EXPLORING MULTI-VALUE CREATION IN PRACTICE: A STUDY ON DUTCH BUSINESSES INVOLVED IN DEVELOPING REGIONS Master Thesis

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EXPLORING MULTI-VALUE CREATION IN PRACTICE: A

STUDY ON DUTCH BUSINESSES INVOLVED IN

DEVELOPING REGIONS

Master Thesis

January 2019

MSc International Business & Management

Faculty of Economics and Business

University of Groningen, The Netherlands

Author:

E.M. (Emile) van der Veen

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ABSTRACT

Only decades ago, the concept of Corporate Social Responsibility (CSR) made its appearance into the field of international business. Although subject to large criticism, the concept of CSR has been widely adopted by the businesses sector. At that time, CSR was dominantly focused on the responsibility of the entrepreneur.

In the present time, we experience a shift from traditional CSR perspectives to perspectives that incorporate social and environmental dimensions into contemporary business models. Here, social and environmental issues are not organized at the peripheries, but become an integral part of the business, defined as multi-value creation.

Empirical evidence of multi-value creation remains largely unexplored, especially concerning practices in developing regions. This study bridges that gap, as it provides an in-depth understanding of multi-value creation in developing regions, as well as identifying the influence of the Circular Economy (CE) and the Sustainable Development Goals (SDGs) on businesses that engage in multi-value creation. Through a series of interviews with businesses, experts and civil servants, the existing literature is linked to empirical evidence, resulting in new perspectives.

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ACKNOWLEDGMENTS

First of all, I would like to thank dr. Bartjan Pennink for his supervision. I greatly appreciate your enthusiasm, positive attitude and constructive feedback throughout the process of writing this thesis. Second, I’m very grateful to all the interviewees for clearing their schedules and making time for this study. The interviews were useful, but above all, very interesting and inspiring. Third, the research direction of this thesis partly came from SDSP, a foundation that promotes responsible business activities in West-Papua. To all people from SDSP, thanks for involving me in your activities. It is inspiring to see how motivated your group is to safeguard West-Papua’s biodiversity and to improve the living conditions of the local community of this extraordinary country. Fourth, thanks to my friends and family for their support and all the feedback that they provided me with. Finally, I would like to thank Mr. Canello for taking the time to read this master thesis.

List of abbreviations:

CSR = Corporate Social Responsibility

TBL = Triple Bottom Line

CE = Circular Economy

SDGs = Sustainable Development Goals

BMC = Business Model Canvas

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1. Introduction

Around the globe, resources become more and more depleted and therefore increasingly expensive. It is for that reason that untouched natural-rich regions become highly attractive for investment purposes. This development demands a tailored strategy that considers the effects on nature and the local community. This study investigates the process of business activity in developing regions in accordance with the principles of multi-value creation.

In order to promote development in developing regions, entrepreneurial activity is needed, which has been proven to positively correlate with economic growth, prosperity and wealth (Baumol, 2012; Schumpeter, 1934). Development in these regions, in terms of social, political, economic and demographical aspects, can be achieved by businesses that create value for all stakeholders, including the local community. The motivation to do so is related to the concept of social entrepreneurship, as this type of entrepreneurship is not solely focused on generating profits, but creating value for multiple stakeholders (Bjerke & Karlsson, 2013). Social entrepreneurship in developing regions requires a business model that supports sustainable development. Sustainable development in a sense that does not differ from the most cited definition, namely development that meets the needs of the present without compromising the ability of future generations to meet their own needs (Brundtland, 1987). What remains is the question of how businesses can translate this perspective into a business model that addresses social and, not to forget, environmental issues. Especially in current times, when numerous developing countries face a trade-off between social development and environmental protection (Muller & Kolk, 2009).

The concepts of entrepreneurship and sustainability have received significant attention since recent years. Interesting is the approach of Jonker (2015), introducing New Business Models: a field of research that aims to reorganize the way businesses create value by complying to the transitions that business is facing. In this book, the practice of addressing multiple values, next to pursuing solely economic value, is introduced as multi-value creation.

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for another”. Related to multi-value creation, this concept becomes interesting as the implementation can address environmental value (Park, Sarkis, & Wu, 2010).

Although not emphasized in the work of Jonker (2015), multi-value creation is now increasingly related to the Sustainable Development Goals (Raith & Siebold, 2018; UNDP, 2015) as well. The SDGs could function as a guideline for the organizational implementation of social and environmental value creation in business models, as they comprise globally shared beliefs (Santos, Pache, & Birkholz, 2015).

Porter & Kramer (2011) state that it is the duty of companies to bring business and society together, but this matter still lacks an overall framework. Current efforts focus on Corporate Social Responsibility (CSR) in which societal or environmental issues are not the core, but on the periphery.

This exploratory study, focused on Dutch businesses operating in developing regions, will provide empirical insights on businesses engaging in multi-value creation in the context of developing regions. In addition, this study will develop an understanding of involved actors and analyze the influence of current trends in the field of multi-value creation. In addition, this study will identify the consequences of multi-value creation on a traditional business model template, the Business Model Canvas.

Henceforth, the research question that follows is:

Dutch businesses in developing regions: what values do they create, how do they interact with different actors, how does this influence their business model and to what extent play SDGs a role?

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2. Literature Review

Central to this study is the concept of multi-value creation, as mentioned in the introduction. Around this concept revolve several concepts and theories, which are expected to interact with businesses engaging in multi-value creation. The identification of these elements has largely been based on the work of Jonker (2015).

In each of the following paragraphs, the identified elements – multi-value creation, involved actors, SDGs, CE, and Business Model Canvas - are studied based on current literature. Thereafter, these identified elements are represented in a conceptual model, that serve as the starting point for the empirical data collection.

2.1 Research on multi-value creation

This section will introduce the concept of multi-value creation, followed by the identification of several perspectives in literature and conclude with the adopted perspective of this study.

