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Individual/Group Assignments | Sustainable Strategies
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Individual Assignment 3 Sydney Straver (542261)Sustainable Strategies (BKMME085) 542261ss@student.eur.nl
Q1. Organisational capabilities – where firms alter their resource-base using coordination
mechanisms to create a competitive advantage (CA) – strengthen this relationship (Sharma &
Vredenburg, 1998). Capabilities are strongly embedded in firms, making it hard for
competitors to imitate or identify them. Sharma & Vredenburg (1998) consider three
capabilities (stakeholder integration, organisational learning, and continuous innovation) that
facilitate a positive relationship between socio-environmentally beneficial strategies and CA.
Stakeholder integration concerns trustworthy and credible relationships driven by a firms’
continuous action to lower environmental impact – a path-dependent capability difficult to
imitate. Organisational learning focuses on attributing new meaning to information to spark
developments –hard to imitate as it is embedded in the ability to relate environmental
responsiveness to learning developments. Continuous innovation reflects continuous
improvement through waste management – difficult to imitate for competitors as firms with
this capability are a step ahead. The stronger the capabilities, the more likely a socio-
environmentally beneficial strategy leads to a CA (Sharma & Vredenburg, 1998) - because
capabilities are competition-related differentiators that are hard for competitors to
imitate/identify.
Lubin & Etsy (2010) identify capabilities that drive socio-environmental strategy
execution: elevating leadership, systemising methods and models, integrating management,
systemising reporting and communication, and aligning strategy and deployment.
Nevertheless, a relationship between capabilities and CA is not defined.
Q2. Differentiation in social markets through socio-environmental practices may occur for
legitimacy purposes. To obtain legitimacy, it is sensible for firms operating in social markets
to translate problems to action using socio-environmental practices. By differentiating
themselves with local initiatives, organisations may distinguish themselves locally but
simultaneously address issues with global relevance, such as water access and waste
management problems (Santos, 2012). It is sensible to focus on value creation in social
markets (Santos, 2012) by differentiating using socio-environmental practices to obtain
legitimacy.
Differentiation in political markets may effectuate morality. Smith et al. (2013) argue
that firms need to consider stakeholders’ claims to effectuate morality. Practices may be
altered/differentiated to comply with stakeholders’ moral standards (McWilliams & Siegel,
2011). Differentiating by accounting for stakeholder claims through socio-environmental
practices is sensible for morality purposes.
Sharma & Vredenburg (1998) argue that firms in regulatory markets tend to be
reactive as they solely comply with legislation. Reactive firms are unlikely to relate socio-
environmental practices with beneficial results (Sharma & Vredenburg, 1998). Firms may
want stakeholders to acknowledge their legal efforts to alleviate reputation and brand image
(Orsato, 2006). Here, it may be sensible for firms to differentiate themselves. Yet, it depends
on whether firms in regulatory markets adopt socio-environmental practices to differentiate
themselves as their main objective is regulatory compliance, rather than going beyond
compliance.
,Individual Assignment 3 Sydney Straver (542261)
Sustainable Strategies (BKMME085) 542261ss@student.eur.nl
Q3a. An organisation may not be able to capture value because the prices of their
products/services are too high - even though customers may be willing to pay. Also, some
organisations enforce practices that alleviate value capturing rather than value creating
potential. Due to these internal conditions, a trade-off arises between value creation (i.e.
output alleviates value of goods, services or the firm) as opposed to value capture (i.e. profit
generation from activities) (Santos, 2012).
Q3b. Due to spill-overs resulting from externalities, some organisational practice may only
create value rather than capture value. Consider Tony’s Chocolonely, a firm striving to
produce sustainable chocolate that is slave-free. To accomplish their goal, they acknowledge
a trade-off due to externalities: if they were to produce slave-free, these costs would not be
directly compensated for. They would create value rather than capture value: a trade-off
would arise. In response, Tony introduced true costs, in which both social and environmental
costs were reflected (Tony's Chocolonely, 2018). Doing so, they could create and capture
value.
Word count: 599
References
• Lubin, D., & Esty, D. 2010. The sustainability imperative. Harvard Business Review,
May: 42-50.
• McWilliams, A., & Siegel, D. 2011. Creating and capturing value: Strategic corporate
social responsibility, resource-based theory, and sustainable competitive advantage,
Journal of Management, 37(5): 1480-1495.
• Orsato, R. 2006. Competitive environmental strategies: When does it pay to be green?
California Management Review, 48(2): 127-143.
• Santos, F. 2012. A positive theory of social entrepreneurship. Journal of Business
Ethics, 111: 335-351.
• Sharma, S., & Vredenburg, H. 1998. Proactive corporate environmental strategy and
the development of competitively valuable organizational capabilities. Strategic
Management Journal, 19: 729-753.
• Smith, W., Gonin, M., & Besharov, M. 2013. Managing social-business tensions: A
review and research agenda for social enterprise. Business Ethics Quarterly, 23(3):
407-442.
