‘The Present State of Social Sustainability Derived from
Literature and Business Practices’
Case Study of Philips Lighting
Program: MScBA Strategic Innovation Management Name: Liesbeth Janine Luimes
Student Number: S1773119
Supervisors:
dr. ir. Michiel Hillen (first supervisor, RUG - FEB) ir. Anton Brummelhuis (Philips Sustainable Lighting) dr. Eelko Huizingh (second supervisor, RUG - FEB)
2
Prologue
Although the master thesis is a compulsory part of the MScBA Strategic Innovation Management, I never experienced writing my thesis as a compulsory process. On the one hand this was because of the guidance and mentorship of both Mr. Hillen and Mr. Brummelhuis. On the other hand this was because social sustainability research is still in an exploratory phase which lead to interesting opportunities for me. While writing my thesis I learnt a lot about social sustainability, about how to conduct research and how to use my personal skills in research; for this am very thankful. Lastly, it was highly motivating and inspiring to interview the Philips Lighting employees, who were enthusiastic and passionate about the topic of social sustainability.
Abstract
This research established a present state of the concept of social sustainability and how this concept is used in business and innovation strategy. Social sustainability research, is still in an exploratory phase. Social sustainability is defined in this paper as; ‘The impact a business (and its value chain) has on the quality of life of stakeholders in an as broad range as possible’. This definition is derived from the people pillar of the Triple Bottom Line (TBL) (Dahlsrud, 2008).
In this research a literature study as well as an internet analysis of four companies (Philips, DSM, AkzoNobel and Unilever) were used to come to a present state of affairs. Then by conducting 25 interviews at Philips Lighting a case-study was built, which has a focus on a less explored area of social sustainability. Namely, social sustainability on product level.
3
Index
1. Introduction... p. 4-5 2. Literature Review... 1. Methodology... 1. Sample Selection... p. 5 2. Method of Analysis... p. 6 2. Review...1. Social Sustainability Defined as part of the Triple Bottom Line…………. P. 6-7 2. Corporate Social Responsibility... p. 7 3. Stakeholder Theory………... p. 7-8 4. Maslow’s Hierarchy of Needs... p. 8 5. Link to Case Illustration... p. 8-9 3. Analysis and Results...
1. Descriptive Results..……….. p. 9 2. Derivative Results……… p. 10-11 3. Internet Analysis... p.11 1. Research Context... p. 11-12 2. Methodology... 1. Data Collection... p. 12 2. Method of Analysis... p. 12 3. Analysis and Results... p. 12-14
1. DSM……….. p. 14-15 4. Present Situation of Social Sustainability... p. 15-17 5. Case Study... p. 17 1. Research Context... p. 17-18 2. Methodology... 1. Sample Selection... p. 18 2. Sample Characteristics... p. 18-19 3. Data Collection... p. 19 4. Method of Analysis... p. 20 3. Results and Analysis... p. 20 1. Comparison with the Present Situation of Social Sustainability………… p. 21 6. Recommendations... p. 22-23 7. Conclusion and Limitations...
4
1. Introduction
In the last decade an important shift in how businesses handle Corporate Social Responsibility (CSR) is noted; from positioning businesses against society, towards the integration of business and society (Porter & Kramer, 2006). This integration of business and society can be understood as social sustainability. In this paper social sustainability is seen as the people pillar of the Triple Bottom Line (TBL) (Elkington, 1998), therefore, the terms are used interchangeably. Despite the place of the people pillar in the TBL literature, academic understanding about the concept is lagging behind the understanding of the other pillars; planet and profit (Hubbard, 2009; Simola, 2012). Additionally, companies increasingly commit to social sustainability despite the fact that the concept is not completely understood (van den Brink et al., 2004). This research aims to provide a starting point in the understanding of this concept.
At the moment of writing this paper, no definition of social sustainability was dominant. In this paper the following definition of social sustainability was used; ‘The impact a business (and its value chain) has on the
quality of life of a as broad as possible range of stakeholders’. This definition is derived from the definition of
the people pillar of the TBL (Dahlsrud, 2008), this will be explained in more detail later on. The research goal of this paper was as follows:
To determine what the concept of social sustainability comprises, and determine how this is used in business strategy and innovation strategy.
This goal can be divided into the following sub-goals:
1. Identify in the academic literature and in business practices: a. Definitions of social sustainability
b. Drivers of social sustainability
c. Stakeholders (and stakeholder management) related to social sustainability d. Innovation strategies related to social sustainability
2. Identify the present situation of social sustainability.
3. Case-study at Philips Lighting.
Business strategy was understood as the strategic intent of a company; the long term goal that guides the development of new businesses and markets and leverages corporate resources (Prahalad, 1993). Since this is still broad I took into account the strategic intent of social sustainability practices. In addition to that I focused on innovation strategy which is the strategic intent related to the product innovation, which is embodied in the outputs of an organization (Schilling, 2010). This could be seen as directly related to the business strategy of a company that is related to the creation of new businesses and markets through their outputs.
A driver is understood in this paper as a trend that influences a company’s social sustainability practice, and is often related to the fulfillment of a human need as those recognized by Maslow (1943). The research on the definition and drivers of social sustainability is conducted in order to get an idea of what the business strategy and innovation strategy for social sustainability comprises.. In this research stakeholders are included in a broad perspective, stakeholders thus are: ‘any group or individual who can affect or is affected by the
achievement of the organization’s objectives’ (Freeman, 1984). Stakeholders in a broad range can likely
5
This research was semi-explorative because the research topic is relatively new. Additionally, the data collection and analysis were qualitative. For the data collection methodological triangulation (Denzin, 2006) was used. First, a literature study was conducted, second, an internet site research was conducted of Philips, DSM, AkzoNobel and Unilever. Within these two steps I looked for possible definitions, drivers, stakeholders, stakeholder management practices, and innovation management. These steps combined provided me with a present state of affairs of social sustainability from an academic an business background. Lastly, interviews were conducted at Philips Lighting. This illustrated the specific social sustainability case for Philips Lighting, with a focus on the business activities at product level. This case could then be compared to the present state of affairs.
