1. BA Businesses Management Honours Dissertation SESSION 2014/5
Trimester Two TITLE: AN INVESTIGATION INTO EMBEDDED SUSTAINABILITY
WITHIN THE ENERGY INDUSTRY AUTHOR: Madelaine Sophie Hickman
40059632 Supervisor: Dr Hock Tan
2. Declaration I declare that the work undertaken for this BA
Dissertation has been undertaken by myself and the final
Dissertation produced by me. The work has not been submitted in
part or in whole in regard to any other academic qualification.
Title of Dissertation: An Investigation into Embedded
Sustainability within the Energy Industry Name (Print): MADELAINE
SOPHIE HICKMAN Signature:
_____________________________________________ Date:
__________________________________ 2
3. Edinburgh NAPIER UNIVERSITY DATA PROTECTION ACT 1998 Consent
Form I confirm that this dissertation is all my own work. I
understand that my written permission is required for the
University to make copies of my dissertation available to future
students for reference purposes and that my name may be evident. I
hereby give my consent to my named work being made available. I
confirm that my work is not confidential. Print name: Madelaine
Sophie Hickman Matriculation No: 40059632 SignatureDate. FACULTY:
Business School SCHOOL: Craiglockhart MODULE NO: XL000589
DISSERTATION: TITLE: An Investigation into Embedded Sustainability
within the Energy Industry LOCATION IN WHICH TO BE HELD 1/53,
Craiglockhart 3
4. Abstract Purpose To explore Embedded Sustainability by
investigating The Little Green Energy Company's strategy and to
make recommendations to leaders and managers within the energy
industry on the development of sustainability orientated
strategies. Methodology Secondary research gained insight into a
range of strategic models which promote Embedded Sustainability and
provided a background of the energy industry's current goals and
strategies. Primary research in the form of a questionnaire method
was then undertaken to gain qualitative and quantitative responses,
forming a demonstrative case study on The Little Green Energy
Company's environmental strategy. Findings The questionnaire
design, response description and response analysis was structured
and informed by the literature review and provided answers to the
aim and objectives initially proposed for this dissertation. The
findings are potentially transferable to companies within the
energy industry, students undertaking study in the area of Embedded
Sustainability particularly with an energy industry perspective and
to motivate the environmental strategy creation of governments,
research institutions, NGO's and the wider private sector. Research
Limitations Sampling from a range of energy companies renewable,
non-renewable, small and large would have provided findings which
would be more generalisable to the entire energy industry. Also
questionnaires have a tendency to produce responses which lack a
higher quality and depth of thought. Recommendations The findings
from the research encourage further study of sustainability within
the supply chain, partnerships to set and accomplish sustainability
goals and the change management of oil and gas companies to endorse
their development of technology towards sustainable energy.
Nether-the-less the study promotes Embedded Sustainability through
use of initiatives and innovative strategies which encompass the
challenges of the environment. 4
5. Acknowledgements Firstly I would like to express my
appreciation to my supervisor Dr Hock Tan for his ongoing help,
guidance, support and enthusiasm over my chosen topic Embedded
Sustainability within the energy industry. I would also like to say
thank-you to all the employees of Edinburgh Napier University for
facilitating my learning of numerous Business Management subjects
and for their consistent friendly and courteous manner. Furthermore
I am extremely grateful for the contribution and efforts given by
all the employees within The Little Green Energy Company. Their
complementing and returning of my questionnaire surveys has helped
me to produce a primary data description and data analysis which
has greatly supported my conclusions and recommendations towards
the energy industry. Finally I would like to thank my friends for
their strong interest in my dissertation project and for sharing
their insightful experiences helping me to approach my selected
topic, Embedded Sustainability, in an objective manner. 5
6. Table of Contents
Declaration.............................................................................................................................2
Consent Form
.......................................................................................................................3
Abstract
.................................................................................................................................4
Purpose
.............................................................................................................................4
Methodology......................................................................................................................4
Findings
............................................................................................................................4
Recommendations.............................................................................................................4
Acknowledgements................................................................................................................5
Chapter 1
Introduction............................................................................................................9
1.1
Introduction.................................................................................................................9
1.2
Background..................................................................................................................9
1.3 Rational for Topic
Choice..........................................................................................10
1.4
Aim.............................................................................................................................11
1.5
Objectives..................................................................................................................11
1.5.1 Objective
1.........................................................................................................12
1.5.2 Objective
2.........................................................................................................12
1.5.3 Objective
3.........................................................................................................12
1.5.4 Objective
4.........................................................................................................12
1.6 Summery of
Methodology.........................................................................................12
1.7 Potential Limitations of
Study...................................................................................12
1.8 Summery of
Chapters................................................................................................13
Chapter 2 Literature
Review................................................................................................14
2.1
Introduction...............................................................................................................14
2.2 Marks and Spencer Plan A: An Approach to Embedded
Sustainability....................16 2.3 Porters Three Generic
Strategies...............................................................................17
2.3.1 Cost
Leadership.................................................................................................18
2.3.2
Differentiation....................................................................................................19
2.3.3 Segmentation Focus
..........................................................................................20
2.3.4 Critical Analysis of Porters Model within a Sustainability
Context .................20 2.4 Blue Ocean
Strategy..................................................................................................21
2.5 Christensen Disruptive
Innovation............................................................................25
2.6 Embedded Sustainability the
Solution.......................................................................28
2.7 Energy
Industry.........................................................................................................30
2.7.1 Todays Energy Industry on the Spectrums of Sustainability and
Change.......30 2.7.2 The Goals of the
Industry...................................................................................31
2.7.3 Is there a Feasible Path to Lead Todays Industry Towards the
Goals?.............32 2.7.4 Industry
Example...............................................................................................34
2.8 Conclusion of
Chapter...............................................................................................36
Chapter 3 Research
Methods................................................................................................38
3.1
Introduction...............................................................................................................38
3.2 Outline of Primary
Research.....................................................................................38
3.3 Hypothesis and
Questions.........................................................................................39
3.4 Method of Primary Data
Collection..........................................................................40
3.4.1 Informed
Methods..............................................................................................40
3.4.2 Critical Analysis of Questionnaire
Method........................................................41
3.4.3 Concurrent Mixed Method Data
Collection......................................................41
3.4.4 Cross-sectional Case
Study................................................................................43
6
7. 3.5
Sampling....................................................................................................................44
3.5.1 Non-Probability Purposive
Sample....................................................................44
3.5.2 Census Sample of
Population............................................................................44
3.6 Data Analysis
Methodology......................................................................................45
3.6.1 Meta-ethnography
Approach.............................................................................45
3.6.2 Integration of Quantitative
Data........................................................................46
3.6.3 Directive Content Analysis
Presentation...........................................................46
3.7
Summery....................................................................................................................47
Chapter 4 Data Description and Data
Analysis....................................................................47
4.1
Introduction...............................................................................................................47
4.2 Porters Generic Strategies
........................................................................................48
4.3 Blue Ocean Strategy
.................................................................................................50
4.4 Disruptive Innovation
...............................................................................................54
4.5 The ES Cloud
............................................................................................................56
4.6 Natural-Resource Based
View...................................................................................58
4.7 Sustainable
Initiatives................................................................................................61
4.8 Additional Comments and Recommendations
.........................................................61 4.9
Main Findings on the Primary Research Subject Embedded
Sustainability within the Energy Industry and The Interconnected
Secondary Research ......................................62 Chapter
5 Conclusion and
Recommendations......................................................................64
5.1 Research Approach and Key
Findings.......................................................................65
5.1.1 The Concept of
Sustainability............................................................................65
5.1.2 Key Models and Theory's
.................................................................................65
5.1.3 Primary Research
..............................................................................................66
5.1.4
Recommendations..............................................................................................67
