Global Compact International Yearbook 2014

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SUSTAINABLE INNOVATION MANAGEMENT: TEN LESSONS FROM INNOVATION STUDIES FOR A SUSTAINABLE PARADIGM Sustainability goals, such as those associated with the the post-2015 development agenda of the United Nations, have to be translated into new commercial products and services as well as different ways of making and delivering them that replace less-sustainable alternatives. This is the role for firms intending to profit from innovation while meeting sustainable goals. Sometimes these innovators are small entrepreneurial firms that see sustainable products as an ideal niche in which to start a new business venture. Sometimes these innovators are large firms that have identified opportunities where customers and / or technologies are new. Successful innovation at the firm level contributes cumulatively to industrial structural change in a process known as “creative destruction.” Through this process, a new paradigm can emerge, within which sustainable economic growth flourishes in an inclusive manner consistent with the goals of the United Nations post-2015 agenda. By Dr. Paul Dewick and Jonathan Aylen The direction and pace of this creative destruction process is difficult to foresee. What history tells us is that we can expect a wide range of novel products, new production techniques, and imaginative services to be offered to the consumer. Given these broad choices, the market acts as a selection mechanism – some alternatives will be picked and some neglected. Competitors will watch what succeeds and adapt their offerings accordingly. It is precisely from this sort of lively variety, selection environment, and serendipity that the winning outcomes emerge that will contribute to a preferred (and potentially more sustainable) paradigm. In the following 10 lessons, we consider briefly the role of innovation dynamics in facilitating a sustainable paradigm consistent with the post-2015 agenda of the United Nations. The list is not exhaustive, but it signposts some of the challenges and opportunities for sustainable innovation management. 1. A sustainable paradigm is more likely if sustainable innovation yields a profit. This is not necessarily difficult. Green goods open new markets. Sustainable raw materials can reduce costs. Diversification to novel, sustainable sources can spread risk. Developing markets for recycled products such as plastics or beverage cans, paper, or compost encourages both collection by households and processing by emerging firms confident of their supplies. For example, the Holmen Paper of Sweden sends fresh newsprint to the United Kingdom and Germany by sea. The same vessels return with waste paper and travel direct to the mill, where it is used as feedstock alongside pulp from timber. Reversing the supply chain in this way allows them to diversify their raw materials supply and cut production costs. The challenge for firms is to stimulate creative ideas and to champion and support the ideas through to implementation. 30 Global Compact International Yearbook 2014
Agenda Measuring SDGs 2. Necessary technologies often evolve together. Innovation needs to be managed at the component and systems levels. Carbon capture is straightforward for many industrial processes, such as oxygen steelmaking. Yet, implementation of carbon capture and storage (CCS) is anything but straightforward, requiring, for example, the development of networks, both physical (e.g., systems of pipes, storage sites) and contractual (e.g., between steel producers and infrastructure owners), as well as supportive institutions (e.g., regulation, local planning). The challenge here is to coordinate individual innovations at different levels into a sustainable architecture. Organizations emerge nationally and regionally to support coordination, often supported by government. For example, the Chinese Ministry of Science and Technology takes a lead role in China’s CCS development, including initiating CCS research and development activities, funding, and approving CCS demonstration projects. In the United States, the Department of Energy’s network of seven Regional Carbon Sequestration Partnerships heads-up national efforts to develop the infrastructure and knowledge base of CCS. In Europe a similar role is played by the European CCS Demonstration Project Network. The Global Carbon Capture and Storage Institute, based in Australia, connects organizations internationally. 3. Technological trajectories will guide the direction of progress, but trajectories will vary. Global problems often need local solutions. Technologies prosper in localities depending on sociocultural-political characteristics and access to different sorts of capital (e.g., natural, financial, human). For example, biomass potentially provides a basis for an alternative (more sustainable) system of production and distribution for (bio-) fuel and (bio-)material products. There are many alternative biomass feedstocks and associated production and processing technologies that lock in systems of production and distribution. Contrast the evolving trajectories associated with sugar cane-to-ethanol production in Brazil with the cellulosic ethanol production in the United States. Going forward as sustainable land-use patterns are developed that balance demands for fuel, food, ecosystem services, and carbon sequestration, we can expect opportunities for different trajectories to emerge around alternative inputs to the bio-economy. 4. Innovation is not just about technological change. Business model innovation is important, too, and there is increasing adoption among small entrepreneurial and large multinational firms of alternative business models that support a value proposition aligned with sustainable goals. For example, Delphis Eco, a UK-based startup, was conceived with a business model applying “creative capitalism” to the consumption and production of ecological cleaning products. At the other end of the size spectrum, well-known examples – including Unilever’s “Sustainable Living Plan” and Marks and Spencer’s “Plan A” – demonstrate how sustainability goals can be embedded into the core business processes of large firms. More recently, the B-Team was established by a group of high-profile business leaders with the aim of catalyzing “a better way of doing business for the wellbeing of people and the planet”; an opportunity consistent with the UN post-2015 agenda. 5. Although it often lags behind technological change, institutional innovation is always necessary to support technoeconomic changes. Indeed, the co-evolution of technologies and institutions shape the pace of progress. Institutions vary greatly across countries, and their influence on innovation processes is complex, but basically there are two types of institutional innovation: formal changes such as new rules, laws, and constitutions; and informal changes such as new sociocultural norms of behavior, conventions, and self-imposed codes of conduct. Government often plays the role of institutional entrepreneur with respect to sustainable innovation, shaping the environment in which novel ideas will prosper and diffuse. Opportunities include funding basic R&D to acquire knowledge of the options; standard-setting to help designs develop and markets flourish; subsidizing capital investment otherwise handicapped by small Global Compact International Yearbook 2014 31
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Global Compact International Yearbook 2014

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