Introduction

The escalating depletion of global natural resources necessitates urgent action by corporations, governmental bodies, and other institutions, emphasizing the transition towards environmentally sustainable operations to foster a greener paradigm (Aagaard, 2019; Gerli et al., 2022; Kraus et al., 2020; Montresor & Vezzani, 2023). Stakeholder pressures demand significant reductions in corporate emissions and pollution, urging firms to align their practices with the growing environmental consciousness and compliance with expanding regulatory frameworks (Yu et al., 2017). This scenario underscores the imperative for investments in sustainable practices and business model innovations, aiming not only to enhance environmental and social performance but also to bolster competitive positioning, performance, and reputation (Awan et al., 2021; Böttcher et al., 2023; Broccardo et al., 2023). In addition, the COVID-19 pandemic has further underlined the importance of incorporating both technology and sustainability into business strategies, compelling organizations to accelerate their dual transition efforts and the critical need for businesses to swiftly adapt (Alraja et al., 2022; Sigala, 2020). Nevertheless, digital transformation in isolation does not inherently lead to improved environmental performance; it requires integration with green solutions to be effective (Ahmadova et al., 2022).

Accordingly, and in response to the urgent need for sustainable development, the European Commission has championed the concept of twin transition (TT) or digitally enabled sustainable transition, emphasizing the role of digital technologies in driving eco-friendly transformations, while emphasizes the integral connection between sustainability and digital transitions, viewing them as co-dependent elements critical for future progress (European Commission, 2024a). In facilitation of these twin transitions, the European Commission has collaborated with ICT sector leaders to launch the European Green Digital Coalition (EGDC), focusing on fully leveraging digitalization's benefits for sustainability (European Commission, 2024b). This approach underlines the EU's strategic commitment to advancing these transitions in tandem, recognizing their mutual reinforcement as vital for achieving comprehensive and sustainable development.

The twin transition presents both a formidable challenge and a unique opportunity for business model innovation. As companies strive to integrate digital and sustainable practices, they will need to navigate a complex landscape of regulatory pressures, market demands, and technological advancements. Thus, this chapter explores the twin transition in the context of business model innovation, illustrating how the synergy between sustainability and digitalization is reshaping business landscapes. The advent of the twin transition marks a critical inflection point in the evolution of business models and we therefore present the four archetypes of twin transition business model innovation and the strategical implications hereof. Furthermore, we identify the key roles of dynamic capabilities and open innovation in twin transition business model innovation. Finally, we explore the micro-, meso-, macro-, and managerial implications of driving twin transition business model innovation and present key venues for further research.

Understanding the Concept of Twin Transition in Business Development

Despite the burgeoning discourse on the potential of digital technologies to foster green innovation at the firm level, the literature has only marginally explored the extent to which firms are capitalizing on these opportunities. Recent scholarly efforts, including those by Paiola et al. (2021), Alraja et al. (2022), Ardito (2023), Böttcher et al. (2023), and Broccardo et al. (2023) alongside contributions specifically addressing twin transitions (Chen et al., 2023; Montresor & Vezzani, 2023; Spaltini et al., 2024; Rehman et al., 2023), have begun to illuminate the nexus between firm digitalization and environmental innovation from a company perspective. However, these investigations predominantly focus on a limited array of firms, often selected by size, which inherently narrows the applicability and generalizability of their findings. This methodological limitation underscores a pressing need for more expansive research that encompasses a wider variety of firm sizes and sectors, thereby enriching our understanding of how digital technologies can be leveraged to achieve sustainability within diverse business contexts.

The journey towards a twin transition necessitates a rethinking of traditional business models and strategies, offering a pathway to competitive advantage, resilience, and long-term sustainability. Accordingly, the concept of twin transition represents a paradigm shift in business model innovation. This dual focus reflects an acknowledgment that long-term business success and resilience increasingly depend on integrating digital technologies with sustainable practices (Lichtenthaler, 2021). The twin transition not only enhances operational efficiency and creates new value propositions but also responds to growing regulatory pressures and societal expectations for sustainable development (Knudsen et al., 2021). As firms navigate the complexities of this dual transition, they are compelled to adopt a holistic perspective that encompasses environmental, social, and economic dimensions (Bocken et al., 2014; Lüdeke-Freund & Dembek, 2017) in their business development. This integration not only fosters innovation, but also aligns business practices with global regulatory trends and evolving stakeholder expectations, thereby mitigating risks and unlocking new avenues for value creation (Schaltegger et al., 2016a, 2016b). A more recent study by Guandalini (2022) explores the impact of sustainability considerations on digitalization strategies and provide contemporary insights into how firms are integrating sustainability and digital technologies. Thus, integrating digital technologies with sustainability principles opens vast opportunities for innovation in products, services, and processes. Digital tools can enhance the efficiency of resource use, reduce waste, and facilitate the development of circular economy models (Geissdoerfer et al., 2017). For example, the use of big data analytics and IoT technologies can optimize supply chain operations, reducing carbon footprints and improving transparency (Montresor & Vezzani, 2023).

