Additional Challenges

provides information on these additional challenges of sustainable entrepreneurs which are tied to the fact that they are following an environmental mission.

and take different decisions. Traditional entrepreneurs do not need to switch between these different roles as in the classical sense they simply act as rational managers in their day-to-day business activities. The next part will showcase examples from my empirical data about which tensions arise when businesses need to balance conflicting goals.

Balancing Different Goals

As has already been elaborated in section 5.1., the case organisations both argued for the balancing of environmental, social and economic aspects within a sustainable organisation. Thus, all the three components need to be addressed adequately. My empirical data as well as the literature suggest that this is a major challenge of sustainable entrepreneurs.

Hockerts & Wüstenhagen (2010) also argue that sustainable entrepreneurs are often not capable of focusing on various goals at the same time as they remain to focus on their idealistic, social or environmental goals which is suggested by Bell & Stellingwerf (2012), too. In their study, Bell & Stellingwerf found that during the start-up phase of a sustainable business, the focus lays more on the economic aspects rather than the environmental or social ones.

“Without the outlooks of running a profitable business, the whole aim to solve a sustainability-related market failure abolishes as the entrepreneur’s solution by itself

becomes unsustainable.” (Bell & Stellingwerf, 2012, 35)

This argument does support the notion that sustainable entrepreneurship has to deal with trade-offs between environmental and economic goals. The economic logic seems to be more present during the start-up process of the business, as there is no reason to set up a business without the prospects of financial sustainability. If the latter cannot be reached, it cannot be a successful sustainable business. Thus, I argue that the environmental mission within a sustainable organisation is indeed at the core of the business, however, the business needs to equally prioritise the financial goals. Or else, as stated above, it cannot be a productive business and on top of that cannot follow the environmental mission either. This notion could be confirmed by my empirical data as

well (Interview Septimius Krogh, 2017b), however, balancing these differing goals in practice creates a major challenge that sustainable entrepreneurs have to bear.

It does seem to represent one of the most pressing challenges on sustainable entrepreneurs to balance more than one value-system and goal within their organisations (Smith, Besharov, Wessels & Chertok, 2012, Galyan, 2015). Even though Smith et al. (2012) focus their study on social entrepreneurs, I argue that these findings can enrich my argument as it can be reflected in the case of sustainable entrepreneurs as well. This is due to the fact that missions of social and sustainable entrepreneurs are of similar nature (Thompson, Kiefer & York, 2011, see also chapter 3.3.) as they additionally have similar tensions to be faced namely economic values versus environmental or social values.

“However, the social and commercial sides of a social enterprise are not isolated from one another. Rather, they are inherently interrelated and often conflicting. Attending to both the social and financial might benefit the organisational overall, yet these different

pursuits are often associated with competing identities, value systems, and norms (Battilana & Dorado, 2010; Tracey et al., 2011).” (Smith et al., 2012, 464)

In the case of Løs Market and Phenix, too, the environmental, social and economic aspects are closely intertwined and in some cases conflicting as I will be pointing out in this section. Different value systems as well as the before mentioned shift between identities might create a dilemma for the sustainable entrepreneur. The authors argue that it is not only a challenge for these entrepreneurs to keep a balance of the conflicting goals at hand but they actually “risk of losing their dual focus and becoming either purely social mission-oriented or purely commercial.” (Smith et al., 2012, 464).

Within my empirical data, I did not find any of the two organisations to completely lose their focus as pointed out by Smith et al. (2012). However, some tensions between conflicting goals did emerge.

As mentioned before in section 5.1., Løs Market does not want to make any compromises on sustainability by claiming that “sustainability always comes first” (Field Notes Løs Market, 2017). However, they do face certain tensions in their day-to-day

business, as this visionary statement is not always easy to implement in business decisions. For instance, not all of the products sold at Løs Market are organic and sourced locally while they aim to “prioritise local produce” on their website (Din emballagefri købmand, 2017). Beans, for example, are sourced from suppliers on other continents such as Asia:

“Yes, with the beans for example. Most of the beans are from China, so this is a pity. We want to change but we haven’t found any suppliers yet.” (Interview Hamburger, 2017,

Appendix J, 116)

Løs Market is very transparent about their products, as the above statement suggests.

They also provide a publicly accessible list on their website including all the products they offer and their countries of origin (Sortiment - Løs Market, 2017). In fact, many products apart from beans and nuts stem from countries on other continents as well such as Thailand, India and Sri Lanka. The example of the beans sourced from China showcases how tensions between economic and environmental goals might emerge.

