The Sustainable Development Goals as Vehicle for Business Model Innovation: A Multiple Case Study of Danfoss Grundfos Novo Nordisk and Ørsted

Abstract

In September 2015, all 193 Member States of the United Nations agreed upon 17 Sustainable Development Goals (SDGs). A distinctive feature of this new agenda is the call upon the private sector to develop innovative solutions that contribute to sustainable development. Three years after the adoption of the global goals, little is known about the private sector’s implementation of the SDGs.
The aim of the present study is to approach the literature gap by adopting a business model perspective. Several stakeholders have prompted companies to innovate their business models in reaction to the SDGs, but academic research exploring how companies follow this call is lacking. To explore how these innovations of business models are carried out by companies, a multiple case study of four large Danish firms was conducted. All companies were committed to sustainable development already before the SDGs were agreed upon and can be considered early movers in adopting the new goals for sustainable development. Sampling is based on a screening of annual reports and sustainability reports to make sure that the case study companies had already adopted the SDGs. Based on Osterwalder and Pigneur’s (2010) Business Model Canvas a new data collection method was developed and applied to capture companies’ reactions to the SDGs. During qualitative in-depth interviews with company representatives, two canvasses were developed per case company that depict the business model before and after the adoption of the SDGs, respectively. The primary data from the interviews was triangulated with additional company publications. Differences between the two canvasses show how business model innovation has occurred in reaction to the SDGs.
Based on a literature review of business model and sustainable development literature, two relevant dimensions for describing and classifying business model innovation in reaction to the SDGs were identified. These are (1) the affected elements of the business model and (2) the mechanisms which the companies apply to embed sustainable development in the business models. Accordingly, four propositions and a new classification tool were developed and tested. This classification tool allows to capture and compare companies’ reaction to the SDGs in terms of business model innovation.
The findings suggest that the SDGs represent a driver of business model innovation for this sample of large Danish companies. In reaction to the SDGs, the companies tend to innovate the majority of their business model building blocks. Furthermore, they employ environmental, social and economic mechanisms for embedding sustainable development in their business models. Thereby, the companies account for the triple bottom-line understanding of sustainable development on which the SDGs are based. Although there is no one-size-fits-all approach for business model innovation in reaction to the SDGs all companies innovate their key partnerships and adopt mechanisms to improve energy efficiency, use renewable energy, adopt a stewardship role and scale up solutions. Additionally, it can be noted that large Danish firms’ business model innovation is rather incremental than radical. Four complementary factors that may explain the given business model innovation can be identified. These are (1) the relevance of the SDGs as driver of business model innovation, (2) the fit between previously existing business models and the SDGs, (3) the impact of company size and (4) the impact of time on business model innovation in reaction to the SDGs.