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Strategy development in small and medium sized enterprises for sustainabilityand increased value creation

Samuel B. Moore a , * , Susan L. Manring ba Ouroboros Holdings, LLC. 4003 Birkdale Ct. Elon, NC 27244-2020, USAb Martha and Spencer Love School of Business, Elon University, Elon, NC 27244-2020, USA

a r t i c l e i n f o

Article history:Received 18 June 2008Accepted 18 June 2008Available online 9 August 2008

Keywords:SustainabilitySmall and medium sized enterprises (SMEs)Sustainable supply chain managementResilienceIndustrial ecology

a b s t r a c t

Sustainability strategies create many synergistic effects for SMEs working collaboratively, as well assystemic benets for the commons. After setting forth the business case for sustainable SMEs, andconsidering SME sustainability advantages in contrast to MNEs, this paper discusses several differentincentives for SMEs to optimize sustainability: (1) becoming valuable sustainable investment targets forlarger rms; (2) creating highly competitive networks of sustainable SMEs in market spaces where largeenterprises are less successful; (3) becoming highly efcient suppliers in global supply chains throughsustainable practices.While several successful models of the sustainable SME are evolving, it may be that networks of SMEswill become essential for addressing the systemic problems that underlie industrial ecology, enterpriseresilience, and global supply chain sustainability. SMEs represent the majority of all enterprises, andrapidly evolving communication technologies allow for various routes of network formation.

2008 Elsevier Ltd. All rights reserved.

1. Introduction

Since the 1990s, environmental and social factors have becomeincreasingly important strategic considerations for enterprises of any size. Emerging 21st century market conditions are now creat-ing truly new lenses through which the world must be viewed [1].By ignoring the hidden connection between business and theenvironment, business is missing many new sustainable de-velopment (SD) opportunities that may prevent the threat of aninevitable collapse of society [2]. As more companies recognize ourCommon Journey [3] , which underscores the necessityof creatingsustainable development, rms worldwide are intentionally de-veloping strategic plans to make their companies competitivesustainably. Hart and Milstein have insisted that creating a sus-tainable enterprise should be viewed as just another factor in themodern business environment and should be addressed as suchwithin the planning process by 21st century business strategists[4] . However, even this view may no longer be adequate.

Modern business plans should include both the limits andopportunities presented by changes in global social and environ-mental circumstances, as limitations of future growth may occur if the global and environmental perspectives for sustainable societies

are ignored. Paradoxically, the global economy grows more rapidlyas companies become more resource efcient. Ecological footprintanalysis indicates that with this rebound effect [5], humanitysecological demands already exceed what nature can supply [6] . Thisecological overshoot means that we are depleting the stock of natural environmental capital rather than living off the interest[6] . In spite of limits to growth, just as is true for all living organ-isms, business enterprises need to grow at least enough to keeppace with the economy, but dening growth and the ways andmeans of growth need to change [7]. Sustainable enterpriseresilience is the capacity for an enterprise to survive, adapt, andgrow in the face of turbulent change, and at the same time, toincrease shareholder value without increasing material through-put [5]. Sustainable enterprise resilience within the framework of industrial ecology creates multiple business opportunities throughgreen technologies, reduction of raw material and energy use, anddiscovering innovative pathways for recovery and reuse of wastestreams in place of virgin resources [5] . This redenes growth ina more sustainable context, a context that is not foreign to SMEs,whohave been operating forcenturies withinthe context of limitedlocal markets, and adapting to those conditions successfully [8] .

The strategy of a sustainable enterprise has been dened as theprocess of aligning an enterprise with the business environment tomaintain a dynamic balance [9] . By adding a sustainability lenswithin the frameworkof SME strategic planning, SME developmentseeks to balance resilience and growth so as to align the creation of abundance: economically, environmentally, and socially, and to

* Corresponding author. Tel.: 1 336 269 0959.E-mail addresses: [email protected] (S.B. Moore), manring@elon.

edu (S.L. Manring).

