ESG-Transformation as an Economic Imperative: Approaches to the Theory of Entrepreneurship and Innovation

The study aims to develop the theory of entrepreneurship and the economics of innovation through the lens of the sustainable development and ESG transformation concept. The subject of the research is the process of fundamental change in a firm's business model and management system, aimed at integrating environmental, social, and governance factors. The object of the research is a firm as an innovative and entrepreneurial entity in the context of a new economic paradigm. The purpose of the study is to theoretically substantiate the revision of the key determinants of a company's competitive advantage and long-term value in the context of ESG transformation. The scientific task is to develop a conceptual model that reveals the mechanism of transformation of ESG factors from a risk management element into a strategic resource that forms new barriers to entry and sources of rent in the innovation economy. Methods of system analysis, modeling, scenario analysis, and comparative analysis were used to conduct the research. As a result, the following main results can be noted. The concept of ESG transformation as an economic imperative has been unified, and key value and risk drivers have been identified. A structure for cost-benefit analysis is presented, demonstrating that the integration of ESG principles is a strategic investment, repaid through risk management, access to "green capital", and the strengthening of intangible assets. A framework for integrating climate scenarios into a valuation model has been developed, overcoming the limitations of traditional financial models. The theoretical contribution is to develop the theory of entrepreneurship and the economics of innovation by integrating the concept of ESG transformation into the analysis of sources of competitive advantage and the dynamics of industry competition. A model is proposed where sustainability is not an external constraint, but the core of an innovative business model that rebuilds value chains and the competitive landscape. The study concludes with recommendations for firms in the aspect of ESG transformation.

economics of innovation, entrepreneurship, long-term value of the company, ESG transformation, economic imperative, sustainable development, risk management, climate scenarios, competitive advantage

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