Social Entrepreneurship: Creating Shared Value through a local innovative solution against the growing global marine litter problem

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University of Groningen

Faculty of Economics and Business Master thesis

Picture

Date: 18/01/2016

Author: Roelof Schouten Netten

Student Number: s2726149

First supervisor: dr. B.J.W. Pennink

Second supervisor: dr. R.W. de Vries

Social Entrepreneurship: Creating Shared Value

through a local innovative solution against the

growing global marine litter problem

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Executive Summary

Purpose: The research aims to describe value incentives from potential partners,

governance and the entrepreneurial ecosystem of the Happy Seal project. These insights can be used by the SRRCP for the start-up phase of the project, generating insights regarding the design of the GVC and the potential value creation by the project for potential stakeholders involved. By knowing these values, stakeholders can be motivated to participate in the realisation of the project.

Methodology: The chosen methodology follows the analysis techniques of Grounded

Theory Building. The research question aims to create insights for a specific, more practical case and is not focussing on creating a generalized theory. However, the analysis technique of the grounded theory approach provides a systematic approach to analyse qualitative data in order to explain ‘some relevant phenomenon’. By adopting their scientific validated analysis techniques collected data can be analysed in a scientific way to contribute to the answer of the specified sub questions, allowing the researcher to answer the specified research question. Data is collected through semi-structured interviews where the respondents are selected through theoretical sampling.

Originality/value: Literature suggests that there has not been much practical research

regarding the theory of Shared Value and the applicability of this theory in real life situations. Linking this to a practical social entrepreneurial case, it is aimed to create findings specific for the case including contributions to the applicability of this theory on scientific level.

Findings: The project has the potential to create both social and economic value for

all the approached stakeholders. This value creation differs per stakeholder and can be created indirectly or directly through the project. It is found that not all the potential stakeholders have adopted the creation of shared value in their business model. Also, the governance of the value chain is based on a relational governance model where trust, cooperation and co-creation are considered very important. There is a strong need for a central coordinating entity that connects the stakeholders and their operations. The SRRCP could assign this important role to itself given their initiating position.

Keywords: Social entrepreneurship, Shared Value creation, GVC, governance,

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Thank word

In front of you lies my Master thesis International Business and Management at the University of Groningen. Firstly, I want to say that this Master year went so fast, almost too fast to really experience it. It had a difficult start in adopting to the theoretical way of learning from the Master IB&M. Especially the fact that I missed quite some business background due to my bachelor at the TU Delft, made it pretty hard in the beginning to get a good grip on all the subjects. However, I managed to pass all my courses and can proudly look back on a successful year at the RUG.

I want to give a massive thank to my first supervisor Bartjan Pennink. Your positivity and enthusiasm helped me so much with writing my research proposal and this Master thesis. I really enjoy your perspective on life and social issues, and have definitely learned a lot from it! A true inspiration!

Besides Mr. Pennink, I want to thank Mr. R.W. de Vries for being my second supervisor and taking the time to read this master thesis.

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List of Abbreviations

GVC - Global Value Chain

SRRCP - Seal Rehabilitation and Research Centre Pieterburen CSV – Creating Shared Value

CSR – Corporate Social Responsibility RVC – Relational Value Chain

VC – Value Chain

RFTO – Raw for the Oceans

List of Figures

Figure 1: Interacting sectors in the contextual framework of a GVC (Teegen et al., 2004) Figure 2: Recovery network [based on Fleischmann et al., (2000)]

Figure 3: Creating Shared Value Figure 4: Conceptual model

Figure 5: Graphical overview of GVC Happy Seal including approached respondents Figure 6: Findings in conceptual model

List of Tables

Table 1: Overview of (shared) value incentives

Table 2: Overview of potential stakeholders and interview constructs Table 3: Overview of selected cases including interview construct Table 4: Codebook SRRCP

Table 5: Codebook VisNed

Table 6: Codebook Groningen Seaports Table 7: Codebook Plastix

Table 8: Codebook Nofir Table 9: Codebook G-star Raw

Table 10: Axial Coding Entrepreneurial Ecosystem Table 11: Shared value creation from cases

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1. Introduction

1.1 Background: Marine litter a global problem

Marine litter can be seen as one of the fastest growing threats to the health of the world’s oceans. Millions of tons of litter from various sources end up in the ocean worldwide, making the ocean world’s largest landfill (European Commission, 2015a). The sources of marine litter are twofold: land-based and marine based activities. Firstly, land-based activities concern landfills, rivers and floodwaters, untreated municipal sewerage and industrial outfalls. Secondly, marine based activities are the fishing industry, shipping industry, offshore mining and extraction, illegal dumping and discarding fishing gear at sea (European Commission, 2015a). This paper uses the term marine litter, adopted from European Union Marine Strategy Framework Directive (MSFD, 2010), as: “marine litter is any persistent, manufactured or processed solid material discarded, disposed of or abandoned in the marine and coastal environment”.

Marine litter has in general a very diverse composition consisting of plastics, wood, glass, rubber, metals and fishing nets (Fanshawe & Everard, 2002). According to Oosterhuis, Papyrakis and Boteler (2014) plastics are by far the largest component of ocean litter in the North Sea, accounting for approximately 70% of all the marine litter washed on shorelines. Annually, 299 million tons of plastic is produced (PlasticsEurope, 2015) from which is estimated that as much as 10% becomes litter in the global marine environment (Koelmans et al., 2014). These plastics can be ingested by marine mammals when mistaken for food resulting in blocking the divesting process and injure the stomach (MPMMG, 2002). Floating plastics contain and absorb dangerous pollutants entering the food chain when eaten by fish causing a danger to the human food chain (Thompson et al., 2009; van Franeker et al., 2014).

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Page | 2 Marine litter has become a global problem. This has resulted in an increasing number of countries that have committed in the Rio +20 Earth Summit to take action to significantly reduce marine litter by 2025 (Oosterhuis et al., 2014). The European Commission strives to be at the forefront in combatting this global problem. Therefore it supports local projects to develop various operations to bundle local strengths when combatting this global problem. In line with these initiatives the Dutch Seal Rehabilitation and Research Centre Pieterburen (SRRCP) has started a local initiative called the Happy Seal project. With this project, the SRRCP aims to contribute to this growing global problem on a local scale. To reduce the amount of litter in the Dutch oceans, Happy Seal aims to create a value chain that reprocesses plastics and discarded fishing gear into valuable reusable products.

