Master Thesis
HALMSTAD
UNIVERSITY
Master of Science in Business and Economics, 60 credits
Sustainability and Swedish SMEs
Drivers for Maintenance and Progress of Business Sustainability Practices
Thesis in Business Administration, 15 credits
Halmstad 2020-05-22
Desislava Tsvetkova, Emma Bengtsson
Acknowledgements
Halmstad, May 20, 2020
We would take the time to thank our supervisor Susanne Durst for supporting us throughout the whole process, from beginning to end. She has contributed with her expert knowledge, in the field of SMEs and sustainability, by giving us constructive feedback and inspired us to think out of the box.
Furthermore, we would like to extend our thanks to all participating companies, which took the time to speak with us, even during the extraordinary circumstances. Without their help and assistance, the outcome of this dissertation would not have been feasible.
Last but not least, we can say that we faced a lot of challenges during the writing process of this thesis, but we can say that it was worth it. This is mainly because we learned a lot and developed our theoretical and most importantly practical knowledge and thinking.
_______________________ _______________________
Desislava Tsvetkova Emma Bengtsson
1
Abstract
Supervisor Susanne Durst
Examiner Christine Tidåsen
Background and Purpose
While the topic of sustainability has captured the interest of many scholars, research specifically regarding SMEs and their practices is scarce. Further, drivers for sustainability engagement are discussed mainly with focus on adoption, but since these are shortly after abandoned, that signaled a more in-depth research for the maintenance. In combination with this, an investigation regarding SMEs’
sustainability progress seemed to be linked to the advancement of these. Hence, this dissertation’s purpose was to address this gap, by identifying the external and internal drivers for maintaining sustainable practices, and investigating the extent of these in Swedish SMEs.
Research Questions
RQ1. What are the internal and external drivers for maintenance of sustainability practices in Swedish SMEs?
RQ2. How far have Swedish SMEs come in their business sustainability practices?
Theoretical Framework
Researchers have identified the strongest external and internal drivers for adopting sustainable practices, which we put against the perception of SMEs and their stimuli for maintaining these. At the same time, previous research has proposed a typology of business sustainability, thus inspiring us to create a matrix, which was used for tracing the current state of the SMEs’ sustainable development.
Method This dissertation had an exploratory nature, which required more in-depth understanding of the issues, which translated into using a qualitative research method.
Swedish companies were the sole focus of the examination, where a cross-sectional research design was applied for collecting the data. Nine semi-structured interviews were conducted, and as with other qualitative studies the results should be taken with caution, but since patterns emerged, this brought merit to our findings.
Findings and Conclusions
Interestingly, out of all thirteen drivers with strong links to adoption, only six were considered more strongly linked to the maintenance component. Apart from these findings, we found a strong motivational driver, namely the perceived longevity of the business, which we consider should stand separately. Our main conclusions suggest that (a) the social pillar has been neglected, (b) the type and extent of sustainability engagement is not as linked to the size of the enterprise, and (c) the majority of the investigated Swedish SMEs are, if not yet, in the ‘Incremental development’ stage, on the way to it. Obviously, reaching outside-in approach will not happen overnight, but businesses can take the next step.
Keywords driver, maintenance, maintenance component, SME, sustainability, sustainability driver, typology.
2
List of Abbreviations
B2B Business-to-business BST Business Sustainability
BSTD Business Sustainable Development EMC Environmental Management Capability EMS Environmental Management System EP Environmental Performance
EU European Union
NGO Non-governmental organization RQ Research Question
SD Sustainable Development SDG Sustainable Development Goal SME Small and Medium-sized Enterprises TBL Triple Bottom Line
TBST True Business Sustainability UN United Nations
3
TABLE OF CONTENT
List of Abbreviations ... 2
List of Figures ... 5
List of Tables ... 6
I. INTRODUCTION ... 7
1.1. Introduction ... 7
1.2. Research Gap ... 7
1.2.2. Research Questions ... 10
1.3. Delimitation ... 10
1.4. Key Concepts ... 10
1.5. Disposition ... 11
II. THEORETICAL FRAMEWORK ... 12
2.1. Sustainability ... 12
2.1.1. Defining Sustainability ... 12
2.1.2. Defining Sustainable Development ... 13
2.2. Defining Small and Medium-sized enterprises ... 16
2.2.1. Quantitative Definition ... 16
2.2.2. Qualitative Definition ... 16
2.3. Drivers for Sustainable Development ... 18
2.3.1. External Dimension... 18
2.3.2. Internal Dimension ... 22
III. METHOD ... 25
3.1. Research Design and Method... 25
3.2. Primary Data Collection ... 26
3.2.1. Interviews ... 26
3.2.2. Participants Selection Process ... 27
3.3. Secondary Data Collection ... 30
3.3.1. Documentation and Archives ... 30
3.4. Thematic Analysis ... 30
3.5. Reliability and Validity in Qualitative Research ... 32
3.5.1. Credibility ... 33
3.5.2. Transferability ... 33
4
3.5.3. Dependability ... 33
3.5.4. Confirmability ... 34
3.6. Ethical Concerns ... 34
IV. FINDINGS AND DISCUSSION... 36
4.1. Type of Sustainability Engagement ... 36
4.2. Drivers for Sustainable Development within Swedish SMEs ... 39
4.2.1. External Dimensions ... 39
4.2.2. Internal Dimensions ... 46
4.3. Progress of Business Sustainability Practices ... 52
4.3.1. Current State and Development of the Firms’ Sustainable Practices ... 53
V. CONCLUSIONS, LIMITATIONS AND FUTURE RESEARCH AGENDA...60
VI. REFERENCES ... 65
APPENDIX A: United Nations Sustainable development goals ... 74
APPENDIX B: Interview guide ... 75
5
List of Figures
Page Figure 1. Stages for Business Sustainability development. 8 Figure 2. The three pillars of John Elkington’s triple bottom line to sustainable business. 12 Figure 3. Matrix of the stages of sustainable development. 15 Figure 4. External drivers for adopting sustainability practice. 19 Figure 5. Internal drivers for adopting sustainability practice. 22 Figure 6. The framework for research design and method of the dissertation. 25 Figure 7. Criteria for selecting this dissertation's participants. 28
Figure 8. The process of conducting thematic analysis. 30
Figure 9. Type of sustainability engagement in the participating firms. 39 Figure 10. Current state and development of the firms’ sustainable practices. 54
6
List of Tables
Page
Table 1. Disposition of the dissertation. 11
Table 2. Quantitative characteristics of SMEs, adopted from the European Commission. 16
Table 3. Qualitative characteristics of SMEs. 18
Table 4. Information of the participating firms. 29
Table 5. External factors influencing the maintenance component in Swedish SMEs. 46 Table 6. Internal factors influencing the maintenance component in Swedish SMEs. 52
7 I. INTRODUCTION
This chapter introduces the reader to the topic of this thesis. It presents the underlying background and research gap together with the purpose, research questions, delimitations and a description of the disposition.
