Sustainability-Oriented Innovations in large firms. SOI enabling organizational factors

Table of Content

1 Introduction
1.1 Research Question and Structure of the Thesis

2 Theoretical Foundations
2.1 Sustainable development
2.2 Corporate sustainability
2.3 Sustainability-oriented innovation
2.3.1 Definition of Sustainability-oriented innovation
2.3.2 Sustainability-Oriented vs. ‘Conventional’ Innovation
2.3.3 Contexts of Sustainability Oriented Innovation
2.4 Enabling Factors of SOI
2.4.1 Corporate culture
2.4.2 Organizational focus - Vision, strategy & managerial commitment
2.4.3 External collaborations for SOI
2.4.4 Knowledge management and Inter-functional Collaboration
2.4.5 Tools and methodologies for SOI processes

3 Methodology
3.1 Research Approach
3.2 Case selections
3.3 Data Collection and Analysis
3.4 Validity & Reliability

4 Empirical Findings
4.1 Case company profiles and strategic approaches to sustainability
4.2 Organizational focus
4.2.1 Sustainability as integral part of corporate strategy
4.2.2 Sustainability targets
4.2.3 Focus on the SDGs and Collaboration for SOI
4.3 External collaborations for SOI
4.3.1 Social investment programs - Autodesk and Cisco
4.3.1 Open innovation platforms - Enel and Novozymes
4.4 Knowledge management and Inter-functional Collaboration
4.5 Tools and methodologies for SOI processes
4.5.1 Neste’s handprint methodology
4.5.2 Enel’s CirculAbility Model
4.5.3 Assessing impact on the SDGs - Chr. Hansen and Novozymes

5 Discussion and Outlook
5.1 Discussion of Results
5.1.1 Organizational focus - Sustainability at the core
5.1.2 Tools and methodologies for SOI processes
5.1.3 External collaborations for SOI
5.1.4 Prevalence of the SDGs
5.2 Theoretical Contributions
5.3 Managerial Implications
5.4 Limitations and Future Research

6 Conclusion

References

Appendix

Abbreviations

Abstract

Over the last decade, there has been a growing interest in sustainability-oriented innovations by both academia and practice as a way to address mounting concerns about environmental degradation, social inequity, and over-consumption of earth’s resources. By conducting a multiple case study, this thesis contributes to the still emerging field by examining sustainability-oriented innovation and its enabling organizational factors in the context of large firms. The empirical results reveal an organizational focus on sustainability, which is characterized by strong market-orientation which is supported by a variety of tools and collaborative innovation partnerships. Moreover, the cases highlight a comprehensive integration of the UN sustainable development goals in several enabling factors of sustainability-oriented innovations.

Table of Figures

Figure 1: Sustainability-oriented innovation contexts

Figure 2: Materiality matrix Novozymes

Figure 3: Chr. Hansen 'SDG materiality matrix'

Figure 4: HelloScience's start-up incubation model

Figure 5: Handprint of Neste’s renewable diesel made from used cooking oil

Figure 6: Enel's CirculAbility Model: the five pillars and corresponding sub-indicators

List of Tables

Table 1: Selected definitions of innovations in the sustainability context

Table 2: Characteristics of 'Conventional' and Sustainability-Oriented Innovation

Table 3: Overview selected case companies

Table 4: Collected vision and purpose statements

Table 5: Quantified commercial sustainability targets related to the core business activities

1 Introduction

August 2nd and thereby 132 days early marked this year’s “Earth overshoot day”, the day when humanity’s demand for ecological resources in a given year exceeded the regeneratable amount in that period (Keane, 2020). The extraordinary growth of the global economy in recent decades has placed an enormous burden on global ecosystems (Altenburg & Pegels, 2012), resulting in unprecedented loss of biodiversity and potentially irreversible damage in our natural systems (Ambec & Lanoie, 2008). The “Earth overshoot day”, calculated each year by the Global Footprint Network, is only one of the ways to highlight the sustainability problems faced by humanity. Beside natural resource scarcity these include challenges such as climate change and social inequality. In 2015 the United Nations (UN) formalized key sustainability challenges in the 17 sustainable development goals (SDG) and accompanied them with a call for new collaborative solutions by governments, researchers, civil actors and businesses to tackle these problems (Bocken et al., 2019; George et al., 2016). As exemplified by the UNs call-out, corporations are facing growing expectations by stakeholders to take an active stand in tackling current social, economic, and environmental issues (Kramer & Porter, 2011; Nidumolu et al., 2009).

The growing pressure was initially considered as a burden by most managers, who predominantly framed in terms of regulations and added costs (Hart & Milstein, 2003). However, this view has been challenged in recent years. The integration of sustainability considerations in business practice is not necessarily associated with higher costs, but may provide a competitive advantage, differentiation and significantly improved corporate performance (Ambec & Lanoie, 2008; McWilliams & Siegel, 2001; Nidumolu et al., 2009). In order to retain their social license to operate and thrive, firms are required to adopt more sustainable practices and outputs in the future (R. Adams et al., 2016). As a result firms increasingly aim to adopt corporate sustainability practices to “address the environmental and social problems to which they are intrinsically entangled” (S Kennedy et al., 2013, p. 1).

