Will Innovations in Future Be Driven By Sustainability?
Bringing Sustainability in Value Chains
Among companies and executives, it is a generally held perception that adopting environment-friendly practices could erode their competitiveness. They believe that it adds to the costs and the returns are not worth the investment in terms of time, money and effort. Becoming sustainable is looked at as corporate social responsibility that does not align with business objectives.
However, nothing could be further away from the truth. A growing body of research points towards the benefits of adopting sustainable practices in business, which contribute to and not take away from business goals, and yield top-line and bottom-line returns. Few benefits of becoming environment friendly include:
- Lower costs as companies end up reducing inputs that they use
- Additional revenue generated from better products that may also enable companies to create new businesses
- Reduce waste and contribute to environmental conservation. For example, collecting empty cans for waste recycling, changing incandescent lights for LED lights, mitigate paper waste etc.
- Improved Brand Image and Competitive Advantage
The key to progress, especially in times of economic crisis is innovation. Sustainable corporations are more likely to emerge successful from today’s recession. By adopting sustainability as a goal, business leaders would be able to gain an edge over their rivals because in days to come, sustainability will become an integral part of development.
Shifting Gears Towards Sustainability
The shift to sustainability is gradual, challenging and requires firms to develop new capabilities. Research suggests that companies that start the journey of sustainability go through five distinct stages:
Viewing compliance as opportunity: Since environmental regulations vary by country, state, city and regions, compliance becomes difficult in absence of standard procedures and practices. However, firms that push through these challenges and focus on meeting emerging norms, gain time to experiment with materials, technologies, and processes and are better suited to comply with global standards when implemented.
Making Value Chains Sustainable: Each link in the value chain has to be carefully analyzed when developing sustainable operations. Once companies are able to meet with regulations, they become more proactive about environmental issues and focus on reducing use of non-renewable resources in their value chains.
Designing products and services to become eco-friendly: Tools like enterprise carbon management, carbon and energy footprint analysis and life-cycle assessment help companies identify the sources of waste in supply-chains. For instance, life-cycle assessment is particularly useful in helping companies identify environment-related inputs and outputs of entire value chains. For example, it helped some companies discover that vendors consume as much as 80% of energy, water and other resources used by a supply chain and they must be a priority when driving to create sustainable operations.
Developing New Business Models: Businesses that are incorporating sustainability or ESG practices in their business models are expected to stay ahead of the curve in years to come. For instance, banks those lend loans for sustainability initiatives or reserve funds for environmental projects embed sustainability in their model.
Creating Next-Generation Practice platforms that enable customers and suppliers to manage energy in radically different ways: This would entail companies acquiring a sustainability focus and a shift in paradigm. For instance, companies like Cisco, Dell, IBM who install smart grids and reduce reliance on conventional energy sources, could lower their costs and achieve higher efficiency in their operations.