2.1.1 Multi-value creation

For the purpose of approaching the concept of multi-value creation gradually, first defining ‘value creation’ contributes to a more comprehensive understanding. Value creation emerges “through inputs from capitals that transform them through business activities and interactions to produce outputs and outcomes that, ‘over the short, medium and long term, create or destroy value of the organization, its stakeholder, society and the environment” (Baldarelli, Del Baldo, & Nesheva-Kiosseva, 2017, p.118). In the past, researchers have mainly explored how businesses can achieve economic performance (Barney, 1991). At this time, the empirical evidence on how business models address social and environmental issues remain to be largely unexplored according to Norman & MacDonald (2018).

All this may be true, except that in last decades, qualitative research on multi-value creation has been evolving in several research streams and received increasingly attention from science and business. Given these developments, it appears that the time of Friedman’s (1970), “the only responsibility of businesses is to maximize its profits” is over, whereby a new business spirit is introduced.

2.1.2 Perspectives on multi-value creation

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Triple Bottom Line of 21st Century Business (Elkington, 1997). The TBL is summarized as a focus within business practices on societal and environmental values, along with the economic value that they create (Elkington, 1997). Central to this vision is collective wealth and environmental protection, directed by a sustainable approach. In a next stadium, Elkington named the TBL as People, Planet, Profit, which was later adopted by Shell for their first Sustainability Report in 1997.

Reviewing this perspective, Norman & MacDonald (2018) label the principles of TBL as ‘vague’. Although this may be true, Hart & Milstein (2003) emphasize that the unfamiliarity forms a huge opportunity for businesses and research in this field.

A second well-cited concept on creating multiple values is the idea of Shared Value, which corresponds largely with TBL. Shared Value involves creating economic value in a way that also creates value for society by addressing its needs and challenges (Porter & Kramer, 2011) (p.64). Shared Value is not a synonym for a redistribution approach. Instead, it is aimed at enlarging the total value created on the economic and social level. For example, a fair trade program is mostly focused on redistributing the revenue, by giving back to the farmers. The principle of Shared Value would be focused on investing in the farmer, in terms of efficiency, production capacity et cetera, in order to enlarge the total value created. Environmental issues are considered as societal issues by Porter & Kramer, as they state “society’s needs are huge – health, better housing, improved nutrition, help for the aging, greater financial security, less environmental damage.” (Porter & Kramer, 2011, p.67).

The concept of shared value leads to criticism as well. Crane & Spence (2014) claim that the authors of shared value have a tendency to simplify addressing societal and environmental

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issues, which give a distorted picture of the outcomes. Furthermore, the authors claim that the concept of shared value creation fails to acknowledge tensions between social and economic values. As Crane & Spence (2014) argue: “Given the complexity of social and environmental problems, their uncritical analysis as to new sources for profit might indeed drive corporations to invest more in easy problems and decouple communication strategies than in solving broader societal problems” (p.137).

Similar to the aforementioned perspectives, another study revealed how economic value can be created through voluntary social and environmental activities (Schaltegger, Lüdeke-Freund, & Hansen, 2012). In this study, the authors label this practice as ‘a case for sustainability’, whereby three criteria have to be met. First, the activity that addresses societal or environmental issues has to be employed voluntarily. Second, the activity must generate economic value. Third, it must be clearly arguable that a specific management activity was the basis, the main driver, of the social/environmental and economic value. Meeting these three criteria creates economic value, by directly addressing social and environmental issues.

Whereas these above-mentioned perspectives equally value the environmental and social dimension, Lüdeke-Freund & Boons (2013) adopt a view that is more focused on social business models. This type of business models emphasize not only social value, but as well engage in multi-value creation by addressing environmental and economic issues and subsequently promotes equitable relationships among stakeholders by doing business through a fair revenue model. In support, Yunus, Moingeon, & Lehmann-Ortega (2010) state that social businesses are traditional businesses, self-sufficient and engaged in regular selling of goods or services, but differ in its main objective as it primarily serves society and improves the lot of the less fortunate.

2.1.3 Aligning environmental dimensions

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input for another product. Third, adopting a solutions-based business model, promoting a shift from the acquisition of goods to providing quality, utility, and performance. Lastly, businesses have to reinvest in nature capital, by restoring, sustaining and expanding the planet’s ecological system so that the planet can be a vital resource in the future.

2.1.4 Multi-value in investment decisions

Approaching multi-value creation from an investment perspective leads to the notion of Social Responsible Investing (SRI). This conceptualization refers to decision-making and investing in accordance with social and environmental goals (Sparkes, 2001). The approach describes the process of investing whereby investors actively pursue social objectives next to financial objectives (Heese, 2007).

In general terms, the roots of SRI date back to the period between the 1960s and 1980s, when the western world was subject to turbulent times fueled by peace and green movements which led to increased attention for social responsibility and accountability when doing business (Schueth, 2003). Last decade, this focus of attention extended to concepts of human rights, working condition, and global warming.

Research by Barman (2018), identifies three dimensions that form the basis of critical indicators of responsible investments, namely Environmental, Social & Governance (figure 2). The environmental dimension describes the way corporations minimize their environmental impact, the social dimension views how corporates manage their social relationships with stakeholders and the governance dimension describes how corporations implement policies to ensure good governance (Eccles & Krzus, 2010).

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13 Figure 2 ESG Criteria and the Creation of Financial Value (Barman, 2018), based on (Business for Social Responsibility, 2008).

Analyzing the incentives of businesses to incorporate social and environmental factors in investment decisions, it appears that two categories of incentives can be distinguished (Schueth, 2003). The first category includes investors that invest their money increasingly in line with their personal values and priorities, where the second category states that investors find ways that improve the quality of life. Investors in the latter category are especially interested in “social change” in terms of positive changes for society at large and finding out how investments can promote this.

