The sustainable business models for industry 4.0 in Vietnam
THE SUSTAINABLE BUSINESS MODELS FOR INDUSTRY 4.0 IN
VIETNAM
Huynh Ba Thuy Dieu, MBA.
Nguyen Thi Quynh Anh, MBA.
Korea- Vietnam Friendship Information Technology College
Abstract
Managing the relationship between business and society has been one of the main topics in
academic and business literature for a long time. In the Industry 4.0 world that is digitalizing
and automating, sustainable business models exist but have not become mainstream.
Sustainable business is the ideal business model but it is quite new in Vietnam, so it is
necessary to learn the experiences of the world and the region in order to create the right
model for Vietnamese enterprises.
This paper focuses on the needed sustainable business model for industry 4.0 in Vietnam. At
the beginning, it gives the main theoretical points of view on sustainability, business model
and industry 4.0. Then, it explains three sustainable business model for industry 4.0 in
Vietnam: (1) backward integration model, (2) Unilever’s sustainable business model and (3)
Corporate Social Responsibility (CSR) model. Finally, it suggests six sustainable business
models in the future in Vietnam: (1) The Real Value Model, (2)The Game-Changer Model,
(3)The Bikini Model, (4)Open Innovation Models, (5) Service Design Models and (6) e-
Residency Model.
Keywords: sustainable business model, Industry 4.0, Vietnam.
I. Introduction
Challenges for business models do not only come forward from business and customer needs.
While business has experienced unprecedented growth after the world-war era, it now faces
major challenges in which there is a misbalance between available supply and expected
demand; with a growth from 3 billion to over 7, 5 billion people from 1960 to 2017, the
purchasing power of each individual tripled. This has led to an enormous pressure on natural
resources and our climate, and has and will result in social instability.
Industry 4.0 – the fourth industrial revolution is changing how the world of business
functions. This new revolution of not only production, but also way of creation and design of
products, processes and organizations, has come to existence because of the inclusion of
various new actors into the way society and business function: artificial intelligence, machine
learning, the combination of potential of hardware, software, and humans.
In Viet Nam, sustainable business models exist but have not become mainstream.
Opportunities for sustainable offerings exist by designing products for longevity, repair and
recycling, such that sustainability is not only focusing on being more efficient, but also on
using less raw materials and recycling more products. This changes the value proposition,
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supply chain, relation with the customer and financial justification of a business model. This
paper discusses potential sustainable business scenarios, and proposes an agenda for research
into how Industry 4.0 can be used to create sustainable business models.
II. Concept
1. What is Sustainable business
At its most general level, sustainability refers to the capacity to continue an activity or
process indefinitely. It can be related to any number of economic, social, or environmental
activities and can have varied meanings within different disciplines. Unsurprisingly, there is a
multitude of definitions of sustainability and sustainable development
Sustainable Business is another way of referring to, and talking about, Corporate Social
Responsibility (CSR). But whether you call it Ethical Business, Corporate Social
Responsibility or Sustainable Business, you're talking about the same thing.
All of these terms refer to systems and strategies for businesses to operate in a responsible
manner that benefits their people, communities and environment.
A sustainable business is any organization that participates in environmentally friendly or
green activities to ensure that all processes, products, and manufacturing activities adequately
address current environmental concerns while maintaining a profit. In other words, it is a
business that “meets the needs of the present [world] without compromising the ability of
future generations to meet their own needs.” It is the process of assessing how to design
products that will take advantage of the current environmental situation and how well a
company’s products perform with renewable resources.
Everyone affects the sustainability of the marketplace and the planet in some way.
Sustainable development within a business can create value for customers, investors, and the
environment. A sustainable business must meet customer needs while, at the same time,
treating the environment well. To succeed in such an approach, where stakeholder balancing
and joint solutions are key, requires a structural approach. One philosophy, that includes
many different tools and methods, is the concept of Sustainable Enterprise Excellence.
The different between Sustainable Business, Ethical Business and Corporate Social
Responsibility
- Ethical Business
When businesses focus on their code of ethics or a code of conduct they may label their
approach 'Ethical Business'. Ethical Businesses often emphasize: The source of products and
services, business conduct and quality and service standards
Consumer-led organizations often adopt an Ethical Business plan in order to demonstrate and
reassure customers of their ethical credentials. But it is equally important that those
businesses also assess and report on all areas of their business activity, including social,
economic and environmental impacts.
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- Corporate Social Responsibility: CSR is the process of assessing an organization’s
impact on society and evaluating their responsibilities. CSR begins with an assessment of a
business and their: Customers, Suppliers, Environment, Communities and Employees.
- Sustainable Business
Sustainable Business essentially means being able to continue, or operating in a way that is
conducive to ongoing trading.
Sustainable Business is an important concept because it recognizes the importance of
businesses continuing, particularly in respect of providing jobs and custom for suppliers.
Recently, Sustainable Business has expanded to become a more holistic view of business
activity - reporting on impacts to people, the planet and profit. People, planet, profit is also
known as the Triple Bottom Line.
2. Elements of a sustainable business model
a. Economic perspective
Within economic frameworks, sustainability is often thought to be achieved if the wellbeing
of society is maintained over time (Arrow et al. 2004; Pezzey 1992; Solow 1993; Toman
1998). There are various formulations of this concept.
Economists have interpreted sustainability in various ways. Not all of these interpretations
explicitly refer to sustainability but nonetheless embody similar ideas — that is, to achieve a
non-declining level of wellbeing (sometimes referred to as utility or welfare) over time.
Three seminal contributions to the economic theory of sustainability were provided by
Dasgupta and Heal (1974), Solow (1974) and Stiglitz (1974). Their models represented
wellbeing over time in terms of welfare maximization. They showed the maximum level of
utility that can be achieved over time with a finite level of natural resources. Utility can be
either constant (Solow 1974; Stiglitz 1974) or declining (Dasgupta and Heal 1974) over time
depending on what is assumed about the capital stock, technological progress, and the rate at
which future utility is discounted.
