8 Co-innovation in Public-Private Partnerships 8.1 INTRODUCTION ‘The fourth category of organizational forms at the co-innovation level is the eategory of public-private partnerships. This organizational form en ables commercial fi Tions ro co-innovate and work on substantive new practices. The distinctive characteristic of a sustainably innovative public-private partnership is its primary focus on creating a new practice that has ecological, social and Societal quality It searches for new ways to create a new sustainable modus Dperand?—or, t0 be more precise, modus co-operandi—for industry. The public-private partnership isan organizational form that is used to exper ent and demonstrate and thus to show how the new ssstainably innovative practice of the future can look, Firms and nongovernmental and govern ‘ental organizations that join these public-private partnerships become che Feading innovators of industry and are often supported by national policy funding programs and regulation. Organizations that do not join the sus tainable public-private partnerships sil have the opportunity to learn from them, look at them, study them and copy aspects and elements of them. The tco-innowative and sustainable public-private partnership is a multipartnet public-private alliance that aims to develop practice that shows industry how nd in what direction to innovate. The knawledge-incensive development of a new sustainable practice with a nationwide potential requires all participants to build a shared vision on sustainability. Participants also have to work ‘on new cooperative ways to realize the new sustainable concept in practice Sustainably innovative public-private partnerships are needed to transform the ideas that are generated by the key individuals at che covideation level into innovations for industry. Eco- and sustainably innovative public-private partnerships ae the fourth element a te eorinnovation level of che model of ecorinnovation and sustainability management (se Figure 8.1). This chapter presents theory that forms the hasis of the public-private partnership element of the model (Section 8.2). It describes the methods tsed to explore the analytical validity of this element for industry (Section 833), and it continues with an exploration of the analytical value of this ns atid goveramental and nongovernmencal organizapel is and podus y The sper ne the iy, from The yhow pants work form evel del of hods Fis Co-innovation in Public Private Partnerships 85 Figue 8.1 Coinnovation in pbliprivate partnerships element in practice (Section 8.4) and in theory (Section 8.5). Ie concludes with a summary (Section 8.6) 2. THEORETICAL BASIS A public-private partnership is often used when a nation wants to create an industry-wide breakthrough innovation program. To develop progsam, several representatives, mainly heavyweight managers and directors of gov snmental, nongovernmental and commercial organizations, join force ‘These representatives deliberate on the actions to plan and the measur fo take to implement a nationwide innovation program, All actors know "hat they have to invest in the plans and that they have to commit them selves, They all join the initiative because of the possible outcomes of the public-private partnership, which can be promising and worthwhile to in vest in. Often, atthe start, che governmental organizations have a national policy plan that is used as a guide for the development of the new co Innovative practice, Most developed countries havea scheme of regulations and subsidies to provide incentives to commercial actors to cooperate i86 Eco-nnovation and Sustainability M public-private partnerships. In addition to this, the nongovernmental and Commercial organizations bring in their own strategies, which vary from protecting the earth to developing sustainable and profitable businesses. An fco-innovative and sustainable public-private partnership heavily depends fon the knowledge ofthe participating organizations. needs ll participants tobe aware that the goal of their partnership i 0 create a new standard that ean become the industry's next pe Governmental Push The government can be seen as a major force behind the formation of public-private partnerships. It can use policy plans, regulation and cco hhomic incentives to create an atmosphere in which nongovernmental and al organizations are willing to join a public-private partnership op new sustainable practices for industry. ‘Governments can develop national environmental policy plans to define the nation’s sustainability goals for several years. The ational environmen fal policy plans have consequences for the future diection of both public and private organizations and can be drives behind the formation of sus fainable public private partnerships. In the national plans, for example wvernment ean state what the central, provincial and municipal author have to achieve in the field of sustainability Ie can also state what is expected from commercial frm in industry (Kivimaa and Mickwitz, 2006). Many nations environmental policies are hazed on the eports ofthe World Crm mmission on Environment and Development of the United Nations (WCED), These policies define visions and action