CHAPTER 5

SUSTAINABILITY AS THE SOURCE

OF COMPETITIVE ADVANTAGE.
HOW SUSTAINABLE IS IT?
Veronika Tarnovskaya

ABSTRACT
As reaching UN Sustainable Development Goals 2030 has become the top
agenda of the global companies, they have prioritized sustainability as a
response to the grand challenges as well as a potential source of competitive
advantage. This chapter poses the question: whether and how can firms achieve
a sustainable competitive advantage via sustainability? I critically examine the
sustainability-based view of sustainable competitive advantage by arguing that
in the changing global landscape we will need to re-think the accepted ideas
as regards sustainability goals, sustainable development and the sustainable
competitive advantage as the individual firm’s achievement. The chapter con-
tributes to the ongoing debate by discussing the potential of de-growth ideas
and principles to solve some of the contradictions and suggesting the questions
for future research.
Keywords: Sustainability; sustainable competitive advantage; sustainable
cooperative advantage; de-growth; embedded sustainability; stakeholders

Creating a Sustainable Competitive Position: Ethical Challenges for International Firms

International Business & Management, Volume 37, 75–89
Copyright © 2023 by Veronika Tarnovskaya. Published by Emerald Publishing Limited.
This work is published under the Creative Commons Attribution (CC BY 4.0) licence. Anyone
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76 VERONIKA TARNOVSKAYA

1. INTRODUCTION
In recent years, sustainability has gained increased attention from academics and
practitioners alike. The growing relevance of sustainability is reflected by the
actions of global and European organizations such as the United Nations with its
2030 Agenda and Sustainable Development Goals,1 not to mention the growing
grassroots movements such as ‘Fridays for Future’. Sustainability is expected to
prevail as a critical megatrend affecting companies (as well as consumers) in the
decades to come (Lichtenthaler, 2021). Because of these developments, compa-
nies need to be prepared to tackle grand challenges such as climate change, pov-
erty, migration and health (pandemics) as well as the recently intensified political
instability in the world (Buckley et al., 2017).
Overall, the growing focus to address these challenges has brought sustain-
ability to the top of companies’ strategic agendas. For example, global multina-
tionals (MNEs) such as Hennes & Mauritz (H&M) with its vision ‘to lead the
change towards a circular and renewable fashion industry, while being a fair and
equal company’ (H&M, 2018b) pledged to use 35% of recycled materials by 2025,
responding to one of the greatest ecological challenges of waste created by the
fashion industry. Similarly, Apple announced in 2020 the goal to become 100%
carbon neutral by 2030, including its supply chain and product life cycle2 while
IKEA has pledged its commitment to become climate positive by 2030
by reducing more greenhouse gas emissions than the IKEA value chain emits, while growing the
IKEA business. This is how we contribute to limiting the global temperature increase to 1.5°C
by the end of the century. (IKEA Sustainability Report, 2021)

All these examples of large MNEs show that sustainability has, in fact,
become a key determinant of future business success. Beyond MNEs, there are
multiple examples of small- and medium-sized enterprises (SMEs) and start-ups
pursuing sustainability goals and adapting their business models to sustainability.
In this chapter, I will use the broad definition of sustainability as defined by the
United Nations – ‘meeting the needs of the present without compromising the
ability of future generations to meet their own needs’.3 In their 2030 Agenda,
the United Nations have developed the Sustainable Development Goals and the
concept of sustainable development in alignment with the triple bottom line of
environmental, social and financial performance (Elkington, 2018). Many com-
panies have started sustainability initiatives not only as a response to the grand
challenges outlined above but because the logic for performance accounting
comprises a broader spectrum which also considers the mitigation of negative
externalities (Tarnovskaya et al., 2022). According to the analysis of the litera-
ture concerning the impact of corporate sustainability on financial performance,
78% of studies in top-tier journals found a positive relationship between corpo-
rate sustainability and a firm’s financial performance (Alshehhi et al., 2018). As
expressed in one of the studies, ‘the impact of sustainability practices on firm
performance is growing over time and is expected to grow further in the coming
years’ (Govindan et al., 2020, p. 13).
Following from the arguments above, sustainability initiatives may provide a
critical source of competitive advantage for diverse types of firms, but especially
Sustainability as the Source of Competitive Advantage 77

