Voluntary programs adoption : the economy for the common good in south Tirol

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Voluntary Programs Adoption:

The Economy for the Common

Good in South Tyrol

Alessia Bernardo

Supervisor: dhr. dr. L.W. Fransen

Second reader: dhr. dr. P. Schleifer June 2016

Master Thesis Political Science – International Relations

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Abstract

Voluntary Programs (VPs) are institutions that induce firms to produce public goods beyond the usual command and control system. Drawing from the existing literature concerning VPs, and using as case sample the Economy for the Common Good (ECG) model and firms based in South Tyrol, the research examines primarily tree aspects. First, it addresses firm size and the likelihood to join a VP. Second, it investigates the effects of cooperation among businesses. Finally, it explores the role of the government as tool to engage more firms in VPs. The findings suggest that a generalization of firm size more likely to participate in VPs is not possible and that each VP deserves a proper analysis. Furthermore, it highlights the fact that cooperation among businesses in VPs is still under-researched and deserves more attention in future. Finally, concerning government support, this one did not appear as the main reason for firms to join a VP but it can play a positive role in attracting more participants. This reasearch endeavours to make a contribution to the literature on Voluntary Programs adoption and aimes to identify some aspects that could improve firms engagement in VPs.

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Acknowledgments

I would like to express my gratitude first of all to my master thesis supervisor Luc Fransen for his valuable inputs and for his enthusiasm and support during this research project. I am also very grateful to my parents and my sister for their encouragement, their everyday moral support and for giving me the opportunity to live wounderful experiences. Finally, I also want to thank my fellow students and friends for having made the time in Amsterdam really special and unforgettable.

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1. Introduction

Over the last few years several European countries have been affected by a deep economic crisis. According to a survey by the Bertelsmann Foundation, 88% of the Germans and 90% of the Austrian citizens interviewed, feel the need for a “new economic order” (Felber, 2015), a need which is in all probability shared also by other countries faced with the economic crisis.

The Economy for the Common Good (ECG) has been designed by the Austrian activist, economist and university professor Christian Felber. This model promotes a change from the pursuit of profits and competition towards the pursuit of the common good and cooperation. According to Felber, the capitalist system itself creates several serious problems such as unemployment, poverty, hunger, inequality, exclusion, environmental degradation and climate change and the ECG solution consists of an economic system that "places human beings and all living entities at the center of economic activity" (The Guardian, 2014). One example of this is Fair Trade products. In an ECG model fair trade products would have a privileged status in comparison to products traded in other ways. In brief, this would lead to a transition resulting in fair trade products being the only products available in the shops (Felber, 2015).

One year after Felbers book about the ECG was published, the author co-founded the Austria Movement and in 2010 he proposed the project for a Democratic Bank (Activesustainability.com). The movement soon gained support from pioneers companies, consultants, auditors, editors, local chapters and unions and has since become a widespread international movement involving companies, communities and organizations working together to both develop and implement the idea. Moreover, various companies in different countries have voluntarily adopted “the Common Good Balance Sheet” to measure their contribution to the Common Good of a democratic society. As the sample of the Common Good Matrix below shows, the Common Good Balance Sheet gives an account of the degree to which the company fulfils the five most important constitutional values of democratic states: human dignity, solidarity, sustainability, justice and democracy” (ecogood.org. 2016).

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Figure 1. Common Good Matrix 4.1 (source: ecogood.org)

The ECG soon became a political movement with the aim of showing governments that it is possible to implement the system (Activesustainability.com). Nevertheless, this new kind of economic model is labelled as utopian. Indeed, the topic is still under-researched and a concrete analysis of its benefits has not as yet been drawn. Even so, later last year (2015), the European Union recognized and promoted this model of alternative economy saying that “the ECG is an economic model that can successfully contribute to the Europe 2020 strategy” (Official Journal of the European Union, 2016). In any case, why a business would adopt the model and which kind of business would be most likely to do it, is still an issue of research among scholars.

In accordance with what has been stated above, the ECG model can be labelled as part of the broad category of voluntary programs (VPs). Voluntary programs are described as institutions “for inducing firms to produce (environmental) goods beyond legal requirements” (Prakash and Potoski, 2011: 123). In other words, not under the usual “command and control” system. Command and control regulation has been object of critics since it is believed that it pushes to specifying technologies rather than improving performance standards (Nash and Ehrenfeld, 1997). In private codes development and enforcement, public resources are not necessary. Industries and individual firms are responsible for ensuring compliance (Nash and

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Ehrenfeld, 1996: 17). Another important difference between regulation and VPs, is that the former tells companies what they can do thereby trying to improve their performances, while the latter function as a guideline for businesses policies and management system (Ibid., 18).

This brief overview on VPs, which will be discussed in more depth later, motivates the current research question: What drives businesses operating in the organic food and cosmetic sector to adopt Voluntary Programs and which kind of business are more keen to adopt them? In order to answer this question, the research will use businesses located in the autonomous region of South Tyrol in north-eastern Italy as an empirical case. Although in South Tyrol the ECG model is spreading very quickly, the main sectors currently adopting it are the hospitality sector and the organic food and cosmetic sector. In order to obtain clearer results, I decided to chose and focus my research on the latter one.

The relevance of conducting research into a more sustainable economic model lies in the fact that in a time of widespread economic crisis, I believe it is necessary to develop an alternative economic model, though this does not necessarily mean a substitute economic model. This alternative can be the ECG: an economic model that takes into account the environment, the society welfare and social justice and is not focused exclusively on businesses profits. Moreover, the study of ECG as an alternative economic model can contribute to the literature on voluntary programs adoption and on the debate on which businesses are more likely to adopt this programs. This aims to help improve the ECG model so that it may be adopted by more firms. It is also a research of societal relevance since it is driven to create a more sustainable economic model which could be a benefit to society as a whole. Finally, the aim of the research is to identify the implications for the ECG to spread to other European regions and countries.

The first part of the research will provide insight into the theoretical framework on which this work is based. In this part the literature on voluntary programs will be presented, as well as the sub-research questions. Part of this chapter is also the approach used and the supporting hypothesis. Secondly, both the research design as well as the case selection will be outlined. The third part consists of a background chapter on the concept of common good to provide a deeper understanding of the roots of this concept. The final chapter will present the outcomes of interviews and policy document analysis. Here, reasons for businesses to adopt

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the ECG or not, as it emerged from the interviews will be presented. Moreover, part of the last chapter will take into consideration findings concerning which role cooperation and the government play in the model and in the voluntary programs in general.

