Sustainability-Oriented Low-Carbon Innovation in SOEs: A Case Study of Shanghai Metro

Abstract

State-owned enterprises (SOEs) encounter various constraints on sustainability in low-carbon development due to institutional hybridity. This study aimed to examine how SOEs develop sustainability-oriented innovation (SOI) toward low-carbon development. Drawing on a case study of Shanghai Metro, we developed a process model for sustainability-oriented low-carbon innovation (SLI) in SOEs. The model illustrated that implementing a national low-carbon strategy introduces environmental, social, and financial constraints on sustaining value pluralism for SOEs, triggering the actors to develop SLI involving sensing and idea generation, configuration, and transformation, resulting in innovative low-carbon operational processes, products/services, and business models which reconcile environmental benefits, financial returns, and social welfare. This paper enriches the emerging research on SOI and extends the existing understanding of low-carbon innovation. Beyond this, the findings also offer a new lens of SLI to the conventional research and managerial practices concerning SOEs’ hybridity and low-carbon development.

1. Introduction

With the dramatic surge in global greenhouse gas emissions, climate change has become one of the most urgent challenges worldwide, attracting widespread attention [1,2,3,4]. To tackle the issue of climate change, more than 190 countries reached a consensus on the necessity of limiting global warming in the Conference of the Parties 21 (COP21) Paris Agreement. To achieve net-zero targets, many countries attach great importance to developing low-carbon economies [5] and have adopted various measures for rapid decarbonization [2,5,6]. As essential components of the national economy and strong proponents for national strategies [2,7], state-owned enterprises (SOEs) are expected to take the lead in carbon emission reduction efforts, ensuring the successful implementation of national low-carbon development strategies [2].

However, in the pursuit of low-carbon development, state-owned enterprises (SOEs) have encountered limitations on sustainability development. In other words, they face the challenge of maintaining value pluralism, which entails balancing environmental benefits, financial performance, and social utility [2,8]. Especially in some countries with aggressive legislation on low-carbon emissions, SOEs are required to make sacrifices in terms of economic and social benefits (such as downsizing, reducing output, and divesting from profitable but environmentally unfriendly businesses) to achieve low-carbon goals [9]. In this case, pursuing low-carbon goals may conflict with the traditional wealth maximization objective. Therefore, such constraints on low-carbon transition have compelled SOEs to seek an innovative approach to sustainability [10]. In practice, some leading SOEs have adopted strategies to revamp their operational processes, create low-carbon products and offer carbon-neutral services, or restructure their business models promptly to better accommodate the era of the low-carbon economy [5,8,9,11]. These sustainability-oriented low-carbon innovations have resulted in a quantum leap in both low-carbon transformation and high-quality development. Nevertheless, the underlying mechanism of sustainability-oriented low-carbon innovation still needs to be researched.

Previous research has concluded that innovation is a multiple-stage and dynamic process through which organizations transform new ideas into improved processes, products/services, or business models [12,13]. In addition, organizing innovation requires significant capital, talent, and technological resources, and their effectiveness depends on the resource orchestration capabilities [8]. In this sense, the innovation process includes idea generation, resource configuration, and implementation. Nevertheless, our understanding of the innovation process in a sustainable low-carbon development context still needs to be researched. To address this gap, this paper examined how SOEs develop sustainability-oriented innovation toward low-carbon development. We conducted an in-depth case study of Shanghai Metro, a typical SOE in China, by analyzing its low-carbon innovation practices and process to sustain value pluralism in the context of China’s aggressive low-carbon strategy.

This paper is expected to make several theoretical contributions and managerial implications. First, this study provides an original and monographic view of how SOEs develop sustainability-oriented low-carbon innovation based on a process model. It depicts that environmental, social, and financial constraints on sustaining value pluralism force SOEs to change and trigger the development of sustainability-oriented low-carbon innovation comprised of sensing and idea generation, configuration, and transformation. Second, this study contributes to the literature on low-carbon innovation by adopting the lens of sustainable development instead of merely focusing on environmental benefits or economic performance. In addition, this study also enriches the understanding of low-carbon innovation, conceptualizing it from three elements—processes, products/services, and business models—rather than as low-carbon technology innovations only. Third, this study sheds light on the essential role of sustainability-oriented innovation that can help SOEs overcome the constraints caused by value pluralism, particularly in the context of low-carbon development. Importantly, our findings also provide practical guidelines to assist low-carbon practitioners in adopting sustainability-oriented low-carbon innovation to simultaneously achieve environmental, financial, and social goals and high-quality development.

The remainder of this study is formulated as follows. Section 2 provides a literature review on the low-carbon development of SOEs and sustainability-oriented innovation. Section 3 outlines the design of the single case study and the qualitative methodology used—a systematic approach to new concept development and grounded theory articulation. Section 4 presents the model for a sustainability-oriented low-carbon innovation development process, providing a detailed explanation of each concept in the model, supported by qualitative data. Finally, Section 5 offers the conclusion, along with a discussion on its theoretical contributions, managerial implications, and limitations and suggestions for future research.

2. Literature Review

2.1. Low-Carbon Development in SOEs

State-owned enterprises (SOEs) are enterprises owned or controlled by a government that produce or provide goods or services to the public [14]. It is widely recognized that SOEs possess hybridity in nature due to multiple institutional logics and value pluralism [7], which refers to the intersection between public administration, informal political interference, and standard corporate governance [15]. First, as part of the public sector, SOEs are expected to create social value, such as providing public services of general social interest [16,17]. Second, as the vanguard of implementing national strategies, SOEs are required to take on more environmental responsibilities, such as pollution control, compared to private enterprises [18]. Third, as players in the market sector and strong supporters of national economic development, SOEs need to pursue financial returns and create more economic value [19]. Accordingly, SOEs face an organizational paradox of simultaneously pursuing competing social, environmental, and economic goals [20]. Noticing this tension, many scholars advocate for further research on exploring how organizations experience and manage the sustainability paradox, especially in the context of low-carbon development [2,6,9,10].

In recent years, there has been growing interest in the issues surrounding the low-carbon development of SOEs. This interest is driven by SOEs’ unique and pivotal role in implementing national low-carbon strategies [2,21]. Previous studies on SOEs’ low-carbon development have primarily focused on the impact of external pressures and other incentive tools on their motivation for carbon emission engagement, as well as the resulting outcomes. However, most of these studies have only examined a single dimension of the outcomes, such as carbon emission reduction [6], financial returns [18], or operational performance [2]. The issue of how SOEs reconcile pluralistic value creation remains under-researched.

Considering SOEs possess specific administrative characteristics and take up a leading position to ensure the implementation of national policies, many studies have examined the effect of institutional pressures on SOEs’ carbon reduction engagement. Surprisingly, the findings of previous studies have yielded mixed results. For instance, some studies have found that institutional pressure from carbon reduction policies influences SOEs’ engagement in carbon reduction, which is associated with their more available access to state-owned bank loans in low-carbon investment [21]. These external pressures and intrinsic financial incentives also enhance SOEs’ environmental performance [18]. In contrast, other studies have revealed that carbon regulation exerts insignificant or even negative effects on operating performance caused by the high costs of low-carbon renovation [11,22], inefficient investment, and low technical efficiency [2]. Furthermore, to meet increasingly stringent carbon reduction targets, some SOEs are compelled to downsize, reduce output, or divest profitable yet less eco-friendly businesses [9], thereby sacrificing economic and social benefits. Based on the above discussion, SOEs face challenges in achieving sustainability in the context of low-carbon development. Therefore, it is crucial for SOEs to adopt an innovative strategy that enables them to simultaneously attain economic profits, social benefits, and carbon emission reduction.

