Multi-value creation: it is not all about
the money
Master thesis University of Groningen Faculty of Economics and Business Msc International Business & Management
Supervisor: dr. B.J.W. Pennink Co-assessor: dr. S.R. Gubbi
Mariska van Beusekom Korreweg 203a, 9714AL Groningen
m.d.van.beusekom@student.rug.nl
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ABSTRACT
We are currently transitioning from an unsustainable, linear economy to a sustainable circular economy (Broekhoven, 2018). The current transaction model where the company takes the lead should change to a model where many actors create a coherent set of values together (Jonker, 2016). This model is called multi-value creation and leads to new, sustainable business models based on the circular economy. Voors (2017) in her Master thesis researched which values are created and by whom. Her sample existed out of MNCs with their headquarters in Europe that all engaged with the Bottom of the Pyramid. This raises the question if these results can be generalized. This research will replicate her research, but with a sample of MNCs from both developed and emerging markets. Besides, this research will develop a measurement tool to measure multi-value creation. Currently, no suitable measurement tools are available, and this research aims to solve that problem. Important parts of multi-value creation are identified, and a new measurement tool is developed.
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TABLE OF CONTENTS
1. INTRODUCTION ... 4
2. LITERATURE REVIEW ON MULTI-VALUE CREATION AND RELATED TOPICS ... 8
2.1 Corporate Social Responsibility... 8
2.2 Circular Economy ... 11
2.3 Multi-value creation and new business models ... 13
2.4 Current models to measure multi-value creation ... 15
2.5 Negative values ... 18 2.6 Research questions ... 19 3. METHODOLOGY ... 20 3.1 Research setting ... 20 3.2 Sample... 20 3.3 Data collection ... 22 3.4 Data analysis ... 23 4. FINDINGS ... 26 4.1 Actors identified ... 26 4.2 Values created ... 28 4.3 Adapted matrix ... 29 4.4 Multi-value creation ... 30 5. DISCUSSION ... 31 5.1 Conclusions ... 31 5.2 Implications... 39 5.3 Limitations ... 40 5.4 Future research ... 41 6. REFERENCES ... 43 7. APPENDICES ... 50
Appendix A. A graphic overview of the circular economy ... 50
Appendix B. CSR Impact Assessment Cycle. ... 51
Appendix C. Varieties of CSR initiatives ... 52
Appendix D. Unedited overview of all actors identified ... 53
Appendix E. CSR impact model ... 55
Appendix F. Market classification MSCI ... 56
Appendix G. Value labels developed by Voors (2017). ... 57
Appendix H. Actors in categories from Voors (2017) ... 59
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1. INTRODUCTION
2%. That is how much companies in India with at least a certain revenue or profit must spend on corporate social responsibility (CSR). Not just CSR activities for employees or their families, but for everyone in the society. This law went into effect in 2014 and has received both criticism and praise, even though the effectiveness is still undetermined (Banerjee, 2013). India is not the only country with requirements concerning CSR. Several countries, like Sweden, the Netherlands and Denmark require (larger) companies to report on their CSR activities (Karnani, 2013). CSR has become a widespread practice. More than 70% of large companies in Europe and the Americas report on their CSR activities, often voluntarily (Karnani, 2013). New movements are developing, and CSR practices are evolving. This might sound like it is almost all fixed and done. CSR has definitely come a long way. Almost 50 years ago Milton Friedman published his view on CSR. Friedman (1970) argued that the only social responsibility of a business is to increase its profits. He saw the ‘doctrine’ of social responsibility as harmful to the foundations of a free society (Friedman, 1970). Freeman (1984) changed that view on business when he came with the stakeholder theory. His stakeholder theory argued that a business should not only take profits into account, but also the interests of other parties involved. In the years since, it appears that most people agree with the view of Freeman (1984) instead of Friedman (1970).
However, the question is if this is enough. Sustainability has become a big issue in society, and it seems like CSR is not effective enough to guarantee sustainability. Governments have made laws or signed agreements to make society more sustainable. These laws also affect companies in several ways. A well-known recent example is the Paris Agreement. The Paris Agreement was signed by 195 UNFCCC members in (United Nations, 2015) and aims to reduce the global warming. By signing this agreement many countries recognize the problem of global warming and realize that our current world is not sustainable. Following this agreement, Norway decided that it will stop selling all petrol-powered cars by 2025 (Staufenberg, 2016). This affects many businesses, both in and outside the country. There are more laws being developed to make society more sustainable for everyone. In 2015, the British parliament adopted a law against modern slavery. This law contains a clause demanding big companies to report on their efforts on stopping modern slavery in their supply chain (Pollitt, 2014).
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had not been effective enough to make our society sustainable. Although it has been around for some time now, the progress made is apparently not enough. There are still incidents happening that create global outrage. For example, the Rana Plaza incident in 2013 in Bangladesh that killed around 1,100 people. Wal-Mart, which has very extensive CSR reporting, was involved in this incident as well. Their extensive CSR reporting did not help to prevent this incident. This incident and others raise concerns about the effectiveness of the auditing practices that should ensure safe working conditions, but apparently do not (Locke, 2013). Companies involved had CSR policies and auditing schemes that should have ensured a basic level of safety, good working conditions and sustainable practices.
A reaction to the current, unsustainable practices has emerged. This reaction entails the view of a new, different, circular economy with new business models. The new business models vary, but have four important basics; sharing knowledge, making connections, raising awareness and multi-value creation (Jonker, 2014). Part of these new business models is the circular economy. Currently, we have a linear economy that is focused on making as much profit as possible on a short term. This has several negative side-effects. A circular economy is one that is focused on value and maintaining value (Jurriens, 2015). Profit is not the only value that can be created, but social, human and ecological values are as important (Jurriens, 2015). The circular economy and new business models lead to multi-value creation. The creation of multiple values with multiple actors is very important in the new business models. The focus is not on only generating profit, but also other values. The goal is to create a coherent set of social, ecological and economic values (Jonker, 2014). This should ideally be done by many actors that all actively contribute (Jonker, 2016). The concept of creating multiple values with multiple actors by using new business models and maintaining as much value as possible through the circular economy is the core of multi-value creation. While the circular economy is not a new idea (Boulding, 1966), the new business models and the concept of multi-value creation is relatively new. Research has led to the development of several new business models already, but there is still a lot of research to do about multi-value creation.