Illustrative of business models propelled by twin transitions and digitally enabled sustainability are, e.g., those rooted in the sharing economy, facilitated by exchange platforms that promote the ethos of sharing resources (Laudien et al., 2023; Rojanakit et al., 2022). Additionally, circular business models, exemplified by subscription services, leverage smartphones and digital platforms to enable a more sustainable consumption pattern (Tunn et al., 2021). These models epitomize the transformative potential of digital technologies in fostering sustainable business practices and consumer behaviors. Moreover, digital platforms enable the creation of sharing economy business models, which contribute to the dematerialization of consumption and the promotion of sustainability (Täuscher & Laudien, 2018). The sharing economy is frequently considered a component of the broader circular economy with the shift towards Product-Service Systems (PSS) being a key aspect of this relationship (Henry et al., 2020). The proliferation of the sharing economy has been significantly facilitated by the rise of internet-based platforms, enabling the emergence of organizations like Airbnb and Uber. Digital technologies have similarly propelled advancements in the circular economy (Neligan et al., 2023), although, unlike the sharing economy, circular economy initiatives often operate independently of exchange platforms, focusing instead on the direct sale of recycled or remanufactured products (Boons & Bocken, 2018). Smart cities epitomize the intersection of twin transitions, blending digital innovation with sustainable urban development to address contemporary societal challenges. By harnessing advanced technologies to optimize resource use, reduce emissions, and enhance quality of life, smart cities exemplify the practical application of twin transitions principles. This integration not only underscores the potential of digitalization to propel environmental sustainability but also positions smart cities as quintessential examples of how twin transitions can manifest in tangible, transformative urban projects (Mora et al., 2023; Paiho et al., 2023; Zheng et al., 2020; see examples in Table 8.1).

Table 8.1 Case examples of Twin Transition approaches
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Summarizing, the twin transition mandates a strategic overhaul across the nine dimensions of business models (Osterwalder & Pigneur, 2010) intricately weaving digital transformation and sustainable development into the fabric of organizational operations. This paradigm shift redefines customer engagement, targeting segments that prioritize digital convenience alongside environmental sustainability, thereby necessitating value propositions that encapsulate both technological innovation and eco-friendliness. Distribution channels evolve, embracing digital platforms to enhance efficiency and minimize ecological footprints, reflecting a broader commitment to sustainability. This transformation extends to customer relationships, where digital tools facilitate deeper connections with eco-conscious consumers, and to revenue streams, which diversify to include offerings that harmonize digital services with green practices. The recalibration of key resources towards renewable energies and digital infrastructures underpins this shift, steering key activities towards sustainable supply chain management and digital product development. Strategic partnerships with eco-friendly and tech-centric entities become pivotal, amplifying the company’s capacity for innovation in the twin transition landscape. Investments in sustainability and digitalization, while initially augmenting the cost structure, promise long-term operational savings and efficiency gains. This comprehensive reconfiguration not only aligns with the evolving market demands but also positions companies at the forefront of the digital and sustainable transformation, ensuring resilience and competitiveness in the contemporary business ecosystem.

The Key Roles of Dynamic Capabilities and Open Innovation in Twin Transition BMI

The twin transition concept is grounded in dynamic capabilities theory and underscores the necessity for firms to adeptly navigate changes by reconfiguring competencies to maintain competitiveness (Teece, 2007). This notion is critical in adapting business models to the dual demands of digital and ecological sustainability, as highlighted by Foss and Saebi (2017). It integrates the principles of sustainable development, as defined by the Brundtland Commission (1987), with the transformative impact of digital technology, as outlined by Vial (2021), addressing the challenges and opportunities of the Fourth Industrial Revolution and the environmental crisis (Alkaraan et al., 2024; Cheng et al., 2021).

The integration of sustainable development with digital transformation, as encapsulated in the twin transition, necessitates the creation of innovative business models. This integration is effectively elucidated through dynamic capabilities theory and open innovation (OI), offering frameworks to understand and navigate the complexities of this convergence. However, twin transition necessitates a radical reimagining of business models. This imperative is grounded in the dynamic capability theory and OI framework, which collectively offer a roadmap for navigating the complexities of this dual transition. Dynamic capabilities, as defined by Teece (2007), emphasize the agility and adaptability firms must possess to thrive in rapidly changing environments. Concurrently, OI, outlined by Chesbrough et al. (2006), advocates for leveraging external knowledge and open innovation ecosystems (Adner, 2017; Holgersen et al., 2022) to accelerate digital and sustainable advancements. The integration of these theoretical frameworks addresses the pressing need for business models that are both technologically forward and sustainability focused. The dynamic capabilities theory provides the strategic underpinning for firms to continuously evolve in response to technological and environmental shifts (Alkaraan et al., 2024). In parallel, the OI paradigm underscores the importance of collaborative innovation in achieving complex sustainability goals and digital transformation objectives. In essence, the confluence of sustainable development and digital transformation through the twin transitions lens challenges firms to cultivate both internal agility and external collaborations. This strategic approach not only enhances competitiveness in the digital age but also aligns business practices with global sustainability imperatives, marking a significant pivot in business model innovation towards more resilient, inclusive, and sustainable futures. David Teece’s (2020) seminal work elucidates this relationship, positing that dynamic capabilities are critically enhanced by OI practices. This enhancement manifests in several key areas as explained by Vanhaverbeke et al. (2024):

  • Sensing Capabilities: OI augments an organization’s ability to sense changes in society and opportunities in new technologies and markets by tapping into a broader spectrum of data, external knowledge and insights. This openness not only broadens the organization’s perceptual field but also deepens its understanding, enabling more informed and data-driven decision-making (Usman et al., 2023).

