Sustainable technology and innovation management - SUM: Sustainability Management Wiki

Authors: Anneke Klein, Carla Marsland, Joshua Orth, Johann Tölle
Last updated: June 22, 2022

1 Definition

Excluding the sustainability aspect, Technology Management is defined as an industrial activity that “links engineering, science, and management disciplines to plan, develop, and implement technological capabilities to shape and accomplish the strategic and operational objectives of an organization”¹. An equivalent definition for Innovation Management is not agreed on. Innovation, and how it is managed, is defined as “[a] multi-stage process whereby organizations transform ideas into new/improved products, service or processes, in order to advance, compete and differentiate themselves successfully in their marketplace”². Following these definitions, Technology Management differs from Innovation Management as it focuses on how technologies are used to meet corporate expectations. By contrast, Innovation Management is about managing processes to realize new possibilities of corporate success.

These definitions have to be seen separated from the term Invention Management, which is defined as a “process [that] covers all efforts aimed at creating new ideas and getting them to work”³. Meaning that it does not cover the exploitation process/realization of the invention, which is covered in the broader management definitions.

When trying to include sustainability aspects into the definitions given, no consensus can be found for either of the two term.⁴. That can be seen as a literature gap in the management research field. The two terms Sustainable Technology Management and Sustainable Innovation Management intend to include a holistic understanding of sustainability and are therefore the preferred choice of terminology. However, due to the literate gap described above, parts of this Wiki-Entry will refer to the stricter definitions of Green Technology Management and Eco-Innovation Management.

The term Green Technology “refers to a type of technology that is considered environmentally friendly based on its production process or its supply chain”⁵. This definition cannot be seen as an equivalent definition to a Sustainable Technology Management definition. It leaves the management part out and only accounts for environmental aspects of sustainability. Social considerations are omitted, and therefore, the Triple-Bottom-Line of sustainability as defined by Elkington (1994) is violated.⁶

Instead of Sustainable Innovation Management, the term Eco-Innovation Management is referred to more frequently in the literature, as Schiederig et al. (2012) point out.⁷ It can be defined as “the development of new initiatives in an organization to sustain, improve and renew the environmental, social and societal quality of its business processes and the products and services these business processes produce”⁸. Even though the term “Eco” might suggest that this definition only focuses on the environmental aspects of sustainability, it, in fact, includes social aspects as well. Therefore, this definition can be seen as an equivalent definition to Sustainable Innovation Management and will be used throughout this Wiki-Entry.

Excluding the management aspect, the literature almost entirely focuses on Eco-Innovations. Following the Organisation for Economic Cooperation and Development’s (OECD) definitions, Eco-Innovation has two important dimensions, targets and mechanisms.

The OECD distinguishes between five targets for Eco-Innovations⁹:

Products, involving both goods and services.
Processes such as a production method or procedure.
Marketing methods are the promotion of and pricing of products, and other market-oriented strategies.
Organizations such as the structure of management and the distribution of responsibilities.
Institutions which include the broader societal area beyond a single organization’s control, such as institutional arrangements, social norms, and cultural values.

Furthermore, four mechanisms describe the Eco-Innovations’ method⁹:

Modification, such as small, progressive product and process adjustments.
Redesign, referring to significant changes in existing products, processes, organizational structures, etc.
Alternatives, such as the introduction of goods and services that can fulfill the same functional need and operate as substitutes for other products.
Creation, including the design, and introduction of entirely new products, processes, procedures, organizations, and institutions.

Eco-Innovations can be on a technological or non-technological bases. They rely heavily on technological development within the first two targets (products and processes)¹⁰. Thus, Green Technology can be considered as a subordination of Eco-Innovation. If not otherwise stated, this Wiki-Entry refers to both (Eco-Innovation and Green Technology) even if only the term Eco-Innovation is mentioned.

2 Sustainability analysis

2.1 Impact of sustainable technology and eco-innovation

Political & Governmental Perspective

Eco-innovations and green technologies have received increasing attention from governments and companies during the last years. They are considered crucial to tackle environmental and social challenges such as climate change (see Climate Change Wiki) and inequality.¹¹ For instance, the progression of green technologies could help reduce the CO2 emissions within the energy sector by 93%-99% until 2050.¹² From a social perspective, studies estimate that eco-innovations are likely to drive the creation of green jobs.¹³

Furthermore, eco-Innovations and green technologies are essential to foster sustainable development.¹⁴ That is also why they have been included in the United Nations Sustainable Development Goals (see SDGs ) as part of the 9th Goal. The Goal addresses a specific target, namely “increasing resource-use efficiency and greater adoption of clean and environmentally sound technologies and industrial processes”¹⁵.

Also, the European Commission considers both as key elements for solving pressing challenges while securing Europe’s competitiveness in the global market. Thus, they have set up the eco-innovation action plan (see EcoAp), which focuses on different measures such as setting new policies, increasing funding, and creating standards.¹⁶ Furthermore, the European Commission even introduced the Eco-Innovation Scoreboard and the Eco-Innovation Index (see Eco-IS and the Eco-Innovation Index) to illustrate eco-innovation performance across all EU Member States.¹⁷ These tools underline the significance that the EU lays on the impact of eco-innovations.

