Sustainable Businesses in Developing

Economies: Socio-Economic and

Governance Perspectives Rajagopal
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Rajagopal

Sustainable Businesses
in Developing Economies
Socio-Economic and
Governance Perspectives
Sustainable Businesses in Developing Economies
 Rajagopal

Sustainable Businesses
in Developing
Economies
Socio-Economic and Governance Perspectives
Rajagopal
EGADE Business School
Mexico City, Mexico

ISBN 978-3-030-51680-2 ISBN 978-3-030-51681-9 (eBook)

https://doi.org/10.1007/978-3-030-51681-9

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…to Arati, my wife who is central to my every endeavor
 Preface

Contemporary marketing has evolved alongside the sustainability perspec-

tives as a dynamic science and spanned across temporal and spatial dimen-
sions involving society, public administration, and market players. In the
process, global sustainable commitment and consumers’ welfare formed
the foundations of markets. The production and consumption patterns
are associated with a wide range of sustainability issues throughout
the lifecycle of product and services. The conventional industry prac-
tices in developing economies result into various social and ecolog-
ical problems. Industries that pioneer sustainability consciousness in the
society integrate strategies to manage the ecosystem through their busi-
ness models. The integrated business models with sustainability commit-
ment can be explained in terms of their value proposition, and value
creation and delivery though effective corporate social responsibility.
These perspectives need to be discussed in terms of cleaner production
and consumption, and managing constituents of sustainable ecosystems
through global-local business models. Though the literature proposes
several conceptual solutions, there is a need to rethink on modular designs
and product-service systems within global-local business dynamics.1

1 Bridgens, B., Hobson, K., Lilley, D., Lee, J., Scott, J. L., and Wilson, G. T. (2017).
Closing the loop on e-waste: A multidisciplinary perspective. Journal of Industrial Ecology,
39 (1), 1–13.

vii
viii PREFACE

Another significant development in the recent past is about the appli-

cation of circular economy, which supports the global sustainability move
and induces shifts in consumption patterns. The circular economy (CE)
is modeled as an industry, which encourages recycling of wastes for
producing industrial products, and adheres to the global sustainability
commitments. However, conventional industrial system tends to collapse
as the consumption level increases due to the scarcity of ecosystem-
based resources. The circular economy has been implemented in indus-
tries such as steel, paper, polymers, and products such as mobile phones.
In the various industrial sectors, the CE has shown positive impact on
the resources management.2 Therefore, holistic assessment of systemic
influences of the circular economy is necessary from a global sustain-
ability point of view and guide companies to develop sustainable business
modeling. CE comprises of end-of-life (decline stage) management of a
product, so that the product after its completion of functional life could
regain commercial value and could be brought back into the supply chain
process by various means rather than considered as a waste.3
Sustainability concerns, pro-environment knowledge, and the social
dynamics of markets drive the consumption behavior of green prod-
ucts among consumers. As the management of green products are based
on intangible factors, trust plays a central role in building cognitive
ergonomics among the consumers. In addition, consumer knowledge and
social consciousness build the foundation of green consumer behavior.
Some previous studies reveal that the global sustainability drive has influ-
enced consumers to change their behavior and purchase decisions through
the consumption of eco-friendly alternatives.4 The green consumption
behavior has emerged over time in food consumption and transport
sustainability, and toward renewable energy usage. Public policies and
social consciousness also contributed significantly in transforming the
consumption behavior at macro level. Therefore, many consumers are

2 Hanumante, N. C., Shastri, Y., and Hoadley, A. (2019). Assessment of circular

economy for global sustainability using an integrated model. Resources, Conservation and
Recycling, 151, Art. 104460.
3 Govindan, K. and Soleimani, H. (2017). A review of reverse logistics and closed-loop
supply chains: A Journal of Cleaner Production focus. Journal of Cleaner Production, 142.
371–384.
4 Paco, A. and Rapose, M. (2009). Green segmentation: An application to the
Portuguese consumer market. Market. Intelligence and Planning, 27 (3), 364–379.
 PREFACE ix

interested in modifying their consumption behavior with less impact

on natural resources, particularly fossil fuels,5 as the social dynamics is
also contributing to the development of green energy. Consumers in
the energy market today are committed with environmental protection
through green electricity.6
Sustainable business widely depends on environment-friendly logistics
and inventory management with low carbon emissions. The refrigerated
transportation and inventory are more susceptible to environmental pollu-
tion than other ways of distribution sources. Freight transportation firms
are facing mounting challenges of fuel consumption, and need to reduce
the significant environmental imbalances that accrue from transport vehi-
cles.7 However, most small and medium enterprises are observing a major
fix between lowering the logistics- and inventory cost and stay price
competitive in the market. The operations of freight transport industry
in developing economies is highly competitive due to increased produc-
tion and consumption coupled with government pressures to achieve
sustainability. Therefore, eco-innovation has become the principal concern
among the business corporations toward following the sustainable param-
eters to not only satisfy stakeholders’ values such as reducing negative
environmental externalities, but also toward reaching governments’ green
requirements and consumer demands.8
In the context of above discussion, most developing nations have
promulgated comprehensive public policies to streamline corporate gover-
nance on implementation of sustainability-driven business model in all
industries. Public policies are focusing on macro-economic disruption due

5 Chen, M. F. (2016). Extending the theory of planned behavior model to explain

people’s energy savings and carbon reduction behavioral intentions to mitigate climate
change in Taiwanemoral obligation matters. Journal of Cleaner Production, 112, 1746–
1753.
6 Strupeit, L. and Palm, A. (2016). Overcoming barriers to renewable energy diffusion:
Business models for customer-sited solar photovoltaics in Japan, Germany and the United
States. Journal of Cleaner Production, 123, 124–136.
7 Bektas, T., Ehmke, J. F., Psaraftis, H. N., and Puchinger, J. (2019). The role or oper-
ational research in green freight transportation. European Journal of Operations Research,
274 (3), 807–823.
8 Garcia- Graner, E. M., Piedra, M. L., and Galdeano, G. E. (2018). Eco- innovation
measurement: A review of firm performance indicators. Journal of Cleaner Production,
191, 304–317.
x PREFACE

to sustainability issues in developing economies.9 Therefore, large compa-

nies are developing alliances with local governments on public–private
partnerships (PPP) in implementing sustainability norms and enhancing
social value. The PPP initiatives in various geo-demographic sectors have
generated social awareness among people and inculcated the environmen-
tally conscious consumption in the society. Environmentally conscious
consumption is one of the key concerns in the modern society, and
it is increasingly affecting the urban consumers. However, consumers
often overstate their willingness to purchase environmentally conscious
products; the global purchasing of these products is relatively low. Most
research studies on environmentally conscious consumption suggest that
the purchase intention is driven by intrinsic factors such as demographics
comprising income, education and social status, consumer cognition, and
personality attributes.10 In addition, external factors and social influences
also affect an individual’s environmental consumption behavior.
Most socially successful companies derive innovation ideas for sustain-
ability projects from consumer driven resources. The customer-centric
innovations are largely developed by the start-up enterprises by analyzing
the customer needs within the niche market. Most of the innovations
positioned in the premier niche markets are of high quality and high
cost, while the innovations focused for the mass consumers in the local
niche are of acceptable quality that deliver the value for money. The two
factors- cost and marketability, drive the strategy of reverse innovation.
Large companies roll over to the local markets to identify the customer-
centric innovations developed by the local enterprises and tend to evaluate
the economics of their business projects. The primary challenge to devel-
oping innovations for emerging markets and catering to the customers
therein is delivering solutions of adequate quality at a competitive price.11
Previous studies on social entrepreneurshipentrepreneurship have
focused on the personality and background of the social entrepreneur and