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2. Theoretical framework

In this section I will present the main concepts on which the research is based. First, the gap in the literature concerning business participation in voluntary programs will be discussed, and more informations about what voluntary programs are will be provided. Second, sub-research questions that this sub-research aims to answer will be presented. I will subsequently give an overview of the multiplicity of motivations generally believed to affect business participation in voluntary programs. Finally, I will explain the approach and the hypothesis of the research.

2.1. Voluntary programs and literature gap

During the last decade, more and more private codes of management practice have emerged in corporate programs (Nash and Ehrenfeld, 1996) and voluntary programs have come to be considered as important instruments of public policy (Berliner and Prakash, 2015). Some of the most known voluntary programs among many others are ISO 14000, the United Nations Global Compact and the Forest Stewardship Council (FSC). All these voluntary programs, require companies to adopt management system and to audit their progress (Nash and Ehrenfeld, 1996). This new idea of self-regulation beyond legal requirements, shows the willingness of companies to take on the responsibility themselves and improve their negative externalities. Self-regulation also “represents an increasingly viable alternative to the market and the state” (Porter and Ronit, 2006: 41). In the same line of thinking, according to what reported by Vogel from Knill and Lehmkuhl (Vogel, 2008), “civil regulation is intended to compensate for the decreasing capacities of national governments for providing public goods”. But why do firms decide to participate in VPs? For Videras and Alberini (2000) some reasons are: “(1) to appeal to consumers who demand “green” products; (2) to preempt government regulation; (3) to seek regulatory relief from the agency; and (4) to gain a competitive advantage over competitors”. Lyon and Maxwell (2002), developed a comprehensive review about existing literature concerning voluntary approaches. Their findings suggest that larger firms are more likely to adopt them and that the motivations rely mostly on economic aspects, reputation and fear of further binding regulations. Nonetheless, the work by Lyon and Maxwell is based on environmental agreements and findings might be slightly different for VPs in a broader sense and which do not stress exclusively on environmental issues.

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Garrett Hardin in his book 'The Tragedy of the Commons' (1968), describes by means of the metaphor of the medieval commons, what he considers as an inevitable damage that will affect natural resources held in common: the solution to this dilemma is the creation of alternative institutions in order to regulate their use (Kollman and Prakash, 2002). The ECG offers to be this alternative, although since its implementation is on a voluntary basis, it must also be considered that some businesses would choose to free-ride on the efforts made by others (Olson, 1965). Nevertheless, concerns about possible free riding firms will be left aside since is not a core aspect this research wants to focus on. On the other hand, what will be considered is an important aspect of the ECG model: cooperation among businesses. Cooperation might lead to isomorphic adoption among companies or suppliers. DiMaggio and Powell (1983; 1991), identify three different kind of isomorphic institutional influences: coercive, normative and mimetic. These correspond respectively to the influence exerted by governmental agencies, professions and social expectations (Rivera, 2004). Since the ECG model is adopted on a voluntary basis, it is not possible to speak about coercive isomorphism but it might be possible to observe normative or mimetic isomorphism. Normative isomorphism is the result of values and norms of conduct which are promoted by professional networks, academic institutions or industry association (Ibid.). Mimetic isomorphism occurs when a firm imitate another firm in situations of uncertainty in order to appear legitimate and competitive (Rivera, 2004; Gonzalez-Perez and Leonard, 2015).

Another aspect of concern among scholars about VPs adoption, is the role played by the government. Indeed, VPs are generally extraneous to carrot and stick approaches. Howbeit, the role of the government does not appear as being non influential. The motivations of a government for engaging in a VP have been discussed to some extent in the literature concerning VPs. According to Van der Heijden article (2015), government may seek to be involved in a VP for various reasons: they can be used to test policy interventions to adopt in the future in cases where it is too difficult or costly to implement direct regulatory interventions; VPs can be an opportunity to reward leading firms; they offer the opportunity to cooperate in a closer way with the regulated sector without being directly involved in this collaboration. At the same time, businesses can also seek government engagement in VPs. This because government engagement can provide VPs legitimacy in the eyes of a wider public and can influence more businesses participation (Van der Heijden, 2015). When getting involved, governments can adopt several different roles. In the following part I will

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shortly outline the different government participation modes, following the exposition of Van der Heijden (2015) from the existing literature:

• Initiating and leading: this aspect is essential to provide VPs participants with cohesion and coordination, necessary aspects to reach the intended end of a business;

• Monitoring and enforcing: being the key of a VPs success for some scholars, monitoring and enforcing is necessary for ensuring compliance with VPs expected outcomes. Self-monitoring is considered to be a too weak tool;

• Supporting: a VP can be supported by the government financially. Governments can provide monetary incentives, for example through tax reduction for participants;

• Assembling: governments can identify possible synergies between various VPs, between VPs participants or between VPs and existing regulations and help these synergies to materialize.

Governments can also be an effective tool to improve VPs visibility. Although this point of view can be arguable, according to Durand (2015: 1512) governments can “employ reputational levers to encourage participation and compliance […] particularly if this is done in conjunction with efforts to raise the profile and visibility of such initiatives among the public”. It can be concluded, that the government even if not directly involved in VPs, also has a role to play to some extent.

Another important aspect of influence in firm decision to join VPs, emerged from the result of the research by Arora and Cason (1996). According to the authors, firms perceive consumers concern about the environment and are therefore willing to engage in VPs that reduce environmental harm also if this means paying a slightly higher price. In other words, “firms increasingly wish to project an image of being environmentally conscious […] (and) consumers are willing to pay a premium for more environmentally benign products” (Ibid., 413). Finally, another consideration that was made by the European Commission, is that voluntary programs are able to impart “norms of shared responsibility and encourage integration of environmental concerns in business decision making” (Harrison, 1999).

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Despite the abundant literature about voluntary programs, as mentioned in the introductory part of this research and as it emerged from this section, the answer to the question of what drives businesses to take part in these programs and which kind of business are more keen to participate, is still not clear as well as other related sub-questions presented in the following paragraph. The purpose of my research is to try to contribute in filling this gap and these controversies.