• Tony's Chocolonely. (2018). The True Price of Cocoa - Progress Report. Retrieved
February 6, 2020, from https://trueprice.org/wp-content/uploads/2018/11/The-True-
Price-of-Cocoa.-Progress-Tonys-Chocolonely-2018.pdf
,Individual Assignment 4 Sydney Straver (542261)
Sustainable Strategies (BMME085) 542261ss@student.eur.nl
Q1. Economic differentiators should rely on customers and employees (primary stakeholders)
because of the instrumental logic. Customers are important, because firms need to address to
their needs to meet demand (customer intimacy; Treacy & Wiersema, 1993). Employees need
to have high motivation to consistently produce sustainably (operational excellence; Treacy
& Wiersema, 1993).
All stakeholders are relevant for the political differentiator due to the moral logic.
Yet, to effectuate morality in local contexts, the community and employees are important. By
keeping strong ties with the local community, a firm will better meet their (moral) demands.
Employees should be on the same page as to how to locally effectuate morality.
The community and local partners (secondary stakeholders) are relevant for social
differentiators due to the relational logic. Social differentiators must understand the local
community to realize local issues and develop solutions. Local partners enable firms to learn
from experiences, thereby enhancing market understanding.
Regulators and employees are key for regulatory differentiators because of the legal
logic. Regulators are important because of the legal logic’s aim to impact regulations.
Employees are relevant to advocate the firm’s stance with organizational capabilities.
Q2a. Henisz et al. (2014) find a positive association between stakeholder support and
financial valuation. Here, the firm-centric logic will probably drive lower financial valuation.
Firm-centrists have a transactional manner of interaction with their stakeholders, while the
other enterprise logics considers a relational aspect (Crilly & Sloan, 2012). Given that Henisz
et al. (2014) argue that financial valuation is driven by stakeholder engagement/support,
ignoring relational aspects in stakeholder interactions will likely reduce financial valuation.
Q2b. Based on the above, the extended enterprise logic will probably facilitate higher
financial valuation. This logic is based on the idea that businesses should be driven by
relationships, rather than transactions (Crilly & Sloan, 2012). This logic focuses on common
interests, thereby pursuing relational interactions with stakeholders (Crilly & Sloan, 2012).
This suggests more stakeholder engagement, which tends to increase financial valuation
(Henisz et al., 2014).
Q3a. Considering the disruptive and innovative potential of the circular economy,
governments, customers, and businesses are salient stakeholders (Esposito et al., 2018).
In the circular economy, governments may establish new policies, that require urgent
compliance from businesses: e.g. a fee or taxes for waste collection, which businesses must
pay (Kunz et al., 2018). Government claims are prioritised due to their power and legitimacy
– i.e. definitive stakeholder (Mitchell et al., 1997).
Customers are legitimate due to their ability to enforce circular practices (e.g.
recycling), who have power to influence other stakeholders by redefining their consumption
chain (Kunz et al., 2018; Esposito et al., 2018) – i.e. dominant stakeholder (Mitchell et al.,
1997).
Businesses have power to innovative within the circular economy and can disrupt the
market with legitimacy and urgent claims – i.e. dormant stakeholder (Mitchell et al., 1997).
Within a market more businesses generally imply stronger competition, driving cost-effective
, Individual Assignment 4 Sydney Straver (542261)
Sustainable Strategies (BMME085) 542261ss@student.eur.nl
recycling (Kunz et al., 2018) – which promotes the circular economy by restoring and
regenerating products/services (Esposito et al., 2018).
Q3b. Businesses and governments need to engage customers to shift from a linear- to a
circular-economy (Esposito et al., 2018). Yet, from the consumer perspective, a consumer
may not feel the urgency to adjust their consumption chain.
Businesses may not have an urgent claim nor be legitimate enough to be able to
engage consumers. From a business perspective, this poses the difficulty of not being able to
drive consumer’s adoption of the firm’s circular model (Esposito et al., 2018).
Few governmental interferences may prevent businesses from adopting circular
models. As Pfeffer (2010) suggests, organisations continue current operations if the
government does not interfere.
Word count: 597
References
• Crilly, D., & Sloan, P. 2012. Enterprise logic: Explaining corporate attention to
stakeholders from the ‘inside-out’. Strategic Management Journal, 33: 1174-1193.
• Esposito, M., Tse, T., & Soufani, K. 2018. Introducing a Circular Economy: New
thinking with new managerial and policy implications. California Management
Review, 60(3): 5-19.
• Henisz, W., Dorobantu, S., & Nartey, L. 2014. Spinning gold: The financial
returns to stakeholder engagement, Strategic Management Journal, 35: 1727-
1748.
• Kunz, N., Mayers, K., & Van Wassenhove, L. 2018. Stakeholder views on extended
producer responsibility and the circular economy. California Management Review,
60(3): 45-70.
• Mitchell, R., Agle, B., & Wood, D. 1997. Toward a theory of stakeholder
identification and salience: Defining the principle of who and what really counts.
Academy of Management Review, 22(4): 853-886.
• Pfeffer, J. 2010. Building sustainable organizations: The human factor. Academy of
Management Perspectives, 24(1): 34-45.
• Treacy, M., & Wiersema, F. (1993). Customer intimacy and other value
disciplines. Harvard business review, 71(1), 84-93.
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