Sustainable Manufacturing & the Role of Companies

Enterprises play a significant role in achieving sustainable development, which becomes particularly clear in manufacturing industries¹⁸ (see Sustainable Production Wiki). In 2008, the OECD launched the sustainable manufacturing and eco-innovation synthesis report (see Synthesis Report). The industry’s impact is illustrated in a report from 2007 by the International Energy Agency (2007), which stated that manufacturing industries account for 36% of the global carbon dioxide emission.¹⁹ At the same time, they also have the potential to design product innovations to provide solutions and to put sustainable practices into action.²⁰ Despite the firms’ role in accelerating eco-innovations, they are usually not only driven by individual firms. Eco-innovations are often created as part of an open innovation process (see section 3.2 Eco-Innovation Management in Practice) which involves various participants.²¹ The impact of a particular innovation depends on the eco-innovation’s target and mechanism (see Section 1). More complex innovations have a higher potential to create a positive environmental impact. A creation of an organizational innovation, for instance, offers a higher potential compared to a modification or a redesign of a product.⁹

2.2 Measuring eco-innovations

Developments in the Measurement of Sustainability

The impact of eco-innovations reaching from micro to macro levels has led to increased research in different areas of eco-innovation publications. Eco-innovation research comprises three perspectives: eco-innovation drivers (see Section 4) and performance outcomes, dimensions of eco-innovations, and measurement. Measuring sustainability only started to be included in research in 2009.²² Furthermore, the focus was set on a macro level, measuring innovation performance between countries and nations.¹¹ Research on practical implementation is still relatively scarce, and measurement on a firm-level is evolving.²²²³ Measuring eco-innovations is challenging since it might not always be entirely clear where to draw the line between a regular innovation and an eco-innovation.

Furthermore, as research focuses on eco-innovation and not sustainable innovation, the social aspect is even more rarely discussed. That could be because measuring waste or energy consumption is less challenging than measuring social performance. Thus, Key Performance Indicators (KPIs) on social impact mainly involve human resources like job creation and income.²³

Purpose of Measuring Eco-Innovations

To manage something successful, it needs to be measured beforehand.²⁴ This is equally true for measuring the performance of eco-innovations.²⁵ It can inform companies and stakeholders about eco-innovations economic, social, and environmental performance.²¹ That is of particular interest as eco-innovations can boost competitiveness and productivity.²⁶ For instance, Azevedo et al., (2014) have found that eco-innovations positively affect net profit, assets, and equity in the Japanese automotive industry.²⁷ Measuring eco-innovations can assist managers, and other stakeholders evaluate the company’s performance and provide information on areas that require improvement.²⁵ Thus, performance indicators need to satisfy different key stakeholder needs. For instance, divisional management would require measurement for strategic business units, whereas middle/lower management levels might be more concerned with product units, product groups, sites, and production steps.²¹

Eco-Innovation Performance Indicators – an Overview

The sustainability performance of eco-innovations can be measured at both micro and macro-levels.²⁸ For the purpose of this Wiki-Entry, however, the following Eco-Innovation Performance Indicators (EIPIs) focus on the measurement at the firm level (micro-level). Table 1 introduces 30 EIPIs that offer a broad overview within the four targets of eco-innovation, excluding the institutional targets, since they are beyond the firms’ control (see section 1 Definition of Function).²⁵ Arundel and Kemp (2009) argue that no general method can be applied for measuring eco-innovation sufficiently.¹¹ Therefore, depending on the type of innovation, different tools and indicators for analyzing must be implemented. Environmental (e.g., products’ ability to be recycled) and economic (e.g., Investment in Research) indicators are needed as both determine an eco-innovation.²¹ However, the table does not convey every KPI. Finally, it is essential to note that there is no focus on social indicators due to the aforementioned reasons.

Product	Process	Organizational	Marketing
– Use new cleaner material or new input with lower environmental impact – Use of recycled materials – Reduce/optimize the use of raw materials – Reduce the number of product components – Eliminate dirty components – Product with longer life cycle – Product ability to be recycled	– Reduce chemical waste – Reduce use of water – Reduce use of energy – Keep waste to a minimum – Reuse of components – Recycle waste, water, or material – Environmental-friendly technologies – Renewable energy – R&D – Acquisition of machinery and software – Acquisition of patents and licenses	– Green human resources – Pollution prevention plans – Environmental objectives – Environmental audit – Environmental advisory – Invest in research – Cooperation with stakeholders – New markets – New systems	– Returnable reusable packaging – Green design packaging – Quality certifications

