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Sustainability and Profit in Fashion: Insights from Born-Sustainable SMEs in Brazil and Scandinavia PDF Free Download

Sustainability and Profit in Fashion: Insights from Born-Sustainable SMEs in Brazil and Scandinavia PDF free Download. Think more deeply and widely.

Master of Science in Management

Master’s Thesis

Sustainability and Profit in Fashion: Insights from Born-Sustainable SMEs in

Brazil and Scandinavia

Authors: Júlia Bergamo de Carvalho, Aliya Zhumagaliyeva

2025

Supervisor: Daniel Hjorth

Examiner: Martin Blom

Abstract

This thesis explores how born-sustainable small and medium-sized enterprises (SMEs) in the fashion

industry can balance and improve the implementation of sustainability and profitability. It develops a

cross-cultural analysis, comparing Brazil and Scandinavia (namely Sweden and Denmark). A

constructionist framework is adopted in order to analyse culture, sustainability, and profitability with a

subjective perspective, as a dynamic process that is shaped by human interactions, interpreting and

emphasising the participants’ approaches to those concepts and how they shape the company

strategies and decisions. A qualitative analysis was applied, based on nine semi-structured interviews

with managers of born-sustainable fashion SMEs and sustainability experts, and thematic analysis was

used to code and identify patterns and divergences, to be able to draw conclusions on the primary data

generated about strategic reasoning and decision-making.

The findings show that sustainability and profitability are not mutually exclusive, but simultaneous

elements of value creation. Hence, efficient strategies should integrate both, ensuring financial

stability while remaining true to ethical and sustainability values. These strategies must be emergent

and adaptive to cultural context, market demands, and stakeholders’ expectations, incorporating

mixed approaches and being able to shift between priorities.

This thesis contributes to the academic community by using a constructionist perspective to show the

importance of external pressures and cultural context in managerial decisions. Practically, it offers a

new vision and tools for SMEs to focus on adapting strategies to the cultural characteristics of their

markets instead of acting against it, supporting ethical responsibilities while remaining financially

stable. It highlights opportunities for future research to explore concrete ways to integrate subjective

interpretations with objective metrics and implementing emergent, adaptive strategies. This study then

highlights that it is possible to balance sustainability and profitability through a more flexible and

adaptive approach, in order to reach the most effective and adaptive strategy.

Keywords: Fashion industry, Cross-cultural comparison, Managerial Strategies, Born-sustainable

SMEs, Constructionist framework, Sustainability, Profitability, Strategic adaptability, Cultural

context, Value creation, Stakeholder vs. shareholder theories, Scandinavia, Brazil.

Acknowledgments

We would like to thank everyone who has contributed to the process of writing this thesis and

supported us along the way, making this journey less challenging and more enjoyable. Our sincere

gratitude goes out to the faculty who shared their knowledge and expertise with us throughout this

programme, our classmates who contributed to the creation of an exceptional learning environment,

our supervisor Daniel Hjorth for providing immense support throughout the stressful process of

writing this thesis, all the companies and experts who agreed to take part in this research, and each

other for sharing this wonderful journey.

Once again, we want to thank our base teams and all classmates for the great memories we made

together this year in Lund.

Thank you, tack så mycket, obrigada, and рахмет!

Table of Contents

1. Introduction........................................................................................................................................ 1

1.1 Problem Background................................................................................................................... 1

1.2 Problematization..........................................................................................................................2

1.3 Research Questions......................................................................................................................4

1.4 Research Purpose.........................................................................................................................4

1.5 Outline......................................................................................................................................... 5

2. Methodology....................................................................................................................................... 5

2.1 Research Approach and Design...................................................................................................5

2.2 Data Collection............................................................................................................................8

2.3 Data Coding and Analysis......................................................................................................... 11

2.4 Reliability, Validity, and Limitations.........................................................................................16

2.5 Usage of Generative AI tools.................................................................................................... 17

3. Literature Review.............................................................................................................................17

3.1 Constructionist Approach..........................................................................................................17

3.2 Culture....................................................................................................................................... 19

3.3 Sustainability............................................................................................................................. 20

3.4 Profitability................................................................................................................................22

3.5 Micro, Small, and Medium-Sized Businesses...........................................................................24

3.6 Managerial Strategies................................................................................................................ 26

3.7 Marketing Perspective: Targeting, Consumer Behavior, and Product Development................ 28

3.8 Stakeholder and Shareholder Theories......................................................................................29

4. Theoretical Framework................................................................................................................... 32

5. Findings and Analysis......................................................................................................................33

5.1 Findings..................................................................................................................................... 34

5.1.1 Internal Culture................................................................................................................ 34

5.1.2 External culture................................................................................................................34

5.1.3 Staying Loyal to Sustainability Values............................................................................ 35

5.1.4 Contextualising Sustainability Metrics............................................................................ 36

5.1.5 Internal Sustainability Perception.................................................................................... 37

5.1.6 Economic Benefit of Sustainability................................................................................. 37

5.1.7 Increasing Sales................................................................................................................38

5.1.8 Profit Expectations...........................................................................................................38

5.1.9 Origin and Vision.............................................................................................................39

5.1.10 Staff Engagement in Strategy........................................................................................ 40

5.1.11 Business Outlook........................................................................................................... 40

5.1.12 Company Size................................................................................................................ 41

5.1.13 Brand Positioning...........................................................................................................42

5.1.14 Production Capacity and Stock......................................................................................43

5.1.15 Production Strategies..................................................................................................... 44

5.1.16 Creative Direction..........................................................................................................44

5.1.17 Exporting........................................................................................................................45

5.1.18 Financial Environment...................................................................................................46

5.1.19 Compliance Standards....................................................................................................46

5.1.20 Public Perception........................................................................................................... 47

5.1.21 Consumer Perception..................................................................................................... 47

5.1.22 Education of Consumer..................................................................................................48

5.1.23 Client relations............................................................................................................... 49

5.1.24 Building Trust by Having a Strong Purpose.................................................................. 49

5.1.25 Cost Anticipation........................................................................................................... 50

5.1.26 Regulation Compliance..................................................................................................51

5.1.27 Cost and Pricing Constraints..........................................................................................51

5.1.28 Supplier Relations..........................................................................................................52

5.1.29 Specifics of the Business Model.................................................................................... 52

5.1.30 Sacrificing Profitability..................................................................................................53

5.1.31 Sacrificing Sustainability............................................................................................... 54

5.2 Analysis..................................................................................................................................... 55

5.2.1 Culture..............................................................................................................................55

5.2.2 Sustainability....................................................................................................................56

5.2.3 Profitability...................................................................................................................... 58

5.2.4 Organisational Structure & Brand Identity...................................................................... 59

5.2.5 Supply Chain and Product................................................................................................60

5.2.6 External Forces and Consumer........................................................................................ 62

5.2.7 Business Model as an Advantage or a Disadvantage.......................................................63

5.2.8 Trade-offs.........................................................................................................................65

6. Discussion..........................................................................................................................................67

6.1 Strength or Constraint................................................................................................................67

6.1.1 External Forces as Strategic Drivers: Balancing Facilitation and Restriction................. 67

6.1.2 How Firms Frame Their Business Model as Strength or Constraint............................... 68

6.2 Emergent Strategy as a Way to Balance Stakeholder and Shareholder Expectations............... 69

6.3 Sustainability as a Subjective and Strategic Process & Constructing Profitability Beyond

Immediate Gains..............................................................................................................................70

6.4 Strategic Adaptation: How Regional Influences and Entrepreneurial Outlook Intersect..........71

6.5 From Consumer Demand to Market Boundaries: Regional Challenges in Business Expansion

& Adaptation to Culture Through the Lens of Consumers............................................................. 72

7. Conclusion.........................................................................................................................................73

7.1 Summary of Main Findings.......................................................................................................73

7.2 Implications............................................................................................................................... 74

7.2.1 Theoretical Implications and Contributions.....................................................................74

7.2.2 Managerial Implications.................................................................................................. 75

7.2.3 Recommendations for Future Research........................................................................... 76

7.3 Limitations.................................................................................................................................76

7.4 Reflection and Self-critique.......................................................................................................77

Appendix............................................................................................................................................... 78

Appendix A: Description of the companies analysed..................................................................... 78

References:............................................................................................................................................79

List of Figures and Tables

Figure 1: Thematic data analysis – Part 1.............................................................................................. 14

Figure 2: Thematic data analysis – Part 2.............................................................................................. 15

Figure 3: Theoretical framework developed by the authors.................................................................. 32

Figure 4: Findings corresponding to the aggregate dimension “Culture”..............................................34

Figure 5: Findings corresponding to the aggregate dimension “Sustainability”....................................35

Figure 6: Findings corresponding to the aggregate dimension “Profit”................................................ 38

Figure 7: Findings corresponding to the aggregate dimension “Organizational Structure and Brand

Identity”..................................................................................................................................................39

Figure 8: Findings corresponding to the aggregate dimension “Supply Chain and Product”............... 43

Figure 9: Findings corresponding to the aggregate dimension “External Forces and Consumer”........ 46

Figure 10: Findings corresponding to the aggregate dimension “Business Model as an Advantage or a

Disadvantage”........................................................................................................................................ 49

Figure 11: Findings corresponding to the aggregate dimension “Trade-offs”....................................... 53

Table 1: Recommendations for managers..............................................................................................76

1. Introduction

1.1 Problem Background

The fashion industry undoubtedly takes an important part in the everyday life of people from all

around the world; people constantly observe trends, buy new clothes, consume fashion products, and

dispose of them after some time to acquire new ones. These clothes serve the purpose of providing

protection, comfort, and a way of self-expression. However, the scale of the impact the fashion

industry has on our lives creates a concern for the impact it has on the environment as well. In terms

of its global environmental footprint, the fashion industry is considered to be one of the largest

contributors to the ongoing crisis. The European Environment Agency (2025) reported the textile

industry to be the fifth biggest sector in terms of utilization of raw materials and the amount of

greenhouse gas emissions. The striking amount of 60 to 70% of the textiles used in the fashion

industry was identified to consist of plastic-based materials (European Environment Agency, 2025).

These figures demonstrate that the fashion supply chain, which is among the three leading

contributors to global carbon footprint (World Economic Forum, 2021), is currently heavily reliant on

the usage of non-renewable resources in its production processes.

The consumption patterns and habits of consumers in the fashion industry further prove the urgent

need to switch to more sustainable practices. In 2020, the textile consumption volumes for each EU

citizen corresponded to 16 kilograms on average, yet only as little as 4.4 kilograms of the material

consumed were collected for sustainability-driven initiatives such as reusing or recycling (European

Environment Agency, 2025). Thus, approximately more than 70% of the textiles sold in the fashion

industry are mismanaged as waste. The statistics further show that as low as 1% of the materials that

form part of the production process of clothes end up being recycled into new garments (Ellen

MacArthur Foundation, 2017). This highlights the lack of a more environmentally responsible

approach to the utilization of resources in the fashion industry.

One of the main drivers of these unsustainable practices is fast fashion, a model described by the

European Parliament (2024) as involving rapid and continuous release of new clothing styles at

consumer-appealing low prices. Although known for making fashion more affordable to a wider range

of people, this model is the main reason behind consumer habits that are detrimental to the

environment. Fast fashion companies deliberately promote trends, leading to constant sales of

garments that are often designed to be disposed of after a short period, encouraging people to abandon

them and buy new pieces of clothing as the new season comes (Abelvik-Lawson, 2023). Hence, more

materials end up in landfills, more scarce resources are used up in the production cycles, and more

harmful substances are released into the environment. By encouraging such consumption patterns, fast

fashion companies become responsible for continuously increasing the rates of environmental damage

done.

The alarming statistics around the fashion industry demonstrate the increasing public awareness of its

negative environmental impact, which calls for the need to adopt business practices that are in line

with the idea of environmental sustainability. Recently, more companies have started to change their

direction towards pursuing business models that put sustainability at their core. These companies are

usually referred to as slow fashion companies, as they operate on principles opposite to the ones that

traditional fashion companies are built on, reducing the amount of focus placed on profit

maximization. Key principles of slow fashion include designing for durability, producing locally and

ethically, engaging in conscious consumption, and being part of a community built on shared values

(Legere & Kang, 2020 cited in Sarokin & Bocken, 2024). These companies promote quality over

quantity and emphasize environmental and social sustainability throughout the lifecycle of clothes

(Fletcher, 2010 cited in Sarokin & Bocken, 2024), focusing on the practices that can reduce the

pressure the fashion industry currently has on the environment. Nevertheless, the reality shows that

implementing such business models is a complicated managerial issue. Hur and Cassidy (2019) claim

that sustainable fashion design is a complex task that requires coordinated efforts from multiple

stakeholders across the supply chain, not just designers alone.

1.2 Problematization

The existing literature supports the idea that there is an urgent need to transition from the principles

adopted by fast fashion companies towards more sustainable business models, encouraging companies

to revisit their business strategies. While this idea appears to be well grounded, its implementation is

challenging in practice. There is a problem of understanding how to incorporate these ethical practices

in a way that would not be detrimental to the financial performance of those enterprises. As Sarokin

and Bocken (2024) state, whether sustainable businesses can continue to operate depends on whether

they are economically viable, emphasizing that net profitability remains essential for their survival,

despite the fact that they are less focused on traditional profit maximization than most companies. The

data shows that some companies that were born with sustainability principles struggle to remain loyal

to their founding values, exactly for the reasons connected to the ability to financially sustain

themselves. When faced with the problem of not being successful enough or not gaining the needed

trust from the public, some fashion companies with sustainable business models decide to return to the

fast production principles to make sure they stay financially viable (Verma et al. 2024).

Small-to-medium-sized enterprises (SMEs) are especially vulnerable, since their actions are often

shaped by the larger companies they serve within supply chains (Demirel & Danisman, 2019 cited in

Ostermann, 2021). Thus, even though there is an increased understanding that shifting to sustainably

organized business models is important to control the environmental impact of the fashion industry,

the evidence shows that there is a lack of knowledge on how born-sustainable companies can manage

their operations to confidently pursue sustainability without risking their financial survival.

Although the data provides greater insight into the environmental impact of the fashion industry,

born-sustainable companies face challenges in terms of insufficient demand. Although 50% of

consumers in the European market say that they are ready to pay a higher price for more sustainably

produced clothing items, market share does not even reach 1% (De Pelsmacker et al. 2005 cited in

Shen et al. 2013). That is, even though consumers say that they are willing to support

sustainability-driven approaches adopted by fashion companies, their claims do not necessarily match

their actual behavior, which is a notion referred to as the attitude-behavior gap (Arbuthnott, 2009;

Yates, 2008 cited in Shen et al. 2013). This gap reflects that born-sustainable fashion companies

represent a promising and desired, yet challenging, idea. The companies that were founded with

sustainability at their core tend to be the ones to lead the process of adopting new technologies and are

more open to disruptive and radical innovation (Ostermann, 2021). However, given the innovative

nature of their business models, they also have to face the issue of educating their consumers about

the value their products bring and influencing their behaviors, while integrating social and

environmental principles throughout their supply chain operations (Ostermann, 2021). “Not being

aware of sustainable fashion enough requires consumer educators to provide more educational

programs, campaigns, and other related training methods to consumers” (Shen et al. 2013, p.145).

Hence, in order to be competitive in the market, these companies need to ensure that consumers are

well informed about sustainable fashion and its importance. Therefore, another problem lies in

understanding how born-sustainable SMEs can strategically attract potential customers to ensure they

reach sales figures needed to sufficiently support their businesses financially.

Even though the question of environmental degradation is considered to be a globally recognized

issue, the managerial strategies needed to help businesses balance sustainability with profitability

cannot be viewed as one-size-fits-all. The studies show that it is important to consider consumer

profile (like age, income, and ethnicity) in determining the degree of their awareness of sustainable

fashion (Shen et al. 2013). National values, which include values people have about what surrounds

them, were also found to determine people’s attitude towards sustainability and their willingness to

support sustainable initiatives (Tata & Prasad, 2015). In line with this assertion, Khan et al. (2024)

found out, in their comparative study of Russian and Italian contexts, that the cultural determinants of

the consumer’s willingness to pay more for the products of sustainable fashion are not the same. Thus,

strategic decision-making must also be sensitive to the specific consumer profiles in different markets

in order to effectively connect with targeted audiences. For these reasons, this study compares two

contrasting regional contexts: Scandinavia and Brazil. Investigating these two geographical regions is

crucial to explore how born-sustainable fashion SMEs develop their strategies in response to different

cultural and economic environments, because analyzing how two significantly different contexts

affect strategy development can offer valuable insights that can be applied to an even wider range of

contexts. This comparative element can also help reveal if there are any shared patterns that could

serve as a navigating tool for developing managerial strategies for other emerging sustainable fashion

companies globally.

The business model built on the idea of slow fashion has been viewed as a promising alternative to

fast fashion, yet its ability to bring sufficient profit to the business still remains uncertain and

underexplored in the literature (Gorge et al. 2015; Niinimäki & Hassi, 2011 cited in Sarokin &

Bocken, 2024). There is a lack of practical knowledge that SMEs can apply to successfully operate as

slow fashion companies while remaining profitable (Abdelmeguid et al. 2022 cited in Sarokin &

Bocken, 2024). Therefore, there is an urgent need to fill this knowledge gap, by developing insights

about how strategic decision-making should be adapted to help managers pursue sustainability path

without compromising financial performance, making sure they can use their unique and

comparatively novel business model to create a competitive advantage, while also considering the

specific regional context in which they operate.

1.3 Research Questions

Given the objective of this research, the following research questions were identified:

Research Question 1 (RQ 1):

What challenges do managers in born-sustainable fashion SMEs face in trying to balance

sustainability and profitability in practice?

Research Question 2 (RQ 2):

How to develop effective managerial strategies in born-sustainable fashion SMEs to maintain

sustainability in business operations while ensuring financial viability?

Research Question 3 (RQ 3):

What role does regional and cultural context (Scandinavia and Brazil) play in the development of the

appropriate managerial strategies?

1.4 Research Purpose

The purpose of this study is to develop an understanding of how managers in born-sustainable fashion

SMEs should approach their strategy development in order to be able to balance sustainability with

profitability. Acknowledging that these companies operate based on business models different to the

ones used by traditional fashion companies, the study seeks to understand how being born-sustainable

influences their position in the market, approaches to strategy development, and the identification of

the main priorities. In particular, this thesis aims to determine what the key barriers are in securing

financial stability when companies decide to put sustainability as their core value. By exploring these

barriers and how companies respond to them, the research will identify what are the main managerial

strategies that ensure sustainable practices can be maintained in a way that ensures competitiveness.

By doing so, we want to understand how to make sure that once companies have decided to follow a

sustainable path, they do not have the need to revert back to fast fashion principles due to financial

constraints. In addition, the study aims to explore how regional and cultural contexts affect managerial

strategies for these companies and how these strategies should be tailored accordingly.

1.5 Outline

This thesis is divided into seven sections. The introduction is followed by the description of the

methodology applied in the study, including the explanation of how the data were collected and

analyzed. Then, existing literature is introduced to demonstrate current knowledge and theories related

to the topic. The literature review is followed by a theoretical framework derived from the

researchers’ view on how the aforementioned theories help explain the problem under investigation.

Further, the thesis presents the main findings of the study, analysis of these findings in the form of a

conversation between theory and empirical data, and a discussion of answers to the RQs, implications,

limitations, and recommendations. Lastly, the thesis will be concluded with a summary of the results

of the study and its delimitations.

2. Methodology

This chapter gives an overview of the research methodology used in this thesis. It will offer

justifications for the chosen research design and approach, pointing out the reasons these options were

proven to be the most suitable given the established research questions. The methodology section will

describe in detail the data collection methods used and the data analysis techniques applied.

2.1 Research Approach and Design

When approaching the development of the research question, we identified that we wanted to explore

the phenomenon of pursuing sustainability in the fashion industry. This initial topic developed an

interest to investigate how managers deal with trade-offs in contemporary sustainability-focused

fashion SMEs to make sure they stay profitable. Acknowledging that managers’ perceptions of the

meaning of concepts of sustainability and profitability, their practices in response to these perceptions,

and individual decision-making strategies are complex, subjective, and often adapt in response to

external pressures, the decision was to focus on the analysis of managers’ individual experiences and

interpretations. Hence, the research strategy used in this study is qualitative, which involves an open

and adaptable approach to studying a few real-life cases in depth, focusing on the subjective

experiences of the involved participants, working with unstructured data, and relying on

language-based analysis rather than numerical methods (Hammersley, 2013).

Rather than testing predetermined hypotheses, this research follows an inductive reasoning process,

which allows conclusions and theories to emerge from the analyzed data (Bell et al. 2022). In that

sense, the nature of this research approach is exploratory, avoiding being influenced by the frames

already established in the existing literature. The exploratory method is the one used when the

problem needs to be more precisely defined and where insights and ideas are to be generated as a

result (Stevens et al. 2013). Therefore, this approach will be applied to develop an understanding of

what managers in fashion SMEs identify as the biggest challenges in balancing profitability and

sustainability, what they perceive to be the “right” balance, and which managerial strategies they find

to be the most useful in trying to achieve this “balance”. Through using an inductive approach, this

qualitative research investigates the challenges these companies face and the strategies they use to

remain competitive in a market that is becoming more aware of the need to increase sustainability

efforts.

