Sustainable Business-to-business (B2B) Strategies
Info: 3522 words (14 pages) Dissertation
Published: 9th Dec 2019
Tagged: Business Strategy
In recent years sustainability has become more than just a short trend in countries all over the world and is now especially popular among businesses and organisations (Bateh et al. 2013; Oyewo, Iredele and Azuh 2018). Therefore, this essay introduces and discusses sustainable business-to-business (B2B) strategies and further illustrates their implementation with examples from the food and drink industry.
Bateh (2013) argues that a business can only be successful if its sustainable strategies are functional. Oyewo, Iredele and Azuh (2018) explain this statement by saying that the rising pressure of stakeholders for sustainable behaviour leads businesses to develop sustainability measures. Many definitions for the term sustainability exist with a commonly accepted one still missing. An often-cited definition can be found in the Brundtland Report of 1987 where sustainable development is defined as the “development that meets the needs of current generations without compromising the ability of future generations to meet their needs and aspirations” (WCED 1987, p.43). One critique of this definition is that it is nearly impossible to define future needs, as they are likely to change over time (Adams 2006; Aghelie 2017). More recent definitions shifted from a focus on environmental sustainability to the three-pillar model introduced by Elkington (1999). With this model sustainability changed to a view where the environmental, social and economic areas of sustainability are equally focused on (Elkington 1999; Maheswari, Nandagopal and Kavitha 2018; Oyewo, Iredele and Azuh 2018). This concept lines up with the ‘Triple Bottom Line’, which has experienced a rise of popularity in recent years (Norman and MacDonald 2004). The purpose of the triple bottom line is that a business cannot be successful by only looking at its financial performance, but that the social and economic performance are of equal importance (Norman and MacDonald 2004). In terms of defining sustainability the economic pillar means supporting future growth within the economy, the environmental pillar means reducing environmental damage and the social pillar means adding value to the people within a community (Dyllick and Hockerts 2002; Beheiry, Chong and Haas 2006; Linnenluecke, Russell and Griffiths 2009; Cunha, Fensterseifer and Leonardo 2011; Pitelis 2013; Maheswari, Nandagopal and Kavitha 2018). In summary it can be said that sustainability has evolved over the years and is now seen as a concept that cares not just about the environment but also about economy and society.
Schaltenegger and Sturm were the first ones to introduce eco-efficiency in 1990 in order to develop a concept that incorporates sustainability in business strategies (Schaltegger and Sturm 1990; Ehrenfeld 2005; Huang et al. 2014; Peng et al. 2017; Zhang, J. et al. 2017; Gómez et al. 2018; Quartey and Darkwah 2018; Yu, Huang and Zhang, N. 2018). It was widely publicised in 1992 in the report Changing Course by the World Business Council for Sustainable Development (WBCSD) (Ehrenfeld 2005; Peng et al. 2017; Zhang, J. et al. 2017; Wu, Y., Chen, Z. and Xia 2018). Eco-efficiency is concerned with generating the same or a higher economic output while, at the same time, minimising the use of natural resources, pollution and waste (Kuosmanen and Kortelainen 2005; Kelly et al. 2007; Zhang et al. 2008; Koskela and Vehmas 2012; Rashidi and Farzipoor Saen 2015; Lorenzo-Toja et al. 2016; Peng et al. 2017; Gómez et al. 2018; Liu and Fang 2018; Yu, Huang and Zhang 2018). Therefore, it can be described as the relation between the value of the produced offerings and their environmental impact (Ehrenfeld 2005; Yin, K. et al. 2014; Peng et al. 2017; Gómez et al. 2018; Quartey and Darkwah 2018; Wang, D., Wan and Yang, J. 2019). To achieve eco-efficiency, companies should produce goods and services that add a significant value to their customers while reducing the environmental impacts of said goods and services throughout their lifecycle (Vîrjan 2011; Lorenzo-Toja et al. 2016; Quartey and Darkwah 2018). This can be achieved by increasing the shelf life of products or the use of recyclable materials (Vîrjan 2011). Using eco-efficiency as a business strategy benefits companies in multiple ways. It allows for a business to improve its environmental performance, gain a competitive advantage, and reduce costs by decreasing their energy use (Vîrjan 2011; Quartey and Darkwah 2018). Many scholars have proposed various methods to measure eco-efficiency, such as lifecycle analysis (Wang, X. et al. 2014, 2015; Chen, W. et al. 2016), ecological footprint analysis (Wright and Østergård 2016; Liu, C.-H. and Fang 2018), and the DEA model (Dyckhoff and Allen 2001; Korhonen and Luptacik 2004; Yu, Huang and Zhang, N. 2018).