Contents lists available at ScienceDirect

Journal of Cleaner Production

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Journal of Cleaner Production 17 (2009) 276282
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conserve that value for future generations [10] . Integrating sus-tainability into their competitive strategy, and thereby obtaininggreater protability for SMEs through adoption of intentionalsustainable strategies, can help them to optimize their rate of sustainable change.

It is becoming apparent that voluntary, incremental environ-mental improvements by individual companies will be in-

adequate to signicantly offset the growth of the globaleconomy, and that the rapid growth of China, India, and otherAsian economies will likely exacerbate this problem [5] .

Sustainability strategies create many synergistic effects for SMEsworking collaboratively, as well as systemic benets for the com-mons. After setting forth the business case for sustainable SMEs,and considering SMEs sustainability advantages in contrast toMNEs, this paper discusses several different scenarios for SMEs tooptimize and use sustainability to create competitive advantagesrather than simply focusing on reducing unsustainability [5] :

become valuable sustainable investment targets for largerrms;

create networked SMEs in sustainable market spaces whereMNEs are less successful;

become sustainable suppliers in global supply chains.

Through this exploration, there is a critical underlying question,which will require fuller investigations; which of these scenarios,or combinations of scenarios, can provide the best alignment forSMEs with the principles of industrial ecology, enterprise resil-ience, and global sustainability?

2. Why do SMEs need to articulate and use SD business plansfor integrating factors of globalization within social andecological limits to growth?

Ignoring the possibilities offered by sustainability can producean articially narrow vision, with even small rms being con-strained as they attempt to operate in a global marketplace, if anexpanding vision of sustainability is not included in planning andbenchmarking performance [11,12] . SMEshave a vital roleto playinmanaging limited global environmental and social resources. Abroad, multidimensional, multi-stakeholder perspective that isformed based on emerging ideas and trends should be the basis of a system approach towards an intentional, proactive situationalanalysis. A thoughtful, situational analysis, as the basis for de-veloping enterprise strategy, must incorporate new global stake-holders and should not be stagnant or reactionary [13] . Suchanalyses can culminate in development of scenarios leading tosound strategic plans, based on foreshortened learning cycles thatbenet from the time and efforts spent in the planning process [14] .

Recognition of the use of sustainability to promote expeditiousplanning dialogues to create competitive advantages are describedby Senge et al. [15] :

People creating together work in different ways. They areanchored in the future rather than in the past, drawn forwardby images of what they truly want to see exist in the world.They learn how to work with a distinctive source of energythat animates the creative process, the creative tension thatexists whenever a genuine vision exists in concert with peopletelling the truth about what exists now. They learn how to letgo of having to have everything worked out in advance and tostep forth with boldness into immense uncertainty . Theorganizations that truly lead in the profound (sustainable)

changes starting now to unfold around the world, who do notget stranded in just being less bad, will be those who

convert sustainability challenges into compelling strategicopportunities.

A number of forces underscore the emerging opportunities[16,17] for SMEs to become proactively involved in sustainablepractices:

accelerating cycles of technological innovation;

rapid globalization of networked communications; extended and interconnected supply chains; rapidly changing markets.

A further important factor tobear in mind is the fact that at least80% of all global enterprises are considered SMEs, having less than250 employees [18] ; SMEs constitute 85 % of USA business [16] ;99% of the European Union business [19] ; over 99% of enterprises inthe UK [20] ; and SMEs account for at least 70% of the worldsproduction [21] . Possible scenarios of the future should be part of any lens for incorporating sustainable development within a plan-ning process [13,2225] . Such lenses have led to the conception of sustainable enterprises [26] : i.e., enterprises that are robust andresilient in face of anticipated and unanticipated economic, envi-

ronmental and social challenges [27] . Scenarios anticipating futuremarket conditions predict that a sustainable enterprise growth willbe enhanced by: (a) adapting to and diminishing the risk of ex-ceeding social and environmental limits, and (b) meeting currentlyunmet market needs for the 2 billion potential consumers that donot currently participate in the global marketplace [2834] .

