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Chapter I
The Challenges of Sustainable Business
Development in The Post-Industrial
Society in the First Half of the 21st
Century
Vasja Roblek
Fizioterapevtika College, Slovenia
Ivan Erenda
TPV d.d., Slovenia
Maja Meško
Faculty of Management, University of Primorska, Slovenia
ABSTRACT
The purpose of the chapter is to find out the meaning of the sustainable development in the post-industrial
society in the first half of the 21st century. The financial crisis that started in the 2008 is an indicator how
short- term- profitability mind-sets and related strategies, policies and actions of individuals and individual
organizations can cause global economic, ecological and ethical crises. These events have contributed to
the judgement that most organizations operate on business models that are not sustainable.
The conceptual content contributes to the ongoing discussion about the increasingly important rule of
sustainable development as a major concern for the profit and non-profit sector that wish to develop the
policies that will enable low but sustainable growth of the society.
Keywords: Circular Economy, Industry 4.0, Post – Industrial Society, Sharing Economy, Sustainable Development,
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INTRODUCTION
Political leaders and managers must be aware that the world economy is now much greater than its natural
base. Managers should devote attention to ensuring sustainable growth, which is represented by the
establishment of innovative environments, which is a significant competitive challenge for regions and
countries. To ensure environments that enable the development of prosperous businesses and start-up
companies, political leaders and think tank organizations should focus on better care for the working
environment and the rules of the game, and less on particular processes (Van Oort & Lambooy, 2014).
Global warming and climate change have significant impacts on the environment. Organizations and people
have to adapt to the consequences of climate change if they wish to survive. Society and organizations are
looking for solutions within the concept of sustainable development, which will affect all levels of
contemporary organizations, whose task will be establishing and maintaining a close relationship with
global challenges (Roblek, Meško & Bertoncelj, 2013). Non-profit organizations, companies, managers,
politicians and socially active influencers have to consider the importance of the integration of
environmental responsibility in the context of socio-economic development issues, which will also affect
the organizational culture (Eteokleous, Leonidou & Katsikeas, 2016).
Only the effective use of natural and intellectual resources allows continuous improvements. Therefore, the
behaviour of business systems at all levels of leadership, management, and implementation of changes,
which will take creative employees who are involved in the processes of strategic thinking and can compare
values of creativity and innovation, and redundant employees will be laid off. Human resources thus become
the most valuable resource, which must be managed effectively (Delgado, Castro & Salvado, 2016).
The purpose of this chapter is to research the meaning of sustainable development in the post-industrial
society in the first half of the 21st century. The 2008-2009 financial crisis was an indicator of how shortterm profitability mind-sets and related strategies, policies, and actions of individuals and individual
organizations can cause global economic, ecological, and ethical crises. These events have contributed to
the conclusion that most organizations operate on business models that are not sustainable (Dominici,
Roblek & Lombardi, 2016; Scharmer & Kaufer, 2013).
The environmental changes and unsustainable and turbulent economic and social conditions represent key issues
for forming the next research question:
Which economic measures and strategies must leaders and managers take to ensure sustained economic
growth, so as to provide a sustainable and naturally harmonized development model?
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This chapter contributes to the ongoing discussion about the socio-economic politics and technological
developments that influence global structural changes. The world’s future economic growth will depend on
how society will manage existing limited resources and the complexity of their interactions. The efficient
use of resources is thus becoming a central issue for competitiveness. Using less water, less energy, and
less raw materials to produce products that can be reused or recycled makes sense in both the economic and
financial aspects. The solution to this is provided by a transition from a resource-intensive linear model
economy into the model of the resource-efficient circular economy. It is an economy that works in harmony
with nature, an economy in which the waste from one industry becomes the raw material for another. The
realization of this is a transition from our old habits and industrial production and consumption patterns.
Society must bear in mind that the environment is not an obstacle to economic growth. It brings innovation
to competitiveness issues, effective management of resources in a circular, low-carbon economy. It is a
prerequisite for the changed global conditions to create a situation in which competitive industrial
production may still be possible.
SOCIO-ECONOMIC CHANGES AND SUSTAINABLE DEVELOPMENT Global socioeconomics review
In the late 1990s, the communist system collapsed, and in the early 1990s ex-communist states adopted
privatization and market liberalization. At this time, globalization opened borders, which had a significant
influence on the Asian, African, and South American developing countries, which then began clearing a
path to the international financial and goods markets (Gilpin, 2002). The World Bank and International
Monetary Fund played a major role in the implementation of global liberal economic policy and integration
of global regulated markets (James & Soguk, 2014).
In today’s knowledge society, it is urgent to develop solutions for structural economic and political reforms.
The global financial crisis of 2008-2009 was an indicator of how the short-term profitability mindsets and
related strategies, policies, and actions of financial institutions, stock markets, and individuals can cause
global economic, ecological and ethical crises (Roblek, Meško, Pejić-Bach & Bertoncelj, 2014). The
consequences of this crisis have led to the breakdown of key business which resulted in a decreasing of
consumer demand estimated in trillions of U.S. dollars. Implications of weak demand led to the Great
Recession between 2008 and 2012 and influenced the European sovereign-debt crisis (Magdoff &Foster,
2014).
