Digital transformation and the circular economy: Creating a competitive advantage from the transition towards Net Zero Manufacturing

Abstract

Manufacturers are exploring the extent to which digital technology applications can support their sustainability efforts by helping to convert abstract sustainability goals, such as those of net-zero emissions and circular economy (CE), into feasible and practical actions, achievements, and ultimately, a sustainable competitive edge. This work adopts a resource-based view (RBV) to explore the potential role that digital technologies play in the cultivation of a manufacturing firm's competitive advantage, and the deployment of existing internal resources and core competencies to achieve net-zero manufacturing emissions and CE. Two questions are addressed: (1) What competitive advantage(s) may be derived from the integration of digital technologies to achieve net-zero manufacturing emissions, and (2) does adopting an RBV facilitate the development of meaningful (and novel) competitive advantage? Engaged scholarship is used to analyse and apply theory to an empirical, real-world dataset documenting the perspectives and experiences of 13 manufacturing firms. Applying the VRIO framework, 21 identified digital technology-based core competencies are categorised as forms of competitive advantage that may be possible for manufacturing firms pursuing net-zero emissions. Four scenarios of digital technology adoption pathways are proposed, differentiated by the degree of radical vs. incremental interests and options available to the firm. This study highlights the critical need for firms to incorporate intangible asset management and development, including the labour and supply chain relationships, as part of their digital transformation strategies. Further, we demonstrate the potential of RBV as a lens for evaluating the competitive advantage potential of corporate sustainability initiatives, and facilitating the development of related strategies.