Erik G. Hansen

Business Cases for Sustainability: The Role of Business Model Innovation for Corporate Sustainability

A considerable body of literature deals with the creation of economic value while increasing corporate environmental and social performance. Some publications even focus on the business case for sustainability which aims at increasing corporate economic value through environmental or social measures. The existence of a business case for sustainability is, however, mostly seen as an ad hoc measure, a supplement to the core business, or simply a coincidence. As a contrast, this paper argues that business model innovations may be required to support a systematic, ongoing creation of business cases for sustainability. A framework for business model innovation is proposed as a means to strategically create business cases on a regular basis as an inherent, deeply integrated element of business activities.

Business Models for Sustainability Origins, Present Research, and Future Avenues

While a consensus appears to have evolved among many sustainability researchers and practitioners that sustainable development at the societal level is not very likely without the sustainable development of organizations, the business model as a key initiating component of corporate sustainability has only recently moved into the focus of sustainability management research. Apparently, the usual approaches to sustainable development of philanthropy, corporate social responsibility, and technological process and product innovation are insufficient to create the necessary radical transformation of organizations, industries, and societies toward genuine, substantive sustainable development. More in-depth research is needed on whether both modified and completely new business models can help develop integrative and competitive solutions by either radically reducing negative and/or creating positive external effects for the natural environment and society (cf. Boons & Lüdeke-Freund, 2013; Hansen, Große-Dunker, & Reichwald, 2009; Schaltegger, Lüdeke-Freund, & Hansen, 2012; Stubbs & Cocklin, 2008). One of the first articles in this field was published in Organization & Environment. The Stubbs and Cocklin (2008) article titled “Conceptualizing a ‘Sustainability Business Model” was a seminal study published a few years before the currently emerging wave of academic business model publications. The Stubbs and Cocklin study revealed a set of normative principles of organizational development that together form an “ideal type” of sustainability-oriented business model. These authors pioneered the field of case-based theory building for sustainability-oriented business models, using Interface Inc. and Bendigo Bank as examples of sustainability-driven organizations. Their ideal type comprised different structural and cultural attributes of an organization, such as developing community spirit, investing in employees’ trust and loyalty, and engaging in sustainability assessment and reporting. They also advanced propositions about sustainabilityoriented business models dealing with an organization’s purpose and goals, its performance measurement approach, the need to consider all stakeholders, how nature should be treated, whether the organization’s leaders drive the necessary cultural and structural changes to implement sustainability, and whether a systems-level, as well as a firm-level, perspective should be employed.

Stakeholder Governance: How Stakeholders Influence Corporate Decision Making

Purpose – This paper aims to explore how stakeholders are voluntarily granted influence in corporate decision making. Design/methodology/approach – The stakeholder governance practices of 46 companies were explored in a multiple comparative case analysis, drawing on publicly available sources. Findings – The research finds that stakeholders are granted a voice regarding operational, managerial as well as strategic issues. The power granted to stakeholders varies from non-participation to co-decision making. The majority of engagements found are a combination of low power and low scope of participation, which are limited in their potential to align the views of those inside and outside the corporate boundaries. Research limitations/implications – The data used in this research relied on publicly available sources, such as company reports, articles and web sites. Practical implications – By seeing an array of different stakeholder governance mechanisms managers can reflect on their own approach to stakeholders and see how other companies use stakeholder engagement for scenario planning and innovation. Originality/value – The paper is the first to empirically analyse a broad range of companies regarding their voluntary stakeholder engagement mechanisms. This design allows the creation of a heuristic for stakeholder governance as well as for identifying clusters.

Business Models for Sustainability: A Co-Evolutionary Analysis of Sustainable Entrepreneurship, Innovation, and Transformation

The relevance of business models for corporate performance in general and corporate sustainability in particular has been widely acknowledged in the literature while sustainable entrepreneurship research has started to explore contributions to the sustainability transformation of markets and society. Particularities of the business models of sustainable niche market pioneers have been identified in earlier research, but little is known about the dynamic role of business models for sustainable entrepreneurship processes aiming at upscaling ecologically and socially beneficial niche models or sustainability upgrading of conventional mass market players. Informed by evolutionary economics, we develop a theoretical framework to analyze co-evolutionary business model development for sustainable niche pioneers and conventional mass market players aiming at the sustainability transformation of markets. Core evolutionary processes of business model variation, selection and retention, and evolutionary pathways are identified to support structured analyses of the dynamics between business model innovation and sustainability transformation of markets.

Intermediaries Driving Eco-Innovation in SMEs: A Qualitative Investigation

Purpose: The purpose of this paper is to identify the role intermediaries can play in an SME’s pursuit for corporate sustainability with a focus on eco-innovation. The research identifies drivers and barriers for eco-innovation, and highlights effects induced through collaboration between SMEs and local authorities, on the one hand, and consultancies, on the other.Design/methodology/approach: This paper is based on an exploratory qualitative interview study among German SMEs of the metal and mechanical engineering industry that have participated in the “Ecoprofit” program, an intermediary-based program that aims at introducing organizations to the concept of sustainable development through implementation of eco-innovations.Findings: Our key findings are that first, the proactive approach by a public intermediary (here local authority) is one essential push factor to trigger eco-innovations in SMEs with low absorptive capacity. Second, we find that SMEs may need facilitation for eco-innovation from different types of intermediaries (public and private) with different levels of support, which can range from customized and individual to more loosely held support, such as networks.Originality/value: Our study discusses the challenges of corporate sustainability with a focus on eco- innovations for SMEs and proposes a ‘complex intermediary’ consisting of a local authority and consultancies as one means to engage SMEs in sustainability. Moreover, it focuses on SMEs in the B2B context, organizations that are often overlooked despite their vast impact. Furthermore, by using a single industry approach, in-depth findings for the metal and mechanical engineering industry are presented.

