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Sustainable Entrepreneurship - summary of the lectures and articles - by Michel Dagli
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Summary of the articles combinedwith the slides
By Michel Dagli
,INHOUD
Week 1: Sustainable Entrepreneurship: business models and co-evolution .................................................................................. 3
Hockerts, K. and Wustenhagen, R. (2010) Greening Goliaths versus Emerging Davids – Theorizing about the role of
incumbents and new entrants in sustainable entrepreneurship. Journal of Business Venturing, 25, 481-492.......................... 4
Bocken, N.M.P., Short, S.W., Rana, P. and Evans, S. (2014) A literature and practice review to develop sustainable business
model archetypes. Journal of Cleaner Production, 65, 42-56. ................................................................................................. 7
Week 2 Entrepreneurship: creating opportunities ..................................................................................................................... 19
Pacheco, D.F., Dean, T.J. and Payne, D.S. (2010) Escaping the green prison: entrepreneurship and the creation of
opportunities for sustainable development. Journal of Business Venturing, 25, 464-480. .................................................... 19
York, J.G. and Venkataraman, S. (2010) The entrepreneur-environment nexus: uncertainty, innovation and allocation.
Journal of Business Venturing, 25, 449-463. ......................................................................................................................... 27
Week 3 Sustainability and stakeholders .................................................................................................................................... 34
Freudenreich, B., Lüdeke-Freund, F. and Schaltegger, S. (2019) A Stakeholder Theory Perspective on Business Models: Value
Creation for Sustainability. Journal of Business Ethics, 166, 3-18. ......................................................................................... 34
Velter, M.G.E., Bitzer, V., Bocken, N.M.P., and Kemp, R. (2020) Sustainable business model innovation: the role of boundary
work for multi- stakeholder alignment. Journal of Cleaner Production, 247, 119497 (in press). ............................................ 39
Week 4 resources and identity .................................................................................................................................................. 45
Guest lecture repeat audio ................................................................................................................................................. 45
Lyons, T. S., & Kickul, J. R. (2013). The social enterprise financing landscape: the lay of the land and new research on the
horizon. Entrepreneurship Research Journal, 3 (2) 147-159. ................................................................................................. 45
York, J.G., O’Neil, I. and Sarasvathy, S.D. (2016) Exploring environmental entrepreneurship: identity coupling, venture goals,
and stakeholder incentives. Journal of Management Studies, 53:5, 695-737. ....................................................................... 52
Parrish, B.D. (2010) Sustainability-driven entrepreneurship: principles of organization design. Journal of Business Venturing,
25, 510-523.......................................................................................................................................................................... 56
Week 5 the circular economy .................................................................................................................................................... 61
Kirchherr, J., Reike, D., and Hekkert, M. (2017) Conceptualizing the circular economy: an analysis of 114 definitions.
Resources, Conservation & Recycling, 127, 221-232. ............................................................................................................ 61
Carrillo-Hermosilla, J., del Rio, P. and Konnola, T. (2010) Diversity of eco- innovations: reflections from selected case studies.
Journal of Cleaner Production, 18, 1073-1083. ..................................................................................................................... 65
McDonough, W. and Braungart, M. (2002) Design for the Triple Top Line: New Tools for Sustainable Commerce. Corporate
Environmental Strategy, 9, 3, 251-258. ................................................................................................................................ 73
Ellen MacArthur Foundation: circular economy. .................................................................................................................. 77
Lecture 6 Sustainability as strategy ........................................................................................................................................... 81
Schaltegger, S. and Wagner, M. (2011) Sustainable entrepreneurship and sustainability innovation: categories and
interaction. Business Strategy and the Environment, 20, 222-237 ........................................................................................ 81
Klewitz, J. and Hansen, E.G. (2014) Sustainability-oriented innovation of SME’s: a systematic review. Journal of Cleaner
Production, 65, 57-75........................................................................................................................................................... 91
Lectrue 7 Corporates: shareholders and greenwashing .............................................................................................................. 98
Flammer, C. (2013) Corporate social responsibility and shareholder reaction: the environmental awareness of investors.
