Sustainable Digital Business Models in the GCC: Opportunities and Challenges

Introduction

Because time is running out and peak oil may have already been reached, sustainable development has become an increasingly critical global issue — and especially so in the Gulf Cooperation Council (GCC) region — with organizations of all types and sizes playing a crucial role in developing viable, sustainable practices (Anser et al., 2020). In response, the sustainable digital business model (SDBM) has received increasing attention based on its demonstrated ability to promote innovative practices that prioritize sustainability. In this regard, the results of a study of SDBMs by Hajiheydari et al. (2023) conclude that:

Business model innovation requires not only proper business design based on social and environmental sustainability and digital transformation requirements but also attention to a new component called sustainable engagement, which represents the need for engaging with social and environmental issues in addition to customers. (p. 420)

As discussed further below, identifying opportunities to develop sustainable business practices has assumed new importance and relevance in the Middle East today.

At present, the GCC region is comprised of six member-states: Bahrain, Kuwait, Oman, Qatar, Saudi Arabia (KSA), and the United Arab Emirates (UAE). While these countries share a common language, heritage, history, and religious values, they are all uniquely situated and differ with respect to their resources and national objectives — all of which can have an impact on the uptake of SDBMs (Freer & Kherfi, 2020).

There remains a dearth of timely and relevant research in this area, however, meaning that there is still limited understanding and awareness of the concept of sustainability in the GCC region. To address this gap, the objective of this research is to examine the opportunities and challenges in building SDBMs in the GCC region, with a focus on how digital technologies can help overcome challenges faced by traditional business models, through a literature review and quantitative analysis of data collected from various sources.

The objectives of this research are threefold:

1. To examine the opportunities and challenges in building SDBMs in the GCC region.

2. To identify the key factors that influence the adoption and diffusion of SDBMs in the GCC region.

3. To evaluate the potential of SDBMs in promoting sustainable development and reducing environmental impact in the GCC region.

This study was also guided by the following three research questions:

1. What are the opportunities and challenges faced in building SDBMs in the GCC region?

2. What are the key factors that influence the adoption and diffusion of SDBMs in the GCC region?

3. How can SDBMs promote sustainable development and reduce environmental impact in the GCC region?

This study is significant for several reasons, including most especially its timeliness and relevance in promoting innovative, sustainable business practices. By identifying the key factors that influence the adoption and spread of SDBMs, the research provides organizations with valuable insights for making informed decisions about integrating digital technologies into their business models. In addition, the study assesses the potential of SDBMs to foster sustainable development and reduce environmental impact, helping organizations align their strategies with broader sustainability goals. Ultimately, the findings contribute to advancing a more sustainable and digitally focused economy in the GCC region.

Literature Review

The literature review that follows provides a systematic overview of the key concepts related to SDBMs and examines the challenges and opportunities associated with their adoption and diffusion in the GCC region. It also identifies the region's unique socioeconomic and cultural factors that may influence SDBM adoption, such as a reliance on hydrocarbon resources, limited sustainability awareness, and a conservative business culture. The review also highlights the potential benefits of adopting SDBMs, including enhanced reputation, increased competitiveness, and reduced environmental impact. Sustainable business models are defined as those that incorporate social, environmental, and economic considerations into their core strategies and operations.

Notwithstanding the need for additional research in this area, there have been some signs of a growing interest in sustainable business models in the GCC region. For instance, a study by El-Kassar and Singh (2020) found a positive relationship between sustainable business practices and firm performance in the GCC region. Furthermore, the study found that firms that adopted sustainable business models had a competitive advantage over those that did not. Sustainability is an increasingly pressing issue in the GCC, where traditional economic activities have historically been based on natural resource extraction. Another important finding from the El-Kassar and Singh (2020) study was that the adoption and diffusion of sustainable business models can offer significant opportunities for economic diversification and long-term growth.

The comparatively limited research in this area to date has focused on the challenges and opportunities of adopting and diffusing sustainability models in other jurisdictions. For instance, according to Matos and Silvestre (2019), a sustainable business model should be focused on the triple bottom line of social, environmental, and economic impact. In addition, digital technologies have also been identified as important enablers for sustainable business models (Osterwalder et al., 2014).