The research is grounded in a constructionist framework, which assumes that nothing is objective or

universal, and all knowledge is socially constructed through human interactions and based on personal

interpretations and context (Berger & Luckmann, 1966). Adopting this perspective, this study seeks to

understand how sustainability and profitability are interpreted by different actors according to regional

and cultural context, and how these interpretations impact their strategic decisions. This thesis also

explores how managers in these born-sustainable fashion companies construct the meaning of

sustainability within their specific organizational and cultural contexts. The initial idea was to conduct

a case study of two companies from two Scandinavian countries: Sweden and Denmark. However,

since case study design poses a concern on whether analyzing only one example can allow for

generalizing conclusions (Bell et al. 2022), we decided to expand the number of participants and

adopt a comparative design that would take into account potential differences that can be found

among areas that are unique or different from each other. Therefore, the research examines companies

in two geographical areas with distinct cultural and socioeconomic contexts: Scandinavia and Brazil.

Conducting cross-cultural research in management assumes that the way the organizations behave is

shaped by cultural context (Bell et al. 2022). Therefore, focusing on the differences between

managerial approaches in these two areas, the research aims at developing further understanding of

how regional contexts influence the extent to which these managerial approaches can be generalized.

It is important to note that the study does not cover the whole Scandinavian region, only Sweden and

Denmark. Hence, the study is not fully representative of the chosen region. However, for the ease of

the analysis, the two countries would be referred to as Scandinavia in this thesis. In addition, the

empirical data comes more from Swedish companies than Danish companies.

The two regions were selected for their striking contrast, each representing a different end of the

economic, social, and cultural spectrum. Economically, Sweden and Denmark represent regions with

comparatively stronger performance than Brazil, with GDP per capita at $55,516.8 and $68,453.9 for

Sweden and Denmark, respectively, compared to $10,294.9 for Brazil (World Bank, 2023). This

noticeable difference in economic strength highlights the importance of understanding the pressures

behind companies’ profitability and consumers’ ability to afford sustainably produced products, which

are often priced higher than fast fashion alternatives. The two Scandinavian countries were also

ranked highly according to the degree to which it is easy to conduct a business in them, Denmark

taking 4th place while Sweden taking 10th (World Bank Group, 2020). Scandinavia is also a highly

advanced and developed region when it comes to sustainability. As noted by McCallin & Webb (2004,

cited in Strand et al. 2015, p.1), “few can contest Scandinavia’s place at the forefront of the corporate

responsibility movement.” Sweden, in particular, ranks at the top of the Global Sustainable

Competitiveness Index 2024, leading among 191 countries worldwide (SolAbility, 2024). In terms of

social well-being, Sweden also performs exceptionally well across various quality-of-life indicators in

the OECD’s Better Life Index (Hutt, 2019). This strong socioeconomic position of the country likely

reduced the financial insecurity of the local population, enabling both individuals and organizations to

be able to focus more on environmental and social concerns. Denmark demonstrates similar patterns

with respect to sustainability, ranking third on the Global Sustainable Competitiveness Index 2024

(SolAbility, 2024). The country is also recognized for its strong commitment to corporate social

responsibility (CSR) (Strand et al. 2015 cited in Toft & Rendtorff, 2021).

Culturally, stakeholder engagement is deeply rooted in Scandinavian traditions and values. Swedish

scholar Rhenman was working on integrating democratic values into industrial settings and was the

first one to use the term “stakeholder” in management literature (Strand et al., 2015). Thus,

Scandinavian management style can be described as the one involving inclusive and ethical

leadership, emphasizing collaboration, shared decision-making, and care for the well-being of all

stakeholders, not just shareholders (Grennes, 2003, 2011; Morsing et al., 2007, cited in Strand et al.,

2015). This reflects a well-established understanding in the region of the importance of working

toward the collective good. When it comes to the degree of importance of the fashion industry in the

local culture, the fashion industry can be described as well-established in Denmark, which is known

for its Copenhagen Fashion Week. This fashion week, which is regarded as the fifth globally, is also

known for its efforts in promoting the need to incorporate sustainability among the companies in the

industry (Copenhagen Fashion Week, n.d.). The specifics of Scandinavian style are also important to

consider, as it is known for being based on the principles of minimalism, simplicity, and neutral tones.

This means that Scandinavian design is inherently the one that focuses on the “less is more” mindset.

In contrast, Brazil represents an emerging sustainability environment, influenced by significant social

and economic inequalities (Valle-Noronha & Chun, 2021). Ranked 52nd on the Global Sustainable

Competitiveness Index 2024 (SolAbility, 2024), Brazil is still in the process of strengthening its

sustainability infrastructure. Nonetheless, the country holds a prominent position in the global fashion

industry, not only as the origin of many top models but also as the only Latin American nation ranked

among the top 15 apparel markets in 2023 (Statista Research Department, 2024). The strong position

of the fashion industry in Brazil is also evident in such huge-scale fashion events like São Paulo

Fashion Week and Fashion Rio. These events now also raise the topics of concern for the environment

and supporting sustainability initiatives (Sutter et al. 2015). The intersection of fashion and

sustainability, however, is a relatively recent development in Brazil (Valle-Noronha & Chun, 2021).

When it comes to the uniqueness of the style of the region, Brazilian fashion is heavily influenced by

culturally significant events like carnival and football (Valle-Noronha & Chun, 2021), pointing to the

deep connection the Brazilian fashion industry has with the country’s national identity. The design of

Brazilian fashion style can be described by the presence of colorful and expressive patterns (Hedi,

2024). Thus, the fashion in Brazil represents the opposite of Scandinavian minimalism. These

economic, social, and cultural considerations, combined with a growing focus on sustainability, make

Brazil an interesting setting to examine how businesses navigate sustainability goals under

resource-constrained conditions, especially when compared to the Scandinavian context.

By comparing these two regions, this study seeks to explore how local conditions, such as levels of

economic development and cultural norms, influence managerial approaches to sustainability. This

contrast offers valuable insights into studying how sustainability objectives are pursued through

distinct strategic paths shaped by each region’s unique context.

2.2 Data Collection

This research is based on the analysis of primary data that was collected through qualitative

interviews with small-to-medium-sized, sustainably founded fashion companies in Scandinavia and

Brazil. The study adopted the use of semi-structured interviews, since the thesis investigates a topic

that requires the exploration of several themes and questions. The unstructured interviews would pose

a risk of failing to gather information that would help meet the study’s objectives, because such

interviews typically involve a single open-ended question that the interviewee is expected to elaborate

on (Bell et al. 2022). Therefore, we have chosen to use semi-structured interviews, which are guided

by a set of predetermined questions across key topics of interest but still allow for flexibility in terms

of which questions to ask, skip, or adapt, depending on the interviewee’s responses (Bell et al. 2022).

These interviews aim to explore the following:

● The challenges these companies face in balancing sustainability and profitability, and how

they define the “right” balance.

● The influence of ethical considerations, environmental impacts, and regional or cultural

contexts on their decision-making processes.

● The managerial strategies used to integrate sustainable practices while maintaining financial

viability.

● The opportunities created by a sustainability-first approach and how these are strategically

leveraged by companies founded on such principles.

A purposive sampling method was used to select participants for the interviews. This type of sampling

involves selecting participants based on specific criteria that help address the objectives of the study

(Bell et al. 2022). In terms of sustainability, companies were chosen based on their communication of

commitment to sustainable business practices. “Sustainable entrepreneurship is understood as aiming

to promote positive environmental and social change, establishing a platform for new opportunities

for businesses, decision making and new products or services from the very beginning to the end

rather than pursuing economic profits as the primary objective” (Zeng, 2017 cited in Franco &

Rodrigues, 2021, p.137). Therefore, the focus was on businesses that stated they were founded with a

sustainability-driven mission rather than one focused mainly on profit maximization. In addition to

interviewing company representatives, we also contacted experts working in the field of helping

sustainable start-ups, who have extensive insights on managing companies that were born with

sustainability-driven ideas. This approach was taken to ensure diverse perspectives were included in

the research, since these experts have substantial experience working with different companies, not

only one. Given the limited timeframe for this thesis, it was important to focus on companies that

would be easier and quicker to reach out to. Hence, the study focused on small to medium-sized

fashion companies in both Scandinavia and Brazil. Their size and accessibility make them more

practical to engage with within the scope of this research. Also, “from a macro-social perspective,

SMEs have a fundamental role in sustainable development because they dominate the business sector

in almost all countries and have a cumulative impact that is far from negligible” (Cassells & Lewis,

2011 cited in Franco & Rodrigues, 2021, p.138).

The perception of what is the appropriate sample size in qualitative research tends to vary based on

each unique situation (Bell et al. 2022). The consideration in mind should be that the sample should

not be too small to avoid the problem of having a lack of information, but at the same time should not

be too big to avoid the problem of a lack of thorough analysis (Onwuegbuzie & Collins, 2007 cited in

Bell et al. 2022). Therefore, given the time constraints of this research, we decided to conduct five

interviews for each geographical area (Scandinavia and Brazil). Resulting in 10 interviews overall, the

study aimed to ensure enough data is generated to draw insightful conclusions, while at the same time

creating a realistic and manageable goal. However, due to unforeseen circumstances, one interview

was cancelled, resulting in nine interviews in total: five from Brazil, three from Sweden, and one from

Denmark.

Most of the interviews, both with Scandinavian and Brazilian companies, were conducted through

online video interviewing via Microsoft Teams, since video interviewing allows for the ease of

communication when the interviewer and interviewees are situated in distant geographical locations

(Bell et al., 2022). Moreover, conducting video interviews might increase the chances that potential

participants agree to participate in the interview (Bell et al. 2022), which was especially relevant in

the case of this research, given the busy nature of SMEs that often have limited staff. Taking into

account that one risk of video interviewing can be low quality of the audio or video due to

connectivity issues (Bell et al. 2022), we conducted interviews in places that had a stable internet

connection. All interviews were recorded upon obtaining an oral agreement from the interviewees to

record the conversation. The interviews were recorded and transcribed, as these procedures are

considered to be crucial to ensure the research takes into account not only what information was

communicated but also how it was communicated (Bell et al. 2022). Interviews with Brazilian

companies were carried out in Portuguese by one of the researchers, who is a native speaker of the

language, in order to facilitate the process of participation in the interviews for the businesses.

Therefore, two different transcription tools were used: TurboScribe for companies in Brazil and Otter

for companies in Scandinavia. Then, the interviews were translated into English by the

Portuguese-speaking researcher. Bell et al. (2022) highlighted that translating texts is not just a

technical process but also a sensemaking process. Among the challenges that can be faced during

translation of interviews can be mentioned the issues of not having equivalent vocabulary in English,

usage of phrases unique to the socio-historical context in question, and overlooking translation issues

(Xian 2008 cited in Bell et al. 2022). However, since the researcher translating the interviews was a

native speaker of the language, held the same nationality, and had an official certificate proving her

right to teach English, the risks of aforementioned limitations were minimized.

Based on the circumstances under which the research was carried out, some interviews were

conducted in the form of asynchronous online interviewing via email, which meant sending the

interview questions to the participants and obtaining the responses from the interviewees after a short

period of time (Bell et al. 2022). Acknowledging that such online interviewing might have a limitation

of not giving the opportunity to initiate full social interaction between the researchers and the

participant (Bell et al. 2022), its use in the scope of this research was minimized and only used when

the interviewees were not available for any other more interactive type of interviewing, such as video

or telephone interviewing.

The interviewing process started with creating a list of topics to be covered in the interview questions.

As suggested by Bell et al. (2022), the topics were then listed in a sequence that would allow asking

questions in the order that would have a logical flow, identifying which topics should be discussed

first and which questions should follow up on the previous topic. However, since the interviews were

designed to be semi-structured, the exact order in which questions were asked and topics were

discussed was flexible and determined by unique interaction with each interviewee (Bell et al. 2022).

All the questions were formed to answer the research questions of this thesis, but at the same time, we

made sure not to make them too specific, as was highlighted by Bell et al. (2022). The purpose of

doing so was to ensure we allow interviewees enough freedom to interpret the questions their own

way and talk about issues and ideas they considered to be the most relevant and essential. We also

stayed open to adapting our questions in between the interviews, based on the initial observations and

insights made during the interviewing process.

This approach was in line with the perspective developed by Gioia et al. (2013), who said that they let

the interviewees shape the way the research questions are explored. We also made sure not to ask

leading questions (Bell et al. 2022) in order to avoid any unconscious bias in interviewees’ answers.

Thus, we ensured participants answered the questions in a way that would demonstrate their own

perspective towards the topic, being cautious about initially imposing certain viewpoints on them.

Although a general list of questions was created to sustain the consistency within the interviews, the

list was open for adaptation based on the specific information about the company and observations

from previous interviews. The questions that were asked out of the predetermined list included

questions clarifying some aspects of the participants’ answers, questions interpreting their answers to

make sure their viewpoints were clearly understood, and asking additional questions that seemed to be

interesting for the purpose of the research based on the answers given by the interviewees.

2.3 Data Coding and Analysis

The primary data that was collected from the interview was analyzed using thematic analysis.

Thematic analysis is a flexible and accessible approach that focuses on identifying and interpreting

patterns of meaning across data (Riger & Sigurvinsdottir, 2016). Since our research is interested in the

personal experiences and perspectives of the managers themselves, the thematic analysis allowed us to

uncover common themes that different participants discussed concerning the key concepts of this

study, such as culture, sustainability, profitability, and managerial strategies, while still capturing the

unique context of each case. The use of the grounded theory method was disregarded because the

short timeframe might not allow it to reach the depth of analysis this method requires (Bell et al.

2022). The analysis was carried out manually based on the six steps suggested by Braun and Clarke

(2023): 1) familiarization with the data through transcribing interviews and reading the data multiple

times to identify emerging patterns; 2) creating initial codes based on the interview data that relate to

key themes like sustainability practices, managerial decisions, and profitability; 3) derivation of

common themes by grouping similar codes into broader themes that reflect how medium-sized

fashion companies balance profitability and sustainability, and 4) checking if the development of

certain themes is well grounded and identifying whether certain themes can be combined; 5)

establishing definitions of the themes; 6) writing the final report based on the analysis made on the

identified common themes, through the combination of the data generated and the theoretical

framework developed in the next section, to create a third voice.

After all interviews were transcribed, the process included going through each of the interviews to

reread them more closely several times to familiarize ourselves with the data before starting to code it.

Familiarization with the data was an important step in getting an initial understanding of recurrent

patterns in the discussed topics, as well as similarities and differences. Since an inductive approach is

applied in this research, we let the data guide us in the process of identifying pertinent patterns

without trying to fit them within the frame of the existing theories. The next step was to identify codes

that could be potentially relevant to the research questions and valuable to the final findings of the

study. In particular, the codes were mainly determined based on the connection of the data to the main

themes of the topic under research: sustainability, profitability, strategy development, value-based

approach, born-sustainable business models, cultural/regional contexts, consumer behavior, etc. These

initial codes relate to how participants were discussing these topics, including both points that were

similar and dissonant among their responses.

Gioia et al. (2013) highlighted the criticism qualitative research receives due to the fact that

sometimes it can be unclear how researchers select what parts of data to focus on and how it should be

interpreted, making it difficult to prove that the reasoning behind these decisions was logical and

objective. Specifically, it can be unclear how the connections between primary data and the

conclusions drawn from it were made. One of the solutions to this skepticism was to build a

systematic approach of presenting both ‘‘1st-order’’ concepts that represented interviewees’ voice and

‘‘2nd-order’’ concepts that consisted of researchers’ interpretations (Gioia et al. 2013). This approach

was used as the core procedure for the data coding process of this thesis because it provides a clear

vision of how connections between data and interpretations were derived and ensures a deep

understanding, which represents the goal of high-quality qualitative research (Gioia et al. 2013).

Therefore, the way the empirical data was coded can be described in the following steps:

1st-Order Concepts. Interviews were analyzed for specific information that could be relevant in

answering the main research questions. Both similar and dissonant viewpoints on the same topics

were recorded. These concepts were described and coded using wording that presented interviewees’

responses with minimal changes to preserve the originality of the data and the participants’ voice.

2nd-Order Themes. When the initial concepts were recorded, they were analyzed and grouped

according to the broader topic they relate to, assessing whether these 1st-order concepts give insights

about a certain shared theme, either reinforcing one another or offering alternative views. In this step,

names for these more aggregate terms and codes were developed from our interpretation of

interviewees’ words, introducing authors’ voices.

Aggregate Dimensions. After all the responses were grouped according to topics they discuss,

2nd-order themes were rearranged to the broadest themes they help to explain. These most aggregate

themes were identified based on their relevance within the scope of the theories and concepts used to

investigate the research question.

All codes were collected into a table and then organized in the form of a diagram to provide a clear

visual representation of the links between 1st-order concepts, 2nd-order themes, and the emerging

aggregate dimensions. The codes were identified and cross-checked among researchers to verify their

relevance and consistency. The step that involved clustering the 2nd-order themes into the most

aggregate topics was insightful in a way that allowed us to see whether there are certain additional

concepts that should be included and discussed in the literature review of this thesis, in order to better

understand the research problem. The next step included going through the generated coding and

identifying whether they should be regrouped, omitted, adapted, renamed, or rearranged with respect

to each other. When the consensus among the researchers was reached, the names and definitions of

all themes were finalized, and the coded data were ready to be discussed together with the theory.

Figure 1: Thematic data analysis – Part 1

Figure 2: Thematic data analysis – Part 2

2.4 Reliability, Validity, and Limitations

Given the differences in the nature of quantitative and qualitative research, there is a concern about

whether the reliability and validity of qualitative research should be determined by the same criteria as

in quantitative research (Bell et al. 2022). One suggestion mentioned by Bell et al. (2022) is to adapt

the meaning of reliability and validity when assessing qualitative research. LeCompte and Goetz

(1982 cited in Bell et al. 2022) discuss the need to ensure what they refer to as external reliability in

qualitative studies. They mention that achieving this criterion is challenging since the social setting of

the qualitative research is dynamic, and thus, the study of the same context cannot be exactly

replicated again in the future. The issue of replicability, as well as transparency, is also discussed by

Bell et al. (2022) as one of the critiques of qualitative research, because qualitative research does not

follow a certain chain of strict standard procedures. Qualitative research makes it difficult to

understand the reasoning behind certain methodological decisions, such as researchers’ choice of

participants and focus areas, leaving this type of research often criticized for being too subjective

(Bell et al. 2022). LeCompte and Goetz (1982 cited in Bell et al. 2022) also note the need to reach

internal reliability by focusing on whether the researchers of the study have the same opinion on what

is being observed. They also emphasize the need to meet internal validity criteria to ensure a strong

connection between observations and the theories that emerge from them. Nevertheless, they

emphasize that qualitative research tends to provide strong internal validity, as researchers spend a

considerable amount of time interacting with the social life of the participants. Furthermore,

LeCompte and Goetz (1982 cited in Bell et al. 2022) point out that, given that qualitative research

often includes focusing on case studies and relatively small samples of participants, it can be difficult

to achieve external validity criteria, which refers to the possibility to generalize the findings of the

study across different social contexts.

Taking into account the understanding of reliability and validity in qualitative research, as well as the

existing criticism of it, the study will employ triangulation to ensure the validity and reliability of its

findings. The setting of this thesis required a collaborative work of two students, i.e., investigators,

enabling investigator triangulation. The investigator triangulation ensured that all the obtained

findings were cross-checked, and that different viewpoints were included in the generation of the final

results (Denzin, 1978 cited in Carter et al. 2014).

While the methodology was designed to enhance the reliability and validity of the research findings,

certain limitations remain. One limitation is the sample size, since having a relatively small sample

size (9 participants) may limit a broader generalisation of the findings. Moreover, the study focuses on

Scandinavia and Brazil, which have distinct cultural and socio-economic environments. While this

comparison provides valuable insights into differences in managerial practices across these two

regions, it does not account for the similarities and differences in managerial strategies used in other

regions. Another limitation of conducting qualitative research is that the obtained findings may not be

transferable even within the exact same context if another study occurs at a different point in time

(Lincoln & Guba, 1985 cited in Bell et al. 2022). Despite these limitations, the study’s qualitative

design allowed for an in-depth exploration of the research question, offering valuable insights into the

managers’ personal perspectives towards the issue of balancing sustainability and profitability in the

context of a born-sustainable company.

2.5 Usage of Generative AI tools

It is important to note that an AI-based tool, namely ChatGPT, was utilized during the process of

writing this thesis. However, its use in the scope of this research was limited to requesting feedback

on grammar, spelling, wording, and the structure of the written text. Thus, the researchers remain the

only authors of this research in the sense that all the text, ideas, analysis, discussions, conclusions, and

recommendations were produced by the authors only. The AI-based tool was used only for the

purpose of improving the text that the authors had written.

3. Literature Review

This literature review explores the most relevant literature given the research questions and purpose of

the study. In order to later analyse the strategies and decision-making processes used by managers in

fashion SMEs that were born sustainable, as well as how they navigate and balance the tension

between sustainability and profitability, we interpret this to be a conflict between the interests of

stakeholders and shareholders, especially in the different cultural contexts of Brazil and Scandinavia.

3.1 Constructionist Approach

To ground this analysis, a constructionist approach is used as this study’s theoretical foundation.

Constructionism acts as an ontological and epistemological perspective in which social phenomena

such as culture, sustainability, profitability, and strategy are seen as dynamic and constructed through

social interactions. This perspective allows for a better understanding of managerial reasoning by

acknowledging how individuals and organisations are constantly and actively shaping and rebuilding

the meanings and practices behind their decisions.