2.2. Research question(s)

As already said in the introductory part of this research, the main question this work aims to answer is 'What drives businesses operating in the organic food and cosmetic sector to adopt

Voluntary Programs and which kind of business are more keen to adopt them?'. Alongside

this central question, other sub-questions will be investigated while developing this research. Indeed, it is important to ask:

• Is the decision to get involved in this programs linked to business investment reasons?

• Does a possible cooperation among businesses play a role in VPs adoption? • To what extent does governmental support lead businesses to adopt a VP?

The rational of these questions is in the assumption that these 3 factors can be directly involved in businesses decision concerning VPs adoption and therefore help me to answer the main question posed by my research.

2.3. Multiplicity of VPs participation reasons

According to Conte and Jacobsen (2015: 1) “the extent to which Voluntary Environmental Programs (VEPs) succeed at improving environmental quality depends on participation levels from firms and consumers”. For Bork and Coglianese (2009), from an economic perspective, business will be motivated to participate in a VEP if the benefits of doing it exceed the costs. Gunningham et al. (2003) developed another framework which considers economic or competitive pressures, regulatory pressures, and social or community pressures as motivation for business to join a VEP. Other authors also tried to investigate what might push business to engage in a VPs or VEPs. Vogel (2008) as well, highlights three factors that might

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make firms willing to accept self-regulation. These are identified with pressure from NGOs, change in corporate strategies and because norms and values have changed.

2.4. Approach and hypothesis

As has just been mentioned above, the ECG is implemented by businesses on a voluntary basis, therefore the theoretical approach will draw upon literature on voluntary programs (VPs) as a tool to offer and regulate a more sustainable economic model. In order to participate in the development of VPs participatory theory, I will study participation levels in businesses in South Tyrol which have decided to implement on a voluntary basis an ECG approach to production. The literature concerning VPs is already quite developed and for this reason I will use a deductive approach. Despite that, since the study of voluntary programs is much more developed in the environmental fields, these will be used as a guideline to study the voluntary adoption of ECG. Drawing upon the existing literature I will try to demonstrate whether it is possible to identify businesses more keen to adopt sustainable standards on a voluntary basis and what is the driving force behind this decision. Following what has been said above the research is based on the following hypothesis:

Hypothesis 1: Small sized business are more keen to adopt ECG.

If larger firms or smaller business are more keen to adopt a voluntary program is a proper dilemma in the literature concerning this topic. Indeed, company size is a variable regularly believed to affect VPs participation. According to Potoski and Prakash (2013: 406) smaller firms are more wary in adopting a VP. For them, “when firms in a given industry show variation in size, smaller firms are often wary that a V(E)P would impose obligations that are more costly for them to fulfil (…) [while] large or more profitable firms might benefit more because they are more vulnerable to the negative reputational externalities generated by others in the industry” (Ibid.). To support the idea that larger firms are more keen to adopt VPs, Potoski and Prakash use as example the Responsible Care (RC) in the chemical industry: in this case, companies that are part of a “privileged group” and that benefit or are hurt by a shared reputation are more likely to take part to a V(E)P. Smaller firms in general are more inclined than bigger oner to shirk because they lack managerial resources but they also might join VPs in the end because they feel costumer pressure (Ibid., 402).

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likely to adopt additional governance regulations. Some scholars (Gompers, Ishii and Metrick, 2003) identify a positive relationship between profits and governance mechanism. Others (Coles, McWilliams and Sen, 2000) do not identify any link between business performances and governance. It is clear that firm size can be question of concern when investigating predisposition to voluntary programs adoption.

Although a major number of scholars seem to support the idea that larger companies are more likely to adopt VP, what my research suggests and expects to find, is that the size may vary according to the voluntary program that has to be adopted. It may not be possible therefore, to identify a unique category. The size of the business adopting a voluntary program might change from that of a VP to another and a universal generalization is, therefore, not possible. It will be necessary to take this factor into consideration while conducting the research, in order to see to what degree we can identify a variation or not. The variation among business could explain their enthusiasm to adopt ECG-instruments. Despite that, I expect the research to show that there is not much variation among business adopting ECG in the chosen sectors, and that the decision rest more on the moral values promoted by the model and shared by business.

Hypothesis 2: The motivations that lead to the decision of adopting a voluntary

program might be consistent with the firm moral values.

Hypothesis 2 is based on neo – institutional theory according to which “not all business choices are the result of managers' rational economic decision” but that management choices are also influenced by external norms, traditions and values (Rivera and Leon, 2004: 421). According to Berliner and Prakash (2015: 115), “actors may not comply because they lack the knowledge and the capacity to do so, or are not socially embedded in networks that emphasize compliance norm”. As the authors suggest, a good program design has to include learning mechanism and “embed actors in appropriate social networks” (Ibid.) and this is what the ECG aims to do. This network aspect lead me to the next hypothesis concerning an already mentioned important aspect of the ECG: cooperation.

Hypothesis 3: Cooperation can play an important role in VPs adoption decision.

Cooperation is an important aspect of the ECG model. Companies are brought together to peer review each other balance sheet and once they decide to fulfil it, they are more keen to

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look for suppliers also working following the ECG values. Therefore, I expect cooperation to play a role in the decision of businesses to adopt a VP as well. For instance, cooperation could be a tool for creating a ripple effect among companies. With ripple effect is intended a situation of normative and mimetic isomorphism in line with DiMaggio and Powell (1983; 1991) study. Nevertheless, the role of cooperation in VP is not a topic that has been yet developed by academics. The research aims to bring up this topic in order to pay more attention to this aspect in future researches.

Hypothesis 4: The role of the government is not particularly influential in the business

decisions to adopt voluntary programs.

As will be explained later, according to Ribar and Wilhelm, a government contribution is not the main motivations for businesses to join a VP although this might help to increase the number of firms that decide to join (Nyborg and Rege, 2003). Likewise, according to t he expected findings of my research, what moves the interviewed companies to join the ECG model does not rely primarily on the support of the government but rather on personal motivations.

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3. Research Framework

This chapter is useful to understand which methods were used for gathering empirical data, what was the process leading to the sample and the case selection choice, as well as how different validity and reliability threats of chosen data and method will be avoided. Finally, it will also give the reader an overview of the societal and theoretical relevance of this research.

