WRI’s Business Center will bring insights and opinions of those leading the charge across the corporate sustainability landscape through our new blog series, The Hot Seat. Over the coming months, we’ll sit down with a wide range of corporate leaders to discuss how businesses can tackle environmental challenges while seizing opportunities. The series draws largely on the expertise of members of the Corporate Consultative Group, a diverse collection of leading companies working closely with WRI to advance corporate sustainability across the planet.
There’s no doubt that “innovation” is one of today’s hottest corporate buzzwords. From business models to core product offerings, companies that are able to deliver new ways to engage customers can capture investor attention, headlines and expanded market share.
Sustainability is increasingly acting as a lever for innovation. From reducing emissions to products made from recycled or waste materials to new business models, sustainability-inspired innovation can raise brand profile, reduce value chain risk and drive revenue growth. I sat down with Caterpillar’s Global Director of Sustainable Development, Tim Lindsey, to discuss how innovation can dovetail with sustainability efforts.
WRI: Some companies, especially those considered tech companies, may be thought of as innovative due to the types of products they produce – for example, Apple. What does innovation mean in the context of a more traditional manufacturing company?
Tim Lindsey (TL): “Innovation” is really any new idea, device, material or process that, when implemented, can lead to really positive change. So I agree there is a tendency to think of innovation in terms of electronics because we see so many new consumer-facing products coming out of those sectors.
But innovation can be about anything that has not already been implemented within a company, even if other organizations have been using it for decades. Typical constraints for innovation often include uncertainty associated with its compatibility with existing culture, values and ways of doing things.
WRI: How can looking at innovation through a sustainability lens change the way a company innovates?
TL: The reason you innovate in the first place is to improve performance. Unlike traditional continuous improvement programs – which focus on small improvements consistently over time – innovation is often about increasing a lot of performance in a short amount of time. The reason you want to be innovative is to get those big gains.
When you really find a good innovation opportunity through a sustainability lens, you simultaneously capture improvements in profitability, environmental performance and social responsibility. Essentially, the sustainability lens helps broaden the focus of, and benefits derived from, innovation. We’ve had some nice examples of that in the last couple years at Caterpillar.
WRI: Like what?
TL: Most recently, we introduced our hybrid excavator that, depending on the application and the skill of the operator, achieves about a 25-50 percent fuel efficiency and emissions-reduction gain. Others have tried to develop heavy machinery that use batteries to store waste energy—similar to hybrid vehicles—and they haven’t performed very well. We decided to try it with hydraulics because we are experts in that, and it’s worked out really well. Energy associated with lowering an excavator’s boom (or arm), for example, goes into an accumulator that uses this energy to send the boom back the other direction. It is an Edison Award-winning technology for innovation.
WRI: For both sustainability and innovation efforts to be successful, they have to be embraced across the company—not just in the sustainability team. How can sustainability priorities be diffused across different teams to spur innovation?
TL: It’s important to note that sustainability in business is an innovation in and of itself. It’s an idea-based innovation, similar to the assembly line or e-commerce or “lean” manufacturing; it’s a different way of doing business that offers a lot of benefits. As such, it can be difficult to implement because it may be perceived to be incompatible with the way a company has done things over the years.
Additionally, because so many aspects of sustainability are rather technical, it can be difficult to get key internal stakeholders on the same page. And then there’s the old paradigm of “business vs. the environment,” which is still out there. Those of us in the sustainability profession can forget that it’s a fundamentally different paradigm that says you can improve business and the environment at the same time—we’re still educating colleagues across our organization.
What we’re seeing now is the expansion of a new quality paradigm. Since the time of the first industrial revolution to after WW II, it was commonly perceived that quality and productivity were at odds with one another in business. Then programs like Total Quality Management and the Toyota Production System came along, and they were able to show that you could simultaneously improve both quality and productivity by preventing problems and waste. In essence, when we talk about sustainablity, we’re talking about a similar concept: that we can simultaneously improve business performance and environmental and social performance with similar techniques of preventing value chain issues, cutting waste and reducing pollution. We can be more efficient, more productive and introduce superior products and services. Talking about sustainability as part of a new quality paradigm can help make it an easier sell, and can facilitate introducing incremental aspects of sustainability – within quality programs – across the business.
Caterpillar has adopted a “lean” system, which is heavily focused on eliminating all types of waste. So you add environmental waste to that and wasted human potential. You focus not only on the quality of products and processes, but also quality of community, quality of our teams and quality of the environment. Suddenly you are well aligned with a basic approach to overall quality. You just need to expand the way you look at quality and tie it to how you positively impact your customer base.
Margaret Gamble, an intern with WRI’s Communications Team, also contributed to this blog post.
Disclosure: Caterpillar is a donor to WRI and a member of its Corporate Consultative Group. The views expressed here do not necessarily reflect those of WRI.