Both the ecological and social system are systematically degrading, resulting in decreasing capacities to support human civilization. Product development and manufacturing companies play a key role in driving society’s transition towards a sustainable path. Besides moral arguments, the motivation for companies can be expressed as a matter of smart risk management, i.e. avoiding threats and exploiting opportunities. Such sustainability risks can be related to, for example, brand and reputation, legislative change, or attracting top-talented employees. But, more importantly, it is about understanding changes that are inevitable on markets to come. Based on Maxwell’s interactive qualitative research approach and following the structure of the Design Research Methodology, this thesis aims to contribute (i) to knowledge by increasing the conceptual understanding of what sustainability risks are; and (ii) to practice by researching decision-support for how sustainability risks can be managed in a product development company context. The first study reviewed existing literature and identified characteristics of sustainability risks, which make them particularly difficult to manage. A following exploratory and descriptive study investigated companies’ current risk management practices and preconditions for sustainability integration. It showed that the effects of uncertainty from the sustainability transition need to be identified, assessed, and managed in relation to how they can affect objectives anchored in both internal and external stakeholder value creation. In parallel, the Framework for Strategic Sustainable Development was applied as a lens to understand the implications of the sustainability transition for company risk management. This resulted in a new definition, stating that sustainability risks are threats and opportunities that are due to an organization’s contribution or counteraction to society’s transition towards strategic sustainable development. A questionnaire study then investigated some case companies’ challenges and preconditions to build sustainability capabilities. Finally, a workshop method is proposed that aims to support design teams in early sustainable product development. Future research will leverage on the findings to develop and test decision support for how product development companies can manage sustainability risks on different organizational levels in practice to increase competitiveness, while taking leadership in the transition towards a sustainable society.

Society’s transition towards a sustainable state entails rapid and disruptive change in all sectors. This change is the source of profound uncertainty. From a company perspective, it can either pose existential threats if current practices or products enforce unsustainable development, or it can present opportunities if the company can provide solutions to the sustainability challenges humanity is facing. Such sustainability-related threats and opportunities, i.e., risks, can be related to, for example, reputation, legislative change, litigation, the ability to attract and retain talented employees, or the ability to meet customer needs on increasingly sustainability-driven markets. While more and more companies recognize the importance of building capabilities for sustainable product development to remain competitive, the relation between social and environmental aspects and economic performance is still oftentimes viewed as a trade-off where some profit must be sacrificed to be sustainable.Based on an interactive qualitative research approach, this thesis shows how a risk management lens can be used to support decision-makers at product development companies in understanding the dynamic interplay between socio-ecological sustainability aspects and business implications. The conceptual understanding of sustainability risks was advanced by identifying their characteristics and by proposing a new definition, utilizing literature review and the Framework for Strategic Sustainable Development. In the next step of the research, today’s situation and preconditions at some product development companies in Sweden were studied. Using multiple data collection methods, current risk management practices were investigated and hypotheses for sustainability integration were derived. Based on interviews with industrial and academic experts, the hypotheses were further developed into key aspects for sustainability risk management that can be used as recommendations for practitioners. Utilizing the newly developed definition and key aspects, a conceptual approach for strategic risk management within the sustainability transition was conceived. This approach was then adapted and operationalized as a workshop method for multifunctional teams in the context of product portfolio planning. Finally, the Sustainability Impact and Effects Analysis was developed and tested through an action research approach to provide decision-makers in early phases of the product innovation process with practical support for identifying, assessing, and managing sustainability risks. Uncertainty is neither good nor bad – it is just an inherent part of reality. This thesis showed how a risk management approach can be used to guide decision-making in uncertainty within the sustainability transition in a product development company context. Thereby, companies can take the strategic leadership that is required to benefit from the opportunities that can be found in this time of deep uncertainty.