Innovation has been increasingly recognized as a key organizational factor in enabling firms to pursue corporate sustainability practice (R. Baumgartner & Ebner, 2010; Bocken et al., 2019; Hall & Vredenburg, 2003; Klewitz & Hansen, 2014). One may even suggest, that “without innovation there will be no sustainability at all” (Boons et al., 2013, p. 5). Therefore unsurprisingly, sustainability-oriented innovations (SOI), that incorporate the three pillars of economic, environmental and social issues, have increasingly received attention (e.g. Adams et al., 2016; Klewitz & Hansen, 2014; Schaltegger et al., 2012).

Besides the recognized importance of innovations, extant literature also highlights the importance of large firms in achieving sustainable development due to their scale-based larger environmental and social impacts as well as the amount of available resources (Geels, 2011; MacKinnon & Cumbers, 2007; Shrivastava, 1995). However, while there are systematic reviews on SOI in general (R. Adams et al., 2016) and on SOI in small and medium sized enterprises (SMEs) (Klewitz & Hansen, 2014), sustainability-oriented innovation and its enabling factors in large firms have received little attention by scholars so far. As one single case, Ritala et al. (2018) studied the adoption of sustainable business models among S&P 500 firms by applying quantitative content analysis to study longitudinal data. However, research has yet to provide comprehensive insights into the underlying enabling factors of SOI in large firms.

1.1 Research Question and Structure of the Thesis

The established importance of large firms in the path to sustainable development underlines the necessity to find evidence how large firms enable sustainability-oriented innovation. To address the outlined research gap, this thesis will empirically explore the still emerging concept of sustainability-oriented innovation in the context of large firms. Specifically, this research seeks to gain insights into the enabling organizational factors of SOI in large firms by answering the following research question:

How do large firms enable sustainability-oriented innovation?

In this way the broad research question reflects the exploratory character of this study and provides the researcher with the opportunity to narrow the focus on specific organizational factors during the course of the data analysis. The thesis seeks to address the research question by first reviewing the literature in the field of sustainability and innovation. Thereafter, the methodology and choice of the qualitative research design is discussed. Further, the part also elaborates on the selection of the case companies. The next part represents the empirical findings and is followed by a discussion of the results. Concluding this thesis, the key findings will be reviewed, limitations of the research design discussed, and research and managerial implications highlighted.

2 Theoretical Foundations

This research aims to establish an in-depth understanding of how large firms engage in and foster SOI. To this end, the chapter comprises a review of the existing literature focused on sustainability, sustainability-oriented innovations, and its related concepts. Further, the chapter covers enabling factors of SOI identified in previous research.

2.1 Sustainable development

Before examining sustainability in the corporate context, it is vital to have a clearer understanding of the term ‘sustainable development’ and its background. Over the years multiple meanings have been attributed to the term sustainability and often differ depending on the respective context, ranging from multinational corporations to individuals contemplating the meaning of sustainable lifestyle (McNall, 2011). The rise to prominence of the sustainability concept can be regarded as a relatively recent development and traced back to the UN Conference on the human Environment in 1972 (W. M. Adams, 2006). With multiple different meanings emerging, defining the sustainability concept has proven to be a difficult and contested task. Influential proved to be the Brundtland report’s definition of sustainable development in 1987, which is the most cited definition of sustainability to date (Dyck & Silvestre, 2018; Stubbs & Cocklin, 2008). It defined sustainable development as: “Development that meets the needs of the present without compromising the ability offuture gen- erations to meet their own needs . . . ensure[s] socially responsible economic development while protecting the resources base and the environment for the benefit offuture generations'" (WCED, 1987, p. 43)

The Brundtland Report reports takes a global perspective and argues that sustainability must also be applied at all levels, i.e. in companies, regions, and economies. Further the report stipulates that sustainability can only be achieved simultaneously on the economic, ecological, and social dimensions and assigns equal importance to each of them. The three principles are interconnected, implying that sustainability will not be achieved if one dimension is ignored (Ranald, 2002). The economic principle requires the adequate production of resources for society in order to maintain a reasonable standard of living, the social-equity principle requires that everyone, independent of initial endowments, should be treated fairly and the environmental principle requires that society protects its environmental resources (Bansal, 2002).

The United Nation’s sustainable development goals (SDG), published in 2015, formalized the idea of sustainable development (United Nations, 2015). The 17 goals establish an agenda for the year 2030 and include more than 160 objectives relating to various dimensions ranging from the eradication of poverty over human rights and female empowerment to fighting climate change (cf. Appendix 9). The commitment to the SDG is grounded in the realization that mankind needs to take action to guarantee a sustainable future for the planet as a whole and the people inhabiting it (Voegtlin & Scherer, 2017). The United Nation’s agenda especially stresses the major responsibility of societal stakeholders such as businesses and the private sector to implement and review SDGs as sustainable development progresses (United Nations, 2015).

