Leading Sustainable Innovation

Nick Coad, Paul Pritchard

• Publisher: Routledge
• Year: 2017
• eBook ISBN: 9781351275224
• Topic: Business
• Subtopic: Business Ethics
• Index: Business

Sustainability will play an increasingly key role in the innovation process within businesses. Leading companies are already integrating these agendas, and preparing their sustainability executives to take the lead.

This book demonstrates why sustainability requires innovation; explains how this opportunity can be grasped by sustainability executives; outlines the skills they will need to learn to lead on sustainable innovation; and outlines key trends in sustainable innovation and in managing innovation.

Coad and Pritchard provide an overview of mainstream innovation, and draw out common characteristics of successful programmes, such as a corporate culture whose systems promote innovation. They highlight developments such as mobile technology, social media and collaborative consumption which transform the way consumers interact with companies. Viewed alongside emerging ideas on sustainability, such as the circular economy, this points to a clear need for a new set of innovation skills.

Companies will face challenges in realizing these opportunities, in particular the development requirements for sustainability executives and broader organizational learning. This book is for companies who want to take advantage, and the sustainability executives who will be leading the way.

Chapter 1
Why Sustainability Requires Innovation

THE AIM OF THIS CHAPTER IS TO EXPLAIN why innovation is now becoming part of the role of the Sustainability Executive and is essential for those organisations that are embarking on ambitious strategies. We start with an overview of the evolution of sustainability, moving on to discuss new thinking and trends before considering what this means for the Sustainability Executive and their function.

Overview of corporate sustainability

The term ‘sustainability’ can be like marmite: some love it, some hate it. We have some sympathy – both of us have had to work with senior executives whose initial response is that this is fluffy, superfluous or even tree-hugging irrelevance. However, alternative terms such as ‘corporate citizenship’ or ‘corporate social responsibility’ (CSR) carry their own baggage. We use ‘sustainability’ here as a broad term covering management of environmental, social, ethical and governance issues. The fact that sustainability is also used in the sense of continuing profitable operation can also be useful (if at times confusing).

Sustainability emerged in the 1990s. Interface, under the inspirational leadership of Ray Anderson, helped define the term and they remain a benchmark for good practice. Their experience was instrumental in demonstrating that sustainability is consistent with business success.⁵

Sustainability management might be broadly described as comprising three levels of increasing ambition:

1. Compliance, risk management and philanthropy;
2. Efficiency improvements and enhancing corporate reputation;
3. Opportunity – generating revenue from new products, services and business models and aiming for net positive environmental impacts.

The current generation of corporate leaders – companies such as Marks & Spencer (M&S), British Telecom (BT), Unilever, General Electric (GE), Kingfisher Group, Kyocera, Procter & Gamble (P&G) and Nike – are united in their commitment to level 3 sustainability. This is not a romantic philanthropic gesture or another example of ‘greenwash’. These companies have all recognised sustainability as a key strategic objective and something that is key to their future success. They realise that resource constraints, climate change and social concerns played out in a world made transparent by social media and mobile technology present profound challenges to the future success and prosperity of their own organisations as weil as the societies they serve. They also recognise that they can generate new value by addressing sustainability. In ever more competitive markets with rapid changes in technology, sustainability presents a major opportunity to generate new forms of revenue.

New thinking

There are emerging ideas that are helping drive the agenda forward:

’To zero and beyond’

This sounds like amisquote from Buzz Lightyear but is a good summary of the goals that leading organisations are setting themselves – namely to have zero impact or to be restorative. John Elkington has written about these as ‘Zeronauts’.⁶ Some companies, such as BT, have adopted the term ‘net good’ to describe their aim to have a positive impact.⁷ These are essentially logical developments of earlier sustainability concepts.

