Responsive and Proactive Sustainability Orientation: A Strategy and Innovation Typology for the ESG Era

With a growing relevance of ESG topics, i.e. environment, social, and governance, this conceptual article builds on sustainability and market orientation research to distinguish two dimensions of sustainability orientation. To date, most companies have concentrated on responsive sustainability orientation, which is reporting-driven and reacts to regulatory push effects to maintain the business with existing customers based on incremental innovations. In contrast, proactive sustainability orientation is opportunity-seeking and characterized by a stronger focus on radical innovations to actively develop new markets based on the expected needs of current and potential new customers. The paper further draws on strategy typology research to develop a conceptual framework for sustainability and innovation strategies. Based on the two dimensions of sustainability orientation, it suggests a typology of four sustainability strategies, i.e. ignorer, defender, explorer, and innovator strategies. In addition, a dynamic perspective and illustrative examples underscore important trends in the transformation towards a circular economy.