5.2 Implications of Findings and
Recommendations......................................................68
5.3 Have the Research Objectives been Achieved?
........................................................68 5.4
Limitations of Study and Topics for Further Research
.............................................68
References............................................................................................................................69
Appendices
.........................................................................................................................77
Appendix A
.....................................................................................................................77
Appendix
B......................................................................................................................78
Appendix C
.....................................................................................................................78
Appendix
D......................................................................................................................78
Appendix
E......................................................................................................................79
Appendix F
.....................................................................................................................85
Appendix G
.....................................................................................................................88
7
8. Index of Figures Figure 2.3.1 Porters Generic Strategies
(Porter,
1985)........................................................18
Figure: 2.3.2.1 Creating Sustainable Value Laszlo
(2008)...................................................19 Figure:
2.4.1 The Yellow Tail (Kim and Maubougne, 2004)
..............................................23 Figure: 2.6.3.1:
Demonstration of the absence of a global climate framework (World
Energy Council,
2013).........................................................................................................33
Figure: 4.2.1 Question 1
......................................................................................................49
Figure: 4.2.2 Question
2.......................................................................................................49
Figure: 4.2.3 Question
3.......................................................................................................49
Figure: 4.3.1 Did The Little Green Energy Company enter a Blue
Ocean? .......................51 Figure: 4.3.2 Rating of
Innovation.......................................................................................52
Figure: 4.3.3 Rating of Value/Utility
...................................................................................52
Figure: 4.3.4 Rating of Affordability
...................................................................................53
Figure: 4.3.5 Alignment of Value-Innovation Attributes with
Sustainability.......................53 Figure: 4.4.1
Categorization of Performance in The Energy Industries Traditional
Competitive
Areas................................................................................................................55
Figure: 4.5.1 Rating of Sustainability
.................................................................................57
Figure: 4.6.1 Sustainability Integration into each Function
................................................60 8
9. Chapter 1 Introduction 1.1 Introduction The purpose of this
paper is to explore Embedded Sustainability within The Little Green
Energy Company and make recommendations to leaders and managers
within the energy industry on the development of sustainability
strategies. This chapter describes the function of the
dissertation. It also offers a background to the research area
within a global context, providing justification for the authors
research goals. Distinct aims and objectives of the study are
defined, a brief description of the research methodology is
outlined and a summary of each of the following sections is
provided. 1.2 Background Laszlo and Brown (2014) aspire for humans
and life in general to thrive on the planet forever. However
society is currently using the environmental resources at a rate
that requires 1.5 planets (World Wide Fund for Nature, 2010).
Global energy consumption is increasing with the dramatic rise in
population and there is now an essential requirement for clean
energy with zero emissions which is globally abundant, compact with
modest land usage, affordable and competitive with other fuels
(Zwicker, 2013). Most economic activity is conducted by large and
small companies therefore businesses heavily determine the
selection of technologies and the resource intensity of economic
activities (Leadership Council of the Sustainable Development
Solutions Network, 2014). For this reason, the traditional role of
business, to provide goods and services that meet customer demands
in a profitable way, must be expanded, improved and ultimately
fixed. Current literature which discusses the ideas of Conscious
Capitalism and Embedded Sustainability encourages businesses to
make sustainability the back bone of business where sustainable
objectives are woven into the fibre of the organization, going
beyond bolt on corporate social responsibility (CSR) activities
such as donating to charity (Simpon, Fischer, Rohde, 2013; Laszlo
and Zhexembayeva, 2011). The Little Green Energy Company has the
characteristics of a firm on endearment, generating value for all
of their stakeholders and 9
10. obtaining long-term competitive advantage as a result
(Sisodia, Wolfe and Sheth, 2014). The company provides insight into
modern sustainable practice rendering rational for an in-depth
study of their strategy. 1.3 Rational for Topic Choice Despite a
multitude of corporate sustainability reports which highlight
sustainability efforts, most business leaders lack a clear
understanding of how to embed sustainability in their day-to-day
decisions and processes (Bertels, Papania and Papania, 2010). A
survey undertaken by Hanna and Lacy (2011) indicates there is
widespread belief in the strategic importance of sustainability
issues among CEO's. However executives are still struggling to
address the issues as competing strategic priorities are seen as a
major barrier (Hanna and Lacy, 2011). The European Commission
(2001) highlights the importance of environmental concerns and
sustainability with regards to current and future energy security.
Pasqualetti and Sovacool (2012) believe energy security requires
the provision of available, affordable, reliable, efficient,
environmentally benign, properly governed and socially acceptable
energy services. Although a few large renewable energy firms are
committing to energy security goals such as the A2Z Group (India)
and Abengoa (Spain) all in all there are a limited quantity of
large energy companies which exhibit a broad-based commitment to
sustainability. In 2013 renewables accounted for just 2.2% of
global energy consumption and Co2 emissions continued to increase
(BP, 2014) reflecting the lack of energy companies jumping onto the
sustainability bandwagon. This is unsurprising as the literature
surrounding the question of how to embed sustainability is limited
(Salzmann, Ionescu-Somers and Steger, 2005) and there is particular
uncertainty over the ways in which energy companies can balance
energy security, energy equity and energy sustainability (The World
Energy Council, 2015). The frameworks discovered via secondary
research and the findings from analysis of The Little Green Energy
Companies strategy will assist managers to create long term
strategies towards embedded sustainability. The dissertation
identifies the 10
11. main strategies required to make the shift from the
Business-as-Usual (BAU) trajectory towards a Sustainable
Development (SD) path within the Energy Industry. It will advise
good management practice of the energy industry in regards to the
worlds natural resources encouraging organizations to perceive
sustainability a business priority, supporting economic and human
development. It is essential for energy companies to conform to the
changing paradigm of sustainability, whereby organizations act as
environmental stewards and global environmental challenges are
internalized (Bithas, 2011). They can achieve this by developing
new strategy, exploiting their resources and technical ability and
developing partnerships with governments, international
institutions and research associations (United Nations, 2008). A
strategy embedded with sustainability should direct energy
companies towards a new path which could lead to long term value
and competitive advantage. The challenges facing the energy
industry therefore represent unprecedented opportunities for large
companies such as Shell, BP, Exxon Mobil and Chevron. 1.4 Aim The
researcher will undertake primary research within The Little Green
Energy Company to assist with the investigation of the concept of
embedding environmental sustainability and to discover practical
strategies for implementing embedded sustainability, particularly
within the energy industry. Hence the case study investigation into
a renewable energy companys strategy will aim to reveal truths on
how to Embed Sustainability. The project also aims to assess the
consistency between the findings of the case study investigation
and the models of Embedded Sustainability discovered during
secondary research. The primary and secondary research ultimately
aims to reveal the best techniques/ models for embedding
environmental sustainability into strategy and ways in which the
models can be applied to conventional energy companies to promote
the movement to alternative, environmentally sound fuels. 1.5
Objectives This dissertation intends to achieve the following
objectives: 11
12. 1.5.1 Objective 1 To describe the concept of Embedding
Sustainability by reviewing and comparing relevant and useful
literature and theory. 1.5.2 Objective 2 To investigate and
identify key models and theories on how to embed environmental
sustainability into corporate strategy. 1.5.3 Objective 3 To
undertake primary research within The Little Green Energy Company
(solar panel designer and installer) to reveal the opinions of
employees over the companies sustainability strategy and address
the question; how can environmental sustainability be embedded into
strategy? 1.5.4 Objective 4 To make recommendations, based on the
analysis of both primary and secondary information, to managers,
particularly in the energy industry, who are seeking to take
advantage of the opportunity to embed environmental sustainability
into strategy and move beyond corporate requirements and to impose
persuasive influence on those who are not. 1.6 Summery of
Methodology Primary research in the form of a case-study was
undertaken to investigate the research topic. All the employees
within the Little Green Energy Company were sent questionnaires.
The questionnaires involved both open ended and close ended
questions of which the majority were based on theory discussed
within the secondary research. The findings were analysed using
mixed quantitative and qualitative methodology. The objective of
the questionnaires was to gain the employee's opinions of the
companies sustainability strategy therefore gaining insight and a
transferable understanding of the research topic. 1.7 Potential
Limitations of Study The lack of experience of the researcher, time
limitations, and sole data collection 12
13. method (questionnaire survey design) constrains the
generalizability, reliability, internal validity and external
validity of the research. Also there is a lack of literature in the
area of Embedded Sustainability within the energy industry and
although the gap is used as an opportunity to expand upon the
research, it also means there is a lack of relevant data to draw
upon. If repeated the study could also include interviews as a
means to obtain the in- depth opinions of employees. Future
researchers could therefore revise the questionnaire research
method perhaps utilizing a triangular approach to improve the
reliability of the data. Also the primary research has an
organization-wide perspective so future research could detail the
importance of building sustainability into the entire supply chain.
