Sustainability and Innovation in Tesla: A Case Study

This report discusses sustainability and innovation in Tesla, focusing on its approach to sustainable profit-making, relevant literary sources explaining how Tesla pursues sustainability, stakeholders' analysis, and sustainability benchmark. The report also provides recommendations for managers.

Sustainability and Innovation
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Table of Contents
INTRODUCTION...........................................................................................................................................3
Part B...........................................................................................................................................................3
Section 2 Tesla’s approach to sustainable profit-making.........................................................................3
Section 3 Relevant literary sources that explain how Tesla pursue sustainability in its offering.............4
Section 4 Stakeholders analysis and their interest in company’s corporate social responsibility............5
Section 5 Sustainability benchmark.........................................................................................................5
Section 6 Recommendations for Mangers...............................................................................................7
CONCLUSION...............................................................................................................................................8
REFERENCES................................................................................................................................................9
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INTRODUCTION
Sustainability is defined as the process in which organizations figure out the innovative
and creative ways in order to target the potential customers in the new marketplace (Adams and
et.al., 2016). It has been identified that sustainable innovation is much more than introducing or
launching the new product in the marketplace that is focus is on commercialization of technology
and the new processes at social level. Moreover it is defined as the process in which focus is on
the growth and development of the organization by creating new innovative products while
considering the environmental improvement. The organization taken for this report is Tesla, Inc.
The company is based in California which deals in electric vehicles and clean energy. The
company is established by Elon Musk and his friends with the motive to focus on growth of
sustainable energy. The topics covered in the report are sustainability offering by the company,
its profitability approach, their action toward CSR activities, sustainability benchmark and the
business recommendations for the managers of the company.
Part B
Section 2 Tesla’s approach to sustainable profit-making
Tesla is an electric vehicle manufacturing company and has always aimed at development
using sustainable energy. Although, majority of emission is generated in product-use phase,
company has made various changes in its manufacturing process as it is fully aware of its
environmental responsibility (Alghalith, 2018). For example, it has increased proportion of
renewable energy usage at its factories in Nevada, Shanghai, Berlin, etc. to minimise its carbon
footprint. They believe that to create a lasting impact on environmental sustainability, company
needs to achieve financial sustainability and that the notion of sustainable future without
economic feasibility is no longer valid as it has declared a positive free cash flow (operating cash
flow less capex) of more than $1 billion for the first time in 2019 (Impact Report, 2019)
Tesla has made development of sustainable products as main aim of its product portfolio
and believes in maximising profit by minimising its environmental impact and enabling others to
minimise their impact as well. For example, Tesla also manufactures a set of energy products
that produces and manages renewable energy production, storage and consumption, with the help
of sunroof or solar panels. These solar panels store energy in Powerwall, which then provides
energy during day, night and also, during power grid outages. Homeowners, businesses and
utilities can purchase such packs depending upon their requirement and size of the project.
Sustainability is at the heart of its business strategy can be seen from it’s the strategical
decision-making from its leadership (Schaltegger, Lüdeke-Freund and Hansen, 2016). It takes a
lot of time to develop a new product for it has aimed a transition to a carbon neutral economy
and developing business model for transportation industry which is based on zero emissions. For
example, its cars have all the latest designs and technologies that ICE cars of Volkswagen or
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Toyota have but are electricity based which are far less polluting than ICE cars’ engines in
generating harmful green-house gases. Charging Tesla cars can be a source of generation of
carbon footprint. Therefore, it has developed renewable energy-based home system and promotes
its usage to reduce foot print in charging as well. This way company is not generating just
generating profits without harming environment rather, it has made sustainable development as a
part of its product portfolio development. Company is a market leader in its segment and with its
sustainable leadership approach has proved that it is possible to achieve long-term profits by
contributing in building a sustainable society that is not harmful to the resources of the planet.
Section 3 Relevant literary sources that explain how Tesla pursue sustainability in its offering
Tesla has environmental sustainability at its heart of development. This is not just proved by
company during its operations but has also been observed by various researchers that have
researched on company’s operations.
Building ecosystem innovation to create competitive advantage - Sustainability and
innovation are two intertwined issues that relentlessly impact each other As per De Pin, Tesla
understands the importance of integrating shared value initiatives and ecosystem innovation for
sustaining its long-term growth. Using it, company has been successful at building competitive
advantage through a sustainable strategy that includes and promotes business ecosystem
innovation. Company works in renewable energy sector and encouraging its raw material
suppliers to go green will help it create a better sustainable offering chain.