According to Berger & Luckmann (1966), the main argument in a constructionism framework, also

referred to as constructivism, is that social phenomena and their multiple meanings are actually

constantly created and transformed by human action, instead of being defined by objective truths.

That means that, in this ontological stance, “organisation” and “culture” are socially constructed

entities that exist and are made real because of human activities and the meaning individuals attach to

them. This challenges the traditional view that suggests those categories as external realities

encountered by individuals and independent of their actions or perceptions (Berger & Luckmann,

1966).

The core of constructionism defends that social phenomena, including cultural approaches, are

produced by social actors and their interactions, but are also constantly modified, rather than being

fixed or pre-existing entities. Gergen (1999) argues that this approach defends the idea that

organisations, culture, and any social structure are in fact the result of continuous human interaction,

and never immutable or objective. In that sense, actions, interpretations, and understandings of the

individuals construct and revise social phenomena repeatedly. This implies that this reality is not

predetermined but persistently reshaped through social practices (Hackings, 1999).

Recently, constructionism has also been referred to as a phenomenon that can also be made real by the

research process itself. By conducting the research and engaging in the study of social phenomena, the

researchers are also involved in a process of actively assigning meanings to the object of study, and

therefore constructing reality, even when the meanings they present should be seen as one aspect of

reality rather than something absolute and definite. It is important to note that knowledge, in that

regard, is indeterminate and can be seen as subjective (Bell et al. 2022). The researcher’s perspective

is thus essential when outlining the understanding of the phenomena being studied.

For this study, it's important to outline the contributions of constructionism regarding culture.

According to this approach, culture cannot be seen as a fixed or external force that constrains and

controls individuals, because it is actually an emergent process that is continuously evolving and

changing through the interactions of social actors (Becker, 1982). In that sense, culture is an active

process of construction and deconstruction and not something that people adapt to or inherit passively.

This interpretation is important because it gives a more mutable and dynamic understanding of culture

and recognises it as a force that is under constant transformation.

A constructionist approach emphasises the construction process of social phenomena, but also

acknowledges that categories, such as culture, possess a certain persistence and precede the

involvement of individuals, meaning that it is pre-existent to their engagement and continues to shape

their perspectives given the context they are inserted into (Swidler, 1986). While individuals are

active actors in negotiating and reconstructing reality and culture through their interactions, it is also

shaped by the experiences, practices, and meanings established by those who came before them

(Swidler, 1986). Therefore, culture is a dynamic reference point that is always in the process of being

formed and reformed through individual and collective actions (Bell et al. 2022).

The constructionist framework will be utilised in this study because it offers a good approach to

understanding how social phenomena and categories, such as culture and organisations, are formed

and how they develop over time. It establishes that those are not static phenomena, but instead

continuously being altered and transformed by human interaction. The importance of individuals’

actions and the subjective nature of knowledge described in constructionism provide a good

perspective while analysing the dynamic and volatile nature of social phenomena. In that sense, it is

possible to interpret how culture and human interactions shape managerial strategies while balancing

sustainability and profitability, their approach and acceptance of those principles, and how cultural

context impacts their perception of reality.

3.2 Culture

Through the lens of this constructionist approach, in which reality is socially constructed, this

sub-section defines and elaborates the concept of culture as a crucial element that shapes and reshapes

the way both individuals and organisations experience and interpret the world. When it comes to

managerial strategy, culture is important to define what is legitimate and relevant, and also how

situations and problems, principles, and values are framed, addressed, and incorporated. Therefore,

culture here is interpreted as a dynamic system of meanings, symbols, and values, and this perspective

allows for a study of cross-country variations in how sustainability and profitability are perceived and

prioritised.

Within a constructionist framework, culture is defined as a system of meaning, values, and practices

that are socially constructed and in constant development, rather than a fixed set of attributes and

traditions. Gienow-Hecht (2003) interprets the concept of culture as a process that shapes and is

shaped by different actors and their conscious behaviour, influencing how they perceive themselves

and others across national boundaries. These cultural formations, therefore, exist beyond geographical

or political division lines, and they emphasise the importance of interpreting culture as a cross-border

and fluid phenomenon.

In comparative management, understanding the concept of culture is important to explain how the

practices of both managers and employees differ across countries (Haire et al. 1966). The literature

presents two important perspectives, the macro, which examines the relation between the culture and

organizational structures, and the micro, which aims to compare how managers act in diverging

cultures (Everett et al. 1982). Culture, however, has an important role in defining and influencing the

behavior inside an organization (Smircich, 1983), as it is seen what holds and ties the organisation

together through the expression or shared values, beliefs and moral frameworks that provide meaning

to human behavior (Depkat, 2003; Louis, 1980; Siehl & Martin, 1981).

Culture, then, consists of shared symbols, narratives, beliefs, and customs; it guides the way

individuals and societies interpret and engage with the world and each other. Based on Wendt’s (1999)

approach to constructivism, culture is fundamental to the construction of reality from an

intersubjective perspective, as it not only shapes interests, identities, and actions but is also

continually reshaped through interactions among agents. In that sense, in order to compare cultures

across countries, it is necessary to analyse in which way the elements that are part of the culture are

constructed, maintained, and negotiated, rather than simply identifying differences in practices or

norms.

According to Jahn (2003), this view is reinforced by the argument that cultural meanings and symbols

are an essential part of how states and institutions are formed and operate, as they are constituted by

and constitutive of cultural systems. This suggests that international actors, such as countries, operate

within culturally situated contexts rather than in neutral environments. Their decisions, perceptions,

and strategies are determined by logics that are shaped by the culture, which makes it a key

component in cross-national comparison and understanding.

Constructivist theories integrate cognitive, reflective, and interpretive perspectives on culture, which

allow for the combination of beliefs, identities, and symbolic structures to be a part of the analysis of

social phenomena (Depkat, 2003). In cross-country studies, to associate culture with static variables is

a simplification that cannot be made; rather, it must be interpreted as relational and interpretive

because it is constantly transforming through interaction. In that sense, culture can also be interpreted

as the reflection of unconscious structures, because it is a way to express unconscious psychological

processes, and therefore organising individuals’ thoughts and behaviours (Rossi, 1974). Through this

perspective, the study of organisations as a social phenomenon can make use of culture as an

epistemological tool (Smircich, 1983). Therefore, both culture and organisations are not independent,

but the result of human interactions in the form of shared language, symbols, myths, and rituals,

which are constantly generated and redefined by individuals’ actions (Smircich, 1983).

For the purposes of this research, culture is understood as a system of meanings that is socially

constructed and consists of values, beliefs, practices, and symbols that shape the way individuals,

states, and societies interpret the world. Culture, as well as managerial strategies and concepts such as

sustainability and profitability, are constructed in social processes permeated by values, language, and

context. This definition will be useful to generate a comparison of the aforementioned countries

because what one society interprets as sustainable or profitable is different from another, as these

concepts are very dependent on the cultural context.

3.3 Sustainability

Since cultural contexts are capable of defining the way individuals and institutions interpret complex

issues, they also influence how they perceive and act on sustainability matters. Especially in the

fashion industry, as the adoption of sustainable measures can be both ingrained in core principles or a

strategic decision, and the meaning of what is considered sustainable or ethically responsible changes

according to cultural and organisational contexts. Therefore, it is important to conceptualise

sustainability through a perspective that takes both social processes and cultural backgrounds into

consideration, in order to identify the values, principles, conflicts, and tensions that permeate

managerial decisions. This action will then uncover how sustainability is interpreted across different

contexts, both theoretical and practical, with an emphasis on the fashion industry.

Sustainability can be defined as a multidimensional and developing concept, even though it was

initially constituted as part of global efforts to handle the conflicts between environmental constraints

and social development. In that sense, it aims to guarantee that human needs are met while it is

preserving the planet’s life-support system (WCED, 1987; IUCN et al., 1991). Nevertheless, it is

important to understand that sustainability is a normative ideal, and not merely an objective or

analytical condition. It is the idealisation that balances interaction between economy, society, and

environment, ethically justified and accepted by the sciences (Spangenberg, 2011).

Sustainable science was defined by Kates et al. (2001) as a research field that is interdisciplinary and

problem-oriented, and is concerned with comprehending the interactions that happen between humans

and the environment. Therefore, this field is characterised by a time-critical situation, geographical

diversity, and complex causality, especially considering recent events such as climate change and

globalisation. Discussing sustainability is an effort that requires the use of systems thinking, long-term

planning, and engagement from different stakeholders, such as civil society and field professionals

(Funtowicz & Ravetz, 1993; Jerneck et al., 2010). However, trade-offs between stakeholder interests

cannot be avoided, and because of that, the solutions found by sustainable science must be based on

dialogue and negotiation, and should not expect beneficial outcomes for all parties (Spangenberg,

2011; Kates et al., 2001).

Sustainability science also addresses, with a critical view, the traditional models that are based on

reductionist mentality, by emphasizing knowledge integration that goes beyond a disciplinary

approach, and recognises the importance of practical experience, cultural values, and social systems in

reaching sustainable results (Ascher, 2007; Jerneck et al., 2010). Sustainability then becomes a

concept that is permeated by culture and is ethically oriented, which allows many interpretations

depending on power dynamics, local contexts, and institutional arrangements (Martens, 2007).

When it comes to the fashion industry, sustainability as a concept was controversial and pluralistic,

and was influenced by differences in culture, professionals, and ethical approaches. Thomas (2020)

interprets sustainability in fashion in the context of different "cultures of sustainability", defined by

contrasts in practices and interpretations that come from the divergence in the work roles, personal

ethics, and social affiliations of industry participants.

According to Thomas (2020), after the conduction of ethnographic interviews in Portland, San

Francisco and London, there is a disparity in the two most prominent groups in the fashion industry:

business managers, that have a tendency to see sustainability through the lens of resource efficiency,

corporate accountability, and incremental innovation, in the sense that sustainability is composed by

the measures, reports, and system optimisation, and that it must be aligned with profitability goals,

what we will refer to as “performance-driven sustainability”; and designers, to whom sustainability is

attached to practices that involve craft, local production, and durability, both in an aesthetic sense and

emotionally, referred to as “emotionally rooted sustainability” in the scope of this analysis. For them,

hands-on engagement with materials is essential, and they put great importance on slow, small-scale

and a personal interpretation of fashion-making processes.

In that sense, those contrasting views reveal other, and much deeper, debates between a transformative

view of sustainability and those who defend that sustainable efforts should also be based on efficiency

(Fletcher & Grose, 2012). Those differences in perception cannot be easily bridged only through

coordination, because they are embedded in professional perceptions, lifestyle commitments, and

people’s approaches to ethics and success. Therefore, without effective and sufficient regulation or

common standards, the fashion industry will continue to be permeated by different views on

sustainability efforts. In addition, there is a moral and semantic ambiguity in the definition of what is

or is not sustainable because of branding, marketing, and consumer expectations (Beard, 2008;

Curwen et al., 2013).

As a result, sustainability in fashion is a field that allows room for negotiation, as it is shaped by the

cultural context in which it is embedded, the dynamics of the workplace, and the values present within

its environment. This view thus suggests that sustainability science does not have a single solution,

but rather that all true effective actions must take into consideration conflict, pluralism, and the

complexity of the world (Kates et al., 2001; Spangenberg, 2011).

3.4 Profitability

Sustainability is an increasing concern in the current reality that companies face, acting as a guiding

principle for businesses. However, another important concept for the survival of a business in

competitive markets is profitability. Those two important elements face, many times, an important

trade-off, and it is essential for managers to navigate and reach a balance between the two, with

strategies that are heavily shaped by cultural and organisational context. Profitability, then, should be

seen as more than a financial aspect and the main goal of a business, but rather as a more nuanced

element that must also consider long-term performance, stakeholder value creation, and ethical

matters. Even though the term "success" in the world of business is often associated with high

financial gains, in a socially constructed reality, what individuals and organisations consider as

“successful” varies significantly, depending on different logics, value systems, and cultural

characteristics.

Conventionally, the concept of profitability is measured and determined through quantitative metrics

in financial outcomes such as net income, return on assets, and operating margins (Penman, 2012;

Horngren et al., 2013), and is described as the main indicator of performance and success of a firm in

classical business models. However, when it comes to the sustainable fashion industry, it is important

to understand profitability in broader and more values-based terms.

The concept of value proposition was created in the conventional view of service management

research, in which services are produced simultaneously by the providers and the customers. In that

sense, value propositions are reciprocal communicative acts and they are present in dynamic networks

(Ballantyne et al., 2011). The stakeholders that interact in those networks are active in different ways

(Frow & Payne, 2011), and the propositions they exchange depend on how they interpret future and

past service interactions (Flint & Mentzer, 2006; Kowalkowski et al., 2012). Value propositions are

then integrated in social environments that determine what is considered to have positive or negative

traits (Chandler & Vargo, 2011). It is in the best interest of an organisation to make several value

propositions depending on the context of the situation to target the different regimes of value

(Hultman & Ek, 2011; Muniesa, 2011).

Drawing from Appadurai’s (1986) interpretation of value, Corvellec and Hultman (2014) argue that

service providers should explore the politics of value that are strategically beneficial for them while

acknowledging that the value propositions are diverse, instead of trying to unify them and adopt

propositions that deny this diversity. Following a constructionist approach, value is defined as socially

constructed through interactions (Ford & Mouzas, 2013), and this social construction occurs prior to,

during, and after those interactions (Peñaloza & Venkatesh, 2006). The cultural and symbolic system

in which value is embedded defines what is meaningful or desirable, and it is collective and

intersubjective (Edvardsson et al., 2011; Graeber, 2005). Value, then, results from situated judgments

and from people’s interpretation of worth and purpose and how they assign meaning to their action

(Frow, 2007; Corvellec & Risberg, 2007).

Different regimes of value have different value definitions, and they operate in different evaluative

frameworks (Boltanski & Thévenot, 2006; Frow, 1995), what makes value an incommensurable

concept that allows organisations to adjust and adapt their propositions to what is necessary in the

moment (Corvellec & Hultman, 2014). This means acknowledging the existence of different

perspectives from stakeholders and how their forces affect the outcome depending on the involvement

of those stakeholders to create a politics of value propositions (Corvellec & Hultman, 2014).

Profitability, then, cannot be determined exclusively by the financial return of a company for small

and medium-sized firms, but rather if the firm can survive and succeed as a business, without

compromising its ethical and environmental values (Sarokin & Bocken, 2024). In that sense, it is not

an option to seek rapid turnover or growth, and the company’s strategies must focus on quality,

consumer loyalty, and longevity, aligning with sustainability efforts. In a study of slow fashion SMEs

based in the UK, Sarokin and Bocken (2024) could identify five elements that contribute to their

profitability: the products, which must be “right” – able to connect and provoke emotional reactions

on the customers in order to incentivise them to purchase less frequently, with design, construction

and function, and that includes consistent aesthetic style, not following trends, high quality and

durable productions, along with a fair price, because well made products make the customer willing to

spend more, and versatility, products that can be easily styled and combined, but not multifunctional

products that do not follow the traditional non-modular format; a slower development of collections,

with less releases permanent styles sold indefinitely, to reduce the development and market costs;

small or on demand production, called fit-for-purpose, that reduce waste and inventory, along with

expertise from different stakeholders, both internally and externally, to avoid errors, and vertical

integration in the supply chain to increase efficiency; and lastly, product services and support, such as

repair and customisation, resales and rent, in order to invest and foster the relationship with the

customer.

This non-traditional definition of profitability, thus, is aligned with the concept of sufficiency

economy (Piboolsravut, 2004), which employs three main components: moderation, reasonableness,

and requirement, and promotes sustainability through the notions of knowledge and morality by

requiring planning and implementation, as well as honesty and integrity to achieve a balanced and

sustainable environment. Profit, in that sense, is not seen as the main goal but rather as a way to

maintain a business that is driven by a purpose such as the development of sustainable fashion

companies.

3.5 Micro, Small, and Medium-Sized Businesses

The trade-off between sustainability and profitability is emphasised even more in the context of

SMEs, because contrary to large, established organisations, SMEs possess less resources and

bargaining power but, on the other hand, have more strategic flexibility, and they also are more

closely tied and guided by their principles, values and relation to cultural contexts. Because of that,

they are also more responsive to stakeholder expectations, and societal standards and demand. This

subsection then explores the official definitions of SMEs, depending on the geographical location and

context, and how their size, structure, and relation to culture relate to the managerial strategies. It is

important to understand the context in which SMEs exist in order to then analyse how they

implement, adapt, and emphasise sustainability strategies, while maintaining financial health, across

different countries.

In order to perform a cross-country comparative research, it is essential to understand what constitutes

a small or medium-sized enterprise (SME), especially when it comes to an industry such as fashion,

where the size of the firm has an impact on their access to resources, innovation capabilities, and

sustainability strategies. The classification for SMEs is different for every country, because the criteria

vary in terms of turnover, number of employees, sectoral context, among other categories.

According to the European Commission (2003), one of the most accepted sources for the definition of

SMEs categorises them according to the number of employees and the annual turnover or balance

sheet total. In that sense, a microentreprise possesses fewer than 10 employees and a turnover or

balance sheet total is not more than €2 million. Additionally, a small enterprise presents less than 50

employees and a turnover or balance sheet total not exceeding €10 million. A medium-sized

enterprise has fewer than 250 people, and its turnover is less than €50 million or a balance sheet total

below €43 million. Those definitions are used in EU members and also in international development

programs with the aim to ensure that SME policy and funding are consistent and comparable

(European Commission, 2003). In that sense, they are important for this study because, in the

European fashion industry, over 90% of fashion companies employ less 50 people, being categorised

as a small enterprise, what makes them extremely important in innovation and sustainability change

initiatives because of the flexibility in their operations and local embeddedness (European

Commission, 2019).

In Sweden, on the other hand, those definitions are operationalised and simplified by only considering

the number of employees. In that sense, microenterprises have less than 10 employees, small

enterprises have between 10 and 49 employees, and medium-sized companies have 50-199

employees. Because of the structure of the Swedish industrial landscape, businesses consider

medium-sized enterprises as having a maximum of 200 employees (Pankotay, 2020). By focusing

solely on the number of employees, it facilitates classification in data collection and policy support,

essential in sectors that are heavy in creative labour like the fashion industry.

The Brazilian definitions diverge from the European ones; they are operationalised by an institution

called Simples Nacional, for tax regime, and vary according to the industry sector. Those definitions

include both annual gross revenue and the number of employees. Microenterprises must have a

maximum of 9 employees in commerce and services, with an annual revenue up to BRL 360,000

(€54,508.677). Small enterprises have 10-49 employees in services and an annual revenue of a

maximum of BRL 4.8 million (€726,132.21). Medium enterprises are composed of up to 249

employees and BRL 90 million in annual turnover (€1,362,687.18) (OECD, 2020). In Brazil, there is

an emphasis on simplifying taxation to encourage industry and the formalization of the informal

workforce, and those definitions are a reflection of that, since the fashion industry in Brazil is

composed mainly of informal and micro-entrepreneurs, at the margin of those categories (BNDES,

2014).

Osterwalder and Pigneur (2010, p.14) define the concept of business model as “the rationale of how

an organization creates, delivers, and captures value”, and a model composed by nine different

elements that shape this environment, those being: customer segments, value propositions, channels

through which the value propositions reach customers, customer relationship, revenue streams, key

resources, activities and partnerships. For sustainable fashion SMEs, a business model is essential

because it shapes the strategies that should be used in decision-making and how sustainability will be

integrated into the way the companies create value, in a way that balances environmental

responsibility with financial return. According to Teece (2010, p.172), “It thus reflects management’s

hypothesis about what customers want, how they want it, and how the enterprise can organize to best

meet those needs, get paid for doing so, and make a profit". The products offered must align more and

more with what the customer needs and wants, and that includes not only the final result but also the

entire production process, including sourcing and distribution (Teece, 2010; Bocken et al., 2014).

3.6 Managerial Strategies

In order to understand more thoroughly how SMEs balance the tension between sustainability and

profitability, it is important to understand and analyse how their main managerial strategies are

formed and the logic behind the prioritisation of certain aspects over others. It is common that

strategies get formed and adapt organically and are embedded in values-driven decisions, especially in

dynamic environments and industries like fashion. It is important, then, to conceptualise and discuss

how literature presents strategy, especially when it comes to the importance of cultural context and

stakeholder expectations existing in SMEs that have sustainability as a core principle. Managerial

strategies, then, are shaped and influenced by the values and meanings constructed in an organisation,

considering the cultural and social context in which it operates.

The term strategy as a concept can vary in meaning and application inside management literature,

especially when applied to categories that have a broad spectrum, for example, from large

multinational corporations to small, sustainability-oriented fashion enterprises. In that sense, strategy

does not only refer to market competition but also managing trade-offs between ethics and profit.

Mintzberg et al. (1998), contrary to classical models that describe strategic planning, argue that small

and medium-sized firms focused on entrepreneurship tend to follow a strategy that is emergent and

incremental, that changes over time, instead of a pre-established and deliberate strategy. Strategy is

seen in this context as actions that follow a pattern, but are developed from their learnings,

improvisations of the leaders, and how they respond to a volatile and unpredictable environment. It is

more important, then, to have a perspective and vision, associated with the imaginary and the sense of

direction the company should take instead of a detailed plan.

