We’ve recently discussed the importance of operationalizing innovation via InnovationOps. As with any operationalizing effort, the key is making a specific effort part of an organization’s DNA. This way, it’s not an add-on or an afterthought but a fundamental part of how the company functions.
On a recent episode of the Innovation Talks podcast, I had the pleasure of talking to Jim Fava about how organizations can embed sustainability measures into their innovation processes. Jim is renowned for his efforts to create sustainable business practices and is considered the father of the modern-day lifecycle assessment.
Our conversation helped frame how companies can start the process of weaving sustainability into innovation. Let’s examine some of the insights Jim shared on the podcast.
In our conversation, Jim made a great analogy for embedding sustainability efforts into innovation, comparing it to a barstool. He positioned sustainable innovation's “legs" as social, economic and environmental efforts and the “seat” as governance. The assertion is that the three legs don’t matter without the seat.
To solidify this point, Jim shared a story about a utility company with a sustainability champion who made great strides in pushing sustainability efforts. Unfortunately, this leader was the only sustainability driver—there was no operationalized plan. It is not surprising that when this leader left the organization, the success around sustainability soon dissipated.
Making sustainability an intuitive part of innovation requires clear rules that dictate how sustainability will drive innovation and ensure those rules are carried out consistently. Governance is especially important for large, complex companies. Such governance should have five components: vision, skills, incentives, resources and an action plan. Once you have these, you have the foundation for governance.
A McKinsey report on the value of sustainability pointed out that 95% of chief investment officers believe environmental, social and governance (ESG) initiatives are important to decision-making. However, the reasons respondents see ESG as critical vary. For example, 53% believe ESG matters regardless of its impact on cash flow, 32% said it only matters if it affects cash flow and risk over both the long and short term, and 11% indicated that it only matters if it affects cash flow and risk over the long term.
The point is clear: ESG matters, but it matters for different reasons to different audiences. Jim noted in our conversation, “There needs to be a two-way translation where the engineering innovation team needs to be able to communicate to the sustainability folks the things they can do from a sustainability standpoint. The sustainability folks need to understand that and translate it back to the engineers in a way they can [understand].” Those responsible for convincing decision-makers must understand how sustainability positively impacts every department and can communicate those benefits in a manner that will resonate.
In our conversation, Jim said you can often initiate a sustainability conversation with disparate groups by identifying which of the four basic business values are most important to them: increasing revenue, enhancing the brand, reducing costs and mitigating risk. Sustainability in innovation can help achieve each of those four. Still, they may not apply to every group, so it’s critical to identify the most important ones and bring anecdotal and data evidence that addresses the most applicable business value.
While embedding sustainable practices is important, integrating sustainability experts into teams and departments is just as essential. As Jim wisely pointed out, “If we’re really going to be embedding sustainability into the business practice of innovation, where sustainability groups report to will be an evolution.”
In many companies, sustainability pros are their own department or serve in a consultancy role. But that’s simply not effective if you’re looking for sustainability to be an integral component of corporate culture. Instead, they should be part of the real-time decision-making process instead of reviewing a plan after the fact. It’s much easier to implement sustainability ahead of time than after the fact.
As we know, sustainability in innovation is a global expectation, and companies that wait for mandates to operationalize sustainability in innovation processes will be caught flat-footed. As Jim noted on the podcast, “It’s going to be a little scary but to accomplish what we have to accomplish [related to sustainability], we have to do it now. And we must realize that change is just part of what we must do to make it happen.”
Learn how Sopheon’s innovation management software Accolade can help your organization seamlessly embed sustainability into your innovation processes.