Environmental Innovation: Nice or Necessity?

03/11/2015 11:53 am ET | Updated May 11, 2015

If we mention environmental innovation, what comes to mind? Most people's thoughts turn to a host of green efforts such as recycling programs, natural products and renewable energy. And they are correct; all are environmental innovations and share a range of characteristics--doing more with less, optimizing operations, cutting waste and turning out better-for-the-planet goods and services. They are nice things to do; companies and their customers can feel good about them.

Yet environmental innovations are much more than nice; they are also fiscally sound practices that add value and provide a tremendous boost to the bottom line. And eventually, they have a domino effect: As businesses realize savings from their incremental environmental innovations, they move from implementing them 'a la carte' to across the board in every area of their business and reap further rewards--as does the planet.

Such was the case for UPS Inc., one of only nine companies (and only two in the industrial sector) to achieve a perfect score of 100 on the CDP S&P 500 Climate Change Report 2014. The company's journey to establishing a culture of environmental innovation began in the years immediately following its 1999 initial public offering, when guidelines such as the Carbon Disclosure Project and the Global Reporting Initiative were just being developed.


"UPS already was measuring every thing about our operations," notes UPS Chief Financial Officer Kurt Kuehn. But as "transparency emerged as a critical business issue ... we saw the value of sharing that data externally." In 2002, UPS Inc. became the first in the industry to publish an annual sustainability report, which allowed the company "to connect our operations to sustainability," he points out. As the company's leaders saw that initiatives such as the effort to reduce fleet mileage also lowered fossil-fuel usage and carbon emissions, "it became obvious" that environmental innovations were so beneficial that they eventually became "a strategic imperative in my job as CFO," explains Kuehn.

Today, Kuehn is a strong proponent of comprehensive sustainability efforts because they drive innovation in new products and services with tighter footprints; in manufacturing processes and end-of-life disposal; energy-efficient facilities and construction; supply chain practices and more, he notes. And all are areas that can boost the bottom line.

In effect, as environmental innovations lower costs, increase revenues, ensure stable supply chains and more, company leaders come to the realization that those innovations drive business value. Noted environmental analyst and best-selling author Andrew Winston made that clear in his Harvard Business Review roundup of "The 10 Most Important Sustainable Business Stories from 2014" when he noted that "two impressive pieces of analysis made the case that moving to a clean economy is profitable--both for society and for the private sector." The reports he cites are the New Climate Economy Report from a group of leading CEOs, economists and former country presidents and We Mean Business, a coalition launched last September representing many of the world's largest companies.

And, in what Winston calls this "resource-scarce world," companies should be embracing a more comprehensive approach to environmental innovation and "a long-term mindset" rather than incremental goals. "Companies that understand how climate change and resource scarcity affect their full value chain--from raw materials to product recycling--will be better positioned to maintain or grow market share," he says in Harvard Business Review. As these companies make "dramatic improvements in operational efficiency and cuts in material and energy use, waste and carbon emissions" they become "more competitive in a world of declining availability and higher prices," he notes.

Today, there is substantial proof that companies that do apply environmental innovation in a strategic and comprehensive manner and integrate it into their corporate cultures reap myriad returns. A 2009 Harvard Business Review portrait of 30 corporations dedicated to sustainability found it is a "mother lode of organizational and technological innovations that yield both bottom-line and top-line returns." And six years later, many agree that the environmental innovations spurred by sustainability initiatives can lower companies' costs at every stage of the production process, increase revenues and mitigate risk by ensuring stable supply chains.

Xerox also has embraced a culture of environmental innovation in its actions, products and services, as evidenced by its 2014 'report card' showing that its efforts have yielded substantial reductions since 2009 in water use (35 percent), greenhouse gas emissions (24 percent) and landfill and incineration rates (60 percent) and an energy use reduction of 30 percent since 2002. It also has achieved a 99 percent reuse, recycling and remanufacturing rate and full compliance with Energy Star criteria for 100 percent of its innovative new products.

At Tetra Pak, we also believe it is critical to act and operate in ways that best protects the environment, which requires continuous innovation across the value chain and systematic and trustworthy sustainability reporting supported by third parties audits and certification. That means developing technologies and products that will drive efficiency, reduce our consumption of finite resources, cut waste and lower environmental footprints--efforts that make environmental innovations such as our new environmental benchmarking service and a drive to use renewable resources systematic and essential parts of our corporate culture.

Today, many business leaders hold the same beliefs: A key finding of the new Global Opportunity Report, spearheaded by the U.N. Global Compact and surveying more than 6,000 business leaders globally, is that they have "strong confidence in sustainable growth opportunities." And achieving sustainable growth requires environmental innovation, especially to address water scarcity and promote green consumer choices, the report notes. So clearly, the 'feel good' efforts we once called 'nice' are now financial necessities--especially in light of the benefits they confer on businesses, the people they serve and the planet.