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Du, M.; Qu, X. Digital Transformation in Enterprise Sustainable Development. Encyclopedia. Available online: https://encyclopedia.pub/entry/54681 (accessed on 03 May 2024).
Du M, Qu X. Digital Transformation in Enterprise Sustainable Development. Encyclopedia. Available at: https://encyclopedia.pub/entry/54681. Accessed May 03, 2024.
Du, Meijie, Xiaoyu Qu. "Digital Transformation in Enterprise Sustainable Development" Encyclopedia, https://encyclopedia.pub/entry/54681 (accessed May 03, 2024).
Du, M., & Qu, X. (2024, February 02). Digital Transformation in Enterprise Sustainable Development. In Encyclopedia. https://encyclopedia.pub/entry/54681
Du, Meijie and Xiaoyu Qu. "Digital Transformation in Enterprise Sustainable Development." Encyclopedia. Web. 02 February, 2024.
Digital Transformation in Enterprise Sustainable Development
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This entry is adapted from the peer-reviewed paper 10.3390/su16030980

Sustainability has become increasingly critical to the development of modern companies. As it emphasizes the generation of value across three dimensions—economics, the environment, and society—sustainable development underscores its significance. Sustainability has become increasingly critical to the development of modern companies. As it emphasizes the generation of value across three dimensions—economics, the environment, and society—sustainable development underscores its significance. 

sustainable development digital transformation digital technologies artificial intelligence (AI)

1. Sustainable Development and Stakeholder Theory

1.1. Sustainable Development Theory

Sustainable development entails the creation of favorable conditions and opportunities to meet developmental aspirations and enhance the quality of life for the current generation without jeopardizing the ability of future generations to meet their own needs [1][2][3]. In the 2030 Agenda, the United Nations designated Major Groups and other Stakeholders as the stakeholders of sustainable development in 2015. The definition of Major Groups includes those who are most in need and most likely to contribute; in essence, this includes all individuals and the natural environment. This concept encompasses both the natural world and human well-being [4].
The three well-established pillars of sustainable development—economic growth, social advancement, and environmental preservation—were introduced in 2002. Sustainable economic development entails ensuring that economic progress succeeds, but not at the expense of poverty, inequality, or environmental harm [5][6]. It emphasizes both the qualitative and quantitative drivers of economic growth, as it consists of changes in consumer preferences, production and distribution systems, and technological advancements [7]. Social progress, for sustainability, includes elements such as social fairness, a thriving and healthy society, participation, sustainability awareness, and social cohesiveness [8][9]. Environmental sustainability involves maintaining ecological balance, improving environmental quality, and reducing the consumption of natural resources [10]. Pursuing sustainable development involves trade-offs among these three pillars, necessitating consideration of costs and benefits.

1.2. Stakeholder Theory

Scholars initially directed their focus towards corporate stakeholders in the 1950s and 1960s. The stakeholder theory emerged as a response to shareholder primacy during this period, advocating for strategic management that considers the interests of various stakeholders who possess different levels of influence over individuals or groups [11][12]. It has been suggested that stakeholders demonstrate their influence through the risks that they assume for an organization [13]. Given this mutual influence, organizations bear a responsibility towards their stakeholders.
Despite differences, advocates of the stakeholder theory agree that an enterprise bears a duty and an ethical responsibility toward its stakeholders. The notion of “the common good” underlies the interaction between businesses and stakeholders. The success of a business lies in its capacity to meet stakeholder requirements; its sustainability is grounded in its ability to generate value for stakeholders in alignment with “the common good” [14][15][16]. To optimize benefits for individual stakeholders, businesses should strive to enhance the value of the entire group [17][18][19].
The stakeholder theory and the concept of sustainable development are similar in their consideration of the broad impacts on diverse groups. The stakeholder theory contributes a moral and ethical perspective to this understanding. Both challenge the notion that businesses can only contribute to social welfare by creating economic value, countering classical economic beliefs in unbridled economic growth. Sustainable development emphasizes equality and fraternity among stakeholders, shifting from individual stakeholder prioritization to comprehensive stakeholder accountability. A widely accepted principle of sustainable development is rooted in the interests of all stakeholders [20].