Table 1: Eco-innovation key performance indicators analyzed by the literature²⁵

Product / Process EPIs & Pro / Cons

Measuring absolute environmental impact is strongly related to both product and process eco-innovations. For example, product durability and recyclability are among the most relevant indicators providing possibilities to increase product efficiency and lower greenhouse gas emissions.²⁵ These performance indicators, including others such as resource consumption, water consumption, and energy consumption, are strongly related to the concept of eco-efficiency. Eco-efficiency is defined as less environmental impact per unit of product or service value, such as value-added/environmental impact added.²¹²⁸

A helpful tool for measuring eco-efficiency is the Life Cycle Analysis as it addresses environmental targets. Assessing the environmental impacts of a product “from cradle to grave” is the key objective of the LCA.²⁹ Since the eco-efficiency concept also involves economic variables, the so-called Life Cycle Cost can be an additional tool to undergo a more holistic approach.²¹ Using indicators that provide information on the absolute environmental impact has both strengths and weaknesses. On the one hand, they offer a specific link between the product value and the environmental impact. Furthermore, various dimensions of environmental impact can be assessed. On the other hand, it can be complicated to cover the true impact along the entire value chain.¹¹

CASE STUDY HENKEL

Henkel is a German stock listed company and manufacturer of different consumption goods. They have global brands in three main business areas: Laundry & Home Care, Beauty Care, and Adhesive Technologies. While they do not specially address eco-innovations in their strategy, they state that they have anchored sustainability criteria into their innovation process since 2008. Henkel includes external sustainability issues like climate change, scarcity of water or rising prices for raw material in their innovation pipeline. To assess the environmental impact of their products and develop innovations with improved sustainability performance, they introduced their own tool, the Henkel Sustainability#Master®. Life cycle assessment helps to evaluate indicators such as raw material use and carbon emissions. Thus, a sustainability profile for each product is made available (see Henkel Sustainability Report 2020).

Other performance indicators commonly applied in process and product are the acquisition of (eco-) patents and R&D investment.²⁵ The assessment could include measuring the percentage of investment on eco-innovation R&D on the total innovation expenditure. Furthermore, identifying the spending on the patent and license acquisition can serve as an indicator for measuring the innovation activity within a firm (input measures). The number of R&D projects achieved and carried out could be estimated as an output measure.²⁸

While measuring patents may provide an overview of inventive output, they can only partially mirror the company’s eco-innovation activity. First, patents display inventions rather than innovations. Second, they are biased towards end of pipe technologies and cannot measure organizational and process innovations. Furthermore, there is no applied category for eco-patents. Data on R&D investments are equally easy to capture. However, they tend to capture formal R&D activities and technological innovations mainly. Furthermore, investments are input measures and not output measures meaning that investment might not lead to actual eco-innovations.⁹¹¹²⁸ Thus both R&D investments and the number of patents cannot serve as sufficient indicators; together, they can cancel out each other’s weaknesses.²⁵

CASE STUDY HENKEL

Henkel sees product innovations as a central instrument to decouple their product value from resource use. Thus, they measure their innovation research input in euros spend. In 2020 Henkel invested 495 million Euros in R&D and R&D staff.

Organizational EPIs and Pros/Cons

Assessing the firms’ green human resources management (see Sustainable Human Resources Wiki) can serve as an indicator for measuring eco-innovation performance.³⁰ The assessment could be done by looking at the total training expenses towards eco-innovation practices compared to the total costs in human resource development. Furthermore, this could be accompanied by the number of training hours for the respective topic. Also, measuring the number of employees involved in R&D as well as other innovation processes could be calculated, including the number of working hours.²⁵²⁸ Similar to R&D investments, the indicators mentioned above are mainly input measures, making it hard to determine performance outputs. Furthermore, other studies found that the complementarity of eco-innovations and human resource actives might not be as apparent in all aspects regarding sustainability. For instance, the study found that only CO2 reduction was clearly reduced due to human resource activities.³¹

CASE STUDY HENKEL

Besides tracking their investment in R&D, Henkel further measures the number of employees involved in the research and development of innovations. In 2020, the firm employed 2600 people to drive R&D.

Marketing Eco-Innovation

Marketing eco-innovations have generally received less attention regarding measurement.²⁵ However, when evaluating the sustainability performance of marketing innovations, green design packaging provides insights into environmental impacts. Within marketing, packing plays an essential role, as customers mainly choose their product based on the packaging. The indicators for green design packaging cover elements such as “easy to empty” and “easy to separate into different fractions”.³²

Using green design indicators can serve as a valid indicator for sustainability performance. 227.5 kg of packaging waste was generated per German inhabitant in 2008.³³ However, no further studies were identified regarding evaluating the use of green packaging as an indicator for marketing eco-innovations.

Another indicator mentioned in the context of marketing eco-innovation performance are quality certifications. They illustrate whether a firm fulfills environmental and social sustainability requirements.²⁵ Standards such as the ISO 14001 or EMAS have proven valuable indicators.³⁴ However, some certifications may not be transparent and cannot assess the sustainability performance sufficiently. They might be too quickly distributed or do not fulfill the promises. The use of government-backed eco-labels might be a more appropriate approach for measuring sustainability performance in this context.³⁵³⁶

CASE STUDY HENKEL

Since a large part of Henkel’s products is packaged, packaging plays an essential role for the firm. Indicators such as recyclability and resource use are evaluated. The firm aims for 100 recyclable or reusable packaging by 2025. Also, they measure the use of virgin plastics within their packaging and are working towards a 50% decrease.