3. Differences between large and small rms that result insustainability advantages to SMEs

A major facet of corporate planning among leading manufac-turers in every industrial sector is the emphasis on sustainability ininternal business processes, external stakeholders and investorrelations, and customer value propositions [5]. It appears that

global multinational enterprises are taking actions towards be-coming more sustainable and they feel strongly enough about theimportance of their efforts to report on their progress throughvarious avenues [29] . An entire lexicon and specic techniqueshave been developed to dene and measure sustainability [35] .

The following indicators of MNEs strategic plans and actionstowards sustainability reveal that the concept of the sustainableenterprise as a successful business paradigm has become a reality:

The development of the World Business Council for SustainableDevelopment (WBCSD) [26] , the Sustainable Enterprise Acad-emy (SEA) [36] , and other consulting organizations whosepurpose is to train and inform business leaders on sustainableenterprise.

The creation of sustainable stockindexes such as the DowJonesSustainability Index (DJSI), which are designed to measure theeconomic performance of sustainable enterprises, enablingcomparison to indexes which do not measure any aspect of sustainability.

The growing number of paid advertisements and web sitesencouraging and reporting on sustainable efforts as a compet-itive advantage.

The audited sustainability reports of hundreds of leading rmsthat have utilized the Global Reporting Initiative (GRI) as theirguide in preparing their reports.

The benets of sustainable strategic plans for SMEs are differentfrom those offered to MNEs. With their large asset bases, MNEs can

invest and spread the costs of product development over a largeand diversied global market. For large rms, if a strategic plan or

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product introduction is not successful in one region, then perhaps,in some market half way around the globe, it will be. This re-alization of greater returns from R D has generally been perceivedas an advantage for larger rms, as they are incumbent in globalmarkets. The limits and advantages of smaller rms are well de-scribed by A cs [37] , in particular the limitations which are based ona historically dened, geographically limited market scope for non-networked SMEs; however, SMEs are also able to act more nimblyto ll local or specialized market and technology niche markets[15,37,38] through being less encumbered by existing organiza-tional structures that predate sustainability as a factor in enterpriseperformance:

Industries that are capital-intensive, concentrated, and adver-tising intensive, tend to promote the innovation advantage inlargerms. The small rm innovation advantage, however, tendsto occur in industries in the early stages of the life cycle, wheretotal innovation and the use of skilled labor play a large role, andwhere large rms comprise a high share of the market [15] .

An organizations resilience and ability to integrate, build, andrecongure internal and external competences to address rapidlychanging environments are critical success factors in coping withshifting markets and for responding to disruptive innovations andchange [39] . Rothaermel andHess [40] suggest that the antecedentsto build these organizational capabilities can be found at the in-dividual, organizational, and network level. At the organizationallevel, two major hurdles to effectively manage disruptive in-novationsand changeare higherin larger rms andlower in smallerrms.

3.1. Streamlined organizational processes and business models

One hurdle for larger organizations to surmount is that whilethey usually have adequate human capital assets and other re-sources, they are often caught facing the challenges of disruptivechange with inappropriate and ineffective organizational processes

and business models [41] . An organizations capacity to meet thechallenges of disruptive change is affected by its resources, pro-cesses, and values. Initially, organizational resources determine therms capabilities. As the rm matures, organizational processesbecome well-dened, and once the rms business model becomesclearly dened, organizational values are articulated. These factors resources, processes, and values are the building blocks of theorganizations culture. Christensen and Overdorf [41] argue thatchanging a companys processes, business models, values, andultimately its culture is difcult, if not impossible, for large,established companies; and yet, this is precisely what must happenin order for a rm to deal with disruptive innovations and majorchanges. Smaller organizations can leverage their capacities forentrepreneurial innovations and organizational change, thereby,

learning to achieve advantages over larger organizations [42] .

