Abstract
How underlying norms influence the introduction of sustainability in existing commercial business models is under-researched. We present an ethnographic study of a professional services firm operating under commercial and professional logics and responding to the introduction of the sustainability logic. We find that different logic characteristics can be core in each business model component, leading to distinct enablers and barriers to change towards sustainability. We show how the alignment of practices between logics of responding to a specific client and employee expectations are enablers for sustainability. Conversely, barriers are created when clients or employees do not require action. We find enabled actions are bound by barriers of not being open to leading clients in sustainability, requiring professionals to integrate sustainability into service delivery, and taking on risk to shareholder returns. This study shows that logics and how they are expressed impact the antecedents of business model change for sustainability.
Keywords
Introduction
To respond to the significant environmental and social challenges we face globally, scholars have called for changes “at the core of the business model” (Bocken et al., 2014, p. 44). Business model changes are considered necessary because businesses interact with the environment and influence how society functions: Businesses shape how people work, the types of goods and services consumed and how this occurs, and relationships along the value chain from resource extraction, through manufacturing, distribution, use, and disposal (Demil et al., 2015). The combination of these aspects is reflected in the business model concept which describes activities within the components of a business, such as customers, product and service offerings, supply chain, operations, and costs and revenues (Osterwalder & Pigneur, 2010; Richardson, 2008). Due to the interconnected nature of the business model, individual organisations can play a role in shifting entire networks to new, sustainable activities and relationships (Johnson & Suskewicz, 2009).
Literature on business models for sustainability (BMfS) has grown in response to the calls for considering sustainability within businesses. Early research suggests the integration of sustainability into existing organisational business models may follow particular patterns through the business model (Battilana & Dorado, 2010; Brehmer et al., 2018; Laasch, 2019; Scarpellini et al., 2017) but may only result in partial integration of sustainability (Stål & Corvellec, 2018). Underlying norms, such as implicit and explicit commercial drivers, have been identified as potential barriers to integration (Laukkanen & Patala, 2014). However, the specific role of these norms in helping or hindering the introduction of sustainability into existing organisations’ business models has not been adequately researched.
Norms are considered in the literature as institutional logics, which capture the shared understanding and values that guide rules, expectations, practices, behaviours, and organisational structures (Thornton & Ocasio, 1999). In this paper, we explore the influence of accepted norms within an organisation using institutional logics as a method theory (Lukka & Vinnari, 2014). Following an existing professional services firm that is considering a transition towards sustainability, we respond to calls from BMfS scholars for research on antecedents of BMfS (Dentchev et al., 2018; Geissdoerfer et al., 2018). We investigate the interplay of the commercial and professional logics with the sustainability logic within the business model. We use business model components to structure our investigation and the model of logic interactions by Besharov and Smith (2014). Specifically, we consider the following research question: How do the interactions of institutional logics in an existing business model act as enablers or barriers to sustainability?
Our study demonstrates the importance of understanding logics as part of BMfS research (Laasch, 2018; Randles & Laasch, 2016). We contribute to BMfS research by describing how different characteristics of logics manifest within an organisation and influence interactions with the sustainability logic. Our study shows that the way in which logics are expressed in different components in the business model matters because the differences influence the potential for change for sustainability across the business model. We demonstrate how interactions of logics can act as an enabler to sustainability actions through compatibility of sustainability practices with the logic that is core to a business model component. Conversely, sustainability practices being incompatible with the core logic acts as a barrier to the integration of sustainability in the business model. These findings also add to the “business case for sustainability” discourse in the literature, showing how the primacy of customers and shareholders can both enable and limit operational changes for sustainability through compatibility or incompatibility of practices between the commercial and sustainability logics. Finally, our study shows how the presence of the professional logic can interact with the “business case” approach to sustainability by acting as an enabler for the introduction of new services and as a barrier to integrating sustainability into all services and choices of customers. Understanding logic interactions such as these is essential to helping existing organisations navigate the radical changes needed to make meaningful contributions to sustainability challenges. Through investigating professional services firms, our study also contributes to the breadth of the BMfS literature, which has predominantly focused on physical product-based sectors.
This paper is laid out as follows. First, we provide an overview of sustainability in the business model and institutional logics. Second and third, we outline our ethnographic methodology and present our findings of the logic characteristics in our study. Fourth, we step through our analysis of the interactions of the commercial and professional logics with the sustainability logic. Finally, we present our conclusions and contributions and suggest areas for future research.
Theoretical Context
Sustainability in the Business Model
The business model concept “provides a simple and logical structure for the strategist to think about how the many activities of the firm work to execute the strategy” (Richardson, 2008, p. 143). One way it does this is by considering business models as sets of components or “building blocks” that make up a business model (Demil & Lecocq, 2010; Massa et al., 2017). Commonly considered components include customers, product and service offerings, supply chain, operations, and costs and revenues (Osterwalder & Pigneur, 2010; Richardson, 2008), with other components including employees and ownership.
Several studies have explored where the integration of sustainability is most likely to occur in the business model. Brehmer et al. (2018) found that for organisations already considered to have BMfS, environmental sustainability is integrated into the product and service offering component. For product-based organisations, these activities are also associated with environmental sustainability in operations, such as using recycled materials and environmentally preferable suppliers in order to provide environment-friendly products. The authors also find that social sustainability in the business model is related to serving a broader set of customers in the customer component. The presence of sustainability in these components of the business model is aligned with the study by Scarpellini et al. (2017), looking at how environmental sustainability moves through a business model. The authors find environmental measures start in the operations component (such as with renewable energy), move to the employee component (through training), and finally appear in the products and supply chain components (in decision-making criteria).
Stål and Corvellec (2018) more specifically focused on circular economy principles in business models and found the presence of these activities but a lack of integration with existing activities. They found that circular economy activities are likely to be kept separate from existing core business model activities, such as through outsourcing. For example, several cases in the study made changes in the product and service offering component; however, this occurred through the addition of new products, with no changes made to existing products. These studies show that the business model components most influenced by sustainability are operations, products and services, supply chain, and employees. The studies highlight that sustainability is not easily integrated into all business model components. Furthermore, sustainability activities in a business model do not necessarily mean business model change.