3.1. Method and data gathering

The data to be analysed consists of the reasons for businesses to adopt voluntary programs and which kind of businesses are more keen to adopt them. The method to develop a research around this question and the ones mentioned beforehand, will consist of both interviews and policy documents analysis. Interviews will be directed to South Tyrol companies engaged in the development of an ECG and to one of the South Tyrol Landtag representer who developed the bill. All interviews have been conducted personally and per email. Interviews will be useful also to understand in which way the cooperation aspect is used in the ECG, what cooperation in this model actually means for businesses, and if it may influence, or not, the decision for adopting the model. Through respondent answers, I will also draw my empirical analysis about the role of the government. The aim here is then to try finding businesses that operate in the same field and highlight the reasons why some of them are adopting the ECG whereas some are not. In addition, since the South Tyrol Landtag turned the concept of an ECG into a draft law, a policy documents analysis of this last one and how it has been implemented will be useful to better understand the role of the government. Document analysis will also concern the Common Good Balance Sheet of the companies adopting the ECG model. It is important to point out that during some of the interviews it was not possible to record, therefore the empirics are based on notes taken during or immediately afterwards. As the documents and the interviews used for this research are in German or Italian, these have been translated to English by the author.

3.2. Validity and reliability concerns

In order to guaranty a high quality of this research it is necessary to consider the possible validity and reliability threats within the design. Both the methods used to conduct the

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research present validity and reliability threats that need to be avoided. Time, setting and the interaction between the interviewer and the interviewed, all represent a reliability threats to the interviews' outcome. Semi-structured interviews will help to prevent this threat since the speaker will be given some degree of freedom while answering the questions. As far as validity is concerned, the language of the interviews will be kept as much as possible at the level of the person being interviewed in so far as enabling the speakers to express him/herself freely in their own words. However, it is also to be considered that with respondent there can always be a bias of information since they can prefer to give socially desirable answers. “Social desirability reflects the tendency on behalf of the subject to deny socially undesirable traits and to claim socially desirable one, and the tendency to say things which place the speaker in a favorable light” (Nederhof, 1985). ECG non adopters can have the tendency to give answers that show they are willing to committee to show their good performances in the future. Respondent answers should therefore be analysed critically. Although it is difficult to find a solution able to solve this problem completely, while conducting the interviews the questions were formulated in a neutral way so that the respondent was able to consider any given answer as equally acceptable. An external validity threat related to the chosen case study, is the fact that South Tyrol can be considered a region sui generis compared to other regions since it is an autonomous one. Indeed, this could make the implementation of the model actually easier with more possibility of government support. Nevertheless, already other regions in Italy and abroad are adopting the model and shaping it to their necessities. Therefore, since the ECG is adopted by business voluntarily and not exclusively with the support of the government, this might led to a solution to the problem itself.

3.3. Case selection

As a case study, I will use the region of South Tyrol in north-eastern Italy, which passed a comprehensive resolution on the Economy for the Common Good (ecogood.org, 2014) and is now putting it into practice. The municipalities of Laas, Mals, Latsch and Schlanders formed in January 2014 the “Gemeinwohlregion Vinschgau [Vinschgau region of the common good]” in order to implement these aims (Cipra.org, 2016). To sum up, they build a real region for the common good, starting with business they triggered off a general consensus process which involved also institutions, citizens, schools and banks. The indicated, is also the first

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common good region in Europe. Some months later, in December 2014, the South Tyrol provincial assembly (Landtag) “adopted three measures to further anchor the ‘common good’ principles in the region” (Cipra.org, 2015). The Landtag of South Tyrol is the provincial council of the autonomous province of South Tyrol in north-east Italy. As a legislature it is responsible for passing laws at the provincial level and enact the budget. The new draft law (Landesgesetzentwurf Nr. 25/14) supporting the ECG which takes effect for the entire province, signs an important paradigm shift in the economic system of South Tyrol. The draft law includes the following:

 The guidelines for government assistance programs have been amended, adding goals of Economy for the Common Good

 The guidelines for public procurement have been amended. Common Good certified companies will be given priority in public contracts

 Common Good Cities with the state of South Tyrol

As a result of this law, the principles of the ECG have also been introduced in the logics of distribution of public money. From now on, ECG principles are part of the guidelines for public loans. According to the website of the ECG movement (ecogood.org), following this decision by the Landtag, South Tyrol is to be considered as playing a pioneer role in Europe.

The Landesgesetzentwurf Nr. 25/14 can be described as a case of soft law. “Soft law refers to international norms that are deliberately non-binding in character but still have legal relevance, located in the twilight between law and politics” (Skjærseth et al.,2006: 104). Compliance with forms of soft law such as voluntary programs, depends on the voluntarily participation, resources and actions of firms (Vogel, 2008). According to Vogel (Ibid.), this approach offers advantages such as timely action when governments are unable or slow to respond effectively to economic globalization challenges.

Starting from this background, I investigate how this model developed in the region, where companies engaged themselves voluntarily in the implementation of this economic model, why they decided to engage, which type and size of business it is, and how the region is supporting this model. Once these questions have been answered, it will be possible to elaborate a more broad spectrum for the adoption of the ECG model abroad. Indeed, the results will give insight on relevant factors for business to adopt the model and this can help

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ECG promoters to engage same business also elsewhere than in South Tyrol.

Due to the recent spread of the ECG model and its adoption within the region of South Tyrol, it is not possible to focus exclusively on one kind of business in this research, this will make the sample to small in order to achieve some satisfactory results. However, the research will take into consideration business dealing with different organic products ranging from alimentary to cosmetics and detergent products. This choice is made due to the fact that businesses dealing with organic products is one of the few sectors where the ECG has been adopted in South Tyrol region. Another sector within the region which saw a modest success of the model is the hospitality sector. Nevertheless, it was more interesting for the research to focus on one of the two. Indeed, in this way the comparison will be also more uniform. The fact that within the alimentary, cosmetic and detergent sector only businesses dealing with organic products are implementing the model, could find its reasons in the tight connection these businesses have with the balance sheet indicators (Stella and Rocchi, 2014). Since the organic sector is generally already basing its identity on the respect of social, economic and ecological sustainability, it can be assumed that, the more a business is close to the content of a VP, the more they are likely to adopt it. This does not mean that other businesses will not implement the model in the future, but they are probably less likely to be the pioneers.

Some examples of companies adopting the ECG that will be used as sample are:

 Triadebio: organic products

 Baeckerei Profanter: bakery

 Almacabio: leading brand of ecological detergent

Companies operating in similar fields, but which have not adopted the ECG but are included in this study are:

• Naturalia: organic products • Pro Natura: organic products • Biobazar: organic products

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about their motivations about adhere or not the ECG model. Before continuing with the empirical part of this research, it is helpful to give a short insight about the term and concept of common good. Indeed, this concept date many centuries back and can help to understand on which particular ideas the model of an ECG has been developed.