Organization Policies and Management Strategies in Electric Vehicle Technology -
According to Alfred Akakpo and others Tesla has implemented a pragmatic strategy for
production of electric vehicles at affordable prices. This enables company to produce low-cost
electric cars with no fumes, noise or dirt. All this is not just profit-efficient business strategy but
also producing an innovative and sustainable business model to the auto-makers. Company needs
to continually research on clean energy sources and develops engine capacities that offers no
fumes and pollutants.
Renewed clean technology – Tesla has been researching to expand its clean technology
horizon for example, Powerwall. As per Sandy Rodrigues and others (2016), Tesla has created a
product that is not just powerful investment from the technological point of view for users but
also from the billing and environmental sustainability point of view. Powerwall is a good
diversion in Tesla's product offering by using solar power but still there are room for
improvement. For example, Tesla can produce batteries which gets charged from solar energy
while being driven or parked under sun. This would save charging time and will provide another
competitive advantage to Tesla.
Using brand positioning – Tesla is placed at one of the leading position in automotive
industry and leads electric auto-makers. Its positioning entrusts upon it to develop such policies
that inspire others to develop sustainable product offerings. E. Musonera and C. Cagle (2019),
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Tesla must establish follow strategies for companies wanting to enter electric car market, for
customers are increasingly getting attracted towards the sustainable innovative products and
design. This will soon help eco-friendly car-makers in taking over traditional fuel using car-
makers with Tesla as its leader.
In-situ monitoring – Tesla has the capability to develop technologies for in-situ
monitoring other than ex-situ. As per C. P. Grey and J.M. Tarascon (2017), solar batteries
produced by Tesla should be maintained in-situ as it will help in minimizing ecological
implications associated with wider use of batteries that are capable of generating large amount of
carbon footprint.
Sustainability in operations – Tesla aims environmental sustainability before profit
sustainability but still lags behind in achieving such feat in some operations. Frank Montabon,
Mark Pagell and Zhaohui Wu (2016) iterates that most of the firms practice profit before
environmental and social interest while companies like Tesla has integrated environmentally
sustainable practices in their product and supply chain portfolio such as producing combustion
free engines. However, company need to improve sustainability in its services provided to
customers in post-purchase phase. For example, Tesla customers report longer wait times for
appointments and poorer rates of problem resolution (Tesla’s biggest problem is its customer
service, according to a new Bernstein survey, 2019). Company can open more service centers to
resolve this issue or can increase its mobile service facility which receives more positive
feedback).
Innovations in sustainability – Companies generally consider sustainability as a
roadblock in profitability but Marcus mentions that companies like Tesla have the capabilities to
use sustainability as their biggest weapon to develop innovative products which will increase its
profitability rather than compromising it. Company should focus more on green practices in its
operations rather than final product which will by default develop more fuel-efficient and cleaner
fuel using vehicles.
Turning sustainability into profitability – Companies require higher funds to research and
innovate their products in sustainable manner. Therefore, it is very important to turn
sustainability into profit earning source so that it can be highlighted and appraised. Williams in
book Green Giants emphasized that those businesses which keeps sustainability as their core are
able to earn billions of profits from it like Tesla which manufactures world's first commercially
successful all-electric vehicles. Company shall focus on keeping sustainability as its core to earn
profit otherwise it will stop standing out from other companies and won't be able to cash this in
their goodwill.
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Section 4 Stakeholders analysis and their interest in company’s corporate social
responsibility
Stakeholders are those individuals, parties or groups which are directly or indirectly
connected to the company’s operations. Relevant stakeholders for Tesla’s efforts towards
production or consumption are its employees, customers, creditors, suppliers, government,
community or society at large, etc. Tesla chooses its associates very carefully and every
stakeholder that Tesla is associated with, plays a part in fulfilling company’s corporate social
responsibility and behaves in manner that is according to company’s pre-decided policies
(Williams, 2015). For example, Tesla has a supplier code of conduct and Human Rights and
conflict Minerals Policy that has outlined all expectations that it has from its suppliers and
partners. As a part of its social responsibility, it continuously strives to make working conditions
in its supply chain safe and humane, in addition to ensure that their manufacturing process is
environmentally responsible.
Company’s line of operation is in accordance with the governmental policies and societal
demands that automakers should increase their energy efficiency and reduce their environmental
footprint caused by engines, as it already has placed target to accelerate the world’s transition to
sustainable energy as its mission statement. Company also places a high value in building a safe,
fair and inclusive culture for its employees (Brockhaus, S. and et.al., 2017). It employs staff from
diverse background and motivates and develops them to work together in the drive to accelerate
company’s vision forward.
