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Sustainability-Driven Innovation

By Chris Park

Sustainability-driven Innovation

Focusing on green can help companies design better products and processes

Until recently, green initiatives were a peripheral activity for most businesses. Companies pursued sustainability either because they wanted to be good corporate citizens, or because their customers demanded it. In many cases, perception mattered more than performance. But now, more and more companies are discovering that focusing on green can actually help them develop better products and smarter ways of working. In other words, they aren’t just using green to differentiate their brand perception — they are using it to drive innovation that helps differentiate the real-world performance of their products and services.

"Sustainability can drive innovation by introducing new design constraints that shape how key resources— energy, carbon, water, materials and waste—are used in products and processes. "
Raising the bar on design

Sustainability can drive innovation by introducing new design constraints that shape how key resources— energy, carbon, water, materials and waste—are used in products and processes. These five resources are ubiquitous, and thus can present a business with significant opportunities to boost efficiency and cut costs. Yet, in the past they often were not treated as primary design constraints.

That’s now changing as designers apply their creativity to the challenge of reducing resource use and cost without sacrificing performance. For example, a typical 16-ounce plastic water bottle requires 5 ounces of crude oil to produce, which costs manufacturers a lot of money and increases their exposure to supply risks. However, one manufacturer was able to reduce the amount of plastic in each bottle by 40%, slashing its production and transportation costs while insulating its business from oil shortages and price shocks. What’s more, the redesigned bottles helped strengthen the company’s green image.

In another example, a company that designs and manufactures equipment to clean and maintain indoor and outdoor surfaces proactively eliminated the need for chemicals in one of its cleaning machines — chemicals that had a potentially negative impact on the environment and consumer perceptions. The company’s innovative new cleaning technology electrically converts water into a cleaning solution, resulting in improved performance, reduced operating costs, improved safety, lower environmental impact, and a stronger brand image. The technology also boosts productivity by eliminating the need for chemicals training, purchasing, storing, handling, and mixing.

Sustainability-driven Innovation

Prime targets for green-inspired innovation
  • Commodity and raw material availability and use: How are environmental disturbances affecting raw goods? Are nonrenewable resources being depleted too quickly?
  • Energy consumption and cost: Will price volatility in carbon-based fuels continue? Can we use energy more efficiently while still maintaining or increasing production?
  • Emissions and waste: Waste equals wasted profits. How can we reduce the amount of materials we waste in our processes? How will new taxes on packaging or waste disposal affect our business?
  • Water availability and quality: How might increasing water scarcity, particularly in emerging markets, affect our manufacturing process and revenue continuity? Will we have to rethink production as we face stricter regulations?
  • Demand for sustainable products: Do consumers and our suppliers care about the sustainability attributes of our products? Will they pay more for greener offerings?

Sustainability-driven innovation goes beyond designing green products and packaging solely for their own virtues. Instead, it focuses on improving products and making business operations and processes more efficient to reduce costs and waste. Another important design goal is insulating the business from the risk of resource price shocks and shortages. Taken together, these enhancements can deliver business benefits that go far beyond the bottom line—whether it’s improving a company’s overall carbon footprint, enhancing its brand image, or engaging employees in a more profound way.

Sustainability-driven Innovation

Developing a strategy

There are four steps to developing and implementing a broad strategy to manage energy and resources and drive process innovation:

Rigorously evaluate energy and resource use. Look beyond current pricing and consider volatility and availability. Collect and consolidate data from the different silos across your enterprise (and your supply chain). This helps establish an internal baseline for measuring and monitoring the impact of your energy and resource strategy, supports external benchmarking, and makes it easier to define goals that align with your overall business objectives. It also shifts the focus from individual sustainability projects to broader programs that treat energy and other resources such as water as strategic assets.

"Businesses today have many significant opportunities to use sustainability as a catalyst to drive innovation and improve how they do business. "

Identify specific areas for improvement. Not all sustainability initiatives are created equal in terms of potential to create business value. Some business operations require more resources than others. For instance, it takes more energy to melt sand into glass than to freeze ice cream. It’s not a question of which operations use the most resources, but which ones use more than they should. Track and analyze data across the facilities and processes to compare apples to apples. Then you can identify areas with the most potential for improvement and return on investment. Some initiatives may create both top-line value and bottom-line savings, while others may only reduce operating costs.

Prioritize projects. Don’t just play follow the leader; prioritize projects based on your company’s specific needs and strategy. With many sustainability projects competing for limited dollars, you should prioritize and pay close attention to sequence and timing. For example, instead of assuming that the cost of a particular resource will rise uniformly across the entire enterprise, look at current and anticipated costs for individual locations. Also, consider benefits beyond the bottom line, such as increasing your brand value.

Measure key performance indicators and results against target. Establish meaningful improvement targets that can be verified with hard data. Use baseline data and your investment plan as reference points to verify that you are getting the results you expect. Make sure employees understand how their behavior affects their use of a particular resource and what they can do to help implement and sustain improvements. Aggressively scale the most effective improvements across the enterprise in order to increase your return on investment.

Sustainability-driven Innovation

Results that boost both perception and performance

Businesses today have many significant opportunities to use sustainability as a catalyst to drive innovation and improve how they do business. To capitalize on these opportunities, leading organizations are taking a hard look inside their operations and across their supply chains, assessing where they are, prioritizing initiatives, and then formulating a broad sustainability strategy to foster product and process innovation that aligns with their business goals. They are also adopting metrics that more accurately measure their green performance and perceived image in the marketplace. Companies that achieve this vision have the opportunity to enhance revenue and brand value, engage effectively with key stakeholders, manage risk, and reduce costs.

Chris Park is the U.S. Sustainability Consulting Leader for Deloitte Consulting LLP.

Copyright © 2012 Deloitte Development LLC, All rights reserved.