This study is important for three reasons. Firstly, it brings academic the understanding of the social pillar of the TBL closer to the level of understanding of the other pillars of the TBL. Second, it provides companies with a more clear understanding of social sustainability related activities. Third, the social sustainability perspective on a product level is elaborated on in this paper. This can likely have an impact on the product or service development in companies.
In this paper it is found that there are three overarching business activities in which social sustainability is found. These activities are related to; 1. Value chain 2. Product level 3. Corporate philanthropy. These activities differ in their degree of context specificity, depending on whether regulations exist, and whether they respond to human needs as identified by Maslow (1943). Eventually, two requirements are suggested on the product level for products or services in order to be classified as socially sustainable. Thus to be socially sustainable a product or service should: 1. Increase the fulfillment of a clearly formulized human need as identified by Maslow (1943) 2. Compensate a trend that decreases the quality of life. Besides these requirements for the social pillar of the TBL it is recognized that there is an importance for companies to also take into account the environmental and economic pillar.
This paper starts with the literature review section, followed by the internet analysis section. Together these sections provide the information for the present state of affairs section. This will be followed by the case-study at Philips Lighting, which will be compared with the present state of affairs. Following are the recommendations, and finally the conclusions are presented.
2. Literature Review
2.1. Methodology 2.1.1. Sample Selection
For the literature review I analyzed 30 academic papers, which was a manageable sample within the scope of this research. To arrive at this sample, the following steps were taken: First, I used the Business Source Premier database at 03/04/2013, with the search term ‘social sustainability’ to look for academic papers. Second, I selected on the quality of the journals; only top journals or very good journals were included, as indicated by the University of Groningen, research institute SOM (Appendix A). In the third step the selection is done by subject. The included subjects are: sustainability, moral & ethical aspects, sustainable development reporting,
ecology, ecological economics, economic aspects, human ecology, literature reviews, methodology, sociological aspects, social indicators, social norms, social participation, social responsibility, sociocultural factors, sustainability - social aspects, values, well-being, caring, civil society, community involvement. This selection
method allowed me to keep qualitative good papers in the sample, which allowed me to cover important findings in the relatively new field of research. After these stages I had a sample of 51 papers.
6
when the paper concerned; a definition of social sustainability, drivers that are possibly related to social sustainability and topics relating social sustainability to stakeholders and innovation. When this was not the case, or when the papers were irretrievable through the database, papers were not used in the analysis. This last step narrowed the sample down from 51 to 30 papers.
2.1.2. Method of Analysis
An overview of definitions, stakeholders and drivers in relation to social sustainability was made in Microsoft Excel 2010. To ensure consistency among the categories I used the same methodology again a week later to make another overview, which I compared to the original overview. During this review I changed a few definitions and reclassified a few stakeholders. For example, after studying the material I combined the stakeholder category community members with the stakeholder category civil society because of the high similarity between description of the terms. Not all papers go into depth on all of the topics that were relevant for this research.
2.2. Review
2.2.1. Social Sustainability defined as part of the Triple Bottom Line
When defining sustainability oftentimes the definition of the Brundtland Commission is used; ‘Development
that meets the needs of the present without compromising the ability of future generations to meet their own needs.’ (United Nations General Assembly, 1987). Frequently this definition is interpreted solely from an
environmental perspective, although it could also be interpreted from a social perspective. Besides, it is a general definition of sustainability, and therefore can be difficult for businesses to work with.
There is no single definition of social sustainability, but definitions recognized that profit is only one element in the long-term success of companies, and the future of people (internal and external) are new concerns (Kleindorfer et al., 2005). Kleindorfer et al. (2005) point in the direction of the TBL to aid in the inclusion of people and planet in business practices.
The TBL is based on the idea that a firm measures its performance in relation to stakeholders including local communities and governments, not just direct stakeholders (Hubbard, 2009). It aids businesses in incorporating their responsibilities towards society in their business practices and performance measurements. The three pillars used in the TBL as identified by Elkington (1998) are people, planet and profit or as referred to in this paper: social, environmental and economical. With these measures the TBL gives direction to the responsibility of a business is beyond the making of profit. In comparison to the environmental and economic pillars of the TBL, the social pillar has received little attention (Hubbard, 2009; Simola, 2012).
In this paper social sustainability was seen in the context of the TBL and the definitions of Hubbard (2009) of the TBL were used. These definitions are as follows:
- Social pillar: The impact a firm (and its value chain) has on the communities in which it works.
- Environmental pillar: The amount of resources a firm uses in its operations and the by-products its activities create.
- Economic pillar: Concerned with producing products and services that customers want, to regulatory standard at a profit.
7
The working definition is based on the social pillar of the TBL, because this is the most used in the literature as well as in business as will be shown later on in this paper. The definition of social sustainability used in this research paper is; ‘The impact a business (and its value chain) has on the quality of life of an as broad as
possible range of stakeholders’. This definition is derived from the people pillar of the TBL as defined by
Hubbard (2009). In which communities was replaced with ‘a broad range of stakeholders’ to cover a wider range of stakeholders. Additionally, the impact of a business is formulated more specific as the impact the business has on the quality of life of the stakeholders. Later on in this paper explanations will be provided of both the stakeholders in a broad range as well as the quality of life.
2.2.2. Corporate Social Responsibility
At the basis of CSR lies the article written by Friedman (1970) in which he stated that in society, ‘There is one
and only one social responsibility of business–to use it resources and engage in activities designed to increase its profits so long as it stays within the rules of the game’. CSR can be seen as the opposite of this spectrum;
companies have responsibilities to society beyond the making of profit. Or as defined by Defee et al. (2009); ‘CSR represents how firms satisfy the needs of society and the environment while meeting their economic goals’. In section 2.2.1. the clear link between this definition has come forward.
This is only one possible definition of CSR. Neither in academics, nor in business practice a dominant definition of CSR has been established. Observed by Dahlsrud (2008) was that none of the CSR definitions defined the social responsibility of business, but rather described CSR as a phenomenon. A reason he provided for this conclusion is that there is confusion about what exactly constitutes the social responsibility of business. In this paper the three pillars of the TBL are seen as giving direction to this social responsibility.