Strategy can also be defined as "the direction and scope of an organization over the long term, which

gains an advantage in a dynamic environment through its configuration of resources and competencies

intending to meet stakeholder expectations" (Johnson et al 2009, p.22). For Grant (2018), an

organization is competitive and has an advantage when it is capable of creating a unique value in a

market or industry where only a few competitors follow similar patterns.

When it comes to SMEs, particularly the fashion companies that operate under sustainability

guidelines, the capacity to adapt and respond to an unpredictable environment is vital. Because of

their size and independence, these shifts occur quickly, as the organization is structured as an

adhocracy, an organic structure that is flexible, loose, and self-renewing, primarily held together by

lateral connections (Bolman & Deal, 2013). This structure is particularly responsive to changes in

consumer preferences, environmental regulations, and cultural trends. (Parrish, 2010; Thomas, 2020).

And this is seen as a competitive advantage when compared to larger companies, which are often

constrained by bureaucratic inertia and standardised systems, organised in a divisionalized structure

(Chaston & Sadler-Smith, 2012; Bolman & Deal, 2013).

In sustainable small and medium-sized enterprises, decision-making is heavily based on the values of

the company, and those are the primary guidelines for managerial strategy. Parrish (2010) argues that

entrepreneurs who follow sustainability guidelines frequently create unique strategies to balance the

conflicts between the generation of profit and their ethical and sustainable goals; and the logic is

usually to adopt a mix between economic objectives and environmental and social responsibilities

(Doherty et al. 2014). The managerial strategies, when it comes to sustainably-born SMEs, focus less

on market positioning and more on addressing external costs that harm society and the environment,

investing in innovation and pushing sustainability standards even further, keeping an alignment with

their stakeholders and organising their resources to meet sustainability requirements (Hockerts &

Wüstenhagen, 2010). In the case of sustainable companies, this mentality is included in searching for

ethical suppliers, designing long-lasting products, investing in a transparent and ethical

communication with society, and cultivating loyalty in the customers, fostering a close relationship

with them .

According to Porter’s Five Forces Framework (1980), it is important to take into consideration the

impact of external forces in the competitive scenario within an industry. The Five Forces defined by

Porter (1980) are the threat of new entrants, the bargaining power of suppliers, the bargaining power

of buyers, the threat of substitutes, and the industry rivalry among existing competitors. Those forces

are responsible for defining the potential for profitability as well as the competitive advantage an

industry possesses. For sustainable fashion SMEs, in the context of this study, those forces are of great

importance when it comes to balancing financial health with sustainability, especially when it comes

to factors such as regulations around environmental practices and standards, and responsible and

ethical sourcing, which can act as challenges to start or maintain a business; consumer demand for

more sustainable potions and constant changes in what is trending can result in an increase of the

bargaining power of buyers. Therefore, it is necessary to understand and take into consideration those

external forces in order to implement a more efficient decision-making process, as well as better

strategies that amplify the opportunities while also reducing the threats in this dynamic industry

(Porter, 1980).

Because this study explores how to create a balance between profitability and sustainability, how

managers interpret and navigate this balance is in itself a strategy issue. There is a strategic trade-off,

therefore, between short-term profit and rapid growth and long-term equity, following sustainability

standards and protecting authenticity (Pache & Santos, 2013). In that sense, sustainable fashion SMEs

are guided by practices, principles, and reasons when it comes to being compatible, and not only by

market planning and positioning, because they have what is described by Thomas (2020) as “cultures

of sustainability”.

Considering this, strategy in this master’s thesis is understood as an organization’s ability to navigate

a dynamic environment by aligning its resources with its core values and objectives. In the case of

sustainability-oriented SMEs, strategy involves making rational decisions to balance profit with

sustainable goals. These companies prioritize innovation and sustainability, often operating within an

organic structure that allows them to adapt quickly to market changes, consumer preferences, and

regulatory shifts. Their strategic actions, thus, aim to create long-term value while staying true to their

sustainability principles.

3.7 Marketing Perspective: Targeting, Consumer Behavior, and Product

Development

According to Berger and Luckmann (1966), reality is socially constructed by the interaction between

actors, those being individuals and organizations, and language and communication play an important

part in that process. When it comes to sustainable fashion, there are many concepts and elements

being constructed simultaneously, according to the actions and decisions of those companies. A

consumer who is concerned about environmental issues is one of those elements, as their perceptions

are continuously being shaped by the organisational and cultural contexts, as well as the image the

companies built for themselves and present to the public (Joy et al. 2012). Sustainable fashion SMEs

are constantly using tools such as branding, social media, and storytelling to create an identity that

represents their products and values in line with what they want customers to see and how they should

behave (Keller, 2019).

Fashion brands, thus, make use of marketing campaigns and specific phrasing in socially constructing

their image and the type of consumer they target, emphasising ethical practices and conscious

consumption. Ballantyne et al. (2011) argue that value propositions are created in communicative and

dynamic networks, social settings, and that can influence how products are perceived, produced and

consumed. Born-sustainable fashion SMEs must then adapt their market strategies according to how

sustainability is viewed and valued by specific cultural contexts.

Following a constructionist approach, understanding consumer behaviour can be interpreted as a way

to create meaning behind their actions, choices, and thoughts, and those are influenced by different

backgrounds, social interactions, individual specificities, and culture. This scenario shapes what the

consumer’s identity or profile is, and their values, preferences, and purchase behaviours (Fournier,

1998). Joy et al. (2012) argue that sustainable consumption is often a combination of personal

principles and social responsibility and belonging, and customers understand that unethical

consumption feeds the industry and large production. In that sense, it is important that sustainable

fashion SMEs understand that their actions also influence consumer behaviour, along with social

values and communication. Cultural characteristics, as well as society, do not only influence but also

validate the consumer’s identity and purchase decisions.

Product development can also be seen through a constructionist approach, as there is a co-creation of

the products that happens through the interaction of companies and customers (Payne et al. 2007). It is

a constant negotiation and interactive process between producers and consumers that shapes what is

offered or not, in a way that the customers are active participants who help shape the meanings and

importance of what is produced based on their purchasing habits (Payne et al. 2007). According to

Niinimäki (2013), products that are part of sustainable fashion chains involve not only concepts of

profitability but also cultural contexts and how they deal with sustainability, ethics, and style. It is

necessary, then, to be constantly adapting product development processes to attend to customers’

needs and desires, taking trends and current demands into consideration, as it also involves changes in

the market and cultural shifts.

3.8 Stakeholder and Shareholder Theories

Finally, to comprehend the logic behind managerial decision-making and what objectives guide them,

it is necessary to understand the stakeholder and shareholder theories, which explore contrasting

views on the main purpose of an organisation, as well as what defines a firm as successful. While

stakeholder theory prioritises ethical responsibilities guided by what society demands, shareholder

theory emphasises the need to generate financial return for stockholders. Those theories, when applied

in different cultural contexts, allow for interpretation and analysis of the most important tensions

present in the trade-off between sustainability and profitability in SMEs and how the managerial

decisions reflect the core principles and values that guide those companies.

When understanding business ethics, sustainability, and strategic decision-making, the Stakeholder

Theory is essential. Freeman (1984) initially described the concept of stakeholder as “any group or

individual who can affect, or is affected by, the achievement of a corporation’s purpose” (p.46).

Freeman (1984) argues that by adopting this perspective, managers can better define how a

corporation should achieve its goals by following a strategic plan, and that the success of a firm

depends not only on generating profit for shareholders but also on how it creates value for the

stakeholders. In management literature, this theory has evolved and been justified because of the

accuracy of its description, normative validity, and institutional power, and it argues that different,

relevant stakeholders and their considerations should also be included in the business strategy

(Donaldson & Preston, 1995). The descriptive aspect refers to specific corporate characteristics and

behaviours, and the instrumental perspective finds connections, or the lack of them, between

stakeholders and traditional objectives in corporations, and concludes that following stakeholder

principles and values leads to improved performance and competitive advantage. Lastly, the

normative view refers to the moral and philosophical guidelines in operations that respect

stakeholders’ interests (Donaldson & Preston, 1995).

According to Freeman et al. (2010), a comparison with competitors’ value chain could create a

competitive advantage, and Porter and Kramer (2006) argue that this can be achieved through

corporate social responsibility and sustainability. Within this view, business means companies

competing with each other for an advantage, and the Stakeholder theory is one strategy because it

questions how to redefine, redescribe and reinterpret the interests of stakeholder to at the same time

satisfy them and create value for the company. The Stakeholder theory, thus, is no longer exclusively

about following ethics and sustainability matters but also a managerial tool that allows firms to

combine both stakeholders’ and stockholders’ interests, balancing responsibilities, legitimacy, and

purpose with profit generation through collaborative processes that result in mutual benefit.

(Freeman et al. 2010). This theory includes the degree to which stakeholders are prioritised by the

managers, called stakeholder salience, based on the power, legitimacy, and urgency they possess as

those attributes identify their classes (Mitchell et al. 1997).

In companies that are sustainability-driven, especially in businesses such as slow fashion that have

alternative and specific logics, the Stakeholder theory can be used as a tool to understand and analyse

how ethical and sustainability values affect decision-making and managerial strategies. In that sense,

long-term prosperity and ethical decisions are a fundamental part of this broader definition of success,

because it embraces the idea that to maximise profit it is also necessary to offer good products or

services that align with customers needs, and foster a good relationship with suppliers. It is important

to inspire employees to believe in the company’s values and missions and help it flourish and also a

community that supports and engages with the business, and all of those components are part of the

stakeholder network (Freeman et al. 2010).

Contrary to the Stakeholder theory, one of the main proponents of the Shareholder theory is Milton

Friedman, stating that the purpose of the business is to generate profit as long as it adheres to law and

ethical guidelines, and stakeholder interests are not related to social responsibility, but to capitalism

instead (Friedman, 1962; 1970). Friedman (1962) separates a business from social concerns and

argues that only individuals can have responsibilities, but not businesses, as he interprets those to be

an “artificial person”, and argues that when a business person directs corporate resources or makes

decisions based on attending to social responsibilities, it may result in increased prices for the

customer, reducing competitiveness, destabilising the market and generating less return for the

stockholders. For Friedman (1962), a businessman should act as an agent who serves the interests of

his employer, nominally the stockholders.

Other scholars such as Milgrom & Roberts (1992) also contributed to the Shareholder theory, by

defending that by maximising the value for the shareholder, it would lead to more economic

efficiency. They argue that ownership gives a right to residual control, which is the right to make

decisions in the company outside of legal limitations, and this combined with residual return, which

means profits, tied to the same person or group, the shareholders, would reduce issues like shirking

and free-rider problem by making decision-making more efficient as the main objective would be

generating more returns for themselves (Milgrom & Roberts, 1992).

However, it is important to point out that one single approach, being either shareholder or stakeholder

support, can lead to significant and negative results, especially by ignoring the interests of

stakeholders’, including employees, consumers, and the environment. Jackson (2011) argues that it is

necessary to combine both stakeholder and shareholder theory, in which the shareholders make

decisions or propose strategies based on wider stakeholder interest, promoting stakeholder

representation and protection, since the current reality still benefits shareholders over stakeholders.

Shareholder theory focuses on economic efficiency by generating profit and establishing a clear and

centralised goal for the company, however, it fails to sufficiently consider sustainability, ethical

obligations, and social responsibility, which are included in stakeholders’ interests. This conflict is

relevant because investments and regulatory frameworks are becoming consistently more strict, and

environmental, social, and governance (ESG) are increasingly more important, making it necessary to

allocate resources towards those causes.

4. Theoretical Framework

Figure 3: Theoretical framework developed by the authors

This study is conducted through a constructionist perspective, in which social phenomena cannot be

seen as objective or fixed, but rather as something constantly shaped and reshaped through human

interaction and meaning-making (Berger & Luckmann, 1966; Gergen, 1999). In that sense, all

meanings, identities, and practices must be interpreted as dynamic and in a continuous state of

construction. Following this perspective, it is possible to understand key concepts such as strategy,

profitability, culture, and sustainability as processes that are constantly being constructed and

interpreted in different ways because they depend on the context they are inserted into, the actors

involved, and the interactions they have.

Within this perspective, the core focus of this framework will be around value creation, and what can

be defined and interpreted as value. There are two opposing theoretical paradigms that permeate the

debate of how and for whom value should be generated. The Stakeholder Theory, first defined by

Freeman et al. (2010), defends that there are a high number of actors affected by a business, and for

this reason it is important that the creation of value attends the interests of the highest number of

actors as possible, guaranteeing that a firm is both financially healthy and ethically responsible. The

Shareholder Theory, on the other hand, argues that the only value a business must create is directed

towards the stockholders, because social responsibilities belong to individuals and not firms,

considering that those already operate within legal boundaries (Friedman, 1962).

Pache and Santos (2013) describe managerial strategy as an emergent and adaptive process that

changes according to the trade-offs the company faces to achieve its evolving and long-term goals.

For this thesis, the most important trade-off identified is between profitability and sustainability, what

we interpret to be corresponding to the stakeholder and shareholder theory, and therefore how to find

a balance between the creation of value within those two perspectives. In this logic, sustainability is

shaped by contextual values and dependent on how different actors perceive what it means to act

sustainably (Spangenberg, 2011; Beard, 2008). Profitability is deeply related to the purpose and

perception individuals have, and it can include several different traits, such as remaining loyal to their

values and principles, surviving as a company, or the creation of long-term value for society, attending

to stakeholders’ interests (Sarokin & Bocken, 2024). Those interpretations and definitions are heavily

dependent upon how certain cultural contexts structure value creation and proposition, and the

interactions that generate and legitimise them.

By adopting this constructionist lens, this study aims to understand how born-sustainable SMEs build

meaning around their strategies and how they interpret sustainability and profitability. This allows us

to understand how those constructed meanings can influence their practices and decision-making

processes across different countries and cultural contexts.

5. Findings and Analysis

This section presents the key findings from the qualitative interviews conducted with born-sustainable

fashion SMEs that operate in Scandinavia and Brazil. The purpose of the study was to understand how

these companies manage to balance sustainability and profitability, what strategies they use to

integrate sustainability into business operations, and how regional and cultural contexts shape their

approaches. The findings were organised according to second-order codes, based on the patterns and

insights collected from the interviews. It includes direct quotes from participants to exemplify each

theme and provide authenticity to the analysis.

The analysis is guided by three research questions and organised according to third-order codes, the

themes generated by us in relation to the literature. The research questions are as follows: the first

aims to understand the role of regional and cultural context of Scandinavia and Brazil in the

development of appropriate managerial strategies; the second addresses the challenges that managers

in born-sustainable fashion SMEs face when trying to balance sustainability and profitability in

practice (RQ2); the third investigates how effective managerial strategies can be developed to

maintain sustainability in business operations while ensuring financial viability (RQ3). By following

this structure, this section connects the empirical data with the theoretical framework previously

presented, in order to understand and analyse how born-sustainable fashion SMEs are able to address

strategic tensions and market demands while maintaining their core values based on sustainability.

5.1 Findings

Figure 4: Findings corresponding to the aggregate dimension “Culture”

5.1.1 Internal Culture

When it comes to regional differences, the data showed that companies rarely discuss how operating

within a specific cultural context influences the internal values of their teams. Only one company

reported that Scandinavian values were put at the center of the philosophy of the company by its

Scandinavian founders. The remaining influence of cultural context was mostly evident from the way

companies respond to the specificities of their customers.

5.1.2 External culture

The data revealed that different factors affected what aspects companies take into account with respect

to regional specificities of their geographical location. Since Brazilian companies were the ones that

were mainly operating in the local market, the data showed that there is a need to adapt to differences

within the country itself. This means that, given that Brazil is a big country, it is important to consider

huge differences among the regions inside the same country (Interviewee G), highlighting that even

within the same country, the strategy might need to be adapted for a different set of customers. The

size of the country was also mentioned as an important factor in understanding the extent to which

small sustainable brands can have an impact on increasing awareness towards sustainable fashion

(Interviewee J). The data from Brazil also showed that they are aware that if they decide to sell

outside Brazil, they will need to adapt their strategies again, even though they consider sustainability

to be a universal value. Another interesting factor was the difference in the demand coming from

different genders in Brazil, while Scandinavian companies did not report the gender to be important in

regard to product demand. Interviewee G stated that the initial idea for the brand was to make

masculine clothes, however, they noted that “the market is female”. They mentioned that after

switching to the production of feminine clothes, their market position got stronger. Thus, one

important factor in the Brazilian market might be the different demands coming from different

genders. Moreover, the responses also revealed that the Brazilian market might be skeptical about

buying clothes that are made from waste (Interviewee I). The responses also noted that Brazil “doesn’t

recognize fashion as an important economic force” (Interviewee J).

Scandinavian companies, on the contrary, have reported operating in a Scandinavian context to be a

great advantage. Interviewee A and Interviewee C reported a close connection between the

Scandinavian concept, Scandinavian design, and the idea of sustainability. The responses show that

the Scandinavian values of the region help attract foreign consumers. Thus, companies benefit from

the positive image associated with the region. Interviewee A, however, noted that some markets are

drawn to their products specifically because the brand is European, viewing this as an additional

attractive factor. Since Scandinavian companies were selling their products internationally, they also

found it important to adapt to the needs of a broader scope of consumers, not only their Scandinavian

customers. It was also observed that consumers in Scandinavia were perceived as relying on their

government to ensure sustainability practices are being followed by the industries inside their

countries, and therefore feel less individual responsibility to make responsible choices themselves

(Interviewee B). Interviewee D from Scandinavia reported that culture indeed affects the willingness

of consumers to buy sustainable products.

Figure 5: Findings corresponding to the aggregate dimension “Sustainability”

5.1.3 Staying Loyal to Sustainability Values

When it comes to sustainability matters, companies have different perceptions on how to stay loyal to

their ethical values. Some companies state that it is important not to incentivise consumerism. For

example, in the case of Interviewee A, they don’t participate in promotions such as Black Friday or

offer deals of “buy 1, take 2”, and that shows their commitment to not increasing unnecessary

consumerism at the expense of their revenue. Interviewee F believes that it’s better to invest in

building a good relationship with clients instead of pushing for “reckless consumption”. Other

important aspects are about respecting both production limits and the time of sustainable production

(Interviewee B; Interviewee F; Interviewee G). In that sense, Interviewee B stated that “I mean, there

are certain threshold of production level that you don’t want to reach because then it just becomes

unsustainable anyway, so you still need to manage it”, and how it is not in their values to pressure the

producers because they are aware of how long it takes to produce sustainably. Another important

aspect is that sustainability is embedded throughout the whole process because it’s part of the core

values of the company, what can be seen in Interviewee I’s statement: “But sustainability needs to be

at the core of all production, of all product creation, and of life itself”. Interviewee F is aligned with

this vision, in a way that producing sustainably is the only option in their vision: “So when I thought,

okay, let’s go and develop the brand’s processes, like I said, everything is very natural for me. And so

I don’t – people see my brand as a sustainable brand, but I don’t say that, I just do things”.

5.1.4 Contextualising Sustainability Metrics

According to the results, there are different ways to measure the sustainability impacts and goals, and

mainly, this depends on both the metrics adopted and on the regional situation, and how it serves to

avoid the possibility of greenwashing, which is very common in Brazilian companies, as described by

them. The most recurring answer was avoiding negative impact on the planet (Interviewee A;

Interviewee G; Interviewee H). However, some Interviewees presented more clear and defined

strategies, such as Interviewee I, who said, “So, today, regarding waste, I try to quantify it. For

example, I try to measure how much weight or mass of waste I’ve transformed over a certain period

… So my quantitative metric today is by weight, and my qualitative metric for goal achievement has

to do with, for example, generating income for the people who work with me”, contributing not only

for environmental concerns but also social. Another way companies measure impact is through carbon

footprint and following ESGs (Interviewee A; Interviewee B). Interviewee A states that the company

started with a differentiation strategy but understood the importance of causing a measurable impact:

“So the company won because they felt after running a lot of companies and selling them off, that

they have to do something on the impact driven and ESG goal driven stuff, which you can see on our

website, which are the ESG goal we are focusing also”. Whereas Interviewee F focuses on strong

partnerships that ensure the achievement of sustainable goals: “we’ve matured processes and created

stronger partnerships to ensure that our sustainability goals become more real and measurable”.

Interviewee I argues that “To give you an idea, since I work with sustainability, I need to be very

vocal about it. I think sustainability also requires transparency”, an idea that is corroborated by

specialist opinion on the matter. In that sense, Interviewee D stated that “It’s hard to get actually, we

don’t have any data to measure it now ... So it will be a fully transparent value chain in less like, let’s

say, six to eight years, it will be fully transparent. And then you can measure greenhouse gasses,

pesticides, water consumption, logistic impacts, so that will actually create the data to make it

measurable”, suggesting that currently there’s no sufficient measure to prove actual sustainable

actions or companies.

5.1.5 Internal Sustainability Perception

It is necessary to take into consideration the different perceptions people have of sustainability inside

the companies. Once again, the most common answer was the motivation to not cause harm and help

the planet (Interviewee A; Interviewee F; Interviewee J). However, other concerns were also brought

up. Interviewee H stated that there’s only so much small companies can do, and the real responsibility

and bigger actions should come from bigger fashion brands, with strategies such as generating less

waste that deteriorates quicker, and products that don’t harm the soil and water. Other companies

defend the idea of degrowth, and how the real solution is to reduce as much as possible the production

and consumption, and resignify the use of clothes (Interviewee I; Interviewee D). That can be seen in

the answers of Interviewee D: “a part of the thing that you have too many clothes in your wardrobe,

for instance, to guide the consumers to actually recirculate your garments or sell it to other you know,

there’s a lot of ideas around this end of life, or usage of the user phase, so so much” and Interviewee I

“I believe the solution lies in economic degrowth, especially for large industries if they truly want to

think about sustainability.”. Another important opinion is that sustainability must be embedded in

every aspect of the production chain, as brought up by Interviewees F and G: “Because when you

think about sustainability, you also think about yourself and the environment. You think about the

whole, right? You can’t just think about the clothes themselves” (Interviewee G).

