Incorporating the choice of centralized vs. decentralized resource allocation into sustainability frameworks

Abstract

The grand societal challenge of implementing the Sustainable Development Goals (SDG) puts pressure on firms to improve their sustainability practices. Environmental innovation can improve firms' sustainability practices, depending, in part, on the firm’s dynamic resource allocation capability. However, addressing whether to centralize or decentralize resource allocation has so far received scant attention in sustainability frameworks. This point-of-view article argues that the choice of whether to centralize or decentralize resource allocation will be increasingly more important as a structural lever for firms seeking to implement the SDGs. Linking this choice to the dynamic capability of resource allocation shows that this lever is intricately connected to the strategies of firms seeking to improve their sustainability practices. A practical framework is demonstrated that offers managerial decision support for this choice. Finally, avenues for future promising research are proposed.