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of actors. Besides, today’s society shows that the CSR does not lead to a sustainable society. More is needed for this and multi-value creation can be the solution.
Currently the research about the topic is expanding and several frameworks have been created. However, not all literature on the topic is very developed yet and therefore, more research and knowledge about it is needed.. An important gap in literature concerns models to measure multi-value creation. No sufficient frameworks to measure all aspects of multi-value creation and new business models exist. There are several models and methods to measure CSR, but not to measure multi-value creation. Pennink (2016) and Voors (2017) both developed a matrix that shows what values are created by whom. However, those matrixes are insufficient to measure multi-value creation. They only show what values are created by whom, nothing more than that. They do not take aspects like the circular economy and new business models into account. Therefore, those matrixes do not fill the void and leave the need for a measurement model of multi-value creation. A measurement model to measure multi-value creation is needed to measure the social impact. The values companies create and who are involved determines the social impact a company makes. Measuring the performance of the social impact a company makes is important for three reasons: it enables for analyzing and improving the impact made, it enables companies to see the results of their activities and it motivates employees and possibly also outsiders (Kroese, 2015). So there is a need for a measurement tool for multi-value creation and the matrixes developed do not fill this need.
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This research aims to help solving both of these problems. First, it will fill the gap concerning the generalizability of which values are created by what actors. For this the following question will be answered: Can the results found by Voors (2017) be generalized when replicating her research with MNCs from both developed markets and emerging markets? It will be researched if companies with their headquarters outside Europe create the same values as the ones inside Europe. By doing this the current literature will be developed further. As of now it is only known what values are created and by whom for MNCs with their headquarters in Europe that also engage with the BoP. This is a very specific type of MNC and a lot of MNCs do not fit those criteria. For those MNCs it cannot be said with certainty if the values and actors created are the same, thus leaving a gap in knowledge. This research will generate results that are applicable for all MNCs, and not only a very specific few. By doing this the gap in literature will be filled. To make a complete image, values created by firms from emerging markets and developed markets will be researched.
The second gap to be filled concerns measuring multi-value creation. As of now there is no satisfactory tool for that available. With the help of the results obtained and literature, a measurement tool to measure multi-value creation will be developed. For this the following question will be answered: How can the matrix developed to assess firm performance be further developed into a useful tool that will enable a more nuanced assessment of a firm’s performance on multi-value creation and allows for comparison?
The theoretical contribution of this research lies in expanding the current literature and frameworks on multi-value creation. This research aims to fill the gap in literature concerning the knowledge of values and actors involved in multi-value creation. It will also provide a new measurement tool and enable future research on the topic. This will be done starting with either confirming or rejecting the generalizability of the results obtained by Voors (2017).
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2. LITERATURE REVIEW ON MULTI-VALUE CREATION AND RELATED TOPICS
A comprehensive overview of the relevant literature will be given. First, a short introduction on corporate social responsibility will be given. Corporate social responsibility is related to multi-value creation, but they are fundamentally different. This has effects on how to measure it. One cannot simply apply the current CSR measurement tools to measure multi-value creation. To truly understand this difference and the subsequent consequences for a measurement tool, one must understand what both concepts are and therefore both concepts will be explained. Regarding the fact that the circular economy is seen as an important addition to value creation, this concept will also be explained. After that an overview of multi-value creation and new business models will be given. Then the current models to measure it will be examined. Finally, the possibility of creating negative values will be discussed. Together, this leads to the research questions.
2.1 Corporate Social Responsibility
Corporate social responsibility is practiced by many companies and has gained a lot in popularity in recent years (Moizer, 2018). A lot can be said about CSR, but it is important to first have a clear definition of it. Multiple definitions exist and most fall in the definition of Blowfield and Frynas (2005). Blowfield and Frynas (2005, p.503) define it as ‘’an umbrella term for a variety of theories and practices all of which recognize the following: (a) that companies have a responsibility for their impact on society and the natural environment, sometimes beyond legal compliance and the liability of individuals; (b) that companies have a responsibility for the behavior of others with whom they do business; and (c) that business needs to manage its relationship with wider society, whether for reasons of commercial viability or to add value to society.’’ Aguilera et al. (2007) define CSR as ‘’context-specific organizational actions and policies that consider stakeholders’ expectations and the triple bottom line of economic, social and environmental performance’’. This definition falls within the definition given by Blowfield and Frynas (2005). This research will use Aguilera et al. (2007) definition, since it provides more clarity and is more comprehensive.
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Freeman (1984). The stakeholder view recognizes that a business should not only focus on profits, but also on the interests of others involved. From the definition of CSR given above, it becomes clear that there are three main topics for companies practicing CSR: economic, social and environmental. By taking these three fields into account, CSR is meant to ensure an ethical way of doing business. However, for employers CSR also serves other goals. It can increase competitive advantage, raise brand awareness and build trust (the University of Edinburgh, 2017).
CSR is voluntary to a certain extent in most countries, but not everywhere. India already requires larger companies to invest at least 2% on CSR activities (Banerjee, 2013) and some countries in Europe require companies to report on their CSR activities (Karnani, 2013). For the most part however, CSR is voluntarily. Companies in India are largely free to spend the money on causes they want and being required to report on CSR does not determine the CSR policy itself. Companies are free to focus on any of the fields or integrate CSR in all aspects of their operations (Igwe and Nwadialor, 2015). Company’s CSR policies depend on many factors, for example the industry, company size, shareholders, (business) culture, labor market conditions, research and development, consumer income and company history (Igwe and Nwadialor, 2015) (McWilliams and Siegel, 2001). Of course, companies have to follow the laws of every country they operate in. These laws can for example concern human rights, working conditions or environmental practices and may differ per country. Following the law can be part of a company’s CSR policy. As the definition states, sometimes CSR goes further than legal compliance, but not always.