3.2. SMEs exposure to competitive forces

A second hurdle is that while larger organizations may do wellinitially with technological developments, their capability toameliorate competitive constraints insulates them so that they arelikely to become weaker competitors over time, compared withsmaller organizations that cannot escape the rigors of technologysurvival contests [43] . When disruptive innovation and change aredriven by competition contests, larger organizations tend to havesignicant survival and competitive advantages [43,44] . However,when a larger organization succeeds in neutralizing the constraintsof competition, the organizations perceived invulnerability serves

as insulation from critical sources of continuous organizationaldevelopment. Hence, strategies that isolate organizations from

competition may actually backre, such that larger organizationsbecome weaker competitors in the long run [43] . These implica-tions suggest that since smaller rms cannot effectively constraincompetitive forces nor shield themselves from these externalforces, the organizational development processes of smaller rmsmay also constitute a built-in engine for addressing the challengesof disruptive innovation and change.

4. SMEs as a laboratory-sandbox for developing sustainablestrategies and technologies which are then integrated intoMNEs via acquisition

SMEs have traditionally been entrepreneurial businesses thatgrow through internal nancing. The leap to external nancing oracquisition becomes necessary when growth outpaces the ability of the SME to nance that growth, or if an SMEs technology or marketsegment becomes of special interest to investors [8]. Small rmscan fulll the desire to grow larger by raising capital in publicmarkets, or they can become attractive acquisition targets for largerrms [37] . Large rms seeking investments or acquisitions in smallto medium sized enterprises typically use traditional strategies toimprove protability by:

acquiring SME technology and market share [45] ; achieving roll-up efciencies through elimination of re-dundant expenses [46] ;

de-fragmenting markets through consolidation of SME com-petitors [47] .

The benets that SMEs bring to larger rms may be otherwiseunreachable by larger organizations. However, there are hurdles inseeking to integrate smaller rms into larger organizations.Roughly 5080% of mergers and acquisitions, depending on whoseresearch is cited, fail to deliver anticipated benets [48] . Regardlessof whether the focus of an acquisition is on the issue of strategic t,or organizational t, or the acquisition process itself, failure rates

remain consistently high [49] . Two meta-analyses of empiricalstudies called for a greater recognition of the process and organi-zational dimensions of acquisitions that are increasingly recog-nizedin thebehavioral literature [50,51] ; forexample, inappropriatedecision-making, negotiation and integration processes can lead toinferioracquisition outcomes [5254] . Additional industrial ecologycriteria [5] for gauging the success of an SME acquisition should bewhether the acquired SME helps an MNE reduce its degrees of unsustainability, or increases MNE capabilities to fundamentallystrengthen the systemic underpinnings of sustainability [55] .

Despite the risks forlarger rms, being acquiredis an interestingoption for SMEs, nancially and organizationally, since acquisitioncan free the founding entrepreneurs and their capital, to continueto develop new rms and to pursue other synergistic alternatives.

5. Network advantages for SMEs utilizing the effects of creative destruction and information technology

One of the apparent reasons for the increasing number of smaller rms globally is the acceleration of creative destructioneffects caused by rapid technology transitions within globalmarkets [41,56] . This factor has persisted despite the breadth of advantages inherent to larger rms [31,57] . Moreover, globalizationof communication technology is facilitating the formation of SMEnetworks. These inter-organizational networks, which are strategicpartnerships or alliancesamong SME stakeholders, introduce a neworganizational form into A cs assumptions [37] , as networked SMEscan behave in the marketplace as a single larger rm, thereby

achieving market penetration through synchronized competencybuilding [5860] .

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Smaller rms may also be more nimble and creative inleveraging the force multiplier advantages of stakeholder net-working [61] . The continuous updating of organizational learningand knowledge bases through networking is a signicant way forSMEs to achieve both positional and performance advantages in theface of disruptive innovations and change. The involvement of former and new business, government, and NGO collaboratorscreates communities of sustainable-knowledge networks similar tothe open-source participation model that is lumpy with smallgroups and clustered with coalitions [60] , rather than clearly de-ned roles with linear reporting hierarchies [20] . For these manyreasons, SMEs are evolving to play a signicant role within themodern global economy. If judged solely by the percentage of allemployees working in them, it may be said smaller rms are reallythe backbone of the modern market. Therefore, SMEs behaviorsand characteristics are important in the evolution towards resilient,sustainable enterprises. If over 95% of all global enterprises areSMEs, and there is a growing mandate to create sustainable en-terprises, then developing and implementing strategies for pro-moting SME investments in sustainable business practices isparamount in making progress towards sustainability [62] . Thegrowing competitiveness and importance of SMEs in the generaleconomy are linked to the growing inuence of networking theserms to meet the demands of growing populations participating inglobal markets [57,63,64] .