1.2 Problem statement

Happy Seal aims to contribute to solutions for the growing global marine litter problem through a local initiative. However, the fact that this idea has only been initiated leaves many operational questions regarding the sustainable business processes, stakeholder participation and the governance of such a chain.

Porter and Kramer (2011: 4) advocate that the solution for sustainable business models can be found in the overall principle of Creating Shared Value (CSV), which aims to create societal value by addressing its needs and challenges whilst also creating economic value for the business. Since the project is in its start-up phase, the potential shared value, of the project, in terms of social and economic value, is not yet clear for the SRRCP. This is important for attracting stakeholders for participation and realisation of the project. In addition, uncertainties remain regarding the design and operational activities within such a Global Value Chain (GVC). In order to create a better understanding, the main question for this research is stated as follows:

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1.3 Objectives

The objective for this research is to create a better understanding for the SRRCP regarding the value creation for potential stakeholders in the Happy Seal Project. By providing a detailed description of the operations, focus of the business model and value incentives, it is aimed to provide insights for the SRRCP how these potential stakeholders can be motivated to participate in the GVC of Happy Seal. In addition, by investigating the GVC governance and value creation of similar initiatives, important aspects of best practice examples can provide insights regarding the set-up and governance of Happy Seal’s value chain.

1.4 Research framework and strategy

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2. Theoretical framework

2.1 Happy Seal Project and Social Entrepreneurship

Happy Seal is an initiative from the SRRCP to create a more sustainable marine environment in the North- and WaddenSea through the recycling of marine litter of ghost nets and plastics into high quality products. This allows the SRRCP to contribute on a local scale to the global problem of marine litter pollution. The SRRCP starts with focussing on the recycling of ghost nets, using them as a source to produce sustainable products such as clothing and seal transport boxes. The SRRCP regards Happy Seal as a sustainable initiative. In order to proof this statement, the principles of the project will be reflected on academic definitions and reviews of social entrepreneurship.

Abu-Saifan (2012) reviews various definitions of social entrepreneurship from the existing literature and argues that the priority of social entrepreneurs’ business models is to fulfil their social mission, delivering social value by solving social and/or environmental problems. However, the concept of social entrepreneurship still has a different meaning to different scholars (Dees, 1998). One group of scholars, in line with Abu-Saifan (2012), links the definition of social entrepreneurship to not-for-profit initiatives when searching for alternative strategies to receive funding or management strategies to create social value (Boschee, 1998; Austin, Stevenson, & Wei-Skiller, 2006). Another group of scholars addresses the concept as the social practice of commercially focussed businesses that engage in cross-sector partnerships (Waddock, 1988; Sagawa & Segal, 2000). Another group of scholars regards social entrepreneurship as an opportunity to alleviate social problems and, by addressing social issues catalyse social transformations (Alvord, Brown & Letts, 2004) where social issues can be found in the domains of education, environment, fair trade, health and human rights (Mair & Noboa, 2003).

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Page | 5 describing the difference between business entrepreneurship and social entrepreneurship improves the understanding of both concepts. At the former, the creation of social wealth is more a by-product of the economic value that is created (Venkataraman, 1997) while the main focus of the latter is purely social value creation at the heart of its business activities with economic value creation as a by-product (Seelos & Mair, 2005). This is in emphasized by Bjerke and Karlsson (2013: 24) who state that: “we see all social entrepreneurs as social entrepreneurs who are not run by a profit motive but as social idea entrepreneurs who have, next to their profit motives, a clear objective to satisfy non-commercial citizen needs in a society. The rest we see as business entrepreneurs (..)”

Lastly, Mair and Marti (2006) identify that social entrepreneurship can occur in both new and/or an established organization. This means that an established commercially enterprise can still initiate or participate in social entrepreneurial activities. Based on the reviewed social entrepreneurial literature, the following sub question is formulated:

Sub question 1: “How does the established theory of social entrepreneurship relates to the GVC of Happy Seal?”

2.2 Social and sustainable initiatives at Value Chain level

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Page | 6 framework of the GVC can offer a basis to understand the possibility for stakeholder cooperation to achieve societal and economic benefits.

Teegen, Doh and Vachani (2004) stress that it is important for organizations from different environments to cooperate in the global environment, creating value through the transformation and exchange of resources within an institutional context. The traditional concept of International Business explains the field where entities and/or organizations from the public- and private sectors work together in achieving mutual values. The public sector reflects the state, in terms of local/regional/national government whereas the private sector reflects the market in terms of profit-seeking firms. However, Teegen et al. (2004) propose a model that expands the current context of International Business, acknowledging the importance of social entrepreneurial movements as an additional sector, shown in Figure 1. These social oriented entities are grouped by Teegen et al. (2004) under the term ‘the third sector’, reflecting NGOs and civil society, which variously engage in social entrepreneurial initiatives (Trivedi & Stokols, 2011). Evers and Schulze-Boing (2001) agree with the fact that social enterprises are covered by the ‘third sector’ definition, and stress that social entrepreneurial spirits are pursued together with the market orientation of (social) tasks and goals.

Figure 1: Interacting sectors in the contextual framework of a GVC (Teegen et al., 2004)

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Page | 7 participate in it.” The description of Teegen et al. (2004) regarding different entities from various environments working together with each other in a GVC is acknowledged by Pennink (2014). Pennink (2014) stresses in his model that stakeholders from various sectors work closely together in their GVC on national, regional and local level in order to create mutual value and stimulate local economic development. By working together in different segments of the GVC, local initiatives can contribute to solutions against national or trans-national problems, and vice versa.