Section 5 Sustainability benchmark
Sustainability report of the Tesla in order to identify its current business situations and
the further improvement which can be done for the purpose of comparing the company with its
competitors (Vaz, Rauen and Lezana, 2017).
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Figure 1Tesla Sustainability and Safety. 2020
Figure 2Tesla Sustainability and Safety. 2020
Above mention are the two graphs which describe Tesla cumulative energy produced vs
its consumption and the injury rate in its car production. This will help the company in making
possible changes in its current system with the motive to improve and enhance in performance in
near future.
From the first graph it has been identified that with the year its consumption and
production is increasing that is they are creating the most efficient electronic vehicles available.
Close by this stands a strong promise to source environmentally friendly power for assembling,
with a definitive objective being 100% environmentally friendly power for all tasks. The energy
delivered by Tesla sun powered organizations far exceeds the energy utilized in the
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organization's processing plants. Due to increasing level of pollution government is taking action
to control it. Tesla will be able to gain more in near feature as they are dealing in electronic
vehicles which are environment friendly. People are shifting from petrol or diesel vehicles to
electronic vehicles which is having positive impact on the performance of company.
According to second graph it has been identified that company is taking precaution and
corrective measures with the motive to help and support employees or workers by providing
them safe environment so that they would able to work more effectively and efficiently. Hence
company take proper measures in order to ensure that its workforce is satisfied with the work
culture. From the last few years they have zero injuries. This is because they belief that workers
are the part of the organization and its their primary responsible to support and take care of
employees.
Competitors- The company is providing tough competition to its competitors as they are
among one of the best car producers across the globe which meet the needs of customers and
focuses on improving environment (Goodman, Korsunova and Halme, 2017). The competitors of
the company are Li auto, Nio, Nikola group, Workhorse group and many more. As main focus of
the company is to grow sustainable due to which they are able to attract large number of
customers. The electronic vehicles are quite convenient for the people as they expenses are low
in comparison to petrol or diesel vehicles. Moreover they are focusing on its employee safety
which is providing them great results as they are work more effectively and efficiently in order to
meet the goals and objectives of the organization. Tesla is using differentiation focus strategy in
order to accomplish competitive advantage where by providing unique and innovative
product(electric vehicles) it is able to attract the market where customers are welling to purchase
newly introduced products. In terms of quality they are able to stand on the terms and conditions
of customers. They are able to get success in the business because with the use of differentiation
strategy they are focusing on long them objectives in electric automobile , battery technology
and eco friendly products. Their main motive is to use the sustainable energy in its business and
to promote it.
Suitable factors related to environment sustainability- The company have come up
with unique concept of providing electronic vehicles which helped in reducing the level of air
pollution. The company designs, manufactures and distributes electric cars which are safe for the
environment that is electricity based vehicles helps in reducing the carbon footprints. Tesla's
corporate social responsibility endeavors are palatable in tending to the interests of the
overwhelming majority of its partners. In any case, the organization can improve its CSR
projects to enhance its exhibition in supporting networks and financial specialists/investors
(Inigo, Ritala and Albareda, 2020). As an example, to enhance CSR viability in fulfilling
networks, Tesla, Inc. can execute new network improvement programs. Additionally, the
organization must expand its endeavors in global extension to deal with the interests of
investors/financial specialists in profiting by the car business. These suggestions are relied
upon to upgrade Tesla's corporate social obligation standing.
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Section 6 Recommendations for Mangers
The recommendation for the managers of Tesla would be that they should be more
passionate and responsible as with this attitude they would be able to make its workforce more
responsible and efficient. They should take feedback form their client on regular bases in order to
identify at what they are lacking and further what they need to improve. They are taking steps in
order to provide save working environment to its employees which is helping them in retaining
the skilled and capable employees. Moreover they should set the realistic goals which helps them
in accomplishing desire results as the employees will function according to the set target which
helps in increasing the productivity of the business. Furthermore they should provide appraisal
and rewards to employees on the bases of their work which lead to motivate other employees to
work more efficiently. The smart objective of the company is to encourage people to use
electronic cars as the level of pollution is increasing and these cars are cost effective as well as
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Illustration 1: Tesla solar panel/ consumed by factories
Illustration 2: Tesla injury in years

pollution free. The target of the company is within coming 5 years they would able to capture
large area of market as people are shifting from diesel or petrol cares to electronic cars. The best
sustainability practices used by Tesla that it focus on maximum utilization of renewable energy
generation and stores it where ever possible.
CONCLUSION
From the above study it has been concluded that it’s essential for the organizations to
focus on the sustainable innovation in order to accomplish the effective results in near future.