2.1.5 Adopted perspective in this study

As discussed above, numerous studies have provided a variety of perspectives on creating multiple values. Although the wide support for the use of the ESG criteria, the model of Barman (2018) is focused on large multinationals and investment decisions, which is not in line with the research scope of this study. Hence, this research adopts a multi-value creation perspective, in which it investigates the economic, social and environmental values in line with the well-known Triple Bottom Line of Elkington (1997).

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Furthermore, we follow the philosophy of Jonker (2015), which describes how multi-value creation is organized. According to Jonker (2015), transforming businesses into ‘sustainable’ enterprises demands for a revised structure of value creation. This structure needs to be guided by three principles of value creation in New Business Models. First, we need to move to multi-value creation, which holds that the purpose is not only to create economic multi-value for the business, but value for both society and business by means of economic, social and environmental value. Second, the way of creating multi-value can be achieved by shared value, which holds that the economic value created, also creates value for society by fulfilling society’s needs and deals with society’s challenges. It should not be seen as a CSR approach to value, but it directly involves the core activities of an enterprise. This concept will redefine the relationship between society and businesses (Porter & Kramer, 2011).

Additionally, as Jonker (2015) states, the concept of shared value can only be organized in a collective way. This implicates that the principles of value creation have to be borne by all involved parties and that the only way to create multi- and shared value, is to organize this together, in a collective way.

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2.1.6 Creating value collectively

To clarify, Kania & Kramer (2011) mentioned the concept of making impact collectively first in 2011, where collective impact was defined as ‘the commitment of a group of important actors from different sectors to a common agenda solving a specific societal problem’ (p.36), whereby economic opportunities can emerge which competitors miss out on. In his later work, he elaborates that collective impact solves social problems by the coordinated efforts of different actors, ranging from government bodies and businesses to the affected local community. The mutual efforts of resources from involved actor result in businesses not bearing all costs, but might as well benefit from economic opportunities that arise (Kramer & Pfitzer, 2016). In order to address the collective process successfully, five elements have to be fulfilled, which are stated in table 1.

Table 1 Five elements of successfully collective value creation adopted by Kramer & Pfitzer (2016)

Elements Explanation

Common agenda Actors must share their vision of addressed issue and solution

Shared measurement system A common understanding of indicators that determined success

Mutually reinforcing activities Each actor addresses a different aspect of the problem, which ultimately will reinforce progress to change

Constant communication Continuous, structured and unambiguously communication to assure trust and coordination among involved actors

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2.1 Interaction involved actors

The three main actors that will be studied in this research are businesses, citizens and the government. In the next section follows a legitimization of this classification and a brief introduction to the actors.

2.1.1 Identifying the actors

The question is which stakeholders apart from businesses come into play in the process of multi-value creation. To answer this question, we first make use of the BBO-model (figure 4), introduced in work of Jonker (2015). This view of involved actors identifies three actors that play a role in the entrepreneurial process of new business models: citizens, businesses and the government (in Dutch abbreviated as “BBO”).

The adoption of this model can be legitimized by emphasizing the support of this division in other studies. Research by Bjerke & Karlsson (2015), identify three similar actors: the public sector, the business sector, and the citizen's sector (figure 5). The division is based on sectors where the authors identified parties that act as entrepreneurs in the context of entrepreneurship. By this classification, three types of entrepreneurs emerge: entrepreneurs in the public sector, business entrepreneurs and citizen entrepreneurs. The first type are people that are employed in the public sector, but strive to make a difference for the common good. The second type are entrepreneurs and innovators that are initially financially driven and focus on market & competitive forces and fulfil the needs on the market through new products and services. The

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third type are citizens that are innovative and enterprising, idea-driven and interested in fulfilling social needs by exploiting new solutions or activities. A third model in this field, designed by Nicholls (2006), is identical regarding the identification of these three forces, capturing the three involved actors under the same conditions.

In support, Teegen, Doh & Vachani (2004) identified these specific sectors as well (figure 6). However, the authors’ framework identifies the citizens' sector differently than before-mentioned studies. Here, Teegen et al. merge NGOs and the civil society as one actor. The legitimatizing of NGOs in this model is described by the importance of NGOs, as these entities are able to comprehend specific needs and act accordingly (Stromquist, 1998), mainly when the market is not able to meet or ignores these needs (Armitage, 1991) or when the public mechanisms are not able, for any reason, to fulfil those needs (Keck & Sikkink, 1998; Meyer, 1999).

Figure 5 Division of actors in studying social entrepreneurship (Bjerke & Karlsson, 2015)

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In conclusion, the classification of the three actors, in line with the BBO-model, received large support. Therefore this model is adopted to capture the interaction between the different actors in the empirical data collection stage. The model serves as a starting point for studying the interaction between the involved actors, in which we do not rule out the possibility of other actors to be overlooked.

2.1.2 The role of the government and citizens in modern society

Jonker (2015) explains that the role of the government changes over time, stating that the government is not able to solve all societal problems independently, but that a collective, combined effort from society is the solution. The government must change to effective practices, whereby society gives shape and input to these practices. It is in the past, that society waits for the government to take on societal issues, but Jonker observes that society takes the initiative and start selling products and services. Crucial to these shifts is that the interaction between the government and other actors works on a basis of equal footing, in which collective value can emerge.

The change, which involves the governments turning into facilitative institutions, goes along with the rising phenomenon of citizen entrepreneurship, where Jonker (2015) observes that citizens increasingly take over duties that earlier belonged to the government. Individuals become a significant, and growing, productive force in the economy (Zwass, 2010).

Analyzing the growing importance of the citizen sector, Murray (2009) stresses that the citizen's involvement was strong during the nineteenth sector, but that this has weakened in the twentieth century. However, the last 30 years the citizen sector experienced a resurrection: the role of citizens becomes increasingly important since governments and markets are unable to tackle all environmental and social issues that modern society faces (Murray et al., 2009). To enumerate, this development is a consequence of three reasons:

1. The consumer has become its own producer to a large extent. The citizen sector is changing from passive consumers to producers of their own products using, among others, programmable machinery. In line with this, businesses integrate more and more their users into the production process (Murray et al., 2009).

