HO CHI MINH CITY UNIVERSITY OF TECHNOLOGY

FACULTY OF MECHANICAL ENGINEERING

SUBJECT: INDUSTRY 4.0 IN MECHANICAL ENGINEERING

WEEK 4 (30/01/2024-05/02/2024)

EXERCISE 2: SUMMARY OF RESEARCH PAPER

Digital transformation and the circular economy: Creating a competitive

advantage from the transition towards Net Zero Manufacturing

Class: CC01
Instructor: Assoc. Prof Phạm Ngọc Tuấn
Student’s name Student’s ID
Hồ Thiên Bảo 2052395

Ho Chi Minh City, 05/02/2024

1. Topic and chosen research paper
- Topic: Digital transformation
- Research paper: O. Okorie, J. D. Russell, R. Cherrington, O. J. Fisher, and F.
Charnley, “Digital transformation and the circular economy: Creating a competitive
advantage from the transition towards Net Zero Manufacturing,” Resources,
Conservation and Recycling, vol. 189, p. 106756, Feb. 2023, doi:
10.1016/j.resconrec.2022.106756.
2. Summary of the paper
The digital technologies are rising as one of the main drivers in 4.0 industry. Therefore,
the manufacturers are trying to implement these technologies into their business to make
abstract sustainable goals come true. In this paper, Okorie and his colleagues investigated the
potential role of digital technologies in enhancement of the company’s competitiveness with a
resource-based view (RBV) and the deployment of available internal resources and core
competencies to obtain net-zero manufacturing emissions and circular economy (CE). To do
so, the author had to point out that the competitive advantage(s) resulted from the implement
of digital technologies and whether adopting an RBV facilitates the development of meaningful
competitive advantage or not. The study was conducted with the participation of 13
manufacturing firms whose perspectives and experiences are recorded in dataset. By applying
VRIO framework, 21 identified digital technology-based core competencies are categorized as
supports for firms to pursue net-zero emissions. The study also proposed 4 scenarios of digital
technology adoption pathways and emphasized the importance of managing intangible assets
like labor and supply chain relationships in digital transformation strategies for sustainability.
The author also illustrated how RBV can help company evaluate the competitive advantage
potential of sustainability initiatives and facilitate the development of related strategies.
In the introduction section, the authors gave a brief introduction to the global warming
policy and the emission of green house gas. There is a policy to limit the global warming under
1.5 ℃. It is required for nations and corporates to reduce greenhouse gas (GHG) emissions by
taking practical action. There raised a new approach which is called “Net Zero”. This approach
indicates the reduction of net 𝐶𝑂 emissions from energy and industrial processes, after
accounting for carbon capture and sequestration, to zero. Beside, due to the energy crisis caused
by Russian – Ukraine war, the United Kingdom (UK) and European Union (EU) had to
reconsider the net zero approach with more emphasis on energy and economic security. In 2020,
it was recorded the GHG emission come from transportation, energy supply, business,

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agriculture… to name but a few. In these sectors, the transportation was claimed to emit the
highest amount of GHGs, accounting for 24%. The requirement of reduction of GHG brought
many challenges to the manufacturing companies in their strategy to achieve and sustain
competitive advantage in the short and medium term. One of the challenges came from the
complexity and vulnerability of the supply chain possessed by the companies. The advancement
and availability of digital technologies such as Internet of things (IoT), additive manufacturing,
big data… and trend of digital transformation provided new opportunities to the companies to
reduce supply chain risk and increase coordination to optimize operations. Embracing these
technologies brings challenges and opportunities to the companies who want to make digital
transformation and internationalization as core competitive strategies. The Resource-based
view (RBV) indicated that the competitive advantages of a firm did not come from the external
technologies but the internal resources which were already possessed by the firms. The term
“resource” can used to describe two types of resources: tangible resources which are physical
assets such as land, buildings, machinery,… and non-physical assets like brand reputation,
trademarks, intellectual property,… of the firm. The RBV approach used to explain the process
with which the manufacturing firms utilize the digital technology to reach CE and net-zero
emissions is illustrated as follows:

The process is conducted to find out the competitive advantages we get when integrating digital
technologies to achieve net-zero manufacturing emissions and exam the helpfulness of the RBV
in developing sustainable competitive advantage. Although there is a crisis against the RBV
due to ignoring the impact of institutions, the authors still applied the RBV approach and tried
to fill the gap within the context of a manufacturing firm. The author identified various
competitive advantages and value while the studied firms engaged in digital transformation. It
was found that the role of human capital was essential in incremental and radical digital

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transformation to reach final sustainable competitive advantage. The author also discussed the
application of Resource-Based View (RBV) theory in various contexts such as digital
transformation, manufacturing strategy, and environmental sustainability. It highlights the
importance of firms bundling and coordinating resources into core competencies to achieve
lasting competitive advantage. Core competencies include both tangible and intangible
resources like knowledge, technology, and skilled labor. Additionally, it emphasizes the role of
digital technologies in creating and capturing value, and suggests that firms can leverage digital
assets for competitive advantage, particularly in pursuing sustainability goals such as net-zero
emissions. The paper outlines a methodology that includes literature review and engaged
scholarship approach to explore the potential of digital technologies in achieving competitive
advantage within net-zero manufacturing strategies. It proposes four scenarios of digital
technology adoption pathways and concludes with reflections on limitations.
In the section of methodology, the authors described a methodological approach
involving two main methods: (1) conducting a literature review to identify connections between
key concepts and themes, and (2) employing an engaged scholarship approach to apply findings
from the literature review to real-world challenges in understanding how Resource-Based View
(RBV) theory can support achieving net-zero objectives within the UK manufacturing sector.
Additionally, it mentions the use of the below flow chart to illustrate the data, method, and
framework employed in the analysis:

The research addressed its outlined questions by examining previous academic literature to
build a theoretical foundation, enhance understanding, and facilitate theory development. Key
terms like "resource-based view," "RBV," "competitive advantage," "digital transformation,"
"sustainability," and "manufacturing" were utilized to gauge the coverage of relevant topics.

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Databases including SCOPUS, EBSCOhost, ScienceDirect, and Web of Science were
employed to gather pertinent articles. This stage of the research methodology combines
engaged scholarship and systematic combining approaches. Engaged scholarship involves
collaborating with manufacturing leaders to tackle real-world issues, particularly suited for
complex challenges like sustainability. Despite criticisms, this approach is employed to address
contextualization requirements through the concept of 'the evolving case'. The flow chart
illustrates the case of achieving net-zero emissions in manufacturing through digital technology
integration and understanding competitive advantage. The objective is to stimulate new ideas
rather than critique existing theories. Case-based investigations, though criticized for being too
specific, can be strengthened by integrating appropriate theory. Data from industry workshops
and secondary sources were blended using a systematic combining approach, which emphasizes
theoretical foundations while considering the empirical world. Despite concerns about blurring
validity and generalizability, transparency in methodology disclosure helps address these
issues. Combining approaches facilitate the simultaneous development of theoretical
frameworks, empirical fieldwork, and context analysis, making them suitable for this research.
Between 2018 and 2021, the UK intensified its efforts to address climate change with the "Net
Zero 2050" strategy, backed by initiatives like the Industrial Decarbonization Strategy and the
Net Zero Strategy. Employing an engaged scholarship approach, data was gathered from
primary and secondary sources to understand the implications of this national focus. Empirical
data was collected through stakeholder engagement at industry workshops held in 2018 and
2021, involving thirteen manufacturing firms with sustainability objectives targeting Scope 3
emissions reduction. These firms represented diverse sectors such as aerospace, automotive, IT,
and FMCG. Workshop #1 in 2018 focused on firms implementing digital technologies for
circular economy adoption, while Workshop #2 in 2021 anticipated full implementation of
these technologies. The selection of participating companies followed theoretical sampling
principles, ensuring representation across the manufacturing sector with varying characteristics
(given in Table 1). Different challenges and opportunities related to digital processes in
emissions reduction were observed, reflecting the broad spectrum of businesses. Firms of
various sizes and establishment dates were chosen to capture contrasting patterns and
experiences in digital transformation's impact on emissions reduction:

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Engaged scholarship integrates perspectives from both knowledge producers and users in the
research process. Method (1) findings informed the selection of sectors and companies for
further exploration in Method (2). Workshop #1 in July 2018 examined the broader question of
circular manufacturing in the digital age, generating insights on short, medium, and long-term
opportunities, challenges, and research questions. These insights were synthesized into focused
questions for Workshop #2 in May 2021, which intentionally addressed the following topics:
- How is digitization (technology and data) used to overcome barriers to achieving 'net zero'
emissions?
- What existing policies/initiatives/support aid manufacturers in their journey towards 'net zero'
emissions, and what additional measures are needed to reach 'net zero' by 2050?
- What will a 'net zero' emission manufacturing sector look like in 2050, and what technologies
will be commonplace?
- What future challenges must be addressed to achieve this vision?
Then, the authors also discussed the evaluation of data from workshops to understand the
relationship between conventional competitive advantage, achieving net-zero performance, and
digital technologies. The VRIO framework, which assesses the value, rarity, imitability, and
organization of resources, is employed to differentiate advantage levels. The VRIO model,
originally designed for firms, is adapted to identify competitive strategies and public policies.
Unlike conventional evaluations of organizational attributes, the focus here is on assessing how
digital technologies contribute to internal information sharing and coordination to exploit
competitive advantage. Additionally, the evaluation extends to examining whether digital
technologies can facilitate achieving net-zero performance alongside conventional competitive
advantage.

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 In the section of results and analysis, the authors emphasized examining the future of net-
zero emissions manufacturing by delving into the role of digital transformation. It explores how
digital transformation contributes to enhancing manufacturing capability and capacity,
establishing competitive advantage, and enabling sustainability strategies such as achieving
climate targets and embracing circular economy principles. Fig. 3 organizes key themes from
the literature review, including strategic management themes like RBV and competitive
advantage, sustainable manufacturing themes such as circular economy (CE), sustainability,
climate targets, and net-zero, digital transformation themes within CE, digital resources and
competencies for achieving net-zero emissions, and emergent issues related to digital
transformation. Digital transformation is described holistically as a process that revises core
organizational processes and services beyond traditional digitization efforts, resulting in the
creation of new digital services and improved user satisfaction. The author highlighted the
economic benefits of transitioning to CE business models, such as reduced manufacturing costs
and environmental penalties, and estimates significant material cost savings opportunities.
Although digital technologies have facilitated advancements in CE business performance and
innovation, achieving sustainable competitive advantage may require continuous development
of capabilities, including building core competency around achieving net-zero emissions. The
Resource-Based View (RBV) is suggested as a framework to unlock these capabilities.

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 The triple-bottom line perspective of sustainability, considering economic, social, and
environmental advantages, views sustainability as a form of competitive advantage. Many firms
in various industries are increasingly integrating sustainability into their businesses to sustain
their competitive advantage. For instance, the UK Government's commitment to reaching net
zero greenhouse gas (GHG) emissions by 2050 has prompted firms to implement energy
efficiency measures, leading to increased profit margins and competitiveness. Climate change
targets, such as net-zero emissions, are seen as opportunities for competitive advantage through
sustainability. The manufacturing sector, a significant contributor to global GHG emissions,
faces pressure to reduce emissions not only for environmental reasons but also due to factors
like reputation risk, cost, compliance requirements, and market conditions. As such, reducing
GHG emissions has become a meaningful performance indicator and a strategy for competitive
advantage, particularly in the transition to circular economy practices.
The research aims to investigate the competitive advantages resulting from integrating
digital technologies for achieving net-zero manufacturing emissions. Table 2, developed
through a systematic combining approach, summarizes the main insights from primary and
secondary data sources, organizing them into digital technology categories. The table reflects
data collected from workshop participants regarding the types of digital technologies perceived
as most influential and the associated value they offer. Additionally, the potential contribution
of digital technologies to achieving circular economy (CE) and net-zero emissions, as well as

