BUSINESS INNOVATION

One of the main puzzles of our time is how to avoid climate change and safeguard ecosystem health while simultaneously improving human wellbeing and sustaining the economy. As a major culture-shaping institution, the business sector has an important role in the road towards a more sustainable society. How can corporations promote environmental and social sustainability, and at the same time have positive returns on investment?

As a part of the Build a Living Economy project, Worldwatch Institute Europe is showcasing several European companies that are generating business value while considering environmental and social challenges. Our viewpoint is that return on investment can be enhanced through sustainable business practices. Hence, a recent Harvard Business School paper concluded that the group classified as High Sustainability firms financially outperformed their counterparts, categorized as Low Sustainability firms (measuring stock performance from 1993 to 2010).

However, our research emphasizes that managing both financial and sustainability performance is a game of careful considerations due to the existence of trade-offs in costs (i.e. converting a traditional energy-plant into a sustainable one could lead to the loss of jobs). Consideration must be given also to what areas of sustainability to focus on, and on timing (legislation, social expectations) when choosing the option carrying greater value.

AN INNOVATION-DRIVEN ECONOMY

What business people really need is a paradigm shift in the way they think of making their profits. Proactive thinkers have the talent to inspire and motivate people around them towards a higher goal, i.e. giving their industry a make-over, changing their business model, disrupting the market through innovation etc. In doing so, system-thinking is crucial, because it forces people out of their comfort zone and it allows the mind to be open to unforeseen possibilities and to question outdated practices.

A Living Economy is an economy that has as a goal to improve human wellbeing and quality of life, moving away from pointless consumerism, without compromising natural resources. In a Living Economy companies engage in multiple sustainable initiatives but it is our view that one of the most important pillars of sustainable business in a living economy is the ability to innovate. In our research we have seen patterns of different kinds of innovations, which we have classified into different categories from transitional innovation (e.g. recycling of resources) to more radical and transformative innovation (e.g. implementing an entire new business model).

One of the ways a company in a living economy is creating value is by considering its relationships with the surroundings, both material and human. For example, the Dutch start-up Floow2 built their commercial concept up on a principle of using the web to disseminate information on available resources that can be rented out to companies that do not want to own or bear the cost of maintenance of heavy industrial equipment. This business model has created a new market where otherwise competing companies exchange equipment and resources and thereby impact the environment (and the economy) less.

PRINCIPLES FOR SUSTAINABILITY MANAGEMENT

Some of the true innovators today are those business people who are inspiring change within their business organisations. We have found that regardless of whether business managers that succeed in sustainability performance come from large corporations, small companies, or start-ups, they all lead their business organisations based on three common principles:

Principle 1: An inclusive management style is needed to get things going
Principle 2: Change requires leadership and top management support
Principle 3: Strengthening the market position takes cultural change

Collaboration at an internal and external level is key in a living economy (Principle 1). Employees in particular are positively impacted by an inclusive management style, their motivation increases as does their productivity. For example, the management of the Greek cosmetics company, Apivita, has succeeded in engaging employees and customers in its business models by continuously sharing new ideas and initiatives and engaging in civil society projects such as the establishment of a Botanical Garden that will both safeguard biodiversity of ancient Greece and explain about invaluable services of nature, such as bee products (honey, wax, etc) that are main ingredients in Apivita’s product range.

TOP-DOWN OR BOTTOM-UP?

Can new initiatives emerge bottom up? Certainly, but at some point they will need top management support, since significant change is only possible when you have that support (Principle 2). At the sportswear company Puma the CEO took a major lead in the implementation of green accounting based on ecosystem services principles. At Tetrapak top management for a long period continuously supported sustainability strategies, even when they were not the best financial option, as was the case of using bioplastic material into their carton containers. It is certainly that these initiatives would not have happened without the continued support from top management.

Finally, Principle 3 implies that making a shift towards a collaborative mindset in the business organisation and creating the market for new services and products requires cultural change within the company. Culture can be changed gradually over time. One way of achieving this is by engaging the organization in projects that challenge the competencies and capabilities of the company. A small new initiative might not seem game-changing in itself but the organizational learning from new types of projects such as new collaborations should not be underestimated.

In most cases the change towards a living economy will be a gradual transition, as illustrated by Van Houtum, a Dutch company supplying a range of bathroom solutions. The company recently launched cradle-to-cradle certified toilet paper, by collecting excess paper from their wholesalers among other initiatives. Business goes well and the next step is to change the company culture towards a common goal to embed a business model where all products are manufactured after the cradle-to-cradle principle.