9 Béal, V. (2015). Selective public policies: Sustainability and neoliberal urban restruc-
turing. Environment and Urbanization, 27(1), 303–316.
10 Tsarenko, Y., Ferraro, C., Sands, S., and McLeod, C. (2013). Environmentally
conscious consumption: The role of retailers and peers as external influences. Journal
of Retailing and Consumer Services, 20 (3), 302–310.
11 Rajagopal (2016). Innovative Business Projects: Breaking Complexities, Building Perfor-
mance (Vol.2)-Financials, New Insights, and Project Sustainability. New York: Business
Expert Press.
 PREFACE xi

the entrepreneurial performance. The social entrepreneurs have unique

characteristics including knowledge, cognitive capacities, and altruistic
values. Social innovation is an interactive bottom-up collective learning
process implemented through social enterprises. As a boundary-spanning
activity across the public and private sectors, the interactive learning
process and associated capability building for social innovation serves as
a catalyst for wider social reform. Social innovations help value creation
in emerging economies involving stakeholders and firms in the broader
projects.12
This book categorically reviews the theories on sustainability, corpo-
rate social identity, and social values in context of the changing dynamics
of sustainable business modeling practices. It also examines previous
researches, and analyzes the strategic and tactical stewardship of firms
for sustainable growth in global marketplace over time and space.
In view of the above arguments, this book discusses the sustainable
business ecosystems and business modeling, contributions of circular
economy and production systems, green consumption behavior, cleaner
energy perspectives, and sustainable logistics- and inventory manage-
ment under the functional management section. In addition, discussions
on public policy and business governance, conscious consumption and
marketing strategies, innovation and technology, and social entrepreneur-
shipentrepreneurship constitute the business strategies section. Accord-
ingly, this book is composed of nine chapters, each supported by applied
examples and short cases.
The chapters in this book are divided into three broad sections
comprising The Founding Concepts, Functional Dynamics, and Moving
Towards Shift. Chapter 1 introduces a framework of sustainable ecosystem
for profit and not-for-profit businesses in the context of sustainable devel-
opment goals. The principal discussion is on foundations of corporate
sustainability, business ecosystem, sustainability commitments, sustain-
able business modeling, and corporate social responsibility. This chapter
analyzes the current sustainable business models in the context of previous
studies, and attempts to guide business leaders to create sustainable busi-
nesses. This chapter is broadly based on the triadic business manage-
ment approach toward profiteering, corporate social responsibility, and

12 Rao-Nicholson, R., Vorley, T., and Khan, Z. (2017). Social innovation in emerging
economies: A national systems of innovation-based approach. Technological Forecasting and
Social Change, 121, 228–237.
xii PREFACE

attaining sustainability goals. Chapter 2 explores the concept and philos-

ophy of circular economy and its applications in business and sustain-
ability. The micro and macro indicators that determine the process and
leverage of circular economy in managing cleaner businesses have been
discussed in this chapter. The chapter also discusses the innovations,
which support improving the management of sustainability issues, and the
social capital and values in implementing various sustainability perspectives
within circular economy system. Chapter 3 critically examines the corpo-
rate business policies on consumer education toward green consumerism.
The endogenous and exogenous factors affecting consumer behavior
toward sustainable consumption and the role of retailing and branding
in building the behavioral orientation toward sustainable products and
services constitute the core discussions in this chapter. In addition, this
chapter analyzes the effects of consumer awareness on their behavior in
the context of family health, wellbeing and social values.
Chapter 4 deliberates on managing cleaner energy by discussion the
energy business modeling, adaptation to innovations, and social manage-
ment modeling for driving behavioral shifts to green energy consumption.
This chapter discusses marketer’s perspective in the implementation of
a green marketing program for a renewable electricity retailing. In
the above context, eco-innovations, adaptability of renewable energy,
consumption economics, servitization perspectives, and public policies on
sustainable energy distribution are discussed in this chapter. Chapter 5
categorically discusses the economics of transportation and logistics,
regionalization of transportation services, managing innovation projects,
and logistics and inventory planning. The chapter discusses barriers and
collective improvement strategies in the management of sustainable logis-
tics and inventory services, in the context of circular economy concepts.
Specific development initiatives on emission control, shifts in transport
economics, delivery technologies, green inventory management, and
logistics modeling that supports sustainable logistics and inventory
management, are also discussed in this chapter. Chapter 6 broadly focuses
on the topics of social and political governance, emerging perspectives
on business and economics, business diplomacy and governance, and
public policy on sustainability by regions (Spain, Mexico, and Brazil). The
chapter critically examines global policies and local laws on governance
of sustainability projects in the developing economies, and suggests
redesigning governance model for implementing sustainability policies.
The public–private participation, and community moves in the direction
 PREFACE xiii

of developing sustainable business model are also discussed as core topics

in this chapter. The chapter also highlights the factors that force the local
civil governance system to realize that it is necessary to change the way
they are operating, in order to include the sustainability aspects within
the operations of the local governance. Chapter 7 examines contem-
porary trends consumption of sustainable products and services, social
consciousness, concept mapping and semantics, and marketing strategy
for sustainable products. In addition, shifts in decision processes among
consumers and socially conscious corporations, social and family factors
affecting consumer preferences, and conformity factors on sustainable
consumption are also discussed in this chapter. This chapter also reviews
the research studies based on norm activation theory and the theory of
planned behavior that argue new perspectives about the environmentally
conscious consumption behavior.
The ecological innovations strategies are discussed in the Chapter 8,
which discusses complexities in eco-innovations, attributes of eco-
innovations and management, social marketing, and branding eco-
innovations. This chapter examines how ecological innovation can support
sustainable manufacturing and society despite the traditionally low coop-
eration in developing economies. The role of frugalinnovations on
sustainability needs, their branding and marketing strategies, and product
value management are also addressed in this chapter. This chapter
emphasizes on social marketing for sustainable products and services
and contemporary strategies for branding eco-innovations. Chapter 9
discusses various aspects of social entrepreneurshipentrepreneurship, new
trends in business modeling, and global-local effects of sustainable prod-
ucts and services. Discussions in the chapter focus contemporary explana-
tions to social needs, social innovations, and organizational performance
of social enterprises. The future business trends are also discussed in this
chapter in the context of social entrepreneurshipentrepreneurship. This
chapter discusses how contemporary social and technological develop-
ments would help the upcoming businesses in generating opportunities
to combine resources, reach markets, and create community value.
In view of the above arguments, this book discusses the sustain-
able business ecosystems and business modeling, contributions of circular
economy and production systems, green consumption behavior, cleaner
energy perspectives, and sustainable logistics- and inventory manage-
ment under the functional management section. In addition, discussions
on public policy and business governance, conscious consumption and
xiv PREFACE

marketing strategies, innovation and technology, and social entrepreneur-

shipentrepreneurship constitute the business strategies section. Accord-
ingly, this book is composed of nine chapters, each supported by applied
examples and short cases.
This book argues that most firms look for gaining competitive
advantage in the marketplace by driving strategic moves, inculcating
consumer consciousness on sustainability-linked marketing approaches.
The trends in cleaner business decisions over the past generations deter-
mine the sustainable business models involving society, stakeholders, and
consumers. Sometimes such profound changes are introduced in the niche
markets, which creates chain effects in consumer awareness, consump-
tion patterns, and yields macro effects in large markets. Often, sustainable
choices of the companies lean toward developing competitive differentia-
tions that enable consumers to realize the social values and loyalty shifts
in the competitive marketplace. The book focuses on sustainability as the
pivot of marketing and argues that commitments on sustainability in busi-
ness leads to social impact, and emotionally helps companies in growing
their image, brands, and socio-political reputations. The book discusses
new strategies suitable for the companies to develop sustainable business
in the emerging markets and to co-create strategies in association with
the market players and consumers. This book significantly contributes to
the existing literature, and serves as a learning post and a think tank for
students, researchers, and business managers.
Some of my research papers on business modeling and customer centric
marketing in the emerging markets have been published in the inter-
national refereed journals that had driven new insights on the subject.
Accordingly, filtered and refined concepts and management practices have
been presented in the book that are endorsed with applied illustrations
and updated review of literature on managing business in the overseas
destinations.
The principal audience of this book are working managers, and
students of undergraduate and graduate management studies, research
scholars, and academics in different business-related disciplines. This book
has been developed also to serve as principal text to the under-graduate
and graduate students who are pursuing studies in managing sustain-
able businesses, corporate governance, and social marketing. Besides
serving as principal reading in undergraduate and graduate programs,
this book would also inspire working managers, market analysts and busi-
ness consultants to explore various solutions on international business
 PREFACE xv

management. This book fits into the courses of Business Management,

International Marketing, Business in Emerging Markets, Managing
Sustainable Businesses, Social Business modeling and New Product
Management in various universities and business schools.
I hope this book will contribute to the existing literature, and deliver
new concepts to the students and researchers to pursue the subject
further. By reading this book, working managers may also realize how
to converge best practices with corporate strategies in managing business
at the destination markets while students would learn the new dimensions
of marketing strategies.

