International Conference on Green World in Business and Technology 2013

Margareth Gfrerer
State Islamic University Jakarta
 Introduction
 Approach
 3Rs for Sustainable Innovation
 Conclusion

3/23/13 2
 Customers’ Perspective:
 ‘Reduce’, refers to cutting the purchase in
quantitative terms, not in qualitative terms.
 ‘Reuse’ refers to the lifetime of the
products/items.
 ‘Refuse’ refers to customers’ consideration,
whether they need new items or not.

3/23/13 3
 Producers’ Perspective
 ‘Reduce’ refers to minimizing input factors.
 ‘Reuse’ refers to the treatment of waste as
input material for the production.
 ‘Refuse’ refers to the elimination of not
sustainable or not environmental friendly
materials from the production process.

3/23/13 4
 The overall question is:
‘Does the Reduce-Reuse-Refuse approach lead
to sustainable innovation?’

Reduce-Reuse-Refuse (3Rs) is the credo of

‘Green World’ and ‘Green Economy’.
References:
 Political Decision Making Process
 Value of the credo
 Sustainable innovation

3/23/13 5
1. Political Decision Making Process
 Pressure Groups: Bently’s (1908) in The ‘Process of
Government’: “Pressure … is always a group
phenomena. It indicated the push and resistance
between groups. The balance of this group pressure
is the existing state of society. Pressure is broad
enough to include … from battle and riot to abstract
reasoning and sensitive morality”.

3/23/13 6
1. Political Decision Making Process
 Public Choice : Buchanan (1962) in The Calculus of
Consent: Logical Foundations of Constitutional
Democracy “collective action must be, …,
composed of individual actions. The first step … is,
therefore, some assumption about individual
motivation and individual behaviour in social as
contrasted with private or individualized activity.”

3/23/13 7
1. Political Decision Making Process
‘Green Economy’ in the social welfare approach
considers the five axioms from Arrow (1976):
▪ the unlimited domain,
▪ the Pareto postulate,
▪ the transitivity,
▪ the non-dictatorship and
▪ the independence of irrelevant alternatives.

3/23/13 8
2. Economic Impact
 The credo of the ‘Green World’ and ‘Green
Economy’

3/23/13 9
2. Economic Impact
 Reconsidering Values: Carl Menger (1871) in
Principles of Economics: “If economizing men
become aware of this circumstance … these goods
attain for them the significance we call value.”

3/23/13 10
2. Economic Impact
 Reconsidering Values:
The subjective theory of values in the context of ‘Green
World’ and ‘Green Economy’ opens the field for
redesigning the purchasing decision-making processes of
customers in the same way as for producers.
‘Green World’ and ‘Green Economy’ can be seen as non-
economic goods at the level of use value.
Goods need significance for customers’ satisfaction of
needs for life and enjoyment that an exchange value can
be created.
3/23/13 11
2. Economic Impact
 Reconsidering Values:
▪ The Reduce-Reuse-Refuse consideration linked with
the subjective theory of value refers especially to the
‘Refuse’ consideration.
▪ The ‘Refusing’ approach ends in a cost-benefit-
analysis:
where the social costs, the social benefits and the exchange value
of the consumption face the social costs and benefits of non-
consumption -> non-economic goods.
▪ The ‘Reducing’ and ‘Reusing’ approaches result in
economic values.
3/23/13 12
2. Economic Impact
 Reconsidering Values:
▪ In Carl Menger’s terms a ‘Green World’ and a ‘Green
Environment’ are non-economic goods when it comes
to individuals’ satisfaction of needs.
▪ In the practical consideration each consumer has to
bring suitability to non-economic goods that those will
create utility for the individual.
▪ Adding significance to the utility of a good creates a
value to this specific good (social costs and benefits).

3/23/13 13
2. Economic Impact
 Reconsidering Values:
▪ An economic good as the result of a manufacturing
process such as clean environment in a ‘Green World’
and ‘Green Environment’ is considered as a non-
economic good, as long as individuals don’t define its
utility and significance for the satisfaction of needs, the
subsistence of life and well-feeling/being.