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the external policies and initiatives required for competitive advantage, are clarified. Analysis
of workshop data reveals that while tangible value dominates, intangible value derived from
worker skills and data interconnectedness is also noted, primarily framed in terms of their
contribution to tangible value. None of the identified intangible value items were directly linked
to achieving net-zero emissions objectives.
VRIO analysis is utilized to differentiate the advantage achieved by digital transformation
resources: achieving two characteristics leads to competitive parity, three results in temporary
advantage, and four leads to sustained advantage. Applying this view to the dataset, only a few
digital transformation resources meet all four VRIO requirements for sustained competitive
advantage. These include specific digital technologies tailored to the firm's operations, faster
time-to-market for product launch, market responsiveness, a digitally-capable labor force,
circularity-enabled business model, optimization of inventory and reverse-logistics systems,
asset traceability, improved value-chain coordination, and enabled new product categories. Fig.
4 synthesizes insights from Tables 2 and 3 into a pathway for considering the role of digital
technologies in net-zero strategies as a competitive advantage. Primary digital technologies
identified by workshop participants are Internet of Things (IoT), automation and autonomous
robotics, digital marketplace, artificial intelligence (AI), and cloud-based enterprise resource
planning (ERP). Using the Resource-Based View (RBV), digital resources and their benefits
are classified into tangible and intangible asset categories, and the degrees of competitive
advantage derived from their adoption are presented based on the findings of the VRIO analysis.

In discussion section, we can see that the workshop discussions highlighted that tangible
competitive advantages associated with digitization for achieving net-zero emissions were more

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readily identified than intangible ones, such as quantifiable cost reductions and acquisition of
equipment and software. However, contrasting with the literature, it appears that the benefits of
digitization for net-zero emissions may be predominantly intangible in nature, enabling
optimization and improvement of manufacturing processes and activities across the value chain.
The adoption of digital technologies alone does not lead directly to sustained competitive
advantage; instead, it's the appropriate and optimized application of these technologies
alongside intangible benefits like trust-building and skilled labor force capabilities that
contribute to sustained advantage. Firms investing in a digitally-capable labor force and
fostering trust with suppliers may achieve a more sustainable competitive advantage within
their net-zero strategy, especially compared to newer or less-connected firms. Additionally, the
Circular Economy's 4R framework emphasizes the importance of retaining maximum resource
value over time, suggesting a different understanding of the relationship between supply and
demand. Identifying tangible and intangible assets can facilitate understanding this relationship
within a Circular Economy context for manufacturing firms.
The workshop data highlights the urgency for firms to embrace digital transformation, as
simple adoption of digital technologies for basic operational improvements is necessary to
avoid falling into a non-competitive position. While basic adoption provides some value to
customers, it's not rare or non-substitutable. More advanced applications, however, can lead to
temporary competitive advantages, particularly when integrated with a digitally-capable
workforce. The path to sustained competitive advantage for net-zero and Circular Economy
(CE) goals requires integrating multiple digital technologies and achieving a digitally-capable
labor force, aligning with Resource-Based View (RBV) theory. We propose four scenarios of
digital technology adoption and business model innovation for net-zero, ranging from
incremental to radical digitalization of the business and net-zero gains. Radical adoption of
digital technologies has the potential to significantly reduce emissions but may also pose
sustainability concerns that need to be addressed through further research and understanding of
their complex interactions with net-zero and CE systems to avoid unintended consequences.

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 In conclusion, the authors underscored the critical importance and increasing complexity
of ensuring operational continuity, especially on a global scale, alongside the strategic priority
for companies to adopt digital capabilities and technologies. It suggests that companies can
attain long-term competitive advantage by integrating resources and capabilities into complex
bundles, making replication difficult for competitors. Emphasizing the significance of
intangible assets, the study advocates for additional investment and development. Sustainability
and circular economy (CE) are identified as key drivers of innovation, with circular business
models offering a competitive edge in mitigating climate change risks. However, challenges in
capturing value from digital technology persist, including data-related concerns such as
collection, privacy, and security. Policy-based support is deemed essential for coordinating and
optimizing value chains. Policy measures promoting emissions reduction and clear guidance on
data management within digital transformation are recommended. The study acknowledges
limitations but highlights opportunities for future research, particularly in exploring the
transferability of firms' digital skills and understanding sustained competitive advantage. It
represents a significant contribution in integrating the resource-based view (RBV) and CE to
elucidate how digital resources and capabilities contribute to competitive advantage through
digital transformation.

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