Value-based ecoproducts and ecoentrepreneurship

Values are connected to the entire operating environment of the SME and are facing the entrepreneur in the marketing environment (Wasik 1996). A small enterprise has strong values because the enterprise’s manager, the entrepreneur, is in a strategic position. In value-based business (Doyle 2006), the entrepreneur needs to ascertain that the chain from entrepreneur to customer is efficient and as short as possible. This is the strength of small entrepreneur’s business.

Lebow and Simon (1997) show that business values define how the organization and its people function and they introduce five key requirements for business. Directing business values as conscious behaviour transparently functions according to the principles of sustainable development. Conscious choices of values are made in business and values are directed to the enterprise’s customers.

Business values must affect everything within an organization, not just one department or region. Business values must be linked to the overall success of the organization. Bu-siness values must be controllable by someone or something. BuBu-siness values must be measurable and business values must be inspirational for all parties involved. (Lebow and Simon 1997)

Lazlo (2003) and (Doyle 2006) have examined and developed added value of sustainable values in marketing. Sustainable values can refer to the economic, social, cultural and environmental values, and these values are present in SME business activity. Sustainable green marketing considers how sustainability issues are increasingly becoming an important factor in how to incorporate the dimensions of sustainable development to marketing as well as providing new

perspectives on marketing for environmental managers. Peattie (1995, 2001) defined green marketing as “The holistic management process responsible for identifying, anticipating and satisfying the needs for customers and society, in a profitable and sustainable way”, while Fuller (1999) defines sustainable marketing as “the process of planning, implementing and controlling the development, pricing promotion, and distribution of products in a manner that satisfies the following three criteria: customer needs are met, organizational goals are attained, and the process is compatible with eco-systems. Peattie (2001) described this third generation of green marketing as an evolutionary change. According to Ottman (2010), there can be a shift of focus towards green living, branding and green trends.

Values are created and define the strategic positioning of ecological business (Fuller 1999).

In ecoproductization, positioning could be made according to financial profitability. The competitive advantage for ecoentrepreneurs could be ensured in the markets and attention could be paid to strategic choices that aim for this. The ability to identify uneconomic business, that is, business that is not financially profitable, is expected from the ecoentrepreneur (Doyle 2006:169). In the positioning, the right strategic choices could be sought to solve the risks associated with uneconomic business and to find new ways to achieve growth (Doyle 2006:166-169). This does not mean that the entrepreneur should abandon a production field or products; moreover, the solution can be done as strategic positioning. Therefore, strategic development of ecoproductization is created. Sustainable management is in a central position in understanding strategic value drivers (Doyle 2006:181) and in the development of new strategies and innovative ecoproductization.

Values are stable and change slowly, but the development of business and ecoproductization does not have to be. The values of an SME bring about long-term business for ecoproductization and this supports the notion that ecoentrepreneurs are committed to the business by their own set of values. The enterprise’s values provide an opportunity for profiling and a way to differentiate from competitors. The transparency of the enterprise’s values planning can have effect on the image of how reliable and trustworthy the business is. Positioning can be used in finding values in the planning for ecological enterprise and its products (Doyle 2006:169-170).

The development of SME ecoproducts are meaningful to start from a value-free environment, even if an already existing product is chosen for development. For this reason, Crawford’s (1996) value-based idea studies a product that is already in the market as it were a new product is used in the development of SME ecoproducts. Three dimensions are included in the new ecoproduct’s marketing position: the right quality, at the right time and with the right price, which are analysed in relation to value-based ecocriteria. These three dimensions have effects on the same direction but are opposite to one another despite synergy advantages (figure 12). A comprehension of environmental values, which a commercialized product includes, is formed and defined from this setting. The entrepreneur decides the available resources according to these dimensions. At the same time, he/she has to define how to optimize the relations of dimensions in the new product situation.

Quality is the first dimension in productization of a product differentiated by its environmental values. The issues related to ecoproducts quality are no different from the elements related to the quality of a so-called ordinary product. SMEs may have quality manuals and operations related to quality of products or the entire enterprise’s business. Therefore, in

marketing the quality of an ecoproduct, the intention is to attain the quality level of similar products or surpass them. To develop SME environmental issues, ISO 14001 (International Organisation for Standardization) and EMAS (The European Community Eco-Management and Audit Scheme) environmental issue control systems already exist. These help in the long-term development work of environmental issues (European Commission 2007d/EMAS toolkit). The control systems are voluntary, but they help the development of ecoproduction.

