Innovation and sustainability.
In a 1970 article in the New York Times Magazine, Milton Friedman asserted that "there is one and only one social responsibility of business--to use its resources and engage in activities designed to increase its profits ... within the rules of the game." Friedman was arguing against a relatively new idea, the concept of corporate social responsibility (CSR). Today, CSR is referred to as sustainability, and an increasing number of businesses are embracing it. A 2011 McKinsey Global Survey on "The Business of Sustainability" found that "many companies are actively integrating sustainability principles into their business." And the 2011 Sustainability and Global Executive Study, administered jointly by the MIT Sloan Management Review and the Boston Consulting Group, found that 70 percent of the companies surveyed had sustainability "permanently on their agendas," and investments in sustainability were increasing even through the economic downturn. Even more impressive, nearly a third of MIT's sample reported that sustainability contributed to their profits. Sustainability has clearly become a way of doing business. What may not be quite clear, as yet, is how it becomes a way of doing innovation.For many people, "sustainability" refers primarily to environmental sustainability--the things we do, as businesses and as individuals, to slow climate change and protect our natural resources. But true sustainability is actually far more wide ranging, concerned with social good as well as ecological impact. The World Commission on Environment and Development in 1987 created what has become the most common definition of sustainability, which the Cleveland Carbon Fund restates as "the successful meeting of present social, economic, and environmental needs without compromising the ability of future generations to meet their own needs." Or, people, planet, profits, as John Elkington succinctly described it in his 1997 book, Cannibals with Forks, the three elements in what Elkington christened the "triple bottom line."
The triple bottom line (occasionally referred to as the 3Ps) has become a central concept in the discussion around sustainability and business. It doesn't quite translate into a metric--no one's yet worked out exactly how three such different domains could be reduced to a common measurement system--but it does offer a way of thinking about how business should act, for its own good and for the good of all its stakeholders. Several books and online sources offer good discussions of what the triple bottom line is and how it works. In The Triple Bottom Line, Andrew W. Savitz goes beyond definitions--although his careful, thoughtful definitions help to map an area all too prone to fuzzy, feel-good thinking--to describe how the strongest companies find what he calls "sustainability sweet spots," areas where the business's interests overlap with society's concerns. Think GE's ecomagineering effort or Toyota's Prius.
This is a concept of corporate responsibility that even Friedman could embrace. Indeed, Friedman was not against businesses doing good in the world; only the idea that businesses would do good at the expense of their economic aims and responsibilities. (In the October 2005 issue of Reason, Friedman and Cypress Semiconductor CEO T. J. Rodgers debate the concept of CSR with Whole Foods CEO John Mackey; Friedman suggests that, in fact, Whole Foods' sustainability work is actually a business practice intended to enhance its bottom line.) Anything a business does must be sustainable for the enterprise as well as for the world. No one benefits if Toyota isn't around to make Priuses anymore. As Michael Porter and Mark Kramer argued in a 2006 HBR article, "Strategy and Society," "CSR can be much more than a cost, or a charitable deed it--can be a source of opportunity, innovation, and competitive advantage."
Innovators will find space to play at this intersection of social good and business success. Savitz's sustainability "sweet spots" are also innovation sweet spots--spaces where the right idea can help a company both do good and do well. Indeed, Ram Nidumolu, C. K. Prahalad, and M. R. Rangaswami, in a 2009 HBR article, suggest that sustainability has become "the key driver of innovation"--even, or perhaps especially, in an economic downturn. Dow Coming, GE, and Nike have all found huge opportunities for innovation in sustainability, and they're not the only ones. Nike is a case study in how a company can embrace sustainability to its own benefit. In the 1990s, Nike was reviled by activists for its reliance on sweat-shop labor to manufacture its products. The company reacted by hiring Hannah Jones as its vice president of sustainable business and innovation in 1998; Jones, who recently spoke with Maya Albanese at GreenBiz.com, has led two decades of radical change at Nike, decades in which the company has become recognized as a leader in sustainability--for its re-engineered business processes, increased oversight of labor practices, and greener products and safer manufacturing processes.
True sustainability requires innovation--fundamental, disruptive, system-wide innovation. As a report issued by the World Business Council for Sustainable Development puts it, "Innovation is at the core of creating a sustainable human society. As a society, we will not succeed in creating a sustainable world if we focus merely on doing more efficiently what we currently do." Or, in blogger Aron Cramer's somewhat simpler formulation, "No one gets very far by sloshing some green paint on our current economy."
A recent MIT Sloan article reinforces the connection between sustainability and innovation. In a study comparing companies that had demonstrated a deep, long-term commitment to sustainability to those that had no such focus, Robert Eccles and his colleagues found that those "sustainable" companies--many of whom also outperformed their "traditional" competitors--have cultures based on innovation and trust and an ability to implement, and follow through on, large-scale change. (1) The innovative culture may well De the most sustainable one.