In particular, Solow (1974) showed that, under certain conditions, constant wellbeing over
time can be achieved by maintaining the total stock of capital. That is, the depletion of natural
capital can be off-set by investment in manufactured capital, or other types of capital. By
maintaining the level of productive capital the largest possible level of constant consumption
per person can be achieved over time.
As stated by Pezzey and Toman (2002, p. 7), even though Solow did not explicitly discuss
sustainability, ‘his was the first widely read paper to suggest in the context of formal
economic growth theory, a sustainability-like objective for society’ and that this differed
from the traditional economic approach of maximising the present-value of wellbeing.
Solow’s maintenance of the total capital stock is similar to a ‘rule’ proposed by Hartwick
(1977). Hartwick’s rule is that if all rents from exhaustible resources are invested in
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reproducible capital then non-declining consumption over time is achieved. However, such
‘rules’ require that different forms of capital are close, if not perfect, substitutes.
Sustainability has subsequently been interpreted by some economists to require a separate
constraint on the conventional formulations of welfare maximization (Pezzey 1992; Arrow et
al. 2004). However, there is disagreement as to whether concern about sustainability requires
any explicit criterion or objective over and above welfare maximization per se (for example,
Beckerman 1994).
Implicit in this interpretation of sustainability is the assumption that natural capital can be
depleted, provided that society invests in other forms of capital (to offset this depletion) so
the total capital stock does not decline over time. This assumes that different forms of capital
are substitutes. For example, the stock of capital could be augmented by investment in
produced capital to offset a loss of natural capital. Similarly, human capital accumulation
through educational attainment and skill acquisition can be a substitute for produced capital.
Technological advancement can also increase the ‘effective’ stock of capital, thereby
enabling production with fewer physical capital inputs. This assumption of substitutability
lies at the core of the sustainability debate, and is discussed in detail below.
b. Social perspective
From a business perspective, social sustainability is about understanding the impacts of
corporations on people and society.
In corporations, social sustainability performance issues include human rights, fair labor
practices, living conditions, health, safety, wellness, diversity, equity, work-life balance,
empowerment, community engagement, philanthropy, volunteerism, and more. Though
social impact, or social sustainability, issues are not easily quantifiable or measurable, they
are easier to identify.
Adrian Henriques, Professor of Accountability and CSR at Middlesex University and author
of ‘Corporate Impact – Measuring and Managing your Social Footprint,’ states, “Social
impact includes anything that affects company-stakeholder relationships: from how much and
how reliably suppliers are paid, to how a product affects lives. From how small shareholders
may be treated to the impact of alcohol on health and communities.”
According to the UN Global Compact, social sustainability should be a critical part of any
business because it affects the quality of a business’ relationships with stakeholders. Social
sustainability is a proactive way of managing and identifying business impacts on employees,
workers in the value chain, customers, and local communities.
Companies that raise the importance of social sustainability recognize the significance of
their relationships with people, communities and society. Social responsibility becomes part
of their core business strategy and they consider how their activities affect people. There is a
human cost to doing business. A socially sustainable business will consider the safety of its
workers in a particular location. It will not allow its workers’ safety to be compromised by
forcing them to work in a building that has been deemed unsafe.
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Social sustainability mitigates risk. Poor social sustainability is a risk to both brand and
product quality. Outsourcing to manufacturing sites with unsafe or poor working conditions
can hurt a global corporation’s brand if a disaster happened or if word were to reach media
and consumers. Similarly, ignoring safety measures to protect public health can cost food
manufacturers millions of dollars through government-backed recalls of products from
market shelves.
Providing safer working conditions, living wages and job security creates a more secure
supply chain.
Consumers want socially sustainable products. Consumers are more informed and engaged.
They care about the impact (environmental or social) of the products they buy. Companies
who are more transparent about their supply chains have reaped the benefits from consumers
who are willing to spend more for products that are more ethical.
Social sustainability is attainable. Companies are now partnering with social sustainability
organizations to become more transparent, make their operations or supply chains more
ethical, and understand the human cost of business.
According to the UN Global Compact, aiming for social sustainability can help businesses in
a number of ways:
x
x
x
x
x
x
Unlocking new markets
Helping retain and attract business partners
Becoming the source of innovation for new product or service lines
Raising internal morale and employee engagement
Improving risk management
Improving company-community conflicts
c. Environment perspective
Environmental sustainability is the ability to maintain the qualities that are valued in the
physical environment. For example, most people want to sustain (maintain):
• human life
• the capabilities that the natural environment has to maintain the living conditions for
people and other species (e.g. clean water and air, a suitable climate)
• the aspects of the environment that produce renewable resources such as water,
timber, fish, solar energy • the functioning of society, despite non-renewable resource
depletion
• the quality of life for all people, the livability and beauty of the environment
Threats to these aspects of the environment mean that there is a risk that these things will not
be maintained. For example, the large-scale extraction of non-renewable resources (such as
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minerals, coal and oil) or damage done to the natural environment can create threats of
serious decline in quality or destruction or extinction.
Traditionally, when environmental problems arise environmental managers work out how to
reduce the damage or wastage. But it is not always easy to work out exactly when and where
threats will have their effects and often the impacts are hard to reverse. So increasingly
environmental managers adopt strategies aimed to prevent damage being done in the first
place. A full sustainability program needs to include actions to prevent threats and impacts
from arising, actions to protect the environment from threats and damage, and restoration to
reverse damage already done.
Sustainability issues arise wherever there is a risk of difficult or irreversible loss of the things
or qualities of the environment that people value. And whenever there are such risks there is a
degree of urgency to take action.
Environmental sustainability programs include actions to reduce the use of physical
resources, the adoption of a ‘recycle everything/buy recycled’ approach, the use of renewable
rather than depletable resources, the redesign of production processes and products to
eliminate the production of toxic materials, and the protection and restoration of natural
habitats and environments valued for their livability or beauty.
These sustainability programs need to operate on an adequate scale and need to continue
operating reliably for as long as the threats continue.