Mexico City, Mexico Rajagopal

July 2020
 Acknowledgments

The thought process in evolving this book originated from the couple
of research studies on sustainable consumption patterns in emerging
markets, which I conducted in the recent past. These studies were devel-
oped on the principles of design-based research (DBR) with the qualita-
tive methodology. The output of these research studies was discussed in
the classroom of MBA program at EGADE Business School and Boston
University during 2019–2020. The narrative outputs and storyboards
on the sustainable practices have given many insights that emerged as
a central theme of this book. I have also benefitted by the discussions
of my colleagues within and outside the EGADE Business School and
Boston University. I am thankful to Dr. Lou Chitkushev, Associate Dean
and Dr. John Sullivan, Chair of Administrative Sciences Department,
Metropolitan College of Boston University for giving me teaching assign-
ments, which enabled me to apply the research output on sustainability-
based business modeling in the classes. I would like to acknowledge the
support of Dr. Osmar Zavaleta, National Research Director, and Dr.
Raquel Castaño, Associate Dean, EGADE Business School, who have
always encouraged me to take up new challenges in teaching graduate
courses, develop new insights, and contribute to the existing literature
prolifically. I also enjoyed discussions with the corporate managers on the
subject, which helped in enriching the contents of this book.
I am thankful to various anonymous referees of our previous research
works on globalization, consumer behavior, and marketing strategy that

xvii
xviii ACKNOWLEDGMENTS

helped in looking deeper into the conceptual gaps, and improving the
quality with their valuable comments. Finally, I express my deep gratitude
to Arati Rajagopal who has been instrumental in completing this book. I
acknowledge her help in copy editing the first draft of the manuscript and
for staying in touch until the final proofs were crosschecked and index was
developed.
 Contents

Part I The Founding Concepts

1 Sustainability in Business 3

2 Circular Economy and Production Systems 35

3 Green Consumerism 67

Part II Functional Dynamics

4 Cleaner Energy Consumption 103

5 Sustainable Logistics and Inventory Management 129

6 Public Policies and Sustainable Business Governance 159

7 Conscious Consumption and Marketing Strategy 179

xix
xx CONTENTS

Part III Moving Towards a New Shift

8 Eco-Innovation and Technology 203

9 Social Entrepreneurship and New Business Trends 235

Index 251
 About the Author

Rajagopal is a Professor of Marketing at EGADE Business School of

Monterrey Institute of Technology and Higher Education (ITESM),
Mexico City Campus and Life Fellow of the Royal Society for Encourage-
ment of Arts, Manufacture and Commerce, London. He is also Fellow of
the Chartered Management Institute, and Fellow of Institute of Opera-
tions Management, United Kingdom. Dr. Rajagopal is serving as Adjunct
Professor at Boston University, Boston, Massachusetts since 2013 and is
also engaged in teaching courses at the UFV India Global Education of
the University of the Fraser Valley, Canada.
He has been listed with biography in various international direc-
tories. He offers courses on Competitor Analysis, Marketing Strategy,
Advance Selling Systems, International Marketing, Services Marketing,
New Product Development, and other subjects of contemporary interest
to the students of undergraduate, graduate, and doctoral programs. He
has imparted training to senior executives and has conducted over 65
management and faculty development programs. Dr. Rajagopal holds
Post-graduate and doctoral degrees in Economics and Marketing respec-
tively from Pandit Ravishankar Shukla University in India. His specializa-
tion is in the fields of Marketing Management, Rural Economic Linkages
and Development Economics.
He has to his credit 63 books on marketing management and rural
development themes and over 400 research contributions that include

xxi
xxii ABOUT THE AUTHOR

published research papers in national and international refereed jour-

nals. He is Editor-in-Chief of International Journal of Leisure and
Tourism Marketing and International Journal of Business Competition.
Dr. Rajagopal served as Regional Editor of Emerald Emerging Markets
Case Studies (2012–2019), published by Emerald Publishers, United
Kingdom. He is on the editorial board of various journals of international
repute. Currently Dr. Rajagopal holds the honor of the highest level of
National Researcher-SNI Level- III. He has been awarded UK-Mexico
Visiting Chair 2016–2017 for collaborative research on ‘Global-Local
Innovation Convergence’ with University of Sheffield, UK, instituted by
the Consortium of Higher Education Institutes of Mexico and UK.
 List of Figures

Fig. 1.1 Elements of business ecosystem 10

Fig. 1.2 Elements of sustainability linked business modelling 20
Fig. 2.1 Business modelling canvas in circular economy environment 40
Fig. 2.2 Attributes of innovation ecosystems and sustainability 47
Fig. 3.1 Attributes and process of consumer behavior 74
Fig. 3.2 Ecosystem of sustainable consumption practices 84
Fig. 4.1 Business modelling for green and renewable energy
marketing 108
Fig. 4.2 Adaptation to green energy: attributes and effects 119
Fig. 5.1 Demand and supply functions of transport economics 136
Fig. 5.2 Ecosystem of sustainable innovation projects 150
Fig. 6.1 Taxonomy of governance in sustainability projects 169
Fig. 7.1 The process of developing sustainable consumption
behavior 183

xxiii
 PART I

The Founding Concepts

 CHAPTER 1

Sustainability in Business

This chapter introduces a framework of sustainable ecosystem suitable to

for-profit and not-for-profit businesses in the context of sustainable devel-
opment goals (SDGs). Sustainability philosophy of corporations fosters
innovations in social businesses and encourages codesigning of sustain-
able business model. A process of systemic thinking needed to develop
socially sustainable business modeling has been discussed in this chapter.
Discussion on corporate social responsibility as an effective tool in imple-
menting the business models linked with sustainability goals is central
to this chapter. The new paradigm suggested in this chapter contrasts
with the linear approach commonly used in business and other disci-
plines. This chapter analyzes the current sustainable business models in
the context of previous studies, and attempts to guide business leaders to
create sustainable businesses. The chapter also discusses how a sustainable
business model could provide profit-oriented business with a commitment
to corporate social responsibility and sustainability.
Sustainability has emerged as a key concern for the companies, from
the local origin firms to multinational corporations, to improve busi-
ness processes, pursue growth, and determine effect social and economic
value additions. Most companies are following pro-sustainability business
philosophy to gain corporate citizenship reputation rather than focusing
on their brand personality alone. Consequently, companies are taking
actions to employ various sustainability measures to enhance the social,
economic, and political dimensions of business such as reducing energy

© The Author(s) 2021 3

Rajagopal, Sustainable Businesses in Developing Economies,
https://doi.org/10.1007/978-3-030-51681-9_1
4 RAJAGOPAL

usage (environmental factor) and reducing waste in operations (ecology,

emissions, circular economy, and green business conditions) ahead of the
concerns on corporate reputation management. Companies engaged in
implementing sustainable measures in business are practicing on judicious
use of water and managing green value chain throughout the process
starting from manufacturing to the supply of products to the end-user.
The underlying objectives of large companies are to leverage the sustain-
ability effects on existing products not only to acquire new customers, but
also to achieve higher prices and market share from the sustainability-led
brands (Bonini and Gorner 2011).

