Filling the Sustainability Innovation Gap

This post originally appeared on the Corporate Eco Forum's Ecoinnovator blog.

Tomorrow’s leading companies will be those that pioneer innovative solutions to match climate change challenges. Today, this is largely uncharted territory; current best practices often focus on incremental product improvements (e.g., cars with moderate fuel efficiency gains) or are limited by existing business models (e.g., facility upgrades with high first costs). This type of change is not sufficient to achieve the 80 to 95 percent reductions in greenhouse gas (GHG) emissions the science tells us we need by mid-century. What is the process for advancing the innovations we need to adapt to a changing climate and reduce GHGs at the pace and scale necessary? We can learn much from others who have shared thoughts in this forum, like Peter Madden and Andrew Winston. At WRI, we are building on existing work and collaborating with partners in the private sector to focus on three critical elements for moving beyond best practices.

Next practices enable businesses to find the opportunities in a zero-carbon future.

First: inspiration.

WRI’s former board member CK Prahalad inspired us, as he had countless others, to think beyond best practices and focus on next practices. This can be a challenge. It means looking beyond typical sources of information like successful past strategies or even strategies that industry leaders are currently using. It means looking at future challenges and developing a strategy with new solutions and services, as our colleagues recently imagined for the forestry industry.

Highlighting the risks and rewards is essential. CK pointed to “mega opportunities” ahead for those who pioneer next practices. Many companies are already looking at global “megatrends” shaping future markets, like population growth and urbanization, but much more can be done to understand how such shifts create risks and opportunities in a changing climate. Better approaches for understanding new value and value at risk can create a compelling case for bigger, bolder corporate strategies. We can find new innovation and inspiration for tomorrow’s markets.

Second: action.

We need to prove the next practice concept. We need pioneers to test new business models and new financing approaches that can drive sustainability innovations. We need to create new benchmarks and indicators, not pegged to current industry best practices, but measured against those megatrends shaping tomorrow’s markets. Above all else, we need to move past ideas and create tangible benefits from next practices.

And actions, of course, speak louder than words. This summer, we formally announced the Next Practice Collaborative—a cross-sector group of companies including AkzoNobel, Alcoa, CEMEX, Johnson & Johnson, Siemens, Staples, and United Technologies Corporation. With input from expert advisors, the group is developing and testing innovations relating to three initial areas:

• Internal capital allocation: aligning corporate investment decisions with long-term sustainability risks and opportunities to create shared value.
• Buildings and energy: new models for accelerating a transformation in the built environment that enables clean, reliable power systems in growing cities.
• Climate-compatible development: Meeting customer needs in a changing climate with new product solutions that enable low-carbon, climate-resilient economic development.

We welcome others who wish to join us in finding ways to act on next practice opportunities.

Third: influence—in particular, collaborative influence.

Pilot projects are important, but we will want better means of getting successful demonstration projects to scale—and quickly. Creating a new “business-as-usual” with next practices will require collaboration and influence.

Leading companies and their partners will need to identify and convince influential decision makers—both internally and externally. Anyone from the CFO to a state regulator to the national government could be the critical partner who opens doors so next practices can transform markets.

A company may be measuring and managing its operational GHG emissions, but innovating beyond best practices will mean finding ways to engage customers and suppliers constructively in new solutions bring emission down even further. This is a careful balance of collaboration (see: Caterpillar’s customer-centric goals) and influence (see: Walmart’s supply chain impacts). Common interests in sustainability innovations can be strong enough to bring together traditional competitors, for example Ford and Toyota who may have common interests in new transport innovations.

Private sector leaders can also work with communities and policymakers, and not simply for broad social responsibility reasons or narrow self interests. Initiatives like PlaNYC in New York have shown that public and private sector leaders can work together with communities to create shared visions and solutions that address vulnerabilities and risks in a changing climate.

We can do more to identify these types of transformative partnerships and strategic influence points. We can do more to build a business case for bigger, bolder climate change strategies. We can do more to identify and act on hidden sustainability risks and innovation opportunities. We look forward to working with others on this crucial and exciting innovation challenge.