2.2.3. Stakeholder Theory
Dahlsrud (2008) observed that further knowledge of how CSR is socially constructed in a specific context must be obtained by other means than through a definition of CSR. To provide such means he points in the direction of stakeholder theory. Stakeholder theory (Freeman, 1984) underscores the fundamental idea behind the notion of sustainable conduct; firms must consider stakeholders and community interests in order to ensure their long-term prosperity and survival (Ehrgot, 2010). This opposes the classical shareholder value paradigm (Freeman, 1984), and overlaps with the understanding of the TBL by Hubbard (2009).
In stakeholder theory is often chosen between a broad and a narrow definition. The broad definition of stakeholders as constituted by Freeman (1984) is: ‘any
group or individual who can affect or is affected by the achievement of the organization’s objectives’. This does
not mean that all groups and individuals could be considered to be a stakeholder. The narrow definition of stakeholders is stricter; stakeholders are those
groups on which the organization is dependent for its
continued survival (Freeman & Reed, 1983). In Figure 1. there is also a ‘Not Relevant Stakeholders’ category,
8
For insight into stakeholders in relation to social sustainability practices I draw upon the research by Maignan & Ralston (2002). In their research they identify different stakeholder categories, these are:
1. Customers 2. Employees 3. Shareholders 4. Suppliers 5. The community
In a company’s operations the importance of the stakeholder in relation to the concept of social sustainability is evident for two reasons. First, in the relationship between a company and a stakeholder the model of a ‘coalition’ is leading, in which both the company and its stakeholders expect to benefit from their contributions (Cyert & March, 1963). This relates to my understanding of social sustainability in the sense that while maintaining itself a company it also improves the quality of life of their stakeholders. Second, stakeholders can pressure businesses to take full responsibility for their operations and clearly demonstrate their environmental and ethical behavior (Ashby, 2011).
2.2.4. Maslow’s Hierarchy of Needs
Maslow’s hierarchy of needs is originally a model that aims to explain human motivation. Depicted in the pyramid in Figure 2. Is the hierarchy of human needs as suggested by Maslow (1943), with the needs on the base being the most basic needs. Maslows’s hierarchy of needs is used in this paper to assess whether a company positively impacts the quality of life of their broad stakeholders. One assumption of Maslow (1943) that people are always looking to fulfill these needs, and if these needs are not met that individuals will feel anxious and tense. Because this feeling is uncomfortable people will always look for ways to fulfill these needs, and thus will feel
better when these needs are fulfilled. Additionally the word hierarchy implies that a person first looks to fulfill the needs on the lowest level of the hierarchy, before moving on to the next level. In my analysis I will look at the needs that companies respond to, in order to improve the quality of life of their stakeholders.
2.2.5. Link to the Case Illustration - Philips Lighting
Jean-Marc Huët, CFO of Unilever mentions that a reliance on governments to deal with challenges concerning the environment and social dimension of the TBL does not longer work (Holmes, 2012). Thus, a role for companies in dealing with these social challenges is recognized in the business world.
9
challenges they have to face and their unique position (Van Marrewijk, 2003). This also emphasizes the point made by Porter and Kramer (2006) that companies should look for the points at which they intersect with society. At these intersections companies should contribute to society in a way that is adjacent to their business.
2.3. Analysis and Results 2.3.1. Descriptive Results
Out of the 30 papers in the sample 17 papers provided some sort of definition of social sustainability. Whenever the papers provided a definition either the Brundtland definition (United Nations General Assembly, 1987) or the concepts of the TBL (Elkington, 1998) are preferred (Table 1), with the TBL having the superior numbers. Other identified elements of social sustainability definitions are; stakeholders, voluntariness, beyond legal requirement and quality of life. Additionally, out of the 30 papers used in this analysis 23 were published in two journals, namely ‘Ecological Economics’ and ‘Journal of Business Ethics’.
A driver is understood in this paper as a trend that influences a company’s social sustainability practice, and is often related to the fulfillment of a human need as those recognized by Maslow (1943). These human needs are “owned” by a company’s stakeholders. For example, the stakeholder group employees has the need for more equality of gender, which aids in the establishment of esteem for women as well as security for their households. The possible stakeholders indicated in the academic papers that have relevant drivers for business are consumer health, consumer shelter, employees, suppliers and the community/society. Most mentioned are the community/society and the employees (Table 2). Except from the shareholder stakeholder category, all other stakeholder categories identified by Maignan & Ralston (2002) have related drivers of social sustainability. These drivers have a broad range. For example, for the stakeholder community/society drivers involving the aid to developing countries is mentioned as well as recreational programs. A more extensive version of Table 2 can be found in Appendix D. As can be seen in Table 3, all stakeholder categories of Maignan & Ralston (2002) are found in the literature analysis. Additionally, other stakeholder groups are identified of which the most important ones are NGO’s and governments. A more extensive version of the table, including all these additional groups can be found in Appendix E. Table 1. Definitions Included in Definition Papers Times Mentioned Out of 17 In relation to TBL 3,4,5,6,7,18,20,25,28,32,33,40 12x Brundtland 3,4,6,7,12,25,28,40 8x Stakeholders 3,4,5,6,12,28,33 40 8x Voluntariness 5,6,16,28 4x Beyond Legal Requirement 18,20,50 3x Quality of Life 3,40,12 3x Table 2. Drivers Stakeholders in relation to drivers Papers Times Mentioned Out of 10 Community/Society 1,5,6,11, 12,14,16,20 8 Employees 5,6,10, 11,12, 14,20 7 Consumers - Health 1,5,6,12, 16 5 Suppliers 12,14,7 3 Consumers - Shelter 1 1 Table 3. Stakeholders
10
2.3.2. Derivative Results
Definition - Firstly, social sustainability is said to be context specific (Van Marrewijk, 2003); which makes the
establishment of a definition difficult. Context specific means that the way social sustainability is immersed in business operations can possibly differ substantially between companies dependent on a certain segmentation like industry or company size. The fact that this definition is context specific can complicate social sustainability research, because different definitions and interpretations can make that different researches are not comparable.