Before the financial crisis, advanced economies had recorded higher economic growth than “emerging” and
“developing” countries did. The financial crisis has changed this ratio in favour of emerging and developing
countries. The International Monetary Fund found data showing that advanced economies accounted for
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only 31% of global GDP while emerging and developing economies accounted for 69% of global GDP
from 2007 to 2014 (IMF, 2014; Virkar, 2015). Since the 1980s, the US and the EU as major economic
players have been losing some innovation advantages and some of the high-tech sectors (Chesbrough, 2006;
Drucker, 1985). Newcomers on the global market in the last 30 years have been Brazil, China, India,
Indonesia, Mexico, Taiwan, Turkey, Russia, South Korea, etc. Higher economic growth from 2007 to 2014
in emerging countries influenced the rise of the middle class with higher incomes (IMF, 2015). Research
by van der Vleuten and Kok (2014) showed that between 1820 to 2010 advanced economies, emerging and
development countries had increased education level and the purchasing power of wages but only a few
countries had reduced income inequality between their citizens.
Notwithstanding the economic growth, there have been (or still are) some countries such as China, Egypt,
Germany and Thailand, which in 2010 had almost the same income inequality as in 1820. Brazil and Mexico
had larger income inequality than in the time of Simon Bolivar. Only some of the richest countries, like
France and Japan, had lower income inequality in 2010 than in 1820. Post-1980 globalization had
influenced a decrease in income inequality between advanced economies and developing countries, but
globalization caused greater income inequality within countries (Moatsos et al., 2014). In this period, the
launching of computer technologies took place and consequently the transformation of “traditional heavy
industry” into the technological development-oriented economy (Roblek et al., 2014). The first wave of
globalization in the 1980s brought about not only the processes of urbanization and modernization but the
USA, Canada, and Europe also lost jobs because of the closing coal mines, labour-intensive industry, and
relocation of production in Asian or South American emerging economies (Hall & Barret, 2012). After the
recession in 2014, political and economic processes have occurred that can have a long-term influence on
the world economy:
-
Western political sanctions increased the Russian economy crisis, which is also caused by lower oil
prices (The Economist, 2015);
-
Uncertainty stemming from Brexit continues to deter investments in Great Britain. It is expected that
their economy will grow 0.3% in 2017 (Aceves, 2016);
-
Lower commodities prices pushed leading economies into deflation and struggling with low inflation.
Central banks reduced interest rates to low levels and, in some cases, they are now below zero.
-
Because of lower prices of commodities, the members of OPEC are faced with recession and currency
devaluation (Aceves, 2016);
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-
The economic concept that believed in the unlimited economic growth of the emerging countries of
Brazil, Russia, India and China known as “BRICs” changed into the “TICKs”. Brazil and Russia, which
are in deep recession, were replaced with the tech-heavy Taiwan and South Korea. The adaptation of
the technology is changing the nature of the emerging markets. The young consumers in TICKS
countries are adapting to technological changes, such as e-commerce and online shopping, much faster
than in the US (Johnson, 2016).
When the world is faced with low or even no economic growth, the key challenge of the concept of
prosperity without growth becomes a development of a new macroeconomics models of sustainable
development (Bermejo, 2014), which will provide processes of sustainable and naturally harmonized
development with a goal of social-economic and ecological welfare (Dominici, Roblek & Lombardi, 2016).
Technological developments and sustainable socio-economic environment
In the second decade of the 21st century, the world is faced with the fact that the third industrial revolution,
which brings new technological development, including increased use of robotics, ever more impacts not
only job migration as caused by globalization but the increasing loss of jobs. The third industrial revolution
was succeeded in 2011 by the concept of the fourth industrial revolution, based on the concepts and
technologies that include cyber-physical systems, the Internet of Things (IoT), and the Internet of Services
(IoS; Lasi, Fettke, Kemper, Feld & Hoffmann 2014; Ning & Liu, 2015), based on perpetual communication
via Internet that allows a continuous interaction and exchange of information not only between humans
(C2C) and humans and machines (C2M) but also between the machines themselves (M2M; Cooper &
James, 2009).
Frey and Osborne (2016) argued that jobs are at high risk of being automated in 47% of the occupational
categories into which work is customarily sorted. That includes accountancy, legal work, technical writing,
and many other white-collar occupations. The substitution of labour with automated production presents
benefits to the owners of capital. As a result, from 1980 to today, they have captured ever more of the
world’s income while the share going to employees has fallen (The Economist 2014).
With the development of digitization, the concept of digital sustainability and its components also needs to be
developed.
Digital sustainability
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One question is how to enable the sustainable access to data. It is about a process of enabling access to
content so that not only the are data retained, but they can also be rendered in future technical environments
(Mudogo, 2014). This is essential for the preservation of digital heritage, because according to the relevant
UNESCO guidelines (UNESCO, 2003), digital materials cannot be said to be preserved if access is lost.
Information and communication technology (ICT) and sustainability are connected through several fields
and their interdisciplinary approaches, which are combining methods from computing and communications
with methods from environmental and social sciences (Hilty & Aebischer, 2015). In this paper, authors are
focused on cybernetics, human behaviour and computers, digital sustainability, and smartness
sustainability.
The organization is a complex composition of various subsystems. All these subsystems are integrated into
a whole work towards achieving a common goal. Management cybernetics is concerned with questions
about what things do and how they interact with one another. In an organization, it covers a field of
knowledge that can help organizations to gain further knowledge in situations in which they cannot
otherwise obtain any concrete information (Potocan, Mulej & Kajzer, 2005).
