SESSION 1: INTRO TO

SUSTAINABLE
INNOVATIONS

Neva Bojovic

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Agenda

• Intro to Sustainable Innovation

• Sustanable innovation in the digital age
• Sustainable business models
• Trade-offs

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 Intro to Sustainable Innovation

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Global issues that impact business and are
impacted by business

• Climate change
• Income inequality
• Depletion of natural resources Corporations play a big
• Human rights issues role in creating
• Fair working conditions these problems and they
can and indeed must play
• Pollution
a central role in
• Racial injustice addressing them.
• Gender inequality
•…
Innovative! Disruptive! Sustainable?

What kind of innovation is

Nespresso?

• Read the Nespresso case and discuss

the questions with colleagues next to
you. (10min)
• Research if and how Nespresso and
similar brands are tackling
sustainability. (15min)
• Share your findings with the class

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Nespresso and Sustainability?

https://www.youtube.com/watch?v=nGIitd2Q8iA

• Message from the CEO (2020)

https://www.youtube.com/watch?v=FQin10YXih0

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While on the topic of coffee…

What kind of innovation is Bio-Bean?

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bio-bean: Turning Coffee Grounds into Clean Fuel

• Starting with the Sustainability Problem

• Globally, 25 million metric tons of coffee
waste per year ends up in landfills. Too
much landfill waste and high levels of
CO2 associated with disposal process.
• Technology
Bio-bean recycles landfill-diverted waste
coffee grounds into advanced biofuels for
the following purposes:
• Heating large buildings (biomass pellets)
• Heating homes (briquettes)
• Powering transit systems (biodiesel)

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 How Sustainable Innovation Differs from
Traditional Innovation?

Sustainable Sustainable
Sustainable
innovations contribute innovations must be
innovations require
to sustainable embedded into firm’s
systems thinking.
businesses. culture.

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Three stages of sustainable innovation

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Forms of innovation

Achieving Sustainability
goals will require
significant multi-faceted
innovation: technological
of course, but also
organizational,
institutional and social
innovation

Ashford&Hall(2011)

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Sustainable business models

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 Why focusing on business models?

• Philantropy, CSR and the development of sustainable product or service are

insufficient to create the necessary radical transformation of organizations,
industries, and societies toward sustainable development
• Sustainable business models can serve as a vehicle to coordinate technological
and social innovations with system-level sustainability
• Modified and completely new business models can contribute to radically
reducing negative and/or creating positive external effects for the natural
environment and society

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Are business as usual business models (not) sustainable?
Why?

What is a sustainable business model according to you?

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 What characterises a sustainable business model?

 Four characteristics of sustainable business models

1. Builds on the triple bottom line approach to define firm’s purpose and
measure performance
• According to neoclassical economics theory, the primary obligation of firms is to maximize
profits for shareholders.
• A sustainable business model is an alternative to the neoclassical model towards one that
places social and environmental priorities at the core.

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What characterises a sustainable business model?

1. Builds on the triple bottom line approach to define firm’s purpose and measure performance

Interface, Inc. is a global commercial flooring company. Over a 25-year

plus sustainability journey, Interface has evolved both the thinking and the
approach. Originally, the focus was solely on reducing environmental
www.interface.com/ impacts, but that evolved to include social impacts and new business
models. Their modular system helps customers create interior spaces
while positively impacting the people who use them and our planet.

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What characterises a sustainable business model?

2. Considers the need of all stakeholders

• In neoclassical thinking, a requirement for social improvement—such as safety or hiring people with
disability—is understood as imposing a constraint on the corporation and reducing financial profit
• Understand that the organization’s success is inextricably linked to the success of its
stakeholders, including local communities, suppliers, partners, employees, and customers.

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What characterises a sustainable business model?

2. Considers the need of all stakeholders

Treating employees like clients; Sharing value with the local

4 days work week community
What characterises a sustainable business model?

3. Uses a firm-level and a system level perspective

• Understand that firms can achieve a lot on their own but they can achieve
much more when the whole system they are part of is sustainable

Sustainable supply chain Changing social norms

Cooperation between competitors to reach

required scale 19
What characterises a sustainable business model?

4. Treats nature as a stakeholder

• Externalisation of pollution and waste following a linear take-make-waste
approach; Natural assets often used for free
• Unsuitable to effectively address ecological and social degradation
• Acknowledge nature as a stakeholder with as objective to reduce the
ecological footprint of people and organizations
Eg. Internalizing externalities by shifting financial model from “price per unit”
to pricing the “job to be done”

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  Builds on the triple bottom line
What approach to define firm’s purpose
characterises a and measure performance
 Considers the need of all
sustainable stakeholders
business model?  Uses a firm-level and a system level
To sum up: perspective
 Treats nature as a stakeholder

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What characterises a sustainable business model?

Overarching definition
A business model for sustainability helps describing, analyzing, managing, and
communicating (i) a company’s sustainable value proposition to its customers,
and all other stakeholders, (ii) how it creates and delivers this value, (iii) and how
it captures economic value while maintaining or regenerating natural, social, and
economic capital beyond its organizational boundaries (Schaltegger et.al, 2016).

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Business model elements

Value creation: How the company helps customers to solve

a problem or perform a job-to-be-done at a given price
(often referred to as the value proposition).

Value delivery: The key resources, activities and partners

that are needed for the company to carry out what the
value proposition requires.

