Resource Decoupling Through Sustainable Innovation in ICT – The tools & business practices to make it happen
Opinion Piece by Dr Robert Gerlach
As the global population will reach over 9 billion people by 2050, the wellbeing of future generations relies on us transforming society now. We need to not only reduce the ecological footprint per person, but also lessen the impact of economic growth on the environment. An economy cannot be sustainable unless we decouple business activity growth from resource usage and environmental impact – a process known as resource decoupling or dematerialisation of the economy.
How ICT enabled sustainable innovations drives resource decoupling
ICT and connected technologies can contribute significantly to resource decoupling. Examples include virtualization of processes (web-meetings over physical travelling, digitalization of paper-based processes etc.) and substitution of physical products, such as car sharing over car ownership.
Together with the circular economy, the potential of connected technologies to unlock 21st century sustainability is widely recognised and proven in practice. In an ever-growing consumer society, our challenge lies in speeding up its application. This is urgent and requires action from policy makers, consumers and businesses – with businesses being the focus of this article.
Why sustainable innovation matters in business
Many factors should encourage businesses to adopt sustainable technological innovations, such as tightening regulations, consumer demand and rising and more volatile commodity prices. Crucially, the business upsides of sustainable innovation in product-, business model and process development are becoming increasingly obvious. Optimising energy and resource usage results in lower production and operational costs. Green product lines have a positive impact on sales. Companies actively pursuing sustainable business practices attract and retain the best employees. By adhering to high environmental standards, companies pre-empt future regulations, reduce their risks and improve their speed to market.
Most importantly, incorporating sustainability into regular business praxis makes companies more innovative: new boundary conditions, perspective and focus all contribute to the development of more innovative products and business models.
The challenge of practical implementation in business operations
Whilst most business leaders recognise the opportunities in sustainability and publicly declare their support for it, actual implementation has proved difficult to achieve. Apart from the frequently discussed lack of effective government policies and regulations, our experience with clients in the connected business sector shows that there are also two main company internal challenges hindering progress. Firstly, effectively embedding sustainability into core business strategy across the complete value chain and company hierarchy. Secondly, the lack of effective processes and tools to implement sustainable business practices into daily operations. Both company internal challenges are interdependent – so we need to address them simultaneously.
A process for successful implementation of sustainable business practice
As our understanding of the effectiveness of connected technologies in generating sustainability impact increases, so too does our ability to derive practical recommendations. For example, at a fundamental level, connected technologies can yield positive effects (i.e. via virtualisation, substitution, optimisation) which we need to maximise, and negative effects (i.e. via rebound effects, life cycle impact, obsolescence) which we need to minimise.
Drawing on these findings and on extensive consultation with clients in the connected business sector, the mm1 Sustainable Innovation Practice recently developed an approach that allows companies to overcome the two challenges previously identified and effectively embed sustainability into business practice.
In order to develop this approach, we first identified a set of criteria for a solution to meet. To change the way corporations approach sustainability we require tools, processes and incentives which:
- clarify the links between sustainability, business opportunities and risk
- script simple guidelines that are specific, achievable and motivational and can be realistically incorporated into day-to-day practice
- are applicable at different levels of hierarchy (from CFOs to product designers)
- incentivise collaboration with other stakeholders, such as regulators, competitors and those within the supply chain
- are useful for companies with no, little or advanced experience in sustainable business practice and offer the potential for standardisation
- address the ‘why are we doing this’ question and help shape a new mind-set
- link overall strategic sustainability goals to the goals of individual business units
- link the achievement of sustainability impact by employees to their targets
Clearly, there is no one process or tool to tackle all of these challenges. Nor would a ‘one size fits all’ approach be effective, given the diverse range of challenges facing different corporations.
Our approach therefore offers a set of tools which corporations can apply along three principle stages of the corporate innovation process: 1) Strategy analysis, 2) Business analyses & development and 3) product or service development. These tools include a sustainability SWOT analysis, a sustainable business model canvas, a sustainability levers framework and a product development script. In addition, a sustainability balanced scorecard helps the corporation to measure and monitor sustainability performance. The tools can be implemented gradually and applied with differing degrees of complexity, allowing for a realistic and pragmatic ‘golden mean’ approach, where businesses can determine for themselves the right balance of investment, opportunity and risk.
More information about the process, individual tools and examples of successful implementations in the telco, automotive, insurance and home appliance industries can be found in our recent publication, ‘Connected Business as a Driver for Sustainable Innovation’.
The path ahead
Systematically applied, simple tools can make a surprisingly big difference. Our work with clients across a wide range of industries has shown that it is possible to generate significant sustainability effects in corporate product- and business model development with the help of tool-based methodologies – whilst at the same time generating tangible business upsides.
Despite their effectiveness, business tools for sustainable innovation are not enough to address the challenge outlined at the beginning of this article. It is essential that policy makers strongly incentivise businesses to internalise negative externalities by developing clear, consistent and fair regulation not only on emission targets, but also on resource usage, both on a national and global level. In addition, policy makers need to recognise ICT as a key to resource decoupling and incentivise investments in connectivity infrastructure (see the GeSi SMARTer 2030 report). Furthermore, policy makers need to incentivise the transition towards the circular economy and begin to implement effective educational polices to ‘nudge’ ICT enabled sustainable consumer behaviour, i.e. by making consumed resources more visible (see ICT solutions for sustainable lifestyles report).
Nevertheless, whilst change towards a sustainable economy can only result from simultaneous action from policy makers, consumers and businesses, our experience has shown that individual businesses can and should take the initiative and be commercially successful.
Will sustainable innovation tools similar to the ones presented in this article find widespread adoption in the daily operations of businesses? Will policy makers rise to the challenge and develop strong and effective incentives for businesses to operate sustainably? How quickly? Can connected technologies reach their full potential to decouple economic growth from resource consumption? These are our challenges for 2015 and beyond.
Robert is interested in sustainable product- and business model development and currently responsible for the Sustainable Innovation Practice at mm1. Working with clients in the telecommunication, insurance, automotive and home appliance industries, his aim is to help organisations to embed tailored sustainable innovation processes into day-to-day operations. He received his DPhil from Oxford University in Engineering Science and currently lives in Berlin.
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