2.2 Corporate sustainability

Corporate sustainability, referring to sustainable development at the business level, has increasingly received attention from scholars, who highlight the central role businesses play in the path towards sustainable development (Bansal, 2005; R. Baumgartner & Ebner, 2010; Dyllick & Hockerts, 2002; Hahn et al., 2015; Shrivastava, 1995). While the path itself remains disputable, it is clear that private businesses, commanding the most resources and capabilities, is a pivotal stakeholder in this transition (Bansal, 2005; Kramer & Porter, 2011). The increasing efforts to achieve sustainable development and thereby impede the ongoing degradation of ecological and social systems are redefining the general conditions for business in the 21st century (Horton & Horton, 2019). As consumers increasingly regard sustainability efforts as an innate obligation for businesses (Janßen & Langen, 2017), they have emerged as a requirement for corporations to realize long-term growth (White, 2009). As posited by the popular ‘triple bottom line approach’ (Elkington, 1997), companies should aim for balanced performance along all three dimensions of sustainability. Increased sustainability efforts can yield tangible benefits in terms of building a better corporate reputation and differentiation from competitors (McWilliams & Siegel, 2001), as well as enable attracting talent, and creating a positive employee attitude (Bhattacharya et al., 2008; Maignan et al., 1999).

Referring back to the interconnected dimensions of sustainable development, it is imperative to understand that corporate sustainability requires a firm to aim for simultaneous performance within the economic, environmental and social dimensions (Bansal, 2005; R. Baumgartner & Ebner, 2010). Pursuing such an integrated approach may however prove to be difficult due to tensions that arise if sustainability is perceived differently by the firm and its socially and/or environmentally oriented stakeholders (Hahn et al., 2015). While for firms the benefits from engaging in social and environmental activities needs to outweigh their respective costs, making the ‘business case for sustainability (Schaltegger et al., 2012), externals stakeholder expect commitment beyond purely reducing negative impacts by firms’ activities (Gao & Bansal, 2013; Hahn et al., 2015). Following an integrated approach to corporate sustainability should generate win-win situations, with mutual benefits accruing to shareholders as well as external stakeholders (Hörisch et al., 2014). However, adopting an integrated approach requires awareness of interdependency between economic, environmental, and social sustainability and will therefore be discussed briefly in the next section.

Highlighting firms’ impacts on their natural environment, the environmental dimension of corporate sustainability is primarily concerned with negative environmental footprints such as resource use and pollution (R. Baumgartner & Ebner, 2010). Facing the finite supply of natural resources, business need to reduce resource consumption while maintaining similar levels of profitability. Therefore, firms engage in environmental management practices through either pollution control by for example reducing waste or pollution prevention at the source through the use of cleaner technologies (Shrivastava & Hart, 1995). The adoption of such practices can not only provide efficiency improvements, but may also result in improved product quality and a competitive advantage (Chang & Sam, 2015; Porter & Van der Linde, 1995).

The social dimensions of corporate sustainability is concerned with how business activities address societal needs, including incorporation of social interests in decision-making, preservation of the environment, fair treatment of employees and the creation of jobs and tax revenues (Dillard et al., 2008; Gladwin et al., 1995). As highlighted by its components, social sustainability relates to internal and external relations of the business, which accordingly both need to be addressed and cannot be considered in isolation (Lozano, 2015). Accordingly, firms need to fulfil the expectations and needs of employees as well as those of civil actors, such as NGOs and local communities to be perceived to socially sustainable.

As innovations has been acknowledged to play a paramount role in sustainable development and the organizational journey towards corporate sustainability (Hart & Milstein, 2003), the following chapters will examine literature in the field of SOI.

2.3 Sustainability-oriented innovation

The following subsections will consider the concept of sustainability-oriented innovations by exploring its definition, the differences to conventional innovations and the organizational context in which firms increasingly integrate SOIs.

2.3.1 Definition of Sustainability-oriented innovation

Over recent decades, innovations increasingly have gained importance for companies’ longterm survival and growth in environments characterized by intense competition and high levels of uncertainty (Gunday et al., 2011; Rennings, 2000; Teece, 2010). This development, coupled with increasing consumer awareness, tightening government regulations and growing stakeholder expectations in respect to sustainable development, has given rise to SOI as an important topic for companies as well as policy makers (R. Adams et al., 2016; Doran & Ryan, 2016). In corporate context, the role of ‘innovation’ is viewed as a potent factor in enabling firms to pursue an integrated corporate sustainability approach (Hall & Vredenburg, 2003; Klewitz & Hansen, 2014; Nidumolu et al., 2009). New products, technologies and organizational practices play a key role in addressing social and environmental issues (M. Arnold, 2017; Ghassim & Foss, 2020; Holmes & Smart, 2009).

With sustainability increasingly shaping innovation activities across different firms and sectors (Ghassim & Foss, 2020; Nidumolu et al., 2009), several different concepts have emerged that address innovation in sustainability contexts. Main concepts include green innovation (Y.-S. Chen et al., 2006; Schiederig et al., 2012), eco-innovation (Pujari, 2006),sustainability innovation (Boons et al., 2013; Bos-Brouwers, 2010) and sustainability-oriented innovation (SOI) (R. Adams et al., 2016). An overview of selected definitions is presented in Table 1. So far however, existing research has not reached a conceptual consensus (Carrillo-Hermosilla et al., 2010; Gunarathne, 2019).

Although the terms refer to a roughly similar phenomenon, they emphasize different aspects of sustainability. Initially the main research emphasis focused on eco-innovations, also interchangeably referred to as green, ecological or environmental innovations, and the rather narrow understanding of sustainable innovations which primarily aim at incorporating ecological aspects (R. Adams et al., 2016; Castiaux, 2012; Karakaya et al., 2014). In contrast to these concepts, SOI specifically broadens the scope to incorporate social performance alongside economic and environmental considerations (R. Adams et al., 2016; Schiederig et al., 2012).