Value capture: How the company makes money by means

of a given revenue model and a given cost structure.

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 Sustainable Innovation in the Digital Age

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Digital age

• Digital transformation is why so many areas of business and life

are fundamentally different from those of 20 years ago. It's also
why we are now living in the digital age to one degree or
another.
• Digital transformation and business success
• Covid-19 pandemic: The ultimate driver of digital
transformation?

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What are success examples?
• Can you think of a company that successfully managed to
transform and implement a good strategy in the digital age?

• How about new entrants whose success was enabled by

digitalization?
 Digital Transformation at LEGO

• After a period of expansion (1970-1991) LEGO suffered a

steady decline (1992-2004) and by 2004 LEGO was close
to bankruptcy.
• Reaching a tipping point, LEGO started restructuring and
a digital transformation programme focused on new
revenue sources coming from movies, mobile games and
mobile applications.
LEGO has recovered • LEGO’s design capabilities have been increasingly
steadily post 2005 handed over to their fans e.g. through the Digital
and it is now seen as Designer (a web-based 3D design tool to create own
“the Apple of designs). It’s USP towards learning and development
toys”. differentiates it from competitors and convinces parents
from millennial generation about the usefulness.
Enabled by digitalization: Spotify

• Spotify is extending the touchpoints and

avenues by which users can stream music
through their service by collaborating across
sound system, home and auto entertainment
providers.
• The company has released Software
Spotify is valued at Development Kits (SDKs) for iOS and Android
over $10 billion. developers and more recently launched the
Spotify + Uber integration, allowing users to
remotely control music in enabled Uber rides.
• Freemium business model
Digital technologies and sustainability
• Digital technologies – e.g.,
IoT, AI, cloud computing,
digital twins, etc. – have huge
potential to create more
efficient industrial processes:
both enhancing productivity
and net-zero
• Implementation of digital
technologies also entails risks

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Digital technologies and sustainability (class
work)
• In teams of 3 do a quick search for digital solutions to enhance
sustainability
• Select one solution and think about the approach they are taking to
sustainable innovation (eco-efficiency, new market opportunities,
societal change); also what is the form of innovation introduced
(technology, business model, etc.)
• Present your innovation to the class

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Positive effects of digital technologies
• They create more efficient processes (e.g., smart farming can save up to 60% of
fertilizers and with that energy use)
• Enable more social inclusivity by being borderless (e.g., virtual events let anyone in
the world participate)
• Create transparency and accountability (e.g., via reviews)
• Digital products can be used longer than physical products, and they can be created
at low cost and large scale
• Digital technologies can form the basis of novel sustainable solutions such as
platforms against food waste (Ciulli et al., 2020), digital payment systems (e.g., M-
Pesa), or shared mobility platforms

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The controversy: Savior vs Threat

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Dark side of digital technologies
• Global ICT uses almost 10% of global energy, which is expected to rise to 20%
• Big Tech’s dominance (e.g., GAFA – Google, Amazon, Facebook, Apple) centralizes
tremendous power in the hands of a few
• Digital technologies raise social and ethical concerns, too, such as data privacy and
consumer lock-in
• Intelligent algorithms have proven to create bias for gender and skin type
• Social media platforms allow the spreading of fake news

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New Age – New Rules

Rule 1. Change is not anymore localized, it is systemic

Rule 2. Capabilities are increasingly horizontal and universal

Rule 3. Traditional industry boundaries are disappearing.

Recombination is the new rule.

Rule 4. From constrained operations to frictionless impact.

Rule 5. Concentration and inequality will likely get worse.

Bridging the technological and digital innovation with
sustainable innovation : what is the way forward?

Mode 1. Know
Mode 2. Rethink
the business
the trade-offs
model trade-offs

Mode 3.Innovate
Mode 4.Thrive
around trade-
within trade-offs
offs
Trade-offs

• Trade-offs can exist within the business model: for example the value
proposition and monetization are not aligned: the question of business model
design
• Every business model has trade-offs: unintended consequences / negative
externalities for certain stakeholders: the question of stakeholder
consequences
• Read the little document about trade-offs from LEARN. Work in small groups on
creating your own examples (10min).

• Two big questions to address:

- How to align the elements within the business model for sustainable
innovation?
- What kind of trade-offs is our business model creating and for whom?
Business model challenge for sustainable
innovations: monetization and trade-offs
• Can We Afford Sustainable Business?
• Premise: Sustainable innovations are expensive. Who is going
to pay for it??
- Customers?
- Sacrificing margin?
- Cutting corners of quality?
- Making the supply chain sweat?
Green Premium (Bill Gates)

• When environmental friendly products

cost more than polluting products
• In cases where the Green Premiums
are big, we know we need innovations
that will close the price gap.
• In cases where they’re small—or where
clean products are actually cheaper
than the polluting version—it suggests
that something other than the cost is
keeping zero-carbon products from
being deployed, and we need to
understand why.
How to solve the issue?

• Every price decision builds on the answers to three basic

questions:

1)What are customers paying for?

2) Who is going to pay?
3) When and how do we transact?

Reimagining these issues is sustainable business model

innovation.
Illustration

• Read one of the two cases on Learn (Solar energy or Lifesaving

treatment)
• Discuss how these companies creatively address the three questions
on pricing.
Next time

• We learn more about the most popular digital business models

• We identify possible trade offs and try to bridge sustainability and
digital innovations
Little Recap