Sustainable Innovation E-Book

Alexander Fink

• Herausgeber: Books on Demand
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 93

Veröffentlichungsjahr: 2021

Beschreibung

Over the last decade, sustainability became more and more important for companies and consumers, as the focus on the ecological footprint of products and companies, as well as the social conditions, is increasing. By evaluating the product announcements of the S&P 500 companies, in terms of the classic types of innovation and the social and green innovation characteristics, during the observation period from 2008 to 2018, this book aims to establish a relationship between the innovative power of sustainable products and the companies profit.

Leseprobe

Table of Content

LIST OF ABBREVIATIONS

LIST OF FIGURES

LIST OF TABLES

ABSTRACT

INTRODUCTION

SUSTAINABILITY

3.1 THE DIMENSIONS OF SUSTAINABILITY

3.1.1 Economic

3.1.2 Social

3.1.3 Environmental

3.2 SIGNIFICANCE FOR CUSTOMERS & COMPANIES

INNOVATION TYPOLOGY

4.1 COMPARISON OF INNOVATION TYPOLOGIES

4.2 ‘CLASSICAL’ INNOVATION TYPES

4.3 SUSTAINABLE INNOVATION

4.3.1 Green Innovation

4.3.2 Social Innovation

DATA ANALYSIS

5.1 METHODOLOGY

5.1.1 Data Collection

5.1.2 Data Preparation

5.2 DESCRIPTIVE ANALYSIS

5.3 REGRESSION ANALYSIS

DISCUSSION

PRACTICAL IMPLICATIONS

SUMMARY

LIST OF REFERENCES

APPENDIX

List of abbreviations

EBITDA – Earnings before Interest Taxes Depreciation and

Amortization

S&P 500 – Standard & Poor’s 500

OECD – Organization for Economic Cooperation and

Development

UN – United Nations

GDP – Gross Domestic Profit

IChemE – Institution of Chemical Engineers

R&D – Research and Development

CSR – Corporate Social Responsibility

List of Figures

Figure 1: Types of Innovation

Figure 2 Framework for Green Product Innovation

List of Tables

Table 1: Number of innovation types and categories

Table 2: Mean number of Companies per Industry Sectors

Table 3: Number of categorized Innovation Types per Industries

Table 4: Number of Sustainable Innovation

Table 5: Number of Green Innovation with less resource input and less undesired output

Table 6: Number of Sustainable Innovations per Industries

Table 7: Number of social innovations per year

Table 8: Number of green innovations per year

Table 9: Descriptive Statistics of the relative Sustainability scores

Table 10: Descriptive Statistics of the Relative Social Score per Industries

Table 11: Descriptive Statistics of the Relative Green Score per Industries

Table 12: Results of the regression analysis

Table 13: Standard Industry Classification

1. Abstract

This Thesis investigates the impact of sustainable innovation on the success of the Standard & Poor’s 500 companies. Over the last decade, sustainability regarding products, services, or processes became more and more important for companies and consumers, as the focus on the ecological footprint of products and companies, as well as the social conditions is increasing.

By evaluating the product announcements of the S&P 500 companies, in terms of the classic types of innovation and the social and green innovation characteristics, during the observation period from 2008 to 2018, this thesis aims to establish a relationship between the innovative power of sustainable products and the companies profit.

Based on 13,137 product announcements, this study finds that between the years 2008 and 2018, sustainable innovations have a significant impact on the profit of the S&P 500 companies. Furthermore, the effect of social innovations is stronger, than the effect of green innovations. Despite the significant influence of sustainable innovations, their share is relatively small, compared to the total number of innovations.

2. Introduction

Since the beginning of industrial revolution, Innovations played an important role. There are many radical technological innovations that changed the whole life of our humanity, for example the electric light, the steam engine or the World Wide Web.

The human strives to improve his life through innovation, including companies, that develop product and service innovations to increase their profits or process innovations to decrease manufacturing costs. The OECD defined an Innovation as “the implementation of a new or significantly improved product (good or service), or process, a new marketing method, or a new organizational method in business practices, workplace organization or external relations” (OECD, 2005: 46).

The concept of Innovation, however, is often defined and categorized differently. In recent decades, many different attempts have been made to categorize innovations and to examine the influence of these categories on a company's performance.

In addition to the categorizations that describe the degree of an innovation, the idea of sustainable innovation emerged and due to climate change and globalization, sustainable innovations became more important.

Researchers suggest that corporate activities in form of sustainable orientation and innovation can maintain ecosystems, 12 counter the global climate change, decrease ecological damage and enhance agricultural techniques, the availability of freshwater and protect biodiversity (Dean & McMullen, 2007).

Furthermore, especially in developing countries, these activities can improve education, productivity and the socioeconomic status, as well as the physical health and the independence of individuals and societies (Wheeler et al., 2005). Besides, the impact on the environment and society, sustainable orientation has a huge impact on companies regarding to their products, their way of production and their business models. Nowadays, companies need to act sustainable in terms of economic performance, environmental footprint and social responsibility.

Consumers are increasingly paying attention to the fact that the products they purchase are sustainable, i.e. that they have a positive effect on the environment or on social conditions (e.g. fair-trade products, child labor).

The world wide web makes it easy to evaluate products and services, as well as the companies themselves. These evaluations are usually visible to all consumers and have an influence on their purchase decision. In addition to product and company ratings, consumers are increasingly focusing on social media.