Within the manufacturing industry, lean thinking is a common approach to organise production as it helps to increase efficiency for material and energy use (Caldera, Desha and Dawes 2017). The concept of lean thinking in manufacturing can be traced back to the Toyota production system (TPS) which was introduced in the 1950s with the main purpose of reducing waste while maintaining an efficient production process (Womack and Jones, D.P. 1996; Herron and Hicks 2008; Julien and Tjahjono 2009; Shamah 2013; Caldera, Desha and Dawes 2017; Iwao 2017; Aamer 2018). Lean thinking is described as a management philosophy and methodology that is concerned with creating additional value to stakeholders by eliminating waste during production (Shah and Ward 2007; Boyle, Scherrer‐Rathje and Stuart 2011; Waterman and McCue 2012; Shamah 2013; Douglas, J., Antony and Douglas, A. 2015; Caldera, Desha and Dawes 2017). Waste is hereby seen as any activity that does not create or add value for consumers, i.e. transportation time or false planning (Womack and Jones, D.T. 1997; Caldera, Desha and Dawes 2017; Aamer 2018). Several studies show that lean thinking can help to significantly increase efficiency while eliminating waste and generating additional value to the customer (Florida 1996; King and Lenox 2009; Rothenberg, Pil and Maxwell 2009; Caldera, Desha and Dawes 2017). It not only decreases the environmental pollution of production but also benefits the manfuacturing company in multiple ways. For example, it increases the production capability, generates higher-quality products, while also reducing the amount of inventory and production times (Mathaisel 2005; Julien and Tjahjono 2009; Shamah 2013; Caldera, Desha and Dawes 2017).
According to Orsato (2009) carbon credits are an important concept within eco-efficiency as they help to lower global carbon emissions. Over the past years there was a significant rise in carbon emissions, which countries try to battle with the implementation of a global trading scheme of carbon allowances (Lee, Kim, D. and Kim, S. 2018; Li, Ukkusuri and Fan 2018). At first, this concept was applied in the coal and steel industry and was further expanded as an enticement policy for businesses and individuals (Li, Ukkusuri and Fan 2018; van der Gaast, Sikkema and Vohrer 2018). Lee (2018) describes carbon credits as a voluntary concept that gives companies and governments the possibility to take part in measures to reduce carbon emissions that go beyond regulatory actions (Lee, Kim, D. and Kim, S. 2018). Günther et al (2018) state the success of this concept as, since its global introduction in 2005, 1 billion carbon allowances have been traded by companies and individuals voluntarily. Carbon credits are generated in various industries with the most important being forestry and agriculture (Man et al. 2015; Günther et al. 2018; Lee, Kim, D. and Kim, S. 2018; van der Gaast, Sikkema and Vohrer 2018). An example of generating carbon credits can be found in Germany. Since 2009 carbon credits generated by peatland rewetting are sold under the name MoorFutures (Günther et al. 2018). Like other carbon credit certificates MoorFutures gives the buyer the possibility to produce one ton of CO2 emissions (Günther et al. 2018).
