This is a picture of the entrepreneur Estée Lauder with a customer in 1966.Next you will look at the Big Five Model.The Big Five ModelThe match between personality traits and successful career development is unique and context-specific, which means that the traits that serve an enterprise manager well in one setting may not be the most appropriate for another enterprise manager in a different setting. Academic research in the area of organisational psychology has provided a rich understanding of the depth and variety of personality traits that can help us to understand and possibly manage behaviour in the workplace.One of the most popular models of personality traits that appears to be validated empirically across time, contexts and cultures is the Big Five Model, also known as the Five Factor model. The model comprises five broad personality dimensions: Openness to experience, Conscientiousness, Extraversion, Agreeableness and Neuroticism, and so the acronyms OCEAN or CANOE are often used. Understanding the impact of these dimensions on organisational and individual behaviour and performance is important for people management in organisations. Numerous authors (for example, Costa and McCrae, 1988; Specht et al., 2011; Toegel and Barsoux, 2012) have discussed these five broad dimensions. Openness to experience: this dimension includes people’s tendency to appreciate art; to be intellectually curious, creative or imaginative; to pursue novelty; or to prefer change over stability. High openness to experience can also be an indicator of a lack of focus and consistency. Low openness to experience can be perceived as being overly cautious or dogmatic.Conscientiousness: this dimension refers to people’s tendency to be organised; to be perfectionists; to focus on details and achievement; and to be self-disciplined. High levels of conscientiousness may also result in focusing too much on details and losing the bigger picture. Low levels of conscientiousness can be perceived as being flexible or possessing a lack of control.Extraversion: this dimension refers to people’s tendency to be energetic; to be sociable or talkative; to pursue excitement; and to exude warmth. High extraversion may reflect assertiveness and a desire to experience positive emotions or attention seeking. Low extraversion may be perceived as being reserved, self-reflective or having a tendency for being self-absorbed and aloof. Agreeableness: this dimension refers to people’s tendency to get along with others, avoid conflict and be friendly, helpful, compassionate and cooperative. High agreeableness may result in being perceived as naïve or submissive. Low agreeableness involves voicing criticism, but it may also be perceived as being competitive and untrustworthy. Neuroticism: this dimension refers to people’s tendency to be sensitive, nervous, anxious and vulnerable, or to generally experience a variety of unpleasant emotions. Low neuroticism may reflect emotional stability, a calm personality or one with low concern. High neuroticism may be perceived as anger or impatience, but it can also convey confidence. These five dimensions provide a strong theoretical foundation in personality psychology and suggest a possibility for explaining potential behaviour and performance in the workplace. Actual behaviour and performance are also dependent on, and impacted by, situational variables, such as the characteristics of the job, the culture of the organisation, relationships with co-workers and the resources provided. You will use the Big Five Model in the next part of Activity 3 to reflect on your understanding of your personality traits, and identify a number of distinctive strengths and competencies, as well as weaknesses and areas for development. Activity 3: Part 2 Understanding your personality traits: the Big Five ModelAllow about 30 minutesNote: we recommend you complete this activity in Chrome or FireFox.1. Assess your personality traits by completing the following questionnaire, which is based on the Big Five model. 2. Now write a paragraph of about 100 words in which you reflect on your results from the self-assessment quiz. Your reflection should compare your self-assessed scores with what you thought about yourself before you completed the questionnaire. It should also include your thoughts on whether your personality traits can be seen as an appropriate predictor of your performance.You will find that by studying the Big Five Model, assessing your personality traits and reflecting on the results, you will have a good background about how personality traits can affect your behaviour and performance. When you analyse yourself on each dimension, note that it shows only a possibility for explaining potential behaviour and performance, which are also dependent on, and impacted by, situational variables, such as job characteristics, organisational culture and co-workers. You could use your notes from this activity to produce a short narrative on what personal development planning means for you and how you can work with others in undertaking sustainable innovation and enterprise development in your future work context.2 Sustainable innovation in different specialismsIn this section, you will look at the concept of sustainable innovation based on three example case studies of discovery, invention and design. However, before doing so, you will review some of the key societal problems or challenges that make sustainable innovations so important. You will then move on to explore how existing innovations can help address societal challenges.2.1 What are societal challenges?On 25 September 2015, the United Nations published a document titled Transforming Our World: the 2030 Agenda for Sustainable Development, which contained 17 sustainable development goals (SDGs) (UN, 2015). The 17 SDGs reflect the problems that every society faces. For this reason, the goals are recognised globally and will be around for at least the next 15 years. The United Nations’ SDGs are all encompassing global targets to end poverty and hunger completely and ensure clean water for all. Another example that can be used to illustrate societal problems is the European Union’s Horizon 2020 (EU, 2013), a research and innovation programme. The aims of Horizon 2020 reflect the policy priorities of the Europe 2020 strategy and address major concerns and societal challenges shared by citizens in Europe and elsewhere. Horizon 2020 is the financial instrument implementing the Innovation Union, a Europe 2020 flagship initiative aimed at securing Europe’s global competitiveness.Seen as a means to drive economic growth and create jobs, Horizon 2020 has the political backing of Europe’s leaders and the Members of the European Parliament. They agreed that research is an investment in our future and so put it at the heart of the EU’s blueprint for smart, sustainable and inclusive growth and jobs.By coupling research and innovation, Horizon 2020 is helping to achieve this with its emphasis on excellent science, industrial leadership and tackling societal challenges. The goal is to ensure Europe produces world-class science, removes barriers to innovation and makes it easier for the public and private sectors to work together in delivering innovation.