Some of the issues that pose major environmental sustainability problems include:
• destruction of the living environments (habitats) of native species
• discharge of polluting chemicals and other materials into the environment
• emission of greenhouses gases into the atmosphere than can cause climate change
• depletion of low cost oil and other fossil fuels ii Some environmental issues are
largely of local significance while others have regional or even global relevance.
At the personal or household level, there are a host of actions that people can take to
contribute to environmental sustainability at home, when travelling or accessing services or
goods, at work, or when acting as a community member or citizen or as an investor of
personal funds.
Some useful examples are include living close to work where possible and walking, using a
bike or using public transport. These are good options to save energy and reduce greenhouse
gases. If these options are not possible then using an ultraefficient hybrid petrol/electric
vehicle can cut greenhouse gases and petrol consumption by about 50% and cut other toxic
pollutants by about 90%.
Buying products made of recycled materials will generally save materials and energy, cut
greenhouse gases and toxic pollution, and reduce impacts on living things in the wild.
Installing a water tank and low flow shower can save water.
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Building or renovating a house using environmental sound design and lower impact
materials and 5+ star appliances can make a big impact on all environmental issues.
Using food in season or from local sources and organically grown can cut impacts from
chemicals, save energy and reduce greenhouse gases.
Involvement in or donations to community environmental groups can help with practical
projects like revegetation or by building support for effective government policies. And
investing savings in ethical investments can help accelerate the creation of an
environmentally-sustainable economy.
3. Industry 4.0
The first time the notion “Industry 4.0” (derived from the German term “Industrie 4.0”) was
mentioned in public, was at the “Hannover trade fair” in 2011, Germany (Kagermann, Lukas,
& Wahlster 2016). The following initiative set by the Federal Ministry of Education and
Research, Germany (BMBF, Bundesministerium für Bildung und Forschung), also called
“Industry 4.0”, intends to encourage the German manufacturing industry to prepare for the
future of production (Bundesministerium für Bildung und Forschung 2016). In the meantime
the term Industry 4.0 is also widely used across Europe. Consequently the term Industry 4.0
describes nowadays in general the digital transformation of the manufacturing industry,
which is accelerated by exponentially growing technologies, like for example intelligent
robots, autonomous drones, sensors and 3D-printing (Bundesministerium für Bildung und
Forschung 2016). Other terms appearing along with Industry 4.0 are the “digital
transformation”, the “Internet of Things” or the “Industrial Internet (of Things)”. These terms
are also applied interchangeably with the notion Industry 4.0 and the last two are used more
commonly in the United States and the English-speaking world (Deloitte 2015, p. 3).
Furthermore other companies like for example Cisco are using the term “Internet of
Everything” (De Bernardini 2015). All these notions are referring to similar technologies and
applications, but can have different origins and meanings. Whereas Industry 4.0 is focused
specifically on the manufacturing industry, terms like the Internet of Things, the Digital
Revolution and the Internet of Everything are more focused on enabling and accelerating the
adoption of internet-connected technologies across industries, both manufacturing and non-
manufacturing. Nevertheless, what all these terms and concepts have in common is the
recognition that traditional manufacturing methods are run through a digital transformation
(Deloitte 2015).
4. The nine pillars of industry 4.0
Industry 4.0 describes a future state of industry characterized by thorough digitization of
economic and production flows. It requires horizontal integration at every step in the
production process, in interaction with machines. In the globally interconnected world of
Industry 4.0, machines also interact with one another.
The Boston Consulting Group has identified Industry 4.0’s nine technological pillars:
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x Autonomous robots. Long used to tackle complex tasks, robots provide an ever
wider range of services and are becoming more autonomous, flexible, and cooperative. They
will interact with one another and work safely with humans (the term “robotics” is used to
describe robots helping operators perform their tasks). Eventually, they will be able to learn
from humans.
x Simulation. 3D simulation of product development, material development and
production processes will become widespread. It will leverage real-time data to mirror the
physical world in a virtual model that will include machines, products, and humans.
Operators will be able, for example, to test and optimize the machine settings for the next
product even before production starts, thereby reducing machine setup times and improving
quality.
x Horizontal and vertical system integration. Today, information systems are not
fully integrated. Companies are rarely connected with their suppliers and customers.
Engineering design departments are seldom linked directly to production within its own
organization. But with Industry 4.0, the entire organization will be interconnected, and
companies will be connected with one another.
x The Industrial Internet of Things. Few machines are currently fitted with sensors
and interconnected. With the Industrial Internet of Things, an ever greater number of
products will incorporate intelligence and be connected using standard protocols. This will
decentralize analytics and decision-making, enabling real-time responses.
x Cyber security. The days of closed, unconnected operational management systems
are over. Connectivity and communication protocols are becoming the norm. Protecting
information systems and manufacturing lines from cybercrime threats is becoming a critical
issue. Sophisticated identity and machine access management systems will be used to provide
secure, reliable communications.
x The Cloud. The operating processes of Industry 4.0 require more data sharing across
sites and companies. The performance of cloud technologies will improve, achieving
response times of mere milliseconds. This will foster the development of an ever greater
number of Manufacturing Execution Systems (MESs) based on cloud-stored machine data.
x Additive manufacturing. Companies have just begun to adopt 3D printing for
prototyping and unit production. With Industry 4.0, these technologies will be chosen for
their very high performance in producing small batches of customized products.
Decentralized systems will reduce transportation and inventory management costs.
x Augmented reality. Augmented-reality tools are still in their infancy, but they are
paving the way for new services. For example, they will provide operators with the real-time
information they need for faster decision-making and for improving work processes.
x Big data and analytics. There are still massive sets of untapped data in the industrial
world. Their analysis will optimize production quality, save energy, and improve services.
Here as well, the goal is to allow real-time decision-making.
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Called “Industry 4.0” in Germany, this manufacturing revolution is elsewhere reflected in
expressions such as “Made in China 2025” and “Manufacturing Renaissance” (US). This
concept is the subject of widespread discussion but its impact in today’s industry remains
relatively modest.
