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The large environmental issues that are confronting modern society underscore that a critical shift is needed and there is an increasing demand for sustainable solutions to tackle these challenges. Agenda 2030 for sustainable development, outlined by the United Nations, encompasses 17 universal goals and 169 transformative targets that address the global challenges and emphasise the urgency of environmental degradation. In addressing the substantial environmental challenges, radical solutions are needed where eco-innovations will play a pivotal role. Eco-innovations are characterized by novelty and often new to the market, representing a risky and costly activity for companies. Managing environmental and financial performance becomes complex where addressing both goals simultaneously becomes conflicting.     

To address the identified research gap the purpose of this study is to analyse how companies manage environmental and financial performance in eco-innovation, especially early in the innovation process. Conflicting perspectives and scattered research underscore the need for a nuanced understanding of how companies manage the tensions inherent in financial and environmental performance in eco-innovation. Paradox theory served as a theoretical lens to gain a deeper understanding of how companies manage the conflicting perspectives that can arise when balancing environmental and financial performance simultaneously. To address the research question and understand the complex interplay that organisations working with eco-innovation are facing, a qualitative method with an inductive approach was chosen. Semi-structured interviews were held with companies mainly working on reducing environmental impact through innovative activities. 

The data collected from the semi-structured interviews were analysed through thematic analysis, it resulted in two main strategies that companies use to balance environmental and financial performance in eco-innovation: (1) Buying time through money (2) Future-proof customer demand which we interpret with the resolution strategy from paradox theory. The result indicated that companies that are buying time through money are facing a tension between saving the budget or saving the planet. The tension arises from the absence of strict regulations resulting in a market where demand is lacking and is not yet ready to embrace the radical eco-innovation. This time gap resulting in a lack of demand and our findings indicated that companies are handling this time gap by finding external resources until the market is ready which is coherent with a separation strategy from paradox theory.  

The second strategy of future-proof customer demand indicates that companies are facing tension between being commercial or being sustainable. Companies are facing a mature market with price sensitive customers, suffering from fear of regulations and regulations that are not fit for purpose. The solution is to secure sales with an end-customer to reduce the financial uncertainty to be able to balance environmental and financial performance early in the innovation process before (if at all) the innovation starts generating profit. This aligns with a synthesis strategy from paradox theory.