MNEs, due to the global supply chains, economies-of-scale, vast resource base,
access to innovative technologies, the public scrutiny they are exposed to and a
more educated workforce. MNEs such as IKEA, H&M, Apple, Lego to name
a few have historically found the key source of their sustainable competitive
advantage in their strong brands (all these companies have been listed as one
of the hundred best brands for decades4). Most recently, they have also reached
high rankings as the best sustainable brands, for example, IKEA being ranked by
consumers as the number one sustainable brand in Sweden.5 Whether this cur-
rent development means that MNEs use both strong brands and sustainability to
compete successfully or whether sustainability has been raised to the level of the
business’s strategic agenda, its role as the source of competitive advantage that
can be maintained rather than simply achieved is still poorly understood.
The aim of this chapter is to examine the viability of sustainability as a source
of sustainable competitive advantage for global firms facing multiple challenges
in the volatile, dynamic environments they operate in. The research question is:
whether and how can firms achieve a sustainable competitive advantage via sus-
tainability? The text presented below is of a conceptual nature, but I will use
multiple examples of MNE’s sustainability endeavours from secondary sources
and illustrate my points by observations from an in-depth case study of H&M
sustainability implementation in Bangladesh.
I will argue that there are inherent contradictions in the very idea of sustain-
able competitive advantage via sustainability as it constitutes unresolved tensions
such as the triple bottom line of competing goals and sustainable development
through perpetual growth. Besides, when sustainability is raised to the level of
industry standards, one single firm cannot maintain its sustainable competitive
advantage alone. When collaboration with competing firms becomes critical for
raising and maintaining new environmental, social and technological standards,
the cooperative (Morioka et al., 2017) advantage might be a more beneficial aim.
I will critically examine the sustainability-based view of sustainable competi-
tive advantage by arguing that in the changing global landscape we will need to
re-think many of the accepted ideas as regards sustainability goals (components),
sustainable development as the strategy to ‘end poverty and other deprivations,
improve health and education, reduce inequality, and spur economic growth’6
and the sustainable competitive advantage as an individual firm’s achievement.
The chapter also contributes to the ongoing debate by discussing the potential of
de-growth ideas and principles to solve some of the contradictions and suggest
the questions for future research.

2. METHOD
The empirical data presented in this chapter provide examples of MNEs’ sustaina-
bility endeavours from secondary sources as well as selected primary sources from
an in-depth case study of H&M sustainability implementation in Bangladesh
conducted by our research team in 2020. Five digital interviews were carried out
with managers from sustainability, environmental and social teams operating in
78 VERONIKA TARNOVSKAYA

Bangladesh. The questions to local managers concerned their attitudes to sus-

tainability programmes, mismatches between operations and strategy and stories
about how sustainability projects have unfolded. We have used corporate social
responsibility (CSR) and sustainability documents as well as news articles and
reports from the business press, as anchor points for the questions (e.g. H&M,
2018a, 2018b, 2019a, 2019b). Various documents explaining the MNE’s sustain-
ability approaches have offered detailed knowledge regarding the sustainability
work, including knowledge on how sustainability activities are organized and
implemented, relationships with different stakeholders, different ethical codes,
etc. The interviews were transcribed and analysed together with the documents
using conceptually clustered matrix coding techniques and pattern matching rec-
ommended by Miles and Huberman (1994). The NVIVO 12 software package
was used to catalogue, collect and sort both the interview transcripts and the
secondary data sources.
In the text below, I have used selected examples from these interviews to illus-
trate analytical points such as of sustainable solutions as the sources of coop-
erative (instead of competitive) advantage that MNEs increasingly pursue on a
global scale. I have also complemented H&M examples from the in-depth case
study with secondary sources featuring H&M Group as well as other companies:
Bohinj ECo Hotel, Ikea, Lego, Patagonia, Alpa. These additional examples were
chosen due to these companies’ track-records in sustainability (Ikea, Lego and
Patagonia) as well as their embedded sustainability approach (Bohinj ECo Hotel
and Alpa) and their elements of de-growth (Fairfone, Alpa and Patagonia). The
empirical examples are used primarily to illustrate various aspects related to sus-
tainability as competitive advantage.