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4. Background chapter:

The concept of Common Good and the ECG

“You should remember that our purpose in framing the State was not that our citizens should do what they like, but that they should serve the State for the common good of all”

(Plato, 2015)

The concept of common good has existed for centuries in different fields. The term has its main roots in the philosophical, religious and economic field and in all cases it means something positive and beneficial for the society. Those goods serve indiscriminately all members of a community and even members of future generations (Etzioni, 2015). For Plato, the best political order is the one where cooperation and friendship dominate among different social groups and where this social groups benefit and add to the common good (Simm, 2011). According to Simm (Ibid.), also for Aristotle what enables somebody to live a good life is the association with others rather than isolation. This is the only way to pursue happiness.

Later on, the concept of common good was further developed by the Christians theologians. In the Christian vision the good is identified with God and seeking to attain the common good means give back to God what is he due (Etzioni, 2015). Interesting is also the vision of the common good by Thomas d'Aquinas (bonum commune), which in his book Summa

Theologiae says “a tyrannical government is not just, because it is directed not to the

common good, but to the private good of the ruler” (Aquinas and Heath, 2006).

In both the philosophical and religious connotation, the term common good refers to something that needs to be pursued in order to achieve happiness, it is identified as the purpose of the community or society. A shift in the concept of common came about with the enlightenment, and this is the way we inherit it. With Hobbes and Locke, a new more individualistic perspective of society emerged. In this new model, society exists “in order to further the goals of individuals, neither asking where the goals of individuals come from nor inquiring into the processes by which individuals are formed in society” (Yuengert, 2009 in Etzioni, 2015: 2). The term was also used by Adam Smith. According to him, the “invisible hand” of the market transforms self-interest into the common good. From his point of view, the common good converges with the well-being of the individual. Moreover, reference to

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the common good appears also in democratic states constitutions (Felber, 2015). Among others, also the Italian constitution refers to the common good declaiming: “public and private economic activity should be oriented to the common good” (Art. 41 Italian Constitution in Felber, 2015).

The economic model promoted by the ECG is in agreement with Smith's line of thought, and seeks to realise a model “that allows for a real social adjustment of the market” (Global Hub for the Common Good, 2015). Although Margaret Tatcher used to say “there is no alternative”, the ECG wants to demonstrate that there are alternatives to the current economic order (Felber, 2015). In fact, when the ECG model appeared in 2008, Christian Felber and other economic experts were trying to find an alternative to the current capitalist economic system.

Felber is the author of the book “Change Everything: creating an economy for the common good” and co-founder of Attac Austria and the ECG movement. With a psychology, sociology and political science background from the University of Madrid and Vienna, he is now lecturer at the latter one and author of several bestsellers (Felber Official Website). In his own words, "the Economy for the Common Good is neither the best economic model ever nor is it the end of history. It is a holistic and well thought through alternative to our system. It is a possible step after the extreme systems of capitalist market economy and centrally planned economy. The ECG is a bridge to the future" (ecogood.org).

Brainchild of Felber, the ECG took one of its biggest step in October 2010 in Vienna, when the idea finally turned into a movement. Just four years later, the movement count the support of 1,7000 enterprises and 200 organization without adding the several schools and universities participating across Europe and Latin America (Felber, 2015). This support can be traced back to reasons linked to the dissatisfaction of citizens with the current economic system as highlighted by the Bertelsmann Foundation research mentioned beforehand. Likewise, according to a survey by the International Trade Union Confederation (ITUC) Global Poll 2014, “more than three quarters of respondents think the economic system favours the wealthy”.

To address this situation and create an alternative economic model, the Economy for the Common Good has 3 major focuses:

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1. it aims to dissolve the contradiction between the values held by businesses and the values held by society;

2. businesses should systematically implement the values and goals of our constitutions;

3. economic success should be measured evaluating businesses goals and not the means remembering that the purpose of a business is to promote the common good and not maximizing profits

(Felber, 2015).

In order to make more transparent to what degree a business is contributing to the common good, the ECG introduced the Common Good Balance Sheet. As it is possible to observe in the sample presented in the introduction, the Balance Sheet is constitute by 17 indicators obtained from crossing the values of a democratic society with the stakeholders related to the business. The values, as already mentioned, correspond to human dignity, solidarity, eco-sustainability, social fairness and democratic management. The stakeholders are: suppliers, financiers, employees, owners, clients, firm partners and the social context. The Balance Sheet includes also negative evaluation criteria in order to evaluate businesses bad performances according to the Common Good. Each indicator has a maximum score and is composed by different criteria with a corresponding percentage weight. The overall maximum score is 1000 points. The purpose is that in the future this will have legal consequences and the more a firm contribute to the community the more it should be rewarded for its efforts “following the principle of justice of performance” (Felber, 2015). The Common Good Balance Sheet also ensures transparency through external auditing and cooperation among businesses.

Since it became a movement, the model is in continuous evolution and is gaining more and more support. Indeed, across Europe, the model has been adopted by several companies and it has been calculated that 2008 businesses are currently supporting the movement (ecogood.org). The Common Good Balance Sheet reflects what are the five fundamental values of the ECG: human dignity, cooperation and solidarity, ecological sustainability, social justice and democratic co-determination and transparency.

Some examples of other organic businesses adopting the ECG model around Europe are Ökofrost in Germany, Llavors Queviures Biologics and Koralium in Spain, Sustainable Food System in Switzerland. All these companies, as the once used for the study, can be

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categorized as small business due to their size. Exception is made for Sonnentor, an Austrian tea, spices and sweet seller with 260 employees. Indeed, the reception of ECG among big firms is still limited. Nevertheless, it is also in expansion and also in different field than the organic one, it is worthwhile to consider for example the German mountain sport equipment firm Vaude and Sparda bank in Munich. Although the model is quickly growing, its reception is also still limited to Germany, Northern Italy, Austria, Switzerland and Spain. The official website of the Economy for the common good, ecogood.org, gives the possibility to access an interactive map which shows all the businesses supporting the model and their location1_.