The emergence of the second generation of cybernetic systems was influenced by the formation of an
interaction between the individual and its environment. The development of information technologies in
the 1970s led to the development of new channels of communication between various systems that attempt
to influence each other. The modern cybernetic science approach has bridged the micro-macro gap and led
to the integration of the individual with society (Bailey, 1994). Science introduces cybernetic theory on the
epistemological assumption that the only relevant knowledge is obtained by observation of external reality
(Easterby-Smith, Thorp & Lowe, 2002).
Human behaviour and computers
It should be taken into account that the ability to develop and acquire the basic concepts of learning about
using ICT and computer literacy plays a major role in the personal development and economic and social
development of society (Bisson, Stephenson & Vigurie, 2010).
The tools to study cognitive phenomena have been used for a few years now. For this purpose, computer simulations
are used, which explore the possibility of structuring human intelligence (Sun, 2008).
Technology companies aim to develop technologies that will allow computer visual recognition, speech recognition
and identification of promising molecules for designing new drugs. Apple’s virtual assistant Siri service already
offers a technology called ‘deep learning’, which is based on a service called ‘Nuance Communications’, and is
intended for voice recognition (Markoff, 2012).
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In the field of computer science, in the last 25 years, the Internet has been playing a critical role in the
development of higher-order thinking in tertiary environments, based on dialogue and asynchronous
textbased interaction that enables reflection and the composition of thoughtful answers.
Dialogue and language use are fundamental to higher forms of knowledge, processes of articulation, and
exchanges of ideas that lead to the very conceptualization of the contents. During innovation processes, it
is necessary to create the conditions to ensure that online forums and other social tools support the
development of higher level cognition. In this way, in business and social environments, it is possible to
devise cognitively demanding tasks so that individuals are encouraged to deal with problems (Fazel et al.,
2015).
Smartness sustainability
Industry 4.0 opens a new approach to digital sustainability. Sustainability and resource efficiency are
increasing in the focus of the design of smart cities and smart factories. Smart technologies monitor and
archive large amounts of data about human behaviour. The operators of ‘big data storage’ are expected to
respect ethical rules when using private information. These factors are fundamental framework conditions
for successful products (Roblek, Meško & Krapež, 2016).
According to the literature review, digital technologies are now used for creative expression in digital art
digitization of cultural and natural heritage, science, technology, and operations, and enable expression,
communication, social interaction, and education. Their expansion has led to the emergence of the digital
economy. In the digital economy, from 2008 onwards, economic and social activities have been increasingly
globally integrated, and they enabled technology platforms such as the internet, mobile and sensory systems
(Roblek, Meško, Bach & Bertoncelj, 2014).
Access to the Internet and digital technologies will play a major role in developing countries in the next ten
years, which represents a profitable investment area for managers. It is estimated for Africa that the
productivity through technological development will have brought 148 to 318 billion dollars of profit by
2025, which will have a positive effect on the growth of standards of living. The positive effect is also
expected in the state administration (ensuring transparency in administration), in financial services
(reduction in transaction costs, banking services for people who live a distance from settlements), education
(access to e-books and e-classrooms of the world’s best schools), health (Internet allows greater use of
diagnostic, treatment and distance education), retail and agriculture (new shopping experiences; Manyika
et al., 2013).
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SUSTAINABLE RESPONSIBILITY FOR EQUAL GLOBAL DEVELOPMENT
The question is how to enable a more balanced development and a more equitable distribution of income in
a world where global inequality is growing, with half of the world’s wealth now in the hands of just 1% of
the population (Kersley & Koutsoukis, 2016), where the neoliberal policy has long been destructive as it
appropriates natural resources for the purpose of high profits and leads to a restriction of human rights and
reduces wages, and where humanitarian crises occur because of the political consequences.
Globalization processes have contributed to the internationalization of competition, increased innovation
dynamics, and uncertainty in the markets. As more and more firms become global, + the most innovative
firms have incorporated global network into their DNA. Firms are exposed to disturbances or changes in
the external environment in which the potential risks arise due to various geopolitical, environmental,
economic and competitive changes (Dominici & Roblek, 2016; Kaplan & Mikes 2012).
The globalization processes are affected by human and environmental factors, which can be seen in the following
cases:
•
Human factors: A result of globalization migration is less demanding and poorly paid jobs in less
developed countries. As a result of this, people do the same job for much lower wages in worse
working conditions than in the country of the owner or client. Firms in development countries
ignore corporate social responsibility rules. The increasing demand for cheaper products and
services is forcing Western companies to search for new members of their supply chains in
countries like Uzbekistan, Moldova, Bangladesh, Pakistan, Cambodia and others. They procure
goods such as textiles, shoes, and technical products. However, the people there work in extremely
poor conditions bordering on slavery. Company owners exploit employees with tactics ranging
from breach of labour standards such as unpaid overtime and non-payment of minimum wages,
through to unsafe and abusive working conditions to (at the very bottom of the scale) forced labour
and slavery. In Bangladesh, the Rana Plaza factory building collapsed in 2013; this is the worst
ever industrial accident to hit the garment industry (The Guardian, 2013a). The second case is from
in 2013 in Cambodia when the ceiling fell at the Wing Star Shoes plant in Kampong Speu province.
In both cases, employees lost their lives because of the inadequate work conditions (The Guardian,
2013b).
