Towards Sustainable Innovation E-Book

Sven Pastoors

• Herausgeber: Tectum Wissenschaftsverlag
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 381

Veröffentlichungsjahr: 2017

Beschreibung

With sustainability having gained a lot of momentum over the last years and companies implementing strategies to create corporate sustainability, there are lots of opportunities for innovation. Thus, the two concepts of sustainability and innovation should not be considered separately – they are closely interlinked with one another. The main goal of sustainable innovation is to develop new products and technologies that have a positive impact on the company's triple-bottom-line. To meet this aim, they have to be ecologically and economically beneficial as well as socially balanced. In order to help companies to improve their sustainable innovation process practically, this book is structured into five possible phases of a sustainable innovation process: Awareness of a sustainability problem, Identification & Definition of the problem, Ideation & Evaluation of the solutions, Testing & Enrichment of the solutions, Implementation of the solutions & Green Marketing.

Leseprobe

Sven Pastoors,Ulrich Scholz, Joachim H. Becker, Rob van Dun

Towards Sustainable Innovation

About the contributors

Sven Pastoors is Lecturer in International Law and Sustainable Innovation at the Department of International Marketing, Fontys International Business School, Venlo. In addition, he works as freelance lecturer for the Team Europe of the European Commission and the German Bundestag. He is member of the advisory board of the Crossing Borders research group at FIBS Venlo.

Ulrich Scholz is Senior Lecturer in International Marketing and Management at the Department of International Marketing, Fontys International Business School Venlo, for nearly 20 years. He has published a number of articles and books on sustainable innovation and customer relation management.

Joachim H. Becker is Lecturer in Communication and Human Resource Management at the Department of International Marketing, Fontys International Business School Venlo, for more than 15 years. Additional focal points of his work are organisational psychology and personal coaching.

Rob van Dun is Lecturer in Economics and Sustainable Innovation at the Department of International Business and Management Studies, Fontys International Business School Venlo. His additional fields of expertise are international business strategies, international management, business consulting and cross-cultural differences.

Sven Pastoors, Ulrich Scholz, Joachim H. Becker, Rob van Dun

Towards Sustainable Innovation

A five step approach to sustainable change

Tectum Verlag

Sven Pastoors, Ulrich Scholz, Joachim H. Becker, Rob van Dun

Towards Sustainable Innovation. A five step approach to sustainable change

© Tectum – ein Verlag in der Nomos Verlagsgesellschaft, Baden-Baden 2017

ISBN: 978-3-8288-6656-0(Dieser Titel ist zugleich als gedrucktes Buch unter der ISBN 978-3-8288-3903-8 im Tectum Verlag erschienen.)

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Table of contents

Introduction

Chapter 1: Introduction to the concept of sustainability

1.1 The concept of sustainability

1.2 Problem statement

1.3 Social-economic effects making sustainable acting difficult

1.4 Different ways to measure the sustainability of a product

1.5 Eco-efficiency vs. Eco-effectiveness

Chapter 2: Corporate Sustainability

2.1 An introduction to corporate sustainability

2.2 The Emergence of Sustainability in Business

2.3 Moving from Obligation to Opportunity

2.4 The Triple Bottom Line Framework

2.5 Sustainable Innovation: Challenges and Opportunities

Chapter 3: What is innovation?

3.1 The term innovation

3.2 Types of Innovation

3.3 The (closed) innovation process

3.4 The open innovation process

Chapter 4: Systematic Innovation

4.1 Introduction to systematic innovation

4.2 Concept of Systematic Innovation

4.3 Internal Sources for Innovation

4.4 External Sources for Innovation

Chapter 5: Entrepreneurial Management

5.1 The significance of entrepreneurial management

5.2 Managing an existing firm

5.3 Managing Start-ups

Chapter 6: Innovation Strategies

6.1 The significance of innovation strategies

6.2 Going All-In (“Being fustest with the mostest”)

6.3 Hit them where they ain’t

6.4 Finding a Niche

6.5 Disruptive Innovation

Chapter 7: Fostering Innovation

7.1 Innovation is Change

7.2 Required capabilities to innovate successfully

Chapter 8: The Birth of the iPod

Chapter 9: Identification of sustainability issues

9.1 Creative problem solving

9.2 The creative problem solving process

9.3 Questioning techniques to identify a problem

9.4 Analytical techniques to identify a problem

9.5 Techniques to visualize a problem

Chapter 10: Introduction to customer insight

10.1 Customer insight

10.2 Incorporation of Customer Insight in the Market Research Process

10.3 Taking advantage of the customer knowledge

10.4 The phase concept of customer insight

Chapter 11: Ideation

11.1 Ideation and creativity techniques

11.2 Creative-Intuitive Methods

11.3 Analytical-Systematic Methods

11.4 What should be used when?

11.5 Sustainable innovation workshops

Chapter 12: Idea evaluation

12.1 Pre-Selection of ideas

12.2 Decision-making methods

12.3 Evaluation of ideas

Chapter 13: Social and environmental management

13.1 Quality management: Product and process aspects

13.2 Social Responsibility

13.3 Ecological Management

13.4 Life cycle assessment

Chapter 14: Cradle to Cradle

14.1 Cradle to Cradle as the new philosophy of sustainable innovation

14.2 The four golden rules of Cradle to Cradle

14.3 Certification of the Cradle-to-Cradle principle

Chapter 15: Introduction to green marketing

15.1 Generation of the term green marketing

15.2 Sustainable marketing and Green marketing

15.3 Strategic green marketing

15.4 The “LOHAS” segment

15.5 Green marketing and sustainable innovation

References

Books

Abstracts

Official Documents

Internet resources:

Glossary

INTRODUCTION

Sven Pastoors

Summary

This chapter provides a brief outline of the subject and the book’s content. The terms sustainability and innovation should not be considered separately, not only when talking about sustainable innovation. They are closely linked to one another. The main goal of sustainable innovations is to develop new products and technologies that have a positive impact on the company’s triple-bottom-line. Thus, they have to be ecologically and economically beneficial as well as socially balanced. Thereby, they are strengthening a company´s market position. In doing so, companies focus their activities on the one hand on technological and innovative developments and, on the other hand on the wishes, expectations and problems of their customers.

Nevertheless, almost half of all the research and development work results in products, which will never reach the market. Companies spend a large amount of time and money on developing new products, based on both their experience and knowledge of the market. Yet, they often find it difficult to understand that their products and their applications need to be adapted to customer needs. They fail because their products are designed in an excessively complicated manner or are not developed to meet the requirements of the customers.

This book aims to help companies to generate sustainable innovations successfully. In doing so, the structure of the book is based on six possible phases of a sustainable innovation process: Awareness, Problem identification, Ideation, Incubation, Implementation and marketing.

Sustainability and innovation

“We can’t solve problems by using the same kind of thinking we used when we created them.” (Albert Einstein)

The terms sustainability and innovation should not be considered separately. They are closely interlinked with one another. The main goal of sustainable innovations1 is to develop new products and technologies that have a positive impact on the company’s triple-bottom-line. Thus, they have to be ecologically and economically beneficial as well as socially balanced. Thereby, they are strengthening a company´s market position. In doing so, companies focus their marketing activities on the one hand on technological and innovative developments and, on the other hand on the wishes, expectations and problems of their customers. Basically, three different starting positions are possible:

•There are already other existing products, which might solve an existing problem. By means of market research it is investigated whether and how the existing customer requirements and problems can be solved better, easier or less expensively with the aid of new approaches (continuous improvement process).

•There is no alternative available on the market yet: the market does not indicate a need, but there possibly is a desire. In this case, customer problems are checked and evaluated whether those could be solved by applying the new technology. and how a demand for the product could be generated (real innovation).

•All solutions to an existing problem are very expensive and centralized (e.g. when main frame computers solved math equations or obtaining medical care at an hospital). Therefore, the solution is only accessible for a relatively small number of customers. There is a need to make this technology far more accessible and affordable (disruptive innovation).

The market technology dilemma describes the contrast between requirements and wishes of customers on the one hand, and the technological possibilities on the other. Not everything customers want is technically possible or morally desirable. As a consequence, new technological developments must first be adapted to the wishes of the customers or new needs must be created. This is particularly true when it comes to innovations. A mere six per cent of all new products manage to become permanently established on the market (Vahs/Burmeister 2005, p. 25).

Almost half of all the research and development work results in products, which will never reach the market. Companies spend a large amount of time and money developing new products, based on both their experience and knowledge of the market. Yet, they often find it difficult to understand that their products and their applications need to be adapted to customer needs. They fail because their products are designed in an excessively complicated manner or are not developed to meet the requirements of the customers. This is especially the case for high-tech innovations, as the innovators deem to believe that more sophistication equals more value for their customers, whereas this typically is not the case. Contrarily to popular believe, innovation is not carried out by genius scientists in a lab that have breakthrough ideas that change the world, but is rather perceptive, requiring the innovator to understand the problems of the customers, the ways to reach the market and an idea of what value truly is for its users.

The success of a product is strongly dependent on the willingness of the users/customers to provide information. Companies learn what is wanted and required directly from their end-customers and local retailers. This information should subsequently be incorporated into the product development.

Therefore, companies and customers must look to the future together in order to find out which problems should be solved. In doing so, they need to take into consideration that all customers are different and that each one of them has specific requirements. However, they are all connected by the desire to solve their problems with the aid of new technologies. This not only means that products should be developed to be more focused on the customer, but also that high-quality technical products should be developed flexibly in order to be able to fulfil a wide range of customer wishes.

Innovations and new product ideas should be communicated to the market at an early stage, as the customer initially should be convinced of the value of the new products. Customers do not buy innovative products merely because they are new. Novelty alone is not a selling point. The majority of customers are rather critical regarding new technologies. The balance is quite delicate, as products or services should not be considered to be too radically different so that potential customers don’t see its uses, whilst they should provide more utility than previous alternatives. In the first place, the potential buyer should be made aware of the crucial advantages of the respective product. Thus, it is important to increase the range of use of new products in order to create acceptance as early as possible. Therefore, right from the start, marketing activities should receive equal consideration within the development process. Furthermore, innovations should be communicated in a stronger value-oriented manner.