Additional Economic Indicators

Eco-innovation often comes with a general interest in cost-saving, increased productivity, and competitiveness.¹⁴ Therefore, in the following, a brief overview of a few classical performance indicators will be given.

The total eco-innovation output, sales, income, revenue, and market share (total production) can be measured by financial value, weight, volume, or units sold. These indicators are important as they illustrate whether the production process has been successful and reflect market demand, as well as its success and eco-innovations competitiveness. The value added is defined by the value of outputs minus inputs in a specific period. This indicator is important for many different stakeholders such as employees, governments, and shareholders. However, detecting the eco-innovations’ added value (e.g., single product) within certain corporate accounting systems. Another important indicator is the calculation of profit. Finally, growth in productivity, market share, value-added, and stakeholder value can be measured over a certain period. Yet, measuring the duration of value growth, for instance, depends on many assumptions.²¹

CASE STUDY HENKEL

Henkel tracks the innovation output for its different business areas. In 2020, product innovations in Laundry & Home Care made up to 45% of sales. These products were on the market for less than three years.

3 Practical implementation

A structured implementation of an eco-innovation goal requires a highly individualized management concept. Individuality is indispensable since different companies are exposed to different environments, on which they have to react in different ways (see section 4.1 Drivers and Barriers in the Environment of Firms). Putting the theoretical concept of sustainable innovation into practice, therefore, requires an adaptation given the company’s internal culture, as well as that of the region. The literature, in consequence, proposes many adaptable tools depending on the company’s situation and innovation goal.³⁷ It is, therefore, somewhat complicated to provide a complete overview of all tools. In 2019, Upadhyay et al. tried to do so by distinguishing between different sustainability dimensions.³⁸

3.1 Design for Sustainability

Design for Sustainability (DfS) is defined as “a design practice, education, and research that, in one way or another, contributes to sustainable development”³⁹. It is, however, not a management concept but provides an overview of the various sustainable design innovations, such as Green Design or Ecodesign. It illustrates two aspects in particular: first, it displays the degree of inclusion of the three-pillar principle of sustainability in innovations. Several designs, such as the Design for Environment (DfE), take the environmental pillar into account alongside the economic one, leaving out social aspects. Others, such as the Sustainable Product-Service-System Design, include all three pillars of sustainability in eco-innovation. Second, the DfS illustrates the level of eco-innovation. Designs can, for example, be created to generate a technological innovation of a company’s product. However, the design does not have to be limited to the product level but can also aim to change a company’s orientation fundamentally.⁴⁰ DfS as such, is used to only summarize the type of innovations described and does consequently not give any information about the underlying process towards an innovation goal.

CASE STUDY NIKE

Take the Cradle-To-Cradle-Design as an example: its main objective to achieve sustainability in production-consumption-systems must be achieved using nature’s materials and circular processes. The sportswear producer Nike followed this goal in 2002 and changed its production system as they mainly used renewable materials from then on and designed their products to be easier to recycle.⁴¹

Nevertheless, it is important to consider DfS, as many management concepts are based on the two aspects mentioned above, namely the distinction according to the degree of sustainability and the level of innovation. In the three management concepts that follow herein, these distinctions can also be observed.

3.2 Eco-innovation management in practice

In the following, three selected management concepts are presented, namely Design4Sustainability (D4S), Design Management for Sustainability (DMS), and Sustainable Innovation Cube (SIC). All concepts have different tools, meaning practical instruments that help implement a defined set of goals.⁴² Described management concepts differ in that they have different approaches to achieve the overall goal of sustainable development. However, they resemble one another in their selection of tools suitable for practical application (for a more detailed explanation of this relationship, see section 3.3).

D4S Step-By-Step-Approach

The United Nations Environment Programme, for example, presented a management concept in the form of a guideline in 2009. A so-called D4S step-by-step approach was compiled there, in which detailed instructions for implementing the desired type of innovation are given. The guideline distinguishes between different types of innovation, like the product service system (PSS).⁴³ The latter involves a wide-ranging innovation of the company’s performance spectrum that goes beyond purely technological innovation. As management systems cannot be generalized and must be adapted individually, the D4S presents three classifications in its guidance regarding PSS. These include product-oriented PSS, as well as use-oriented and results-oriented ones. Depending on the classification, different customized approaches are proposed. Consequently, the guideline is adapted according to company-specific framework conditions. More detailed information regarding named classifications can be found in the D4S document.