1.1. Introduction
Sustainability has been a highly discussed topic during the last two decades, and it has attracted the attention of many scholars and researchers ever since the twentieth century. In recent years, it has become somewhat of a ‘hot’ topic, thus increasing the academic publications in number and focus, where the period between 2000-2010 is known as a relatively mature stage (Wang & Gao, 2016). In today’s society, it is incredibly important for businesses to contribute to welfare, both socially and environmentally, as well as maintaining their profitability. Where most definitions of sustainability share these three aspects (Vos, 2007), where the most commonly cited is stated by The World Commission on Environment and Development, also known as The Brundtland Commission: “development which meets the needs of the present without compromising the ability of future generations to meet their own needs'' (Brundtland Commission, 1987, p. 41). Some studies highlight the value of having a holistic approach (Bocken, Short, Rana & Evans, 2014;
Svensson & Wagner, 2015), since environmental changes generally go side by side with economic and social change. On that note, one also has to acknowledge that the environment is a complex and dynamic system, i.e. new problems and challenges will occur, and the notion of sustainability will therefore be constantly changing (Vos, 2007).
The concept of business sustainability can be further related to the so-called triple bottom line (TBL), which aims to synchronize the social, environmental and financial outcomes (Gupta &
Kumar, 2013). This further extends to additional research on true business sustainability, also known as Business Sustainability 3.0 (Dyllick & Muff, 2016). Different scholars (e.g. Hoejmose
& Marchant, 2012; Horak, Arya & Ismail, 2018) have shown that by implementing sustainable strategies, firms may gain various benefits such as positive image, greater trust from shareholders, and growth in terms of increased revenue and profitability.
1.2. Research Gap
Even though small and medium enterprises (SMEs) play a key role in the global economy (OECD, 2017a), research on sustainability in the context of these has received little attention (Johnson &
Schaltegger, 2016; López-Pérez, Melero-Polo, Vázquez-Carrasco & Cambra-Fierro, 2018). One can argue that the phenomenon has been primarily analyzed with focus on large enterprises as opposed to SMEs. Inarguably large enterprises and SMEs share some general requirements for maintaining sustainability practices such as shared vision, management support and organizational
8 culture, which further promotes business sustainability (BST). However, these are also different, where the differences stem from their resources and size (Hörisch, Johnson & Schaltegger, 2015).
Thus, in contrast to SMEs, large enterprises are neither constrained from their human and financial resources, not blind to the obligations and responsibilities their size entails. Therefore, research focusing solely on SMEs and their sustainability practices will be more valuable, than assuming the existing research on large enterprises sustainability is valid for SMEs.
The need for such an investigation derives from the fact SMEs collectively contribute to pollution in Europe with up to 70% (OECD, 2018). Moreover, SMEs account for 99.7% of all enterprises in the OECD area, and are responsible for around 60% of the total employment (OECD, 2017b).
In Sweden, however, SMEs account for approximately 99.9% of registered firms and contribute around 40% of value added (Tillväxtverket, 2017a). Hence, based on their collective impact on the economic, environmental, and social areas, they are fundamental to advancing the Sustainable Development Goals (SDGs) established form the United Nations (UN) presented in Appendix A.
As any other development, business sustainability development (BSTD) is bound to require some planning, and robust resources for its successful implementation (Clackson, Li, Richardson &
Vasvari, 2011). The process, as seen in Figure 1, can start by identifying the need for sustainability and then moves to developing a plan for action. The action plan may be dependent upon the individual organization’s resources and capabilities, since a fit should be achieved. The next step can be to adopt the strategy and to communicate it to the relevant stakeholders. In order to see satisfactory results from it, BST strategy should also be maintained with long-term focus (European Commission, 2016b). Monitoring the results can inform the company if the desired results are achieved, perhaps some reporting technique can aid here. Since sustainability should be considered as a long-term effort, maintenance is a vital part of the process, and therefore the focal point of this dissertation.
Figure 1. Stages for Business Sustainability development.
9 Upon reviewing the literature on the subject, one can notice that little attention has been paid to the drivers for maintaining sustainable development (SD) among SMEs, as opposed to barriers and challenges for implementation. The literature body concerning sustainability and SMEs, have directed its efforts towards investigating the negative side, i.e. barriers and challenges for implementing sustainability management practices in SMEs. A systematic review of the literature (Johnson & Schaltegger, 2016) presents an overview of all publications related to internal and external barriers for SMEs, or as the authors call them ‘internal shortcomings’ and ‘external deficiencies’. While one cannot forget to account for possible limitations of SMEs, in their efforts to engage in sustainability practices, it is also important to put the emphasis on the positive side, i.e. drivers for SMEs maintaining such practices.