German experts reckon that we are now at 3.8, and that it will take a decade or so before we
arrive at 100% Industry 4.0 manufacturing. No company will move from 3.0 to 4.0 in a single
step. Despite its speed, this migration will take place in stages.
III. Literature overview
In his value chain theory, Porter (1998) stressed the importance the specific profile of
activities as a source for the long-term competitive advantage of a company and he used the
term company activities synonyms with business processes comprising supply chain
processes due to the cross-company character of value chains.
Today’s value chains, often evolved over longer periods, tend to be relatively static and the
supporting ICT systems exchange information along the value chain via a variety of
interfaces but usually there is no global overview from the product perspective that has been
manufactured and distributed (Brettel et al., 2014). M2M technology of Industry 4.0 together
with internet–linked production facilities and networked manufacturing systems allow to
identify and to trace single products during their entire life-cycle and even more because in
industry 4.0 it becomes possible for products to organise and choose their own way through
the production and related logistics processes (Bauer et al. 2014). The pilot project
“AMATRAK” at ISL Bremen showed that self–guided container transportation systems are
feasible where the containers are able to choose and book suitable and optimal transportations
means according to their own needs (ISL 2015). Thus Industry 4.0 leads to new supply chain
paradigms based on complex and intertwined manufacturing networks with changed roles of
designers, physical product suppliers, clients and logistics service providers.
As a consequence, Dujin et al. (2014) pointed out that Industry 4.0 value chain will undergo
the same fragmentation, which have emerged already before in other monolithic industries
like music or the media and that this fragmentation comes along with low entry barriers for
SMEs, i.e. the “slicing up” of the aggregate value chains, as well as the entry of new
countries bearing low labor costs (Belussi and Sedita 2010). Consequently, Industry 4.0 will
deliver greater flexibility and robustness and Industry 4.0–related value chains will be built of
flexible and adaptable business structures, which possess the permanent ability for internal
evolutionary developments in order to cope with a changing business environment (Koether
2006). Suitable business structures have been coined by Warnecke (1997) already in the
1990’s in his concept of a fractal company. A fractal enterprise is characterized by self-
similarity, self-organization, self-optimization, goal-orientation, and dynamics as winning
attributes of flexible and adaptable manufacturing organizations.
Warnecke (1997) stressed also intrapreneurship as a success factor of fractals and pointed out
that fractal organizations are linked via high performing ICT systems and they decide
individually about the type and scope of access to their data. These fractals enjoy the five
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properties, which have been pointed out by Warnecke and these five properties are also
compatible with the discussed characteristics of the Industry 4.0. The process of building a
fractal structure is based on relations between material, personal and information whereby
inside a fractal structure these relations are closer and more intensive than on the outside, so
that fractal building is comparable to mathematical cluster process based on the relationship
and weights of the resources. In the context of Industry 4.0 due to the increasing importance
of information, internet, cross–company interconnectivity in operations and supply chain
management the weight of information gains significant importance in the clustering process
whereby the supply chain comprises the entire product life-cycle process including product
design and development, operations management and logistics (Koether 2006).
Consequently, the internet access points within a supply chain as well as the cross–company
information interfaces together with their surrounding form structures of high internal
interaction and exchange of resources, which can be considered as fractals in the sense of
Warnecke since they are built according to the principle “join the parts around an information
access point of equal information level” and they represent timely, limited, stable, optimal
structures that are changing their shape and structure according to their local needs (Prause
2015b).
Thus coherence between the fractal concept of Warnecke and sub–organizations in Industry
4.0 can be identified as well as another observation of Warnecke stating that the information
intensity and complexity inside a fractal is higher than between fractals. Consequently, also
the workers in a fractal represent information processing individuals whose required skills
and knowledge levels have to be relatively homogenous and strongly related to the used
information quality of the fractal (Spath et al., 2013; Kagermann et al. 2013). Meanwhile
many scholars have been inspired by the fractal concept and developed extensions of the
fractal model in the direction of flexible relationship networks built of autonomous and
interdependent manufacturing fragments (Canavesio, Martinez 2007; Shin et al. 2009). Such
organizational expansions bring new responsibilities, new branches and growth, which gives
room for the integration of information and manufacturing structures in the context of
fractals, especially paving the way to the alliances of the fractals as they work together
(Panetto, Molina 2008; Raye 2012). Canavesio and Martinez (2007) formulated another
viewpoint on fractals by considering a fractal company as a multi-agent system, where each
fractal has the ability to observe its environment and make decisions based on the feedback.
The case study of a very successful Estonian production company for functional maritime
wear with global operations shall shortly illustrate the potential of a fractal approach and that
already nowadays fractal concepts have captured the interest of business life. The
management headquarters of the company are located in a rural area in Western Estonia
whereas the company operates in highly developed foreign markets like Germany, Sweden
and UK. The business operations are distributed all over the world comprising global
sourcing mainly in Europe and Asia, German R&D activities, cutting and production of
components in Estonia, sewing in Ukraine of the final products and sales activities outside
Estonia. The local units of the company benefit of the smart specialization advantages of the
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involved regions and the company units enjoy all characteristics of fractals, i.e. they are self-
similar, self-organizing, self-optimizing, goal-oriented, and dynamic, and even if they are
legally independent they are organizationally linked. This linkage of the company fractals is
realized by Internet, common goals and standardized trans-fractal processes, which are fixed
and illustrated by multi-media process documentation including e-learning tools that act as
blueprint for the business processes in a fractal and the interfaces between the fractals. By
doing so the company was able to become the European market leader in maritime functional
clothes and showed that Industry 4.0 concepts have been tested successfully in niche markets
already before Industry 4.0 reached the political and economic agenda. More details about the
case study can be found in Olaniyi et al. (2015).
In summary it can be concluded that fractals can be considered as the new structural and
organizational building blocks of Industry 4.0, where the different fractals are connected by
related information flows, which control the processes inside and between the networks of
fractals. By following Lee et al. (2014) this gluing function and the high importance of
information in Industry 4.0 will open new business opportunities in the field of big data since
every piece in the value chain is related and based on specific data characteristics touching
the 4V of big data (IBM 2015; Mayer-Schönberger, Cukier 2013).
