Business models and sustainable firms: a focus on B Corps in Italy
Business models and sustainable firms: a focus on B Corps in ItalyEleonora Di Maria, Valentina Demarchi, Ambra Galeazzo, Elena Bonel
An increasing number of companies are becoming aware of the need to combine economic goals with the achievement of social and environmental goals (Porter and Kramer, 2006). Research on sustainability in the business domain highlights the opportunities of integrating profit – within a shareholder perspective – with a more open approach, focused on the stakeholder view (Buysse and Verbeke, 2003). In particular, sustainability contribute to gain a competitive advantage (Orsato, 2006), where firms can benefit from an explicit strategic orientation that includes environmental and social objectives. Studies on the Triple Bottom Line (Elkington, 1997) pointed out the advantages – but also the challenges – in combining multiple strategic goals.
This strategic path can be enabled through business model innovation, whereby value production and distribution are characterized by distinctive features (Geissdoerfer et al., 2018). Growing literature on business model innovation connected to sustainability (Bocken et al., 2014; Bocken and Geradts, 2020) shows the variety of business models that might be adopted as well as the different drivers of value creation and value appropriation (Evans et al., 2017). Sustainable-oriented firms may develop business model innovations in order to achieve sustainability, putting different emphasis on the environmental and social perspectives, thus leading to different performance results (Ritala et al., 2018).
Leveraging hybrid organizational forms (Doherty et al., 2014), companies change their strategies by transforming their internal processes and products based on a sustainability perspective. Hybrid organizations emerge (Haigh and Hoffman, 2012) as new organizational forms that take into account the variety of goals and domains of actions with respect to traditional organizations. Such organizations include social and environmental changes as objectives, within a framework of constant interaction with stakeholders as well as with the market, competitors, and industry institutions. It is specifically because of this combination of purposes that those firms are competing differently from well-established businesses, dealing also with the consequences of managing this apparent paradox of corporate sustainability (Hahn et al., 2017).
In this scenario, B Corps are emerging (Stubbs, 2017) – a movement originated in the United States, then spread internationally – which represent business models formalizing sustainability investments through voluntary certification processes, thus increasing visibility to social entrepreneurship. As hybrid organizations, these firms have been recognized by some scholars as having a role of public nature, since their activities are geared to the achievement of goals that go beyond mere entrepreneurial interests (Vaughan and Arsneault, 2018).
In the European context, Italy is the second country after the United Kingdom in terms of number of B Corp enterprises, consistently with entrepreneurial dynamics that have shown – especially in the small business realm – the attention towards social and territorial context. Past studies show that cohesive Italian companies are better able to face changes in competitive scenario, thanks to a strong focus on their internal (employees) and external (local community) social context. There is a new geography of value in which the different forms of organization between profit and non-profit are directed at producing shared value (Sturabotti, Venturi, 2016). It appears to be relevant in research, to pursue a better understanding of how companies get started on this journey, the transformations it entails at strategic level, and the impacts at the organizational and networking ones, as well as the role of human resources.
An increasing number of firms strives to simultaneously achieve economic, social and environmental objectives (Triple Bottom Line) (Elkington, 2013). Companies decide to craft their strategies so as to transform environmental and social constraints into new sources of competitive advantage, thus improving their market reputation and transforming their offer and business models, as well as their cost structure.
In particular, literature on business models (BM) for sustainability focuses on redesigning BMs so as to enable the company to gain economic value by delivering social and environmental value to a wider group of stakeholders (Schaltegger et al., 2012). Such move to a more sustainable model requires significant changes in business goals, not only in terms of specific processes and products that could be innovated to close the loop or improve energy efficiency, but rather more broadly, on every aspect of how the business is run.
Three groups of sustainable business models can be identified (Ritala et al., 2018): environmental, social and economic ones. An environment-oriented BM focuses specifically on the management of resources within the company and its value chain, with the aim of promoting environmental sustainability (also in terms of circular economy), which implies profound changes in how companies deal with product development, supply chain management and production processes. Socially oriented BM groups have focused on the impact of business activities on the social dimension, by changing the behavior of consumers and society at large through an innovative value proposition, as well as by pushing customers’ commitment to innovation and new consumption habits. The economic dimension of BMs purports the inclusion of both dimensions of sustainability (social and environmental) in the company’s economic goals (profitability), but through an economic logic: how value is produced and how the organization is structured to incorporate in its own internal processes a wider set of actors, and their respective goals.
Each of these sustainable BMs create value in different ways, giving relatively more or less importance to the economic, social or environmental dimensions (Lüdeke-Freund et al., 2018). From this point of view, the relationship between the characteristics of the BMs and the results achieved is important and deserves further attention, specifically in the context of hybrid organizations.
One type of business where there is an explicit focus on sustainability is represented by the B Corp model (Stubbs, 2017; Waddock and McIntosh, 2011). B Corps are firms that voluntary invest in certifying their strategic orientation toward sustainability as part of their mission and strategic behavior. B Corp can be understood as hybrid organizational forms, because of their role in promoting shared objectives and public benefits (André, 2015). These companies are committed to formalizing and measuring the simultaneous achievement of the Triple Bottom Line. They therefore represent a new way of doing business, where the top management is committed to a multiplicity of stakeholders, in order to achieve social and environmental sustainability goals through its business (which nonetheless remains profit-oriented).
Though literature on B Corps is attracting greater attention, it is unclear how the paths adopted by B Corps and the results they achieved differ from the multiple paths of sustainable business model innovation described in the literature (Evans et al., 2017b; Ritala et al., 2018; Wilburn and Wilburn, 2015). Moreover, in this theoretical debate further attention has to be devoted to explicitly address the networking dimension within the strategic behavior of B Corps. Studies on sustainability and innovation, as well as on circular economy more recently, highlight the relevance of collaboration in supporting sustainable outcomes and innovation results (Brown et al., 2019; De Marchi, 2012). Since B Corps also emerge as an international movement gathering firms “with a purpose” (Bauer and Umlas, 2017), this issue should be considered when examining how B Corps behave and what results they achieved. More specifically our research questions are as follows: What are the BMs adopted by these companies? What are the motivations for such a formalization process towards sustainability, its implications in terms of the needed resources, and the collaboration network to leverage on? What are the results?
Answering these questions can provide a better understanding of these companies’ developmental path, and of the factors on which to leverage at institutional and territorial level, so as to support the conversion processes of an entrepreneurial system in terms of sustainability.#B Corp #business models #social impact #strategy #Sustainability