For years, there have been great concerns regarding the use of resources and the amount of waste generated within the lifecycle of a product or service (Cheung et al. 2015; Cheung, Leong and Vichare 2017). As a potential solution various scholars have proposed lifecycle assessment (LA) as a potential solution to increase sustainability and reduce waste (Finnveden and Moberg 2005; Manuilova, Suebsiri and Wilson 2009; Jeswani et al. 2010; Björklund 2012; Loiseau et al. 2012, 2013; Bidstrup 2015). LA was first introduced in the 1960s as a resource management strategy, with the first guidelines for its use only in 1990 (Hunt, Franklin and Hunt 1996; Klöpffer 2006; McManus and Taylor 2015). LA was first defined as a technique to evaluate and quantify the environmental impacts of a product, service or activity from the extraction of resources to its disposal (Tukker 2000; Tan and Khoo 2005; Manuilova, Suebsiri and Wilson 2009; Jeswani et al. 2010; Curran 2012; Židonienė and Kruopienė 2015; Michailidou et al. 2016; Cheung, Leong and Vichare 2017). In 2006 the International Organization for Standardization (ISO) defined LA as “the compilation and evaluation of the inputs, outputs and the potential environmental impacts of a product system throughout its life cycle” (n.p.). The lifecycle can be described as the entirety of stages a product or service goes through from the extraction of raw material, to its production and use until its disposal (Levitt 1965; ISO 2006; Heijungs, Huppes and Guinée 2010). It can be organised as a cradle-to-grave approach, with an assessment from resource extraction to disposal, or as a cradle-to-gate approach, with an assessment from resource extraction to the product leaving the factory (Van den Heede and De Belie 2012). According to the literature, a LA consists of four stages (Tukker 2000; Tan and Khoo 2005; Manuilova, Suebsiri and Wilson 2009, 2009). The first stage includes the goal and scope definition, which defines the purpose and scope of the assessment (Tukker 2000; Manuilova, Suebsiri and Wilson 2009; ISO 2006). The second stage includes the inventory analysis, which identifies relevant processes included in the assessment (Tukker 2000; Manuilova, Suebsiri and Wilson 2009; ISO 2006). The third stage is an impact assessment where potential impacts of inputs and outputs included are evaluated (Tukker 2000; Manuilova, Suebsiri and Wilson 2009; ISO 2006). The last stage consists of an interpretation of the results which further aids to set future goals for the reduction of resource use and waste (Manuilova, Suebsiri and Wilson 2009; ISO 2006). LA is used as a decision-making tool for both businesses and consumers in terms of sustainability as it gives an overview of the environmental impacts of a product or service (Tukker 2000; Tan and Khoo 2005; Jeswani et al. 2010). Even though it is a well-established strategy within sustainable development it has limitations, as shown in the literature. Currently, most studies are undertaken with a cradle-to-gate approach, which was criticised by Tan and Khoo (2005) as it does not include the waste generated by the product or service. Another critique of the methodology is the presence of value judgements within the assessment that can potentially have an impact on the outcome (Heijungs, Huppes and Guinée 2010). Furthermore, a LA can never be better as its data or the people who use the results, as the generated data must be used within the frame it was developed for (McManus and Taylor 2015).
With natural resources rapidly fading due to overuse and the climate warming due to human made pollution biotechnology is crucial to secure a future for the next generations (Hennebel et al. 2015; Lokko et al. 2018; Osmakova, Kirpichnikov and Popov 2018). It can be described as a combination of biological science and technology in order to increase the quality while reducing the environmental impact of produced goods (Kong 2017; Lokko et al. 2018).
Today, biotechnology can be found in various different sectors and industries. For several years, it has been used in the agricultural sector where it is used to increased food output, reduce environmental impact of production as well as the use of resources (Lokko et al. 2018). In the food sector fermentation, for example, is probably the oldest biotechnology method and forms the centrepiece of food biotechnology (Camarasa et al. 2018; Lokko et al. 2018). It is used to prepare many commonplace foods, especially dairy products, but also wine and beer, for human consumption and to increase their storage life (Camarasa et al. 2018). Biotechnology related to food has been under criticism because it still lacks a commonly followed guideline and therefore consists of several individual procedures followed by manufacturers (Camarasa et al. 2018).
Industrial biotechnology is crucial for the further development of the bioeconomy (Camarasa et al. 2018). It is used to produce a range of products and services with greater efficiency, higher quality and less environmental impact by using eco-friendly procedures (Camarasa et al. 2018; Lokko et al. 2018). The positive effect of these technologies not only helps an individual manufacturer but also works towards reaching overall sustainability development goals (Camarasa et al. 2018; Lokko et al. 2018). In the industrial sector, especially in manufacturing, biotechnology is already well-established in highly developed countries. Less developed countries are still behind and therefore cannot contribute to the overall sustainable development (Camarasa et al. 2018; Lokko et al. 2018). Even though industrial biotechnology is positive in regards of sustainability, it comes with certain downsides. For example, research and development processes are expensive and long and the procedures used take significantly longer than their less sustainable alternatives (Camarasa et al. 2018).
