How can businesses use innovation to be more sustainable?

Daniel Saunders

Chief Executive Officer

Climate change is a “wicked problem” that requires leaders to rethink business models and recognise the knock-on effect their choices have on the environment and society. But to achieve radical thinking and transformation, the “business as usual” mindset needs to be replaced with experimental, systems thinking. If not, businesses will only take sustainable actions within their existing parameters, such as reducing energy consumption or using more sustainable materials for existing products. While these are positive steps, such activities will not create the speed or scale of change needed to tackle climate change. 

Innovation helps develop radically new ideas and provides a framework to move businesses beyond a limited scope and combat resistance to change. It does this by using experimentation to validate ideas with data (not opinion) in a risk-managed way.

Specific characteristics of innovation are crucial in the battle against climate change:

• Fast, agile development – we need to make headway, fast. 
• Systems thinking explores the broader relationships between businesses and the causes of climate change, ensuring we’re not tackling the problem in isolation (or pushing the problem further down the chain). 
• Collaboration – bringing together a group of diverse people and approaches to tackle complex problems in new ways.  

Large organisations often struggle to develop innovation programs with such characteristics. This is why many companies partner with innovation labs or “accelerators” that provide the necessary expertise, resources, connections and culture. Let’s look at how innovation labs cultivate the ideal environment to develop sustainable innovations. 

Fast, agile development

Innovation labs bring together large established organisations and promising startups or scaleups for an 8-10 week program designed so that all parties move fast and use agile principles. The startup gains valuable learnings from the larger organisation, which may have taken decades to develop. The idea refinement process can also be fast-tracked by experimenting ‘in market’ with the corporations’ customers. 

By working together, innovations can be brought to market faster. The scaleup Powervault was working on hardware to create a smart grid which reduces dependence on coal power stations. The route to commercialisation for such ideas can take decades, but by joining EDF Energy’s accelerator program, Powervault reduced its time to profitability from ten years to three.

Systems thinking

Systems thinking means businesses consider what they do and how they operate within the context of the larger system and how this contributes to climate change. For example, using systems thinking, a corporation might consider using discarded products (even those produced by competitors) to create new products rather than developing recyclable products that use virgin materials. 

For instance, United Utilities worked with L Marks to run an innovation lab that explored ways to enhance biodiversity and natural flood control. Although such innovations might seem disconnected from United Utilities’ day-to-day operations, such ideas positively impact the environment and the broader system, in turn improving their business. 

Collaboration

Working with individuals from different backgrounds or industries can help generate diverse ideas. Innovation labs connect teams from large businesses with founding teams they wouldn’t usually work with.

For example, CarbonChain initially focused on industrial and commodities businesses but, by working alongside Lloyd’s, Atrium, and Tokio Marine Kiln, bought their idea to the insurance industry. Insurers can now use CarbonChain for climate-based risk assessments when underwriting policies and measuring emissions from insurance portfolios. 

Where should I start?

Innovation labs work by understanding your objectives, so they can scout for startups working on ideas that will assist you in achieving your goals. 

It’s worth recognising at this stage that your goals should be financially sustainable too. Developing a 100% recycled product that costs more than customers are prepared to pay won’t be something you can feasibly sustain long term. 

Given the increased awareness of climate change, businesses have several established frameworks for goal and objective setting they can use. I’ll discuss the top three frameworks.

Net Zero 

The concept of “Net Zero” is that you do not produce more greenhouse emissions than you remove. It was created on the scientific consensus that the earth needs to become carbon neutral to prevent the negative impacts of exceeding a 1.5°C rise in temperature. The UN popularised Net Zero when 194 nations agreed to the goal as part of the Paris Agreement. Today, more than one-third of the world’s largest publicly listed companies have a Net Zero goal. 

Scope 3

Scope 3 focuses on identifying a range of emissions businesses must minimise. Emissions are categorised as follows:

• Scope 1 – Direct emissions, such as those produced by corporate vehicles.
• Scope 2 – Indirect electricity emissions, such as those from the power plant where your business buys electricity.
• Scope 3 – Includes all additional indirect emissions that happen upstream and downstream throughout the value chain. Scope 3 emissions are produced when customers use your goods or services or when employees travel to the office, for example. In many cases, indirect emissions account for the vast majority of a business’s emissions, up to 95% in certain circumstances.  

During Sodexo’s innovation lab, they worked with Wayleadr, an app which helps staff save time (and emissions) when parking at work (Scope 3). The trial results showed a reduction of 23.86 metric tonnes of CO2 emissions across three car park sites. This increased to 260 metric tonnes when used across 50 sites with 50 spaces. 

SDG

Developed by the UN, Sustainable Development Goals consist of 169 objectives across 17 goals. Combined, the goals provide a “blueprint for peace and prosperity for people and the planet, now and into the future.”

The SDG framework takes a broader view and recognises the interconnected nature of global problems. 

Before diving head first into goal setting, it’s worth reiterating a note of caution from the author of Getting Green Done, Auden Schendler; 

“measurement and reporting have become ends to themselves, instead of a means to improve environmental or social outcomes. It’s as if a person committed to a diet and fanatically started counting calories but continued to eat the same number of Twinkies and cheeseburgers.” 

That is to say, ensure significant time, effort and resources are spent on taking action that impacts your goals instead of setting and measuring goals but doing little to impact them. 

Summary

Significant adjustments must be made to business models, commercial operations, and society to drive truly effective climate action. Innovation labs allow large corporations to collaborate on fast, system-changing disruptions in a risk-managed environment. 

If you are looking for a corporate partner to run an innovation lab, get in touch with us to discuss your goals and requirements further.