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Finally, the company should assess the monetary value added because of CSR. Besides firm specific methods or certain models, there are also big indexes that measure CSR performance. Indexes like the FTSE4Good, Dow Jones Sustainability Index or Global Reporting Initiative (GRI) are examples of popular and well-known indexes. These indexes however vary at the concept used, definition of CSR, conceptual framework, indicators defined, and measures given (Hopkins, 2005). There are more points at which these indexes and other CSR initiatives differ. Gjolberg (2009) researched several CSR initiatives and found that some initiatives have hard requirements, while others have soft requirements (see appendix C). Hard requirements are performance-based and need to be satisfied for a company to be included. An example of this is the Dow Jones Sustainability Index. To qualify for this index a company must be in the top 10% of companies in the sector. Other indexes have soft requirements, no hard performance-based requirements are made. Soft requirements focus on relative achievements and aim to inspire, motivate and educate. Finally, CSR initiatives also differ among their focus on either results are processes. While some result-oriented initiatives require documented achievements, other process-oriented initiatives focus on participation, improvements and learning processes and often multi-stakeholder based (Gjolberg, 2009).
One of the downsides of CSR is that it does not contribute enough to make today’s society truly sustainable. Even though it has increased in popularity and is widespread, today’s world still has a huge sustainability problem. The sustainability problems are not only several environmental issues like global warming and pollution, but also social issues like poverty and inequality (Ehlert, 2016). Governments are trying to solve the sustainability issues with several measures. The most well-known one is probably the Paris Climate Agreement that was signed by 195 UNFCCC members (United Nations, 2015). The European Commission gives its member states some general guidelines like ‘be the change you want to see’ and ‘genuinely integrate sustainability in policy actions and monitoring of sustainability’ (EC, 2012 p.42). However, the fact that governments are still needed to make society more sustainable, indicates that CSR alone is not enough.
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of a circular economy. While the circular economy is different than multi-value creation, it is a part of it and the new business models evolve around a circular economy.
2.2 Circular Economy
The idea of a circular economy is not as new as one might think. The idea has gained a lot of popularity in recent years (Korhonen et al., 2018) but it is not necessary a new idea. Kenneth Boulding (1966) already spoke of open and closed systems. He stated that the world economy at that point was open on all three classes: matter, energy and information. He recognized that resources are exhaustible and thought that a closed system, in which there would be neither an increase or decrease in material entropy, is conceivable. This is by many seen as the origin of the circular economy idea (Allwood, 2014). There were more early scholars on this subject, however. In 1982 Walther Stahel published his prize-winning paper ‘the Product-Life factor’ in which he argued for the extension of the product-life. The extension of product-life would reduce the depletion of natural resources and waste and thus lead to a more sustainable society. By reusing, repairing, reconditioning and recycling this could be achieved. Stahel (1982) also argues this will lead to smaller, more labor-intensive and locally integrated factories.
The circular economy concept may have gained a lot of popularity in recent years, but the concept has stayed rather vague (Korhonen et al., 2018). To solve this problem Korhonen et al. (2018) have developed the following definition:
‘’Circular economy is an economy constructed from societal production-consumption systems that maximizes the service produced from the linear nature-society-nature material and energy throughput flow. This is done by using cycling materials flows, renewable energy sources and cascading-type energy flows. Successful circular economy contributes to all the three dimensions of sustainable development1. Circular economy limits the throughput flow to a level that nature tolerates and utilizes ecosystem cycles in economic cycles by respecting their natural reproduction rates.’’
A circular economy and sustainability creation might be often mentioned together, but they are distinct and should not be treated as the same concept. Geissdoerfer et al. (2016) show that a circular economy and sustainability are not the same. They do have multiple similarities, but also several dissimilarities. One of the most important differences is that the economic system is prioritized in the circular economy while the triple bottom line is prioritized in sustainability. Sustainability focusses more on the interests of all stakeholders, while the
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circular economy mainly focusses on the economic/financial advantages for companies and also the environmental benefits (Geissdoerfer et al., 2016). A successful circular economy may contribute to all three dimensions of sustainability, but it cannot guarantee to solve all the sustainability issues.
The circular economy is often mentioned in combination with sustainability and multi-value creation. Important to note is that we currently have a linear economic system and are slowly transitioning to a circular economy (Broekhoven, 2018). The linear economic system does not fit with the idea of multi-value creation and a sustainable society, while the idea of a circular economy does. The linear economic system is focused on generating as much profit as possible. This often entails operating as cheap as possible and generates a lot of waste (Jurriens, 2015). The linear economy is often described as ‘Take, Make and Waste’. The linear economy contradicts the circular economy. Instead of operating as cheap as possible and thereby generating a lot of waste, a circular economy is focused on value and maintaining value (Jurriens, 2015). A circular economy strives for a closed-system, thus producing no or very little waste. This is more sustainable than the current linear economy.
The Dutch government organization PBL (environmental assessment agency) has developed three broad strategies for a circular economy, each with several sub-strategies (see appendix A). The first broad strategy is to think more careful about producing and using products. This can be done in three ways: realize the product is unnecessary or can be replaced by another product (refuse), intensify the use of the product by making it multifunctional or share it (rethink) or use less resources to produce the product (reduce). The second broad strategy is to extend the lifespan of products or parts. This can be done by reusing, repairing, refurbishing, remanufacturing or repurposing the product. The last strategy is the useful application of materials. This can be done by recycling the product or recovering resources, for example in the form of energy (Potting et al., 2016; Potting et al., 2018, Rood et al., 2019). These three strategies and their sub-strategies can be used to measure the performance of the circular economy.
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situation is the same. Frontrunners should be selected and empowered to guide the transition and allow others to follow (Cramer, 2014).
2.3 Multi-value creation and new business models
Multi-value creation and the subsequent new business models have gained popularity in recent years. Jan Jonker from the Radboud University does a lot of research on this topic and the development of new business models. He said ‘’with multi-value creation it is about working on a coherent set of social, ecological and economic values. This way profit will be more than just money’’ (Jonker, 2014). He also said that for true multi-value creation we have to let go of the company being the main actor, and instead develop an economy where many actors are active and contribute all together (Jonker, 2016). To achieve true multi-value creation, a transaction to new business models has to be made. In the current transaction model, the business is the main factor that initiates most, if not all, activities. To achieve the transaction to a model where many actors are active and contribute all together, new business models have been developed. Some companies already operate (partly) according to these new business models (Accenture, 2015).