plans to work on sustainable devel ‘opment, which, according to WCED, means that "humanity has the ability to make development sustainable to ensure that it meets the needs of the present without compromising the ability of fature generatio fown needs” (Brundtland and Khalid, 1987), Regulation can be another key element of a governmental portfolio to stimolate ecorinnovation and sustainability. Regulation ean provide incen tives that direc and stimilate innovative activity in sustainable public-private partnerships. The government also as the legal right to impose restrictions on governmental and commercial organizations. The basic concept is that the government is permitted to establish codes of conduct and levels of per formance and that the authorities and private organizations have to work within the boundaries ofthese rules (Brio and Junquera, 2003; Nameroff, Garant and Albert, 2004). Many countries have general Iaws that can be used to set new or additional envitonmental requirements. Various countries ample already have lavs on ai polation, noise, soil protection and ‘waste management By tightening the quirements of these lave, countries fan quickly and effectively ensure some environmental mits ‘Governments can also use financial incentives and obstacles to trigger industry to innovate in a sustainable dcection. Subsidies and funding can romect theirial and ny fom se An s sepends pants wandad ation of pad eco" pal and oeship 0 define eoamen- fs public ple, 2 expected By Many ii Com IVCED). he deve: ability othe shee tlio to leprivate 5s that sof per 0 work fmeroft, = a7 Covinnovation in Public-Private Partnerships stimulate companies to participate in environmentally friendly public: private partnerships, Peltier and Ashford (1998) argue thataltematives that Ere explored in a public-private demonstration can be attractive because they offer ims exta technical and financial assistance, The authorities can {ange the financial parameters to reorient firms’ practices. An example of a financial incentive isa subsidy for energy-efficient cars, and an example {fa financial obstacle is a governmental decision to inerease dumping costs for unsorted waste, Both changes can lead to changed cost calculations for assinis and Vafeas, Agreements, Governmental, nongovernmental and commercial organizations can wse iweitten and oral agreements t0 secure a certain level of sustainability in theie work, In these agrsements, governments, for example can guarancee {pare of the turnover of a sustainably innovative entrant in the industry OF firms can (inlformally agree to dump waste in sorte fractions when the government reduces the dumping fees (Clark and Paolucci, 2001), 4 nongovernmental organization and a commercial firm can cooperate on Sustainable issues and, for example, agree that the firm will decrease its ological footprint in exchange for an official environmental quality em {Torsement from the nongovernmental organization, Or the government can ‘negotiate covenants and codes of conduct with nongovernmental organiza tions and commercial companies. Although there is often no legal basis for Such ageeements and they cannot be used to force the partes involved to Uphold their side ofthe del, itis plausible thar signatories wl fee a profes onal and moral obligation o behave in a sustainably innovative way. Next-Practice Creation “The public-private partnership can develop, create and demonstrate a “next practice” for industry. The innovative potential ofa public-private partner Ship that consists of governmental organizations, nongovernmental organ tations, universities, research institutes and knovledge-inensive firms can tye immense, The exchange of knowledge among these actors cam facilitate the development of new knowledge and industry’s next practice (Goverse, Hekkert, Groenewegen, Worrell and Smits, 2001). To produce the build ing blocks for industry's next practice, the public-private partnership can be organized as an R&D consortium. In the R&CD consortium, radical in novations in the Feld of sustainability can be invented, developed, tested land improved. Commerce, universities and scientific esearch eenters and hongovernmental and governmental organizations can be the stakeholders bf this consortium, and an important function of the public-private consor- tium for sustainable innovation can be its demonstrative effec, It shows to others what sustainable technologies and co-innovation routines can be88 Feo-innouation and Sustainability Management used in regular project in the country (Refnders and Huareges, 2 Deng and Cui, 2000), Usually the government subsidizes a public-private ‘demonstration project but this does not mean hat it donates excessive fe nancial resourees to the commercial participants of the demonstration. In ‘many eases, the commercial fms are asked to invest an equal amount in the projec in the form of man-hours, the input of advanced knowledge and the participation of their top managers Although public-private demonstrations can have a knowledge-generat ing Function, the knowledge from a demonstration does not flow to other ‘organizations in industry by itself. Research by Harhorne and Hendry (2009) and by Hendry, Harborne