Business Activities - From the literature two business activities are derived in which social sustainability
practices are found. These are: the value chain and the product level. 1. Value chain
Description - The commitment of business on establishing a positive impact on the quality of life stakeholders in an as broad as possible perspective, in the value chain. This does include all the parties that add value to the output of the organization, and logically the own organization as well. This commitment is consistent with an observed trend that stakeholders hold companies responsible for their own activities as well as the activities in their supply chain (Ashby, 2011). This means that companies have to extend their social sustainability practices to the parties in the supply chain and to those with which they collaborate.
Stakeholders & drivers - The stakeholders that are most related to the value chain are the employees and the suppliers. The driver of social sustainability practices for these stakeholders in relation to the value chain activities is mostly safety and security (Maslow, 1943).
2. Product level
Description - The commitment of business on reaching a positive impact on the quality of life of stakeholders through the outputs of the organization.
Stakeholders & drivers – Naturally the stakeholder that is most important in this business activity is the consumer, since this stakeholder has a direct interaction with the output of the company. The drivers for the consumer stakeholder are mostly related to human physiological needs (Maslow, 1943), of which health, food and shelter are dominant in the literature. For companies it may therefore pay of to be aware of what trends influence the fulfillment of those physiological needs for their consumers.
Overall - Comparing the two business practices it becomes clear that the understanding of the value chain is
clearer than the understanding of the product level. The literature provides more explanations and examples of practices that are related to the value chain. This can likely be because there is a more general understanding of how to measure safety and security, than there is an understanding about how a company should measure whether it improves a consumer’s health.
Innovation - None of the papers in the sample concerned the role of innovation in social sustainability. This
may mean that my assumption about the relevance of innovation in social sustainability, because of the link with innovation and the quality of life, is wrong.
Propositions - From this analysis I derive the following propositions, which I will investigate further during the
internet analysis and the case-study:
11
Proposition 3: There are two main business activities in which social sustainability is found: the value chain and on product level.
Proposition 4: Of these two activities, the product level is less understood.
3. Internet Analysis
In this section the goal is again to identify the following areas in relation to social sustainability: definitions and drivers, stakeholders and stakeholder management, and innovation. Besides this, the analysis will look for confirmation, rejection or alteration of the propositions.
3.1 Research Context
For this analysis I selected four companies; Philips, DSM, AkzoNobel and Unilever, these will be introduced later in this section. The choice for Philips was obvious, since I was given the opportunity to study social sustainability at this company in-depth; therefore, including Philips in this part of the analysis gives me the opportunity to verify the information shared on the corporate website with the information obtained in the interviews.
Besides that, Philips, AkzoNobel and Unilever are three Dutch companies identified by the Dow Jones Sustainability Index as sector leaders in their respective industries in 2012. DSM, is not named as super-sector leader, nonetheless the company is active in the field of social sustainability and working together with i.a. Philips on developing measurement tools for social sustainability.
By the inclusion of companies from different industries I aimed to establish a general view of social sustainability practices in businesses, with which I compare the case-study of Philips Lighting.
Philips
Philips is a company that serves professional and consumer markets through three sectors, which are: Healthcare, Lighting, and Consumer Lifestyle. Their mission is to improve the lives of people through meaningful innovation. The innovative capacity of Philips is demonstrated through the translation of customer insights into technology and applications. This improvement of lives will be when products or services contribute to the achievement of a healthier and more sustainable world (www.philips.com).
DSM
Royal DSM is a science-based company active in health, nutrition and materials. The company aims to create sustainable value for all stakeholders by connecting competences in Life Sciences and Material Sciences. The company wants to deliver innovative solutions that nourish, protect and improve performance in markets such as food and dietary supplements, personal care, feed, pharmaceuticals, medical devices, automotive, paints, electrical and electronics, life protection, alternative energy and bio-based materials www.dsm.com).
AkzoNobel
AkzoNobel is an industrial company; its businesses are active in decorative paints, performance coatings and specialty chemicals
.
The company aims to deliver leading performance in these areas. Central to that is a focus on four end-user segments: buildings and infrastructure, transportation, consumer goods and industrial (www.akzonobel.com).Unilever
12
their health and well-being by 2010. Additionally, they indicate that innovation as well as consumer research are important to reach this goal (www.unilever.com).
3.2. Methodology 3.2.1. Data Collection
For the data collection I visited the corporate websites of the four selected companies. The exact links and data on which I visited these websites can be found in Appendix E. Per hyperlink I copied and pasted the textual information from the webpage to a Microsoft Word 2010 document, in which I later on performed the analysis.
3.2.2. Method of Analysis
To get an image of what information was disclosed in the webpage content, I first read through the documents highlighting sentences about definitions, drivers and stakeholders in relation to social sustainability. Then I grouped these highlighted phrases schematically. A week later I went through this process again so I could compare both of the results, in order to ensure validity.
3.3. Analysis and Results
Definition - None of the companies provided a clear definition of social sustainability, however, companies
provide examples of practices or products in their webpage content that they consider to be socially sustainable. Besides that DSM, AkzoNobel and Unilever all mention the TBL in their sustainability section, although they do not go into depth on profit pillar in these sustainability sections.
Business Activities - Besides the two business activities found in the literature review, a third business activity
is found in the internet analysis in which social sustainability practices are found. This business activity is ‘Corporate Philanthropy’ and will be explained later on in this section.
1. Value chain
All companies implicitly or explicitly recognize the need for these management practices, a detailed report can be found in appendix G.
Description - The description in the internet analysis remains the same as in the literature analysis.
Stakeholders & drivers - Again the stakeholder focus lies on the supplier and employees, and the main driver of social sustainability for these stakeholders in this business activity remains safety and security.
Context Specificity - With regard to the value chain social sustainability as understood here is not context specific. This because all companies adhere to specific international standards, and are audited on them. Which likely means that these practices are comparable across companies. Details can be found in Appendix G. 2. Product level
13
Another driver, is the bottom of the pyramid (BOP), or the developing countries. These are markets, instead of human needs. Nonetheless, it is a market that is recognized by the companies as one that plays an important role in social sustainability. Additionally, it is a market with distinctive needs which likely makes it an attractive driver for companies.