(EU, 2013)This approach brings together resources and knowledge across different fields, technologies and disciplines, including social sciences and the humanities. Societal issues can include the following challenges:health, demographic change and wellbeingfood security, sustainable agriculture and forestry, marine, maritime and inland water research, and the bioeconomysecure, clean and efficient energysmart, green and integrated transportclimate action, environment, resource efficiency and raw materialsEurope in a changing world – inclusive, innovative and reflective societiessecure societies – protecting freedom and security of Europe and its citizens. It is important for entrepreneurs and innovators to understand the industry, market sector or specialist area which they wish to enter or in which they operate. A good understanding of the specialist area includes an understanding of aspects such as technological changes, social pressures, government regulations and competitors. Activity 4 Addressing societal challengesAllow about 30 minutesListen to the audio recording in which practitioners from three different specialist areas – engineering, science and information technology; creative, leisure and cultural industries; and health and social care – share their experiences of how to identify and address societal challenges using entrepreneurship and innovation. You will then start thinking about your own specialist area. NARRATORYou’re going to hear from representatives of organisations sharing their experiences of how to identify and address societal challenges using entrepreneurship and innovation.First of all, Richard Goodhead , Senior Vice-President, marketing at Rolls Royce Civil Aerospace.RICHARD GOODHEADRolls Royce plc effectively provides power for use in land, sea and air, whether that’s in civilian aircraft use, defence use, marine use, power generation on land, or nuclear power, but specifically my area of the business is related to civil aerospace so that’s providing engines that power aircraft that are used in commercial use whether that is for airlines or in the realm of business aviation.Once you’ve made the assumption, in terms of societal impact, that air travel is a good thing for society, some people believe that, some people don't. Obviously, I'm biased, I think it's a great economic contribution to society and it connects people, not just for business reasons, but for a whole host of other reasons. People like to travel to see each other and it's that person to person contact that makes the world go round. In providing the propulsion systems that allow aeroplanes to connect people and make the world a smaller place, then clearly we are meeting some societal needs but we have to do it in as responsible a way as we possibly can. And, obviously the way that aeroplanes are currently powered is through the use of fossil fuels so to minimise that and make it as clean and efficient as possible is a goal that we've been striving for at Rolls Royce for many years. Not least of which because it doesn’t only meet environmental requirements but it, because there's competition in our industry, the person with the most efficient engine usually wins so we've always spent lots of our research and technology investment on doing just that.JO HALLMy name is Jo Hall. I'm the founder and director of Creative Stirling. Creative Stirling is a membership-driven organisation founded originally as a community interest company and now a charity. Our vision for Stirling is that it is a lively and culturally livened place for everyone who lives, works and visits. For example Made in Stirling, our shop which supports artists to retail their work, but other aspects of what we do, we're supporting learning creative education and creative learning and cultural activity. And to me people's cultural lives are as important as food and drink. Working from information that was coming out of the creative and cultural sector what they needed, you know, it was we need spaces to sell, we want there to be more events and festivals and activities, you know we want spaces for artists' studios so those were the founding principles of our original business plan.The point of it is it's for the local economy it's to support local artists' livelihoods and in amongst that there's a lot of support of their wellbeing, because you get people who can also learn what sells, how to display their stuff.Basically we want to support skilled artists and designers to be able to generate incomes through their work. That also generates income for Creative Stirling overall so that we can support the other things we do.ALASTAIR DUNCANMy name is Alastair Duncan and I'm Church of Scotland Minister in St George's Tron Church of Scotland in Glasgow City centre, which is where the Wild Olive Tree Café is located.JODI DUNCANMy name is Jodi Duncan and I am a manager at the Wild Olive Tree Café.We are a café which addresses the issue of homelessness and poverty within the city of Glasgow. We have a couple of partner charities Glasgow City Mission and Bethany Christian Trust who also work with vulnerable and homeless people within the city.ALISTAIR DUNCANMany of the people who we seek to help through the Wild Olive Tree Café are some of the more vulnerable people in the city. Some of those are people who come to the café to take advantage of the suspended soup and coffee scheme we have, whereby paying customers will give the cost of a free soup, or tea or coffee, as a donation and we then make that available. We do that because there are people who don’t have enough to eat and can't afford to eat in a café and so, without asking any questions, we are able to provide for people basic food once per day, each day that they come into the café. So those issues are clearly issues around poverty, hunger, destitution, physical want. But in addition, we seek through the Wild Olive Tree to make employability training placements available via our contacts with Bethany Christian Trust and Glasgow City Mission.So we seek to address issues of work, readiness for work, building self esteem, giving people new skills and sometimes just confidence in getting into the workplace. 1. For each specialist area, make a list of the societal challenges that the speaker identified and the ways these are being addressed.a. Societal challenges and innovative solutions in engineering, science and information technologyb. Societal challenges and innovative solutions in creative, leisure and cultural industries c. Societal challenges and innovative solutions in health and social care Entrepreneurs and innovators must have a good understanding of the current state of the area they are working in, including issues such as expected growth rates, trends and competitors. Market research reports are one source of such information and so you should become familiar with the type of information in such reports and where you can find them. 2. Now decide on the specialist area you want to focus on and make notes about why you have selected this area. You should then use this chosen specialist area to complete the rest of the course so that you can gain the knowledge and skills that work for you when you become involved in sustainable innovation projects in the future.2.2 Connecting societal challenges with sustainable innovationSustainable development offers an organising framework based on opportunity and respect for human values. Innovation is about using change in ways that better meet human needs and values. The connection between the two seems obvious although, in the absence of clear market pressures and a common language, can be hard to realise, especially since innovation can come unexpectedly ‘out of left field’ and have such uncertain consequences. Innovation has often been the result of presenting (or being presented with) a credible strategic dilemma: a shock that can only be resolved by developing wholly new approaches. Innovation based on better design and new technologies gives us the means to act smarter and more sustainably. Using these tools well depends upon understanding the public’s expectations and concerns, and being able to meet needs cost effectively without raising further alarms over the scale or novelty of technology. The leadership task is to harness these economic and social trends, capture the tremendous amount of knowledge and experience that exists in networks worldwide and combine these in ways that create value. Traction is likely to be greatest when the management approach is positioned appropriately for the organisation in its network and seen by staff to be relevant and self-evident (if not simple) in purpose and content. The need for sustainability is already starting to transform the competitive landscape, which will force companies to change the way they think about products, technologies, processes and business models. The key to progress, particularly in times of economic crisis, is