Eco Investor December 2014

Unlisted Companies

United Nations Makes the Business Case for Eco-Innovation

When Australia's fossil fuel loving Federal Government and Industry Minister realize they need to know what real leadership looks like, they can turn to the United Nations and the European Commission and read their new report, The Business Case for Eco-Innovation.

Published in Paris, the report "demonstrates the compelling case for companies to embark on eco-innovation".

It says the global business landscape is rapidly changing, companies are facing growing market and regulatory pressures due to dwindling resources and environmental degradation, extreme weather patterns are affecting business profitability, and global water demand is expected to surpass supply by 40 per cent within 20 years.

"Unless a company is looking beyond its gates to assess sustainability risks and opportunities throughout its value chain, and in cooperation with key partners, it will be incapable of unlocking the transformational potential to deal with these growing external pressures. Leading CEOs have already identified the need to change their business strategies and point to systemic change as the right approach," said Achim Steiner, UN Under-Secretary-General and executive director of the UN's Environment Programme (UNEP).

The strategic nature of eco-innovation means it drives long-term value creation and increased competitiveness, rather than just short-term, incremental improvements. The benefits extend beyond the company to the value chain as it requires incorporating sustainability throughout all business operations based on life-cycle thinking and solutions to market needs.

Influenced by consumer demand, regulatory pressure and sustainability imperatives, eco-innovative goods and services are gaining a stronghold in regional and global markets. The Business Case for Eco-Innovation shows that eco-innovative companies of all sizes are growing at an average annual rate of 15 per cent.

Eco-innovation is especially relevant to small and medium-sized enterprises (SMEs) as these have a high degree of responsiveness and adaptability. As contributors of as much as 70 per cent of GDP and two-thirds of formal employment in developing and emerging economies, SMEs are potentially a key driver for eco-innovation in the transition to a resource efficient economy.

The report contains numerous insights from eco-innovative companies.

"In South Africa, an SME provides alternative energy to rural communities in partnership with the local government. In just three years it has tripled in size and is now rolling out its micro grid-kit model of energy supply in more areas in neighboring countries," said Mr Steiner. Specialized Solar Systems brings electricity to rural communities with limited or no energy access. It deploys microgrid kits fed by solar power and modifies home appliances to use Direct Current (DC) which consumes two-thirds less energy than conversion to AC systems. The microgrid kit was designed to minimize impacts along its life-cycle.

In Belgium, Ecover, a small manufacturer of ecological cleaning products, grew revenue 10-25 per cent per year between 2002 and 2013 while the rest of the market remained flat. The company's expansion from small shops to big supermarkets was thanks to its eco-innovation across all parts of its business from product formulas to packaging, including re-fill options, says Tom Domen, Long-Term Innovation Manager for Ecover.

"Understanding the value of eco-innovation will determine the future success and resilience of a business," said Marie-Claire Daveu, Chief Sustainability Officer and Head of International Institutional Affairs at Kering.

Funded by the European Commission, UNEP is implementing the Eco-innovation Project to develop local and national technical capacities to strengthen sustainable practices in SMEs.

The report also quotes a recent survey that says "at least 56 countries have public institutions that incorporate the principles of green or sustainable procurement into their purchasing policies." That's leadership. Please take note, Mr Prime Minister and Mr Industry Minister.

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