Foundations of Corporate Sustainability

Sustainability is a sociopolitical driver that governs the business philos-
ophy to build green effects in manufacturing, marketing, supply chain,
innovations, and technology management. Businesses embedded with
sustainability concerns enhance customer engagements and customer
value to support the corporate citizenship goals of a firm. However,
environmentalists and social activists have often argued that the sustain-
ability measures adopted by large manufacturing companies (industrial
and consumer products) are not sufficient. Environmentally conscious
companies run their businesses in a socially- and economically respon-
sible fashion by engaging stakeholders and employees. Small and medium
sized companies face resources limitation in developing and implementing
a sustainable business model, though most entrepreneurial leaders know
and feel the importance of making their businesses sustainable. To
overcome obstacles in sustainable business models, companies need to
consider a roadmap to circumvent them. Sustainability involves creating
value for all stakeholders within the business ecosystem, and contem-
plating profits with value creation. Sustainability also requires a business to
look at its entire value chain. Entrepreneurial and corporate leaders need
to drive the sustainability initiatives and call for the employee and stake-
holder involvement. Such integration of roles in the implementation of
business models helps not only in creating social values to endorse corpo-
rate citizenship, but also in establishing clean production and corporate
governance (Bhattacharya and Polman 2016).
Most companies pursue sustainability as a project to deliver corpo-
rate social responsibility. Sustainability projects add to the operational and
 1 SUSTAINABILITY IN BUSINESS 5

overhead costs of the company but deliver no immediate financial bene-

fits. Consequently, though sustainability is a matter of public concern and
is governed by public policies, companies often give low priority to social
sustainability projects as they do not directly contribute to the profitability
and market competitiveness. Companies with green business philosophies
such as automobiles, energy, textile, and paper products have begun to
transform the manufacturing process alongside the competitive landscape.
These companies redesign products, technologies, processes, and business
models through social enterprises to deliver the social value for their prod-
ucts and services (Nidumolu et al. 2009). Despite the success of some
sustainable business models implemented by the manufacturing and oper-
ations companies, small, medium, and large-scale companies in regional
settings are struggling with the challenge of integrating environmental
plans into their core business strategies. Local companies develop low-
cost sustainability projects with an objective with restricted outreach to
stakeholders. Sustainability has emerged as a megatrend for businesses in
the twenty-first century. Companies plan transformative changes in orga-
nization to create social values across the competitive marketplace (Lubin
and Esty 2010).
Emerging companies design and implement sustainability programs
as pragmatism, while the large and long-standing companies implement
sustainability programs out of idealism. These companies have consis-
tently generated significant growth rates and profit margins with the
sustainability programs irrespective of their size and destination. Compa-
nies with sustainability objectives take a futuristic view and invest in social
operating methods that lead to lower costs and higher yields. Companies
tend to make local adjustments in sustainable social programs to generate
savings in cost, which then identify local administrators for managing
these projects. Sustainability projects are sometime co-funded by the
companies and local governments to support operations with advanced
technologies and to coevolve business models. Collectively, these compa-
nies with socially responsive organizations demonstrate trade-off between
sustainability and financial performance. The pursuit of sustainability
therefore, has emerged as a powerful path to grow business enterprises
with social values (Haanaes et al. 2013). The concept of systems thinking,
in which the business operates as a system in contrasts with the linear
approach, commonly used in business and other disciplines to manage
the business operations in a systematic way. This approach explains what
6 RAJAGOPAL

might cause an action or reaction but ignores any feedback effect between
the subsequent action and its cause (Sun et al. 2018).
Sustainability-based business models have emerged rapidly with global
and local companies. Such business propositions have been extensively
supported by the public policies in developing countries. Consumer
education on sustainable products has increased over time, and they
are seeking out sustainable products by transforming the competitive
scenarios across the destinations, which forces companies to change their
products, processes, technologies, and business model (Goni et al. 2017).
The trend of sustainability has encouraged both high-and low- investment
companies. The dominant belief about creating and developing sustain-
able business model in the customer-centric and industrial-marketing
companies is driven by the idea of solving environmental and economic
issues and providing high social values. The response of public policies
helps in developing sustainable business models through social guidelines
to move their businesses toward green and circular economy (Evans et al.
2017).
Innovating the sustainable business model is about creating supe-
rior customer- and firm value by involving stakeholders and market
players such as supply chain and packaging partners. Sustainable busi-
ness model of a company addresses societal and environmental needs
through integrated business operations. Ecosystems of different business
models are specific to the purpose and the corporate goals of the compa-
nies. Some companies that grow with social innovation objectives have
a greater number of qualitative designs encompassing social needs, stake-
holder education, user value generation, and bridging the corporate social
responsibilities. Social sustainability manifests itself in corporate culture,
organizational behavior, and functional practices of companies. Sustain-
able business models are spread longitudinally; so, they are bound to face
unforeseen risks which need to be managed in association with the stake-
holders. However, companies must engage in mapping the performance
of pilot business-experimentation models (Rajagopal 2020b).
A new commercial reality in today’s global marketplace is the rapid
shift in consumer behavior due to the emergence of dynamic disruption of
innovation and technology in consumer products on a previously unimag-
ined scale of magnitude. Environmental sustainability and consumption of
green products has driven the world toward converging openness, trans-
parency, and commonality. Sustainable business models are proactive to
the systematic patterns of regulatory, social, or voluntary practices that
 1 SUSTAINABILITY IN BUSINESS 7

tend to generate social and commercial value on the business investments.

Sustainable business models of textiles, energy, and telecommunication
industries have played transformational role within and outside their
industries (Schaltegger et al. 2016).
Companies functioning with sustainable innovative business model
succeed in developing multi-stakeholder values, engagements, and oper-
ational alignments. Sustainability is a consistent philosophy among
business organizations. However, their operational boundaries change
across companies, stakeholders, and socioeconomic values. Companies
employ different sustainable business model initiatives from for-profit
and non-profit organizations by developing alignments among various
players at normative, instrumental, and strategic dimensions in order to
achieve sustainable value creation. However, during the implementation
of sustainable business models, companies face complexity for alignment
of value, diverging interests, investment risks, profitability, and corporate
responsibilities. Multi-stakeholder engagement in implementing sustain-
able business plans enhances envisioned and perceived values in large
companies. Most customer-centric firms are engaged in radical forms
of reorganizing the business model to create perennial values, while
conventional business models focus on satisfying customer needs and
maximizing their returns. Sustainable business models integrate multiple
dimensions of economic, social, and environmental value, and adapt to
customer-centric strategies (Bocken et al. 2015). Sustainable business
models include corporate strategies on development of new value proposi-
tions, delivery networks, and value augmentation approaches. Sustainable
business models emphasize on stakeholder relationships through value
creation for customers, suppliers, or other business partners (Boons and
Lüdeke-Freund 2013).

Business Ecosystem
Continuous disruptions caused by frugal and radical innovations in the
consumer- and industrial markets and business processes pose chal-
lenges to the contemporary business ecosystems. Disruption of products
and services are rapidly increasing in the emerging markets that affect
the performance of companies in an industry. Business ecosystems are
protected with public policies and robust strategies of companies within
industries, which operate around various subsystems including sociopo-
litical, socio-technical, economic, and entrepreneurial. Such ecosystems
8 RAJAGOPAL

like China, India and Brazil are able to manage short term, sporadic
market instabilities and geo-demographic variations in consumption
trends (Ramezani and Camarinha-Matos 2020). Large companies that
collaborate with local enterprises to manage frugal and reverse innovations
for implementing sustainable social responsibilities develop competence
to cope with severe disruptions, and survive or even thrive in a context
of volatility and uncertainty. Such practice builds collaborative business
ecosystem, which emphasizes the collaborative perspective of sustainable
business modeling (Graca and Camarinha-Matos 2017).
Business ecosystems involve multiple players of different types and sizes
in a market, industry, or region to create value, develop economies of scale
in manufacturing, and serve the markets with maximum capacity. Such
business ecosystem has diverse objectives and operations. Their collective
ability to learn, adapt, innovate, and coevolve businesses within socioe-
conomic subsystems constitutes the key determinant of their longer-term
success. Ecosystem exhibits important intervening variables in business,
which influence creating new value-chain in the society and among market
players. The value perceptions in social business ecosystems are driven
by shared interests, goals, and values. Companies collaborate with local
companies to meet the increasing customer demands in niche and to
invest in the long-term sustainability projects like eco-conservation, public
health, and housing, which can derive mutual benefit. Business ecosys-
tems based on social and public economic goals are dynamic, which
coevolve with communities of diverse actors who serve to the social
responsibilities, and create and capture new value through increasingly
public–private partnership models (Kelly 2015). Companies like Nestle
(Organic coffee cultivation in Columbia) and Unilever (empowering rural
women in India) could lead the market competition in specific consumer
products segments in the regional markets. Nestle continued to be the
market leader until 2016 in Latin America, and Unilever is projected to
be the market leader in consumer products segment until 2020. Successful
companies develop transactional alliances and legal business partnerships
with local partners. These companies also invest in developing community
buy-ins and in long-term personal relationships based on mutual trust.
Companies that create high corporate value through social embedded-
ness by implementing codesigned corporate social responsibility projects,
make them competitive to lead in the market for long term (Rajagopal
2020a).
 1 SUSTAINABILITY IN BUSINESS 9