It is widely supported that innovation may contribute to sustainability [10]. Many scholars have found that embracing the tensions arising from pursuing competing values can lead to an innovative (“both–and”) solution, resulting in sustainable outcomes [20,23,24]. In this sense, sustainability-oriented low-carbon innovation may help SOEs balance the tension of reconciling economic, social, and environmental benefits, thus achieving a win–win situation of decarbonization and corporate development.

2.2. Sustainability-Oriented Innovation

Sustainability-oriented innovation (SOI) stresses the notion that “innovation should not only guarantee a competitive advantage for companies but also provide environmental benefits and produce social well-being” [25]. This concept is essentially aligned with the triple bottom line proposed by Elkington [26], which emphasizes that businesses ought to adopt a responsible approach and provide equivalence to environmental, social, and economic dimensions in decision-making. Since many scholars have demonstrated that SOI requires different conditions in different contexts [27,28], it is necessary to conduct empirical research examining SOI in a specific context, such as enterprises’ low-carbon development, which requires firms to enhance environmental performance in addition to financial or social performance.

In this paper, sustainability-oriented low-carbon innovation (SLI) is defined as SOI in the context of low-carbon development. Unlike the broader concept of SOI, which is not limited to a specific context, SLI specifically focuses on innovation in the low-carbon context. In other words, SLI represents the pursuit of low-carbon innovation that contributes to sustainable development, essentially requiring a reduction in carbon emissions while generating social value and economic returns. This concept is of great significance in addressing the challenge of achieving coordination of multiple values in the process of low-carbon development. However, further investigation is still needed to understand how SLI can be effectively achieved [10].

In the context of SOI, there is emerging research on the internal managerial and external relational factors of effective SOI and the measurement of its outcomes [25]. These factors encompass various aspects, such as organizational sustainable consciousness [29], learning [30,31], new forms of management systems (e.g., environmental management systems) [31], holistic sustainability management system standards and guidelines [32], sustainability-oriented business models [33,34], and collaboration within sustainable innovation ecosystems [35]. Nevertheless, previous studies have failed to systematically explore how companies develop SOI. Although some authors have attempted to treat SOI as a dynamic process [28], further research is needed to comprehensively understand the process by which organizations cultivate and implement sustainable organizational innovation.

Regarding low-carbon innovation, the majority of studies primarily focus on the technological aspects, antecedents, and outcomes of low-carbon innovation while overlooking other crucial dimensions and the process of low-carbon innovation [36]. The prevailing focus lies on radical or incremental low-carbon technology innovation, encompassing energy-saving technologies, renewable energy technologies, and CCS [11,37], which focus on the single value dimension, that is, ensuring environmental benefits at the partial expense of economic and social benefits. Thus, they cannot address the myriad of constraints associated with sustainable low-carbon development and maintenance of the multi-value synergy in the process of low-carbon development [38]. Given the importance of achieving value coordination in low-carbon development, it is imperative to deepen the concept and dimensions of low-carbon innovation from the perspective of sustainable development. Only on the basis of an orientation toward sustainable development can low-carbon innovation better serve the synergy of multiple values. Therefore, how to broaden the dimension of low-carbon innovation and update the mode of low-carbon development is a key issue that needs to be considered and solved.

It is widely accepted that innovation is a multi-stage process in which organizations transform new ideas into improved processes, products/services, or business models with diverse strategic aims based on specific financial, social, and environmental contexts [12,13]. The essence of organizational innovation lies in incremental or rapid changes at the firm level [10], and it is typically seen as a dynamic, continuous, and iterative process of generating, configuring, and transforming new ideas into practices [39,40,41]. Specifically, (1) sensing involves sense-making and idea generation, including scanning, interpretation, and conceptualization [42]. Actors must actively try to make sense of the external changes, as well as monitor internal conditions [43] and reach agreements about problems and potential solutions before proceeding to actions [42]. Importantly, moving through the innovation process requires a fundamental shift in philosophy and values from the beginning [10]. (2) Resource configuration requires actors to orchestrate the firm’s resources and capabilities to capture value from those ideas [41]. (3) Transformation involves implementation, realizing innovation and continual renewal to maintain competitiveness [43].

In this sense, the process of sustainability-oriented low-carbon innovation commences as a response to constraints that arise from the triple bottom line, followed by sense-making and idea generation, resource configuration, and transformation.

3. Methodology

We conducted a case study with the intention of developing a conceptual framework for sustainability-oriented low-carbon innovation [44]. (1) Given our interest in understanding how SOEs innovate toward sustainable low-carbon development, we adopted qualitative methodology, which is particularly suitable for exploratory research studying ambiguous phenomena [45,46]. (2) Following the qualitative approach, we conducted an in-depth single case study following Yin’s [45] suggestion. On the one hand, a single case study is “eminently justifiable” when the case is the quintessential example of a particular phenomenon under investigation (i.e., revelatory). On the other hand, it allows the researchers to use “thick description” [47], which refers to providing detailed descriptions and interpretations of the observations to achieve external validity and facilitate the identification of patterns in low-carbon innovation formation [48].

3.1. Sampling and Research Setting

To achieve the research aim, we applied theoretical sampling and selected the Shanghai Metro as the case study, examining its low-carbon innovation practices and processes in the context of implementing long-term low-carbon development strategies in China.

Research setting. Our research setting was based on SOEs in China. In the past two decades, China has experienced impressive annual GDP growth averaging 10%, making it the world’s second-largest economy by 2015. However, this rapid economic expansion has taken a toll on China’s environment, leading to it overtaking the United States as the world’s top carbon emitter in 2009 [21]. According to the China Carbon Accounting Database (CEADs), China’s cumulative carbon emissions in 2022 were 11 billion tons, accounting for approximately 28.87% of global carbon emissions [49]. As a result, the Chinese government has determined to improve its environmental conditions and transition from a capital-intensive and industry-dominated economy to a more sustainable one, announcing “dual carbon” goals that peak carbon emissions by 2030 and realize carbon neutrality by 2060 [50]. While such ambition is welcomed by the world, it has placed extreme pressure on Chinese SOEs. Chinese SOEs, which are strong supporters of the central government’s decision-making and faithful executors of the State Council’s will, are the leading pioneers in carbon emission reduction [2]. Consequently, it is meaningful to study how Chinese SOEs respond to these initiatives, thereby providing a typical research context for our question.

Shanghai Metro has been run by Shanghai Shentong Metro Group, a typical Chinese state-owned enterprise, since it first began operations in 1993. It owns the most extended metro network in the world, with 20 metro lines and 508 stations covering 831 km [51]. It is also one of the busiest city transit systems, carrying over 10 million passengers per day, accounting for 73% of the urban public transportation system [52,53]. To improve residents’ quality of life while ensuring its sustainable development, Shanghai Metro has carried out three strategic transformations between 2009 and 2020 with incremental progress and notable innovation in the engineering, construction, and operational management of the metro system. Responding to the national strategy for tackling climate change, Shanghai Metro was the first in the rail transit industry to launch low-carbon strategies as early as 2006 [54].

Rationales for case selection. Consistent with the rationale for a single case selection suggested by Yin [45], Shanghai Metro, a “common” and “revelatory” case, was chosen for several reasons.

