D1.2 Version: 2.0 Date: 2013-12-20 Author: VTT Dissemination status PU Document reference D1.2 Towards sustainability governance in value networks Project acronym: SustainValue Project name: Sustainable value creation in manufacturing networks Call and Contract: FP7-NMP-2010-SMALL-4 Grant Agreement no.: 262931 Project duration: 01.04.2011 – 31.03.2014 (36 months) Co-ordinator VTT VTT Technical Research Centre of Finland (FI) Partners: POLIMI Politecnico di Milano (IT) UiS Center for Industrial asset management, University of Stavanger (NO) FIR Research Institute for Operations Management at RWTH Aachen University (DE) DIN DIN, The German Institute for Standardization (DE) FIDIA FIDIA (IT) Riversimple Riversimple LLP (UK) CLAAS CLAAS Selbstfahrende Erntemaschinen GmbH (DE) ELCON Elcon Solutions Oy (FI) UC University of Cambridge(UK) This project is supported by funding from the Nanosciences, Nanotechnologies, Materials and new Production Technologies Programme under the 7 th Research Framework Programme of the European Union.
51
Embed
D1.2 Towards sustainability governance in value · PDF fileTowards sustainability governance in value networks ... Towards sustainability governance in value networks ... KV Katri
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
D1.2
Version: 2.0
Date: 2013-12-20
Author: VTT
Dissemination status PU
Document reference D1.2
Towards sustainability governance in value networks
Project acronym: SustainValue
Project name: Sustainable value creation in manufacturing networks
The content of the publication herein is the sole responsibility of the publishers and it does not
necessarily represent the views expressed by the European Commission or its services.
FP7-262931 SustainValue D1.2 v2.0
Page 5 of 51
Foreword
The overall goal of the SustainValue project is to develop industrial models, solutions and
performance standards for new sustainable and better performing production and service networks.
This workbook is the update for the deliverable 1.2 in Task 1.2. The goal of the task is to develop a
sustainability governance model for manufacturing networks. In present networked manufacturing
industry, however, the importance of intangible assets is growing continuously due to servitisation.
Therefore, the original title of the deliverable D1.2 has been changed in this workbook and thereby
the term “value networks” is used instead of the term “manufacturing networks”.
The final form of the D1.2 will be workbook-oriented, and this deliverable serves as the draft for the
workbook that will be finalised in the early spring 2014. The deliverable focuses on network-level co-
development methods and tools, while development strategies and transformation processes at
firm-level will be considered in D1.3. The D1.2 update targets to summarize the appropriate tools
and methods from other WPs of the SustainValue project, and emphasizes the network approach
within them. In other words, the updated 1.2 does not present new tools but gathers up the
network governance-related tools and supporting information for their utilisation at value network-
level. The theoretical backgrounds and the development processes of the presented tools and
methods have been described in more detail in the project’s deliverables and other publications (see
the reference list).
This deliverable proceeds as follows: In the introduction the concept of governance and the
SustainValue value network governance model are presented. Part I Analysing deals with analyses of
value network and broader business ecosystem around the network. Through these analyses
network actors are able to identify total sustainability impacts over the product life cycle and
requirements of all involved actors as well as create joint strategic sustainability objectives. Part II
Organising offers tools and methods for understanding and discussing the collaboration models,
network structure, roles and responsibilities both inside the value network and with other
stakeholders within business ecosystem. Part III Developing focuses on sustainable development as a
value network thus considering the value network as an entity, and discusses evaluating the
progress and future development needs. The practical challenges presented in the beginning of the
main parts and the key questions in Table 1 guide the reader to choose the suitable tool in the
particular situation.
FP7-262931 SustainValue D1.2 v2.0
Page 6 of 51
Workbook’s background: SustainValue project
This workbook and the tools presented are based on the work carried out in the ‘Sustainable value
creation in manufacturing networks’ (SustainValue) project. SustainValue is a collaborative EU
project co-ordinated by VTT Technical Research Centre of Finland. The project’s duration is three
years, and the work started in April 2011. The consortium consists of 11 partners, including research
organisations Politecnico di Milano, Cambridge University, the Center for Industrial Asset
Management at the University of Stavanger, and the Research Institute for Operations Management
at RWTH Aachen University; industrial partners FIDIA, Riversimple, CLAAS, and Elcon Solutions Oy;
and the German Institute for Standardisation (DIN).
According to the project’s vision:
“New forms of business models and value networks together enable knowledge-based
transformation of the manufacturing industry and improve all three dimensions of
sustainable value (economic, environmental and social)”.