There has been research dedicated to investigating the adoption component of sustainability practices in SMEs. For instance, access to new markets and gaining competitive advantage (e.g.
Cohen & Winn, 2007; Jansson, Nilsson, Modig & Hed Vall, 2017), managers’ beliefs and values (e.g. Evans & Sawyer, 2010; Jenkins, 2004; Kusyk & Lozano, 2007; Spence, 1999; Williamson, Lynch-Wood & Ramsey, 2006), positive brand image and increased customer base (e.g. Horak et al., 2018), and internal social relations with employees (e.g. Jamali, Zanhour & Keshishian, 2009;
Murillo & Lozano, 2006). Positive relations have been found within these drivers and the implementation of sustainability related practices in SMEs. However, often these practices are adopted with short-term focus, thus not long after abandoned (Johnson & Schaltegger, 2016).
1.2.1. Purpose
In combination with the research gap (see 1.2.), it was considered appropriate to extend the dissertation to investigating the business sustainability progress of SMEs. The reason behind this is that without advancement (i.e. maintenance), there will be no progress and vis-a-vis. Therefore, the purpose of this dissertation is to identify the external and internal drivers for maintaining sustainable practices, and to investigate the extent of these in Swedish SMEs. Therefore, the focus will be solely on Swedish SMEs that have already engaged in sustainable practices. A survey, conducted in 2017 from the Swedish Agency for Economic Growth and Regional Growth (Tillväxtverket, 2017b), has shown that there is an increasing trend among SMEs to engage in sustainable practices. This is especially significant for small businesses, whose engagement has increased with seven percent in the period 2014 - 2017, where the bigger the firm the more they engage in sustainability practice (ibid.). Furthermore, this dissertation will investigate how far SMEs have come in their sustainability efforts (i.e. their level of commitment). Therefore, this dissertation will contribute to understanding the drivers behind the maintenance component and type of business sustainability for Swedish SMEs.
10 1.2.2. Research Questions
In regard to the research questions (RQs) for this dissertation, the authors are focusing on the following:
RQ1. What are the internal and external drivers for maintenance of sustainability practices in Swedish SMEs?
RQ2. How far have Swedish SMEs come in their business sustainability practices?
In order to investigate the first research question, inspiration will be drawn from the existing literature on adoption of sustainable practices by SMEs. This dissertation will put the participating SMEs’ perception and opinion in the center of the investigation. Furthermore, in order to investigate the second question, a matrix inspired by Dyllick and Muff’s (2016) sustainable typology will be presented, thus allowing for an investigation of how far they have come in their BST practices.
1.3. Delimitation
According to the European Union (2016) SMEs are divided in three categories based on two quantitative criteria: annual turnover and number of employees. The three categories are micro (fewer than 10 employees), small (fewer than 50), and medium (fewer than 250). This dissertation will focus solely on small and medium sized enterprises, and will therefore delimit from investigating the micro-sized companies. The reason is that micro-companies may be even further restrained from their resources, in contrast to small and medium-sized firms.
1.4. Key Concepts
In order to avoid any possible misunderstandings, the definitions of the key concepts used in the thesis are presented in this section.
● Small and medium enterprises (SMEs) are defined as “...enterprises employing fewer than 250 persons and which have an annual turnover not exceeding EUR 50 million, and/or an annual balance sheet total not exceeding EUR 43 million.” (European Commission, 2016a). This dissertation will exclude micro-sized companies (1-9 people), as these can be lacking the necessary structure and resources for sustainable development. Therefore, when referring to SMEs, one is considering firms employing between 10-250 employees, and annual turnover more than EUR 2 million, but not more than EUR 50 million.
● Business Sustainability (BST) is focused on how organizations can profit from BST with less considerations regarding the society or the environment (Dyllick & Muff, 2016). Thus, this approach has a micro-level perspective (i.e. internally) due to its narrow focus.
11
● Sustainable Development (SD) is rather focused on how to effectively reach the global SD goals, while maintaining financial prosperity (Dyllick & Muff, 2016). Thus, this approach has a macro-level (i.e. externally) perspective due to its broader focus.
1.5. Disposition
The disposition has been constructed with a short summary of each chapter and aims to give the reader a quick overview of the dissertation presented in Table 1.
Table 1. Disposition of the dissertation.
CHAPTER DESCRIPTION
I. Introduction This chapter introduces the reader to the topic of this thesis. It presents the underlying background and research gap together with the purpose, research questions, delimitations and a description of the disposition.
II. Theoretical Framework
This chapter presents the dissertation´s frame of references, which is the foundation of this thesis with the intention to foster empirical data. It includes the main topics, such as sustainability, SMEs definition and characteristics, and drivers for sustainable development.
III. Method This chapter demonstrates the methodology behind the research of this thesis. It portraits the research design and method, the data collection process and the analysis approach. This is followed by a discussion about the reliability and validity for qualitative research and the ethical concerns.
IV. Findings and Discussion
This chapter will present the results of this dissertation in a structured way for a better flow, which will be delivered under thematic headlines.
Furthermore, each section in this chapter will include a discussion component and reasoning for the findings.
VI. Conclusions, Limitations and Future Research Agenda
This chapter outlines the main findings and provides practical managerial implications and recommendations. Furthermore, the limitations of the dissertation are presented, as well as suggestions for future research directions.
12 II. THEORETICAL FRAMEWORK
This chapter presents the dissertation´s frame of references, which is the foundation of this thesis with the intention to foster empirical data. It includes the main topics, such as sustainability, SMEs definition and characteristics, and drivers for sustainable development.