(1) A “common” case with typical representativeness. As an SOE, Shanghai Metro has faced multiple constraints on sustainable low-carbon development. First, it has to meet various social, financial, and operational goals. These goals are often vaguely defined (e.g., more environmentally friendly), while others are incompatible or even contradictory (e.g., increasing employment while reducing costs). Second, the institutional environment and policies relating to SOEs, the transit industry, and environmental protection in Shanghai are continually evolving. Its actions may provide insights into how to handle value pluralism through innovation.

(2) A “revelatory” case with enlightening insights about sustainability-oriented low-carbon innovation. Since the Chinese government began releasing five-year plans on energy conservation and emission reduction in 2006, Shanghai Metro has faced multiple challenges in low-carbon development. As an energy hog, it urgently needs to change its philosophy, values, and behaviors to reduce carbon emissions. Specifically, although the metro is universally regarded as a low-carbon transportation tool, the system guzzles over 2.5 billion kWh of electricity annually, accounting for 1.5% of the urban electricity consumption. Under constraints on low-carbon development, Shanghai Metro has adopted several measures and actions to control emissions and participate in low-carbon governance in the rail transit industry in the past two decades. These efforts have created representative innovations in low-carbon development and successfully balanced economic, environmental, and social performance. Thus, such conditions are highly related to our research questions and can uncover revelatory findings previously inaccessible to researchers [45].

3.2. Data Collection

We relied on multiple data sources, including interviews, archival data, and observation. As shown in

Table 1. Profiles of the interview data.

No.	Interview
	Informant’s Department	Informant’s Organizational Level	Position and Responsibility	Gender	Length of Interview
A1	Technology Center	Manager	Deputy Director of the Environmental Energy Research Department	Male	120 min
		Manager	Head of the Electric Power Department, Engineer	Male
		Manager	Head of the Ventilation and Air Conditioning Department, Engineer	Female
A2	Market Operations	Executive	Minister, Board Member	Male	120 min
A3	Operations and Management	Executive	General Manager	Male	120 min
		Manager	Head of Facilities and Equipment Management Department, Power Engineer	Male
	Operation Company	Executive	General Manager	Male
A4	Party Building Department	Executive	Head of Green Propaganda	Female	120 min
		Manager	Deputy Secretary of Youth League Committee	Female
A5	New Energy Company	Executive	General Manager	Male	60 min
A6	Planning and Technology Information	Executive	Minister	Male	110 min
A7	Environmental Energy Research Department	Manager	Deputy Director, Staff Member of Energy Saving Office	Male	120 min
Total number of interviews				12

and

Table 2. Profiles of the archival data.

No.	Archival
	Content	Data Source	Number
Internal documents
B1	Book “Shanghai Shentong Metro Group Limited Company Chronicles”	Shanghai Metro official website	1
B2–B11	CSR Report (2013–2022)	Shanghai Metro official website	10
B12–B29	Annual Report (2005–2022)	Shanghai Stock Exchange official website	18
B30–B34	Planning Report (2006–2022)	Private data	5
External documents
C1–C21	Policies: National Five-Year Plan, Greenhouse Gas Emission Policy, Energy Planning, etc.	The State Council of the People’s Republic of China official website	22
C22–C36	News: Shanghai Metro’s Road to Green Development, Low-carbon Practices; Chairman’s Exclusive Interview	China Association of Metros official website; Shanghai Metro official website; China National Radio News; Sohu News	14
C37–C46	Reports: Urban Rail Transit Statistics and Analysis Report (2014–2021), China’s Low-carbon Development Journey, etc.	China Association of Metros official website	10
Total number of archival			80

, we employed archival and observational data to triangulate the interview data. The consistency of data sources helps to support the validity of the data collection [45].

Interviews. We conducted eight semi-structured interviews with 12 informants from different organizational levels between April and September 2022, involving board members, general managers, section directors, engineers, and frontline operators. Interview questions were asked following a prepared protocol that involved questions on (1) constraints—the constraints on sustaining value pluralism after the implementation of the national low-carbon strategy, (2) innovation process—to investigate the process of how constraint-solving ideas were developed and then led to low-carbon innovation, and (3) outcomes—the low-carbon innovation that achieved the coordination of economic, environmental, and social benefits. The interview protocols can be found in

Table 3. Interview questions.

Themes	Interview Questions
Constraints
	From the perspective of your company/department, how do you define sustainable low-carbon development? What are the main constraints or challenges that may hinder your company’s sustainable low-carbon development? Could you provide some examples of specific constraints?
Innovation process
	How does your company/department respond to these constraints? (How does your company develop low-carbon innovation?) Provide concrete example(s) if there are any. How are these innovative constraint-solving ideas generated? Could you describe the detailed process by which constraint-solving ideas are developed within your organization? How do you overcome different constraints when you are engaging in the process of low-carbon innovation?
Outcomes
	From the perspective of your company, how do you define the coordination of economic, environmental, and social benefits in low-carbon innovation? Can you provide specific examples of low-carbon innovations that have successfully achieved this coordination?

. These interviews lasted 120 min on average. All of the interviews were audio recorded and subsequently transcribed within 48 h. The transcripts for each interview formed the basis of the data analysis.

Archival data. To control the retrospective bias caused by time lag, we employed archival data to triangulate the interview data [45]. (1) We systematically collected private data, recording the historical path of Shanghai Metro’s low-carbon development since 2006, including 18 annual reports (2005–2022), 10 CSR reports (2013–2022), one ethnography, and five strategic plans. (2) We also collected public data from websites, including patents and news related to Shanghai Metro’s low-carbon practices for data triangulation. In addition, we collected environmental regulations from official government websites, tracking the evolution of the institutional environment.

Observation. Since the phenomena of low-carbon transition and innovation have not been historical, some relevant social or environmental conditions were available for observation [45].

3.3. Data Analysis

Step 1. Development of chronological case stories. Our analytic approach was iterative and abductive to develop a process model [55]. We began by developing chronological case stories of the low-carbon development of Shanghai Metro between 2006 and 2022 (see Figure 1). In this step, we attempted to understand what low-carbon innovation it has made and the overall unfolding processes of innovation formation, focusing on broad issues, such as the backgrounds and objectives of each low-carbon innovation and the implementation statuses of each innovation. Specifically, the low-carbon development of Shanghai Metro is a progressive process, which has gone through three stages: germination, growth, and expansion. Due to its strategic planning based on China’s five-year plans, the low-carbon practice plan has been dynamically adjusted in different stages. Therefore, the low-carbon development process can be divided into the following three temporal intervals: (1) The 11th Five-Year Plan period (2006–2010), which was the germination period of low-carbon development, focusing on low-carbon process innovation, such as carbon emission monitoring systems and a low-carbon workplace. (2) The 12th Five-Year Plan period (2011–2015), which was the growth period of low-carbon development, focusing on low-carbon technology R&D and low-carbon product innovation, such as low-carbon consulting services and high-quality low-carbon transportation services. (3) From the 13th Five-Year Plan (2015–2022) to the present, which is the expansion period of low-carbon development, focusing on low-carbon business model innovation, such as the “photovoltaic-metro” mode and “Smart Metro” systems. Based on chronological analysis, we developed preliminary concepts and found clear patterns for low-carbon innovation—sensing and idea generation, configuration, and transformation.