2. Corporate “Resource—Value” Exchange

Resources and value are inherently interconnected. An enterprise is essentially an amalgamation of valuable resources. In conventional economics, the economic value of an enterprise, as per shareholder primacy, is the summation of producer and consumer surplus. The foundation of corporate value lies in resources that are valuable, rare, imperfectly imitable, and non-substitutable (VRIN) [21][22]. Acquiring such key resources empowers firms to minimize costs and to enhance revenues, thereby influencing the overall value of the firm [23].
Sustainable development transforms the dynamics of the ‘resource-value’ exchange between stakeholders and companies [24][25]. It perceives an enterprise’s value as the comprehensive value generated through the conversion and addition of value to its resources. This extends beyond the economic value delivered to upstream suppliers, downstream customers, internal management and employees, external creditors, and shareholders. It encompasses social and environmental value as well. This redefines the traditional belief that enterprise value is the residual value post the deduction of resource consumption [26]. According to the new property rights theory, employees, by investing time and energy or resources, have the right to see their needs or interests addressed by the company they work for. This right is fulfilled through wages, allowing employees to partake in the value created by the business. Consequently, workers emerge as significant stakeholders in the company, akin to investors, actively shaping the ‘resource-value’ exchange within the business. This principle extends to other involved parties, such as suppliers and customers [27].

3. Application of Digital Technologies in Business

The integration of digital technologies can elevate an organization’s business and financial operations, amplifying productivity, resource conservation, and efficiency in production, operation, and decision making. Additionally, it contributes to safeguarding employee rights and safety, collectively fostering progress toward sustainable development. Despite these advantages, the initial costs of labor, materials, and time associated with these evolving technologies are a point of consideration for businesses [28]. However, the impact on social sustainability is a subject of ongoing debate. Advocates posit that digitization can contribute to societal sustainability by addressing safety concerns through real-time monitoring, potentially replacing manual labor and improving resource allocation efficiency across longer distances, thus expanding the customer base. Conversely, critics argue that digitalization may undermine societal sustainability by increasing unemployment and by compromising employee security [29].
Artificial intelligence, blockchain, cloud computing, and big data represent key facets of digital technologies. Artificial intelligence involves enabling machines to emulate human behavior and thought processes, facilitating intelligent decision making and the provision of smart products or services [30]. Blockchain, a decentralized digital ledger technology, ensures security and transparency in data or process recording, enhancing efficiency and earning stakeholders’ trust. Research suggests that both artificial intelligence and blockchain support sustainable development by aiding decision analysis and streamlining supply chain management [31]. Cloud computing, an internet-based data processing service, allows organizations to reduce expenses and to focus on core competencies, contributing to sustainable revenue generation when the right provider is chosen [32]. Big data technologies enable processing of massive volumes of data based on specific business requirements. This capability allows organizations to record, evaluate, and align with sustainability goals and stakeholder needs, ultimately enhancing sustainability by addressing identified gaps [33].