Furthermore the questionnaire design whereby models selected by the
researcher are utilized to form questions (the grounded approach)
could introduce researcher bias. The qualitative analysis of data
whereby trends and parameters are identified and selected by the
researcher may similarly introduce researcher bias. Finally bias
may have occurred during identification of the study population as
The Little Green Energy Company is only one Small to Medium
Enterprise (SME) within the sea of energy companies. This presents
an opportunity for future researchers to study the strategy of
larger renewable firms or the change management of large oil and
gas firms towards the supplying of renewable fuels. 1.8 Summery of
Chapters The study begun by presenting a background to the concept
of Embedded Sustainability and of the current condition of the
energy industry. The introduction also offered a rational for the
topic choice, the overall aim and supporting objectives. Chapter 2
provides an overview of Embedded Sustainability followed by a
literature review which explores the key frameworks surrounding
Embedded Sustainability and an example of a sustainable strategy
within the energy industry. Chapter 3 evaluates the methodological
approach selected to analyse the primary 13
14. research and discusses the integration of the secondary
research within the questionnaire and data analysis. Chapter 5 is
devoted to a data description of the primary research questionnaire
responses and an analysis of the data. Finally Chapter 6 arrives at
conclusions relating to the research aims, questions and objectives
and offers recommendations based on the entire study. Chapter 2
Literature Review 2.1 Introduction Embedded Sustainability can be
defined as the integrating of sustainability pursuits into the DNA
of the organization, incorporating environmental health and social
value into the organizations core whilst excluding trade-offs in
price and quality (Laszlo and Zhexembayeva, 2011). Bertels, Papania
and Papania (2010) identified 13,756 academic articles and reports
related to Embedded Sustainability of which 96 were highly relevant
to the study of how to embed sustainability. The current and
significant discussion over the concept of Embedded Sustainability
has emerged from the vast accumulation of literature throughout the
past two decades which recognizes the crucial role industry plays
towards the future achievement of sustainable development (Pfeiffer
2004; Business Action for Sustainable Development, 2012). The
Brundtland Report (World Commission on Environment and Development,
1987) defines sustainable development as: Development that meets
the needs of the present without compromising the ability of future
generations to meet their own needs. The WBCSD (World Business
Council of Sustainable Development, 2014) is strongly encouraging
businesses to take full account of global social and environmental
capacities by considering longer-term environmental and social
impacts. The WBCSD is just one of the growing array of campaigners
and stakeholders attempting to steer businesses to take
responsibility for their impacts on the environment and make active
strategic decisions to ensure their business operations remain
within the barriers of social and environmental capacities,
balancing the interests of Elkingtons (1997) triple bottom line.
This builds a strong 14
15. rationale for the investigation of appropriate strategy to
embed sustainability. Embedding Sustainability into corporate
strategy would ease the positive tension between drivers of
sustainability such as environmental activist groups, consumers,
political bodies and those with the power to make decisions such as
company directors, leaders and managers. Marks and Spencer's
recently evolved approach which has aligned sustainability with
their core strategy will be the first approach to be outlined,
offering initial insight into the main components of Embedded
Sustainability. Next the review will discuss and assess Laszlo and
Zhexembayeva's (2011) suitably selected three strategic models
which Embed Sustainability for the demanding business environment
of the contemporary; Porters (1985) Three Generic Strategies, Kim
and Mauborgne's (2004) Blue Ocean Strategy and Christensen's (1997)
model of Disruptive Innovation. The ES (Embedded Sustainability)
cloud, a model derived from a combination of the prior three models
by Laszlo and Zhexembayeva, will also be evaluated. Laszlo and
Zhexembayeva are experts in corporate sustainability, teaching,
researching and writing about the subject in depth. The
creditworthiness of Laszlo and Zhexembayeva and the compelling
nature of the book 'Embedded Sustainability' provides the author
with significant rational to investigate their suggested models of
Embedded Sustainability. Laszlo and Zhexembayeva (2011)
self-justify their selection of models by explaining the models
relevance to the external environment which is characterised by
declining resources, high transparency and rising expectations.
They believe the models are reflective of the magnitude of these
current sustainability challenges. This being said the review of
each of the suggested theories will include an investigation into
supporting and opposing literature to highlight potential
weaknesses of the models. The key models core suggestions towards
integrating sustainability into strategy will then be applied to
the current global energy industry. This will begin to indicate
which of the key models of Embedded Sustainability, if any, will be
most viable 15
16. and applicable to the energy industry. Finally the review
will explore the attempts of ExxonMobil towards developing a
strategy embedded with sustainability which promotes the move from
the trade of oil and gas towards natural fuels. Fusion energy will
then be introduced as an alternative energy source and a possible
solution to energy sustainability challenges. Finally a summery of
the models, their contribution and limitations with regards to the
wider researcher topic and their relevance to the primary research
will be provided. 2.2 Marks and Spencer Plan A: An Approach to
Embedded Sustainability Marks and Spencer introduced the Plan A as
a scheme to address sustainable development issues and accelerate
their journey towards a sustainable business (Grayson, 2011). The
first step, fully supported by former M&S manager Sir Stuart
Rose and his successor Marc Bollard, was to obtain the commitment
of top management and publicly communicate the companys dedication
to the goals of Plan A to investors, stakeholders and customers.
Plan A executives were appointed and a bonus system was settled for
the successful implementation of Plan A initiatives. Board meetings
were set to occur twice annually to ensure alignment of investment
decisions. The Plan A commitments became fully integrated into
operations, transforming from bolt-on attributes (See Apendix A) to
functions ran by every department. This required strong change
management to shift the way M&S did business. For example the
Human Resources department developed healthy eating initiatives,
the store development department have ecological targets and the
purchasing department aim for each product to have at- least one
Plan A sustainable supplier story by 2020 encouraging change of
supplier practices. M&S's following measure involved the
engagement of the value chain. M&S encouraged knowledge sharing
between their 2500 suppliers via an online portal and held a
sustainability conference, of which 1000 suppliers attended, aimed
at teaching suppliers cost effective ways to innovate for Plan A
(Grayson, 2011). They also engaged customers to participate in
sustainability pursuits by introducing a 5p charge for plastic
bags, donating the profits to Groundwork, an 16
17. environmental charity. Furthermore M&S has collaborated
with, commercial organizations, competitors, the public sector and
charities to discover new ways to Embed Sustainability. They also
monitor the progression of Plan A and facilitate its continuous
improvement, delivering an annual Plan A progress report. The
project required 200 million of funding over five years of
operation. However a return of 50 million has been gained. This
demonstrates that Embedded Sustainability can generate substantial
returns. M&S have recycled the profits back into Plan A
indicating a ceaseless belief that a company can do well by doing
good, a view derived from Benioff and Southwick (2004). Marks and
Spencer gain competitive advantage from their strategic
capabilities which incorporate a range of sustainability
initiatives/ actions. The approach is derived from the natural
resource based view towards creating sustainable value whereby
capabilities are central, a firm is concerned with its future
position thus matches its capabilities to the external environment
and valuable and costly to copy resources of a firm are key to
maintaining competitive advantage (Hart and London, 2005). Overall
the purposeful mission and goals of Plan A partnered with strong
leadership have facilitated the continuous development of
company-wide initiatives towards sustainable practices and endowed
a corporate culture where sustainability is held at the core,
influencing and guiding both employees and operations. 2.3 Porters
Three Generic Strategies Porter introduced the Generic Strategies
as an extension of his 1979 article in the Harvard Business Review
which focused on the analysis of five environmental competitive
forces; threat of new entry, intensity of rivalry, pressure from
substitute products, bargaining power from suppliers and bargaining
power from buyers (Ormanidhi and Stringa, 2008). Porter (1985)
believes the generic strategies (Figure 2.3.1) position a company
against the pressure of the five forces. Porter's (1985) study
consisted of three methodological stages. The first stage 17
18. involved the conducting of a questionnaire to discover
executive views regarding their firms competitive method, analysis
to discover the key dimensions of the methods and a categorization
of the dimensions to reveal the Three Generic Strategies. The
second stage gained recommendations from a panel of experts towards
the content of each strategy and the final stage assessed the
variation in performance between three groups of firms, each
implementing a different generic strategy (Dess and Davis, 1984).
The first generic strategy is cost leadership. The strategic
strength lies in offering low cost products or services to a broad
market. The second is differentiation which focuses on offering
unique products and services to a broad scope of consumers. Pavitt
(1991) states firms which use innovation to differentiate
themselves from competition can be twice as profitable supporting
Porters (1985) differentiation strategy. The final strategy,
segmentation focus, tailors strategy to a specific customer segment
(narrow market scope). Segmentation focus has two variants, cost
focus and differentiation focus. Cost focus meets the needs of the
segment with competitive pricing whereas differentiation focus
brings success by supplying for the specific needs of the segment.
