System innovation for sustainability: a systemic double-flow scenario method for companies
Introduction
In order to achieve sustainability there is a requirement for societal transformation covering institutional, social/cultural, organizational as well as technological change (Loorbach, 2010). The process of societal transformation to achieve sustainability is defined as the transition to sustainable socio-technical systems or system innovation for sustainability.
Interest in system innovation for sustainability started in the early 1990s, initiated by the Dutch National Inter-Ministerial Programme for Sustainable Technology Development (see Weaver et al., 2000). This was followed by several other projects (Elzen et al., 2002, Elzen et al., 2004, Geels, 2002a, Green and Vergragt, 2002, Hofman, 2005, Loorbach, 2010, Partidario, 2002, Partidario and Vergragt, 2002, Quist et al., 2001, Raskin et al., 2006, Tukker et al., 2008, Vergragt, 2000, Vergragt, 2005). Recent developments discussed the dynamics within the socio-technical system (Geels, 2005, Smith et al., 2005), identified transition typologies (e.g. De Haan and Rotmans, 2011, Geels and Schot, 2007), developed transition arenas and proposed a management approach to such transitions (Loorbach, 2010).
System innovation is defined as ‘a transition from one socio-technical system to another’ (Geels, 2005, p. 2) and occurs when the societal system functions differently and thus there is a requirement for fundamental structural change (Frantzeskaki and De Haan, 2009). Historical examples of system innovation include transitions from sailing ships to steam ships, from horse-and-carriage to automobiles, and from piston engine aircrafts to jetliners (Geels, 2002b, Geels, 2005). The agricultural and industrial revolutions were profound system innovations which fundamentally changed how society operated. Society is experiencing another profound system innovation through the current development and diffusion of information, communication, green and nano-technologies. Since system innovation transforms the wider societal context, it covers not only product and process innovations but also changes in user practices, markets, policy, regulations, culture, infrastructure, lifestyle, and management of firms (Berkhout, 2002, Geels, 2006, Kemp and Rotmans, 2005, Sartorius, 2006).
Companies have important roles in developing the technologies of the new system (Charter et al., 2008). Depending on the level of response to sustainability issues, companies can be grouped under six categories: rejection, non-responsiveness, compliance, efficiency, strategic proactivity and the sustaining (transformed) corporation (Dunphy et al., 2007). The majority of companies which respond to sustainability issues currently fall under compliance and efficiency categories. As a result, although there is an observable change in businesses, this has not yet reached a leverage point to contribute in systemic transformations toward sustainability. A transformed company adopts a model which ‘reinterprets the nature of the corporation to an integral self-renewing element of the whole society and its ecological context’ (Dunphy et al., 2007, p. 17), as opposed to a conventional profit-centered value generation model. Shifting a company’s sustainability approach to a transformed one needs to occur as part of the broader societal transformation. Therefore, the strategies should be developed with references to the expected and desired systemic changes.
There are several different business models and management and innovation strategies. The options cover product/service/process innovations, implementing environmental management systems, devising corporate social responsibility frameworks and implementing several design-for-sustainability approaches. It is not possible to generate generic strategies which will be applicable to all companies. The sustainability challenges and drivers/barriers relevant to companies are contextual; so are the strategies to address challenges. Companies need to develop a systemic understanding of their role and impact in the society and start aligning their products/services, strategies and business models with long-term sustainability visions in a systemic way.
While theory around system innovation is elaborate, it provides only limited explanations as to how companies fit into the big, long-term picture of system innovation. Recent contributions articulated different perspectives on system innovation including policy perspective, business perspective, design perspective and consumer perspective through cases, examples and some models (e.g. Frantzeskaki and De Haan, 2009, Geels, 2005, Geels, 2006, Geels, 2010, Geels and Schot, 2007, Grin et al., 2010, Joore, 2010, Loorbach et al., 2010, Rotmans et al., 2001, Smith et al., 2005, Tukker et al., 2008, Vergragt, 2005, Weaver et al., 2000). However, the mutual relationship between activities of companies and wider societal change at the societal level has been insufficiently researched (Korhonen and Seager, 2008). In addition, the contributions have been primarily occupied with creating market incentives and business cases (Parrish, 2010).
For example, the Natural Step (TNS) uses a strong, principles-based approach to sustainability within an industrial context (Holmberg, 1998, Holmberg and Robèrt, 2000, TNS, 2011). The educational value of TNS for company managers and employees is well recognized but the four system principles used by TNS reflect a simplified material accumulation model that is not designed to account for ecological, let alone socio-economic complexity (Upham, 2000). TNS also operates within the “business-case” discourse and does not challenge the assumption that a company’s bottom-line objective is to make (financial) profit (Sandström, 2005) which remains highly under-examined in the mainstream business and innovation literatures (Parrish, 2010).
There is a lack of tools to enable companies to analyze themselves in the context of socio-technical systems they reside in, understand implications of sustainability issues for their business and devise their own innovation strategies in such systemic change toward sustainability. This paper presents a new scenario method with a specific focus on generating innovation pathways for product development to respond to the needed and upcoming systemic changes toward sustainability. Addressing the product development level is crucial in system innovation because it is:
- 1.
the key business function of companies (all companies deliver products and/or services to generate financial and societal value);
- 2.
the operational and strategic level within which the required business transformation will manifest itself over time;
- 3.
where the new technologies and products/services of these technologies will be developed;
- 4.
where the new markets and new user profiles of new socio-technical systems will be envisioned;
- 5.
where the technical characteristics of the new products and services will be determined, and;
- 6.
where the social meaning of products/services will start to form.
Although the scenario method focuses on product development, it takes a systemic view. The scenario method links product development to the visions of sustainability at the societal level. Companies are then able to relate product development to the organization and to society, as compared to standard product-centered design and development approaches. Therefore, it is a significant contribution to the ongoing dialog on system innovation in general and how companies can be (pro)actively involved in longer-term societal level changes toward sustainability specifically.
This paper outlines the theoretical, conceptual and operational frameworks of the scenario method, then discusses the results of the evaluation carried out to establish the value and significance of the scenario method. Outstanding issues are discussed, followed by conclusions.
Section snippets
Theoretical underpinnings and conceptual framework
Sustainability is:
- a)
a system property and not a property of system elements (Clayton and Radcliffe, 1996);
- b)
a dynamic and contextual property of systems (Faber et al., 2005, Hjorth and Bagheri, 2006);
- c)
a “moving target”, updated on a continuous basis as a result of continuously improving understanding of dynamic conditions of sustainability.
Products, services, technologies and organizations cannot be regarded as sustainable in their own right but they may be elements of sustainable socio-technical
The fieldwork
The scenario method was evaluated to establish its potential value and uptake by companies and its potential to aid in achieving system innovation for sustainability. One-on-one consultation sessions were held with expert users to obtain feedback on the workshop process. A potential expert user of the method was defined as any person who has expertise in providing advice/consultancy to businesses in the joint area of sustainability and innovation and/or any person who has expertise in
Conclusions
Innovation at the system level requires companies to align their products/services, strategies and business models with long-term sustainability visions in a systemic way. Despite increasing interest and promising developments in research addressing sustainability issues in innovation, existing approaches, tools and methods are not sufficient to guide the industry toward system level innovation. Consequently, confusion on how to relate long-term sustainability requirements to day-to-day company
Acknowledgments
New Zealand Foundation for Research and Technology is gratefully acknowledged for funding this research. The authors would like to thank two anonymous reviewers for their constructive feedback and comments on earlier drafts of this article.
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