  • Seizing Opportunities: OI facilitates the development of new, digital, and sustainable capabilities, particularly in instances where management identifies strategic gaps. By leveraging external resources and collaborations, organizations can expedite the development of in-house capabilities, thus enhancing their capacity to seize emerging digital and sustainable business opportunities.

  • Twin Transformation: The adoption of OI principles may aid in the twin transformation process, allowing organizations to reallocate internal resources from non-core to more strategic areas of twin transition. This strategic shift is made possible by accessing external sources for non-essential technologies, thereby optimizing the internal allocation of resources towards areas with the highest potential for sustainable value creation.

According to Teece (2020) robust dynamic capabilities are essential for transforming OI activities into sustainable competitive advantages. Thus, we pose that this reciprocal relationship underscores the interdependence between an organization’s ability to adapt dynamically to the needs of twin transition and its success in implementing innovative twin transition strategies and represents a sophisticated model for achieving organizational resilience and competitive differentiation through twin transition business models aimed for rapidly evolving society and markets. Emerging technologies have the capacity to significantly disrupt existing business models and, by extension, entire industries. In this context, the imperative for business model experimentation becomes clear and underscores the necessity for established organizations to engage in OI and adaptation to remain competitive in the face of technological advancement and sustainability requirements (Aagaard et al., 2021; Bocken et al., 2019a). However, the OI literature predominantly focuses on a firm-centric view, as highlighted by Barbic et al. (2021) and Aagaard and Rezac (2022). This emphasis reveals a critical need to broaden our insight beyond just the dynamics of collaborative innovation, urging a deeper investigation into value creation and capture at an inter-organizational level (Bogers et al., 2017; Chesbrough et al., 2018). This pivot is crucial for a more nuanced understanding of how organizations across sectors and ecosystems jointly generate and seize value through dynamic capabilities and open twin transition business model innovation.

Consequently, twin transition business model innovation requires a radical reconceptualization of open innovation (OI). Traditional OI models, primarily focused on bilateral partnerships, are insufficient to meet the multifaceted challenges and opportunities presented by these dual imperatives. Instead, the complexity and scope of the twin transition necessitate a cross-disciplinary, multi-stakeholder approach to OI (MacDonald et al., 2022) emphasizing open ecosystems over isolated innovation efforts (Adner, 2017). This shift towards more inclusive and collaborative innovation ecosystems is critical for harnessing the synergies between digital advancements and sustainability goals. Cross-disciplinary OI facilitates the integration of diverse knowledge bases, technologies, and perspectives, essential for addressing the systemic challenges inherent in the twin transition. For example, Bogers et al. (2017) highlight the significance of cross-industry collaborations in fostering innovation, underscoring the value of diverse stakeholder engagement in driving technological and sustainable advancements. Furthermore, the concept of open ecosystems, as discussed by Adner (2017), emphasizes the strategic orchestration of a broader network of participants, including academia, industry, government, and civil society, to co-create value and drive systemic innovation. This expanded view of OI recognizes that the complexities of achieving sustainable and digital transformations cannot be effectively addressed through traditional, linear innovation models. Instead, they require a more holistic, networked approach that leverages the strengths and capabilities of a wide array of stakeholders. Such an approach not only accelerates innovation but also ensures that it is more resilient, adaptable, and aligned with broader societal goals. In essence, the twin transition challenges firms to move beyond conventional OI paradigms towards creating and participating in open ecosystems that foster cross-disciplinary collaboration and innovation. By doing so, organizations can better navigate the intricacies of digital and sustainable transformations, leveraging collective intelligence and resources to develop solutions that are at once innovative, inclusive, and impactful.