However both segmentation variants assume the customer segment
targeted is not currently adequately served by the competitors.
2.3.1 Cost Leadership Laszlo and Zhexembayeva (2011) believe
sustainability can be utilized by 18 1. Figure 2.3.1 Porters
Generic Strategies (Porter, 1985)
19. businesses in different ways to achieve each of Porters
(1985) Three Generic Strategies. Sustainability can promote cost
leadership if a business implements initiatives to reduce material
inputs, reduce waste and reduce energy requirements. Walmart have
achieved cost leadership with a broad scope by perusing three main
cost cutting goals. Walmart aim to use 100% renewable energy,
produce less greenhouse gasses and create zero waste (Walmart,
2014). Conversely Laszlo (2008) believes firms now need to make a
transition from cost cutting and risk management approaches towards
full blown sustainability strategies involving every aspect of the
business from the lower levels of strategic focus such as business
processes to reduce waste and Co2 to the higher levels of strategic
focus such as embedding sustainability within employees mindsets
and organizational culture (Figure 2.3.2.1). 2.3.2 Differentiation
Sustainability can also be a source of differentiation. Businesses
can promote the 19 2. Figure: 2.3.2.1 Creating Sustainable Value
Laszlo (2008)
20. uniquely sustainable attributes of the product or service
and charge a price premium as a result. Differentiation is usually
successful when a company seeks to satisfy peoples specific needs
(Porter, 1985). At the simplest level the sustainable aspect adds
to the overall product attributes such as the fair-trade aspect of
Starbucks coffee. 2.3.3 Segmentation Focus Finally sustainability
can be utilized in attempt to adopt to Porters (1985) segmentation
focus. Tesla's Model S zero emissions, luxury car is an example of
the differentiation focus variant (Tesla Motors, 2014). The product
is uniquely entirely sustainable, targeting the narrow market niche
segment of consumers who value luxury and demand an environmentally
friendly car. The the value of sustainability to the niche segment
enables Tesla to charge a price premium. Cost focus achieves cost
advantage in the niche segment. The business can offer cheaper
products than the competition by performing cost cutting
sustainable operations similar to those of cost leadership. Over
half of small businesses now recognise the cost benefits of
implementing sustainable business practices and some have seen
improved profitability as a result (Lloyds Bank, 2013). 2.3.4
Critical Analysis of Porters Model within a Sustainability Context
Overall Laszlo and Zhexembayeva (2011) show that pursuits to
increase social, environmental and economic performance can often
strengthen the strategic performance of a company. The pursuits can
either drive a business to perform activities differently for
example using renewable fuels or perform a different set of
activities such as providing renewable energy rather than oil and
gas. However Porters (1985) framework has a fundamental weakness as
it fails to provide information or theory on ways for a businesses
to move towards a new strategy within the sustainability driven
marketplace (Laszlo and Zhexembayeva, 2011). Furthermore Porters
general approach which focuses heavily on the external business
environment is widely criticised by resource based theorists as it
lacks attention to internal aspects such as the roles of the
employee, worker morale and 20
21. leadership to bring out the potential of employees (Aktouf
at al 2005). Stalk, Evans, and Schulman (1992) believe focus should
be taken from the creation of strategy to achieve competitive
advantage towards ideas over where to gain competitive advantage,
believing the advantage can be found in resources and skills held
within the company opposed to the external market. Porter (1991)
acknowledges the resource based theory but believes it only
provides a small step towards the understanding of strategy to
obtain competitive advantage, believing competitive advantage is
gained from all sources which determine performance. Porter's
(2011) discussion of CSV (Corporate Social Value) is closely
aligned with Laszlo's and Zhexembayeva's (2011) discussion of the
Generic Strategies within a sustainability context. Porter (2011)
explains how businesses should not just participate in industry
analysis when speculating strategy but investigate the broader
business environment surrounding their major operations, connecting
business success with societal improvement. Porter and Kramer
(2011) CSV article similarly sees opportunities in addressing
social and environmental issues and believes the issues are now a
means to create business advantage. Epstein- Reives and Weinreb's
(2013) article praises Porters ideas stating he has enormously
aided the sustainability movement. Furthermore Cruz et al, 2006;
Peters, & Zelewski, 2011 and Shrivastava, 1995 have also
discussed the generic strategies in the context of sustainable
development, supporting Laszlo and Zhexembayeva's (2011)
sustainability interpretation of Porters strategies. 2.4 Blue Ocean
Strategy Kim and Mauborgne's (2004) Blue Ocean Strategy also
supports the sustainability movement by helping companies to
progress towards a new, more defensible strategy. This is a
development from Porters (1985) framework which focuses on
strengthening existing strategy. Kim and Mauborgne (2004) believe
the marketplace is divided into Red Oceans and Blue Oceans. Oceans
turn red when supply exceeds demand and products become more alike
and standardized causing competitive convergence. Red Oceans are
expanding because of the 21
22. increased ease of replicating competitor moves due to
global changes such as the lowering of trade barriers. However Blue
Oceans are accessible for the companies who decide to neglect the
competitive game of the current marketplace and the benchmarking of
their operations to those of competitors, instead aiming to create
unique customer value in a new, uncontested marketplace. Kim and
Mauborgne (2004) propose companies can create Blue Oceans by
participating in value innovation. Value innovation works on the
assumption that value without innovation traps companies in the old
paradigm which supports only incremental changes. They believe
incremental changes are insufficient within the ever demanding
marketplace. Value innovation also assumes innovation without value
creates products which would lack demand. To overcome these issues
value innovation aligns the products cost, price and utility with
innovation to create goods which will be both accepted by the
market and profitable for the company. Value innovation provides an
excellent frame to enable sustainability orientated business to be
accepted by the market and for the business to capture a proportion
of the value created. Taking a perspective behind the lens of
sustainability, value without innovation promotes incremental
changes such as Nestle reducing plastic material use in its
eco-shape bottle (Nestle, 2014). This does not combat the real
challenge of using an entirely sustainable material. On the other
end of the spectrum, innovation without value brings products to
market which fail to achieve market penetration such as Lackner's
(2013) artificial trees which remove CO2 from the atmosphere. Blue
Oceans await for the companies which align value innovation with
sustainability. Vast markets can be created as a reaction to the
pressure to reduce reliance on fossil fuels and eliminate waste.
Value-innovation is therefore suited to the enormity of ecological
and social challenges, providing companies a means to achieve whole
system change of their utility whilst ensuring the alignment of
price and cost attributes (Laszlo and Zhexembayeva, 2011). Where
eco-efficiencies such as cutting material inputs may contribute to
the strengthening of Porters 22
23. (1985) cost leadership strategy for example this does not
lead to the whole system transformation required to create Blue
Oceans. Whole system innovation can lead to Embedded Sustainability
by challenging the system behind every activity a company
undertakes and encouraging a leap in value for both the business
and the buyers. Kim and Mauborgne (2004) investigated this leap in
a study of 108 business launches. The findings showed only 14% of
launches aimed to create Blue Oceans, the rest were line
extensions. The Blue Ocean projects generated 61% of the companys
profits whereas the line extensions only accounted for 39% of
profits indicating the clear performance benefits associated with
creating Blue Oceans. Cemex, a cement company, created a Blue Ocean
by launching The Patriminio Hoy program in 1988. The program
provided credit instalments to people in Mexico to enable them to
build their own homes room by room. This enabled 75,000 people to
build houses whilst generating $650 million a year. Cemex is an
excellent example of a company looking at value-innovation through
the lens of sustainability. Kim and Maubouge offer a strategic
profile framework to enable businesses to reach Blue Oceans (Figure
2.4.1). 23 3. Figure: 2.4.1 The Yellow Tail (Kim and Maubougne,
2004)
24. The framework illustrates the opportunity to explore into
new potential dimensions of a product (the yellow tail) and bring
focus away from the conventional dimensions competitors previously
competed on in order to attract a new market. In this case wine
with the new dimensions, ease of selection and fun, attracts custom
from cider and beer drinkers and takes market share from the
current premium and budget wines. In the context of sustainability
the framework leads to four key questions for businesses to
consider; 1. Which dimensions can be reduced below industry
standard? 2. Which factors the industry takes for granted could and
should be eliminated? 3. Which factors should be raised above
industry standard? 4. Which factors can be created which do not
currently exist? The questions can be contextualized and applied to
the installation of solar panels; 1. The visual impact of solar
panels can be bellow industry standard yet accepted by consumers.