A total of five steps on the way to a sustainable PSS are explained. Each step contains suggestions for the use of tools, such as the sustainability SWOT-analysis, which use is suggested at the beginning of an innovation. Depending on the results of the analysis, the subsequent steps of PSS innovation are implemented differently. This approach can be used by companies that need general information on different types of innovations. It further serves as continuous support during the whole innovation realization process.⁴³

Design Management for Sustainability

A similar management concept serving as a guideline was developed by Fargnoli et al. (2014): Design Management for Sustainability (DMS).⁴⁴ The management concept proposes a suitable approach aiming for the best possible implementation, based on the Design for Sustainability. Tools are presented depending on the individual stage of the innovation process (see Figure 1). In the following, several tools included in the framework of DMS will be introduced, categorized by the respective design and development process.

CASE STUDY

An Italian gardening firm chose its trimmer to undergo a technical innovation with the help of DMS, aiming in its redesign to be more sustainable and applicable for non-professional workers.⁴⁴ Individual innovation steps of the company are presented.

In the design planning phase, people responsible for the innovation process mainly focus on analyzing the firm’s customer, its supplier, innovation legislation, and the market in general. One helpful tool proposed here is the augmented Quality Function Deployment (QFD) (see Figure 2). In a nutshell, it ensures that sustainable needs for the product are translated into practices during the planning phase, resulting in individual design requisites.⁴⁵

CASE STUDY

When applying the presented tool to the trimmer, the augmented QFD helped assess which parts were indispensable in designing. A survey consisting of three heterogeneous groups was conducted: experts, non-professional users, and manufacturer’s technicians were involved. Results revealed that the product is asked to be technical, environmentally friendly, and at the same time not too expensive.⁴⁴

In the conceptual phase, these product requirements were then translated into various solution approaches using a Morphological Matrix. Each function is put in comparison with different conceivable possibilities for realization. This includes weighing the best technical options as well as the most desired characteristics of the users.⁴⁴

CASE STUDY

For the redesign of the trimmer, it meant that a power supply utilizing gasoline is not an option considering ecological aspects. For reasons of production costs in combination with the customer’s desire for a low-cost product, a solution based on the power supply should also be dispensed. What remains is the solution approach that proposes using an electric motor powered by batteries.⁴⁴ This design requirement best combines all three pillars of the QFD: the ecological, social, and economic perspective.

Then, in the so-called preliminary embodiment, a prototype’s first draft is then developed based on previously defined requirements. This one is then compared with the underlying product before the innovation process is being carried out. In concrete terms, with the application of this concept, successes achieved through the innovation process can be visualized and translated into concrete numbers using a direct before-and-after comparison (see section 2.2 Measuring Eco-Innovations). ⁴⁴

CASE STUDY

The before-and-after comparison for the trimmer shows that the product’s overall environmental footprint has decreased by 15%, thanks to a low impact during use. The cost factor has also been reduced by 20%, while inversely, proportionally, there has been a 70% technological improvement in the characteristics of the trimmer. ⁴⁴

Sustainability Innovation Cube

The Sustainability Innovation Cube (SIC) is another technical management concept to structure and implement sustainable innovations. As the name suggests, a distinction is made between different “cube” areas (see Figure 3). Structured three-dimensionally, it is characterized by the dimensions (1) innovation type, (2) life cycle, and (3) target.⁴⁶ That creates 27 sustainability areas, in which a total of 76 applicable tools are listed, to be adopted according to the desired innovation target (see Figure 3). Due to its complex structure, the SIC serves as a meta-method for the appropriate selection of suitable tools.⁴⁷

The SIC highlights product-, process- and organizational innovation, depicted by technology, product-service-system and business model. A car manufacturer can improve its car technologically to become more sustainable (product eco-innovation). Beyond purely technological innovation, the product-service system can also be transformed (process eco-innovation). The manufacturer can, in this case, offer to take back old components of the cars that could be recycled. Furthermore, a complete rethinking of the business model is also possible (organizational innovation). That would mean that the actual goal of maximizing the owner-use of vehicles would be superseded by the shared use of these vehicles. At the same time, the basic idea of high sales would be replaced by the idea of sufficiency. New goals, strategies, and business partners are needed, of which the implementation is extensively more complex than the purely technological innovation towards more sustainability.⁴⁸

Depending on the described innovation type dimensions coupled with the other two dimensions, namely target and life cycle dimension, the SIC suggests applying practically implementable tools. If a company, for example, seeks to improve the ecological dimension of its product, then the areas 1-3 of the cube are the ones affected. In that case, according to the SIC guideline, the ecological footprint, an environmental impact analysis, or the above-mentioned life cycle assessment (see DMS section) should, for example, be conducted.⁴⁷

Open Innovation

What all management concepts have in common is the continuous application of the principle of open innovation throughout the whole innovation process. According to the latter, external opinions from experts, other companies, and customers are included across the entire innovation process to create the broadest possible knowledge base.⁴⁹ The principle is implied in many tools, such as the augmented QFD presented above (see section 3.2 Eco-Innovation Management in Practice). Opinions of experts, users, and technicians were combined to include as many opinions as possible for the redesign draft. The basic principle of open innovation requires a vital exchange with the environment throughout the entire innovation process. It stands in stark contrast to traditional Research & Development, where a company tries to develop its patent and does not rely on knowledge and technology transfer.⁵⁰