AkzoNobel, as a chemical company specialized in paints and coatings, does not provide as many examples as the other companies of how they translate these drivers into products. Their main product that responds to a driver is an air purification paint, which responds to a physiological human need of air (Malsow, 1943). However, this is not a driver recognized by all companies.
Another important aspect of social sustainability turns out to be partnerships and engagement. Stakeholder engagement especially seems important because of the possibility this gives to derive what the needs of the stakeholders are. As Unilever explains ‘Listening to others and learning from our stakeholders informs our
decision-making, strengthens our relationships in order to deliver commitments and succeed as a business’.
Sometimes these stakeholders engagement practices take the format of partnerships. One example of this is that DSM is working together with the World Food Program to fight against hunger.
Context specificity - For the product level social sustainability is context specific. Although the companies respond for the most part to the same drivers, the translation of these drivers to products is completely different. Thereby it confirms van Marrewijk (2003). For example when considering the driver of health: Unilever may develop ice creams with less saturated fats, whereas Philips may develop medical equipment that can easily be used in developing countries.
3. Corporate Philanthropy
Strategic intent - The commitment of an organization to a positive impact on the quality of life of an as broad range of stakeholders through philanthropic deeds.
Stakeholders & drivers - For this business activity the community stakeholder has an emphasis. Although it is clear from the websites that there is a wish of the companies to aid in community development, there is not one dominant idea on how to do this. A clear example however is Unilever, which has a ‘Livelihoods’ plan. With this plan, Unilever makes their supplier a community stakeholder. For example, they build partnerships with suppliers in Indonesia. Another more conventional example is the SimplyHealthy@Schools program for which Philips employees visit elementary schools to illustrate the children how they can improve their health and well-being, in addition a free lighting upgrade is given to these schools( http://www.philips.-com/about/sustainability/ourcommunities/simplyhealthyatschools.page). Partnerships within this business activity are often found, this could for example be a
partnership with an NGO.
Context specific - For corporate philanthropy social sustainability is context specific, because it highly depends on how a company interprets its community and its needs.
Overall - Comparing the business activities it is
obvious to note that the value chain is most well developed and understood because of the presence of international standards.
Besides this, the three activities have their own emphasis on different stakeholders. Together they cover the stakeholder groups as identified by
Table 4. Stakeholders
Stakeholders Philips DSM AkzoNobel Unilever
14
Maignan and Ralston (2002). In Table 4 on the previous page a more extensive overview of all the named stakeholders is given. The companies are highly similar in the stakeholders they communicate on their website.
Innovation - Innovation is recognized to have a
role in sustainability by all the four companies, especially when it comes to innovation in products. Another issue to be recognized is the emphasis on needs by both Philips and DSM (Table 5).
Propositions – Here I will come back to the
propositions made in the literature analysis, to see whether or not they are confirmed.
Proposition 1: Social sustainability is context specific not only in definition but also in business activities. This is confirmed for the product segment and the corporate philanthropy segment.
Proposition 2: Innovation strategy does not play a role in social sustainability. This is rejected by internet analysis.
Proposition 3: There are two main business activities in which social sustainability is found: the value chain and on product level. This proposition needs to be altered into: There three main business activities in which social sustainability is found: the value chain, product level and corporate philanthropy.
Proposition 4: Of these two activities, the product level is less understood. This proposition needs to be altered into: Of these three activities the value chain and corporate philanthropy are best understood.
3.3.1. DSM
At DSM I interviewed Jacobine das Gupta, project manager of the People+ program. During this interview the previously drawn conclusions were confirmed.
4. Present Situation of Social Sustainability
In this section I combined the results from the literature review with the results of the internet analysis to come to a present state of affairs of social sustainability. From this I will derive my focus points for the case study, as well as the propositions to be tested in the case-study.
Definition - Academics as well as businesses do not provide clear definitions of social sustainability. However
dominant in both is the view that social sustainability is part of the TBL. For this reason the definition of social sustainability used in this paper is based on the definition of the social pillar of the TBL (Hubbard, 2009), two adjustments are made to this definition in order to make it more suitable for this research.
Business Activities - These are activities that a business engages in, in which social sustainability practices are
found. The value chain and the product level are found in both the literature analysis and the internet analysis. The corporate philanthropy activity, however, is not found in the literature analysis. One explanation for this might be that the literature recognizes corporate philanthropy as part of CSR.
1. Value chain
Table 5. Innovation
Philips DSM AkzoNobel Unilever Strive to make the
World healthier and more sustainable through innovation Aim to meet these needs (trends) by providing innovative and sustainable solutions. – adds eco-value Sustainability focus based on sustainable innovation We will do this by winning with brands and innovation, in the marketplace; through continuous improvement. Where technology
15
Description - In both the literature as well as in business the understanding of social sustainability in the value chain can be described as: The commitment of business on establishing a positive impact on the quality of life stakeholders in an as broad as possible perspective, in the value chain. This does include all the parties that add value to the output of the organization, and logically the own organization as well
Stakeholders & Drivers - In both the literature and in the internet analysis the supplier and the employee turned out to be the most important stakeholders in this business activity. The main driver here is the human need of safety and security (Maslow, 1943)
Context specificity - The social sustainability aspect in the value chain is recognized to be not context specific, because of the different standards regulations that the companies adhere to.
2. Product level
Description - In both earlier performed analyses the understanding of social sustainability on product level can be described as: The commitment of business on reaching a positive impact on the quality of life of stakeholders through the outputs of the organization.
Stakeholders & drivers - For this activity the employee stakeholder is identified as most important, and the basic human needs (Maslow, 1943) are the most important drivers of development of social sustainable products. In the literature review, these are health food and shelter. Whereas the internet analysis confirms health as an important driver, and adds the BOP or developing countries as driver.
In the internet analysis it is noted that stakeholder engagement is a practice that companies engage in, in order to derive several sub-trends related to the drivers. Also partnerships are of importance for companies on the product level, not much examples are given, but this seems to be important in order to enter markets with which another party has more experience or also understand the needs of the market better.