With respect to the rates of adoption and uptake of SDBM practices, some studies have shown that many firms currently fail to recognize the importance of developing and administering sustainable business models to fuel long-term growth and flexibility in times of change (Lambert & Davidson, 2013). Likewise, a limited amount of research has focused on the role of institutions in facilitating the adoption of sustainable business models, with supportive governmental regulatory frameworks and financial incentives being among the most important contributing factors (Kolk & Pinkse, 2010).

Beyond the foregoing research, other studies have underscored the centrality of top-down management support in creating and maintaining an organizational culture that prioritizes sustainability (Haigh et al., 2015). In addition, forging strategic partnerships and collaborations with supply chain partners and other stakeholders has been identified as an important facilitator of diffusion for sustainable business models (Afuah & Tucci, 2012). Although not specific to the GCC situation, the foregoing studies do provide a useful rationale in support of investing the time and effort needed to make the fundamental changes required for long-term sustainability.

More specifically, AlSaeed et al. (2021) argue that digital technologies offer significant opportunities to enable sustainable practices and enhance the value of sustainable business models in the GCC region. As Ali and Abdel-Kader (2021) and Al-Mashari and Zairi (2015) caution, however, several challenges to the adoption and diffusion of sustainable business models in the GCC persist, including a fundamental lack of awareness concerning the benefits of SDBMs, regulatory constraints, and limited resources.

Despite these challenges, a growing consensus indicates that innovation is a critical driver of SDBM adoption and diffusion in the GCC region, underscoring the need for more research on the topic (Al-Shamsi et al., 2021). In addition, Alkhatib and Al-Lozi (2020), Al-Mubaraki et al. (2018), and Al-Otaibi et al. (2019) also concluded that government support is critical for the adoption and diffusion of SDBMs in the GCC region. Islam and Can (2024) further stress the need for greater public and private sector support for sustainable entrepreneurs within GCC member-states.

In reality, many of the above-described constraints to SDBM adoption could be overcome if practitioners were more aware of the proven benefits to their bottom line that can be achieved through sustainable digital business models (Al-Faris & Abbad, 2019; Al-Khouri, 2018). In addition, Al-Hammad et al. (2019) determined that the effective use of an organization's existing knowledge management resources was key to promoting sustainable practices in the UAE.

In short, the case for sustainable transformation is increasingly evident, yet profound changes typically require considerable time — a luxury that far too many organizations in the GCC can no longer afford. As a result, and despite the growing interest in SDBMs globally and in the GCC in particular, the adoption and diffusion of these models in the region are still in their infancy, meaning that new opportunities and challenges await exploration.

Opportunities and Challenges in Building Sustainable Digital Business Models

The GCC region presents significant opportunities for the adoption and diffusion of digital sustainable business models, driven by its focus on economic diversification and technological innovation. The region's large youth population offers a potential market for sustainable products and services (Bakir, 2020). Challenges persist, however, including a lack of awareness and understanding of SDBMs, insufficient supportive regulatory frameworks and financial incentives, and cultural barriers to adopting sustainable practices (Ghobadian et al., 2019). A study by Akguc and Al Rahahleh concluded that "this investment behavior is partly attributable to [GCC] firms' relatively limited access to capital given the tendency to keep leverage at a low level" (p. 3766). Moreover, greater collaboration among stakeholders is also needed in order to facilitate SDBM adoption (Sarkis et al., 2020).

Perhaps the greatest opportunity afforded by digital technologies for GCC member-states is that they offer new avenues for developing more efficient, effective, and sustainable SDBMs (Geissdoerfer et al., 2018; Rohn, 2017), as well as addressing traditional challenges such as limited scalability and profitability (Bocken et al., 2014; Stubbs & Cocklin, 2008). The GCC region is of particular interest for SDBM development and implementation due in large part to its unique economic and environmental characteristics (Schweitzer et al., 2018). While traditionally reliant on oil and gas, the region now recognizes the need to diversify its economy and develop sustainable industries to create jobs and reduce fossil fuel dependence (Alshuwaikhat & Abubakar, 2008).

Finally, the GCC faces environmental challenges including water scarcity, air pollution, and climate change (Bazilian et al., 2011; United Nations Development Programme, 2018), prompting calls for more sustainable practices across all economic sectors. As noted throughout, however, the successful adoption and diffusion of digital SDBMs in the GCC region requires enhanced regulatory support, suitable infrastructure, and relevant skills and competencies that are currently lacking in the region.