Companies in a wide range of industries are using sustainability as a springboard to growth, often doing so by working across industries.  I’ve written before (Paths to Top-Line Sustainability Innovation) about the three primary strategies companies are taking to innovate and grow with sustainability as a primary driver. 

While companies develop and execute comprehensive sustainability strategies with a range of stakeholders and business partners across their ecosystem and even across industries, the success of sustainability-driven revenue growth strategies ultimately depends on how well a company serves the needs of end markets and specific customers.  Looking deep within an industry, in addition to across them, underlines how large and important the sustainability innovation and growth opportunity has become.

My work recently with the executive team of a multi-billion dollar client in the communications and high tech industry brought this point home.  This company manufactures hundreds of products from facilities in over 20 countries across the world.  They win business and make money based on how well they procure components, run their supply chain, and operate their facilities. 

Certainly any company with this range and complexity of operations would be highly focused on their environmental and social responsibility and the cost effectiveness of their business, and indeed this client is.  But, in the midst of the global focus on sustainability, they wanted to determine what competencies they had and needed to be able to innovate and grow new businesses in markets driven by sustainability including those for solar panels, residential meters, power distribution, and water desalinization kits.  

Look deeper into the communications and high tech industry.  Much has been written about how software will play an important role in monitoring environmental performance – an estimated $12 billion market this year with some of the world’s and industry’s leading companies like IBM, HP and SAP actively competing for it.  But, sustainability is playing a much larger, even pivotal role in remaking the competitive fundamentals, business models, and direction and growth of the industry itself.  A snapshot of activity in three major sectors provides a compelling illustration of the industry-wide growth opportunity provided by sustainability.

• High tech equipment and services – Cloud computing is fundamentally shifting the way enterprises use communications and high tech products and services.  Enterprises are embracing “the cloud” to reduce capital and operating expenditures.  Of course, one of the biggest operating expenditures in a data center is the cost of electricity to power the servers and heat and cool the center.  The use of virtualization software (central to the operating effectiveness of servers in data centers) from the leading provider (VMware) saves more power than the amount of electricity used annually for heating , ventilation and air conditioning across all of New England.  Further, the energy efficiency of computing and network equipment has improved by 70% to 90% in recent years.   “Cloud” is the competitive game changer and a big growth opportunity that every major player in this industry is working on and sustainability is a fundamental reason for its emergence.  

• Telecom services – For major telcos and other players in the communications business, the focus on sustainability is reviving established services like video conferencing, fleet telematics, and telecommuting that date back a few energy crises.  It is also putting communications companies in position to compete for business in the rapidly growing markets for cloud, hosting and vertical solutions like e-health against IT providers.  New and potentially very large markets for smart buildings, smart grids, remote monitoring, and electric vehicle charging are also in the sights of many companies in this space.  Leading telco services providers are beginning to put sustainability at the center of their product strategies and are looking to address the competitive and regulatory pressures customers are feeling around the sustainability issue.  They are in a unique position to provide a broad and integrated set of solutions to the range of an enterprise’s sustainability needs.

• Clean Tech – Clearly a new and rapidly emerging, yet already large space ($188 billion market value in 2010 according to Clean Edge), more money is going into clean tech than any other communications or high tech segment.   Billions are being invested by venture funds, Internet players like Google and long established tech giants including Intel.  Why? Solar, water, wind, power, electric vehicles and other clean tech products are highly dependent on information technology and communications in both their operation and distribution and represent the most significant growth and value creation opportunities in this industry for the foreseeable future.

Market and customer-driven growth that addresses sustainability needs in the communications and high technology industry will provide important environmental benefits as well.  Analysis by McKinsey showed that the potential to optimize energy productivity using existing technologies in just one, already identified opportunity area in each of the buildings, power, transportation and manufacturing sectors could abate at least 15% of all GHG emissions across the world by 2020.  While emissions from communications and high technology products will also increase between now and then, the analysis also showed that the industry could abate at least 5 times what it is expected to emit.  

Taken together, revenue growth and abatement opportunities put sustainability front and center in the strategies and success of communications and high tech industry companies both now and in the future.