and Brown (2010), for example, points ‘ut that new eco-knowledge that is developed in a demonstration tends to low exclusively to its participating ims and thei furuee projects, noe to the industry’ eraditional firms and cheir standard projects. Next-practice devel ‘opment by public-private partnerships seems to be particularly usefl for the development of new knowledge and for demonstrating « possible next practice. The output of the demonstration can be seen as an assembly of Knowledge thats tangible and aessible but that does not flow to industry spontaneously. Outside firms that want to appropriate this knowledge may have to actively study and leaen from the demonstea 83. RESEARCH METHOD Additional empirical and theoretical seuies ate performed to further in crease the analytical value ofthe public-private partnership element of the ‘model of eco-innovation and sustainability management for industry Step 1. Shaping the Research Model This chapter builds om the results from the intial study of Bossink (2018) (see Appendix 1) Te focuses on the public-privace the model (Section 8.2) and conducts empirical research inthe Dutch food industry to investigate how the public-private partnership element of the ‘model holds for another empirical context (Section 8.4). It carries out a lit trature review of eco-innovative and sustainable public-private partnering inorder to explore how this element of the model can be shaped toward a beoader analytical value for industry (Section 8.5 Step 2. Conducting Theoretical and Empirical Studies Literature databases are consulted for research papers on environmental ecological, green, social, societal, biological and sustainably innovative pub ie private partnerships, In addition, ten managers and experts in the Dutch food industry are interviewed and asked to reflct onthe sustainability seesha, private sive fe ion In inthe andthe pera p other Hendey points ends to meothe devel cil for he next bly of industry ie may cher in ofthe n yatta) nent of sh food tof the pat i= atnering veard 3 mental, ye pub be Dutch ty issucs Co-innovation in Public-Private Partnerships 88 they think are important for sustainably innovative public-private partner ships (De Bruijn, 2009) ‘sep 3. Analyzing and Synthesizing the Studies’ Outcomes “The public-private partnership clement in the initial model (Bossink, 201 La) ‘ponfconted with the addtional empirical and theoretical studies, On the frst of the outcomes of this analysis, the characteristics of the public- private partnership element atthe co-innovation level are articulated for Industy (Section 8.5) 84 EXPLORING THE EMPIRICAL FIELD “The exploratory interviews indicate that public—private partnering with the sim to cteate the next practice for sustainability is a complex matter that fequire alot of deliberation, mutual adjustment, investments and| mental and social energy from pareners The interviews aiso indicate that the pub fesprivate partnership can be a powerful organizational form for the trans formation of the ideas that originate at the co-ideaton level into the next sustainably innovative practice for industry. This section isthe author’ in terprctation of De Bruijn (2009), and quotations ae taken from that sours Governmental Push Public private partnering is complex, and its complexity starts with the na tion's environmental policy planning process. The national environmental planning process is dependent upon the political siuation in the country, which can be unstable, In the Netherlands, for example, the nation’s pop Tation chooses the parliament every four years In the Dutch democratic sy tem, never occurs that one single political party has mote chan 50 percent bf the votes. Thus, political parties have to enter into a coalition with one for more other partes to be able to govern the country. Because governing Coalitions regularly fall apart, elections often take place before the four-year period has ended. This shortens the time horizon of 2 governmental sustain ability policy plan to four years or even less Inthe words ofa respondent, ths hinders long-term governmental vision development: “The world is a tomplex place. When you solve one problem, it could be causing another problem somewhere else, That complexity is hard co... [address by] fhe government, since they want to proceed to solutions too fast” (p. 50) The time frame of governmental policy seems to be shorter than the sustain abilsy issue eequires. (On a worldwide level, egulation is Regulation tends to differ from country to countey. This makes it dificult for multinational firms ta actin accordance with one specific and generally ren characterized by disharmony.90 Ecovinnovation and Sustainability Management accepted law or code of conduc. Self-regulation is even more dificult. The Sustainability issue ism tters and can be interpreted in differene ways (or more about sustainabil fe of many subissues, consists of many paca ity issues and parameters ee Appendix 7). Iimpedes the development of aquick and hands-on regulation that simply tells rms how to be sustain able, Respondents put forward that this isa serious problem in industry ‘One of the interviewees, for example, states that consumers stat