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Tuncalp, D.; Yildirim, N. Sustainable Entrepreneurship. Encyclopedia. Available online: https://encyclopedia.pub/entry/21323 (accessed on 03 July 2024).
Tuncalp D, Yildirim N. Sustainable Entrepreneurship. Encyclopedia. Available at: https://encyclopedia.pub/entry/21323. Accessed July 03, 2024.
Tuncalp, Deniz, Nihan Yildirim. "Sustainable Entrepreneurship" Encyclopedia, https://encyclopedia.pub/entry/21323 (accessed July 03, 2024).
Tuncalp, D., & Yildirim, N. (2022, April 02). Sustainable Entrepreneurship. In Encyclopedia. https://encyclopedia.pub/entry/21323
Tuncalp, Deniz and Nihan Yildirim. "Sustainable Entrepreneurship." Encyclopedia. Web. 02 April, 2022.
Sustainable Entrepreneurship
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This entry is adapted from the peer-reviewed paper 10.3390/su14073864

Sustainable entrepreneurship is venturing to shift business practices towards environmental and social sustainability. It gained popularity worldwide, particularly in the US and Europe, due to promoting regulations for some sustainability areas, the availability of impact investment, and the large-scale entrepreneurial ecosystem of the country.

sustainable entrepreneurship sustainability keyword co-occurrence

1. Introduction

The population and the socioeconomic activity of humans have already surpassed the Earth’s capacity to supply essential resources [1]. Change and innovation have become vital for establishing a sustainable economic order worldwide. Humanity needs better living conditions for everybody while maintaining the delicate ecological balance of the planet [2][3]. Services flowing from nature to the people create high levels of cost as they cause pollution, harm, and biodiversity loss. As custodians of natural ecosystems, sustainable entrepreneurs [4][5] venture to create significant economic value for the large-scale betterment of the Anthropocene [6]. They may also have pivotal roles in translating scientific and technological knowledge into innovative products and services in various industries and markets [7][8]. These roles seem necessary for a large-scale transition towards a sustainable future [9][10][11][12]. There are various research papers on the roles of sustainable entrepreneurs [13] and techniques to locate [12] or support them in entrepreneurial ecosystems [14] with extensive reviews and theoretical models [15][16][17].
However, sustainability-driven, sustainable, or sustainability entrepreneurship is relatively recent [18]. As an umbrella term, it covers a variety of approaches, including “green” entrepreneurship, “ecopreneurship” [19][20], “business social entrepreneurship” [21], or “sustainability-motivated” [22] entrepreneurship. However, the study could not locate any comprehensive review identifying the business landscape of sustainable entrepreneurship. This gap may be due to unavailable data and methodological limitations. Fielser et al. [13] argue that researchers have a preoccupation with studying the features of sustainable entrepreneurs and their potential to act as catalysts for sustainable development. However, the literature is also silent on which SDGs sustainable entrepreneurs serve. Several research areas covered “opportunities, motivations, competencies, strategies and business models”. However, the knowledge about their focus on different SDGs is still limited [13]. As the world needs urgent global actions towards a comprehensive sustainability transition [23], questions remain on how entrepreneurs respond to sustainability issues and how these responses change.
In exploring sustainable entrepreneurship on the business landscape, one has to acknowledge the particular position of the US. Sustainable entrepreneurship has a significant footprint in this country with the regulations that promote sustainability in some domains, available impact investment, and its large-scale entrepreneurial ecosystem [12][24][25]. Therefore, making a wholesale analysis of world countries without separate treatment of the US may hinder differences and shifts in the coverage of sustainable entrepreneurship in other countries.

2. Sustainable Entrepreneurship

2.1. The Coverage of Sustainable Entrepreneurship

Sustainable entrepreneurship is the “discovery and exploitation of economic opportunities through the generation of market disequilibria that initiate the transformation of a sector towards an environmentally and socially more sustainable state” [26] (p. 482). It involves “the process of discovering, evaluating, and exploiting economic opportunities that are present in market failures which detract from sustainability, including those that are environmentally relevant” [27] (p. 58). It primarily “combines opportunities and intentions to simultaneously create value from an economic, social and ecological perspective” [28] (p. 18). These entrepreneurs aim to balance their efforts in these three areas [4] and design their organisations [29]. It focuses “on the preservation of nature, life support, and community in the pursuit of perceived opportunities to bring into existence future products, processes, and services for gain”, where the gains includes “economic and non-economic gains to individuals, the economy, and society” [30] (p. 142).
The literature defines sustainable entrepreneurship as “the teleological process aiming at achieving sustainable development, by discovering, evaluating and exploiting opportunities and creating value that produces economic prosperity, social cohesion, and environmental protection” [31] (p. 2). It differs from regular entrepreneurship by its social, economic, and environmental dimensions [32] or the economic, psychological, social, and ecological consequences [7]. Sustainable entrepreneurs introduce innovative business models and develop revolutionary technologies through the concept of “creative destruction” [33][34]. It draws attention to four market imperfections: flawed pricing mechanisms, information asymmetries, inefficient firms, and externalities leading to unsustainable business and environmental degradation [7]. It is a controversial area following the legacy of sustainable development [35] (p. 441).
Researchers have suggested that sustainable entrepreneurs focus more on social issues than environmental problems [36]. They suggest green products are less likely to facilitate a scalable business [37]. Similarly, some have suggested that sustainable entrepreneurs prefer focusing on consumer-focused technologies to scale. For them, the recent sustainability trend in startups mainly involves consumer-focused technologies, with less interest in traditional or basic technologies [38].