Axelrod indicated that the results from experimental gametheory, where games are developed that mimic market behavior,show that linking individuals through networks develops in-terdependence, and that interdependence makes cooperationmuchmoreefcient than adversityand conict [65] . Comparing therole and inuence of large trans-national enterprises and SMEs inthe world of the 21st century is, in reality, comparing the inuenceof uid and nimble decentralized networks of numerous SMEsseeking mutually efcient transactions, vs. fewer (albeit mega-sized) global multinational rms, seeking monopoly. It is verysimilar to comparing mainframe computers to networked PCs [66] .

6. The end game of the comparison of large and small rms isthe triple bottomline

Kerr concludes that SMEs should develop strategies that in-corporate sustainable development, and that the resulting skillswould guide them to act in a sustainable way [62] . Acting andleading in sustainable ways that acknowledge the global commonsare premised on multiple ethical, social, and environmental im-peratives. However, signicant research ndings which cannot beignored indicate that a primary survival driver for SMEs (or for anysize rm) to invest in sustainability must increase opportunity forprots and/or to avoid threats to protable growth [1,11,33,67] ; i.e.,rms will not value a global commons unless a connection to

protability is made.Will larger rms or networked SMEs produce the most rapidreturns on investment in a global market scenario where sustain-able development must occur? Will the highest returns from in-vestments in sustainability be achieved within a rapid transition tonetworks of sustainability driven SMEs, or through an evolution of MNEs transitioning towards sustainable behavior? Inevitably,whichever avenue produces the most rapid returns on investment,this will depend on situational market environments and organi-zational capabilities, will yield improved competitive advantage,and will become the preferred structure for a particular situation.

In situations that require long term, very large nancial in-vestments in infrastructure and R&D, MNEs with large marketcapitalizations may remain the most efcient organizational form.

Their diversied sources of income and ability to efciently pene-trate global markets should maximize their returns. However, as

SMEs become more rmly networked and investors become com-fortable with networked structures, combining assets of networkscould provide equal sources of market capital and access. There isalso the additional evidence that the market capital of MNEs willmost likely be utilized for investments that are aligned with in-cumbent MNE activities, rather than unaligned opportunities thatare disruptive to existing business activities [57] . Herein is anotheradvantage for SMEs: the ability to connect unaligned opportunitiesby becoming sustainable suppliers in global supply chains.

7. SMEs as sustainable suppliers in global supply chains

Firms of all size are increasingly being confronted by multipleexternal stakeholders to demonstrate a commitment to corporatesocial and environmental responsibility (CSR/CER). One response issupplier management for risks and performance that takesa minimalist approach to incorporate environmental and socialcriteria to complement what are essentially economic-based sup-plier evaluations [16] . The second strategy, supply chain man-ageme nt for sustainable products goes beyond mere compliancewith legislation and regulations; it demands the denition of lifecycle based standards for the environmental and social perfor-mance of products that are implemented by certied companiesupstream and downstream in the supply chain [16,68,69] . For ex-ample, one of the leading-edge efforts to incorporate sustainablesystems thinking into the design and development of new energyand mobility solutions is Well-to-wheels life cycle modeling [5].Vachon and Mao established a link between sustainability in-dicators and supply chain strength (dened as the availability,quality, and interactions among organizations in the supply chain)at the country level [70] . Their ndings indicate that no trade-off exists between sustainability and economic development andwealth creation; i.e., a positive link between supply chain strengthand natural environment is possible [68] .

