Javier Carrillo-Hermosilla - Eco-Innovation: When Sustainability and Competitiveness Shake Hands

WHEN SUSTAINABILITY AND COMPETITIVENESS SHAKE HANDS

Dr Javier Carrillo-Hermosilla,

IE Business School, email:

Dr Pablo del Ro Gonzlez

Institute of Public Goods and Policies (IPP), email:

Dr Totti Knnl*

Institute for Prospective Technological Studies (JRC-IPTS), email:

* The views expressed are purely those of the authors and may not in any circumstances be regarded as stating an official position of the European Commission.

Javier Carrillo-Hermosilla, Pablo del Ro Gonzlez & Totti Knnl 2009

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First published 2009 by
PALGRAVE MACMILLAN

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ISBN-13: 978-0-230-20206-1

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To our families

A warm welcome to this book which states the case for sustainability and shows companies struggling for real and fair competitiveness how to introduce the concept of eco-innovation as a management tool and the primary model.

Recent events in the global economy inescapably demonstrate the need for a new model of development; one which ensures improvements in the quality of life for current and future generations and for a larger proportion of the worlds inhabitants. This is what sustainability is all about. This requires reconsidering the whole system and calls for innovation in sustainability and governance, since the two go together. It does not mean just any innovation; rather innovation with a purpose, innovation to make progress in sustainability in short, eco-innovation, the key operational concept of this book.

This book is about bringing a new logic the logic of sustainability to business via eco-innovation, offering a leading edge to those who are convinced that sustainable business is about doing business both now and in the future. It is about applying the economy of permanence, it is about delivering product-services packages in a way that is effective (what society and people actually need or demand) and efficient (with as little use of resources and environmental degradation as possible), leaving society, via demand management and fiscal systems, to take care of the sufficiency principle, that is, how much is enough in terms of use of natural resources without impeding the development of future generations.

Many of us have argued tirelessly that a new development is necessary, possible and timely. It is now inevitable. We have no other choice but to introduce the required changes and particularly this is something we tend to overlook the conditions for change or the appropriate rules of the game. This is the key to providing real advantages, to providing rewards in market terms too competitive advantages for companies which introduce eco-innovation as a leading concept and management tool. If we do not pay sufficient attention to this in the present situation of financial crisis, we may once more underestimate the need to establish this institutional framework or the conditions for change.

As the book notes, Michael Porter has already stated the case for countries introducing stricter environment-promoting eco-innovation into business, possibly resulting in higher competitiveness ratings. Similarly, the Dow Jones Sustainability Index stated the case for higher returns for companies at the cutting edge. The question is how to retrieve those arguments in order to transform the current crisis into an opportunity and how to establish the conditions for change at a global level too. As one well-known NGO has been stating for some time: From climate change to a climax for change.

The authors provide the theoretical and empirical basis and tools for applying eco-innovation as a management instrument to deliver higher competitiveness. Therefore, I will focus on the conditions for change, the business environment what the authors call the institutional framework , which must be developed to ensure that the market economy works towards sustainability, reducing the impact of those, in the financial sector too, who take abusive short-term benefits and transfer costs or externalities to the rest of society and to future generations. This institutional framework must also pave the way for the doers of good, that is, those at the cutting edge of eco-innovation the eco-innovators.

This book demonstrates that we have the management tools for businesses to deliver product-services packages with the understanding that it is probably better from a sustainability perspective to have products delivered as part of a service to society rather than the other way round, which is usually the case. It is only a matter of ensuring that this time we do not overlook the key point of creating the conditions to really turn this into an advantage.

We need to set a real Agenda for Change, where the key references must be sustainability and governance, using existing instruments of the market economy, within limits, to ensure efficient allocation of resources once basic needs are covered and once proper costs are internalized. This involves realizing that, perhaps, an appropriately run market with proper taxation can help or encourage businesses to increase efficiency, or at least do things more efficiently in terms of use of resources (the efficiency principle), and it may even help them, as this book identifies, to do the proper things (the effectiveness principle), while a greater effort from the regulators is required, particularly via taxation, not to overdo things (the sufficiency principle), that is to say, to rationalize.

Many attempts have been made to establish an institutional framework at EU level and it may be of interest to review them. The main barriers to making the market work for sustainability and to promoting eco-innovation should be considered, with the aim of establishing the institutional framework that this book urges, so as to enable sustainability and competitiveness to go together. At the European Council of March 2005, eco-efficient innovation was recognized as a potential economic driver in the Lisbon Strategy. The Clean, Clever, Competitive project started during the Dutch presidency (second half of 2004) already pointed to the fact that many existing programs focused on the supply side (R&D) of the innovation market. The conclusion was to turn attention to the demand side of the market too and thus to some policy initiatives and to the institutional framework.