The project rose to the challenge by aiming to develop industrial models, solutions, and
performance standards for new sustainable and better performing value networks. The research
contributes to extended product utilisation by creating new business models and value-added
services. The research focuses on 1) designing governance models and business architecture for
sustainable manufacturing networks, on 2) delivering a set of tools and methods for sustainable and
value-added business modelling and network analysis and providing a methodology for developing
sustainable solutions, on 3) developing a governing framework for sustainability-performance
standards across integrated value networks and verification processes, and on 4) testing and
validating the tools and methods in real-world use cases.
The research leading to the results presented in this workbook has received funding from the
European Community’s Seventh Framework Program (FP7/2007–2013) under grant agreement
n°262931. The authors wish to acknowledge the Commission for their support.
FP7-262931 SustainValue D1.2 v2.0
Page 7 of 51
Introduction: Setting the scene
1 Creating sustainable value in networked manufacturing industry
1.1 Why did we write this workbook?
Global distribution of work within manufacturing industry and growing importance of service
business alongside with other structural changes in networks have challenged the traditional
business models in Western countries emphasising value co-creation between network actors. Also
the growing complexity and shorter life cycles of products drive companies to collaborate in new
ways. Now the success of a firm depends on its strategic collaboration with other organisations that
have an influence on the creation and delivery of its services or products. Thus, the companies
cannot solve the complex sustainability challenges (Figure 1) alone. The concept of value networks
represents the paradigm shift towards the co-creation of multiple sustainable values between
network actors.
In the integrated and networked production setting much of the opportunity to address
sustainability rests on the enhanced network management. The focal companies of value networks
are now asked to consider also the sustainability performance in their entire supply chain to cope
with new requirements and interests growing from customers and other stakeholders. Advantages
of network coordination are considerable, and alongside with the opportunity to address
sustainability, they include also enhanced learning, more efficient use of resources, increased
capacity to plan for and address complex problems, greater competitiveness, and better services for
clients and customers (Provan & Kenis 2007).
Sustainable development is development that meets the needs of the present without
compromising the ability of future generations to meet their own needs (ISO 2010). Sustainability
combines social, environmental and economic viewpoints.
This workbook considers sustainable value co-creation in manufacturing industry. Sustainable value
networks and sustainable manufacturing are important cornerstones of the sustainable
development.
Sustainable value network is an organisational form which targets to gain future competitive edge
to all participants through interaction and collaboration, and thereby is able to balance the three key
aspects of sustainability (environmental, economic and social aspects).
Sustainable manufacturing can be defined as the ability to smartly use natural resources for
manufacturing by creating products and solutions via a network of suppliers, customers, partners
and collaborators that due to new technologies, regulatory measures and coherent social behaviour
are able to satisfy sustainability - economical, environmental and social objectives. Thus preserving
the environment, while continuing to improve the quality of human life and remaining financially
viable for the long term by returning adequate profits and growth (developed from Garetti & Taisch
2011).
FP7-262931 SustainValue D1.2 v2.0
Page 8 of 51
Figure 1. Key challenges that sustainable manufacturing must respond to.
Sustainability issues are recognised as strategically essential in business: According to Lacy et al.
(2010), 93 % of CEOs see sustainability as important to their company’s future success.
Strengthening brand, reputation and trust is the strongest driver and motivator for CEOs for taking
action on sustainability issues, with revenue growth and cost reduction, CEO’s personal motivation,
and consumer and customer demand following. Sustainable business practices and products are
now opening up new markets and sources of demand, driving new business models and sources of
innovation, changing industry cost structures, and, little by little, permeating to all elements of
operations. In this change, partnerships and collaboration have been acknowledged as a critical
element of companies’ approach to sustainability. (Lacy et al. 2010.)
This workbook presents a sustainable value network governance process and suggests relevant tools
to support businesses that want to be more sustainable and that want their network members to
develop alongside with them.
1.2 What is it all about?
Governance model addresses the rules, processes, metrics and organisational structures needed for
effective planning, decision making, steering and control. Governance can be discussed on
corporate-level and on network-level, from the point of view of internal or external governance.
Corporate governance involves a set of relationships between a company’s management, its board,
its shareholders and other stakeholders (OECD 2004). It provides the structure through which the
objectives of the company are set, and the means of attaining those objectives and monitoring
performance are determined. Originally, corporate governance has been built around the concept of
accountability but later on the key principles of good corporate governance have come to cover also
transparency, responsibility, and fairness. (Shkolnikov & Wilson 2008.)