Academy of Management Journal, 56, 3, 758-781 ................................................................................................................ 98
Siano, A., Vollero, A., Conte, F. and Amabile, S. (2017) “More than words”: Expanding the taxonomy of greenwashing after
the Volkswagen scandal. Journal of Business Research, 71, 27-37. ..................................................................................... 103
,WEEK 1: SUSTAINABLE ENTREPRENEURSHIP: BUSINESS MODELS AND CO -EVOLUTION
Sustainability in the news: World Economic Forum 202099
2020 theme: Stakeholders for a Cohesive and Sustainable World
The World Economic Forum Annual Meeting in Davos-Klosters is the foremost creative force for
engaging the world's top leaders in collaborative activities to shape the global, regional and industry
agendas at the beginning of each year.
It will bring together 3,000 participants from around the world, and aim to give concrete meaning to
“stakeholder capitalism”, assist governments and international institutions in tracking progress
towards the Paris Agreement and the Sustainable Development Goals, and facilitate discussions on
technology and trade governance.
Let’s go back to ... 2015
On September 25th, 2015, the United Nations adopted a set of 17 Sustainable Development Goals
(SDGs) to end poverty, protect the planet, and ensure prosperity for all.
Unlike previous development goals – which were essentially guidelines – all UN member states
agreed to strive to achieve the SDGs targets within their own countries.
Let’s go back to ... 1987
The Brundtland Report, published by the World Commission on Environment and Development
(WCED) of the United Nations. In it the term “sustainable development” was coined.
Definition: Sustainable development is development that meets the needs of the present without
compromising the ability of future generations to meet their own needs (WCED)
“Humanity has the ability to make development sustainable to ensure that it meets the needs of the
present without compromising the ability of future generations to meet their own needs.”
“We do not pretend that the process is easy or straightforward. Painful choices have to be made.”
“...in the final analysis, sustainable development must rest on political will.” p. 16
Let’s go back to ... 1972
Limits to Growth - The Club of Rome
“The earth’s interlocking resources – the global system of nature in which we all live – probably
cannot support present rates of economic and population growth much beyond the year 2100, if
that long, even with advanced technology.”
“Man can create a society in which he can live
indefinitely on earth if he imposes limits on himself and
his production of material goods to achieve a state of
global equilibrium with population and production in
carefully selected balance.”
,HOCKERTS, K. AND WUSTENHAGEN, R . (2010) GREENING GOLIATHS VERSUS EMERGING
DAVIDS – THEORIZING ABOUT THE ROLE OF INCUMBENTS AND NEW ENTRANTS IN
SUSTAINABLE ENTREPRENEURSHIP. JOURNAL OF BUSINESS VENTURING, 25, 481 -492.
Abstract This paper proposes a model of how incumbents and new entrants engage in sustainable
entrepreneurship. We suggest that in the early stages of an industry's sustainability transformation,
new entrants (‘Emerging Davids’) are more likely than incumbents to pursue sustainability-related
opportunities. Incumbents react to the activities of new entrants by engaging in corporate
sustainable entrepreneurship activities. While these ‘Greening Goliaths’ are often less ambitious in
their environmental and social goals, they may have a broader reach due to their established market
presence. This paper analyses the interplay between ‘Greening Goliaths’ and ‘Emerging Davids’ and
theorizes about how it is their compounded impact that promotes the sustainable transformation
of industries.
Hockerts et al. argues that:
Incremental solutions will not be enough to maintain critical levels of natural and social capital.
Sustainable Entrepreneurship has a role to play. There is a need for transformational change
- Starting point: Incremental solutions won’t be enough to maintain the critical level of
natural and social capital.
- Definition of Sustainable Entrepreneurship: the discovery and exploitation of economic
opportunities through the generation of market disequilibria that initiate the
transformation of a sector towards an environmentally and socially more sustainable
state.
Greening Goliaths versus Emerging Davids
Central idea: Firms can be divided into 2 categories:
- Greening Goliaths represent larger incumbent firms using
incremental innovation to bring about sustainable development.
(market incumbent)
- Emerging Davids are start-up and young companies introducing
disruptive innovations. (sustainable entrepreneurship)
,Both can play a role in contributing towards sustainable development but they do so in different
ways. For future success the interaction of the two types is needed.