Steve Goldstein, managing partner of Growth Advisors, has worked with companies to turn sea changes in technology, society and economics into game-changing innovation, advantage and growth. He has helped major clients across a range of industries grow and transform their businesses, strategies, operations and organizations as a catalyst, strategy advisor and implementation partner. He can be reached at sgoldstein@growth-advisors.com and found on Twitter at @ImSteveG.

Do consumers care about “green” products anymore? According to a piece in The New York Times last week “the consumer’s love affair with green products, from recycled toilet paper to organic foods to hybrid cars, faded like a bad infatuation” in the grip of the recession.

As evidence the reporters point to the 40% decline in sales (to $60 million/year) of Clorox’s Green Works, one of the most successful and highly promoted household cleaning lines from any of the big consumer products or independent companies. They also point to the number of green cleaners offered dropping by a third to around 100 and the green versions of well known brands like Scrubbing Bubbles and Windex totaling less than a couple million dollars in sales last year.

Is this really news? I don’t think so.  I’ve written before why Green Doesn’t Sell and how major consumer companies have learned to avoid promoting the environmentally sustainable aspects of their products.  The reality is that consumers purchase on price and performance and to a lesser degree, brand.  

Green products have never really been more than an “eco-niche.” Even one of the most successful products marketed on its green benefits – the Toyota Prius – sold 141,000 cars last year, a mere 1.2% of the 11.6 million new vehicles sold in the US in 2010. Depending on the analyst, the Prius began to turn a profit for Toyota after 10 years… or hasn’t yet. And of the other 31 hybrid or electric vehicle models sold last year by other car companies, only 6 models sold more than 10,000 cars and another 15 sold less than 1,000 units during the entire year.  

If green doesn’t matter much to consumers, does it matter to product companies anymore? Actually, more than ever.  Put the marketing aside and you’ll see that the best consumer and commercial product companies across industries are remaking their operations, products, and business models using environmental and social considerations to drive innovation and improve their top and bottom lines. 

Companies are saving millions by reducing their energy and water use and limiting their waste through fundamental process change. The Environmental Defense Fund (EDF) “Climate Corps” - a group of MBA student interns - identified $350 million in potential net operational cost savings last summer from energy reducing projects at 50 major companies. Walmart is turning its global supply chain inside out by demanding its suppliers address a long list of environmental and social criteria. P&G is pursuing its announced goals of using only renewable energy in its factories, only renewable or recycled materials in its products, and sending no waste to landfills.  Unilever has publicly committed to improve the health of 1 billion people and cut the environmental impact of its products in half.  Chemical companies have committed to “green chemistry,” systematically replacing chemicals which produce environmental and health problems with those that don’t. 

Why are these and 70% of Fortune 500 companies publicly engaging in sustainability efforts, especially if consumers don’t seem to care when it comes time to make a purchase decision? Walmart wants to be assured a continuing stream of low cost products to sell. Coca-Cola wants to be able to operate and expand in countries with limited supplies of water. The companies that EDF works with want to be able to reduce their energy consumption, a major and growing portion of their operating costs. 

All of these companies realize that wrecking the environment and human health will also will wreck the economy and their markets.  And all of these companies want to create advantage by becoming sustainable in a smarter way than their competitors.  Green is the catalyst for intensely competitive innovation.

Which takes us back to green products.  Unilever is rolling out sales of its water purifying products to solve the clean drinking water needs of a half billion potential customers. Eastman Chemical is expanding revenues of its copolyester resins to create durable housewares, accomplished in part by looking for a BPA free solution.  Philips, GE, Osram and other LED light bulb makers are growing their business because they provide lower energy and service costs compared to incandescent and fluorescent bulbs.  GE and Siemens have each built over $25 billion of business selling engines, turbines, trains, building products, and power plants that improve energy efficiency, reduce costs and emissions.   

All of these products are green but sell on their performance and cost benefits.  The lesson is clear; innovate green, don’t market it.

