Integrating Environmental Sustainability into Strategy-How headquarters-subsidiary dynamics shape the integration across locally embedded subsidiaries

Abstract

Environmental sustainability has gained increased attention among corporations and stake-holders. Recently, proactive companies have started to integrate environmental sustainability into strategy by accumulating products with enhanced environmental performance in ‘envi-ronmental portfolios’. Even though in research environmental portfolios have been presented as a successful way to integrate environmental sustainability into strategy, there are few, if any, empirical studies. By performing a case study based on a Swedish industrial corpora-tion’s environmental portfolio, this thesis starts to fill this research gap. Thus, this research contributes to both the literature about environmental portfolios and the more general litera-ture about the integration of sustainability into strategy. In sharp contrast to the claims in con-ceptual papers, this research shows that environmental portfolios have limited impact on op-erations and are therefore no fast means to integrate environmental sustainability into strategy. This is due to a conflict of interest between the multinational corporation’s (MNC) headquar-ters (HQ) and subsidiaries. In such situations HQ has difficulties overcoming subsidiaries’ local embeddedness. In other words, when subsidiary managers experience a squeeze between HQ demands to integrate environmental sustainability and market demands, subsidiary man-agers prioritise market demands, at least in this case study and at this point in an on-going process. Thereby, this research contributes by linking the literature fields of Sustainability and International Business by showing how HQ-subsidiary dynamics shape the integration of en-vironmental sustainability into strategy. The study also contributes to International Business literature by suggesting that when integrating environmental sustainability into strategy, the HQ role shifts between brain and puppet on a string as a result of organisational and external conditions.