Two other ideas, which also have the benefit that they avoid the term ‘sustainability’ for those who find the term unpalatable, are of interest:

’Shared value’

Michael Porter, a Harvard professor and authority on business strategy, and Mark Kramer, wrote an influential paper that introduced the term ‘shared value’.⁸ This provides a great critique of CSR, and sets out the connection between social issues and competitive advantage that they claim will generate greater innovation and growth. Nestle is one high profile corporate adopting this approach.

’The circular economy’

The circular economy is ‘a generic term for an industrial economy that is, by design or intention, restorative and in which materials flows are of two types, biological nutrients, designed to re-enter the biosphere safely, and technical nutrients, which are designed to circulate at high quality without ente ring the biosphere’.⁹ Championed by the Ellen MacArthur Foundation, it focuses on a new business model that responds to resource constraints. The Foundation has published two insightful reports setting out in detail the ideas,⁹ which should be mandatory reading for the sustainability professional. The most recent report estimated that $700 billion in savings were possible if businesses apply circular economy principles to the consumer goods sector.

Neither shared value, nor the circular economy, are fundamentally different to how pioneer companies currently approach sustainability. Their biggest value may be in enabling a discussion about sustainability without the baggage of prejudice the term can invoke. The circular economy in particular is rapidly gaining traction by providing a clear focus on a solution, rather than emphasising environmental constraints. The Foundation, accompanied bya successful education programme, is rapidly gaining new supporters.

Whether a company uses sustainability, shared value or the circular economy to frame their strategies they will need to adopt radical innovation throughout all levels of the organisation – new processes, new products, new services and new business models – if they want to create new opportunities and competitive advantage from their insight. The sustainability agenda demands transformation of existing practices.

The changing skills of the sustainability functlon

The skills needed by Sustainability Executives, and the sustainability department, are very different for organisations moving into the third level where their aims become a strategic imperative. Levels 1 and 2 require organisations to develop new processes, standards for operations and reporting – traditional ‘command-and-control’ tools where technical subject matter expertise is vital. Moving up to level 3 requires Executives and teams with experience of leading innovation, managing change, creating new business plans and brands. Correspondingly, there is also a need for a greater understanding across the business in the non-sustainability functions of the environmental and social impacts of their roles.

Few corporates are currently operating anywhere near Level 3. M&S are a recognised sustainability leader, yet Mike Barry, their Head of Sustainable Business, candidly said that they are ‘only 10-15% of the way to being sustainable’. In other words, there is long way to go and what lies ahead are the really challenging problems. We are entering aperiod that will see increased focus on innovation in sustainability. With no obvious end-point for sustainability – why stop at zero impact on the environment if you can support regeneration, and social issues and expectations will change overtime – it is unclear when this will stop or what comes next.

Convergence of sustainability and innovation?

Innovation is therefore set to play an increasingly important part in the role of the Sustainability Executive. Insights from sustainability can also support mainstream innovation processes by identifying new opportunities and filtering out bad ideas. As we discuss later, there are many similarities between managing innovation and sustainability. We are already seeing some leading companies explicitly merge responsibility for innovation and sustainability. A good example would be Nike, once a pariah of social and environmental campaigners, who have been recognised as the world’s most innovative company in 2013.¹⁰

Nike also launched a YouTube video, ‘The Making of Making’, in which they state, ‘Make no mistake, we hate sustainability’. Instead, the slick video says: ‘We’re here to unveil a newage of design, one that is about making better things and making things better.’ It is a little early to announce the death of the phrase ‘sustainability’ – there is no reason why you can’t be focused and precise in using the term sustainability – but new thinking aliows you to avoid it and if like Nike, you start to align sustainability and innovation, then you can move beyond it.

Table of contents

• Cover
• Title
• Copyright
• Abstract
• About the Authors
• Contents
• Introduction
• 1 Why Sustainability Requires Innovation
• 2 Innovation Theory and Practice
• 3 Lessons from Innovation and Sustainability Practice
• 4 Sustainable Innovation
• 5 Implementing Sustainable Innovation
• 6 Concluding Thoughts
• References