The Corporate Model for the 21st Century

Jakki Mohr | Regents Professor of Marketing, University of Montana

Technological innovations have played an important role in the development of human society. The application of technology can either solve problems for society’s benefit, or it can cause harm. And even when used for society’s benefit, unintended consequences can still occur.

For example fertilizers can be used to enhance the productivity of crops but can also pollute the environment. Similarly the promise of battery-powered vehicles sounds exciting, but toxicity in battery manufacturing and disposal issues must be considered.

In exploring the intersection of innovation, environmental sustainability, and business strategy I’d like to do three things. First I’d like to dispel myths about business strategy and environmental concerns. Second I will talk about differences between companies leading the way in sustainability and creativity compared to the rest of the pack. And finally I will talk about new protocols these industry leaders are using to generate new insights and innovations for sustainability, insights both for business and for other organizations such as educational institutions, non-profits, and governmental agencies.

First let me dispel myths regarding sustainability and business strategy. The first myth is companies that engage in activities that benefit the environment reduce their business profits. The facts show the opposite. Waste reduction and energy efficiency are the top priorities for businesses to lower costs. Cutting waste through energy and package reduction provides fast and measureable returns for organizations. The ability to measure and track such savings exists and provides us with more than adequate data to dispel this myth.

A second myth is that during economic downturns companies can’t afford to focus on sustainability initiatives. Again the evidence says the opposite. Despite our current economic downturn, 60 percent of company executives surveyed have increased their sustainability investments. In fact this number is increasing over time. In 2009 only 25 percent of companies reported increasing their investments to sustainability spending. In 2010, 59 percent said they were. In 2011, 70 percent said they were. These increases in investments are actually most pronounced in industries that people would find surprising: commodities, chemicals, and industrial goods.

I could go through many other myths regarding sustainable business strategies. The key point though is that business leaders and policy experts must have data before they make decisions not to engage in strategies that benefit the environment. At a minimum leaders need to have a balanced view of the pros and cons of their strategies before jumping to unfounded conclusions.

My second objective is to talk about the differences between the leaders and the rest of the pack on sustainability, innovation, and strategy.

The data shows that embracers of sustainability initiatives are the highest performing businesses in their industries. These are companies who report that sustainability issues are deeply integrated into their business strategy. Twenty-four percent of companies in a study of 3,000 companies worldwide reported that they were embracers. Sixty-six percent of these companies say their sustainability decisions have generated business profits. This is compared to only 23 percent of companies who said sustainability was not deeply integrated into their business strategy.

Embracers of sustainability initiatives realize that these strategies deliver new customers and increase market share and profit margins. These embracers view sustainable business strategies as a way to gain competitive advantage in their industries. Seventy percent of these companies report that they out perform their competitors, while only 53 percent of companies who don’t embrace sustainability say that they outperform competitors.

A business person in Montana is likely asking what these worldwide statistics have to do with their business in Montana. As a person who has lived here for 15 years, I am well aware of the fact that people are wary of applying national and international statistics to our local economy. I frequently hear things such as, “We do things differently here,” or, “Global business practices don’t apply very well to my small business.”

The data were sliced and diced into small regional companies compared to other companies. It shows that smaller companies tend to focus on sustainability initiatives that are either revenue generating or they develop new innovations. Additionally, regional companies tended to be more concerned with community impacts with their sustainability initiatives. With respect to small and regional companies, these statistics were very similar to Montana-based businesses.

The key takeaway is that forward-looking business leaders believe that sustainability will be a key source of competitive advantage. It does require a fundamental transformation in the way business operates however. Despite economic pressures, sustainable innovation offers a way for companies to focus on specific areas where sustainability can deliver competitive advantage to their businesses.

Whether a company focuses their initiatives on efficiency, risk mitigation, regulatory compliance, or strategic innovation, the data indicate that a philosophy of sustainable business management is the key to success for all businesses in the future. Sustainability is becoming mainstream.

An example of a company looking at an old problem through a sustainable-innovation lens is Sharklet Technologies. Sharklet is revolutionizing the way hospitals and health care workers think about infection and cleanliness. Until recently hospitals were the most likely area to find the MRSA bacteria. According to the Journal of the American Medical Association, community-associated MRSA has become the most frequent cause of skin and soft tissue infections in emergency departments throughout the United States.

Let’s face it, we go to the hospital to get well. But we frequently come out of the hospital with new infections. Rather than escalating the war on bacteria with harsh chemicals, Sharklet found a new innovation on the underlying properties on the skin of a shark. The unique pattern of denticles on the shark skin, its physical structure, is arrayed in distinctive hills and valleys. This makes it very difficult for bacteria to adhere to and grow on the shark’s skin. Sharklet’s technology mimics the micro-resistant properties of this skin by putting the distinctive pattern into films, a surface coating. These films are then applied to high-contact surfaces in health care settings: nurse work stations, counters, medical cards, bed rails, bedside tables, etc.

This is an example of creativity and sustainability that is offering a new way to solve existing problems in a compelling fashion.

Finally, I’ll discuss the types of protocols that companies and organizations are using to generate new insights and innovations for sustainability. There are a plethora of tools and frameworks to unleash creativity that is both sustainable and profitable. Some of these protocols are familiar. They include: life cycle assessment, cradle to cradle design, and biomimicry.

This talk would be very long if I described each of these protocols. Thus I will focus on one, biomimicry. The word biomimicry comes from the combination of bio, meaning “life,” and mimicry, meaning “to imitate.” Hence biomimicry is the conscious seeking of inspiration from nature. It is to look at nature through a lens, whereas instead of trying to master nature or coming up with traditional heat-beat-treat methods of toxic manufacturing, inventors seek to mimic the natural world in solving our human problems. Sharklet Technologies is one of these companies.

We find that there are multiple levels at which a company attempts to integrate biomimicry or sustainable innovation protocols into their strategy and processes. Some companies look to biomimicry in their process to reduce waste materials or in energy utilization. Others are looking to biomimicry to bring new, exciting products to the market place. Finally some are looking to achieve very ambitious sustainability objectives, like a zero carbon foot print, or in a best case scenario the company actually has a restorative impact on the planet. Each of these levels present very different challenges and opportunities.

A second finding is that companies are seeking to identify the best points to exert leverage on the business network, whether it is with suppliers, retailers, distribution partners, internally in their own process, or with disposal issues when consumers are done using their product. To identify these points of leverage, business owners must re-examine their business fundamentals: their assumptions, their metrics, their time frames, even the underlying business model itself.

Asking new questions can provide the catalyst companies need for new insights and innovation in sustainability. These questions might include: Could your product design incorporate greater environmental benefits? Do your processes and logistics maximize efficiencies in energy and water use? Could your new facility be constructed in a way that achieves better community impact? How could you enhance your community as a business location?

These are just a few questions that help companies to re-imagine their possibilities.

In conclusion, the promise of new innovations to solve both social and environmental problems remains infinitely large. The intersection of creativity, sustainability, and business allows this new potential to be realized. This requires that companies question their underlying assumptions about the viability of sustainable business strategies. They should study best practices models; they should leverage exciting new protocols to stimulate sustainable innovation strategies.

The fact is companies can be most successful when the communities in which they operate are healthy. Profit at the expense of people and the environment is wrong.

This requires business leaders with courage who are willing to challenge the status quo.

Thank you.