Changing climate patterns, rising sea levels, more extreme weather systems; every year the world is confronted with further evidence that the global environment is changing. And it is becoming more apparent that humans have a strong role in these changes.
Consequently, companies, economies and societies around the world are looking for capabilities to use all resources more efficiently and ultimately shift to a steady- state system that relies on the consumption of only renewable resources. This ultimate goal of sustainability will not be achieved overnight. A series of small and large advances will be required. Social responsibility can and will play a role in the world’s progress, but if this is the only motivation, it may not be enough and certainly will not be fast enough.
Therefore, addressing most of the environmental sustainability challenges the world faces must be done with innovations that are financially sustainable. This goal usually requires significant innovation in both products and services and in processes and business models.
Rising to meet this goal are a host of entrepreneurs and established companies that are addressing sustainability issues with profitable solutions that can spur even more innovation, growth and development as individuals and companies realize that being green does not mean being in the
red. While the approaches to this challenge are many there are some common themes that offer insights to all those wanting to pursue sustainability solutions.
IXL Center defines Sustainability Innovation as innovations that create and capture new value by meeting the needs of the present without compromising the ability of future generations to meet their needs. With this definition in hand, we have conducted extensive research on the range of sustainability-focuses businesses, initiatives, products and technologies to identify the best examples of truly sustainable innovations – concepts that make money and improve the environmental equation.
Looking across the range of sustainability innovations from different industries and geographies, three common themes emerge – 1) the emphasis on larger, longer- term wins and patient capital over the temptation to focus only on quick wins, 2) the passion and persistence of founders and sponsors often required to create brand new markets and businesses, and 3) the successful design and implementation of a profitable and innovative business models.
1) Patient Planning and Capital: The first common theme is that long-term thinking and planning is required to create and capture the longer-term value from sustainability innovations. These innovations often require new-to-the-world technologies and/or significant changes in behavior from consumers. Neither can be easily achieved in the short-term.
Companies that are focused and organized for the long march win with their sustainability innovations. Toyota developed completely new hybrid driving system to yield 2x fuel efficiency instead of focusing on marginal improvements in the existing combustion engine and similarly ETH in Brazil is pushing the limits of sugar cane ethanol production to provide a viable substitute for oil. By not pacifying the near-term needs of stakeholders, the companies in this book have avoided falling into the trap of “green-washing” and have actually captured the real opportunity and value in sustainability.
2) Passionate and persistent sponsors: The second common theme we found builds on the first. Passion and persistence are required to support the long march for the big win. In many examples, we found that leaders and sponsors were both excited and personally motivated to build and drive the business in spite of the pessimism of conventional market and financial analysis
Whether it was to change the world and make it a better place (Green Urban Planning in Curitiba and U.S. Green Building Council’s LEED) or to grasp the business opportunity (Green Polymers at Braskem), the passion and persistence of these leaders (like the government leaders of Curtiba and Luiz de Mendonça at Braskem) were keys to unlocking the challenges of changing consumer/customer behaviors or bringing new technologies to create new markets or new business models. It is clear that sustainability innovations cannot be left to managers but require leaders whose passion and persistence are critical to overcome the range of barriers that will arise.
3) Profitable and Innovative Business Models: Finally, the third common theme to successful sustainability innovations is the design and implementation of a profitable and innovative business model. There is a virtuous cycle in making something that is valued by the market and doing it profitably. We find that sustainability offerings that have a clear and compelling value proposition to the consumer/customer must be combined with a profitable business and usually innovative model to have greater market acceptance and higher growth rates.
As an example, A123 is accelerating commercialization of new lithium batteries through a range of non-competing channel partnerships with BAE for buses, GM for cars, DeWalt for drills, and Duracell for portable consumer electronics. Each partnership focuses development and commercialization on a specific slice of A123’s overall opportunity in high power batteries. Leaders in innovation must think hard about value the proposition, barriers to entry and the business model to figure out who to partner with and how to share the value across the chain to get the fastest market acceptance of their offering. Whether its building business models based on Leasing solar panels in the US or solar water distillers in India, new business models are becoming critical to rapid and sustainable success.
Critically, these three common themes are not limited to innovations in the sustainability space, but are often enablers for any innovation. By examining how other firms inside and outside your industry have successfully pursued sustainability innovations, you can incorporate the lessons learned to drive greater innovation success in your firm, whether you are focused on sustainability or not.
Note: The next article will focus on the second set of insights uncovered during the research – the major types of environmental improvements that are winning in the market. For more information on the Sustainability Innovation book, please contact email@example.com.