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Unlocking the One Trillion-Dollar Innovation Opportunity

January 24, 2017

 

Last week Unilever announced research showing that one-third of consumers now purchase its brands based on their good social and environmental performance, but went on to suggest that brands are missing an opportunity from not promoting sustainability effectively. Getting this right could unlock a further $1trn market opportunity for sustainability innovators.

 

This backs up a growing business case for sustainable innovation, suggesting: a healthy price premium, growing revenues, better customer loyalty, and increased employee motivation, from new sustainable product development. We are witnessing a sea-change in the way businesses embrace corporate sustainability, shifting from bottom line cost and reputational drivers, to it becoming a driver for top-line growth and competitive advantage.

 

Yet it is one thing to recognise the opportunity from sustainability; another entirely to act on it effectively. Today’s innovator could risk mishandling sustainability by defaulting back to traditional innovation methods and approaches in which sustainability all too frequently falls off-the-radar.

 

We will need new approaches and processes, and new corporate mind-sets to tap this $1trn opportunity. The business case will help wake manager up to the opportunity, but cannot show them ways to unlock it; for this we must move from ‘why to’ to a ‘how to’.

 

Here are four important factors to kick start sustainable innovation – an organisational, two process, and a mind-set change.

 

Embed sustainability at the front-end

Companies have generally managed manage sustainability by creating stand-alone teams, then deployed this through internal, operational functions like quality, operations, finance, supply chain, etc. In contrast, sustainable innovation will be delivered through fuzzy-front end, early-stage functions; like R&D, marketing, strategy, product development or design, or alternatively through external partners like creative agencies, incubators or collaborative partnerships.

Some, like GE, Philips, and DuPont do this by significantly invested in sustainability-led research and development to successfully growing green portfolios and revenues. Others establish their sustainability reporting line through marketing: Unilever’s Chief Marketing and Communications Officer, Keith Weed, has board responsibility for sustainability, while organic food company Royal Wessanen has a Chief Marketing and Sustainability Officer.

 

Companies look to the front-end as 80% of the environmental impacts of today’s products and services are determined at the early-stages of their development. Yet sustainability is frequently added-on at later, more operational development and detailing stages; after important decisions are made. Sustainable innovation is best managed early-on by these marketplace functions to ensure success.

 

Beyond Customer Insights

How we innovate must also change too. Customer-focussed, human-centred, user-driven; innovation and marketing today are driven by consumer and customer insight methods. There are two fundamental problems with this on sustainability:

 

First, despite the Unilever research, customers in other categories and in certain regions can be indifferent and less committed to sustainability. Unilever’s own data shows a marked difference between sustainability commitment from developed (UK/US) versus emerging markets (Brazil/Turkey) which is backed up by National Geographic research showing western market consumers flat-lining on sustainability interest. There remains a question of whether the case for sustainable innovation will really come from consumer or customer insights. Former CEO of M&S, Stuart Rose, famously positioned their sustainability program (Plan A) as half-a-step ahead of consumers stating that:

 

“If you wait for customers to tell you that you need to do something, you're too late. Good business leaders should be half a step ahead of what customers want”.

 

Brands need to be comfortable leading customers on sustainability.

Secondly, consumer/customer insights only really deliver consumer/customer benefits while sustainable products must serve other members of society too – like supply chain workers, employees, communities or the environment.

Pioneering start-up Fairphone created the worlds first ethical , modular and repairable smartphone. Consumers can repair and replace broken components, like the screen or speaker, allowing them to keep the phone for longer. The phone is ethically sourced ensuring materials and components are conflict-free and fairly traded, meaning workers in the supply chain are free from exploitation and factory employees get a fair deal for their work. Longer lasting phones also helps reduce ewaste mountains and the burden of extracting increasingly scarce resources on our planet. Sustainable innovations need to be humanity-centred – as much as human-centred - seeking insights and benefits from wider stakeholders than customers alone.

 

Reframe Sustainability Challenges as Big Innovation Opportunities

Sustainability issues have historically been seen as ‘impacts to manage’ and ‘risks to mitigate’ in business, but this isn’t great for innovation. The world faces unprecedented environmental and social challenges – climate change, resource scarcity, water shortage, poverty and inequality – and this requires innovators mind-sets to shift, from a focus on ‘your business’ to ‘our world’.

 

There are some promising signs of this, with growing interest in pro-poor strategies, circular economy projects, and climate innovation, while a growing number of companies reporting against the Sustainable Development Goals (SDG’s) also lays testament to this. A further step will be to pursue new business opportunities that accelerate our path to the SDG’s 2030 goals, rather than measuring how today’ business activities overlap them.

 

Global carpet manufacturer’s pioneering Net-Works program has created a social business model, setting up a supply chain to source recycled nylon from discarded fishing nets left as waste in the ocean. This provides much needed employment and income for poor coastal fishing communities (SDG #8) and helps reduce ocean plastic waste which can disrupt delicate coastal ecosystems (SDG #14). Sustainability innovators must not simply reduce their own negative impacts, but see opportunity, growth and creativity in humanities big problems - using business as a force for social good.

 

Don’t Sell on Sustainability

Though sustainability may be the driver for innovation, its probably shouldn’t be the positioning or marketing strategy. Unilever’s research highlights growing commitment to sustainability, but for many customers and categories saving the planet and caring for people remain secondary support benefits (at most) to more directly beneficial drivers of purchase – like value for money, convenience, safety, speed, efficacy, better functionality, etc. Innovators and marketers should still focus on these benefits to stand any chance of success.

 

Food waste innovator Winnow Solutions understands this well in helping commercial kitchens manage and reduce wasted food by providing ‘technology to cut food waste in half and boost your kitchen profit’. For Winnow and its customers, this is just food and profit that’s going in the bin with no mention of the environmental or planetary benefits - which is what customers are really interested in.

 

Businesses mistakenly assume that the key to sustainable innovation is to marketing sustainability, which are really not the same thing. In the end, we just need good marketing and innovation with sustainability baked-in for sustainable products to succeed, and innovators must remember that sustainable products need to be better as well as greener

 

Finally

Sustainability offers a powerful new set of innovation and marketing lenses that can give brands a commercial edge. There will be many issues for innovators to consider in unlocking this opportunity, but these four factors will help ensure that future innovations are successful and sustainable.

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