climate change economics --
Peak resource
• Atheory
‘peak curve’ applies to any
resource that can be
harvested faster than it can be
replaced.
– 2012: Peak oil
– 2025: Peak water
– 2025: Peak coal
– 2020: Peak gas
– 2035: Peak uranium
 Climate change economics --
Risk analysis
• Entrepreneurs must evaluate economic impact of their
activities.
• Physical risks: Weather-related events
• Reputation risks: Threats to a company's brand
value.
• Competition risks: If companies do not take measures
to reduce climate risks they are competitively
disadvantaged.
• Regulatory risks: Climate change seen as serious
market failure
• Litigation risks: Greater regulation leads to more
litigation.
Climate change economics --
Social discount rate
• A 50-year-old Bangladeshi grandmother on
the coastline, with a life expectancy of 37,
has a slender chance of living to 2050. But
the sea is rising.
• She is more likely to ignore risks of the sea
rise.
• But her 10-year-old granddaughter today
has a life expectancy of 61 years.
 Entrepreneurial ecology:
Sustainability
• The Brundtland Report (1987) defined
–Sustainability defined as ‘Meeting the needs
of the present generation without
compromising the ability of future
generations to meet their needs’.
–Markets are both the cause and the potential
solution to the sustainability puzzle
–For the entrepreneur, opportunities are
inherent in market failure.
 Entrepreneurial ecology:
Sustainable
entrepreneurship
Industrial entrepreneurship (IE) Sustainable entrepreneurship (SE)
• Extraction of scarce resources with little • Think ecologically about the biosphere
regard to their replenishment • Consider the waste embodied in products
• Global distribution without regard to • Take into account the living dimension of
distance the products and services that we
• Rampant construction without regard produce.
to environmental consequences • Business opportunities to end poverty
• No concern for net improvement in and hunger, improve health and
the physical and social universes. education, make cities more sustainable,
• Waste was not a design combat climate change, and protect
consideration. oceans and forests.
 Entrepreneurial ecology:
Theoretical
• A framework helps us identify • frameworks
Natural capitalism
relationships. • Cradle-to-cradle design
• Field of sustainable • Economic gardening
entrepreneurship is just • The Natural Step
developing. • Industrial metabolism
• Candidate frameworks that bring • Natural advantage of nations
entrepreneurship into the realm • Lean manufacturing
of climate change theory. • Ecology of commerce
• Triple Helix
• University-based
entrepreneurship
ecosystem
Entrepreneurial ecology:
Where do entrepreneurs operate? Econosphere

Sociosphere
• In the econosphere and
surrounded by the
biosphere Biosphere
 • Planet
Negative

Biosphere Climate & energy

•
entrepre-
How are • Water, soil, flora & fauna
neurship • Atmosphere & topography
entrepreneur
s connected ((-)
0)
• People
to Earth, (+) • Human enterprise
people and Sociosphere • Knowledge, labour & capital
• Opportunity and value
the economy
connected? • Profit
• Entrepreneurs operate here
Econosphere •
•
Business environment
Entrepreneurial factor
Positive
conditions
entrepre-

neurship
 Entrepreneurial ecology:
Sustainable
Entrepreneurs future
must help us Declining supply
Resources and ecosystem services
travel Sustainable supply
Sustainable
through future
the ‘funnel’Margin for action
is narrowing Sustainable demand

Increasing demand
Demand for resources and eco-system
services
The present T
h
e

f
u
t
 Key concepts

?
(close your books)
1. How can entrepreneurs turn
climate change into an
opportunity?
2. What does ‘sustainable
entrepreneurship’ mean?
 Key concepts
• Entrepreneurship and crisis
– Entrepreneurs help us into crisis, and are the key to addressing the crisis.
• Entrepreneurship and climate change
– Potential for positive and negative impacts
– A key role in addressing population, water, biodiversity, food and energy.
• Entrepreneurial ecology
– Improvement through sustainable entrepreneurship.