Steve Goldstein, managing partner of Growth Advisors, has worked with companies to turn sea changes in technology, society and economics into game-changing innovation, advantage and growth. He has helped major clients across a range of industries grow and transform their businesses, strategies, operations and organizations as a catalyst, strategy advisor and implementation partner. He can be reached at sgoldstein@growth-advisors.com and found on Twitter @ImSteveG.

Over the past month, a number of high profile surveys have been released that provide useful context for senior executives committed to making sustainability a vital part of their company’s success.

One survey (link) found that nearly 90% of senior executives at Fortune 1000 companies believe sustainability is a “moral responsibility” but that cost savings is the leading driver of sustainability related project investments.  Another (link) concluded that while most companies see improved efficiency and risk mitigation as positive outcomes of pursuing sustainability, a distinct group of leading companies are aggressively embracing sustainability to create fundamental competitive advantage.  A third survey (link) notes that “saving the earth has taken a back seat to simply saving the day” in social and political spheres but businesses are working to green the U.S. economy more expansively than in the past (yet making progress along only 7 of 20 indicators).

These and similar reports likely to come out through the year will paint enough different pictures for a senior executive to find kindred spirits in whatever approach he might take to sustainability.  

My own analysis of the strategies the most successful executives are taking now to grow the value of their companies includes a five part sustainability agenda:

Reengage – Yes, investment in sustainability-related projects (most those that save money) has continued through the down turn. But now, as we come out of a cyclical, albeit deep and damaging recession, C-suite executives are reengaging far more thoughtfully and personally than ever before in the advancement of a long term company strategy with sustainability at its core.

Expand – Sustainability efforts have been focused in too many companies around specific risk or cost considerations and primarily on environmental or social responsibility issues directly in their business path.  The greatest opportunity to create value comes when companies expand their strategies to include sustainability thinking and initiatives to top line growth, across all businesses, and deeper into corporate social responsibility areas.  Execs at top companies are now pursuing these expansion approaches to make their corporate strategies more meaningful.

Reach – Sustainability is a big issue and a big opportunity, perhaps the biggest in the career of many of today’s senior executives.  The best are seizing this opportunity and pursuing daring goals, reaching for breakthrough approaches in an effort to create truly differentiated and competitively advantaged positions. 

Embed – Large companies are very complex organisms.  It’s hard to get them to change or to embrace new strategies or initiatives even with the most deliberate and well conceived programs. Yet, that is the challenge now at this stage of sustainability adoption.  Embedding sustainability goals, approaches, and thinking into the company’s core strategies, processes, culture and leadership has become central to making sustainability a foundation for long term value creation.

Deliver – Corporate boards are beginning to demand significant results from sustainability.  A handful of sustainability projects that save several million dollars or a few new greener products that shine a temporary light on the company and make employees feel good about it is no longer enough. Results vital to the financial performance, brand and equity value of a company are increasingly the goal of sustainability strategies being outlined by top executives now.

These agenda items are central to what executives at the best companies are pursuing today to make sustainability a part of their current and long term success.  

Steve Goldstein is managing partner of Growth Advisors, a catalyst, strategy advisor and implementation partner for companies that want to leverage sustainability to innovate and grow. You can follow his blog and tweets, find him on LinkedIn and reach him via email.

“Competitors compete” was the explanation coach Bill Belichick offered when asked why his New England Patriots played so hard yesterday and soundly beat the Miami Dolphins in a game that had no effect on their post-season position.

As I caught up on my reading last week, I couldn’t help but see a parallel with Belichick’s statement and what sustainability leaders continue to do. Despite the conventional wisdom that the economy and new congress will make sustainability progress this year about as unlikely as a win against the Patriots in the playoffs, sustainability leaders continue to lead and make breakthrough progress. 

Here are a few excerpts from reports of those moving the ball down field.

From the BSR-GlobeScan State of Sustainable Business Poll 2010:

• Business leaders remain focused on sustainability despite economic uncertainty, and nearly all plan to maintain or increase spending on CSR programs.

• Demonstrating the benefits of sustainability—whether economic, social, or environmental—is highly important in promoting CSR/sustainability among consumers and businesses, and is vital for building trust.

