How sustainability focus creates innovation
You probably already know that sustainability should be at the heart of your business. But did you know that sustainability can also accelerate innovation within the company and drive business growth? In this column, we examine different approaches to implementing sustainable practices—and see how it paid off.
Expect to learn:
How sustainability drives innovation and increases bottom- and top-line returns.
How you can create a positive cycle of sustainability, innovation and collaboration.
How to build a competitive advantage with an eye on innovative approaches to sustainability.
Sustainability is a priority for many reasons. But there are more benefits to incorporating sustainability into your business practices than you might have thought, including those that lead to business growth as well as environmental and ethical impacts.
Crucially, Deloitte has analyzed the relationship between sustainability and innovation, concluding that sustainability drives innovation in a very significant way. As a result, sustainability leaders are now more than 400% more likely to be considered “innovation leaders”.
Why is this the case?
Sustainability focus forces you see things differently
It has been proven that sustainability can provide a “lens” for thinking and guiding companies to approach situations in a new way.
In turn, thinking differently can help to unleash innovative potential: companies may see situations from a different point of view, they may re-examine their perspective of what is important, and they can tap into a wealth of new ideas.
Sustainability helps businesses re-examine what’s important
Indeed, smart business leaders now consider sustainability as “innovation’s new frontier”. Sustainability generates organizational and technological innovations that yield both bottom-line and top-line returns.
Sustainability feeds innovation – and vice versa
In order to tackle solutions for sustainability challenges, you first need to get your organization working to a different beat. Jennifer Goodman, Angelina Korsunova, and Minna Halme from Aalto University have studied innovation and collaboration in companies that aim for sustainable practices and business. Their study looked at how a newly sharpened focus on sustainability often generated the need for new practices, new ideas, new innovations and new partnerships. This brought forth the chance to discover and shape new partnerships that spurred new thinking. Successful companies were then able to use this momentum to create a positive cycle of innovation and collaboration affecting all areas of their business.
Sustainability, innovation and collaboration all feed one another
To design sustainable products, companies need to understand stakeholder concerns and ensure that the products’ life cycles are planned carefully. Especially as businesses move into markets that challenge their previous expertise, they have to team up with relevant stakeholders.
Goodman, Korsunova and Halme claim that companies should expand the scope of their sustainable innovation and welcome relevant universities, NGOs, municipalities and customers or citizens to participate in the work. Collaboration allows businesses to manage risks and fail faster because the feedback is immediate. Open and collaborative innovation and co-creation also provides opportunities for integrating stakeholders into the development of new products, services and business models.
Innovative ideas often need an initial push from top management. In Harvard Business Review, Ram Nidumolu, C.K. Prahalad, and M.R. Rangaswami noted that when senior teams decide to focus on driving sustainability and innovation, progress tends to happen more quickly.
They presented an example: In 2005, General Electric’s CEO Jeff Immelt declared that the company would focus on tackling environmental issues. Since then, every GE business has tried to move up the sustainability ladder, which has helped the conglomerate take the lead in several industries.
How Natura innovated to champion local communities
The Brazilian natural cosmetics company Natura has built a unique, innovative competitive advantage by forging a symbiotic relationship with its suppliers and their communities.
This is how Natura does it:
Natura has worked with rural communities, local governments, and NGOs to develop ways to sustainably extract raw materials.
In turn, Natura teaches those methods to its suppliers, thereby helping them create jobs and increase capabilities in their own communities.
Natura works with dozens of local communities and thousands of families in fair trade partnerships. Stakeholders are not only rewarded for the ingredients they provide but also for all the knowledge and practices they are able to share. Communities are also remunerated for the environmental protection work they do.
Natura has been able to develop many innovative and commercially successful new products with this method of long-standing and committed form of co-operation.
These partnerships with sustainable values at their core benefit the communities and the company at the same time, each supporting the other.
One of these collaborations introduced incentives to production techniques that have already helped safeguard 257,000 hectares of forest.
Making an impact with supply chain partnerships at Neste
Dialogue is key in sustainability practises and plays a vital role when you are creating a positive cycle of sustainability, innovation and collaboration.
To foster face-to-face dialogue with its suppliers, Neste started organizing supplier workshops with its partner and social issues' expert BSR (Business for Social Responsibility). The events were built upon the findings of two separate social and labor impact assessments of the palm oil industry.
In addition to sharing key observations from the assessments, the workshops also enabled Neste to carry out consultations with its suppliers' on their key concerns and opinions.
”Not many companies engage in a partnership with their suppliers like Neste does. Normally companies do a top-down assessment or audit and then ask suppliers to fix the problems discovered. This approach usually results in quick fixes that are not long-lasting,” explains Jaewon Kim, Associate Director from BSR. ”If you really want to make an improvement, you have to make the supplier understand the basics of the problem. This is what Neste does. It engages with its suppliers to identify the root cause in the context of the supplier's perspective.”