•
Environmental factors: Human impact on the environment is seen in various forms. People leave
traces with their lives, the manufacturing process, consumption and lifestyle in a natural
environment, often with a negative impact on the environment. Due to the rapid growth of
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production on the global scale in the 21st century, we have arrived at the turning point when earth’s
natural resources are becoming increasingly unable to absorb the levels of pollution and
regeneration of natural resources required by the human economy (Goudie, 2013). World economic
growth is based on quantitative accelerated consumption of resource supplies. It is necessary to
realize that (due to the lack of natural resources, such as coal, oil, metals, wood etc. and the pollution
that these sources cause) this economic model has to be replaced with one based on renewable
sources. It is interesting to compare the information about the ecological footprint of global
production and consumption. Wackernagel et al. (2006) highlighted that while, we needed 0.7
hectares per person of the Earth for our production and consumption needs in 1961 (the ecological
footprint was, therefore, 0.7) in 2007, this figure was 2.7. This means that we have already exceeded
the organic load-carrying capacity of our planet and our lifestyle is no longer naturally harmonized
(Hannigan, 2014).
The concept of sustainability adapted to socio-economic characteristics (Figure 1) is based on the four cores
of sustainable development. They enable the development of long-term improvement of welfare
components, namely a responsible and balanced increase in economic, social, cultural and environmental
well-being of the present generation without compromising the ability of development and prosperity of
future generations (Bertoncelj, 2014). It is about the holistic approach because its model includes not only
the environmental dimensions of sustainability, but also the structural reforms that contain long-term
planning to ensure continuity in policy through social, political, economic and cultural dimensions of
sustainability (Alkier, Milojica & Roblek, 2015). Consequently, a valid and sustainable strategy should
include both the economic and environmental perspective and the development of the social-political and
cultural aspects of development (Gibson et al., 2013).
An interesting case of economic exploitation is the German model of building up an enormous competitive
advantage undercutting its Eurozone neighbours via low wage increases. People in Italy, Poland, the Czech
Republic, Slovakia, Slovenia, etc., where products are produced for German industry, have lower salaries
than workers in German companies do. The increased profit goes to the German owners (Lewis-Wren,
2015).
Figure 1 The concept of sustainability, adapted to the socioeconomic characteristic’s (author´s adaptation according to Alkier, Milojica
& Roblek, 2015; Bertoncelj, 2014)
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The authors consider the concept of sustainability (Figure 1) to be important for policy makers and managers
because it includes all factors that enable the implementation of structural reforms. The concept includes
components for preparing structural reforms on the basis of the long-term planning in order to provide
continuity in strategies through social, political, economic, and cultural dimensions of sustainability.
The development of multicultural societies based on the concept of cultural sustainability, an important part
of which is relations between members of different nations, culture and religions, who must be aware of the
importance of harmony in the common region. The purpose of all the inhabitants and their leaders must be
to ensure economic prosperity and equality awareness among the people of different cultures. It is important
for investors and managers to recognize the importance of the economic aspects of sustainability, along
with the social and environmental aspects when they prepare projects in rural areas. The purpose of these
projects should be preparing the sustainable concept for the use of resources (e.g. social capital, natural
resources, cultural resources) which will provide the competitive advantages that lead to viability and enable
existence and further development
In the continuation of this paper are presented cases that in recent years have had an impact on changes in
the political and economic sphere. It is the author’s opinion is that it is important that leaders and managers
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consider not only financial benefits for the companies but also added value that is based on the development
of society as a whole, measured through non-financial indicators (Table 1).
Table 1. Indicators of the society development in 21st centuries (Dominici, Roblek, Lombardi, 2016)
Group of Indicators
Social
(S)
Economic (Ec)
Environmental
(En)
Health
(H)
Indicators
S1: School enrolment rate
S2: Internet connectedness rate
S3: IT literacy rate
Ec1: Per capita GDP
Ec2: Per capita energy consumption
Ec3: GDP of the population employed in agriculture
Ec4: Exports of manufactured goods
Ec5: Share of manufacturing industries in the GDP
En1: Ecological carrying capacity
En2: OECD green growth indicator
En3: Ecological footprint
En4: Carbon footprint
H1: Life expectancy at birth
H2: Number of nurses per 1000 people
H3: Number of pharmacists per 1000 people
H4: Number of dentists per 1000 people
H5: Number of physicians per 1000 people
Cases of global challenges in society and economy
The Arab Spring revolution (2011), caused by the Western world, resulted in the disintegration and
destabilization of the North African and Middle East region. The world is presently faced with the
disintegration of Libya, the unstable situation in Iraq, a revolution in Syria and the establishment of the
Islamic State (ISIS), where the militant Sunni movement has conquered territory in western Iraq, eastern
Syria, and Libya (Laub, 2016). The rise of extremist Muslim forces that want to destabilize the entire region
leads to a growing refugee wave. In Europe, refugees have opened the issue of the impossibility of the
integration of Muslims into society and the question of taking into account social and religious norms.
Members of different cultural and ethnic groups all over the world are faced with the challenges of
multiculturalism and understand it to be a social challenge. This challenge is the need to focus on the
development of the concept of cultural sustainability as a development agenda for rural areas. It is necessary
to start from the thesis that cultural affiliation does not happen just by being born in the community, but
develops as a long-lasting process of experiencing, learning, understanding and a sense of common ground
according to the principles of equality (Rosenmann, Reese & Cameron, 2016). In the past 25 years, culture
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has become an interdependent part of sustainability, and as such is extremely greatly contributing to
sustainable development (Bertoncelj et al. 2014).