Structure of this book

This book consists of two major parts. The first section (chapter 1-8) comprises eight chapters which cover all basic information relating to sustainable innovation. First of all, the need for sustainable innovation and the concept of sustainability are explained in the initial two chapters (chapter 1 Sustainability and chapter 2 Corporate sustainability). Sustainability describes the ability of a community, organisation or a company to operate in such a way that they also have the capacity to endure into the future. This applies not only for every individual and every company, but also for humanity as a whole. On the long run, the global community cannot live at the expense of future generations. This also includes individual communities not being allowed to consume in such a way that they burden people in other regions of the world.

In the following two chapters the process of innovation and creation of sustainable products is demonstrated (chapter 3 Innovation and chapter 4 Systematic Innovation). These chapters focus on entrepreneurial management and innovation strategies.

Besides a fitting strategy companies need an appropriate culture and suitable systems in order to innovate successfully. Innovation requires internal change, or the willingness of a firm to do so. Companies that want or need to innovate, need to foster innovation. That means to nurture or cherish innovation within the business environment. Finally, the first part of the book is completed by a case study about the invention of the IPod.

In the second part of the book (chapter 9-15) the five-step-approach towards sustainable innovation will be explained. This process starts with creating awareness for a specific sustainable challenge. Relatively often, problems have had an impact for some time before they are recognised or brought to the attention of someone who can do something about them. When a company becomes aware of a problem it often has no idea what it is about and how to solve it. As there is no answer to the problem yet, a creative solution has to be found. When a person encounters a problem, the natural tendency is to immediately propose possible solutions. Consequently, the thought and discussion focuses on the merits and problems of proposed solution(s), rather than an in-depth discussion of possible causes of the problem itself. Thus, in chapter 9 different techniques how to define a problem will be introduced.

One important step to understand a problem is the identification and definition of the customers’ needs and wishes (chapter 10 Customer Insights).

After a company identified and understood the problem, a solution has to be found. One way to do so is creative problem solving. The term problem solving describes the process of working through the details of a problem in order to reach a solution for each kind of problem, including sustainability issues. Besides logical or systematic thinking, problem solving may require creative skills. Thus, the following chapters focuses on the generation of new ideas, which are needed to create new products and services (chapter 11 Ideation), and the selection of the best ideas to solve the problem (chapter 12 Idea evaluation).

The improvement of the new ideas or products takes place via quality and environmental management (chapter 13)2, or through new approaches, such as Cradle-to-Cradle (C2C/chapter 14). C2C is an innovative, positive and integral approach to sustainability, which is not based on reduction, but rather on unlimited reuse of raw materials. In contrast, life-cycle assessment is used to assess the possible impacts of a product, procedure or activity on the environment during the course of its life (life-cycle). Subsequently, a marketing strategy is developed, which takes the ecological and social aspects into consideration. Green marketing allows a new, ever-increasing customer group to be addressed, the ‘LOHAS’ (chapter 15).

In doing so, the structure of the book is based on five possible phases of a sustainable innovation process:

•Awareness of a problem: Prior to the start of the innovation process all parties involved have to become aware of an existing problem.

•Identification & Definition of the problem: After recognizing a problem the stakeholder has to define the problem as accurately as possible. Very often, a company can only overcome the challenges that arise with changes in the framework conditions by means of innovations. Innovative ideas can only take hold, however, if the market accepts them. Therefore, a company has to understand its customers.

•Ideation & Evaluation of the solutions: Ideation is the creative process of generating, developing and communicating new ideas to solve the defined problem.

•Testing & Enrichment of the solutions: Companies follow philosophies like Cradle-to-Cradle or management systems like corporate social responsibility (CSR) or lifecycle assessment (LCA) to ensure lasting success of sustainable products.

•Implementation & Marketing of the solutions: Ending and starting point of a sustainable innovation process is the so called green marketing.

1Sustainable innovation couples the protection of natural systems with the notion of business innovation while delivering essential goods and services that serve social goals of human health, equity, and environmental justice.

2The starting point environmental management is the critical examination of the life cycle assessment (LCA), an analysis of the environmental impact of products throughout the entire lifecycle.

CHAPTER 1: INTRODUCTION TO THE CONCEPT OF SUSTAINABILITY

Sven Pastoors

Summary

“We are living beyond our means” – a striking statement made by the press as well as leading scientists! For a good 50 years, both scientists and companies have been growing increasingly aware that we are living beyond our means and are exhausting our natural resources. We are removing more from nature than can be replenished naturally.

Sustainability is a concept that seeks to tackle this problem. It describes the ability of a community, organisation or a company to operate in such a way that they also have the capacity to endure into the future. This does not only apply to every individual and every company, but also for humanity as a whole. In the long-term, the global community cannot live at the expense of future generations. This also includes individual communities not being allowed to consume in such a way that they burden people in other regions of the world.