Business models describe the way a company creates and captures value. It determines important aspects of a business, like the value proposition and who will produce these values (Kavidas et al., 2016). The traditional business models are focused on the company itself creating the value, while the idea behind multi-value creation is that many actors actively create values (Jonker, 2016). Therefore, to transit to multi-value creation, new business models have been developed. The new business models are characterized by the following seven things according to Jonker (2012):
1. Cooperation is central and the basis.
2. The aspiration of multiple values. Not only monetary, but also environmental and social values.
3. Money will not be the only currency anymore. Activities like taking care of someone or spending time with someone will also be valuable and used as currency. Profit will be shared with stakeholders, not only shareholders.
4. The economy will be based on needs. To fulfil those needs people will work with vouchers for energy, food, care etc.
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7. Money will not always be needed anymore since it will not be the only currency anymore.
As explained in the previous literature section, the circular economy in itself is not already multi-value creation, but it can be a part of it. The new generation business models include the circular economy and also focus on multi-value creation (Jonker, 2016). Jonker (2016) says that the multi-value creation in the circular economy is based on the following four principles:
1. Use resources/materials as careful and efficient as possible 2. Use and reuse materials/products as long as possible
3. The service (achievement) is more important than the product itself 4. The raw materials in products should be easily usable as resources again
These four principles and seen characteristics of new business models lead to five business models developed by Accenture (2015). These models can be used separately or combined. Some models are more suitable for certain type of companies than others.
1. Circular supplies. This model is based on ‘’supplying fully renewable, recyclable, or biodegradable resource inputs that underpin circular production and consumption systems. Through it, companies replace linear resource approaches and phase out the use of scarce resources while cutting waste and removing inefficiencies.’’ (Accenture, 2015). Companies that have scarce resources or a significant environmental footprint are suited for this business model.
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4. Sharing platforms. This business model facilitates the sharing of overcapacity or underutilization and provides a platform for collaboration. This can be for both individuals or organizations. This model is suitable for businesses that have a low utilization or ownership rate.
5. The Product as Service. This business model entails that products are used by a single or multiple customers through leasing or pay-for-use. The customer does not own the product but does use it. This model is suitable for companies that have high cost of operation and can offer a skill advantage in maintaining the product. It encourages companies to develop longer lasting products and make them recyclable.
The business models explained above are the ones currently developed and sometimes already applied by companies. However, this are just five possibilities and more/other business models might be developed in the future. What is important is not just those five business models, but their common characteristics.
Multi-value creation and CSR can partly overlap as they both focus on more than just profit, but they are definitely not the same. Pennink (2018) said that multi-value creation is not just CSR+, but CSR+++++. In other words: multi-value creation is not just taking CSR one step further, it is really next level and more than just CSR. More values are included in a business model and more actors will be involved. CSR still has the traditional transaction model, the idea that the company itself has to be the main actor to create value. Besides, in the current model monetary profit often is an important focus for companies. Multi-value creation maintains a different transaction model and wants profit to be more than just money. Multi-value creation aims to develop a coherent set of Multi-values with many actors actively involved (Jonker, 2014;2016). The new business models with the circular economy explained are seen as the way to achieve this.
2.4 Current models to measure multi-value creation
There are many ways to measure CSR, but the measuring of multi-value creation is not as developed. In this part several current models will be explained and discussed.
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leads to a total score for each area and all the total scores combined lead to the score on the value. All scores combined give an overall score of the performance of the firm. The MultiCapital Scorecard from Thomas and Mcelroy (2015) does measure the creation of multiple values, but it can be seen as method to measure CSR. It measures the performance from the firm’s point of view and does not take values created by others into account. It does not consider the cooperation with other actors and the economic values created are focused on monetary factors.
Figure 1. the MultiCapital Scorecard
Source: Thomas, M., McElroy, M.W. (2015). The MultiCapital Scorecard. White River Junction: Chelsea Green Publishing
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Table 1. Multi-value Multi-actor matrix
Source: Pennink, B.J.W. (2016). Exploring a changing view on organizing value creation. Conference New Business Models.
Pennink (2016) his matrix uses two dimensions to describe which values are created by whom. The combination of a value created, and an actor involved, represents the position of a company. The traditional company focused on profit generated by the owner/management will be in the top left. Companies that focus more on ecological and social values will be in the lower part of the matrix, depending on which actors are involved.
Voors (2017) followed a different approach. By using annual reports and sustainability reports she analyzed what values are created and which actors were involved. Voors (2017) her matrix partly overlaps with the matrix developed by Pennink (2016). This matrix can be seen in Table 2.
Table 2. Multi-actor multi-value matrix for mapping value creation Actor Value MNC Local player NGO Educational & research institutes National government Value chain actors Firm cooperative IGO Profit Social Ecological Local economic Economic
Source: Voors, T. (2017). Moving beyond profit: multinationals and multi-value creation (Master’s thesis). University of Groningen, Groningen, The Netherlands.
The matrix mainly states which value is created and by which actor. It is used to demonstrate the number of values created and by whom. This is based on all the firms analyzed in her research. However, it is unclear how this matrix should be used for evaluation purposes. There
Owner
/management
Employees Customers Local
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are no clear criteria or guidelines available. It seems that it should merely be stated if an actor creates the value or not and the number of values that are created. This leaves a lot of room for interpretation on the performance of a firm. By merely stating that a value is created, and by whom one does not do justice to all the different parts of multi-value creation. More nuance in evaluation a firm’s performance is needed. Besides creating a more nuanced evaluation, it could also be useful to compare the performance of multiple companies. This way one can assess the performance of a firm and compare it to other firms. Comparing across industries and countries for example, might be very useful.
2.5 Negative values
The matrix in table 2 focuses only on positive values created. However, these are not all values created by MNC). MNCs can also create negative values. A quick search on the internet reveals several serious scandals MNCs were involved in during 2017. Samsung was involved in a bribery scandal, Uber experienced sexual harassment allegations and criminal probes, Equifax faced a serious data breach scandal and Apple faced a product performance scandal (Shen, 2017). Another good example of this is JBS S.A. When looking at the sustainability report of the firm (2017) one might get a very positive image of the firm. However, what it does not mention is that the firm was involved in several scandals that year. In 2017 the CEO and former chairman of JBS were involved in a corruption scandal and both were arrested (Meyer, 2017). This seems very contradictory with their sustainability report which talks extensively about compliance and ethics. JBS was involved in another scandal in 2017 concerning the safety of food. This scandal led to an initial rejection of 11% of fresh beef and later on it even led to a total halt of imports of fresh beef from Brazil to the USA (Runyon, 2017). Their report claims that the company focusses on food safety, but the reality again shows different. On paper the performance of this company might seem to create only positive values, but in reality, it also creates several negative values.