In this research the definition of sustainability-oriented innovation by Adams et al. (2016, p. 181) is used, which captures a broad spectrum of sustainability-oriented innovations: “Sustainability-oriented innovation (SOI) involves making intentional changes to an organization's philosophy and values, as well as to its products, processes or practices, to serve the specific purpose of creating and realizing social and environmental value in addition to economic returns. ”

The definition encompasses SOIs in the form of new products and services, processes, technologies, organizational practices and even entirely new business models (R. Adams et al., 2016). The focus on sustainability ‘oriented' innovation makes reference to intentional dimension of the innovation process (R. Adams et al., 2016). This is significant as it differentiates such innovations from “sustainably beneficial normal innovations” (Cairillo-Hennosilla et al., 2010) where the sustainability beneficial aspect is an unintended byproduct. Although the used definition poshilates the tlnee-dimeusional approach, SOI often has one more dominant dimension (e.g. environmental or social focus) (Bocken, 2015b).

Table 1: Selected definitions of innovations in the sustainability context

Abbildung in dieser Leseprobe nicht enthalten

Finally, an important classification is necessary with regards to the distinction between incremental and radical SOI. Whereas incremental SOIs focusses on the minimization of negative impact and marginal improvements of the social, environmental, and economic status quo, radical SOI brings profound changes to markets and organizational structures based on substantial changes and new innovation processes (Bourreau et al., 2012; Carrillo-Hermosilla et al., 2010; Crossan & Apaydin, 2010; Inigo et al., 2020).

2.3.2 Sustainability-Oriented vs. ‘Conventional’ Innovation

As already mentioned, the integration of social, environmental and economic concerns distinguishes SOIs from ‘conventional’ innovations (R. Adams et al., 2012). Both types share the aim of innovating in operating procedures, processes, business models and system thinking as well as addressing technological change in general. Crucially however SOI is differentiated from ‘conventional’ innovation in terms of purpose and innovation process as the phases of integrating sustainability require a more integrated thinking (R. Adams et al., 2012). This is due to the complexity, which arises as a result of the socio-technical diversity inherent in sustainability contexts (Clarke & Roome, 1999). The integration of environmental and social considerations requires knowledge about regulations, technologies, and societal expectations (R. Adams et al., 2016; Ghassim & Foss, 2020; Ketata et al., 2015).

In addition to raised complexity, the associated uncertainty differentiates SOI from ‘conventional’ innovations (Hall & Vredenburg, 2003; S. Sharma, 2005). In case social and environmental improvements are achieved at the expense of increasing the cost of processes and products, the resulting innovations could face market and system failures (Foxon & Pearson, 2008; Ghassim & Foss, 2020). Especially disrupting and radical SOI requires longer time horizons and a higher capital intensity, which increases level of uncertainty involved (Jay & Gerard, 2015). Table 2 provides an overview of shared and additional characteristics of SOI compared with conventional innovations.

Table 2: Characteristics of 'Conventional' and Sustainability-Oriented Innovation1

Abbildung in dieser Leseprobe nicht enthalten

2.3.3 Contexts of Sustainability Oriented Innovation

As already hinted by the differentiation of radical and incremental SOI, there is broad scope of the ambitions and ways in which SOI is practiced. To capture the different contexts of SOI Adams et al. (2016) developed a model that depicts the chronological journey along the contexts in which firms integrate and pursue SOI (see Figure 1). These contexts are: Operational Optimization, Organizational Transformation and System Building. Along the journey towards system building, the potential to achieve ambitious sustainability targets as well as their degree of difficulty increases.

The first context, operational optimization, is characterized by internal, incremental SOI to reduce harm, typically as a response to regulatory stimuli (R. Adams et al., 2016). For companies in this context no or only moderate alterations of their business model are necessary to pursue the their sustainability strategy (Schaltegger et al., 2012). Within the second context, companies engage in wider reaching SOI and aim to create shared value through collaboration with their immediate stakeholders (R. Adams et al., 2016). While the core business is not challenged, firms occasionally modify one or more elements of the business model (Schaltegger et al., ¹ 2012). Finally, companies aiming for system-level changes, collaborate with multiple stakeholders and desire to have a net positive impact through radical SOI. For those firms sustainability is an integral part of their business operations and they are therefore open to fundamental changes to their business model (Schaltegger et al., 2012). Defining characteristics of such innovations are that they consider impacts across the entire value chain and can tackle sustainability-related challenges (Boons et al., 2013; Lin & Tseng, 2016; Tura et al., 2019), generate sustainable business value (R. Adams et al., 2016) and provide an overall positive impact on the system (Hansen et al., 2009). Especially, innovations on a systemic level, deliver the opportunity for radical SOI (Quist & Tukker, 2013). Such innovations may entail the repositioning of firms which in turn can lead to market and/or industry transformation and alter competition (Schaltegger & Wagner, 2011).

Abbildung in dieser Leseprobe nicht enthalten

Figure 1: Sustainability-oriented innovation contexts2

2.4 Enabling Factors of SOI

Previous research has identified various enabling factors of SOI, which will be reviewed in the following sections. In doing so, this research primarily builds on the conducted literature reviews by Adams et al. (2016), Inigo & Albareda (2016) and De Medeiros et al. (2014).