asking for ore sustainability, but companies da not always know hove to deal with this demand: "Awareness of consumers is inereased by more information about production pr ation [of production processes] re Suits in mote availabe information on products, which gives consumers the possibilty to choose” (p. 51). The respondents opinion i that worldwide Feulaton and codes of conduct can suppor ronnentaly conscious consumer The respondents frequently state that the economic climate is changing in favor of eco-innovation and sustainability. Sustainability is becoming a duality aspect that can be used by firms to create a competitive advantage. A Fespondent, for example, says that “sustainability can be used as a compet tive advantage since consumers seem to focus on it nowadays. Everybody knows that we should take care of oue planet” (p. 42). The same respon race on sustainable quality in the near fucue in ‘which “frontrunners are followed by others, which makes it even a bigw Challenge forthe front running firms to keep abead of competition” (p. 42) Some ofthe interviewees envision an economic paving field thaeprioetzes sustainability with consumers who are even willing {0 pay extra for more sustainable quality. A respondent emphasizes this by saying that “now sus inability isa societal ss, itis easier to make decisions in favor of sustain bility, even when i increases costs” (p. 41), esses... Ceti Agreements The respondents confirm that policy plans, regulation and economic incen tives ean be complemented by agreements berween the partnering orga~ nizations in public-private partnerships. There ar agreement on codes of condct internally as well as with partners. Tools that can be used are corporate responsibility reports (for more about the possible elements of such a report, se Appendix 7), industrial guidelines, prosict certificates (for more about sustainable product certificates, see Ap pendix 4), production agreements and environmental quality systems (for more about environmental quality systems, sce Appendices 2 and 3). The fespondents think that the public-private partnership is a sound organiza tional structure through which to collaborate learn and improve sustain able standards and practices. Nongovernmental organizations often have a lot of knowledge of enviconmental and sustainable affairs and can be asked for portunity to innovate: “The ample possibilities f ip A respondent perceives this as anut. The param sinabil ent of dustry. ing foe al with ses re ers the lawide anging rage. A peti rybody spon bigger p42), orgie ies for Tools atthe ene, ee Ap (for ). The have @ asked “The ton nnovation in Public-Private Pi non-governmental organizations will support fies publicly, and wan ac tion from them in reuen” (p. 49). Ir stimulates the development ofthe na tion's next sustainable practic Next-Practice Creation Respondents see many opportunites for public-private parinerships to de velop the next sustainable practice. An interviewee, for example, responds that “guidelines for supplies, renewed mechanism to deal with suppliers, and new performance measures” (p. 43) can be developed and improved b public-private initiatives, Respondents agree that production can be sen as 4 chain of activites that often transcends the boundaries of organizations and countries, with sustainable “innovation being crucial tothe whole chain, searing at agriculture. All processes need innovation for sustainably, in lading the way we do business with suppliers” (p. 43). Ths broader scope ‘ould be a main pillar of next sustainable practice. Next sastainable prac= tice does not concentrate on just one Firm or business but involves others in doing busines, as tated by one of the interviewees: "One should be aware of what stakeholders sink. We ae trying to map the stakeholders: wo are our stakeholders and what do they think?” (p. 45) Respondents agree that where firms and other types of organizations connect, symbiotic relationships will sprout. One of the interviewees, for example, states chat commercial fms ealay leat lot fon engovernmenal organizations: “Non-governmental onganigatons share their opinion, and strikingly they . . « take the costs for companies into account. They offer practical solutions, They are abl to translate complex guidelines from the European Union tothe company. They come up with very reasonable things” (p. 46). These “very reasonable things” touch upon people's and organizations” need for concrete actions and measures. Os, a one ofthe interviewees put it clearly: "Sustainability i the ‘ame of the journey, not ofthe final destination. Since ths sounds very soft you should make it concrete” (p. 40). Making ic explicit and concrete stil leaves partnering onganizations with difficult issues and problems to solv Other respondents express i ike this: “Sustainability should be a custom ‘made concep since each situation i diferent” (p. 40) and “sustainability i a complex issue tis hard to define shared goals how fae eaching. [oar oF tanizaton] .. - wants tobe; how things should be formulated” (p. 40). They Stees their own and theie partners’ esponsibility to cooperate liberate and mudilechrough as long as needed to find ways to creat the next sustainable