Capturing Value from Green Offers – An Examination of Environmental Differentiation and Economic Performance

Abstract: This thesis examines how a number of Swedish firms try to create and appropriate economic value from offers that are differentiated by low environmental impact. It presents empirical, methodological and theoretical contributions to the environmental strategy literature, focusing on the appropriation of economic value by profit-seeking firms. Based on accounting and survey data and a novel methodological approach the thesis shows that, in small Swedish firms, environmental differentiation is negatively associated with economic performance. It shows also that for environmentally differentiated offers, a resource efficient design leading to low total cost of ownership for customers is positively associated with economic performance. Other hypothesized benefits related to environmental differentiation, such as increased sales from communicating environmental superiority, associated regulatory support and improved product quality, are not significantly related to economic performance. Based on a multi-level qualitative study of an established firm, the thesis explains how corporate visions and top managers’ explicit commitment to increased sustainability facilitate the commercialization of environmentally differentiated offers. This study shows that cleverly formulated environmental goals may enable a firm to accelerate and achieve wider diffusion of already developed, originally customized solutions to specific customer problems. A longitudinal study of a small manufacturing firm developing and launching a service-based, circular business model built on remanufacturing, provides a rare examination of the challenges and opportunities encountered during the development of such a business model. An important conclusion of this study is that service-based circular business models, by design, imply a larger business risk during their implementation than more traditional, so-called linear business models. The thesis proposes a theoretical framework of appropriation strategies specifically related to environmental differentiation. The framework draws on the problem-solving perspective of the firm and the social dilemma literature to derive four generic appropriation strategies in which many of the drivers of environmental differentiation reported in prior literature can be understood as special cases. The four appropriation strategies exploit the advantages from resource efficiency, reputational gains, regulatory fit and closer inter-firm value chain integration.