2. Solar panels eliminate the need to rely on gas or electricity
(sources of energy which consumers often take for granted). 3.
Solar panels provide customers with long term benefits such as
energy security which the traditional energy industry fails to
offer. 4. Feed-in-tarrif's from governments are offered, adding an
additional beneficial factor to the purchase of solar panels which
does not exist with traditional energy sources. However this
approach to sustainability has been widely criticised. Firstly The
TRU Group (2014) critique Kim and Mauborgne's research as it
conceals full details on their methodology and analysis.
Furthermore only 13 out of 108 (14%) business launches analysed
were of a Blue Ocean Nature, providing a small sample. Small
samples are less likely to yield reliable and precise results
(Hackshaw, 2008) making it difficult to generalize Kim and
Mauborgne's (2004) conclusions over the 24
25. successes of companies pursuing Blue Ocean's to all
business launches which attempt value-innovation. Secondly Herman
(2005) believes the Blue Ocean Strategy sees sustainability as a
simple addition to a product and it is therefore similar to
Levitt's (1980, p.99) differentiation which is defined as a change
of the attributes of products to give the marketer an opportunity
to win custom and retain the customers. Herman (2010) also points
out the significant limitation that once Blue Oceans are created
they will quickly turn red with other businesses replicating or
improving upon the new business model. Kim has accepted the
limitation within a business insider article, however Kim believes
the manger can resolve the challenge by searching for a new
strategy every several years (Herman, 2010). This is concerning for
businesses which are attempting to create Blue Oceans by
implementing sustainability related product attributes as the
profits related to their value innovation may not last. If Blue
Oceans disappear, companies may disregard sustainability
orientation and value-innovation as a means to gain long term
success. This leads to another limitation. Kim and Maugborge have
not yet explored the creation of an entirely new Blue Ocean for
sustainability opportunities. This would surpass the simple
integration of sustainability into new product dimensions and
encourage acceptance of Simpon, Fischer, Rohde's (2013) idea that
sustainability can be the backbone of a business. Also the ideas do
not define how high to aim with regards to sustainability driven
operations (Laszlo and Zhexembayeva, 2010). 2.5 Christensen
Disruptive Innovation Christensen (1997) disruptive innovation is
relevant to the current sustainability challenges which require
radical business solutions. Christensen distinguishes between
disruptive innovation and sustaining technologies. Where sustaining
technologies makes incremental or transformational improvements to
performance across the dimensions which customers value in the
current market place, disruptive innovation does not conform to the
valued attributes of the mainstream markets, introducing a product
to market which may initially offer poor 25
26. performance but appeals to those who value the particular
innovation. Christensen (1997) uses the example of the electric car
industry to show the challenges and benefits of disruptive
innovation in relation to sustainability. He investigates the
difference in performance of electric cars produced by new entrant
companies and large car companies in respect to the mainstream
market demand. The performance criteria selected by Christensen;
top speed, range of miles and acceleration, are popular and valued
dimensions of the car industries market. The analysis showed the
Chevy Volt and Tesla Model S outperformed the market demand in all
the three dimension in 2010. The Nissan Leaf did not reach market
expectations for the range of miles and for speed of acceleration.
Tesla Model S outperformed both the larger car companies in all
three areas. Christensen further explores into potential reasons
why the majority of the companys electric cars display higher
performance on the three dimensions than market expectations and
why Tesla, a new entrant, is outperforming the larger companies.
Christensen concludes companies need to exceed the expectations of
the mainstream market within the key valued dimensions to enable
the disruptive innovation to be adopted by the mainstream market.
The consumers will be encouraged to switch from petrol cars to
electric cars as the electric cars excel in the conventional
performance dimensions petrol cars compete upon. Performance in
conventional areas is required because the product attributes such
as zero emissions may not be immediately appealing to the
mainstream market. Larger companies often work closely with their
Research and Development department and a lack of demand for the
disruptive innovation (introduction of electric car) identified by
the large firms value network, often leads the firms to allocate
resources towards the sustaining of innovations (continuous
improvement) which are currently measured such as manufacturing a
car with higher horsepower. The deafness of larger firms to market
realities such as the pressures of sustainability allows new
players to emerge such as Tesla, who value 26
27. the innovation despite its weaknesses, recognizing the long
term opportunities of a sustainability approach. The new entrant
begins to make improvements to the technologies leading to an
overshooting of customer needs and a consequent invasion of
established market segments of the larger firms. The large firms
then introduce the new technology simply to defend their customer
base. First mover advantage from this pattern of managerial
decision making of the large and small firms means the Nissan Leaf
and the Chevy Volt are outperformed by the Tesla Model S. The large
incumbent firms struggle to look past poor short term performance
of the disruptive technology, there is a time lag in the discovery
of the innovations potential and as a consequence they are forced
to respond to the introduction of the disruptive innovation by new
entrants. This is the innovators dilemma. Larger firms need to
begin to look ahead of current customer needs and expectations
towards the needs of future generations. Christensen's (1997) work
assists incumbent firms to recognize the dilemma which favours new
entrants and begin to see sustainability challenges as an
opportunity for disruptive innovation. His work therefore assists
firms to realize the hidden danger of existing market success and
consequent sustaining of innovations, assisting firms to explore
beyond their previous boundaries and participate in disruptive
innovation. Which, a consumer group, conducted a survey, involving
9,400 informants, to investigate the customer satisfaction of
different energy providers (Christie, 2015). The survey revealed
that small and green energy companies had the highest customer
satisfaction levels. Ecotricy, an independent green energy
supplier, had the greatest customer satisfaction of 84% and another
green energy company, Good Energy, scored 82%, strongly
outperforming the big 6; E. ON, British Gas, EDF Energy, Npower,
Scottish Power and SSE which all scored 50% or less. 27
28. This validates Chistensens (1997) thesis and shows its
substantial relevance to the energy industry. 'The big six' need to
raise their game and participate in similarly green practices to
experience the customer satisfaction benefits of the smaller energy
firms who use Embedded Sustainability as a source of disruptive
innovation and competitive advantage. The survey results also
indicate and confirm that smaller companies are pressurized to
exceed customer expectations in conventional product/ service
dimensions such as customer service in order for the sustainable
disruptive innovation to be adopted by the market. 2.6 Embedded
Sustainability the Solution Laszlo and Zhexembayeva (2011)
incorporate the prior three models, adopting a meta-analysis
approach, to compose a comprehensive solution to strategic problems
such as the innovators dilemma. Laszlo and Zhexembayeva (2011) use
the example of the Ersta Group Bank to demonstrate Embedded
Sustainability though the collaboration of key models. In 2008 the
bank realized it was quickly approaching maximum efficiency. This
drove the management to rethink their strategy to find a new way to
achieve competitive advantage. The Ersta Group bank therefore
decided to increase its shares owned by non-profit organizations to
31% of total shares. This is an example of the strengthening of
Porters (1985) differentiation strategy by pursuing sustainability
interests and providing the company with a 'good bank' image. The
Ersta Group furthered its sustainability pursuits by moving towards
a strategy to provide micro-finance and by participating in social
entrepreneurship. This was a highly uncontested market space and an
excellent example of exploring Blue Oceans when traditional markets
turn red. Laszlo and Zhexembayeva (2011) promote their ES cloud as
a guide to assist companies to pinpoint their current strategy on
the scales of; sustainability (polluting to solving global issues)
and change (incremental to radical), and identify their desired
position for the future. The framework guides a company to choose a
path which enables them to either Embed Sustainability leading to
better 28
29. positioning, taking from Porters (1995) model, or Embed
Sustainability to create Blue Oceans (Kim and Mauborgne, 2004).