innovation. By treating sustainability as a goal, it allows enterprises to develop competencies that will give them competitive advantage. Incorporating sustainability into an organisationThe world has evolved through what can be described as cycles of change and waves of innovation, partly driven by incremental and disruptive innovations (Utterback and Acee, 2005). Silva and Di Serioa (2016) argue that every organisation is under pressure to embrace sustainability because of the depletion of resources and the competitive performance that can be realised by developing and sustaining innovative solutions to societal problems.Incorporating sustainability into an organisation’s goals and operational strategies can generate economic, social and environmental benefits both for the organisation and society as a whole. The societal problems described so far in this course ‘provide opportunity for action and highlight the need for sustainable innovation systems, incentive policies and support for sustainability, as well as the development of technologies that enable organisations to combine economic, environmental and social objectives’ (Silva and Di Serioa, 2016, p. 129).To illustrate, consider two types of sustainability. Financial sustainability: the capacity of an organisation to secure the necessary financial resources to continue operating over an extended period, as seen in cash-flow management.Environmental sustainability: a term that has a range of definitions, but is concerned primarily with the impact of organisations on the natural world. These impacts can range from local air and water pollution problems to much broader ones, such as the depletion of scarce natural resources, biodiversity loss and global warming arising from greenhouse gas emissions. Later in this course you will also consider organisational sustainability and social sustainability.Activity 5 Sustainable innovation through compliance Allow about 30 minutesWatch the video below exploring how enterprises can connect societal challenges to sustainable innovation. Then answer the questions that follow.[MUSIC PLAYING] NARRATOR: To become sustainable, companies need to recognise their roles and responsibilities in addressing employment conditions and social and environmental impacts within their supply chains. Compliance is an important element in helping companies achieve this. A business's compliance programme is made up from the internal processes and policy decisions employed by the business to meet the standards set by the government laws and regulations. Key elements of a typical compliance programme include managing risk, meeting global standards, preventing corporate loss, insurance systems are in place that would reduce any penalties incurred in civil or criminal judgments, improving the business's public image. Together they represent the many things that the compliance programme aims to achieve. And they are the first steps companies need to take on the road to sustainability. Compliance is complicated with laws and regulations varying country by country, and perhaps, region by region or city by city. But once enterprises have learned to keep pace with regulation, they are likely to become more proactive about sustainability issues and social and environmental impacts within their supply chains. On their own, traditional compliance programmes do not always produce sustainable change. New approaches to compliance are needed, particularly to address environmental and social performance issues in supply chains. These might include shifting from pass/fail to continuous improvement, replacing audits with collaborative assessment and root cost analysis, helping suppliers identify the business case for better social and environmental performance. A well-managed supply chain will aim to reduce the cost and complexity of the production process and environmental cost at all stages of the process. Sustainable supply chains offer a win-win situation. They are profitable for the businesses involved and they are beneficial for the environment. Value chains are the processes or activities a business uses to add value to its end product or service. The traditional value chain is a linear system with upstream suppliers providing component parts for products, and downstream entities providing product distribution and point of sale. The key elements of a value chain, as first described by the American academic Michael Porter, are inbound logistics, including acquiring and storing raw materials; operations, the processes needed to convert the raw materials into the finished products or services; outbound logistics, getting the product or service to the end users; marketing and sales; and after sales service. Each step in the value chain offers opportunities to add value to the product or service. Enterprises develop sustainable operations by analysing each link in the chain and looking for ways to improve its efficiency. These improvements are enabled by what Michael Porter calls, the support activities of the value chain: procurement of the raw materials, technological developments to improve the processes, human resource management, and company infrastructure. But in practice, value chains are often far from linear. Businesses need to take into account a whole range of stakeholders when seeking to create social, environmental, and organisational sustainability. 1. Can you think of another example of compliance as opportunity? For instance, a new technology, a product, or a less tangible sustainable innovation such as a process or service. Describe your example in the box below.Compliance can be seen as opportunity by examining the component parts. In the video some component parts were internal to the enterprise (internal processes and policies) and others were external (laws and regulations). The management team of an enterprise can be upfront and create products and services that exceed the legal requirements, rather than focusing on the costs involved. Such an enterprise is well placed to achieve sustainability. For example, an enterprise that sets a target of 4 per cent carbon emissions in its production process even though the regulatory limit is 6 per cent. Compliance helps companies to be more aware of how the enterprise can be innovative in its production and marketing processes, taking into account societal challenges (e.g. environmental damage) that need to be addressed to achieve sustainability.2. How has the value chain been used in the three specialist area examples given to obtain sustainable innovation? You could select a new technology, a product, or a less tangible invention such as a process or service. Describe your example in the box below. A sustainable supply chain is beneficial to an enterprise where it helps the enterprise to be successful (e.g. in generating profits or other rewards) while contributing to protect the environment. This can be achieved by focusing on the value added and/or waste reduction across the supply chain rather than simply viewing the supply chain as a linear process from raw materials to point of sales. In the video this is described as value chain. For example, a value chain can be used to create a sustainable innovation by rethinking how a product is produced and delivered to end users – how the enterprise maximises material and energy efficiency, creates value from waste or substitutes with renewables and natural processes. Examples can include energy-efficient vehicles and alternative power sources. 