As the principle of eco-efficiency states, it is concerned with generating the same or a higher economic output while minimising the use of natural resources, pollution or waste (Kuosmanen and Kortelainen 2005; Kelly et al. 2007; Zhang, B. et al. 2008; Koskela and Vehmas 2012; Rashidi and Farzipoor Saen 2015; Lorenzo-Toja et al. 2016; Peng et al. 2017; Gómez et al. 2018; Liu and Fang 2018; Yu, Huang and Zhang 2018). A good example for this strategy can be found at Innocent Drinks, a London based smoothie company founded in 1999 (Innocent Drinks 2018). For the production of its smoothies, Innocent Drinks sources strawberries from farmers in Spain. The majority of Spain’s big strawberry industry is located in and around Seville. Due to its production volume, the watering of the plants uses up to half the water the surrounding land needs to survive (Leahy 2016). Also located nearby is the Doñana national park, home to a big variety of wildlife and therefore in great need of sufficient water.
Innocent Drinks became aware of this problem in 2010 and launched a four-year on-farm research in partnership with Unilever to map the farmer’s water use efficiency (Leahy 2016; Sustainable Brands 2016). This was done by looking at different watering equipment and water management strategies while taking into consideration the different types of soil, plant varieties and climate conditions (Leahy 2016; Sustainable Brands 2016). Based on the findings of this research Innocent Drinks and the University of Cordoba developed an app called Irri-fresa, which helps farmers to increase their water use efficiency by calculating the optimal irrigation times on a daily basis (Leahy 2016). With the use of this app farmers were able to reduce their water use by up to 40%, saving 1.7 billion litres of water in 2015 (Leahy 2016). In order to encourage farmers to take part in this new water management strategy the University of Cordoba set up free workshops and a water blog that illustrates cutting water use can help to save energy, fertiliser and labour costs (Leahy 2016; Slawson 2016).
This example shows that incorporating eco-efficiency has economic, environmental and social benefits. This strategy still produces the same economic output, the amount of strawberries, while using up to 40% less water. This benefits the nearby Doñana national park as well as farmers and residents as it actively fights the water shortage. Innocent Drinks improve their corporate reputation by being environmentally friendly which can lead to higher profits and greater customer loyalty in the long term.
As the strategies within the concept of Environmental Cost Leadership are more likely to be spread across a whole industry or country rather than just pertain to one single company, genetically manipulated (GM) food is used as an example. GM food has been a controversial topic in countries across the globe since it first emerged. Several studies over the past years have shown that genetically modifying food is crucial for securing sufficient food supply in the future and for the environment (The Economist 2013; The Economist 2014a). By 2050 the world population will need twice the amount of food while having the same amount of land, less water and fewer chemicals (The Economist 2013). Due to the climate change, food crops will have to be more resistant to weather conditions (The Economist 2013). It is scientifically proven that GM crops are generally more resistant to weather and diseases and thus, farmers do not need to use as many chemicals as they do in organic farming (The Economist 2013). GM foods can also benefit human health, as Golden Rice shows. The crop was GM so that it carries beta-carotene, which helps in battling the high vitamin A deficiency in children in the Philippines. This deficiency leads to many early deaths and blindness every year (The Economist 2013).
Even though scientific evidence is largely positive, GM foods still have a bad reputation in many countries worldwide. A study, retracted due to a lot criticism for its methodology, found an unusually high number of tumours and deaths in rats that had previously been fed with various GM foods (The Economist 2014b). Even though other studies did not find the same effects, this one was enough to influence governments (e.g. Kenya banned all GM crops, Russia suspended imports of certain GM grains) (The Economist 2014b).
Despite the negativity on this subject, research shows that views are shifting. This can especially be seen in Britain, where 42% of people felt that the risks to human health of GM foods were bigger than their benefits in 2003. In a more recent survey, undertaken in 2011, only 27% thought that GM foods were risky (The Economist 2014b). These changes are mostly due to better explanations from scientists, better briefing of journalists and keener politicians (The Economist 2014b). Whilst many European supermarkets still state that they do not sell any products with GM ingredients, Britain has become more open to the idea of GM foods (The Economist 2014a, The Economist 2014b).
In conclusion it can be said that businesses all over the world have the power to reduce the current pollution of the planet and overuse of resources by using sustainable strategies. The ones introduced in this essay include various concepts that can be amended and adapted to different industries. B2B strategies build a good foundation for businesses in working together to increase their sustainability in producing, distributing and disposing of their products and services. Furthermore, they provide less developed countries with the opportunity to use new technologies as they can work in close proximity with rich countries. Overall, the conclusion can be drawn that businesses should consider implementing one or more of the introduced sustainable strategies in their core business strategies to secure the same life standard for future generations
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