The main differences between the company and network governance models are related to legal
aspects, decision making processes and control mechanisms. Networks consist of independent
actors, who have their own targets and decision making models, and that typically have limited
formal accountability to network-level goals. Thus, conformity to rules and procedures is not
•by producing effectively and efficiently and creating new services ensuring development and competitiveness through time
Economic challenges
•by promoting minimal use of natural resources (in particular non-renewable energy) and managing them in the best possible way while reducing environmental impact
Environmental challenges
•by promoting social development and improved quality of life through renewed quality of wealth and jobs
Societal challenges
FP7-262931 SustainValue D1.2 v2.0
Page 9 of 51
governed by binding regulations but is more voluntary and requires interaction between the parties
in order to build shared understanding and action agenda. Therefore, for intentional networks with a
distinct identity, governance is needed to ensure that participants engage in collective and mutually
supportive action, that conflict is addressed, and that network resources are acquired and utilised
efficiently and effectively.
Though corporate governance already extends into many areas of creating sustainable business,
broadening of stakeholder involvement in the decision making, and regulatory enforcement
mechanisms are needed (Shkolnikov & Wilson 2008; Bosselmann et al. 2008). Moreover, since
manufacturing activities are presently organised through networked processes within value
networks, new models for network governance are needed in order to ensure sustainable
development and performance also on the network level. These governance models should enable
clear identification of network actors and stakeholders who are influencing and can be influenced by
the sustainability of the product or service during its life cycle. In network governance, governance
structures are what bring actors to work together — the process, rules and norms by which the
network enables individuals to influence to network’s operations and decision making. Governance
involves the use of institutions and structures of authority and collaboration to allocate resources
and to coordinate and control joint actions across the value network as a whole (Provan & Kenis
2007).
As described above, network governance deals with many important questions (Figure 2): How is the
governance structure organised – is governance shared or does it have a leading organisation
(typically focal company) or perhaps a “third party” that works as an administrative organisation?
What are the governance mechanisms – is it governed by contracts or relational norms or how are
these combined? To which levels network governance, collaboration and decision making extends –
strategic, tactic, or operative issues?
Figure 2. Elements of network governance.
FP7-262931 SustainValue D1.2 v2.0
Page 10 of 51
The SustainValue governance model illustrates the sustainability governance within a value network
as a process that guides the activities of all involved actors towards sustainable development and
performance over product life cycle. The SustainValue governance model process integrates i)
requirements and commitment of stakeholders within a business ecosystem as well as ii) business
models and self-interest of value network companies.
The SustainValue governance model that presents the governance model of a value network (Figure
3Error! Reference source not found.) includes three main tasks – analysing, organising and
developing – that are in accordance with company level approaches but highlight the need for
multilevel network governance. The tasks also form the outline of this workbook.
Figure 3. SustainValue governance model.
Analysing (Part I):
In order to guide the activities of all involved actors towards the sustainability objectives, companies
must first define the key players inside the value network and the boundaries between the network
and business ecosystem. This network analysis requires picturing the connections (e.g. business
relationships, informal collaboration, ownerships etc.) between the actors. In order to the network
members to understand the network’s value for each member, their objectives, self-interests and
expectations should be covered. Concurrently, it is important to define the requirements and
expectations of the important stakeholders within the business ecosystem. Based on these initial
analyses companies are able to identify total sustainability impacts over the product life cycle and
requirements of all involved actors.
Organising (Part II):
The analysis of the involved actors and the understanding of their requirements direct the organising
and managing of sustainable development at the network level. Shared targets and collaboration
models are formed both inside the manufacturing network and towards other stakeholders within
the business ecosystem. In this phase an important aspect of the sustainability governance in value
networks is the connection between sustainable development and business models. Thus, aligning
An
alys
ing - Defining and
describing the key players of the value network and business ecosystem
- Identifying impacts over the product life cycle and the requirements of stakeholders within business ecosystem
Org
anis
ing - Forming shared
targets and collaboration models both inside the value network and with the stakeholders within business ecosystem
- Aligning business models and integrating processes according to sustainability objectives
Dev
elo
pin
g - Evaluating progress and setting new targets through shared action agenda
- Renewing actions, operations and business models towards sustainable value network
FP7-262931 SustainValue D1.2 v2.0
Page 11 of 51
business models and integrating processes according to the sustainability objectives should be
carefully considered.