Advanced economies have no need to evaluate the development model which has to include the transfer of
best practices, business development, corporate social responsibility, and ethics. The African continent is
exposed to constant coups, ethnic massacres, as seen in Kenya, Somalia, Congo, and others. In North and
South Sudan, it is about unsustainable and conflict situation because of an open question of shared oil
revenues and border demarcation (BBC, 2016).
How important the factor the oil economy remained in the 21st century is shown in the oil crises that began
in the autumn of 2014, because of the depressed demand induced by the persisting global recession and
increasing oil extraction from non-traditional sources, such as shale in the US, that have brought global oil
prices down. Prices fell mainly due to large inventories. The Organization of the Petroleum Exporting
Countries (OPEC) did not want to reduce the quantity of oil production. The state members of OPEC, Iran,
Venezuela and Russia, which have established their economy on exports of commodities and consequently
ensured the social peace with high prices of oil, are faced with recession and currency devaluation (EIU
2015).
The structural reforms have to include promotions of the long-term planning to ensure continuity in policy
through political changes. There is need to change the development model based on fossil fuels with a
model based on the use of renewable energy sources. A new energy plan has to be based on renewable
energy sources, which will result in the reduction of the depletion of natural resources. Governments, local
municipalities in particular, have to prepare strategies based on a combination of measures regarding energy
efficiency and the development of renewable energies (e.g. solar energy, biomass, thermal power). Local
communities have to provide the conditions for starting collaboration between the fast-paced economy, the
green economy, and smart firms. The goals of the renewable energy strategy should be (Dominici, Roblek
& Lombardi, 2016):
-
Reduction of GHG emissions;
-
Share of renewable energy production;
-
Increase in energy efficiency;
-
Modal split of transport: e.g. increase in public transport using gas or electricity.
To ensure economic growth, emerging and developing countries use unsustainable economic models. One
of which is the export-driven model of newly industrialized South-East Asian countries (e.g. tiger cub
economies), based on exploiting natural wealth (e.g. minerals, oil, wood, water resources, etc.) and the use
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of fossil fuels (e.g. in China) causing a deterioration of the living environment of the population and
consequently contributing to worsening of health conditions (e.g. in China, Indonesia, Vietnam,
Philippines; Sachs, 2015). It should be noted that exponential growth of consumption and GDP based on
fossil fuels will no longer be possible in the future due to a lack of minerals.
In the 21st century, China was transformed into a major economic power, but it fell into a recession due to
its non-sustainable model, which no longer allowed the provision of equal development and economic
growth. China’s economy is slowing down, the cracks in the system can be seen, and abandoned cities are
found across the country. Mining was once the lifeblood of many Chinese cities, but the global demand for
coal has fallen. Chinese authorities say they will lay off up to six million workers from the factories and
mines. It is estimated that an enormous number of workers will fall ill in the future due to poor working
conditions. For example, workers in coal mines have only cotton masks, which cannot protect lungs against
coal dust. Due to the drop in steel prices on the world market, Chinese steel mills found themselves to be
billions of dollars in debt. However, the Chinese policy still supports the state steel industry and plans to
sell a share in nine state companies, to restart the economic cycle. Excess capacity and growing debt are
two problems faced by many state-owned companies. Many fear that the economic collapse of China could
hit the world economy harder than the economic crisis of 2008 did. The mistaken investments that had
apparently ensured economic growth are causing concern. Shenfu in the northeast of China is a ghost town
of epic proportions. At 22 square kilometres, and almost no inhabitants, construction of it was halted by the
economic slowdown. The fate of Shenfu reflects the economic problems of China. To attract tourists, the
local authorities spent $ 16 million building the city’s 60-storey monument, the ‘Circle of Life’. In Jinzhou,
construction of an artificial island, which is supposed to resemble the one in Dubai, began but was never
completed (Chao, 2016).
World political players (USA, Russia, China, and EU) and the multinationals that have influence in these
environments have to stop the conflicts that are generated on the basis of racial, religious and economic
reasons and affect the economic downturn of the regions and increase poverty. They have to start to take
into account the concept of social responsibility and the concept of business ethics. These concepts are
strongly inter-linked, and both focus on the welfare of stakeholders, with social responsibility representing
a broader view of ethics, containing the Carroll pyramid of social responsibility and the Schwartz-Carroll
tripartite model of corporate social responsibility.
Sustainable economic models in the 21st century
The economist Adizes (2004) termed the period prior to 1929 as Go-Go (rapid growth). The result was a breakout
of the American Stock Exchange and Keynesian legitimization of interference from the government in the economy.
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Similarly, some economists describe the period until 2008 one of rapid growth, which was largely caused by
derivative securities and led to the global financial and economic crisis (20082010). The consequences of low
growth rates still affect the changes in global markets.
During the 2008–2010 economic crisis and later, the processes of the integration of internet and digital
technologies were underway. The processes of the hybridization of the internet, digital signatures, semantic
technologies and business intelligence are leading to the development of social businesses (Schimmenti,
Galati & Borsellino, 2014). This is reflected in different behaviours of consumers and results in the
development of new business models, which include sustainability and the circular economy, the sharing
economy, and the rise of the fourth industrial revolution (Aryanasl et al., 2016; Roblek, Meško & Krapež,
2016).
The effective application of new knowledge for the purpose of efficiency and sustainable growth must
involve all the resources directed to the efficiency of processes in contemporary theory including
sustainable models (Table 2).
