Why Sustainability Is Now the Key Driver of Innovation

When companies pursue sustainability, it's usually to demonstrate that they are socially responsible. They expect that the endeavor will add to their costs, deliver no immediate financial benefits, and quite possibly erode their competitiveness. Meanwhile, policy makers and activists argue that it will take tougher regulations and educated, organized consumers to force businesses to adopt sustainable practices. But, say the authors, the quest for sustainability can unearth a mother lode of organizational and technological innovations that yield both top-line and bottom-line returns. That quest has already begun to transform the competitive landscape, as companies redesign products, technologies, processes, and business models. By equating sustainability with innovation today, enterprises can lay the groundwork that will put them in the lead when the recession ends. Nidumolu, Prahalad, and Rangaswami have found that companies on the journey to sustainability go through five distinct stages of change: (1) viewing compliance as opportunity; (2) making value chains sustainable; (3) designing sustainable products and services; (4) developing new business models; and (5) creating next-practice platforms. The authors outline the challenges that each stage entails and the capabilities needed to tackle them.