These ideas are reflected in an emerging call for a shift in our approach to sustainability. "Triple bottom line" has become a kind of shorthand for sustainability, but it may be an insufficient model. As a Tumblr blogger who goes by the handle "Pissed-Off Optimist" put it, "The name itself implies use as an evaluative tool best applied after everything about the business has been said and done. But why stop there? Sustainability is more than an auditing mechanism; it is an excellent source of inspiration for innovation and growth." While the triple bottom line has its uses, some, Pissed-Off Optimist among them, argue that innovation really comes into its own from a triple top line perspective. The bottom line is focused on net income, perhaps encouraging a focus on incremental changes that can increase income by reducing costs and minimizing liabilities--for instance, by cutting waste or streamlining the supply chain. These are often important changes with real impact, and many times they require some hardcore innovation, but they frequently aren't truly disruptive. They don't reset the system; they only reshape it.
The top line, on the other hand, is revenue. Focusing on a triple top line means seeking opportunities not just to minimize negative impact but to maximize positive impact---opportunities to create real value, for the business and for all of its stakeholders. As William McDonough and Michael Braungart put it, shifting from triple bottom line to triple top line means moving from "strategies to manage negative effects" to "creating value with innovative product design."
Isn't that what innovators have always sought to do?
DOI: 10.5437/08956308X5505005
RESOURCES
IN PRINT
Friedman, M. 1970. The social responsibility of business is to increase its profits. The New York Times Magazine, September 13: 122-126. Text available at http:// www.colorado.edu/studentgroups/libertarians/issues/friedman-soc- resp-business. html.
EIkington, J. 1997. Cannibals with Forks: The Triple Bottom Line of Twenty-First-Century Business. Mankato, MN: Capstone.
Porter, M., and Kramer, M. 2006. Strategy and society: The link between competitive advantage and corporate social responsibility. Harvard Business Review 84(12): 78-92.
8avitz, A., with Weber, K. 2006. The Triple Bottom Line: How Today's Best-Run Companies Are Achieving Economic, Social, and Environmental Success. New York: Jossey-Bass.
ONLINE
Albanese, M., with Jones, J. 2012. How she leads: Hannah Jones of Nike. GreenBiz. corn, February 6. http://www.greenbiz.com/blog/2012/02/06/how-she-leadshannah-jones-nike? page=0%2CO
Bonini, S., and Gorner, S. 2011. McKinsey Global Survey results: The business of sustainability. McKinsey Quarterly, October. https://www.mckinseyquarterly.com/The_business_of_sustainability_McKinsey_ Global_Survey_results_2867.
Cramer, A. 2010. Sustainability can drive innovation, but only through disruption. [Weblog post, January 8.] Fast Company Expert Perspective. http://www.fastcompany.com/blog/aron-cramer/sustainable-excellence/ sustainability-can-drive-innovation-only-through-disruption.
Dormann, J., and Holliday, C. 2002. Innovation, Technology, Sustainability, and Society. Geneva: World Business Council for Sustainability. http://www.scribd. com/doc/56697017 /World-Business-Council-for-Sustainable- DevelopmentInnovation-Technology-Sustainability-Society.
Eccles, R. G., Perkins, K. M., and Serafeim, G. 2012. How to become a sustainable company. MIT Sloan Management Review, June 1. http://sloanreview.mit.edu/ the-magazine/2012-summer/53415/how-to-become-a-sustainable-company/.
Friedman, M., Mackey, J., and Rodgers, T. J. 2005. Rethinking the social responsibility of business. Reason, October. http://reason.com/archives/2005/10/01/ rethinking-the-social-responsi/singlepage
Haanaes, K., Reeves, M., von Stren9 Velken, I., Audretsch, M., Kiron, D., and Kruschwitz, N. 2012.8ustainability nears a tipping point. Special report: Sustainability & innovation. MIT Sloan Management Review, January 23. http://sloanreviewmitedu/featu re/sustainability-strategy/.
McDonough, W., and Braungart, M. 2002. Beyond the Triple Bottom Line. MBDC. http://www.mbdc.com/images/Beyond_Triple_Bottom_Line.pdf.
Nidumolu, R., Prahalad, C. K., and Rangaswami, M. R. 2009. Why sustainability is now the key driver of innovation. Harvard Business Review 87(9): 57-64. http://hbr.org/200g/Og/why-sustainability-is-now-the-key-driver-of- innovation/es.
Pissed-Off Optimist. 2011. Above and beyond the triple bottom line. tumblr post, December 21. http://pissedoffoptimist.tumblr.com/post/14563155460/ above-and-beyond-the-triple-bottom-line.
Slaper, T. E, and Hall, T. J. 2011. The triple bottom line: What is it and how does it work? Indiana Business Review 86(1): 4-8. http://www.ibrc.indiana.edu/ibr/2011/ spring/a rticle2.html.
(1) Eccles and colleagues provide a blueprint for creating a culture of sustainability; IRI's ROR working group Sustainability Maturity Models has developed a tool for assessing your organization's progress in meeting sustainability goals. The tool is accessible to IRI members at http://www.iriweb. Org/Main/Collaboration_Center/Research-on-Research/Sustainability Maturity_Models_l/
In this space, we offer a series of summaries on key topics, with pointers to important resources, to keep you informed of new developments and help you expand your repertoire of tools and ideas. We welcome your contributions, in the form of suggestions for topics and of column submissions.
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| Title Annotation: | RESOURCES |
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| Author: | Gobble, MaryAnne M. |
| Publication: | Research-Technology Management |
| Date: | Sep 1, 2012 |
| Words: | 1734 |
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