Either they only source their products from local suppliers, whose labour conditions they are familiar with and where distribution costs – both environmental as well as economic – would be lower. This would be an environmentally and socially viable option, yet their variety of products offered in the shop would be slimmer. However, on the other hand, if Løs Market wants to offer a variety of basic products, therefore, in the case of the nuts and beans, they accept this trade-off and choose the less sustainable option.

I argue that a major reason why they feel the need to offer beans and nuts, even if they have to be shipped over long distances, is because they want to remain a competitive alternative option of a supermarket. As customers are used to having the option of buying seemingly “basic” products like beans and nuts in a supermarket, they fear of losing a competitive advantage by slimming down their product range. This challenge, however, only arises due to the fact that they position themselves as an “alternative supermarket” through which they put themselves in the position of feeling forced to offer a competitive product range. If, on the other hand, they would position themselves more clearly as a sustainable supermarket or health store that only offers sustainably and locally sourced products, they would not find themselves in a trade-off situation as

the one described above. As already discussed in section 5.1., Løs Market did not decide on a common definition of sustainability, hence their marketing communication also stays somewhat vague. I argue that they could overcome this challenge by establishing a clear position on the market (such as a sustainable health store) as well as a comprehensible communication strategy.

Another example of balancing tensions within Løs Market could be identified from my empirical data as well. During the interviews, I confronted my interviewees from Løs Market with a recent report published by the Danish Environmental Protection Agency (Miljøstyrelsen) and composed by the Danish Technological Institute, the packaging company DS Smith as well as the Royal Danish Academy of Fine Arts Design School (Antvorskov, Allermann, Herrefoss & Berg Villumsen, 2017) about the usage of packaging for food. The conclusion of this report is that proper packaging of food such as cucumbers extends the product life cycle, therefore contributing substantially to the fight against food waste. As food waste contributes to environmental degradation on a much higher level than packaging, it is argued that using proper packaging for food products is a more vital option in regards to the environment (Antvorskov et al., 2017).

When I confronted my interview partners from Løs Market with this study, their reactions have been mixed. They have been well aware of the existence of this study, however, Hamburger even mentioned that he has not been looking into it in much detail (Interview Hamburger, 2017). I interpreted Hamburger’s reaction to be quite defensive and even depreciating of the findings of the study at hand. The literature supports defensive reactions among organisational leaders when confronted with paradoxes and tensions from competing demands (Lewis, 2000 as cited in Smith et al., 2012). A paradox in this context refers to "contradictory, yet integrated elements that exist simultaneously and persist over time" (Smith & Lewis, 2011, 382 as cited in Smith et al., 2012).

Both, Septimius Krogh and Hamburger showed a high level of criticism towards the study for several reasons. Firstly, they argue that the authors of the study have to be considered as they might be following their own interests as well by promoting packaging. Secondly, Løs Market’s aim is not only bound to avoid packaging as a whole, but to use proper packaging that can be reused in order to keep waste to a minimum.

Furthermore, they also want to promote more awareness in consumers about shopping in general, as a lot of food waste occurs in private homes. This is the result of excessive consumption and consumers being forced to buy pre-packaged food that might exceed their needs and therefore results in food waste (Interview Septimius Krogh, 2017a, Interview Hamburger 2017).

Løs Market does not neglect packaging per se, however, they want to promote reusable packaging as well as a more environmental awareness towards consumption when buying food. Even though packaging might extend the product life cycles in some cases, Løs Market neglects to embrace the findings from the study at hand as it works against their beliefs and waste-avoiding approach. This example showcases again how tensions between different spheres arise need to be faced by the sustainable entrepreneur.

Major tensions between environmental and economic goals could not be identified in the case of Phenix. I argue that they have found an opportunity in the existing supply chains to make it less harmful to the environment, which represents a win-win-win situation for Phenix’ clients, the environment, and Phenix itself. Løs Market, on the other hand, is trying to establish a sustainable alternative within an unsustainable system (see section 5.2. for types of sustainable entrepreneurs). Therefore, they find themselves in a “green prison” (Pacheco, Dean & Payne, 2010) as will be discussed in the following.

Unsustainable Systems and Supply Chains

When sustainable entrepreneurs act in unsustainable systems such as an industry or a supply chain, they might experience substantial disadvantage due to their sustainable orientation. Some would even say they are caught in a “green prison”:

“These limitations can often be attributed to a prisoner's dilemma problem: where even though sustainable business models may carry collective benefit (for example, to an entire industry), entrepreneurs face a disadvantage when pursuing costly sustainable actions, as such costs may not be borne by competitors (Carraro and Fragnelli, 2004;

Hardin, 1968; McWhinnie, 2009; Schelling, 1978; ). Under these circumstances, sustainable actions are punished rather than rewarded. We label this phenomenon “the

green prison”; wherein entrepreneurs face a system of incentives that fail to encourage sustainable practices.” (Pacheco, Dean & Payne, 2010, 464-465)

I could identify this notion of being caught in an unsustainable system quite clearly in Løs Market’s case. As they are aiming for a more circular supply chain in which less waste occurs and packaging is reused more (Interview Hamburger, 2017, Interview Septimius Krogh, 2017b), they engage in a sustainable practice which most of the other stakeholders in their supply chain do not. Therefore, they are experiencing a niche position as the majority of the existing supply chain has not transitioned to a circular and sustainable approach. Phenix, on the other hand, is enabling other companies that already benefit from the current supply chain system to make it less wasteful.