Developing (Part III):
In order to ensure continuous improvement as well as renewal, the progress should be evaluated
through shared action agenda and new targets should be set transparently based on the
achievements. In this phase actors should renew actions, operations and business models together
to become truly a sustainable value network in the manufacturing industry. Whereas the first two
phases of the governance model concentrate on building up and developing the sustainable value
network so that it really fits and works together, this third phase focuses on the network as an entity
and thus also discusses its relationship with external stakeholders and environment and the whole
ecosystem. The future structure and performance of network is co-produced by involved actors and
thereby governing the network level activities is more or less self-sustaining and evolving.
Table 1 sums up the key issues of the value network governance process.
Table 1. Governance model, its phases, key questions and results.
Analysing Organising Developing
Key questions in each phase
With whom to collaborate, co-operate to co-create new ”shared value” from sustainability?
How are we able to control or influence the choices of all parties regarding to sustainability?
How to collaborate with our network members? What is the appropriate co-operation model according to our sustainability targets? How to define and agree on the decision making mechanism within the network?
How to set new targets and evaluate the progress through shared action agenda? How to constantly renew our network settings and collaboration models?
How to identify the impacts over product life cycle and broader to the business ecosystem?
Key results Understanding of the key players, relationship types with them, their roles and the value for each actor.
Understanding of the structure of the network, different roles within it, and of the possibilities to affect each other and sustainability objectives. Alignment of different business models and building base for new, sustainable business opportunities.
Understanding of the network as a collaborative entity, of the integration of formal and informal governance, and of the vision of future development needs.
1.3 How this book supports sustainable value creation in networks of
manufacturing industry?
This workbook has been developed first of all for managers that are involved in companies’
sustainability and corporate responsibility management and for consultants and auditors that work
in the field. The reader could be a representative of the focal company in a network, and thus have a
special view to the business and also the interest to develop the network. This workbook does not
aim to describe the steps for building up a new network “from scratch” but presents important
perspectives and tools for developing an already established network towards a sustainable value
network. The workbook is developed especially to the needs of business-to-business networks in the
FP7-262931 SustainValue D1.2 v2.0
Page 12 of 51
(European) manufacturing industry. Its focus is on strategic and tactic governance, and thus
operational issues (e.g. reporting, measuring) are not covered.
The workbook takes the perspective of a focal company, and focuses on value networks and their
governance thus emphasising value network members and interaction between them but excluding
internal stakeholders (owners, employees etc.) and detailed discussion on external stakeholders in
the broader business ecosystem. Thus the workbook distinguishes those network members that
have a business relationships with each another (suppliers, customers, service providers etc.) from
those other external stakeholders with which the relationship is not based on direct business
relations.
With this focus and definition as the foundation, the following figure (Figure 4) presents the network
governance model on a more detailed level. In each main stage of the network governance process,
the work starts with making decisions on the governance structure, then proceeding to issues
related to governance mechanism, and finally to discussing collaboration of the network:
- In the analysing phase, the aim is to create joint strategic sustainability objectives within the
value network based on analyses and understanding of interests of all involved actors (both
the network and stakeholders).
- In the organising phase, the network actors agree on organising (like network structures,
roles, responsibilities) within the network in order to be able to coordinate the actions.
- In the developing phase, the network actors are continuously working together to gain the
joint objectives, and also evaluating the progress and required changes.
Figure 4. Value network governance: Elements and process.
Figure 4 outlines also the structure of this workbook. Each element is further discussed in the
chapters that present the important issues and steps and tools that help in the strategic governance
of the network. The following table presents and shortly describes the workbook’s tools and check
lists.
FP7-262931 SustainValue D1.2 v2.0
Page 13 of 51
Table 2. Table presenting the workbook’s tools and check lists.