3/23/13 14
2. Economic Impact
 Reconsidering Values:
▪ On the first sight these two goods (the economic
good and the clean environment) are not
complementary.
▪ On a second sight, the two uncomplimentary goods
could be separated into complementary economic
goods:
▪ the composition of the economic good (the product itself)
▪ the clean environment (the clean environment contribute to
the satisfaction of needs and well-feeling/being)

3/23/13 15
2. Economic Impact
 Reconsidering Values:
▪ This situation brings the exchange value into
discussion, which is the value increased by the
product-life-end-costs for the final disposal (social
costs) of products. (These costs are normally paid by the public in order
to clean the environment and to limit environmental damages with impacts on
health and safety for the citizens, which are caused by individuals and
enterprises alike.)

3/23/13 16
2. Economic Impact
 Sustainable Innovation
▪ Joseph A. Schumpeter (1942) in Capitalism, Socialism
and Democracy: “competition from the new
commodity, the new technology, the new source of
supply, the new type of organization … which
commands a decisive cost or quality advantage and
which strikes not at the margins of the profits and the
outputs of the existing firms but at their foundation and
their very lives.”

3/23/13 17
2. Economic Impact
 Sustainable Innovation
▪ Joseph A. Schumpeter (1939) in Business Cycles: “the
term Innovation … is not synonymous with ‘invention’.
… it is entirely immaterial whether an innovation
implies scientific novelty or not.”
▪ Innovation is defining the means of the production
function: “This function describes the way in which
quantity of product varies if quantities of factors vary.”

3/23/13 18
2. Economic Impact
 Sustainable Innovation
▪ Bridging the gap between innovation and the credo of the
‘Green Economy’: Schumpeter’s refers to the fact “that
innovations do not remain isolated events, and are not evenly
distributed in time, but that on the contrary they tend to cluster
to come about in bunches, simply because
▪ first some, and then most firms follow in the wake of
successful innovation;
▪ second that innovations are not at any time distributed over
the whole economic system at random, but tend to
concentrate in certain sectors and their surroundings.”

3/23/13 19
2. Economic Impact
 Sustainable Innovation
▪ Innovation neither could be understood as regional or
local phenomena but as a wave, which
▪ has a powerful starting point and
▪ slows down over the time the more it spreads out.
The wave is normally kicked-off by a leading company
and will be spread out further by its competitors.

3/23/13 20
2. Economic Impact
 Sustainable Innovation
▪ The wave of innovation at the global level implicates
the strategy of leapfrogging in coaching emerging
economies to ‘bypassing some of the processes of
accumulation of human capabilities and fixed investment
in order to narrow down the gaps in productivity and
output that separate industrialized and developed
countries”.(Steinmueller, 2008)

3/23/13 21
2. Economic Impact
 Sustainable Innovation
▪ Comparing he internalized ‘Green World’ and ‘Green
Economy’ approach of consumers and producers in
industrialized countries with that in emerging countries,
leapfrogging appears theoretically as means of
harmonizing technological and environmental
perspectives towards a mutual responsibility (between
the industrialized and emerging economies) of living
standards and global environment.

3/23/13 22
 Answering the question:
‘Does the Reduce-Reuse-Refuse approach lead to
sustainable innovation?’
 Overall, Reduce-Reuse-Refuse approach has an impact
on the production function.
▪ the input materials need to be improved or production
processes need to be redefined that products could get
prepared for new challenges.
▪ research need to be applied that new processes and new
materials can be developed to replace wasteful and not
environmental friendly products by sustainable and
environmental friendly products.

3/23/13 23
 In summary the innovation process focuses on
 the production process and
 the factors in the production process.

From consumers’ side an increase of

awareness towards high quality product will become
more economic in spending terms and will support
the long term thinking of sustainability.

3/23/13 24
 Thank you

3/23/13 25