Integrating sustainability and innovation

Aileen Ionescu-Somers, Forum for Corporate Sustainability Management at IMD shares her thoughts on the importance of integrating sustainability and innovation and how it can be done. Change agents and techniques such as open innovation and knowledge brokering can help organizations to “leapfrog” towards solutions.

Experts predict that today’s population will increase by another 50% to reach more than 10 billion people by 2050. The demands on both the climate and the world’s diminishing resources are likely to be even more intense as emerging societies move towards a higher standard of living. With increasing numbers of people demanding more from a planet that is already reaching its limit, it is not “rocket science” to work out that sustainability will be an increasingly hot issue, not just in terms of the climate, but also in guaranteeing that we have enough food to eat and enough energy to keep functioning.

By now, just about everyone recognizes that we have a problem, but as the recent climate change conference in Copenhagen demonstrated, creating enabling mechanisms and changing behavior and perceptions is not easy.

Integrating social and environmental issues into corporate strategies and processes

The Forum for Corporate Sustainability Management (CSM), a research and learning initiative of IMD, was established to help companies integrate social and environmental issues into corporate strategies and processes. The short way of saying it is that we work with a membership of global companies to “get stuff done” in the area of global sustainability. We also facilitate cross fertilization of learning amongst companies and industries.

…using open innovation and knowledge brokering techniques, help them to “leapfrog” towards solutions.

Above all, CSM can work with teams faced with sustainability challenges in companies and, using open innovation and knowledge brokering techniques, help them to “leapfrog” towards solutions. Research indicates that there can be significant barriers to introducing process innovation into any organization. This can be especially true in business, and above all when it comes to process innovation related to sustainability strategies. Management tends to see innovation itself as a “fuzzy” area. Entrenched mindsets, reluctance to introduce change into a system that already seems to be working (“if it ain’t broke, don’t fix it!”) and a tendency to short-term strategic planning, are some of the main hurdles to new ideas.

Overcoming barriers to introducing process innovation

The most effective way to overcome such obstacles is, not only to build a strong business case for change, but also to organize multiple demonstrations and rehearsals until the new concept is internalized in the organization. Let’s call it “the woodpecker approach.” But even getting to this stage is an arduous task for sustainability managers and others concerned with embedding sustainability in organizations.

Often there is no reward or incentive for a manager to risk disrupting the organization with a new idea whose benefits are not immediately obvious.

CSM research at IMD shows that in most cases even progressive firms do not fully develop and roll out the business case for sustainability to the maximum. Even more important, the current shareholder model places a maximum emphasis on short-term results. Often there is no reward or incentive for a manager to risk disrupting the organization with a new idea whose benefits are not immediately obvious. Most managers are short on time and resources, and are understandably hesitant to add to the workload unless there is a clearly identifiable and immediately tangible (thus quantifiable) business advantage to the company.

Short term interests decrease incentive

Our research also reveals that even in companies that have a direct interest in sustainability, such as the food and beverage industry, which is heavily dependent on raw material from agriculture (affected also by climate change), there is often a disconnect between the company’s long term interests and the shorter term interests of powerful business units such as procurement and marketing, which set their own policies with the company.

So how does a change agent — the person or group that is actually trying to innovate —manage to win over the skeptics and move forward with the sustainability agenda? How do you convince a company’s management that when it comes to sustainability, it can make business sense to go beyond mere compliance? Our research shows that simply advocating change is not enough. Approaching the key stakeholders in a company requires careful analysis and a highly structured approach.

IMD has been working closely with the Sustainable Agriculture Initiative (SAI), a consortium of 22 global food & beverage companies, to create training and development modules to enable change agents to break down mindsets and fill the knowledge gaps within their companies.

We are also showing these change agents how to build effective internal influence networks and to spot gaps within their companies.

The role of change agents

Change agents need to identify and become familiar with the differing types of internal networks in their firms. To institute change, they need to clearly define their objective and then to identify which strategy makers, which decision makers and which experts need to buy into the innovation in order to make it happen. And then, in an analogy of the firm as a busy and complex “ant’s nest”, which of the firm’s “worker ants” need to be on board to do the actual work?

Finally, change agents will need to work out what they can ask from each group. The change process works in phases moving from awareness building, to generating interest, to organizing trials and evaluations and finally to internal acceptance of the sustainable process. To accomplish this, it is essential to accurately identify internal allies and opponents.

Examples of successful initiatives

After the climate conference in Copenhagen, it is obvious that companies have still some considerable time to wait before a binding agreement on carbon limits becomes available. However, even without a broad regulatory framework, corporations can still be creative on the “beyond compliance” climate agenda. For example, companies can create conditions that reduce the risk of investments in renewable energy. It can be as simple as building long-term partnerships with renewable energy suppliers and, together, setting up mechanisms for pushing the market for renewable energy from the demand side. Tetra Pak, Novo Nordisk and Nokia Siemens Networks are all examples of companies that have done just that. Johnson & Johnson has introduced an innovative financing mechanism for carbon related projects that incentivizes managers to get approval for getting projects off the ground that would otherwise risk being overthrown in favour of other more lucrative options.

Such firms have shown that with flexibility, imagination and a carefully structured approach, it is entirely possible for firms and partnerships to push the boundaries of incremental innovation in the area of sustainability towards more radical innovation, and to do so without having to break the bank.

By Aileen Ionescu-Somers, Co-Director of IMD’s Forum for Corporate Sustainability Management

This article was republished with the kind permission of IMD, Switzerland

About Aileen Ionescu-Somers

Aileen Ionescu-Somers is Deputy Director of the Forum for Corporate Sustainability Management. For further details on how CSM at IMD can deliver value to your company, contact her at aileen.somers@imd.ch. For details about CSM’s activities as a research and learning center, visit www.imd.ch/csm.

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