• Respondents think innovating or sustainability is a critical driver of overall business success and leadership, and is also important in encouraging sustainable consumption among consumers.

From New York Times Op-Ed Columnist Tom Friedman’s recent piece The U.S.S. Prius:

As I was saying, the thing I love most about America is that there’s always somebody here who doesn’t get the word — and they go out and do the right thing or invent the new thing, no matter what’s going on politically or economically. And what could save America’s energy future — at a time when a fraudulent, anti-science campaign funded largely by Big Oil and Big Coal has blocked Congress from passing any clean energy/climate bill — is the fact that the Navy and Marine Corps just didn’t get the word.

God bless them: “The Few. The Proud. The Green.” Semper Fi.

From Yale Environment 360 – Green Tech Sector Advances Despite Failure of Climate Bill:

“The lack of legislation is important, but companies are probably not changing the direction they’re headed in,” explains Linda Fisher, chief sustainability officer at Dupont, which sees growing markets for lightweight plastics for cars, solar panel materials, biofuels, and other Dupont products. “We are not pausing on our growth opportunities.”

From GreenBiz Senior Writer and Columnist Marc Gunther’s report Inside Unilever’s Big, Broad, Bold Sustainability Plan:

Unilever unveiled its 2020 sustainability plan yesterday, and no one can accuse the company of playing small ball.

The global consumer products giant ($57 billion in revenues in 2009) intends to improve the health of 1 billion people, to buy 100 percent of its agricultural raw materials from sustainable sources, and to reduce the environmental impact of everything it sells by one-half, while doubling its revenues.

The biggest idea here -- and the one that will probably prove hardest to achieve -- is that a company can grow its sales without growing its environmental footprint. As Dave Lewis, president of Unilever Americas, put it: "We cannot choose between growth and sustainability. We have to do both."

Its going to be a great year with this mindset among our leaders. Happy New Year.

Steve Goldstein is managing partner of Growth Advisors, a catalyst, strategy advisor and implementation partner for companies that want to leverage sustainability to innovate and grow. You can follow his blog and tweets, find him on LinkedIn and reach him via email.

In my last couple of blog posts, I’ve written some things that would probably make green marketers howl. I’ve said that “sustainability is not the key purchase criteria” and warned that companies should not innovate for small, transient “eco-niche” markets whose customers buy green despite a product’s poorer performance or higher price.

While most probably believe as I do that green doesn’t sell, I wanted to provide a few data points to back up this statement.  I’ll write about the implications for the sustainability movement in an upcoming article.   

Let’s start with an executive’s view. Sprint CEO Dan Hesse recently told reporter Marc Gunther: "People just want a cell phone. They don't care how green it is. But we think they will over time." Gunther reported that most of the communications around two phones Sprint now offers from Samsung made partly from recycled and bioplastic materials is intended for its employees to hear. Considering that Sprint spends quite a bit of money on market research, there’s probably some solid analysis behind Sprint’s saying a mass market campaign can’t be justified now.

Many other marketing executives wait to make sure they have a credible and relevant story to tell.  Most, like Nike, are not even telling the story of what they’ve done directly to customers to avoid distracting them from the core brand image the company has built. Nike has worked hard and quite impressively to reverse the environmental and labor practices that led to their bad actor social and environmental image. Despite that Lorrie Vogel, head of Nike's green business practices, told Business Week recently “we want to do more and say less.”

The greenwashing lessons of recent years (see BP) have convinced all but the most ardent ad agencies to make sure that companies have something credible to say and that it matters to their customers before promoting sustainability accomplishments. Timberland, for example, has built a tremendous amount of environmental and social responsibility into their products and opertions and their messaging around this core to their products' brand image and the personal values of many people who work and hike in their footwear.

From a market perspective, hybrid cars are one of the most well known and successful examples of a product using a green selling proposition. But, the debate over whether hybrids are an eco-niche product that will ever cross into the mainstream continues.