Chapter Tools and check lists Description
Par
t I:
2. Defining key actors Network picturing tool A tool for recognising key players broader in
the business ecosystem and more specially
the value network members participating to
the life cycle of products or services
Value mapping tool A tool for identifying potential stakeholders
and for defining the sustainability priorities
3. Analysing
relationships
Relationship analysis Analysing the relationships (type of the
relationships, sustainability-related objectives)
with value network actors and other
stakeholder groups
Supplier evaluation matrix A tool for searching and evaluating possible
suppliers
4. Defining joint
strategic objectives
Maturity assessment for
network conditions
Elements and a set of questions for assessing
the relationships between actors and the
network effectiveness
Sustainability matrix A tool for evaluating and coordinating
interests and sustainability objectives of
stakeholders, e.g. in supplier selection
Par
t II
:
5. Determining roles,
benefits and
responsibilities
Actor – contribution –
benefit check list
A check list for discussing roles, contribution
and benefits of each stakeholder group
6. Negotiating
network structure
and tasks
Collaboration models,
network management tasks
check list
Models and a check list for making decisions
on the structure of the network and on how
activities are organised
7. Coordinating tactic
and operational
actions
Steps for aligning business
models
Steps that guide the aligning of the business
models of network actors
Sustainable business model
element archetypes
An approach for selecting business model/s
that deliver business model innovation for
sustainability
Par
t II
I:
8. Talking about joint
actions as a value
network
Shared action agenda for the
future development of value
network
Important steps for the development of the
value network as an entity
Strategic roadmapping tool Identification of obstacles, solutions and steps
for future development, and the shared
targets and vision
9. Strengthening trust
through joint actions
Relationship – interaction
matrix
For describing the evolvement of relationships
10. Thinking
sustainability on
network level
Corporate sustainability
continuum
Supports in framing of the present situation
regarding to sustainable development, and in
studying the future paths
FP7-262931 SustainValue D1.2 v2.0
Page 14 of 51
This workbook presents examples on how the selected tools could support sustainability governance
within a value network. It needs to be pointed out, however, that the tools can be adapted to
different purposes and may be utilised in more than just one phase.
Each part of workbook works independently, and thus the tools and methods of the workbook do
not need to be used one after the other. The practical challenges presented in the beginning of the
main parts and the key questions in Table 1 guide the reader to choose the suitable tool in the
particular situation.
Introduction’s background in the SustainValue project:
Palomäki, K., Reunanen, M., Valkokari, K. & Valkokari, P. 2011. Sustainability gaps and stakeholder
requirements. D1.1, SustainValue project.
Valkokari, K., Valkokari, P., Reunanen, M., Palomäki, K. & Amirmostofian, A. 2012. Towards
sustainability governance in manufacturing networks. D1.2, SustainValue project.
Holgado Granados, M. & Macchi, M. 2012. A reference business model architecture for sustainable
manufacturing products, services and processes. D1.3, SustainValue project.
FP7-262931 SustainValue D1.2 v2.0
Page 15 of 51
Part I: Analysing sustainability governance within a value network
Figure 5. The focus of Part I: Analysing.
Part I describes the analysing phase of the sustainability governance process. In this phase, it is
important that the organisation defines the key players and their roles inside the value network but
also in the broader business ecosystem. The phase proceeds from defining the key actors to
analysing the relationships with the identified actors, and to describing, aligning and developing new
strategic sustainability objectives with the actors. For this e.g. network picturing or value mapping
are exercises to start with. Forming shared targets as such takes place in the following phase but
partly these two phases overlap, and the work should already be started at this phase. Based on
these initial, company-centric analyses companies are able to proceed to the next phases of the
governance model, organising and developing within the value network.
Practical challenges:
Recognising the value network actors and the key stakeholders in the business ecosystem
Understanding formal and informal relationships and their strength and value from the viewpoint
of sustainability
Describing and aligning strategic objectives
Communicating within the value network and with stakeholders in order to create shared
understanding and true engagement
Tasks of the phase:
• Defining key actors (both value network and stakeholders)
• Analysing relationships
• Defining joint strategic objectives
2 Defining key actors
In a traditional value network within the manufacturing industry, suppliers, lead producers (typically
focal company) and customers can be defined as the most typical roles. Still, the roles and operation
models are changing towards more collaborative processes and thereby different partnerships as
well as roles of service providers and integrators are emerging within value networks. In addition to
value network members, company’s business ecosystem includes various stakeholder groups that
An
alys
ing - Defining and
describing the key players of the value network and business ecosystem
- Identifying impacts over the product life cycle and requirements of stakeholders within business ecosystem
Org
anis
ing - Forming shared
targets and collaboration models both inside the value network and with the stakeholders within business ecosystem
- Aligning business models and integrating processes according to sustainability objectives
Dev
elo
pin
g - Evaluating progress and setting new targets through shared action agenda
- Renewing actions, operations and business models towards sustainable value network
FP7-262931 SustainValue D1.2 v2.0
Page 16 of 51
influence and are affected by the company’s actions (see Figure 6), and also the interests of these
external stakeholders should be considered.
The aim of this phase is to define the key actors in the organisation’s value network and
stakeholders in its business ecosystem (Figure 6), and their roles in order to recognise with whom to
collaborate to create shared value.