2.1. Sustainability
2.1.1. Defining Sustainability
Unfortunately there is no universal definition of sustainability, due to the complexity of the phenomenon. Therefore, Purvis, Mao and Robinson (2019) have advised future researchers to explicitly define the concept, and how it is understood from their perspective. Thus, this dissertation will further investigate the phenomena in regards to its three pillars - social fairness, environmental responsibility and financial viability (Khan, Dewan & Chowdhury, 2016; Svensson
& Wagner, 2015). These are said to derive from the concept of TBL, which includes people, planet, profit (see Figure 2), coined by John Elkington in the late 1990’s (Jackson, Boswell & Davis, 2011). TBL has also been referred to as the practical framework of sustainability (Alhaddi, 2015), and its pillars are defined as following:
Figure 2. The three pillars of John Elkington’s triple bottom line to sustainable business.
13 Social fairness - corresponding to people
This component refers to a company’s impact on its employees and the societal system within its community and society. Or in other words, conducting fair business practices to labor, human capital and the society at large (Elkington, 1997). One can discern between internal company perspective and external societal perspective when addressing social sustainability (Ajmal, Khan, Hussain & Helo, 2017). The internal company perspective includes, and deals with, social equity regarding business’ employees and their well-being. These practices include, but are not limited to, e.g. health and safety, professional growth, training and learning (Weingaertner & Moberg, 2014). At the same time, firms can also be evaluated based on their external societal efforts, which includes social development, social justice and social growth (Ajmal et al., 2017). External social sustainability, refers to “the impact that the company has on the surrounding communities”
(Longoni, Golini & Cagliano, 2014, p. 148), where Boström (2017) argued that it has been the most challenging pillar to operationalize, due to the vagueness of what it entails.
Environmental responsibility - corresponding to planet
This component refers to a company’s qualitative and quantitative effects on local, national and international resources. Thus, engaging in practices that do not compromise the natural resources for future generations, thus minimizing the ecological footprint (Alhaddi, 2015). A distinction can be drawn between internal and external environmental performance (EP). Internal EP includes a firm’s efforts for greening its own operations, where accreditations, such as ISO 14001, can provide information regarding the level of greenness of the firm (Rao, 2002). This among other things comprises, efficient use of energy sources, reducing greenhouse gas emissions, and minimizing the amount of waste from the production. At the same time, firms can also be engaging in external EP, which refers to a firm’s efforts to green their entire supply chain, by requiring suppliers to provide accreditation for their EP (Zhu & Sarkis, 2004).These can be achieved through, for example, higher requirements for suppliers and their EP, or through developing environmental programs in collaboration with suppliers.
Financial viability - corresponding to profit
This component refers to a company’s financial performance, such as flow of capital, and economic involvement in society. It pertains to the firm’s capability of surviving, prospering and evolving, in order to support future generations, while incorporating social and environmental practices in its operations (Alhaddi, 2015). Several scholars (e.g. Hoejmose & Marchant, 2012;
Horak et al., 2018) have highlighted the potential benefits from sustainability engagement, such as cost reduction and improved brand image.
2.1.2. Defining Sustainable Development
There are different ways for understanding what SD entails. This dissertation will adopt the definition, as formulated by the Brundtland Commission, “development which meets the needs of the present without compromising the ability of future generations to meet their own needs”
14 (Brundtland Commission, 1987, p. 16). From a business perspective, this will imply that business prosperity should not come at the cost of harming the environment, through exploitation of natural resources, or discharge of harmful substances. Furthermore, economic prosperity should not come through disregard of humans or their exploitation in any form. SD is often presented as a business opportunity, which can drive growth and economic prosperity for firms (OECD, 2016), where regard for the environment and society at large should be taken into consideration during the process. In Sweden, sustainable business is defined as having “active concern for the environment, human rights, work requirements, anti-corruption, business ethics, gender equality and diversity”
(Governmental Offices of Sweden, 2013, p. 18).
Dyllick and Muff (2016) also refer to business sustainability, where they propose a typology depending on the level of SD. Ideally, this should provoke businesses to change the game, by turning from an inside-out approach (i.e. how businesses are contributing to none or some sustainability issues) to an outside-in (i.e. how businesses are contributing effectively to solving global challenges).
Business-as-Usual: The Current Economic Paradigm
This paradigm is labeled inside-out, and is purely based on the economic view of the business, thus taking the assumption that “economic concerns are pursued to produce economic value in the form of profit, market value or, more generally shareholder value” (p. 163). Therefore, concerns regarding social fairness and environmental responsibility are not taken into account as they are considered responsibility of the government - “the business of business is business” (p. 163).
Business Sustainability 1.0: Refined Shareholder Value Management
Within this paradigm firms are starting to introduce sustainability into the current economic model, as a result of new challenges arising from external pressures. Even though firms are forced into considering sustainability management, this is still done in a manner, where economic prosperity is still number one concern (i.e. inside-out). Or in other words as the authors put it “introducing sustainability into business will generate positive side-effects for some sustainability issues, their purpose is to reduce costs and business risks...Business success still is evaluated from a purely economic view and remains focused on serving the business itself and its economic goals” (p.
164).
Business Sustainability 2.0: Managing the Triple Bottom Line
Here, introducing sustainability into the business acknowledges that it is more than just recognizing the relevance, thus moving from knowledge-based sustainability to action-based sustainability. It means “broadening the stakeholders perspective and pursuing a triple bottom line approach” (p. 164). Firms do not just experience the side-effects of their business activities, but deliberately address sustainability issues with refined goals and programs. By incorporating the TBL approach, businesses are seeking to address environmental and social issues, while maintaining economic prosperity. As the authors declare, this paradigm is a step further in the right
15 direction, yet “The value proposition of business is broadened to include the three dimensions of the “triple bottom line” (people, planet, profit). However, the perspective applied is still inside- out” (p. 165).