Taken together, combining sales of all hybrid models would make them the 7^th most popular US vehicle this year. But, there are over 25 hybrid models. The Prius, on pace to sell a 120,000 cars this year, outsells all other hybrid models combined but is only the 17^th best selling model. It lags behind sales of a dozen conventionally powered small cars with good gas mileage. Depending on the analyst, the Prius finally turned a profit for Toyota after 10 years… or hasn’t yet. That doesn’t say much for the other 24 hybrid models, only 6 of which will sell more than 10,000 cars this year and 14 of which are on pace to sell under 1,000 vehicles.  

Bob Lutz, the long time US auto senior exec and recently retired vice chair at GM often said that hybrid cars have a limited market, aren’t profitable and companies are forced to make them because of fuel efficiency regulations and pressures from Washington. Even Lutz wrapped the larger context around GM’s pursuit of the electric-drive Volt. He acknowledged that GM will lose money on the car for at least one or two generations but he was willing to accept that to develop the technology and for the perceived green marketing benefit. The question remains, how many companies can invest for this type of return and, more importantly, should they?  

For a customer's perspective, a recently published research study called The (Not So) Green Buyer conducted by the sustainable branding firm Fruitful Strategy found “some interesting paradoxes among five consumer segments such as:

• some of the more vocal green proponents secretly believe it's a fad, yet are driven by pressure from friends and family (the Pretenders)
  
• the segment most likely to live sustainably is not so quick to buy green products (the Pragmatics)
• the untapped mass-market segment who appears apathetic about sustainability on the surface is, in fact, receptive to green products that perform (the Apathetics)"

And finally, there’s the news that FritoLay decided to pull their recently introduced, fully compostable SunChips bags.  Seems that those munching on the chips weren’t sufficiently soothed by the environmental benefit of the snack’s bag to put up with the noise pollution they had to endure while crinkling it during the act of reaching for their next mouthful. Or, perhaps the uncommonly loud sound of the bag was an uncomfortable reminder of the guilt they felt eating a less than fully nutritious snack?

Steve Goldstein is managing partner of Growth Advisors, a catalyst, strategy advisor and implementation partner for companies that want to leverage sustainability to innovate and grow. You can follow his blog and tweets, find him on LinkedIn and reach him via email.

It’s pretty well accepted now that sustainability is not the key purchase criteria for most customers. Few are going to buy a product or service because it’s greener than a competitor’s or made by more equitably treated employees if it costs more or doesn’t perform as well.

Of course, there are product and service “eco-niches” supported by customers who will buy green despite poorer performance and price. But, with competitors continually strengthening the value of what they provide while increasingly making their offerings more sustainably, eco-niches will come and go.

But here’s the flip side. Sustainability is a key consideration in attracting and retaining employees. And, it has become an increasingly important factor to shareholders of companies that have significant sustainability risks.

So what’s the solution? Should you make your operations more sustainable, building your “green-cred” with employees and shareholders while passing on developing poor returning, eco-niche products and services? Perhaps, but that’s a bar many will hurdle soon, if they haven’t already in your industry.  E&Y’s recent survey found that 65% of executives planned to invest to “develop new products and services” in response to climate change.

A more compelling approach is to grow your revenue with new products and services by leveraging sustainability taking one or more of the paths I’ve described below. None of these will put you in a position of trying to sell products to customers based on how green they are or responsibly they are made.  All will strengthen the credible link between your company and sustainability that your employees and shareholders care about.

Here are the paths you can follow:  

• Innovate-For Sustainability: Improve your customers’ sustainability performance – This path is ideal for B2B businesses that sell equipment to reduce their customers’ operating costs by cutting their use of resources and environmental impact in the process. GE has built a $7 billion business selling wind turbines this way. Diversey, a multi-billion dollar leader in industrial cleaning products and services, has introduced innovations that allow it to clean beverage plants and lower operating costs by using 30% less water and 60% less energy. P&G does the same thing on the consumer side, reducing customer energy costs with cold water washing machine detergent.

Key to success taking this innovation path is to understand your customers’ sustainability challenges well enough to develop solutions that help address them in a way that either lowers their costs and or improves their performance. 

Innovate-For is clearly the busiest path for top line sustainability innovation and growth now. And with good reason - there are tremendous efficiency improvement opportunities available. But, if your product or service has little opportunity to change a customer's sustainability, following this path will not yield the opportunity to benefit them or advantage you.  

