Strategic ESG Management and Transformation in International Price-Sensitive Markets: A Dynamic Capability Perspective

In international markets with strong price sensitivity, firms face the dilemma of reconciling environmental, social, and governance (ESG) demands with cost efficiency. This study examines how dynamic capabilities—sensing, seizing, and transforming—shape ESG strategies and business model transformation in such contexts. Through a comparative case study of two global Danish transportation firms with contrasting ESG approaches, findings show that firms with strong dynamic capabilities integrate ESG into core operations as a source of differentiation, while weaker firms adopt a defensive compliance stance, limiting efforts to regulatory minimums.
The study demonstrates how dynamic capabilities help overcome business model inertia, align ESG initiatives with strategic goals, and reconfigure operations for long-term competitiveness. A conceptual model and decision tree framework are proposed to map ESG pathways and support decision-making under uncertainty. Hence managerial implications include a decision tree tool that clarifies when to pursue minimal compliance, incremental change, or radical transformation. This framework strengthens strategic communication, fosters cross-functional alignment, and supports comparative analysis across industries and geographies. Overall, the study advances understanding of sustainable business model innovation by showing how dynamic capabilities transform ESG from a compliance burden into a competitive advantage in resource-constrained, price-sensitive environments.