Strategic thinking in organizations has driven the concept of sustain-

able strategic management through coevolution involving society,
stakeholders, and employees of a firm. Socially and ecologically respon-
sible firms tend to explore sustainable socioeconomic opportunities
within the proximity of their operations. The socioeconomic, techno-
logical, and cultural business ecosystems have emerged as foundation for
implementing sustainable strategic management strategies. Such business
ecosystem functions effectively in a reverse organizational pyramid with
stakeholders on the top, and coevolves with social sustainability objectives
in developed-, developing-, and undeveloped markets. Both the busi-
ness ecosystem leaders and players in local markets play critical roles in
formulating and implementing potentially profitable strategies. Business
ecosystems converge social needs, sustainability goals and the quality of
human life in the coevolved business models. Ecosystem leaders of large
companies are responsible for creating and stewarding the sustainability
perspectives while niche-based firms invest in social and sustainability-led
innovation to make the vision of the industry (including large compa-
nies), a reality (Stead and Stead 2013). The principle business ecosystem
and its subsystems are discussed in Fig. 1.1.
Business ecosystem has six core elements embedded with six rela-
tional subsystems as illustrated in Fig. 1.1. The core elements constitute
stakeholders, society, innovation, and technology, macroeconomic factors,
sustainability, and corporate governance. Crowdsourcing or collective
intelligence has emerged as a dynamic tool in the business ecosystem
today, which is supported by the stakeholders. They support compa-
nies in co-creation and coevolution process with stakeholders through
social interaction, social innovations, and social governance. Business
ecosystems linked with the sustainability goals drive public–private
entrepreneurship (collaborations) to meet the sustainable development
goals through social- and frugal innovations. Taxonomy of leadership and
employee engagement largely drive the corporate governance practices
as central to the business ecosystem. Among various subsystems associ-
ated with the core business ecosystems, stakeholders are influenced by
the cognitive subsystem comprising perceptions, emotions and social-
interactivities. Social and innovation subsystems include social values,
entrepreneurship education, and utilitarian innovations. Management
of resources and factors of production, procurement, and transactions
of public goods constitute some significant factors of macroeconomic
 10

Stakeholder Subsystem Social Subsystem

Percepons, beliefs, & values Society
Social needs
Emoons & self-reference Social interacons
Social learning
Movaon Social innovaon
Social Values
Experience sharing Corporate cizenship behavior
Social media Social governance
RAJAGOPAL

interacvity Innovaon and Technology Subsystem

Entrepreneurship educaon
Innovaon and Knowledge management
Stakeholders Technology
Collecve intelligence Digizaon and crowdsourcing
Frugal innovaon Innovaon sponsorship
Co-creaon Reverse innovaon
Co-evoluon Networks and plaorms
Technology lifecycle Ulitarian innovaons
Empowerment Transfer of technology Cost-Time-Risk factors
Business
Ecosystem Corporate Governance Macroeconomic
Factors Macroeconomic Subsystem
Role of stakeholders
Resources management Public-private funding
Leadership
Infrastructure Factors of producon
Decision-making
Fiscal policies Tax structure
Financial administraon
Trade agreements Procurements, transacon cost
Employee engagement
Public policies Public goods
Boom-up strategy Local-global relaons
Organizaonal culture Sustainability
Corporate philosophy Green concepts
Business ethics Sustainability Subsystem
Public-private partnership
Connuous learning Natural resources subsystems
Compliance with SDG
Corporate Governance Territorial subsystem
Circular economy
Subsystem Social and cultural subsystem

Enterprises-Stakeholders-Society-Technology-Public Governance

Fig. 1.1 Elements of business ecosystem

 1 SUSTAINABILITY IN BUSINESS 11

subsystem. However, territorial subsystems also affect the business ecosys-

tems as exhibited in Fig. 1.1. In the context of an industry, business
ecosystem is a community comprising various levels of interdependent
firms that tend to coevolve in an ongoing business cycle and constantly
renew their business configurations. The business cycle of a firm is largely
affected by political, economic, social, technological, and legal subsys-
tems. In view of the ecosystem discussed above, the coevolutionary
process of business modeling consists of co-vision, codesigning, and
co-creation as the domains of activities (Liu and Rong 2015).
The innovation subsystem within the broad business ecosystem is
built upon the knowledge of stakeholders in creating and sharing their
experiences across companies. In addition, knowledge institutions, policy
regimes, business enterprises, and industry boundaries also contribute
to the innovation subsystem. Public policies and government play an
important role in promoting local innovation and forming innovation
ecosystem to support social and sustainable business models (Ma et al.
2019. Consumers also play a significant role in the innovation subsystem
by co-creating products that add value to the social sustainability. End-
users share insights on low-cost innovations and the possible ways of
their utility with the consumer communities. The consumer-led social
innovations are supported by public policies and encouraged through the
non-governmental organizations and public–private participation. End-
users contribute to the innovation processes by contributing to the design
perspectives and stimulating demand of the innovative product. Thus,
stakeholders, corporate managers, and policymakers remain apprehensive
about the potential of end-users driving sustainable innovation (Nielsen
2020).
Social innovations emerge as the product of social entrepreneurs driven
by the knowledge-intensive social needs and contextual services. Social
innovations are often addressed to the non-profit sector such as social
health, natural resources management, farming activity, and domestic
energy, which are sometimes referred as the social policies and economy.
Companies develop sustainable business models by critically examining
the inputs of innovation subsystem and socioeconomic resources. Inno-
vation subsystem largely evolves within the geo-demographic niche and
uses initially cost-effective local resources; and it later transforms to
commercial propositions in alliance with large organization (Dionisio
and Raupp de Vargas 2020). Continuous growth in technology has
stimulated digital innovations in the social, sustainable, and industrial
12 RAJAGOPAL

business sectors. As digital innovations expand, many small and medium

businesses tend to seek partnerships with technology companies to main-
tain competitiveness among innovative products and services within the
digital sphere. But some companies find greater success through an adap-
tive ecosystem model, by stimulating business collaborators to develop
innovations linked business projects, instead of a business-to-business
partnership. Such strategy requires collective intelligence, flexibility, and
collaboration of stakeholders and firms in the innovation process (Furr
and Shipilov 2018).
Firms consider collaborative innovations as the most effective source
of business modeling today. Collective intelligence plays significant role
in ideation process and in managing the demand of innovative prod-
ucts in the initial stages of market. Crowdsourcing categorically delivers
the relevant knowledge in innovation and business modeling process by
addressing consumer problems and offering solutions. Previous studies
suggest that three distinct types of crowdsourcing can be used to solve
the problems of differing scope and complexity, and to generate oppor-
tunities for innovation (Williams et al. 2020). The innovation business
modeling through collective intelligence can be built using three distinct
types of crowdsourcing comprising search crowds, wired crowds, and
crowd teams.
Acquiring financial resources for micro, small, and medium enterprises
is one of the major challenges within the microeconomic subsystem of the
business ecosystem. Crowdfunding and public–private financial partner-
ship have emerged as new modalities in exploring financial resources for
these enterprises. The sustainable business goals have shown added advan-
tage in tapping the public and private financial resources for coevolving
small enterprises with large business houses with an industry domain. The
small and medium enterprises need financial support longer than normally
expected by the financial markets as their business growth is often jeopar-
dized due to shifts in consumer preferences and market competition. The
financial requirements in these enterprises are associated with the lifecycle
of firm in lieu of the need of the project-based capital resources. Financial
needs for these firms can be assessed in the context of their correlation
among the age of the firm, capital requirement, and financing costs. The
cross-sectional age profile and financing costs of the firm are hump-shaped
that explains their growth as business cohort in the region. However, the
long-term effects of lifecycle-based financing demonstrate that financing
costs decrease monotonically as the firms move over the different stages of
 1 SUSTAINABILITY IN BUSINESS 13

lifecycle (start, growth, maturity, and aging). These firms are more depen-
dent on financial intermediaries of business lifecycle to make optimum use
of credit linking to productivity and gain desired market share (Ylhäinen
2017).
Crowdfunding has emerged as one of the new popular ways to find
financial resources for innovative firms of small and medium size in local
settings. Firms have conceived this approach as a creativity support tool
to raise public funds through web-based technology and online payment
systems for simplified transactions. The crowdfunding projects are driven
by various motivations such as frugal innovations, social benefit, and
Fintech ventures (Buttice et al. 2017) Epistemologies and practices on
public investments, social equities, and social capital are addressed under
this theme. Psychosocial behavior of nonprofit organizations makes signif-
icant contribution in raising and managing funds through the crowd-
funding projects. The social objectives of crowdfunding often embed
emotions and storytelling, which works as a compelling and effective
strategy for engaging stakeholders for funding behaviors (Woodside et al.
2008).

