Starting point: Barrier, alignment

and synergy?
Environmental sustainability and economic sustainability

1
Two lenses to visualize how win-win
situations may arise
• Direct effect
• How incorporating (or intent for incorporating) environmentally sustainable
practices enhances innovation, operational, financial, image, and market
performance

• Indirect effect: Accentuation of other beneficial relationship

• How incorporating environmentally sustainable practices helps firms better
direct its innovation capabilities towards improving export competitiveness
Which company?

3
The business case for ES Enhancement in:
Operational performance
Financial performance
Image/ market performance
Incorporation of
Firm environmentally
Improved environmental
sustainable practices
performance

Faced a lot of challenges/public Narrowed the root causes

criticism over pollution and -ve effect on brand of the problem to:
Nike labour practices in contract value Material (env.)
factories Manufacturing (env., soc.)

Used a specialized yarn Reduced labour required

Innovation:
system Cut down waste generated Better environmental
Nike FlyKnit Sourced raw material from by 80% performance
1 solution to beat them all landfill Cheaper source of RM

Source: NYU Stern caselet

Innovation capabilities, environmentally
sustainable practices, and export competitiveness
• Bhat and Momaya (2020) in their
study provided evidence to the
hypothesis that firms with higher
innovation capabilities (InnoC)
possess higher export
Environmentally
Sustainable Practices competitiveness (EC)
• We (Adhikari & Momaya, 2021)
extended this study by saying that
Innovation capabilities maturity of ESPs accentuate this
relationship
• Product innovation Export Competitiveness
• Process innovation

• Why?
• Maturity: enhances green image easier
entry in other countries (especially
developed countries)
• Maturity: age (older firms)
Reconciling win-win and tradeoff
hypotheses
Explanations that consider both win-win and
tradeoff hypotheses
• So far, we have understood the w-w and TO hypotheses separately: How
have we tried to reconcile such divergent arguments?

• Let’s look at two possible ways

• Win-win is contingent on the context (i.e., contingency based argument)

• Non-linearity arguments
• No linear relationship (e.g., absolute positive or negative correlation)
• Too-much-of-a-good-thing argument
• Too-little-of-a-good-thing argument
Explanations that consider both win-win and
tradeoff hypotheses
• So far, we have understood the w-w and TO hypotheses separately: How
have we tried to reconcile such divergent arguments?

• Let’s look at two possible ways

• Win-win is contingent on the context (i.e., contingency based argument)

• Non-linearity arguments
• No linear relationship (e.g., absolute positive or negative correlation)
• Too-much-of-a-good-thing argument
• Too-little-of-a-good-thing argument
 Contingency based argument
Contingencies

Proactive environmental action by

firms (e.g., proactive environmental Firm competitive advantage
strategy, incorporation of ESPs etc.)

Source: Adapted from Aragón-Correa & Sharma, 2003

• Going green can provide firms • Contingencies:

competitive advantage in some • Uncertainty
cases and not in other cases: • Complexity
hence both w-w and TO • Munificence
hypothesis are context-specific
Explanations that consider both win-win and
tradeoff hypotheses
• So far, we have understood the w-w and TO hypotheses separately: How
have we tried to reconcile such divergent arguments?

• Let’s look at two possible ways

• Win-win is contingent on the context (i.e., contingency based argument)

• Non-linearity arguments
• No linear relationship (e.g., absolute positive or negative correlation)
• Too-much-of-a-good-thing argument
• Too-little-of-a-good-thing argument
 Too-much-of-a-good-thing effect?
Firm economic performance Firm economic performance

Firm environmental performance Firm environmental performance

Source: Adapted from Trumpp & Guenther, 2015

 Too-much-of-a-good-thing effect?
• When firm environmental Firm economic performance
performance increases, firm
economic performance goes up
till an inflection point
• It then starts dropping
• Idea is based on the law of
diminishing marginal returns
• Beyond a point, additional costs
accrue less additional benefits
• Inverted U-shaped graph
Firm environmental performance

Source: Adapted from Trumpp & Guenther, 2015

 Too-little-of-a-good-thing effect?
• When firm start taking steps to Firm economic performance
improve their environmental
performance, the huge up-front
investment mean that benefit
accrued is less
• There comes a point (inflection
point) when:
• Benefits start going up
• Stakeholders start recognizing efforts
• After inflection point, there is a
win-win relationship
• U-shaped graph
Firm environmental performance

Source: Adapted from Trumpp & Guenther, 2015

 Which camp are you in? Why?
Firm economic performance Firm economic performance

Firm environmental performance Firm environmental performance

Too-little-of-a-good-thing Too-much-of-a-good-thing
 Summary: How are w-w and TO theories
reconciled?

Source: Adapted from Trumpp & Guenther, 2015

Hands-on: 15 minutes
• After a quick search on internet:
• Provide examples of either win-win or tradeoff in action

• Choice of firm:
• Either your mini-project firm
• Or firm associated with your favourite brand
Select references
Adhikari, P., & Momaya, K. S. (2021). Innovation Capabilities, Environmentally Sustainable Practices and Export
Competitiveness: An Exploratory Study of Firms From India. International Journal of Innovation and Technology
Management, 18(06), 2150035. https://doi.org/10.1142/s0219877021500358

Aragón-Correa, J. A., & Sharma, S. (2003). A Contingent Resource-Based View of Proactive Corporate Environmental
Strategy. Academy of Management Review, 28(1), 71–88. https://doi.org/10.5465/amr.2003.8925233

Fujii, H., Iwata, K., Kaneko, S., & Managi, S. (2012). Corporate Environmental and Economic Performance of Japanese
Manufacturing Firms: Empirical Study for Sustainable Development: Corporate Environmental and Economic Performance of
Japanese Manufacturing Firms. Business Strategy and the Environment, 22(3), 187–201. https://doi.org/10.1002/bse.1747

Trumpp, C., & Guenther, T. (2017). Too Little or too much? Exploring U-shaped Relationships between Corporate
Environmental Performance and Corporate Financial Performance. Business Strategy and the Environment, 26(1), 49–68.
https://doi.org/10.1002/bse.1900
Class participation topics: 6 slides (15
minutes) | Due: Wednesday and Friday
of next week
Topics` Group/Individual
Carbon footprint of top 5 Indian Rushikesh and Minkesh
companies in Fortune Global 500
(2022) versus carbon footprint of top 5
US companies in the same list: A
comparative analysis
Change in emission intensity of top 5 Harshini Sreeram, Anjali Prabhakar
Indian firms in Fortune Global 500
(2022) versus change in emission Slides:
intensity of top 5 US firms in the last
10 years
• Slide 1: Title slide
Correlation of emission intensity and Kundan, Marc
• Slide 2: What is the question you’re
profit after tax (PAT) for NIFTY 50 handling?
firms (rate of change as well as
absolutes)
• Slide 3: Sources of data
Correlation of R&D spend (as % of
• Slide 4: Charts and tables of findings
revenue) and emission intensity of • Slide 5: Discussion of findings
firms for NIFTY 50 firms
• Slide 6: How would you apply the
Scope 1, Scope 2, and Scope 3 of top Shrikant, Tanmay, Aryan
learnings for your mini-project?
10 Fortune 500 (American) firms:
Discussion on what are they and how
OR
are they different? What are some practical implications?
CP for others
Assignment on searching resources (due: 10th March 2023)