Sustainability is a cross-sectional task, because it affects all the areas of our lives. Its implementation is a global challenge. Due to globalisation, the social, economic and ecological consequences can be felt worldwide. Environmental and development problems cannot be solved by one country alone; rather they must be solved together in close collaboration.

1.1The concept of sustainability

“Sustainable development satisfies the needs of the present generation, without endangering the possibilities of future generations to meet their own needs.”3 Since 1987, this United Nations definition has characterised the discussion about the terms sustainability and sustainable development. Sustainability4 describes the ability of a community, organisation or a company to operate in such a way that they also have the capacity to endure into the future. This does not only apply to every individual and every company, but also for humanity as a whole. In the long-term, the current global community cannot live at the expense of future generations. This also includes individual communities not being allowed to consume in such a way that they burden people in other regions of the world.

Even though the first calls for the sustainable use of the natural resources were already made in antiquity, the efficient use of natural resources did not play a role for a long time (Rogall 2012, p. 29-31). The term “sustainability” itself derives initially from the forestry sector in the 18th century.5

The discussion about sustainable development originates from the global economic crisis of the 1970s. This crisis made it clear that we are endangering our own livelihood through the exploitation of natural resources. Today, sustainability is an economic concept. Economic, ecological and social developments must not be separated from one another or played off against each other: no permanent economic and social progress without an intact environment – no intact environment without economic and social well-being.

Sustainability is a cross-sectional task, because it affects all the areas of our lives. Its implementation is a global challenge. Due to globalisation, the social, economic and ecological consequences can be felt worldwide. Environmental and development problems cannot be solved by one country alone; hence they must be solved together in close collaboration. From this, the three dimensions of sustainability can be deduced:

Ecological sustainability (Ecological):

•Ecological sustainability describes the considerate handling of resources and the environment.

•It covers every step of the product life cycle (extraction of raw materials, production, packaging, marketing, transport, use and disposal).

•A way of producing and living, which only stresses the natural resources to a limited extent so that they can regenerate, is considered ecologically sustainable (Rogall 2012, p. 47).

Social/ethical sustainability (Ethical):

•Social/ethical sustainability describes responsible behaviour of all the people involved in a process.

•The aim is to keep social tensions limited and to settle conflicts in a peaceful and reasonable manner.

•Within a company, this concerns, for example, handling of the employees, the relationship to interest groups, or the responsibility of the company towards the community (concept of corporate social responsibility/CSR) (Rogall 2012, p. 47f.).

Economic sustainability (Economical):

•Economic sustainability is distinguished by the efficient allocation of resources.

•Every organisation (a company, state or community) should not economically live beyond their means, as this inevitably leads to damage for the future generations.

•Economic actions are considered sustainable if the business model can be permanently practised (Rogall 2012, p. 48).

Embedment:

•The fourth “E” is generally still known as “Embedment”, the embedding of sustainability considerations in the processes and structures of an organisation.

•The prerequisite for embedment is a change in awareness of all the parties involved.

•The measures in the embedment area include, for example, education and training, or functioning innovation management (Rogall 2012, p. 49).

Figure 1.1: Four E’s of sustainability

Source: Own representation.

1.2Problem statement

For a good 50 years, both scientists and companies have been growing increasingly aware that we are living beyond our means and are exhausting our natural resources. We are harvesting more from nature than can be replenished naturally. The exploitation and contamination of natural systems are visible in many different ways:

•Shortage as a result of exploitation of our natural resources (e.g. freshwater, tropical forests, oceans)

•Climatic change and the increasing use of fossil fuels (e.g. oil, coal)

•The pollution of our environment and the associated risk to our health (e.g. through incorrect waste disposal)

•Destruction of ecosystems and biodiversity6 (c.f. Rogall 2008, p. 31)

Exploitation of renewable resources

We consume more resources than the ecosystems can replenish during the same period. The most important resource is fresh water. Our nutrition, our standard of living and many industrial processes depend on the availability and quality of clean drinking water. Yet 96 % of our planet’s water resource is saltwater, and 3 % is locked up in ice. Only 1 % is potentially suitable for human consumption. Today 2.5 billion people live without clean drinking water (UNICEF/WHO Report 2012). Therefore, the struggle for control of clean drinking water is threatening to become one of the primary sources of future conflicts.

In addition, deforestation is leading to an acceleration of climate change and desertification of large land areas. At the beginning of the 20th century, tropical rainforests covered around 12 % of the earth’s surface; today they have shrunk to 6 % (FAO 2005). A further problem is soil sealing and erosion of arable lands. Each year, more farmland is lost through sealing and erosion than can be reclaimed for cultivation. Additionally, overgrazing and overfishing are leading to destruction of ecosystems. Total global fish stocks have halved since the beginning of the 1970s (Rogall 2008, p. 35).