3.3 Comparison and pros / cons

Latest product developments are primarily implemented using the open innovation approach instead of the classical R&D method. The reason for this is the enormous increase of know-how resulting from the collaboration with stakeholders, other companies, or consumers.⁵¹ These outweigh the advantages of the classic R&D approach. Such benefits arise, for one, when a pioneering project is successfully developed, thereby providing the company with a competitive advantage.⁴⁹ They arise partly from the unique selling proposition and partly from the earnings of possible patents. The disadvantage, however, is that many companies are working on similar projects simultaneously, where efficiency losses are accepted due to the lack of cooperation. In addition, there is a risk that another company will launch a product innovation before its own, failing to achieve its goal of becoming a pioneer.⁵⁰

Different management concepts may be implemented using the same or similar tools. As for explained concepts of Sustainable Innovation Cube and Design Management for Sustainability, the former proposes specific tools depending on the desired outcome of innovation. The latter, in contrast, suggests their use depending on the phase of innovation. To make it more tangible, take the tool Social Life Cycle Assessment as an example. The SIC proposes its use when aiming to improve the life cycle dimension regarding social effects at the technological level (see Figure 3).⁴⁷ In contrast, the DMS suggests applying the very same tool at the beginning of the process development in the design planning phase of the innovation development process (see Figure 1).⁴⁴

In closing, it should be noted that the selection of management concepts depends above all on the complexity of the innovation. As for concepts that only provide new impetus regarding selective, specific changes to existing products, the SIC is primarily helpful. However, for more fundamental eco-innovation wishes, individual instructions for practical implementation provide more structure. In this respect, management concepts such as DMS and D4S step-by-step approach are to be preferred.

4 Drivers and barriers

When speaking about drivers and barriers of eco-innovation and green technology, it can be distinguished between drivers and barriers in the firms’ environment and individual firm-internal drivers and barriers.⁵²⁵³ Based on the PESTLE framework, which is used to evaluate the impact of external influences on a business, the environment of a firm can be subdivided into specific environments.⁵⁴ In the following, the external environment of companies is subdivided into the political, economic, social, technological, and the ecological environment. Firm-internal drivers and barriers can be subdivided into resource-related ones as well as motivational and structural ones.

4.1 Drivers and barriers in the firm environment

Political Environment

In the following, the political environment is defined as the totality of governmental activities that influence firms’ decision-making and consequently their business activities.⁵⁴ These governance activities often crystallize in the form of regulations and standards that stake out a frame in which eco-innovations can be implemented. They are key mechanisms that can either encourage or discourage eco-innovation.⁵⁵

In the literature, there are ambiguous views on whether environmental regulations positively or negatively affect eco-innovation and green technology.⁵⁶ On the one hand, it is argued that through strict environmental regulation, private costs are induced that compromise competitiveness and productivity. Companies must bear the costs incurred in the process of complying with regulations, which can weaken their position compared to competitors that are not affected by these regulations.⁵⁷ On the other hand, Porter’s hypothesis argues that strict environmental regulations stimulate innovation, for example, through first-mover advantages created by the development of new technologies and create “win-win” opportunities where a pollution reduction is coupled with an increase in productivity. Innovation triggered through properly designed regulation even may partially or more than fully offset the costs of complying with them.⁵⁸ There are still controversial discussions about the Porter hypothesis, primarily because of the complexity of attributing specific innovations to singular stimuli, such as regulation, and the largely ambiguous empirical evidence so far.⁵⁶ Therefore, it can be said that it is challenging to ascribe environmental regulations a driving or an inhibiting effect when it comes to (eco-)innovations because the complex relationship between environmental regulation and eco-innovation is still not fully understood yet. The types of environmental regulation also play an essential role in this discussion. More recent studies, e.g., from Leitner et al. (2010), suggest the need for “smart” regulations to promote eco-innovations through environmental regulation and lower negative effects on nature. The authors define such “smart” regulations as regulations that take a broader and more sophisticated view on environmental and other problems.⁵⁶ Smart regulations use a variety of policy instruments to “stimulate self-reflection and self-correction by regulated actors in line with public goals, rather than dictating the details of permissible behavior”.⁵⁶

CASE STUDY

An example of such a “smart” regulation is the so-called “Top Runner” approach that has been successfully implemented in Japan since the late 90s. The Top Runner approach is a policy instrument that seeks to promote energy efficiency in products. It takes a market-based look at targeted products, from which the use-phase energy efficiency of the products that achieve the highest efficiency (the “top runners”) become the basis of a standard that the industry has to comply to. The compliance with the standards is evaluated by corporate average. The approach thereby leaves latitude in the product choice and innovativeness of firms and overall stimulates incremental innovation.⁵⁹ This positive policy-efficiency-innovation relation has been proven in Japan. For example, the energy efficiency of room air conditioners has improved by 67.8% from 1997 to 2004 through the Top Runner Program.⁶⁰