Drawing on Bocken et al.’s (2014) archetypes of how sustainability could manifest in an organisation, the study by Laukkanen and Patala (2014) sheds light on why sustainability is being integrated into only some components of existing business models. Barriers to BMfS included a lack of normative rules for sustainability and dominant attitudes and values in the market. The study highlights that these prevailing attitudes and values arise from commercial barriers of financial risk and short-termism, as well as a general lack of awareness and understanding of sustainability. Institutional logics describe underlying structures of shared approaches and values that have developed over time and guide “acceptable” actions and decision-making (Thornton & Ocasio, 1999). Randles and Laasch (2016) argue for drawing on institutionalism to draw out normative orientations of business models and how these inform design, practices, and identities and change occurs within organisations. We, therefore, suggest that further investigation of institutional logics in the context of organisations moving towards BMfS is needed.
Institutional Logics
Institutional theory seeks to explain the uniformity of organisational approaches and practices by describing the socially constructed pressures in which organisations operate (Suchman, 1995). Recognising increasing institutional complexity (Greenwood et al., 2011; Seo & Creed, 2002), scholars draw on institutional logics to explore variation in how different actors within the same context respond differently to institutional pressures (Friedland & Alford, 1991). Thornton and Ocasio (1999, p. 804) define institutional logics as “socially constructed, historical patterns of material practices, assumptions, values, beliefs and rules by which individuals produce and reproduce their material subsistence, organise time and space, and provide meaning to their social reality.” In summary, institutional logics hold the shared goals, practices, and understanding that have developed over time. Specific characteristics describe norms and expectations associated with different logics. These characteristics include, for example, the logic objectives, key stakeholders, governance approaches, sources of identity, and basis of strategy (e.g., Laasch, 2018; Thornton, 2004). Institutional scholars initially identified “generic” market, family, community, and religion logics. Over time, scholars have expanded the descriptions of these logics, added other core logics, and identified the creation of new logics through combinations of the generic logics (e.g., Friedland & Alford, 1991; Reay & Hinings, 2005; Thornton, 2004).
In this paper, we focus on three logics: commercial, professional, and sustainability logics, which are summarised in Table 1. We now describe the attributes of a professional services firm as if it were operating solely under each logic separately, illuminating the potential influence of each of these logics on a business model (Goodrick & Reay, 2011).
Characteristics of the Commercial, Professional, and Sustainability Logics and Description of Business Model Components in a Professional Services Firm Under Each Logic.
Source. Adapted from Barac et al. (2019); Laasch (2018); Thornton (2004); and other sources as identified.
This study draws on Laasch’s (2018) set of commercial logic characteristics. The commercial logic is the prevailing logic in commercial organisations. It focuses on financial outcomes, efficiency, and profitability, and customers and shareholders are the key stakeholders. We include the professional logic through our study subject, a professional services firm, into which the sustainability logic is introduced. Table 1 summarises these attributes according to business model components.
Empson et al. (2015, pp. 6–8) outline a set of features of professional services firms. These are, to varying degrees, professionals’ knowledge as a core asset and application of specialist expertise, individual autonomy of professionals, and professional recognition among one another and by external stakeholders. The professional logic underlies norms and expectations in these organisations. A “classic” professional services firm characteristic is to have no outside ownership with professionals creating partnership-type arrangements to be market-facing while retaining their professional autonomy (Goodrick & Reay, 2011; Thornton, 2004). This organisational form leads to a consensus-building management style (Greenwood et al., 1990) as “a system of control in which authority is shared by all members of the working group” (Marcson, 1962, p. 38). The networked form leads to a characteristic of relational networks, which in scholars notes are typified by attributes such as reciprocity and friendship (Powell, 1990; Thornton et al., 2005). Professional logic characteristics also include professionals having “the right to make choices about how best to apply their specialist technical knowledge to the delivery of customised professional services” (Empson et al., 2015, p. 7). In other words, individual professionals expect autonomy in the choice of the clients they work with, the services they provide, and how those services are delivered. Profit in a professional services firm focuses on the individual professionals’ financial outcomes or “personal capitalism” (Thornton, 2004).
Laasch (2018) identifies sustainability as a new logic. An organisation under a sustainability logic aims to maximise social and environmental value (Laasch, 2018). As such, products and services are designed to meet social and environmental needs (Pache & Santos, 2013; Spieth et al., 2019). Similarly, operations are designed to protect the environment, such as through resource efficiency (Laasch, 2018), and support communities and create wider economic value, such as by creating local jobs (Mitzinneck & Besharov, 2018) or supporting partners’ activities for sustainability outcomes (Spieth et al., 2019). Profit is managed as a means to achieving the organisation’s objectives, not an end goal (Stubbs & Cocklin, 2008). As such, organisations under this logic may have a nonprofit form (Pache & Santos, 2013). Community ownership can be used as a way of (re)distributing value to a wider set of stakeholders (Laasch, 2018), with associated democratic organisational control (Litrico & Besharov, 2018).
The differences between these illustrations of a professional services firm under different logics highlight the challenges of integration of the logics, which we discuss in the next section.
Interactions of Logics
Combining logics is challenging, and scholars have identified barriers to successfully navigating and balancing the different content of multiple logics. Besharov and Smith (2014) outline a conceptual model to describe different levels of conflict arising from logic interactions. They identify variables of logics being core (or not) to organisational strategy and having compatible actions (or not) prescribed by the respective logics. These dimensions lead to four types of logic interactions. A “dominant” relationship describes where organisational goals are captured within one logic, and other logics can be leveraged to achieve those objectives through compatible practices. This relationship has no conflict, as the practices between the logics support the goals of the core logic. When multiple logics are core to organisational objectives and have compatible practices, the interaction is “aligned,” leading to minimal conflict where there may be slight variations in practices. Lack of compatible actions and one logic being core to organisational functioning create an “estranged” relationship with moderate conflict. Finally, where multiple logics are core to organisational objectives but do not have compatible practices, the interaction is “contested,” leading to extensive conflict. Ocasio and Radoynovska (2016) suggest that organisations can interpret institutional complexity as incompatible or opportunities for the integration of logics. Interpreting multiple logics as core or focusing on compatible practices could reduce conflict, while concentrating on incompatible practices and prioritising one logic over another may increase conflict.