3. SUSTAINABILITY AS THE SOURCE OF COMPETITIVE

ADVANTAGE. HOW SUSTAINABLE IS IT?
The origins and history of the sustainability concept can be traced as far back
as the enlightenment era with its concern for the preservation of life. The post-
modern idea of sustainability emerges from the conditions specific to the time
and space of postmodernity, where life has become endangered to such an extent
that ‘nature has taken over the old religions’ fundamental function of having
an unquestionable authority that can impose limits’ (Zizek, 2008, pp. 53–54).
Conceptually understood in management literature as the triple bottom line, sus-
tainability consists of environmental sustainability defined as ‘a condition of bal-
ance, resilience, and interconnectedness that allows human society to satisfy its
needs while neither exceeding the capacity of its supporting ecosystems to regen-
erate the services necessary to meet those needs nor by our actions diminishing
biological diversity’ (Morelli, 2011, p. 6); social sustainability – universal human
rights, liveable communities and basic needs for many people (Lichtenthaler,
2021) and economic sustainability – activities and systems supporting long-term
economic growth by enabling communities worldwide to keep their independence
and access to resources without negative social and environmental consequences
Sustainability as the Source of Competitive Advantage 79

(Elkington, 2018). As seen from these definitions, the economic sustainabil-

ity goals go beyond financial indicators and measures since they include such
indicators as quality of life, social cohesion and sound environment for people
(Spangenberg, 2005). Besides, the environmental, social and economic compo-
nents of sustainability are interdependent as they provide opportunities/chal-
lenges for each other.
It is not hard to see that the triple bottom line of three sets of interdependent
goals presents a serious challenge for companies trying to implement all of them
without sacrificing one or another. In practice, many companies treat sustainabil-
ity as a ‘business case’ by focussing the sustainability programmes on their value
chain, key stakeholders, critical markets (e.g. human rights, workplace safety,
labour norms in the supply chain) while pursuing less ambitious goals for other
stakeholders. Depending on the degree of convergence of business and social
interests, companies can function as good corporate citizens, attuned to evolving
societal concerns or mitigate the adverse effects of corporate activities. The most
important feature of this approach is the reconciliation of societal impact and
business effectiveness through the creation and implementation of social projects
for a company’s competitive positioning.
Historically, the term ‘sustainable competitive advantage’ described a firm’s
superior attributes and resources that its competitors were unable to imitate
(Barney et al., 1989) and the assets that lasted for an extended period (Porter,
1985). Barney (1991) defines competitive advantage as
the implementation of a value creating strategy which is not simultaneously being implemented
by any current or potential competitors; whereas sustainable competitive advantage is viewed as
an implementation of a value-creating strategy not simultaneously being implemented by any
current or potential competitors and when these other firms are unable to duplicate the benefits
of this strategy. (Barney, 1991, p. 102)

While Barney (1991) saw the sources of sustainable competitive advantage in

resources that are rare, inimitable, un-substitutable and un-codifiable, Chaharbaghi
and Lynch (1999) argued that the essence of sustainable competitive advantage is
firms’ capabilities (Teece et al., 1997) in producing core competencies – in other
words, ways to produce and utilize resources in the dynamic and fast-changing
environment. However, when the sources of core competencies are possible to
imitate, for example, by sharing the knowledge on how to make the production
process more sustainable across the industry, the sustainability of a competitive
advantage might become questionable.
I will use the H&M case to provide examples of sustainable solutions to further
argue that they might constitute the source of cooperative (instead of competitive)
advantage that MNEs increasingly pursue on a global scale. I will start by argu-
ing that in times of crisis MNEs might be forced to prioritize social/environmental
goals over the economic ones.

3.1. H&M – Prioritizing Social Goals When Crisis Comes

A particularly good example of using sustainable solutions as cooperative advan-
tage is H&M. H&M is pursuing its sustainable strategy of ‘leading the change
80 VERONIKA TARNOVSKAYA