Economic Environment

In the following, the economic environment is defined as market-based economic influences affecting companies’ business activities.⁵⁴ Important economic drivers are considered to be demand-pull drivers and competition pressures. Demand-pull drivers are, e.g., expected future customer demands. Customers increasingly expect companies (and their products) to comply with their (personnel) concept of sustainability. Companies are forced to develop sustainable solutions that satisfy the demanded (base-)level of sustainability, otherwise, they risk being left behind in the competition. Competition pressures from rival firms are also critical external drivers. Firms that are forerunners in eco-innovation and green technologies are more likely to gain market shares and therefore put pressure on other companies to improve their innovation abilities as well. Ignoring the technological leading edge of forerunners increases the risk for companies to be left behind and eventually lose customers and market shares.⁵²

According to the EIO Annual Report (2011), significant external economic barriers are an uncertain demand from the market, an uncertain return on investment, and a lack of external funding.⁶¹ Customer demand for innovative products and technologies can be uncertain for multiple reasons. The novelty of the products may lead to hesitation on the part of the customers, especially if the product is costlier in comparison to conventional products and changing consumers’ views on these innovative products may prove to be a challenge for firms.⁶²⁶³ In addition to that, the sustainability benefits of innovative products may not be easy to identify, may be overlooked by the customers, or be irrelevant for them.⁶³⁶⁴ An uncertain return on investment and lack of external funding are also external barriers. Eco-innovations and green technologies are often still in an incipient phase and are subject to performance uncertainties. This uncertainty and long-term orientation are expressed in uncertain return on investments and more extended payback periods. As a consequence, financial institutions are more reluctant to grant eco-innovative companies’ credits.⁶⁵

Social Environment

In the following, the social environment is defined as influencing factors of socio-cultural groups that may not be directly involved in the business activity of firms but influence their activities and their performance cultural expectations, norms, and trends.⁵⁴ A firm’s responsibility to the community and the social good can be seen as an important driver for eco-innovation and green technology. It can be categorized as an external driver when societal concerns pressure companies to meet a certain sustainability standard, but also as an internal driver, especially in SMEs where the sense of responsibility and commitment of a firm can be seen as a reflection of the owner-managers personal dedication.⁵³ Closely linked to this driver are the firm’s image and reputation. Sustainable, innovative ideas can help companies to be perceived as sustainability pioneers and thereby gaining advantages over the competition.⁶⁴

Important social barriers to eco-innovation and green technologies can be a low environmental awareness on the customers’ side and connected to that a lack of customer demand. Companies seldom initiate innovative ideas without seeing these innovations as a market opportunity that will be worthwhile for them.⁵⁵⁶¹ According to the EIO Annual report (2011), the most common barriers among the socio-cultural factors are weak linkages and cooperation between research and industry,⁶¹ especially regarding the translation of inventions onto the market, defining priorities, and knowledge exchange.

Technological Environment

The technological environment is defined as the totality of technological techniques, skills, methods, processes, and knowledge affecting businesses.⁵⁴ An important external technological driver of innovation is the effect that available technological possibilities often induce further innovations, or simply put: “innovation breeds innovation”.⁶⁶ Innovations can cause additional innovations and technologies that further enhance the effectiveness of a product, as, for example, the computer mouse did for the computer. They can also invite research and development activities that foster innovative improvements of the initial innovations or aim to create superior substitutes.⁶⁶ Nevertheless, there is still a need for research to affirm that this effect also applies to eco-innovations confidently.

The main technological barriers are lock-ins and path dependencies. Sustainable innovations and technologies are often insufficiently mature in comparison to conventional technologies, which have an advantage in the historical path of their development. Consequently, companies, as well as investors, expect severe market failures and question the commercial viability of eco-innovations. The lock-in is then reinforced by suboptimal investments of firms in green research and development compared to “dirty” research and development investments and by the co-evolution between the technological and the supporting institutional systems ⁶⁷⁶⁸

CASE STUDY

The electric car manufacturer Tesla is a prime example of a company that achieved to position itself in the very much locked-in market of automobiles, which is dominated by conventional fossil-fueled vehicles. Tesla has overcome technological limits by starting with a minimum viable product and then scaling up while simultaneously going through significant design iterations. By doing so, the company also limited economic risks, compared to the approach of moving into the market with an ultimate final product that could potentially fail to establish. Tesla also compensated for a lack of expertise by using networks and by building modular relationships with other companies, e.g., Lotus, to help with technology.⁶⁹