Empirical studies illustrate these interactions, with a particular focus on impacts on the commercial (or similar) logic. Battilana and Dorado (2010) describe how different banking and development logic approaches can lead to different outcomes. The findings indicate that integration of logics in organisational identity can support wider integration success. Pache and Santos (2013) present a comparative case study of four work integration social enterprises. They identify that a selective combination of commercial and social welfare logics enables organisations to navigate logics perceived to be in conflict. Spieth et al. (2019) explore “social businesses,” which combine commercial and social logics. They find that businesses with these logics have interdependent social and economic benefits with social value integrated and prioritised through choices in products, processes, and partnerships. Some scholars have also explored the process of logic interactions. Laasch (2019) presents an in-depth study of how a “responsibility logic” permeated across a firm. In business model component terms, Laasch (2019) found that the responsibility logic influenced the employee, supplier, and product and service offering components. The commercial logic remained core and conflicted with the responsibility logic in the customer and costs and revenues components. Similarly, in a longitudinal study of a new logic being introduced, Reay and Hinings (2009) found that the new logic can be accepted only superficially by actors.
In this study, we explore how interactions such as these may play out in the transition towards a BMfS.
Methodology
To address the research question, we chose a methodology to allow close observation of logics being expressed and interacting over time. With the researcher embedded in the research context, organisational ethnography is well suited to exploring the “messy” and “improvised” microlevel activities that occur as change is navigated (Micelotta et al., 2017). Ethnography comprises observing and interacting with actors in their context and supplementing participant observation with documentation and informal and formal questioning (Maanen, 1979; Watson, 2011). The study thus responds to BfMS scholars’ calls for in-depth studies within firms to explore organisations’ complex nature and tensions better (Bocken et al., 2018; Laasch & Pinkse, 2020; Pieroni et al., 2019).
The research question required a study site that provided an opportunity to identify and observe the interactions of logics within the business model of an organisation seeking how to understand sustainability. Through the lead author’s professional role as a sustainability consultant, we identified an existing organisation (a professional services firm) beginning to consider its response to clients’ and employees’ increasing focus on sustainability. The lead author had a long-standing working relationship with the professional services firm and, thus, had a good rapport and trusting relationships with firm members, already “fitting in” when the research commenced (Riemer, 1977).
Professional services firms have been the subject of institutional logics and institutional work literature (e.g., Bévort & Poulfelt, 2015; Greenwood & Suddaby, 2006; Lander et al., 2017). However, reflecting the general lack of focus on professional services firms in academic research (Empson et al., 2015), they have not been well studied in the BMfS literature. We chose a professional services firm as a distinct organisational type that is an increasingly important part of the global economy (Empson et al., 2015). Empson et al. (2015, p. 3) argue that professional services firms “are worth studying because of their theoretical significance and the insights they may generate into the contemporary challenges facing organisations within the knowledge economy.” In addition to the extensive contributions of professional services firms on their own, professional services firms play a leading role in guiding and shaping the behaviour of the businesses and governments they work with (Scott, 2008). Furthermore, scholars (e.g., Bévort & Poulfelt, 2015; Ollila et al., 2015) identify theoretical potential from professional services firms’ firmly held institutional logics, ownership forms, strong relationship with clients, and knowledge management and delivery.
Overview of the Research Context
We refer to the organisation as “Orion”, and all individuals’ names have been changed. Orion is a well-established professional services firm of medium size operating predominantly in Australia and New Zealand. Orion provides services related to the built environment to public and private companies across many sectors. At the start of the study, Orion had been operating for several decades and remained in a strong financial position throughout the study period, indicating a stable business model. Orion has an employee-ownership structure, whereby mid- and late-career employees who are established in the firm are invited to become shareholders. Except for several specific roles, all senior management team and board roles are held by employee-owners who are “built environment” professionals in the firm. Kim, an employee-owner, described Orion as a “collection of individuals,” saying, “we’re a group of [many] individuals, all of us with different opinions about things” (Kim, interview). The wider shareholding group of employees not in formal management and governance roles expect some involvement in decisions impacting Orion, leading to a multi-stakeholder approach to governance. Peter, the CEO, explained, “part of our leadership journey is to get the business to put the peg in the sand, not to be the definer of the peg” (Peter, interview).
Before the current focus on sustainability, various attempts were unsuccessful in integrating sustainability into Orion’s core activities. The renewed efforts, however, benefitted from a greater emphasis on sustainability in the external environment. This included, for example, the UN Sustainable Development Goals, the Paris Agreement on Climate Change, increased government focus on sustainability, and increased societal awareness of issues such as plastic waste and climate change. There was also a general sense of growing numbers of clients asking Orion to provide sustainability information. However, there was recognition that sustainability was not part of Orion’s business model, as a senior employee observed, “I hear sustainability talked about—see some people have a strong personal passion, like waste-free July. It comes up because of a passion. But we don’t mirror that in our business, in terms of how we operate” (Sam, meeting minutes).
At the commencement of the study period, Orion allocated resources to understand its sustainability context better and identify how to respond to it. The project was proposed and led by a sustainability professional (the lead author) who spent approximately one day per week on the project, supported by the risk manager. Two senior management team members were nominated as project sponsors and contributed through discussions during periodic updates on progress. Team members from across the organisation interested in sustainability also provided additional support. The first part of the work comprised preparing a “Sustainability Issues Paper” (issues paper) synthesising clients’ and employees’ sustainability expectations and identifying external drivers and context for sustainability. The paper recommended a series of low-cost and uncontentious operational actions and a strategic response integrating long-term objectives into the planned organisational strategy update. The senior management team and board accepted the recommendations, and the resource allocation extended to focus on implementation.