Archetypes of Twin Transition Business Model Innovation

Digitalization offers significant potential for enhancing sustainability by optimizing resource utilization, such as minimizing waste, and leveraging the predictive capabilities of algorithms to navigate Internet of Things (IoT) systems towards more sustainable decisions (Di Vaio et al., 2020). For instance, the adoption of Internet of Things (IoT) devices for smart energy management systems (Subramanian, 2023) has been shown to significantly reduce energy consumption and carbon footprints in manufacturing operations (Ali et al., 2021; Song et al., 2023). Similarly, blockchain technology facilitates energy transition (Montakhabi et al., 2023) and is being used to improve traceability and transparency in supply chains, ensuring ethical sourcing and reducing environmental impacts (Jan et al., 2023). Furthermore, digitization facilitates the development of intelligent solutions that lower energy use and improve the efficiency of capacity utilization and logistics networks (Tan et al., 2023) underscoring the transformative impact of digital technologies on sustainable business practices. Within the framework of circular business models, the integration of digital technologies is posited to reduce resource consumption and bolster circular processes, provided that businesses employ these technologies to use resources more efficiently, thereby also diminishing operational expenses (Neligan et al., 2023). Digitalization also facilitates the development of circular economy business models, where the value of products and materials is maintained in the economy for as long as possible. For example, platforms such as the Ellen MacArthur Foundation’s Circulytics tool leverage digital data to help companies measure and enhance their circularity performance, driving innovation in product design, material recovery, and business models (Geissdoerfer et al., 2020). Thus, within the ambit of existing discourse on twin transitions, the focus shifts towards operationalizing these paradigms through business model innovation. This exploration delves into the strategic frameworks and methodologies by which companies can harness the synergies between digitalization and sustainability to foster innovation in their business models, thereby creating resilient, future-oriented enterprises. To conceptualize key archetypes in twin transition business model innovation, we employ a matrix, which juxtaposes the dimensions of digital intensity (low to high) against sustainability integration (low to high). This matrix elucidates four distinct archetypes (see Table 8.2).

Table 8.2 Archetypes of twin transition business model innovation
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Strategic Approaches for Operationalizing the Archetypes of Twin Transition BMI

Traditionalists embark on their journey towards twin transition by recognizing the imperative to gradually integrate digital technologies and sustainability practices into their core operations. The strategic focus for these entities lies in laying a foundational step through the adoption of basic digital tools—such as cloud computing and data analytics—that enhance operational efficiency and customer engagement. This is paralleled by initiating attainable sustainability goals, including waste reduction and improvements in energy efficiency. The approach for Traditionalists is characterized by a cautious yet deliberate entry into the domains of digitalization and sustainability, aiming to build a solid base from which further advancements can be made (Porter & Heppelmann, 2014). Philips Lighting’s transition to Philips Signify, focusing on LED and smart lighting solutions, demonstrates this approach, where sustainability concerns have spurred digital innovation, leading to business model development and new revenue streams (Philips, 2023).

Digital Innovators, having already established a strong foothold in digital technologies, are poised to integrate sustainability into their digital strengths. The strategic imperative for these organizations involves leveraging their digital capabilities—through advanced technologies like AI, IoT, and blockchain—to achieve better sustainability outcomes, such as enhanced energy management and greater supply chain transparency. Furthermore, innovation with sustainability in mind becomes a key focus, as these entities develop new products and services that utilize digital technologies to address environmental and social challenges, thereby embedding sustainability into their innovation processes. Rennings and Rammer (2011) highlight the concept of “eco-innovation,” where digital tools enable the development of products and services that meet sustainability goals. In practice, IBM’s use of AI for water management in agricultural sectors exemplifies how digital technologies can be applied to address resource scarcity, enhancing both environmental sustainability and business efficiency.

Sustainable Pioneers stand out for their deep commitment to sustainability yet face the challenge of fully harnessing digital innovations to amplify their sustainability efforts. The strategic direction for these organizations entails adopting digital technologies that can scale their impact, for instance, through precision agriculture technologies or digital platforms that promote circular economy principles. Moreover, embedding a digital mindset within the organization’s culture is crucial, ensuring that digitalization efforts are aligned with and support sustainability goals, thereby facilitating a more integrated approach to achieving their environmental and social objectives. The imperative to reduce carbon footprints and achieve energy efficiency compels firms to adopt smart technologies, thereby accelerating digital innovation (Subramanian, 2023). Thus, environmental sustainability requirements are driving firms towards digital solutions, reshaping business models around the principles of the sustainable and circular economy. Furthermore, Guandalini (2022) and Ardito (2023) reveal how companies integrate sustainability concerns in their digitalization strategies and to enhance performance.

Twin Transformers represent the vanguard of integrating digital and sustainable innovations, setting new benchmarks for what is achievable in the business world. The strategic approach for these trailblazers involves developing and implementing business models where digital and sustainability principles are not just aligned but deeply intertwined, offering innovative solutions that redefine industry standards. Leading with innovation, Twin Transformers push the boundaries in both domains, adopting cutting-edge technologies and pioneering sustainable practices that not only redefine their market but also contribute significantly to addressing global challenges of sustainability and digital inclusivity (George et al., 2021). The Ellen MacArthur Foundation’s CE100 network is an illustrative example, where companies, innovators, and regions collaborate to foster novel and global circular economy practices, leveraging digital tools to facilitate knowledge exchange and innovation in driving circular twin transitions.

This exploration into the strategic approaches of Traditionalists, Digital Innovators, Sustainable Pioneers, and Twin Transformers reveals the multifaceted nature of navigating the twin transitions. Each archetype represents a strategic stance on navigating the twin transitions, with varying implications for business model innovation, competitive advantage, and sustainability outcomes. The matrix serves as a tool for businesses to assess their current position, identify gaps, and strategize on moving towards the Twin Transformers quadrant, which aligns with both future-readiness and responsible business practices.