As introduced by Pennink (2014), entrepreneurship has a central place in local- or regional level within the GVC. As shown by Teegen et al. in figure 1, stakeholders from different sectors working together within the institutional context, influencing entrepreneurial initiatives. The interaction of stakeholders within this institutional context is what Prahalad (2005) and Cohen (2006) describe as the entrepreneurial ecosystem: the context where individuals, businesses, governments and society come together and cooperate to support (social) entrepreneurial activities. However, the entrepreneurial ecosystem is a complex construct, typified by various actors from national/regional level, firm level and individual level (Simatupang, Schwab & Lantu, 2015). Whether an entrepreneurial ecosystem is effective depends on the integration of activities of the stakeholders on various levels, namely strategic level, policy making level, and enterprise level (Simatupang et al., 2015). The entrepreneurial ecosystem is formed by legislation, programs and processes that foster (or hinder) entrepreneurial activities (Simatupang et al., 2015). This will be included in the research to gain a better understanding of important aspects that apply to Happy Seal to foster the execution of the project. Therefore, the following sub question is defined:

Sub question 2: “What are important aspects regarding the entrepreneurial ecosystem of Happy Seal to create value for the stakeholders involved?”

2.3 Circular Economies

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Page | 8 materials with their by-products, focussing on resource- and waste-discarding minimisation and usage of environmental friendly technologies (Andersen, 2007). These ‘circular economies’ are aimed at the recovery of resources, recycling and reuse, which is known in society as ‘cradle-to-cradle’ resource management (Kumar & Putnam, 2008). This is where the link can be found to the Happy Seal initiative. Especially Europe is on the forefront with these cradle-to-cradle initiatives directed by institutional power.

According to Kumar and Putnam (2008) one of the critical factors to use recycled operation is the limited availability of resources such as steel, copper, and petrol which is often the case for automotive, consumer appliances and electronics. However, more and more industries are making use of recycled products as raw materials such as e.g. the garment industry. Also, consumers are increasingly demanding organizations to reduce their negative environmental impact of their products and operations (Fleischmann, Krikke, Dekker & Flapper, 2000). For organizations a ‘green’ image has increasingly become important for companies as a ‘licence to operate’ (Stock, 1998).

To give a general idea how product recovery networks are generally organized, the paper of Fleischmann et al. (2000) is used. The authors review multiple product recovery chains and describe the general characteristics of such a process where transportation and storage activities are the explicit link between the processes.

Collection. First of all, the collection refers to all activities in which the used

products are gathered on a physical point, awaiting for further action to be taken.

Inspection/Separation. This enhances all the operations that determine the

quality and whether there exists a potential to re-use the collected products. This results in splitting the material flow according to ‘re-usable products’ and disposal options. Other potential activities that can be executed in this phase are the shredding, testing and sorting and turning the product back into a raw material.

Re-processing. The re-processing stage includes the transformation of a used-

into a reusable product. In this phase, the transformation can be consists of different methods such as recycling, repairing or even remanufacturing.

Disposal. Some products cannot be reused due to their low product quality,

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Redistribution. Lastly, the re-used products are offered on their specific

markets where they are enabled to be used for consumption. An overview of this process is given in Figure 2.

Figure 2: Recovery network [based onFleischmann et al., (2000)]

In each of the steps, value is added to the potential raw material/product by a potential stakeholder. In some value chains, these processes are done within one facility. Yet, in cases multiple-level faculties are involved, management complexity will also increase. Another complexity that is considered in the organization of such a product flow is the amount of uncertainty (Fleischmann et al., 2000). The origin of this uncertainty is threefold. Firstly, the demand of recovered products can be difficult to forecast. Secondly, the availability of the used products on the disposer market is in many cases highly uncertain and thirdly, the quality of the products is highly dependent on the quality of the collected products which is also regarded to be an unknown factor.

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2.4 Business Model Innovation

Business models constantly face challenges over time, due to changing world environment from which they can cultivate new opportunities or are required to adapt to. Linder and Williander (2015: 2) define business model innovation as “the process of devising and realizing a novel way to create and appropriate economic value” based on Blank (2005), McGrath (2010) and Govindarajan and Trimble (2010).

However, Jonker (2012) stresses that it is not only the economic value that drives business model innovation. The creation of social value plays an increasingly important role in current society, which can also be seen as a driver for business model innovation. At the interface where the connection of community building and cooperation is established, innovation and new business models are coming into existence (Jonker, 2012). This understates the fact that in current society, money is not the only incentive and means for conducting business. This is elaborated by first explaining the traditional business models where after innovative theoretical concepts of new business models will be discussed.

2.4.1 Traditional Business Models

Traditional business models are mainly focussing on single value creation (Jonker. 2012). These models are often stuck in their narrow view of creating value, only focussing on optimizing their short-term financial performance. If these business models even target social or sustainability issues, it is often at the periphery resulting in philanthropy which sometimes does not even target the social issue (Porter & Kramer, 2011).

However, in the current age of crises such as the financial-, energy- and climate crisis, heading in the same direction is not an option any more. Both Jonker (2012) and Linder and Williander (2015) introduce the fact that we are heading more and more to a circular economy where organizations significantly have to rethink and reorganize their business, requiring innovative business models.

2.4.2 New Business Models: Creating Shared Value

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Page | 11 creating short-term financial successes, remaining trapped in their narrow view on social value. CSV could be the solution to open up this created bubble of short-term profit maximisation. CSV shifts organization’s core business models towards addressing important customer needs in a social responsible manner, thereby creating social value. Whilst creating this social value, businesses will also benefit economically and thereby create economic value. This is shown in Figure 3.

Figure 3: Creating Shared Value

CSV supersedes the traditional Corporate Social Responsibility (CSR). CSR programs are often aimed to improve reputation, having limited connection to the operations of a business, making it hard to justify the CSR program over a longer term. CSV in contrast addresses CSR related topics; however, these operations are the source of an organizations competitive position and income generation. It leverages the unique operations and expertise of the organization to create joint company and community value (Porter & Kramer, 2011). Shared value can provide a roadmap for innovative organizations to achieve social and sustainable solutions to the world’s sustainability problems.

CSV can be achieved in three ways: reconceiving products and markets, redefining productivity in the value chain and enabling local cluster development (Porter & Kramer, 2011). The created shared value for each of these three strategies is dependent on how an organization’s business and strategy is related to social issues and can differ per industry and company.