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Table 2. Sustainable models and their characteristic’s
Authors
Sustainable model
Hacker and
Pierson, 2011
Sharing economy
Characteristics
People have started to realize the costs of the ownership and sub-optimal
utilization of cars, real estate, and other goods. Innovative companies have
started to promote services based on a sharing economy, creating a shift in
the culture of possession of goods. The first applications of sharing
economies have been in durable goods, such as cars and apartments
The circular model requires firms to develop disruptive technology and
business models that are based on longevity, renewability, reuse, repair,
upgrade, refurbishment, servitization, capacity sharing, and
Esposito, Tse,
Circular economy
dematerialization. This means that they have to move from merely
costcutting, and start focusing on rethinking products and services as well as
customer propositions.
Industry 4.0
Development of the Internet of Things, considered by some a new industrial
revolution, was named “Industry 4.0” as a proposal for the development of a
new concept of German economic policy based on high-tech strategies. One
characteristic of Industry 4.0 is increased competitiveness through smart
equipment, making use of information about high-wage locations,
demographic changes, resources and energy efficiency, and urban
production. The consequences will be a loss of jobs and the creation of new
unforeseen ones.
and Soufani,
2015
Dais, 2014
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Nidumolu,
Prahalad, and
Rangaswami,
2009
A sustainable
organization
Sustainable development and increased uncertainty in the business
environment are forcing organizations to engage in the constant
reconstruction of comprehensive infrastructure as a strategic goal. This
renewal is based on a more flexible organizational structure (internal
environment) including the introduction of modern technologies for the
implementation of the content marketing and renovation of technological
innovations. By achieving their strategic objectives, organizations will be
affected by the increase in productivity, efficiency, sustainable value chain
and consequently, the development of economy and society. In such an
environment, it is difficult to define and determine the appropriate
boundaries of business (Cummings & Worley, 2015). Competitors do not
compete only with similar (or identical) business models. New ones are
emerging with different approaches, techniques, and concepts that
undermine the traditional rate-set market share.
Cosmi et al.,
2015;
Kammerlande
r et al, 2015;
Venema and
Rehman, 2007
Energy and climate
Energy and climate change are issues of critical importance in shaping a
sustainable future. Countries and companies are faced with adapting
investment in renewable/sustainable energy technologies. The transition
towards renewable and sustainable energy is being accompanied by a
transformation of communities. Many regions in the European Union wish to
achieve that all private households can be supplied with renewable
electricity. The goals of ambitious energy strategies have to include
reduction of GHG emissions, the share of renewable energy, increased
energy efficiency, and modal splits with increasing the public transport and
decreasing motorized private transport.
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The European
parliament and
the council of
the European
Union (2011)
Harper, 2015;
Knox, Agnew
and McCarthy,
2014
Clean and sustainable
production
Companies and consumers should be aware of the importance of corporate
social responsibility. Therefore, fair trade is increasingly becoming a
significant phenomenon. Fair trade is an alternative to conventional trade
and constitutes equitable trading systems for producers and workers in
developing countries (mainly in Africa, Asia, and Latin America) with
developed countries. Legislation of developing countries increasingly seeks
to ensure clean production. The European Union has a Restriction of
Hazardous Substances Directive, which regulates the use of lead in
electronics products. Firms that wish to produce and sell products on this
market have become focused on meeting emerging norms to gain more time
to experiment with materials, technologies, and processes. For the
realization of corporate social responsibility, norms will also need to be
provided by more education programs and by organizing consumers so that
they will force businesses to become sustainable.
Key drivers that have the most significant influence on changing and adapting not sustainable models into the
sustainable models in the first half of the 21st century are as follows (Figure 2):
Figure 2 The concept of sustainability, adapted to the socioeconomic characteristic’s (Roblek, Štok and Meško, 2016)
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1. Socio-demographic factors: (i) the young generation is more quickly adapted to the use of new
technologies. Generations Y and Z are highly computer literate. Differences in the use and handling
of ICT technologies between generations have effects on the performance of business processes
due to personality differences and norms between them.
New digital and sustainable economy models such as the application platform for the sharing
economy, green economy, smart cities, etc. are spreading faster in countries where children are
raised with the new technologies and technological literacy of older generations (Lee & Coughlin,
2015). Many higher educated and affluent older people adopt internet technologies in contrast with
less educated and lower income people. The major barriers and challenges faced by the elderly in
adapting to new technologies are: physical challenges to using technology, sceptical attitudes about
the benefits of technology, and difficulties learning to use new technologies (Smith, 2014). (ii)
Urbanization is the main factor for the development of new models that include sharing and circular
economies which are based on phenomena such as green cities, smart cities, etc. By 2030, 70% of
households will be urban around the world (Euromonitor International, 2014). Urbanization is
important because urban residents have higher incomes than their counterparts and they are more
educated. Thus, urbanization can result in greater consumer market gains.
In cities where there is a high density of residents and where the quality of their life depends on the
size of their living space, environment models such as the circular economy, sharing economy and
Industry 4.0. will play a major role in ensuring a higher quality of living conditions.
2. ICT Innovations: The current wave of digitization is gaining influence on changing the established
business models, with the complex cross-community interactions, digital media and semantic web
challenging the current consumers’ habits (Crnkovic, 2013). One of the most pressing business
challenges is to find ways to fully utilize internet potentials as part of the multi-channel marketing
paradigm (Khong et al., 2013). ICT innovation factors are changing consumers’ behaviour and the
traditionally structured supply chains. Their infrastructure is becoming more flexible in order to
implement on-demand marketing and technological innovations (Autry, Goldsby & Bell, 2013).