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originally thought. Society endured higher emissions which had a negative impact on the environment. Furthermore, the reputation of Germany and the European Union got damaged, because they failed to notice the fraud.
Therefore, it can be argued that not only positive values created have to be considered. Companies have shown to create negative values as well. Multi-value creation is different from the current economic and business model, but this does not mean no negative values will be created anymore.
2.6 Research questions
This literature review shows that multi-value creation is a relatively new subject. There is much research to be done on the topic. Only Voors (2017) researched exactly which values are created and by whom, but her sample prevents the generalization of the results obtained. Besides, although there have been several attempts, no satisfying measurement model has been developed yet. This research will fulfill both of those needs. First, this research will analyze what values are created and by whom with a diverse sample of MNCs in both developed and emerging markets. This will allow for the results to be generalized to all MNCs in either developed or emerging markets, not just a rather small, specific type of MNC. This information is needed to develop the measurement tool, as the values created, and actors involved are an essential part. The measurement tool will fill the gap that currently exists concerning measuring multi-value creation. It will be assessed how a nuanced measurement tool can be developed using the currently existing matrix. This leads to the following two questions:
1. Can the results found by Voors (2017) be generalized when replicating her research with MNCs from both developed markets and emerging markets?
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3. METHODOLOGY
In this section the methodology will be discussed. The research setting will be discussed, the sample will be given and explained, the data collection will be explained and finally it will be explained how the data will be analyzed.
3.1 Research setting
The first part of this research will test the generalizability of the results from Voors (2017) her master thesis. It will be researched if firms with their headquarters outside Europe create the same values with the same actors. The same methods will be used to obtain and analyze the data to ensure validity. This research will only deviate on specific parts that are necessary to test the generalizability, like the sample. This will either lead to rejecting the results or not. Knowing the generalizability of the values created will be crucial for the second part of the research; developing a measurement tool for multi-value creation. This measurement tool will be developed according to relevant literature and results obtained from this research.
The exploratory nature of the questions leads to a qualitative research approach. As is shown in the literature section, there is still a lot to discover concerning multi-value creation. The first step was to analyze MNCs with the headquarters in Europe that engage with the BoP. This research will expand on that and explore the values created and actors involved for MNCs in developed and emerging markets. It will also explore possible measurement tools. An exploratory approach to understand the data is needed before quantitative research can be conducted. Qualitative research to understand qualitative data, instead of displaying mathematical relationships, is seen as an appropriate method (Sullivan, 2011).
3.2 Sample
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For the results to be truly generalizable, the sample has to be diverse. To prevent overrepresentation from certain countries, it has been decided to divide the sample in two. Half of the sample will exist out of firms from developed markets and half of the sample will exist out of firms from emerging markets. This way diversity, till a certain extent, is ensured.
The number of firms analyzed should ideally be high enough to reach saturation. According to Spencer et al. (2003) the quality of qualitative research, to a considerable extent, relates to the sample. The sample should be adequate, provide dept and maximum opportunity for transferability of findings. Although there is debate among researchers how to reach this (O’Reilly and Parker, 2013) one method is to reach saturation. Data saturation is achieved when increasing the sample size does not lead to new information (Green and Thorogood, 2004), the point where increasing the sample size leads to fewer surprises and no more new emergent patterns (Gaskell and Bauer, 2000). In her master thesis, Voors (2017) discovered that the sample size of 25 led to no new information. As a matter of fact, after analyzing 25 companies she did not discover any new information anymore. Therefore, it is assumed that around 20 companies saturation is reached. This means that 10 companies from developed markets and 10 companies from emerging markets will be analyzed. Since saturation at 20 firms is not proven, it will be tested during the analysis. An overview of values and actors will be made after 15 firms are analyzed. After that the remaining 5 firms will be analyzed. If the assumption of saturation is correct, few or no new actors or values should be identified. In case the results of the last five firms include new actors and/or values, the sample size will be increased.
For developed markets, companies with their headquarters in and outside Europe will be analyzed. Due to the international character of their operations, it is not expected that firms from emerging markets create different values with different actors. Firms from developed markets operate in both developed and emerging markets and so do firms from emerging markets.
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by MSCI will be followed (see appendix F). An overview of the firms and the reports analyzed can be seen in table 3.
Table 3. Overview of firms and reports analyzed
Country Company Year sustainability report Year annual report
USA AmerisourceBergen 2017 2017
USA Apple 2017 2017
JPN Honda 2017 2017
USA Amazon Website 2017
USA Exxonmobil 2017 2017 NLD Shell 2017 2017 FRA Total 2018 2017 JPN JapanPost 2017 2017 USA Ford 2017/2018 2017 USA CardinalHealth 2017 2018 KOR LG 2017 2017 RUS Gazprom 2017 2017
CHN Hon Hai (Foxconn) 2017 2016
RUS Sinopec 2017 2017
EM JBS merged 2017
EM PICC 2017 2017
KOR Posco merged 2017
KOR Samsung 2018 2017
CHN PetroChina 2017 2017
KOR Kia 2018 2017
The use of annual and sustainability reports can be said to be reliable enough. Annual reports have to be approved by an auditor and many firms get their sustainability report checked and validated by an auditing firm as well. The chance does exist that firms do not get their sustainability report checked and/or validated and make the report better than reality. It is seen as unlikely that firms will lie about the actors involved, because they have no known reason for this. They might make the values created seem more positive, however. This is a risk that has to be taken, since it cannot be avoided.
3.3 Data collection
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company’s website. In case the reports cannot be found on the company’s website, but can be found somewhere else, they will be downloaded from a different source.
For this research the operational definition of multi-value creation developed by Voors (2017) in her master thesis will be used. Her definition is ‘all the activities a firm voluntarily
undertakes to create value that are not (directly) related to profit and for which an outcome is specified. That means that activities a firm undertakes to comply with rules and regulations will
not be recorded. They have no choice to perform these activities and therefore those activities do not represent their true intentions. Besides, activities that are directly related to profit will not be recorded either. These activities are seen as marketing and not as multi-value creation. Finally, an outcome must be specified. Without an outcome the goal of the firm is unclear and making inferences about the goal might lead to less reliable information.