One of the main issues I could identify within the case organisations seems to be the existence of unsustainable systems and supply chains in place that hinders companies aiming for sustainability to reach their mission of fighting waste and contributing to sustainable supply chains.

Both, Løs Market and Phenix advocate and work towards a circular economy approach as they fight against the mostly linear approach that can be observed in today’s supply chains.

“There is too much garbage for me, so to make it circular is a challenge.

For example, the boxes, the carton boxes for food and vegetables. I would love to have hard plastic boxes which I could use all the time, wash them, I return them and then they

reuse them. Most of the boxes here are thrown out, so this is not good.” (Interview Hamburger, 2017, Appendix J, 118)

Løs Market wants to be 100% free of packaging, however, their suppliers are often not.

Changing the economy to a circular one is a huge challenge, as the system is not built up this way (Interview Hamburger, 2017). One of Løs Market’s main mission is to disrupt and positively impact the existing supply chain system towards a more sustainable one. Løs Market’s activities are contributing towards that change in an incremental way so far as suppliers of cucumbers, for example, have been asked to adapt to the policy of not packaging and filming the produce with plastic. Smaller suppliers are often happy to make small adaptations for transportation to meet Løs Market’s requirements, yet this is

not the norm (Interview Septimius Krogh, 2017b). Even though the impact of Løs Market and Phenix on existing supply chains might be comparatively small, they have already achieved certain changes within.

The supply chains are often complex, large and therefore very rigid. This organisational inertia hinders the implementation of changes to existing structures and processes that might be unsustainable (Interview Septimius Krogh, 2017b). For instance, larger suppliers many times cannot meet the high standards of Løs Market when it comes to environmental aspects and as a result often cannot meet seemingly small requests.

These are requests such as adapting the predetermined quantity of ordered products or the type of packaging used for transportation. As these processes are highly standardised and have been developed to be economically efficient, it is often not profitable for large suppliers to provide smaller retailers like Løs Market with small quantities, different packaging or even no packaging at all (Interview Septimius Krogh, 2017b).

A huge systemic issue that Phenix encountered in the Danish market is related to the biogas industry. There are around 55 biogas plants in Denmark that digest of manure and organic waste in order to create energy and has emerged to be a well-established technological practice (Raven & Gregersen, 2007). Phenix could not find enough demand for their services due to the large biogas industry sector (Interview Boyer Chammard, 2017a). Local companies and even other countries sell their waste directly to biogas-producing companies in Denmark, as they create energy out of the waste. This business model has been very profitable for the biogas industry so far (Raven & Gregersen, 2007).

Even though it sounds environmentally friendly to create energy out of waste products, therefore transforming them into something else, it is not the ideal solution in Phenix’

understanding. This is because products that could have been reused are directly sent to waste (Interview Boyer Chammard, 2017a) instead of extending their product life cycles. However, it is financially more profitable to send the waste directly to the biogas industry instead of repurposing them. This approach, however, works against Phenix’

philosophy and values, hence impeding their work in the local market.

Market Creation and Awareness

“A newly established company always faces a major challenge: the good business idea needs to be realised in practice. Market creation requires strong belief in the entrepreneur’s own vision and capabilities. The need to create a new market for new

products often proves difficult.” (Linnanen, 2002, 75)

Every business is faced with the challenge of market creation which means that they have to spread their business idea and translate their services into benefits for potential customers. Diffusing environmental awareness specifically, though, has proven to be even slower (Meffert and Kirckgeorg, 1993 in Linnanen, 2002).

In the case of sustainable entrepreneurs, the communication challenge seems to be an even harder one. Even in the year of 2017, when scientific facts about climate change and environmental degradation due to human impact have long reached public awareness, it is still a challenge to communicate environmental issues in a compelling way. These issues have always longed for more proof than usual in public discourse, therefore making it harder for these ideas to be accepted by the public (Sutton & Staw, 1995 in Linnanen, 2002).

