Can Profitability and Sustainability Co-exist? : An empirical study on design-thinking and digitalization for sustainable practices

Liu, Rebecca and Kremer, Steve (2024) Can Profitability and Sustainability Co-exist? : An empirical study on design-thinking and digitalization for sustainable practices. In: 2024 British Academy of Management Annual Conference, 2024-09-02 - 2024-09-06, Nottingham Business School, Nottingham Trent University.

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Abstract

As humanity confronts numerous sustainability and environmental challenges, can we navigate our way out of the damage we have inflicted? As the conventional linear economy model of "take, make, dispose" is no longer sustainable for preserving our planet, a new sustainability paradigm is emerging - the circular economy, characterized by principles of "reuse, repair, and recycling." (Ghisellini, et al., 2016; Zucchella and Previtali, 2019). Pursuing a balance between profitability and sustainability poses a formidable challenge. Managers are tasked with the daunting responsibility of upholding their businesses' financial health while safeguarding the well-being of both people and the planet. A shift in mindset is underway. This developmental paper sheds lights on this endeavour. Through an examination of firms' integration of design thinking and digitalization, several repeated themes have emerged. Three cases suggest that human/customer centric solutions and co-created value (the fundamental characteristics of design-thinking concept) lead to new product/service innovation, along with digitalization that is applied to enhance process and operational efficiency. Hence, revenue and competitiveness are optimized on one hand; cost is mitigated, and operation/process effectiveness and efficiency are enhanced on the other. Not only does our research suggest that profitability and sustainability can harmonize within businesses, but it also furnishes empirical evidence on how this alignment can be realized. As a result, this preliminary study promotes us to propose a conceptual framework (Figure 4) that depicted a synergistic system. The ramifications of this intricate synergy are manifold. Firstly, organizational culture emerges as pivotal, with management commitment and leadership fostering mindsets towards human-centred design thinking. Secondly, an ecosystem perspective underscores the significance of stakeholder collaboration for value co-creation, mutually benefiting firm profitability and sustainability. Thirdly, an innovative corporate culture necessitates the embrace of data-driven initiatives (including AI, IoT, and cloud-based technology) as indispensable tools to facilitate stakeholder collaboration within the ecosystem and innovative managerial approaches. In short, achieving a balance between profitability and sustainability revolves around an innovative organizational culture facilitated by dedicated management commitment and leadership, cooperative ecosystem for value co-creation, and supported by digital transformation. This complex synergy is imperative for firms' endeavours towards sustainability, environmental conservation, and an economically sustainable future.