This definition is subjective and till a certain extent. Several choices had to be made to deal with a few uncertainties. First of all, it can often be unclear if a company is following a law or truly doing an activity voluntarily. The choice was made to record all activities unless it was specifically stated that it was required by law. It is impossible to check every law in every country researched. Therefore, it was assumed that an activity was voluntary, unless explicitly stated otherwise. It is not always clear if an activity is directly related to profit or not. Therefore, activities that are clearly only focused on generating more profit will not be recorded. Activities that are at least partly focused on generating other values besides profit will be recorded. It will be noted that these activities were also partly focused on creating profit.
3.4 Data analysis
For analyzing the data, the same coding scheme from Voors (2017) will be used. The following general information will be recorded: name of the firm, type of report, year of the report, country of the headquarters and the type of market (emerging or developed). The value-creating activities will be recorded, their goal, the value category and the involved actors. All raw information will be recorded in an extensive Excel file.
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if the two extra categories (local economic and profit) are valid, the question for actor-categories focuses on all actor-categories created.
The process to test the validity of the categories will involve several steps. The actors identified in the annual and sustainability reports will be noted in the coding scheme under the section ‘actors involved’. An overview of all actors will be made. Following the definitions of each category, the actors will then be assigned to a category if possible. In case not all actors can be assigned to a category, the remaining actors will be noted. The same process goes for the values created. While analyzing the values created, it is very important to know the context. Context determines to which value category an activity belongs. The judgement of the value category will be done with the help of the overview Voors (2017) created (see appendix G) and her definitions of the value-categories (see table 7). However, the process does not stop here. Even if all actors and values can be assigned to a category, it does not mean that the categories developed should be blindly followed. To ensure that the categories developed are optimal, this research will also develop categories based on literature and the findings in this research. Current categories mentioned in literature will be reviewed and then data will be analyzed to see if there is any reason to diverge from the literature. Based on literature and characteristics of the findings, new categories will be developed. If these categories match the current categories it can be said that the results are generalizable. In case the categories do not match, her results are not generalizable. However, even if the results are not generalizable, there will still be new categories developed that are accurate.
A matrix with values and actors will then be used to develop a measurement tool. In case the results are not generalizable, the matrix will be adapted, and the adapted version of the matrix will be used. This matrix gives information about which values are created and by whom and can therefore be used as part of the measurement tool. The requirements for the measurement tool will be identified from the literature section. The literature will be analyzed, and essential parts of multi-value creation will be identified. These essential parts will form the basis of the measurement tool. Goal is to ensure that the measurement tool measures all essential parts of multi-value creation.
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4. FINDINGS
The results from the analysis will be shared. All actors identified in the reports were put together in a clear overview. Regarding the huge amount of data not every single value created will be presented here. This part will only show the data found, conclusions made based on this data will be presented in the next section.
4.1 Actors identified
The actors that were identified for all firms analyzed can be seen in table 4. The raw data with every single actor can be seen in the appendix D. This is a modified version of the actors involved to give an idea of what kind of actors were identified.
Table 4. All actors identified
MNC Female employees Non-profit organizations
Society Marginalized classes Students
Other MNC SMEs Hospitals
Local communities Volunteers Contractors
Foundation Affiliate/supplier employees Joint-venture
Other companies Government Purchasers
Communities Partnerships with customers Operators
Employees Civic groups Academia
Shareholders Family of employees Business partners
NGOs Media Subsidiaries
Suppliers United Nations Animals
Minorities UNESCO Third parties
Groups organized by associates
Local suppliers Charities
Children Advisory panel Stakeholders
Customers Local stakeholders Trade unions
Educational institutes Host governments Industry
Consumers Vendors Universities
Experts Lower income communities Local employee resource groups
Partnerships Investors European Union
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All actors categorized in the actor-categories identified by Voors (2017) can be seen in the appendix H. The following actors could not be placed in one of the categories: Society, communities, underprivileged groups, minorities, children, volunteers, vulnerable groups in society, marginalized groups, specific groups within communities, family of vulnerable groups in society, lower income communities, families with children, animals, external stakeholders, natural environment and family of employees. All other actors could be placed in the actor-categories. However, the actors were not evenly distributed among the actor-categories. The category Firm Cooperative contained only one actor. The category Value Chain Actors had by far the most actors, namely 47. The other categories had more or less the same number of actors assigned to them, ranging between 5 and 14.
Most of the actors not assigned to a category are groups or individuals targeted by value-creation or individuals helping with value-creation. These actors were not part of the MNC, an NGO, IGO, a VCA, educational & research institutes, the national government or a firm cooperative. The ‘local player’ category might come closest to these actors, but this category does not provide a good fit either. Most actors were not necessarily local but had a national or even international character.
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Table 6. Actor-categories and actors
Actor category Actors
MNC The MNC itself, all its subsidiaries,
shareholders, affiliates and groups that are part of the MNC
Employees All employees belonging to the MNC,
specific groups of employees, groups organized by employees
Other businesses All other businesses/for-profit organizations the company is involved with
NGOs All organizations that are non-profit and
have a certain social/political/ecological goal like NGOs, NPOs, charities
Governmental actors All governmental actors; local, regional, national, international. IGOs
Society (local) communities, specific
groups/individuals within the society, civil society, natural environment
4.2 Values created
All values created could fit in one of the categories developed by Voors (2017). However, the difference between ‘local economic’ and ‘economic’ value was not seen as justifiable and necessary. Although there were several activities that did specifically focus on local communities, these activities often also created social and ecological value. The value category ‘profit’ is maintained. This category allows for more nuance. Some activities simultaneously create profit while also creating other values. Profit is often generated for the MNC itself and its shareholders, which makes it distinctly different from other economic values created. Economic values focus on the economic prosperity of stakeholders, not of the MNC itself. Therefore, four value-categories remain (see table 7). The definitions for the value categories developed by Voors (2017) remain the same. Some activities create multiple values at once. In this case multiple value-categories are assigned to it.
