Sustainable Innovation Strategies for Increased Competition among Companies: Comparison
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Please note this is a comparison between Version 2 by Lindsay Dong and Version 1 by João M. Lopes.

Companies have concerns about environmental issues, translated into the implementation of sustainable practices in their business models, not because they are legal obligations, but because they incorporate sustainability in their strategic vision. Thus, companies add considerable value to their value chain and obtain a better strategic positioning in relation to competitors. There are companies intend to implement innovative sustainable practices and that some companies have a business model that already incorporates sustainability strategies. 

  • sustainable innovation
  • sustainability strategies

1. Introduction

Innovation is one of the drivers of the development and economic growth of countries. Being a preponderant characteristic of developed countries, it is also essential for the generation of competitive advantage in increasingly competitive markets [1]. According to Schumpeter [2], innovation can be seen as a capacity that, when well applied, allows individuals, companies, regions or countries to obtain this competitive advantage. Currently, the focus is not only on the economic growth of countries and/or companies merely quantitatively but an economic growth with quality, i.e., sustainable through qualitative changes in the production composition, in the organization of economic activities and the economy structure [3].
Sustainable innovation has been getting more and more attention due to its importance and relevance in an increasingly global world. The growing increase in consumption imposes ever higher levels of production. Over the years, it has been observed that a balance between what is extracted from nature that wears out the ecosystem and what is needed to satisfy consumption has yet to be achieved [4]. Veiga [5] proposes that sustainability indicators be established to simultaneously evaluate ecosystem resilience, quality of life and corporate economic performance.
When the innovation process is applied in organizations with sustainable practices, without neglecting their objectives, wescholars reach innovation technologies that translate into the production of green products [6,7][6][7].
Business aspirations related to sustainability may result from a practice based on acceptance, whereby companies limit themselves to respond to the measures adopted to meet the external pressures of legislation and stakeholders [12,13][8][9], i.e., reactive measures. They can also be the result of a proactive stance, seeking to be ahead of these pressures (adoption of proactive strategies) as a way to differentiate themselves from competitors to improve their competitive position [9][10]. Thus, it is important to know the real reason for the implementation of sustainable practices in companies, since when the company is motivated toward this type of practice for merely fiscal reasons, i.e., to comply with imposed legislation, there is a resistance to the adoption of radical innovation measures within organizations, which can jeopardize the success of sustainable projects [14][11].

2. Sustainable Innovation Strategies for Increased Competition among Companies

2.1. Sustainable Innovation

Innovation is the capacity that organizations have to implement new products or transform existing products through new combinations of materials used in production processes or adding qualities to the product in order to meet the needs of the market in which it is located [20][12]. It can also be understood as a process in which the company finds unmet market needs that enable the creation of new products, using innovative ideas of practical use [21][13]. There are many types of innovation, depending on its source and scope. Menezes and Dapper [11][14] focused on product innovation, which consists of the introduction of a product or service already existing in the market with modifications of its characteristics and ease of use, or in the introduction of a new product in the market. Pinsky and Kruglianskas [4] defined process innovation as innovation linked to the operational side, ranging from the implementation of a new production method (machinery), or significantly improved, to distribution conditions. Aksoy [22][15] defines marketing innovation as the implementation of a new method of marketing with significant changes in product design or packaging, product positioning, promotion or pricing. Finally, organizational innovation which can be considered more comprehensive as it addresses a complete restructuring in the company’s business practices, ranging from the company’s internal operational process to relationships with external agents [23][16]. Pinsky and Kruglianskas [4] state that innovation oriented to sustainability has several denominations in the literature, such as sustainable, green, eco or environmental innovation. Chen et al. [24][17] define sustainable innovation as a set of activities that modify product design (marketing innovation) and those that modify production, both with the aim of eliminating negative impacts on the environment and obtaining environmentalist value [25][18]. Green product innovation refers to the introduction of a new product or service that is environmentally friendly [26][19]. Green process innovation is the proactive adaptation of production processes using green technologies and designs that decrease risks to the ecosystem [17][20]. A company benefiting from differentiation, environmental risk reduction, cost reduction, and sales increases with differentiated products, can improve its profit margins, brand value and company reputation in society [18,19][21][22]. According to Foss and Saebi [27][23], companies with sustainable commitments are more likely to innovate, although the aforementioned benefits may take a few years to achieve. When companies opt for eco innovative practices, they must be willing to delay, in the first years, their priorities in the financial sphere in favour of an organizational structure that favours environmental protection and adopting clean and sustainable technologies [28][24]. The company should move towards a common goal, i.e., all its departments (marketing, R&D, human resources and production) should work in an interconnected manner in order to develop and achieve sustainability in the company [29,30][25][26].

