Advertisement

When does it pay off to integrate sustainability in the business model? – A game-theoretic analysis

  • Henner Gimpel
  • Valerie Graf-DraschEmail author
  • Alexander Kammerer
  • Maximilian Keller
  • Xinyi Zheng
Research Paper
  • 1 Downloads
Part of the following topical collections:
  1. Special Issue on "Sustainability in business models in the network economy"

Abstract

Acknowledging sustainability as a challenge of utmost importance, organizations face questions on dealing with different dimensions of sustainability. Respective actions include a fundamental shift in the purpose of business and almost every aspect of how it is conducted, or in short: an integration of sustainability in organizations’ business model. However, as sustainability is no altruistic end in itself, respective transformation must resonate with organizations’ economic conditions and their position in the market. But when does it pay off for organizations to integrate sustainability in their business model? Within this research paper we find answers by applying a game-theoretic framework and examining competition strategies for organizations integrating sustainability in their business model. Hereby we consider different market scenarios where symmetric and asymmetric, weak and strong, as well as a varying number of organizations interact. Our results suggest different strategies organizations can apply to gain competitive advantage.

Keywords

Sustainability Sustainability business model Game theory; 

JEL classification

D440 

Notes

References

  1. Abdelkafi, N., & Täuscher, K. (2016). Business models for sustainability from a system dynamics perspective. Organization & Environment, 29(1), 74–96.Google Scholar
  2. Antikainen, M., Lammi, M., Paloheimo, H., Rüppel, T., & Valkokari, K. (2015). Towards circular economy business models: Consumer acceptance of novel services. In Proceedings of the ISPIM Innovation Summit, Brisbane, Australia, December 6-9. Google Scholar
  3. Banerjee, S. B., Iyer, E. S., & Kashyap, R. K. (2003). Corporate environmentalism: Antecedents and influence of industry type. Journal of Marketing, 67(2), 106–122.Google Scholar
  4. Baniak, A., & Dubina, I. (2012). Innovation analysis and game theory: A review. Innovation, 14(2), 178–191.Google Scholar
  5. Bini, L., Bellucci, M., & Giunta, F. (2018). Integrating sustainability in business model disclosure: Evidence from the UK mining industry. Journal of Cleaner Production, 171, 1161–1170.Google Scholar
  6. Bocken, N. M. P., Short, S., Rana, P., & Evans, S. (2013). A value mapping tool for sustainable business modeling. Corporate Governance, 13, 482–497.Google Scholar
  7. Bocken, N. M. P., Short, S., Rana, P., & Evans, S. (2014). A literature and practice review to develop sustainable business model archetypes. Journal of Cleaner Production, 65, 42–56.Google Scholar
  8. Bocken, N. M. P., Schuit, C. S. C., & Kraaijenhagen, C. (2018). Experimenting with a circular business model: Lessons from eight cases. Environmental Innovation and Societal Transitions, 28, 79–95.Google Scholar
  9. Boons, F., & Lüdeke-Freund, F. (2013). Business models for sustainable innovation: State-of-the-art and steps towards a research agenda. Journal of Cleaner Production, 45, 9–19.Google Scholar
  10. Brandenburg, M., Govindan, K., Sarkis, J., & Seuring, S. (2014). Quantitative models for sustainable supply chain management: Developments and directions. European Journal of Operational Research, 233(2), 299–312.Google Scholar
  11. Brandenburger, A. M., & Nalebuff, B. J. (1995). Use game theory to shape strategy. Harvard Business Review, 73(4), 57–71.Google Scholar
  12. Brehmer, M., Podoynitsyna, K., & Langerak, F. (2018). Sustainable business models as boundary-spanning systems of value transfers. Journal of Cleaner Production, 172, 4514–4531.Google Scholar
  13. Bressanelli, G., Adrodegari, F., Perona, M., & Saccani, N. (2018). Exploring how usage-focused business models enable circular economy through digital technologies. Sustainability, 10(3), 639.Google Scholar