5.1.6 Economic Benefit of Sustainability

When referring to the economic benefits of sustainable choices, the overall answer was that many

sustainable choices actually help the company save money. Specifically, Interviewees B and F,

respectively, stated that “it’s hard to know if we saved money. For example, all of our offices and

stores, they’re powered by renewable energy. So that for sure has saved us money, especially now that

the electricity prices have gone up so much. So we’ve saved money there.” and “A practical example

was our choice for timeless designs and durable fabrics. This reduces the turnover of collections and

encourages more responsible consumption, which, in addition to being sustainable, is also financially

smart in the long term.”, showing that some decisions, when it comes to both the structure and the

fabrics chosen, can in fact reduce the costs of production.

Figure 6: Findings corresponding to the aggregate dimension “Profit”

5.1.7 Increasing Sales

The responses also demonstrated that companies follow different strategies when it comes to

increasing their sales for better profits. Some companies find it important to focus on expanding

visibility, accessibility (including selling abroad), and the variety of their products, favoring growth

strategies. One of the issues is that customers simply do not know where to buy these sustainable

products (Interviewee A), meaning companies need to think of ways to make their products widely

available. Interviewee A claims that one way to do it is to start selling on more platforms, even if

these platforms do not satisfy the sustainability standards the company is following. While companies

like Interviewee A try to expand the range of their products, others like Interviewee B mention that

they are unable to do so, and therefore work on analyzing which products perform well to focus on

selling more of these products. In contrast to these companies that focus on expansion, some

companies focus on customer retention. As Interviewee G put it, “I think everything we build, with all

these conversations that go beyond clothing, that really builds loyalty with our clients.” Interviewee F

also highlighted that they focus on gaining trust from their customers, ensuring that customers return

to build their entire wardrobe from the clothes sold at their company.

5.1.8 Profit Expectations

Overall, the responses show that companies were prepared to face the financial difficulties of pursuing

a sustainable path due to having initial modest expectations of future profits. For example,

Interviewee A stated that generating huge profits “was never part of the idea.” Respondents stated

they did not expect to have huge profits; they expected to make just enough profits to keep themselves

alive in the market. Interviewee A emphasized that “I’m not saying they want to make an example of

profit like Apple or Google”, referring to founders of the company, but at the same time they say that

they expect to get profitable, “because, of course, they are not here to do charity, right?”. It was also

noted that there is a belief that profitability will eventually follow as a result of the values the

companies have and the strategically developed sustainability of their operations (Interviewee I;

Interviewee B). Nevertheless, Interviewee D asserted that there is a limit to how much small

sustainable fashion brands can make in profit. One company stood out in this discussion about the

profit expectations, highlighting that they expect to be able to offer a competitive price despite the

limitations of being a born-sustainable SME, stating that “because also, it would be no use for me to

launch a new brand that’s sustainable, but that also didn’t have a competitive price, right?”.

Figure 7: Findings corresponding to the aggregate dimension “Organizational Structure and Brand

Identity”

5.1.9 Origin and Vision

When describing how they came to the idea of working in the fashion industry and focusing on

sustainability, Brazilian companies mentioned that they either came from a peripheral background,

where resources were scarce, or from families where connection to earth was strongly established

(Interviewee F; Interviewee G; Interviewee H; Interviewee I). For example, Interviewee G explained:

“Back then, we had less access, I come from a peripheral family, so with many difficulties. So, I

always wore clothes from other people since my childhood, right?”. So, the data shows that the

conditions in which these people grew up, especially conditions that led them to practice lifestyles that

required cautious use of scarce resources, played a significant role for Brazilian context in shaping

their values and attitudes towards business creation.

In terms of how companies saw their initial goals, apart from the fact that the idea was to create

sustainable clothes, differed among them. The three main visionaries could be classified as focusing

on certain types of clothing to be produced (Interviewee B; Interviewee G; Interviewee C), letting the

business grow from a hobby (Interviewee H), and bringing something different to the market

(Interviewee A; Interviewee F; Interviewee I). In terms of pursuing the initial plan, Interviewee G

mentioned that they had to adjust the direction because they did not find the necessary demand: “So, it

was a desire to make it masculine, but the market is female”.

5.1.10 Staff Engagement in Strategy

The data shows that when it comes to the way the idea of sustainability is being spread throughout the

company, companies differ in the extent to which general staff are aware of the importance of

pursuing sustainability and adjusting the strategies accordingly. Some companies reported that

knowledge and awareness about sustainability matters are spread out inside the company and that

each employee has an opportunity to share their ideas and contribute to appropriate strategy

development (Interviewee A; Interviewee B; Interviewee F; Interviewee G). These companies find it

important that all employees are informed about the motivations behind the operations of the company

to be able to engage all staff in the strategy development and execution. For example, Interviewee B

said, “So you have to make sure everyone understands what it is, how we do it, and how they can

participate in the mission.” However, responses also showed differences in the extent to which final

decision-making involved employees’ opinions. While some companies mention that they make

decisions collaboratively (Interviewee B; Interviewee F), other companies reported that final decisions

are made by top management (Interviewee C; Interviewee A). For example, when interviewed, the

representative from Interviewee A shared that they do not agree with the decisions that top

management made for the development of the company: “My founder wants to build the company

more faster, maybe, but that is not the right way to do it”. Some companies reported that the

knowledge about sustainability matters is mostly concentrated among the top management. For

instance, Interviewee C said that “so, so I’m 100% in control of those things. The factory only makes

what I tell them to make”, showing that, being the only person possessing necessary knowledge, the

manager is the one making all the decisions.

5.1.11 Business Outlook

The responses also demonstrated that they have different attitudes towards the future of both their

companies and the market overall. When it comes to the market of sustainable fashion, Interviewee A,

Interviewee F, and Interviewee H demonstrate a strong positive attitude towards the opportunities

present in the market, believing that demand will increase in the future. Interviewees believe that the

sustainable market is growing not only in their regions but also around the world (Interviewee A;

Interviewee F), highlighting the scale of the market. As Interviewee A put it, “So there is a potential

and opportunity also, I would say, for sustainable fashion, very, very much in the market.”

However, some companies show more skepticism towards the ability of the market to provide

necessary demand. For example, Interviewee B noted that it is sustainable companies that need to

adapt to the demand, saying that “I’m not sure you can become a market leader solely based on the

fact that you’re producing more sustainably, because people are still buying clothes, and they’re

buying the brand for what it represents”. This represents the view that the sufficient demand for

sustainable products is not yet in place. Some companies agree with this point, but they see the

potential in the improvement of the situation (Interviewee I; Interviewee J). Only one response was

relatively more pessimistic towards the situation in the market, pointing to the fact that the majority of

the born-sustainable companies closed due to not being able to make sufficient products (Interviewee

G).

Among the responses, there prevails an optimistic attitude towards the company’s long-term success.

Companies either demonstrated strong belief in their business, had a more neutral but optimistic tone,

or did not comment on this point at all. This positive attitude was evident both in companies that

reported being in a good financial situation (Interviewee B; Interviewee F) and in companies that are

not yet producing sufficient profits (Interviewee A). Thus, some companies have a strong belief in

their projects even when their financial situation is not very stable at the moment. Other companies

demonstrated a more reserved attitude towards the company’s future, pointing to the fact that they still

face a lot of challenges and need to make certain improvements (Interviewee J; Interviewee G;

Interviewee H; Interviewee C). Nevertheless, all companies believe that with the needed effort, their

business can achieve financial stability in the long-run.

5.1.12 Company Size

Since the companies under study are SMEs, they mentioned how the size of the company plays a role

in certain aspects of their operations. Firstly, companies mention that due to the small size of the

company, there are certain limits to the production capacities. This happens either because there is not

enough stuff to increase the production volumes (Interviewee H; Interviewee I), or because the size of

the company does not allow for having a large stock and sales (Interviewee A; Interviewee B).

Interviewee B also mentioned that being a small company makes it difficult to arrange certain deals

with suppliers. They say “So if you’re a bigger brand, maybe you have a bit more leverage to try to

convince but also train the factories that you work with to switch to better materials, for example, and

then financially, it can make sense for the factory to do so if you’re a big client, but we don’t have that

luxury.”. The size of the company was also described as a disadvantage by a Brazilian company in

terms of not being able to attract shareholders (Interviewee G). Interviewee G also highlighted that

this is the issue that prevails throughout the country: “We don’t have, I think this is a big reality in

Brazil, not only for us, I think mainly for smaller brands, we don’t have investors.”

Nevertheless, the small size of the company was also reported to be a positive side of the organization.

Company size was highlighted to be beneficial by Interviewee F in the sense that it allows for easier

and more efficient communication within the team.

5.1.13 Brand Positioning

Investing in brand identity was identified to be crucial by the participants. Some companies reported

that their brand identity is not yet strong enough to have a competitive position in the market

(Interviewee A; Interviewee B; Interviewee H). The implication of this was mentioned by Interviewee

A, who said that “So our activewear did not work very well, because our price point is almost near to

Lululemon, and we are not Lululemon, and in terms of brand image and perception, people don’t

purchase from us, we made this amazing shoe”. Weak brand image harms these companies in a way

that consumers prefer to buy clothes from more recognized brands if the price is the same, pointing to

the importance of brand popularity among consumers. Interviewee I also highlighted that they need to

work not only on clothes produced but also on image and content creation. Some companies,

however, claim that they have already built a strong brand identity (Interviewee F; Interviewee G).

Interviewee F claims that their consumers are well aware of the quality and commitment to

sustainability of their products, making it an important point for their consumers to choose their

brand.

The data shows that companies find it essential to invest more in marketing, even though they

consider the investment to be costly. For example, Interviewee B stated that marketing is one of the

biggest expenses of the company. The responses also demonstrate that marketing is seen to be vital in

delivering the message to consumers about the quality of their product and the importance of

supporting sustainably produced goods. Interviewee J stated that “Not everyone understands what it

means for something to be well-made or fair. Is it possible? Yes, it is. But branding is key.”. However,

there is also a struggle in understanding what the right marketing strategy is. Interviewee A mentioned

that focusing on social media did not bring them the desired results, so they are actively searching for

new means of communicating the brand identity to potential customers.

Figure 8: Findings corresponding to the aggregate dimension “Supply Chain and Product”

5.1.14 Production Capacity and Stock

Another finding was that born-sustainable fashion SMEs face the issue of production limits. These

limits were found to be imposed on them for two different reasons: sustainability considerations and

scalability issues. For example, Interviewee A stated that “because, if you’re making a sustainable

product, you cannot produce like a bulk”. This means that companies cannot increase their profits just

through producing more, because they found ethical considerations to come against the idea to

increase production volumes, calling such volumes “unsustainable” (Interviewee B) or “too much for

a brand that wants to be responsible” (Interviewee G). However, the data also indicated that these

production limitations come from the simple inability to scale up, especially while maintaining

structural consistency in the products, due to the specific characteristics of sustainable production

(Interviewee I; Interviewee J). Interviewee I mentioned the issue of replicating the same products in

big quantities since waste materials are used in the production of the clothes.

The way companies approach production also differs in terms of whether they produce their products

in advance or on demand. In general, the tendency is that companies find it vital to have some ready

products in stock in some minimum quantities. Interviewee B says it is important to produce products

of timeless design to have them in inventory, so that their design can be adapted a little bit to be able

to sell them later. They also said that sometimes, when they have to work B to B, they need to sell

their products a long time in advance, meaning they always have stock. Nevertheless, one strategy

visible from the data is to produce these unique sustainable products on demand, securing only a

minimum space for some stock (Interviewee G).

5.1.15 Production Strategies

The data shows that one of the important aspects that born-sustainable fashion SMEs adopt to ensure

they stay sustainable while also maintaining financial stability is related to the way they choose to

organize their production. One way of strategically planning the production is to think of what

material will be used. Interviewee A and Interviewee B say that they focus on buying the type of raw

material that could be used in the production of a wide range of products. Interviewee B emphasized

that “So we had to buy more fabric, and then you have to be very strategic to you buy the fabric, but

you don’t dye it, maybe, so you can reuse it for future seasons”, highlighting that the minimum

amount of changes should be made to the bought raw materials to ensure they can be used again in the

long-run. Another strategy evident from the data is to use scarce resources or incorporate waste

materials. Interviewee G highlighted the importance of buying raw materials that are not in high

demand in the market by saying that “because if I can get a raw material at a better price, I can make

this clothing more competitive in the market”, demonstrating that producing from leftover materials is

not only sustainable but also financially attractive strategy.

Another important aspect to consider in the supply chain was found to be the decision to focus on

making the production process itself more sustainable. Interviewee B claims that producing at

factories that use renewable energy can also be a contributing factor to reduced costs in production, in

addition to being an environmentally conscious strategy. Interviewee D also highlighted the need to

integrate the questions of sustainability throughout the departments to ensure maximum commitment

to sustainable production. They stated that “that means that the design department will actually have

to talk to all the other departments more closely now, because the designer will choose the material

based on sustainability and repairability and problematics, otherwise the brand will pay so that will be

costly to have, like the department not talking to each other”.

Finally, the data shows that determining the type of products to be produced is also crucial. Producing

basic products was found to be efficient in terms of getting wider acceptance from consumers

(Interviewee H) or in terms of ease of finding the suppliers who would provide necessary materials

(Interviewee B). However, Interviewee H also found it to be crucial to first focus on raw materials the

company wants to include in the production, and only then to think about what products to produce

from these materials.

5.1.16 Creative Direction

Regarding their approach to decision-making around which products to produce, companies talked

about how they respond to trends, decide on the design, and establish what qualities to focus on.

Concerning the trends, two different viewpoints were observed. Some companies stated that they

focus on producing timeless designs that are not particular to any specific trends. For example,

Interviewee F highlighted the fact that allowing yourself to work outside the frames of the ongoing

trends leads to financial benefits, stating that “timeless designs and durable fabrics...which, in addition

to being sustainable, is also financially smart in the long term.” However, other companies

demonstrated greater concern with the need to follow the trends. Interviewee H emphasized that

“there’s no way you’re not contaminated, I don’t research trends, but nowadays there’s no way you

don’t know.” This points to the fact that even if companies do not intend to follow those trends, they

get influenced by the content they consume, for example, on social media (Interviewee H). In

connection with this observation, it was noted that companies tend to adopt corresponding designs.

Interviewee A also mentioned that they view the minimalistic nature of the Scandinavian design to be

an advantage, explaining that it has sustainability at its core. While it was noted that companies focus

on timeless design to make sure their products remain relevant, Interviewee I stated that “it’s a very

special product, but not always viable for every consumer or business.”, highlighting that sustainable

fashion design might not be suitable for a wider audience. When it comes to quality, the data shows

that companies find it important to produce clothes that last long, pointing to the focus on

discouraging their consumers from replacing clothes often. However, it was also found that

introducing sustainability to the production process can result in high-quality products that might not

always be comfortable to wear. Interviewee C mentioned that the leather they use in the production

might be hard to wear, but they highlighted that they are not willing to sacrifice the quality of the

material due to sustainability concerns.

5.1.17 Exporting

Two regions under the study revealed different patterns in terms of their exporting decisions.

Scandinavian companies operate globally, expanding their market reach far beyond the country of

origin of the business. Interviewee A explained the decision by stating that they believe there are a lot

of consumers around the world who are interested in buying sustainable products. In contrast to

companies from Sweden and Denmark, Brazilian companies tend to operate within the geographical

borders of their country. The reasons behind this decision were the sufficiency of the number of local

consumers and the simple inability to afford to expand internationally. Interviewee G explained their

decision to stay in Brazil by saying that “I already have a large production, of course, so I can serve

differently within Brazil itself”. Interviewee I, on the other hand, stated that going internationally can

not be financially viable due to the need to scale production, which is costly. So, both reasons reveal

the fact that Brazilian companies perceive the volumes of production they have now as being the limit

of what they want or can currently sustain. However, overall, the companies reported interest in

considering exporting their products in the long run.

Figure 9: Findings corresponding to the aggregate dimension “External Forces and Consumer”

5.1.18 Financial Environment

The data shows that some born-sustainable fashion SMEs are in need of external financial support.

Companies from both Scandinavia and Brazil reported that they are searching for investors, but from

the voice of Brazilian companies, it was more evident that there is a great struggle to find investors

who would be ready to financially support these small brands. For example, Interviewee G stated that

“we don’t have, I think this is a big reality in Brazil, not only for us, I think mainly for smaller brands,

we don’t have investors”. It was noted by Interviewee A that the difficulty arises in incentivizing the

external investors to offer financial support. Therefore, one observation was that there might be an

issue of a lack of belief that there is an opportunity in developing a sustainable fashion business.

However, one company found the question of the financial stability of the business not that

concerning, claiming that sustainability and financial stability are not aspects that come into conflict

with each other (Interviewee F). Another Brazilian company also reported the pressure that is coming

from tax policies, highlighting the intensity of the problem by stating that “the amount of taxes they

have to pay makes things extremely difficult”.

5.1.19 Compliance Standards

Even though Interviewee D claimed that there are a lot of strict laws and regulations that strictly

penalize unacceptable behaviors, and there are some regulations that complicate processes for these

born-sustainable fashion SMEs, the data shows that, overall, companies do not find it very

challenging to comply with the regulatory standards. The companies highlight that they have already

adapted to a range of sustainability standards, which puts them in a better position to adhere to strict

industry norms. Interviewee B and Interviewee F even reported treating these standards as guidelines

for identifying in which direction they should develop. Some companies reported that they would like

to see more changes in the regulations to work in favor of their business and the industry. For

example, Interviewee G stated that cultural incentive laws would help a lot in providing support for

the companies operating in the fashion industry, pointing to the fact that, recently, there were changes

that started to include fashion in the context of cultural aspects that need to be supported by

regulations. Nevertheless, the data shows that there is also skepticism towards how much such

regulations are going to help the businesses (Interviewee A). Company J also reported that regulatory

changes in Brazil aimed at supporting the fashion industry are progressing too slowly, stating that

“they end up delaying these issues a lot here in Brazil”.

The data indicated that using waste materials in the production demands extra effort and careful

consideration regarding their proper treatment. As Interviewee I put it: “There’s also the pressure from

dealing with waste itself.”. They mention that since they include waste as the material used in clothes

production, they need to work on identifying how to record these materials according to legal and

financial standards.

5.1.20 Public Perception

The data revealed that, in the Brazilian context, some companies struggle to deal with the criticism

from the media and the public in general. CompaIntervieweeny I reported that small sustainable

companies that participate in such big fashion events like São Paulo Fashion Week receive a lot of

criticism in the media for not operating in the same manner as big industries. The company

commented that the media unfairly judges small brands, expecting them to behave according to what

is seen in large industries. Interviewee J also commented on social pressure small sustainable brands

receive locally, stating that “popular pressure is also a very complex issue here in Brazil, because

again, we’re talking about a huge country, with many inequalities, many social issues.”. Thus, the data

shows that the Brazilian context is not yet fully supportive of the born-sustainable fashion brands,

partly due to the social context.

5.1.21 Consumer Perception

An important element in this analysis was the perception customers have of the companies and of the

values they represent, because that directly impacts how much they are willing to spend on their

products. Interviewee F says price is not an issue for them because they focus on building trust with

their customers, which leads them to be willing to spend more as they are investing in quality and

awareness. Interviewee A, on the other hand, stated that consumers say “we are ready to pay

additional money for the sustainable, impact-driven product, but when it comes to the reality, they are

not doing it as much as they are committing to it.”. In line with this observation, Interviewee C argues

that, as a brand, you must be aware of what your target audience is willing to spend and work within

those limits, adjusting your production to reach the right clients, even if it limits your target. There is

also a divergence between answers, when Interviewee D states that scandinavian countries are a good

option when it comes to running a sustainable business, because those values are embedded in the

customer and that makes customers more willing to pay, Interviewee A says that it is not what they

observe in reality, as “I would say Scandinavian countries, particularly, more they are saying that they

want to support this, but when it’s come out to take out the money from their wallet, it’s not matching

the number, it’s matching better than Asia”, showing that different brands can present different

perspectives in the same matter, even though they are inserted in the same context.

The lack of trust, or the search for status, is another impactful element. Interviewee B stated that “if

you don’t have a very strong brand identity, maybe people would rather buy something else that has a

logo that is recognizable for the status of it, really.”, which suggests that while the companies try to

build a good relationship with clients and legitimize their work, the fact that brand name still have

importance, and that many people are untrustful of the brands processes is still a big challenge

(Interviewee A; Interviewee B; Interviewee G; Interviewee I).

