Does strategic focus on environmental sustainability favor servitization?

Increasingly, investors, consumers, employees, and policymakers are demanding sustainable practices from manufacturers. As a result, the focus on sustainability has become a crucial aspect of companies' strategic agendas. In recent years, environmental sustainability (ES) has emerged as a significant driver of servitization for two primary reasons. First, the recognition of the potential of servitization to reduce the negative environmental impact of products throughout their lifecycle. For instance, servitized business models that focus on delivering product functionality rather than ownership (through sharing, renting, and leasing arrangements with customers) are expected to reduce resource consumption, enhance efficiency in use, improve product longevity and durability, and facilitate the reuse of materials. Additionally, manufacturers can offer high-value advanced services aimed directly at improving energy efficiency and reducing product emissions, leveraging the wealth of data and knowledge from their installed product base.
Second, the proliferation of new and increasingly demanding ES disclosure standards (such as the Scope 3 emissions disclosure and the Global Reporting Initiative) has intensified the pressure on manufacturing companies to report their negative or positive contributions to sustainable environmental development, not only from their own operations but also from activities across the broader supply chain (i.e., from the goods they purchase to the disposal of the products they sell). Thus, firms look at servitization as an important strategy to meet mounting environmental requirements. Despite the important role of ES in driving servitization, there remains a dearth of both theoretical insights and empirical evidence linking a firm’s focus on ES to the implementation of servitization strategies. This study theoretically articulates and empirically tests the relationship between a manufacturing firm’s focus on ES and servitization.