B205A Block 01 Week 03

ARAB OPEN UNIVERSITY- FACULTY OF BUSINESS STUDIES -B205A- Dr Yara
Abdallah
ARAB OPEN UNIVERSITY- FACULTY OF BUSINESS STUDIES -B205A- Dr Yara Abdallah
B205A
EXPLORING INNOVATION & ENTREPRENEURSHIP
• BLOCK 01 – CORE CONCEPTS
• 1.2 Creating Different Kinds of Value /Week 03

BLOCK 01 – WEEK 03
SECTION 1.2 CREATING DIFFERENT KINDS OF VALUE
• Section 1.2 Learning Objectives:

 Develop a clear view of three distinct types of value: economic, social, & environmental
 Understand how they relate to innovation and entrepreneurship
 Understand the ‘triple bottom line’ and examine the role of entrepreneurs and innovators
in creating economic, social and environmental value.
 Look at 2 cases of social enterprises that are creating the different kinds of value
 Triple Bottom Line

In traditional business accounting, the "bottom line" refers to either the "profit" or "loss", which is
usually recorded at the very bottom line on a statement of revenue and expenses. Over the last 50
years, environmentalists and social justice advocates have struggled to bring a broader definition of
bottom line into public consciousness by introducing full cost accounting.
John Elkington: Former head of the Sustainability strategy consultancy and writer of persuasive
books on environmentalism introduced the concept of Triple Bottom Line in 1994.
• The triple bottom line (noted as TBL or 3BL) is an accounting framework with three parts: social,
environmental (or ecological) and financial.
• Some organizations have adopted the TBL framework to evaluate their performance in a broader
perspective to create greater business value.
The main argument of the triple bottom line is that:

• Businesses do not have only the single objective of creating economic or
financial value, but also the production of environmental and social value
as well (Elkington, 1997).
• The triple bottom line reflects the components of sustainability, which
‘refers to the long-term maintenance of systems according to
environmental, economic and social considerations.’ (Crane and Matten,
2007).
I - Economic value
• The creation of economic value is considered the main objective of business. Creating
economic value means to generate and maximize profits to reward the entrepreneur or the
shareholders for bearing the risks related to the activity.
• In corporations, the responsibility of management is to maximize the performance of the
firm in the long run and to increase the value of the shares.
• Economic value is produced if the firm offers something that competitors do not offer.
• Innovation provides the competitive edge to business so that profits can be maximized.
I - Economic value
• In a natural/social context an understanding of economic value places economic activities in the
natural and social context.
• Businesses operate by using natural and social resources.
• Businesses use energy sources and raw materials, which are taken from the natural environment.
• Businesses rely on values of human dignity and equality, on norms of behavior that are
embedded in societies, on bonds of trust amongst individuals without which transactions and
collaborations would be difficult.
I - Economic value
• Economic activity also relies on the existence of social institutions such as family and
friendship.
• Without social institutions individuals would become unhappy and reduce their ability to work.
• The sustainable production of economic value needs to take into account the impacts on its
sustaining systems, for example the planet and its resources on the one hand, and society on the
other.
• The Economy is a subset of society, and society is a subset of the planet.
I - Economic value
• Business decisions concern not only the business itself, the entrepreneurs and
the shareholders, but also society and the planet.
• The creation of economic value should not reduce social and environmental
value.
• This represents a big challenge for businesses. There is not a unique solution,
and businesses can promote the triple bottom line in different ways.
II - Social value
• Social value creation from a business view point, considers

people and their needs, thus improving social inclusion, equality,
and wellbeing.
• The inclusion of societal concerns into the business discourse
aims at reacting to the effects of business on marginalized groups.
II - Social Value
Examples of social inclusion/awareness:
 people from local communities in developing countries,
 Responding to the increasing needs of weak categories of people, such as those affected
by chronic illnesses or those struggling with life situations (i.e. immigrants, single
parents, former prisoners, long-term unemployed, etc.).
 Address diffused societal challenges, such as the increased isolation of individuals, their
safety, and so on.
II - Creation of Social Value

• Concerns with social value creation followed increasing social inequality
within localities and across the world (United Nations, 2015).
• Therefore improving the quality of life in communities, and a greater level
of societal inclusion remains the central aim of social value creation.
II - Methods and approaches to Social Value Creation

• Businesses address social inclusion issues through employment
generation, and practices of corporate social responsibility (CSR).
• The goals related to societal inclusion are ambitious, and businesses need
to think about comprehensive and novel ways of conducting and governing
economic activities (Crane and Matten, 2007).
II - Methods and approaches to Social Value Creation