Sustainability Commitments
Broad sustainability development goals, which call for global political
and business partnerships across the countries and industries, are set by
the United Nations around the social, economic and industrial sectors.
There are seventeen Sustainable Development Goals (SDGs), which call
for an integrated action in a global partnership between developed and
developing nations. In implementing strategies to achieve SDGs, corpo-
rate commitments play a significant role, which helps in streamlining
the global socioeconomic and environmental agenda with business poli-
cies and governance. The sustainability commitments of business houses
recognize poverty and other deprivations as hidden obstacles in improving
the business performance from the point of view of socioeconomic
perspectives. The corporate commitments on SDGs must go hand in
hand with the global strategies that aim to improve health and education,
reduce inequality, and spur economic growth. Achieving these sustainable
development commitments help in improving the social and ecological
facets of various business and industrial sectors. Committing on reaching
out the SDGs, manufacturing sector would significantly contribute to
the climate change strategies and improve the planetary environment.
14 RAJAGOPAL

In order to meet the above commitments, business organizations are

augmenting their ability to integrate, build, and reconfigure internal
and external competences to address the growing need for planning
and implementing enhanced corporate social responsibility goals (Teece
2018). The commitment on SDGs drives companies toward putting
their efforts in sensing the areas of social and environmental needs by
identifying and assessing opportunities and mobilizing adequate capital
resources to address opportunities and capture value. Companies invest
resources and engage human capital in transforming the organizational
capabilities as learning organization, which enables their dynamic capabil-
ities to adjust, recombine, and create ordinary capabilities matching with
the social and environmental needs (Harreld et al. 2007; Teece 2018).
Large companies invest in strengthening their strategies on corpo-
rate social responsibilities to ensure compliance with the SDGs and
augment social values in business. The crucial role of corporate reputation
is observed in the mitigation of vulnerability of the young-companies.
Firms involve employees and stakeholders in managing corporate social
responsibility and capitalize on its own corporate reputation. In addi-
tion, the corporate social commitment in the context of SDGs drives
corporate social performance and promotes local-global business oppor-
tunities. However, entrepreneurs perceive high risk of engaging in the
activities targeted toward corporate reputation in short term as it takes
a long time to accrue social benefits and values, and exhibit the benefits
of corporate social responsibilities. The transaction cost theory explains
the links between company’s reputation, degree of risk, and effective cost
of production (Tate et al. 2011). Deployment of the strategy of corpo-
rate social responsibility, and its external influence increase the corporate
brand-image and enhance the achievement of an adequate and sustainable
profitability.
Organizations are increasingly focusing on sustainability as an impor-
tant element for developing business strategies to achieve societal
value led business performance. The role of innovation, manufacturing,
marketing, purchasing, and supply functions has become critical in trans-
lating sustainability commitment into performance. Among many factors,
the impact of sustainability commitment on various manufacturing and
business operations, processes and routines depend on the organizational
capabilities. Nonetheless, the business performance varies by industry,
regions, and societal values, which are largely under-explored. From a
resource-based view perspective, it has been argued that commitment
 1 SUSTAINABILITY IN BUSINESS 15

to sustainability leads manufacturing and business functions to develop

intra- and inter-firm collaborative capabilities within the social environ-
ment, which in turn forces organizations to enhance their organizational
capabilities and competencies to deliver improved performance (Luzzini
et al. 2015).
Most large and medium companies are committed to the sustainability
practices, which have consistently been driven by the need to contribute in
social value of business and reduce the negative impact of for-profit corpo-
rate philosophy. The for-profit philosophy focuses on business growth
and expansion with no philanthropic and social concerns. The sustain-
ability commitment allows companies to invest in not-for-profit projects
by advancing into the global sustainability agenda across the three bottom
lines comprising economic, environmental and social sustainability. Bene-
fits of sustainability and green organizational practices in manufacturing,
services, and facilities management are measured by substantial reduction
in wastes (waste management), increased productivity and social values
through efficient work practices, and optimization of consumption of
natural resources (Ikediashi et al. 2020). Commitment to sustainability
is a common responsibility that involves partnership of state, public,
and private sectors. Socially enlightened corporate sector tends to meet
the sustainability commitments by involving stakeholders and raising
crowdsourced funds in addition to that of the organization. Collective
intelligence helps companies monitor social sustainability projects with
sense of public commitment and deliver social values. Consequently,
companies utilize independent incentives through channel relationship
commitment, which determines performance of sustainability projects. In
addition, crowdsourcing, corporate funding, and social incentives appear
to be more effective in promoting sustainability commitment (Sheu and
Hu 2009).

Sustainable Business Modeling

The growing concerns of circular economy and circular business have
reoriented companies toward developing sustainable business models with
effective social value-chain management. Circular economy encourages
sharing of ideas, processes, and outcomes that are widely connected with
sustainability projects. Sharing the economy of consumers, stakeholders,
and society related to the consumer products companies encourages them
to develop sustainable business model. Most companies are engaged
16 RAJAGOPAL

in building and implementing sustainable business models in the social

interest that helps in value-chain creation and acquiring new customers.
While sharing sociocultural attributes of geo-demographic segments has
been a long-standing practice in society, the sharing economy is used
as an umbrella concept to exhibit broad range of disparate consump-
tion practices and organizational models (Habibi et al. 2017). The
value proposition of both customers and social communities contributes
significantly in the sustainable business modeling process. Value proposi-
tion describes the attributes of product/service offering, the customer
segments, and their relationship in the social deliveries, while value
creation and delivery describe how value is provided to customers (the
channel efficiency and value delivery process), including the structure and
activities in the value chain (Osterwalder and Pigneur 2010).
The success-driven social sustainability dimensions of corporate culture
include sustainability-strategy and leadership, mission, communication
and learning, social care and work life, and loyalty and identification.
In addition to other indicators related to measurement of the business
performance of a company, the indicators mentioned above are taken
into consideration for a company to be classified as financially successful.
Collaborative and longitudinal approaches over phased project timeline
work better to create and measure the impact of sustainable business
models on environment, society, economy and other key stakeholders.
Hence, a systemic form of sustainable business model can be developed to
ensure clarity in propositions and constructs, and make geo-demographic
expansion possible. Sustainable business models are spread longitudinally,
so they are bound to face unforeseen risks which need to be managed in
association with the stakeholders. Creating Shared Value (CSV) serves
as the fundamental guiding principle for consumer-centric companies.
Sustainable development can be easily integrated into business activities by
creating shared values. Such business models with focus on sustainability
are increasingly attracting long-term investors and involving unrelenting
stakeholder participation. CSV brings business and society together by
generating values for the local livelihood economy, global economic
concerns, and value for society (Rajagopal 2020b).
Sustainability-driven companies make sustainable choices on priori-
tizing social and environmental elements in developing business models
and make them visible to the consumer as product- or service attributes.
Such marketing strategies are embedded in the business models as part
of the value proposition. Marketing strategies that are backed by social
 1 SUSTAINABILITY IN BUSINESS 17