Business Sustainability 3.0: Truly Sustainable Business
Truly sustainable business “shifts its perspective from seeking to minimize its negative impacts to understanding how it can create a significant positive impact in critical and relevant areas for society and the planet. A Business Sustainability 3.0 firm looks first at the external environment within which it operates and then asks itself what it can do to help overcome critical challenges that demand the resources and competencies it has as its disposal” (pp. 165-166). Therefore, one can say that within this paradigm, considerations are not how to minimize its negative footprint, but how a firm can contribute to the global sustainability challenges with the available resources it has. For this reason, the last paradigm is considered to be with outside-in approach, as economic prosperity is no longer the priority, but BST 3.0 firms consider themselves as “responsive citizens of society” (p. 166).
Presented in Figure 3 is a matrix developed by the authors of this dissertation, inspired by Dyllick and Muff’s (2016) typology.
Figure 3. Matrix of the stages of sustainable development.
16 2.2. Defining Small and Medium-sized enterprises
2.2.1. Quantitative Definition
SMEs are generally quantified by the number of employees or financial assets, which can vary across countries. However, the most frequent upper limit of the definition is 250 employees (OECD, 2005a), as in the recommendation stated by the European Commission (2003). In Europe, a total of nine out of every ten companies are SMEs and an important driver for the European economy when it comes to economic growth and for generating jobs (European Commission, 2016a).
As shown in Table 2, the concept of SMEs contains three different classifications: medium (50 to 249 employees), small (10 to 49) and micro (less than 10). Therefore, the universally approved definition for SMEs according to the European Commission (2016a) is to have less than 250 employees, and that the enterprise should have an annual turnover of no more than EUR 50 million or a balance sheet total of EUR 43 million. Many Swedish authorities (e.g. The National Agency for Public Procurement and Vinnova, Sweden’s innovation agency), abide by this definition.
Table 2. Quantitative characteristics of SMEs, adopted from the European Commission.
2.2.2. Qualitative Definition
SMEs can also be described in a qualitative manner, but unfortunately, publications regarding those aspects derive from earlier research, as literature is dominantly defining these in a quantitative manner (Berisha & Pula, 2015). However, earlier publishing can aid in capturing the qualitative nature of SMEs.
17 Brooksbank (1991) has outlined five characteristics that can describe SMEs: (a) limited number of products and/or services and know-how; (b) relatively limited resources and capabilities; (c) less development management systems and administrative procedures; (d) informal management style; and (e) management position held by the firm founder. In a similar line of thinking Loecher (2000) argues that it is the personal principle (i.e. the company manager performs a central role in the business decision-making process) and the principle of unity of leadership (i.e. the company manager and proprietor are one and the same person) that discerns SMEs from large enterprises (see Table 3). Therefore, it is reasonable to assume that it is the small-scale of decentralization, flat organizational hierarchy, and the relative informal working environment that is dominant among SMEs.
However, the European Union (EU) has further distinguished between three types of SMEs, (Type 1) family owned, (Type 2) manager operated with a board of directors, and (Type 3) belonging to enterprise groups (OECD, 2005b). For the purpose of this dissertation enterprises Type 1 and Type 2 are of interest, as these are in comparison to Type 3, described as flexible when it comes to the decision-making especially for firms’ strategic issues (ibid.). On one hand this can accelerate the decision-making process, on the other it can lead to neglect of certain aspects, due to prioritization of tasks (Martens & Cho, 2010). Another distinctive characteristic of SMEs, is their business culture and structure, which can often be less formal than their counterparts (i.e. large enterprises) (Fassin, 2008). Thus, communicating the vision of the firms easier in a management-employee scenario, due to lack of sophisticated divisionalized structures (Jones & Tilley, 2003).
Moreover, an important characteristic of SMEs is the number and role of the human capital. In contrast to their counterparts, SMEs are highly reliant on their employees (due to their limited number) and their knowledge, skills and values (Martens & Cho, 2010). Hence, one can argue that the human capital can play a key role in stirring the direction of the business, and vocalizing issues relatively easier, than one can in a large enterprise. The role of relevant business networks is also a central factor, since this can be a source of new ideas, exchange of expertise and resources (ibid.).
On another note, it is also reasonable to assume that the level of risk and uncertainty, in context of SMEs, is higher than in their counterparts. One way of explaining this is rooted in their internal shortcoming, i.e. limited human and financial resources. However, it has to be remembered that the situation may vary depending on the company and the sector it is serving.
18 Table 3. Qualitative characteristics of SMEs.
Characteristic Small and medium sized Large Management Company manager = Company
proprietor (in most cases)
Company manager ≠ Company proprietor
Resources Limited resources and capabilities Extended resources and capabilities
Organizational structure
Flat hierarchy
Simplified and centralized
Highly hierarchical
Sophisticated divisionalized Business
Culture
Informal Formal
Uncertainty and risk
High Low
2.3. Drivers for Sustainable Development
Since research has neglected the maintenance component of SD practices, inspiration will be drawn from literature on adopting sustainability. Just so any possible misunderstandings are avoided, in this dissertation ‘adopt’ means starting to use something new, whereas ‘maintain’
means continuing to have, keeping in existence.
Drivers, in this context, can be seen as positive factors influencing the firm’s sustainable innovations. These can be both internal and external, and due to cultural differences they may differ by country or sector. It is known that external drivers affect the internal ones and both will influence the development or adoption of sustainable innovation (Bossle, de Barcellos & Vieira, 2016), therefore the discussion will start from the former and move to the latter. The factors within each dimension derive from a systematic literature review of 44 articles in the period 1987-2018, on drivers for sustainability practices and SMEs conducted by Yadav, Gupta, Rani and Rawat (2018).
2.3.1. External Dimension
External factors can be described as the ones upon which businesses have no direct influence.