Step 2. Coding by using Gioia methodology. We adopted the systematic approach to new concept development and grounded theory articulation proposed by Gioia et al. [56]. It not only enabled us to organize our data into a coherent visual aid, but also offers a graphical representation of our progression from raw data to first-order concepts, second-order categories, and aggregated dimensions during the analysis. This is a crucial aspect of demonstrating the rigor in qualitative research [56]. Figure 2 visualizes the emerging data structure. For instance, first-order concepts can be extracted from transcripts, such as “interpreting institutional requirements,” “scanning market and technology opportunities,” and “conceptualizing a sustainability-oriented philosophy.” These codes can be grouped into a second-order category called “sensing and idea generation.” Finally, the combination of this category and others, including configuration and transformation, can be distilled into an aggregate dimension known as “developing low-carbon innovation.” For the sake of clarity, we illustrate this process sequentially:

(1) Open coding. All eight interview transcripts and 80 archival data were transcribed and imported into MAXQDA2020 software for qualitative analysis during open coding. Our initial engagement with the qualitative data was based on multiple rounds of open coding to uncover low-carbon innovation-related constraints, processes, and outcomes. These in vivo codes were inducted from informants’ descriptions of the inner workings of securing energy saving and carbon emission reduction and their strategies for sustainable development [56]. The coding was conducted by two researchers independently and then mutually checked. Any disagreement was resolved through detailed discussions. Multiple iterations eventually reduced in vivo codes to 25 first-order codes that described low-carbon-related constraints, innovation processes, and outcomes.

(2) Axial coding. Drawing concepts from existing sustainable development theory [10] and innovation process research [13,57], we grouped higher-level categories that shared similar characteristics in the process of open coding [56]. We then clustered these codes into nine second-order codes, including environmental constraints, social constraints, financial constraints, sensing and idea generation, configuration, transformation, innovative low-carbon-oriented operational processes, diversified low-carbon products/services, and advanced low-carbon-oriented business models.

(3) Selective coding. Finally, the categories were abstracted during selective coding into aggregate dimensions that share similar properties and dimension ranges [56]. The aggregate dimensions emerged after a series of iterative processes between theory and data, including constraints on sustainable low-carbon development, developing low-carbon innovation, and sustainability-oriented low-carbon innovation.

4. Findings

Figure 3 depicts the process model of sustainability-oriented low-carbon innovation formation and serves as the theoretical framework for our findings. Specifically, we argue that the formation process is comprised of three interrelated stages: (1) constraints on sustainable low-carbon development, (2) developing low-carbon innovation, and (3) sustainability-oriented low-carbon innovation. It demonstrates that the implementation of a national low-carbon strategy has introduced environmental, social, and financial limitations on Shanghai Metro’s ability to sustain value pluralism. This has motivated the actors involved to develop sustainability-oriented low-carbon innovation (SLI) through sensing and idea generation, configuration, and transformation. As a result, innovative low-carbon operational processes, products/services, and business models have been created, which harmonize environmental benefits, financial returns, and social welfare. Table 2 presents supplementary evidence derived from our informants and archival sources.

4.1. Constraints on Sustainable Low-Carbon Development

Constraints can stimulate practitioners to generate ingenious problem-solving [58] and often play a pivotal role in promoting sustainability-oriented innovation [59]. Implementing a national low-carbon strategy has introduced constraints on sustaining value pluralism and hybridity for SOEs. Many SOEs face high expectations concerning their environmental performance, in addition to economic performance and social utility, aligning with the “dual carbon” goals proposed by the Chinese government. Based on the analysis of illustrative quotes (see

Table 4. Profile of the illustrative quotes of “Constraints on sustainable low-carbon development”.

Second-Order Categories	First-Order Concepts	Illustrative Quotes
Environmental constraints	Increasingly stringent environmental regulations on carbon reduction	“In the development outline proposed by the government in 2016, it is required to actively control carbon emissions, implement emission reduction commitments, and reduce carbon dioxide emissions per unit of GDP by 18% from 2015 to 2020.” (C21)
	Inefficient management of large-scale operation	“Vigorously strengthen the management of energy conservation work in each unit, but due to redundant personnel and numerous tasks, management efficiency is insufficient.” (C13)
Social constraints	Insufficient capacity for increasing demands for low-carbon services/products	“Some new energy-saving products are also in the process of continuous attempts, and the overall low-carbon capacity of the enterprise is difficult to rapidly improve.” (A5)
	Inherent social missions of SOEs	“Based on serving the public, state-owned enterprises consider more things and need to weigh their social responsibilities.” (A4)
Financial constraints	Decreasing the cost-effectiveness of carbon emission-reducing practices	“Before, the enterprise spent a lot of energy to do energy-saving transformation but also achieved good results. However, this work is now in a stage of diminishing marginal benefits, and the more difficult it is to reduce emissions.” (A6)
	Lack of financial support and additional revenue generators	“The most important thing for low-carbon transformation is the mentioned funding issue. In the past, ticket income could balance operating costs. Hence, the entire energy conservation work is still relatively large, and the results are relatively significant, but now the enterprise has entered a state of loss. The fund gap for energy conservation transformation is relatively large.” (A1)

), we found that these constraints include (1) environmental constraints, (2) social constraints, and (3) financial constraints.

4.1.1. Environmental Constraints

Increasingly stringent environmental regulations on carbon reduction. Over the past two decades, the progressive iteration of environmental regulation has presented Shanghai Metro with increasingly stringent binding targets in energy saving and carbon emission reduction. Starting from the 11th Five-year Plan period (2006–2010), China has incorporated energy intensity reductions into the outline of the plans for national economic and social development as binding targets that slashed energy intensity by 20% from 2006 to 2010. During the 12th Five-year Plan period (2011–2015), China supplemented binding targets that slashed carbon intensity by 17% based on decreasing energy intensity by 18%. To further guarantee the fulfillment of commitments in meeting energy conservation and energy efficiency enhancement targets, since the 13th Five-year Plan period (2016–2020), China has implemented a system for controlling energy intensity and energy consumption. Based on this, the provincial-level government has set targets at the firm level with supervision and performance evaluation. From controlling energy intensity to volume, from single index to multiple indexes, and from requiring energy conservation to carbon emission reduction, the evolution of index management systems has imposed more and more tough institutional constraints on Shanghai Metro’s low-carbon development.

Inefficient management of large-scale operations. Managerial capacity constraints have brought enormous carbon reduction pressure to Shanghai Metro. With the world’s most rapidly expanding metro network, Shanghai Metro confronts formidable challenges in effectively aligning large-scale operations with low-carbon management. As the Board Chairman said, “Building such an extensive metro network is an extraordinary achievement. However, behind the glamorous speed lies the necessity to tackle various construction and management challenges developed countries have encountered over 100 years. This presents a tremendous managerial challenge for administrators” (C28). This necessitates a transformative shift for Shanghai Metro from construction-oriented endeavors to operating efficiency, focusing on reducing the overall energy consumption of the metro system.

4.1.2. Social Constraints

Insufficient capacity for increasing demands for low-carbon services/products. With the growing popularity of low-carbon living, there is an increasing demand for low-carbon transportation services. Given its insufficient capacity, Shanghai Metro needs to continuously expand its infrastructure to enhance its passenger-carrying capacity. However, the need to enlarge capacity conflicts with the environmental regulation on energy consumption volume. For example, from 2006 to 2010, Shanghai Metro was mandated to construct at least a 400 km metro network to ensure passenger-carrying services during World Expo (B1). Furthermore, over the following decade, Shanghai Metro also faced ongoing pressure to develop a green and low-carbon transport system, aligning with Shanghai’s strategic objectives of building a sustainable and environmentally friendly city. On the contrary, the inadequate capacity is also reflected in service quality. Shanghai Metro also needs to improve service quality to foster a societal preference for eco-friendly commuting and enhance its market share within the urban public transportation system.

