Sustainable innovation: creating real benefits for SMEs

When we think about SMEs and sustainability, social ventures often come to mind. The Grameen Bank founded by Muhammad Yunus provides micro loans to women in Bangladesh. Solar technology company SELCOR India has provided sustainable energy for 135,000 homes in India since its inception in 1995. Such business models were built to serve society from the ground up. But for existing firms – the incumbent retailers, manufacturers, service firms, looking to stay competitive – there are still many ways to innovate sustainably.

SMEs have fewer resources than larger firms. But when it comes to innovation – creating new products, processes, and practices – they also have some distinct advantages. Research finds smaller firms are well-positioned to try new things because of their flexible firm structure, financial control of the owner, and the ability to react to new opportunities and rely on intuition to inform decisions.

Increasingly, firms of all sizes, as well as governments and civil society groups, are focusing on sustainable innovation (sometimes called sustainability-oriented innovation). Sustainable innovation is about creating new or improved products, technologies, processes and management techniques that produce environmental or social benefits along with economic value.

Why would firms consider environmental and social dimensions? Sometimes it’s about responsibility, or doing the right thing. But research shows it’s also good for business in the long-term. Creating sustainable new products can grow market share, build new competencies, and satisfy customer demand. New processes can help your firm comply with or beat regulations, reduce costs, and respond to supply chain pressures.

In practice: businesses doing good and doing well

Here are examples of ways that two Canadian SMEs, Kal Tire and Artopex, use new products and processes to reap economic, environmental and social benefits.

Kal Tire, a retailer in British Columbia, is a family-run company that sells and services tires for retail, commercial and mining customers. On top of facility improvements, such as replacing traditional lights with energy-efficient ones, Kal Tire has focused on extending the life of its products through tire retreading: buffing off the old tread and applying new tread. Retreading extends tire life, which saves customers money and diverts used tires from landfills.

Artopex, a Quebec furniture manufacturer, encourages its employees to experiment often. Employees meet in small groups and challenge company norms and find ways to improve their manufacturing process. The focus initially is on improving productivity but often leads to improvements in quality of life as well – for employees and end users of products.

Leaping into sustainable innovation

Sustainable innovation, while having a greater payoff in the long term, is more complex than conventional innovation because of the broader issues and stakeholders involved. Some tips for SMEs to innovate:

1. Use your slack. Take advantage of existing resources to pursue innovation. Experiment with new processes or products.
2. Collaborate with competitors, customers. Reach out to universities and colleges for new insights.
3. Invest in long-term supplier relationships. Engage in both audit (checking) and development (training for the future) to build competencies and trust.
4. Track and reward environmental performance. Factor in avoided costs and profile small and large wins across the organization.
5. Manage knowledge. Bring in new expertise, find ways to mobilize it across the firm, and ‘unlearn’ old ideas that are no longer useful.
6. Use tools. Life Cycle Assessment (LCA) or Environmental Management Systems (like ISO 14001) can help improve the sustainability of a product, process, or your entire business.
7. Design green first. Build recovery, reuse and disposal early in the process of designing new products and services.

Where to start

If you’re wondering how to embark on sustainable innovation, consider the following operational changes across your organization, products, or logistics. Some – like flexible work hours or reducing paper consumption – are easy and costless to implement. Others – like hybrid fleets or energy-efficient lighting – require an upfront investment:

Organization

• Allow flexible work hours/telecommuting
• Install energy efficient lighting
• Reduce paper consumption
• Products
• Reduce packaging for product lines
• Reduce or eliminate the use of hazardous materials
• Optimize product size/weight for shipping
• Logistics
• Use hybrid fleet vehicles
• Redesign delivery boxes so they can be used multiple times

For more information. Visit nbs.net for additional resources on SMEs and innovation for sustainability:

• Innovation for Sustainability: Executive Report: http://nbs.net/wp-content/uploads/NBS-Executive-Report-Innovation.pdf
• Primer on Business Sustainability for SMEs by Dr. Laura Spence: http://nbs.net/knowledge/primer-business-sustainability-for-smes/
• Sustainable development drives SME innovation: http://nbs.net/knowledge/sustainable-development-drives-sme-innovation/
• Large firm CSR strategies can work for SMEs: http://nbs.net/knowledge/large-firm-csr-strategies-can-work-for-smes/

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Pamela Laughland is Managing Director of the Network for Business Sustainability (NBS). NBS, a non-profit with offices across Canada, connects researchers and managers through knowledge to change business practice. Its members include more than 3,000 researchers and businesses from around the world. NBS produces free, authoritative resources in collaboration with leading academic researchers on priority topics including innovating for sustainability, embedding sustainability into organizational culture, and building sustainable supply chains.