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Page | 12 value chain. Lastly, creating shared value through local cluster development focuses on strengthening the organizations position in the environment through community investments and strengthening local suppliers, institutions and infrastructure (Porter et

al., 2011).

Organizations wanting to address social issues should reach out to their stakeholders in order to plan and implement strategies to achieve long-term shared goals. These shared goals can only be achieved when stakeholders have mutual long-term goals and cooperate in the GVC to achieve these goals (CECP, 2010; Jonker, 2012). In order to motivate stakeholder participation and achieve shared values, stakeholder incentives have to be investigated. By investigating the stakeholder incentives, important values for each individual stakeholder become clear. Therefore, the following sub question is defined:

Sub question 3: “What are the individual Shared Value incentives from potential stakeholders?”

Happy Seal’s core activities and business plan seem to align with Porter and Kramer’s Theory on Creating Shared Value. Sub question 3 will therefore be answered by the following sub questions:

3.1 “What are the value incentives for potential stakeholders to participate in Happy Seal?”

3.2 “What are the overlapping values among stakeholders?”

3.3 “What is the social and economic value created in the (Global) Value Chains of similar projects, used as business cases for best practice?”

2.4.3 New Business Models: Collaboration and Shared Value

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Page | 13 Creating an innovative and new business model that aims to create shared values requires a different way of thinking and cooperating with stakeholders. Jonker (2012) stresses that the creation of shared or mutual values is not so much about the operations of one organization, rather how the entire network participates in it. As stated in chapter 2.2, organizations are constantly interacting with each other in their value chain in order to create (mutual) value. However, the objectives of the specific value creation for various stakeholders in the GVC can differ. In order to successfully create shared value, collaboration and co-organization between stakeholders is needed in the governance of the vale chain. This is called co-creation and is described by Jonker (2012: 10) as the collective organization of activities within the value chain – or stakeholder network – creating shared value across the value chain. According to Jonker (2012), many new business models are embedded in the ‘green’ or ‘blue’ economy, striving to create a circular economy. This means that business models replace the traditional linear economic approach to a more circular, closed loop approach (Yuan, Bi, & Moriguichi, 2006). This is where the link with Happy Seal can be made, given the purpose of the initiative.

However, on the other side, Gereffi et al. (2005) have identified other ways to govern value chains in order to create ‘value-added chains’. He makes a distinction between five GVC governance types1:

1. Markets: governance is typified by low complexity of information exchange and little explicit coordination of transactions, often occurring in spot markets. 2. Modular value chains: governance is typified by little coordination needed to

transfer complex information by unifying process specifications.

3. Relational value chains: governance is typified by complex transactions where a high level of explicit coordination is needed, where social proximity plays an important role.

4. Captive value chains: governance is typified by high switching costs through dominance of lead firms resulting in ‘captivity’ in the chain.

5. Hierarchy: governance is typified by vertical integration with a specific focus

on top-down control.

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Page | 14 The question that remains now is how the coordination and governance of Happy Seal’s GVC should be arranged in order to create the intended shared value?

Therefore, the following sub question is specified:

Sub question 4: “How should the collaboration and governance for Happy Seal be arranged in order to create shared value, based on similar initiatives?”

2.5 Components of New Business models 2.5.1 Definition of Social value

Social value can be created when organizations go beyond their profit-oriented focus, solving societal problems concerning employees, marketplace (suppliers and customers), environment, community, ethics and human rights in response to the needs of a community (Moir, 2001; di Domenico, Haugh, & Tracey, 2010; Porter & Kramer, 2011). Furthermore, social organizations aim to generate additional benefits such as increased social capital and enhance community cohesion (Di Domenico et

al., 2010). Through social interaction and e.g. resource exchange, social capital can

emerge which creates access to support, skills and experience, thereby facilitate market access (Di Domenico et al., 2010). This can contribute to an organization’s value creation (Tsai & Ghoshal, 1998). When looking at established research about sustainable and social value, many different parameters have been used to define its impact. Porter and Kramer (2011) basically define social value as the comprehensive definition of achieving societal benefits relative to the costs in every way possible, depending on the focus of the organization (Aguilera et al., 2007). This means that environmental value is part of the overall term of social value. It should therefore be noticed this research identifies environmental value as being part of social value.

2.5.2 Definition of Economic Value

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Page | 15 expand resulting in higher returns (economic value). Also, a firm can create competitive advantage from the configuration of the value chain, thereby increasing its returns.

Public sector and non-profit stakeholders, described by Teegen et al. (2004) as the third sector, are (potentially) involved in the project. These organizations may be revenue driven in combination with the achievement of social and environmental goals (Di Domenico et al., 2010).

Investments are required to set-up a GVC of recycled plastics and fishing nets. Investment- and operational costs are important determinants of economic value; if the costs are higher than the potential generated income, participating in such a value chain would economically not be beneficial. However, the financial requirements are still largely unknown for the RSCCP. In order to say something about the economic value, the potential costs of set-up and operations of such a GVC will be investigated. Therefore, the following sub question is defined:

Sub question 5: “What are the financial costs and benefits of the Happy Seal Value Chain, based on similar projects?”

2.6 Conceptual model

In order to answer the main research question: “How can the Happy Seal project create shared values, in terms of social- and economic value, for their (potential) stakeholders participating in the Global Value Chain (GVC) of the project?”, academic constructs that are related to this topic are identified in the theoretical framework. The first sub question will investigate whether Happy Seal can be described as a social entrepreneurial initiative based on established academic literature: “How does the established theory of social entrepreneurship relates to

GVC of Happy Seal?”

In addition, Simatupang et al. (2015) stress that it is important to investigate the entrepreneurial ecosystem to detect supporting factors for social entrepreneurial activities. This forms the basis of the second sub-question: “What are important

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Page | 16 Simatupang et al. (2015) stress that within the entrepreneurial ecosystem a network of cooperating stakeholders is of crucial importance. Stakeholder cooperation in the process of value creation is acknowledged by Teegen et al. (2005) and Bjerke and Karlsson (2013). What this value creation for each individual stakeholder will be in case of Happy Seal is linked to Porter and Kramer’s Shared Value theory, addressed in sub question 3: “What are the individual Shared Value incentives from

potential stakeholders?”. It is assumed that the project creates participation incentives

to create shared value. By researching the incentives, the shared value created by the project can be answered. Besides investigating the individual incentives, overlapping values will also be investigated which can motivate and create commitment with potential stakeholders in the project execution. To get a better understanding of the Shared Value creation, 3.3 aims to investigate similar initiatives how shared value is created in those value chains: “What is the social and economic value created in the

(Global) Value Chains of similar projects, used as business cases for best practice?”.