Inherent social missions of SOEs. SOEs are prevalent in public products/services of general economic and social interest [7]. However, their social commitments sometimes conflict with their underlying higher standard of energy saving and carbon emission reduction. As an interviewee pointed out, “The primary objective of state-owned metro enterprises was to fulfill the citizens’ demands on public transportation featuring green and low-carbon. In the past two decades, we have already built an extensive metro network with 20 metro lines that are 831 km in length and 508 stations, ranking first in terms of metro scale in the world. It attracted more than 10 million daily passengers, accounting for 70% of the urban public transportation system. Nevertheless, there is an ongoing requirement to enhance capacity, such as shortening the minimum headway of metro to less than two minutes, raising the maximum speed, and improving the efficiency of current operations” (A1). Scaling up capacity means a rise in overall energy consumption, which makes energy saving binding targets more challenging to meet. In short, Shanghai Metro needs to handle potentially conflicting values underlying the complex missions of SOEs [60], especially its inherent social mission and exogenous environmental regulation.

4.1.3. Financial Constraints

Decreasing the cost-effectiveness of carbon emission-reducing practices. The profound decarbonization efforts present financial sustainability challenges for SOEs. In the past decade, Shanghai Metro has put millions into the energy-saving transformation of existing stations and equipment. Approximately 70% of the energy-intensive and high-emission equipment, such as air conditioners, lighting, and electric traction equipment, has accomplished energy-saving renovations. Nowadays, the potential for energy savings has gradually contracted, leading to diminishing marginal returns on these low-carbon investments. As an interviewee demonstrated, “We have done all that is humanly possible and almost approached our peak, leaving the rest to be a hard nut to crack” (A3).

Lack of financial support and additional revenue generators. Maintaining financial sustainability also requires Shanghai Metro to acquire additional financial support for deep decarbonization and to create new areas of business growth. On the one hand, due to decreasing subsidies in energy-saving renovations, many low-carbon practices have become challenging to implement. As highlighted by an interviewee, “Initially, ticket revenues could balance out operational costs, and the government also provided special subsidies for energy-saving initiatives. This prompted significant progress in energy-saving endeavors. However, the government reduced subsidies for energy conservation. Some high-risk and high-devotion low-carbon initiatives were postponed due to the lack of funding and cost-cutting” (A6). On the other hand, following the corporatization and privatization trends in recent decades, many SOEs in China face much higher expectations concerning their financial performance [7]. In addition, as growth slows, creating new revenue generators is crucial for Shanghai Metro to extend growth and prevent decline in the long term. Consequently, the sustainable low-carbon development of Shanghai Metro encounters dual financial constraints arising from the lack of government financial support and the enterprise’s non-ticket revenue.

4.2. Developing Low-Carbon Innovation

Embracing tensions (i.e., constraints on sustainable low-carbon development) can lead to an innovative (“both–and”) solution [8,23,61]. Innovation, defined as the invention, development, and implementation of new ideas [57], is a source of the continued vitality of firms and transformative change in society. Being consistent with the process perspective, developing low-carbon innovation refers to all the steps taken during an innovation process, which can be categorized into three main stages: (1) sensing and idea generation, (2) configuration, and (3) transformation. The illustrative quotes are shown in

Table 5. Profile of the illustrative quotes of “Developing low-carbon innovation”.

Second-Order Categories	First-Order Concepts	Illustrative Quotes
Sensing and idea generation	Interpreting institutional requirements	“During the 12th Five-Year Plan Period, the Chinese government has also organized and implemented various policies and actions closely related to the control of greenhouse gas emissions.” (C18)
	Scanning market and technology opportunities	“In 2021, the government will issue relevant laws, regulations, rules and normative documents, and provide for the launch of online trading in the national carbon market.” (C37)
	Conceptualizing sustainability-oriented philosophy	“Before the double carbon goal, our group promoted green, energy saving, and wisdom. On the one hand, there will be circulation of red-headed documents within the group or raise environmental awareness through public accounts and slogans in station management offices.” (A4)
Configuration	Resource acquiring and leveraging	“Enterprises have gradually increased investment in energy-saving special renovation projects of operational lines and actively strive for the government’s energy conservation and emission reduction special funds.” (C28)
	Institutional building	“Since 2007, Shentong Metro Group has established an energy conservation work system composed of policy, management, and technical support and gradually transformed the extensive energy management mode into an intensive and fine management mode to ensure the standardization and long-term efficiency of energy conservation work.” (C22)
	Research and experimental development	“During the 12th Five-Year Plan period, Shentong Metro attaches importance to innovation and research and development, introduces, digests and absorbs foreign advanced technologies, independently researches and applies the “four new technologies”.” (B1)
	Cooperation and learning	“In 2015, Shentong Metro Group signed a strategic cooperation agreement with Beijing Jiaotong University. Shentong Metro Group, as a practice base for teachers and students of Beijing Jiaotong University and a joint training base for industry-university-research, jointly promoted the talent reserve in urban rail transit-related fields.” (B10)
Transformation	Establishing a low-carbon management system	“Since the “11th Five-Year Plan” period, Shanghai Metro has been actively planning, formulating a system of energy conservation and emission reduction strategy and building an energy conservation and emission reduction work system composed of four systems of “management guarantee, special planning, regulations, and special technologies.” (B1)
	Applying low-carbon technologies	“Shentong Metro Group attaches great importance to the introduction, digestion, and absorption of foreign advanced technologies in cooperation with industrial, academic, and research units, and the independent development and application of new technologies.” (C29)
	Developing low-carbon business	“Cooperate with JCDecaux Advertising Company, apply energy-saving and environmental protection technology to JCDecaux subway, airport and bus body and other media, adhere to the cooperation with low-carbon and environmentally friendly enterprises to promote low-carbon lifestyle advertising.” (C32)
	Building low-carbon collaboration networks	“Shanghai Metro enterprises pay attention to strengthening the interaction and cooperation with government departments and social resources and build a platform of “subway construction and social opera.” (C23)

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4.2.1. Sensing and Idea Generation

The initiation stages of innovation include sensing and idea generation [13]. Sensing is the awareness and interpretation of potential threats and opportunities [43]. Relying on an organizational interpretation system, it holds a valuable potential for increased understanding of the multiple values underlying complex missions [7]. Furthermore, in sustainable low-carbon development, idea creation requires a step-change in values at the outset [10]. In other words, innovators must embed sustainability-oriented philosophy into new ideas. Specifically, this process includes (1) interpreting institutional requirements, (2) scanning market and technology opportunities, and (3) conceptualizing a sustainability-oriented philosophy.

Interpreting institutional requirements. SOEs are often the critical group constrained by policy while being more sensitive to policy, which may help them implement changes in response to political decisions more quickly [60]. Shanghai Metro actively gains and interprets institutional information, such as the five-year plans, government statements, and industrial policies, to have a comprehensive understanding of explicit and implicit institutional requirements to assist decision-making. Specifically, the outcomes of meaning construction about the institutional requirement and environmental changes are reflected in its strategic plans for each five-year period. For example, Shanghai Metro’s 11th five-year strategic plan demonstrated that, “As an active practitioner of SOE’s social mission, Shanghai Metro actively responded to the national strategic goal of building an environmentally friendly society, by enhancing energy-saving awareness, and comprehensively promoting energy conservation and environmental protection efforts. In addition, we planned to construct 400 km metro lines to support Shanghai build a low-carbon city” (B32). As for the requirement on its financial performance, Shanghai Metro is not a passive recipient of institutional prescriptions but interprets and transforms them as licenses to make rapid innovation. For example, “Responding to deepening reform of SOEs, we would like to transform to a market-oriented business model for financial sustainability” (B33). Taking multiple stakeholders’ various, incredibly conflicted needs into account, such an organizational interpretation system might encourage active institutional responses and creative idea generation [62].