From a dynamic perspective, transitioning between the four twin transition archetypes requires deliberate strategic actions, tailored to bridge the gaps in digital intensity and sustainability integration. A concise explanation of how companies evolve from one archetype to the next would require an extensive empirical study. However, we suggest different key considerations for managers to include in making these transitions.

From Digital Innovators to Twin Transformers

Digital Innovators, characterized by high digital intensity but low sustainability integration, need to embed environmental and social governance (ESG) criteria into their core operations and strategy. Concrete actions include adopting sustainability reporting standards to measure and disclose environmental impact, integrating ESG factors into decision-making processes, and leveraging digital technologies to enhance sustainability outcomes. For instance, employing AI and big data analytics to optimize energy use in data centers or supply chains can simultaneously advance digital and sustainability goals.

From Sustainable Pioneers to Twin Transformers

Sustainable Pioneers already excel in sustainability integration but must embrace digital technologies to amplify their impact and efficiency. This transition involves investing in digital tools that complement their sustainability goals, such as precision agriculture technologies for sustainable farming enterprises or blockchain for enhancing transparency in sustainable supply chains. Furthermore, fostering partnerships with tech companies can accelerate digital adoption, ensuring that sustainability efforts are both scalable and impactful.

From Traditionalists to Twin Transformers

For Traditionalists, the leap to Twin Transformers necessitates a dual focus on ramping up digital capabilities while integrating sustainability principles. Thus, we would speculate that Traditionalists would benefit from first pursuing Digital Innovators or Sustainable Pioneer before aiming for Twin Transformers, as this massive transition in most cases would be too extensive and demanding for any organization to carry out successfully. Particularly, as making this transition would require initiating digital literacy and upskilling programs across the organization to cultivate a digital-first culture. Simultaneously, embedding sustainability into the business model—from sourcing to operations and product design, which would require adopting sustainable practices and reporting. Collaborating with digital and green start-ups may help inject innovative sustainability and circular economy thinking and targeted digital technologies into traditional operations, facilitating a smoother transition towards both digital and sustainable excellence.

Cross-Archetype Strategic Imperatives

Across all archetypes, moving towards Twin Transformers requires the fostering of an organizational culture that values continuous learning, innovation, and adaptability and a strategy that integrates digitalization for sustainability. This will entail a completely different managerial mindset and most probably also new types of leadership profiles. In addition, engaging multiple and cross-disciplinary stakeholders in the transition process and leveraging external networks and open ecosystems for knowledge exchange and collaboration can provide valuable insights and resources (MacDonald et al., 2022) facilitating the integration of digital and sustainability innovations. In conclusion, transitioning from one twin transition archetype to another is not merely about adopting new technologies or practices, but about strategically aligning digital and sustainability efforts to drive systemic change. By focusing on concrete activities tailored to their starting points, companies can navigate the complexities of this transition, positioning themselves as leaders in a future where digital innovation and sustainability are inextricably linked.

Reconfiguring Organizations to Leverage Twin Transition Business Model Innovation

The twin transition presents a critical challenge for modern businesses, necessitating a deep-seated re-evaluation of their operational and strategic approaches. This concept underscores a pivotal shift from traditional business practices to a model where digital innovation goes hand in hand with environmental and social responsibility. Such a transition does not merely add layers to existing strategies but demands a comprehensive reassessment of how businesses operate, innovate, and compete in an era marked by rapid technological advances and growing sustainability concerns. This paradigm shift transcends traditional business practices, demanding a holistic reconfiguration of how companies operate, strategize, and innovate in an increasingly interconnected and resource-constrained world.

Accordingly, this profound reconfiguration requires a holistic examination and integration of several key business dimensions. At its core, the twin transition compels organizations to rethink their strategic frameworks, ensuring that digital and sustainability principles are not peripheral elements but foundational to their business models. This strategic shift is complex, involving not just the adoption of new technologies or practices but a fundamental rethinking of sustainable/circular business value creation in the digital age. Additionally, the transition calls for a cultural shift within organizations, fostering an ethos where sustainability and digital innovation are embraced across all levels. Leadership styles and management practices must evolve to support this shift, promoting a culture of adaptability, openness, and continuous learning. In essence, the twin transition is a clarion call for businesses to adapt, innovate, and lead in a world where digital and sustainable development are intertwined. This introduction sets the stage for a deeper exploration into how businesses can navigate this transition, highlighting the need for strategic, cultural, organizational, and technological transformations to thrive in the future business landscape.

Strategic Reconfiguration

Central to navigating the twin transition is a reimagined strategic framework that places equal emphasis on digital and sustainability principles. Traditional business models, often linear and efficiency-driven, must evolve towards systems thinking, emphasizing resilience, circularity, and long-term value creation. This strategic pivot demands comprehensive sustainability and digital audits, identifying areas for significant improvement or overhaul, such as transitioning to circular economy models that reuse resources and leveraging digital platforms for greater supply chain visibility (Lacy & Rutqvist, 2016; Linder & Williander, 2017; Nidumolu et al., 2009). Strategic foresight becomes crucial, as does the alignment of digital initiatives with sustainability goals, ensuring that investments in technology also advance environmental and social objectives (Langley et al., 2023).

