Driving Sustainability-Oriented Innovation
Organizations can innovate to address environmental and social problems — but they need to build the right culture.
It’s no surprise that many large multinational corporations are paying increased attention to sustainability-oriented innovation (which we’re broadly defining as improvements for social good, not just “green” initiatives).1 Faced with mounting challenges and pressure from governments, nongovernmental organizations (NGOs), investors, and employees to be more aware of the environmental and social impacts of business activities, companies are searching for ways to do things differently while also seeking opportunities for growth.2 As a result, many are attempting to tap into the creativity and entrepreneurial potential of their employees, encouraging them to develop new products, services, or business models that create value for both the company and society.3
Sustainability-oriented innovation isn’t new — researchers have been studying it for more than a decade.4 However, as traditional organizations adopt new technologies and business models, some are finding it difficult to get employees to think like entrepreneurs, which is essential to building an innovative culture that’s committed to solving environmental and social problems.5 To learn what leading companies are doing to address that challenge, we conducted interviews with managers at seven multinational companies recognized for their sustainability activities: AkzoNobel (a Dutch paint and chemicals company), Interface (a U.S. carpet-tile manufacturer), Johnson & Johnson (a U.S. medical products, pharmaceuticals, and consumer goods company), Pearson Education (a British education and publishing company), Koninklijke Philips (a Dutch company involved in health care, consumer electronics, and lighting),6 UBS (a Swiss financial services company), and Unilever (a Dutch-British consumer goods company). (See “About the Research.”) In this article, we integrate the experiences of these companies with findings from prior studies to illustrate what effective sustainability-oriented innovation looks like and to describe how companies can cultivate the entrepreneurial thinking and behavior that will spark such efforts.
What Sustainability-Oriented Innovation Culture Looks Like
Sustainability-oriented innovation takes many forms — everything from the development of new or improved products or services to the creation of new processes and business models that bring benefits to the environment or the society at large.7 While the innovations themselves may or may not be disruptive or radical, the idea is to mitigate the negative impacts of existing solutions or, even better, make a positive impact.
1. D. Kiron, N. Kruschwitz, M. Reeves, and E. Goh, “The Benefits of Sustainability-Driven Innovation,” MIT Sloan Management Review 54, no. 2 (winter 2013): 69-73; J. Jay and M. Gerard, “Accelerating the Theory and Practice of Sustainability-Oriented Innovation,” working paper 5148-15, MIT Sloan School of Management, Cambridge, Massachusetts, July 2015; R. Nidumolu, C.K. Prahalad, and M.R. Rangaswami, “Why Sustainability Is Now the Key Driver of Innovation,” Harvard Business Review 87, no. 9 (September 2009): 56-64; and S. Schaltegger and M. Wagner, “Sustainable Entrepreneurship and Sustainability Innovation: Categories and Interactions,” Business Strategy and the Environment 20, no. 4 (April 2011): 222–237.
2. N. Bocken, S. Short, P. Rana, and S. Evans, “A Literature and Practice Review to Develop Sustainable Business Model Archetypes,” Journal of Cleaner Production 65, no. 15 (February 2014): 42-56.
3. P. Polman and C.B. Bhattacharya, “Engaging Employees to Create a Sustainable Business,” Stanford Social Innovation Review 14, no. 4 (fall 2016): 34-39.
4. A.B. Lovins, L.H. Lovins, and P. Hawken, “A Road Map for Natural Capitalism,” Harvard Business Review 77, no. 3 (May-June 2007); and R. Adams, S. Jeanrenaud, J. Bessant, D. Denyer, and P. Overy, “Sustainability-Oriented Innovation: A Systematic Review,” International Journal of Management Reviews 18, no. 2 (May 2016): 180-205.
5. C.B. Bhattacharya and P. Polman, “Sustainability Lessons From the Front Lines,” MIT Sloan Management Review 58, no. 2 (winter 2017): 71-78.
6. In 2016, Philips separated its health care and consumer lifestyle division from its lighting business. The health care and consumer lifestyle company is now known as Royal Philips. In 2018, the name of Philips Lighting was changed to Signify.
7. Adams et al., “Sustainability-Oriented Innovation: A Systematic Review”; and E. Hansen and F. Grosse-Dunker, “Sustainability-Oriented Innovation” in “Encyclopedia of Corporate Social Responsibility,” vol. 1, eds. S.O. Idowu et al., (New York: Springer, 2013), 2,407-2,417.
8. H. Plieth, A.C. Bullinger, and E.G. Hansen, “Sustainable Entrepreneurship in the Apparel Industry,” Journal of Corporate Citizenship, no. 45 (2012): 123-136.
9. P. Polman and C.B. Bhattacharya, “Engaging Employees to Create a Sustainable Business.”
10. E. Hollensbe, C. Wookey, L. Hickey, G. George, and C.V. Nichols, “Organizations With Purpose,” Academy of Management Journal 57, no. 5 (October 2014): 1,227-1,234.
11. J.E. Austin and E. Reficco, “Corporate Social Entrepreneurship,” working paper 09-101, Harvard Business School, Boston, Massachusetts, March 2009; R.M. Kanter, “How Great Companies Think Differently,” Harvard Business Review 89, no. 11 (November 2011): 66-78; D.F. Kuratko, J.S. McMullen, J.S. Hornsby, and C. Jackson, “Is Your Organization Conducive to the Continuous Creation of Social Value? Toward a Social Corporate Entrepreneurship Scale,” Business Horizons 60, no. 3 (May-June 2017): 271-283.21; and C.A. Ramus, “Encouraging Innovative Environmental Actions: What Companies and Managers Must Do,” Journal of World Business 37, no. 2 (summer 2002): 151-164.
12. B. Jenkins, “Cultivating the Social Intrapreneur,” Stanford Social Innovation Review 4, no. 9 (January 2018).
13. Philips’ Light-as-a-Service Offering, Nov. 22, 2016, smartcitiesworld.net.
14. C. Kraaijenhagen, C. van Oppen, and N.M. Bocken, “Circular Business: Collaborate and Circulate” (Amersfoort, Netherlands: Circular Collaboration, 2016); and I. Weissbrod and N.M. Bocken, “Developing Sustainable Business Experimentation Capability — A Case Study,” Journal of Cleaner Production 142, no. 4 (January 2017): 2,663-2,676.
15. T.M. Jones, “Instrumental Stakeholder Theory: A Synthesis of Ethics and Economics,” Academy of Management Review 20, no. 2 (April 1995): 404-437.
16. E.G. Hansen and S. Schaltegger, “The Sustainability Balanced Scorecard: A Systematic Review of Architectures,” Journal of Business Ethics 133, no. 2 (January 2016): 193-221; and E.G. Hansen, F. Grosse-Dunker, and R. Reichwald, “Sustainability Innovation Cube — A Framework to Evaluate Sustainability-Oriented Innovations,” International Journal of Innovation Management 13, no. 4 (December 2009): 683-713.
17. T. Hahn and F. Figge, “Why Architecture Does Not Matter: On the Fallacy of Sustainability Balanced Scorecards,” Journal of Business Ethics 150, no. 4 (March 2016): 1-17.