3. Global expansion with cultural limitations: The sharing economy and circular economies are
increasing globally. It should be emphasized that the sharing economy boom occurred in Asia and
South America, where urbanization has had significant influence (e.g. in Shanghai, Seoul, Rio de
Janeiro). In Asia and South America, the majority proportion of Generation Y (born between 1977
and 1994) live, and the highest popularity of the smartphones is recorded there (Australia ranks in
this same category). In emerging countries, though, the main limitation to growth is simply vast
poverty and thus low levels of education and poor internet infrastructure (Stiglitz, 2016).
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All participants in the process of launching models of new economies must be mindful of the advantages
and disadvantages brought by new technologies (figure 3). The challenge will be restructuring of jobs. The
less-demanding jobs are disappearing with increasing the launch of new smart technologies’. It is expected
that Industry 4.0 will cause the technological unemployment in the near future (Hungerland et al., 2015).
The field of education will have to come to adapt to the requirements of the development and use of new
technological solutions.
New Industry 4.0 technologies threaten to automate smart systems in the short term, leading to job losses.
At the same time, in highly developed digital societies, there is currently a shortage of experts for new
technologies and digital systems.
Figure 3: Factors important for implementation of the business models based on smart technologies
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In Figure 3, the key factors that are important for implementation of the business models based on smart
technologies are shown:
-
The key drivers that help managers to adopt the external factors include: socio-demographic
factors and an increasing number of innovations in information communication technologies and
their global expansion (with certain limitations). Semantic technology and the internet of things
(IoT) pursue profit and non-profit goals and develop new digital tools that enable the development
of new business models (e.g. sharing economy, circular economy).
-
Business strategies: The condition for achieving added value is the ability to speed the
transformation of innovative ideas into business cases. They have to take into account the
limitations of the social constraints, local legislation, (including obligatory taxes (e.g. VAT,
capital gain taxes), ensuring the safety of privacy information, etc.
-
Marketing: All participants in the processes of new business models must be mindful of the
advantages and disadvantages brought by collaborative marketing and trust between the
participants. Managers have to establish a policy to customer relationship management and
suppliers develop a marketing strategy that provides market positioning and design of brand
loyalty (Roblek et al., 2013).
Value added: managers have to recognize the importance of new business models, which provide not only
added value to both businesses and individuals in the form of intangible assets (social capital as an internal
adhesive for creation of the organizational culture or an external relationship agent), but also affect the
development of the products and services, raising the quality, focusing on the customers’ needs, and
increasing employability and the growth of incomes of both individuals and companies. For the success of
the business models, it is vital that the managers leading the processes establish mutual trust between all
participants. Managers have to implement the cost effectiveness and sustainable efficient digital business
solutions (e.g. rental of electric through mobile application) which bring value to customers (e.g. saving
time, lower transport costs). In the last years, the value has become an important tool for understanding the
impact of information technology on business. The company value chain includes suppliers, distribution
channels and consumers. Development of new technologies (e.g. Internet of Things) based on launching
the complex models among partners (e.g. project network) and consumers. These models are built on the
exchange of information through the Internet of Things (e.g. sensors, cloud computing, application
software). Knowledge that is transmitted through internet technologies will impact the value added
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provided by the information delivered between machines (e.g. smart factory: communication between
robots and machines), smart road (cars communicate between themselves and with the traffic control
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systems), smart shopping (refrigerator communicate with the computer in store), between machines and
customers or customers and people in service centre’s (e.g. emergency health unit, traffic control centre,
grocery store). All these information flows must be in real time, accurate, reliable and properly secured.
Managers must properly and fully use human resources because this is a major factor that will enable the
transformation of the intangible assets in innovative projects which will contribute to the company´s
intangible and financial value.
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In book: Managerial Strategies for Business Sustainability During Turbulent Times, Chapter: Ch. 1: Managerial
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DISCUSSION
The authors of this chapter applied a holistic approach in the context of defining the factors in the
business environment and society that have a significant impact on the managerial strategies, which will
help managers understand why and how they need to adopt or change the business processes with the
goal of transforming the intangible assets for the reorganization of the business models, which includes
the characteristics of society in the first part of the 21st century (Figure 2).
The Western world, along with Eastern superpowers, is faced with the fact that it must ensure social and
economic development in developing countries, which are experiencing low economic growth and
relatively high unemployment. The answers should be sought by new entrepreneurial mindsets, in which
the state, the market, and NGOs together shape the corporate politics. In doing so, we must bear in mind
that the multinationals do not represent the strategic advantages of countries. An example of this is seen
in Germany, whose its competitive advantage is not represented by multinationals such as BASF, BMW,
Daimler, and Siemens, but small and medium enterprises, the so-called Mittelstand. These are
companies that are mostly still in family ownership; the core concept is based on innovation and focuses
on the specific product. These companies are aware of the skills of their employees, because production
is not outsourced; only on the basis of their own knowledge and unique business processes, and
adaptation to the needs of consumers has added value increased and new value been created (Bertoncelj
et al. 2015; Welter 2014). Micro-, small and medium-sized enterprises constitute a fundamental
challenge for responsible development that will be based on innovative approaches, regardless of the
branch of activity. The importance of the German Mittelstand model, which promotes enhanced
innovations has begun to be realized by the Chinese, who began buying German family enterprises after
2008. State leaders and managers more recently realized that with these acquisitions becoming the
property of China they are losing control over the technological developments and domestic intellectual
knowledge. Consequently, this can lead to compromising the national economic interests of the
European Union and the dominance of China in the development of high technologies, which would
lead Europe to lower economic growth and higher unemployment.