practice. Murual trust among the cooperating governmental, aongovernimie- tal and commercial partners is crocial in Finding solutions and creating new sustainable production and consumption patterns. One respondent expresses the importance of this process of continuous tial and error by stating that “it should be a ral commicment.... The agreements should be very clear and ‘thats why this stares with a behavioral codes how do we treat each othe and92 Eeoxinnovation and Sustainability Management ‘what goals do we want to achive? This has tobe as concrete as posible, only then there wil be commitment. Ir should not be jas talking, i mast be more than just knowledge sharing” (p. 54). The interviews indicate that publi private partnering among governmental, nongovernmental and commercial brganizations isa mater of perseverance and vigor 8.5. DEEPENING THE THEORETICAL BASIS The review of the literature supports the prominent postion of public private partnerships in the ereation of next sustainable practice for industry ‘Von Malmborg (2003) substantiates chat organizations that engage in a public-private parmership for sustainable development and thus take the Tead in developing the nation’s next sustainable practice an havea range of qualities, They must be willing and knowledgably competent partners with atience and a feling forthe pitfalls hidden agendas, interests and specific rganizational cultures of the organizations they engage With as partners They also mast be able to translate a rather broad vision of sustainable de velopment into workable programs and action plans. The objectives of the public-private partnership mast be realistic to the partnering organizations Partners have to be competent in che organizational aspect as well as the substance ofthe sustainable public-private partnership. If they do not have these competences, ether managerial competence or sustainable knowledge Should be hited from outside to neutralize this defciney. With respect © the concept ofthe public-private partnership, Von Malmborg (2003) dem onstrates thatthe social aspect is important. People who represent a gov femnmental, nongovernmental or commercial organization need tobe able co build trast and cooperate on the basis of thae rust. They must have sufi cient managerial and interpersonal sil, beable to identify their knowledge deficiencies and act on this, for example by hiring experts from the outside. Krozer, Mass and Kothuis (2003), Harborne and Hendry (2009) and Hendry, Harborne and Brown (2010) contend that there are serious imped iments tothe diffusion of innovative practice from public-private partner ips to other firms in industry. They argue that this failure i eaused by a ack of incentives, Most firms in industry do not participate in a public private partnership. Most of them may not even look atthe next practices that are developed by public-private partnerships and instead go’ on with theie traditional practice. Ie is their comfore zone. In addition, for next prac tice, especially sustainable practices, che financial parameters are precar fous. That is nota comfort zone buta danger zone. Firms, for example, want to know whether savings and earnings during the lifetime of a prodverion plant or production process will compensate for the investments required Most Firms, small and medium-size fms in particular, are preoccupied with short-term actions that are related t lovs-cos strategies and price comp tion in today’s markets, not so much with next sustainable practices for theion in Public-Private Partnerships 93 longer term. The sustainable market of the future can, for many firms, be too far away co invest in. Keoleian and Kar (2003) and Krozer, Mass and Kothuis (2003) argue that dilfusion of next practices from public-private partnerships 1 industry can be supported by edcating and taining indus ‘ay and by informing them about the possiblities and opportunities of next sustainable practices. People ean, for instance, be taught how to apply env ronmental and safety management systems that are based on notms ofthe International Standardization Organization (ISO), such as the ISO 14000 norm series (see Appendices 2, 3, 4, 5 and 6) and the ISO 26000 norm {see Appendix 7). Fiems can he informed of how much customers, in both husiness-ro-business and business-to-onsumer markets, start t0 ask for these systems. Although direct diffusion from public-private partnerships to the majority of ims isnot always taking place, indirect changes in indosery can be induced by public-private partnerships that promote next practices, Tomotrow's regulation, for example, can change in favor of next practice 0s, tomorrow's subsidy programs can be oriented toward firms, nongoy ‘enmental organizations, research centers and knowledge workers who act in the spirit of che next practice. Next practice thus has the potential to change the playing fed on which organizations have to compete. This implies that che frm is not an entity that i isolated from its business en vironment, eis part of it and has to put efforts in serving stakeholder. It therefore has to choose when and how to adopt aspects of demonstrated next practice. Krozes, Mass and Kothuis (2003), Harborne and