2.4.1 Corporate culture

Within literature there is a clear recognition that organizational culture has a strong influence on the implementation of sustainability aspects and thereby on the transition towards sustainable development (Islam et al., 2019; Weerts et al., 2018). Focusing on organizational culture is necessary as a fit between new management systems & approaches (i.e. sustainability) and the ² organizational culture increases the effectiveness and success of these new approaches (R. J. Baumgartner, 2009). The organizational culture is based on a system of formal and informal values that refer to views about which goals members should pursue and the demanded standards of behavior to achieve them (Schein, 2010). If shared across the organization, common values and norms promote the alignment of behaviors and decision-making with a firm’s sustainability efforts (Galpin et al., 2015; Hargett & Williams, 2009). If a solution based on a new judgment (i.e. sustainability aspects) works and is perceived as success by the group, it will be first transformed to a shared value and later to a shared assumption as part of the company culture (R. J. Baumgartner, 2009).

Therefore, to enable the necessary change towards sustainability and promote the search for external knowledge, an open-minded culture towards sustainability issues can be regarded as an essential prerequisite (Ketata et al., 2015; Kiesnere & Baumgartner, 2019). To promote and anchor sustainability as part of organizational values corporate leaders increasingly take steps to ensure their employees are aware of their efforts by dedicated value declarations or through organization-wide campaigns (Galpin et al., 2015). Moreover, an open culture also allows for the break-down of cultural barriers that may inhibit companies from pursuing SOI opportunities (De Medeiros et al., 2014).

Another driving factor of SOI promoting culture identified by previous research is accountability. Organizations seeking to promote SOI need to establish employee accountability that extends beyond shareholder wealth maximization and incorporated sustainability in target and appraisal systems (Geradts & Bocken, 2019). Such established incentive systems encourage employee commitment towards achieving ambitious targets for sustainable growth. (Hansen et al., 2009; Schaltegger et al., 2012). Accountability also extends to transparency about sustainability goals and their performance towards achieving them (Geradts & Bocken, 2019). Clearly defined and transparent performance measurement increases firm accountability and helps to set even more ambitious targets going forward (Hahn & Figge, 2018).

2.4.2 Organizational focus - Vision, strategy & managerial commitment

An organizational focus on sustainability represents important enabling factor of SOI. The basis is formed by a persuasive organizational vision in which sustainability constitutes an integral part (Hart, 1997; R. Baumgartner & Ebner, 2010). Clearly articulated and inspiring visions help to widen a corporate support base by shimmering stakeholders’ needs and aspirations, aligning individual differences in shared concerns about the organization’s future (Nanus, 1992; Kan- tabutra, 2020). A company’s vision is usually accompanied by a mission statement that communicates a company’s value proposition and establishes the priorities of the organization (Galpin et al., 2015; Jacopin & Fontrodona, 2009). The necessity of an integrative and inspiring vision is pronounced for SOI as it incorporates a broader range of stakeholders and possesses higher levels of uncertainty and risk, that need to be countered with a powerful narrative argument (Weissbrod, 2019; R. Adams et al., 2016).

To initiate strategic changes toward SOI a clear vision needs to be accompanied by managerial commitment and support (M. Arnold, 2010). As highlighted by Adams et al. (2016), executives committed to sustainable development need to display the firm’s commitment by actively communicating the values and goals related to sustainability in- and outside the boundaries of the organization (R. Adams et al., 2016). Top-management attention acts as an accelerator in corporate sustainability efforts (Nidumolu et al., 2009). Regarding corporate strategy, research dictates that companies, aiming to innovate for sustainability, should incorporate sustainability at the core of their strategy (R. J. Baumgartner & Rauter, 2017). Thereby, sustainability becomes a shaping logic and strategic norm (Hart, 1997). If articulated clearly, sustainability strategy can act as a trigger for SOI (R. Adams et al., 2016; Ayuso et al., 2011). As argued by Foxon and Pearson (2008), SOI itself should be an integral part of corporate strategy (Foxon & Pearson, 2008). To increase trust with and accountability towards stakeholders, firms should also make their sustainability strategies tangible and quantify targets whenever possible (Epstein & Buhovac, 2014; Rietbergen & Blok, 2010).

2.4.3 External collaborations for SOI

Extant literature makes it clear that companies pursuing SOI benefit from engaging with external stakeholders to a larger extent than companies pursuing traditional innovations (Juntunen et al., 2019; Klewitz et al., 2012; Messeni Petruzzelli et al., 2011). Stakeholders are defined as “any group or individual who can affect or is affected by the achievement of the organization’s objectives” (Freeman 1984, p. 46). An important characteristic of SOI are the types of stakeholders a company integrates into collaborative activity (Juntunen et al., 2019). To this end, researchers make the important distinction between primary and secondary stakeholders, in which the latter has received less attention (Ayuso et al., 2011). According to Clarkson (1995) primary stakeholders, such investors, employees, and suppliers, are those without their continuing and direct involvement or input the firm cannot persist as a going concern. Secondary stakeholders on the other hand can be defined as those who influence or are potentially influenced by the organization’s operations without being directly involved with the firm (Clarkson, 1995). These stakeholders for example include non-governmental organizations (NGOs), local communities, government agencies and academic institutions (Goodman et al., 2017).