  14. Breuer, H., Fichter, K., Lüdeke-Freund, F., & Tiemann, I. (2018). Sustainability-oriented business model development: Principles, criteria, and tools. International Journal of Entrepreneurial Venturing, 10(2), 256–286.Google Scholar
  15. Brundtland, G., Khalid, M., Agnelli, S., Al-Athel, S., & Chidzero, B. (1987). Report of the world commission on environment and development: Our common future. Oxford: Oxford University Press.Google Scholar
  16. Bryson, J. R., & Lombardi, R. (2009). Balancing product and process sustainability against business profitability: Sustainability as a competitive strategy in the property development process. Business Strategy and the Environment, 18(2), 97–107.Google Scholar
  17. Casadesus-Masanell, R., & Zhu, F. (2013). Business model innovation and competitive imitation: The case of sponsor-based business models. Strategic Management Journal, 34(4), 464–482.Google Scholar
  18. Chander, P., & Tulkens, H. (2006). The core of an economy with multilateral environmental externalities. In P. Chander, J. Drèze, K. C. Lovell, & J. Mintz (Eds.), Public goods, environmental externalities and fiscal competition: Selected papers on competition, efficiency and cooperation in public economics by Henry Tulkens (pp. 153–175). Springer Science & Business Media: New York.Google Scholar
  19. Chiarini, A. (2014). Sustainable manufacturing-greening processes using specific lean production tools: An empirical observation from European motorcycle component manufacturers. Journal of Cleaner Production, 85, 226–233.Google Scholar
  20. Collins, C. M., Steg, L., & Koning, M. A. S. (2007). Customers' values, beliefs on sustainable corporate performance, and buying behavior. Psychology & Marketing, 24(6), 555–577.Google Scholar
  21. Davenport, C., & Pierre-Louis, K. (2018). U.S. Climate Report Warns of Damaged Environment and Shrinking Economy. Retrieved from https://www.nytimes.com/2018/11/23/climate/us-climate-report.html. Accessed 4 Dec 2018
  22. Dean, T. J., & McMullen, J. S. (2007). Toward a theory of sustainable entrepreneurship: Reducing environmental degradation through entrepreneurial action. Journal of Business Venturing, 22(1), 50–76.Google Scholar
  23. Despeisse, M., Baumers, M., Brown, P., Charnley, F., Ford, S. J., Garmulewicz, A., et al. (2017). Unlocking value for a circular economy through 3D printing: A research agenda. Technological Forecasting and Social Change, 115, 75–84.Google Scholar
  24. Dolinsky, M. (2015). Sustainable systems-game theory as a tool for preserving energy resources. Energy, Sustainability and Society, 5(1), 6.Google Scholar
  25. Dunlap, R. E., van Liere, K. D., Mertig, A. G., & Jones, R. E. (2000). New trends in measuring environmental attitudes: Measuring endorsement of the new ecological paradigm: A revised NEP scale. Journal of Social Issues, 56(3), 425–442.Google Scholar
  26. Dyllick, T., & Muff, K. (2016). Clarifying the meaning of sustainable business: Introducing a typology from business-as-usual to true business sustainability. Organization & Environment, 29(2), 156–174.Google Scholar
  27. Earth Overshoot Day. (2018). Earth Overshoot Day 2018 Livestream. Retrieved from https://www.overshootday.org/; Accessed 4 Dec 2018http://www.webcitation.org/74SYPTXnS. Accessed 4 Dec 2018
  28. Elkington, J. (1998). Partnerships from cannibals with forks: The triple bottom line of 21st-century business. Environmental Quality Management, 8(1), 37–51.Google Scholar
  29. Elliot, S. (2011). Transdisciplinary perspectives on environmental sustainability: A resource base and framework for IT-enabled business transformation. MIS Quarterly, 35(1), 197–236.Google Scholar
  30. European Commission. (2019). Circular Economy: Implementation of the Circular Economy Action Plan. Retrieved from http://ec.europa.eu/environment/circular-economy/index_en.htm. Accessed 25 May 2019
