Abstract
Companies are attempting to create sustainable value (SV), as a holistic integration of social, environmental, and economic value, rising beyond traditional economic value, in response to sustainability issues. However, tensions among these values pose difficult challenges for both practitioners and researchers. Creating an integrated organizational response to sustainability concerns requires both general and situationally-specific knowledge as well as appropriate resources. While academics debate the meaning of SV and sustainable value creation (SVC), practitioners struggle with vagueness in the concept of corporate sustainability and how they can reconcile competing demands on their limited capacities.
These challenges are addressed by the sustainable business model (SBM), which guides businesses to balance the three goals of profitability, stakeholder welfare, and minimal environmental effects. SBM emphasizes creating value that goes beyond customers and includes a broader range of stakeholders (i.e., creating SV), with SVC at its core. Despite its business orientation, SBM is difficult for businesses to understand and implement, particularly where it relates to SVC. This is in large part driven by deficiencies in the SBM academic literature, which has only recently begun to incorporate SVC research and awareness.
This research employed a mixed-methods approach. First, a qualitative approach was used to examine how managers perceive sustainable value creation in their organizations. 23 semi-structured interviews were conducted with managers of the selected case company as well as with shipping industry stakeholders. Thematic analysis was used to examine the qualitative data. Second, based on findings from the qualitative study, hypotheses were developed and tested via a quantitative study, featuring a survey of 211 organizations across multiple industries in New Zealand. The resulting data were analyzed with partial least squares structural equation modelling (PLS-SEM).
From the findings of the first study, an SVC framework was developed. The qualitative findings showed that generating social and environmental value are essential for long-term economic value creation in business organizations. These three forms of value are integrated through the concept of ‘social license to operate’ (SLO). SV is created when organizations meet the social and environmental demands of stakeholders through social and environmental activities, with the value of the activities being perceived by the stakeholders. Favorable stakeholder perception helps organizations to achieve SLO, which leads to economic value creation. The results of the second study confirmed and generalized the key role of SLO in the SVC model for multiple industries in New Zealand. However, they rejected the relationship between SLO and environmental value creation via internal business processes. This result indicated that stakeholders may not be able to form a perception of an organization’s environmental value creation when it is hidden within its internal business processes.
Developing the SVC framework produced three main contributions to the SV literature, all within the SBM context. First, SV is a holistic value that includes social, environmental, and economic value. Sustainability conceptually reflects the integration, multi-dimensionality, long-term orientation, and continuity aspects that define SV. Second, if the business intends to create SV, managers’ perception of SLO is that they need to be perceived as a corporate citizen by stakeholders. SVC is grounded in stakeholders’ perception of the firm’s social and environmental activities. This leads to the emergence of SLO, and subsequently economic value. Managers interpreted their attainment of SLO as evidence confirming that the value of their social and environmental activities has been perceived by stakeholders, and hence they have created social, environmental, and (in the long-term) economic value. Managers considered that SLO can be employed as an influencing factor with stakeholders when they face issues requiring stakeholder support. Third, managers can use SLO to manage tensions among social, environmental, and economic value in order to create SV. SLO enables the business to more readily accommodate and, in turn, affect the opinions of stakeholders (particularly the community), rebalancing the nature of some activities as a concern shared between the stakeholders and the business.
This research also contributes to practice by showing how managers can attain SLO within their sustainable business model. Attaining SLO improves the relationship between the firm and stakeholders, and serves as an intangible asset that engenders mutual benefit.