• Social value can also be the aim of smaller businesses, generally operating at local or national level.
• Particular forms of business, identified under the umbrella of the ‘social economy’ are created and
developed with an explicit societal objective.
• Their main aim includes addressing the social needs of particular categories of people and, to produce
widespread social value.
For the social economy business organizations, the production of economic and financial value
(surplus) is functional to the main social goal, which is to benefit the community by responding to
their social challenges (Defourny and Nyssens, 2008).
• Social value can be created through the provision of innovative services or technologies.
TECHNOLOGICAL INNOVATION WITH A SOCIAL AIM – I-CANE SOCIAL TECHNOLOGY BV
Today Europe counts approximately 13 million blind and visual impaired people (worldwide there are more than 40 million) who rely on ‘old fashioned’ aids e.g. the white cane and guide dogs.
The traditional solutions do not offer navigation outside the memory constrained zone. This enforces the social and economic isolation of this fast growing population of which the majority is over
50 years of age.
Developing high tech solutions for a group of people with both limited financial means and also working with a user volume considerably lower than the requirements of high volume electronics
manufacturers is not an easy market choice, it needed a particular approach. In 2004 the I-Cane foundation was initiated. Through this foundation funds were raised from charities and the public
sector (province of Limburg NL and the EU ERDF fund) to execute a feasibility study and to deliver the proof of principle demonstration. In 2008 I-Cane succeeded in navigating a blind person on
an unfamiliar route without hitting obstacles. In this demonstration the I-Cane invented tactile men-machine interface also demonstrated its value since the test person was still able to listen to the
environment parallel to receiving instructions via his fingers, a unique men machine interface. It can be also a special mobility support for disabled pedestrians and the user of the aging group.
From 2008 the social enterprise I-Cane Social Technology BV continued the works of the I-Cane foundation. Developing assistive technology for the blind and visual impaired requires true
interaction with end users and patience since you need solutions which must be operational in almost any circumstance. A development time of 5–8 years must be expected for mobility tools for
disabled people but is unattractive for those who seek a quick return on investment. Via support from the Social Economy network in the Netherlands, Belgium and Germany the funds were raised
to meet the matching requirements of EU ERDF (OP Zuid) and national grant arrangements.
Today this combination of public and private funding has resulted in an Euregion based platform of SMEs, with European wide knowledge institutes (such as the University of Delft, RWTH,
Fraunhofer IPT, IMEC, TNO, ESA/Estec) and end cross border user organisations, led by I-Cane Social Technology BV and the I-Cane Foundation. In 2012 the first large scale tests with I-Cane
systems have started start followed by a market introduction targeted in 2013.
The I-Cane case demonstrates the combination of funding, close user interaction and cooperation between social enterprises and knowledge institutes can deliver world-class break-out solutions.
• Technological innovation with a social aim – I-Cane Social Technology BV

Social value can be created through the provision of innovative services or technologies.
The case illustrates the value created for blind and mobility-impaired people by the social
enterprise, I-Cane Social Technology BV.
The I-Cane case demonstrates how the combination of funding, close user interaction and
cooperation between social enterprises and knowledge institutes can deliver world-class
break-out solutions.
WORK-INTEGRATION SOCIAL ENTERPRISES – THE ‘INCONCERTO’ CONSORTIUM

In Europe, social organisations (increasingly denominated by social enterprises) have built and strengthened educational, cultural, social, and healthcare and related services in local rural communities and
urban centres. Many of these organisations offer so-called work-integration services, i.e. their main aim is to employ a high proportion of individuals with difficulties, and shape production activities
accordingly to facilitate this social aim. Work-integration follows the idea that health and wellbeing are integrated concepts, and that it does not involve only healthcare and treatment. Rather, employment
is a complementary and most important way to improve wellbeing, since it is conducive to an active social life, economic autonomy, and dignity. Work-integration social enterprises illustrate how a
business enterprise can deliver a double benefit: the work that needs to be done, such as a machine component, as well as jobs for excluded people.
Innovation in work-integration social enterprises occurs mainly at two levels. One is around the type of service and solutions offered (the business idea), the other is around the production technology used.
As an illustration, consider the following example, which illustrates the innovation introduced by some social enterprises in Italy, which are grouped under a consortium called ‘InConcerto’.
The enterprises’ main aim is to provide rehabilitation through work integration services for disadvantaged groups in the locality. The targeted groups are individuals with psychiatric conditions and ‘new
poverties’, i.e. people with very low household income. Overall, the consortium and its enterprises employ over 1,300 workers, of which 30% belong to disadvantaged groups.
Service innovation is illustrated by the experience of the oldest enterprise in the consortium. This enterprise started to address the needs of psychiatric users, and created ‘day-centres’ for people with
mental illness. At that time, the public health service managed a day centre where users would manufacture goods that were then taken apart to be rebuilt again. The entrepreneur recognised that this
practice caused a deficit of meaning for the patients. He introduced therefore a new idea of day centres, with a special educational purpose based on the development of an ‘ethic of purpose’. Differently
from the existing day centre, the new centre was focused on occupation, learning a profession, responsibility and commitment. Consider also the cultural context: in the Veneto region work is part of a
person’s identity, and not having an occupation, even when affected by a disability, meant losing dignity. The concept behind the social venture was that having a meaningful occupation is a way to
rehabilitate people and increase their wellbeing. A system of incentives was meant to ensure that beneficiaries attached meaning to their work and to the relations with other people in the day centres. The
innovation with respect to the public sector was evident, since standard public health services could not undertake business activities as part of the healthcare treatments offered, and social integration,
being far from the public sector’s competences, mission, and culture.
Technological innovation, complementary, was meant to enable and empower the disadvantaged workers. This implied the collaboration with manufacturers outside the locality for designing and
introducing new production technologies (machineries) which are safe to use and fit best the different abilities of disadvantaged workers.
• Work-integration social enterprises – the ‘InConcerto’ consortium