  31. Evans, S., Vladimirova, D., Holgado, M., van Fossen, K., Yang, M., Silva, E. A., & Barlow, C. Y. (2017). Business model innovation for sustainability: Towards a unified perspective for creation of sustainable business models. Business Strategy and the Environment, 26(5), 597–608.Google Scholar
  32. Fang, K., Heijungs, R., Duan, Z., & de Snoo, G. R. (2015). The environmental sustainability of nations: Benchmarking the carbon, water and land footprints against allocated planetary boundaries. Sustainability, 7(8), 11285–11305.Google Scholar
  33. Fellner, J., Lederer, J., Scharff, C., & Laner, D. (2017). Present potentials and limitations of a circular economy with respect to primary raw material demand. Journal of Industrial Ecology, 21(3), 494–496.Google Scholar
  34. Finus, M. (2002). Game theory and international environmental cooperation: Any practical application? In C. Böhringer, M. Finus, & C. Vogt (Eds.), Controlling global warming: Perspectives from economics, game theory and public choice (pp. 9–104). Northampton: Edward Elgar Publishing, Inc..Google Scholar
  35. Finus, M. (2008). Game theoretic research on the Design of International Environmental Agreements: Insights, critical remarks, and future challenges. International Review of Environmental and Resource Economics, 2(1), 29–67.Google Scholar
  36. Fonseca, L., Domingues, J., Pereira, M., Martins, F., & Zimon, D. (2018). Assessment of circular economy within Portuguese organizations. Sustainability, 10(7), 2521.Google Scholar
  37. Geissdoerfer, M., Savaget, P., Bocken, N. M. P., & Hultink, E. J. (2017). The circular economy–a new sustainability paradigm? Journal of Cleaner Production, 143, 757–768.Google Scholar
  38. Geissdoerfer, M., Vladimirova, D., & Evans, S. (2018). Sustainable business model innovation: A review. Journal of Cleaner Production, 198, 401–416.Google Scholar
  39. Ghisellini, P., Cialani, C., & Ulgiati, S. (2015). A review on circular economy: The expected transition to a balanced interplay of environmental and economic systems. Journal of Cleaner Production, 114, 11–32.Google Scholar
  40. Gibbons, R. (1994). Primer in game theory. Harlow: Prentice Hall Books.Google Scholar
  41. Gordon, R., Carrigan, M., & Hastings, G. (2011). A framework for sustainable marketing. Marketing Theory, 11(2), 143–163.Google Scholar
  42. Hamari, J., Sjöklint, M., & Ukkonen, A. (2016). The sharing economy: Why people participate in collaborative consumption. Journal of the Association for Information Science and Technology, 67(9), 2047–2059.Google Scholar
  43. Hart, S. L., & Milstein, M. B. (1999). Global sustainability and the creative destruction of industries. MIT Sloan Management Review, 41(1), 23.Google Scholar
  44. Hofer, C., Cantor, D. E., & Dai, J. (2012). The competitive determinants of a firm's environmental management activities: Evidence from US manufacturing industries. Journal of Operations Management, 30(1–2), 69–84.Google Scholar
  45. Isaksson, R., & Steimle, U. (2009). What does GRI-reporting tell us about corporate sustainability? The TQM Journal, 21(2), 168–181.Google Scholar
  46. Jansson, J., Marell, A., & Nordlund, A. (2010). Green consumer behavior: Determinants of curtailment and eco-innovation adoption. Journal of Consumer Marketing, 27(4), 358–370.Google Scholar
  47. Jolink, A., & Niesten, E. (2015). Sustainable development and business models of entrepreneurs in the organic food industry. Business Strategy and the Environment, 24(6), 386–401.Google Scholar
  48. Joyce, A., & Paquin, R. L. (2016). The triple layered business model canvas: A tool to design more sustainable business models. Journal of Cleaner Production, 135, 1474–1486.Google Scholar
  49. King, A. A., & Lenox, M. J. (2001). Lean and green? An empirical examination of the relationship between lean production and environmental performance. Production and Operations Management, 10(3), 244–256.Google Scholar
  50. Klose, B., & Kovenock, D. (2015). The all-pay auction with complete information and identity-dependent externalities. Economic Theory, 59(1), 1–19.Google Scholar
  51. Kreps, D. (1990). Game theory and economic modeling. The Journal of Economic Education, 23(2), 189–191.Google Scholar