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and demand for services that deal with societal and demographical trends, i.e. obesity, chronic diseases, demographic aging (Murray et al., 2009).

3. The green revolution. The green movement has been harder to avoid. The scale and intensity of the environmental movement lead to new types of organizations and a renewed social economy. A massive agenda now emerges based on the transition in food, energy, transport et cetera. In each of these areas, the citizen's sector has their own role in terms of protest, production, and consumption (Murray et al., 2009) (p.19)

2.2 Sustainable Development Goals

Within the research question that is ought to be answered in this research, the role of the SDGs in the process of multi-value creation will be studied. The Sustainable Development Goals (table 2) comprise seventeen goals that form the worldwide agenda to fight the global challenges for the people, planet, and prosperity (UNDP, 2015; United Nations, 2015). The goals form the basis for worldwide sustainable development in terms of economic growth, inclusiveness, and environmental protection (Stafford-Smith et al., 2017).

Table 2 The Sustainable Development Goals (UNDP, 2015)

Nr. SDG Nr. SDG

1 No Poverty 10 Reduced inequalities

2 Zero Hunger 11 Sustainable cities and communities

3 Good Health and Well-Being 12 Responsible consumption and production

4 Quality Education 13 Climate action

5 Gender Equality 14 Life below water

6 Clean water and sanitation 15 Life on land

7 Affordable and clean energy 16 Peace, justice and strong institutions

8 Decent work and economic growth 17 Partnerships for the goals

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2.2.1 The role of businesses in achieving SDGs

The aim of adding this element is to analyze to what extent the entrepreneurial activity is integrating the goals. This particular view of study remains largely unexplored. The SDG agenda calls for action, whereby all countries and stakeholders, including governments public bodies, businesses, and the civil society need to join forces to achieve the goals and targets (Gusmão Caiado, Leal Filho, Quelhas, Luiz de Mattos Nascimento, & Ávila, 2018). Current literature is rather focused on the implementation of SDGs by bodies within the public sector (Aitsi-Selmi et al., 2016; Waage et al., 2015), than identifying how businesses integrate Sustainable Development Goals.

Research by Chakravorti (2015) states that businesses should consider the Sustainable Development Goals for three reasons. First, for businesses that are interested in emerging and frontier markets, the Sustainable Development Goals form a major opportunity for long-term growth. According to estimates by McKinsey (2012), the annual consumption of emerging markets will grow to thirty trillion dollars in 2025. Since 2011, emerging markets have experienced slower growth and social discontentment, which complicates the achievement of 30 trillion dollars (Atsmon et al., 2012). Implementing Sustainable Development Goals in your businesses process could help address several of these obstacles that are giving rise to “trapped value” in developing regions (Chakravorti, 2015).

Second, many businesses have already stated that they will integrate the goals in their business models, which gives rise to a ‘competitive pressure’. Therefore, if businesses move quickly, the first adopters can take advantage of this in terms of partnership and branding purposes. Being a follower in this process could lead to competitive disadvantages, by being left out of strategic relationships and missed opportunities from a brand equity perspective.

Third, the costs of achieving the Sustainable Development Goals are estimated to be 3 trillion a year up until 2025. As we learn from the past, this bill cannot be paid solely by governments, as this actor has often coped out on similar areas. Therefore, the business sector is vital to progress-making and co-financing the achievement of SDGs.

2.2.2 Integration SDGs in business models

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economic value. The business models are economically sustainable and built around a mission centered on SDG’s, in line with principles of the TBL of Elkington (1997).

Raith & Siebold (2018) distinguish in this framework two dimensions, which ultimately lead to four business strategies. The first dimension relates to the way the sustainability target is reflected in the process of value creation, where the researchers distinguish between a supportive mode and an integrative mode. The supportive refers to value-creation for a target, where the latter refers to value-creation with a target (Dohrmann, 2015). The second dimension refers to the process of value-capturing, in what form revenue or income is generated. Hereby the authors differentiate between a commercial mode of value capturing through the market, for example by market revenues, and a social mode of value-capturing through the mission, for example by monetary donations. These two dimensions bring us to four different business models (see figure 7).

1. Provision: organizations in this category are characterized by creating social value by means of directly working on a sustainability target through the free provision of goods and services. Positive externalities will follow when the target is of sufficient social concern or does well. The income will consist of donations, either in-kind or monetary. Examples of organizations that fall into this category are charities and homeless shelters.

2. Self-Help: organizations in this category are characterized by integrating the target in the process of value creation. Organization in this group substitute a missing market for

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resources that the target can deliver itself, in other words: the target is able to provide the input to create value. One example that Raith & Siebold (2018) mention is the “Ocean-Clean-up”, whereby the ocean cleans itself by making use of its currents and specific geographical locations being designed to capture the plastic.

3. Deployment: organizations in this category are characterized by the integration of multi-value creation into the selling of consumer goods for commercial purpose, which leads to economic sustainability (Haigh, Kennedy, & Walker, 2015). This hybrid business model is based on fusing social and commercial elements resulting in economic value. Examples of this type of business-model are National Parks or employing disadvantaged target groups.

4. Promotion: organizations in this category are characterized by its social value creation, whereby it finances this social value creation by selling a commercial product. This can happen through either a “1-on-1” construction, where customers engage in a “buy-1-donate-1” proposition or, in general, the revenues of the marketing captures are supporting the sustainability target (Marquis & Park, 2014).

2.3 Circular Economy

Over the last decades, the concept of CE received growing attention, introducing alternative solutions for the so-called “take-make-dispose” economy that currently dominates the world economy (Ghisellini, Cialani, & Ulgiati, 2016; Ness, 2008). The field of CE remains young and emerging (Blomsma & Brennan, 2017), which results in an ongoing discussion about a workable definition of CE. The EU (EU Commission, 2018) defines CE as an economy where “the value of products is maintained for as long as possible”. The Chinese Government, who actively promoted the CE in its five-years plan National Economic and Social Development, defined the Circular Economy as “a general term for the activity of reducing, reusing and recycling in production, circulation, and consumption” (Jintao, 2009; p.1).

