By building sustainability into innovation, companies can create products, services, and processes that are good for both society and the organization.
“The Basics” provides essential knowledge about core business sustainability topics.
Innovation is vital for a company’s survival and growth. Firms that don’t innovate fall behind their competitors and ultimately go out of business.
However, traditional forms of innovation may result in profitable products, services, and processes – but also harm employees or over-exploit natural resources.
Think of the capsule coffee machines which let us have café-quality coffee at home at the touch of a button. They’re so popular that 40% of U.S. coffee drinkers own one or more. But as a result, every minute, 29,000 plastic capsules are dumped in landfill sites.[1]
What is the Goal of Sustainable Innovation?
“Sustainable innovation” seeks to address those unintended social and environmental impacts. It implies that companies can provide products and services that are good for themselves and for society in the long term. This article explains what sustainable innovation means, why it is important, and how to practice it.
The ideas in this article are based on our work at the Innovation Learning Lab at Ivey Business School, where we work with leading corporations and organizations in Canada on pathways to sustainable innovation.
What is Sustainable Innovation?
Sustainable innovation involves making intentional changes to a company’s products, services, or processes to generate long-term social and environmental benefits while creating economic profits for the firm. That definition comes from researcher Richard Adams, who reviewed academic and industry research on the topic.
Are you an innovator and want to learn more about sustainable innovation? Well, you’ve come to the right place! In this video, we explain what sustainable innovation means, why it is important, and how to do it.
So what is sustainable innovation? Sustainable innovation is new products, services, or processes that are good for the organization and for society in the long term. Too often in the past, companies innovated only to sell more stuff – to increase their top line. But, this has taken a toll on the environment.
Take capsule coffee machines, for example. They gave us café-quality coffee at home at the touch of a button and became so popular that about half of U.S. coffee drinkers own one or more. But, as a result, 29,000 plastic capsules are dumped in landfill sites every minute. But sustainable innovation is different.
Instead of creating more waste, Bio-bin, a British start-up, collects used coffee grounds and turns them into products such as coffee logs and coffee pellets that are used as fuels. Not only are these products less carbon intensive than coal briquettes and wood logs, they also made approximately $10 million US dollars in revenues for the company in 2020.
Then, why is sustainable innovation important? There are at least three reasons. First, the companies that want to make the world better attract the best people. Millennials, Gen Xers, and Gen Zers, especially, care deeply about sustainability and want to work for companies that share their values.
Second, sustainability sparks creativity. There is plenty of research that shows that people who care about society tend to be more collaborative, committed, and caring. They produce more innovations and better innovations.
Third, sustainable companies are more resilient. That means surviving crises, more stable share prices, and higher long-term revenues.
Then you might wonder: if sustainability is so important to innovation, why don’t more firms do it? Because it’s hard. It takes time, focus, and effort. But you can start with small steps.
First, you can “do the same things better.” Tackle the ‘low hanging fruit’ that doesn’t fundamentally change what you do. A car manufacturer could use less energy making cars.
Second, you can “do new things.” Think about how you can deliver value differently. For example, if you make cars, think of yourself as selling mobility. That opens up the options of making electric cars, or even offering car-sharing services. Widen your focus and you can disrupt your industry for the better!
Most advanced is to collaborate. Collaboration is fun and leads to niche markets that others can’t easily replicate. Together, you can also bring about big changes that are good for society, good for the planet, and good for your company. Sustainable innovations are the future. With all the net-zero commitments being made, jump on the (electric) bandwagon or get left behind.
NBS guides managers in tackling sustainability issues, with research-based insights. Join us on this journey. Subscribe to the NBS newsletter, follow us on social media, and ‘like’ this video.
How Sustainable Innovation Works
Here’s how sustainable innovation works with products, services, and processes:
Developing novel products and services
Through sustainable innovation, companies can invent and offer novel products or services that directly contribute to achieving sustainability.
For example, Bio-bean, a British startup and certified B Corp, developed an eco-friendly biofuel made from coffee waste to help power London’s double-decker buses. Bio-bean also upcycles spent coffee grounds into eco-friendly products such as coffee logs and coffee pellets—alternatives to carbon-heavy fuels such as coal briquettes and imported wood logs. Bio-bean is using a material previously considered waste, contributing to a circular economy while generating approximately $10 million (USD) in annual revenue in 2020.
Changing operational processes
Sustainable innovation is not only about inventing novel products or services. Firms can also innovate sustainably while offering existing products or services when they change their processes. Process changes can occur in many areas, e.g. design, production, marketing, and even HR.
For example, Fairphone, a Dutch social enterprise, offers consumers fairly-sourced smartphones. Unlike bio-bean, which created novel products (i.e., logs and pellets made out of coffee waste), Fairphone products do not have any new technical features.
Instead, Fairphone dramatically changed the smartphone production process to make it more responsible and sustainable. They use recycled and responsibly mined materials and provide their workers with fair wages and good labor conditions. Because approximately 80% of the emissions of a smartphone come from its production, Fairphone designs their phones to last.[2] They have a modular design which makes repairs and upgrades easier, thereby significantly reducing e-waste.
Fairphone’s modular design of Fairphone greatly reduces environmental footprint
How Sustainable Innovation Differs from Traditional Innovation
Some might wonder how these sustainable innovations differ from traditional forms of innovation. After all, both traditional and sustainability innovation involve developing new products, services, or processes. Three core features set sustainable innovation apart:
Sustainable innovations contribute to sustainable businesses
Sustainable innovation intentionally aims to “meet the needs of present generations without compromising the needs of future generations.”[3] It requires businesses to actively incorporate issues such as human rights, and climate change into their innovation processes. Companies that engage in sustainable innovation go beyond seeking immediate profits. They think long-term, about investing in technologies and people for the future.
