From Potential to Impact: How Artificial Intelligence Drives Dynamic Capabilities for Sustainability

As environmental challenges intensify, companies face increasing pressure to integrate environmental sustainability through innovation into their core business practices. Artificial intelligence (AI) holds transformative potential for enabling sustainable business, yet the mechanisms through which firms develop AI-driven capabilities for sustainability remain underexplored. To bridge this gap, this study inductively analyses an extensive sample of semi-structured interviews with CEOs, business unit heads and sustainability as well as AI managers. The resulting integrated empirical framework illustrates the iterative process of AI-driven capability development of firms tackling sustainability challenges. Entrepreneurial orientation is central to this process, serving as a critical driver of agility, proactiveness, and risk-taking behaviors essential for cultivating dynamic capabilities for sustainability. By uncovering the microfoundations of AI-driven sustainability practices, this study offers actionable insights into aligning entrepreneurial strategies with sustainability objectives, utilizing AI as a catalyst for transformative and environmentally sustainable innovation.