IV. Sustainable business models for industry 4.0 in Viet Nam
1. Backward Integration Model
Backward integration is a form of vertical integration that involves the purchase of, or merger
with, suppliers up the supply chain. Companies pursue backward integration when it is
expected to result in improved efficiency and cost savings. For example, this type of
integration might cut transportation costs, improve profit margins and make the firm more
competitive.
FrieslandCampina Vietnam is a cooperation of Binh Duong Import and Export Corporation
and the leading Dutch dairy group - Royal FrieslandCampina. Friesland Campina has a
business model of cooperation with farmers (backward integration strategy), it helps them
know the value of their milk, increase their income and invest more in sustainable
development.
FrieslandCampina in collaboration with the Netherlands Agricultural Development
Organization (Agriterra) organize exchanges, training and exchange of experience in dairy
farming between Dutch farmers and Vietnamese farmers.
The expert guides are the excellent farmers in the Netherlands are strictly selected by
Agriterra. Before the training sessions, Dutch farmers through FrieslandCampina Vietnam
came to typical farms at the time of milking during the day to survey farmer and technician
practices of Vietnamese farmers. At the same time, milk sampling was performed to check
the number of total dormancy and stem cells at dairy farms.
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From the field survey, Dutch farmers will collaborate with experts in FrieslandCampina
Vietnam to provide a specific training program and follow the practice of dairy farming in
Vietnam.
The objective of the training program was to focus on improving milking techniques to
improve the incidence of total bovine sperm and stem cells in dairy cows in the farmer
households who supplied milk to FrieslandCampina Vietnam.
In addition, through the direct approach, Dutch farmers also train and advise Vietnamese
farmers on good dairy farming practices, conveying valuable experience from the cattle
industry. Dairy farmers in Vietnam can be more successful in dairy farming. As a result,
successful farmers will be the nucleus model, delivering experience and training to other
farmers, contributing to the development of dairy farming in Vietnam.
The training program is part of the cooperation between FrieslandCampina and Agriterra,
which was signed in August 2012, aimed at actively developing sustainable dairy farming in
the countries where the plant is located. FrieslandCampina, help improve the lives of farmers
and ensure the supply of raw materials for the plant.
Accordingly, Agriterra will coordinate with experts of FrieslandCampina to provide technical
assistance, exploit and develop the maximum potential of farms and farms through technical
training programs, , responsible for animal husbandry, applying successful breeding
experiences to improve dairy farming techniques, productivity and quality assurance of raw
milk in developing countries comparable to Europe standard.
2. Unilever’s sustainable business model
Unilever's sustainable business model is based on the following factors: promoting
sustainable growth, minimizing costs, minimizing risks throughout the entire production
process, especially risks in the supply chain; climate change and increased credibility.
In the project "For a healthier Vietnam", Unilever has implemented a number of programs to
improve public health such as: World Day for Handwashing with Soaps, protect Vietnamese
smile…
Unilever has made significant strides at the plant to reduce greenhouse gas emissions from
transportation to production by increasing efficiency and prioritizing the use of
environmentally-friendly energy sources. Biomass for boiler operation, solar power for
heating water and circulation for re-use of heat. Unilever's entire plant has been successful in
managing its waste streams and has closely monitored its cleaner production processes to
achieve its goal - no more rubbish buried in the environment. Unilever is continuing to work
with its partners (suppliers and service providers) to reduce, reuse and recycle waste.
Unilever has set ambitious goals:
• In cooperation with Ho Chi Minh City Urban Environmental One Member Limited
Company (CITENCO), a sustainable business model for collecting plastic packaging and
processing according to Solvolysic technology of Unilever.
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• Cooperate with CITENCO and other government agencies to promote
communication, improve people's awareness of waste separation at source and expand the
nation's waste treatment and recycling business.
• In cooperation with the Vietnam Chamber of Commerce and Industry (VCCI),
contribute to the development of a policy system for waste management, the development of
a revolving economic model, and the linking of other partners. water, businesses, social
organizations, media) to develop in the project.
Unilever is committed to "helping the Vietnamese people to live a better life", especially for
women and children. This is a cornerstone of the long-term strategic partnership between
Unilever Vietnam and the Vietnam Women's Union.
The program "Improving the quality of life for women through business development and
health education" aims to help poor women in all 63 provinces of Vietnam improve their
quality of life by helping them Better access to employment and education, the establishment
of small businesses with the support of the Microfinance Program and improved family
health care by raising awareness about health and hygiene. and nutrition.
x Perfect village model to build new rural areas
The Perfect Village model of the "New Rural Buildings" public-private partnership program
is a comprehensive demonstration of the public-private partnership programs between
Unilever and the Government of Vietnam.
In these impeccable villages, Unilever is focused on implementing all the activities and
initiatives of collaborative projects with individual departments, with the goal of jointly
improving local people's lives in the local community. in villages, in all fields of education,
health, material facilities, culture, environment, communication ... in accordance with the
objectives of the national target program on new rural construction.
This year, in addition to utilizing traditional media channels, Unilever researches and
launches digital media channels to provide information on health care, hygiene and nutrition
for many rural residents. the village.
In addition, Unilever has focused on developing new sustainable business models that
address issues of employment and empowerment for women. By 2020, Unilever will train,
train and create jobs for thousands of Vietnamese people in the distribution chain. This helps
Unilever reach more customers and consumers, as well as help businesses grow in a
sustainable way.
3. Corporate Social Responsibility model
Especially since the early 2000s, Asia has become a prominent focus of CSR research (see
Chapple & Moon, 2007). The topic is also considered as being of importance by ASEAN of
which Vietnam is a member.
In spite of regional initiatives, the main proponents for spreading CSR in Asia still are
Western TNCs (Debroux, 2006, 17) and up to now, the major CSR topic in Asian countries
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has been environmental standards (Chapple & Moon, 2007, 185; Debroux, 2008, 25). This is
also the case in Vietnam with a regularly cited scandal of corporate misbehaviour that had
been made public here in 2008. It refers to the violation of environmental standards by the
Taiwanese food manufacturer Vedan who was accused of illegally dumping waste in the Thi
Vai River from its Monosodium Glutamate (MSG) plant for about 14 years (Nguyen &
Pham, 2011).