Figure 6. Company’s business ecosystem and value network (Koivisto et al. 2004).
Network picturing tool helps in recognising the key players broader in the industrial sector and
more specially the value network members participating to the life cycle of products or services.
Furthermore, the relationships and also informal linkages between the actors can be described. In
order to recognise other important actors than the present business partners (value network
members), the vertical and horizontal dimensions of networks should be distinguished (Figure 7).
This helps also define the network position of the focal company.
FP7-262931 SustainValue D1.2 v2.0
Page 17 of 51
Figure 7. Network picturing tool (modified from Valkokari et al. 2004).
A network picture is a starting point to represent network actors, links and their resources, like
competences and intellectual property (IP). It is important to figure out company’s negotiation
position related to possible collaborators – suppliers, partners, customers as well as stakeholders.
Network picturing works as a ‘sense-making’ device, and consequently to shape managerial
decisions, actions, and evaluations regarding the networks dimensions and the network position of
the focal company.
Network picturing supports shared sense-making process when it is done together at company or
even network level. In such a workshop the participants are able to create shared understanding
about their relationships with other network members and also to recognise if there are links
missing between them and the key players of their business environment.
Define the unit of analysis (i.e., the business unit, company, or network). The focus is on
the key players (network actors) participating to the life cycle of products or services.
Identify the network actors and place them in the vertical and/or horizontal network
dimensions.
Recognise the role of network actors (such as subcontractor, supplier, partner, service
provider, etc.) and consider your relationship to them, include also informal relationships
between the actors (see also Chapter 3, Analysing relationships).
FP7-262931 SustainValue D1.2 v2.0
Page 18 of 51
Value mapping tool helps in identifying potential stakeholders in the business ecosystem and within
the value network and defining the sustainability priorities that will assist in exploring the new
sustainable value proposition. A clear understanding of the purpose of the organisation and of the
sustainability and target positions for the future helps in determining the sustainability priorities.
Value mapping tool supports in this.
Figure 8. Value mapping tool (Short et al. 2012, Bocken et al. 2013).
The value mapping tool supports exploring, mapping and analysing the relationships and exchanges
between the stakeholders through mapping the current value, value destroyed and missed and
value opportunities. This is carried out to develop opportunities for new sustainable value
propositions from a system perspective without being firm-centric. Here, every value can be
illustrated for every stakeholder to get an easy overview of changes for each stakeholder. In case co-
operation partners for the new service are needed, they can be identified by this value mapping tool
as well.
FP7-262931 SustainValue D1.2 v2.0
Page 19 of 51
Step 1 – Setting the scene
Decide the unit of analysis (product/service, business unit, company or an industry)
Add or modify any missing stakeholders (can be done based on the results of network picturing)
Identify the business purpose of the unit of analysis (yellow star) Step 2 – Map the value (follow the spiral, clockwise)
Current value captured for each stakeholder
Value missed and destroyed for each stakeholder (use different colour post-its to distinguish values)
Step 3 – Generating solutions
Eliminate value destroyed - where is the conflict between stakeholders? How might it be resolved?
Look for ways to utilise value missed
Explore new value opportunities – extending the value proposition, shifting to higher value added
Use of the tool and the design of workshops should be adapted to the size and complexity of the
business. For more complex businesses it may be desirable to focus on specific business units or
product lines to ensure the process is manageable. To maximise the potential of the tool,
representatives or suitable proxies for each major stakeholder group should participate in the
process to solicit broad perspectives on value.
This tool provides a structured approach for entrepreneurs and business managers to gain a more
complete understanding of the value proposition of the company, and to explore opportunities for
transforming the value proposition towards more sustainable solutions.
3 Analysing relationships
After the key actors in the network have been identified, the identified actors, connections with
them and their sustainability-related objectives should be analysed (Relationship analysis,
FP7-262931 SustainValue D1.2 v2.0
Page 20 of 51
Table 3). The first step in this phase is to recognise and distinguish those actors with which the
organisation has a business relationship that can be controlled e.g. with business contracts, and
actors with which influencing takes place for example through shared projects, involvement in
programmes, and external communication. Thus, also the business relationships have various forms,
for instance some of the suppliers can be considered as partners where as others are classified as
sub-contractors – similarly also the relationships towards customers have different forms.
FP7-262931 SustainValue D1.2 v2.0
Page 21 of 51
Table 3. Analysing the relationships with different value network actors and stakeholder groups.