Cultural Evolution and Adaptive Leadership

Achieving the twin transition also hinges on cultivating a corporate culture and leadership ethos that prioritizes innovation, transparency, and inclusivity. A culture that values continuous learning and adaptability encourages employees to explore how digital tools can be used in environmentally sustainable ways. Leadership must champion this culture, promoting open strategy and inclusive decision-making processes that consider diverse stakeholder perspectives (Falcke et al., 2023; George et al., 2021). Adaptive leadership styles, characterized by a willingness to experiment and learn from failures, are vital in steering organizations through the uncertainties of the twin transition (Hautz et al., 2017; Whittington et al., 2011).

Organizational Competencies and Structural Redesign

The organizational fabric must be rewoven to integrate new competencies and adapt structures conducive to the twin transition. This involves creating interdisciplinary teams that combine digital prowess with sustainability expertise, breaking down silos to foster a holistic approach to innovation. Investing in training and development programs ensures the workforce is equipped with the necessary skills to navigate and lead in the twin transition landscape. Moreover, organizational structures must be flexible, allowing for rapid adaptation as external conditions change or new technologies emerge (Köhler et al., 2019; MacDonald et al., 2022).

Process Reengineering and Technological Synergies

Internally, business processes—from product design to operations—must be reengineered to embed sustainability and digitalization at their core. This may involve adopting lean and green manufacturing practices augmented by digital technologies like IoT for real-time monitoring and optimization of resource use. Externally, businesses must leverage digital platforms for stakeholder engagement, enhancing transparency and collaboration across the value chain. The application of technologies such as blockchain can ensure traceability and integrity in sustainable supply chains, creating trust, and accountability (Langley et al., 2023; Nidumolu et al., 2009).

Expanding Cross-Disciplinary Collaborations

The complexity of the twin transition necessitates a broadening of collaboration horizons, moving towards open ecosystems that embrace cross-disciplinary partnerships and knowledge sharing. Establishing partnerships with academic institutions, industry peers, start-ups, and NGOs can provide access to novel ideas, technologies, and methodologies that propel both digital and sustainable innovation. These collaborations should be guided by principles of open innovation, where sharing risks and rewards accelerates the development of solutions that are not only technologically advanced but also sustainable and socially responsible (Hautz et al., 2017; Whittington et al., 2011).

In essence, navigating the twin transition demands a multi-dimensional approach, integrating strategic, cultural, organizational, and technological transformations. By elaborating on these dimensions, organizations can develop a comprehensive roadmap for successfully integrating digital transformation and sustainable development, positioning themselves as leaders in the emerging business landscape defined by resilience, innovation, and societal value.

Advancing Twin Transition Business Model Innovation Across Micro-, Meso-, and Macro-Levels

Navigating the complex interplay between technological advancement and environmental stewardship, modern organizations are increasingly called upon to redefine their strategic imperatives. The imperative for sustainable growth, coupled with the relentless pace of digital innovation, has ushered in an era where traditional business models are being fundamentally challenged and reimagined. At the micro- and firm level, the imperative to adopt twin transitions mandates a profound re-evaluation of operational frameworks and strategic orientations. Organizations are compelled to harness digital technologies not solely for enhancing operational efficiency but as pivotal tools for advancing sustainable practices. This necessitates a paradigm shift within the corporate culture, prioritizing sustainability alongside digital innovation. Digital tools can enhance the efficiency of resource use, reduce waste, and facilitate the development of circular economy models (Geissdoerfer et al., 2017). For example, the use of big data analytics and IoT technologies can optimize supply chain operations, reducing carbon footprints and improving transparency (Paiola et al., 2021; Patil et al., 2023). Moreover, digital platforms enable the creation of sharing economy business models, which contribute to the dematerialization of consumption and the promotion of sustainability (Täuscher & Laudien, 2018). For example, digital channels and social media amplify consumers’ awareness and expectations, compelling businesses to adopt more transparent and responsible practices, while ensuring win-win outcomes (Beckmann et al., 2014).

At the meso-level, the industry or sectoral perspective on twin transitions reveals a complex scenario where digital and sustainable innovations disrupt traditional value chains and market structures. Digital technologies enable more transparent, efficient, and flexible supply chains, promoting principles of the circular economy and reducing environmental footprints. This meso-level transformation encourages industries to rethink competitive strategies, moving towards collaborative models that leverage digital platforms for shared value creation. Industries become incubators for sustainable practices, driven by digital capabilities that allow for resource optimization, waste reduction, and enhanced lifecycle management of products and services. The complexities of the twin transition necessitate collaboration among a broad spectrum of stakeholders, including governments, NGOs, industry peers, and academia. Such collaborative ecosystems can accelerate the development and diffusion of sustainable and digital innovations (Altman & Nagle, 2020). For instance, public-private partnerships can facilitate the sharing of knowledge and resources, driving the co-creation of sustainable solutions (Ansell & Torfing, 2021).