Through social media, companies are literally forced to behave in an environmentally conscious and socially compliant manner, as they were hit by a shitstorm when a breach is detected, which causes consumers to turn away from the company.

The literature review suggest that Sustainable Innovation can influence the sales and costs of sustainable orientated companies, which is why this thesis based on data from the S&P 500 companies analyzes, if sustainable innovations have an impact on the EBITDA and the Return on Assets. In order to answer the central question of this thesis, four hypotheses were formulated in the process of literature research, which have to be proven.

Accordingly, the paper is organized as follows. The first part of this thesis sheds light on sustainability and why sustainable orientation is so important for consumers and companies. Afterwards, it shows the theoretical foundations of different categorizations of Innovation, the ‘classical’ Innovation Types, which were also used in the Data Analysis, as well as Social and Green Innovation. The following Chapter takes a closer look on the Data Analysis of the S&P 500 Companies, in form of a detailed description of the methodology and a descriptive analysis, such as a regression analysis of different success factors.

Based on the analysis, the results are discussed in detail and related to the literature research. Furthermore, the limitations and further research approaches for future work will be presented.

The Thesis closes with practical Implications and the Summary with the key findings.

3. Sustainability

For several years now, Sustainability has been moving into the focus of companies and consumers. Consumers often associate sustainable activities of companies with the development of environmentally friendly products, but Sustainability has several more facets.

This chapter reflects upon the different dimensions of sustainability and why it is so important for companies to act sustainable. It serves as a basis for understanding what sustainability actually means and how the meaning is constructed in relation to sustainable innovations.

3.1 The Dimensions of Sustainability

The United Nations defined sustainable development as the ‘development that meets the needs of the present without compromising the ability of future generations to meet their own needs’ (United Nations, 1987).

Today’s most popular framing of sustainability with the Dimensions ‘Economic’, ‘Social’ & Environmental’, which is also called ‘triple bottom line’, was strongly affected by this definition (Choi & Ng, 2011).

3.1.1 Economic

After the financial crisis in 2008, economic sustainability has again become more apparent, as companies and consumers fear the loss of jobs scale, uncertainty and financial risks for governments (Choi & Ng, 2011).

Sheth et al. (2011) determined two main issues of economic sustainability. On the one hand, economic sustainability regards to the stakeholders' economic interests, as well as a broad enhancement of economic welfare and living standards, on theother hand it regards to the conventional financial performance (e.g., cost reductions) of a company (Choi & Ng, 2011).

To ensure that these issues are addressed to achieve sustainable financial performance, companies need to be aware that their resources, that create value in the company’s business, also create value in the future. (Banker et al., 2014). For a company, it is important to occasionally comply with the economic interest of it’s Stakeholder, because if it does not satisfy the demand of it’s Stakeholder groups, it could lose their trust and support (Reynolds et al., 2006).

The enhancement of economic welfare and living standards are strongly connected to the social dimension of Sustainability, because they contribute to the well-being of individuals and communities.

Labuschagne et al. (2005) defined four criteria for short- and longterm financial stability: ‘Financial health’, ‘Economic performance’, ‘Potential financial benefits’ and ‘Trading Opportunities’ (Labuschagne et al., 2005).

The ‘Financial health’ includes elements to evaluate the internal financial stability of a company through criteria like profitability, liquidity or solvency (Labuschagne et al., 2005).

The ‘Economic performance’ measures the value of the company in the perception of shareholders, top management and the government trough criteria like the profitability of the shares, the contribution to gross domestic product (GDP) or the performance of market shares (Labuschagne et al., 2005).

The ‘Potential financial benefits’ evaluates financial benefits such as national and international fundings based on the social, environmental and technological enhancements generated by corporate activities (Labuschagne et al., 2005).

The ‘Trading opportunities’ valuates the sensitivity of the company's trading network and the risks to which it is subjected by the network in which it is located, based on the number of companies within the trade network (Labuschagne et al., 2005).

By taking these criteria and the conomic interestes of their Stakeholder into account, companies can monitor whether they are financially stable and whether their development is economically sustainable.

3.1.2 Social

The social dimension of sustainability addresses the well-being of communities and individuals such as the non-economic gains to the society and their individuals (Choi & Ng, 2011).

Communities are referred to a complex network of relationships between a group of individuals, who share a number of values, norms and meanings, as well as a common identity and history (Shepherd & Patzelt, 2011). The unique characteristics of a community are their culture and places, such as the groups within the community. Through the maintenance of the culture in a large society, individuals can preserve their personal identity (Shepherd & Patzelt, 2011).

If they are not able to do so, psychological as well as physical problems often arise. For example, due to the loss of their cultural identity, the physical health and life expectancy of the Australian Aborigines diminished appreciably (Mcdermott et al., 1998). Additively to the cultural identity, families and other groups give individuals a sense of their own identity, which is why they are also considered as a foundation for highly developed communities (Miller, 1966).

For individuals, the loss of the family could lead to being less able to take on social responsibilities that foster the development of a community (Stevens, 1994).

Aside the community, there are also non-economic gains that needs to be developed for individuals to ensure their well-being. They contain child survival, increased life expectancy, improved education, equity, and equal opportunities (National Research Council, 1999).