The proposal of Brammer et al. (2012) to perceive of CSR as an institution of transnational
governance perfectly applies to the situation in Vietnam, because CSR is predominantly
pushed by international and transnational actors. At the same time, the topic has been taken
up as an important concern in the transition process from a planned to a so-called socialist
market economy. Thereby, the Doi Moi renovation of 1986 with the admittance and
encouragement of privately-owned enterprises besides state-owned enterprises was the initial
spark for a dynamic economic development with the aim for a better integration into the
global economy. The entrance of Vietnam to the WTO in 2007 was a further step in this
direction. The topic of CSR is understood to fit well into this overall policy goal of further
developing the Vietnamese economy to an export-orientated market economy.
Following the Vietnam Chamber of Commerce and Industry (VCCI), CSR was first
introduced by TNCs who asked their suppliers to implement codes of conduct (Nguyen,
2007). In 2003, the topic was brought to the Vietnamese government through the World
Bank. The country was a part of the World Bank’s program Strengthening developing
country governments’ engagement with Corporate Social Responsibility which “was set up to
explore the potential roles of the public sector within developing countries to encourage and
strengthen […] CSR” (Twose & Rao, 2003, 1). The research focused on the footwear and
garment industry which is the second largest export sector of the country after crude oil. The
results revealed governance challenges caused by contradictions between internal parameters,
such as national laws and codes of conduct of TNCs. Furthermore, the report highlighted that
the labor inspectorate needed to become more familiar with CSR demands. Opportunities
were seen in an increase of competitiveness of the involved enterprises. Also, a positive
relation between CSR implementation and law enforcement at the enterprise level was
emphasized. The report concluded with six recommendations to the Government of Vietnam,
with the Ministry of Labor, Invalids and Social Affairs (MOLISA) being addressed explicitly.
They were directed towards enhancing CSR in Vietnam, giving guidance to buyers and
harmonizing international demands with national and local conditions. However, it seems
that in the following years MOLISA did not take over an active role in this respect, and up to
now one major characteristic of CSR in Vietnam is the lack of a coherent public CSR policy.
Challenges may be the lack of a respective legal foundation, weak law enforcement and also
corruption may be hindering the development of such a policy. Today, there are attempts by
the government to enhance CSR through laws such as the labor code and the reform of the
union law. It also seems that TNCs and their associations such as the European and American
Chambers of Commerce more and more address the Vietnamese government not only to
establish a business-friendly surrounding for doing business in the country, but also raise
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social issues such as decent wages as a means against the increasing number of wild cat
strikes.
At present, the major public actor with respect to CSR seems to be the VCCI. However, also
the VCCI appears as a weak actor for entrenching CSR, partly because of a lack of external
funding and also corruption may be an issue. Nevertheless, the VCCI is active in many topic-
related international initiatives. The Global Compact Network Vietnam (GCNV), for
example, was launched in 2007 as the cooperation of the United Nations (UN) and the VCCI.
This endeavor was supported by the Spanish Agency for International Cooperation (AECI)
and Unilever Vietnam. According to the official website the GCNV has the goal “to be the
national corporate social responsibility centre of excellence”. Also, according to the website,
the GCNV had “over 95 active members, consisting of national and international companies,
non-governmental organizations (NGOs), academic, United Nations (UN) and government
agencies” in 2011. While the network was growing until 2010, it seems to be stagnating since
then. Moreover, the UNDP recently withdrew its support. It seems that up to now the GCVN
cannot take over the role of facilitator of CSR activities in Vietnam. An important
international initiative to spread the idea of CSR among Vietnamese enterprises is the project
of the United Nations Industrial Development Organization (UNIDO) Helping Vietnamese
SMEs Adapt and Adopt CSR for Improved Linkages with Global Supply Chains in
Sustainable Production. It is financed by the European Union and one important counterpart
from the Vietnamese side again is the VCCI. The aim of the project is to raise awareness and
entrench CSR standards in small and medium enterprises in Vietnam, thus enhancing their
competitiveness towards global buyers. In order to reach this aim, UNIDO is cooperating
with universities, ministries, civil society organizations and local networks.
Also other development agencies of Western donor countries and international organizations
have initiated projects to enhance CSR in Vietnam, and often VCCI is an important partner.
A very recent initiative that is financed by the US State Department is of the Fair Labor
Association (FLA), a multi-stakeholder initiative in the USA with transnational outreach.
FLA and VCCI agreed to a project to enhance social standards in 50 garment factories, who
are suppliers of big Western brand firms. Beside these factories and the buyers also MOLISA
and the Vietnam General Confederation of Labour (VGCL) are partners in the project.
Similar to the VCCI the VGCL is more or less a government body. While some deplore that
VGCL is not acting as a trade union standing up for workers’ rights, others also see a positive
development because VGCL branches are increasingly cooperating with unions from
Western countries thereby taking up the topic of CSR in order to strengthen labour rights.
Moreover, the government seems to be willing to grant the unions more autonomy via the
reform of trade union law, which may strengthen their role as stakeholder for workers’
interests (Chan & Wang, 2003).
According to the Bertelsmann Stiftung (2007, 182) the incorporation of further external
nonstate actors into agenda-setting, such as NGOs, is also important for the enhancement of
CSR in the country. In addition to transnational NGOs such as OXFAM, national NGOs play
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an increasing role in the institutionalization of CSR. Mostly, they are networking with
Western transnational NGOs. An example is the Center for Development and Integration
(CDI) which is also an active promoter of the ‘Business and Human Rights’ discourse to
Vietnam.
While these various transnational activities are meant to strengthen CSR as a mode of
governing the Vietnamese economy for the purpose of global market integration, we find
many expressions of philanthropy as more traditional commitments of business to the
communities and the overall society. It seems that these two types of CSR more or less
coexist. However, the tradition of philanthropy may be a fertile soil for the reception of CSR
in the Vietnamese society in the future.