Collaboration with various types of stakeholders offers firms the opportunity to access necessary knowledge for SOI, which cannot be gathered inside the organization’s boundaries (Behnam et al., 2018; Goodman et al., 2017). Primary stakeholders as part of the value chain, ranging from customers over suppliers to even competitors, have long been recognized to hold important knowledge in regards to SOI (R. Adams et al., 2016; Carrillo-Hermosilla et al., 2010; Goodman et al., 2017; Lim et al., 2010). However, researchers have increasingly identified the integration of secondary stakeholders as key success factors for SOI and call for multiple partnerships and collaborative alliances with primary and secondary stakeholders (De Marchi, 2012; De Medeiros et al., 2014; Goodman et al., 2017). Organizations need to be able to collaborate with both, primary and secondary stakeholders, as it is unclear where exactly the needed knowledge for SOI resides (Goodman et al., 2017).

Furthermore, the exchange of knowledge also needs to include ways for stakeholders to express their expectations regarding sustainability-related outcomes and to encourage their engagement towards those ends (Breuer et al., 2018; Hörisch et al., 2014). Therefore, the creation of suitable structures for this purpose is crucial (Breuer et al., 2018; Freudenreich et al., 2019; Greenwood, 2007). The knowledge exchange can take various forms ranging from inter-organizational contractual agreements such as joint ventures and alliances (Ben Arfi et al., 2018) over stakeholder dialogue fora and stakeholder advisory board to various co-creation activities, such as designthinking and co-creation workshops (Hansen & Grosse-Dunker, 2013; Senge et al., 2008). Especially with regard to innovations aiming at radical, system-level changes, societal and environmental stakeholders become key partners of the focal organization (Ayuso et al., 2011). For firms pursuing radical and system-level changes the firms boundaries become blurred due to the extent with which disruptive social and environmentally oriented stakeholders have become ingrained in order to co-create with them (R. Adams et al., 2016; Inigo et al., 2017).

Often companies seek to pursue SOI by means of open innovation³ and related constructs for which the importance of stakeholder integration becomes even more pronounced than in conventional innovations (Ayuso et al., 2011; Goodman et al., 2017; Juntunen et al., 2019). This is due to the often-radical characteristic of SOI that goes beyond new product development, involving product-service systems and or new business model, and that can lead to systemic-level changes (Juntunen et al., 2019). Open innovation involves organizations acquiring knowledge through partners and then together build the necessary skills to generate innovation and knowledge due to their complementarity (H. Chesbrough, 2006).

2.4.4 Knowledge management and Inter-functional Collaboration

Novel collaborations with external stakeholders, as discussed in the previous chapter can provide opportunities for SOI. However organizations may fail to capitalize on those opportunities, if they lack the internal knowledge management processes to convert these into innovation (R. Adams et al., 2016; Ayuso et al., 2011). Necessary knowledge for SOI needs to be collected, distributed and efficiently used throughout the organization (Ayuso et al., 2011). Due to the uniquely complex characteristics of SOI to consider environmental and social aspects additionally to economic ones, firms need to ensure the availability of the necessary knowledge for SOI (R. Adams et al., 2016). One way is to provide specific training to employees via formal learning structures such as platforms, workshops and sustainability programs (Ayuso et al., 2011; Messeni Petruzzelli et al., 2011). Other ways include addressing competence gaps through targeted recruitment, issuing sustainability guidelines and monitoring of compliance (R. Adams et al., 2016).

Another possibility for improving the knowledge base in relation to SOI are inter-functional collaborations, referring to the collaboration between different business units (Dangelico et al., 2017; De Medeiros et al., 2014; Ketata et al., 2015). In a similar vein to the necessity to involve different types of external stakeholders due to the complex knowledge required for SOI, firms also need to foster collaboration between different business areas to connect diverse competencies and create an organization-wide network (Boons & Lüdeke-Freund, 2013; Van Kleef & Roome, 2007). The continuous and proactive exchange between the different departments fosters the development of SOI innovations (De Medeiros et al., 2014; Inigo & Albareda, 2016). This inter-functional collaboration for SOI requires the involvement of nearly all organizational functions, including human resources, R&D, production, marketing, and sales (Ketata et al., 2015). Multidisciplinary teams formed on this basis enable the break-down of silo thinking and thereby increase the knowledge base available for SOI (Inigo & Albareda, 2016).

2.4.5 Tools and methodologies for SOI processes

To perform SOI at the firm level, new tools, methodologies, skills and technologies are required (Carrillo-Hermosilla et al., 2010; Inigo & Albareda, 2016). They are necessary to alter an organization’s innovation process in order to deliver sustainability, including the search for new ideas, their conversion into products and services and final value capture from them (R. Adams et al., 2016). One area of the research is concerned with the way companies improve the sustainability performance of their innovation processes. The employment of measurement tools such as environmental management systems, and impact minimization tools and technologies help companies to gather necessary data to enable them to monitor and reduce their environmental impact and resource consumption (Inigo & Albareda, 2016). These standardized tools are primarily available for the elements of the environmental dimension of sustainability, as for example the consumption of resources is easier to measure as elements of the social dimension such as employee morale and community engagement (Gunarathne, 2019).