Figure 4 shows a sum up of the external factors, which are influencing firms to direct their efforts towards BST.
19 Figure 4. External drivers for adopting sustainability practice.
Government
The government is found to be a major external driver influencing the sustainable behavior of SMEs through regulations and structural support and knowledge (Yadav et al., 2018).
Furthermore, Strand, Freeman and Hockerts (2015) have argued that governments are a strong driver when it comes to sustainability engagement from firms in the Scandinavian region. The Swedish government has been an active player in promoting SD among society and businesses. A report published by the UN (United Nations, 2017) revealed the extensive efforts Sweden has put towards contributing to the execution of Agenda 211 and 2030 Agenda2. All three levels of the Swedish administrative societal structure (i.e. central government, regional and local) have a central role in working with sustainability for translating legislation into practical actions. “It is the task of the Government to make clear requirements of the business sector but also to support its work on sustainability” (Government Office of Sweden, 2016, p. 8). For instance, this report showed the government invited representatives of the business sector, academia and governmental agencies to engage in an open dialog for SD. The Swedish government and the Swedish Agency
1Agenda 21 - non-binding plan of action with regard to sustainable development. The agenda was a result of the Earth Summit (UN Conference on Environment and Development) held in Rio de Janeiro, Brazil in 1992. “21” refers to the 21st century, and it aims to achieve global sustainable development on local, national and international level within five concepts: people, planet, prosperity, peace, and partnership.
2 2030 Agenda - also known as Sustainable Development Goals, was the result of the UN Sustainable Development Summit in 2015. The agenda has seventeen goals, which are drawn from the five concepts present in Agenda 21. The goals are set to stimulate action over the period of fifteen years in areas of critical importance for the planet and humanity.
20 for Economic and Regional Growth are working to support companies, with a particular focus on SMEs, by information sharing, and the development of tools and methods (ibid.).
Networks and Alliances
Due to SMEs restrained resources, these are considered to have a positive attitude towards participating in local networks aiming to collectively solve ecological and societal problems (Revell, Stokes & Chen, 2010). Such networks can be business hubs, universities, public authorities, and research centers. The EU has established the Sustainable Business Exchange Hub, which aims to empower companies to take action towards achieving the UN’s SDGs. In Sweden, there are different networks such as the Sustainable Business Hub, TEM and CSR VästSverige, which are promoting innovation and sustainable business development. The organizations are collaborating with businesses, universities, institutes, municipalities, embassies and the Swedish Trade Council to drive change. Furthermore, fairs such as Climate Week Malmö comprising lectures, business success stories and networking can be a good opportunity to engage in sustainable development discussions.
Competitors
Guler, Guillén and Macpherson (2002) describe this factor as the notion of learning and improving by mimicking other firms’ efforts. Due to hypercompetition and globalization, companies may change their products after studying the offering of competitors worldwide, thus this can be considered as a driver for engaging in BSTD, such a positive link has been found in a study conducted by Lee and Klassen (2008). Swedish companies might be considered highly susceptible, due to the geographical limits of their domestic market. Therefore, expanding operations to international markets might necessitate the development of sustainable practice.
Suppliers
Many SMEs are a part of global supply chains of large corporations, thus greening the supply chains has been argued to be more important for internationalized firms than domestically operating ones (Lee, 2008; Lee & Klassen, 2008). The majority of large firms have procurement policies and criteria, which have to be met before working relations are established. Hence, even domestically operating SMEs working with large corporations can be pressured into enforcing sustainability practices in their operations.
Customers
Depending on the customer segments, firms might influence the behavior of SMEs towards engaging in sustainability practices. Furthermore, a positive relationship has been found between demand for green offerings and SMEs focusing on SD practices (Lee & Klassen, 2008; Sáez- Martínez, Díaz-García & González-Moreno, 2016).
There has been a lot of research regarding green purchasing where the customer is a private individual, thus their choices and activities are influencing the production (Government Offices of Sweden, 2003). Also, private individuals have a high impact on companies' engagement in
21 sustainability (Joshi & Rahman, 2016). Swedish consumers have a long history of green purchasing behavior, thus there is a high demand for green products, processes and services (Svensk Handel, 2018). At the same time, depending on the level of a client firm’ sustainability engagement (i.e. business-to-businesses interaction), their influence may vary. For instance, it can be that if a firm is actively engaged in sustainability practices in its own operations, the probability that they demand the same in business-to-business (B2B) transactions can be higher, and vis-a-vis.
However, since around 55% of Swedish businesses are actively engaging in sustainability practices (Tillväxtverket, 2017b), this can be taken as an especially powerful driver.
Community Surrounding
Communities, such as environmental pressure groups, can be a powerful driver for SMEs for adopting sustainability practices, especially when it comes to the environmental pillar (Williams
& O’Donovan, 2015). Public demand for such practices, deriving from high levels of community participation, can also increase the engagement levels of SMEs (Jansson et al., 2017). In Sweden, there are several environmental groups (NGOs) pressuring politicians and businesses towards implementing stricter sustainability practices. For instance, the Swedish Society for Nature Conservation (Naturskyddsföreningen3) is working towards preserving the seas, forests and people’s health through a number of initiatives, such as decreasing the hazardous chemicals in production. The organization has its own environmental certifications system (SSNC), which helps consumers to choose products that are the least damaging to the environment. At the same time, the most influential group for the social aspect of sustainability, in Sweden, are the unions. The unions are dealing with, among other things, wage formation, gender equality, collective bargaining, conflict and legislation. According to the Swedish National Mediation Office, collective bargaining in all sectors has affected 90% of employees between 16-64 years, with an average retirement of 64.5 years (Medlingsinstitutet, 2019).