V. Sustainable business models in the future in Vietnam
Business models describe rationales how companies create, deliver and capture value and the
process of constructing a business model is part of the business strategy (Hummel et al.,
2010). The importance of business model comprising the identification of strategic supply
and demand drivers, macroeconomic environment, megatrends, the level of innovation,
business sophistication, technological readiness, financial market development, labour market
efficiency, hard/soft infrastructure has been outlined and mentioned in a range of scientific
publications and research papers (Eckert 2014). Osterwalder and Pigneur (2010) identified
nine building blocks that make up a business model, the so-called “Business Canvas”, which
can be considered as an example of an operative business model approach comprising nine
elements: customer segments, value propositions, channels, customer relationships, revenue
sources, key resources, key activities, key partnerships and cost structure.
Since Industry 4.0 embraces “networked manufacturing”, “self-organizing adaptive logistics”
and “customer integrated engineering”, suitable business models will primarily be embedded
in highly dynamic business networks than restricted to a single company. Consequently, new
and sustainable business models have to ensure fairly shared business benefits among all
stakeholders in the value chain and might be more complex, open, collective and
evolutionary than the existing ones. Furthermore, they have to facilitate innovation, product
development, financing, reliability, risk, intellectual property and know-how protection in a
network environment. These considerations lead to different business areas for new business
models
1. The Real Value Model: Integrating the Cost of Environmental Markets into Consumer
Goods
When the value of environmental services is not commoditized and traded, its de facto price
is zero. Environmental services include carbon sequestration, which helps regulate our global
climate system; watershed filtration, which ensures water quality to local sources; and
biodiversity conservation, which increases ecosystem resilience and provides a host of other
direct benefits. Once a market is established for these services, prices can be assigned, the
services can be traded, and profits can be made.
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This is neither new nor small potatoes. For example, in 1995 the United States launched the
first large-scale market in trading permits, or “allowance” of sulfurdioxide (SO2) emissions.
The allowance trading system provides incentives for energy conservation and technology
innovation that can both lower the cost of compliance and yield pollution-prevention benefits.
In fact, the SO2 trading program has achieved reductions in emissions ahead of schedule in
its first phase. Since then, we’ve witnessed the creation of multimillion-dollar markets in
greenhouse gases, wetlands, clean water, and even in the conservation of endangered species.
As these markets develop, their power can be integrated into business models and harnessed
to help consumers make smart choices. Here’s an illustrative case study: Due to local
regulation in New South Wales, Australia, individuals can bundle their validated reduction in
carbon emissions and sell them on the NSW carbon market. An entrepreneurial company,
Easy Being Green, created a business trading energy-efficient light bulbs for individuals’
carbon credits. When the price for carbon was high, this was a nicely profitable business that
gave consumers a financial reward for switching to an energy-efficient product. Price
volatility in the carbon market caused this pioneering venture to go belly up. Indeed, failures
will always be a part of the pioneering landscape, especially when commodities have unstable
market support.
2. The Game-Changer Model: De-Materialization via Disruptive Technology
“Above-ground mining” is another example of a disruptive business model. The Belgium-
based materials technology group Umicore SA transformed itself from a “traditional”
provider of metals to its customers it mined the earth in Africa and Latin America for a wide
variety of materials. Today, it is able to recycle or recover 17 metals, of which seven are
precious metals. This model not only prevents increased environmental destruction from
continued mining, it rewards heavy industry for recycling their materials by creating a market
for them.
De-materialization can take us a fair way down the path toward sustainability. Most models
rely on technology. For example, as telephonic interfaces with banking become more
sophisticated, they will replace paper train, plane, and other forms of tickets—and possibly
car keys. Thus as technology advances, so will the opportunities to displace materials.
However, the real trick is to combine the benefits of de-materialization with a disruptive
business model that alters behavior for a significant reduction.
3. The Bikini Model: Sell Less, Make More
For most business leaders, profits are predicated on selling more. This model flips that
paradigm on its head and still results in a healthy profit. One of the fundamental challenges
we face in societies that are fed on overconsumption is how to foster client contentedness
with less especially after we have spent decades telling them they’ll be happy only if they
consume more. It’s a fine mess, but we do have some interesting pioneers to point the way.
The bikini is our inspiration because the less fabric involved, the more the consumer tends to
pay for it. Some companies have switched from selling products to selling services. A
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popular example of this model comes from Interface, which switched from selling carpets to
renting carpeting services. Another example comes from DuPont’s industrial paints business,
which switched from selling paint by volume to selling the service of painting cars. DuPont is
paid based on the number of cars painted, not the quantity of the paint used. By perfecting the
painting method and improving its paints, the company reduced the quantity of paint required
per car, which lowered both the car’s cost and its environmental footprint.
The Bikini Model, like the swimsuit, does more with less. Only in this case, the model results
not in greater sex appeal but in enhanced product durability and more opportunities to reuse
and recycle the commodity. Many of the products and services in this scenario will require a
disruptive business model. For example, I am waiting for the water company that stops
selling plastic bottles full of water, and sells empty durable (yet chic) bottles with built-in
filters so that we can fill with ordinary tap water when we’re on the go.
Bikinis aren’t jeans, and I, as a consumer, am not yet ready to pay more for jeans with less
material. However, I do welcome the day when I am rewarded for keeping my clothes
longer—in other words, for consuming less. These are the core behavioral changes that could
be supported by the carbon-credit scheme noted earlier. If the company splits the value of the
carbon savings, it could drive value from selling less, all the while keeping me well-covered.
This type of innovative business model is needed—now. Good companies can adapt and
innovate themselves out of any crisis, be it related to the economy or BSR | Sustainable
Business Models 4 the ecosystem. As we face both types of pressures, the companies that
innovate their business models—with sustainability in mind—will emerge from this crisis
stronger.