Actors Connections Objectives related to sustainability
Focal company Business relationship with
direct suppliers and
customers
Fulfilling orders, ensuring economic
performance
Defining and monitoring environmental and
social performance criteria
Customers Business relationship Collaboration and strategic partnerships
Life cycle services
Direct suppliers
(=supply chain
members)
Business relationship
(including both
partnerships and arms-
length relationships)
Cooperation and integration for sustainable
performance
Fulfilling environmental and social criteria
Other stakeholder
groups
(government,
customers, NGOs, etc.)
Exert pressure and offer
incentives for focal
company as well as other
supply chain members
Fulfilling additional (normative/ethical)
stakeholder requirements of
environmentally and socially extended
value network performance
Relationship analyses can be done internally within the focal company, though discussion with
network members is very useful as it may help to clarify their interests, objectives and expectations.
It is important to have a broader insight to networked business environment and figure out also the
actors who are not directly involved to company’s value creation process. For instance, exploring
the business environment of customer as well as defining customers of customers might offer new
insights to the sustainability as well as to the offering of the network.
Because of their network position focal companies have more power over their suppliers than over
their customers. Therefore sourcing companies typically have different tools for evaluating their
suppliers and guiding their development work, also including sustainability issues. Supplier
evaluation matrix is a tool for searching and evaluating possible suppliers (to operate as value
network members). When making the decision between the possible suppliers, it is important to
compare their characteristics such as their resources, competences, and commitment related to co-
operation. Table 4 shows an example of a supplier (network member) evaluation matrix. The criteria
according to which a decision is made in the end are case-specific, and should be aligned with the
strategic objectives of the sourcing company.
FP7-262931 SustainValue D1.2 v2.0
Page 22 of 51
Table 4. Supplier evaluation matrix.
In addition to evaluating suppliers, also the identification and categorisation of external stakeholders
is a practice that should be considered in this phase. Stakeholders may be categorised e.g. according
to three main attributes - power, legitimacy and urgency - they hold relative to the relationship with
the focal company and other network members. The salience of a particular stakeholder to a
company is low if only one these three attributes is present, moderate if two attributes are present,
and high if all three attributes are present. Thus the company should, at least, identify those
stakeholders that are most important for it and that hold the combination of all of the three
attributes, the so called definitive stakeholders. (See Mitchell et al. 1997.)
4 Defining joint strategic objectives
After the focal company has identified its network’s key actors, other stakeholders and their roles as
well as analysed its relationship with each stakeholder group, analysing phase proceeds to the
organising phase. In this phase, network actors describe and align their strategic objectives together.
This is an important step for an actor itself and for the sustainable development within the network.
Communicating with stakeholders and within the value network is crucial in order to create true
engagement to the joint strategic objectives. The following figure (Figure 9) describes how the
different level objectives influence and guide each other.
FP7-262931 SustainValue D1.2 v2.0
Page 23 of 51
Figure 9. The interdependency of strategy and objectives on the value network and network actor level.
Maturity assessment for network conditions can be utilised to create shared understanding about
network’s present sustainability level and development needs. It proposes three elements –
objective alignment, capability matching and partnership health – that can be used for assessing the
relationships between actors in a network, and that together characterise network effectiveness.
The maturity assessment model considers also contracts, a formal governance mechanism, as an
instrument through which actors’ commitment towards sustainability can be assessed and practices
can be agreed. Moreover, this model and the related questions bring out many other concrete issues
that network actors need to discuss and decide on.
Objective alignment describes the match between an organisation’s objectives and the objectives of
potential network members, and thus it focuses on how well organizations are able to align their
organisational objectives with their value-adding collaborators to find common ground for progress
in sustainable business development. Capability matching describes the ability to deploy resources,
skills, competences/abilities and experiences of organisations for collaborative purpose. Partnership
health indicates the condition or status (e.g. the level of collaboration) of the mutually beneficial
relationship between two or more members within a network.
Figure 10. Network condition elements.
Objective alignment
Sustainability objectives of contract partners
Criteria for sourcing and service contract decisions
Contract design & objective alignment
Life cycle thinking in contract design
Capability matching
Assessment of contract partners’ capabilities
Technological capability
Resource availability and accessibility
Knowledge base
Collaboration capability
Partnership health
Knowledge, information and data sharing
Network level processes and division of work
Cost and benefit sharing
Decentralized – centralized decision making
Relationship development
FP7-262931 SustainValue D1.2 v2.0
Page 24 of 51
These elements and their sub-elements can be utilised in analysing the current state in a network as
well as in setting targets towards sustainable development at the network level, thus providing also
a roadmap for actions. Relating to each of the elements, the following list of questions supports this
assessment:
Questions regarding objective alignment:
To what extent are sustainability objectives defined and utilised by the company’s network
members?