  52. Lang, D. J., Wiek, A., Bergmann, M., Stauffacher, M., Martens, P., Moll, P., Swilling, M., & Thomas, C. J. (2012). Transdisciplinary research in sustainability science: Practice, principles, and challenges. Sustainability Science, 7(1), 25–43.Google Scholar
  53. Lewandowski, M. (2016). Designing the business models for circular economy—Towards the conceptual framework. Sustainability, 8(1), 43.Google Scholar
  54. Lieder, M., & Rashid, A. (2016). Towards circular economy implementation: A comprehensive review in context of manufacturing industry. Journal of Cleaner Production, 115, 36–51.Google Scholar
  55. Lindberg, M. B., Markard, J., & Andersen, A. D. (2018). Policies, actors and sustainability transition pathways: A study of the EU’s energy policy mix. Research Policy, 103668.Google Scholar
  56. Lloret, A. (2016). Modeling corporate sustainability strategy. Journal of Business Research, 69(2), 418–425.Google Scholar
  57. Loorbach, D., & Wijsman, K. (2013). Business transition management: Exploring a new role for business in sustainability transitions. Journal of Cleaner Production, 45, 20–28.Google Scholar
  58. Lovins, A., Lovins, L., & Hawken, P. (1999). A road map for natural capitalism. Harvard Business Review, 1–14.Google Scholar
  59. Lueg, R., Pedersen, M. M., & Clemmensen, S. N. (2015). The role of corporate sustainability in a low-cost business model–a case study in the Scandinavian fashion industry. Business Strategy and the Environment, 24(5), 344–359.Google Scholar
  60. Lyon, T. P., & Maxwell, J. W. (2007). Environmental public voluntary programs reconsidered. Policy Studies Journal, 35(4), 723–750.Google Scholar
  61. Malhotra, A., Melville, N. P., & Watson, R. T. (2013). Spurring impactful research on information systems for environmental sustainability. MIS Quarterly, 37(4), 1265–1274.Google Scholar
  62. Marett, K., Otondo, R. F., & Taylor, G. S. (2013). Assessing the effects of benefits and institutional influences on the continued use of environmentally munificent bypass Systems in Long-Haul Trucking. MIS Quarterly, 37(4), 1301–1312.Google Scholar
  63. Mas-Colell, A., Whinston, M., & Green, J. (1995). Microeconomic theory (1st ed.). New York: Oxford University Press.Google Scholar
  64. Melville, N. P. (2010). Information systems innovation for environmental sustainability. MIS Quarterly, 34(1), 1–21.Google Scholar
  65. Milne, M. J., & Gray, R. (2013). W(h)ither ecology? The triple bottom line, the global reporting initiative, and corporate sustainability reporting. Journal of Business Ethics, 118(1), 13–29.Google Scholar
  66. Moktadir, M. A., Rahman, T., Rahman, M., Ali, S. M., & Paul, S. K. (2018). Drivers to sustainable manufacturing practices and circular economy: A perspective of leather industries in Bangladesh. Journal of Cleaner Production, 174, 1366–1380.Google Scholar
  67. Müller, A.-L., & Pfleger, R. (2014). Business transformation towards sustainability. Business Research, 7(2), 313–350.Google Scholar
  68. Nath, V., Kumar, R., Agrawal, R., Gautam, A., & Sharma, V. (2013). Consumer adoption of green products: Modeling the enablers. Global Business Review, 14(3), 453–470.Google Scholar
  69. Oghazi, P., & Mostaghel, R. (2018). Circular business model challenges and lessons learned - an industrial perspective. Sustainability, 10(3), 739.Google Scholar
  70. Piscicelli, L., Ludden, G. D. S., & Cooper, T. (2018). What makes a sustainable business model successful? An empirical comparison of two peer-to-peer goods-sharing platforms. Journal of Cleaner Production, 172, 4580–4591.Google Scholar
  71. Prakash, A., & Potoski, M. (2012). Voluntary environmental programs: A comparative perspective. Journal of Policy Analysis and Management, 31(1), 123–138.Google Scholar
  72. Ritzén, S., & Sandström, G. Ö. (2017). Barriers to the circular economy–integration of perspectives and domains. In Proceedings of the 9th CIRP IPSS Conference: Circular Perspectives on Product/Service-Systems, Copenhagen, Europe, June, 19-21 (Vol. 64, pp. 7–12).Google Scholar
