In developed countries, companies' product innovation has the problem of not incorporating sustainability in a sufficiently high degree. Companies in developed countries will however continue to innovate since it is required to stay competitive. At the same time, being considered sustainable is vital for a company to stay competitive, when market demand for such products and services increases. One way to overcome the imbalance between innovation and sustainability could be frugal innovation. Frugal innovation, according to some, is inherently sustainable and at the same time offer business opportunities and a new target group to companies in developed countries. This thesis therefore aims to explore how frugal innovation can enable companies to develop sustainable products. 

The study employed explorative research with a single case study on a Swedish company. Via twelve semi-structured interviews, primary data from a purposeful sampling of employees was gathered. A theoretical framework was established by performing a literature review. Analytical activities such as categorization, abstraction and data reduction were performed after transcribing and coding the recorded interviews. The analysis revealed three general findings: 1. Profit margin has been sacrificed to pursue environmental sustainability. 2. One suggestion to lower cost is moving the production outside Sweden. 3. Frugal products can be in conflict with a brand positioning that emphasizes quality.

This thesis concludes that companies similar to the company in this study actively and purposefully consider environmental sustainability when developing products. Economic sustainability is built into the construction of profitable business cases, whereas social sustainability is “forgotten” and rarely talked about or considered. Outcomes from frugal innovation, in combination with an existing brand positioning that emphasizes quality, might require a new marketing strategy. Frugal innovation can be realized by setting strict limitations to resource usage and the complexity of technology.

Suggested further research is to expand the study to a larger number of companies. Another research field is how frugal innovation can be measured now and in the future. It is also suggested to study how companies in developed countries can “go back” and design out of resource scarcity, and how frugal innovation will diversify business models and product portfolios.