Sustainable change needs to happen from the inside out. Here’s why that needs investment

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Costas Papaikonomou, Co-Founder, UnaTerra

• The rise of venture capital has encouraged many young startups to misuse technological innovation to create sustainable alternatives to “dirty” goods.
• Innovation has been critical to sustainable consumption but it is too often thought of in terms of disruption, which fails to produce the impact required.
• It is more effective to implement small changes within existing infrastructures to ensure more sustainable solutions for buy-in and cost effective remedies.

Today, the number of impact-driven startups and scale-ups with noble intentions of improving the planet are plentiful, as are their ideas for clean alternatives to dirty technologies and innovations. But unfortunately, many of these ideas are simply reinventing what already exists, whether it be a product, supply chain or distribution system. Moreover, many are trying to reinvent all those things in parallel.

These attempts sometimes fail to consider what competitors are already doing out there and don’t take a holistic view of the existing industry. The risk is that energy and money is wasted on piecemeal solutions to bigger systemic problems.

The innovation fallacy

In the previous century, before the rise of venture capital (VC), such ambitions died quickly and for good reasons: they were too expensive and complicated to be realistic. Fast forward a couple of decades and the rise of VC and more accessible cash is only partly why things have changed. The whole perception of innovation and what constitutes success has been skewed to a new, bizarre reality.

To list but a few of the odd characteristics of this innovation universe:

• Innovation has become synonymous with “disruption,” replacing old ideas with something different. Cutting ties with past concepts works well when the old solution is broken but if it isn’t, it will lead to market failure.
• As it manifests today, innovation feeds an assumption that “old” means “broken”. It overlooks how traditional solutions are often part of an intricate web of habits, relationships, infrastructure, culture and regulatory frameworks. To increase impact, some of these old systems may need upgrading but not total reinvention so readily called for by industry outsiders.
• New benchmarks are mostly drawn from the digital world, which, albeit huge, is a relatively young and immature domain compared to laundry detergents or rubber tyres, for example. Metrics from digital innovation drive unrealistic expectations mostly related to the speed of scaling product creation, customer acquisition and the business model. However, bits and bytes do not scale like the kilojoules and kilograms required to improve sustainability and impact.
• Success and failure have become intertwined in a zero-sum game, rather than failures guiding an innovative development towards success. Previously, one pot of money would fund a team by developing an innovative solution; now, that pot is split across parallel teams, hoping one will succeed at the expense of other initiatives. Innovation, once built on trial and error, has now been gamified into a lottery.

These points aggregate into an ugly implication at the early stages of innovation and developing new businesses: investment trumps revenue. Ask any contemporary startup founder about success and they will talk about how much money they have raised. Paying customers and their revenue become secondary, relegated to a problem for the future. This handicap runs deep in many young company cultures, which has become a problem for the present as investors change their stance towards cash flow.

“

Make it easy to incorporate new, clean solutions into the category you’re trying to improve as more sustainable.”— Costas Papaikonomou, Co-founder, UnaTerra

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Conventional wisdom

Resolving this problem comes down to solutions from the past. Build good, impactful ideas through sound business principles with paying customers. Real-world impact will emerge organically and is intrinsically sustainable because it will keep it running on its own cash flow with no need for external investors.

The meaningful impact of innovative ideas comes much faster when they are focused on technology improvements for existing supply chain infrastructure that existing mass market customers can easily adopt. The capacity is there for big improvements. For example, a packaging technology that allows sustainable paper bottles to be filled in the same factories that currently fill plastic bottles boils down to a flick of a switch.

Therefore, it is easier for consumer goods companies to incorporate innovations because large industrials will not trial or commit to building new manufacturing infrastructure. However, they would welcome solutions that give old equipment a new lease of life for a cleaner future. The case for improvement before revolution could be made repeatedly:

• Produce cleaner cement before revolutionizing construction.
• Introduce lithium-free AAA batteries before launching new storage formats.
• Create mono-material, 100% recyclable coffee cups before setting up logistics for picking up, cleaning and reusing durable cups that industry players aren’t accustomed to.

The advice is clear. Make it easy to incorporate new, clean solutions into the category you’re trying to improve as more sustainable.

Finally, if you look at the business case through the eyes of the consumer, the truth is that old habits die hard. Most people will not change their behaviour, pay more or accept less convenience for a more sustainable product. Those willing are likely to have done so and made their choices a decade ago. Therefore, making minor improvements for the masses will always be more impactful than asking for massive changes only a minority are willing to adopt.