The European Commission’s Environmental Technologies Action Plan (ETAP)⁷⁰ also identifies insufficient research efforts, coupled with inappropriate functioning of the research system and weaknesses in information and training as a barrier to environmental technologies. Technological aspects that pose barriers to green technology and eco-innovation are also found on the part of technology suppliers. There might be a lack of interest in energy efficiency as they get higher returns in commercializing lower energy efficiency technology and therefore are reluctant to foster high energy-efficient solutions. Technology suppliers may also not be up to date. Suppose they do not ensure that their employees are on par with the latest technological standards of green technology. In this case, customers may be misinformed and possibly choose inefficient or even obsolete conventional technology. That may be coupled with scarce communication skills. Green technologies might be ignored if their advantages and effective performances are not effectively communicated.⁷¹

Ecological Environment

In the following, the ecological environment is defined as the totality of bio-physical resources and mechanisms on earth that influence companies in their business activities.⁵⁴ They drive ecological factors to include increasing resource demand, environmental risks, and climate change impacts. With increasing global resource demand due to population growth and higher living standards, resource-efficient eco-innovations are needed, which drive eco-innovations and green technology.⁷² First-movers of such innovation and technology can secure competitive advantages while simultaneously minimizing the environmental impacts of their industry.⁷³ Climate change and its environmental risks reflected in an increasing occurrence of environmental catastrophes like draughts, fires, and floods also push climate adaptation innovations forward, e.g., in agriculture.⁷⁴ Specific ecological barriers to eco-innovation and green technologies were not found in the literature.

4.2 Firm-internal drivers and barriers

Besides external factors, firms are also influenced by internal factors when making the decision to eco-innovate and develop green technology. These factors are internal drivers and barriers that revolve around resources, competencies, and dynamic capabilities.⁷⁵ Based on the study of Kiefer et al. (2018), they can be divided into resource-related drivers and barriers (e.g., physical resources, financial reserves) and those that are connected to the organizational structure of the company (e.g., management related, size-related).⁷⁵

Resource Related Drivers and Barriers

Kiefer et al. (2018) describe resources as “firm‐specific assets whose value is context-dependent”⁷⁵ that can be tangible (e.g., financial reserves and physical resources) or intangible (e.g., reputation, organizational culture, customer relationships). Contrasting theories suggest that tangible resources can be internal drivers or barriers, depending on the amount of “physical slack” that companies possess. The “physical slack” is the number of resources that exceeds the minimum level that is needed to create a given outcome for an organization. This excess amount of resources can be used to explore and experiment, thus stimulating (eco-)innovation.⁷⁶ Other theories suggest that additional resources increase the inefficient and undisciplined use of these resources and therefore constitute a barrier to eco-innovation.⁷⁷ An optimal amount of physical slack allows firms to experiment and explore without jeopardizing the efficient use of the resources.⁷⁵ A similar dynamic can be observed with financial resources, as the availability of financial resources and financial slack influences eco-innovation efforts. While a slack of financial resources may drive eco-innovation and green technology, excess financing may lead to undisciplined management of these resources and imprudent and unfavorable investments.

Nevertheless, a more significant amount of slack can make larger innovation investments feasible in the first place. Here, too, an optimal amount of slack can be found that drives eco-innovation most effectively. Connected to that is the still dominant driver of firms to reduce operating costs by reducing energy and resource consumption through eco-innovations and green technology.⁵³ However, this internal driver often has an external root: increasing fuel and electricity prices and growing demand for energy and resources as economies grow lead to companies reducing their energy and material usage.⁷²⁷⁸

Motivational and Organizational Drivers and Barriers

Numerous internal drivers and barriers are not directly connected to the number of resources a firm possesses but are embedded into its organizational and normative structure. Notable factors that influence eco-innovation and green technology activities are the company’s corporate culture, the role of the management, and the size of the company.⁵⁵⁷⁵ The corporate culture of a firm can act as a driver or barrier to innovation as it defines the firm’s behavior. Depending on what kind of corporate culture is cultivated, it determines the firm’s orientation towards learning, exploration, and experimentation as well as risk-taking and thereby how open the company is towards new ideas in the form of eco-innovations and green technology.⁷⁹

CASE STUDY HENKEL

Henkel (see Case Study in Secition 2.2) is a prime example of how corporate culture can foster eco-innovation is Henkel. A board member said about Henkel’s flagship detergent: “Persil remains Persil because Persil does not remain Persil,” emphasizing the relationship between the brand’s quality and innovation.⁸⁰

Closely connected to the corporate culture is the role of the (senior) management. Managers who act as leaders can strongly influence employees through their personal motivation and guide individuals in eco-innovative processes. Conversely, poor managerial support can hinder eco-innovation and act as a barrier.⁷⁹ The size of a company is also a factor determining the engagement in eco-innovation and technology activities. A study from Triguero et al. (2013) found that a firm’s size is positively related to the decision to eco-innovate on a product, process, and organizational level. Furthermore, small-sized companies face more difficulties applying eco-innovations.⁸¹ Qi et al. (2010) come to a similar conclusions, observing that larger firms are statistically more likely to implement green construction technology.⁸² This can be explained by a greater amount of resource slack and the fact that large firms receive more pressure from their social and economic environment (see Section 4.1) to adopt green practices.

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