Context specificity - It can be noted that the socially sustainable products are related to a basic human need (Maslow, 1943). How companies respond to this need, differs per company, and is thus context specific in the product element of social sustainability.
3. Corporate Philanthropy
Description - The corporate philanthropy actions can be described as the commitment of an organization to a positive impact on the quality of life of an as broad range of stakeholders through philanthropic deeds.
Additionally, it must be noted that corporate philanthropy here is not interpreted as just donating money. Contrarily, it is seen as an act of looking executing philanthropic deeds that are adjacent to their own business, just like what Philips did with the SimplyHealthy@Schools program.
Stakeholders & Drivers - The stakeholder recognized for this activity is the community, however, no clear drivers are observed. Collaboration with other parties like governments and NGO’s may have a prominent role here. Most companies see communities as those that are affected by their value chain, like those people living around their factories. The only company that actively seems to improve the quality of life of the community stakeholder is Unilever with its Livelihoods plan, in which they for example build partnerships with suppliers in Indonesia. DSM intends to reach the community in a different manner, namely through their employees. Context specificity - Corporate philanthropy is recognized to be context specific, because the adjacency to the own business makes that the actions differ per company.
Innovation - Innovation has not come forward as related to social sustainability in the literature review. In the
16
role is mainly dedicated to the product level. Which means that innovation plays an important role when it comes to the development of new products or services that respond are socially sustainable and thus positively contribute to the quality of life of the consumer. For this innovation to take place correctly it is important for the companies to be aware of the influences on the quality of life of their consumers.
Focus Points and Propositions for the case-study
Of the three business activities the value chain and the corporate philanthropy element are most clear in academics as well as in business live The understanding of the product level, however remains rather vague. An example of a remaining question is: What is the exact role of innovation on product level when it comes to social sustainability? Therefore, the case-study at Philips Lighting will have a more extensive focus on the product level segment. This focus has been derived from the confirmation of the hypothesis that of the three business activities the value chain and corporate philanthropy are best understood. This proposition is therefore removed from the propositions to be tested.
Additionally, attention will be given again to the propositions, which have been adjusted after the first two analyses.
- Proposition 1: Social sustainability is context specific not only in definition but also in business activities. This is confirmed for the product segment and the corporate philanthropy segment.
- Proposition 2a: Innovation strategy does not play a role in social sustainable product or service development. - Proposition 2b: Innovation strategy does play a role in social sustainable product or service development. analysis.
- Proposition 3: There three main business activities in which social sustainability is found: the value chain, product level and corporate philanthropy.
5. Case-Study
The goal of the case-study is to verify the earlier presented present state of affairs, as well as to dive deeper into the activities related to social sustainability on product level. Besides that the aim is to confirm or reject the propositions that are established in the present state of affairs.
The unit of analysis in the case-study is Philips Lighting. Through interviews I gathered information about social sustainability. Philips is the ideal candidate for social sustainability research because the company is engaged with the concept, which is ideal for a semi-explorative research. This is for the simple reason that a company needs to be involved with social sustainability to some extent to be able to make observations about it.
5.1. Research Context Philips Lighting
Philips Lighting’s ambition is ‘Enhancing Life with Light’. This goal is derived from the corporate vision in which is stated that Philips wants to improve the lives of three billion people by the year 2025. Philips wants to reach these improvements not only with ‘green products’ but also by addressing the existing ‘social needs’. Philips measures this using three categories; healthcare (curative), well-being (preventive) and green products. The trends driving social sustainability as identified by Philips are a growing and aging world population as well as urbanization which will lead to global warming and scarcity of energy, food, water and material.
17
presence in these categories.. This means that Philips Lighting might need to rethink the way it uses their social measurements, and what social sustainability means for them.
It is important to note that in the lighting industry a very radical change is taking place; the transition from incandescence lamps to LED. At the moment LED is highly contributing to the green segment of Philips Lighting. Because of the digital aspect of LED, there are numerous possibilities that LED offers which can have an impact on social sustainability in the product element which still are undiscovered.
For Philips Lighting, as well as other companies with similar aspirations, it is interesting to start researching and working on social sustainability. For Philips, to maintain its well established sustainability position it is important that their social sustainability practices contribute to their ambition to enhance life with light.
The Ventures
Within Philips Lighting, ventures are used for the development of businesses that at the moment do not fit within the boundaries of the existent businesses. The ventures can differ from the existent businesses to the extent that they might have a new business model, a new customer group, a new technology etc. Additionally, oftentimes, it takes longer before the venture will start to make money. Although there is obviously an element of the venture that differs from the conventional businesses, the venture has to be adjacent to the conventional businesses. This is because the venture has to be incorporated into the existing business over time.
Horticulture – is a venture that uses light in the cultivation of vegetables and fruits as well as flowers.
Additionally, it includes the relatively new concept of cityfarming. This concept can be illustrated by the cultivation of crops in multiple layers in existing buildings. For this venture Philips Lighting has unique insights into the so-called light recipes, which determine the growth of a certain crop. Additionally, the inclusion of LED enables energy saving for the customer.
Phototherapy – is a venture that uses light to conquer chronic skin diseases like psoriasis, vitiligo and atopic
dermatitis. Besides that, there are also possibilities to treat baby jaundice with light.
5.2. Methodology 5.2.1. Sample Selection
The initial goal was to interview approximately twenty Philips employees about social sustainability at Philips Lighting. Additionally a variety of expertise owned by the interviewees was aspired for the sample. Examples of expertise areas are; sales, innovation, venture management and collection and recycling. The different areas of expertise assure that an overview is made of all different points of view in the organization. Whenever possible at least two people were interviewed within one area of expertise to reduce a possible bias from interviewing just one person. Together with Anton Brummelhuis a list of 22 employees was established for a first approach. All employees were approached by e-mail. In the end, 18 employees of this original list were interviewed. During these interviews I asked the interviewees which persons they would recommend me to talk to. This allowed me to build a reserve list of people that I could approach when the initial prospect of twenty respondents would appear to be out of reach. Additionally, it did regularly happen that the interviewees recommended persons that were already on the list, which confirmed for me that the right persons were interviewed. In the end 7 people of this reserve were invited for interviews because of the relevance of their expertise for this research. An overview of the final sample of 25 Philips employees that are interviewed for this research can be found in Appendix H.