Sustainable innovations require systems thinking
When companies engage in sustainable innovation, they do not merely focus on their own organization. Instead, they look more broadly to the whole system of which they are part – including other companies, the natural environment, and stakeholders and communities. They have a good understanding of how their actions affect other organizations and vice versa.
Sustainable innovations must be embedded into firm’s culture
Unlike traditional innovations that are mostly performed within a separate R&D department or unit, sustainable innovations are likely to be more successful when they are deeply embedded in the firm’s culture.[4] When sustainability is not part of the corporate culture, the pursuit of short-term profits will kill sustainability-oriented creative ideas without giving them sufficient time to mature.
Why Innovate Sustainably?
Ultimately, companies succeed when they are sustainable. First, sustainable companies attract talented employees. Compared to their non-sustainable competitors, sustainability-oriented companies bring in better people. In a recent Deloitte survey of millennials and Gen Zs, 49% said that their personal ethics have played a role in their career choices.
Second, companies that consider stakeholders produce more patents and also more impactful patents, according to research by Caroline Flammer and Aleksandra Kacperczyk.[5] In other words, a sustainability orientation leads to more innovation and better innovation. Firms involved in sustainable innovation think more broadly and learn from different perspectives. They get insights and solutions from afar, e.g. from other industries and stakeholders.
Moreover, companies that care about sustainability are also more resilient compared to their competitors: especially important in a turbulent world.[6] Companies with a sustainability orientation were more likely to survive through crises, experienced less share price volatility, and generated more revenues over the long run than those without a sustainability orientation, according to research by Natalia Ortiz-de-Mandojana and Tima Bansal.
How Do We Make Innovation Sustainable?
Despite how wonderful it may sound, sustainable innovation does not come easy. Achieving sustainable innovation within an organization takes time, commitment, and effort. So: how can firms innovate sustainably?
Three categories of sustainable innovation
Sustainable innovation can be put in three broad categories:
- Operational optimization,
- Organizational transformation, and
- Systems building.
Researcher Richard Adams and colleagues identified these different categories, shown in the graphic below. They represent a continuum in terms of impact, with “systems building” creating the greatest change.
Firms can engage in three types of sustainable innovation; Source: Adams et al. (2015)
1. Operational optimization
Firms can improve their operational processes without fundamentally changing their business model. They can find ways to “do the same things better,” and reduce their negative environmental and social impacts (e.g., using renewable energy and reducing packaging). This can be done relatively easily by adding environmental and social criteria to existing quality or profit criteria. This approach to sustainable innovation is sometimes called “eco-efficiency.”
2. Organizational transformation
For a greater change, companies can create disruptive new products and services that serve societal needs and/or benefit the environment. This step goes beyond “doing less harm” and focuses on “doing good by doing new things.” These companies also see sustainability as a business opportunity. The sustainable innovation examples mentioned above (i.e., biofuel made out of coffee waste, the smartphone with modular design) show how companies can engage in this kind of sustainable innovation. In order to achieve organizational transformation, firms must radically shift their mindset from doing things better to doing new things sustainably.
3. Systems building
The most advanced form of sustainable innovation involves collaborating with others to create positive impacts on people and the planet. Companies here see themselves as part of an ecosystem and recognize that sustainability can’t be achieved by any single organization. They aim to “do good by doing new things with others.” These system builders extend their thinking beyond the boundaries of the organization to include partners in previously unrelated industries as well as marginalized actors.
Each company will want to assess what type of sustainable innovation makes sense for it. Some companies may move through these types sequentially. Others might engage in multiple approaches to innovation. For example, an oil and gas company can seek efficiencies in reducing carbon emissions, while simultaneously investing in sustainable innovations in renewable technologies that will take it out of fossil fuels.
Both coffee logs and coffee pellets burn hotter (i.e., generate more energy) while producing significantly less greenhouse gas emissions compared to traditional logs and pellets.
Find Out More
Connect with Innovation North. Innovation North works with leading corporations and organizations in Canada to ‘innovate the innovation process.’ As organizations face greater complexity and disruption than ever before, they believe in revisiting our knowledge of innovation. For more up-to-date information about their new approach to innovation, click here.
A review of this article was provided by Dr. Pratima (Tima) Bansal, Founder of the Network for Business Sustainability and Professor of Strategy and Sustainability at the Ivey Business School (Canada).
About the Series
“The Basics” provides essential knowledge about core business sustainability topics. All articles are written or reviewed by an expert in the field. The Network for Business Sustainability builds these articles for business leaders thinking ahead.
References
[1] Balme, T. (2024). How Single-Use Coffee Capsules Are Destroying Our Planet. The Green Pods.
[2] Thorne, M. (2021). The carbon footprint of your phone – and how you can reduce it. Reboxed.
[3] Corporate Sustainability – Meaning, Examples, and Importance. (2021). Network for Business Sustainability.
[4] Embedding Sustainability. (2010). Network for Business Sustainability.
[5] Flammer, C. & Kacperczyk, A. J. (2014). The Impact of Stakeholder Orientation on Innovation: Evidence from a Natural Experiment. Academy of Management, 2014(1).
[6] Ortiz-de-Mandojana, N. & Bansal, P. (2015). The long-term benefits of organizational resilience through sustainable business practices. Strategic Management Journal, 37(8), 1615-1631.
Add a Comment
This site uses User Verification plugin to reduce spam. See how your comment data is processed.This site uses User Verification plugin to reduce spam. See how your comment data is processed.