Innovation: what’s good for clients is good for climate

Innovation should be about embedding sustainability into products. Scaling those products then becomes scaling sustainability. It’s a very specific form of innovation; but it’s innovation at its best. It’s both good for clients and it’s good for climate.

This type of sustainability/innovation/product triangulation is easy to spot at the start-up/high growth stage of a company’s lifecycle…but not so much at the mature end of the growth curve. Venture capital firms probably play chief witness to this type of innovation.

Pi labs is a European property technology venture capital firm. It has invested in a plethora of technologies that scale sustainability alongside their own growth. It invests in the PropTech space – seeking technologies that can scale within real estate and real estate adjacent spaces.

For example, Kamma supports letting agents on licencing compliance, including gathering energy performance data. By ’selling more’, Kamma provides better energy efficiency transparency. Also, Responsibly is a platform that performs supplier due diligence for compliance against UK and EU regulations. The company’s product is both necessary and scales normally as a business. And QFlow enables better recording of material delivery at  construction sites. By streamlining real-time record-keeping, QFlow reduces materials waste as well as embedded carbon.

These are all examples of early-stage high-growth companies backed by venture capital who are building sustainability into their innovations and scaling them. But, as always, this start-up mindset can be applied equally to mature companies in traditional industries where transition to a decarbonised future is complex but nevertheless still part of growth.

The sustainable option for mature companies

It is fair to say that sustainable option, driven by innovation and enabling infrastructure, is often also the optimal solution. Witness electric vehicles, renewable energy or modern home fixtures and fittings that use fewer resources while increasing efficiency and comfort (if they are supported by the requisite infrastructure and skills).

The key is for sustainability to sit at the heart of strategy and operations – never siloed. It is a foundation of strategy as a driver of economic value, innovation, and resilience – never a compliance exercise. “The strategy function can be greatly enhanced with a sustainability mindset,” says Jia. “Take real estate, which consumes 40% of global resources and energy use. Any organisation that can lower that number will generate an inherent benefit through lower costs, and often improved functionality.”

For boards, it’s crucial to create this cultural and strategic shift. Doing so is a catalyst for visionary thinking and achieving business advantage. "Product innovations that reduce a customer’s costs and resource-dependency creates a competitive advantage in the market,” points out Jia.

“This is what we do at the Center for Sustainable Energy – ensure sustainability is embedded deeply in the products that we bring to market.”

It takes more than a village

But companies cannot act in isolation. Responsible policy engagement is often an enabler of innovation. It means collaborating effectively with the public sector by making the business case for systemic change and the benefits it can bring. When done effectively, this can unlock the right policies that create a level playing field and support market demand.

Systemic change both supports and rewards innovation. Electric vehicle charging infrastructure and home energy efficiency programmes to boost heat pump adoption both require systems thinking to bolster skills and kickstart progress. This is the case for many of the other advances that will play major roles in the new economy.

“Boards have a role to play in steering their organisations towards constructive engagement with government to deliver an environment that rewards such innovation,” says Jia. “This does not have to be done through prescriptive regulation, but instead by business working with policymakers to ensure a level playing field with a high floor that incentivises competition and innovation.”

Government does not necessarily need to dictate how businesses deliver decarbonisation alongside growth; rather it needs to set the direction and enabling elements, then allow businesses to accelerate their progress within these parameters.

This process is evident at the Center for Sustainable Energy. It uses a tool that assesses the economic and social value that sustainable products and infrastructure can deliver for people and businesses. It demonstrates where new technology can create a win win situation for government, business and the public.

“Forward-looking organisations are already talking about emissions reductions in business terms. These are not separate considerations; they are a fundamental part of a company’s value proposition,” he says.

Building an edge

The competition in this space is only growing. China’s rapid economic ascent, particularly driven by policy support that demands innovation, presents a risk for everyone else. Doubling down on innovation is not only a solution to value-generation now, but also a fundamental part of ensuring business resilience and future success.

This is where the long-term voice of the board comes into its own. The board stewards its company into the future, looking ahead to where the market will be in five to 10 years’ time and beyond. The board should ask: are there opportunities in new technologies that we aren’t grasping; have we examined why that is and, if so, how can our business help to create markets for better products that will stand us in a good stead for the future?

A board that is laser-focused on future prosperity not only improves decision-making and drives better capital allocation but also provides clarity amongst the noise created by disruption.

Trends change, in both markets and in the sustainability movement; but a clear vision from the top insulates businesses from short termism and compromised decision-making based on temporary changes in the narrative.