5.1.22 Education of Consumer

Education of customers was another theme often discussed by the companies interviewed. Among the

answers, it highlighted the need for transparency, not only to prevent greenwashing but also to build

trust in the brand and create a network of loyal customers, as Interviewee G argues “Because I take

care of the raw material, I take care of this relationship with my client. Because it’s an education of

the client to understand the quality that my clothes have”. Many people, even those with a high

purchasing power, choose not to buy from sustainable brands because they have enough knowledge or

are prejudiced against the pieces. In the perspective of Interviewee I, the clients need to “avoid

prejudices – like the idea that clothes made from waste are somehow inferior, or that secondhand

clothes, like those sold in thrift shops, aren’t valuable.” Another important argument was that, in order

to educate customers about sustainability values and therefore foster the consumption of responsible

and ethical products, for example, Interviewee A stated that “Of course, this is a challenge where you

have to educate the customer, or you have to provide more choices on sustainable fashion, and

because you have to help them to live a conscious life and conscious living.”. Therefore, it is

necessary to have more options of sustainable fashion that can also attend to different customers’

needs but also desires, as company I argues: “No one buys out of pity – you might do it once, but

eventually you want what’s beautiful, what everyone is wearing. Traditional and fast fashion brands

work with this instant desire, right? And it’s completely irrational, it’s entirely emotional. And fashion

is emotion, fashion is not reason.”. Companies also presented the idea that consumer behaviours will

change, both as they gain more knowledge about sustainable causes and the importance of this

movement, but also because ultrafast fashion will get more expensive and take them closer to the

price level of sustainable products, as defended by Interviewee D.

5.1.23 Client relations

A common pattern observed was having clients as guidelines and using their feedback to improve

strategies or decisions around productions (Interviewee B; Interviewee F; Interviewee I). For example,

Interviewee B stated that “It allows us to see a bit, okay, these are the things that consumers and, yeah,

stakeholders in general, are talking about now. So it gives us a bit guidelines for what to focus on with

the strategy” and Interviewee F complemented this mentally by emphasizing the importance of the

clients “I’m grateful because they provide us with a guiding line: our customers are our most valuable

asset, and their feedback is seen as a drive to improve more and more”. In addition, Interviewees G

and H highlight that they try to build a close relationship with the clients to foster trust and loyalty.

Interviewee G described their creative and productive process as very personalised and bonding: “We

create an experience with the client that goes way beyond just buying a piece of clothing, right? So,

they need to come to the studio, they need to take measurements.”. Interviewee H described their

relation with clients in a way that shows the peculiarities of their work, as well as their adaptation

process: "And then, I started understanding this. As I was there day-to-day with the clients. They said,

ah. Tried on the pants. Wow, I love the pocket on your pants. Because it fits the phone, it fits the

wallet. So, these are things you hear. And I kept. I was adapting my product to this listening."

Figure 10: Findings corresponding to the aggregate dimension “Business Model as an Advantage or a

Disadvantage”

5.1.24 Building Trust by Having a Strong Purpose

Born-sustainable fashion SMEs perceive themselves to be the companies that stand out because they

have a strong purpose when it comes to sustainability, a commitment communicated from the very

establishment of the business. Interviewee A described their viewpoint saying, “I see this as an

advantage because, see if you’re doing like a regular thing, because, first of all, as a brand, as a

company, you need a story, you need a reason. You need a purpose”. When the company

communicates this purpose of promoting sustainable fashion from the very beginning, they find it

easier to gain trust from the public. They perceive it as an effective signal that says the company is not

trying to fit an environmentally-cautious society but is the one building and shaping it (Interviewee F;

Interviewee C; Interviewee J). These companies say that companies that adapt to sustainability

practices later on have difficulties gaining trust from consumers and proving that they are not just

greenwashing. For example, Interviewee C says that “it’s difficult to do it after, I think, and it’s also

not that trustworthy because you think that this is maybe something you add because you want to be

correct, not because you are sustainable”.

5.1.25 Cost Anticipation

Early commitment to sustainability was found to give the companies the privilege of adapting to the

high costs of sustainable production quite early in the process. Realizing that they would have high

costs, Interviewees B, C, and G said they knew from the very beginning what their margins would

look like, which gave them the leverage to include these costs in the price right away, with no need to

adapt their prices later on. For example, Interviewee B said that they see this as an advantage because

“you know what your margins are going to be, you know what the prices are going to be, and you

don’t have to later on, if you started maybe with conventional fabrics or materials, you don’t have to

cut your margin or increase the price later on if you need to switch”. Anticipating that their costs are

going to be high, some companies also researched how they can organize their production processes

to reduce their costs. Interviewees B, G, and I reported adjusting their production processes through

introducing alternative means of generating energy, searching for materials that are underused in the

market, and using defective and waste materials. Interviewee B highlighted the benefits they got from

adopting alternative sources of energy, saying, “So that for sure, has saved us money, especially now

that the electricity prices have gone up so much”. The approach of Interviewee G, who said that “so,

for example, the first raw materials I researched fabrics that were idle in the market, right? So, I

would take the raw material that was there because it was at a better price”, which demonstrates that

they incorporated such an approach from the very beginning of their operations which ensured they

get materials at better prices. So, companies develop different strategies to prepare for the upcoming

costs, but this early consideration of the ways needed to cut costs puts them in better shape to produce

sustainably and avoid experiencing shock from the high costs later.

5.1.26 Regulation Compliance

The data shows that being born-sustainable gives the companies leverage in the sense that they are

already adapted to a range of strict sustainability standards. Interviewee B described it as “We don’t

know exactly what they (regulations) are going to be, but we know that we’ve already done a bit of

work with that”. This shows that even though born-sustainable companies also still operate in the

landscape of uncertainty about future regulations, they have already adjusted to a lot of standards that

they anticipate will help them more easily and quickly adapt to new environmental regulations.

Interviewee F mentioned they see regulations more as a guideline that shows them in which way to

develop, highlighting that this is just a path they paved for themselves. So, even though adhering to

certain regulations requires certain adaptation, efforts, and costs, born-sustainable SMEs have the

advantage of having a considerable amount of work already done in this direction.

5.1.27 Cost and Pricing Constraints

The data shows that although born-sustainable companies’ business models were initially adapted to

high costs of production, these costs still pose a constraint. Most of the companies point to the fact

that the material used in the production of these clothes costs comparably more than the material used

in fast fashion, which makes it difficult to compete with traditional companies (Interviewee A,

Interviewee B; Interviewee F; Interviewee G). Company A also points out that the increased costs

come from the fact that being a born-sustainable SME imposes production limits, meaning that these

companies cannot benefit from the economies of scale. However, not all companies found this to be a

major constraint. Although Interviewee B mentioned sourcing materials from certified suppliers is

costly, they claim that it is possible to decrease costs by focusing on such approaches as buying

recycled material, which they claim has lower costs. The claims of Interviewees F and C support the

position of Interviewee B, with Interviewee F pointing out that it is all a matter of “making a fair and

disciplined calculation of costs, and everything flows smoothly”. Thus, it can be seen as a

responsibility of the businesses themselves to make sure the costs they incur do not become a limiting

factor, highlighting the need to take cautious steps in determining costs early and building strategies to

minimize unnecessary expenses. The responses also indicated that high costs lead to high prices of

finished goods, making it difficult to compete with traditional fashion companies and reducing the

range of the customers who would be willing to buy the product for such a price (Interviewee A;

Interviewee B; Interviewee G; Interviewee C; Interviewee I). Company B pointed out that it makes it

difficult to be able to create highly sustainable products, stating that “achieving 98% sustainability, we

are not able to sell those one in a higher level because, of course, the price was high”. Company I

agrees, saying that the products they produce have a higher value, but do not necessarily have

consumers who will be able to afford them.

5.1.28 Supplier Relations

One of the factors that companies were found to be heavily reliant on was supplier relations. As these

companies need to source specific materials that satisfy the requirements of sustainable production,

companies have to be selective with suppliers. For example, Interviewee F noted that “We assess the

impact of each material and look for suppliers who can prove their sustainable origins”. The data

shows that most of the companies do not have enough bargaining power when it comes to their

relationships with suppliers, due to a limited number of appropriate agents (Interviewee A;

Interviewee B; Interviewee F; Interviewee J). This lack of bargaining power also leads to increased

prices for the products, as the suppliers use their position to charge more for the raw materials they

offer (Interviewee B). However, responses of Interviewees A and J demonstrated a more opportunistic

viewpoint on their relations with the suppliers, Interviewee J stating that “we already have more

things being offered in the market”. SMEs can also benefit from the fact that sometimes suppliers

have leftover material in small quantities, which big fashion companies are not interested in buying

(Interviewee A). Despite this optimism, the data shows that a limited number of suitable suppliers is

one of the major constraints for more profitable deals.

5.1.29 Specifics of the Business Model

Some responses revealed a viewpoint that the business models based on the idea of slow fashion are

simply not built to be successful in the conditions of the current market (Interviewees J and D).

Interviewee D explains that “the infrastructure of the production is based on mass production”.

Whenever a born-sustainable SME decides to produce certain products, it faces the problem of the

need to order a certain minimum quantity of the product to secure a partnership with a manufacturer

(Interviewee D). The challenge for these SMEs is that they take on a risk by agreeing to pay for this

minimum quantity, because they cannot be sure that the whole stock will be sold (Interviewee D). So,

the way the market is working currently is not favoring the business models of slow fashion

(Interviewee J).

Figure 11: Findings corresponding to the aggregate dimension “Trade-offs”

5.1.30 Sacrificing Profitability

The data shows that being a born-sustainable company means that companies have to forgo some

potential financial earnings in order to stay loyal to their core sustainability values. The most common

aspects of profitability that companies tend to sacrifice to adhere to the sustainability idea are

targeting a smaller market due to higher prices of finished sustainable products, accepting restrictive

terms of sales channels, limiting stock and sales to preserve ethical production, and prioritizing brand

differentiation even when it results in lower public acceptance. For example, Interviewee A stated that

“if you charge premium, then you cannot sell to everyone, because everyone cannot afford your

product also”, meaning that companies understand that they cannot charge prices that give a high

margin on top of the production costs, because otherwise they will not be able to attract enough

consumers. Thus, these companies accept that they are going to have high costs and decide to keep

low margins, sacrificing the opportunity to make higher profits. Even with low margins, the prices are

still high due to high production costs. The companies reported that they still decide to focus on

sustainable production, despite knowing that they will only be able to sell their products to a small

audience or not be able to sell at all in some cases (Interviewee A; Interviewee B; Interviewee C).

Born-sustainable SMEs also focus on small production and sales (Interviewee B; Interviewee G;

Interviewee H). The data shows they limit their production capacities in order to keep the production

under ethical considerations (Interviewee B; Interviewee G). Interviewee G stated that “I think it’s

about finding this balance of a slow quantity that doesn’t hurt your production process, the industry,

and everything, but keeps you healthy for survival and the reality of market competitiveness too”.

Hence, their choice of quantity is focused on producing quantities only large enough to ensure they

stay financially viable and not on producing more to secure more profits. Agreeing to channel terms

also poses another challenge to these SMEs, because they have to agree to the specific conditions of

these channels that turn out to hurt profitability. If SMEs want to be able to sell on marketplaces, they

have to agree to conditions such as free shipping and free returns (Interviewee A), which lets them

make sustainable products more easily accessible but adds extra costs, eventually reducing the profits.

Interviewee B stated that they do not agree to paying for returns, because it is not sustainable to

encourage increased numbers of shipments so that consumers can just get to try on clothes. However,

this could potentially discourage potential buyers from buying the products if they know that the

brand is not willing to pay for the cost of returns.

5.1.31 Sacrificing Sustainability

Being born-sustainable means that sometimes these companies face financial difficulties. To ensure

the business stays alive and increases its profits for future development and expansion, they decide to

temporarily sacrifice their loyalty to sustainability values. Interviewee A, Interviewee B, Interviewee

C, Interviewee H, Interviewee J, and Interviewee D acknowledged that even though their businesses

are built around a commitment to sustainability, they have to agree to some non-sustainable practices

on some occasions. Interviewee H claimed that, especially if the company wants to grow as a

business, it will “detach from a lot of things you believed and did in the beginning”. Interviewee B

reported the following: “We’ve had to pause our carbon footprint calculations as well for financial

reasons”, showing that when it comes to the question of being financially able to survive, one solution

is to stop certain sustainability-motivated practices until the company can regain its financial strength.

Interviewee A and Interviewee C agreed to collaborate with other companies that do not emphasize

sustainability as much as they do. Interviewee A explained such a decision by stating that there exists

an issue of consumers not knowing where to buy sustainable fashion products, implying that the only

way to solve this was to agree to sell their products on non-sustainable platforms. This demonstrates

that being strict about sustainability in each step of the supply chain may not be a financially viable

path. Interviewee C had a collaboration with H&M, which is a company known for its business model

based on fast fashion. Moreover, some companies found it critical to still include non-sustainable

materials in the production process to make clothes that look good and last long (Interviewee H;

Interviewee J). Interviewee H said, “I can’t make a pleated piece without polyester. I mean, I could,

but once you wash it, the pleats will fall apart”, meaning that there are certain limits on how

sustainable you can be until you start sacrificing the quality and design of the products. Interviewee J

said that they believe that “a portion of the collection can be slow, while the other portion follows the

market rhythm – but made with more sustainable materials, fair payment practices, and so on”. Thus,

companies realize that there is a limit to the extent to which it is financially healthy to stay

sustainable. Concerning production quantities, even though there is a pattern of companies stating

they try to focus on small production, sometimes there is still a need to reach certain production

volumes to secure sufficient revenues. Interviewee B explained that “you don’t want to be too big, but

you have to reach a certain scale in order to have good margins and access to better technologies”. In

line with this thinking, Interviewee G stated that “but I also believe that if you produce too little, you

won’t reach the people you need to reach, right?”. Interviewee D also argued that if born-sustainable

SMEs are to work on reducing their costs to increase profits, they should work on increasing their

production volumes: “So effectivity and low cost will, the only way you can actually achieve that is to

have high volume, you know, based on efficient production lines and really expensive machineries as

well”.

5.2 Analysis

5.2.1 Culture

The literature describes culture as constantly being in a dynamic process of influencing how people

perceive themselves, while at the same time also being shaped by these same actors (Gienow-Hecht,

2003), with this process going beyond the national borders. The data demonstrates that this process

has an important implication on the perception of the products outside the country where they are

produced. Scandinavian minimalistic and simplistic approach, characteristic to the design of the

locally produced goods, was expected to increase the sales of the products inside the country, since

customers are used to the aforementioned values. However, the data shows that the effect goes beyond

the national boundaries and helps Scandinavian companies gain popularity and trust from the broader

international market, due to the perception of the Scandinavian concept as one closely connected to

sustainability values. Hence, this narrative or belief about what the Scandinavian concept is about,

shaped and translated by Scandinavian culture, serves as a guide for people in determining what

products they find to be sustainable. This underscores the idea that culture, as Gienow-Hecht (2003)

suggests, is shaped by actors and their interactions across national lines. The Scandinavian consumers

themselves, in contrast to international consumers, were described by the data as the ones who rely on

their government to ensure environmental issues are being addressed and do not feel the need to be as

much personally engaged in supporting such initiatives. Smircich (1983) offers a theoretical lens that

would explain this by the idea that organizations are affected by culture through constant interaction

between individuals. This suggests that companies should focus not on the way the culture of the

country is described overall, but on the way individuals are observed to behave in that setting.

Overall, the findings suggest that how Brazilian and Scandinavian companies decide to operate differs

significantly, including what they focus on, what they find important, and what strategies of expansion

they follow. The theoretical perspective of Haire et al. (1966) supports this observation by showing

that to be able to understand why these differences take place, it is crucial to pay attention to the

cultural differences of these regions.

The data shows very weak evidence of the country’s culture being important in shaping how values

are going to be formed inside the organization. The organizational culture was found to be shaped

primarily by adapting to external cultural values shaped by their consumers, rather than being rooted

in inherent, internally developed principles. Even though culture was described as being a determinant

of how the behaviors inside the organization are being shaped (Smircich, 1983), the data shows that

culture in this context should be defined as an interactive process between the business and their

consumers rather than a static concept possessing a certain description of the values to which

managers are trying to adhere to.

In this way, the findings lead us to reconsider how we conceptualize culture. Rather than starting with

a fixed theory of what culture is, the data points us toward a more dynamic understanding: culture as

something co-created by organizations and their stakeholders. As the aforementioned theories suggest,

the culture is important in understanding the managerial practices organizations adopt, but it is more

important to focus on the interactions of individuals within the cultural context, because it is not only

the culture that affects in which market conditions the company is going to operate, but also the way

individuals interact with each other, both inside national boundaries and across them. Therefore,

companies need to see culture through the perception of the people who actively shape the culture to

build efficient and relevant strategies.

The data suggests that it is necessary to consider outside forces when understanding how cultural

interpretations are being developed, which can be explained by theoretical understanding that the

culture is being constantly shaped. What is driving the regional attitude towards sustainability in the

fashion industry can also be attributed to the local economic situation. A challenging economic

landscape might discourage the movement towards sustainability when it comes to such creative

industries as fashion, creating a perception of disconnection between fashion and sustainability. This

influence might originate from government and investors, eventually affecting the end consumers,

who might decide not to include environmental protection as the core value or priority when it comes

to choosing their clothes.

5.2.2 Sustainability

Sustainability was overall perceived as a way of feeling empathy towards the environment and planet,

by considering how the whole supply chain is constructed and thinking that less environmental impact

should be made, despite some opinions that bigger brands should be the ones held responsible.

Therefore, the principles that drive born-sustainable companies to remain committed to sustainability

can be summarized as reducing waste through limiting both production and consumption.

Companies find it important to prove to the public their sustainable nature by using different metrics

to measure their impact. The theory considers sustainability to be an understanding that cannot be

perceived as something concrete, objective, or analytical (Spangenberg, 2011; Beard, 2008; Curwen et

al., 2013). Interpreting the findings through this theoretical perspective suggests that sustainability

should be more related to what each company perceives to be sustainable based on their subjective

ethical judgements. Such a subjective view on sustainability, as data shows, creates a difficulty in

understanding whether companies that call themselves sustainable are indeed fulfilling the

sustainability goals they assure people they are targeting (Interviewee D).

Theory helps explain why sustainability is interpreted differently across organizations. However, it

does not fully account for how this ambiguity can be strategically used by companies. This flexibility

in formulating the idea of sustainability can be used by companies to adjust their strategies to stay

financially stable, even if it means forgoing certain formal requirements of sustainability standards.

This happens because their focus is not on concrete sustainability measures but rather on the idea that

the actions they are taking, including actions that ensure the business stays alive, are all targeted

towards addressing environmental concerns as the final goal. The data then suggests that companies

often emphasize intent over impact, valuing their idea of being sustainable more than any formal

compliance. This raises the need to rethink how sustainability success is assessed, since the amount of

effort to be done to achieve sustainability is driven by subjective interpretations of managers about

what is their responsibility and what is not.

As stated in the theory, achieving sustainability requires the adoption of a mix of actions that are

found to be effective (Kates et al. 2001; Spangenberg, 2011). Analysing the data from this perspective

may suggest that there cannot be a universal strategy that would work for every company in any

context; the companies should be driven by the same motivation towards sustainability, but they must

take into consideration which actions would be the most appropriate given the opportunities of the

market in which they operate.

Thomas’s (2020) perspective divided sustainability interpretations into two: one more

performance-driven perception associated with managers and one more emotionally motivated view

attributed to designers. This theoretical perspective demonstrates that there can be different

motivations behind the idea to pursue a sustainability path, yet it does not fully capture what the data

shows about the economic side of sustainability. The sustainability path was found to be attractive in

economic terms as well, since focusing on small quantity materials, waste materials, and sustainable

infrastructure can help the companies cut their costs. Small companies, which do not have as much

strength as large companies, also view sustainability as a smart business tool. Hence, although there

are different views on sustainability, it does not mean that the ideas are mutually exclusive.

It can be concluded that when understanding how managers balance profitability with sustainability,

sustainability cannot be viewed to be solely motivated by ethical concerns, because the ambiguous

nature of its interpretation intersects with the ideas that also motivate the pursuit of financial success.

5.2.3 Profitability

Since pursuing sustainability means producing less, companies need to identify how to keep their

sales revenue increasing while trying to reduce overconsumption. It was apparent that some

companies follow expansion strategies not by encouraging every individual to consume more but by

reaching more customers who are ready to switch to sustainably produced clothes and by creating a

good customer experience to retain these environmentally conscious consumers. The pursuit of these

strategies is not focused on maximizing profits by encouraging people to buy clothes more frequently,

but rather on encouraging more consumers to switch to sustainable products.

The theory supports this observation by highlighting that the meaning of being profitable does not

consist only of having high financial returns, but also keeping the business alive while allowing it to

achieve its ultimate goal (Sarokin & Bocken, 2024). Thus, what born-sustainable companies consider

to be profitable is different from what traditional business models are used to, and they focus on

making profits not by charging high margins on their products, but by strategically organizing the

whole production process. The profitability for these born-sustainable SMEs means ensuring a

revenue stream that is necessary and sufficient for achieving their initial purpose. The ultimate goal

these companies are trying to pursue could be described by what Grant (2018) referred to as offering

something distinctive in a sector where few others operate in the same way or prioritize similar

values. This suggests that companies see success as being able to deliver value to their customers by

offering products that have reduced impact on the environment, and believe that this differentiation

strategy, compared to traditional fast fashion companies, gives them a competitive advantage

necessary to ensure future profits. The observation that companies follow different strategies in

securing the generation of income is supported by the theoretical perspective of Chandler and Vargo

(2011), who claim that whether the value delivered by the company is perceived differently depends

on what the targeted consumers consider to be important. That is, the success of the strategy of

securing profits is dependent on the organization’s ability to understand what their customers care

about, pointing to the fact that managers are concerned with value creation for stakeholders rather

than shareholders.