18
The interviewees are mostly male and have worked for Philips for a long time, i.e. longer than five years. Additionally most have the Dutch nationality. All interviewees are familiar with the concept of sustainability, although oftentimes more familiar with the environmental sustainability aspect. Of the total sample of 25 interviewees, 4 interviewees are directly related to the ventures.
5.2.3. Data Collection
The interviews have a duration of approximately one hour and are conducted in English or Dutch dependent on what the interviewee feels most comfortable with. Initially the interviews were semi-structured. Before establishing the interview questions I needed more background information about Philips Lighting. Therefore, I had five orientating interviews with Philips employees about the social sustainability practices and measurements at Philips, and I received papers from Anton Brummelhuis about the line of thought which is being explored at Philips. Keeping this information in mind as well as my research goals I established the research questions (Appendix I). These questions were tested in a pre-test after which adjustments to the interview were made.
However, during the first two interviews I realized that the information was obtained more effectively when taking a more open approach. This increased effectiveness is possible because social sustainability as a concept was still too abstract for most of the interviewees. This abstractness made it difficult for the interviewees to answer my direct questions. Nonetheless, I realized that this difficulty did not arise because the interviewees did not know anything about the subject, but because they were not used to think about it with this label on it. Thus during the data collection process I converted to my final interview approach. This final approach entailed that after an introduction of my research I opened the interview with the question whether the interviewee could describe his/her job for me. This allowed for a framework to be established within which the rest of the topics could be discussed, whenever relevant within the expertise of the interviewee. During the interviews other terminology was used, because this other terminology was better understood by the employees. So was the word ‘trend’ used instead of ‘driver’, and the term ‘social innovation’ was used instead of ‘social sustainability’. When these different terms were used I asked the interviewees to describe what this term meant for them in order to make sure that my understanding was correct. The topics discussed in the interviews were:
- Definition
- Trends for social sustainability - Stakeholders
- Innovation - Communication - Collaboration
More topics came up during the conversation than those that were included in the research question. Since the research was semi-exploratory this is not a problem. The interviews were transcribed within a week, the transcription as close to spoken language as possible while still being comprehensible. The transcriptions were sent to the interviewees, so that they could verify whether all information was displayed correctly and they could clarify aspects when needed. All interviews are conducted by the same interviewer, which reduces bias (Straus & Corbin, 1998).
19
5.2.4. Method of Analysis
First the transcribed interviews were read as to familiarize myself with the data. In another reading session I highlighted the relevant remarks. These remarks are then grouped. When this process is concluded, it will be repeated. This is to ensure that a possible bias is minimized, that categories were coded consistently and important remarks are not overseen. It is also necessary because the context of the interviews can be highly interpretative.
5.3. Results and Analysis
When the interviewees were asked what they considered as social sustainability, none provided a clear definition. It is important to notice that the understanding of social innovation was sometimes understood as the product element of social sustainability, and sometimes it was understood as the overarching concept of social sustainability. It has become clear through the interviews, that sometimes the understanding of the terminology by the employees is unclear.
Definition - During the interviews several aspects of what social sustainability is according to the interviewees
came up. Most obvious was that it has a focus on people, and that it is embedded in the mission of the company, as can be seen in Table 6. As clearly recognized by an employee with the function ‘Public, Private Innovation Partnerships – External Relations’: ‘With social innovation you approach something that is different
for everybody, because everybody has different needs.’ Other interviewees agreed with this. One last finding is
that the interviewees agree that social sustainability can provide a competitive edge for businesses, one condition for this is that there is sufficient scientific proof that the social innovation does contribute to the quality of life of consumers.
Drivers - When discussing drivers of social sustainability, it is noticeable that the interviewees have not really
thought this through. The only trend that was ever-present in the interviews was health & well-being. A reason for this is presented by an employee who fulfills the function ‘S&R Global Domain Lead Sustainability’; ‘You
have to choose trends and commit to those trends’. Other trends that were named sometimes are urbanization,
an older world population and consumers that want experiences. A development in the lighting industry that is recognized as a driver for social sustainability is LED, although the possibilities that this platform offers are still being explored.
Table 6. Descriptions of Social Sustainability
Social sustainability…
… is people focused. 11x
… is embedded into the Philips Lighting mission. 9x … is context specific, when it is related to the product segment. 8x
… can provide a competitive edge. 7x
… is in need of proof points in relation to the improvement of quality of lives. 7x
Table 7. Stakeholders Interviews
20
Stakeholders - Customers, governments, employees and industry
associations are most named (Table 7.). The stakeholders mentioned, cover all categories as established by Maignan and Ralstan (2002). In addition, governments and industry associations seem to be important stakeholders with which Philips Lighting collaborates in order to improve the quality of life of their consumers.
Innovation - The innovation in business model with regard to social sustainability was something that
participants highly agreed upon. Most examples of such business model innovation related to a service oriented business model, or new business models that could be applied to the Bottom of the Pyramid. As also recognized by a Project Manager New Businesses; ‘The ventures are mostly services’. Besides this it is also recognized by a Public & Government Affairs employee that: ‘Sustainability is equal to innovation, but puts
preconditions to this innovation.’ Another guide in the direction of innovation are consumer needs, which are
derived from dialogues with the consumers. Lastly, most interviewees recognize social innovation as happening in the ventures, of which in all occasions Healwell and SchoolVision are recognized as social innovations. Details on how many people agreed with these statements can be found in Table 8.
Three business activities in which social sustainability takes place - During the interviews the three proposed
business activities as presented in the present state of affairs (section 4.0) are identified (Table 8.). Also the same stakeholders correspond to these three business activities as earlier identified. Most mentioned in the interviews was the product level. Which is strongly driven by innovation, for example in different sort of product innovation; ventures and LED. Additionally, the BOP is recognized as a new market for the outputs of an organization. Lastly, an important issue came forward. This was that to make all this happen, a change in business model is necessary as well.