Data Collection
Data collection took place from July 2019, when the aforementioned resources were allocated, to March 2021, when Orion formally included sustainability in the firm’s strategy. In addition to the approximately 1 day per week for undertaking Orion’s sustainability project, the lead author spent 1 to 2 days per week engaging with team members on separate projects. The additional time provided opportunities to observe interactions in different settings. The lead author had unfettered access to individuals across Orion through these multiple avenues, including senior management and board members. This included individuals with alternative views on sustainability from the lead author, who freely provided their time and perspectives to contribute to the research. The data sources for this research included existing and new organisational documents, documented interactions with team members, personal notes and reflections, and transcribed formal interviews. These data sources are summarised in Table 2, along with the number of sources. All data sources involved a digital file (or part of a file) to allow collation and coding. From these data sources, 87 documents (including 500+ emails) were transferred to NVivo for coding.
Summary of Data Sources Reviewed and Indicative Source Size.
Data Sorting, Coding, and Analysis
Being responsible for the fieldwork, the lead author did the initial sorting, coding, and analysis, and all authors debated the emerging coding scheme extensively throughout the research process. Table 3 summarises the steps taken.
Data Coding Steps.
There were three parts to data sorting to generate analytic artefacts (Locke et al., 2022). First, the data were sorted by date and activities. This enabled the development of an “event history database” (Garud & Rappa, 1994) and a write-up of the research narrative. Second, we sorted the data into business model components. Third, we sorted the data into two groups: “general content,” that is, data that reflected the typical descriptions or actions for the business model component, and “sustainability content,” data that captured the introduction of sustainability into the business model component.
Data coding was undertaken in two parts, reflecting the third data-sorting step. We followed the Gioia methodology (Gioia et al., 2012) for drawing out themes and aggregate dimensions in the data. We coded the general content data for each business model component to identify the logic characteristics expressed, following Goodrick and Reay (2011). In other words, we identified the core logic for each business model component and the primary characteristic of the expressed logic. We then coded the sustainability content data to draw out themes in the core logic(s) interactions with the sustainability logic. See Figure 1 for an example of coding for the customer business model component. As demonstrated in Figure 1, content related to the core logics was succinctly articulated in the documentation, enabling the theme of the content to be identified directly. However, content related to sustainability required additional coding to draw out the themes, reflecting the “newness” of the subject within Orion.
Example Data Table (Customer Component of the Business Model).
Data analysis comprised applying the framework of Besharov and Smith (2014) to the logic interactions identified through coding. The sustainability logic was not core in any component or overall level. Therefore, according to the model of Besharov and Smith (2014), commercial or professional logic interactions with the sustainability logic were either “dominant” or “estranged.” For each interaction, we considered if the interaction reflected the compatibility of practices between the sustainability and core logic (“dominant” interaction type) or incompatibility (“estranged” interaction type). We checked our assessment of the interactions against the event history database to find subsequent organisational actions to demonstrate the presence (or lack) of the interaction identified. We followed the actions and interactions through the study period to consider how they acted as enablers or barriers towards the decision for Orion to make a high-level commitment to sustainability. The process was iterative (Locke et al., 2022) as we moved between the event history database and the themes we saw in the interaction of logics. Table 4 summarises the results of data coding and analysis. We have only included the interactions with the strongest logic expressions we identified.
Data Structure.
Findings
In our study, the commercial and professional logics were core to organisational goals. Our data indicate an interaction between the commercial and professional logics of “alignment,” meaning there is minimal conflict due to compatible practices between the logics. At an overall level for the professional services firm, this consisted of providing high-quality services (professional logic) to meet the needs of customers (commercial logic). Our findings are summarised in Figure 2, which shows the core logics and associated characteristics within business model components and how these interacted with the sustainability logic leading to different actions. Figure 2 also identifies the effect of the interactions as enablers and barriers to sustainability activity. In this section, we describe how the core logic characteristics were expressed in the components within Orion’s business model. We then explore the interactions of these characteristics with the sustainability logic individually and how the resulting enablers and barriers play out together. Overall, the interactions form pockets of enabled activity, bounded by barriers to sustainability in other areas.
Theoretical Model of Core Logic Characteristics in Key Business Model Components and Interactions With the Sustainability Logic.
Orion’s Business Model Components
In the customer component of the business model, the core logic was commercial, expressed through the characteristic of the primacy of customers. Most notably, Orion described itself as “client-led.” This primacy of clients for Orion was summarised in an internal presentation explaining Orion’s overall business objectives: “central to everything we do is our clients. They engage us and pay us money. They are central to us generating profits. We organise ourselves around our client [and] project teams” (Morgan, internal presentation, field notes, commercial logic).
Moving to the employee component of the business model was also a shift to the professional logic led by the characteristic of a strong relational network. Orion was recognised for having a caring environment arising from the strong relational network among the professionals who made up Orion’s employees and shareholders. Employees typically stayed a long time and often returned after being employed in other organisations because they felt seen and heard as individuals at Orion. Kim is an example:
Every now and then, I have a conversation with myself, am I here for the right reasons, and is there something else I would rather be doing, or somewhere else I would rather be? And no, I’m happy here. And I talk to other people that come from other consultancies, and they say stuff like this, that “I just felt like a cog in a wheel,” or “just the big brother, being treated like a number just got too much.” (Kim, interview, professional logic).
Orion’s service offering business model component also reflects the core professional logic through the expectation of having professional autonomy. Kim also described professional autonomy in Orion, “it gives us the scope to go and chase those things that we feel really could make a difference, which is amazing” (Kim, interview, professional logic). The impact of this professional autonomy is evident in how Orion’s scope of services has grown organically over time, expanding offerings as individuals explore new services and develop teams of similarly interested professionals to support them.
The ownership component of Orion’s business model returns to a core commercial logic for Orion’s employee-owners. Shareholding is a way for Orion to reward its more senior employees through annual dividends. Profit is seen as “shareholders” money, with any increase in operational costs potentially reducing shareholder dividends. One employee summarised this by saying, “at the end of the day, we’re a consultancy looking to make money and make a profit for our shareholders” (Blake, interview, commercial logic).
Logic Interactions as Enablers for Sustainability
We found that the interaction of the core logics with sustainability in the customer, employee, and service offering components can act as an enabler to sustainability action within the business model.