While the theory helps us understand why companies balance purpose and profit, it does not explain

what exact factors companies take into account to understand whether their financial situation is stable

enough to ensure business continuity. Overall, data shows high awareness of the fact that engaging in

sustainable production cannot guarantee high profits, yet there is a prevailing belief that long-term

financial stability can be achieved by raising consumers’ consciousness about environmental

concerns. Nonetheless, it was observed that there are cases when a company does not consider itself to

be at financial risk even though the business was making losses at the time. The company reported

that they feel positive about the future, believing in their purpose of having an impact on the world by

making the fashion industry more sustainable, and find these losses to be just a step on the long way

towards turning financially stable. However, it is unclear whether such a positive attitude and

perception that the company is not at risk would be the same given another regional context. Thus,

even though it is explained that perception of profitability may vary, especially between

born-sustainable companies and the ones operating in traditional ways, it is important to also

understand what role does regional or cultural contexts play in determining what companies would

consider to be profitable and what they would consider to be an indicator of business “failure”.

Therefore, while theory helps explain how value and profitability are socially constructed and

context-dependent, the data suggests a need to further explore how regional or cultural norms

influence what companies see as profit, loss, risk, and success.

5.2.4 Organisational Structure & Brand Identity

Results show that in Brazil, the background of the founders and managers influences strategy and

decision-making. That is because their upbringing and the values they were exposed to during their

lives shape the way they interpret the world and act on principles such as sustainability, and also the

development of their brands. Joy et al. (2012) support this observation by stating that sustainability

practices are the result of a sense of social responsibility and belonging, but also individual values and

principles, which are related to the founders’ backgrounds. Inside the companies observed, these same

ethical values lead companies to ensure all voices are heard, in both regions. However, in Brazilian

companies, generally, sustainability procedures and principles are spread throughout the whole

company, whereas in Scandinavia, this kind of knowledge is concentrated mostly in one person or

department. This suggests that the type of company can be both a limiting factor and a beneficial

characteristic. Since the companies studied are SMEs and organised as an adhocracy, shifts happen

faster and the structure is more flexible and self-renewing (Bolman & Deal, 2013). Communication is

made more effective, guaranteeing that even when sustainability is concentrated, the whole company

is aware of it, and all employees can express their needs and thoughts.

Another important conclusion from the data is that it is easier to implement an entrepreneurial vision

and optimism when it comes to the future of the business in SMEs than in bigger companies. What

helps companies maintain focus on sustainability despite financial difficulties is the belief in their own

values and that they will achieve long-term profitability by focusing on their own ethical values in the

present. The employees then must share the same values, and this is more easily achieved because of

the adhocracy structure, as communication is more effective and facilitated. However, while some

interviews highlighted the importance of believing in the company’s purpose and the success of the

business itself, the specialists’ interviews demonstrated that an external view allows for a more critical

perception, pointing out that this organisational structure may not be the best option when it comes to

the fashion industry. They argue that it is necessary to combine both sustainable and unsustainable

practices, as the model is based on linear production since the start, and the current idea of

consumption is not aligned with truly sustainable production.

When it comes to brand identity, Brazilian companies had stronger faith in their own identities than

Scandinavian companies, stating that customers chose to buy from them because they knew it was an

investment in good quality products. The data also showed that marketing is very important for

communicating sustainability matters to customers, although it is very costly for the companies.

According to Keller (2019), it is important to make use of tools such as branding and storytelling

when building an identity and presenting products and values to customers. Since Scandinavian

companies share a more minimalistic design, storytelling is more relevant to the Brazilian context.

Regionalism also influences brand positioning, and this minimalistic design and adaptation to cultural

preferences result in the brands not being as easily recognised, what does not happen in Brazil, as the

stronger and more diverse characteristics allow for creators to have more creative space and the

clients can identify their products more easily, creating a stronger brand positioning. Scandinavian

companies, then, could benefit from investing in storytelling to sell their products and create a

stronger identity that would create a closer and stronger relationship with their customers, also

benefiting marketing strategies.

Although Hockerts and Wüstenhagen (2010) argue that managerial strategies should be more focused

on social responsibility and investing in innovation and increasing social standards, and less on

market positioning, the interviews suggest that such a distinction may be overly simplistic. Both

elements are important, and investing in brand strategy can improve not only the business identity and

generate more profit, but also bring more awareness about sustainability issues and the challenges the

companies are trying to overcome, educating consumers on the importance of supporting ethical and

responsible brands.

5.2.5 Supply Chain and Product

A consistent theme across the interviews was that SMEs operate with small production volumes, due

to both sustainability concerns and scalability difficulties. They all work with minimal stock, the

amount necessary according to the demand they have. This observation is consistent with the

arguments of Pache and Santos (2013), who suggest that there is always a trade off between

short-term profitability and long-term growth, authenticity and sustainability, which is a strategic

decision that must be made by the manager. This suggests that the choice for smaller productions can

be interpreted in two ways: as a result of a financial restraint because larger productions are more

costly, therefore acting as a strategic decision to remain profitable; or for sustainability matters and

staying true to ethical values. This aligns with what Thomas (2020) described as “cultures of

sustainability”, which is present in SMEs because they are guided by actions, reasonings, and

principles that are compatible with their core values.

When it comes to production strategies, it is important to consider the whole production process.

Participants reported adopting practices that ensure sustainability is embedded in as many aspects as

possible, such as selecting specific raw materials, adopting cheaper logistics decisions, and deciding

which products to use, also reducing the costs of such materials. Building on Teece (2010), these

findings suggest that the companies organise their supply chain based on how they interpret

customers’ needs and wants. In that sense, the companies are prioritising innovation and sustainability

in order to achieve long-term value while remaining true to ethical principles. They also maintain a

structure that allows for quick adaptation to forces such as market changes and consumer preferences,

making those customers active participants in this negotiation and interactive process, shaping what is

considered important or not, as described by Payne et al (2007).

The design is another important element in production strategies. Interviewees frequently highlighted

the importance of having an awareness of the trends but not necessarily following them, instead

opting for a timeless design. In the case of Scandinavian companies, this was achieved more easily

because of a minimalistic design. Another important reflection was that focusing on producing

durable clothes of good quality reduced the need to buy clothes more often. According to Teece

(2010) and Bocken et al. (2014), the whole production process, including sourcing and distribution, as

well as the final product, must be aligned with what the customer wants, even if that reduces the total

sales. This suggests that, by focusing on both the product and the whole supply chain, the brand builds

an image of legitimacy for itself, in which the customer develops trust and therefore chooses to buy

more or stay loyal to the brand, increasing sales as a result.

Responses also revealed that while Scandinavian companies export their products and put great

importance on this, Brazilian companies demonstrate uncertainties when reflecting upon expanding

their businesses internationally. This is because of the difficulty of financial constraints and the desire

to first attend more thoroughly the national market, which already presents a great variety and size.

These insights point toward a more dynamic and context-dependent understanding. Since within the

Scandinavian minimalistic approach the designs are more similar, it is less costly to produce, and

fabrics can be reutilised more easily. Because of similar values and aesthetics, it is easier to export and

serve other markets, as those markets are exactly interested in the minimalistic design provided by the

companies. For the Brazilian design, which varies a lot, other strategies are necessary, such as

producing pieces that can use the whole fabric and generate no waste. Attending to Brazilian markets

is another challenge, as the culture in the company is extremely different from one region to another,

making it more difficult to export when there are already so many target groups and tastes to adapt to.

The regulations and laws within the European Union also make it easy to export and achieve fair trade

deals for exports; in Brazil, there are not as many incentives and taxes for exporting, and so the

regulations are not favorable. The influence of those external factors is explained by Porter’s (1980)

Five Forces model.

In general, the observations and insights gained from the companies are supported by Niinimäki

(2013), who describes that products and supply chains are embedded in the cultural contexts and how

they interpret the concepts of sustainability, ethics, and style. Hence, constant adaptation in product

development is necessary in order to be able to attend to customers’ needs, trends, markets, and

cultural demands.

5.2.6 External Forces and Consumer

A recurring theme across the interviews was the perception that the companies could benefit from

external funding, despite not perceiving themselves to be in great financial danger. Brazilian

responses showed that the struggle for SMEs to get funding is widespread and that the tax policies are

not favourable, as they result in relatively larger charges for small companies. In general, companies

are not excessively concerned with changes in regulations because they have prepared and adapted

beforehand for stricter policies. They, however, expect more support to be established in new

regulations for sustainable companies, as they face more financial difficulties than fast fashion.

According to the Porter’s Five Forces Framework (1980), external forces have considerable impact on

the competitive advantage of a company, as well as potential profitability, and for that reason it is

important to analyse and insert this consideration into decision making processes in order to increase

the opportunities and reduce threats in the market. For sustainable SMEs, those external forces such as

regulations, ethical sourcing, and changing consumer demands are challenges when trying to balance

financial health with sustainability.

In Brazil, this scenario is particularly more challenging as interviews revealed that fashion is not

considered an economically important industry, and therefore neither investors nor the government are

willing to invest in those businesses, especially born-sustainable SMEs. The general public is not

particularly supportive either. In addition, the findings suggest that brand name and status remain

important for consumers, even for those who claim to support sustainability concerns and products.

Especially in Scandinavia, interviewees support the idea that consumers rely heavily on the

government to present and guarantee that the brands are sustainable, instead of doing individual

research and personally engaging in ethical consumption. This observation supports the reality

described by Fournier (1998), which emphasizes that from a constructionist perspective, consumer

behaviour is heavily influenced by social and cultural contexts, and also a way to create meaning for

their actions, defining how individuals construct their identities, values, preferences, and purchasing

choices. In that sense, individual principles as well as social responsibility and belonging are what

motivate customers to understand how unethical consumption impacts both the industry of large

production and the environment (Joy et al. 2012). A cultural shift is therefore necessary to achieve a

meaningful change in consumer behaviour.

It is important, then, to educate consumers about the importance of pursuing sustainability, or

influence their behaviours by creating an emotional connection. The companies suggested that being

attentive to the customers, as well as being receptive to their feedback, is very important to guarantee

customer retention, and this is particularly important when selling products that have a higher price

than what is found in fast fashion stores. Beard (2008) and Curwen et al. (2013) argue that the

definition of sustainability is always permeated by moral and semantic ambiguity as they are

dependent on branding, marketing, and consumer expectations. While theory explains why such

behavior or problem occurs, it does not point out who should take the initiative in solving this

ambiguity. For this reason, it is possible to conclude that, when there is ambiguity, it is also the

company’s responsibility to educate the consumer with their power of influence on what is perceived

as sustainable and how they measure their own achievements.

Joy at al. (2012) argue that sustainable fashion and everything it involves is in a constant process of

construction, and it is heavily influenced by the actions and decisions of the companies. The

customers, thus, are only one element of many, and their understanding is continuously shaped by the

surrounding culture, the organization’s dynamics, and the public image companies choose to project to

the public. Because cultural traits and societal influences not only shape but also validate consumers’

identities and purchasing choices, when practices or values are deemed legitimate or important by

society, consumers are more likely to adopt corresponding behaviors, whether it be related to brand

consumption and status, or sustainability. Consumer adaptation probability increases when such

behaviors are positioned as part of a broader societal movement, and this is a movement that should

be started by the SMEs.

5.2.7 Business Model as an Advantage or a Disadvantage

To structure the analysis, the interview data were organized into two overarching categories:

perceived advantages and disadvantages of the business model. Concerning what we classified as

advantages, the participants mentioned rapid trust through early engagement in sustainability, as it

builds a narrative and storytelling about the brand essential to create a connection with customers;

planning of how to cut costs at early stages of production; and adapting early to sustainability

standards, creating a unique value from differentiation and being more structurally prepared for

changes than big companies. Those findings are supported by the existing literature on how

sustainable fashion SMEs make strategic decisions by combining branding, storytelling, and the use

of social media in order to influence and shape the perceptions and behaviours of customers. Early

engagement in sustainability creates the sustainability mentality from the start, and the companies can

then build both customer trust and a unique market entity.

According to Johnson et al. (2009), strategy can be defined as the direction an organisation takes in

order to seek advantage in the long-term through the configuration of resources and competencies that

align with stakeholder expectations, and this resonates with the early cost-management and resource

allocation strategies classified as advantages. The structuring of business practices according to

sustainability patterns contributes to Grant’s (2018) definition of competitive advantage by creating a

unique value in a market with only several competitors. In addition, the flexibility observed in the

company is characteristic of an adhocracy, and that is why the companies are able to adapt more

quickly to market and regulatory changes, as well as customer demands.

Whereas disadvantages were interpreted to be the high costs, and therefore the resulting high prices,

which leads those companies to have a price that is less competitive than fast fashion enterprises;

scarcity of suitable suppliers and long production time from suppliers, as sustainable production

demands more time than mass production, which requires the companies to adapt and understand that

their bargaining power is limited; and that the infrastructure of the industry is not suitable for the

born-sustainable SMEs’ business model, as described by the specialists interviewed. These findings

reflect what was described by Parrish (2010) as the unique strategies entrepreneurs must develop to

manage the tensions between profitability and ethical responsibility. The challenges described by the

interviewees, such as high production costs, high bargaining power of suppliers, and long production

times, also relate to this aforementioned conflict, and Doherty et al. (2014) argue that it is therefore

necessary to have a mixed strategy that integrates ethical and economic objectives. The high

bargaining power of suppliers resonates with Porter’s (1980) framework, as it reveals the influence of

external forces in the competitive advantage generated by different businesses. Thus, SMEs focused

on sustainability seem to invest less in market positioning strategies that are supported by traditional

views. Rather, they emphasise managing external pressures, and Hockerts and Wüstenhagen (2010)

highlight the importance of strategies that revolve around society and the environment, addressing

sustainability requirements while also meeting stakeholders’ interests.

A business model is defined by Osterwalder and Pigneur (2010) as the way an organisation deals with

value creation and delivery. Building on this theoretical foundation, it is possible to conclude that for

sustainable fashion SMEs, the business model has an essential role in shaping the strategies behind

decision-making and how sustainability is integrated into value creation, with the objective to balance

environmental responsibility with financial performance.

The definition of a constructionist framework is that social phenomena and their meanings are not

objective facts but are constantly shaped and reshaped through human actions (Berger & Luckmann,

1966). Gergen (1999) supports this approach by arguing that organisations, culture, and society itself

are the products of constant human interaction. Social phenomena then depend on the interpretation of

individuals, in a way that reality is continuously reconstructed by social settings (Hackings, 1999).

More recently, it is accepted that research itself can contribute to creating reality by assigning

meaning to the phenomena studied, reinforcing that knowledge is always partial and subjective (Bell

et al. 2022). What differentiates an advantage from a disadvantage, then, can be seen as inherently

subjective and shaped by the company’s, as well as the individuals’, own interpretation of what

supports or hinders its objectives. Sustainably born companies must then make strategic choices and

decide how to achieve their objectives, the trade-offs they are willing to accept or sacrifice, and how

they define and interpret what constitutes an advantage or a disadvantage in their own context.

Therefore, their business model can be seen as a disadvantage, since it is difficult to be a born

profitable and sustainable SME. However, it is important to understand that there are still advantages

present and learn how to use and turn them into opportunities, as well as overcome those threats. In

that sense, there are two different focuses: a company that has been sustainable since the founding, in

a way that the strategies and adaptations were already planned in advance, turning the process into an

opportunity to differentiate and create a competitive advantage; or a company that was born

sustainable, interpreting sustainability as a condition to be met that requires adjustments that turn the

business less profitable, and interpreting the business model as a limiting factor. Ultimately, the way

companies define and frame the meaning of being ‘born-sustainable’ will shape their future strategies,

decision-making processes, and long-term objectives and aspirations.

5.2.8 Trade-offs

Findings show that most decisions and strategies revolve around two choices: either sacrificing

profitability or sustainability. In the first category, to remain loyal to ethical responsibilities, the most

recurring observations were that companies could not charge the consumers excessively to

compensate for the higher costs of production; they faced high supplier costs; they had limited

amounts of goods produced, both for sustainability matters and financial restrictions; and given the

nature of sustainable products, not all consumers were willing to accept the clothes because of their

different characteristics and production processes. On the other hand, by sacrificing sustainability

companies could increase their revenue through the use of non-sustainable materials or

non-sustainable channels, which damages stakeholder interests to generate more revenue; forgoing

ethical values; stop adhering to certain sustainability standards such as calculating carbon footprint;

producing more than what is considered sustainable to maintain stock and reduce costs. This points to

the idea that the challenge of balancing profitability and sustainability is a constant judgement of what

should be the priority at the moment and what should be forwent.

In fashion, different "cultures of sustainability" reflect contrasts in interpretations and practices

resulting from professional roles and individual values (Thomas, 2020). This leads to deeper debates

between approaches that focus on sustainability as being transformative or efficiency-based, which is

further complicated by the lack of regulation and semantic ambiguity in sustainability claims (Fletcher

& Grose; Beard, 2008; Curwen et al., 2013). However, even though trade-offs between stakeholder

interests are unavoidable, sustainable solutions must include dialogue and negotiation rather than

expecting absolute beneficial outcomes (Spangenberg, 2011; Kates et al. 2001). A value proposition

cannot be measured and depends on context, and is therefore shaped by different evaluative

frameworks and stakeholder interests, requiring companies to balance financial health and success

without compromising ethical and environmental commitments (Boltanski & Thévenot, 2006; Frow,

1995; Corvellec & Hultman, 2014). What is considered profitable, thus, cannot be determined only by

the company’s revenue, but also includes sustainability and ethical principles and values (Sarokin &

Bocken, 2024)

The stakeholder theory helps explain how sustainably born companies integrate ethical and long-term

responsibilities into their decision-making strategies by balancing their relations with customers,

employees, suppliers, and communities and everyone affected by the business as part of broader

success (Freeman et al. 2010). While shareholder theory advocates for prioritizing shareholder

interests (Friedman, 1962), relying on a single approach can be harmful. The best solution then is to

find a balanced approach that combines both stakeholder and shareholder interests as needed

(Jackson, 2011) to promote broader stakeholder representation and protection, but also to adapt to an

emergent strategy that attends to the company’s goals and needs.

The definition of strategy includes market competition and managing tensions between ethics and

profit, involving long-term plans by allocating resources to meet stakeholder expectations (Johnson et

al. 2009), and competitive advantage emerges from creating unique market value (Grant, 2018). SMEs

should then follow emergent and adaptive strategies, constantly changing and shaped by learning and

responses to dynamic environments, thus focusing more on vision and perspective than on fixed and

detailed plans (Mintzberg et al. 1998).

The trade-offs made by these companies are mainly shaped by the business model they have chosen,

which reflects their ethical values and long-term vision. Despite the challenges, they choose to remain

committed to this model because it aligns with their principles. This highlights that business models

are not only driven by economic choices, but also that organisational values guide strategic decisions.

Therefore, sustainably born fashion SMEs must balance two interdependent logics: sustainability,

which is linked to stakeholder interests, and profitability, linked to shareholder agendas. Instead of

choosing one over the other, in order to achieve success, those perspectives must cooperate in

constantly adapting and developing an emergent strategy. Companies then continuously adjust their

priorities as the conditions change, reinforcing that strategy is not fixed but an emergent process to

reach competing goals.

6. Discussion

RQ 1: What challenges do managers in born-sustainable fashion SMEs face in trying to balance

sustainability and profitability in practice?

6.1 Strength or Constraint

6.1.1 External Forces as Strategic Drivers: Balancing Facilitation and

Restriction

The analysis shows that several factors, including external forces, can make it difficult for

born-sustainable companies to start a business and successfully maintain it. However, these SMEs can

then use these forces that seem to be “negative” to their advantage, using them as a guideline in

understanding how their strategy should be constructed to be competitive in the market that is still

based on long-established “rules”.

One of the main forces currently acting as a barrier to success is consumer attitude. Even though a

modern consumer is found to be significantly more conscious compared to the past, there are still

difficulties in convincing the customer to pay for a relatively more expensive product, which is often

made with non-traditional types of materials. Nevertheless, the study also shows that consumer

perceptions are dynamic, moderately dependent on the culture, and are under constant influence of the

information they are exposed to. Hence, when it is challenging to increase profits on the sales of

sustainable products, the solution should not be to switch back to the accustomed modes of production

characteristic of fast fashion, but to adapt how the managers deliver their value proposition. One way

to adapt is to better educate consumers on the importance of buying sustainable fashion products.

However, another challenge lies in understanding what the common beliefs, narratives, and values are

in the region where the enterprises are operating. Getting familiar with the local specificity of

perceptions of sustainability and local attitudes towards such production will allow the managers to

understand what gaps in knowledge they need to fill, where their processes lack trust, and what

customer experience the consumers are used to. Understanding these factors will help managers build

their strategies that facilitate the change in the situation of the lack of demand for their products,

lessening this constraint and allowing them to pursue their sustainability path efficiently.

