Technological Innovation and Sustainable Business

Fundamental to many sustainable businesses, including Enertrac and SustainX, are so-called clean energy technologies or sometimes called clean tech. These include technologies that generate energy from renewable sources, store energy, conserve energy, monitor and regulate energy usage and the pollution it generates, and efficiently manage water and other natural resources.

Technological advancement relies on investment in research and development. This can range from relatively small investments for Enertrac and other sustainable businesses pursuing low-cost technology solutions to millions of dollars for companies like SustainX, which are pursuing more radical (so-called game-changing) inventions.

Public policy can play a role in encouraging the development and adoption of new technology, which serves to jump-start market development and demand and reduce start-up risks for sustainability entrepreneurs. Research and development tax credits can reduce the costs of innovation and new products and services, offering development for entrepreneurs. And public programs offering tax advantages and rebates to customers, such as the California Solar Initiative (http://www.gosolarcalifornia.ca.gov/csi/index.php), can lower the cost and increase the rate of customer adoption of new products and services.

Also important in the development of new technologies are the industry standards the government defines and regulates. Examples of public policy initiatives that have pushed forward technological innovations are energy efficiency standards for appliances and for buildings.

Innovation in turn can lower the barriers and costs of public policy standards on emissions and efficiency, and this can also be true for some policies to address social injustices (e.g., technologies that improve the productivity and output of workers and that can lower the costs of increasing the minimum wage). So from a systems perspective, there is feedback going in both directions between innovation and public policy.

The end users of clean energy technology are diverse. They include private households, businesses, public agencies, and utilities. End users can take advantage of public incentives and they can also influence the public discourse and policies concerning investment, standards, mandates, and incentives. Most importantly, the choices end users make influence decisions by green producers and sustainability entrepreneurs regarding new products and services. For example, as end users are becoming more conscious about the environmental impact of a product from production to discontinued use (from “cradle to cradle”), consumers are demanding cleaner production processes and recycling services for the end of the product’s life. And this provides an entrepreneurial opportunity.

Innovation and Social Networks

To compete in the sustainability arena, entrepreneurs must frequently go beyond what has worked in the past and seek new and different perspectives and connections. One important area of innovation is new associations, networks, and partners that can provide new resources and information and foster new ways of doing things. Facebook is an example of a social network that has been innovative in creating new connections and relationships on a global scale that otherwise would not have existed through applying existing technology.

People from the same circles tend to share the same pools of information and contacts. Research indicates that the longer the duration of these direct connections, the more similar the perspectives and resources. Under normal circumstances, this is fine. However, when entrepreneurs want to take action in an arena outside the familiar terrain—such as launching a new sustainable enterprise—it is likely that information from existing relationships will not be enough. Instead they must search outside of their traditional network of relationships.

For new entrepreneurs, it will be beneficial to seek information and resources from new relationships and contacts. These new relationships can be formed with a range of individuals and organizations—including academics, consultants, nonprofit research institutes, government research organizations, and nongovernmental organizations (NGOs). NGOs have often been business’s harshest critic on environmental and social issues. It is for this reason that businesses are increasingly forming relationships to these groups to engage them in thinking strategically about solutions and new venture opportunities. The most innovative ideas may well come from those quarters most critical of how business has traditionally been done. An example of this is McDonald’s benefitting from collaboration with the Environmental Defense Fund, which was one of the company’s harshest critics before their working together. In consultation with the Environmental Defense Fund, McDonald’s has reduced their use of materials in packaging, replacing polystyrene foam sandwich clamshells with paper wraps and lightweight recycled boxes, replacing bleached with unbleached paper carry-out bags, and making dozens of other packaging improvements behind the counter in McDonald’s restaurants and throughout the company’s supply chain.

Ronald BurtRonald S. Burt, Structural Holes: The Social Structure of Competition (Cambridge, MA: Harvard University Press, 1995). and other network theorists add useful and interesting constructs to the discussion of entrepreneurship, which is relevant to understanding the benefits of weak ties to sustainable businesses. Burt’s focus is on what he calls “structural holes.” Structural holesThe gaps between nonredundant contacts. are defined as the gaps between nonredundant contacts, stated more simply for our purposes here: it is individuals not connecting with resources that would be very helpful to them.

For sustainable business focused on producing green products or services, structural holes often take the form of engineers aspiring to start businesses based on new technologies they have conceived but that are not connected or don’t know how to get connected to well-qualified (1) marketing professionals (who can help them identify specific market opportunities) and (2) management professionals (who can help them effectively develop and implement business plans and to potential funders).

Burt suggests the value of processes at the “local” level, which help to fill structural holes for entrepreneurs. An example of what Burt suggests is the Green Launching Pad (GLP; http://greenlaunchingpad.org/about/overview) at the University of New Hampshire. The GLP works with aspiring entrepreneurs and connects the entrepreneurs with qualified marketing and management professionals and potential funders. The program works with entrepreneurs to accelerate the development of new sustainable businesses that will directly reduce energy use and carbon emissions while creating new jobs and economic opportunities in the state of New Hampshire. In a short time period, just more than one year (from May 2010 to June 2011), the GLP helped to launch eleven companies, including Enertrac and SustainX.

The GLP’s focus is on helping entrepreneurs enter new social networks that are critical to their success. The GLP helped Enertrac gain the support of state and federal government officials and helped the company to expand the markets they target and reach. The GLP is helping SustainX, which is dominated by highly skilled engineers, connect with market development expertise. Without GLP, both these companies would not have been able to establish these connections to new resources and to develop their businesses as fast and as effectively.