The Role of an SME’s Green Strategy in Public-Private Eco-innovation Initiatives: The Case of Ecoprofit

Abstract Increasingly, eco-innovation is a major challenge for small and medium-sized enterprises (SMEs). To diffuse eco-innovation, public support programs have been established as inter-organizational networks between local authorities and smaller companies. Based on seven public-private partnership cases from the eco-efficiency Ecoprofit initiative, we identified three behavioral patterns (hold-up, step-up, and frontrunner) developed by the companies within the partnership. These were the result of an interaction between the companies’ green strategy and their related level of absorptive capacity, which influenced their ability to respond to the handholding processes offered in the partnership. Reactive companies mostly benefit from agent-based instruments (e.g., individual consulting). More proactive companies can also capitalize on peer-based handholding (e.g., ‘clubs’). The longitudinal research design shows that public-private partnerships can stimulate adaptations in a company’s green strategy over time. Propositions and an integrated framework are developed with implications for policy makers.

Business Cases for Sustainability and the Role of Business Model Innovation: Developing a Conceptual Framework

A considerable body of literature deals with the creation of economic value while increasing corporate environmental and social performance. Some publications even focus on the business case for sustainability which is targeted towards increasing corporate economic value through environmental or social measures. The existence of a business case for sustainability is, however, mostly considered to be an ad hoc measure, an add-on to core business, or simply a coincidence. As a contrast to these views this paper argues that to support a systematic, ongoing creation of business cases for sustainability may require business model innovation. A framework for business model innovation is proposed as a means to strategically create business cases on a regular basis as an inherent, deeply integrated element of business activities

Sustainability Innovation Contests: Evaluating Contributions with an Eco Impact-Innovativeness Typology

Companies operating in business-to-consumer markets have been increasingly pressured to transcend the focus on economic and technological innovations and to address more environmental-friendly and socially desirable products and services, i.e. to engage in Sustainability-oriented Innovation (SOI). This paper examines the suitability of innovation contests to generate SOIs and the resulting degree of innovativeness in conventional and ecological terms. Using a case study of an innovation contest in the shoe industry, we derive three strands of results. First, a large majority of the submissions belongs to the category of product care. Second, submissions categorised as ‘greenwashing’ receive a better average assessment, although technically equal to the ones of product care. Third, using eco-impact class as the first axis, and the (conventional) innovativeness criteria – as judged by the experts – as the second axis, we develop an eco impact-innovativeness grid. It illustrates that a vast majority of user submissions falls into the classes incremental innovation and radical conventional innovation. Results go beyond previous studies and thus contribute to the fields of open innovation and SOI.

100 per cent organic? A sustainable entrepreneurship perspective on the diffusion of organic clothing

Purpose – This paper analyses the sustainability-oriented transformation of industries from the lens of sustainable entrepreneurship. The authors investigate the co-evolution between pioneers introducing radically more sustainable offerings and (mostly large) market leaders with their responses. While sustainability pioneers introduce new products in niche markets, incumbents advance them into the mass market, together leading to the transformation of industries, markets and consumer habits. Design/methodology/approach – The authors apply the sustainable entrepreneurship perspective to a case study of the German clothing retail industry with a focus on organic cotton. The analysis covers four of the ten largest German textile retailers. Data collection is based on public available sources. Findings – The late 1970s saw the foundation of Hess Natur, which pioneered organic cotton practices and supported the development of sustainability standards in the clothing industry. In the beginning this was largely a phenomenon in niche markets, but to date some organic practices have diffused amongst mainstream retailers. This is counter-intuitive, as theory suggests that incumbents only adopt practices with significantly lower sustainability standards than companies in the niche. Research limitations/implication – The study suggests that more research should focus on the co-evolutionary dynamics between pioneering companies and incumbents and examine whether and how sustainability practices diffuse into the mass market. Practical implications – The findings can help managers to better understand their organisation’s role in the transformation of industries towards sustainability and, vice versa, how the transformation may affect them. Leading the transformation challenge by adopting organic and other sustainable supply chain practices can be an important measure for market success. Originality/value – This study is one of the few pieces of research investigating sustainability-oriented industry transformation from a market-based perspective. Actual data on organic cotton diffusion in German retail are presented.

Measuring the Impacts of NGO Partnerships: The Corporate and Societal Benefits of Community Involvement

Purpose – This paper aims to address partnerships between corporations and non-governmental organizations (NGOs) dedicated to corporate community involvement (CCI). It seeks to focus on how to measure both business and community benefits derived from CCI, especially stressing the need for developing indicators beyond the input level considering outputs and impacts. Design/methodology/approach – This paper follows a case study research strategy in a subsidiary of a multinational chemical and pharmaceutical company. Data collection is based on triangulation of data using interviews, action research, and documents. Findings – Based on the case study presented, it was found that, when CCI is an integral part of corporate strategy, it is also possible to develop advanced performance measurement systems for CCI. Such measurement systems include input, output, and impact level metrics for both community and business benefits. Community benefits are best developed and monitored in collaboration with the NGO partner. Further, it was found that the measuring frequency partly transcends conventional reporting periods. Practical implications – The research should motivate companies that engage in corporate community involvement to go beyond input-level metrics in measuring the success of such initiatives. However, in order to successfully operate a performance monitoring on output and impact levels, partnering with an NGO that has greater capability in socio-economic assessments is key. Originality/value – This paper shows how NGOs can contribute to performance measurement as part of the strategic performance management system of a corporation and how this allows for metrics beyond common input-level to address output or even impact-level metrics.