2.2. Sustainable Entrepreneurship across Countries

A country’s favourable environment and supportive conditions significantly determine the success or failure of its startups, where sustainable entrepreneurs are not an exception. The distribution of the capital available for impact investment is uneven across countries [39][40]. Therefore, the availability of sustainability-sensitive capital makes the country context more critical for sustainability startups [12][41][42][43].
Previous literature emphasised the importance of countries’ innovation ecosystems in facilitating and regulating economic activity and their effects on productivity and innovation [44]. They focused on understanding the economic, social, and institutional background to explain the regional agglomeration patterns across regions and countries [44][45][46][47]. Research also dealt with the same issue within the “systems of innovation” concept for exploring regions and countries [44][48][49].
Political and social conditions in a country also make the location more critical for sustainable entrepreneurship. Entrepreneurial ecosystems in a country or a region affect business models’ selection and orientation towards specific sustainability topics [12]. The proximity between entrepreneurs with similar interests reduces R&D and transaction costs, increasing the availability of qualified human capital [50]. It enables knowledge spillovers and intellectual asset transitions, accelerating digital entrepreneurship [51]. Institutional settings shape entrepreneurs’ topical and technological choices in a particular region [12][52][53][54][55]. Therefore, it is crucial to grasp how countries and regions have specific differences in sustainable entrepreneurship.
The US has a sizeable sustainable entrepreneurship activity among world countries, as the largest country in venture capital [56]. The sample distribution among other countries also illustrates this phenomenon. Besides the size of the US economy [57], there are several reasons for the extent of sustainable entrepreneurship. For example, the US has various bodies that support sustainability, such as the Environmental Protection Agency (EPA) [58][59][60]. Sustainability-related regulations include the Clean Water Act, Clean Air Act, Clean Energy and Security Act, Endangered Species Act, Insecticide, Fungicide, Rodenticide Act, and Lacey Act. The government also actively funds projects and economic activity in biofuels or renewable energy [61]. Public policy plays a substantial role in channelling US institutional asset owners’ capital to impact investing for many years [25]. The country contributes more than 50% of the total value created into the global startup ecosystem. It hosts several of the world’s top startup ecosystems, including Silicon Valley, New York City, Boston, Los Angeles, and Seattle. These cities account for more than 70% of North America’s entrepreneurial ecosystem value [62]. Previous research has identified Boston, Houston, and Seattle as the top three locations for sustainable entrepreneurship in the US [12]. With more than two hundred specialised companies, San Francisco, including Silicon Valley as the innovation core of the US, holds the leadership position for the CleanTech vertical [24][63]. Silicon Valley has created a significant gap between the US and the other countries [63]. Therefore, this entry analyzed the US and the other countries separately.

2.3. Entrepreneurship for Sustainable Development Goals (SDGs)

The UN announced SDGs and declared the general responsibility of businesses in sustainability issues relatively recently in 2015 [64]. This move has acted as a driver for the general recognition of sustainable development challenges worldwide [12][13]. Later, the UN [65] extended this call by defining the sustainable development pillars as (1) driving economic growth, (2) promoting sustainable agriculture and innovation, (3) increasing social cohesion, (4) reducing inequalities, (5) introducing climate change mitigation technologies, and (6) establishing environmentally sustainable practices and consumption patterns.
Before the release of the UN’s sustainable development goals in 2017, Eurostat’s “Environmental Goods and Services Sector” classification for environmental protection activities (CEPA) or resource management activities (CReMA) mainly described the focus of sustainable entrepreneurship [9]. However, after the announcement of the UN SDGs, the scope has shifted to address them through innovation [12][33].
Previous studies provided some early insights into the focus areas of sustainable entrepreneurship. Tiba et al. [12] suggest sustainable entrepreneurs mainly target the “health and well-being” SDG. They argued that these entrepreneurs were primarily attracted to the comparatively higher earnings potential of businesses in the medical and pharmaceutical sectors and the number of health issues in urgent need of solutions. They also suggested that the SDG regarding quality education was the second most popular SDG.

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