3. Can you think of another example of sustainable products and services? For instance, you could select a new technology, a product, or a less tangible invention such as a process or service. Describe your example in the box below.The example of an energy-efficient vehicle can be an illustration of a sustainable product depending on whether the organisation that produces it addresses the compliance, and supply and value chain issues discussed in the answers to the first two questions above.2.3 Developing next-practice sustainability strategyNext practices, those practices that only exist in our imagination, can change existing paradigms. To develop innovations that lead to next practices, entrepreneurs and innovators must question the implicit assumptions behind current practices. This is exactly what led to today’s industrial and services economy. Can we create a carriage that moves without horses pulling it? Can we fly like birds? Can we dive like whales? These questions will once have been asked. By questioning the status quo, people and companies have changed it. In like vein, questions must be asked about scarce resources: can we develop waterless detergents? Can we breed rice that grows without water? Can biodegradable packaging help seed the earth with plants and trees? Sustainability can lead to interesting next-practice platforms. Successful business models include novel ways of capturing revenues and delivering services in tandem with other companies. Developing a new business model requires exploring alternatives to current ways of doing business as well as understanding how companies can meet customers’ needs differently. Entrepreneurs and managers are learning to question existing models and to act to develop new delivery mechanisms. As companies become more adept at this, the experience will lead them to the final stage of sustainable innovation, where the impact of a new product or process extends beyond a single market. You will now consider how to develop your next-practice sustainability strategy in Activity 6
Figure 2 Sustainable strategy
The figure is a circle depicting the four perspectives or dimensions of a sustainable strategy. These are economic perspective, market perspective, social perspective and environmental perspective, all of which are presented around the inside of the circle with sustainability strategy at the centre.Activity 6 Creating a next-practice platformAllow about 20 minutesListen to the following audio in which Richard Goodhead explains how Rolls Royce connect societal challenges to sustainable innovation. You will notice that it is an extended version of part of the audio which you first listened to in Activity 4. Then answer the following questions on next-practice. RICHARD GOODHEADRolls Royce plc effectively provides power for use in land, see and air, whether that’s in civilian aircraft use, defence use, marine use, power generation on land, or nuclear power, but specifically my area of the business is related to civil aerospace so that’s providing engines that power aircraft that are used in commercial use, whether that is for airlines or in the relevant business aviation. What we're looking at very actively are increasing the level of choice and flexibility in the services that we offer to match the customer's needs as they evolve.The other thing that we are looking to do is expand our scope of service provision beyond what has been traditionally narrowed, if you like, to maintenance of the engine. So preventing unplanned maintenance, making sure the engine works on the wing and if it does, as it will, require maintenance it's done in a planned way that minimises disruption to the airline. We can expand our scope of services to not only look at maintenance so that i.e. the engine doesn’t break, but we can also look at making sure the engine is more available, i.e. it's not got niggling problems with accessories, we could predict them and fix them ahead of time. The other thing that we can do is expand our scope of services into the efficiency, not just is that engine not broken but working well, but is it working as efficiently as it possibly could and in this world it means burning the least fuel, and burning the least fuel means it's having the least environmental impact. So these are all about addressing these challenges and meeting the needs not only of the customer themselves but also, arguably, society.Once you’ve made the assumption, in terms of societal impact, that air travel is a good thing for society, some people believe that, some people don't. Obviously, I'm biased, I believe it is, I think it's a great economic contribution to society and it connects people, not just for business reasons, but for a whole host of other reasons. People like to travel to see each other and it's that person to person contact that makes the world go around. In providing the propulsion systems that allow aeroplanes to connect people and make the world a smaller place, then clearly we are meeting some societal needs but we have to do it in as responsible a way as we possibly can and, obviously, the way that aeroplanes are currently powered is through the use of fossil fuels, so to minimise that and make it as clean and efficient as possible is a goal that we've been striving for at Rolls Royce for many years, not least of which because it doesn’t only meet environmental requirements but because there's competition in our industry, the person with the most efficient engine usually wins so we, we've always spent lots of our research and technology investment on doing just that. We're making sure that we are as sustainable as possible in terms of the use and manufacture of our products. But in terms of other areas then clearly there's economic sustainability as well so that is about us being able to sell enough of our product but such that we can make enough profit that we can survive as a profit-making organisation - we aren't a charity, we are a business. And so to, the best way to do that, obviously, is to meet your customer needs more effectively than your competition and that’s the route to achieving that economic sustainability which actually is linked to the financial sustainability because being a public listed company we are floated on the Stock Exchange and, hence, we have to make sure that our shareholders see a good incentive to invest in us as a company.Combine that with successfully selling our products to our customers and making sure they meet their needs, then that gives us adequate cash flow which funds the whole healthy cycle of investing the cash flow back into research that allows you to give you a better product which you sell for a better price, you get more cash ad infinitum.And then last, but not least, organisational sustainability. Rolls Royce has grown significantly over the last 30 years from being, arguably, a solely British company that was selling to a restricted area of the market in terms of customers that have been for whatever reason more predisposed to choose a British product, to now a definite multi-national global company with customers all over the world. That degree of growth requires the organisation to grow with it, but in a lean and efficient way, and so there has been much effort and thought put into how we achieve that without growing uncontrollably. From a Rolls Royce perspective the competition that we face is intense. When you consider that Rolls Royce, as big as we are, is effectively competing with, arguably, the biggest company in the world in General Electric, then that in itself clearly offers a whole host of challenges which means that adage of work smarter, not harder, and being agile, becomes really quite important. 1. Create a next-practice platform for using the sustainable strategy diagram in Figure 2. For this, draw a blank diagram that has a shape similar to Figure 2 with clearly marked sections for economic, market, social and environmental sustainability. Next identify information from the audio about Rolls Royce which reflects each of these four components of sustainability to complete your figure. While this does not give you a definitive sustainable strategy of Rolls Royce, it provides an illustration of the types of information that constitute the sustainable strategy of an enterprise. 