With the increase in the level of pollution and damage to the environment business organizations
should focus on introducing environment friendly products. For example in context of Telsa
they are working on various sources in order to minimizing the level of pollution that is they are
the large users of renewable energy in its manufacturing unities. Moreover with the increasing
level of competition the business unities need to come up with new innovative and creative
business ideas and products in order to maintain its position in the marketplace. Maintainable
business techniques or sustainable business strategies are ones that accomplish monetary
execution through ecologically and socially mindful plan and working practices that push us
toward a cleaner and more beneficial. Tesla is a successful electric auto-maker. It has
environmental sustainability at its core and has been able to turn it into its competitive advantage
as well. It has used electric technology to position its brand and further researches in clean
technology to expand it products portfolio such as Powerwall. It has proved that a company can
operate in sustainability with environment while being successful and profitable at the same
time.
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REFERENCES
Books & Journal
Adams, R. and et.al., 2016. Sustainability‐oriented innovation: A systematic
review. International Journal of Management Reviews, 18(2), pp.180-205.
Akakpo, A. and et.al., 2019. Foresight, organization policies and management strategies in
electric vehicle technology advances at Tesla. In Futures Thinking and Organizational
Policy (pp. 57-69). Palgrave Macmillan, Cham.
Alghalith, N., 2018. TESLA: INNOVATION WITH INFORMATION
TECHNOLOGY. International Journal of Business Research and Information
Technology. 5(1). pp.37-51.
Brockhaus, S. and et.al., 2017. Motivations for environmental and social consciousness:
Reevaluating the sustainability-based view. Journal of Cleaner Production. 143.
pp.933-947.
Dangelico, R.M., Pujari, D. and Pontrandolfo, P., 2017. Green product innovation in
manufacturing firms: A sustainability‐oriented dynamic capability perspective. Business
strategy and the Environment. 26(4). pp.490-506.
De Pin, F., 2015. How Tesla integrates Shared Value principles with Ecosystem Innovation to
build sustainable competitive advantage (Bachelor's thesis, Università Ca'Foscari
Venezia).
Goodman, J., Korsunova, A. and Halme, M., 2017. Our collaborative future: Activities and roles
of stakeholders in sustainability‐oriented innovation. Business Strategy and the
Environment. 26(6). pp.731-753.
Grey, C.P. and Tarascon, J.M., 2017. Sustainability and in situ monitoring in battery
development. Nature materials. 16(1). pp.45-56.
Inigo, E.A., Ritala, P. and Albareda, L., 2020. Networking for sustainability: Alliance
capabilities and sustainability-oriented innovation. Industrial Marketing
Management, 89, pp.550-565.
Marcus, A.A., 2015. Innovations in sustainability. Cambridge University Press.
Montabon, F., Pagell, M. and Wu, Z., 2016. Making sustainability sustainable. Journal of Supply
Chain Management. 52(2). pp.11-27.
Musonera, E. and Cagle, C., 2019. Electric Car Brand Positioning in the Automotive Industry:
Recommendations for Sustainable and Innovative Marketing Strategies. Journal of
Strategic Innovation and Sustainability. 14(1).
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Rodrigues, S. and et.al., 2016. Tesla powerwall: analysis of its use in Portugal and United States.
Int. J. Power Energy Syst. 36(1).
Schaltegger, S., Lüdeke-Freund, F. and Hansen, E.G., 2016. Business models for sustainability:
A co-evolutionary analysis of sustainable entrepreneurship, innovation, and
transformation. Organization & Environment. 29(3). pp.264-289.
Vaz, C.R., Rauen, T.R.S. and Lezana, Á.G.R., 2017. Sustainability and innovation in the
automotive sector: A structured content analysis. Sustainability. 9(6). p.880.
Williams, E., 2015. Green giants: How smart companies turn sustainability into billion-dollar
businesses. Amacom.
Williams, E., 2015. Green giants: How smart companies turn sustainability into billion-dollar
businesses. Amacom.
Online
Tesla Sustainability and Safety. 2020. [Online]. Available
through:<https://www.tesmanian.com/blogs/tesmanian-blog/tesla-impact-report-2019 >
Impact Report, 2019. 2020. [Online]. Available
through:<https://www.tesla.com/ns_videos/2019-tesla-impact-report.pdf >
Tesla’s biggest problem is its customer service, according to a new Bernstein survey. 2019.
[Online]. Available through:<https://www.cnbc.com/2019/03/11/teslas-biggest-
problem-is-customer-service-new-bernstein-survey.html>
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