Another way companies pursue SOI is through the inclusion of sustainability criteria in the development and design of new products and services. (R. Adams et al., 2016; Calik & Ba- durdeen, 2016). Product development methodologies help companies to ensure that environmental and social considerations are considered from inception as decisions in the early stages of product development largely determine its final socio-ecological impacts (Baumann et al., 2002; Hallstedt et al., 2013; McAloone & Tan, 2005). Studied product development methodologies include ecodesign (Pujari, 2006), circular product design (Bocken et al., 2016) as well as life-cycle analysis (Melville, 2010). However, currently there are no widely adopted tools or methods to consider triple-bottom-line value creation during product innovation processes (Weissbrod, 2019) and in existing methodologies social measures are underrepresented to environmental and economic ones (Zetterlund et al., 2016).

3 Methodology

In this chapter the chosen research methodology for this master thesis is addressed by presenting the research approach as well as the type of data analysis. Further, the selection of the studied companies is described and discussed. Finally, validity and reliability of the chosen research approach are examined.

3.1 Research Approach

Within academic research, two main research approaches can be distinguished: qualitative and quantitative research (Easterby-Smith et al., 2012; Tharenou et al., 2007). While the two approaches vary in number of ways, the most significant difference pertains to the collection and analysis of data (Saunders & Lewis, 2012). Compared to quantitative research, whereby findings are obtained by statistical procedures or other means of quantification, qualitative research makes use of a highly descriptive research method that uses an interpretive, naturalistic approach to its subject matter (Easterby-Smith et al., 2012). By taking this approach the research emphasizes the qualities of entities, i.e. the processes and meanings that occur naturally (Gephart Jr, 2004). Rather than being a specific set of techniques, qualitative research represents an approach that derives its appropriateness “from the nature of the social phenomena to be explored” (Morgan & Smircich, 1980, p. 491).

With regard to this master thesis, a qualitative research design is applied. This choice enables a focus on the written material, published by companies in relation to their reporting on sustainability management, to explore how they enable sustainability-oriented innovations. A qualitative approach offers a greater degree of flexibility and is thereby better suited to generate interesting findings (Bell et al., 2018; Gephart Jr, 2004). These advantages become especially potent considering the exploratory nature of this study, which aims to study organizational factors enabling SOI. As SOI is still an emergent concept, an exploratory study is deemed appropriate as such research is particularly potent to seek new insights, to question and asses phenomenon in a new light (Yin, 1994). Exploratory research also helps to clarify and establish an understanding of a certain topic or problem (Saunders & Lewis, 2012). Considering the aforementioned advantages of a qualitative research design, for the purpose of this thesis they outweigh the disadvantages labeled at qualitative strategies, such as too high subjectivity, difficulties in replicating and generalizing results as well as lack of transparency (Bell et al., 2018). However, one needs to be always cautious of those limiting features.

In order to address this thesis’s research question, a case study strategy is pursued. In line with its exploratory design, a case study strategy is highly suitable considering its ability to answer “why”, “how” and “what” questions (Saunders & Lewis, 2012). With the purpose of identifying cross-firm patterns in enabling factors of SOI and to make attempts at generalizing findings, a multi-case study design was chosen (Yin, 2009). Evidence obtained from multiple cases is “often considered more compelling, and the overall study is therefore regarded as being more robust” (Yin, 2009, p. 53). This thesis focuses on seven cases, which lies within the boundaries recommended by several researchers for such designs (Eisenhardt, 1989; Crabtree & Miller, 1992; Yin, 2009). Besides allowing for the analysis cross-organizational patterns, the relatively low number of cases enables the collection and analysis of more detailed information (Saunders & Lewis, 2012).

The study of the cases is conducted by using qualitative content analysis, which is one of the numerous research methods used to analyze text-based data. Qualitative content analysis seeks to generate knowledge and to establish an understanding of the processes and phenomena under study by analyzing the content or contextual meaning of the text (Hsieh & Shannon, 2005). In the context of sustainability especially and less frequently in the context of sustainability-oriented innovation research, qualitative content has been used to study secondary data (e.g. Mo- rioka et al., 2016; Stewart & Niero, 2018).

3.2 Case selections

In selecting the cases, the guiding principle should be the relevance to the research questions rather than representativeness (Carson et al., 2001). As stated by Eisenhardt (1989) “random selection of cases is neither necessary, not even preferable” (Eisenhardt, 1989, p. 537). Therefore, this study uses a purposive sampling technique to ensure the highest possible relevance to the research question. To increase the probability of obtaining valuable insights for organizational enabling factors of SOI, the case selection was based on firms exhibiting a high level of sustainability performance. This was assessed by the criteria of being indicated as sustainability leaders according to the Global 100 list, an annual ranking of the most sustainable companies worldwide. The ranking is conducted by a Toronto-based media and investment advisory firm, Corporate Knights based on their research results regarding the sustainable behavior of companies. The list is frequently used for sampling purposes due to its reputation as well as the breadth of the covered industries (e.g. Arbogast et al., 2012; Rahdari & Rostamy, 2015; Nawaz & Kof, 2019).