2.3.1 Integrating the CE in business models

For the implementation of the CE, Bocken, de Pauw, Bakker, & van der Grinten (2016) distinguish two business models whereby the CE takes shape.

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al., 2016, p.3) The second strategy is called closing loops: by making product loops fully circular, for example through recycling, the loop between the stage after product lifetime and input for production is being connected or closed. This implementation will make the production loop circular. Within these categories, six business model strategies were developed to introduce circularity in business models (Bocken et al., 2016). An outline of the presented strategies is provided on the next page, table 3.

2.3.2 CE in de developing regions

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Table 3 Strategies to integrate CE in business models (Bocken et al., 2016)

Category Strategy Implementation Examples

Slowing resource

loops

Access and performance model

Based on user-needs, offering solutions whereby the user does not need to own physical products

Car sharing, leasing cars, clothes leasing

Extending product value Exploiting residual value of products, by

remanufacturing and refurbishing practices

Remanufacturing parts in the automotive industry, refurbished phones or other electronics, return clothing iniative

Classic long-life model Providing ever-lasting products, whereby

durability and repair practices extend product-life

Watches or wash machines where long-lifetime is promised

Encourage sufficiency Stimulating consumers to reduce consumption by

means of durability, upgradability, service and warrantees in order to prolong product lifetime

Water companies, energy service companies, high service & quality brands

Closing loops Extending resource value Exploiting residual value of products, but focused

on transforming waste into new forms of resources

Using fishing nets as raw material for carpets, rewarding customers for recycling products

Industrial symbiosis Process-focused solutions, whereby residual output

of an industrial process becomes input for another industrial process, whereby geographical factors could benefit this process

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2.4 Business Model Canvas

A business model is a conceptual blueprint of a firm which enables to create an understanding of how a firm does business (Osterwalder & Tucci, 2005). It conceptualizes how a firm converts resources and capabilities into economic value (Teece, 2010).

In its field, The Business Model Canvas, presented by Osterwalder & Pigneur (2010) is the most popular mode of business modeling (John, Kundisch, & Szopinski, 2017; John & Szopinski, 2018; Strategyzer, 2011), see appendix 3. The Business Model Canvas consists of nine interrelated elements – key partners, key activities, key resources, value propositions, customer relationships, channels, customer segments, cost structure, and revenue streams.

However, along with the rise of sustainability, the Business Model Canvas received criticism for being profit-oriented and lack the identification of social value (Coes, 2014). Bocken (2013) argues that contemporary business models only focus on one value, i.e. economic or environmental value; whereby the field of innovative sustainable business models remains largely unexplored. A small number of researcher have explored the integration of sustainable practices into business models and hardly have researchers associated this research direction with the Business Model Canvas. A new holistic business model is demanded which incorporates economic, social and environmental perspectives.

To bridge this gap, studies have ‘simply’ added social and ecological benefits and costs as components to the Business Model Canvas (School for Change, 2018). This practice did not receive major support, in contrast to the study of Joyce & Paquin (2016), which adopts a TBL perspective to the Business Model Canvas and proposes a Triple Layer Business Model Canvas (TLBMC), see appendix 3.

The TLBMC is a conceptual tool that aims to integrate economic, environmental and social elements into a holistic view (Joyce & Paquin, 2016). Instead of integrating all three value components in one single canvas, the TLBMC consists of vertical and horizontal layers which all interact. The model analyses each layer from one perspective, either from an economic, social or environmental perspective and enables to generate an in-depth understanding of the process of value-creation.

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canvas, whereby businesses can align their economic activities with environmental and social concerns.

Figure 8 TLBMC: Horizontal and Vertical coherence (Joyce & Paquin, 2016)

On one hand, TLBMC appears to respond to criticism of the Business Model Canvas, as it incorporates economic and social dimensions into the Business Model Canvas. On the other hand, the model becomes increasingly complex and too extensive to use for the interviews. For this reason, as the Business Model Canvas is expected to be either recognized or easily be explained, during the interviews this study uses the Business Model Canvas. Thus, the aim here is not to develop an alternative canvas, but to analyze the influence of multi-value creation on the traditional canvas.

2.5 Exploratory study on the Conceptual Model

To conceptualize the findings in the early stage of this research, in this section a conceptual model is created that represents the discussed elements and serves as a starting point for this exploratory research, see figure 9.

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27 Figure 9 Conceptual Model for Exploratory Study

To arrive at a comprehensive answer to the main research question, sub-questions are formulated. The sub-questions relate to the specific elements in the exploratory model or provide context-related information about relationships embedded in figure 9. Below, in table 4, the sub-questions are enumerated a visualized in the conceptual model.

Table 4 Sub-questions for Empirical Stage of Research

Nr. Sub-question In relation to figure 9, this sub question provides…

1 How has multi-value creation evolved? …background information on trends over time regarding multi-value creation 2 What social, environmental and economic

value do businesses create?

… concrete evidence in what way the three values are created

3 What role does circular economy play in the business model?

…an illustration of to what extent this concept currently influences business processes

4 Will multi-value creation be more profitable compared to solely pursuing economic value?

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5 To what extent is multi-value creation organized collectively?

…insights on how the actors in the BBO-model collectively engage in multi-value creation

6 What role do Sustainable Development Goals play in businesses that engage in multi-value creation?

…insights on ‘if’ and ‘how’ businesses adopt the SDGs into their business strategy

7 How is multi-value creation reflected in the Business Model Canvas?

…insights on how multi-value creation influences traditional business modeling templates

8 How do businesses experience the interaction between the business sector, the public sector, and the citizen sector?

…insights in two issues: how interviewees experience the interaction and the validity of the model is attested

9 How do businesses experience the partnership with foreign developing regions?

…insights in the relationship and collaboration between the Dutch business and the foreign partner

3. Methodology

This section describes the methodological framework of this study. The interviews are held to find answers to the “how”, “who” and “why” that are related to our research direction, which is the essence of qualitative research and can be approached as an open question (Doz, 2011).