Climate change

The global average temperature is dependent upon a large number of factors, such as solar and seismic activity or the concentration of greenhouse gases in the earth’s atmosphere. In the last three billion years, the earth has seen several major climatic changes. The last glacial period, which led to the extinction of many animal and plant species worldwide, only ended about 12,000 years ago.

Since the industrial revolution, humans have released an ever-increasing amount of greenhouse gases; the CO2 concentration in the atmosphere increased by 35 % from 1850 to 2005, more than in the previous 650,000 years. This has warmed the atmosphere by 0.8 °C, and this will rise even more in the years to come. If the earth’s temperature were to rise by an additional 1.2 °C, the critical level would be exceeded (Pachauri/Reisinger 2007, p. 2). If we fail to limit the further increase in the average temperature to 1.2 °C, this will have serious consequences for life on this planet. A further sea level rise would reduce the world’s freshwater reserves. This would lead to an increase in desert and steppe lands and declining crop yields (Pachauri/Reisinger 2007, p. 10). In addition to malnutrition as a result of poor harvests and a rising risk of epidemics, the extreme weather conditions themselves would directly threaten millions of people. According to estimates of the World Health Organization (WHO), the European heat wave of the summer of 2003 caused approximately 70,000 deaths (Robine 2007).

In the coming years, climate change will also bring about extreme economic costs and threaten the livelihoods of hundreds of millions of people (Stern 2006, p. 1). In the long term, this development can only be stopped if every country on the planet takes measures to decrease CO2 emissions. The only politically enforceable solution is to allocate each person equal emission rights. However, this means that western industrialised countries in particular would be required to rapidly reduce their CO2 emissions.

A fundamental cause of climate change is the burning of fossil fuels. Although the world’s fossil fuel reserves are slowly approaching their end7, demand for them continues to increase. Despite the opening up of new reserves and technical developments, over the long term we can expect continued price increases. The growing scarcity of fossil fuels will, therefore, also lead to an increase in international conflicts.

Environmental pollution and the resulting health threats

Industry, agriculture, transport and private households release hazardous substances during energy generation, heating and manufacturing processes, which are poisoning our environment. This adversely affects not just existing ecosystems, but also, to a large extent, our health. In particular, incorrect waste disposal leads to air, water and soil pollution on an enormous scale. This is especially true for those regions where waste is improperly disposed of or incinerated. An example of this is Lake Aral in Uzbekistan, where improper waste disposal and pollution has led to an extreme draught shrinking the lakes sizes and contaminating the remaining part to inhabitable levels.

Destruction of ecosystems

Until now, we have come to know only a fraction of the animal and plant species living on the earth. It is estimated that there are about 30 million different species, of which we only know 5 %. But many ecosystems might not be able to adapt to the new climate conditions. Approximately 20-30 % of all animal and plant species are threatened with extinction. In the next ten years alone, an estimated 1.5 million species will become extinct (Pachauri/Reisinger 2007, p. 10). In addition to the ethical concerns that arise in connection with the extermination of animal and plant species, each single species loss restricts genetic diversity on earth and thus our development potential forever. Possible consequences include epidemics, crop failures and pest infestation.

The challenges resulting from our lifestyles are global in nature, and they can only be solved by all countries working together. The impact of these changes will be felt by each one of us. Climate change and habitat destruction are political challenges. Our entire global industrial society needs restructuring, ecologically and sustainably.

The Paris Agreement

In December 2015, 195 countries (out of 206) finally agreed on a universal, legally binding global climate deal at the Paris climate conference. The agreement sets out a global action plan to avoid dangerous climate change by limiting global warming to well below 2°C. Within the context of the agreement the governments agreed on the following goals to reduce carbon emissions:

•Keeping the increase in global average temperature to well below 2°C above pre-industrial levels;

•Limiting the increase of the global average temperature to 1.5°C compared to today´s level, since this would significantly cut the risks and the impacts of climate change;

•Getting the reduction of global emissions started as soon as possible;

•Accomplishing rapid reductions afterwards in accordance with the best available science (European Commission, 2016, Paris Agreement).

During the Paris conference, countries submitted comprehensive national climate action plans. Since those proposals were not enough to keep global warming below 2°C, the governments committed themselves to agree on further measures.

Although, the agreement focuses primarily on measures to stop climate change it also includes regulations concerning social and economic sustainability. To prevent possible conflicts and to support developing in adapting the agreement the governments agreed:

•To strengthen the capacity of the national societies to deal with the impacts of climate change;

•To provide international support for adaptation to developing countries.

The governments agreed also on economic cooperation, to avert and minimise loss and damage associated with the adverse effects of climate change. Besides, they acknowledge the need to cooperate and enhance the understanding, action and support in different areas such as early warning systems, emergency preparedness and risk insurance (European Commission, 2016, Paris Agreement).

The agreement is due to enter into force in 2020. But we still have a long way to go before we will be in a position to implement individual measures. Partly because exploitation of natural resources will continue to increase as the world population and economies in emerging countries continue to grow. And partly because social agents (i.e. corporations, governments, policy makers, etc.) have failed to get a grasp on the challenges we face, given how little time we have left.