While SMEs may acknowledge their often signicant environ-mental impacts (in the UK, for instance, SMEs could be responsible

for up to 70% of all industrial pollution) [20] , SMEs may tend tofocus their CSR/CER behaviors on internal stakeholders, rather thanon stakeholders in the supply chain [19] . The high costs and re-source demands make it difcult for SMEs to adopt CSR/CER practices and monitor their transfer along the supply chain.Meeting these demands is all the more difcult for SMEs operatingin developing countries, and it is generallypressurefromcustomersor supply chain partners in developed countries that is the primarydriver for SMEs in developing countries to adopt CSR/CER behaviors[19] . Much of the literature to date considers the role of SMEsprimarily as suppliers of larger companies. When SMEs produceunique sustainability technologies or processes, they can use theirinnovation potential to move their customers in the supply chaintowards more sustainable directions [20] . SMEs need also to be

considered as buyers from upstream suppliers, and by acting asbuyers, SMEs can exert more pressure for sustainable supply chainmanagement, dened as the management of SCs where all thethree dimensions of sustainability, namely the economic, envi-ronmental, and socialones, are taken into account [19] . Ultimately,what determines the success of SMEs in sustainable SCM isa combination of their relative unique product positioning in nichemarkets and the personal CSR/CER values of the owner/entrepre-neur [19] . This is precisely the commitment that is neededto evolvetowards a systems approach to sustainability.

8. SME sustainability and resilience

It seems that rapid growth and disruptive innovations are being

achieved by SMEs from core competencies derived from a focus onentrepreneurial sustainability. Why are small rms innovating in


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these new, exciting areas, while large global rms are not? Thereason for this differential may be due to the nature of sustain-ability itself. Hart and Milstein [4] introduced a strategy frameworkwhich describes how rms can analyze investments through thelens of sustainable enterprise with the goal of increasing prot-ability synergized through increasing sustainability. Their frame-work directs investments that protably resolve tensions createdby the following global conditions:

increasing human population; approaching the limits of the available environmentalcommons;

apparent limitations to growth due to limited availability of energy and raw materials;

globalization of trade and economic development; social issues (war and terrorism) that disrupt global trade.

Hart and Milsteins framework is shown in a 2 2 matrix thatanalyzes returns on investments in sustainability which can pro-duce present and future value within internal operations of therm and externally in the broader market (see Fig. 1). While largerrms seek paths to increased prots through innovations within anexisting sustainability space, the appreciation in value for MNEsis largely achieved through maximizing opportunities found inlower quadrants of Harts strategic matrix, i.e., incremental im-provement in existingoperations through pollution prevention andby nding sustainable efciencies. Larger, incumbent rms rstmust x perceived challenges in present operations, before theybegin experimenting in new markets [31] .

A review of business cases indicates that SMEs canbringskill setsto bear on disruptive opportunities quickly and more competitivelythan existing MNE rms [17,28,33,71] . These cases, ranging fromhealth care and communications to apparel and manufacturing, allhave similar narratives: SMEs, founded and structured using a lensof sustainability, can focus on new innovations without the dis-tractions of having to x existing operations. These SMEs, focused

on sustainable opportunities, do not have an existing history of compliance only investment and infrastructure to overcome.SMEs can invest in leading edge efforts in sustainable enterprise,without risking or dealing with entrenched expectations internallyor externally to the rm. Initially, entrepreneurial rms such as

Seventh Generation (green cleaning products), Plug Power(hydrogen fuel cells), Zip Cars (transportation services), GrameenBank (micro-credit), etc., produced strategies working throughoutall quadrants of the HartMilstein matrix, but most of the value(growth) has occurred in the upper half of the matrix. These are theareas of innovation and repositioning for green technology de-velopment, efcient resource utilization, socially aligned business,and meeting the needs of the base of the economic pyramid [33] .

9. Conclusions

As SMEs succeed in integrating social and environmental sus-tainability performance into nancial projections and strategicbusiness goals, they will expand opportunities for innovation byincreasing their opportunities for rapid learning. This paper hasmade the business case for SMEs investing in sustainability whileexploring various scenarios: being acquired by an MNE; becomingnetworked with other SMEs; playing a major role in creating andmaintaining sustainable supply chain management.