This case study analyzes how technological innovation, complementary, was meant to
enable and empower the disadvantaged workers. This requires collaboration with
manufacturers outside the locality for designing and introducing new production
technologies (machineries) which are safe to use and fit best the different abilities of
disadvantaged workers.
The case example illustrates social value produced for psychiatric patients and their families
through service and technological innovation.
III - Environmental value
• Businesses create environmental value when, through innovation, they

introduce solutions that improve the conservation of physical resources for
future generations.
• This means that innovative solutions are introduced so that the production
of goods and their disposal does not threaten the health of the system and
its inhabitants by producing damaging pollutants.
III - Environmental Value Creation

• Concerning social value creation, businesses can address the production of environmental
value through corporate social responsibility (CSR), by introducing innovation that reduces
the use of resources and the production of waste and pollutants.
• In parallel, environmental value creation can be the explicit aim of the business organizations:
like those that provide environmental services (re-cycling),
Those who produce green energy, or that promote environmental awareness amongst the
population or amongst business enterprises.
Interplay of the three kinds of values

• Traditional businesses can address the three components of sustainability through
practices of Corporate Social Responsibility CSR.
• This implies increasing transparency, and reporting about their achievements with
respect to economic sustainability, impact on the communities where the
business operates, and on the natural environment.
• As part of their CSR strategies companies formulate statements about their
commitment to balancing economic, social and environmental sustainability.
• The CSR statements of major corporations that produce in sectors that can potentially cause great damage to the
environment, such as BP, ICI, Shell, Volkswagen, etc., represent an example.
• Caution is needed in drawing conclusions simply from statements (as recurrent scandals prove).
• Businesses will be more likely to produce social and environmental value if this is beneficial for economic
performance.
• By improving their knowledge of the environment, companies can introduce innovations which reduce the
consumption of energy and waste, thus reducing costs and improving competitiveness.
• The preservation of the natural environment creates better life conditions for communities, which are therefore less
likely to come into conflict with the business enterprise.

 The triple bottom line has been applied in many areas of business.
 Some firms promote environmental sustainability by producing ‘greener’ products by adopting NE
technologies that have a lower environmental impact (Reading 3.5).
 They seek to produce useful products while also reducing demand on the planet’s finite resources,
minimizing pollution and respecting social ties and individual dignity.
 Producing bamboo fibers for industry that replaces conventional plastics.
 Adopting production processes that are more friendly to nature and engage in fairer trading
practices that benefit the local communities where they operate.

• A type of business, described as ‘social economy organizations' are defined by the explicit pursuit
of social aims.
• These organizations use the economic value (surplus or profit) that they generate to achieve their
main goal, which is to benefit the community by responding to specific social challenges.
• For example, a social enterprise might provide employment and skills development opportunities
to groups of disadvantaged people. This kind of activity can deliver a double benefit: the activity
may generate useful outputs, such as garden furniture, laundry services, or some kind of
environmental improvement, as well as creating opportunities for otherwise excluded people to
earn a living.

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ARAB OPEN UNIVERSITY- FACULTY OF BUSINESS STUDIES -B205A- Dr Yara

• BLOCK 01 – CORE CONCEPTS

• 1.2 Creating Different Kinds of Value /Week 03

• Section 1.2 Learning Objectives:

 Triple Bottom Line

The main argument of the triple bottom line is that:

• Social value creation from a business view point, considers

II - Creation of Social Value

II - Methods and approaches to Social Value Creation

II - Methods and approaches to Social Value Creation

• Technological innovation with a social aim – I-Cane Social Technology BV

WORK-INTEGRATION SOCIAL ENTERPRISES – THE ‘INCONCERTO’ CONSORTIUM

• Work-integration social enterprises – the ‘InConcerto’ consortium

III - Environmental value

• Businesses create environmental value when, through innovation, they

III - Environmental Value Creation

Interplay of the three kinds of values

Interplay of the three kinds of values

Interplay of the three kinds of values

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