The methodology of this study is based on the foundations of grounded theory. Grounded theory is a research method which is aimed to develop a well-integrated set of concepts that provide a thorough theoretical explanation of phenomena under study (Strauss & Corbin, 1990a). In this manner, grounded theory research is aimed at developing a theory that can be useful in practice (Strauss & Corbin, 1998).

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The constant comparison method can be traced back in the analytical hierarchy, see appendix 4, where is visualized how findings are consequently compared to existing literature. As proposed by Charmaz (2006), the theoretical sampling in this study is conducted by the continuous collection of data to elaborate or refine themes or categories.

The role of the concepts in this conceptual model can be characterized as sensitizing, which holds the concepts in our conceptual model serve as indicators for the research direction and will develop over time during the course of study (Jonker & Pennink, 2010; Strauss & Corbin, 1990b). The concepts that are formulated will guide the path of research and serve as a starting point for this exploratory research. Furthermore, the research will strive to increase the utility factor, by emphasizing the managerial implications of the research.

3.1 Data collection procedure

The data collection will consist of primary and secondary data, respectively data collection through interviews and through an extensive literature study. In the literature review, different concepts and theories have been discussed to collectively form the basis for the conceptual model. The second data component will consist of empirical data by means of interviews.

The following groups will be interviewed:

A. Experts on doing business in developing regions: this group is able to provide us with experience that would increase the reliability of this proposed conceptual model.

B. Entrepreneurs and businesses that have experience with investing in developing regions: this group will examine our model by their experience. This group can validate whether our model is reflecting reality and their experiences support the proposed conceptual model.

C. Experts on business in developing regions from the public sector: this group is able to provide us with information that would contribute to the understanding of the role of the public sector within the proposed conceptual model.

3.2 Sampling

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phenomena under study are being analyzed and framed. Based on this analysis, the relevant persons involved in the research phenomenon are carefully being selected (Strauss & Corbin, 1990). In this study, the interviewed entities are selected by their role in multi-value creation and related concepts presented the conceptual model (see paragraph 2.5). For the sample size, we follow the principles of saturation, whereby the sample size is expanded until new data no longer contributes to discovering new phenomena (Jonker & Pennink, 2010).

For an overview of the sample of this study, see appendix 1.

3.3 Data analysis

The analytical hierarchy of this study, based on the principles of grounded theory, is presented in appendix 4. As follows from this hierarchy, the interviews are analyzed using the analytical process of coding. This coding process has been conducted by three stages: open coding, axial coding and selective coding as described in Strauss & Corbin (1990). The first analytical stage holds the process of extracting the transcribed interviews into categories and subcategories so that similar phenomena are grouped together. The second stage involves the process of axial coding. This stage entails the process whereby the categories and subcategories are being further related to the proposed relationships in the initial stage of research. In the final stage of the coding process, the selective coding process takes place, whereby the data is related to the core variables and patterns are being discovered. The open, axial and selective coding processes can be found in appendix 6, 7 and 8. The transcripts are included in the open coding process.

3.4 Research Criteria

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4. Empirical findings

In this section, the data that is collected through interviews is examined using the sub-questions, as formulated in paragraph 2.5. The aim of the interviews was to collect empirical evidence that provides input for the sub-questions and ultimately give an in-depth understanding of the exploratory model.

4.1 How has multi-value creation evolved?

Engaging in multi-value creation and social entrepreneurship is one of the challenges that all organizations in the Netherlands face, according to expert 1. More and more people stand up for this challenge, whereby economic literature more and more embrace economic models where limitless growth is not the most important thing, but inclusiveness, equality and a clean society is more important. The descending trust of people in society, in institutions, is one of the causes of this trend, according to expert 1.

Multi-value creation is much more integrated than the Dutch derivative Maatschappelijk Verantwoord Ondernemen, which entail how you can be a profitable organization, satisfying potential financiers, employees, and customers, but as well can adopt a societal issue. In addition, Maatschappelijk Verantwoord Ondernemen has a more green component and is not so much associated with societal issues.

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As stated in the literature review, it remains vague how CSR is defined. Expert 4 regards this as follows: “The question that we have got to ask ourselves is: why do we do what we do? Everybody needs to do corporate social responsibility, you must. Is expected of them. But what do you do? (..) Are you building a bridge? Are you building a road? Are you supporting a school? (..) And every entrepreneur argues something different: this is not CSR, this is definitely CSR. So it is just really vague.” This quote illustrates that the interpretation of CSR remains subject to discussion.

In summary, over time we have ruled out economic value in this debate, where it now makes its re-introduction. Vagueness remains about the concept of CSR, whereas this concept remains ill-defined in practical terms.

4.2 What social, environmental and economic value do businesses create?

On the next page, a cross-comparison of interviewed businesses that create economic, social and environmental impact is presented, see table 5. The table presented contains per business how their entity creates economic, social and environmental value.

All businesses were asked in what way their entity captures value in terms of social, environmental and economic sense. All of the businesses that were interviewed, have indicated that to be commercially feasible, is a prerequisite for their businesses. However, for all businesses, it remains clear that social and environmental value creation is of (almost) equal importance, as business 3 indicates: “of course, profit is the ultimate goal. But one can make a profit in a lot of ways, we want to have a good feeling about it”.

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Table 5 Cross-comparison of multi-value creation among interviewed businesses

Businesses Economic Social Environmental

BUSINESS 1 By selling re-usable bottles by means of a private company.

Customer service is employed by youth that experience poor job prospects.

Reduce plastic pollution., a partnership with sustainable shipping business.

BUSINESS 2 Selling fair chocolate by

means of a private company.

Local partner developed microcredit.

Empowering local community, and creating labor opportunities.

Living conditions of farmers within chain significantly better.