1.3Social-economic effects making sustainable acting difficult

To prevent a shortage in resources and to slowdown climatic change, every state, company and even the individual consumer must rethink and invest in renewable energy sources and sustainable innovations. However, a series of social-economic phenomena are making sustainable trade and the implementation of sustainable innovations difficult.

The tragedy of the commons

Public goods are freely available for all the potential consumers. Furthermore, no one can be excluded from their benefit. They are made available both by the state (e.g. roads, internal security) and by private providers (e.g. Google or Wikipedia). A particular form of public goods is the so-called common goods. As with other public goods, no one can be excluded from the use of common goods (e.g. free nursery places, place to lie on a public beach). However, as they are only available in limited quantities, the consumers rival each other for their use.

If goods are freely available despite limited resources, there is usually rationing in the form of a waiting period. The more limited the goods become, the longer the user must wait for them. The result is a resource-consuming fight for acquisition during which each part attempts to be the first to appropriate the resources. (Tietzel/Müller 2000, p. 316)

As no member of society (private persons nor companies) can be excluded from the use of the common “environment”, it often results in overexploitation of free-available natural resources. The individual members of society would like to profit from the free-of-charge use of the environment, without footing the bill for its accessibility. Examples of problematic use of natural resources without exclusive property rights (public goods) include:

•Deforestation of the rainforests (overexploitation),

•The plundering of wild animal stocks, particularly in developing countries,

•Over-fishing of the world’s oceans,

•The use of the atmosphere for the disposal of pollutants (e.g. air pollution by motor vehicles).

A solution for this dilemma would be the definition of user rights under state control or the regulation of limited resources, e.g. through catch limits or emissions trading.

Free-rider problem

As individual society members cannot be partly or fully excluded based on economic, political or technical grounds from the use of goods provided once, there is often a free-rider problem with public goods. Individual users conceal their real purposes during the decision about the financing of public projects in order to not be drawn into their financing. They reckon that the goods will be provided without their contribution. The free-rider problem leads to a suboptimal distribution of the goods in question:

•Some of the users of purely public goods, such as sewerage system, street lighting or embankments are often not willing to pay for the development and upkeep costs. As a result, such goods are not offered by private providers or not in sufficient quantities. Public goods are therefore usually provided by the state and financed with fees.

•With common goods, such as the fish stocks in the North Atlantic or the atmosphere (for CO2 emissions), the free-rider problem threatens to result in overexploitation. Due to free access, free riders profit from the self-limitation of other users when their usage correspondingly intensifies. This problem of collective trade is known as “tragedy of the commons”. (Rogall 2012, p. 78)

Externalisation of costs

A further problem arises through external effects. Holger Rogall describes external effects as follows: “External effects (shifting of costs and usage without payment): If people economise, this can have a positive or negative effect on society. Positive external effects raise the quality of life of other members of society, without them paying for the additional benefits. With negative effects, costs are generated, which the society members rather than the perpetrator must pay.” (Rogall 2012, p. 67)

The negative external effects (external costs) to the environment and the demands on other public goods are neglected in the company balance sheets, the budgetary calculations of the public sector and the considerations of private households. The economic term for the shifting of costs to the general public, other persons, or regions, or to future households (e.g. draining of wastewater into rivers, which then have to be cleaned at the expense of the community) is “externalisation”, (Schubert/Martina 2011.) States, companies, but also private persons thereby consciously or unconsciously burden others with a part of the costs for their behaviour. The most important forms of externalisation of environmental costs include:

1.Externalisation of costs to the general public: A product is manufactured in such a way that the general public rather than the perpetrator is responsible for a part of the ancillary or subsequent costs. An example of externalisation of costs to the general public is the manufacturing of products that require specialist disposal (e.g. dangerous chemicals such as drain pipe cleaner etc.). The disposal is taken care of by the public sector, in other words the taxpayers, who also bear all the costs for the disposal. Were these disposal costs to be included in the price of these products, many of them would not be manufactured or bought in the first place. Hence, companies externalise these costs as to not incur them.

2.Externalisation of costs to other countries or regions: A product is manufactured in such a way that the ancillary or subsequent costs fall to another country or region, such as the production of food for the EU in developing or emerging countries (e.g. beef in Argentina, cocoa in Ghana or palm oil in Indonesia). In many places, the traditional lives and economies forms of peoples within these countries are endangered by the export of crops from monocultures. The costs arising from this are not incurred in Europe, but in the countries involved.

3.Externalisation of costs to future households: Products are manufactured in such a way that parts of the costs are only incurred years later. In some countries, for example, poisonous pesticides are still used to generate higher yields and in order to save money on environmentally friendlier measures for pest control. Pesticides take around 20 years to reach the groundwater. The costs for cleaning the groundwater or drilling a deeper well are passed on to future generations.

To move companies and private persons to a more conscious handling of resources, many organisations demand calculation of all the resulting costs (internal and external) into the price. However, this would not guarantee damage prevention, or a further unequal distribution of the burden (unstressed environment as expensive goods) is expected.