Laszlo and Zhexembayeva (2011) argue no choice is superior however
the path selected should be dependent on the type of change
desired. The change desired will fit into either Christensen's
(1997) sustaining change to remain in the existing market space but
improve positioning via eco-efficiency's, incremental or radical,
or Christensen's (1997) disruptive innovation, radical change which
creates uncontested market space (Blue Oceans). Clean energy
providers such as Vestas Wind Systems demonstrate the use of
disruptive innovation to respond to sustainability drivers and to
create Blue Oceans. Vesta historically produced household
appliances and agricultural products however began to rethink its
strategic path in the 1970's. Vesta began the mass production of
wind turbines in the 1980's (Vesta, 2014). The cloud draws on many
additional industry examples. Each company exemplified has a
starting point based on the companys rate of sustainability and
rate of change, has adopted a new path and has reached a new, more
positive position on the cloud. The cloud therefore offers managers
an opportunity based framework where an array of paths can be taken
to achieve Embedded Sustainability. The key dimensions of Embedded
Sustainability verses a 'bolt-on' approach are displayed in
Appendix A. Hammersley (2001) critiques the meta-analysis approach
(the methodological approach adopted by Laszlo and Zhexembayeva,
2011) which combines studies to achieve a mean affect, as the
variation between models can cause heterogeneity which often
removes critical contextual information. On the other hand Clem's
(2012) book review praises the ES cloud as it is derived from other
highly valued models and assists managers to assess their current
situation and plot a course which makes sense for the particular
business for permanent Embedded Sustainability. Clem (2012) sees
Embedded Sustainability as an avenue for managers to combat the
changing business landscape, realizing long term growth and
competitive advantage whilst remaining profitable. 29
30. 2.7 Energy Industry 2.7.1 Todays Energy Industry on the
Spectrums of Sustainability and Change An investigation into the
opinions of executives regarding sustainability issues can be
useful in identifying the level of change in an industry and the
level of sustainability on the agenda. Executive opinions can
therefore assist in pinpointing the starting point of an industry
on the ES cloud. The Global Compact Surveys (United Nations, 2007)
investigation into executive opinions showed sustainability was
only a minor concern within the energy industry. Hanna and Lacy's
(2011) investigation three years later indicates a radical change
within the energy industry, revealing sustainability issues are now
a key priority and concern of executives. Hanna and Lacy (2011)
found ninety-four percent of executives within the energy industry
rated sustainability issues as either important or very important.
However the research also identified some key issues within the
industry. Although Ninety- one percent of CEO's in the renewables
sector expressed sustainability issues as 'very important' only
sixty-one percent of CEO's in the oil and gas sector regarded the
issues as 'very important'. Hanna and Lacy (2011) believe the
divide is evident because the renewable sector see sustainability
solutions as an opportunity where the oil and gas sector view
sustainability as a hindrance. The survey also discovered the
support for sustainability is stronger within emerging markets.
Hanna and Lacy (2011) believe this is attributed to 'the lens of
proximity' where social development issues drive emerging market
companies to engage in sustainable operations. The survey also
measured executive opinions of stakeholder influences. An above
average fifty-one percent of the energy industry CEO's, out of all
CEO's, saw the government as a primary influence in enabling
Embedded Sustainability as investment incentives and regulations
30
31. directly affect the companies. Communities were also
identified as a strong driving influence for change within the
industry. 2.7.2 The Goals of the Industry The World Energy Council
(2013) believes the global energy industry is experiencing
sustainability challenges of an increasing complexity which
necessitate the introduction and achievement of three key goals;
energy security, energy equity and environmental sustainability.
Energy security is the effective management of the energy supply by
energy providers to ensure current and future demand will be met.
Energy equity is concerned with the affordability of energy across
the population and environmental sustainability involves the
development of industry towards supplying renewable energies or
efficient alternatives. The goals, if shared, would assist in
leading the energy industry to overcome sustainability challenges.
However The World Energy Councils interviewees have expressed
concern that the essential values for a globally sustainable energy
system are not shared and that we are far from a globally
sustainable energy system. The World Energy Council (2013) defines
the deviation from the three values as an 'energy trilemma'.
Increasing pressure has been pushed on governments to implement
complimentary policies and regulations and increase investment
however The Energy Council (2013) also emphasizes the role of
industry in overcoming the energy trilemma. Furthermore they
believe companies within the energy industry can influence
government energy policies and regulations by sharing knowledge,
insights and experiences. Also they recommend the energy industry
to act independently by increasing private investment in energy
infrastructure and technology and attempting to support those
economies which particularity struggle with achieving energy
sustainability. The key sustainability goals and industry
recommendations of The Energy Council could be used as benchmarks
to guide companies within the energy industry towards the solving
of global problems within Laszlo's and Zhexembayeva's (2011) ES
Cloud. 31
32. 2.7.3 Is there a Feasible Path to Lead Todays Industry
Towards the Goals? Hanna and Lacy's (2011) research reveals the
current state of the energy industry and The World Energy Council
(2013) sets vital goals for the industry however there is
widespread uncertainty and a lack of consensus over a particular
path to adopt. In 2011 102 mining companies published reports, of
which 95% were based on the GRI framework (GRI, 2012b), a global
standard of sustainability reporting. However Moneva et al (2006)
claim that the GRI approach of reporting sustainability has
significant flaws which can camouflage an organizations un-
sustainabile activities. Fonseca et al (2012) provides a critical
review of the Global Reporting Index, warning the mining industry
that by continuing to accept the limitations of GRI and by
perceiving it as a sufficient means of sustainability reporting,
the companies may experience difficulties in the future when
communities and governments begin to require more integrative
approaches. Gray and Milne (2002) argue effective sustainability
reporting requires an analysis of the organization's compatibility
with ecological systems, resources, habitats, and societies
incorporated with a consideration of all other organizations past
and present impacts on the same systems. However The Word Energy
Council (2013) highlight the absence of a global climate framework
(Figure 2.6.3.1) which consequently makes it difficult for private
companies in the energy sector to determine activities which will
contribute to the achievement of industry goals. 32
33. Hanna and Lacy (2011) provide a more optimistic view
believing companies can shape the future energy system by pushing
the boundaries of what is possible by innovation and Embedding
Sustainability in line with core business challenges and
opportunities. They suggest energy companies can position
themselves for the new waves of demand by shifting resources
towards opportunities which are environmentally sustainable and
investing in new technologies which will both cut costs and drive
growth. Hanna and Lacys (2011) suggestions are derived from
industry examples such as Austria based OMV and South African
Eskom. OMV primarily supplies fossil fuels but now ensures this
core operation is conducted in an environmentally responsible and
climate-friendly way. Also OMV is developing innovations such as
carbon capture and storage (CCS) technologies. Lastly they are
actively increasing their renewable energy operations. Eskom,
traditional a coal dominated company, moved its strategy towards
renewables by heavily investing in solar panels and wind-farms.
Overall, although the path will be company and country specific
(Steger, 2004) the growth and success of the companies which are
creating a sustainable path indicate the feasibility and benefits
of strategic changes to Embed Sustainability 33 4. Figure: 2.6.3.1:
Demonstration of the absence of a global climate framework (World
Energy Council, 2013)
34. into the core of business and internalize environmental
issues. 2.7.4 Industry Example Switzer (2014) sees significant
barriers in the sustainability pursuits of oil and gas companies
towards providing renewable fuels. Firstly the capital costs of
renewable energy is high and the rate of return often low. Secondly
political effort is lacking around climate change and renewables
and there is a lack of renewable energy literacy among oil and gas
engineers. Finally the oil and gas sector usually requires
personality-driven leadership approaches to renewable energy
project development, securing top management commitment. However
Greenwonder (2014) believes there are counter forces pushing oil
and gas companies to go green; The growing anxiety over the
depletion of oil, the negative impact on the environment attributed
to oil spills and air pollution, the industrialization of poor
countries which were previously considered as major future sources
of oil and the changing belief of oil companies who now see
renewable energy as a more viable future power source. Forbes
(2009) discusses ExxonMobil's combined political and engineering
approach to going green. The softening of ExxonMobils strategy
regarding climate-change is largely attributed to the leadership of
Rex Tillerson. ExxonMobil have invested $600 million into methane
producing algae farms which turn sunlight to fuel. Methane releases
up to 50% less carbon dioxide than coal and petroleum. The use of
the natural fuel would cut 1 billion tons of carbon dioxide a year,
equivalent to building 80,000 wind turbines. ExxonMobil have worked
in close proximity to the Qatari government and prime minister
Al-Attiyah, paying 40% royalties in return for favourable terms
towards developing the North Field LNG plants (algae farms along a
80 mile stretch of Qatars coast). Both Shell and BP overlooked the
opportunity and have suffered a negative relationship with the
Qatari government as a consequence. ExxonMobil clearly have a
highly differentiated strategy, making informed strategic decisions
based on their unique perception of the long term potential of
34
35. sustainability opportunities. ExxonMobils differentiation
also demonstrates their neglect of the current competitive game
within the oil and gas industry and alternative exploration of Blue
Oceans, finding value and customer utility in a uniquely innovative
project. Where other oil and gas companies such as BP continue to
compete on traditionally valued customer dimensions, ExxonMobil
engages in disruptive innovation of their core activities, adding
the yellow tail dimensions of energy security, environmental
sustainability and energy equity and seeking to produce power via a
natural form of energy to cater for the needs of future
generations. However pinpointing ExxonMobil on the ES cloud is a
difficult task. The company is performing radical changes however
it is difficult to know or predict if the new strategy contributes
towards solving global issues. As algae still produces CO2 the
strategy could simply be seen as a corporate social responsibility
activity and it is debatable to whether energy from algae is a
solution to the magnitude of sustainability challenges within the
energy industry. Therefore although ExxonMobils strategy has the
key characteristics of Embedded Sustainability it is questionable
as to whether they have fully internalized sustainability issues
and Embedded Sustainability to solve the global issues of future
energy security, energy equity and environmental sustainability.