Only biological purchasing prevents local farmers from exposure to chemicals and pesticides.

Re-usable and biodegradable packaging, CO²-free shipping.

BUSINESS 3 Selling fair coffee, tea & chocolate by means of a franchise model.

Set up a dentist Clinique in México.

Fair wages for farmers by buying responsibly

Planting trees in India to improve biodiversity & donated cows in India which improves soil fertility.

By building a factory, farmers can focus on biological cultivation Biodegradable packaging and CO²-free shipping.

BUSINESS 4 Selling prostheses by means

of a franchise model.

Mobile protheses enable doctors to go to patients to treat them & developed an app with protocols and standards, as many clinics did not meet standards and faced closure. Educating people about the Majicast is easier, which makes it accessible for more people.

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BUSINESS 5 Recycling used cell phones,

by means of a private company.

Creating labor opportunities in Africa.

Customers in Africa received money for trade-in cell phones.

Reducing e-waste in Africa.

BUSINESS 6 Providing water, by means of

a limited company.

Educating Indonesians how to run and repair drinking water facilities. Setting up a school near a drink water business to educate mechanics and factory workers.

Giving sourcing fields a second function as a nature reserve, increasing natural value and living conditions for flora and fauna. Stimulates citizens to use less water. Only uses wind energy as well as

striving to reduce energy

consumption.

Reducing water leakage problems in Indonesia.

BUSINESS 7 Selling beverages by mean

means of a private company.

Brewery in Ethiopia creates labor opportunities and improvement in living conditions (sanitary facilities, electricity et cetera).

Generates own electricity, using resting head to stoke their own maltings and purifies water in a sustainable way.

BUSINESS 8 Selling a variety of fish

products.

Improving work & living conditions by a foundation that business is associated with

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Considering the interview cases, environmental value creation is often related to the key resources that the businesses are handling. This can be the transport, as business 2 and 3 engaged in CO²-free shipping, but can also express itself in innovations in fishing methods, as business 8 demonstrates. An interesting finding is that the interviewee of business 5 was convinced that eco-innovation is a lot more important than eco-efficiency. Business 6 affirms this belief, claiming that it is difficult to influence the citizen, but that it believes in innovation for reducing water usage.

Thus, the way environmental or social value is embedded into the business’ activities differs per business. Part of the interviewed businesses address these values central to their activities, by creating economic value through social or environmental value. For example, the main activity of business 5 is to reduce electronic waste (old cell phones), by recycling as businesses pay them for doing this. In like manner, the main activity of business 6 is to increase access to prostheses in developing regions, by offering a franchise model. Both businesses aim to improve the world and do this in a way that is economically profitable for them.

Based on the sample that has been interviewed, multi-value creation is created as well in the Netherlands as in the developing regions where the businesses are active. As an illustration, in the Netherlands, business 6 minimizes its negative effects on nature, by turning water-collection areas into natures reserves. In Indonesia, business 6 reduces water leakage problems in two regions as well as educating Indonesians how to repair water constructions, which combine social and environmental value creation.

In summary, all businesses state that creating economic value is essential for their business. It differs in what way businesses create social and environmental value, however, the latter is mostly based on the resources that the businesses manage. Furthermore, whether enviornmental or social value is embedded into the core business’ activities differs as well. For a number of businesses it is central to their main activities, as for other businesses it is created in the peripheries.

4.3 What role does Circular Economy play in the business model?

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4.3.1 CE – perspectives of actors

To begin with, expert 2 explains that at this moment, we find ourselves for 99% in a delayed linear economy. We will get to the circular economy, but we still have a long way to go. The modern economy is a waste economy, caused by welfare, where we forgot how to see value in things.

At this point in time, many of the businesses are not ready to receive used product after lifetime to flow back into the business. Businesses have to rethink about products that they sell in the coming years: how can we assure that the product will be endlessly in the loop? Expert 2 claims that business must come together with all their partners in their chain to solve the circular problem whereby it is essential that businesses trust each other.

Expert 2 proceeds claiming that there is also a responsibility for the government as well, who have to consider whether is it is legally feasible to force businesses to design their products in such a way that raw materials can remain in the loop. According to expert 2, the government should have a facilitating role in this transition, where law and regulation are aligned with the new system of thinking. At this moment, we’re having outdated law and regulation and a million things have to be changed yet.

On one hand, expert 2 states that we need behavioral scientists that influence the behavior of the consumer, in order to make responsible consumer choices. On the other hand, expert 2 admit that customers often do not have much choice within the current marketing offering, quoting expert 2: ´Consumers do not want to spill at all. But If I go to the supermarket and I can only grab my potatoes and fruit in plastic, then I have no choice”.

From a government perspective, civil servant 1 explains that in 2016 the Netherlands have been chairman of the European Union. CE has been a major topic that year for promotion purposes. On a national level, the ministry compiled a government-wide policy for CE with independent goals and projects, where the role of the government should be to facilitate and stimulate circular initiatives for businesses.

4.3.2 CE in business models

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In the case of business 7, circular activities are aimed at the flow of water within their business. The business initiated a multi-actor project that facilitates the circular flow of rest water into the ground of farmers of nearby plots of arable land. Furthermore, they are actively measuring circular KPI’s which entail among others waste management and circular purchasing.

Similarly to differences in how multi-value creation is embedded within the business activities, the same phenomenon is observed for CE. Business 1 and 3 make their loop of product flow circular, by introducing a trade-in programme. Only the scale and purpose of the trade-in programme differs, as for business 1 this trade-in programme is a service, while for business 3 it is their business proposition.

In a few businesses, only small-scale circular initiatives within the business models are observed on the basis of the interviewed businesses. For example, business 2 and 5 sell resides from production for re-use, where the resides are input for a new production process. Likewise, business 2 and 4 make use of biodegradable or reusable packaging.