towards circular and climate positive fashion while being a fair and equal com-
pany’ across its value chain of 1,603 tier one suppliers, 708 tier two suppliers
employing 1.56 million people and 153,000 employees in approx. 5,000 stores. The
company has achieved remarkably high rankings in the Dow Jones Sustainability
Index (ranked fourth in 2020), the Dow Jones European Index, the highest pos-
sible score for human rights, environmental reporting, social reporting and mate-
riality, the highest score in the fashion industry for supply chain management
(92/100) and strategy for emerging markets (56/100).
According to the financial newspaper Dagens Industri: ‘H&M Group was
ranked as the most sustainable consumer goods company in an assessment of
listed companies in Sweden by Dagens Industri and Aktuell Hållbarhet’. These
figures and facts show a strong competitive position achieved by the company if
we limit the focus only to sustainability. It has been consistently ranked as one of
the 50 best global brands by Interbrand and one of the Top 50 Global Retailers
by NTF,7 proving that its competitive standing has been sustainable for more than
a decade (slightly decreasing in 2021). All that despite the numerous accusations
of bad working conditions at its factories in Cambodia and Bangladesh, child
labour in Uzbekistan, safety issues at factories in Cambodia and Bangladesh and
low living wages in Bangladesh. Most of the reported incidents have led to con-
crete measures being taken by the sustainability teams at H&M. Nevertheless, the
controversies remain (the latest one is the usage of forced labour at its factories in
Xinjiang in China – accusations in 2021).
The most recent situation in the world when Russia started the brutal war
in Ukraine de-stabilizing the European and worldwide political, economic and
social order has led many global companies to leave the Russian market. As of 9
April 2022, more than 600 companies had withdrawn from Russia or freed them-
selves from Russian ties in protest at Russian actions.8 H&M is one of these com-
panies – on 2 March 2022, they announced that its 150 stores would be closed.
H&M cited that it stands ‘with all the people who are suffering’ in Ukraine as
well as for ‘the safety of customers and colleagues’ in Russia.9 Russia was H&M’s
sixth-biggest market at the time, representing 4% of group sales in the fourth-
quarter of 2021.10
In this respect, it seems relevant to discuss the role of external factors such as
the changes of market dynamics in maintaining sustainability as the foundation
of competitive advantage. As emphasized by Lichtenthaler (2021), the radical
changes in the competitive environment, business and/or political environment,
might deem the sustainability-based competitive advantage unsustainable. In the
situation of global crisis or war in one of the markets, the global firm needs to pri-
oritize some of its sustainability goals more than others, as seen in the H&M and
other MNEs’ statements and actions due to the situation of Russian aggression.
More specifically, the economic goals were not seen as being of utmost impor-
tance as the retailer’s expected loss was estimated to be around 190M USD.
According to the analyst Richard Chamberlain, the profit estimates for H&M
for this year and next year will decrease by about 10% due to both its Russian
store closures and the slowdown in central and eastern Europe.11 As H&M was
Sustainability as the Source of Competitive Advantage 81

one of the firms who followed the exodus from Russia rather than started it,
the foundations of the firm’s superior performance (along the economic and the
social axis) might be weakened.

3.2. H&M – Sustainable Solutions Via Collaboration

H&M also provides a particularly good example of collaborative sustainability
solutions together with other global brands to solve the grand challenge – to
ensure good working conditions and improved wages in the markets with under-
developed labour laws such as Bangladesh. Fair wages are one of the United
Nations Sustainable Development Goals. H&M has created a roadmap to reach
this objective: ‘Every garment worker should earn enough to live on’ – the initial
implementation of the Fair Living Wage Roadmap. However, ensuring living wages
for workers in supplier factories has been challenging. Firstly, since H&M does
not own or manage the factories, the company does not pay garment workers’
salaries and cannot, therefore, decide how much they are paid. Secondly, workers
have limited possibilities to negotiate wages collectively using union representa-
tives. In addition to these challenges, H&M often faces the situation that factories
normally are contracted by varied brands.
In their Fair Wage project, H&M managers elevated the wage issue to industry
level to engage concerned stakeholders as well as governments to promote sys-
temic change. One example of a crucial collaboration for H&M was the forma-
tion of ACT – Action, Collaboration, Transformation – formed in 2015 together
with the global union organization IndustriALL and 22 other global brands. The
mission of ACT is to transform the garment, textile and footwear industry and
achieve living wages for workers through collective bargaining at industry level.
ACT provides a framework through which all relevant actors, including brands
and retailers, trade unions, manufacturers and governments, can exercise their
responsibility and role in achieving living wages. ACT represents ‘an innovative
solution, in terms of being the first time 22 companies in the industry get together
and agree on improvements regarding issues related to living wages’ and this is the
collective solution of the leading brands in the industry. In an interview, the CEO
of H&M (H&M, 2013) pointed out that to create a sustainable fashion industry,
one company cannot make lasting and systemic change alone.
The examples of H&M’s sustainable solutions highlight another important
aspect of achieving a sustainable competitive advantage via sustainability. Firms
which have integrated sustainability in their business operations (sustainable busi-
ness models) formulate their business success differently from the firms which
have added sustainability issues to their current business-as-usual (Morioka et al.,
2017). Their success is about solving a social and/or environmental problem
that requires a joint effort with competitors to find an innovative sustainability
solution. For these firms, a cooperative (or cooptative) advantage is critical for
business survival (Morioka et al., 2017) and it implies a broader view of advan-
tage derived from the competition and collaboration with competitors. The
firms taking the sustainability business model path also define the performance
82 VERONIKA TARNOVSKAYA