The NIMBY effect (“Not in my backyard”)

One of the obstacles dealing with sustainable innovations or the construction of renewable energy power plants is the NIMBY-effect. The NIMBY-effect refers to organized opposition by residents to a proposal for a new development because it is close to their homes. These residents often believe that though the developments are needed in society in general, they should be realized somewhere else. Opposing residents themselves are called ‚Nimbies’.

The NIMBY effect may also apply more generally to people who advocate some change or proposal (for example, eating less meat, wasting less food or austerity measures like budget cuts and tax increases), but oppose implementing it in a way that would require sacrificing on their part: they support progress but they are not willing to change themselves.

Examples of projects likely to be opposed are:

•Renewable energy generators, e.g. wind farms and solar panels;

•Infrastructure development or large-scale developments, e.g. new roads, (freight) railways, light rail and metro lines, airports, seaports, power plants, electrical transmission lines, mobile telephone network masts, wastewater treatment plants, landfills and incinerators, or new industrial parks and shopping malls;

•Social infrastructure, e.g. schools, kindergartens, hospitals, youth hostels or sports stadiums;

•Accommodations perceived as primarily benefitting disadvantaged people, e.g. subsidized housing for the financially disadvantaged, supportive housing for the mentally ill, halfway houses for drug addicts and criminals, or homeless shelters for those with no fixed address;

•Innovations or changes of all kinds, e.g. new products or an altered traffic system.

1.4Different ways to measure the sustainability of a product

One way to measure the sustainability of a product, a process, a company or a way of life is the ecological footprint. “Human activities consume resources and produce waste, and as our populations grow and global consumption increases, it is essential that we measure nature’s capacity to meet these demands. The Ecological Footprint has emerged as one of the world’s leading measures of human demand on nature. Simply put, Ecological Footprint Accounting addresses whether the planet is large enough to keep up the demands of humanity.” (Footprintnetwork, 2014)

Fig. 1.2: The ecological footprint

Source: ecological-footprints, 2014.

The ecological footprint illustrates the amount of biologically productive land and sea area necessary to supply the resources a human population consumes, and to assimilate associated waste. Using this assessment, it is possible to estimate how much of the Earth (or how many planets like Earth) it would take to support humanity if everybody followed a given lifestyle.

Thus, the term ecological footprint stands for an accounting system for bio-capacity. It tracks the amount of bio capacity and how much of it is used by people. Bio capacity represents the planet’s biologically productive land areas including our forests, pastures, cropland and fisheries. These areas, especially if left untouched, can also absorb much of the waste we generate, especially our carbon emissions.

In more specific terms, this means that an ecological footprint analysis compares human demands on nature with the biosphere‘s ability to regenerate resources and provide services. It does so by assessing the biologically productive land and marine area required to produce the resources a population consumes and absorb the corresponding waste, using prevailing technology. Footprint values at the end of a survey are categorized for Carbon, Food, Housing, and Goods and Services as well as the total footprint, the number of planets like Earth needed to sustain the world‘s population at that level of consumption. This approach can also be applied to an activity such as the manufacturing of a product.

In conclusion, ecological footprint analysis is a tool of comparing consumption and lifestyles, and checking this against nature‘s ability to provide for this consumption. The tool can inform policy by examining to what extent a nation uses more (or less) than is available within its territory, or to what extent the nation‘s lifestyle would be replicable worldwide. The footprint can also be a useful tool to educate people about carrying capacity8 and over-consumption, with the aim of altering personal behaviour. Furthermore, ecological footprints may be used to argue that many current lifestyles are not sustainable. Such a global comparison also clearly shows the inequalities of resource use on this planet at the beginning of the twenty-first century.

Ecological footprint analysis is now widely used around the world as an indicator of environmental sustainability9. It can be used to measure and manage the use of resources throughout the economy as well as to explore the sustainability of individual lifestyles, goods and services, companies, cities, regions or nations.

Carbon footprint

Another way to measure the sustainability of a product is the carbon footprint. Given that ecological footprints are a measure of failure, many companies choose the more easily calculated “carbon footprint” as an indicator of unsustainable energy use. A carbon footprint is defined as “the total sets of greenhouse gas emissions caused by an organization, event, product or person.” (Carbon Trust, 2014)

However, the total carbon footprint cannot be calculated because of the large amount of data required and the fact that carbon dioxide can be produced by natural occurrences, too. It is for this reason that authors Wright, Kemp, and Williams define the carbon footprint as “a measure of the total amount of carbon dioxide (CO2) and methane (CH4) emissions of a defined population, system or activity, considering all relevant sources, sinks and storage within the spatial and temporal boundary of the population, system or activity of interest. Calculated as carbon dioxide equivalent using the relevant 100-year global warming potential.” (Wright/Kemp/Williams 2011, p. 61-72.) Greenhouse gases can be emitted e.g. through transport, land clearance, and the production and consumption of food, fuels, manufactured goods, materials, wood, roads, buildings, services etc. For simplicity of reporting, it is often expressed in terms of the amount of carbon dioxide, or its equivalent of other greenhouse gases, emitted.