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Table 7. Value-categories and description
Value category Description
Profit Activities that mainly focus on generating
profit for the MNC
Social Activities that contribute directly to the life, welfare and relations of human beings in society
Ecological Activities that relate to organisms and the environment
Economic Activities that relate to economic prosperity
4.3 Adapted matrix
Voors (2017) researched which values are created and by whom and created a matrix based on these results. Pennink (2016) also created a matrix that involved multiple values and actors. Based on the new categories developed in this research, those matrixes have been adapted. The adapted matrix can be seen in table 8.
Table 8. Adapted matrix
The matrix proposes four value-categories, as opposed to three from Pennink (2016) and five from Voors (2017). Profit is included as a value category, but ‘local economic’ and ‘economic’ have been merged. The actors involved differ partly from the existing matrixes. The actor-categories ‘customers’ and ‘local communities’ from Pennink (2016) have been omitted, as well as the categories ‘local player’, ‘educational & research institutes’, ‘IGO’ and ‘firm cooperative’ from Voors (2017).
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4.4 Multi-value creation
Literature review shows that the following aspects are important for multi-value creation: - The circular economy
- New business models based on the circular economy - The creation of negative values
- The creation of multiple values by multiple actors
The circular economy can be measured using the method developed by Potting et al. (2018) (see appendix A). This method divided the strategies for a circular economy in three different categories, each with sub-strategies. All strategies for a circular economy are: refuse, rethink, reduce, reuse, repair, refurbish, remanufacture, repurpose, recycle and recover energy. These strategies can each be measured and thereby the performance on a circular economy can be measured. Each strategy has a different possible impact on sustainability. This can be used to give all strategies a different weight based on their possible impact.
The new business models based on the circular economy do not have an established measurement tool. However, there are five new business models (Accenture, 2015), seven characteristics (Jonker, 2012) and four principles of multi-value creation (Jonker, 2016) known. These facts can be used to develop a way to measure the adaptation of new business models.
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5. DISCUSSION
In this section the conclusions that are made based on the findings will be discussed. These conclusions have certain implications which will be discussed as well. After that the limitations of this research will be explained and suggestions for future research will be done.
5.1 Conclusions
In this section the findings will be analyzed which will lead to conclusions. These conclusions will provide an answer to the two research questions.
5.1.1 Actors
Not all actors identified during the analyses could be placed in one of the actor categories designed by Voors (2017). All actor categories however did have actors assigned to them. This can be the consequence of multiple factors. First of all, it might be that the matrix was not understood well enough. However, a table describing the actor categories and possible subcategories were given which should provide sufficient understanding.
Another explanation might be found in the analysis itself and the interpretation of the term ‘involved actors’. An operational definition of multi-value creation was given and used, but this definition did not include clear definition of ‘involved actors’. Following the coding scheme, all actors involved were noted. However, it is suspected that the difference might stem from a different interpretation of ‘involved actors’. This research has taken all involved actors into account, and not only the actors that actually create value themselves. This means that also actors that do no create value itself but are involved somehow in the value-creation were considered. However, this is pure speculation. No raw data was available and besides a few examples, no information was available about the actors identified. Only information about the actor-categories developed was given and explained. So unfortunately, it is unclear where this difference comes from. It is deemed unlikely that those actors were not present in the reports analyzed by Voors (2017), as they were found in a large number of reports during this analysis. They do not seem to be specific to a country or market.
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contribute already. Therefore, to identify as many involved actors as possible, all involved actors were considered.
New actor categories have been developed to fit all the actors identified. Every actor category, actors belonging to that category and the differences with current categories will be discussed.
The first actor identified is the MNC itself. The MNC itself includes all its subsidiaries, affiliates, shareholders and advisory panels/groups organized within the MNC. The actor ‘employees’ has been left out of this category and is become a category itself instead. The reason for this is the fact that the MNC and employees are distinctly different and have different interests. The power between those two actors is too different as an employee is often subordinate to the MNC. Besides, MNC sometimes entail in activities that create value specifically for employees which cannot be recognized in the matrix if those two actors are placed in the same category.
The second actor category is ‘employees’. This entails all employees of the MNC, all specific groups of employees, and also employees of business partners. Sometimes value-creation is focused one group in specific, for example female employees or LGBTQ employees. It also includes local groups organized by employees. It does not include trade unions since trade unions are often not limited to one company in particular.
The third actor category is named ‘other businesses’. This category entails among other suppliers, contractors, other MNCs, companies, SMEs, the industry and for-profit educational institutes. The choice has been made to expand the ‘value chain actors’ category to other businesses in general. Following the definition of Michael Porter’s (1985) value chain2, not all
businesses and value-added activities they offer could be placed in this. Therefore, the term was deemed not suitable and replaced.
The fourth actor category is ‘non-governmental organizations or NGOs’. It entails all organizations that are non-profit and have a certain social/political/ecological goal. For example, charities or NPOs. IGOs do not belong in this category, even though they sometimes can be very similar. IGOs however, are governmental organizations and therefore belong in the ‘government’ actor category.
The fifth actor category identified is ‘governmental actors’. This includes all governmental actors, from local government to foreign governments. The categorization with
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the ‘national government’ category and including the local governments in the ‘local player’ category does not allow for all possible forms of government. Regional or foreign governmental actors cannot be placed in those categories. According to Harvard Law School an IGO is ‘an entity created by treaty, involving two or more nations, to work in good faith, on issues of common interest.’’ Regarding the fact that IGOs are inter-governmental organizations, they belong in this category.
The final actor category is ‘society’. This category partly entails the ‘local communities’ category. This category is for actors like communities, (groups of) people that create value but are not part of an organization and specific groups of people that are the focus of value-creation, like minorities and women. Besides, this category recognizes values that are created that everyone enjoys. Examples of this are mainly ecological values, like reducing the use of electricity and using renewable energy sources. Even though the effect might be small and not directly noticeable, it is an effect that everyone can profit from on the long run as it reduces GHG emissions and is more environmentally friendly.
5.1.2 Values
All five value categories identified by Voors (2017) could be replicated. Every value created could be fit in either one or multiple categories. No new categories or sub-categories were discovered during the analysis.
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big the impact created is. What matters is whom creates what values and that is what should be measured.
Although current literature does not recognize ‘profit’ as a separate value category, the choice was made to maintain this category. As explained in the literature section, multi-value creation focuses the creation of multiple values by multiple actors. This should lead to profit not being the main value created anymore. And as explained in the new business models, payment can also be in other ways than money. However, the current economy is not one of multi-value creation yet. Currently, there are still many companies that focus solely on profit and not on the creation of other values. Profit often goes to the shareholders and not stakeholders, while multi-value creation considers all stakeholders. It is therefore a vastly distinct value that is created and does not fit in the economic value category. By seeing profit as a separate value category, it can also be taken into account while measuring the performance on multi-value creation.