• Innovate-In Sustainability: Better meet existing market needs or meet un-served or underserved needs using more sustainable product and process solutions – Many associate environmental and socially responsible solutions with higher operating, capital or product costs. While investments are usually required to commercialize any innovation, sustainability solutions can take enormous costs out of company operations and processes and can provide improved product or service performance benefits. These can lead to discontinuous changes in the cost-performance relationship that will allow new products to grab greater share of existing markets or open new markets.

  New, less toxic and environmentally harmful household cleaners, for example, are taking share from traditional ones because they improve personal health. Sales of long lasting LED lights are growing because the cost savings achieved from not having to regularly replace light bulbs in hard to reach locations outweighs the high purchase cost of these LEDs. This benefit is made possible because designers used their understanding of how sustainable materials and technology could greatly extend bulb life.  
  

  Market demand drove $5 billion Eastman Chemical Company to develop its Tritan copolyester, a hard plastic for food and beverage container applications that had higher heat resistance than other solutions used at the time. Consumers wanted to be able to run their reusable plastic water bottles, baby food containers and other house ware items in the dishwasher and have them be resistant to odors, tastes and stains.

  Several years in development, Eastman introduced Tritan in 2007 to meet these performance requirements with a solution that was free of bisphenol A (or BPA). At the time of Tritan’s introduction, BPA had just begun to receive more scrutiny for potential health issues but the research was not yet clear and no consensus had been reached amongst consumer and government agencies.  In the next couple of years as companies including Thermos, CamelBak, and Evenflo adopted the Tritan innovation for its performance benefits, the testing on BPA made its risks better understood and states banned its use in kids’ products.  Eastman’s Innovate-In Sustainability got the jump on competitors developing BPA free solutions coming later from an Innovate-For Sustainability path. 
  

  Key to Innovate-In is the ability to build and combine deep knowledge of market needs with a well considered understanding for the cost and performance trade-offs that exist with more sustainable product and process solutions.

• Innovate-With Sustainability: Develop or acquire innovations working with outside parties - suppliers, researchers, licensors, start-ups and other corporations – As with any relatively new area of innovation, companies should look to collaborate with a wide range of external sources to accomplish their Innovate-For and Innovate-In Sustainability goals.

  Venture and corporate investment in clean-tech continues high and quite promising, largely for sustainable energy and other resource solutions. GE, which built its $7 billion wind turbine business after acquiring it for $200M in 2002 from Enron, is now investing another $200M through a different type of Innovate-With Sustainability initiative: an open-to-all idea generation contest. Its “Ecomagination Challenge” is soliciting ideas for smart grid innovations from businesses, entrepreneurs and students through an online submission process. It will award $50,000 to $100,000 prizes to the best ideas and consider an equity investment or cooperative development agreement with the winners.
  

  Between outright acquisition of innovations and open innovation contests to find new ideas, companies driving for top line sustainability innovation are reaching out to suppliers to develop potential solutions. As an example, Coca-Cola, PepsiCo and Nestle are working to source bio-plastics for their beverage containers. Bottles made from these plant based materials hold the promise of fully degrading in compost piles after only a few months.

  Those dedicated to growing their revenue through sustainability innovation must realize what competencies and technologies they lack to develop Innovate-For or Innovate-In Sustainability products and services. If they don’t have the ability in-house, and most companies don’t have the full range of what is needed, they must find others to Innovate-With to remain competitive.

These three paths to top-line sustainability innovation can focus your plans and action. Increasingly, all three will be needed to successfully leverage sustainability for innovation and revenue growth.

 Steve Goldstein is managing partner of Growth Advisors,a catalyst, strategy advisor and implementation partner for companies that want to leverage sustainability to innovate and grow. You can follow his blog and tweets, find him on LinkedIn and reach him via e-mail.