In the customer component, we found that clients’ clear expectations of Orion in sustainability enabled sustainability action. One respondent to an internal survey on sustainability noted that “clients are moving towards more sustainable approaches [and] we need to be able to adapt quickly to their requirements before the competition” (anonymous, internal survey, commercial logic). For example, new government procurement rules were introduced during the study period, indicating an increasing requirement for sustainability to be considered in procurement, impacting a high proportion of Orion’s clients. In this context, sustainability was a way to meet customer needs and reduce the risk of Orion losing work through lack of action or, conversely, a way to secure more work. Importantly, expectations needed to be specific to be an enabler for action. For example, clients requested information on how services would reduce carbon emissions for the client and for services supporting sustainability certifications. They also asked for information about how Orion was reducing carbon in its supply chain and if Orion provided employment and supplier opportunities for disadvantaged groups. A bid writer reflected on this, observing that “as soon as clients have started requiring specific details around how we positively impact social initiatives, our organisation has really progressed things and started to actively make change—which wasn’t the case when sustainability was a general clause asked in proposals (which it has been for some time)” (Jan, emails, commercial logic). In other words, the practices were compatible when Orion could clearly understand the sustainability actions needed by the client because this would help Orion to meet its clients’ expectations.
The employee and service offering components followed a similar pattern with the professional logic. Employees’ views were regularly sought in the employee component as part of the relational network characteristic of the professional logic. For sustainability, the internal survey on sustainability was used to “help create consensus on the approach going forward and the [sustainability] areas that we focus most on” (firm-wide email, professional logic). The issues paper summarised results from a survey of employees and noted that “there is a very strong desire for visible and meaningful action in sustainability in the organisation” (sustainability logic). Employees conveyed their request for actions in reducing the environmental impact of Orion’s operations, such as reducing impacts of Orion’s fleet and travel. Demonstrating the compatibility of relational network practices and sustainability actions, the board endorsed proposed actions that responded to employees’ sustainability requests.
In the service offering component, the sustainability logic and professional autonomy and knowledge were compatible with the introduction of new services for clients. Professionals interested in sustainability were supported to build their work in this area. Over the study period, pockets of interest and expertise in different aspects of sustainability were developing across Orion. One team leader observed, “there’s people in the environment team that see themselves as providing sustainability advice” (Alex, field notes, sustainability logic). A senior team member reflected on the evolution of another team, which expanded from an initial narrow focus and was driven by the people within the team itself, “The natural hazards hub was transformed into the advisory group . . . [and now] the current group could be better called the Sustainability, Risk and Resilience Advisory Group.” The team member saw this evolution as supporting the aspirations of team members, “the sand pits that most of the junior staff are now playing in, [is] the reason they get up in the morning and come to work at Orion.” (Charlie, internal thought piece, professional logic).
Together, these interactions enabled three areas of sustainability activity. Clients’ and employees’ sustainability-related expectations and requests enabled ad hoc operational actions to be taken. These included the inclusion of “social and environmental considerations” in the procurement policy, the calculation of Orion’s operational carbon footprint, and the development of a child protection policy. Another activity was the formation of two-employee networks to learn, discuss, and progress sustainability activity: a “community of practice” for new sustainability services and “sustainability champions” for interested team members. Finally, support for pursuing individuals’ professional interests led to the development of new sustainability services.
Additional actions were progressed by the end of the study period that were not directly tied to business model components or individual logic interactions. Instead, it appears these actions benefitted from the enabling interactions and associated activities. The additional actions demonstrated a high-level commitment to sustainability. These actions included the approval of a new sustainability policy, identifying sustainability as a pillar in the new strategy, and committing to allocate further resources.
Logic Interactions as Barriers to Sustainability
During the study period when the sustainability logic was being introduced into Orion, we observed three key barriers arising from the interaction of the existing core logics in Orion’s business model with the sustainability logic.
The first barrier we identified arises from the customer primacy characteristic that was core to the customer component of Orion’s business model. As a result of being client-led, Orion sought to respond to all client requests for services within Orion’s existing or potential skillsets. The caveats Orion placed on this were if there was a risk the client might be operating outside the law or if the client had previously been found to be a financial risk (interaction of the customer primacy characteristic with the shareholder primacy characteristic of the ownership component). A senior manager for the largest technical group within Orion reflected that there “would need to be a strong argument not to work with a particular client” (Riley, interview, commercial logic). Another employee was more blunt, “I don’t believe that we would turn down work” (Blake, interview, commercial logic). These sentiments show the incompatibility of commercial logic practices with the sustainability logic, which would only target work aligned with objectives of environmental and social benefit. A board paper during the study period proposed an approach to reviewing all clients and projects for potential negative sustainability impacts. The paper review process resulted in downgrading a recommendation for immediate action to providing a discussion only. In other words, sustainability activity faced a barrier of Orion not being open to leading clients in sustainability. The estranged interaction was a barrier to further integration of the sustainability logic into this part of the business model, and no further action was progressed during the study period.
The second incompatibility of practices, or estranged relationship between the logics, occurred when sustainability interacted with existing services in the service offering component. Alex commented on the lack of progress across Orion’s other services, “the biggest thing we aren’t doing is embedding the sustainable offerings within our products and services” (Alex, field notes, sustainability logic). We identified that distinct interactions of sustainability with professional autonomy and professional knowledge created a barrier to sustainability activity.
First, professional autonomy meant different approaches would only be applied if individual professionals chose to do so. A clear example of this was when projects were set up in Orion’s system. A check for project characteristics that had previously proven risky for Orion was undertaken, and when required, a panel of professionals assessed the proposed project. However, the assessment was considered guidance only, and the project manager could choose to disregard suggested approaches even in the face of objections from the panel. Kim described this, “if someone decides that no, I’m going to work for this client, they just go off and work for them (laugh). And that’s how we roll here” (Kim, interview, professional logic). Second, professionals rely on explicit knowledge to guide their decisions, such as formalised professional standards. For example, technical standards related to the built environment are typically based on the assumption that the societal context will not substantially change. Blake pointed this out in his questioning of decisions related to large infrastructure projects.