Fusion power on the other hand may be more suitable and relevant to
the global issues. Fusion power is generated by the fusion of
atoms, creating heat, which is then used to operate a steam
turbine, driving generators to produce electricity. This is similar
to most coal, oil, and gas-fired power stations however the power
does not rely on fossil fuels and consequently is an
environmentally sound option (Wood, 2013). Zwicker, 2013; Smith and
Prager, 2014; Gentile, 1995; and Jacobs, 2013 believe fusion energy
can meet the worlds energy needs and promise virtually unlimited
clean fuel. However Jacobs (2013) describes the challenges of
incorporating fusion energy as part of the global energy network as
myriad. Fusion energy would have to transform from a research
project to a commercial venture with political backing and
increased competition within the market. 35
36. Toole and Vogel (2011) believe some problems are so large,
that they cannot be solved solely by the actions of individual
businesses. To fight the true enormity of energy challenges
non-profit research groups such as the U.S Department of Energy,
institutions such as Princeton University's Plasma Physics
Laboratory (PPPL), governments and private companies operating
within the energy industry must form partnerships, similar to those
seen in the Marks and Spencer case, to adequately fund investment
and support activities towards researching, developing and
implementing renewable energy alternatives which have the potential
to meet the energy needs of the present and future population
(United Nations, 2014). However Seyfang (2004) believes statements
made by international governments echo a denial of the importance
of considering overall resource use, or of questioning economic
growth which consequently prevents the market mechanism from
delivering sustainable consumption. These market failures would
have to be addressed in order to solve environmental problems. 2.8
Conclusion of Chapter This chapter discusses many models and
examples which contribute towards the formation of strategy which
Embeds Sustainability. The Marks and Spencer case demonstrates the
use of a large-scale sustainability plan and numerous initiatives
to achieve Embedded Sustainability. Porter (1985) sees
sustainability as strategy strengthening mechanism to enable a
company to obtain competitive advantage. Kim and Mauborgne (2004)
explain how a company can make the transition towards a defensible
strategy by creating uncontested market space (Blue Oceans) via
sustainability pursuits. Christensen (1997) takes a similarly
divergent approach, introducing disruptive innovation as a strategy
to bring a sustainable and non-conventional products to the
marketplace and eventually secure mainstream customer interest.
Laszlo and Zhexembayeva (2011) encourage Embedded Sustainability by
incorporating the prier three models, creating a strategic approach
based on a starting point, a goal and a path. The models
demonstrate that companies should no longer see sustainability as
an obligation or an attribute to bolt on instead viewing
sustainability as an opportunity which 36
37. does not require trade-offs and can be integrated into core
business activities. The decision to execute the long term
integration of sustainability into a companys DNA can bring
substantial benefits from cost savings achieved by using natural
resources, a highly motivated workforce, improved reputation,
regard from non- governmental organizations and other stakeholders
and improved investor relations (May and Spring, 2008). Furthermore
Oleson (2004) believes sustainability-driven management can lead to
fewer trade-offs, increased speed to market, and an improved
connexion between product and strategy. However the chapter prompts
further research to investigate Embedding Sustainability into
strategy via internal drivers such as human resources, technology
development and organizational culture. Further investigation into
the resource based view of sustainability would provide a more
comprehensive augment over the ways to successfully Embed
Sustainability and encourage the discovery of a strategic approach
which details the internal execution of the models and suggestions.
This being said the predominantly external focus and the framework
design of the models enables their application to multiple
contexts, making it possible to apply the models to the energy
industry and The Little Green Energy Company. The wider models and
frameworks can be used during the primary research analysis of The
Little Green Energy Company to assess the models validity to energy
industry, compare the models against one another and identify the
key variables to consider when Embedding Sustainability. On the
other hand, although the models discussed offer great insight into
strategy through the lens of sustainability, they do not express
the level of change required. It is essential that the goals of
sustainability are recognized and known by each industry in order
to encourage the adoption of a path towards positive strategic
change from their current activities (The World Energy Council,
2013). ExxonMobil embrace a new, more sustainable strategic path
towards the achievement of ambitious goals. However to combat the
energy trilemma, companies within the energy industry must truly
internalize sustainability issues, assessing alternatives 37
38. such as fusion energy and tacking the barriers of
implementation by building partnerships with non-profit
sustainability orientated organizations, energy research
institutions and governments. Overall the review of literature has
discovered that elements from all the models can be used towards
formulating an appropriate strategy which embeds sustainability.
The compatibility and broad outlook of the models make a useful
stage for the environmental pursuits of the energy industry and the
analysis of The Little Green Energy Company. Chapter 3 Research
Methods 3.1 Introduction This chapter discusses and explains the
research methodology selected to conduct the primary research
investigation. The first section outlines the key purpose of the
primary research, its connection to the secondary research and the
technique of data collection. The second section discusses the main
questions the primary research will seek to resolve and the
consequent mixed style of questions, open ended and close ended to
obtain both qualitative and quantitative responses. Next the author
will justify the questionnaire method of data collection selected.
The following paragraphs will explain and justify the sampling
technique applied. Finally the technique of data analysis will be
described. Limitations of the selected primary research method will
also be discussed. 3.2 Outline of Primary Research The purpose of
the primary research was to expand the knowledge base surrounding
Embedded Sustainability by applying the conceptual and theoretical
ideas, revealed within the prier secondary research, to a specific
industry (the energy industry) and company (The Little Green Energy
Company). The broad scope of function characterized by the key
models was narrowed in order to undertake an in depth investigation
of strategy to promote Embedded 38
39. Sustainability within the energy industry. Permission was
granted from the head engineer within the Little Green Energy
Company securing informed consent, a principle from the Code of
Human Research Ethics (Oates et al, 2010). The data was collected
via a questionnaire survey method to obtain both qualitative and
quantitative responses. The surveys were sent in January via email
to assist with a convenient and easy return of the questionnaires.
The vast majority of employee's within The Little Green Energy
Company completed and returned the questionnaires in February. The
questionnaire adhered to the framework for research excellence
(Economic and Social Research Council, 2012) by openly and honestly
explaining the research agenda, thanking the employees for their
time, avoiding harm and informing respondents their answers would
be treated with confidentiality. 3.3 Hypothesis and Questions The
secondary research which discusses the key models of embedding
sustainability has validated the relevance of the authors
originally proposed research hypothesis and questions; Hypothesis
1: A case study investigation into a renewable energy companys
strategy will reveal truths on how to embed sustainability,
Hypothesis 2: The findings from the primary research (case study)
are consistent with models of embedding sustainability, Question 1:
What are the best techniques/ models for embedding environmental
sustainability into strategy? Question 2: How could these models be
applied to conventional energy companies to promote the movement to
renewable fuels? The models investigated during secondary research
also triggered enquiry questions to address and analyse the Little
Green Energy's fit into each model. These further questions aim to
discover the classification of the companys strategy according to
each model. The questionnaire seeks to gain responses to address;
Which of Porters (1985) Three Generic Strategies does The Little
Green Company adopt? Did the companies launch create a Blue Ocean
(Kim and Mauborgne's, 2004) and if so is the Blue Ocean consistent
with the ideas of value innovation? Could The Little Green Energy
Company be considered as a new 39
40. entrant disruptive innovator (Christensen, 1997)? and Where
is The Little Green Energy Company positioned on Laszlo and
Zhexembayeva (2011) ES Cloud? The intended purpose of the
questionnaire was to discover the feasibility of a sustainability
orientated agenda and Embedded Sustainability within the energy
industry. To achieve an in depth analysis the questionnaire
assessed queries raised by the key models, encouraged qualitative
informant description of the stages involved within the process of
Embedding Sustainability and a description of the core competencies
of the company which enabled environmentally sustainable
strategies. Berry (1995) and Denyer and Tranfield (2006) believe
questions to obtain qualitative responses obtains information with
the potential to provoke managerial decision-making and action. 3.4
Method of Primary Data Collection 3.4.1 Informed Methods Secondary
research helps to build a conceptual framework which shows the main
dimensions or variables and the presumed, theory-driven
relationship between them (Miles and Huberman, 1984). Existing
research discussed within the literature review not only informed
the questions included within the questionnaire but the research
method selection. Grayson's (2011) case study method of Marks and
Spencers strategy generated detailed findings and great insight
into best practice towards a strategy which embeds sustainability.