Many times, people are unaware of certain environmental issues or what actually causes them. Often the target group does not fully grasp the benefits of buying the sustainable product or service at hand compared to traditional offerings, leading to the sustainable venture needing to educate potential customers (Sumathi, Anuradha & Akash, 2014 as cited in Gast, Gundolf & Cesinger, 2017) hence imposing an additional challenge on them (Rodgers, 2008 as cited in Gast, Gundolf & Cesinger, 2017).

For example, unsustainable and highly wasteful supply chains might not be in the general public awareness, hence impeding Løs Market’s communication task. Due to the fact that many consumers are not aware of how the supply chain is built up and which consequences this system entails, they are not enabled to take informed decisions (Interview Hamburger, 2017).

Furthermore, the system often does not even allow the consumers to take their own decisions as is the case with prepacked products in standardised quantities. Thus, Løs Market sees it as one of their responsibilities as a company to provide consumers firstly with the ability to choose the quantities of products they really need (Interview Septimius

Krogh, 2017a) and secondly to support consumers with relevant information about environmental issues and sustainable actions they can take (Interview Hamburger, 2017). They aim to make the general public think about issues like environmental degradation, waste, packaging and consumption patterns as they aim to change the way we think, live, consume and shop.

“Yes, and that’s how I engage myself in the project as well. […] It’s more like a life change.

Do you go right or left? You just have to think different or choose different instead of just choosing blindly. And we know we do it, because we see today, people choose more and more organic options. So, it’s possible. You just have to know how to push people to take

the right choice.” (Interview Septimius Krogh, 2017a, Appendix I, 112)

It has been pointed out that Løs Market takes on an activist-like role as they aim at informing and educating people about environmental issues and sustainable lifestyle options (Interview Septimius Krogh, 2017a).

There is a clear challenge of customer unawareness and lack of knowledge about the consequences of own purchasing decisions as well as environmental issues in general linked to economic activities and represents a substantial challenge for both Løs Market and Phenix. This notion has been pointed out in the literature, too (Bell & Stellingwerf, 2012), however Dean & McMullen (2007) identify opportunities for entrepreneurs as well:

“Customer imperfect information regarding product or service attributes presents opportunities for entrepreneurial action if entrepreneurs can inform customers

regarding product or service attributes” (Dean & McMullen, 2007, 69)

As already mentioned in chapter 5.2., Løs Market is tackling the market imperfection of information asymmetry (Cohen & Winn, 2007), trying to balance out the information flow on both sides of the supply chain by adding more transparency to the customer side.

The communication challenge of sustainable entrepreneurs is even harder, as it resembles activist-like functions. Activism in this context means the informing of customers and other stakeholders about environmental impacts of certain behaviours and products. Thereby they aim to drive change in behaviour as well as support to their cause and increase market pressure on other unsustainable companies (York &

Venkataraman, 2010). As a consequence, activism always interferes with ethics, morals and values in society, therefore putting additional pressure on the sustainable business.

This represents an issue which conventional businesses usually do not experience. I will elaborate more on this issue in chapter 6.

Habits and Behaviours

“The diffusion of environmental awareness and, even more so, a change in consumer behaviour have proved to be slow (Meffert and Kirchgeorg 1993).” (Linnanen, 2002, 74) In fact, my interview partners have identified this as their most pressing challenge:

changing the habits and usual behaviours of individuals as well as businesses they are dealing with (Interview Boyer Chammard, 2017a, Interview Septimius Krogh, 2017a).

Phenix aims to have an impact on the behaviour and habits of its clients, however, they have a different target group than Løs Market (see chapter 5.2.). Their main customers are businesses in the form of retailers and large supermarket chains, which is why they mainly try to change existing business practices and business’ behaviours towards a more socially just and environmentally sustainable frame.

“It’s mostly about changing habits. You know, a store functions in this way and you have a good idea and potentially you can make money from it as well but the whole process of

having people change how they operate is quite difficult. And also, you have to be careful when you tell people ‘Hey, maybe we can do your job better than you.’ That’s not what we are trying to say, we are trying to say ‘We can help you’. But they’ve always done

it this way, they’ve been in the business for 20 years, and they say ‘You start-ups, a bunch of under-30-year-olds, what do you know about the retail industry? You can’t tell us to do better.’ That’s kind of the biggest thing of just breaking habits.” (Interview Boyer

Chammard, 2017a, Appendix H, 101).

Thus, Phenix needs to delicately handle the communication towards potential customers as they need to avoid implying that the way they have always done it before, is not good enough. Overcoming habits and organisational inertia is a big challenge to tackle, especially when aiming to implement it as an external company (Interview Boyer Chammard, 2017a).

In document HALLENGES OF USTAINABLE NTREPRENEURS C S E (Sider 59-73)