In order to create shared or mutual value in a GVC, the collaboration and governance is crucial. The importance of an integrated network of stakeholders is highlighted by Jonker’s (2011) theory of co-creation between stakeholders. Gereffi et

al. (2005) propose various governance structures to achieve a value-creating chain.

However, it remains unanswered how Happy Seal, aiming to create shared values, should be coordinated and governed. Therefore sub-question 4: “How should the

collaboration and governance for Happy Seal be arranged in order to create shared value, based on similar initiatives?” is introduced.

Lastly, the research aims to gain a better understanding of the financial flows, costs and benefits which is addressed in sub question 5: What are the financial costs

and benefits of the Happy Seal Value Chain, based on similar projects?

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Page | 17 stakeholders will be asked to their incentives to cooperate. This is assumed to reflect the potential value that can be created for the individual stakeholder.

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3 Methodology

Explaining a particular phenomenon can be related to what Thomas (2004: 16) calls “theorizing”. He stresses that “broadly speaking, a theory is any systematic body of reasoning that attempts to explain phenomena.” The approaches of engaging with theory can be twofold: by theory-building or by theory-testing. The aim of theory building is that the researcher creates an explanatory structure of particular phenomena that are based on empirical observations. Theory testing, on the contrary, is verifying and validating an existing theory based on obtained quantitative data. Looking at the research question of this paper, it can be concluded that this research question aims to address a phenomenon in an unexplored area. It aims build an explanatory structure of the shared value creation for the specific GVC of recycling marine plastics and fishing/ghost nets.

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Page | 19 added to the research as best practice examples, in order to reveal important constructs and values within their established GVC.

3.1 Data collection

According to Yin (2014) several methods can be used to gather data for case studies and theory building studies. One of the most important methods to collect data for qualitative methods is the usage of interviews. In this research, gathering data through conducting interviews was the primary source chosen for the required data collection. Usage is made of the semi-structured interview. Questions of the semi-structured interview where carefully designed to harmonize adequately the underlying purpose of the formulated research questions. The semi-structured interview is an appropriate choice since it is well suited for exploratory studies where the investigated issues or phenomena are not ambiguous defined, highly personal with heterogeneous samples (Thomas, 2006 & Hennink, Hutter, & Bailey, 2011). In addition, Yin (2014) argues that semi-structured interviews allow the researcher to obtain in-depth information in which there is a higher degree of freedom compared to other interview techniques. This means asking specific questions, thereby allowing one to go in depth in specific predetermined topics (Yin, 2014). Yet, Thomas (2004: 166) argues that with a semi-structured interview “interviewer bias is more likely to arise” and that “categorization and comparison is also more problematic”. However, several methods are enhanced to limit the data bias. A key approach that is used to achieve this is the usage of multiple highly knowledgeable informants which can shed light from different perspectives on the phenomena of research (Eisenhardt & Graebner, 2007). Also, the data sampling technique adds a value which is further discussed in the following sub paragraph.

3.1.1 Sampling technique

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Page | 20 Since this research connects different theories and applies these to a real life case, theoretical sampling is chosen (Eisenhardt and Graebner, 2007: 27). This means that respondents are chosen based on their suitability of “illuminating and extending relationships and logic among constructs”. This is in line with Strauss and Corbin (1998: 202) who state that “the aim of theoretical sampling is to maximize opportunities to compare events, incidents, or happenings to determine how a category varies in terms of its properties and dimensions.” When conducting these interviews, usage will be made of an interview guide to keep a clear direction during the interview (Hennink et al., 2011).

The respondents that have been selected represent potential stakeholders that have different but strategically important positions within the GVC. This is done since time constraining factors did not allow the research to intensively investigate multiple stakeholders in each level of the value chain. Even though there are many potential stakeholders on each level of the GVC, a choice is made to specifically highlight these stakeholders to gain knowledge in their operations, value incentives and contributions to Happy Seal. They are assumed to be a representative informant on each level of the GVC. A graphical overview of their positions is graphically shown in Figure 5.

Stakeholder 1: Initiator. Respondent A is the Director of the SRRCP. As being the

initiator of the project linking the operations of various stakeholders together,

Respondent A is a crucial link in this value chain.

Stakeholder 2: Fishing industry. To get insights in the potential benefits and

incentives of the fishing industry, Respondent B is chosen to be interviewed.

Respondent B is the director of Fishing Cooperative VisNed, being a representative of

the fishermen from the South-West, North-West and Northern parts of the Netherlands. Recently, Respondent B has established another partnership between the fishery sector and a similar fishing net recycling initiative (Het Urkerland, 2015) and can explain the incentives and benefits regarding the Dutch Fishing industry.

Stakeholder 3: Groningen SeaPorts. Groningen SeaPorts is the commercial exploiter-

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Page | 21 offer central facilities in their harbours for the fishery sector to discard their fishing nets makes them a valuable potential partner in the value chain. Respondent C and D are both engaged in sustainability projects of Groningen SeaPorts.

Stakeholder 4: Plastix. Plastix is a re-processor that has a cradle-to-cradle technology

to bring waste materials into the loop by using recycling technology to transform different waste streams into raw materials (Plastix.com, 2015). Respondent E is a representing board member of Plastix. Besides this, Respondent E is operating for many years in the recycling industry, having started several companies.

Another important stakeholder in the chain is EcoAlf, a sustainable fashion label that uses discarded fishing nets, plastic bottles, worn out tires and post-industrial cotton as a basis for their fashion (EcoAlf, 2016). They have been approached for an interview, however unfortunately they first agreed but turned out to not to be able to give an interview. Due to time constraints regarding this research, no other comparable organization could be approached for an interview.