Characteristics of Davids and Goliaths:
Incremental and disruptive innovation
Innovations can be disruptive or incremental. According to Hockerts & Wüstenhagen:
- only Davids introducing disruptive innovations can be classified as demonstrating
sustainable entrepreneurship.
Bioneer: a biological pioneer, an ecological inventor who's got an elegant and often simple set of solutions for
environmental conundrums. / Bio and pioneers. They have profit motives, but more driven by a desire to
achieve environmental and social change.
Emerging Davids – business behavior
- They are not limited by previous (technological) mindsets and are more innovative
- They are part of the solution and not seen as part of the problem
- Sustainability start-ups have a value-based approach and externalize costs by asking
customers to pay a premium for socially and environmentally superior products (and
services)
Drawbacks
- They tend to have a single-issue focus and can be less good at addressing a broader range of
sustainability issues.
- Idealistic approach can lead to little or no attention to growth strategies
- They prefer to keep their niche market small and exclusive, in order to avoid incumbents
moving into their markets
,Greening Goliaths – business behavior
- Incumbents may be slow to react but are often able to catch up quickly once they have
decided to follow
- They may then benefit from being able to charge premium prices (high prices), following the
price level established by the start-up (because of market power)
- They can launch Venture Capital funds to monitor innovating Davids (e.g. Philips, Sabic,
Unilever)
Drawbacks
- They may be able to influence the setting (or reduction) of environmental standards in their
favor (e.g. car industry lobby)
- They may try to keep standards fixed rather than encourage continuous improvement
Co-evolution: Sustainable transformation of an industry when both start-ups and incumbents
influence each other in the market.
A maturity model: Goliaths and Davids follow different approaches but they can converge
(samenkomen):
Conclusion
The initial phase (introduction) is characterized by sustainability initiatives of idealistic "Davids". In a
second phase (early growth), some pioneering "Goliaths", for example retailers with a higher quality
positioning, imitate some of the David initiatives and try to bring them into their mainstream
distribution channels. In isolation, none of these two developments would necessarily lead to
sustainable transformation of mainstream markets, because Davids tend to get stuck in their high-
quality, low-market penetration niche, while Goliaths will sooner or later react to cost pressures
by lowering the sustainability quality of their offerings. The sustainable transformation of
industries is not going to be brought about by either Davids or Goliaths alone, but instead that their
interaction is essential.
,BOCKEN, N.M.P., SHORT, S.W., RANA, P. AND EVANS, S. (2014) A LITERATURE AND
PRACTICE REVIEW TO DEVELOP SUSTAINABLE BUSINESS MODEL ARCHETYPES. JOURNAL
OF CLEANER PRODUCTION, 65, 42 -56.
Abstract: Eco-innovations, eco-efficiency and corporate social responsibility practices define much
of the current industrial sustainability agenda. While important, they are insufficient in themselves
to deliver the holistic changes necessary to achieve long-term social and environmental
sustainability. How can we encourage corporate innovation that significantly changes the way
companies operate to ensure greater sustainability? Sustainable business models (SBM) incorporate
a triple bottom line approach and consider a wide range of stakeholder interests, including
environment and society. They are important in driving and implementing corporate innovation for
sustainability, can help embed sustainability into business purpose and processes, and serve as a key
driver of competitive advantage. Many innovative approaches may contribute to delivering
sustainability through business models, but have not been collated under a unifying theme of
business model innovation. The literature and business practice review has identified a wide range
of examples of mechanisms and solutions that can contribute to business model innovation for
sustainability. The examples were collated and analysed to identify defining patterns and attributes
that might facilitate categorisation. Sustainable business model archetypes are introduced to
describe groupings of mechanisms and solutions that may contribute to building up the business
model for sustainability. The aim of these archetypes is to develop a common language that can be
used to accelerate the development of sustainable business models in research and practice. The
archetypes are: Maximise material and energy efficiency; Create value from ‘waste’; Substitute with
renewables and natural processes; Deliver functionality rather than ownership; Adopt a stewardship
role; Encourage sufficiency; Re-purpose the business for society/ environment; and Develop scale-up
solutions
Bocken et al. argue that the route to a sustainable economy, will require the development of
innovative Sustainable Business Models (SBMs). It requires a fundamental shift in the purpose of
business and almost every aspect of how it is conducted.