2. Select an organisation of your choice and repeat the task in Question 1. This could be your own organisation (if you own one), the organisation you work for or one that you may have studied in other contexts.You will have written about your own specific example but one constant to bear in mind is that sustainability can lead to interesting next-practice platforms. One example written about in hbr.org as far back as 2009, but which is only recently emerging, is at the intersection of the internet and energy management. It is called the smart grid – it uses digital technology to manage power generation, transmission and distribution from all types of sources along with consumer demand, with the aim of lowering costs as well as more efficient energy usage. The concept has been around for years and the huge investments so far have recently made it a reality. The grid allows companies to optimise the energy use of computers, network devices, machinery, telephones and building equipment, through meters, sensors and applications. It also enables the development of cross-industry platforms to manage the energy needs of cities, companies, buildings and households. Technology vendors such as Cisco, HP, Dell and IBM have invested to develop these platforms, as have utilities like Duke Energy, SoCal Edison and Florida Power & Light. Now complete Activity 7. Activity 7 Societal impacts of sustainable innovationsAllow about 15 minutes1. In what areas can entrepreneurial initiative and innovation help people who are marginalised?access to job opportunitiesaccess to a community-based energy enterpriseaccess to care and health servicesaccess to safe housingall of the above2. In what ways might entrepreneurship have an impact on societal challenges? by improving access to safe and healthy food in areas with high rates of malnutritionby improving access to finance for otherwise marginalised entrepreneursby increasing the share of profits distributed to shareholders overseasby influencing consumer behaviour to increase profitsby improving stakeholder inclusion in the governance of the enterprise3. Which of the following could be seen as a practical example of societal challenge?decreasing income inequalityyoung people criminalityageing of population and careenvironmental degradationmore public parks4. Which of the following are key perspectives that are considered when developing a sustainable strategy?economic perspectivemarket perspectivesocial perspectivelegal perspectiveenvironment perspective5. Which of the following could be seen as a practical example of an innovation that was developed to have little impact on the environment?hydrogen-powered vehiclewood burnera community-owned hydroelectric schemea biodegradable plasticYou will now look at how you can measure and evaluate the impact of sustainable innovation.3 Measuring the impact of sustainable innovationIn this section, you will examine methods for evaluating and measuring different types of sustainability management tools.Social impact tells the story of the change you can bring to society and people’s lives. Enterprises can and should measure their social impact. One reason for this is because an enterprise’s funder may want to know that their investment will make a real difference. However, this is not the only reason why it is good to measure social impact, and the real benefits derived from the process happen within the organisation. If you have a way to tell the whole story of the enterprise’s impact – not just sales and profit – then you have a powerful tool that will improve credibility and encourage people to believe what the enterprise says. It will inspire staff and volunteers, and the enterprise will be encouraged to continuously improve services, communicate to stakeholders, form the basis of powerful publicity materials and funding applications, and help to make an even greater difference. Every organisation – no matter how small or new – can measure its social impact. That being said, it is often better for small organisations to start by measuring just one indicator, perhaps related to just one activity. Once used to this, more indicators can then be added. 3.1 What is social impact?What does the term social impact really mean? The word impact means there are consequences to the actions you take. You therefore create change in something else. What about the social element? This is the reason for being, the purpose of the organisation you work in. It addresses a social need identified in your community. If the impact you have consists of the consequences of your actions, then your social impact is simply the consequences of the actions you take to address the social needs you have identified. Put even more simply, social impact is the change you bring to the lives of the people and organisations you work with. Rather than asking about the social impact your organisation achieves, you can think about it by giving an example of how your organisation has changed someone’s life. Your ‘social impact’ is how the lives of your clients are being changed. ‘Social impact measurement’ is just a new approach to doing something that has always been done.Activity 8 Key Performance Indicators (KPIs)Allow about 20 minutesBefore going on to study what social impact to measure and what framework to use, it is important to first ask yourself: how do you know that the strategy of your sustainable enterprise is on track? In this activity, you will look at how organisations can use Key Performance Indicators (KPIs) to measure and manage key aspects of their operations. Watch this introduction to KPIs and make your own notes about what steps this organisation takes to incorporate KPIs into its business. [MUSIC PLAYING] NARRATOR: Welcome to a typical organisation. Let's call it Furniturecorp and imagine that it's a long-established company that manufactures and market's chairs, tables, and other furniture for end-consumers. The senior management team at Furniturecorp has been on a strategy away day. After a series of workshops facilitated by external consultants, they've come back with a clear strategic direction for the organisation which will require a number of changes to it's traditional practises. They've also got a plan for consulting the rest of the organisation about the new strategy. Everything's looking good, so far[DING] But how do they ensure that the organisation as a whole is in tune with this new strategy and that everyone is headed in the same direction? As the 20th century business leader, John Harvey-Jones once said, ‘The challenge is to get all your ducks in line.’ [QUACKING] Key Performance Indicators, or KPIs, are one popular approach to tackling this issue. According to one of the leading writers on KPIs, David Parmenter, ‘If KPIs are implemented effectively you can encourage the various teams within your organisation to come more closely aligned with other teams, so reinforcing its overall strategic direction.’ A good place to start is the organisation's Critical Success Factors, or CSFs. These are the things that the organisation needs to do particularly well in order to achieve its goals. For example, Furniturecorp might have CSFs such as designing robust products that customers can rely on. Or manufacturing in sufficient volumes to meet the demand of large retailers. But CSFs can change over time, perhaps due to technological changes, or because the business is competing in a different kind of market. For example, Furniturecorp's new CSFs might include responding quickly to the latest fashion, providing an effective online ordering facility for end-consumers, or being able to demonstrate that all their raw materials are from environmentally sustainable sources. So Furniturecorp might run some workshops to identify a relatively small number of CSFs – perhaps five or six – and distinguish them from a larger number of general success factors. Next, the KPI team needs to find a set of measures that will help to drive the kind of behaviour that is needed in order for these CSFs to be realised. Staff consultation is needed over these measures to ensure they're based on a realistic assessment of the organisation's activities and the constraints within which its people are operating. As David Parmenter emphasises, it's essential to put the right measures in place. Amongst other things, KPIs should be nonfinancial. They should be measured frequently and linked to a particular group or team within the organisation. They also need to be