Most of the carbon footprint emissions for an average household come from “indirect” sources, i.e. fuel burned to produce goods far away from the final consumer. These are distinguished from emissions which come from burning fuel directly in one’s car or stove, commonly referred to as “direct” sources of the consumer’s carbon footprint.

1.5Eco-efficiency vs. Eco-effectiveness

In academic discourse, a great variety of approaches exist to foster and implement sustainability in companies (e.g. ‚cradle to cradle’, ‚life-cycle assessment’ or ‚green marketing’). All these approaches are based on one of the following fundamental hypothesises:

•Eco-efficient techniques seek to minimise the volume, velocity, and toxicity of the material flow system and by this the harm done to environment. By doing this, eco-efficiency is based on the assumption of a linear flow of materials (cradle to grave): raw materials are extracted from the environment, transformed into products, and eventually disposed of. Some materials are recycled, but often as an end-of-pipe solution, since these materials are not designed to be recycled. Thus, the principal aim of these approaches is to improve efficiencies (doing less bad). Common approaches based on eco-efficiency are e.g. ‚lifecycle assessment’ or ‚environmental management systems’.

•Eco-effectiveness proposes the transformation of products and their material flows in a way such that they form a supportive relationship with ecological systems and future economic growth. The goal is not to minimise the cradle-to-grave flow of materials, but to generate cyclical, cradle-to-cradle ‚systems’ that enable materials to maintain their status as resources over time (recycling). The eco-effectiveness fosters the relationship between ecological and economic systems and raise issue how that relationship can be symbiotic if not regenerative. This concept is a shift in mind-set from eco efficiency (“doing less bad is not good”). ‚Cradle to cradle’ is the most frequently practised approach based on eco-effectiveness is.

Eco-efficiency

Eco-efficiency is the quotient derived from the monetary value of a product and the costs for the general public resulting from the production processes (or the influences exerted on the environment, measured in suitable units, e.g. with the aid of the ecological footprint).10 The World Business Council for Sustainable Development (WBCSD) introduced the term in 1991. The aim was to reduce negative ecological effects and the use of resource during the entire lifecycle (of a product) to a level that is compatible with the Earth´s estimated carrying capacity (cf. www.wbcsd.org).

Fig. 1.3: Eco-efficiency

Source: WBCSD, 2014.

A product is considered eco-efficient if the following three criteria are equally fulfilled:

a)economic competitiveness,

b)fulfilment of the human requirements and raising of the quality of life, and

c)fewer resources are required than nature can regenerate within the same period.11

In doing so, both the manufacturing process and the use and later disposal (for products) are included in the balance (“from the cradle to the grave”).

Eco-efficiency serves companies as a characteristic factor, with the help of which the production processes and products are designed more economically. The increase in environmental compatibility is a positive side-effect. Eco-efficiency therefore creates a classic win-win situation. Environmental resources are saved and therefore costs reduced. Ecology and economy benefit equally because the company can produce more with a lower energy and resource requirement. At the same time, the ecological effect must be monitored in every phase of the production. Both the manufacturing process and the usage and disposal of the product are included. The lowest possible resource use should result in a multiple gain, in which the intensity of the materials and energy are reduced, pollutant emission is reduced, and the environmental load is reduced through the use of recyclable materials.

Examples of practical implementation of eco-efficiency in the economy are environmental management systems and the life-cycle assessment. The aim of the system is to keep resource use throughout the entire life cycle of a product(Cradle-to-Grave)as low as possible.

Eco-effectiveness

However, there are also critical voices, which view the eco-efficiency aims as being too limited: Reduction, reuse and recycling may slow down the process of contamination and depletion, but it won’t stop it. They therefore preach eco-efficiency solutions such as Cradle to Cradle.

Fig. 1.4: Eco-efficiency versus eco-effectiveness

Source: EPEA, 2014.

The central assumption to Cradle to Cradle is: Waste is food. This means: All the products are developed in such a way that they can either be traced back to biological nutrient matter in biological cycles, or remain as technical nutrient matter in technical cycles.

Green marketing

The third approach, green marketing, attempts to connect the ideas with one another. With green marketing, the company or the individual products are no longer the focus, but rather the consumers. Correspondingly, it focuses on the companies developing sustainable products and solutions with their customers. This way, added value is created for all those involved (economy, people and environment).

Training questions:

1.Name the two different starting points for sustainable innovations? What are the main differences? Please give an example for each.

2.Explain the NIMBY-effect and give an example.

3.State the four dimensions of sustainability (4 “E” s) and explain them. How are the connected?

4.Why is embedment of special importance?

5.Explain the difference between the Ecological Footprint and the Carbon Footprint.

Recommended literature

Food and Agriculture Organization (FAO) of the United Nations (Ed.) (2005): Global Forest Resources Assessment, Rome.

Keystone Center (1991): Final Consensus Report of the Keystone Policy Dialogue on Biological Diversity on Federal Lands