Sustainability as a Competitive Advantage

Participants of the Refresher on sustainability
For a long time, sustainability was seen as a cost. Alternatively, it was something you did out of goodwill. Nowadays, under pressure from institutional investors and customers, companies are increasingly rethinking their business models and embedding sustainability in the core of their competitive strategy. But can this also lead to a competitive advantage? Filip Caeldries, Professor of Strategic Management and Organization, TIAS Business School, Tilburg University, the Netherlands answered this question at the Leaders Circle Refresher 2022.

“Sustainability is not a new topic but the voices demanding action are getting louder”, says Petra Joerg, CEO of Rochester-Bern, in her introduction to Filip Caeldries seminar. In fact, there are many examples of how the call to do something about the impending climate catastrophe is getting noisier: young people are taking to the streets and the issue is more and more part of political and social debates.

The role of the companies

But what role do companies play in terms of sustainability? A very big one, as Filip Caeldries impressively shows. “We need the corporate sector when we want to save the environment”, he says. Corporations are powerful economic actors. “The economic significance of the top 10 corporations is more than that of the bottom 180 countries, which includes countries such as Ireland, Indonesia, or Colombia”, he adds.

A clear sign, then, that we should not only look at countries but also at companies when it comes to sustainability issues. And this is also increasingly happening. Hardly any company can avoid the topic altogether anymore. Which brings us to whether sustainability not only has to be good for the environment, but also offers a competitive advantage to the company.

Back to the classics

“People tend to forget everything they learned about economics when it comes to sustainability. They are busy ‘planting trees’ but seem to have forgotten most of the classic strategy and economic theories they once learned”, says Caeldries. And when he says classic, he talks – among others – about Michael E. Porter’s book “Competitive Advantage: Creating Sustaining Superior Performance”.

A competitive advantage means that the company outperforms its peers in the industry. According to Porter there are two ways to do so: By cost leadership or differentiation. Firms should therefore assess all sustainability initiatives in terms of their effect on these cost or differentiation drivers, whereby relative effects matter and not absolute ones! “The key question is: How will an investment in sustainability affect the firm’s competitive position? And as a result, affect the value of the firm”, explains Caeldries.

The consumer need to care

However, this only works if consumers go along with it. If consumers are not prepared to perceive sustainability as a value, then this strategy will not work. “If the consumers don’t care, the bad guys will win”, says Caeldries. This issue is also fueled by the fact that it is not at all easy to separate good (high sustainability) companies from bad (low sustainability) companies. The sustainability label jungle is huge, and Greenwashing is meanwhile a long-known problem.


“Corporations are not responsible for all the world’s problems” says Caeldries.  “However, each company should identify the social problems that is best equipped to help resolve and from which it can gain the greatest competitive advantage” he adds. With this, he closes the Leaders-Circle refresher 2022 and has achieved to boil down seemingly disconnected and confusing topics to a robust framework.