clearly understood by the people involved and capable of acting as a trigger for corrective action. For example, in order to promote this new CSF of effective online ordering, Furniturecorp might develop a KPI related to the speed with which online furniture orders are processed and dispatched to their customers. They'll also need to be careful to avoid what Parmenter describes as the dark side of performance measurements. For example, ‘Where a badly implemented set of measures distorts behaviour as people become cynical and try to 'game' the system.’It's important to distinguish KPIs from what Parmenter calls Key Results Indicators, or KRIs, These are also important measures, but they are summaries or overviews of past performance, and they're based on the combined activities of many different teams. For example, Furniturecorp's sales turnover, its net profits, or its market share, are all KRIs. They are important measures, but they're not the kind of indicator that people in the organisation can use to monitor and improve their day to day activities. For David Parmenter, ‘KPIs are the only things that truly link day-to-day performance in the workplace to the organisation's critical success factors.’But it's important that these performance measures are not simply a way of exercising top-down control. [ALARM SOUNDING] Instead, they communicate what needs to be done and they help staff to understand what's required. So at Furniturecorp, the leadership can use their KPIs to help people in the organisation to understand the general direction of travel with their new strategy, and let them use these measures to guide their daily decision making. [DING] The video illustrates how Furniturecorp, a small business, goes about incorporating KPIs in its strategy in order to be sustainable. Once the business develops a strategic plan which requires a number of changes, it then has to work with its staff to ensure that everyone within the organisation understands and buys into the new strategy. The concept of KPIs is discussed in the video as one popular approach to tackling this issue. It requires the organisation to follow the steps below: Identify the organisation’s Critical Success Factors (CSF), that is, what the organisation must do successfully in order to achieve its goals (e.g. manufacturing and sales targets) while being aware that these may change over time.Work with staff to develop and agree measures to achieve CSFs and to discuss the constraints to be overcome. Some of the measures identified include non-financial aspects, frequency of measurements, and links to individual and team goals, all of which must be clearly understandable and serve as triggers for action. Identify the Key Results Indicators (KRIs), that is, summaries of past performance (e.g. sales turnover, net profits and market share) and how they differ from KPIs. KRIs can be used to measure day-to-day performance. Beware of the ‘bad side’ of KPIs. Make sure you consider their implementation and ensure that staff are not focusing only on KPIs. KPIs should be used as a guide to ensure the attainment of organisational and individual goals.If you want to read more about these four steps, you can consult Parmenter, D. (2015) Key Performance Indicators: Developing, Implementing, and Using Winning KPIs, Hoboken NJ: John Wiley & Sons.3.2 Approaches to measuring and evaluating social impactThe social impact measurement process is a planning procedure that should underpin every organisation – defining its values, vision, mission, aims and objectives so that the organisation is clear on what they wish to achieve. An organisation should always be guided by its values. There are a few approaches to measuring and evaluating social impact. In this section you will learn about three approaches. First, the life cycle assessment (LCA), a technique to assess the environmental aspects and potential impacts associated with a product, process or service. Second, the triple bottom line, a popular approach to impact measurement developed for assessing results of business activities. Third, the social performance scorecard, an approach that considers social impact in terms of measurable indicators of social performance. Each approach will have practical examples. You should consider and compare them with other approaches you may know as the basis for developing an approach that works for you or your organisation. <b>The life cycle assessment (LCA)</b>The life cycle assessment (LCA) is a technique to assess the environmental aspects and potential impacts associated with a product, process or service, by:compiling an inventory of relevant energy and material inputs and environmental releasesevaluating the potential environmental impacts associated with identified inputs and releasesinterpreting the results to help make a more informed decision about the human health and environmental impacts of products, processes and activities.Life cycle assessments involve cradle-to-grave analyses of production systems and provide comprehensive evaluations of all upstream and downstream energy inputs and multimedia environmental emissions. For a typical product, LCA takes into account the supply of raw materials needed to produce the product, the manufacturing of intermediates and finally the product itself, including packaging, transportation of raw materials, intermediates and the product, use of the product and disposal of the product after use. LCAs have been done on a huge variety of products and processes, including jet engines, drinking cups, computers and waste disposal, however they can be costly and time-consuming, thus their use is often limited as analysis techniques in both the public and private sectors. Streamlined techniques for conducting LCAs are needed to lower the cost and time involved with an LCA and to encourage a broader audience to begin using the LCA. The benefits of a LCA are:to focus on the most significant environmental impacts as the company develops and evaluates sustainability programs and policies.to inform product decisions to reduce the environmental impact from design and materials to manufacturing.to support engagement with external stakeholders to reduce the impact of materials and consumer care.Ultimately, the purpose is to allow for accurate and expedient comparison of a product’s environmental performance – enabling significant reductions in the environmental impact of all products. An LCA can also be used to assess the end-to-end environmental impacts of a business decision on overall value creation. The International Standards Organization (ISO) created ISO 14040 and 14044 standards for conducting LCA studies.Such studies involve four steps:establishing the goal and scope of the studytaking a life cycle inventoryconducting a life cycle impact assessmentinterpreting the results to make a business decision.The first step for any life cycle study is to establish the sustainability goals. The most common goals are: identify cost savingsenhance brand value for competitive differentiationimprove design decisionsmake better procurement decisionsThese will be discussed in more detail using a case study on Levi Strauss next.<b>Levi Strauss case study</b>Levis’ mission and vision describe what they are doing, how they are doing it and where they want to be in the future. Missionstatement: ‘The Mission of Levi Strauss & Co. is to sustain responsible commercial success as a global marketing company of branded apparel. We must balance goals of superior profitability and return on investment, leadership market positions, and superior products and service.’ (Strauss & Co., 2015)Vision: ‘We are the embodiment of the energy and events of our times, inspiring people with a pioneering spirit.’ (Strauss & Co., 2015)
Figure 3 Levi Jeans
