7 Simple Rules for Using Sustainability to Drive Innovation

Many executives face a strategic dilemma.  On one hand, regulatory requirements and public sentiment are pushing them to direct scare resources to environmental initiatives that are not seen as enhancing competiveness.  At the same time, executives know that they need to germinate innovation in order to drive product differentiation and sustain margins in highly competitive, global markets. 

Can organizations reconcile these two seemingly incompatible business objectives?  Yes.  What is needed is a new strategic paradigm that sees sustainability and innovation as mutually reinforcing.  In essence, formal and voluntary sustainability requirements (e.g., reduce, reuse and recycle) can provide a major impetus to product and process innovation.  For example, firms can drive cost savings through reduced raw material usage or greater energy conservation.  Furthermore, higher revenues could be generated through higher margin enviro-friendly products or developing new business models. 

Even if executives don’t see the compatibility between innovation and sustainability, they will have to learn to deal with the trade-offs in terms of focus and capital allocation.  Based on my consulting experience and a good article from the Harvard Business Review,  I have developed a series of first principles for using sustainability to stimulate major leaps in innovation:

1.     View compliance as a business opportunity

When it comes to environmental policy, regulations eventually migrate to the toughest standard.  Companies can choose to ignore or delay their response but eventually they will have to be compliant.  An early and corporate-wide embrace of compliance based on a single and forward-looking norm can bring many savings including economies of scale, optimized operations and improved corporate image.

2.     Search and reapply the lessons of others

Despite the relative newness of environmental regulations, companies can still leverage considerable learnings from other firms.  However, companies should modify these best practices to suit their business model, competitive environment and culture. 

3.     Inculcate sustainability throughout the organization

Senior management support is important but insufficient in itself to catalyzing innovation.  In addition to being aligned, the employees need to be empowered to use innovation to drive sustainability and business results.    Furthermore, firms need to weave sustainability metrics into their planning and performance measurement systems to ensure the change sticks.

4.     Implement ‘quick wins’ that have a positive business case

Quick wins are critical to proving a business case, generating learning and securing alignment. Smart companies start with small pilots, course correct as they learn, and scale rapidly.

5.     Design sustainability into your offering

Although it is a laborious and expensive process, designing sustainability into the product is often the best way to reap business and environmental benefits.  As well, careful attention should be paid to the entire customer experience.  There are often considerable opportunities to reduce cost, minimizes waste and message your environmental credentials in areas such as service, support and distribution.

 6.     Leverage your partners

Leveraging your supply chain and channel partners through collaborative problem-solving and planning is a critical strategy to maximizing the scale of innovation and improving performance. Part of this involves setting bold yet achievable sustainability targets with your partners.  This will help secure their attention and commitment while triggering their own innovation activities.

7.     Explore new business & operating models

Environmental regulations can be highly disruptive to a market leading to a reordering of customer needs, a change in the industry cost structure or the introduction of new technologies.  To leapfrog competition and reduce business risk, companies should consider adjusting their go-to-market strategies to reflect the new realities as well as to exploit market openings.

For more information on our services or work, please visit us at Quanta Consulting Inc..


1 comment so far

  1. […] genuine commitment to S&CSR and risk management versus more ad hoc efforts.  In particular, sustainability driven innovation, supply chain optimization and green product development will yield higher returns in a firm that […]

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