Sustainability and value creation: Changing the perception of environmental responsibility and economic benefits

Julie Pihl Dalbøl & Mads Lundgård Dalbøl

Student thesis: Master thesis

Abstract

In today‘s business, privately held companies are facing an increased competition along with environmental constraints, such as industry regulations and government legislation. Furthermore, the depletion of natural resources and the carbon emission levels act as even more threatening constraints in the longer run. Business theorists argue that companies implement sustainability to address and avoid these constraints. According to these, companies can do business while both achieving economic benefits and reducing their environmental impact. A contemporary study by The Boston Consulting Group shows that sustainability is a widely recognised business concept, however, most managers possess a mistaken perception of sustainability, and as a consequence companies in general struggle to integrate and exploit the potential of sustainability. The purpose of the thesis is to create knowledge, which elucidates the various ways companies can pursue sustainability, and how sustainability and value creation are interrelated. The research is guided by two questions; (1) how can companies make sustainability a strategic asset, and (2) how can sustainability create value for companies? The research is conducted in two parts. Part I presents a full-suit fact base in a four-step process; first we scope sustainability, second we explore recommended practices, third, we define ten sustainability steps, and address these in a strategic framework, and fourth, we argue for capability building as stepping-stones for sustainability to become a strategic asset. Part II presents sustainability value creation knowledge in a two-step process; first, we lay out a theoretical basis for value creation and sustainability, and second, we explore the ways sustainability can affect the value levers, margin improvement and revenue growth. The research method relies on a nuance of the resource-based view. This implies an understanding of sustainability as being accessible through resources and organisational capabilities, where their heterogeneity is a source of competitive advantage and value creation. We conclude that companies can make sustainability a strategic asset, when sustainability is considered as corporate sustainability, when it is acknowledged for its valuable effect, and when it is strategically integrated to build capabilities in all business areas of the company. As such, corporate sustainability deals with environmental problems as business issues, rather than as responsibility towards society. Sustainability entails both an action and a valuable effect, which is why sustainability is value creation. We also conclude that the integration of sustainability through acquisition, development and exploitation of resources and capabilities, can create value both when a value lever is actively addressed, but also due to the self-reinforcing effect that resources and capabilities enable.

EducationsMSc in Strategy, Organization and Leadership, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2011
Number of pages100