The Role of Corporate Sustainability in a Low‐Cost Business Model – A Case Study in the Scandinavian Fashion Industry

Abstract

AbstractThis multi‐level case study illustrates how corporate sustainability contributes to the low‐cost business model of a Scandinavian fashion company.Contrary to parts of the extant literature, we do not find that corporate sustainability directly adds measurable value (e.g. a better brand image); neither does it exert coercive control over critical supplier relationships. However, corporate sustainability minimizes the downside risk of the business model. It does so by (1) creating implicit contracts that reach beyond traditional ‘shareholder value’, (2) transferring risk to suppliers and (3) improving leadership by motivating management and employees, and by directing their attention to critical issues.For companies, we offer the insight that corporate sustainability is a necessary complement to shareholder value, even if the relationship is not obvious at first sight. We also suggest that concerted actions of companies or a positive connotation of certification create effective control over suppliers. As to public policy, we conclude that regulators could introduce mandatory disclosure of suppliers to facilitate controls through stakeholders, or alternatively an industry‐wide comply‐or‐explain code of conduct. We also address how regulators can take direct actions against countries with unsustainable labor policies. Last, we suggest future research topics, e.g. expanding the notion of a business model by interpreting ‘adding value’ as prevention of losses. Copyright © 2013 John Wiley & Sons, Ltd and ERP Environment.