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Page | 22 The specified questions on the interview guide differ slightly for each individual stakeholder. Analysis and reviewing the data collected from one interview can affect the following. To ensure that the interviews address the data that is aimed to collect, some questions slightly changed throughout the process. The questions that are asked to these respondents are related to their incentives and potential benefits that they can retrieve from participating in the Happy Seal project. The transcribed interviews can be found in Appendix II-V.

In addition, two interviews are conducted with specialists in similar GVCs. These respondents have been selected based on their established operations in setting up a similar GVC as that of Happy Seal. They have been found on the Internet and assumed to have in depth knowledge about the value creation and governance that can provide valuable insights for the SRRCP to be considered for their GVC.

Expert G is the director of Nofir, a Norwegian organization that has an established

GVC that turns fishing- and fish farming industry waste into high quality raw materials used for various recycling sectors. Since Expert G has much knowledge in the set up and operations of such a chain, he is a very important expert that can provide valuable insights for the SRRCP and Happy Seal.

Expert H is working in the sustainability department of a G-Star Raw. This company

has recently started a new initiative creating garments from recycled plastics by cooperating with international partners. Since Expert H is an insider of this brand, working on the sustainability department she has high knowledge in the operations and key issues regarding this initiative. It must be noticed that this respondent provided written answers on the interview questions instead of giving an interview, due to time constraints and policies from the organization.

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3.1.2 Interview questions

For the potential stakeholders, questions regarding the operations/added value, value incentives, and business models have formed the basis of the interview. The questions are based on the specified themes, discussed in the theoretical framework which has been the basis of each sub question. Appendix I gives an overview of the underlying constructs discussed in the interviews and the related sub questions. Even though the specific questions slightly differ per stakeholder, they aimed to address these main constructs:

 What are the main operational activities of [organization]? (Operations/Added

value)

 In what kind of position would you see yourself concerning the operations of the Happy Seal Project? (Operations/added value)

 What would be the added value that you could bring into the chain Happy Seal project regarding your own position? (Operations/added value)

 What would for you be a critical incentive to cooperate in the Happy Seal Project? (Value creation)

 What kind of values are you aiming to create with Happy Seal? (Value

creation)

 How would you describe the core organizational goals of your current business model? (Business Model)

The transcribed interviews can be found in Appendix II-V.

The interview questions for the two cases, chosen on their uniqueness, aim to gain insights in their entrepreneurial ecosystem, coordination/governance, value creation and financial arrangements. These interviews are aimed to shed light on important aspects of influences on operations and how the value chain is operating:

 Could you describe your value chain with its specific operations? (Operations)

 What is in your view the most important aspect of achieving a successful operating value chain for the recycling of the fishing? (Entrepreneurial

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 What are the biggest challenges [organization] is facing in their operational activities? (Entrepreneurial ecosystem)

 What is the position of [organization] in the chain of operations?

(Governance)

 Would you say that trust is an important aspect in cooperating with your stakeholders? (Governance)

 Is there a dominant stakeholder in your Value chain? (Governance)

 Could you tell a bit more about these specific aspects that your business model aims to create? (Value creation)

 Are you fully focussing on sustainable issues or any other financial motives?

(Value creation)

 How do you financially arrange the collection of the waste material?

(Finance)

The interviews of the potential stakeholders and two cases can be found in Appendix II-VII.

3.1.3 Validity and reliability

Firstly, as stated before, conducting interviews is seen as a highly efficient way of gathering rich and empirical data. However, Eisenhardt and Graebner (2007: 28) describe the challenge that interviews can result in “knee-jerk” reactions which have the potential to bias the collected data, affecting the validity and reliability of the data. To minimize this potential bias, numerous and highly knowledgeable informants are chosen. These informants have different backgrounds, working for different organizations, shedding different perspectives on the issue of Happy Seal. This is done aiming to increase the internal validity of the research (Yin, 1994; Thomas, 2004).

Secondly, in order to maximize the reliability regarding the interviews, the different interview guides will be pilot-tested before being used for the interviews. This will be done in cooperation with colleague students to verify whether the questions are clear for the respondent.

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Page | 25 Discussing the data collection, concepts and its relations helps to guard against bias, lead to new insights and increase the theoretical sensitivity. This is done with a colleague student working on a similar research topic.

3.2 Data analysis techniques

To create constructs and concepts, patterns in the data have to be analysed. In order to identify patterns in the obtained data, the transcribed interviewed will be analysed and coding techniques from the Grounded Theory approach will be applied. Hennink et

al. (2011) stress that the purpose of coding is twofold. Firstly, it allows one to identify

and understand the issues raised in the interview by participants. Sencondly, codes can be used as markers which enables the researcher to easily locate data where a specific issue is raised.

The first step of the data analysis technique is the open coding to ‘open up the text and expose the thoughts, ideas and meaning sontained therein’ (Strauss & Corbin, 1998: 102). Open coding aims to identify as many as possible issues, topics, objects, actions, interactions etc. and group them in categories based on similarities and differences (Burnard, 1991; Corbin & Strauss, 1990). Alongside with open coding, constantly questioning and comparisons enables one to reduce subjectivity and potential bias. After each interview, memoing will be applied to get a better understanding of the underlying constructs. Memoing allows the reseracher to create analytical and descriptive ideas of the data. When codings have been assigned to the data, an overview will be made of the identified codes and definitions in a codebook (Hennink et al., 2011). Within the codebook, specific descriptions are created that describe a particular topic together with the context in which this occurs. Describing the context of the codes increases the understanding and interpretation of the coding. These descriptions are combined with examples from the text as how is indicated by Hennink et al. (2011).

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Page | 26 this telescope technique which can be used to analyse, and specifically conceptualize the gathered data.

The transcribed interviews, codes and memos will be systematically analysed to answer the defined sub-questions. For sub-question 1, the data from the director of the SRRCP will explicitly be compared to the established literature of social entrepreneurship, discussed in Chapter 2.1. Subsequently, sub-question 2 is answered based on constructs of the entrepreneurial ecosystem based on Simatupang et al. (2015). These constructs are compared to identify related constructs from the data as the basis of the entrepreneurial ecosystem.