Scanning market and technology opportunities. To identify and shape opportunities, enterprises must constantly scan, search, and explore across technologies and markets [43]. This includes intensive interaction with suppliers, industrial associations, and the government to sense supportive policies and customers’ changing needs. In the context of developing low-carbon economics, Shanghai Metro has exquisitely detected the rising demand for new energy vehicles and that photovoltaic technologies are more mature and less costly than they have been for decades. At the same time, it has also identified that the Chinese government has issued a series of climate change-related unique plans for green industry catalogs such as photovoltaic power. Combined, it has conceived an idea for developing a solar power business and has initiated detailed planning and market feasibility research. In addition, since the Chinese government has committed to basic scientific research on climate change, Shanghai Metro has promoted the research, development, and application of low-carbon technologies since 2008 in response to the national science and technology innovation platform plan.

Conceptualizing a sustainability-oriented philosophy. Moving through the innovation process requires a step-change in philosophy and values at the outset [10]. Sustainability means the harmonious coexistence of economic, environmental, and social benefits [10]. Shanghai Metro has conceptualized sustainability-oriented philosophy as the strategic positioning of building a low-carbon corporation of “safety, convenience, efficiency, greenness, and economy” and related measures (B34). In line with this positioning, Shanghai Metro adheres to the orientation of meeting the low-carbon transportation needs of passengers and strives to provide a safe, efficient, and high-quality low-carbon commuting service. At the same time, it has set building a “green metro” as one of its strategic objectives. This forward-looking and long-term vision leads the urban rail traffic industry. In addition, with the increasing financial pressure, Shanghai Metro has proposed to conduct institutional reform and innovate business models to enhance the firm’s profitability.

4.2.2. Configuration

The second stage, configuration, is acquiring, accumulating, combining, and coordinating the firm’s (and partners’) resources and capabilities to address constraints and seize opportunities [43]. Four components are defined here: (1) resource acquiring and leveraging, (2) institutional building, (3) research and experimental development, and (4) cooperation and learning.

Resource acquiring and leveraging. Resource acquisition refers to purchasing resources from strategic factor markets or accessing resources via social relationships [63]. Resource leveraging focuses on exploiting market opportunities by bundling or reconstructing resources and capabilities [63]. Shanghai Metro has purchased commodity-like resources (e.g., low-carbon energy-saving equipment) and intangible resources (e.g., low-carbon technologies and energy performance contracting). Additionally, to exploit SOEs’ advantages on rare resources, “Shanghai Metro actively communicated with the government to secure special financial funds for energy conservation and emission reduction, providing financial guarantees for the low-carbon renovation” (A6). As for resource leveraging, “Shanghai Metro innovatively combined Energy Performance Contracting and Direct Contracting modes and implemented decarbonization projects, such as lighting, air conditioners, motors, and environmental monitoring systems” (B1).

Institutional building. Altering managerial structures and institutions is an essential prerequisite for organizational renewal [62]. As early as 2007, Shanghai Metro set up a particular leading group, namely, the Energy Saving Management Committee, to guide and coordinate the work related to the firm’s low-carbon development. To further coordinate the functions, initiatives, and mechanisms for responding to carbon emission reduction and protecting the eco-environment, the committee has defined the major areas and critical tasks covering strategic planning, equipment, intelligence capital, R&D, and low-carbon managerial institutions. For example, to balance the effectiveness and cost of decarbonization, it has explored and improved the energy monitoring system, drawing upon a multi-level governance perspective (i.e., classified management of corporations, affiliates, and stations) (C22). In addition, according to Shanghai Metro’s 11th Five-Year Plan for energy saving, it has also proposed a four-stage road map for low-carbon practices, including planning, pilots, implementation, and improvement (B32). Institutional building in a science-based approach and taking targeted measures to improve standardization achieved steady progress in the capability of low-carbon management.

Research and experimental development. Since intangible resources are sometimes challenging to acquire, exploration also requires the internal accumulation of knowledge that contributes to developing innovations [64]. Being aware of the importance of technologies in sustainable low-carbon development, Shanghai Metro established the Rail Transit Technologies R&D Center in 2008, boasting a dedicated research team that prioritizes low-carbon and energy conservation. Moreover, an interviewee said, “We also set up R&D groups within frontline departments and implemented the two-way communication approach to ensure that R&D is aligned with frontline needs” (A1). As a result, Shanghai Metro has carried out more than 600 R&D projects and has obtained over 100 patents over the past decade. Its supreme endeavor in low-carbon R&D has earned numerous national and provincial awards, taking the lead in developing new technologies in the rail transit industry.

Cooperation and learning. Configurations must then be implemented appropriately to create value [63], including organizational learning via information sharing and business development via cooperation with multiple stakeholders. For example, (1) Shanghai Metro has held multilateral joint meetings, implemented collaborative R&D projects, and established innovation-based communications platforms to facilitate R&D cooperation among universities, industry, and enterprises. (2) Furthermore, Shanghai Metro has taken the lead in holding the CEO Summit within the Chinese metro industry, providing a platform for dialogue, information-sharing, and resource collaboration, which is open, active, and based on mutual benefit. (3) In addition, Shanghai Metro utilizes the Sunshine Procurement Platform to select environmentally friendly suppliers and has established long-term strategic collaboration with Longi and Huawei. Specifically, Huawei and Longi offer efficient, cost-effective, and customized core components for photovoltaic construction, enabling Shanghai Metro to achieve the industry’s first “Metro + Photovoltaic” initiative. For instance, “Huawei provides ingenious photovoltaic inverters empowered by ICT technology, which increases power generation by over 2%, enhances operational and maintenance efficiency by over 50%, reduces the overall levelized cost of electricity by 6%, and significantly decreases photovoltaic operation expenses. Longi supplies high-power Hi-MO 4 modules with attributes such as low attenuation, multiple power generation, and high returns, which improves power generation efficiency and saves costs by 0.04–0.08 yuan per watt” (B36). These efforts in cooperation and learning have facilitated the configuration and implementation of low-carbon innovation.

4.2.3. Transformation

New ideas for sustainable low-carbon innovation can only be realized through implementation and commercialization [41]. Transformation refers to applying a series of new techniques and management practices and taking an innovation to market. This process can be divided into (1) establishing a low-carbon management system, (2) applying low-carbon technologies, (3) developing a low-carbon business, and (4) building low-carbon collaboration networks.

Establishing a low-carbon management system. Shanghai Metro has established a systematic low-carbon management system comprising managerial institutions, working mechanisms, and technologies. First, managerial institutions refer to the Energy-Saving Management Committee and the index system for evaluating performance in energy-saving progress and low-carbon development. Second, working mechanisms refer to openly criticizing entities for wrongdoing, early warnings on energy use, regulatory talks, and accountability, and gradually forming sound working and regulatory systems. Third, technologies refer to green construction techniques, energy-saving equipment, solar power techniques, digital technologies, etc. The transformation from a conventional system to a more efficient and advanced one ensures the coordination and sustainability of low-carbon practices.