choices converge key partners, activities, and resources in the business

model. The social products are marketed to customer with value propo-
sitions, which delivers utilitarian values upon purchasing the products or
services. Consequently, customers develop perceived value consistently,
which later develops loyalty for brands. The sustainability-linked busi-
ness modeling, therefore, relies significantly on the value proposition
(Pal and Gander 2018). Social sustainability is manifested in corporate
culture, organizational behavior, and functional practices of the compa-
nies. In order to create and measure the impact of sustainable business
models on environment, society, economy, and other key stakeholders,
collaborative and longitudinal approaches over phased time-span work
better. Successful businesses in manufacturing and service sectors tend to
understand the challenges and opportunities linked to business transition
toward sustainability in a society today. They create considerable aware-
ness on the environment and green consumption practices in the society
(Rajagopal 2020b).
Consumer-centric companies are engaged in sustainable agriculture,
developing green by-products emerging from ecological conservation
projects. Stakeholders contribute significantly in developing sustainability
projects with the companies, and in carrying out the implementation of
projects at the field level. Accordingly, stakeholders collaborate, co-create,
and co-manage sustainability projects. Value perceptions of sustainability
projects integrated into business model innovations are closely associ-
ated with the development needs, economic growth, and quality-of-life
improvement of society in general and stakeholders of the company in
particular. Sustainable social development projects have spanned over long
time and their measurable impact is longitudinal. Companies look for
return on investment made in sustainable social development projects
sooner or later. Therefore, integrating sustainable social development
projects into business model(s) is the only option for the companies.
Among the elements of canvass, measuring cost-time-risk (CTR factors),
key partners, possible shared resources, predetermined revenue stream
and its management, social value generation, investment on social-
innovation, and analyzing market trends make significant contributions
(Rajagopal 2020b).
Sustainability-based business models are developed and implemented
by most companies at the corporate level by applying uniform strategies
across their subsidiaries with marginal field level adjustments. However,
multi-domestic companies operating with the subsidiaries in different
18 RAJAGOPAL

destinations with a definite focus on manufacturing and marketing tend

to develop homogeneity in the business models for implementation.
For example, Nestlé has uniform social sustainability business models
toward organic coffee cultivation, green curing of coffee, and dairy
farming practices in Latin American, African, and Asian destinations. The
boundary-spanning sustainability-based business models have different
types of organizational boundary changes between the subsidiaries and
their external stakeholders as these business models seek exploring,
negotiating, disrupting, and realigning organizational boundaries. The
complexity for alignment can be seen through different ways of perceiving
the stakeholder and societal values, serving to diverging sustainability
interests, risks and responsibilities, and connective efficiently with the
existing processes and activities. Openness for strategic alignment of
business models with stakeholder needs, culture, and societal values signif-
icantly affect the implementation of sustainable business models (Velter
et al. 2020).
As the business environment is changing rapidly, the performance of
sustainability-based business models is turning complex. Seamless imple-
mentation of business projects has taken a long time to gain the social
value as its stakeholders initially found it difficult to adapt to the change
from conventional to digital or self-service technologies. However, a well-
implemented business model allows a company to gain economic value
by providing social and environmental benefits over time (Schaltegger
et al. 2016). Managing sustainability-linked business models refers to the
approaches dealing with social, environmental, and economic issues in
an integrated manner to transform businesses that create social values
and equity of brands of the company. Such business models contribute
to sustainable development of the economy and society within the
ecosystem. Accordingly, a sustainability-based business model describes
the design, delivery, and capture mechanisms to create social value. It
emphasizes stakeholder and customer needs and defines ways through
which companies deliver value to them, invests in value creation, and co-
creates resources through the proper design and operation of the various
elements of the value chain (Teece 2010).
Implementation and governance of sustainability-based business
models are shared through public–private partnerships. In addition,
stakeholder-driven governance forms such as cooperatives, public–private
 1 SUSTAINABILITY IN BUSINESS 19

partnerships, or social businesses help companies transcend narrow profit-

maximizing models. The business models are analyzed from a sustain-
ability perspective to overcome the economic, social, and technological
bias of sustainability approaches. Accordingly, entrepreneurial approaches
are designed in improving social sector, and operate through a typology
of “isolated” and “interactive” business models categorically in geo-
demographic market segments (Sánchez and Ricart 2010). The practice
of developing sustainability-linked business model has dyadic leverage for
companies and society and listed below:

• It stimulates new approaches in the corporate sustainability manage-

ment and sustainable entrepreneurship, and
• Its conventional experience strengthens the business paradigm of
social value creation

The value proposition embedded in these business models provides

ecological, social, and economic values through sustainable products and
services, while business infrastructure enables the sustainable supply chain
management to operate with public–private partnership and involving
stakeholders and corporate resources. The customer interface during
the implementation of business models enable direct relationships with
stakeholders, key partners, and public systems, and share responsibility
of production, services, and consumption systems (Boons and Lüdeke-
Freund 2013). The attributes of sustainability-linked business modeling
is illustrated in Fig. 1.2.
The emerging and existing companies are engaged in working with
innovative business models respecting society and environment to stay
competitive in the marketplace. Trends like circular economy, busi-
ness waste control (manufacturing, packaging, logistics, and inventory
wastes), value-oriented recycling under growing consciousness of circular
business, and the sharing economy are some of the many sustain-
able entrepreneurial approaches. Figure 1.2 explains the framework of
attributes associated with the sustainable business modeling process.
Among others, design-to-market , design-to society, and design-to-value are
the three principal emerging concepts that guide the sustainable business
modeling process. Convergence of these concepts is a major challenge in
building sustainable business model and ensuring its effective implemen-
tation. Corporate goals, objectives, and philosophy drive the anatomy of
 20

For-and not-for-profit objecves

Vision and mission-learned-acquired Macro Factors
Corporate-social foundaons Circular economy Capital resources
Global-local congruence
RAJAGOPAL

Philanthropic orientaon Circular business Infrastructure

Corporate-social convergence
Shared economy Strategy and
Performance with purpose
milestones
Corporate Goals,
Objecves, and
Micro Factors
Philosophy
Value-chain creaon
and delivery Collaborave projects Corporate social responsibility
Leadership taxonomy Innovaon and technology Employee engagement
Partnership and Stakeholder engagement Work culture and autonomy
Sustainable
Design to Market performance
Business
Design to Society
Modelling Social innovaon Frugal innovaon
Design to Value Macro Factors
Ecology and environment Social entrepreneurship Reverse innovaon
Social sectors Co-creaon and co-evoluon Collecve intelligence
Social Needs, Public policies
Processes, and
Values
Social awareness Micro Factors Cost-me-risk factors
Knowledge ergonomics Systems thinking
Task priorizaon Strategic alignment
Community cognion Deliverables and values
Geo-demographic effects Servizaon
Social governance Decision-making
Social values and lifestyle Social empowerment

Fig. 1.2 Elements of sustainability linked business modelling

 1 SUSTAINABILITY IN BUSINESS 21

such business model on one hand, and right assessment of social needs,
processes, and value propositions strengthen the business models on the
other. There are macro- and micro business environmental factors that
affect both corporate and societal domains. Corporate goals, objectives,
and its underlying philosophy is affected by the emerging concerns on
circular economy, circular business, and shared economy as macro factors.
There are micro-environmental factors that influence sustainable business
modeling process comprise value-chain creation and delivery, leadership
taxonomy through the sustainable business modeling and implementa-
tion process, and public–private partnership and performance. Companies
engaged in developing business models embedded with sustainability
objectives, need to strengthen capital resources and infrastructure to
ensure achievable milestones through right strategies. These companies
divide the long-term business plans into rolling plans of shorter duration
and operate through collaborative projects by engaging stakeholders.
Emerging consumer- and industrial-marketing companies focus on
innovation and technology to stay abreast with the market trends, social
needs, deliverables, and contemplating values while implementing the
business plans. However, technology in sustainable product, processes,
and services is advancing rapidly and many companies find it difficult to
meet their sustainability targets by doing high investment in technology
resources. Therefore, to leverage sustainability solutions and align them
with revenue and value streams, innovation are focused on intermediate
technology, which is homegrown at relatively low cost to commercial
technologies. In addition, sustainable business models are encouraged to
work with local innovation firms that are cost-effective and hold utilitarian
values considering the stakeholder value, social needs, and ethnocentricity
(Rashid et al. 2013).
The corporate goals toward sustainability need to be determined by
ensuring broadly the global-local congruity and convergence of corporate
objectives with the social and environmental requirements. Besides these
factors, the concept of performance with purpose further strengthens the
sustainable business models and its recurring innovations. Some multina-
tional companies like PepsiCo have implemented the social responsibility
with a deep sense of purpose to drive stakeholder value. This concept
has emerged to create social values with focus on sustainability (Nooyi
and Govindarajan 2020). PepsiCo has nurtured this concept by delivering
following benefits:
22 RAJAGOPAL

• Superior financial returns (financial sustainability)

• Transforming the product portfolio to social health concerns by
reducing the sugar, salt, and fat, and introducing healthy and
nutritious foods and beverages (human sustainability)
• Conserving water and reducing carbon emission and plastic waste
(environmental sustainability), and
• Encouraging gender and family perspectives in employment within
the company (social sustainability).