Most businesses have focused their sustainability work on reducing their environmental impact and lowering their resource costs. These bottom-line initiatives, many of them highly innovative, are critical to staying viable and competitive while benefiting society and the environment. They’ll grow profits, for a while anyway. But, they are not a path to continued growth or advantage. The re-engineering, quality and IT movements showed that improved efficiency doesn’t drive long-term value creation.

To consistently grow the bottom-line, sustainability innovation needs to drive the top-line. Innovation that successfully builds new products, services, businesses and customers drives advantage and value. One only need look at the success that Toyota had with the Prius and the huge bet GM is making on the Volt to see the opportunity that environmental innovation at the top-line offers to companies.  Similarly, companies like Unilever are pursuing top-line growth from socially responsible innovations like making more nutritious food products.

Top executives now say that innovation is their top growth priority and addressing sustainability issues are critical to their success. In large sample size surveys conducted this year, 84% of executives told McKinsey that innovation is extremely or very important to their companies’ current growth strategy, 93% of CEOs told Accenture that sustainability issues will be critical to their future success and 95% of those CEO’s said sustainability considerations should be fully integrated into their strategy and operations.

How do you leverage sustainability to innovate for top-line growth if your company is already a good innovator or you want to build your innovation capability to take advantage of this opportunity? There are some approaches that may already exist in your set of innovation capabilities that you will need to lean on especially hard for top-line sustainability innovation to succeed. And, you will undoubtedly need to develop others to the take full advantage of the sustainability opportunity.

Here are a few to start with:

• Stick to your evaluation criteria and don’t add sustainability to them. If you want more than a demonstration or niche market product, forget about using an environmental or socially responsible benefit as part of your evaluation criteria. Recent research shows that mainstream customers won’t favor a more sustainable product if it doesn’t offer equal or better value along existing dimensions like price and performance (subject of an upcoming article).  The best innovators aren’t marketing sustainability benefits or trying to educate customers to value them.

LED lights, for example, are being bought and sold based on the reduction in their total operating cost (longer life, lower maintenance and energy cost) despite their higher capital cost. The elimination of mercury used in fluorescent lighting, the near elimination of electricity converted to heat (90%) rather than light in incandescent bulbs and the reduction of fossil fuel use, air pollution and climate effects in going to LED lighting are great benefits but don’t figure into the buyer’s decision making or the marketer’s message.  Employees and shareholders will value sustainability benefits and should be sold on them but only after the innovation is proven in the marketplace on its own, non-sustainability merits.

• Look intently at challenging orthodoxies and leveraging discontinuities. My colleague Peter Skarzynski at the innovation consultancy Strategos wrote about the four “lenses” of innovation in his book Innovation to the Core (co-authored with Rowan Gibson).  Sustainability innovation will depend heavily on two of them: challenging deeply held beliefs about what drives success inside your company and industry (“orthodoxies”) and identifying and analyzing unnoticed patterns that could substantially change industry or competitive rules (“discontinuities”).

• Create revolutionary rather than evolutionary innovations. As sustainability affects multiple points in the supply and value chains of many industries, there is opportunity for you to innovate in ways that will change customer expectations, competitive advantage and industry economics. Compare that with incremental innovation (another thin blade added to a razor) that changes none of those things. While far reaching in its impact, revolutionary innovation can still be done in core or adjacent markets but can more easily open up markets and customer bases beyond them. Started from their commitment to social responsibility, Unilever’s innovations to greatly increase nutritional value in food products has the potential to be truly revolutionary.

• Develop or use sustainability analysis capabilities. To leverage sustainability for revenue growth, you obviously need to understand the sustainability issues inside your company, industry, customers and suppliers. Many companies that have tackled sustainability-based cost and efficiency measures at the product level have developed these capabilities. If your company’s sustainability work has focused primarily on reducing energy use, emissions, and risk, you may need to develop new skills or hire people to, for example, do life cycle analysis, inject thinking on new technologies that improve the sustainability of products like yours and create scenarios around how your industry will evolve through the lens of sustainability. For many companies, this will require new hiring and contracting but also a more robust involvement in open innovation and partnerships to incorporate expertise beyond what you can quickly acquire.