Later last year (2015), also the European Union recognized and promote this model of alternative economy saying that “the ECG is an economic model that can successfully contribute to the Europe 2020 strategy” (Official Journal of the European Union, 2016). Also the European Economic and Social Committee (EESC) (2015a) gave a public hearing entitled “Economy for the Common Good – changing the way business and economy work?”. The public hearing included an own initiative opinion by Carlos Trais Pintó, Repporteur for the EESC, called "The Economy for the Common Good: a sustainable economic model geared towards social cohesion". According to this official own initiative opinion document (2016/C 013/06), the ECG can contribute to the Europe 2020 strategy by:

• boosting the employment rate and enhancing the quality of existing jobs (‘human dignity’ and ‘social justice’ values),

• fostering social innovation in civil society and the business and political spheres (‘participation and democracy’ values),

• cutting CO2 emissions, promoting renewable energies, improving energy efficiency

and reducing energy consumption (‘ecological sustainability’ value),

• reducing the population at risk of poverty or suffering social exclusion (‘solidarity’ and ‘social justice’ values)

(Official Journal of the European Union, 2016).

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5. Results

After this overview about the concept of Common Good, which values the Economy for the Common Good promotes, and what the purpose of this research is, the following part will give insights into what leads some companies which are very similar, to voluntarily adopt a program or not. The results are based on interviews and companies documents analysis concerning ECG. The business used for the research all deal with organic products. In fact, in the alimentary, cosmetic and detergent context, the only companies taking up the model are those working with this kind of products. All the three sectors, deal with human beings everyday life and wellness. Three out of five of the interviewed businesses work with food and care for early childhood, organic food products, products for people with intolerance or allergies, dietary supplements, natural cosmetics and also detergents. While Almacabio just focuses its work on organic detergent and Baeckerei Profanter sells different kind of bakery products.

According to the Council Regulation (EC) No 834/2007 “organic production is an overall system of farm management and food production that combines the best environmental practices, a high level of biodiversity, the preservation of natural resources, the application of high animal welfare standards and a production method in line with the preference of certain consumers for products produced using natural substances and processes” (Official Journal of the European Union, 2007). These aspects are really important for all of the respondents and the ECG gives them the opportunity to evaluate their contribution to the common good and their respect of the environment. This is also useful for the consumers which can exactly see how much a company is respecting the values they claim to support. This leads, indeed, to a more transparent communication between companies and consumers. Nevertheless, not all the organic shops or companies in South Tyrol have decided to adopt the model. Why not? The following paragraphs will give a more detailed explanation about the decision of the companies both adopting and not adopting the ECG.

5.1. Triadebio

Triadebio is a small company based in Bozen with its other 3 branches located across South Tyrol. The shop based in Bozen, where the interview was conducted, counts 15 employees. Therefore, we can speak about a case of small size business which import most of its

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products. Between the year 2010 and 2012, Franz Hillebrand, director of Triadebio in Bozen, has done a Master degree. During his Master, he became aware of the existence of the Economy for the Common Good because he got to know people that have experienced it and since then he decided to take part in the project. In fact, in 2011, after several workshops held by Terra Institute, where they were instructed on the requirements to participate and what is necessary to take into account, they completed the first balance sheet for the common good. Once completed, this one, has then been peer reviewed with other 2 companies. As already mentioned, in fact, one of the main characteristics of the model of the Economy for the common good is cooperation and this happens as early as during the balance sheet fulfilment. Nevertheless, they decided to adopt the model independently from the fact that other companies where doing it or not. In fact, they didn't know with which companies they were going to cooperate. But once they adopted it, they discovered about some suppliers which were adopting the model as well. From that moment, they always support suppliers adopting the ECG model and they reached a total of 5 suppliers who decided to work accordingly. This intrinsic concept of cooperation in the model, is really important for the company, which knows exactly “about what we are speaking with the suppliers” (Hillebrand, 2016) and that they share the same values and point of view.

On answering the question of what led him to adopting this model, Mr. Hillebrand refers explicitly to the values that the model promotes, which are the same Triadebio has always had. “The Common Good balance sheet is a direct way to see at which point we are in promoting these values and where we can do better” (Hillebrand, 2016). For Mr. Hillebrand and Triadebio, the important thing is to have an orientation, some fixed points that help them to do always better and promote their values in the best way. They highlight also the fact, that they are not doing that just for themselves, but also for the people they work with, from the stakeholders up to the costumers. The balance sheet allows the company to make clear that “these are our principles and our ideals, and this is the basis on which we can compare ourselves with who we deal with” (Hillebrand, 2016).

The lawmaking process of the bill (Landesgesetzentwurf) by the Landtag has not had any influence on the decision of Triadebio to adopt the model. In fact, it was done after they completed their first balance sheet and only recently the Landtag has done a document about the guideline on how to adopt it. Therefore, this bill has not any kind of influence or

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power until now. Moreover, the bill is more destined to companies which have more contact with the public sphere, like business operating in canteens or hospitals.

Triadebio is continuously working to develop this model and they are planning to fulfil the next balance sheet together with the employees and they are also building a network with the consumers to involve them as much as possible in the evaluation process. To sum up, Triadebio idea of business founds itself to be really close to the ECG model and they saw it as an opportunity to make their commitment to protect the environment and respect humans more visible.

5.2. Baeckerei Profanter

48 people work for Baeckerei Profanter, bakery based in South Tyrol which trades 90% inland and export 10% of its products. This business was first introduced to the ECG via Günther Reifer und Evelyn Oberleiter of the Terra Institute. They immediately realised that their philosophy and sustainable way of production of organic bakery products had a lot in common with the model. Later, the “consciousness of responsibility vis-à-vis human beings and nature” (Profanter, 2016) made them willing to adopt the model. Currently, they cooperate in selling terms, with Triadebio and the Meraner Weinhaus / Pur Suedtirol. Nevertheless, the cooperation aspect has not had any influence on the decision of Backerei Profanter to adopt the ECG and complete the balance sheet, which was completely independent and based on a shared vision of values. Indeed, the business shares the values of the ECG from its own impetus, the fact that other business adopt it can encourage but is not the motivation that made them join the program. To highlight this point of view and the philosophy of the business, Mr. Profanter said “it is only if we work in the sense of a social and economic sustainability, that our work will have a meaning also for the future and future generations” (Profanter, 2016). The business has not received any support or benefit by the

Landtag up to now but and they decided anyway to adopt the model before the bill was

finalized. One more time, the decision of adhering to the ECG and adopt the balance sheet, find its motivations in the close relation between the company work and the ECG initiative.

