What is sustainability innovation and why does it matter?

27 November 2024 - Jie Zhou, Head of International Engagement for CISL’s Innovation team, discusses why sustainability-led innovation is crucial for both startups and established businesses to thrive in a rapidly changing world. This blog builds on CISL's recent innovation thought piece, which reflects on the importance of innovators helping to build the markets we need for a more sustainable and equitable future.

Throughout history, technological innovation has been an engine of progress. From the invention of the printing press to the current generative AI revolution, those who embrace change and adapt to new realities thrive, while those who cling to the status quo risk obsolescence. In today's world, where environmental and social challenges are intertwined with economic competitiveness, sustainability-led innovation is no longer an option; it's an imperative for businesses of all sizes and sectors to survive and thrive in the long term.

What is sustainability innovation?

Sustainability innovation is a way of framing innovation ambitions and processes to take account not only of current market demands, but also the global social and environmental trends and impacts that will shape societies in the longer term. The approach ensures that new products, processes and systems actively deliver a positive future and align with a vision of a sustainable economy and society - rather than exacerbate societal challenges, such as pollution, nature degradation, poverty and inequality.

Sustainability innovation comes in different shape and formats. For example, a disruptive startup might develop breakthrough technologies that can transform entire industries— like Tesla’s impact on the electric vehicle market. This type of radical innovation challenges the status quo and opens up new, future-focused market opportunities. On the other hand, established corporations may approach it by making their existing products and processes more sustainable or socially responsible – an incremental approach to start with.

Moreover, a sustainable economy will require companies to embark on more transformational innovation, such as rethinking and redesigning product and service to be more sustainable and circular. However, a deep transformation also needs to build on business model innovation, which can enable an entire supply chain to operate more sustainably and deliver greater social and environmental value.

How to pursue sustainability innovation

CISL’s Chief Innovation Officer, James Cole, recently argued that both entrepreneurs and corporates are nested in markets that don't yet fully reward their planet-friendly efforts - and sustainability entrepreneurs and intrapreneurs play an active role at the leading edge in tapping into a social purpose, educating customers and investors, and creating markets that reward sustainability. We have seen how pioneers like Octopus Energy are actively shaping and accelerating the shift to markets that compete on sustainability, rather than underprice it.

The key challenge is how established businesses - the incumbents - and startups can navigate these imperfect markets and develop winning sustainability innovation strategies?

Established companies face a balancing act with sustainability innovation. They must keep improving existing products, even if they may not be central to their long-term future (a challenge known as the "innovator’s dilemma"), while also exploring transformative ideas.

For them, sustainability innovation goes beyond R&D - it should be woven into the fabric of the company's culture and values. Fostering a culture of innovation means empowering employees at all levels to contribute ideas, experiment with new approaches, and challenge the status quo. To expand their impact, corporations can adopt open innovation by partnering with universities, startups, and research institutions. By collaborating outside their own walls, they gain access to cutting-edge solutions, accelerate R&D, and drive broader and systematic change at a faster pace.

Meanwhile, startups have unique advantages: they are agile, focused, and unburdened by legacy systems, allowing them to disrupt markets quickly. By targeting niche areas where sustainability solutions are needed but overlooked, startups can gain a foothold and prove the potential of their innovations.

Startups can especially challenge existing paradigms and offer radically different approaches to sustainability. For example, Fairphone, a social enterprise from the Netherlands, has boldly challenged the traditional smartphone industry by prioritising fairness, transparency, and longevity. Their modular phone design allows for easy repair and upgrades, extending the device's lifespan and reducing electronic waste. This challenges the prevailing model of planned obsolescence and encourages consumers to rethink their consumption habits.

In summary, sustainability innovation is more than a trend; it's a fundamental shift in how we approach business. It isn't just for bright-eyed startups and disruptive entrepreneurs. It's also a vital strategy for incumbents to future-proof themselves in a rapidly changing world.

Ways we can support

Unlock sustainability strategies most appropriate for your situation with our self-paced online course, Sustainability Innovation Strategy for Businesses and Entrepreneurs. This course will equip you with the knowledge and tools to embed sustainability into your innovation approach, enabling you to drive real transformation in your organisation.

It is informed by CISL’s hands-on experience fostering sustainability ventures through our startup hub, the Canopy; our Accelerator programmes; corporate businesses, through open innovation programmes, like the Unilever Young Entrepreneur Award; and partnering with international organisations, such as UNICEF Innovation 30, toward high-impact solutions.