Sustainability As Strategy

Sustainability: The Process of Green Innovation

Scholar: Andrea Larson

Think about a company founded at a time when few people were questioning the health of the earth's natural systems. Over many years, or even decades, that company's strategies, products, operating systems, incentives and culture evolved in the absence of serious environmental concerns. It's no surprise if current sustainability efforts in that organization seem separate from or even at odds with the core business.

Compare that with a start-up or a new venture or project within an established firm whose very mission is to mitigate environmental and health problems, design new products and processes, and even create new markets in doing so. The players aren't just trying to avoid doing more damage, but are actively promoting environmental welfare and addressing public health issues. And they do not think in terms of constraints.

In her many years researching the innovations that drive and arise from sustainability efforts, Darden professor Andrea Larson has seen the tide turn from an academic debate about what companies should be doing to an investigation of what is actually happening. In her latest field research, she is examining entrepreneurial ventures  a mix of start-ups and established players  and the processes by which they move from an idea to a commercially viable green offering.

One of her favorite examples is Project Frog, founded in 2006 to design high-performance, energy-efficient, and "healthy" buildings for education, as an alternative to the windowless trailers, often produced with toxic materials, in which more than one-third of U.S. children are now educated.

Cofounder Mark Miller, an architect by training, went into this venture with a vision and a conviction, backed by numerous studies, that the environment in which children learn matters to their performance. But he did not have all the skills he needed. His response was both to boost his own capabilities and to find partners with complementary skills and knowledge. His classroom design required the creation and integration of software for the state-of-the-art sensors that provide feedback on the building's heat, humidity and air flow, allowing occupants to adjust their energy usage and maintain ideal micro climates. He used building industry experience to find providers of nontoxic, recycled materials and to help him develop the prototypes that could prove his concept.

The result is a product that is proving disruptive in the building industry: a design that is significantly less expensive than a brick-and-mortar structure, can be erected quickly and provides a healthy environment for students and teachers. The start-up attracted venture capital in 2008 and was reported to have secured another round of financing in January 2010.

"Innovation," Larson explains, "requires what are called 'weak ties.' To bring their new ideas to market, innovators use the input of people they don't traditionally tap for knowledge and with whom they may have little in common. The new collaborator may even be a critic." Entrepreneurs are generally more comfortable broadening their social and professional networks in this way, Larson notes. By nature, they are people who disrupt patterns and break down the conventional ways people think. "They often attract a network of other innovative thinkers as their early customers and suppliers," Larson says.

It can be a different story in an established firm, in which efforts to promote innovative activity can disrupt many aspects of the organization. This is true, Larson explains, even for sustainability initiatives, which have become widely accepted in mainstream business. In a company founded in a pre-environmental age, Larson notes, any new activity will be embedded in a social and organizational system that is naturally in opposition. Large companies are often organized into groups of like-minded people, who may not be inclined to cultivate the weak ties and new cross-functional affiliations necessary for the development of game-changing ideas.

But increasingly there are exceptions. Larson points to outdoor recreational equipment company REI, which has created a management role devoted to incorporating sustainability into the company's strategy. One recent success story was an initiative to reduce packaging waste. Consider a bicycle that must be transported from the manufacturer in Asia to a retail outlet in the United States. The materials used to package that bicycle include not only cardboard, but also various metal fasteners. As the bicycle makes its journey, it may be unpacked and repacked multiple times, resulting in a waste stream that remains mostly invisible to consumers.

In a collaborative process involving the head of packaging, packaging suppliers, product manufacturers and distributors and retail stores, REI transformed its decade-old packaging system, combining four bicycles into a single container, removing toxic inks from the packaging materials and designing cartons that can be reused. The result is not only a tremendous reduction in waste, but also decreases in packing time and in the space required on container ships. REI is now sharing the details of this initiative with other companies  an openness that is itself an important part of the innovation process, Larson notes.

Private-sector efforts like the ones at Project Frog and REI, which draw on a broad network of players to effect innovative change, are the future, Larson says. But she's concerned that business educators may not be preparing their students for it. "We mostly teach students how to succeed in the world of big, established enterprises," she says. "That means we're teaching them to conform to that world and its operating routines. But large companies are increasingly realizing that 'we are not doing anything illegal' is not a vision. We need to be preparing students to operate according to a different kind of vision, one that does not accept the tradeoff between financial performance on the one hand, and social and environmental welfare on the other."

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