An image of lots of folded up jeans. With sustainability becoming increasingly important, it is essential that companies establish their competitive advantage while justifying the impact of sustainability. For this to happen, the enterprise must both invest in social impact initiatives that generate measurable results, and engage in marketing campaigns that inspire internal and external stakeholders to participate in the process. Levi Strauss & Co. have done this using sustainability in the apparel industry, to bring an innovative lens to environmental and social impact throughout its supply chain, materials and whilst also activating its consumer base. The company has gone beyond labour compliance standards by publicly disclosing its manufacturing supplier locations. It has also led the industry in banning sandblasting, and partnering with non-governmental organisations (NGOs) and key suppliers to support programs that improve workers’ lives. Levi Strauss’ sustainability goalsIdentify cost savingsA common goal of many sustainability projects is to reduce costs. This can be achieved by reducing consumption of costly resources, or by recycling/reusing materials that would previously have been considered waste when manufacturing the product. LCA provides a data-driven approach to identifying potential operational efficiencies through reducing energy use, material use, water consumption, waste generation and emissions. By quantifying environmental impacts through measuring the amounts of water, materials and energy consumed, and the carbon and waste generated at each stage of producing a product or delivering a service, companies can see where those impacts are greatest.Environmental impacts have associated financial costs – whether it’s a higher energy or water bill, or increasing business risk because of future expected regulation or price volatility. By reducing the impacts, the company can also reap cost savings. In this case Levi Strauss found a way of dramatically reducing costly water consumption and are also going forward by persuading consumers to do the same. Enhance brand value for competitive differentiationIn many industries, and particularly the fashion and apparel industry, there is a competitive advantage if your product and brand is perceived as environmentally and socially beneficial. Many businesses are embracing sustainability initiatives and Levi Strauss have used their LCA results to promote their brand. The brand revolves around the fact that its products are using less water. The company has also been able to leverage sustainability decisions made primarily for other reasons – cost or regulatory compliance, for example – into positive publicity. Improve design decisionsLCA is also useful when making design decisions that affect sustainability. By evaluating various possible materials and processes for manufacturing and delivering a new product at the design stage, companies can use environmental, social and economic criteria to reduce the life cycle impact. This helps to answer eternal dilemmas such as ‘which type of fabric is better to use for jeans?’ Levi Strauss have compared different materials and analysed the environmental impact to see which fabric is better when considering the main environmental issues caused by the washing of the jeans. This has informed the choice of materials for their products. Make better procurement decisionsBy engaging multiple suppliers on joint cost and impact reduction efforts, and by encouraging innovation among suppliers, businesses can make procurement decisions that significantly boost their sustainability efforts. LCA can lead the way here. Levi Strauss asks suppliers to assess the environmental footprints of their products and challenges them to continuously improve. In addition, developing these footprints usually results in lower costs. Although this is a sustainability initiative, procuring products from supply chain partners that are proactively and continuously reducing their water or carbon impacts can translate into lower costs for Levi Strauss as a retailer – who can pass them on to consumers and retain its reputation in the price–quality ratio. LCA can also be applied to a related procurement goal: evaluating which supplier out of a large pool of potential partners might be best positioned to contribute to your sustainability objectives. Likewise, LCA can be used to choose the most appropriate product from a supplier’s portfolio. For example, a packaging supplier might offer a range of options based on the percentage of recycled material Levi Strauss prefer.A recent study by Levi Strauss & Co. (2015) found that 1000 gallons (3800 litres) of water are used over the lifetime of a pair of jeans, with regular care contributing 37 per cent of the roughly 74 pounds of carbon dioxide emitted during the jeans’ use. The company decided to launch a month-long campaign – World Water Day through Earth Day – to promote its campaign Water<Less™ , a process to reduce the water used in ‘garment finishing’ by up to 96 per cent. The move has helped the company save millions of gallons (1 billion litres) of water since 2011.The study concluded that:fibre production, which is predominantly cotton, contributes extensively to water consumption.consumer care and fabric production are the most significant phases for climate change impact and energy. by including the leading cotton-producing countries, they have realised that water consumption from cotton cultivation increases to 68 per cent of the total impact.When they assessed their findings in consumer use, they found that if the jeans are washed every ten times the product is worn, this will reduce energy use, climate change impact and water intake by up to 80 per cent. There were also significant differences in geographic regions noted, as consumers in the UK and France use more hot water to wash their jeans than American or Chinese consumers. Consumers in China tend to use a cold water wash, air dry their jeans and wash them less. (Strauss & Co, 2015)Activity 9 Applying the LCA method to the Levi Strauss case studyAllow about 20 minutesHaving read the case study on Levi Strauss, now answer the questions below.1. How does Levi Strauss’ mission statement explain what the company wants to achieve?2. Which measurement issues outlined in the LCA used by Levi Strauss appear particularly relevant to your specialised area?3. How does the discussion about evaluating and measuring the impact of sustainable innovation relate to your specialised area?4. What additional issues (if any) are you likely to face in evaluating your specialised area?These are a few examples of the LCA used by Levi Strauss. LCA is fast becoming an increasingly effective way for businesses from all industries to prioritise and assess opportunities to create added value across a product’s life cycle. Despite the rigour involved and potential value created, LCA can be a relatively simple and inexpensive process for larger companies that incorporate a sustainability argument into their strategy. An LCA that matches objectives to expected outcomes and involves internal and external stakeholders throughout the process can help to deliver additional value creation, including cost reduction and improved brand identity.The triple bottom lineThe triple bottom line considers the different types of impact which can be produced, to varying extents, by business enterprises. They are:economic or financial impactenvironmental impactsocial impact.The three dimensions identify the diverse but highly interconnected components of sustainability. Businesses are challenged to produce all three types of value if they want to be sustainable economically, environmentally and socially. For example, failure to protect natural resources creates barriers for social inclusion by destroying the conditions for accessing the life needs of people. Failure to pay fair wages in order to accrue profits equally fosters marginalisation and social inequality. The figure below shows the intersections between areas of sustainability. This suggests that economic, environmental and social elements of business activities are not separable aspects when assessing the effects or societal impacts of entrepreneurship and innovation.You have already read the Levi Strauss case study, which addresses the impacts generated by washing jeans, both for specific stakeholders and for the wider community.