Born-sustainable fashion SMEs also do not have much leverage and strength when it comes to the

market, since their position in it is not yet fully developed, and they have to follow strict standards to

showcase their loyalty to sustainability. Managers of these companies do not have much bargaining

power when it comes to supplier negotiations, since there are very few manufacturers who can offer

the materials these SMEs require for their production. Even though currently suppliers are seen as a

limiting factor for them, SMEs can view their early positioning as a sustainable company as a

facilitating force. These born-sustainable companies have adopted many environmental standards

from the beginning that put them in a competitive position compared to traditional companies that

need to adapt to a more sustainable path later. Although born-sustainable fashion SMEs find it

difficult to stay competitive in the market because of the lower prices of competitors who operate

traditionally in the fashion industry, the direction in which the market is starting to develop can

change the situation for these SMEs. Given the increase in concern about the need to make the fashion

industry more sustainable, these born-sustainable companies are better positioned to be flexible in

adapting to future regulations. This challenge related to being a sustainable company can then be seen

as an advantage in the long-run, letting managers secure partnerships with suppliers who can deliver

necessary raw materials early in the process.

Thus, it is important for the companies not to focus on the barriers they are facing when it comes to

external forces, but keep investing in the sustainability values they adopted, understanding that their

position can be changed in the long-run to get advantage of the external environment that seems to be

so unfavorable at the moment, misleading certain companies into belief that born-sustainable business

models cannot survive in the current market environment.

6.1.2 How Firms Frame Their Business Model as Strength or Constraint

Understanding whether being born-sustainable is an advantage or a disadvantage was found to be a

highly subjective perception. When faced with the question of whether companies consider their

business model to be their main strength or constraint, all companies acknowledged that there are both

benefits and limitations to it. What is common among all responses is that their business model is

currently unique in the fashion industry, making it likely to face some barriers in its way of

development. One of the barriers is the market itself, which is made to serve traditional fast fashion

companies, which were established a long time ago and had their influence on how the industry is

structured and how it is operating. Hence, running an innovative, born-sustainable company is

expected to take their managers through the phase of adapting to the market that is not yet ready for

the upcoming changes. Then, the most important thing is to focus on the advantages the business

model can offer to offset the unavoidable challenges.

When adapting an innovative model, the managers should also employ innovative thinking. It is

difficult to predict how exactly the market will change, what consumer behavior will be like, or when

these changes will take place. This uncertainty creates another level of complexity to the process of

balancing sustainability with profitability to make this born-sustainable model work, making

forecasting what can happen a weak and difficult strategy. Therefore, managers need to focus on

foresight, looking for ways to enhance their strategies in a way that would make the company better

prepared for potential difficulties. From here comes the importance of taking advantage of having this

purpose from the very establishment of the enterprise, looking for ways this could be used as a

strategic tool to make these businesses competitive in an increasingly conscious market, where the

majority of the businesses are yet only on their way to adjusting to a more sustainable path.

The main challenges managers face in balancing sustainability and profitability in born-sustainable

companies, then, are around properly addressing the pressure coming from external forces, such as

consumers, suppliers, competitors, and regulatory bodies, due to the novel nature of the business

model they adopted. The analysis demonstrates that even though some managers have a strong belief

that the market conditions will transform in support of the more sustainable practices, managers have

difficulties in structuring their operations strategically to be able to operate given the current

limitations that come from working with their business model. This issue needs to be addressed to

ensure these born-sustainable companies do not forgo sustainability values to secure higher financial

returns.

RQ2: How to develop effective managerial strategies in born-sustainable fashion SMEs to maintain

sustainability in business operations while ensuring financial viability?

6.2 Emergent Strategy as a Way to Balance Stakeholder and Shareholder

Expectations

The analysis demonstrates that understanding whether companies should be driven by benefiting

shareholders (owners of the business in case of SMEs) or all the stakeholders cannot give a definitive

answer to the question of what the exact strategy should be in balancing sustainability and

profitability. Given the difficulties born-sustainable SMEs face in their pursuit of practices that

prioritize environmental concerns, managers need to understand that it is important to be flexible in

changing their focus according to the circumstances. Given the developing nature of the market,

which is evolving, adapting, and behaving unpredictably at times, following a strategy that balances

sustainability and profitability should reflect these same characteristics of the market and, therefore,

have an emergent nature. The strategy that identifies how these two aspects should be efficiently

balanced should depend on the situations the company is undergoing at the specific point in time.

For example, one of the responses mentioned that the company had to forgo the process of calculating

carbon emissions temporarily due to financial constraints it was experiencing at the moment. Such a

finding demonstrates that even though companies realize the importance of staying loyal to certain

sustainability practices they adopted to pursue their initial goal of building fashion based on

sustainability values, they need to understand when to prioritize financial incentives to be able to

secure the continuous operation of the enterprise. Here comes the need to understand that making

profits is also essential to be able to keep the business running. Such a focus on profitability can be

motivated by the idea that to make a difference in the fashion industry by making it more sustainable,

the company should first be strong enough to sustain itself financially. Therefore, the decisions that

are directed towards increasing profits should be made with consideration of sustainability values to

make sure they do not come in conflict with environmental concerns, but at the same time the

managers should assess whether such profitability-driven decisions are indeed needed at that point to

make sure the company has necessary resources to pursue their sustainability-driven goals. Hence, it

means that whether at a certain point a company should prioritize sustainability or profitability

depends on the situation, suggesting that the managers of these companies need to constantly adapt

their strategy, letting it be emergent based on the circumstances.

RQ 3: What role does regional and cultural context (Scandinavia and Brazil) play in the

development of the appropriate managerial strategies?

6.3 Sustainability as a Subjective and Strategic Process & Constructing

Profitability Beyond Immediate Gains

The results of the analysis showed that sustainability is not a universal concept that is interpreted and

applied in the same way regardless of external forces. Rather, it is shaped and influenced by the

cultural and regional contexts. In Brazil, the companies’ perception of sustainability is heavily defined

by individual ethics and upbringing, and this approach, based on values, is naturally reflected in

business strategies. It is therefore not a result of external pressures, but rather of personal principles.

In Scandinavian companies, even though sustainability is perceived to be deeply embedded into their

culture, the need to apply sustainable practices was also in a large part due to expectations from

society and institutional pressures. It is important to note that, even though many practices can be

similar and sustainability is academically described as a universal notion, there are important

differences in the motivation for sustainability actions, how the strategies are formed, and what is the

real importance that people attribute to it inside an organisation.

Following a similar pattern, how profitability is interpreted and constructed also depends on the

context. Traditional approaches focus on short-term growth and revenue, benefiting mainly

shareholders in the company. However, the SMEs analysed in these countries have a different

perspective, which puts more emphasis on creating an environment where it is possible to be

financially healthy in the long-term, but especially remaining loyal to sustainable and ethical

responsibility goals. In Brazil, creativity is highly valued, and often this characteristic is applied to

strategies to cut costs and remain profitable, for example by selecting fabrics made from waste. The

companies have difficulties because of the lack of investment from the government and from

institutions. In Scandinavia, however, the environment and infrastructure have more benefits for this

kind of business, and they also try to stay aligned with their sustainability goals and create value for

stakeholders, while seeking enough financial return to survive in the market.

Those reflections suggest that regional and cultural contexts play an important role in the development

of the appropriate managerial strategies, because they shape how sustainability and profitability are

interpreted and applied inside the company. Those concepts are relevant because they define how

managers develop the most appropriate strategies that will be the most culturally responsive and

effective in the long-term. SMEs thus should continually negotiate and reconstruct what those

concepts mean, instead of adhering to universal definitions, and balance important elements such as

personal values, stakeholder expectations, and external pressures. Managers must reflect and analyse

their context in order to make the best decisions, and align their own personal definition of

profitability with their ethical and sustainable goals. It is equally important to stay adaptable and

transparent, maintain a constant dialogue with customers, and formulate strategies based on the

context, not in spite of it.

6.4 Strategic Adaptation: How Regional Influences and Entrepreneurial

Outlook Intersect

The analysis demonstrated that regional and cultural contexts, as well as the entrepreneurial mindset,

are the main influential factors in managerial strategies and decision-making in the born-sustainable

fashion SMEs analysed. In Brazil, sustainability knowledge and main strategies are spread throughout

the whole organisation, and it is important to have this notion as a guide in the business. The main

motivation for sustainability in those companies is the founders’ individual values and personal

experiences. In Scandinavia, however, sustainability is usually centralised in specific departments,

even when decision-making processes include employees from all areas in order to make sure all

voices are taken into consideration. These differences are important to demonstrate how cultural

context and beliefs have an important role in shaping strategies and sustainability practices.

Brand identity is another strategic tool that is heavily influenced by cultural context. Brazilian

companies in general put great importance into storytelling and expressing local culture, and their

designs and communication patterns are closely related to personal narratives, as well as regional

habits and practices. This is a differentiation strategy that develops naturally, not necessarily planned

by them, but embedded into cultural habits, and it cultivates a stronger bond with customers. For

Scandinavians, the focus is on minimalistic design and neutral aesthetics, in a way that hinders

creating a strong brand identity that can appeal and emotionally connect with consumers. It is

important thus for Scandinavian companies to invest in storytelling to create a better identity and

differentiation strategy.

Even though there are many differences observed, highlighting the important role cultural and

regional contexts play in the company’s strategies, there are common factors between the companies

of those two regions. It is crucial to have an entrepreneurial optimism, in order to motivate employees

and increase customer retention, especially when it comes to overcoming the difficulties of being a

born-sustainable SME in the fashion industry. The way people interpret and apply this mentality is

also a diverging point. In Brazil, it is more common to see the company’s purpose with a more

positive attitude, and this is often a strategic anchor when pursuing profit. In Scandinavia, even

though optimism is still present, it is not as emphasized. Therefore, there is always the need for a

confident, optimistic, and values-driven style of leadership, in order to inspire cohesion, employee

motivation, and long-term sustainability, aligning with regional characteristics on how to implement

this vision.

6.5 From Consumer Demand to Market Boundaries: Regional Challenges

in Business Expansion & Adaptation to Culture Through the Lens of

Consumers

Regional and cultural context does not have a direct impact on shaping managerial strategies. Instead,

they affect consumer behaviour and how they interpret value. In that sense, culture is not an

immovable external force, but rather it shapes and is shaped by individuals and how they perceive

sustainability, profitability, and brand identity. Managers should then adapt their strategies to the way

consumers act and react within their own cultural context. For this to happen, it is necessary that the

companies have a flexible approach to market changes, while also staying loyal to their sustainability

and ethical principles.

It is how companies react to national and international consumer expectations that will shape strategic

decisions. Scandinavian brands have minimalistic designs that are similar in general, as well as

favourable regulations because of EU laws and agreements, so it is easier to expand their target

market to other countries. In Brazil, however, there is no support from the government or agreements,

and the designs are extremely characteristic of the region they are from inside the country, what

results in a stronger adaptation to different regions and focus on different strategies such as recycled

materials, as well as highlighting and giving priority to national markets. These observations highlight

that infrastructure, cultural elements, and economic incentives can either be a constraint or an

opportunity for companies to grow and expand.

Even though cultural differences affect customer preferences directly, all companies interviewed

emphasised that customer interaction, adaptation to market changes, and regulations were important

forces when making strategic decisions. All companies, then, should be adaptable within their own

sustainability values and ethical principles, and react to trade-offs while remaining loyal to long-term

ethical responsibility. This includes being aware of regional differences and interpreting cultural and

regional context in order to remain flexible and adaptable, turning constraints into opportunities.

7. Conclusion

7.1 Summary of Main Findings

This study sought to explore how born-sustainable fashion SMEs in Brazil and Scandinavia balance

the conflict between sustainability and profitability and what the main strategies are to achieve this

balance embedded into their decision-making processes. It also explored the influence of cultural and

regional context in those strategies and world views, including the main challenges managers face

while integrating ethical responsibility and financial goals to ensure long-term success.

The analysis demonstrated that there is no fixed strategy that should be implemented, given the

dynamic environment in which the companies operate. Rather, the strategies and decision-making

logics should be emergent and adaptive. They are permeated by continuous negotiation between

external forces, internal values and principles, and customer expectations. Additionally, it was

observed that culture is another influential force over how consumers and markets understand and

react to sustainability interpretations. However, internal operations and strategies are more dependent

on the interpretations and reactions of managers to the cultural context, than on the cultural context

itself.

Companies see sustainability as both a business opportunity and an ethical responsibility to the

environment. The way it is implemented across the companies varies, however, due to subjective

interpretations and approaches to what is actually feasible and meaningful when it comes to

sustainability. This observation can be seen as beneficial because this flexibility allows companies to

adjust their strategies, but it is also an obstacle to objectively measuring and communicating

sustainability. Profitability is also seen as a subjective concept, as it is pursued through the creation of

long-term value for conscious customers and not through traditional models that focus on revenue.

Quality, storytelling, and brand identity are then important elements in a differentiation strategy and

consumer retention. While Scandinavians present minimalistic design and regional advantages to

export and expand internationally, Brazilian companies are more centered around creative processes,

resource management, and are inserted into a diverse domestic market. Sustainable brands in general

face high production costs and scalability challenges, however, they accept that it is a necessary

trade-off in order to stay loyal to sustainable values.

In conclusion, those findings suggest that the best option for a company to be successful is to have the

ability to shift between different strategies and priorities according to the demand they have. That

could be to prioritise market positioning, stakeholder interests, or operational efficiency. Those shifts

are motivated mainly by external pressures, consumer expectations, and managerial strategic

decision-making, and there is a need for flexibility and constant adaptation.

7.2 Implications

7.2.1 Theoretical Implications and Contributions

Using a constructionist approach as the basis for the theoretical framework, this study analysed how

born-sustainable SMEs in the fashion industry interpret, understand, and implement the concepts of

sustainability and profitability, and how they relate to their strategic decisions. In accordance with the

theoretical framework previously developed, the findings demonstrated that culture cannot be

interpreted as a static concept, but rather as an interactive force that shapes and is shaped by the

individuals’ interactions, consumer behaviour, market narratives, and the interpretations of managers.

Following this perspective, it is necessary to adopt a shift in mentality, from culture as an immovable

and influential force to how creation of meaning is done by both managers and employees, driven by

their interactions. The main conclusion of the analysis is that successful managerial decisions should

not always opt for and remain fixed on one or the other, with an exclusive perspective. Rather, it

should be an adaptive and emergent strategy that shifts between those two focuses and priorities as

needed. While already existing theories describe the conflict between those two perspectives, for

example, when it comes to shareholder and stakeholder theories, this research highlights the

importance of actively balancing this conflict through merging and adaptive strategies.

Building on this, the theoretical framework developed for this study was co-constructed based on the

empirical findings, and it served as a useful and valuable structure that allowed for the analysis of data

and drawing conclusions. Considering that one of our main objectives was to understand the strategies

that could be used by managers to balance profitability and sustainability, the constructionist approach

opened space for our own interpretation, as well as the interviewees responses, to be the guide on how

to approach the aforementioned concepts and the starting line for the conclusions reached. In that

sense, binary assumptions were avoided, and an open mind was needed in order to accept different

perceptions and interpretations of the core values that guided this research. The main contribution of

this study was then the ability to analyse such important concepts as profitability and sustainability as

cultural constructs, and how to balance and articulate efficient strategies when dealing with both.

However, a few concepts could have been more explored in the framework and literature review, in

order to assess more objective definitions and metrics for sustainability, such as the issue of digital

product passports, which track the whole life cycle of the product, and the importance of carbon

footprint tracking (Publications Office of the European Union, 2024). Those measurements contribute

to generating more accurate data regarding sustainability and therefore reveal more practical actions

that could be taken in order to reduce the environmental impact of the fashion industry. Our

framework, while flexible and valuable when dealing with subjective descriptions and definitions,

could have benefited from a more practical perspective in order to help managers deal with the need

for verification and proof of their commitment to sustainability.

7.2.2 Managerial Implications

This research emphasises the importance of emergent and adaptive strategies and optimistic mindsets

in born-sustainable SMEs in the fashion industry, in which managers must balance sustainability and

profitability in volatile and unstable environments (see Chapter 5.2). The findings showed that a

single fixed strategy is not the best path for a business with the aforementioned characteristics to

follow. Overall, the success of a company depends on its ability to adapt and prioritise objectives,

identify opportunities, and overcome possible threats, whether it be related to the market, external

context, or the business model itself. It is also important for entrepreneurs to foster an optimistic view

of the future, ensuring that all departments are aligned between themselves and with the company’s

vision and values, even through times of financial instability. It is then important for managers to

focus on developing organisational flexibility in order to adapt to external influences, understanding

the dynamics that emerge from cultural context, as well as market and customer demands. It is

essential to also motivate and engage employees and customers to build trust in the company and its

future.

The table below exemplifies some possible actions and dynamics to be considered by managers, as

well as the motivation for them and the intended results.

Challenge

Actions needed

Aimed result

Cultural Context

Evaluate and reflect on how cultural context impacts customer

expectations and values

Attend to local

stakeholders’

expectations

Limited

Resources

Analyse and plan fabric and waste use according to budget and

products

Reduce costs in

production

Brand Identity

Invest in storytelling and a stronger relations with customers

Stronger brand

identity

Entrepreneurial

Vision

Fostering optimism and positive vision towards the future, reinforcing

current values among employees and across departments

Facing financial

issues more easily

and with internal

support

Adaptability

Keeping track of the company’s current situation, as well as external

context, and what actions are necessary for the company to thrive

Development of

emergent and

adaptive strategy

Prioritization

Knowing when to prioritise financial stability and what decisions to

make, and when to invest in loyalty to core values in order to build

trust in the brand

Balance in the

trade-offs

Table 1: Recommendations for managers

7.2.3 Recommendations for Future Research

This study was able to arrive at conclusions that have important implications for both theory and

managers. Although the study reached its initial purpose, future research is needed to further

investigate the issues of financial struggle for born-sustainable companies in the fashion industry, and

prepare better reflections on the way these problems should be handled. During the data analysis

process of this thesis, it was noted that the size of the chosen geographical areas plays a significant

role in the way business operations of the local companies are organized. Future research can

investigate further the ways in which the size of the local market affects what challenges companies

face in balancing sustainability with profitability, how their strategies are differently adapted to these

challenges, and what further implications local market size has on the possibility of the companies to

adopt certain strategies compared to companies from other regions. The analysis also revealed that

there are differences between managers from companies and sustainability experts in the level of

skepticism towards the viability of the born-sustainable business model. This study included

interviews with only one sustainability expert from each of the two geographical regions. Therefore,

we suggest that future research include more perspectives on the questions under investigation from

people working outside the fashion companies. Such outside perspectives can bring a more extensive

view on the situation in the market due to experts’ rich experience of interacting with several

sustainability-centered companies.

7.3 Limitations

It is important to acknowledge that the thesis also has its limitations, which are a result of several

external factors. Firstly, it is important to mention that the time frame available for this research was a

major constraint. To be able to have enough time to conduct a good quality data analysis, the sample

size used for gathering empirical data was chosen to be relatively small, thus reducing the

generalizability and reliability of the study. The limited time also imposed pressure in a way that the

study lost certain interview opportunities because the companies reported to be available only later.

Another factor that played a role in the outcomes of this study was constraints in the data gathering

process, when companies initially agreed to participate in the interview but did not commit to it in the

end, reducing the number of interviews on which the data analysis was based. Some companies were

also reluctant to participate in video interviewing, mentioning that they are constrained by time.

Furthermore, there were limitations in the completeness of the answers that the companies were

providing. The companies did not always respond to the exact questions asked or avoided answering

some parts of the questions, leaving the researchers with incomplete data that might have led to fewer

important patterns being revealed among the responses. When it comes to regional coverage of the

research, the empirical data is not fully representative of the chosen region, specifically Scandinavia,

because none of the Norwegian companies that we contacted agreed to participate in this research.

The study got more responses from Swedish companies compared to Danish companies as well.

Finally, even though the research is offering insights into the differences between the two large

geographical regions, further research is needed to derive more generalizable conclusions and be able

to understand how other regional contexts might affect the outcomes of the research.

7.4 Reflection and Self-critique

During the process of conducting this research, we identified certain aspects that could have been

improved in future research. It was noted that the question lists prepared for the interviews lacked

some concreteness, potentially giving the interviewees the possibility to use this ambiguity to adapt

the interpretation of the question in a way that let them avoid answering some of them. While giving a

chance to uncover differences in the ways companies interpret the questions, this ambiguity reduced

the consistency among the topics that the data was expected to cover. Regarding the choice of the

regions under study, it might have been better to focus on two countries rather than comparing a

country with the whole region. Although Scandinavian countries share a lot of characteristics, there

are still some distinct cultural or socio-economic nuances that might have been important to consider.

To avoid the issue of understanding the extent to which the characteristics of these countries could

have been generalized to be able to compare the region to a separate country, the other option is to

focus on country-to-country comparison.

Appendix

Appendix A: Description of the companies analysed

Company

Pseudonym

Country

Foundation

employees

size

1 people

Interview A

Denmark

2012

11-50 employees

small

DEDICATED

Interview B

Sweden

2006

21 employees

small

Swedish

Hasbeens

Interview C

Sweden

2006

2-10 employees

micro

Lars

Mattiasson

Interview D

Sweden

Sustainability

expert for startups

micro

SOBEK

Interview E

Sweden

not interviewed

not

interviewed

Minimadeia

Interview F

Brazil

2021

2-10 employees

micro

Thear

Interview G

Brazil

2018

2-10 employees

micro

Jorge Feitosa

Interview H

Brazil

2011

micro

Leandro

Castro

Interview I

Brazil

2019

micro

Fábio

Monnerat

Interview J

Brazil

Sustainable

fashion expert

micro

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