Additionally the proposition with which the products or services are communicated to the consumer changes to a more socially sustainable one; from being based on Total Cost of Ownership to being based on the benefit for the consumer.
Industry associations 6x
Table 8 . Interview Findings
Main Category Subcategory Explanation Times
Mentioned Social
Sustainability
Value Chain Fair conduct concerning the people involved in the supply chain. 6x
Product Usage Adding to the quality of life of the consumer by product usage 15x Corporate
Philanthropy
Charity-like projects that can comprise collaborating with a NGO or a government. 2x Other TBL dimensions Environmental sustainability
Environmental sustainability sells because of monetary benefits. 8x
Economic sustainability.
A profit element should be included in sustainability. 5x
Sustainability can be seen as a growth factor for businesses. 3x
Innovation Business model To become social sustainable innovation in the business model is necessary. 14x BOP/ developing
countries
The development of products for the BOP and developing countries. 10x
Ventures Social Sustainability is present in the ventures. 11x New Product
Development
Because of the dynamics of LED, the implication this has on social sustainability are not clear yet.
5x
Social sustainability should be embedded into product development. 5x Short lines to consumers are essential 4x
Collaboration Research and Development
Working together with other companies for research and development. 6x
Industry Associations (and governments)
For regulations and collection and recycling 6x
Communication External Proposition changes from Total Cost of Ownership to the benefit for the consumer.
21
Context specificity - It is confirmed that social sustainability is mainly context specific for the product segment,
rather than for the value chain. For the corporate philanthropy segment there is no predominant evidence on whether it is context specific or not, although it is mentioned by the Head of Corporate Sustainability Office that although corporate philanthropy also takes place at a sector level and is thus business specific instead of corporate philanthropy taking place only on corporate level.
Planet - In addition, the employees see a social sustainable aspect in environmental sustainability in the
long-run. This is because an environmentally bad product may lead to a situation in which future generations may not be able to uphold the same quality of life as we have now. The tension between social and environmental sustainability is explained from one perspective by the Senior Director Business Excellence in that you have to find a balance sometimes between what is bad for the environment or saving lives.
Other issues of relevance for Philips Lighting, but not for this research are found in Appendix J.
5.3.1. Comparison of the case with the Present Situation of Social Sustainability
In Table 9. Can be seen that there are three categories in which the case-study at Philips Lighting does differ from the present state of affairs, these three categories will be discussed here.
Table 9. Comparison of Philips with Present State of Affairs
Category Sub-category Equal/Different
Definition Equal
Business Activities Value Chain Equal
Product Level Different
Corporate Philanthropy Equal
Stakeholders Equal
Drivers Different
Innovation Different
Context Specificity Value Chain Equal
Product Level Equal
Corporate Philanthropy Equal
Product Level - Three remarks need to be made here. First of all from the case-study was derived that the product level has a strong link with innovation. Second, the proposition related to the products changes to a ‘benefit for the consumer’ proposition in order to become socially sustainable.
Drivers - Besides the recognition of similar human needs as drivers of social sustainability as those recognized in the present state of affairs, Philips notices another one. This driver is the upcoming of LED, from this can be derived that new developments in products can also can drive social sustainability.
Innovation – That there was a link between innovation and social sustainability, was weakly supported by the present state of affairs. However, in the case-study much details about innovation and its link to the product level were obtained. Like the urge to make the new product developments process take into account social sustainability, as well as the act of using ventures to do so. The ventures enable products or services that do not fit into the conventional business to prove their case.
6. Recommendations
22
quality of life of consumer through use of products. With this information you could rephrase the initial question as follows: ‘When does a product improve the life of the customer?’
First, there is a role for (basic) human needs in social innovation. When these human needs are “fulfilled”, the quality of life of a person increases. Most needs that are identified can be classified as basic human needs or physiological needs as identified by Maslow (Eckerman, 1968). The basic needs as identified by Maslow are: air, shelter, food, water, sleep and sex. These physiological needs in this paper are; air, food, water, healthcare and well-being. Compared to needs higher up in Maslow’s hierarchy, those at the bottom are easier to measure and concretize, because product usage will have a largely direct effect on the quality of life. This leads to the following conclusion:
1. A product improves the quality of life of a consumer when it responds to a clearly formulized (basic) human need.
Up until now Philips has explored the direction of healthcare and well-being. One advice is to explore the possibilities that other basic human needs offer, as well as the needs higher up in the need hierarchy.
Second, there is a part to be played by global trends, which respond to the human needs. As mentioned earlier when the needs are fulfilled the quality of life of a person increases, however, there may be a (global) trend that decreases this quality. Thus to counter this:
2. A product improves the quality of life of a consumer when it compensates a trend that decreases the quality of life.
An example of these trends can clearly be seen in the need for food. First, there is a trend of the lack of food in developing countries. Second, there is a trend of nutrition deficiency in developed countries. Third, Philips responds to a threat that urbanization places on our access to fresh food. These are all examples of how trends can pose threats to the fulfillment of a basic human need, and thus a threat to the quality of life of the consumer. Thus, although the needs might be universal; the trends that impact their fulfillment can differ for example per geographic area or economic status.
Lastly, environmental and economic sustainability play a part in this. This is mostly because of the social impact that environmental sustainability has on the long-term. This means that if environmental sustainability is not integrated into business practices as soon as possible, this has as a consequence that the next generations will not be able to life their lives the way we do now due to resource depletion and pollution. Besides this it is also important to take into account the economic sustainability, because without that the company cannot survive. From this it can be derived that it is important to take into account the two other pillars when evaluating products or services, however these are no direct requirements for social sustainability in products:
3a. For a product, environmental sustainable requirements should be met, or it should have the prospect of meeting these environmental sustainable requirements in the nearby future.
3b. For a product, economic sustainable requirements should be met, or it should have the prospect of meeting these economic sustainable requirements in the nearby future.
With the second half of the statement the process of product evolvement is taken into account; some products when initially developed might not meet the set environmental requirements, but will be able to do so after an improvement cycle. Additionally, this requirement prevents a socially innovative product from not being socially sustainable.