In the development of ecoproductization quality, it should be noted that quality is not the same as a certificate and it should be understood that the quality operations include the entire communication of the product.

The second dimension of ecoproduct development is time. SME resources are defined within the limits of the use of time and outside factors that affect the products, such as changes in legislation. In product development, new environmental information should be utilized as early as possible. The product development process should be flexible so that old information could be replaced with new information, which helps to increase the sustainable competitive advantage and enables to offer new and better attainable products to customers. It should also be noted that the emphasis in product development is to build the future of the product. The third dimension is price. The price of ecoproduct is not usually cheaper than the equivalent products on the market. The price can be higher, because of the inputs made. For example, investments and employer training are allocated to development of ecoproducts. The content of an ecoproduct defines the factors influencing the price of a product differentiated by its environmental values.

Traditional green product development models use LCA as well as product and system-oriented thinking as starting points. Many authors have attempted to define a green product using a variety of criteria. Life cycle thinking has been in the background of these definitions. The development of products started from the general criteria of an ecological product. In their article, Pujari and Wright (1999:109) have represented the criteria formed by Schmidheiny (1992), Simon (1992) and Elkington and Hailes (1998). As examples of different criteria, Schmidheiny (1992) represents eliminating or replacing the product, or eliminating or reducing harmful ingredients. Simon (1992) proposes, for example, reduced raw material, high recycled content of product and minimal packaging or no packing at all. Elkington and Hailes (1998) suggest criteria of green products could be, for example,

Figure 12. Limits of the development of a new ecoproduct (adapted from Crawford 1996).

not endangering the health of the consumer or of others, and not adversely affecting other countries. The development of arguments suitable for the marketing of ecological products is part of environmental policy discussion, but also reasons arising from the operational environment of the enterprise.

Values have effects on the enterprise’s decision making and therefore decision making is a key feature in developing ecoproductization. Laszlo (2003) investigated the verification of sustainable development’s organizational values. He has developed principles according to which an enterprise can practise value-based business (Figure 13).

The eight principles are integrated into a management process that executives can use in their organizations to discover and create sustainable value in a step-by-step approach. Six principles are organized into two sub processes “Discover Value Opportunities” and “Create Value” with the seventh principle serving as a feedback loop from one sub process to the other. The eight principles use the other seven to increase the organization’s capacity to deliver sustainable value. The scale at which the SME uses the principle can vary widely in different SMEs, in some cases, the effort may start with a single initiative; in other cases, a SME will use the principles in a specific business unit, in still others, the principles may be used company-wide. The eighth principle is a cohesive set of competencies and provides the best and most rigorous chances of success in creating sustainable value (Laszlo 2003).

Principle 1: Understanding the current value position

Understanding the current position means being able to determine the value created or destroyed by the company for its shareholders and stakeholders. This requires an assessment

Figure 13. Principles of ecoentrepreneurship (Laszlo 2003)

of the impacts of the business on its stakeholders and of how those impacts lead to value creation or destruction.

The Shareholder/Stakeholder values position is key to understanding the centrality of the variation in the value-based ecobusiness and marketing (figure 14). Enterprises operating in the upper right quadrant, which deliver value to their shareholders without transferring it from other stakeholders, have sustainable business. To assess the stakeholders’ impacts, companies begin with data from internal management systems. Direct dialogue with stakeholders can take place in a variety of forums, such as community advisory panels. These sources of information could be tailored to company’s specific circumstances. They provide a baseline for the company’s social and environmental performance. The main kinds of external performance indicators of stakeholder’s value are: global reporting frameworks and performance standards, the capital markets and industry measures (Laszlo 2003).

These external standards provide a degree of objectivity that is often missing in internal management systems or direct dialogue with stakeholder groups.

Principle 2: Anticipate future expectations

This discipline assesses probable future expectations of shareholders and stakeholders.

