The integration process of the environmental, social and governance (ESG) factors to a firm's business model

Abstract

This thesis examines the integration process of ESG into the business model. It consists of three stages. In the first stage, we asked the research question of how the literature examines the relationship between ESG and business models. We conducted a systematic literature review of 326 papers about ESG and business models; we found only 29 discuss ESG and business models. Also, we found that the majority of the literature focuses on outcomes such as integration behavior, advantages, practices, and critical, and only two explain the process. We extended our literature and examined sustainability as a synonym of ESG. We found few discussions on the process and were limited to the early stage of sustainability integration. The second stage we asked is ESG integrated into the business model. We conducted a comparative analysis of corporate narrative reports in Japan and Europe. We used legitimacy theory to understand firms' behavior in integrating ESG into the business model; we applied a content analysis and analyzed 70 reports of 35 firms. We found the majority to be a general statement followed by concrete activities and aspirational targets, and only one mentioned a systematic dimension. We address the validity of this stage by examining the synonym of ESG, sustainability. We found that the same pattern exists for the findings. In the third stage, we examined the ESG integration process in two case studies. We asked our main research questions from an operational perspective: how is ESG integrated into the business model? Moreover, from a theoretical perspective, how do firms manage conflict in ESG integration? Finally, we used process theory to propose a framework for integrating ESG into a firm's business model. The framework synthesizes two process models identified from a systematic literature review of sustainability and business models and the successful case study.