Applying low-carbon technologies. Leveraging its R&D resources and advanced administration, Shanghai Metro has established a standardized roadmap for the extensive application of new technologies. The roadmap includes experimental research, feasibility assessments, pilots, large-scale implementation, performance evaluations, and optimization. In this way, it has enhanced the efficiency and safety of applying innovative energy-saving technologies, promoting the commercialization of scientific and technological advances, such as new technologies, techniques, equipment, and materials. For instance, “When constructing metro stations, we applied their in-house developed “non-excavation” techniques, which recycles construction waste for road repair, backfilling, and foundation reinforcement, converting over 100,000 cubic meters of waste materials into valuable resources on-site” (A1).

Developing low-carbon business. Shanghai Metro established Shanghai Metro New Energy Co., Ltd., a wholly owned subsidiary, in 2018 to promote a green revolution in energy consumption and foster low-carbon business. Its main business is energy conservation consulting services and solar power development. According to an interviewee, “This decision is a response to the soaring market demands on new-energy vehicles and national initiative to promote renewable energy, followed by bundling its low-carbon resources such as lands, R&D, managerial capabilities, and social capitals” (A5). Recently, it also developed the charging piles business to expand the business portfolio and formulated matching engineering technique guidelines.

Building low-carbon collaboration networks. Shanghai Metro is committed to building low-carbon collaboration networks, fostering interconnectivity among network actors in the way of collaborative standard setting, dialogue mechanisms, joint research and development, and cooperative benchmarking. As the CEO demonstrated in their interview, “Each network actor leveraged its relative advantages on resources and knowledge. The cooperation and knowledge sharing within network members would bring about optimal harmony of economic returns and contribution to society and environmental protection” (C29).

4.3. Sustainability-Oriented Low-Carbon Innovation

Moving through the three-stage process, including sensing and idea generation, configuration, and transformation, new ideas toward sustainable low-carbon development are transformed into new/improved processes, products/services, and business models, which leads to the coordination of environmental benefits, financial performance, and social utility. This sustainability-oriented low-carbon innovation can be categorized as (1) innovative low-carbon organizational processes, (2) diversified low-carbon products/services, and (3) advanced low-carbon business models. The illustrative quotes are shown in

Table 6. Profile of the illustrative quotes of “Sustainability-oriented low-carbon innovation”.

Second-Order Categories	First-Order Concepts	Illustrative Quotes
Innovative low-carbon oriented organizational processes	Low-carbon and eco-friendly construction	“Enterprises use subway stations all over the city to build green ecological civilization publicity positions, carry out green public welfare, energy conservation publicity, garbage classification, Marine environmental protection art installation exhibition and other green public welfare publicity activities to spread the concept of green energy conservation.” (B1)
	Digital energy consumption and carbon emission monitoring systems	“Enterprises have formulated various power consumption management methods for trains, stations, vehicle bases, etc., and established an energy consumption index system for rail transit.” (B1)
	Low-carbon workplace	“In terms of internal management, the company advocates that employees in every position save every hour of electricity and every drop of water, and has made detailed regulations on the use of lighting, the start and stop of air conditioning, and the switch of office equipment.” (C22)
Diversified low-carbon products/service	High-quality, low-carbon transportation services	“More than 200 sensors are installed in the subway station to intelligently adjust the environmental comfort of the station, equipped with intelligent lighting, effectively reduce electricity consumption, and use environmentally friendly building materials to provide passengers with a healthy and comfortable riding environment.” (B11)
	Low-carbon consulting services	“As an early rail transit development unit in China, Shentong Metro has the obligation and responsibility to provide help, share the experience and lessons to the metro operating units in later cities in China so that they can avoid detours in operation management and maximize their operation management capabilities.” (B1)
	Industrial standards for low-carbon development	“Formulate clear and strict industry standards for low-carbon development, led by example, form a good social demonstration and lead effect, and shape the good social image of Shanghai Metro “green transportation.” (B11)
Advanced low-carbon oriented business models	Hybrid mode of metro transportation and green energy	“The Group adheres to digital operation and maintenance to improve the safety factor of subway construction, providing strong support for project quality and management efficiency.” (C25)
	Smart metro systems	“The company systematically proposed the definition and top-level structure of “smart subway,” released the industry’s first “Smart Subway Construction and Development Outline,” and created the industry’s first batch of smart station pilot projects.” (C33)

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4.3.1. Innovative Low-Carbon Operational Processes

Low-carbon and eco-friendly construction. Shanghai Metro has achieved innovative strides in green construction, benefiting from its extensive R&D endeavors and the efficient commercialization of technological advances. For example, applying the “non-excavation” technique reduces solid waste pollution, energy consumption, and carbon emissions during metro construction, along with minimized disruptions to the urban transportation system. This groundbreaking technique has garnered recognition from authoritative international experts and was honored with the highest award at the 8th International Tunneling Association in 2022. In addition, Zhuguang Road station was awarded LEED Silver Certification, a globally recognized symbol of sustainability achievement, the first ever in Asia. In regard to environmental control, “the environmental control system adopts an efficient air conditioning system configuration, which is coordinated and linked with wind power and condensation water, effectively reducing the energy consumption of the station’s air conditioning by 26.4%” (B1). Regarding lighting, “the main lighting fixtures at the station are equipped with DALI dimmable LED luminaires developed by OPPLE Lighting, coupled with lighting control systems, effectively reducing lighting energy consumption by 48% and minimizing light pollution from the fixtures” (B24). At the same time, it employs innovative station design concepts, featuring a through-style large atrium and utilizing skylight glass with high reflectivity and thermal insulation properties. The glass has a heat transfer coefficient of only 2.6 W/m²K, which is much lower than the LEED certification standard (U ≤ 6.64 W/m²K)” (B26). Regarding renovation, environmentally friendly, green building materials are widely used, including non-radiation renovation materials, coatings releasing negative ions, and previous concrete bricks.

Digital energy consumption and carbon emission monitoring systems. Shanghai Metro has pioneered low-carbon operations by establishing the first digital energy monitoring and management platform in the Chinese urban rail transit industry. Leveraging digital technology, this system has facilitated the transformation and modernization of conventional energy consumption management. It has achieved the visualized, automated, and intelligent management of real-time electricity consumption and environmental monitoring, offering accurate quantitative data for low-carbon governance. As an interviewee said, “The system can monitor the fluctuation of energy usage to trace abnormal situations and analyze problems. And we can use the information to take action” (A1). Consequently, this system has enabled a science-based approach to carbon emission reduction. From 2006 to 2020, Shanghai Metro has saved over 1.6 billion kWh of electricity (i.e., 460,000 tons of standard coal) and reduced 1.26 million tons of carbon dioxide emissions, equivalent to planting nearly 33 km² forests. This project has brought significant environmental benefits.

Low-carbon workplace. Shanghai Metro launched a “Low Carbon at Work” project in 2007, which includes several effective strategies to promote low-carbon behavior in the workplace, including (1) cultivating personal low-carbon awareness to form a positive attitude, (2) implementing simple energy-saving measures into daily work, and (3) using punishment or incentive to change energy consumption behavior. This gradual process has fostered a low-carbon culture and formed a low-carbon atmosphere.

4.3.2. Diversified Low-Carbon Products/Services

High-quality low-carbon transportation services. (1) Fully automatic operation (FAO) not only achieves integrated energy-efficient optimization for operations and reduces maintenance costs, but also provides more reliable, efficient, and convenient metro services to customers. (2) Shanghai Metro has implemented incentive measures, including intermodal discounts, cumulative discounts, and QR code-based promotions to encourage citizens to commute by metro. In 2022, it carried over 2279 billion passengers, accounting for 73% of the urban public transportation capacity. (3) It has also been advertised at metro stations to propagandize a green and eco-friendly lifestyle in society. High-quality transportation services create significant social and environmental benefits.

