“People just aren’t naturally oriented towards innovation or change” Loran Nordgren - Kellogg Business School
The sustainability transitions are one of the biggest challenges that many organisations will face over the coming decades. They will require a massive change in business models. This type of change is difficult, and it's doubly difficult for finance people if the benefits are not explained to them in concepts they understand. This failure can result in roadblocks and delays, to the long term detriment of the organisation - both socially and financially.
If we are to actually make the sustainability transitions happen on the ground, we need to mobilise vast amounts of private sector finance. And to enable this, we need to find ways to use the language and culture of finance to drive change. The concept of the innovation curve can help in this. And not just in the way you may think. Yes, its a great tool for marketing. Explaining how with the right sort of focus we can grow a market, with different messages targeting different groups.
But it's application is much more powerful than that. It can also set out what actions, what investment, we need to make to get the market to grow. And this can be incredibly useful for sustainability professionals in their discussions with their finance colleagues.
"Innovation is one-percent inspiration and ninety-nine-percent perspiration" - Thomas Edison.
Innovation doesn't blossom on it's own, it needs planning. It's a bit like strategy. The high level aim is easy, it's the hard, detailed work that precedes and follows the inspiration that actually delivers the real change.
The innovation curve is a useful tool in explaining to finance professionals where we are as an organisation now, where we are aiming to get to (our strategy), and perhaps most importantly, what we need to invest in to make our planned future a reality.
A good example in the sustainability transition world is electric vehicles. All of the best policies and targets will not deliver more electric vehicles. What will ? Investment in everything from production plants, vehicle design, battery technology, supply chains, new materials, charging systems and vehicle servicing. Yes, good policy can really help get us over the hump, but on it's own it's not enough.
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Most people support sustainability until .....
We know that the majority of people, in companies and in the wider public, support the general idea of sustainability. And this support continues right up until it comes to making the required sacrifice, either financially or one that requires major changes to their lifestyle or how they work.
Looking across Europe, measures to reduce greenhouse gas emissions get widespread support. In a recent survey for the European Union 93% of citizens think climate change is a serious problem, and 88% agree that greenhouse gas emissions should be reduced to make the EU climate neutral by 2050.
So why such limited change?
If there is so much public support, why are we seeing governments scaling back, or even reversing their climate and social action commitments? And why do so many sustainability professionals express frustration about how hard it is to really drive change.
To me, it's mainly a communication gap. Or putting it in the language of tech entrepreneurs', we are failing to cross 'the chasm' between the early adaptors and the early majority. Remember you, as a sustainability professional, are most probably an early adaptor. And you are trying to persuade finance people, who mostly are either early, or even late majority.
What is the major barrier. It's finance ! We need to invest more in new ways of delivering the goods and service's that society needs. In a way that is socially, environmentally and financially sustainable. Investing is about long term value creation. The concept of investing now for a future return is well embedded and well understood. So, if we are not delivering enough investment, perhaps part of the problem is in how we pitch the changes.
Finance people think about the world very differently from sustainability professionals. They see sustainability decisions in the context of their own experience, as financial decision makers, and as consumers. And regardless of how we feel about this, it's largely finance people that make investment decisions. Deciding what factory to build, what new product or service to launch, what company to invest in or what new technology to try. These are all financial investment decisions.