These new massive highways . . . they’re designed until 2050 or something. And I just asked the question in the presentation; I was like, are you considering autonomous transport in your design? And they said, oh no, it’s not part of our design. (Blake, interview, professional logic)
Even when team members wanted to consider sustainability in their work, there was a conflict in practices through an expectation that there is knowledge about the “right” solutions, which are expected to be clear and straightforward. Kim noted the struggle with this:
for me personally, as a scientist, I want to know what’s behind those variables. And you know, if you’re telling me that this type of concrete is not, it has a really big environmental footprint, well, don’t tell me that. Tell me what are the alternatives and demonstrate to me how they are better. But the problem with sustainability is that there isn’t one right answer. (Kim, interview, professional logic).
This estranged interaction between professional autonomy and knowledge and the sustainability logic meant that Orion was not open to requiring its professionals to include sustainability in their work. Subsequent activity comprised a continuation of existing approaches by professionals within Orion.
Finally, our findings show an estranged interaction of the sustainability logic with shareholder primacy (commercial logic) in the ownership component of the business model. Shane, a Leadership Team member, reflected on the focus within Orion on the annual dividend, “I fear it then focuses some people too much around the short term, you know, things such as financial gain” (Shane, interview, commercial logic). For example, Mark felt strongly about the need to prioritise billable hours over other activities:
Orion’s not the Department of Social Welfare, you know . . . . People want to come to work, they want to work hard, they want people beside them to work hard as well, and they want to be well rewarded for that. (Mark, interview, commercial logic)
While the sustainability project could commence within this context, it was limited by the time resource allocated. One of the project sponsors described the approach to resourcing the project as relying on the “influence and goodwill” of supportive team members (Shane, field notes, professional logic). A report to the Leadership Team, part way through the study period, noted that “there has not been a discussion of how resourcing needs have changed. As that hasn’t happened, we have been progressing actions that seem most important but without ideal resources for those tasks.” Resources that would not align with billable hours were not allocated, reflecting the logic interaction with Orion not being open to a risk of reduction in shareholder returns from sustainability activity. This state remained throughout the study period, including some time after the high-level commitment to sustainability had been made. Thus, the estranged interaction of the primacy of shareholders with sustainability logic acted as a barrier to slowing the introduction of sustainability into the business model.
Bringing the Interactions Together
The discussion so far has focused on the interactions largely in isolation. However, each interaction occurred within the context of the other interactions. As shown in Figure 2 and described in the previous sections, the interactions can be broadly seen as creating pockets of enablers surrounded by barriers to sustainability activity. It is important to note that the processes described were not sequential. Rather, different enablers and barriers arose as interactions occurred. The exception to this was for the high-level commitment to sustainability, which followed previously enabled activities.
As noted by a bid team member, clients had previously made generic sustainability requests to Orion, which had not enabled sustainability action. This lack of action reflects the barrier created to protect shareholder returns by not increasing operational costs. However, compatible practices between the logics arose when clients and employees/professionals made specific sustainability requests to the organisation, triggering commercial and professional logic objectives of responding to client and employee needs. As a result, Orion introduced activities directly led by clients and employees, including ad hoc operational changes and new sustainability services, and establishes networks to connect interested employees.
However, as shown visually in Figure 2, the sustainability activity was “bounded” by barriers to sustainability activity in three ways. First, there was a barrier to any actions that would lead to clients who were not requesting sustainability services or information. Orion continued to respond to all (legal) client requests. Second, any activities that could risk short-term returns for shareholders were not progressed. Finally, Orion did not introduce actions requiring professionals to integrate sustainability into their work.
Thus, the actions taken occurred within this context and, as such, demonstrated, particularly to employee-shareholders, how sustainability could align with the existing commercial and professional logics. The increased familiarity of sustainability within the commercial and professional logic objectives enabled further sustainability activity. By making a high-level commitment to sustainability, Orion was able to respond to clients and employees asking for sustainability activity while maintaining focus on the objectives of the commercial and professional logics. As the meaning of the high-level commitment is explored, it is likely that the enablers and barriers to sustainability will change, with Orion moving from a period of introduction of the sustainability logic into sustainability being more embedded in the firm’s objectives.
Discussion
We now return to our research question: How do the interactions of institutional logics in an existing business model act as enablers or barriers to sustainability? Our ethnographic approach has allowed us to identify and closely observe the interaction of logics as sustainability is considered within an existing organisation. In our discussion, we consider how logics are expressed within the components of a business model and how the interaction of commercial and professional logic expressions with the sustainability logic acts as enablers and barriers and discuss our findings in the context of the business case for sustainability literature.
Varied Expression of Logics Within the Business Model
In this study, we show that logics can be expressed differently across the components of a business model. Our study reveals that whole logics may not be core in every part of the business model. Instead, characteristics of the logics, such as those described by institutional scholars (e.g., Barac et al., 2019; Laasch, 2018; Thornton, 2004), “lead” the expression of the logic. Furthermore, the core logics may not be evenly spread across the business model. In our study, the professional logic in the employee component was led by the relational network characteristic, with employees as part of each individual’s professional network. As noted by one of Orion’s team members, this characteristic might not be core in all professional services firms. Simultaneously in Orion, the characteristic of professional autonomy and knowledge led the expression of the professional logic in the service offering component. The characteristics of the commercial logic expressed were primacy of customers and shareholders, and the organisational form was networked, a characteristic of the professional logic.
Recognising this variation for a given organisation is important as our study shows it has implications for how sustainability can be integrated into a business model. For example, the study by Scarpellini et al. (2017) identified four patterns in activity towards environmental sustainability and found that the patterns were associated with varying economic outcomes. Understanding the core logics already present in an organisation and how they manifest within the business model components may help explain why different organisations’ activities are more or less likely to reflect each of the patterns. Similarly, considering the specific characteristics of logics expressed may explain the variation identified in the study by Battilana and Dorado (2010) of different hiring and socialisation practices under the same core logics. Thus, the variation in how logics and their characteristics manifest across and within a given business model is an important building block for our research question.
Enablers and Barriers to Sustainability
Our study helps to identify how logic interactions can act as enablers and barriers, impacting the integration of sustainability into a business model. We find that compatibility (or not) of sustainability practices with the core logic characteristic in a given business model component can act as an enabler (or barrier) to integration of sustainability into a business model. Furthermore, enabled activity may be limited by the incompatibility of those practices with other core logic characteristics in different business model components.