differently – not as a financial success for shareholders but as a broader sus-

tainable value creation for multiple stakeholders, deeming obsolete the view of
competitive advantage as a path to superior financial value.
What follows is that the foundation of sustainability needs renewal and recon-
figuration while performance outcomes of sustainability need to be specified. As
argued in the literature, besides purely financial measures of firm performance, the
triple bottom line considers various performance indicators capturing the social
and environmental dimensions (Alhaddi, 2015; Elkington, 2018) which might
at different time periods create high social and environmental value but lead to
negative financial effects (lower economic value). Overall, the sustainability view
of competitive advantage calls for rethinking the whole idea of the competitive
advantage through the superior value creation by a single firm focussing better
than competitors on economic value and customers’ satisfaction. Instead, firms
aiming at integrating sustainability into their business models need to extend their
value propositions to all stakeholders, employ proactive problem-solving, engage
stakeholders and collaborate rather than compete with competitors.

3.3. Bohinj ECo Hotel – Embedded Sustainability

The literature uses the concept of embedded sustainability as the incorpora-
tion of environmental and social value into the company’s core business with
no trade-off in price or quality (i.e. with no social or green premium) (Laszlo &
Zhexembayeva, 2017). Unlike CSR initiatives or efforts to add social and environ-
mental issues at the margins of the core business, embedded sustainability offers
new pathways to enduring profits via stakeholder value creation.
Embedded sustainability goes much further than just adding sustainability to
some parts of a company’s operations and/or having sustainability as separate
from the core business strategy. The embedded sustainability is also more than
just a balancing act in which economic interests are traded off against social and
environmental targets. Embedded sustainability is the incorporation of environ-
mental, health and social value into the company’s core business with the goal to
pursue sustainable value for multiple stakeholders including customers, suppliers,
employees as well as NGOs and regulators with whom the sustainable solutions
are co-developed for system-level changes. This is achieved via a transformation
of core business processes across all levels of the value chain, offering ‘smarter’
solutions with no trade-offs in quality and no social or green premium (Laszlo &
Zhexembayeva, 2017).
An exceptionally good example of such a business is the first complete eco-
hotel in Eastern Europe – Bohinj ECo Hotel.12 Bohinj ECo Hotel is the first and
only Green Globe-certified hotel in Slovenia, recognized among the best of the
sustainable hotels in the world. Instead of focussing on marginal environmental
attributes such as usual eco-efficiency practices, the hotel has embedded envi-
ronmental thinking and performance into all its operations. Combining geo-
thermal and co-generation technologies, the hotel produces its own energy for
all hotel operations, including its aquapark. Water is continuously recycled, and
heat reused. Wall and window insulation in combination with the energy-efficient
Sustainability as the Source of Competitive Advantage 83

LED lighting allows for the highest levels of comforts at reasonable costs. The
hotel generates 17.22 kg of CO2 per guest per night compared with 174.82 kg
produced by ‘standard’ hotels in the region. The savings from energy expenses are
channelled into other activities of the hotel such as food and catering, allowing
the company to produce superior performance without a price premium.
In the next section, I will discuss a more radical alternative to sustainable
development and firms’ strategies – the idea and concept of de-growth. This con-
cept challenges the basic assumption of sustainability as ‘a business case’ with the
growth imperative.