Tangibility of the offering
It has been argued that the more tangible the offering, the more the company will be willing to engage in sustainability practices (Uhlaner, Berent-Braun, Jeurissen & de Wit, 2012). Tangibility of the business sector, in this context, refers to products and services offered by SMEs. Thus, the more tangible the offering the higher the probability of businesses engaging in green practices.
This is due to the higher impact the creation of the product will have on the environment, in terms of CO2 emissions and use of resources like water and energy, etc. On the other hand, services can also be sustainable despite being classified as intangible offerings. According to Belz and Peattie (2012), sustainable services are the ones that are satisfying customers’ needs while improving the social and EP along their full life cycle.
3Naturskyddsföreningen is the oldest and biggest non-profit Swedish environmental organization established in 1909, with more than 230.000 members in 2019. The organization also works on a global level in partnerships with 40 organizations in 10 countries.
22 According to the Swedish Growth Agency (Tillväxtverket, 2017b), high-scoring sectors working actively with the environment are production of energy, water and electricity (75%), the transport sector (63%), the hospitality sector (59%), and manufacturing (57%). In comparison, the sectors working actively with social issues are healthcare (44%), real estate and rentals (39%), hospitality (39%) and education (39%).
2.3.2. Internal Dimension
At the same time, the internal factors will most probably also influence the sustainability practice of SMEs. Figure 5 shows a sum up of the internal factors, which are influencing firms to direct their efforts towards BST.
Figure 5. Internal drivers for adopting sustainability practice.
Employees
Employees are a vital part of an organization, simply because they build the company. Some of them are responsible for the company’s strategic approach, yet most of them have greeted responsibility in their daily routines, which in turn contributes to the final performance (Kucharska
& Kowalczyk, 2019). According to Venturelli, Cosma and Leopizzi (2018) employees’
involvement, in sustainable practices, helps to implement it successfully. Furthermore, many researchers have found that employees do influence SMEs’ work, especially towards sustainability. For example, Zhang, Bi and Liu (2009) found that demand from the employees have a high impact when it comes to SMEs adoption of environmental practices. Another study came across the fact that employees’ working conditions have a positive effect on SMEs and their investments in environmental issues (Masurel, 2007).
23 Organization culture
Organizational culture can comprise many aspects, such as personal values and ethics of owners and managers, responsibility of moral and social aspects, management support and knowledge management (Yadav et al., 2018). Therefore, researchers argue that organizational culture has a high impact, thus it is a main driver for sustainability practices when it comes to SMEs (e.g.
Cambra-Fierro & Ruiz-Benítez, 2011; Uhlaner et al., 2012). This can be explained by the fact that decision-making, in smaller enterprises, often is relying on owner-manager’s personality and characteristics, rather than economic conditions (Battisti & Perry, 2011; Fassin, Van Rossem &
Buelens, 2011). Moreover, Font, Garay and Jones (2016) found that SMEs’ owners, their habits and lifestyle, influences the work toward sustainability. Moreover, many scholars argue that the social responsibility and ethical concerns of the top managers are a strong driver for the company's environmental practices (e.g. Johnson, 2015; Lee, 2009; Shields & Shelleman, 2015).
Brand image and reputation
Corporate image is another key driver for sustainability that has received a lot of attention. Agan, Acar and Borodin (2013) found that ‘Expected Soft Benefits’, such as corporate image and brand name is the strongest driver of environmental activities for SMEs. Social capital is defined as “the nature of power and meaning that exists as structures and mechanisms guiding everyday social practice” (Fuller & Tian, 2006, p.287), and can therefore be seen as a driver for improving one's reputations as an ecologically responsible firm (Font et al., 2016). It has also been arguing that SMEs apply environmental activities in order to gain a better green public image, demonstrate environmental stewardship, and green brand image (Battisti & Perry, 2011; Cambra-Fierro &
Ruiz-Benítez, 2011).
Competitive advantage and strategic intent
Bansal and Roth (2000) states that competitiveness is a major motivation behind environmental responsiveness, with other words competitive advantage can be gained through different green activities. For example, Gadenne, Kennedy and McKeiver (2009) found that SMEs’ owner- managers are adopting sustainability in their organizations with cost saving intentions. Such cost benefits can result in competitive advantage and can be, for example, waste reduction and recycling of packaging, or changing procedures, in order to decrease waste and raw materials consumed (ibid.). However, this transformation (i.e. build greener organizations) often demands investments in technology developments, employee training and a reconstruction of the organizational structure (Lee, 2009), which can be difficult for SMEs to take on. On the other hand, Battisti and Perry (2011) argue that investments in environmental sustainability can be perceived as beneficial. Still, according to Sáez-Martínez et al. (2016) suggest that SMEs are focusing on environmental responsibility mainly due to strategic intent.
24 Environmental Management Capability
The environmental management capabilities (EMC) refers to various technologies, skills and assets, which can support SMEs to integrate and respond to different environmental demands of stakeholders (Yadav et al., 2018). Certifications such as ISO can testify to the level of greenness of a firm (Rao, 2002), and these can be further related to environmental management systems (EMS). Sáez-Martínez et al. (2016) found that SMEs with benefits such as green experiences (i.e.
development of internal EMC) did have a positive effect on organizational performance and sales growth. A robust resource base is important when it comes to taking on sustainability issues successfully (Clarkson et al., 2011).
Size of firm
According to a study conducted by Reyes-Rodríguez, Ulhøi and Madsen (2016), the size of the firm is seen as an important driver for SMEs regarding their environmental initiatives, especially their greening processes (Hoogendoorn, Guerra & van der Zwan, 2015). Thus, small firms (10-49 employees or those with a turnover between 500.000 and 2 million euro) seem to be the enterprises which engage the most in greening processes (ibid.). However, Johnson (2015) states that bigger SMEs are more likely to adopt sustainability management tools.