Whether larger rms wishing to venture into new sustainablebusiness segments will nd it less expensive to enter these marketsthrough investment or acquisition of adroit SMEs, or whether theywill build capability internally, is still an unanswered question andmay relate to the perceived importance of sustainability within theexisting management of MNE rms. As new business units at-tempt to compete for resources within larger rms, organizationalhurdles arise, if these new units compete with or are in conictwith incumbent activities. As rates of change are accelerated byglobal environmental and social conditions, new disruptive pathswill be necessary to answer these challenges, even if they are not inalignment with current missions. Disruptive skunk works may beforced to develop outside MNE structures. Such a situation isdocumented in The NIKE World Shoe Case where NIKE was un-successful with an inexpensive, sustainable world shoe that wasdesigned for developing markets, because it was in conict withexisting brands and company missions [72] .

Smaller rms can often develop without such competitive fric-tion and expectations. Therefore, MNEs may nd that by adoptingnew sustainable strategies, through SMEs, they can more quicklyevolve technologies and markets that are disruptive, rather thanghting through frustrating organizational conicts. This strategy

SustainableValue

DriversPollution

ConsumptionWaste

DriversDisruption

Clean TechFootprint

Today

Tomorrow

ExternalInternal

DriversPopulation

PovertyInequity

DriversCivil Society

TransparencyConnectivity

Strategy:Product Stewardship

Integrate stakeholder viewsInto business process

Corporate Payoff :Reputation and Legitimacy

Strategy:Pollution preventionMinimize waste and

Emissions from operations

Corporate payoff:Cost and Risk Reduction

Strategy:Sustainability Vision

Create a shared roadmapfor meeting unmet needs

Corporate Payoff:Growth Trajectory

Strategy:Clean Technology

Develop the sustainablecompetencies of the future

Corporate Payoff:Innovation and

repositioning

Fig. 1. The HartMilstein matrix for assessing the value of sustainability within an organizations strategic plan, from Hart and Milstein [4] .


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may move MNEs towards a new paradigm that addresses andstrengthens an open-system approach to global sustainability [5] .

Networked SMEs provide much nancial and organizationalefciency that enable development of technologies and marketsessential to achieve sustainable development. Many of thesedevelopments are new and disruptive. While larger rms haveorganizational barriers that may slow innovation in more revolu-tionary technology and market spaces, SMEs are not as large andtherefore, do not have as many organizational inertia effects. Ex-actly how important individual SMEs will be to a sustainabilitydriven local or global marketplace and how disruptive their accel-erating rate of entry and exit into and out of markets could be ontheir economies, may depend upon their speed and efciency of networking so they can act in congress [59] . Networking shouldmitigate the disruptive inuences generated by individual SMEsand should help to produce progress towards sustainable de-velopment. This can only occur if cooperation on the challengesfacing society and ecology clearly favor the competitiveness of thenetworked companies and if stable business communities areformed [65,73] . The connection to Corrals insights should be clear[67] : to be sustainable, SMEs must network in order to obtain thesize and efciencies needed to compete. Through the success of such networks, the individual SMEs must believe that the success of the whole is paramount to individual SME successes.

Developing networked SME strategies for sustainable supplychain management also seems to offer opportunities for bettereconomic performance in market spaces that are foreign to MNEs.As creative destruction effects accelerate within an increasingglobal marketplace, the gravitational effects from existing in-cumbent operations may not allow large rms to take full advan-tage of clean technologies, resource efciencies, including rawmaterials and new energy sources, and the needs of emergingpopulations of consumers. SMEs have demonstrated the ability tothrive in these new spaces. Perhaps, new networked organizationalstructures, including sustainable supply chains involving SMEs andMNEs, will emerge, with MNEs supplying much needed in-

frastructure and capital, and SMEs providing the sustainabilitydriven innovation engine that MNEs desire. While more than onesuccessful model of the sustainable enterprise is evolving, collab-oration, with the force multiplier of networks will remain essen-tial for addressing the systemic problems that underlie industrialecology, enterprise resilience, and global sustainability. Real andlasting systemic changes can only be achieved through coordinatedglobal efforts, and this will necessitate collaborative participationfrom public, private, and non-governmental organizations.

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