Hendry (200%) and Hendry, Harborne and Brown (2010) maintain that public Private demonstrations have a considerable effect on industry, nor so moch in terms of direct diffusion as in terms of changing regulation, market demand and national policy. Ahlstrom and Sjastrém (2005) argue that songovernmental organiza tions can be valuable partners in a public-private partnership but that not all nongovernmental organizations are helpful and cooperative by nature ‘They underpin their argument by distinguishing so-called preserving, pro testing, modifying and scrutinizing nongovernmental organizations. Ac cording to Ahistrém and Sjéstrém (2005), preservers have a partnership strategy and try to do cooperative projects, education and joine market ing with governments and the private sector But protesters hang on to an independency strategy and focus on acting against the existing world by ‘means of protest campaigns and protest actions, Modifiers also hang on to "heir independency and choose not ro cooperate with government and busi ness, Modifying nongovernmental organizations want to realize a paradigms shift in corporate practice. They refuse to cooperate because they do not want to given on their paradigm and act by means of demonstrations and Publications to disseminate their new scenarios, Finally serutinizers also ‘fuse to cooperate and want to stay independent, They plan to influence corporate behavior by highlighting what they believe firms are doing wrong, They influence public opinion about this by media attention. Ahlstrom an94 Beorinnor tion and Sustainability Management me of Reference for Ecoinnovative and Sustainable Public Private ablcprivare paterson Characteristics mental Publipevate partnerships are guided by governmental posh sustainable policy plate, ae dependent on the politica Climate and stably of the conrys government, are pied by (international rules, laws and codes of conduc, have dlicuties with norms tha are complex and that fer and obec, are sensitive to customer demand that x ‘hanging in fvor of sustainability, know that susainbii fan become an element chat provide fru competitive Agreements Publcprivate partncshipe are guided by oral and wen ngrcerients between partners af ued by codes of Conduct, are managed, coordinated and safe by be ‘with excellent managerial sil and negotiation skills Nextpracce Publcprivate partnerships develop next practice or industry, have the form af an R&D consrtom that develops nee standards or have the form of demonstration project that ‘hows to industry what the nek practice can Siastcin’s (2005) classification sheds an interesting light on nongovernmen tal organizations’ intentions and ambitions. Most of these nongovernmental ‘organizations probably do not intend to change the world by means of jin ing a public-private partnership, Ie seems thatthe only willing nongovern mental organizations that join public-private partnerships co develop next sustainable practice are the preservers. The others apply differ to change the world The research inthis chaprer indicates thatthe public-private partnership isa powerful organizational form forthe development of an industry’s next sustainable practice. The frame of reference in Table 8.1 shows the char {acteristics of eco-innovative and sustainable public private partnerships ‘The government can use policy plans, financial incentives and regulation to support the public private initiatives. The partnering commercial, go cemmental and nongovernmental organizations ean use a broad spectrum fof management methods, social skills and negotiation skills to manage a public-private partnership and create industry's next eco- and sustainably innovative practice The research in this chapter indicates chat the ch able publi privat tainably innovative ideas, concepts, visions and initiatives into innovative next sustainable practice in industry parnerships can contribute to the transformation of susprivate sided at petal Fioin- ries hip set char ships lation re ge 8 nably fsa Co-innovation in Public-Private Partnerships 95 36 SUMMARY ‘The public-private partnership isthe fourth clement at the co-innovation evel of the model of eco-innovation and sustainability management. The research shows that the sustainably innovative public-private partneeship {Geates and demonstrates industry’s next practice. A cadre of governmental policy plans, egulations and financial incentives enables governmental, non- fovernimental and commercial organizations fo team up in R&D consortia and demonstration projects. In these experimental organizational settings, the organizations join forces to create the next practice for the nation’s in Alstry. The eco- and sustainably innovative public-private partnership is an important organizational form tha structures co-innovative activity “This co-innovation process is located in the sphere of the co-instiutional- ation process, which provides the infrastructural arrangements for innova: tive businesses and practices to grow large. The co-institutionalization level ff the model of eco- and sustainable innovation is the subject of the next three chaprers. The next chapter starts with the frst element at this level, which i marker and society