Low-carbon consulting services. Shanghai Metro has forged a good reputation for operational capability and service quality among its peers at home and abroad. Driven by its “going out” strategy, Shanghai Metro has expanded its consulting services to low-carbon management consulting, low-carbon certification consulting, green technology services, and so on, bringing in substantial revenue and promoting sustainable low-carbon transformation.

Industrial standards for low-carbon development. Shanghai Metro has proposed many innovative approaches for low-carbon transition, shared experiential knowledge, and offered public goods to the industrial community. For instance, it has taken the lead in editing the national and urban standards for low-carbon development in industry.

4.3.3. Advanced Low-Carbon Business Model

Hybrid mode of metro transportation and green energy. The establishment and revenue generation of the New Energy Co., Ltd. represents a vital business model innovation for Shanghai Metro, facilitating the development of a low-carbon economy and aligning with the market-oriented reform of state-owned enterprises. This sustainable-oriented business innovation—“photovoltaic-metro” mode—provides an outstanding example of the hybrid application of metro transportation and green energy. By the end of 2022, it has established the industry’s most extensive distributed photovoltaic power generation system, boasting a capacity of 42.8 MWp and leading the nation in the rail transit sector. The cumulative power generation from the photovoltaic system reached approximately 89,988,900 kWh, reducing approximately 37,795.32 tons of carbon dioxide emission. This new business model has gained revenue of 57,831,500 yuan, effectively achieving a win-win scenario of low-carbon development and economic benefits.

Smart Metro systems. Shanghai Metro pioneered the “Smart Metro” idea and has implemented several key strategies: (1) It has established a big data center and coordinated with the city’s comprehensive transport platform. (2) It has initiated the first pilot project of intelligent stations in the industry and leveraged the “Metro Metropolis” app to upgrade innovative ticketing services and develop a low-carbon digital economy (3) to provide passengers efficient and convenient travel services while reducing operating costs through intelligent scheduling. This advanced idea creates and realizes social and economic returns and environmental value.

5. Conclusions

This paper aimed to answer the following question: How do SOEs realize sustainability-oriented innovation toward low-carbon development? To achieve this aim, we conducted an in-depth single case study of Shanghai Metro, analyzing its low-carbon innovation practices and process in implementing long-term low-carbon development strategies in China. Based on our qualitative analysis, we put forward a process model of sustainability-oriented low-carbon innovation (SLI) formation, containing constraints on sustainable low-carbon development, developing low-carbon innovation, and sustainability-oriented low-carbon innovation (illustrated in our theoretical model in Figure 3). This highlighted that implementing a national low-carbon strategy introduces environmental, social, and financial constraints on sustaining value pluralism and hybridity for SOEs, forcing the actors to change and triggering the development process of SLI. Aligned with the process perspective, this process involves sensing and idea generation, configuration, and transformation. The organization initially senses potential threats and opportunities, followed by conceptualization (i.e., incorporating sustainability-oriented philosophy into new ideas). Subsequently, it seizes it by acquiring, configuring, and coordinating resources and capabilities across multi-stakeholder networks, ultimately transforming these innovative ideas into practices. The outcome of this process is SLI, including low-carbon operational processes, products/services, and business models, which facilitate the coordination of environmental benefits, financial performance, and social utility.

5.1. Theoretical Implications

This study makes several theoretical contributions. First, to the utmost extent of our understanding, this article makes a preliminary endeavor to systematically elucidate how sustainability-oriented innovation develops, especially in the particular organizational context of low-carbon innovation. Prior studies on SOI have examined its contributors from the internal managerial perspective [29,30,31,32,33] and external relational perspective [35]. Although these findings have provided insights into some specific aspects, they have failed to systematically explore this process. Based on a case study of Shanghai Metro, this study proposed a process model of SLI, containing constraints on sustainable low-carbon development, developing low-carbon innovation, and sustainability-oriented low-carbon innovation. It depicts how SOEs transform new ideas toward sustainable low-carbon development into applicable low-carbon innovation by changing their recognition and managing resources and capabilities. In particular, a step-change in philosophy, values, and behaviors is critical to moving through the innovation process, enriching previous research in this domain.

Second, this study contributes to the existing literature on low-carbon innovation by adopting a sustainable development perspective and enriching the understanding. On the one hand, previous studies on low-carbon innovation have primarily focused on the impact of low-carbon innovation on either environmental benefits or economic performance rather than the compound values [1,6,21]. By emphasizing the constraints of value pluralism on sustainable low-carbon development for SOEs, this study emphasized what innovation activities firms engage in to become sustainable (i.e., the coordination of environmental benefits, financial performance, and social utility). This is consistent with the triple bottom line proposed by Elkington [26].

On the other hand, this study also deepens the understanding of low-carbon innovation rather than only a single dimension of low-carbon technology innovation. Previous studies have regarded low-carbon innovation as only low-carbon technology innovation [11,37]. Induced by the SLI practices of Shanghai Metro via rigorous qualitative data analysis procedures, this paper defined low-carbon innovation from three dimensions: process, service/product, and business models.

Third, this paper contributes to the research field of low-carbon development in SOEs and sustaining SOEs’ hybridity. However, previous studies have noticed the tension caused by value pluralism for SOEs [9,20,60], but they have failed to propose effective solutions. Our findings shed light on the essential role of sustainability-oriented innovation that can help SOEs solve the constraints caused by value pluralism, especially in low-carbon development. This is supported by prior opinions that innovation contributes to sustainability and helps the organization achieve a win–win situation of decarbonization and corporate development. [2,10,20,23,24].

5.2. Managerial Implications

The research findings also provide some practical guidelines to assist SOEs in adopting SLI and policy implications to achieve sustainable low-carbon development.

For state-owned enterprises, (1) more effort should be placed on sustainability-oriented low-carbon innovation activities, such as acquiring and accumulating low-carbon resources, constructing low-carbon management systems, investing in low-carbon technologies, cooperating with low-carbon networks, and learning from others. (2) They should be sensitive to the changes in the low-carbon development environment. Specifically, they should continually interpret relevant information, such as institutional requirements, market opportunities, and technological advances, and, furthermore, conceptualize new ideas toward sustainable low-carbon development according to the potential opportunities and challenges sensed by them. (3) It would be better for them to proactively embrace the constraints on sustaining hybridity in low-carbon development and embed the philosophy of sustainability into strategic decision-making at the outset, because a slight change in values can effectively promote innovation activities.

From a public policy perspective, our findings emphasize the significance of non-regulatory interactions between the State and businesses. It would be more advantageous for the government to establish a regulatory framework that is more adaptable and to implement supportive policies. For example, (1) allocate dedicated funds to assist state-owned enterprises in their low-carbon transformation, thereby reducing their financial burdens; (2) establish a trading platform for low-carbon technologies to facilitate the research, development, and commercialization of such technologies; (3) create both domestic and international platforms for exchanging low-carbon innovation to enhance communication and collaboration.

5.3. Limitations and Future Research

We acknowledge several limitations of this study that could be addressed in future research. First, this study relied on a single case study, hindering the ability to compare different cases and generalize in other situations. It is recommended that future studies employ a multiple case design to compare different patterns of SLI development in different SOEs. Second, the perspective of sustainability-oriented development adopted in this study is relatively static. A longitudinal approach can be used to explore the evolution of SLI in different phases of low-carbon development. Lastly, the results obtained through qualitative research can be further validated using quantitative methods in future research.