Business model innovation offers a potential approach to deliver the required change through
re-conceptualizing:
- the purpose of the firm and
- the value creating logic,
- and rethinking perceptions of value
,Sustainable Business Models will incorporate a triple bottom line approach and consider a wide
range of stakeholder interests, including environment and society (and economical – triple =3).
What are they? Business models are concerned with how the firm defines its competitive strategy
through:
- the design of the product or service it offers to its market,
- how it charges for it, (revenue model)
- what it costs to produce,
- how it differentiates itself from other firms by its value proposition,
- and how the firm integrates its own value chain with those of other firms in a value
network
Defining a traditional business model
- A business model articulates how the company will convert resources and
capabilities into economic value. It is …the organizational and financial
‘architecture’ of a business and includes implicit assumptions about customers,
their needs, and the behavior of revenues, costs and competitors (Teece, 2010)
A future sustainable economy requires new goals and priorities and a future business
system that:
- encourages minimizing consumption
- prioritizes societal and environmental benefits over economic growth
- emphasizes the delivery of functionality rather than product ownership
- operates on a closed-loop where nothing is allowed to be wasted
Defining a sustainable business model. Key differences that influence the
strategy of the enterprise.
Sustainable business models build on
- the triple bottom line approach to define the firm ’s purpose and the
measurements of performance,
- includes a wider range of stakeholders, and thus consider the
environment and society as stakeholders.
Business model innovation for sustainability often involves changing: “the way firms do business”
- business model that creates competitive advantage through superior customer value and
contributes to a sustainable development of the company and society.
But HOW? Research is needed and ongoing…
… because a transition to more sustainable business models requires a better understanding of how
sustainable business models can deliver better social and environmental performance.
Better performance means reducing or eliminating negative impacts and creating positive social,
environmental
… how can we innovate and adapt business models to deliver (more) sustainable solutions? Bocken
et al. 2014
,Business model innovation: Economic logic
A commercial business model describes a way of capturing economic value (economic driven logic
and purpose). Business model innovation in this context usually means making changes to increase
the economic value capture. Example: Mobile telephony business model.
Business model innovation: Sustainable logic
A sustainable business model requires innovation that changes the way you do business. A way of
capturing economic value AND environmental AND social value (benefits)
Types of strategy business models:
- Defensive (adjustment) → incremental business adjustments to protect current business
models focusing on risk and cost reduction driven by the need for compliance.
- Accommodative (improvement/integration) → modifications of internal processes and
include considerations of environmental or social objectives.
- Proactive (full integration) → the redesign of core business logic of the firm for sustainable
development.
Sustainable business model archetypes
Goal of their research:
How to stimulate innovation that places environmental and societal benefits above purely
economic benefits?
- Categorize sustainable business models into archetypes
o The archetypes create insights into the range of possibilities and even how they
might be combined.
- Technological: archetypes with a dominant technical innovation component (e.g.
manufacturing process and product redesign)
- Social: archetypes with a dominant social innovation component (e.g. innovations in
consumer offering, changing consumer behaviour)
- Organizational: archetypes with a dominant organisational innovation change component
(e.g. changing the fiduciary responsibility of the firm).
, Understanding the sustainable business model archetypes:
- Key characteristics to exemplify which features are adapted or specifically designed to
create social or/and environmental value / benefits beyond economic value creation
8 sustainable Business Model Archetypes (see model next page)\
(trick: MSC DEARD)
1. Maximize material and energy efficiency
2. Create value from ‘waste’
3. Substitute with renewables and natural processes
4. Deliver functionality, rather than ownership (garantie en leasen)
5. Adopt a stewardship role (leidende rol)
6. Encourage sufficiency (Aanmoediging van adequaatheid)
7. Re-purpose the business for society/environment
8. Develop scale-up solutions
Business model archetypes are useful for:
- existing businesses (redesign),
- entrepreneurs (creating new business)
- research (understanding trends and direction that are creating impact)
Business model key components in this paper:
Value proposition
- Product/service offering to generate
economic, social, ecological return
- Customer segments
Value creation and delivery
- Creation of value by seizing new business
opportunities, new markets, new revenue
streams
- Key activities, resources, channels, partners, technology
Value capture
- Cost structure / Revenue streams
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