Sub question 3 reflects the value that is potentially created by the project. This will be investigated by answering the value incentives from each potential stakeholder. It is assumed that these incentives reflect the potential value that can be created by the project for each stakeholder.

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4 Analysing The Happy Seal Chain and its stakeholders

This chapter is based on the systematic analysis that has been applied to the collected data from the interviews that can be found in the Appendix.

4.1 Happy Seal as Social Entrepreneurial Initiative2

This paragraph aims to answer sub question 1: “How does the established theory of

social entrepreneurship relates to the GVC of Happy Seal?” based on the interview

with Respondent A and the established literature on social entrepreneurship.

What can be learned from Appendix II is that Happy Seal project has been initiated from the frustration that a growing number of marine mammals becoming a victim of our waste pollution in the oceans surrounding us. As described in the introduction, this growing problem is not only recognized on the global level, also on local level this problem is started to be recognized as a serious threat (Koelmans et al., 2014). By cooperating with multiple potential stakeholders, the SRRCP aims to kickstart the fight against this ocean pollution on a local level. By doing so, it aims to initiate a local contribution for against the growing global problem of litter polution in the ocean.

The vocal aim of Happy Seal is to reduce the threat on seals on a local scale in the Waddensea by creating an innovative solution against the plastic and fishnet pollution. The plastic and fishinets will be removed from the oceans, transformed into raw materials which can be used for clothing or other industry sectors. This can be linked to the Shared Value creation of Porter and Kramer (2011) since they aim to reconceive products and markets focussing on societal ills and developing innovative products. Besides the benefit for seals regarding reduced pollution, society and environment as a whole benefit from this. By preventing plastics and nets to pollute our oceans, the centre wants to expand its operations from only rehabilitating seals, to a more proactive attitude and focus on the prevention of seal injuries or deaths. The basis of their operations is the motivation to combine animal welfare with nature conservation, meaning that they are fully focussing on an environmental and ecological goal.

2_{The description of the Happy Seal Project is based on the information obtained from interview with}

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Page | 28 As seen in chapter 2.1, scholar’s exact definition concerning social entrepreneurship differs among scholars. However, the main principles of these various interpretations stress that social entrepreneurship is addressing societal issues, creating social values that benefit others rather than just personal wealth (Austin et al., 2006; Bjerke & Karlsson, 2013). Relating this to Happy Seal, Respondent A emphasizes that the project is neither driven by profit generation nor the creation of personal wealth. Therefore, it is concluded that Happy Seal can be defined as a social entrepreneurial initiative where there is a strong focus on social value creation. What these values are will be discussed (per stakeholder) in chapter 4.3.

4.2 Happy Seal’s Entrepreneurial ecosystem

To foster cooperation and value creation within this social entrepreneurial initiative, important aspects of the entrepreneurial ecosystem have to be investigated. In order to answer sub question 2 “What are important aspects regarding the entrepreneurial

ecosystem of Happy Seal to create value for the stakeholders involved?”, constructs

of Simatupang et al.’s (2015) entrepreneurial ecosystem (legislation, programs and processes that foster or hinder entrepreneurial activities) are linked and compared to axial codes and concepts from the interviews with potential stakeholders and experts (Appendix VI, VII and VIII).

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Page | 29 Besides supportive legislation, the entrepreneurial ecosystem can be influenced by contradicting (international) legislation. Waste material is subject to strict legislation related to disposal and transport of the material. Especially nets are difficult since they contain various different supplements that can fall under different hazardous category legislations (OECD, 2009) (green-, orange- and red list3). This increases the difficulties of transportation and export of waste material, according to respondent G. What can make it even more difficult, is that countries can vary in their legislation regarding waste transport. The EU has provided guidelines regarding this issue, which form the basis for most of the member states legislation. However, expert G stresses that they experienced different import rules during their operations in different countries which led to an unexpected cost increase. Since Happy Seal aims to transport waste internationally, stakeholders should carefully pay attention to potential contradicting legislation to- or from where they want to transport the waste material.

The next identified category is the cooperation between stakeholders. Respondent G and H highlight that in both their cases, the most important stakeholders are from the private sector. Besides the influence of the public sector, mostly private sector organizations operate in a GVC such as Happy Seal. This could influence the stakeholder participation incentives, which is further investigated in Chapter 5. Secondly, close ties is an important factor that needs to be achieved. This together with trust positively influences the network of relationships between stakeholders in the ecosystem. Respondent G and H both acknowledge this from their practical experience and highlight that besides trust and close ties, active communication is important to create a network of relationships. Both parties state that active communication enables effective stakeholder participation within their entrepreneurial ecosystem. In addition, in order to create committed stakeholders, a strong focus should lay on discussing the overlapping goals with potential stakeholders. Based on the interview cases, ensuring overlapping goals, active communication, trust and close ties could improve collaboration and create commitment that could make Happy Seal a successful operating GVC. Lastly, the importance of horizontal coordination in

3

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Page | 30 similar value chains is highlighted by the respondents. Despite that there is not a dominant stakeholder in both cases, there is a need for enthusiastic coordinating party that coordinates and connects the operations and ensures collaboration between the involved stakeholders.

The last identified category is the creating financial resources in the entrepreneurial ecosystem. One important aspect is the low willingness to pay by producers that use the re-cycled material. The fact that raw materials are produced from waste material lowers its value. Respondent G highlights that this makes it difficult to generate sufficient income from the products to continue operations. The low value per unit of raw material requires large amounts of supply to generate income. This is resolved by Respondent G by the fact that they got financial support from their shareholders to build their existing value chain. Respondent G stresses that it is important to have a partner that is able to provide large financial support.

4.3 Description of shared value incentives and motivations4

This chapter gives per interviewed stakeholder a brief description about their operations and added value to the Happy Seal initiative, whether their business model can be related to innovative or traditional business models and finally the participation incentives. The participation incentives are critical in this analysis because it is assumed that the incentives reflect the created value per stakeholder when participating in the Happy Seal project. The data from this chapter is obtained by careful and systematic analysis of the interviews, found in Appendix II-V.

4.3.1 SRRCP

The following information is based on systematic data analysis of the transcribed interview, found in Appendix II.