Our findings could help explain variations in sustainability integration in existing organisations identified in the literature. For example, the study by Stål and Corvellec (2018) reveals that sustainability actions can be undertaken in a way that maintains separation of those actions from the extant business model activity. Specifically, the authors found changes to products and services that are only made by adding new products and services, rather than changing existing ones. Our findings indicate this may be because the development of new sustainable products and services is a compatible practice with the primacy of customers’ characteristic (commercial logic) due to meeting the objective of responding to customer needs. New service development is also compatible with the professional autonomy characteristic (professional logic). However, as our findings show, the same commercial and professional logic characteristics interact with the sustainability logic to create a barrier to integrating sustainability into existing services. That is, if customer needs are already being met with existing services and professionals are not inclined to change their approaches to their work, there is no enabler for sustainability action. Instead, the logic interactions act as a barrier to introducing sustainability.
This pattern of sustainability action being led by customers and employees is similarly reflected in the integration of sustainability into operational activities within the business model. The pattern echoes the findings of Scarpellini et al. (2017) that early sustainability activity includes the operations component of the business model. We find that customers and employees enable ad hoc operational changes for sustainability by making specific requests. In this way, customers and employees can shape an organisation’s focus areas in sustainability. This finding may help to explicate the literature that shows that even among existing commercial organisations with a clear commitment to the sustainability logic, there is variation in which aspects of sustainability are prioritised (DiVito & Bohnsack, 2017). However, as noted above, our study also illustrates that barriers from other logic interactions limit the enabled actions. In other words, where customers and professionals do not drive sustainability actions, the logic interaction acts as a barrier to sustainability practices. Furthermore, these activities occur within the wider context of logics in the business model, such as financial returns to shareholders. That is, not every customer and employee request is acted upon, only those that will not create conflict with characteristics such as the ownership component’s core logic characteristic of primacy of shareholders.
Our findings also add to the study of Laasch (2019) on how an artefact led to introducing a responsibility logic into an existing organisation. The author found that the responsibility logic reflected in the artefact was subsequently enacted in relation to values, individual employees, some aspects of operational procedures, and discretionary activities in the organisation’s operations. The responsibility logic was not enacted in activities related to customers and shareholders. Our findings suggest that an artefact could lead to business model changes by reflecting and inspiring practices compatible with the commercial logic characteristic in those areas. Following our finding of different core characteristics being expressed across a business model, our study indicates that multiple artefacts may be needed that inspire practices compatible with core characteristics in different parts of an organisation to achieve integration of a new logic.
The Business Case for Sustainability
A commonly cited interaction of core logics and the sustainability logic is the “business case for sustainability” (Hörisch et al., 2014; Schaltegger et al., 2012). The business case for sustainability describes the benefits to businesses when they undertake sustainability activities, typically understood as ultimately leading to financial outcomes (Carroll & Shabana, 2010). The literature identifies that the business case for sustainability can be both an enabler and a barrier to sustainability. Where the market can reward sustainability activities, the business case for sustainability acts as an enabler. Schaltegger et al. (2012) took this further, arguing for business model innovation, whereby sustainability activities are integrated strategically into the business. Conversely, a lack of economic incentives has been identified as a barrier to sustainability activity (Carroll & Shabana, 2010; Laukkanen & Patala, 2014). By drawing on institutional logics, we build on this literature.
Our findings reflect the business case for sustainability through the interaction of the commercial and sustainability logics. We find that the interaction of the commercial and sustainability logics is focused on key stakeholders: meeting customers’ sustainability expectations and protecting and enhancing shareholder returns. Hörisch et al. (2014, p. 328) describe this stakeholder perspective as a sustainability activity based on “creating mutual sustainability interests.” In our study, these two aspects were described in an early board paper, “at risk is our ability to respond to client expectations, as well as capitalise on the opportunities presented by sustainability” (board paper, commercial logic). This is an effective use of the business case for sustainability, as the literature shows that the connection of sustainability to risk is important to trigger action (Pinkse & Gasbarro, 2016). This board paper led to the project being established.
However, our findings also demonstrate how the business case for sustainability lens leads to narrower detection of sustainability issues, as identified by Hahn et al. (2014). Specifically, if customer primacy is a core characteristic in the business model, customer expectations must be specific for actions to be taken from a customer driver. This means actions are limited to those identified by customers, and a lack of customer expectation may lead to a lack of action. As a result, customer views of sustainability can influence organisational responses to sustainability. Similarly, the emphasis on an immediate and quantifiable commercial benefit for sustainability means activities that do not align with commercial objectives face a barrier to progressing within a business model. This interaction was evident in our study through the interaction of sustainability with the primacy of shareholders.
Furthermore, our findings demonstrate that the interaction of the commercial and sustainability logics that leads to the business case for sustainability is only part of the picture of barriers and enablers for sustainability activity. By recognising the presence of other institutional logics, we shed light on interactions that can support or detract from the business case for sustainability.
Our study highlights the role of the professional logic in enabling or acting as a barrier to sustainability activity in ways that may not align with the business case for sustainability. Specifically, we find that “professionals’ inclination to resist autocratic actions” (Greenwood et al., 1990, p. 736) is a key factor in integrating sustainability into their services. In other words, where individuals have a professional interest in sustainability, their expectation of professional autonomy enables them to develop new services or build their knowledge in sustainability to integrate it into the services they provide to their clients. Conversely, the expectation of professional autonomy means that individuals who do not share an interest in sustainability are likely to reject sustainability efforts, even in the face of a business case for sustainability, and deliver the services they provide to their clients in the way they choose.
Due to the relational network characteristic, which comes with an expectation of reciprocity (Powell, 1990; Thornton et al., 2005), our study illustrates the firm’s tendency to respond to employee requests for sustainability. This is because individuals requesting sustainability activity are recipients of others’ support, with an implicit commitment to supporting other activities in the past or providing support in the future (and vice versa). There is some alignment in responding to employees’ requests for sustainability in the business case for sustainability literature. The extant literature notes the benefits of sustainability activity, including employee attraction and motivation (e.g., Hörisch et al., 2014; Mueller et al., 2012; Schaltegger et al., 2012). Employees themselves as drivers for sustainability activities do not appear to be widely captured in the extant literature (see Collins et al., 2010; Mithani, 2017 for an exception). Our findings suggest that in an organisation expressing the professional logic characteristic of a relational network, employees are more than recipients of benefits and pathways for implementation. They can also act to direct potential activities to be undertaken.