• Get buy-in from the top. Nearly 3/4s of Fortune 500 companies have formally bought into sustainability as evidenced by their public initiatives and reports. Most of this buy-in is impact, cost and efficiency related; far fewer companies understand, talk about or are committed to using the sustainability imperative for top-line innovation and growth. As with any innovation program, top leadership has to understand the value of pursuing a stream of innovation activity and be ready to say yes when good investment opportunities are presented. Sustainability at the top line is a newer and, some would say, harder sell. The general case must be pre-sold before specific investments are proposed. 
  

You’ll need a well developed innovation capability to pull off these and other approaches key to successful top-line sustainability innovation.  If your company’s innovation skills aren’t where you want them to be yet, leveraging the sustainability opportunity will accelerate their development and ultimately, your growth.

Steve Goldstein is managing partner of Growth Advisors, a catalyst, strategy advisor and implementation partner for companies that want to leverage sustainability to innovate and grow. You can follow his blog and tweets, find him on LinkedIn and reach him via e-mail.

Energy usage slashed. Waste recycling way up. Greenhouse gas emissions way down. Supply and value chain initiatives showing good progress. Biggest sustainability risk – e.g., water, end-of-life disposal, global labor practices – getting needed focus. Carbon neutrality in sight. Social responsibility opportunities defined.

These are all critical to reducing your environmental impact, lowering your costs and improving your standing with employees, customers and stakeholders. Hard work. Big financial, environmental and social payoffs. Well done. Keep it going.

But just as an athlete works hard to maintain his fitness and address his weaknesses, all of this important work on sustainability cost, risk and impact reduction is enough, perhaps, to keep your company competitive for a while. It’s certainly not enough to win and, if the focus remains on cost, risk and impact, you are more likely to be putting your business at a disadvantage for years to come.

Why? Because, nowadays nearly everyone is doing these same things. CEOs, unit and functional heads dedicated EHS, CSOs, and CR executives, green teams, NGOs and more are working the compliance and efficiency sustainability agenda hard. It’s become a new source for cost reduction, a key element in shareholder reporting, a growing part of company strategy, and vital to employee retention and brand building.

However, to update a saying about cost cutting from a few years back, “you can’t sustain your way to prosperity”. Few company leaders have figured out how to leverage sustainability to grow their top line, add products, services and customers, innovate across their business, improve or re-invent their business model, create new advantage or increase their equity value starting at the top line.

Sure, there are the notable examples of companies who have – GE and its ecomagination initiative among the most successful, Clorox among the most surprising (given the perception of bleach’s environmental impact), and Waste Management amongst the most transformational. Some companies are now setting revenue growth targets that include ‘sustainable products’ (variously defined) as a sizable portion of the goal. But many making headlines for their sustainability impact and cost-related efforts haven’t yet figured out how to do sustainability innovation and growth in a systematic or sizable way.

I was recently involved in a year-long ongoing collaboration of a dozen senior sustainability executives from Fortune 100 companies in segments as varied as IT, food and beverage, consumer products, chemicals, retailing, entertainment, aerospace and business equipment. Despite their industry leadership on many sustainability impact, efficiency and improvement fronts, few had established processes, practices or competencies to leverage sustainability into product, service or business model innovation to create new revenue and competitive advantage. Many are experimenting in this area and part of their rationale for coming together was to learn from each other before taking the next step.

In their 2009 Harvard Business Review article, “Why Sustainability Is Now the Key Driver of Innovation”, Ram Nidumolu, C.K. Prahalad and M.R. Rangaswami argued that designing products and developing business models and platforms around sustainability should naturally follow a company’s efforts to embrace compliance and value chain sustainability as opportunities. I agree. But, to quote the title of a famous Charlie Parker tune – Now’s The Time. For many companies, 2011 should be the year when sustainability innovation and growth move to the top of the agenda.

In our next post, we’ll talk about approaches to leverage sustainability for innovation and growth and how you can lead your business to make it happen.

Steve Goldstein is managing partner of Growth Advisors, a catalyst, strategy advisor and implementation partner for companies that want to leverage sustainability to innovate and grow. You can follow his blog and tweets , find him on LinkedIn and reach him via e-mail.