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The Benefits of Sustainability-Driven Innovation

December 18, 2012 | David Kiron, Nina Kruschwitz, Martin Reeves , Eugene Goh | Strategy

Results from the fourth year of MIT Sloan Management Review’s research collaboration with the Boston Consulting Group have found that managers who say sustainability has caused their organization to change its business model are also more likely to say that the organization’s sustainability activities have added to profits. Respondents to the survey who not only changed their business model because of sustainability but also generated profits from their sustainability-related activities and decisions "Ò “Sustainability-Driven Innovators” "Ò represented 23% of the survey pool.

The survey results suggest that business model change, top management support, collaboration with customers and having a business case are associated with creating economic value from sustainability activities and decisions. Ninety percent of all managers who said their companies have all these characteristics also say that their sustainability activities add to their profits.

The authors’ research suggests several ways in which companies can become more effective at connecting business model change with sustainability-based profits. Based on the behavior of Sustainability-Driven Innovators, they make three recommendations for how managers can improve their odds of profiting from their sustainability activities.

First is to be prepared to change the business model, which may involve extensive corporate change, require significant top management attention and entail setting multiyear goals. Second is to learn how your customers think about sustainability and understand what they are willing to pay for in connection with sustainable products or services. The final recommendation involves increasing collaboration both internally and externally with customers, businesses and groups beyond the boundaries of the organization to improve operations and competitive advantage.

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