Earlier this year, the global consulting firm Arthur D. Little released "Innovation High Ground: How Leading Companies are Using Sustainability-Driven Innovation to Win Tomorrow's Customers." The study, which surveyed 40 technology companies across Europe, the U.S. and Japan, found that 95 percent of companies surveyed believe that sustainability-driven innovation has the potential to bring new business value, with 25 percent feeling this will definitely happen.

The study is a follow-up to a 1999 study, done in partnership with the World Business Council for Sustainable Development, which investigated how 80 companies were integrating sustainable development into their approach to innovation management. The overall conclusion at the time was that companies were "part way there," but there was still a long way to go.

The new study focuses even more on the business opportunities presented by the integration of sustainability into the innovation process. "We call this 'Sustainability-Driven Innovation,'" says the report, "which we define as being the creation of new market space, products and services or processes driven by social, environmental or sustainability issues. An example might be a novel service that provides better environmental information to meet the needs of potential buyers of a particular product, or a new product that meets the social needs of an emerging market that has hitherto been untapped."

A comparison of the 1999 study findings to those of the current study demonstrates that companies innovating on sustainability are shifting from simply managing risk to meeting customer demand. In 1999, 39 percent of respondents said their sustainability initiatives were customer-driven, while 70 percent said customer demand would grow. In 2004, 70 percent of respondents consider customers "very important" or "critical" drivers of sustainability innovation.

In 1999, 45% of companies viewed regulatory requirements as a key driver and almost 60% of companies said this driver would grow in importance. Five years later, companies have placed still greater emphasis on legislation as a driver, with 70% believing meeting legislative requirements is critical. Companies see the legislative driver as decreasing in importance in the future, however – only 63% of companies see legislation as being very important or critical in five years time, perhaps as companies achieve better compliance with regulations.

Other key findings include:

• 95% of companies believe that Sustainability-Driven Innovation has the potential to bring business value and almost a quarter believe it will definitely deliver business value
• 60% of companies see potential benefits to their top line and 43% see further benefits to the bottom line
• However, most companies still have a long way to go to integrate sustainability into both their business strategy and product/process design – the prerequisite for pursuing Sustainability-Driven Innovation

The study draws four main conclusions:

• Sustainability-Driven Innovation is starting to offer real business value, but benefits are still intangible for many and there are still significant barriers to be overcome
• In stark contrast to five years ago, the leaders are now focusing on winning tomorrow’s customers, rather than just managing risks
• A small minority of companies have integrated sustainability into both their business strategy and product/process design
• A few leading companies are already exploring exciting breakthrough opportunities in Sustainability-Driven Innovation

To download the complete study, click here.