Esty and Winston (2009); Romm (2006) and Werbach (2009) also use
case studies to demonstrate the best practice of sustainability.
The key limitation of Grayson's (2011) case study investigation
into Marks and Spencer strategy however was the lack of
generalizability of the findings to other industries. However the
Grayson's (2011) research exemplifies the case study method as an
appropriate means to investigate Embedded Sustainability within a
particular company and industry therefore encouraging a similar
methodological approach to be selected by the author for the
investigation of the energy industry and The Little Green Energy
Company. 40
41. The questionnaire method was used by Porter (1985) to
discover the key variables which are commonly linked to a strong
corporate strategy. Porters research design influenced the
methodological approach selected to address Objective 3 (To
undertake primary research within The Little Green Energy Company
(solar panel designer and installer) to assist in answering the
question; how can environmental sustainability be embedded into
strategy?). 3.4.2 Critical Analysis of Questionnaire Method However
Gorrell et al (2011) believes questionnaires often introduce bias
in the form of common method variance (CMV). CMV occurs when the
approach of data gathering introduces a bias, leading to
exaggerated correlations between the separate variables being
measured (Gorrell et al, 2011). People have a tendency to answer
questions that measure the same hypothesis with high consistency,
providing answers which either support or go against the
hypothesis, particularly when a singular data gathering technique
is used such as the questionnaire method. For example the primary
research questions During the launch of The Little Green Energy
Company the marketplace was new and uncontested. Do you strongly
agree, agree, don't know, disagree or strongly disagree? and Has
The Little Green Energy Company brought new performance dimensions
for the energy industry to compete on? For example energy
efficiency. What are the new dimensions? may lead the informant to
answer both questions similarly and consequently lead to a
conclusion which may falsely inflate positive correlations between
the two entirely different models and unrelated variables.
Nether-the-less the above questions were informed and supported by
secondary research providing qualitative validation. According to
Hult et al (2011) qualitative validation reduces CMV bias. 3.4.3
Concurrent Mixed Method Data Collection The questionnaire research
method was selected to obtain qualitative and quantitative data
through a mix of open ended and close ended questions. Driscoll
41
42. et al (2007) believes the concurrent mixed method of data
collection can allow participants to be intuitive by offering a
large space within the open-ended response fields and if these
fields are linked to the preceding structured questions,
explanation by the participants during data collection will be
facilitated. This was evident in Embedded Sustainability within the
Energy Industry questionnaire design as respondents were free to
type unlimited responses below each open- ended question.
Quantitative research is suitable for answering questions about
relationships between specific variables and who, where and how
much questions whereas qualitative questions are more apt for
answering how and why questions (Harrison and Reilly, 2011). Miles
and Humberman (1984) describe qualitative research as an
investigation involving a process to make sense of a social
phenomenon by contrasting, comparing, cataloguing and classifying
the object of study. The questionnaire attempts to make sense of
Embedded Sustainability within the Energy Industry by classifying
The Little Green Energy Companies activities in terms of each
model, comparing the responses relevant to separate models and
recording additional responses. The use of existing models of
Embedded Sustainability allows for an assessment of the
questionnaires concurrent validity which shows the level
consistency between the questionnaire results and established
measures. The close ended questions however seek to discover the
link between variables such as the level of integration of
sustainability into each business function. Harrison and Reilly
(2011) believe the mixed approach provides strengths which offset
the weaknesses of using a singular approach. Furthermore according
to Eisenhardt (1989) the mixed approach gives a synergistic view of
evidence, promotes divergent perspectives and strengthens the
grounding of research. However Driscoll et al (2007) comments on
the difficulties of analysing, coding, and integrating unstructured
data with structured data, describing the process as complex and
time-consuming. Overall the use of open and closed questions
increases face validity as the questions can measure the construct
with higher accuracy and content validity as the mixed approach
allows for coverage of the important aspects. 42
43. 3.4.4 Cross-sectional Case Study A cross-sectional study
measures a concept at one point of time, allowing researchers to
compare many different variables at the same time (Weerasekera,
2014). Although a longitudinal study may have offered insight to
the ways in which Embedded Sustainability changes and develops
within an organization over time, cross-sectional surveys can be
conducted using any mode of data collection, require less time and
are less costly. The case study mode of data collection is gaining
acceptance within small business research (Perren and Ram, 2004).
Yin (2014, pp.40) defines a case study as: an empirical inquiry
which investigates a contemporary phenomenon in depth and within
its real-life context, especially when the boundaries between
phenomenon and context are not clearly evident. This is relevant to
the study of Embedded Sustainability within The Little Green Energy
Company as there is currently limited evidence to show how to embed
sustainability within the energy industry. However there is
controversy regarding the process to select towards creating a
sound and grounded theory via a case study. Eisenhardt (1989)
believes case studies should be compared to other cases and
literature to increase the likelihood of creative re-framing into a
new theoretical vision, creating valid and testable theory from the
intimate interaction with the evidence. However Glaser and Strauss
(1967) argue it is simply the intimate connection with empirical
reality that permits the development of a testable, relevant, and
valid theory. Although direct comparisons between the case study
and literature were not made, the questions within the Embedded
Sustainability within the Energy Industry questionnaire were based
on literature, assisting with the re-framing of theory and
development of conclusions to fulfil objectives 3 (Section 1.5.3)
and 4 (Section 1.5.4). 43
44. 3.5 Sampling 3.5.1 Non-Probability Purposive Sample A
non-probability purposive sampling method was selected to target
The Little Green Energy Company due to its strong sustainability
agenda and qualities. Maxwell (1997) defines purposive sampling as:
a type of sampling in which, particular settings, persons, or
events are deliberately selected for the important information they
can provide that cannot be gotten as well from other choices (p.
87). There is a certain extent of sampling bias associated with
this method (Lohr, 2010) as the results will not be representative
of the entire energy industry population. Probability samples of
informants from a range of companies within the energy industry
would have obtained a wider array of responses which could have
been analysed to come to conclusions with higher external validity
and representativeness (Teddlie, 2007). Nether-the-less the
non-probability method was selected due the high costs of
alternative probability sampling and the time constraints of the
project. Also Miles and Humberman (1984) believe the sampling
technique selected should not only be relevant to the population
but to the social processes wished to be researched and purposeful
sampling can more adequately obtain qualitative information about
The Little Green Energy Companies strategy, providing insight into
research topic. To some extent the sample of The Little Green
Energy Company's population will be reflective of the
characteristics of the population from which it is drawn (the
energy industry). 3.5.2 Census Sample of Population A census
sampling technique of The Little Green Energy Company population
was attempted. A census includes every member of the specific
population, providing accuracy, reliability, a true measure and
true values. Furthermore a census makes 44
45. it possible to access detailed information from a small
group such as the staff members within The Little Green Energy
Company. There are 13 full time staff members within The Little
Green Energy Company; Contracts Manager, Managing Director,
Designer, Head of Sales, Office Manager, Site Manager, 5 x PV
installer, 2 x electricians (See Appendix B). Unfortunately one
member of staff failed to respond. 3.6 Data Analysis Methodology
3.6.1 Meta-ethnography Approach Meta-ethnography is similar to the
grounded theory approach as it uses open coding and identifies
categories emerging from the data as well as making constant
comparisons between in