Are there any measures in place to align sustainability objectives of network members with
the company’s sustainability objectives?
Do sustainability objectives of network members take into consideration a variety of
stakeholders besides shareholders?
What are the criteria – besides economic efficiency – that sourcing and service decisions
are based upon?
Do contracts with network members take into account possibly diverging or conflicting
objectives with the company?
How are contracts designed to allow for objective alignment with network members?
To what extent are life cycle considerations made in contracts design/terms with network
members?
Questions regarding capability matching:
Are measures in place to assess the capabilities of the network members across the
network?
Do the firm and its network evaluate environmental and social impact when deciding to
invest on technologies and/or equipment for the manufacturing process?
How are technologies and equipment used in the value network, managed and evaluated
regarding their environmental and social impacts?
Are there initiatives/processes to configure and coordinate resource availability/
accessibility?
To what extent are the initiatives regarding training and know-how defined, managed and
improved to develop the knowledge base across the value network?
Which are the initiatives/methods for collaboration across the value network and to what
extent are they implemented and improved?
Questions regarding partnership health:
How is the knowledge, information and data sharing organized between the network
members?
To what extent the network level process and the division of work (e.g. roles and
responsibilities) are defined and agreed between the network members?
To what extent cost and benefit sharing is agreed (or transparent) between the network
members?
How is decision making criteria agreed between the network members?
How do the network members agree on relationship and its development needs?
FP7-262931 SustainValue D1.2 v2.0
Page 25 of 51
Sustainability matrix is another tool for evaluating and coordinating interests and sustainability
objectives of stakeholders, and can be used e.g. in supplier selection, customer communication as
well as considering collaboration initiatives within business ecosystem. The interests of various
stakeholders to strategic sustainability key issues are evaluated and presented with a colour scale in
the matrix (key actors – key issues). This is an exercise that which the assessing company can carry
out on its own.
Figure 11. Sustainability matrix (modified from Timlon 2011; Carroll 1991).
Overview of Part I and discussion
After this governance process phase the networking company has recognised they key players in its
networked business environment, relationship types with them, their roles (network members and
stakeholders) and the value for each actor. In other words, the company has a better understanding
with whom and how it can collaborate in order to develop sustainable value.
Using the tools presented in Part I in collaborative development work within a value network is at
the same time communicating with the network actors and stakeholders, sometimes even involving
the building up of totally new connections. Many of the tools can be, or even should be, used in a
workshop kind of setting where the focal company jointly with its stakeholders and/or value
network representatives discusses relevant issues for their development towards sustainability.
In the governance of sustainable value networks, transparency, interaction with stakeholders, and
bidirectionality of feedback loops are some of the important principles to see about. As in network
co-operation generally, good network governance provides continuous interaction, co-operation and
joint development as well as openness and network members’ willingness to work together. In this
first phase of the network governance process, network actors have a unique possibility to launch
FP7-262931 SustainValue D1.2 v2.0
Page 26 of 51
new more open and interactive practices that may, at best, become everyday routines in the
network.
The background of Part I in the SustainValue project:
Palomäki, K., Reunanen, M., Valkokari, K. & Valkokari, P. 2011. Sustainability gaps and stakeholder
requirements. D1.1, SustainValue project.
Valkokari, K., Valkokari, P., Reunanen, M., Palomäki, K. & Amirmostofian, A. 2012. Towards
sustainability governance in manufacturing networks. D1.2, SustainValue project.
Rana, P., Short, S. & Evans, S. 2013. Lessons learned report, documenting the impact from use of the
tools & methods and areas for improvement. D2.5, SustainValue project.
Valkokari, P., Valkokari, K., Reunanen, M., Grefrath, C. & Wagner, D. 2012. Analysis of the existing
methodologies supporting innovation and solution engineering. D3.2, SustainValue project.
Grefrath, C., Wagner, D., Ruder, P.M., Rotaru, R., Frey, D., Brenken, B., Reunanen, M., Valkokari, P.,
Valkokari, K., Macchi, M., Holgado Granados, M., Fumagalli, L., Evans, S., Rana, P. & Short, S. 2013.
Development methodology for sustainable solutions. D3.3, SustainValue project.
Liyanage, J., Beer, J., Valkokari, K., Macchi, M., Rana, P., Short, S. & Evans, S. 2012. Multi-objective