Strategic Impact of Environmental Regulation : Case RED III Directive and Andritz e-Fuels

Aim: The climate change presents a holistic challenge to fossil energy consumption requiring adaptation of renewables where renewable hydrogen’s role is evitable. Regulation provides the basis of business in the green transition and companies recognizing their regulatory position can gain competitive advantage. While environmental regulation is well studied in economics, its role in strategic management remains unexplored. This study explores how environmental regulation shapes firm strategy and business model innovation (BMI), altogether competitive advantage in the renewable hydrogen industry. Methodology: the study adopts a qualitative case study. The thesis consists of both an empirical study based on the existing theory for academia and novel findings, as well as a practical business development case. Literature is reviewed from business models, business model innovation and environmental regulation with their perspectives on competitive advantage. The empirical results are conducted with a case study approach, drawing on 12 semi-structured interviews conducted with professionals in the renewable hydrogen regulation and business. Furthermore, the Gioia method was utilized to induce the rich qualitative results, with addition of context analysis of renewable fuels of non-biological origin (RFNBO) regulation and value system. Results: The findings indicate that regulation functions as the market-forming antecedent: it creates the offtake basis of the whole RFNBO industry, there by setting boundary conditions for firm actions and gaining competitive advantage. The findings develop a concept of regulatory position as a two-sided strategic variable for high context regulatory driven industries. First, focal firm’s strategy and regulation are interlinked, how firms engage in business in relation to focal regulation. Secondly, understanding value system’s relevant regulation indicates predictability on market opportunities and risk level anticipation. Theoretically, this study’s contributions lie in examining regulation as a moderator of different steps in the process of gaining competitive advantage between strategy, BMI and performance. For managers, the findings on regulation’s strategic impact may enable managers to better understand how regulation impacts hydrogen value systems’ development and develop their firms’ strategic orientation with regulation. For policy makers, the study advocates regulation’s impact for business and investment decisions by highlighting the importance of trustworthiness on policies defining bankability of renewable energy solutions.