  73. Rizos, V., Behrens, A., Kafyeke, T., Hirschnitz-Garbers, M., & Ioannou, A. (2015). The circular economy: Barriers and opportunities for SMEs. CEPS Working Documents.Google Scholar
  74. Salzmann, O., Ionescu-Somers, A., & Steger, U. (2005). The business case for corporate sustainability. European Management Journal, 23(1), 27–36.Google Scholar
  75. Schaltegger, S., & Wagner, M. (2011). Sustainable entrepreneurship and sustainability innovation: Categories and interactions. Business Strategy and the Environment, 20(4), 222–237.Google Scholar
  76. Schaltegger, S., Lüdeke-Freund, F., & Hansen, E. G. (2012). Business cases for sustainability: The role of business model innovation for corporate sustainability. International Journal of Innovation and Sustainable Development, 6(2), 95–119.Google Scholar
  77. Schaltegger, S., Hansen, E. G., & Lüdeke-Freund, F. (2016). Business models for sustainability: A co-evolutionary analysis of sustainable Intrepreneurship. Innovation, and Transformation, 29(3), 264–289.Google Scholar
  78. Schoormann, T., Behrens, D., Kolek, E., & Knackstedt, R. (2016). Sustainability in business models - a literature-review-based design-science-oriented research agenda. In Proceedings of the 25th European Conference of Information Systems, Portugal, Europe, June 5-10. Google Scholar
  79. Seidel, S., Bharati, P., Fridgen, G., Watson, R. T., Albizri, A., Boudreau, M.-C., et al. (2017). The sustainability imperative in information systems research. Communications of the Association for Information Systems, 40, 40–52.Google Scholar
  80. Seifi, S., & Crowther, D. (2018). Using game theory to develop sustainability strategies in an era of resource depletion. Industrial Engineering & Management, 7(1), 1–7.Google Scholar
  81. Seuring, S., & Müller, M. (2008). From a literature review to a conceptual framework for sustainable supply chain management. Journal of Cleaner Production, 16(15), 1699–1710.Google Scholar
  82. Srivastava, S. K. (2007). Green supply-chain management: A state-of-the-art literature review. International Journal of Management Reviews, 9(1), 53–80.Google Scholar
  83. Stahel, W. R. (2016). The circular economy. Nature News, 531(7595), 435–438.Google Scholar
  84. Stubbs, W., & Cocklin, C. (2008). Conceptualizing a “sustainability business model”. Organization & Environment, 21(2), 103–127.Google Scholar
  85. Teece, D. J. (2010). Business models, business strategy and innovation. Long Range Planning, 43(2–3), 172–194.Google Scholar
  86. United States Environmental Protection Agency. (2017). Global Greenhouse Gas Emissions Data. Retrieved from https://www.epa.gov/ghgemissions/sources-greenhouse-gas-emissions. Accessed 4 Dec 2018
  87. Van Bommel, K. (2018). Managing tensions in sustainable business models: Exploring instrumental and integrative strategies. Journal of Cleaner Production, 20, 829–841.Google Scholar
  88. Vrieze, O. J. (2012). The environmental game. In J. Filar & C. Carraro (Eds.), Control and Game-theoretic Models of the Environment (2nd ed., pp. 16–23). New York: Springer Science & Business Media.Google Scholar
  89. Wijkman, A., & Skånberg, K. (2015). The circular economy and benefits for society: jobs and climate clear winners in an economy based on renewable energy and resource efficiency. Retrieved from http://hdl.handle.net/20.500.11822/15102. Accessed 25 May 2019
  90. Zink, T., & Geyer, R. (2017). Circular economy rebound. Journal of Industrial Ecology, 21(3), 593–602.Google Scholar
  91. Zott, C., Amit, R., & Massa, L. (2011). The business model: Recent developments and future research. Journal of Management, 37(4), 1019–1042.Google Scholar

Copyright information

© Institute of Applied Informatics at University of Leipzig 2019

Authors and Affiliations

  1. 1.FIM Research Center, University of Augsburg, Project Group Business & Information Systems Engineering of the Fraunhofer FITAugsburgGermany
  2. 2.FIM Research Center, University of AugsburgAugsburgGermany

Personalised recommendations