On 9 July, international corporates, startups, academia, financiers and not-for-profit organisations (including Pepsico, Arqiva, Imperial College, Green Alliance and the BBC) discussed sustainable innovation at the inaugural Lavery/Pennell Sustainable Innovation Breakfast in London.
Sustainable innovation is defined as innovation that leads to greater profits, better social outcomes and less environmental damage. And the conclusion of the group was that it differs from regular innovation in three substantial ways:
- Sustainable innovation is more disruptive
New business models (such as remanufacturing, servitisation and asset sharing) challenge many aspects of incumbent companies including production, operations, brand, marketing and sales. They also introduce non-traditional risks. This broad challenge to corporates often causes them to defend the status quo; large organisations develop ‘corporate antibodies’ within the company’s culture to resist change.
Beyond new business models, incremental sustainable innovation initiatives, like changing staff behaviour regarding energy use, have proven to be almost universally short-lived without significant accompanying internal system and process change to incentivise the new behaviours.
“Quick wins” like installing more efficient replacement equipment are much less disruptive; however it was argued that these use existing technology with a strong economic case and so should not be recognised as “sustainable innovation”, even though they may have environmental and/or social benefits.
- There’s a stronger rationale behind sustainable innovation
While sustainable innovation is more disruptive, it is also considered to have a stronger case for change than other forms of innovation. The drivers for change include:
- Changing consumer aspirations and behaviours, such as Millennials not wishing to own vehicles and instead focussing on how to optimally get from A to B.
- Customers and consumers expecting companies to look after the environment and community – with some consumers preferring products with provenance
- Increasing staff expectations of their employers (and managers) to share their personal values, ethics and purpose
- Increasing commodity prices
- Environmental and social externalities being included into business cases either through real pricing (e.g. the UK’s landfill tax) or through “shadow pricing” (e.g. an internal price for carbon)
- Cleaner technologies (such as renewable energy) and enabling technologies (like remote monitoring) becoming less expensive
- Shareholders equating good sustainability performance with good management
- Communities increasingly challenging companies’ licence to operate (and licence to grow)
These can add up to a strong business case for sustainable innovation which can garner senior executive support and overcome corporate “antibodies”. However, building such a case is more difficult because some of this value is unconventional and requires new skillsets to be able to quantify it.
Further, it was felt that this array of benefits has not been effectively presented to consumers as compelling tangible benefits supporting more sustainable solutions. This contrasts with the success of safety (a concept considered by the group to be similar to sustainability) in driving the purchase of safer vehicles, personal protective equipment and behaviour change.
- Sustainable innovation involves greater collaboration
More disruptive business models unlocking different types of value require greater collaboration to succeed. This can include collaboration between and among individuals, divisions, and organisations.
In some instances one company alone cannot succeed and must work with its peers because the challenges are bigger than any single participant’s resources. An example is the aviation industry in relation to noise reduction, fuel efficiency, and alternative fuels.
In other cases, uncertainty about the future is causing companies to spread their innovation investment across a broader portfolio of initiatives, so co-funding is needed.
This collaboration required for sustainable innovation is seen as a departure from Michael Porter’s linear value chain to a “value network” or web.
Sustainable innovation collaboration is being enabled by social media technology as well as modern portfolio careers (where individuals contract to a range of organisations) which make it easier for participating individuals/bodies to share ideas, leverage networks, and build and strengthen relationships across companies that really need to be working together.
Good examples of successful collaboration for sustainable innovation were noted:
- RBS Innovation Gateway
- Microsoft’s Carbon Fee
- #theBIGshift – Unilever, Kingfisher, M&S, et al.
- ASDA Sustain & Save Exchange
- GSK Supplier Exchange
- Roadmap to Zero Discharge of Hazardous Chemicals (ZDHC) Coalition – Nike and other leading Apparel Brands
- M&S, UNICEF Global Community Programme (GCP)
- Albert: The Carbon Calculator for television and movie production
So what next?
We want to hear your views on sustainable innovation. Tell us what you think by posting below.
The three key themes identified above will help define our agenda for future breakfasts, which will cover topics including:
- New collaboration models for sustainable innovation
- Purpose: How it is reshaping companies and their innovation
- Structuring sustainable innovation to overcome corporate resistance
- Millennial consumers: How they will shape your future innovation
- Building your innovation ecosystem
Lavery/Pennell Sustainable Innovation Breakfasts are about useful insights and implementable actions. To automatically receive invitations to future breakfasts, register at LaveryPennell.com
Lavery/Pennell = RAPID SUSTAINABLE INNOVATION. We have identified billions of dollars of value for some of the world’s leading companies both through revenue growth and cost reduction – and established disruptive new startups including Rype Guides and Rype Office.