Novel R&D Capabilities as a Response to ESG Risks-Lessons From Amazon’s Fusion of Diverse Knowledge

Abstract

Environmental, Social, and Governance (ESG) management is essential for transforming corporate financial performance-oriented business strategies into Finance (F) + ESG optimization strategies to achieve the Sustainable Development Goals (SDGs). In this trend, the rise of ESG risks has divided firms into two categories. Former incorporates a growthmindset that creates a passion for learning, and urges it to improve itself by endeavoring Research and development (R&D) -driven challenges, while the other category, characterized by risk aversion, avoids challenging highly uncertain R&D activities and seeks more manageable endeavors. This duality underscores the complexity of corporate R&D strategies in addressing ESG risks and necessitates the development of novel R&D capabilities for corporate R&D transformation strategies towards F + ESG optimization. Building on this premise, this paper conducts an empirical analysis, utilizing reliable firms data on ESG risk and brand value, with a focus on 100 global R&D leader firms. It analyzes R&D and actions for ESG risk mitigation, and assesses the development of new functions that fulfill F + ESG optimization through R&D. The analysis also highlights the significance of network externality effects, with a specific focus on Amazon, a leading R&D company, providing insights into the direction for transforming R&D strategies towards F + ESG optimization. The dynamics of stakeholder engagement in F + ESG optimization are indicated with the example of amazon's activities. Through the analysis, it became evident that Amazon's capacity encompassing growth and scalability, specifically its ability to grow and expand, is accelerating high-level research and development by gaining the trust of stakeholders in the "synergy through R&D-driven ESG risk mitigation." Finally, as examples of these initiatives, the paper discussed the Climate Pledge led by Amazon and the transformation of Japan's management system.