In 2020, August 22 marked Earth Overshoot Day, the date that humankind had already used up all of the natural resources the earth can restore and sustainably provide within that year. This misuse of natural resources is resulting in worryingly rapid and irreversible environmental changes, for which companies, in particular, are held responsible. As a result, both consumers who show a preference for green products, and environmental regulation, are pushing companies to improve their environmental performance. In this context, eco-innovations have emerged as a key tool on the pathway towards greater sustainability. But do these eco-innovations not only benefit the environment but also the companies introducing them?

Scientists focusing on plants and technology

Studies in Eco-Innovations

In my master’s thesis, I address this question and can answer it with a definite yes, based on quantitative data from almost 3,000 German companies. The positive effect of eco-innovations can be attributed, amongst other things, to the fact that eco-innovative products differentiate themselves from regular products, and align with consumer concern for the environment. This in turn both enhances the reputation and prestige of the company,  and leads to greater acceptance of eco-products by the customers and thus also to the acquisition of new customers. Companies are able to charge a higher price and ultimately achieve higher sales figures, resulting in increased turnover. Likewise, efficient design and hence reduced use of raw materials, energy, and services, arising from the implementation of eco-innovations contribute to a reduction of a firm’s costs.

An example of this is provided by Tamayo-Orbegozo and his colleagues (2017), in their case study analyzing EROSKI, a large retailer founded in the Basque Country in 1969. EROSKI has been committed to innovation and environmental protection, and sees this as key to its success. The company strives to reduce its emission of greenhouse gases through a variety of measures. A prominent example of EROSKI’s eco-innovation commitment is the development of the first zero-emissions store in Spain and the first in Europe with ISO 50001 certification. The store led to an achievement of 60% savings in energy consumption, and therefore is considered a model for future store development both in Spain and across Europe.

However, only if a systemic and integrative view is adopted, i.e., if the circumstances are investigated under which eco-innovations make economic sense, can explicit recommendations be made to companies in order to encourage them to introduce eco-innovations and thus achieve greater sustainability. For this reason, I also examine how collaboration, as well as a dynamic business environment in the context of eco-innovations, affect their successful implementation.

Implementing Eco-innovations

Due to the complex, systemic, credence, and people-intensive nature of eco-innovations, they are characterized by a higher degree of technological novelty than non-eco-innovations. Accordingly, a multi-faceted knowledge base is a necessity for their development, which, however, is unlikely to be fully embedded within a single firm. Thus, there emerges the need to collaborate with different organizations on the basis of open innovation. For example, environmental mandates are held by regulators; universities and other research institutes possess expertise on environmentally friendly materials that comply with legal standards; suppliers have knowledge about sustainable inputs and methods of production; and feedback from households indicates market acceptance of new eco-innovations.

A library full of people studying
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At EROSKI open innovation also represents a key element in successfully implementing eco-innovations. Thus, the company collaborates with a variety of stakeholders belonging to the industrial, political, and knowledge creation spheres. In industry, for instance, they collaborate with the National Association of Large Retailers (ANGED) and foster international partnerships with supermarket chains such as Intermarche (France) and Edeka (Germany). Beyond that, the company participates in regional, national and European Union projects for the management and recovery of different types of waste and cooperates with a number of universities. These collaborations lead to win-win situations as not only EROSKI benefits from the eco-innovation engagement but also others benefit as well.  For example, also the Basque Country, which has been recognized as having high unemployment and as being one of the most polluted regions in Spain for a long time.

However, by focusing on sustainable development and thereby increasing its competitiveness, the region has managed to reverse its environmental and economic situation and is now regarded as one of the most prosperous one in Spain and the EU. Furthermore, companies that operate in a dynamic environment have to deal with the constant change or even obsolescence of everything known, which also impacts their eco-innovation activities. Hence, due to frequent environmentally-related paradigm shifts, companies face shorter life cycles of eco-products as well as processes. The resulting obsolescence of existing eco-knowledge leads to an insufficient green technological knowledge base. Relying on traditional core eco-competencies in such a context may result in them turning into core rigidities, leading to inertia and thus contributing to organizational decline.

Engineers in a workshop talking about eco-innovations
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Particularly in a dynamic environment, cooperation is therefore very helpful in acquiring the appropriate knowledge for the successful implementation of eco-innovations. Firstly, a wide range of eco-resources may be accessible via cooperation, of which those that are necessary to adapt to the dynamics of the environment can be used. Secondly, cooperative relationships involving a large number of heterogeneous partners with different skills and knowledge components, leads to the emergence of numerous diversified eco-innovative ideas and opportunities. This, in turn, allows better anticipation of environmental discontinuous change and thus better risk management. In line with these arguments, I find out that a firm’s innovative performance is indeed highest when it engages in a high level of eco-innovation intensity, has a wide breadth of cooperation, and operates in a dynamic environment.

Considering the dynamic retail industry in which EROSKI operates (i.e., facing changing consumer behavior, a retail apocalypse due to the rise of e-commerce, digital transformation as well as increasing importance of new technologies such as augmented reality and robotics), it therefore does not seem surprising that the company is able to counter and even harness these dynamics, and emerges as a healthy, high-growth company, especially due to its large number of heterogeneous eco-innovation partners.

About the Author

Fee Friedrich

Anyone interested in learning more about the master’s thesis and research about sustainability in general is welcome to contact Fee Friedrich. She holds a Bachelor in Cultural Studies & Business Administration and a Master’s degree in Management & Economics. She is currently employed as a research associate at the Fraunhofer Institute for Systems and Innovation Research.

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