Macro-Level Implications: On a broader scale, the twin transitions address critical societal and economic challenges, aligning with global sustainability goals and digital equity objectives (Nidumolu et al., 2009). The macro-perspective underscores the role of policy and regulatory frameworks in facilitating these transitions, highlighting the need for supportive infrastructures, incentives for green technology adoption, and standards for digital governance. Twin transitions have the potential to catalyze systemic changes, promoting a more sustainable and digitally inclusive economy. This encompasses not only environmental benefits but also socio-economic impacts, such as job creation in new green and digital sectors, re-skilling of the workforce, and fostering innovation ecosystems that contribute to resilient and sustainable growth for society at large and across sectors and borders.

The successful interaction across these three levels involves a dynamic interplay where micro-level organizational innovations are supported and amplified by meso-level collaborations and networks, all within an enabling macro-level environment. This open ecosystem approach ensures that innovations are not isolated but are instead integrated into a broader system of support, facilitating scalability and impact. For instance, the development of a digital platform for circular economy practices requires not only the technological capabilities and strategic vision at the micro-level but also the collaboration with supply chain partners at the meso-level and is significantly influenced by regulatory frameworks and market demands at the macro-level. In conclusion, the successful fostering of twin transition business model innovation is contingent upon a holistic understanding of the interactions across micro-, meso-, and macro-levels. By aligning internal strategies with external collaborations and operating within a supportive broader ecosystem, organizations can effectively navigate the complexities of digital and sustainable transformation, driving innovation that is both impactful and enduring.

Wanted: Visionary Leaders to Navigate the Twin Transition Challenge!

The imperative for twin transition in business model innovation (BMI) heralds a new era for leadership and management, fundamentally altering the competencies required to navigate the confluence of digitalization and sustainability. This transformative landscape necessitates a departure from conventional managerial approaches, demanding a reconfiguration of leadership styles, strategic orientation, and organizational culture to fully leverage the synergies between digital advancements and sustainability goals. Accordingly, successful navigation of twin transition BMI requires leaders who can blend adaptive leadership and visionary strategic thinking with operational pragmatism, embodying a commitment to both digital innovation, sustainability, and circular economy. This new breed of leaders must excel in strategic foresight, recognizing the long-term value and competitive advantage derived from integrating digital technologies with sustainable practices. They are tasked with transcending traditional profit-centric models, advocating for and embedding Environmental, Social, and Governance (ESG) principles and digital technologies as core elements of corporate strategy and value creation (Abebe et al., 2021; Eccles & Klimenko, 2019). In addition, adapting to the twin transition necessitates cultivating a culture that prizes adaptability, continuous learning, and cross-functional collaboration. Accordingly, leaders must foster an environment where experimentation is encouraged, and failure is viewed as a stepping stone to innovation (Aagaard et al., 2021; Bocken et al., 2019a). This involves investing in developing dynamic capabilities that allow the organization to swiftly respond to emerging technological opportunities and sustainability challenges (Teece, 2018, 2020). Furthermore, managers play a crucial role in enhancing digital literacy and sustainability awareness across the organization, recruiting, motivating, and training the necessary competencies, while ensuring alignment with twin transition objectives. Hence, leaders must balance the pursuit of disruptive innovation with the imperative of operational stability, carefully managing the risks and opportunities presented by digitalization (Broccardo et al., 2023; Nambisan, 2017; Teece, 2018), while fostering an innovation management strategy that is both agile and aligned with sustainability objectives.

The complexity of integrating digital and sustainable innovations into BMI underscores the importance of stakeholder engagement and transparency. Managers must navigate this complexity by aligning business strategies with ESG criteria, ensuring that decision-making processes are inclusive and transparent. This strategic shift towards ESG and transparency not only meets societal and market expectations but also fosters trust and strengthens the organization’s social license to operate (Eccles & Klimenko, 2019; Lozano, 2020). Hence, the realization of twin transition BMI depends on the ability to develop open ecosystems and cross-sector partnerships that extend beyond traditional industry boundaries. Leaders must actively seek and cultivate relationships with technology providers, start-ups, academic institutions, policymakers, and civil society, embracing cross-disciplinary open innovation and co-creation as essential strategies for addressing the multifaceted challenges of digital and sustainable integration (Chesbrough, 2012; Cozzolino & Geiger, 2024; Pittz & Adler, 2023). In twin transformation business development, the dynamics of partnering within open ecosystems are crucial for success. These partnerships, spanning across industries, academia, start-ups,and policymakers, enable the sharing of ideas and resources, accelerating innovation in digitalization and sustainability. Managers navigating this terrain must strategically cultivate and maintain these collaborations, ensuring alignment and managing complexities such as intellectual property and cultural integration. Effective partnership management is key to unlocking the transformative potential of the twin transformation, making it essential for managers to embrace flexibility, strategic thinking, and a collaborative mindset. This requires a keen understanding of the interdependencies between digital and sustainable strategies, and the ability to integrate diverse stakeholder goals around this dual focus.