5.1.3 Matrix
The matrix is improved with the new value and actor categories. The combination of a value and an actor can be noted with an X in the matrix. The combination of multiple values and/or actors will lead to multiple notations in the matrix. The X will be red to mark the difference between what values the MNC creates only by itself and what values it creates cooperating with others. Multi-value creation encourages all actors to work together to create all values, and therefore it should be discouraged for MNCs to create values only by itself. For example, an MNC that creates profit by itself, cooperates with other businesses to create ecological value and cooperates with non-profit organizations to create social value will have the notations in table 9.
Table 9. Adapted matrix as an example MNC Employees Other
businesses
NGOs Society Governmental actors
Profit X Economic
Ecological X X
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The more values a MNC creates and the more actors it cooperates with, the more notations there will be. In the ideal scenario of multi-value creation and new business models there are no empty spaces in the matrix and no red X. Everyone helps to contribute to create one or multiple values.
In practice, this matrix can be seen as a guideline for companies. Companies can use the matrix in several ways. First of all, it can be used to assess the current performance of the company. The matrix can be used to get a clear overview of the values created and actors involved. Second of all, it can be used to see where improvements can be made. After assessing the current performance of a company, the matrix will show empty spaces and thereby showing where there is room for improvement. Finally, it can be seen as a guideline for companies that want to transition their organization. Companies that only generate profit by themselves can use the matrix to see which actors they can involve and what values they can create.
5.1.4 Answer research question 1
This leads to the final answer on the first research question. The first main question is: Can the
results found by Voors (2017) be generalized when replicating her research with other MNCs from both developed markets and emerging markets? All actors, values, actor-categories and
value-categories could be identified again with a sample with firms from both developed and emerging markets. However, not the same results were obtained. The results have not changed due to the difference in nature of the companies. However, there were actors identified that did not seem to fit in one of the categories developed by Voors (2017). Due to a lack of clarification in her research it is impossible to say if this difference lies in the actors identified, the analyzing method, researcher’s interpretation or purely in the categorization. In the end however, this leads to different results.
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choices has been given already, but the short summary is as follow: MNC and employees were made two categories, because of the difference in interests. Educational & research institutes did not need to be a separate category, as those institutes fit perfectly in other categories. The category ‘value chain actors’ was renamed for accuracy. The category ‘society’ was added for the actors that did not fit in the other categories. The category was named ‘society’ based on the common characteristics of the actors that did not fit in other categories. Concluding, the results obtained from this research differ on several points from the results obtained by Voors (2017) and therefore it cannot be said that the results are generalizable.
5.1.5 Measurement tool: From business the old way to multi-value creation
Several requirements for a measurement tool have been identified. After comparing the developed matrix against these requirements, it becomes clear that it does not meet all the criteria. The matrix does measure what values are created by what actors, but it does not measure other factors like the transaction model, the circular economy and the corresponding business models. The empty spaces in the matrix do show where there is room for improvement, but this also has to be shown for the factors the matrix does not measure. This has led to the development of a new measurement tool which will be explained below. The measurement tool consists of several parts, each part is needed to fulfil a requirement identified earlier. All parts together are combined in one, clear matrix which will be presented at the end. The measurement tool exists out of the following parts: The matrix shown in section 5.1.3 Matrix. The matrix serves to identify which values are created and which actors are involved in this. To translate the matrix into scores that can be used in the measurement tool the following method is proposed: measure which values are created and by whom with the matrix. The matrix can have 24 combinations of value-creations with other actors. The number of combinations a company has will be divided by 24 * 100%. This percentage will be the performance of the MNC on this part. For every value the company creates only by itself it will get a deduction of 5%. What transaction model the company has does not have to be measured separately, since the outcome of this will reveal that. MNCs that mainly create values by themselves have the traditional transaction model, while companies that mainly create values in cooperation with other actors will have the transaction model from multi-value creation.
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be measured and will show how a company is doing on the circular economy part. Every strategy has a different possible impact (Potting et al., 2018) and the strategies are divided in three parts based on the impact they have. Based on these impacts, it can be decided to give every strategy a different weight. The strategy with the possibly biggest positive impact will be assigned the biggest weight. All strategies together will determine the performance on the circular economy. Details for this method have to be developed further. Potting et al. (2018) could possibly provide more detailed knowledge about the measurement of these strategies, as it is done in their paper.
The third part of the measurement tool is about the business models. Literature shows that new business models are a part of multi-value creation (Jonker, 2016). There are five new business models identified and the business model can be compared against those. However, the five new business models develop by Accenture (2015) are not the only new business models possible. The seven characteristics of new business models (Jonker, 2012) and four principles of multi-value creation in the circular economy (Jonker, 2016) have to be taken into account as well. A simple example of how the company could be classified in one of four categories with the following scores:
1. New business models not used at all 0%
2. New business models used for (small) parts of the company 25% 3. New business models used for most of the company 75%
4. New business models fully adapted 100%
However, a reliable way to measure this part has to be developed. The example mentioned above is probably too simple and leaves too much room for ambiguity.
5.1.6 Negative values as part of value creation
Finally, during the analysis it has come to the attention that there is another factor that should be considered: negative values. Several sources and even the analyzing of the reports show that firms do not only create positive values. They also create negative values in several ways. These values can impact not only the MNC, but also their customers, consumers, countries and society in general. Unfortunately, there is no measurement tool available yet to measure the negative values created.
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involved, this would be negative for the negative values. The more negative values created, and the more actors involved increases the severity of the scandal. However, it is unknown if the same actors and the same values are involved with negative value-creation. There has to be done specific research regarding the negative values created and which actors are involved first. This leads to table 10. This table shows a framework that can be used to judge the multi-value creation of an MNC.
Table 10. Measurement tool multi-value creation
Score % Room for improvement %
Matrix performance Circular economy - Refuse - Rethink - Reduce - Reuse - Repair - Refurbish - Remanufacture - Repurpose - Recycle - Recover energy
New Business Model adaptation Negative values
Average