4. CAN DE-GROWTH LEAD TO A COMPETITIVE

ADVANTAGE?
In this part, I would like to question the very idea of sustainable development
as the strategy to ‘end poverty and other deprivations, improve health and edu-
cation, reduce inequality, and spur economic growth’13 from the perspective of
de-growth.
The term ‘de-growth’ (‘decroissance’ in French) was used for the first time by
French intellectual Ander Gorz in 1972. He posed a question that remains at the
centre of the de-growth Google scholar debate: ‘Is the earth’s balance, for which
no-growth – or even de-growth – of material production is a necessary condition,
compatible with the survival of the capitalist system?’ (Gorz, 1972 in Kallis et al.,
2012). With the advent of neo-liberalism in the 1980s and 1990s, the interest in
growth and de-growth declined while in the beginning of 2002 it came back when
Bruno Clementin and Vincent Cheynet coined the term ‘sustainable de-growth’,
understood as sustainable development. Since 2008, the English term has entered
academic discourse reflecting the activities of the French-founded academic col-
lective Research & De-growth and leading to more than 100 publications and
several special issues (D’Alisa et al., 2015; Kallis et al., 2012).
The meaning of de-growth is not very transparent and hardly popular among
economists as the prefix de-creates negative connotations of stagnation rather
than development. De-growth signifies a critique of growth as the central goal
of the capitalist system reflected in gross domestic product, increased consump-
tion and commodification of all spheres of human life, including the social ones.
De-growth challenges the whole capitalist system based on growth and profit
maximization. De-growth signifies a different growth with ‘smaller metabolism’,
the usage of fewer natural resources and different organization of society on such
principles as sharing, simplicity, conviviality, care and commons (collectives and
communities) (D’Alisa et al., 2015; Kallis et al., 2012). Put briefly, de-growth
does not call for doing less of the same but doing things differently (it is not
about making an elephant leaner but turning it into a snail) (D’Alisa et al., 2015;
Kallis et al., 2012).
The proponents of de-growth strongly argue for the incompatibility of sus-
tainable development and economic growth, and more generally, of sustainable
84 VERONIKA TARNOVSKAYA

development and capitalism. As argued, ‘history suggests that it is highly unlikely

that nations with capitalist economies would voluntarily choose not to grow’
(D’Alisa et al., 2015, p 10). As capitalism is represented by a specific range of
institutions – the corporation, private property, waged labour, private credit and
money at an interest rate – involved in the continuous struggle for profit accumu-
lation, de-growth literature does not usually discuss what might happen to these
institutions during de-growth transition. Instead, it includes diverse types of non-
profit institutions and projects such as eco-communities, digital commons, com-
munities of back-to-the landers, cooperatives, urban gardens, time banks, barter
markets and healthcare associations.
De-growth at its core is a grassroots movement and among its practices are
fast-growing consumer movements against consumerism and MNEs’ ethical prac-
tices, especially in their production countries. A recent survey in France showed
that 27% of respondents want to consume less – double the percentage from two
years earlier (Roulet & Bothello, 2020). The number of people eating less meat
or giving it up completely has been rising exponentially in recent years, too. Such
movements as the Flygskam (‘flight shaming’ in Swedish) have grown in Sweden
and it has even led to reduced pollution in 2019–2020. In the apparel industry,
garment manufacturers like H&M are aware of the growing consumer criticism
of the ecological impact of fast fashion. These examples show that consumers
(in developed countries) are increasingly conscious of the negative consequences
of consumerism and are changing their habits. As argued, ‘we are witnessing the
emergence of consumer-driven de-growth’ (Roulet & Bothello, 2020).
These consumer stories clearly show that de-growth opens new opportuni-
ties for companies – even within the present capitalist system – if they embrace
consumer trends and/or disruptive technologies. For example, in Sweden and
Scandinavia, the growth and popularity of Flygskam has created a boost for train
travel and companies like SJ. The reduced meat and dairy consumption have led
to the rise of meat substitutes and non-dairy products like Oatly, boosting the
respective company’s competitive standing. What follows is that de-growth might
reshuffle competitive dynamics within and across industries and even present new
opportunities for competitive advantage (Roulet & Bothello, 2020).

