NEW RESEARCH | How to create sustainable and competitive businesses

Businesses are major climate culprits – but a transition is possible and those who invest in sustainable innovations can see huge successes. But the right conditions are needed. Former Norsi PhD student Fanny Hermundsdottir explains how.

Congratulations on your dissertation! What have you studied?

– My doctoral thesis is about how companies, by investing in sustainable innovations, can contribute to solving the environmental and social sustainability challenges the world is facing, while maintaining their competitiveness. Businesses consume a lot of resources and contribute significantly to climate emissions, and have a wider role than just creating value for themselves. If they are to survive in the future, they need to take responsibility for the environment and society around them.

– At the same time, we cannot take for granted that companies will invest in sustainable innovations if they are not competitive for the company.

What types of sustainable innovations exist?

– Eco-innovations can be divided into new products, processes or organizational innovations. Product innovations are often new products that reduce material or energy consumption. Process innovations can be, for example, new processes that lead to reduced emissions, waste, energy and materials or resources, reducing the consumption of water, electricity, gas and oil. New organizational innovations can be the introduction of environmental management, green marketing or other new organizational practices.

So what are the main findings of your thesis?

– The main practical results are that sustainable innovations can significantly increase the competitiveness of companies through increased profits, sales and market share – or new market opportunities. Companies can also achieve other non-financial benefits such as a better reputation among stakeholders, a stronger brand and higher customer satisfaction.

– Sustainable innovations also often lead to reduced costs in the company due to reduced consumption of materials and energy, among other things. But also, by meeting societal and stakeholder demands for sustainability and staying ahead of future sustainability regulations, the company reduces future risks.

But what does it take for corporate sustainability initiatives to have a real positive impact on the sustainability challenges we face? Surely it can never be enough for a few companies to invest here and there?

– If we really want to solve the sustainability challenges, we need to get all businesses on board. Only when we reach a critical mass of companies developing sustainable innovations can we solve the climate and social challenges we face. We will also achieve more economies of scale and more knowledge sharing between more companies. It makes it cheaper and less risky to invest in sustainable innovations.

– And the companies that have chosen not to invest will be the losers, forced to adapt to ensure their survival.

You say that regulation is needed to get the shift going in earnest. What are the main types of regulation?

– Due to complexity, market challenges, time pressure and incomplete information, we cannot assume that companies will invest in new sustainability innovations on their own. This is why regulations are needed – but they must promote the competitiveness and value creation of businesses.

– It is important that new rules give companies enough time to figure out how to innovate and solve the sustainability challenges facing their industry. Regulation is also important to reduce, for example, market barriers and to facilitate business, for example by raising awareness of sustainability and promoting cooperation between companies and sectors.

– We should also remember that for companies to be able to develop sustainable innovations, financial support is crucial. Few companies can finance these themselves – especially radical innovations.

What are your main messages to entrepreneurs?

– I cannot stress enough how important it is for businesses to work together. No single company can solve sustainability challenges on its own. Instead, companies and industries need to work together and share knowledge and resources to find good solutions to sustainability challenges.

– Implementing sustainability in your overall strategies is a good start to getting started.

Contact fanny.hermundsdottir@ntnu.no

This article is produced in collaboration with Norsi.

More about the thesis and Norsi
Fanny Hermundsdottir recently defended her PhD at NTNU in Norway with the thesis Sustainability innovations: The role of sustainability innovations in solving the sustainability challenges and increasing firm competitiveness. During her PhD studies, she participated in the Nordic Research School in Innovation and Entrepreneurship (Norsi) research network. It is a research school for PhD students in the Nordic countries in the field of innovation and entrepreneurship. Read more about Norsi.

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