4. Open Innovation Models
Today, innovation is increasingly complex, fast, interactive, and requires the access to
external and internal knowledge in order to develop new or significantly improved good or
service, process or new marketing method, new organizational methods in business practice,
workplace organization or external relations. Firms acquire knowledge from different
sources, actors and geographical locations, combining it with internal knowledge and
competences. This innovation approach is in line with the internet and network orientation of
the Industry 4.0 concept and it embraces collective concepts in innovation, especially all
kinds of open innovation thinking. Following Bartl (2008), open innovation is referred to as a
concept, which underscores the way of going beyond the corporate boundaries, i.e. an active
strategic deployment of environmental clout or external factors of influence to increase its
own innovation potential. Crucial determinants of such concepts are the shift from the
industrial society to the network-based knowledge and communication society like it is
facilitated in Industry 4.0. As a result, innovation occurs and ideas are generated in such a
society through the interactive creation of value.
Prause and Thurner (2014) pointed out how developments in communication technology
have enabled new forms of user integration in the innovation processes and how virtual
communities, communities of practitioners and living labs can be used as a powerful tool to
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safeguard user oriented and accepted new technologies. This development recognizes cluster
aspects as well as the complexity and interdisciplinary of new R&D fields related to
sustainability and multimodality and can be applied in the Industry 4.0 value chain with the
targeted ICT infrastructure. Collaborative innovation approaches integrate the SME sector
with the complex open innovation approaches, where the access points for open innovation
are the product design and development fractals in the supply chain. The underlying business
model in open innovation activities is related to IPR issues. Hoffmann and Prause (2015)
highlighted that product-related data provided by users in virtual communities in form of
comments, feedbacks, and recommendations is already today an essential source of
innovation and that these data are basically freely accessible on the web endangering a
company’s legal position in patenting due to the risk of lack of novelty. So there are various
intellectual property issues protecting the user’s contribution, which are often not taken into
account by companies making use of the respective data, causing an eventual infringement of
protected rights and therefore the sustainability of the company’s innovation policy.
5. Service Design Models
Industry 4.0 paves the way for new business models covering also new sustainability
concepts of product life cycles. Derived sustainable business models can deliver marketing
advantages for sustainable products even if they are related with higher prices. Prause et al.
(2012) discussed the case study of a multiple useable teapot warmers developed by the
Sustainable Design Centre in Berlin in order to demonstrate a new service–design oriented
business model. The product “teapot warmer” enjoys already now a lot of characteristics of
Industry 4.0 because it is built in small series, consists of high quality steel parts and the full
life-cycle of the product is traceable since the manufacturing takes place by craftsmen in
Berlin and the selling and distribution is mainly realized via internet. The client is able to
customize his product according to his specific design requirements and the teapot warmer is
delivered in parts via postal mail to the client who only assembles the parts. Compared to
ordinary product, the price but also the quality of the sustainable teapot warmer is
significantly higher and the big difference to Industry 4.0 is that the manufacturing process is
fully realized by persons and not in a network of CPS. Nevertheless the teapot warmer can be
taken as a blueprint for a new business model in the context of Industry 4.0 due to the long
list of common characteristics with Industry 4.0 as well as the need for developing a
sophisticated marketing strategy for the sustainable teapot warmer in order to keep the high–
price product competitive.
The Sustainable Design Centre created a new business model based on the idea that the
interested client can buy the product for a fixed price including the option to give back the
teapot warmer to the producer after a certain time of use. This approach develops further the
well-known example of the recycling system of return bottles but now for an entire high–
quality product, which is still fully functioning. By virtue of the high quality of the material
and the stick-together technology of the product the producer is able to renovate the returned
parts and sell them again to the next client with the same business model. Therefore, this
particular product integrating design and technology along with its specific business model
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results in a sustainable product that enjoys a multiple product lifetime and becomes
competitive compared to traditional products that are bought and trashed after usage. It was
possible to realize this business model only because the whole product was created and sold
by one manufacturer, i.e. from Sustainable Design Centre.
Industry 4.0 opens now up the possibility to implement comparable business models also for
complex products with cross-company operations and a complex supply chain due to the
involvement of internet-use and CPS, which makes the full production process traceable and
transparent so that life-cycle oriented business models like the teapot warmer can be realized
also for sophisticated products. Such a business model represents the realization of a service
design concept where the customer does not primarily purchase itself a product but rather
buys the service the product or devices is realizing with the consequence that the product
design changes into service design (Scheider, Stickdorn 2011). In this sense service design
represents sustainable design since not the material product stands in the focus of the business
model but the service, which is realized by the product, which poses new challenges since
successful service design solutions have to be connected to a strong and coherent brand
identity and a smart business model (Kaivo-oja 2012).
6. E-Residency for Industry 4.0
The fusion of cyber–world and material world in Industry 4.0 leads to virtual structures in the
value and supply chains, which require organizational and managerial tasks for related cross-
company operations processes in networks touching manufacturing, logistics and distribution
(Sydow, Möllering, 2009). These management tasks are realized and controlled by
information flows within the Industry 4.0 networks and they are running parallel to the
physical value and supply chain flow (Simchi-Levi et al. 2007). Consequently, the physical
value streams in Industry 4.0 – related supply chains require an appropriate cyber – platform
to be able to control the parallel information streams and to handle the related business
administration tasks.
The Republic of Estonia is the first country to offer a transnational digital identity available
to anyone who is interested in administering a location-independent business online. This
sophisticated form of e-business is called “e-Residency” and offers a government-issued
digital identity and the opportunity to run a trusted company online, unleashing the world’s
entrepreneurial potential. The concept of e-residency is in line with ongoing approaches in
the context of Industry 4.0 trying to realize the fusion of the virtual and the real world, i.e. the
linkage between internet and manufacturing leading to concepts of smart supply chain
management.
The Estonian ministry of Economic Affairs and Communication initiated recently a study for
analyzing the pain points for entrepreneurs and SME’s participating in international supply
and value chains (e-Estonia 2015). The results of these investigations reveal that the e-
residency platform enables SMEs which are participating in Industry 4.0–supply chains to
control the information streams of material added value streams of supply chains and to
handle realted business administration tasks.
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