Added value to HS and participation

The Seal centre has a core focus on the rehabilitation of seals, conduction seal-related scientific research, functioning as an educational centre and being a tourist attraction.

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Page | 31 They see their role “as taking care for animals that are in danger but also to create consciousness for this huge problem of which nobody can foresee what the consequences are.” By initiating this project, the centre aims to realise a more proactive role regarding the rescuing of seals and obtain an internationally known name.

First of all, the added value of the SRRCP is the initiating role of this chain. Also, the established name of the SRRCP can be used for exposure purposes. The established name can be used to generate media attention. They can give ‘a face’, the face of a seal, to the problem plastic soup. “Most people like to relate a problem to

facts or a symbol. And that’s where I see that we can be a better connecting partner then other organizations that are dealing with the same kind of issues.” In addition,

the centre can use its initiating role to connect stakeholders in order to create a cooperative network of stakeholders.

Business model

Respondent A describes the seal centre as a privately funded NGO, with the aim on ecological welfare and the rescue of endangered seals. The main entities that provide income for the seal centre are 70.000-90.000 visitors and around 30.000 donators yearly. To be less dependent on these two unstable income generating entities, the centre wants to find other ways to expand their income possibilities and create awareness of their existence and the magnitude of the global pollution problem.

Based on the description, the business model of SRRCP can be described as a new business model in which it aims to create social value, thereby creating economic value (Shared Value, Porter & Kramer, 2011).

Stakeholder specific value creation

Based on the analysis, six factors that can create value have been identified which have been clustered based on social- and economic value.5

Factors that create social value: The fact that the project aims to reduce the threat on seals for entanglement of plastic contamination can be seen as a value since the core operational activities are protecting and rehabilitating seals. This project allows the centre to achieve a future goal of having a more pro-active role regarding

5

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Page | 32 the protection of seals, thereby creating value for the centre. In addition, the project creates specific value in that it contributes to the solution of a global environmental problem. Fourthly, creating a network of cooperating stakeholders is identified as a social value. This is identified as a social value since the respondent specifically aims to create the value of coexistence, where multiple stakeholders/initiatives strive for a sustainable goal and competition (that leads to wrong goals) is avoided. Lastly, the project can be used for exposure and communication purpose. Communication creates awareness that can trigger individuals or organizations to support the initiative or change their behaviour in order to contribute to the reduction of ocean pollution.

Communication is also identified as a factor potentially creating economic

value for the centre: through communication it can reach out to the wider community

and increase the amount of donators which are an important source of income. It must be noted that the project is not initiated with the intention to generate profits.

4.3.2 Fishermen

The following information is based on systematic data analysis of the transcribed interview, found in Appendix III.

The fishermen can be seen as a critical chain in the GVC since they can collect, and produce waste and/or fishing nets (waste owners). A critical point for participation is the need for an independent, enthusiastic initiator who is coordinating the processes and pointing on the positive effects when cooperating in the chain. This can stimulate the awareness of the fishermen, another critical point highlighted in the interview. ProSea, a Dutch NGO is working on increasing the awareness of sustainable operations among fishermen. A telephone interview with Mr Tim Haasnoot from ProSea revealed that (young) fishermen often don’t know the impact of the litter problem in the oceans or that they don’t know how they can contribute in solving this problem. Also, the collection process on shore is sometimes not well organized,

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Page | 33 which is of crucial importance. It can be considered to involve ProSea in the operations and collectively organize educational events to increase the awareness and motivations to participate among fishermen. There should also be the possibility to give feedback from the fishermen in order to improve the process.

Business model

The respondent highlights that fishermen’s operations, being individual entrepreneurs, are mainly driven by creating economic value. According to the respondent “without an economic incentive the rate of success is much, much lower”. Therefore, it is assumed that fishermen in general still have a traditional business model where they mainly focus on achieving financial benefits.

Stakeholder specific value creation6

One of the driving forces for the fishermen to participate in similar initiative that collect fishing nets is that they are experiencing more difficulties for discarding their nets. The fact that nets consist of a variety of components creates high disposal costs. A specific value that Happy Seal can create is that fishermen can dispose their waste material for a lower price, or for free, than incinerating them. This means a financial gain and reflects a factor that creates economic value by the project. This is economic benefit has to be ensured by the project to create this specific value for the fishermen. Lastly, Happy Seal add value in terms of communication and exposure for the fishermen to show that they are contributing to the reduction of marine litter. Since this is not related to any economics, this is described as a social value that can be created by the project. For the respondent, being the director of an umbrella organization, it aims to connect several initiates and participating harbours where everyone is contributing to a general goal: reduce the litter in our ocean. They can’t directly achieve this when participating with Happy Seal; however they can connect Happy Seal to other initiatives/harbours to achieve their goal. Therefore, this is described as social value that can be created through the project.

6

Specific descriptions and explanations per value can be found in the codebook in Appendix III.

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4.3.3 Groningen Seaports

The following information is based on systematic data analysis of the transcribed interview, found in Appendix IV.

As the owner of two large harbours in the North of the Netherlands, Groningen Seaports can be seen as a critical connection that can offer waste facilities to the fishermen. Groningen Seaports aims to connect companies, creating a win-win-win situation for all the parties involved. Groningen Seaports sees itself in a facilitation role offering waste collection containers on strategic locations on their property. “We

are the owner of the property around here, and we have the authority to collect waste materials from the shipping industry. If we won’t cooperate, than nothing will happen on our properties.” Besides this, respondent C&D stress that Groningen Seaports is willing to assist in de developmental phase, sharing their knowledge regarding the implementation of the containers on strategic locations. Lastly, respondent C&D stress that Groningen Seaports can add value through the communication of the project, to promote it to society. This could be a basis of further expansion of the project to multiple harbours.

Business model

Social Entrepreneurship: Creating Shared Value through a local innovative solution against the growing global marine litter problem

Social Entrepreneurship: Creating Shared Value

through a local innovative solution against the

growing global marine litter problem

Executive Summary

Thank word

Table of Contents

List of Abbreviations

List of Figures

List of Tables

1.

Introduction

2.

Theoretical framework

3 Methodology

4 Analysing The Happy Seal Chain and its stakeholders