Corporate Kiüghts applies a rigorous methodology to evaluate the sustainability performance of international corporations. After applying various exclusion filters (number of published key indicators, financial figures, product categories, sanctions), the companies are evaluated and scored according to a maximum of 21 quantitative key indicators, covering factors such as sustainability disclosure rate, energy productivity, supplier sustainability score, women on board and innovation capacity, from which a cross-sectoral ranking of the 100 most sustainable companies is derived. The number of included companies per sector is fixed (Corporate Knights Inc., 2019). For the seven cases the companies were selected in descending order starting from the top-ranked company 0rsted. All companies have been sampled based on tins order with the exception of Dutch bank ING Groep NV. which was excluded due to the banking sectors rather intermediary role in enabling sustainable development through the allocation of funds. Instead 8th placed Enel S.p.A. was included in the case selection. Satisfying the desired sampling of large companies, all selected organizations are publicly traded companies with more than 1 billion annual USD revenue⁴, as this is one of the selection criteria of the Global 100 ranking (Corporate Knights Inc., 2019).

Table 3: Overview selected case companies

Abbildung in dieser Leseprobe nicht enthalten

3.3 Data Collection and Analysis

One of the major strengths of the case study method is the flexibility and adaptability it offers in terms of methods of data collection (Cavaye, 1996; Ponelis, 2015). The empirical data for this research was mainly gathered from the most recently published sustainability or, if integrated, annual reports, which represent the corporations’ main activities concerning sustainability for the last concluded financial year. Cut-off date for the inclusions of reports was August 1st, 2020. The publications were complemented by data from corporate websites concerning sustainability, such as corporate policy statements, project reports, investor presentations as well as press releases. Whenever possible, the companies’ information were supplemented with other sources, such as newspapers and websites from collaborating organizations. By including a variety of communication channels, this research ensures that companies’ sustainability activities can be studied in a comprehensive manner.

After the collection of the secondary data as outlined in the previous section, the collected data were grouped and structured into a number of categories during the analysis (Eisenhardt & Graebner, 2007). The categories were initially derived from the enabling factors of SOI in the theoretical foundation chapter. The categorization of the data provided a structured framework to identify themes and patterns and to further analyze the data (Bell et al., 2018). However, the researcher remained open to pivot to any new emerging factors if revealed during the analysis of the case material.

3.4 Validity & Reliability

As final aspect, researchers also need to discuss the validity and reliability of their results. Assessing the reliability of the data provided in sustainability reports required knowledge of the methods applied in the data collection process, but these were not made available to the public by the reporting entities. Therefore, it was not possible to evaluate the applied data collection methods. However, as the sustainability reporting of the selected case companies was already screened as part of the Global 100 evaluation process, it was assumed to be of high quality, thereby increasing the possibility of obtaining truthful results. Other secondary data obtained from corporate websites was evaluated on consistency with the information from company’s’ reports and, whenever possible, triangulated with newspaper articles, third-party data from collaborating entities and intergovernmental organizations such as United Nation organizations.

4 Empirical Findings

This chapter will present the research findings, which were gathered during the research process outlined beforehand. When appropriate, finding will be accompanied and supported by quotes from the sustainability reports and additional data sources. The structure of the chapter follows the established enabling factors of SOI identified during the literature review, apart from organizational culture for which implications of the findings will be considered in part during the discussion chapter. If not indicated otherwise, the sources of the findings are obtained from the most recent sustainability reports as outlined by the section on data collection and analysis. Before examining the cases, each company and their strategic approaches to sustainability will receive a short introduction in the following section.

4.1 Case company profiles and strategic approaches to sustainability

Orsted develops, constructs, and operates offshore and onshore wind farms, bioenergy plants, energy storage facilities, and waste-to-energy solutions. Formerly known as DONG Energy A/S, the company changed its name to 0rsted A/S in November 2017. At the same time the company announced its intention to transition to renewable energy, divesting and closing its oil and gas business. Today 0rsted operates through three segments: Offshore, Onshore, and Markets & Bioenergy. Ranked first in the Global 100 ranking, 0rsted has announced its vision for a “world that runs entirely on green energy” (0rsted A/S, 2020, p. 7). The company already aims to be carbon-neutral by 2025 in scope 1 and 2 emissions⁵, referring to emissions stemming from their own energy production, energy consumption as well as operations and administration. 0rsted has identified decommissioning of their final coal plants and the increase of certified biomass as key enablers to reach their target. In addition, 0rsted has announced targets to increase their renewable energy capacity by more than 250% by 2030⁶. With its 2025 carbonneutral target being close, 0rsted has committed to a net-zero carbon footprint, including all up-stream and downstream emissions by 2040 (0rsted A/S, 2020).

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¹ Adapted from Jay & Gerad (2015).

² Taken from Adams et al. (2016, p. 185)

³ Open innovation can be defined as “a distributed innovation process based on purposively managed knowledge flows across organizational boundaries, using pecuniary and non-pecuniary mechanisms in line with the organization’s business model” (Chesbrough et al., 2014, p. 17)

⁴ Revenue is purchasing power parity adjusted.

⁵ To better understand the source of emissions, they are broken down into three categories by the Greenhouse Gas Protocol (GGP). Scope 1 includes all direct emissions from the activities of an organization or under their control. Indirect Emissions from electricity purchased and consumed by the organization are included in Scope 2. Finally, Scope 3 covers all other indirect emissions occuring from sources that the organization does not own or control (Greenhouse

⁶ Compared to baseline FY 2019 levels.