Sustainability Challenges Shaping Competitive Advantages in Technology and Innovation

Abstract

How do sustainability challenges shape the competitive behavior of corporations? Does investing in sustainability actually pay off? The chapter studies the current state of the world in terms of its environmental limits, reaching from climate change to biodiversity. It highlights population growth as the main driver for exceeding some environmental planetary boundaries and makes the link to the type of technologies currently used. The case is made that no country which enjoys high standards of living appears to be living within its environmental limits. Given forecast rapid population growth and the legitimate drive to raise standards of living for all, the need for technological change and innovation is presented in a new dimension. The traditional approach to innovation and competitive advantages is analyzed and the necessity to integrate sustainability into the methodologies is stressed. It is shown that the integration of sustainability into the core business strategy of a corporation is becoming a determining factor for future competitive advantage. Two examples, one from the automotive sector and one from the consumer goods sector, are provided. Furthermore, the key challenge in measuring environmental and social performance is highlighted and current developments presented. The integration of the materiality aspect by the Sustainability Accounting Standards Board is crystallized as a key milestone in sustainability accounting. Finally, the case is made that sustainability does create financial outperformance.