4.1. De-growth Strategies for Competitive and Cooperative Advantage

In this section, I will outline strategies available for firms that pursue sustainabil-
ity via de-growth. Three different strategies identified in the literature (Roulet &
Bothello, 2020) can provide sources of competitive advantage for private firms. I
have placed these strategies in a spectrum between the endpoints of competition
and cooperation to argue that the more extensive is the shift towards the basic
principles of de-growth: sharing, simplicity, conviviality, care, commons (broad
stakeholder engagement) and the broad stakeholder value of the offerings – the
stronger is the cooperative spirit of the business and its focus on the cooperative
(rather than competitive) advantage.
Firstly, firms can pursue de-growth-adapted product design, involving the
creation of products with longer lifespans via a modular or local production
Sustainability as the Source of Competitive Advantage 85

(Roulet & Bothello, 2020). Fairphone – the sustainable smartphone produced

by a company from the Netherlands with a strong community of supporters –
avoids the built-in obsolescence practised by most mobile manufacturers such
as Apple and Samsung and produces repairable phones having a dramatically
extended longevity.14 Similarly, the start-up – the 30-Year Sweatshirt under the
Tom Cridland brand15 – sells high-quality, durable products that refute the fast
fashion principles. Alpa – the Swedish company16 – has sustainability as the core
value and business principle. They produce ‘timeless garments that withstand
time’, long-lasting and practical, ecologically produced from carefully chosen
yarns in Peru. All garments can be repaired free of charge and sold after use in
the company’s online store.
Secondly, firms engage in value-chain repositioning, where they might skip
certain stages of the value chain and even delegate some tasks to stakehold-
ers (Roulet & Bothello, 2020). The vehicle manufacturer Local Motors created
a proof-of-concept recyclable vehicle crafted with 50 individual parts printed
onsite, compared with 25,000 parts required for a traditional vehicle. The com-
pany crowdsourced designs and crowdfunded the project from their potential
consumers. Larger firms such as IKEA and Lego have also modified their value
chains, launching marketplaces for either creating innovative designs or trad-
ing used products as well as involving customers in product delivery and design.
These firms have already incorporated stakeholder engagement into their opera-
tions and, therefore, they will be faster to adapt to de-growth when it becomes
more mainstream.
Thirdly, firms can lead through de-growth-oriented standard setting (Roulet &
Bothello, 2020). This involves the creation of a standard for the rest of the indus-
try to follow. The apparel company Patagonia – that explicitly follows an ‘anti-
growth’ strategy – is the best example of this approach, offering a second-hand
store and providing free repairs not only for their own products but also for those
of other manufacturers. Walmart and Nike have requested advice from Patagonia
on such practices, and more recently, H&M initiated the service with a pilot in-
store repair facility. Similarly, the automobile company Tesla released all its pat-
ents in 2014, in an attempt to catalyse the diffusion of electric vehicles. Such
initiatives were not merely marketing tactics, but also strategies to standardize a
practice or technological platform throughout an industry in which companies
like Patagonia or Tesla would have the best expertise.

5. CONCLUDING THOUGHTS ON SUSTAINABILITY AS A

SOURCE OF SUSTAINABLE ADVANTAGE
In this section, I will summarize the insights from the previous discussion and
illustrative cases and answer the question: whether and how can a sustainable
competitive advantage be achieved by firms via sustainability? I have tried to
probe this question through critical examination of the sustainability view of
competitive advantage by arguing that sustainable development as such has been
86 VERONIKA TARNOVSKAYA

suggested as a global solution for the mounting global challenges that our socie-
ties are increasingly facing, and therefore, sustainability has developed from being
the single firms’ response to the external pressures to their conscious, proactive
and joint role in the radical change of business-as-usual. When sustainability is
elevated from being an add-on to the ‘normal’ business to the embedded mode,
it requires the joint efforts of companies, industries and stakeholders. Given its
joint character and firms’ co-dependence on each other’s success, sustainabil-
ity cannot be the source of sustainable competitive advantage but sustainable
cooperative advantage.
In Table 1, I have provided examples of different strategic aspects of sus-
tainability leading to competitive and/or cooperative advantage. It shows that
when sustainability is added to the business-as-usual (which is in other parts

Table 1. The Strategic Aspects of Sustainability Leading to Competitive and

Cooperative Advantage.
Business- Added Added Embedded
As-Usual Sustainability Via Sustainability Via Sustainability
Growth De-growth

