Friday, April 25, 2014

A Critical Review of the Interplay between Policy Instruments and Business Models: Greening the Built Environment a Case in Point

Read the working paper
INSEAD Working paper 2014/36/IIPI

Policy instruments introduced with the aim of promoting environmental sustainability are often designed and evaluated in terms of their impact in facilitating technological change. The bulk of ‘green’ policy instruments that have emerged in recent decades have had as their target the facilitation of the development and adoption of greener processes, goods and services. Concurrent business models have sought to create and capture value arising from this policy-induced transition to more environmentally sustainable practices. However, both such policy instruments and the business models are often evaluated more in terms of their impact on the development and adoption of innovations, and less in terms of their impact on behavioural change. This paper provides a critical review of interplay between green policy instruments and green business models from a behavioural perspective. Thus, instead of looking at policy instruments from a technology-push and demand-pull perspective, this paper samples them in terms of sticks, carrots and sermons and then provides a critical review of the emergent business models that have emerged in response to stick-, carrot-, and sermon-types of policy regimes. The paper finds that most green business models that emerged, in the built environment, in response to sticks may be characterised as buck-passing, i.e. passing costs to others and skirting around the stick of regulations; those that emerged in response to carrots as opportunistic carpet-bagging aimed at capturing temporary gains; while those that emerged in response to sermon-orientated awareness campaigns, show a tendency to diffuse even in the absence of supportive fiscal conditions.