Conclusions and Contributions
BMfS scholars have identified that the extant literature does not provide a thorough understanding of how existing organisations navigate barriers and enablers to move towards a more sustainable business model (Geissdoerfer et al., 2018). In response to this imperative, we build on the findings of Laukkanen and Patala (2014) and Bocken and Geradts (2020) that underlying norms and expectations act as barriers to business model changes for sustainability. To contribute theoretically to these barriers, we draw on institutional logics, focusing on the antecedents of business model changes for sustainability (Dentchev et al., 2018; Roome & Louche, 2016). Our ethnographic approach allows us to identify the interaction of logics as sustainability was considered within an existing organisation where the sustainability logic was not core to organisational objectives. This paper shows a rare study into the complex nature of the change process towards sustainability.
We build on the discussion by Laasch (2018) on institutional logics in the context of BMfS, including bringing the theory on the interaction of logics into the BMfS literature (Besharov & Smith, 2014). Specifically, we show not only that different logics may be core within different components of a business model but also are different characteristics, or expressions, of the logics. This is important because, as we demonstrate with this study, the differences in logic characteristics interact with the sustainability logic in diverse ways, leading to various barriers and enablers across the business model. By highlighting this potential for variation, we show that logics and how they are expressed in existing commercial organisations impact the antecedents of business model changes for sustainability.
Our study supports the idea that compatibility of prescriptions for action is key in triggering business model changes (Besharov & Smith, 2014; Ocasio & Radoynovska, 2016). We build on this by showing that the prescriptions for action arise from the logics’ characteristics and where they occur within the business model. Our findings suggest that for changes to be triggered in the business model, the introduced logic must find characteristics within the core logics with which it can create compatibility. We also identify that sustainability prescriptions for action may be bounded by barriers created by other characteristics within the core logics. We suggest that progress towards a BMfS can be achieved through focusing on the compatibility of the logics present in the business model.
We contribute to the process of business model change for sustainability by exploring where a change for sustainability is more likely to occur in the business model (Brehmer et al., 2018; Laasch, 2019; Scarpellini et al., 2017; Stål & Corvellec, 2018). In our study, we show how interactions of institutional logics influence where changes occur. Overall, our findings support the literature that business model components most influenced by sustainability are operations, employees, and products and services (Brehmer et al., 2018; Laasch, 2019; Scarpellini et al., 2017; Stål & Corvellec, 2018). Specifically, we show that before a commitment is made to sustainability, change is more likely in components of the business model that have a limited impact on customer processes, professional autonomy, and shareholder returns. This is important to assist scholars and managers identify and target change activities as organisations begin to consider sustainability.
Our paper also contributes insights into the “business case for sustainability” discourse in the literature (e.g., Schaltegger et al., 2012). The literature shows that the “business case for sustainability” can be a barrier and an enabler (Bocken & Geradts, 2020; Hahn et al., 2014). We add to this by showing how the commercial and sustainability logics interact in different parts of the business model, leading to compatibility or incompatibility of practices. Specifically, the study builds on the findings from Hahn et al. (2014) that the “business case for sustainability” approach narrows what is considered within sustainability by showing that customers’ specific requests in sustainability support and shape, but also limit, organisational responses to sustainability. While the strength of customer pressure is an enabler, our study suggests there is a reliance on this form of pressure for sustainability. That is, we suggest that the absence of customer pressure would lead to a similar absence in active and effective consideration of sustainability. We also show how different logics can lead to responses not explained by a “business case for sustainability” approach, such as the role of employees shaping sustainability action where a core characteristic of a relational network is present in the business model.
Limitations
While our ethnographic methodology has enabled us to illuminate the interaction of logics within a single organisational context, findings from ethnographic approaches are not empirically generalisable. However, the theoretical insights from this study can provide the basis for future research. This could include investigating if the logics interact similarly within other professional services firms and other organisational types. This study focused on logics interaction; future work could explore the institutional work required to effectively navigate the barriers we identified.
Our study focused on the period of introducing the sustainability logic into an organisation. As such, our theoretical model is relevant for this period. As actions continue to be taken and the sustainability logic can no longer be characterised as being introduced to the organisation, the model of interactions is likely to change. Future research should explore how enablers and barriers arise and support different actions as organisations embed the sustainability logic into their business models.
The interactions described in our study demonstrate the importance of better understanding how change occurs in an environment with strong commercial and professional logics. Our study provides some insights into how professional services firms may navigate these interactions. However, as noted in our study, not all professional services firms may have the same strength and characteristics of logics. Therefore, further research is needed to understand the interactions of different combinations of logics and organisational types. In addition, future research could explore the actions that actors can take to facilitate effective changes for sustainability due to the logics present.
Our study appeared to support the stakeholder attributes of the logics described in the literature: being customers and shareholders under the commercial logic and professional networks under the professional logic. In our study, the focus on customer needs was predominant. Shareholders in our study were employees, meaning the pressure from the commercial logic was focused on customers and internal, rather than external, investors. Future research could consider the role of external shareholders in firms with external ownership arrangements. Future research could also consider how other external pressures manifest, such as through education and training under the professional logic. We also suggest future research could identify effective enablers for changes in sectors that may be less exposed to customer pressure for sustainability. These pressures may come from different logics, which may also interact with the “business case for sustainability.”
Our research could also be applied to research different types of responses to sustainability by exploring compatible or incompatible practices in each type. For example, Laasch and Pinkse (2020) outline a scale of how existing organisations respond to sustainability pressure. They describe “discretionaries” with strong commercial relationships and drivers, through “remedials” with more ambiguity and pressure, to “reactives” and “proactives,” who face similar pressure for sustainability but respond with minimum effort or actively work to embed sustainability into the business model, respectively. Future research could investigate if each of these steps on the scale is associated with specific extant logic characteristics that interact with the sustainability logic in consistent ways.
Footnotes
Declaration of Conflicting Interests
The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.
Funding
The author(s) received no financial support for the research, authorship, and/or publication of this article.