The low energy consumption bulbs manufactured by leading electro-

domestic companies like General Electric, and Philips have been
successful in implementing sustainable business model in the business-
to-consumer (domestic use) and business-to-business (commercial use)
market segments. In addition, Walmart, an international retail giant intro-
duced green supply chain efforts, which emphasizes selling low energy
consumption electro-domestic products like led lights, television screens,
laptops, and other consumer durable products. The retail giant’s powerful
buyers, or merchants, now have a sustainability goal in their performance
targets and reviews. Companies manufacturing construction material also
show mega concern on business models leading to sustainability. The
idea that organizations should send zero waste to landfill has grown out
of niche as a global vision among the construction materials manufac-
turing companies. Over time, the waste management has turned as a
management strategy to a source of profit. DuPont’s building innova-
tion products business reduced its landfill waste from 81 million pounds
to zero by 2012 and beyond (Winston 2012).
The micro-level factors associated with the corporate process of
building sustainable business models consist of following nature:

• Value-chain creation and delivery,

• Type of leadership in driving sustainable business projects, and
• The nature and extent of partnerships in developing and imple-
menting sustainability liked business models.

There are various layers of social value creation. In the base layer, the
value-chain model includes mainly informational-, emotional-, esteem-,
and commitment factors, which positively influence the value creation
process. The intermediate level of social value creation is developed by
 1 SUSTAINABILITY IN BUSINESS 23

establishing relationships with stakeholders that enables sharing of infor-

mation, co-creation, and coevolution process of social innovation and
business projects. The apex level of social value creation has been iden-
tified as the sense of belongingness among stakeholders of sustainable
business projects. In addition, collaborative projects promoting stake-
holder engagements in managing sustainable projects, innovations, and
technologies contribute to the social value creation (e.g., Liu et al. 2020).
The value-chain management, and deliveries of sustainable business
projects show effective results when organizations follow collaborative
work culture with autonomy and employee engagement. The corpo-
rate social responsibility projects of most multinational companies are
implemented as a pilot to test the sustainability-based business model.
The macro and micro factors related to social needs, processes, and
values significantly influence the business models driven by the sustain-
ability objectives as exhibited in Fig. 1.2. Broad macro factors include
ecology and environment, needs that are contextual to principal social
sector (health, housing, agriculture, energy, natural resources, and local
industries), and relevant public policies. The macro factors are affected
by various micro elements in the implementation of sustainable busi-
ness projects due to improper prioritization across the geo-demographic
segment, which represent misleading social values and lifestyle. In a broad
context, the social entrepreneurship tends to co-create social innova-
tions while implementing the sustainability projects in the region and
coevolve with the collaborating organizations. Collective intelligence
(crowdsourcing) helps to enhance the ideation process on socially sustain-
able business projects and leads to frugal or low-cost innovations. Frugal
innovation is often associated with sustainability (ecological and social)
as it is developed with an objective to minimizing the use of resources
(raw material, production resources, energy, fuel, water, waste, financial
resources) and maximize the output within the given space, time, and
application limitations. Frugal innovations are affordable and easily acces-
sible as compared to conventional innovations (Weyrauch and Herstatt
2016).
In addition, the reverse innovation with the potential of commer-
cialization in a local-global marketplace is identified through collective
intelligence. Multinational companies are practicing reverse innovation as
one of the best practices suggested by General Electric company, in which
products are designed first for consumers in low-income countries and
24 RAJAGOPAL

then adapted into disruptive offerings for developed economies. Compa-

nies adapting to the reverse innovation practices tend to market products
at low price as it requires low technical requirements. Such reverse innova-
tion products are created for low-income markets but could have global
appeal (Winter and Govindarajan 2015). General Electric developed an
Electrocardiograph (GE Mac 400) machine and a portable ultrasound
machine for the Indian and Chinese markets as a reverse innovation
product, which have been very successful in these markets. Similarly,
Gillette had developed the Guard razor for the Indian market, which led
to good performance. Later on, General Electric and Gillette introduced
these products to US consumers and other developed markets (Zhu et al.
2017). However, products of social, frugal, and reverse innovations face
the challenges of cost, time, and risk. Such problems have motivated
micro, small, and medium companies to explore strategic alignment with
large companies or sponsors. Cost and marketability are the two factors
that drive the strategy of reverse innovation. Large companies, thus, roll
over to the local markets to identify the customer-centric innovations
developed by the local enterprises and tend to evaluate the economics
of their business projects. When a company with the capability of spon-
soring the reverse innovation investigates a new product opportunity, it
not only defines the problem to which an innovation serves as a solu-
tion, but also lists the requirements that are needed for commercializing
the innovation (Rajagopal 2016). The reverse innovation helps companies
penetrate in the entering emerging markets or aim to realize opportuni-
ties to create high-performance, high-value products, and service at low
cost and affordable prices that appeal to consumers with low per capita
income. Delivering solutions of adequate quality at a competitive price
for the masses is the primary challenge in developing innovations for
emerging markets and catering to the customers therein is.
Most international companies are getting engaged in managing reverse
innovation for global markets, in which products are designed first for
consumers in low-income countries and then adapted into disruptive
offerings for developed economies. But only a handful of companies have
managed to do it successfully until now. International companies usually
create products by following time-tested methods, struggle to overcome
the constraints, and leverage the benefits of emerging markets. They tend
to develop reverse innovations and create scope for penetrating into the
low-income markets that could have global appeal by matching market
segments to existing products, lowering price by removing features,
 1 SUSTAINABILITY IN BUSINESS 25

redesigning technical specification of generic products and upholding

stakeholder value.
Disruptive innovation is linked to reverse innovation that drives the
firms back to the consumers’ buying behavior in reference to 4As
paradigm comprising awareness, acceptability, adaptability, and afford-
ability. Reverse innovation refers to developing ideas in emerging markets
and persuading them in the existing markets, which drives tough chal-
lenges. Such innovation requires a company to overcome the institution-
alized thinking that guides its actions and acquires ideas through the social
media. Firms following reverse innovation develop a radically simpler and
cheaper way of creating products in emerging markets and then position
them in the desired consumer segments (Rajagopal 2014; Govindarajan
2012).
Servitization is an emerging concept, which is associated with the inno-
vation and social products. This concept suggests integration of product
marketing and sales along with the relevant services associated to the
product. Servitization concept encourages continuous services to support
the product use and value-creation process, rather than selling a product
with no services support from the manufacturer. Servitization has the
following attributes:

• Base services—Associated services with the products and its compo-

nents,
• Intermediates services—This is an extended services category
that includes product repairs, maintenance, overhauls, helpdesks,
training, condition monitoring, and
• Augmented services—Provide intensive (repeat services, feedback,
and improvements), extensive customer support arrangements, and
outcome-based contracts (guarantee and warrantee execution).

Rolls-Royce, which manufactures aircraft engines with a service package,

can be cited as an appropriate example of servitization, whereby customers
pay by the hour according to the amount of time an engine runs in
flight. This is an unconventional drift from the traditional business models
used by manufacturers, in which the manufacturer sells a product, then
charges for repair work as often as it is needed. Rolls-Royce has integrated
the services cost within the cost of product and offers life time service
for the product. Caterpillar, a heavy earth moving and construction
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