By Valentina De Marchi.
How can firms change for sustainability?
As political and societal pressures increase, and more and growing evidence supports a business case for sustainability, an increasing share of firms is considering how to change their activities to reduce environmental impacts. However, going green does not entail the innovation process firms are used to.
Changing for green
The way firms might reduce their environmental footprint is by changing their products and/or the activities needed to realize them, that is, to innovate. Such innovation might regard the type of inputs used.
For example, in the context of apparel, substituting traditional cotton or synthetic fibers with new ones like bamboo and eucalyptus, that require less water and pesticides to be produced. Or the features of the product – designed for easy disassembly and recycleability. Also, they might regard the process – i.e. investing in machines and process layout that might allow reusing waste from their own activities within the production cycle, or more efficient use of resources. Or, more often, both of them, as a holistic approach to the reduction of impacts on environment might require a profound transformation of several aspect of the firm’s production activities at once [1].
A peculiar shade of innovation
Innovation is not a novel aspect for firms – the intensification of international competition has made it the key mantra for companies in most industries in the recent years. But innovating for environmental sustainability entails peculiar challenges [2, 5].
Environmental innovations are, on average, more complex than other (non-green) innovations.
- They are characterized by a higher degree of novelty – still representing a technological frontier for which many firms are still inexperienced. They often require resources and skills distant from the traditional knowledge base of the industry.
- They are associated by a higher degree of uncertainty and risks – as there are not yet widely accepted standards, either in terms of specific technological solutions or measures for evaluating the environmental performance of products and processes.
- They require a systemic approach, as the possibility of a firm to realize a green product is strictly depending on the green performance of the suppliers of raw materials of components or on the clients that are going to use it.
- Finally, they entail a credence character, as the environmental feature of a product or process, i.e. being realized via a low polluting process, is often a hidden attribute that cannot be disentangled even after the purchase.
Planning for green innovation
Considering for such special character of environmental or green innovations, effectively developing them requires a peculiar process, too. In particular, empirical studies converge in suggesting that a key aspect regards the importance to rely on knowledge and competences coming from external partners.
In order to introduce new products or processes that reduce emissions and wasteful use of resources, firms need to cooperate with external partners more than with respect to other innovations. This is especially the case of cooperation with suppliers, to ensure the supply of inputs or components with the needed eco-friendly features – that might not be readily available on the market – to close the production cycles and to enhance ‘recycleability’. And of cooperation with ‘knowledge providers’, being private design studios or environmental consultants (including non-profit actors such as NGOs), or public institutions such as research centers or universities [2, 3].
Interestingly, the importance of cooperation increases for the most intense green innovators, those who introduce changes that reduce several environmental impacts, such as: reduction of air, water, soil pollution, increased energy or material efficiency, improved after-use recycling of products, and others. Indeed, they are more likely to cooperate with a higher number of external partners, being also more often foreign partners [4].
However, such an open approach to innovation does not replace the internal innovation effort of the firm: investing in an internal research and development (R&D) office and in the skills and competences of the firms’ remains a key driver to ensure the effective development and introduction of a green innovations [5].
A call for a new approach toward innovation and sustainability
Willingness to reduce its own impact on the environment is not enough. To become effectively green, firms need to carefully plan their innovation activities toward this goal. The approach to innovation developed during the firm’s experience might not be enough to take up this challenge: opening up to external partners needs to be an essential complement to an internal investment to environmentally upgrade.
How to identify the correct partners to enter this new field, so as to govern the collaboration both with private and with public or not-for-profit organizations and mix it with internal, private effort might be challenging. But it is an essential step toward a lower impact production system. United we stand, divided we fall far from reaching sustainability goals.
References
[1] Network for Business sustainability (2012), “Literature Review: innovating for sustainability”, December
[2] De Marchi V. (2012), “Environmental innovation and R&D cooperation: Empirical evidence from Spanish manufacturing firms“, Research Policy, 41(3), 614–623
[3] Roscoe, S., Cousins, P. D., & Lamming, R. C. (2016). “Developing eco-innovations: A three-stage typology of supply networks”. Journal of Cleaner Production, 112, 1948-1959.
[4] De Marchi V., Grandinetti R. (2013) “Knowledge strategies for environmental innovations: the case of Italian manufacturing firms“, Journal of Knowledge Management, 17(4): 569-582
[5] Cainelli G., De Marchi V., Grandinetti R. (2015) “Does the development of environmental innovation require different resources? Evidence from Spanish manufacturing firms”, Journal of Cleaner Production, 94: 211‑220.
The Author
Valentina De Marchi is Assistant Professor at the Department of Economics and Management ‘Marco Fanno’ at the University of Padova, Italy, and Governing Responsible Business Research Environment (GRB) research fellow at Copenhagen Business School. She is interested in the study of the peculiarity of environmental innovations and on the greening of firms embedded in Global Value Chains.
Website: www.valentinademarchi.it
Twitter: @dema_val
Photo by Edgar Castrejon on Unsplash.