New markets, new processes, new laws… There are many factors that can motivate companies and institutions to create alliances for environmental reasons.
Léa Stadtler, an associate professor at Grenoble Ecole Management and an expert in business strategy, shares with us the results of her latest study.
"Our research focused on studying the alliances created between companies, government organizations and NGOs in the field of environmental issues. Alliances include agreements to cooperate on major issues such as climate change, resource rarefaction and the current crisis in terms of economic models, due in large part to the diminishing availability of fossil fuels," explains Léa.
The study was carried out in collaboration with a Canadian team[1] and relied on a database of 1,200 business alliances set up between 1980 and 2015 in North America. A majority of alliances were made up of businesses from the same sectors (e.g., automobile, energy…). Some alliances were international and became part of the company's strategy (e.g., General Electric with its growth program: Ecomagination ).
Combining economic and environmental interests
"These alliances aim to unite economic and environmental interests. The challenge is how to go about doing it. Sometimes, it's simply an initiative to reduce consumption of resources and waste. Sometimes, it's much more complicated. For example, trying to transition towards renewable resources in a production line. These types of changes can require important investments in terms of R&D. In such cases, it can also be difficult to measure the return on investment. Our analysis of alliances showed that they can open the door to a variety of collaborations, which can unite anywhere from 2 to 15 partners," adds Léa.
4 Types of alliances
In addition to examining types according to partners, the researchers highlighted that alliances can also be classified according to their goals. The first type of alliance goal is that of improving processes or technology within a sector. To optimize processes, this type of alliance can also integrate suppliers. For example, such an alliance could help develop new technology for floor treatments in the chemical industry.
The second type of alliance aims to develop a disruptive product or technology (e.g., an autonomous electric car or biogas based on organic waste products). The third type of alliance aims to act as a catalyst for changes in industrial models in order to improve a sectors reputation through collaboration. The goal can be, for example, to avoid major accidents or negative environmental effects.
“All of these actions would be hard to implement alone,” adds Léa. They often include major campaigns to raise consumer and government awareness. For example, an alliance might communicate on its goal to reduce energy consumption in construction or to improve the management of waste disposal
The fourth type of alliance aims to influence regulatory conditions. For example, General Motors is part of the BlueGreen Alliance, which brings together various organizations intent on advancing standards that will improve the economic and environmental sustainability and competitivity of the U.S. economy.
The motivations behind alliances
Why do companies engage in environmental initiatives? “External pressure from NGOs, reactions to environmental accidents, these factors all guide companies’ motivation to create environmental alliances,” explains Léa.
In terms of internal motivations, organizations can create alliances to help decrease their resource consumption and improve their waste management. This is usually an initiative that brings lower production costs and easier process management. Another important factor is the ability to improve risk and accident management.
“Relationship with governments and suppliers can also be sources of innovation. They’re often combined with requests from consumers for more environmental and sustainable production processes. The more sustainable a product, the less it impacts the environment and the less a company must rely on energy consumption,” underlines Léa.
Why are alliances effective? “Examples of alliances in the automobile and energy industries underline the ability to create disruptive innovations (e.g., fuel cells). They enable alliance partners to share the financial burden and risks. In the case of the autonomous electric car being developed by Ford and General Motors, an alliance enables them to combine their expertise: embedded digital tech, artificial intelligence, hydrogen, etc.,” illustrates Léa.
Collaborations between NGOs and companies can help businesses build on an NGO’s expertise on environmental matters. This can provide the industry with legitimacy and facilitate public awareness campaigns. Collaborations between governments and companies are often based on a variety of bilateral partnerships with different companies. By multiplying alliances, these initiatives can lead to the creation of networks and consortiums with public and private universities or research labs. “Alliances with the public sector offer a wide array of possibilities. However, issues in terms of confidentiality can hamper scientific publication. As a result, it’s important for public-private alliances to set a framework before beginning their collaboration,” concludes Léa.
[1] Team members included Professor Haiying Lin, Waterloo University, and Professor Oana Branzei, Western University