At the same time, the interviews uncovered a number of constraints on the implementation of the circular economy. The products that business 1 sells aim at reducing plastic in the sea and other forms of plastic pollution, except the product in itself are not made of recycled plastic. When asked why this is not the case, business 1 explains that the quality of recycled plastic is simply not sufficient yet. Expert 2 affirms this constraint and states that there exists only one business in the Netherlands, at this time, that is able to produce high quality recycled plastic.

In summary, although experts emphasize the urge to engage in the CE, moving to CE remains a large challenge for businesses and the government. Even though businesses experience constraints on implementing CE, numerous businesses have embraced circular initiatives in their business activities.

4.4 Will multi-value creation be more profitable compared to solely pursuing economic value?

One of the questions that is interesting for the future of multi-value creation, is whether this form of value creation has future potential. Business 1 thinks this remains a difficult question, nonetheless, it would be a bright reality: only buying goods that improve the world’s condition. But in reality, as business 1 clarifies, businesses still earn major profits by selling trash.

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perspective, it could be disadvantageous, as you invest in your relationships. But on the long-term, the interviewee believes this strategy would be winning strategy. In support, business 2 exemplifies that many people come to their store as they know how they do their business and that they pay a fair price to the partners in their chain.

In summary, there is no consensus on whether businesses that engage in multi-value will be more profitable on the long-term.

4.5 To what extent is multi-value creation organized collectively?

The empirical data is analyzed based on to what extent the processes to multi-value creation are collectively created. In order to do so, the interviews on multi-value creation are analyzed based on cases where multiple actors were involved. Three cases were identified that all together give an answer to this research question.

• Case one refers to a coffee plant where business 2 was involved. In order to improve processing techniques, the Dutch government and business 2 have built a coffee plant in Uganda. The initiative benefited all actors, as the development aid of the Netherlands was considered as a proper investment, the local community experienced cost reductions and business 2 benefited from improved quality of resources. This initiative exemplifies how value creation is being created collectively and not solely by one entity, in this case, business 2.

• Case two refers to a cacao plant in Peru, where business 4 was involved. In the activities of business 4, a significant role is observed for cooperatives. Together with the cooperatives, business 4 has set up a cacao plant which makes it possible to fabricate chocolate in Peru. This effort exposes a shift in where the value is added in the chain; from retailer/manufacturer up in the chain to the farmer, in Peru. Both parties benefit in this process, as the manufacturing process is cheaper in Peru, which decreases the costs related to business activities of business 4 and leads to an increase in income for local farmers in Peru. Furthermore, for business 2 and 4 applies that the cooperatives offer purchasing practices to the businesses whereby local farmers in developing countries directly benefit.

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as time passed by, the group realized that is was difficult to build a brewery on their own. They lacked knowledge and needed a partner, that is when business 7 joined the collaboration.

In summary, above-mentioned cases show how businesses engage in multi-value creation collectively, in which they co-operate with different actors, e.g. cooperatives, governments or the local communities.

4.6 What role do Sustainable Development Goals play in businesses that engage in multi-value creation?

In this section, the empirical findings are tested on what role SDGs play in businesses that engage in multi-value creation.

4.6.1 Perspective of businesses

According to business 3, the SDGs make it easier to concrete certain ambitions and to get to work with these goals, therefore business 3 promotes the goals on their website as well. Business 3 has also been a guest at the UN conference in June 2017 where it received positive feedback claiming that business 3 is a great example of concrete action regarding the SDGs.

Business 7 points out that the SDGs play a major role in their business as well. Business 7 clearly makes a distinction between direct and indirect consequences of their efforts. Directly, the business contributes to two major pillars: water and energy. But by bringing labor opportunities in Ethiopia, the business also reduces hunger, which indirectly contributes to goal two.

In the data collection process, it appears that business 7 is the only business among the interviewees that connected their business model to the achievement of the SDGs in their annual report. The business clearly illustrates the input of the business processes, the business activities, the outputs and consequentially connects these outputs to certain SDGs.

In addition, business 7 also has the ambition to integrate the SDGs in their innovation processes. When asked about this, the interviewee responds with the following: “Integrating that (SDGs, red.) is difficult, but yes, that is what we will do. It gives a higher purpose to innovate. You actually contribute to something.”

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indicates that they did a lot of effort to contribute to the SDGs, however, they did not promote this at all and realize that the business should have been more transparent about this.

For business 5 it is the government that expects them to work on the SDGs. Business 5 has created a pact with the government that it will take on the responsibility to connect ten million people to water systems in developing regions. By means of this pact, business 5 is actively contributing to goal 6 of the SDGs.

4.6.2 Perspectives of other actors on SDGs

Expert 1 stresses that SDGs are important for businesses for two reasons: first, it is something to hold on to for businesses, in a way that it can provide guidance. A second important factor is that the goals are being monitored worldwide. In that way, according to expert 1, it is able to give us insights into whether we are making progress or not.

Expert 4 points out that the SDGs remain a theory. The reason that goals are being chosen by businesses is that it looks good for buyers, for example by building a school. Furthermore, expert 4 argues that nobody in Ethiopia talks about the SDGs, which according to the interviewee, proves that CSR is deployed at random, instead of strategically.

Expert 2 and 3 agree on SDGs often being used as ‘checklists’. Expert 2 clarifies that these checklists are often being used in financing situations, whereby the financial institutions or investors demand these checklists for providing funding.

To end with, expert 1 argues that the created value that contributes to SDGs is not necessarily bound to foreign countries, but as well contribute to development in the Netherlands where we experience these issues as well.

In summary, it largely differs to what extent businesses integrate SDGs. Ranging from businesses that integrate SDGs into its main activities, to businesses that do not consider SDGs at all. Although expert 1 emphasizes the importance of SDGs, other experts regard the goals as ‘checklists’.

4.7 How is multi-value creation reflected in the Business Model Canvas?

EXPLORING MULTI-VALUE CREATION IN PRACTICE: A STUDY ON DUTCH BUSINESSES INVOLVED IN DEVELOPING REGIONS Master Thesis