Figure 4 The three impact components of sustainability and their interconnections
The figure is a Venn diagram depicting three interrelated components of sustainability, namely environmental impact, social impact and economic impact. Each component is in a circle and their interlinkages can be seen where the circles overlap. The overlaps are socio-economic impact, socio-environmental impact and environmental-economic impact.The triple bottom line became popular following a series of corporate, unethical practices which destroyed social and environmental value in order to maximise profits. The idea of the triple bottom line is that businesses should pursue economic sustainability together with environmental and social sustainability. In particular the term tripple bottom line refers to three interlinked bottom lines that a sustainable enterprise pursues:Environmental bottom line: is measured through the so-called ‘planet account’, which identifies the environmental sustainability of the business.Economic bottom line: is typically measured by profit.Social bottom line: is accounted for by human wellbeing, or to what extent a business cares about people and societal needs.Activity 10 The triple bottom line in entrepreneurial experiencesAllow about 15 minutesThe Levi Strauss case study that you read earlier addresses the impacts generated by washing jeans, both for specific stakeholders and for the wider community. Now apply the triple bottom line framework to the case study. As you re-read the case study, make notes on the following questions:What are the social impacts generated on specific stakeholders?What are the economic impacts generated on specific stakeholders?What are the impacts generated on the community as a whole?The case study identifies several examples of indicators that can be used to answer these questions and you will no doubt have identified many of them. Some examples under each of the three components of triple bottom line include:Economic bottom line: develop and implement sustainable strategies that allows the company to make profit. For example, the case study reveals how the company reduced their water or carbon impacts as a way of reducing costs and thereby retaining its reputation in the price–quality ratio. The positive publicity that comes with this also helps to increase sales and profit.Social bottom line: working with non-governmental organisations (NGOs) and key suppliers to support programs that improve workers’ lives; gone beyond labour compliance standards by publicly disclosing its manufacturing supplier locations.Environmental bottom line: set and achieve above the industry benchmark for waste as well as banning sandblasting. For example, a packaging supplier might offer a range of options based on the percentage of recycled material Levi Strauss prefer.Social performance scorecardThe social performance scorecard is another approach to measuring and evaluating the social impact of a sustainable and innovative enterprise. You will now study the social performance scorecard of Social Bite and adapt it for use in evaluating the social impact of an enterprise within your specialist area. Specifically, you are required to complete two steps. First read the Social Bite case study. You will learn that the social performance scorecard and balance scorecard can mean the same thing in terms of both requiring some form of measurements. The Balanced Scorecard is a performance measurement and the aim here is to add the social dimension to this measurement.Second, complete Activity 11 by applying what you have read in the first step to create your own social performance scorecard.Social Bite
Figure 5 Social Bite
This rectangular picture contains a listing of the characteristics or features of a social business that are important for Social Bite, a social enterprise based in Scotland, United Kingdom.Social Bite have five cafés in Scotland. All their profit goes towards solving social problems. Social Bite offer ‘suspended coffee and food’. Customers of the cafés can pay in advance for any item of food from the menu and a homeless person can come into the shop to claim it. Each shop currently provides food and hot drinks to over 30 homeless people who visit on a daily basis and get a filling sandwich, hot bowl of soup or a cup of coffee as a direct consequence of these donations. Social Bite also provide employment and try to help people to get off the street and back into society.The Balanced Scorecard (Kaplan and Norton, 1996) is a performance measurement tool that uses a strategy map to connect an organisation’s day-to-day processes to its organisational goals. Rather than capture how an organisation currently operates, the Balanced Scorecard is concerned with creating a strategy to drive future direction, building in cause and effect linkages while simultaneously taking into account both financial and intangible resources that can determine success or failure. Kaplan and Norton introduced the Balanced Scorecard (BSC) in the early 1990s as a means to provide a more holistic diagnosis of a business’ performance. They argue that lagging financial indicators are not sufficient enough to tell senior management whether work taking place on the ground accurately corresponds to the business’ corporate strategy. Overemphasis on reducing costs in the short run to boost financial indicators underestimates the value of large investments in research and development to the detriment of the company’s long-term survival strategy.The Balanced Scorecard might add value by making transparent this decision-making framework, capturing both the benefits and consequences to ensure that social enterprise managers make decisions that are strategy-led rather than reactions to short-term conditions in the marketplace. The Balanced Scorecard can be amended for social enterprises. An example of this is the social enterprise (sEL) model. To amend the original Kaplan and Norton Balanced Scorecard to a sEL model, three changes were introduced: an additional layer was added in which social goals are articulated above the financial perspective; the financial perspective was broadened to focus on sustainability; and the customer perspective was widened to capture a larger number of stakeholder groups.In the model shown in Figure 6, social enterprises begin by stating their social goals as desired outcomes, and then move into the perspectives. In the financial sustainability perspective, each ‘bubble’ represents an objective. The Social Enterprises Balance Scorecard model appears more complex, and this reflects the hybrid nature of social enterprises that demand more complex management systems. This is best demonstrated through the stakeholder perspective, which has been widened from customers in the original model to distinguishing between those who pay for a service and those who consume it (donors, grant funders, employees and the wider community).
Figure 6 Social enterprise Balanced Scorecard model