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Eco Innovations

Eco innovations include “any innovations that lead to reducing the impact on environment (OECD, Organisation of Economic Co-operation and Development).

Eco innovations – “the creation of new and competitive price products, processes and systems that meet the needs of people …. with a minimum use of natural resources …. and minimal emissions of toxic substances” (Reid and Miedzinski, 2008).

Key features of the eco innovations:

  • reducing the environmental impact is their direct purpose
  • a broader range of application, which apart from technological innovations at products, processes, organizational and marketing methods include innovations in the social and institutional structures

2009 was a turning point in understanding the need to shift to an economy of sustainable development (the report of the World Economic Forum “Redesigning Business Value & A Roadmap to Sustainable Consupmtion”, 2009).

In 21st century (Age of Sustainability) a new industrial revolution are anticipated (on basis of biotechnology, eco-friendly production methods from renewable sources, biology, information technology etc.). Global challenges for the transition to a low-carbon economy by 2050 will be the driving force of new wave of technological innovation and the creation of new consumer and social values.

Eco innovations will be a key driver in the industrial development in post-Kioto era strategy of “green growth”. Industries that are rapidly using eco innovations – clean technology, renewable energy and management, pollution control, water and waste management, production of sustainable building materials and green building, sustainable transport and logistics, environmental consulting etc.

Study of market practice initiatives for sustainable development in 30 major corporations showed that sustainable development is a the key driver of innovation in 21 st century (C.K. Prahalad and Ram Nidumolu, Harvard Business Revue, 2009).

Sustainable development has been a magnet for organizational and technological innovations that have led both reputational and economic results. Turning to responsible environmental policies such companies are lowering their costs because economize on resources.

Moreover, the process to generate additional revenue from better products and enables companies to create new business.

Companies that are anticipated future changes of the environmental regulations and trends of sustainable development see new business opportunities first:

• HP in 2002 co-operated with three manufacturers – Sony, Braun and Electrolux- to create a private European Recycling Platform calculated that own platform itself will be more profitable than planned to introduce European standards of regulation of waste (Europe’s Waste Electrical and Electronic Equipment regulations) providing for payments of the manufacturers cost of processing in proportional of the volume of sales. In 2007 platform which works with more than 1000 companies in 30 countries have recycled about 20% of the equipment covered by the directive WEEE. Partially due to the scale of the operations costs of the platform by about 55% lower than competitors. This not only allowed HP to save more than $100 million from 2003 to 2007 but also enhance the reputation among consumers, politicians and industry.


Once many consumers prefer green goods and services business that will propose the first such products instead of existing ones will have an advantage:

  • Procter & Gamble performing life cycle analysis of washing powders observed that the power consumption when washing is 3% of annual household budget on electricity and in 2005 released a detergent for cold water (Tide Coldwater in U.S. and Ariel Cool Clean in Europe). By 2008 already 21% of British households washed in cold water compared to 2% in 2002, in the Netherlands the number has increased from 5% to 52%.
  • In 2008, Clorox has become one of the first manufacturers of consumer goods, which issued a non-synthetic cleaning products for home, having spent 3 years and $20 million for the development of Green Works line. They decided to give premium surcharge of 15 to 25% by conventional goods to reflect the higher cost of e raw materials. Green Works products are still cheaper than similar competitors, which are worth more than 25% - 50%. By the end of 2008 the share of Green Works has grown in the U.S. market by 100%, and Clorox has a 40% share of $ 200 million market.

Once a company to master the art to keep up with regulation they become more proactive in environmental matters. Many then focus on reducing consumption of non-renewable resources such as coal, oil, natural gas and renewable resources such as water and wood. Incentives are beginning to be more effective to go beyond production facilities and offices to the value chain.

At this stage corporations are working with suppliers and retailers for the development of eco-friendly raw materials and components as well reduce waste:

 

  • In April, 2010 IBM announced new requirements for all suppliers on the environment - they must implement a management systems which monitor and publish data on the environment. New requirements are relating to 28 000 suppliers from 90 countries. This also applies to subcontractors of the suppliers – if the products or services of subcontractors are an essential part supply chain IBM. Companies that do not comply by 2011 will be excluded from the number of suppliers.
  • In October 2008 Lee Scott then CEO Wal-Mart has issued more than 1000 suppliers in China directive: reduce the cost of waste and emissions, reduce the costs of packing up to 5% by 2013 and increase the energy efficiency of products available in Wal-Mart stores in 25% within 3 years.
  • Unilever has announced that by 2015 will buy palm oil and tea only from sustainable sources
  • Cargill and Unilever responding to people attitude to destruction of jungle and swamp have invested in technology development and have worked with farmers to promote sustainable development practice in the cultivation of palm oil soybeans, cacao and others. This led to the creation of technologies to improve productivity.

Eco innovations help turn environmental challenges into new business opportunities through innovative strategies aimed at improving internal efficiency and external interactions with the surrounding systems – economic, environmental and social.