The authors of this paper have prepared managerial implications for the new business models strategies,
and value added creation (Figure 3). The most important characteristic is that the key factors and
conditions that influenced the business development in the first half of the 21st century are
sociodemographic factors and an increasing number of innovations in information communication
technologies and their global expansion (with certain limitations).
A characteristic of the present time is the (social) innovation entrepreneurship based on research and
development, deregulation, increased funding with venture capital and contemporary derivatives as
crowdfunding and international protection of intellectual property (Bertoncelj et al., 2016).
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The introduction of new economic systems, such as the sharing economy and cycling economy is,
therefore, necessary because it will facilitate earnings and employees who will be the first to be affected
by the loss of existing jobs. In the post-industrial period, managers will have to pay attention to their
actions that affect people, their community, and their environment. State and local communities will
have more resources geared towards social innovative projects and promote growing trade between
people.
Policymakers, managers of the profit and non-profit organizations, at the macro level, as well as
companies and investors on the micro level, need to conceive of value creation in a holistic sense when
formulating strategy and allocating dwindling resources, especially since they seek to build on longterm
value. They must have in mind that the rapid development of developing countries represents a threat to
the ecosystem.
CONCLUSION
The capitalist system cannot continue to be based on mere profit and to be measured by quantitative
statistical data alone; a radical shift is needed to avert its collapse. It is necessary to be aware that every
natural process of growth is limited by the ecological carrying capacity.
Will it be necessary to realize that capitalism faces the question of how to proceed at low or even zero
growth? In zero or even negative growth, the economic system pushes the commodities prices to the
highest levels, the limited resilience of global ecosystems, utilization of cultivated land scarcity and
pollution of water resources and social pressures to avoid anthropogenic climate change (Segal & Cloete,
2012). The capitalist system is thus faced with the transition to a kind of regulated steady-state
capitalism. Tendencies of the decrease of profit rate in competitive markets are likely to lead to the
transformation of the final phase of capitalism in the post-capitalist society, which will be based on
sustainable consumption governance and non-profit business (Blauwhof, 2012; Buch-Hansen, 2014;
Murtaza, 2011). Development of a new social entrepreneurial model will allow the integration of
immigrants and the emergence of good practices that can be implemented in less developed areas.
Recognizing the environmental and social costs of the current paradigm of consumption is a way towards
sustainably transitioning to a global culture of sustainability. The paradigm shifts from maximizing
profits to maximizing well-being are still in progress. The development of the market economy towards
maximizing sustainable prosperity is proceeding in both developed and developing societies.
This chapter also offers a solid basis for decision-makers, strategists, and managers. The authors have
prepared managerial implications for the new business models strategies and value-added creation. It
suggests to managers that they have to incorporate sustainable development and new digital technologies
into the strategy base of the companies in ways which allow their adaptation to different regions where
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they can make choices and to protect their traditions, religion, lifestyles and environment from negative
impacts.
One particular limitation of the paper is that no research was done; however, the intention has been to
review existing literature and assess positions on the basis thereof. Further research should be focused
on the effect of this direction of technology on the ecosystem. Deeper investigation of this topic could
include a case study with elements of implementation, testing business benefits and social and
environmental benefits with real data.
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KEY TERMS AND DEFINITIONS
Brexit: The term for the he term for withdrawal the United Kingdom from the European Union.
Bricks: In economics, “BRICs” is a grouping acronym that refers to the countries of Brazil, Russia,
India and China, which are all deemed to be at a similar stage of newly advanced economic
development.
Circular economy: It is an industrial economy that promotes disruptive technology and business models
that are based on longevity, renewability, reuse, repair, upgrade, refurbishment, servitization, capacity
sharing, and dematerialization.
Industry 4.0: A proposal of the German government for the development of a new concept of German
economic policy based on high-tech strategies
Internet of things: It is a concept which is based on perpetual communication via the Internet that
allows a continuous interaction and exchange of information not only between humans (C2C) and
humans and machines (C2M) but also between the machines themselves.
Sharing economy: A hybrid market model of peer-to-peer exchange.
Social innovation: It is an innovation which is covering new ideas, concepts and strategies that respond
to the needs of society, such as working conditions, education, health, empowerment and community
development.
DOI: 10.4018/978-1-5225-2716-9
In book: Managerial Strategies for Business Sustainability During Turbulent Times, Chapter: Ch. 1: Managerial
Strategies for Business Sustainability during Turbulent Times The Challenges of Sustainable Business
Development in the Post-Industrial Society in the First Half of the 21st, Publisher: IGI Global, Editors: RamonaDiana Leon, pp.1-22
Ticks: It is an acronym that refers to the emergent high tech development countries of India, China,
Taiwan and South Korea.
DOI: 10.4018/978-1-5225-2716-9
In book: Managerial Strategies for Business Sustainability During Turbulent Times, Chapter: Ch. 1: Managerial
Strategies for Business Sustainability during Turbulent Times The Challenges of Sustainable Business
Development in the Post-Industrial Society in the First Half of the 21st, Publisher: IGI Global, Editors:
RamonaDiana Leon, pp.1-22