25 III. METHOD
This chapter demonstrates the methodology behind the research of this thesis. It portraits the research design and method, the data collection process and the analysis approach. This is followed by a discussion about the reliability and validity for qualitative research and the ethical concerns.
3.1. Research Design and Method
According to Bell, Bryman and Harley (2019) the research design should provide a framework of how to collect and analyze the data. Therefore, the framework for this dissertation is presented in Figure 6. Aligned with this dissertation’s purpose, which is to identify the external and internal drivers for maintaining sustainable practices, and to investigate the extent of these in Swedish SMEs, the authors have chosen the most suitable research design according to them, so the purpose and research questions can be answered. Due to the time horizon, this dissertation had a cross- sectional design, meaning that the data only will be gathered at a single point in time, e.g. days, weeks or months (Sekaran & Bougie, 2016). The primary data was collected in 2020 between March and May, as for the secondary data, only the most recently published reports and up-to-date documentation were used.
Figure 6. The framework for research design and method of the dissertation.
26 On another note, one has the research method which refers to the technique for collecting data (Bell et al., 2019). Depending on the purpose, research questions and objectives, one can choose the most appropriate method for the data collection. It is reasonable to assume that there are a number of different ways for data collection, and in social science researchers can choose from two main strategies, i.e. quantitative and qualitative (ibid.). For this thesis, a qualitative method was considered to be more appropriate, since it gave the authors the ability to explore a topic which had not been thoroughly investigated in the past. Furthermore, by using this approach, the authors could obtain more detailed and in-depth knowledge about the objects (i.e. participants) perception regarding the given topic.
Furthermore, since the research purpose was considered as a gap in the knowledge, the nature of this dissertation had an exploratory nature, which often relies on qualitative approaches for data gathering, such as interviews (Sekaran & Bougie, 2016). Exploratory research questions are often formed when: (a) there is little known about a specific phenomenon; (b) the already existing research results are unclear or affected by major limitations; (c) the subject have a high complexity;
or (d) there is a lack of theory in order to guide the development of a theoretical framework (ibid.).
3.2. Primary Data Collection 3.2.1. Interviews
There are three types of interviewing styles, i.e. structured interviews, semi-structured and unstructured interviews (Wilson, 2012). Due to the exploratory nature of the RQs in this dissertation, it was considered more suitable to use semi-structured interviews, because (a) the topic for the discussion was predetermined, and (b) it allowed for more open and free discussions.
Furthermore, this type of interviews are perhaps the most commonly used in qualitative research, as it follows topics of interest without necessarily following a structured set of questions (Kitchin
& Tate, 2000; Wilson, 2012). Flick (2006) argues that the more complex or broad the topic, the more essential it is to create a guideline of questions. Therefore, it was considered a necessity to create a guideline (see Appendix B) for two reasons, (a) due to the complexity of the research topic, and (b) since some potential participants wanted to know, if they could help the researchers with the specific topic at hand.
The questions were formulated by the authors, since standardized or previously used ones could not be identified. Developing, writing, and re-writing the interview guide is a part of a dynamic and reflective process, which allows researchers to create good qualitative questions that implicitly or explicitly make a link to the theory in the specific research (Agee, 2008). Therefore, the formulation of the questions followed some simple guidelines (a) open-ended in nature (i.e.
allowing discussion type of conversation), (b) clear and easy to understand (i.e. not including unfamiliar theoretical concepts), and (c) containing only one question (i.e. no sub-questions) (Longhurst, 2016). Different types of questions were used (e.g. introductory, follow-up, interpreting, and structuring), as to enhance the understanding of the interviewers (Bell et al.,
27 2019). Also, these were grouped in three different categories and topics (i.e. description of current practice, drivers for adopting sustainability practice, drivers for maintaining sustainability practice, and level of commitment and progress), so to make it easier afterwards when analyzing the data, and answering RQ1 and RQ2. After completion the interview guide was distributed to the participants who agreed to collaborate with the researchers.
Due to extraordinary circumstances in 2020 (i.e. covid-19), the possibility of conducting face-to- face interviews was dismissed from both the interviewers and the interviewees. However, the interviews were still conducted in a synchronous environment, allowing real time, back-and-forth communication (Sullivan, 2012), which gave the researchers and the participants an experience almost as in face-to-face interviews. The interviewees could choose between having a Microsoft Teams, phone interview, or any other available means allowing real time communication.
On that note, it has to be acknowledged that lack of face-to-face contact is said to restrict the development of natural encounters, such as the body language of the interviewee, as this can be showing something that the interviewer cannot pick up on in a telephone interview (Irvine, 2012).
However, one can supplement that with verbal acknowledgements (e.g. mm, hmm, right, and yeah) and use these signs instead of body language (Sullivan, 2012). Therefore, even with its limitations, online or telephone interviews had advantages. For example, conducting telephone or online interviews can save time or add anonymity around the topic and the participant (ibid.).
Furthermore, she argues that these types of interviews can enhance the pool of possible interviewees, as it can include geographically dispersed potential participants, all of which were beneficial for this dissertation.
3.2.2. Participants Selection Process
Qualitative scholars can choose between different sampling techniques, where their choice should be dictated by the purpose (Marshall, 1996). Moreover, it has been suggested that researchers need to disclose the unit of analysis already in the research questions (Bell et al., 2019). Hence, as already disclosed the units of analysis (i.e. objects) in this dissertation were Swedish SMEs. A purposive sampling technique, called criterion sampling, was used as the investigators wanted the sample pool to consist of strategically selected objects. Therefore, in order to ensure that they were relevant to the dissertation a list of the criteria was created (see Figure 7). The objects’ eligibility was investigated via online desk research, meaning that several online platforms were used for ensuring the criteria were met before the initial contact.