2.2. Sustainable Management Strategies

The concept of sustainability, namely sustainable development, became known worldwide as of 1987, when it was first used by the “World Commission on Environment and Development (WCED)” in its report “Our Common Future”, also known as the Brundtland Report. The responsibility towards sustainability of companies gained legitimacy when the Triple Bottom Line emerged. This term gained popularity with the publication of Elkington [31][27]. In this study, Elkington [31][27] includes the responsible management approach, arguing that companies should consider the following three dimensions of development (Triple Bottom Line) in their management: environmental, social and economic. The environmental dimension encompasses the protection of the environment and natural resources (local, regional and global); the economic dimension includes subsidies/incentives and taxes/penalties to promote environmental efficiency; and the social dimension includes corporate responsibility, business ethics, worker protections and fair trade. All dimensions are interconnected through sustainability [32][28]. Often companies adopt sustainable practices as a mere form of strategic investment [33][29] since it involves costs related to the purchase of equipment, greener raw materials, implementation of stricter quality control and sustainability reports. Bradshaw et al. [34][30], on the other hand, analyze sustainable management practices as strategies that must only be implemented when it is advantageous for the company to practice them. Other authorscholars believe that such practices only translate into reality when corporate objectives are limited by some social and environmental considerations [14][11]. One of the barriers to sustainable organizational practices is often the companies’ own partners or shareholders, since innovation can be seen as an investment, and its return can only be in the long term. This fact makes it uninteresting for partners and shareholders to invest in sustainable practices if their objective is to maximize their wealth in the short term [34][30]. It is in this sense that the relationship between corporate performance and social responsibility is so important. Governments have been increasingly encouraging sustainable practices. Haas [45][31] argues that sustainable innovation is motivated by governments through measures that reduce the private cost of project development (driving technological advance) or that increase private profit from successful innovation (attracting demand). Subsidies to government-funded corporate R&D initiatives, increasing knowledge transfer capacity, supporting education and training initiatives, and funding demonstration projects are examples of how public policies based on the approach of boosting technological advances can incentivize eco-innovation projects by reducing costs for firms [43][32]. In contrast, intellectual property, tax benefits and rebates for consumers of new technologies, government procurement of products, and taxes on competing technologies are some public policy approaches based on demand pull [46][33]. Pollution is the main challenge of any sustainable management and can be considered a form of waste because it consumes resources and increases costs without any compensation [51][34]. As a result of environmental practices, organizations have made efforts to develop products and services that reduce pollution, require less packaging and less energy consumption, and eliminate their raw materials’ toxicity [52][35]. Companies should opt for the production of products that are enabled for use more than once, i.e., products that are reusable. An organization promotes sustainability when it encourages the increase of social, economic and environmental capital through its policies [53][36]. Organizations committed to and qualified in the implementation of eco-innovations develop training and education programs focused on environmental management, develop innovative product designs, and also include organizational efforts aimed at reducing social and economic impacts, aiming at continuous improvement of processes and products and their relationships with stakeholders [54][37]. Georgescu-Roegen [55][38] emphasizes that large companies usually make greater investments in the research and development department and, as such, in these cases, it is easier to implement eco-innovations in organizations. On the other hand, micro and small companies, according to Georgescu-Roegen [55][38], implement sustainable practices by means of the personnel’s own creativity in production processes and by recycling and reusing materials. Studies show that consumers prefer companies that assume social and environmental responsibilities. It is recommended that companies disclose or publicize their environmental care in order to attract new customers and preserve the old ones [14][11]. Odum and Barrett [56][39] state that when referring to sustainable and innovative companies, this does not refer to the fact that companies cease to apply technologies in their production process, which would currently be impossible given that manufacturing production costs are high. On the contrary, it refers to the use of technologies that increase resource productivity in order to be able to reduce the pressure on natural capital stocks [55][38]. Production processes that are elaborated in a strongly manual manner, in addition to high costs, usually make use of large quantities of raw materials, which decreases their productivity [57][40]. Speth [58][41] translates the idea of sustainable development into a perspective of qualitative improvement, the ability to meet what is lacking (needs and desires) without quantitatively increasing production. The compatibility between corporate objectives, technological development and wealth generation is plausible within an environmental perspective that attempts to find ways to avoid greater environmental errors [59][42].

2.3. Sustainable Management Model

Arvizu et al. [61][43] states that a management model is an auxiliary tool of management used to make a rigorous and well-structured analysis of the company’s performance, identification of their deviations and how to rectify them through guidelines for continuous improvement, which aim to guide efforts to achieve the defined objectives. Duque et al. [62][44] analyzes the management model as the way to organize and combine the organization resources to meet the defined objectives. When the company implements radical sustainability innovations, new business models may emerge since they often comprise new combinations of products and services, as well as a new value proposition generated by the new business models implemented in the company [63][45].

According to Klein, Spieth and Heidenreich [16][46], the management model should be founded, in any organization, on three important bases: the production processes, the human resources, and the technology applied. Only with these three pillars, acting together and in a coordinated manner, the organizational objectives can be achieved and, therefore, should be considered in the management models. Casadesus-Masanell and Ricart [64][47] state that there are practices that must be observed when designing any management model, such as the strategy, because it allows the company to stay focused on the objectives, creating efficient tactics for the achievement of the same and promoting continuous growth and a culture; the creation of a culture strongly inspired by good performance should be privileged over any other option. It is essential that the company has a horizontal structure that facilitates communication between the various departments of the company in order to obtain greater speed in solving internal problems [60][48]. When a company commits to being sustainable, the three pillars mentioned above (production processes, human resources and applied technology) are restructured in order to respond to the new business reality [65][49]. The differences between companies regarding the processing, interpretation and implementation of the information collected depend in part on the strategic orientation adopted [66][50]. Companies adopt strategic orientations in order to obtain competitive advantages, and they may be market-oriented [67][51], technology-oriented [68][52], or entrepreneurial-oriented [69][53]. Mehrabian and Russell [70][54] explain that the company, upon receiving information, for example, the increase in emissions of pollutant gases, according to its market orientation, may trigger internal evaluations to find a solution to the problem. Thus, companies may approach their customers (i.e., market orientation), seek new technologies (technology orientation) or seek new market opportunities (entrepreneurial orientation) to find one or several potential solutions [65][49]. This problem, the moment the company adopts a sustainable orientation, will cause the company to readapt its business model, since processing the sustainability issue, based on the company’s orientation, will change its target customers, product portfolio, value chains or revenue models [50][55]. This means that, upon detecting a problem that acts as an external stimulus, the company will tend to adopt general attitudes such as commitment to sustainability, which triggers further processing and interpretation behaviour through different strategic orientations (i.e., market, technological and entrepreneurial orientation), resulting in strategic responses deployed in business model changes [16][46].

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