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5.3. Almacabio

Almacabio deals with ecological detergent and cosmetics and counts 7 employees in its branch in Bozen and several suppliers in other Italian regions. Moreover, they export their products in 16 different countries around the world. When they became aware about the Economy for the Common Good in Nuremberg at the Biofach Exhibition of 2011, they decided to adopt the model in the same year. Once they had decided to adopt the model, they started cooperating with other 2 companies in drawing up the Balance sheet. In this way, they could compare themselves to the 2 other companies and it is possible for all the participants to have a better understanding of what exactly is meant with every point of the Balance sheet. Cooperation and comparison with other companies allows a more equal evaluation and this makes the result more uniform since they use the same yardstick. It can also be assumed that this give more confidence to a business since they know exactly how other companies are evaluating themselves.

Almacabio's aim, as we can read in their detailed balance sheet, also available on their website, is “to put the wellbeing of human beings and the environment into the foreground” (Almacabio, Balance Sheet 2012). We see how the environment and human beings are at the core center of the business work. Once again, the ECG function as a tool to show consumers and suppliers the values of the business and also as a tool for the company to improve always more their commitment to create a better world for future generations.

5.4. Naturalia

Based in South Tyrol, with two shops, one in Bozen and one in Meran, Naturalia counts 44 employees and its products are imported from Germany. The business became aware about the existence of the Economy for the Common Good model through a supplier from German that they have known for years and that has managed his company on the basis of this, including ecological balance, since a long time. Since then they are working towards the model and they find that it reflects perfectly the philosophy of their business. Although they share the values of the ECG, Naturalia hasn't adopt the model yet. The reason lies in the fact that currently the business is in a restructuring phase but they are inclined to adopt the model in the nearest future. The role of the Landtag is not much influent in the decision of Naturalia on adopting the model or not, indeed for them these values “are an attitude and

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not a financial consideration” (Desaler, 2016). It is possible to conclude, that the main reason for Naturalia not to adopt the model is due to a current time impossibility and other priorities. Nevertheless, it is interesting how they highlighted the fact that the ECG values are something they share and this could led them to adopt the model in the future also if this does not necessarily mean any advantages.

5.5. Pro Natura

Pro Natura is a shop in Bozen which sells different imported organic products. 8 people are currently working in the shop. They started to approach the Economy for the Common Good and to understand how it works on reading German business magazines. They also realised that they are actually already applying this model in the shop since they share the same values and points of view. Pro Natura is still not part of the ECG network. This is due to the fact that the manager of the shop just came back from her maternity and does not have enough time to dedicate to the implementation of the model. She also believes that their business is already working according to the values promoted by the ECG. For this reason they don't feel the necessity to fulfil the ECG balance sheet yet. Nevertheless, they do not exclude to adopt the model in the future. Besides the interview with Pro Natura manager, what can be concluded, is that the decision not to adopt the ECG Balance sheet is due to a matter of time together with the belief that it is not necessary to make more transparent a kind of business that already applies the common good values.

5.6. Biobazar

Based in Bruneck, South Tyrol, Biobazar 4 employees work in order to offer to the consumers food and natural products which reflect as much as possible the natural cycle. Indeed, they sell only organic certified products and the shops itself are controlled and certified by the control organism AbCert-Bio. Only recently they heard about the Economy for the Common Good but what it exactly is, is still not completely clear to the business. Therefore, the reason why Biobazar is not adopting the ECG Balance sheet is due to an absence of information and knowledge about it. Nevertheless, they admit to be interested in learning more about it. Further, the support that the Landtag is showing concerning the ECG, can play a positive role in changing their mind and supporting the model in the future. This leads to the

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consideration that a lack of knowledge about the model is what led Biobazar not to consider to adopt it. Nonetheless, they showed to be interested in it and the Landtag could be a tool to make them more inclined to adhere.

5.7. Landtag representer

The decision of the Landtag representer Dieter Steger of supporting the model, find its motivation in the belief that after the crisis that took place in the last years, a new economic and social approach is important. One necessary thing to do, is to define the concept of 'growth' again. It is necessary to stop describing 'growth' just measuring it in quantity and it is important to introduce the concept of quality in its definition. In his eyes, the ECG propose a meaningful approach. Despite that, the ECG requires a pragmatic implementation so that the current economic system does not go entirely off its hinges.

Concerning the values promoted by the ECG, the Landtag represented Dieter Steger believes that putting the common good before self-interest is a crucial aspect. Nevertheless, this value should not be seen in a fundamentalist way. The ideal situation is a win-win situation from which both individual and the entire society can benefit. The reason for some businesses to adopt the model and some not, according to the respondent depend on the field the business operate. Even if smaller firms seem more keen in adopting the ECG, according to Steger also some larger companies are going in this direction. To improve this process, he affirms that politicians can help optimize ECG reception by creating suitable conditions. The trend is currently going in this direction and this give space for some hope. Looking to the future, Dieter Steger does not think the bill will ever become legally binding. The ECG challenge is to introduce itself in the “opportunity competition”, however, government incentives are important and right to orient firms. For the Landtag representer it is important to create an environment where everyone, from the individuals to the society as a whole, recognize the advantages and benefit the model can produce. Only after that it will be possible to bring to concreteness these economic and social change.

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6. Analysis

In the following sections, the empirical results, so as it was possible to draw them from the interviews, will be illustrated and discussed in relation to the hypothesis on which my research is based on.

6.1. Why firms decide to adopt or not the ECG model

The answers obtained during the interviews with companies trading organic products on being asked whether they adopt the ECG balance sheet or not, give an insight into the motivations behind each choice. Indeed, the main reason for companies decide to implement the model in their business is due to the fact that they themselves share the values promoted by the ECG. In which way? In the following paragraphs, I will illustrate how each firm is mainly putting the five ECG fundamental values into practice. The description will give just a brief overview of how these values look like as they are described in each company balance sheet. Due to the length and detailed content of the balance sheet it is not possible to give the reader a deep insight but I will provide an exhaustive summary. What exactly are the characteristics each value should respect, can be easily seen in the balance sheet Matrix presented in the introduction.

Almacabio

Human dignity: Human dignity in the ECG values, concerns workplace quality and affirmative

action (C1); ethical costumer relations (D1); value and social impact of products and services (E1).