In conclusion, the twin transition in BMI not only demands a reconfiguration of business models but also necessitates a profound transformation in leadership and management. The leaders of tomorrow must be adept at navigating the intricate interplay between digital and sustainable innovations, championing a culture of adaptability, engaging with a broad array of stakeholders, and driving strategic, cultural, and technological changes. This new leadership paradigm is essential for organizations aiming to thrive in the era of digital and sustainable transformation, embodying the principles and practices that will define success in the twin transition landscape. However, integrating digital technologies into existing operations and aligning them with sustainability goals can be complex and resource intensive. Hence, managers face challenges in selecting the right technologies, ensuring interoperability, and managing the associated risks, including data security and privacy concerns (Acciarini et al., 2023; Calluzzo & Cante, 2004; Nambisan, 2017; Ogbuke et al., 2022). Moreover, navigating regulatory compliance and the evolving regulatory landscape related to sustainability and digitalization presents another challenge. Managers must stay abreast of global and local regulations, which can vary significantly across markets and sectors (George & Schillebeeckx, 2022). Additionally, the incorporation of digital technologies and sustainability concerns into new twin transition business models necessitate a thorough assessment of their social implications, including considerations related to human rights, privacy, health, and safety, and working conditions (Trittin-Ulbrich et al., 2021; West, 2019). For example, at a more fundamental level, the dynamics between digitization’s influence on employment and society—whether it displaces existing jobs or creates new opportunities—remains a critical area of investigation and concern (Aubert-Tarby et al., 2018). Finally, business model innovations in twin transitions typically feature disruptive technologies that forge unprecedented pathways, leading investors into uncharted realms. This unfamiliarity can leave investors uncertain about their capacity to comprehend such innovations and, as a result, doubt their ability to derive strategic benefits from their investments, which may ultimately deter them from investing (Ansari et al., 2016; Piazza et al., 2023).

Future Research in Twin Transitions Business Model Innovation

The discourse presented in this chapter on twin transition business model innovation lays a crucial groundwork for identifying future research directions that promise to significantly enrich our academic and practical grasp of this field. The confluence of digitalization and sustainable practices, as notably advocated by the European Commission and epitomized through the European Green Digital Coalition, marks a transformative nexus in the evolution of business models. This dual integration not only aligns with contemporary environmental imperatives but also heralds a new era of business innovation that leverages digital technologies for sustainable growth.

A foremost area for forthcoming research lies in the empirical evaluation of how twin transition BMI influences organizational performance, sustainability metrics, and competitive advantage. Such an inquiry is essential to quantify the operational and strategic dividends of marrying digital initiatives with sustainability goals, thereby elucidating the nuanced balance between innovation and environmental stewardship. Further scholarly exploration is warranted into the mechanisms through which dynamic capabilities and open innovation facilitate twin transitions, especially in the context of cross-sector collaborations. This research trajectory could unveil how diverse industries can coalesce around shared sustainability and digital transformation goals, overcoming traditional barriers to innovation and fostering a culture of collective advancement.

The interplay between regulatory frameworks and the adoption of twin transition business models also demands rigorous analysis. Investigating the extent to which ESG legislation, policy, and governance structures support or impede these innovative models can offer actionable insights, potentially guiding policy adjustments to better accommodate and promote such transformative business strategies. Moreover, delving into the adoption challenges and best practices for integrating disruptive technologies within twin transition frameworks can provide vital guidance for businesses. This exploration should aim to uncover strategies for seamlessly blending digital transformations with sustainability objectives, ensuring that technological advancements contribute positively to environmental goals. Furthermore, we also need to explore how companies are navigating the ethical use of data, data privacy, and data security in leveraging digital technologies for (Acciarini et al., 2023; Calluzzo & Cante, 2004; Ogbuke et al., 2022). In addition, analyzing the impact of twin transition business models on consumer behavior and market dynamics represents another fertile ground for research. This avenue could reveal how digital and sustainable innovations reshape consumer expectations and loyalty, influencing market trends and driving competitive advantage in increasingly eco-conscious markets.

Longitudinal studies tracking the evolution of twin transition business models over time are crucial for understanding the dynamic interplay between strategy, operation, and market positioning as companies navigate this changing landscape. Such research can highlight the transformative impact of twin transitions on business practices, offering insights into long-term sustainability and digital integration. Lastly, a multi-level analysis—spanning the micro (individual organizational strategies), meso (industry and ecosystem collaborations), and macro (broader economic, societal, and policy impacts)—is indispensable for a holistic understanding of twin transitions`. This comprehensive approach promises to dissect the complex layers influencing twin transition initiatives, paving the way for strategic and policy frameworks that support sustainable and digital business transformations.

In essence, these elaborated research directions aim to deepen our understanding of twin transition business model innovation as a pivotal game changer. By systematically addressing these areas, academic inquiry can illuminate the pathways towards integrating digital and sustainable practices within business models, steering firms towards a future that is both environmentally responsible and technologically advanced.