Competing on sustainability - A study on stakeholder interaction, becoming truly sustainable and obtaining a sustained competitive advantage in an industry characterized by low sustainability maturity

Abstract

Although more and more companies are facing increasing pressure to take responsibility for their actions impacting sustainability, the pharmaceutical industry and in extension the cold chain solutions industry, have previously been exempted from scrutiny. Research on sustainability in the industry is lagging, why this master thesis aims to explore how sustainability can be incorporated into the business model while avoiding creating a disconnect between corporate strategy and actual sustainability impact. Conventional management theories and sustainability research have been combined with findings from interviews and document studies of a focal company in the industry, “The Company”.

This master thesis concludes that there is a shift towards increasing sustainability focus in the industry and that The Company could benefit from a position as being the most environmentally friendly solution. By analyzing stakeholders’ influence, attention, as well as tradeoffs in relation to sustainability, and channeling this analysis into an organization’s business model, sustainability can provide a competitive advantage. Internal factors that could strengthen The Company’s position as sustainable are identified as organizational support and the development of unique sustainability actions. External factors such as regulations and government intervention to encourage meaningful collaboration and spur implementation of sustainability, will also play a pivotal role in the sustainability transformation of the industry. Further, the thesis highlights that becoming truly sustainable requires a holistic perspective on social, economic, and environmental sustainability, as well as expanding the focus from mitigating negative impact, to strive for positive impact.

Popular Abstract

The topic of sustainability is a stronger buzz than ever, gaining increasing recognition as a necessity to stay competitive. Companies can no longer overlook sustainability considerations and stakeholder pressure is spreading to industries that have earlier been exempted from sustainability scrutiny, such as the cold chain solutions industry that is essential for the reliable transportation of pharmaceuticals and vaccines. Cold chain solution providers will face a new competitive landscape and are grappling to understand how they can accelerate the green transition. The question is: “How can a cold chain solutions provider incorporate sustainability to obtain a long-term competitive advantage, while creating meaningful environmental improvement?”. Claiming the front seat in the journey towards sustainability also requires an understanding of how to implement sustainability in practice, and how stakeholders’ priorities and influence will affect the transition.

The importance of sustainability
The COVID-19 pandemic has disrupted global supply chains and emphasized the need for efficient and timely supply chains in the quest to deliver 11 billion doses of vaccines around the world. The distribution and transportation of the vaccines is estimated to have required over 15,000 flights. This raises the question of how cold chain transportation can address tricky tradeoff considerations between delivering lifesaving vaccines and mitigating the environmental impact associated with the energy intense transportation. Even if it looks as though we have managed to come out on the other side, the chaos of the pandemic and the short-term solutions that it has entailed, have resulted in sustainability falling through the cracks.
Companies of all sizes and industries are facing increasing stakeholder pressure to take social and environmental responsibility. Sustainability is emerging as a strategic asset necessary to compete in the future. Although more and more companies are promoting themselves as sustainability champions,
there is often a disconnect between what companies report and the actual impact these efforts have on sustainability. As Greta Thunberg argues; “The biggest danger is not inaction. The real danger is when politicians and CEOs are making it look like real action is happening when in fact almost nothing is being done, apart from clever accounting and creative PR”. The uprising of sustainability as a corporate consideration has not lived up to the hopes, rather carbon emissions have continued to rise and environmental damage has been exacerbated.

The study
This master thesis has examined how a cold chain solutions provider, active in an industry characterized by a low level of sustainability maturity, can create a competitive advantage based on sustainability. The study seeks to explore how an understanding of the organizations most influential stakeholders and their identified sustainability trade-offs can be translated into a sustainability strategy that creates meaningful impact.

Analyzing stakeholders’ power and attention to sustainability issues
The study concluded that there is a clear shift towards increased sustainability responsibility in the pharmaceutical industry - stakeholders agree that sustainability can no longer be overlooked and that it will become a prerequisite to stay competitive in the future. Pharmaceutical companies are no longer protected by cross-insurance mechanisms and sustainability pressures are compelling them to engage their whole value chain in the transition towards a more sustainable future. Solving the long-term and complex sustainability issues associated with the cold chain industry will require collaboration across the industry. Government interaction will be vital to ensure meaningful industry-wide sustainability progress that goes beyond financial incentives and quick fixes. Cold chain solutions providers can become a part of the industry shift by translating stakeholders’ driving forces into a sustainability strategy that empowers employees to transform sustainability from a strategic initiative to real impact.

Implementing and integrating sustainability at the core
To avoid a disconnect between the corporate strategy and the sustainability agenda, sustainability must be integrated into the organization’s core, permeate all processes and be supported by an organizational
structure that brings sustainability to the fore. Organizations should design its sustainability work according to granular topics which are either important for the organization, or because the company is positioned to have the greatest chance of impact in these areas. To realize the targets associated with these topics, organizations could benefit from appointing a central sustainability team responsible for setting the sustainability agenda, while decentralizing the responsibility to the operational departments that actually drive the sustainability work.

Creating a competitive advantage based on unique sustainability actions
A competitive strategy should be based on an analysis of the organization’s position in relation to its industry and its competitors. The cold chain solutions industry is concluded to have reached a rather low, and varying, level of maturity and the organization could utilize the gap in the market by investing in novel and unique capabilities. In contrast, sustainability efforts regarded as low-hanging fruit will diffuse quickly in the industry, diluting the unique value of a capability and undermining the potential for a competitive advantage.
This master thesis has contributed to research by practically examining how sustainability can be integrated into a business model to create a competitive advantage. The findings have added to the investigation of sustainability in an industry where research has been lagging and can be transferable to other companies and industries in their quest towards becoming more sustainable. Sustainability has been concluded to allow for sustained competitive advantage. However, creating meaningful change requires an understanding of social, economic and environmental sustainability to aptly address the complex tradeoff considerations. Becoming truly sustainable requires a widened perspective where companies strive to create positive impact, rather than mitigating negative impact. Companies who want to compete on sustainability and create meaningful improvements should move from a reactive approach to working with sustainability in a proactive manner.

• author: Källner, Kristina and Lundberg, Anna
• supervisor: Izabelle Bäckström
• organization: Production Management
• course: MIOM05 20221
• year: 2022
• type: H2 - Master's Degree (Two Years)
• subject: Technology and Engineering
• keywords: Sustainability, cold chain, pharmaceutical industry, stakeholder theory, sustainable business models, VRIO analysis, truly sustainable, competitive advantage
• report number: 22/5689
• language: English
• id: 9089541
• date added to LUP: 2022-06-28 12:07:02
• date last changed: 2022-06-28 12:07:02