(C1). One of the main aspects is flexible working hours for all the employees. Employees are involved in all the important decision making circumstances, moreover, every morning the employees and the board meet in an informal meeting during which everybody is informed about the tasks to be done and problems to be solved. Health is an important issue within the company. Almacabio offers iridology visits and free treatments if necessary. Once a month it is also possible to see and approved kinesiologist free of charge. From a total of 6 contract employees 3 are women and 3 are men, with no difference in salary.

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consumer is consider as a equal partner and all feedback is taken into consideration and used to improve the products. All products are produced according to ethic and ecological criteria in adherence to the strict BIO C.E.Q. guideline. The marketing strategy aims to transmit as much informations as possible to the final consumer, therefore, Almacabio foregoes any kind of blender advertisement but use media in order to allow the consumer to make an autonomous choice.

(E1). Detergents are used in our day-to-day life, Almacabio tries to combine this need with health and care for the surrounding environment. This is the overriding aim of the company.

Cooperation and solidarity: This includes just distribution of labor (C2); cooperation with

businesses in same field (D2); contribution to the local community (E2).

(C2). Absence can be made up by overtime and this is at the own employee discretion.

(D2). Cooperation with businesses in the same field is still a niche, but the company is working in order to improve it.

(E2). According to Almacabio, it is hard to evaluate the contribution to the local community, which can be measured proportionally to the products consumption. It is, however also up to consumers to choose the more sustainable ones from the many products available on the market.

Ecological sustainability: values concerning ecological sustainability are the promotion of

environmentally friendly behavior of employees (C3); ecological design of products and services (D3); reduction of environmental impact (E3).

(C3). Ecology is a fundamental aspects in Almacabio's office. Employees bring their food from home and fulltime workers can eat home with their children. Moreover, most of the employees travel to and from work by bike or public transports.

(D3). Products are subject to strict European directives concerning detergents and are biocompatible.

(E3). All the raw materials come from renewable sources.

Social justice: here we find a just income distribution (C4); socially oriented design of

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(C4). The gap in earnings is very small, the difference between the maximum and the minimum salary is around 700 Euros.

(D4). Clients who suffer from allergies can inform Almacabio which will use the provided information to develop suitable products. This products are available for free for the consumer which can test its efficency.

(E4). The little profit has been always reinvested in development and research.

Democratic co-determination and transparency: this includes corporate democracy and

transparency (C5); raising social and ecological standards (D5); social transparency and codetermination (E5).

(C5). Each employee can access the company information and is involved in the development process.

(D5). Standards are set according to the BIO C.E.Q. disciplinary, but the company strive for putting higher standards. In this way they aim to promote and diffuse the economy for the common good project.

(E5). Transparency of the product is a core issue for Almacabio, indeed, detailed information about each and every product are available on their website. The publication of the common good balance sheet reflects the will of transparency.

Triadebio

Human dignity:

(C1). Most of the employee travel to and from the working place by public transport. Employees are always invited to take part in internal courses and keep up to date with the specific products, consciousness and health. All the employees and managers together visit suppliers companies and participate in exhibitions. Women and men are treated equally and have the same responsibilities, opportunities and duties without any discrimination. Working schedules are flexibles and all 11 employees have an open-ended contract.

(D1). Consumers needs, satisfaction and health are the core concern of the company. If consumers have specific request, Traide Bio does its best to introduce this new products in their shop. Direct contact with the public is essential, they accept and take into consideration

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every complaint and work in order to find a solution. Through out the year Triadebio organizes consultations, company visits, tastings and other events whereby the consumer can inform him/herself about the products. They decided voluntarily to avoid mass media advertisement since they conduct only ethical and moral acceptable activities.

(E1). Particular attention is paid to the fact that products have the least impact possible on the environment both during the production process and the sale moment as well as during the refuse disposal. All products derive from renewable raw materials from local or international producers. Cosmetic products are not tested on animals and do not contain synthetic preservation substances. Raw chemical materials are not present in any detergent product. Traide Bio cooperate with several common good oriented producers and organizations.

Cooperation and solidarity:

(C2). Overtime is only carried out in extraordinary situations and employees are recompensed in free time. Employees are involved in important decision making situations and they can give their proposals.

(D2). Triadebio is forerunner in the development of specialized organic shops in South Tyrol. Thanks to their experience they support organizations and events that distinguish themselves by means of using alternative economic approaches and putting social-economic projects into practice. Agreements with different associations and firms have been established so that they can buy Triadebio products at favorable conditions.

(E2). Triadebio work is especially oriented to enhance, in a sustainable way, human beings, nature and environment conditions through cultural and social impulses. It participates in several common good oriented initiatives and support several organizations whose objective is the improvement of human beings social conditions.

Ecological sustainability:

(C3). Managers set an example for employee in respecting the environment. Waste are carefully separated and only ecologic detergents are used.

(D3). All the products sell by Triadebio are the result of high organic standars. It is important that the products are local (0km), that they are fair trade products, that they are sustainable

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and protect the climate. Recycling is another particular important value, even consumers are invited to recycle, for example, detergent containers by refilling them.

(E3). The major energy consumption is due to lightening, refrigeration and electronic devices. Since the main energy source for electric energy is hydrpower, the CO2 impact is lowered. Waste are carefully divided. Hot water for the heating is produced partially with solar energy partially with pellets or gas. Hot water in general is heated through the heat produced by refrigerators. Producers are constantly ivited to use recyclable containers.

Social justice and democratic co-determination:

(C4). The difference between the highest and lowest salary is less than the double (1:2). Everybody can access informations about salaries in a transparent way.

(D4). Thanks to the Bonus Card, clients and especially families can purchase by Triadebio at a convenient price. Also students have some advantages. Parking expenses can be refunded in special circumstances. Slightly damaged products which are still suitable for consumption are given to the needy. People with intolerance or allergies can use trial products for free.

(E4). 100 % of the profit is used to reinforce its own capital, for investment or socio economic initiatives. Profits are not distributed to external owners.

Transparency:

(C5). Suggestions put forward by employees are constantly analysed and where possible put into practice. Managres decide up to a certain point, but long term decision are discussed during the general meetings with employees.

(D5). Triadebio organizes exhibitions, open dialogue evenings and support publications. They have taken a clear position on social media concerning important issues. By means of culinary events they try to both inform and raise awarness.

(E5). The common good balance sheet and its public availability consists in an important contribution to transparency. Through the use of social media they constantly share their activities.

Voluntary programs adoption : the economy for the common good in south Tirol