Goals Pursue Pursue Pursue stakeholder Pursue sustainable

shareholder stakeholder and value via value
value via shareholder doing things
growth value via differently
growth
Scope of business Marginal for Partial internal Partial internal Core business
transformation symbolic wins (product) (product) processes
and external and external
(value chain (value chain
or industry or industry
standard) standard)
Value Customer – Key stakeholders – Broad stakeholder – Broad stakeholder
proposition focussed focussed focussed and focussed and
aligned with aligned with
sustainability sustainability
goals goals
Stakeholder Transactional Competitive and Collaborative Collaborative and
relationships collaborative transformational
Competitors Win–lose mode From win–lose to From win–lose to Win–win mode
win–win modes win–win modes
View of Not important. Profit as a Profit as a Profit as a
sustainability Profit requirement requirement requirement
maximization for social and for improved for positive
environmental efficiency and social and
value creation reputation as environmental
(business case) socially and impact
environmentally
responsible
Viability of the Competitive – Competitive – Competitive – Cooperative
sustainable not cooperative but cooperative but sustainable
advantage sustainable not sustainable not sustainable
Sustainability as the Source of Competitive Advantage 87

unsustainable), it might lead a firm to a combination of competitive/cooperative

advantage which is unsustainable. Both firms pursuing the growth imperative and
firms partly embracing de-growth are still coping with the conflicting economic
and non-economic goals and they need to be profitable to implement these other
goals. On the contrary, the firms that have embedded sustainability in their core
business process become profitable because they have succeeded in the pursuit of
sustainable value, which requires the whole transformation of the business ethics,
relationships with stakeholders, competitors and other firms in the industry. In
doing so, they can achieve a sustainable cooperative advantage.
In Fig. 1, I have placed different options for reaching the competitive/coop-
erative advantage via sustainability along the axis of growth – de-growth and
competition – collaboration. I am arguing here that there are two ways of pur-
suing sustainability – to add it to the existing business model or fully embed it
into the business operations by implementing a radically different business model
with sustainability in focus. This can be achieved within the traditional growth-
oriented and competition-based paradigm of capitalism (added sustainability as
business case) as well as the alternative de-growth-oriented and collaboration-
based paradigm of prosperity without growth imperative (embedded sustainabil-
ity – societal case). However, only in the case of de-growth and collaborative
approach (top right corner in Fig. 1) can sustainability become the source of
sustainable (cooperative) advantage that can contribute to both businesses and
societies as well as benefit the planet. There are also sideways options: to focus
on the competition while pursuing de-growth and cooperating while growing. In
both latter cases, sustainability will be achieved partially as it requires different
trade-offs and, because of that, cannot lead to the sustainable advantage.

De-growth

Embedded sustainability Embedded sustainability

– stakeholder case NSA – societal case SA

Added sustainability – Added sustainability –

business case NSA stakeholder case NSA

Growth

Compeon Cooperaon

Fig. 1. When Does Sustainability Become a Sustainable Advantage?

NSA – Non-sustainable advantage. SA – Sustainable advantage.
88 VERONIKA TARNOVSKAYA

Achieving sustainable cooperative advantage via sustainability can be achieved

only via decoupling of economic goals from social and environmental ones when
the latter goals become central while profits follow as stakeholders ‘reward’ firms
by prioritizing their goods and services. The literature talks about decoupling of
economic and social/environmental goals in the context of different approaches
to sustainability as well as in the context of de-growth (Tarnovskaya et al., 2022).
It seems to me that a fruitful conclusion of this chapter is to come to similar ideas
by dis-connecting sustainability from the established postulates of sustainable
competitive advantage. I would like to end this chapter by saying that there will be
plenty of examples of firms using sustainability as the way to over-compete with
their rivals, position or reposition their brands and conquer market shares but we
will also see examples of firms that will cooperate rather than compete and create
innovative offerings of a sustainable value that won’t simply meet the growing
concerns of customers and other stakeholders but, first and foremost, will solve
the burning environmental problems, decrease the level of inequality in the world,
improve lives of millions of poor people and even reverse climate change.

NOTES
1. THE 17 GOALS | Sustainable Development ([Link]).
2. Apple commits to be 100% carbon neutral for its supply chain and products by 2030 –
Apple.
3. [Link]
4. [Link]
5. [Link]
6. [Link]
7. [Link]
8. Sonnenfeld (2022).
9. ‘Ukraine conflict: Growing numbers of firms pull back from Russia’. BBC News,
March 6, 2022.
10. [Link]
11. H&M sales soar but shares slip on wider Ukraine impact concern | BoF
­([Link]).
12. [Link]
13. [Link]
14. [Link]
15. [Link]
16. [Link]

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