The purpose is to understand how shareholders’ and stakeholders’ expectations may evolve and what this means in terms of business opportunities and risks. Leading companies develop a process for managing stakeholder’s expectations and emerging issues to create strategic opportunities for their business. The greatest potential for sustainable value creation lies in going beyond the known solution set. Engaging stakeholders can unlock hidden value and generate otherwise missed opportunities (Laszlo 2003).

Figure 14. Value-based ecobusiness position (Laszlo 2003:126)

Principle 3: Set sustainable value goals

Principle 3 establishes a vision and goals for how to create additional value for shareholders while reducing negative impacts and creating value for other stakeholders. Goals are mapped based on identification of the products or activities that are negatively impacting shareholder/

stakeholder value and that represent significant future risks given probable market and social expectations. New value can be created in many ways, for example by including better management of risks or redesigning products. There are two key tools in this principle. The first is the six levels of strategic focus, which helps an enterprise to identify where sustainable value can be created. The second tool is the sustainable value intent that gives voice to the aspirations of the enterprise’s leadership. Here the resulting intent integrates stakeholder value and shareholder value into the vision of a desirable future for the business (Laszlo 2003).

Principle 4: Design value creation initiatives

The purpose of principle 4 is to design initiatives to meet the priority goals established through the previous principles. Another goal is to integrate stakeholder perspectives into initiatives. The sustainable value leaders will often call for one or more workshops that engage in internal and external stakeholders as appropriate. The output is a completed initiative design and initiative implementation plan that has broad support inside the organization (Laszlo 2003).

Principle 5: Develop the business case

Principle 5 helps to build a compelling business case for the sustainable value initiatives and to obtain the resources and organizational support needed to implement them. The six drivers of shareholder value show the key ingredients of shareholder value. The top four value drivers in the left-hand column are the classic drivers of economic added value. The remaining two drivers are strategic value and market confidence. Strategic value assessed through real-options analysis is a powerful way to account for the foresight of management teams in creating opportunities and managing risks from emerging issues that might threaten shareholder value (Laszlo 2003).

Principle 6: Capture the value

Principle 6 represents the ability to execute the value creation initiatives. It embeds social and environmental initiatives into the organization with cross-functional implementation teams. This discipline requires the managers responsible for implementation to work collaboratively with stakeholders in a way that guarantees transparency and learning. It requires the initiatives to be integrated into the management and accountability structures and processes. It establishes two-way communication mechanisms and action meetings to engage key stakeholders throughout the implementation process. This discipline requires stakeholder management and engagement as part of the normal course of business (Laszlo 2003).

Principle 7: Validate results and capture learning

This principle is the systematic result tracking and feedback loop that enables learning and improvement in the organization. The components of this discipline include: regularly

assessing actual progress in achieving targets defined in the business case. Holding learning-focused reviews of the initiatives to assess potential barriers to value realization and revise initiative approaches as needed. Reviewing many initiative results against the overall sustainable value goals and refining the goals as appropriate (Laszlo 2003).

Principle 8: Build sustainable value capacity

Principle 8 focuses on developing the mind-set and capabilities needed to embed a sustainable value perspective into the organization. It includes making changes to existing processes, such as those that determine how investment is approved. It also includes the creation of new processes for such tasks as stakeholder engagement and dialogue (Laszlo 2003).

Laszlo’s principles show that value-based productization is connected broadly to the entire company and its operational environment, even though the focus is on ecoproductization.

Therefore, it can be assumed that the enterprise uses its product to approach the entire target consumer and customer group. Laszlo’s principles open possibilities to study the enterprise’s value base. In this way, the strengths and weaknesses can be verified easier and be taken into account in decision making.

Profitable new product development is an important part of green marketing (Stevels 2001), and the focus of environmental new product development (NPD) must be on improving the primary and environmental performance of a product rather than merely introducing cosmetic changes (Peattie 1995). Within ecoproductization, the change process already in the markets can lead to a new type of thinking about the product content. In order for the product content to be changed, through positioning the product can be re-affiliated in the product development environment. On the other hand, ecoproductization can create a totally new product through positioning, and in order for it to be positioned in the products of other companies and for risks to be assessed, the product can be assessed through the same process. Repeatability, transparency and timely cooperation with product development create possibilities to find better environmental solutions and develop new products.