References

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  2. Thomson, I. Mapping the terrain of sustainability accounting. In Sustainability Accounting and Accountability; Routledge: London, UK, 2010; pp. 38–55.
  3. Laine, M.; Tregidga, H.; Unerman, J. Sustainability Accounting and Accountability; Routledge: London, UK, 2021.
  4. Isaksson, R.; Steimle, U. What does GRI-reporting tell us about corporate sustainability? TQM J. 2009, 21, 168–181.
  5. Meier, G.M.; Rauch, J.E. Leading Issues in Economic Development; Oxford University Press: New York, NY, USA, 1995; Volume 6.
  6. Barbier, E.B. Natural Resources and Economic Development; Cambridge University Press: Cambridge, UK, 2005.
  7. Barbier, E.B. The Concept of Sustainable Economic Development. Environ. Conserv. 1987, 14, 101–110.
  8. Dempsey, N.; Bramley, G.; Power, S.; Brown, C. The social dimension of sustainable development: Defining urban social sustainability. Sustain. Dev. 2011, 19, 289–300.
  9. Murphy, K. The social pillar of sustainable development: A literature review and framework for policy analysis. Sustain. Sci. Pract. Policy 2012, 8, 15–29.
  10. Vezzoli, C.; Manzini, E. Design for Environmental Sustainability; Springer: London, UK, 2008.
  11. Freeman, R.E. Strategic Management: A Stakeholder Approach; Cambridge University Press: Cambridge, UK, 2010.
  12. Friedman, M. The social responsibility of business is to increase its profits. In Corporate Ethics and Corporate Governance; Springer: Berlin/Heidelberg, Germany, 2007; pp. 173–178.
  13. Clarkson, M. A risk based model of stakeholder theory. In Proceedings of the Second Toronto Conference on Stakeholder Theory, Toronto, ON, Canada, 20–21 May 1994; pp. 18–19.
  14. Mitchell, R.K.; Agle, B.R.; Wood, D.J. Toward a theory of stakeholder identification and salience: Defining the principle of who and what really counts. Acad. Manag. Rev. 1997, 22, 853–886.
  15. Suchman, M.C. Managing legitimacy: Strategic and institutional approaches. Acad. Manag. Rev. 1995, 20, 571–610.
  16. Freeman, R.E.; McVea, J. A stakeholder approach to strategic management. In The Blackwell Handbook of Strategic Management; Blackwell Publishers Ltd.: Hoboken, NJ, USA, 2005; pp. 183–201.
  17. Freeman, R.E.; Harrison, J.S.; Wicks, A.C. Managing for Stakeholders: Survival, Reputation, and Success; Yale University Press: New Haven, CT, USA, 2007.
  18. Argandoña, A. The stakeholder theory and the common good. J. Bus. Ethics 1998, 17, 1093–1102.
  19. Edward Freeman, R. Managing for stakeholders: Trade-offs or value creation. J. Bus. Ethics 2010, 96, 7–9.
  20. Steurer, R.; Langer, M.E.; Konrad, A.; Martinuzzi, A. Corporations, stakeholders and sustainable development: A theoretical exploration of business–society relations. J. Bus. Ethics 2005, 61, 263–281.
  21. Penrose, E. The Theory of the Growth of the Firm. Long Range Plan. 1995, 29, 1.
  22. Priem, R.L.; Butler, J.E. Is The Resource-Based View a Useful Perspective for Strategic Management Research? Acad. Manag. Rev. 2001, 26, 22.
  23. Demsetz, H. Industry structure, market rivalry, and public policy. J. Law Econ. 1973, 16, 1–9.
  24. Schaltegger, S.; Burritt, R. Business cases and corporate engagement with sustainability: Differentiating ethical motivations. J. Bus. Ethics 2018, 147, 241–259.
  25. Gray, R. Social, environmental and sustainability reporting and organisational value creation? Whose value? Whose creation? Account. Audit. Account. J. 2006, 19, 793–819.
  26. Adams, C.A. Conceptualising the contemporary corporate value creation process. Account. Audit. Account. J. 2017, 30, 906–931.
  27. Donaldson, T.; Preston, L.E. The stakeholder theory of the corporation: Concepts, evidence, and implications. Acad. Manag. Rev. 1995, 20, 65–91.
  28. Broccardo, L.; Truant, E.; Dana, L.-P. The interlink between digitalization, sustainability, and performance: An Italian context. J. Bus. Res. 2023, 158, 113621.
  29. Grybauskas, A.; Stefanini, A.; Ghobakhloo, M. Social sustainability in the age of digitalization: A systematic literature Review on the social implications of industry 4.0. Technol. Soc. 2022, 70, 101997.
  30. Di Vaio, A.; Palladino, R.; Hassan, R.; Escobar, O. Artificial intelligence and business models in the sustainable development goals perspective: A systematic literature review. J. Bus. Res. 2020, 121, 283–314.
  31. Yermack, D. Corporate governance and blockchains. Rev. Financ. 2017, 21, 7–31.
  32. Brenner, B.; Hartl, B. The perceived relationship between digitalization and ecological, economic, and social sustainability. J. Clean. Prod. 2021, 315, 128128.
  33. Barbeito-Caamaño, A.; Chalmeta, R. Using big data to evaluate corporate social responsibility and sustainable development practices. Corp. Soc. Responsib. Environ. Manag. 2020, 27, 2831–2848.
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