ENVIRONMENTAL INNOVATION: NATURE, DETERMINANTS AND TYPES
As a Social Innovation, Environmental Innovation incorporates ethical arguments to products, processes and organizational modes of the company. This statement, however, lacks specificity. Therefore, it’s necessary to specify in more detail its nature, its determinants and the different types of environmental innovations in order to understand the strategic options in the environmental field.
Some academics suggest that Environmental Innovation have different natures (Rennings, 2000). Thus, its nature can be technological, organizational, institutional or social. Technological nature can be seen in environmental technologies for the prevention of environmental pollution or for the control ofthe same, commonly called “end of pipe”. In relation to its organizational nature it includes environmental management tools such as ISO 14001 or EMAS. Institutional and social nature can be seen in the environmental institutions such as the intergovernmental panel on climate change and in changes in styles and dynamics of life and consumption respectively.
However, arguing that Environmental Innovation has different natures implies, from our point of view, to assume a very limited concept of Social Innovation. Accordingly, the social nature of Environmental Innovation would be restricted exclusively to changes in lifestyles and consumption habits, leaving out those changes in behavior and relationships of individuals as a result of the emergence of administrative and technological
environmental innovations such as environmental management systems or recycling of materials for re-entry into the production process. In other words, under that limited scope of the social nature of the Environmental Innovation, we are not considering the changes (in behavior and relationships) that occur inside the business when administrative or technological environmental innovations are implemented.
We believe, therefore, from Business Strategy, that is more appropriate to use a broad definition of Social Innovation. A broader definition of the concept is needed in order to be able to classify as environmental innovations the changes (in behavior and relationships) that occur inside the business when administrative or technological environmental innovations are implemented.
Environmental Innovations have been defined from different points of view. Thus, according to Chen et al., (2006), Green Innovations are hardware or software innovations related to green products or processes, including the innovation in technologies that are involved in energy-saving, pollution prevention, waste recycling, green product design or corporate environmental management. Kemp et al., (2001, in Horbach, 2008) argues that Environmental Innovations consist of new or modified processes, techniques, systems and products to avoid or reduce environmental damage, and according to Rennings (2000), Environmental Innovations can be defined as the measures of relevant actors consisting in the development, application or introduction of new ideas, behaviors, products and processes that contributes to a reduction of environmental burdens or to ecologically specified sustainability targets.
In line with the extensive concept of Social Innovation that we are using in this chapter, Rennings’s definition is the one that fits better to our purposes since it refers not only to environmental product and process innovation but also to ideas and behaviors, which, from our point of view, are particularly important to understand environmental organizational innovations like environmental management systems or “green teams”. Note that this definition encompasses technological environmental innovations as well (regarding the changes in behavior and relationships that occur inside the business technological environmental innovations are implemented) as we have highlighted before.
Regarding the determinants of Environmental Innovation, the literature suggests that these are supply factors, demand factors and institutional and political influences (Horbach, 2008). From the supply side, the Environmental Innovations (as many innovations) are conditioned by the available technological possibilities of the firm and by the return appropriation of the innovation activities. At this regard, the double externality problem must be highlighted. Environmental Innovations, besides the positive externalities from spillovers which are common to all innovations, are characterized by the fact that while the whole society benefits from a technical environmental innovation, the cost have to be borne by a single firm (Rennings, 2000).
From the demand side, both the potential market demand and the social awareness can determine the posture of the firm regarding the Environmental Innovations. Thus, through the Environmental Innovation, firms may have access to those segments of the market willing to pay a premium for green products (Miles et al.,
1997) and also create a green reputation (Chen, 2008). Furthermore, companies can leverage their reputation for environmental innovation to gain preferential access to new and lucrative businesses like waste management, recycling services and environmental impact analysis among others (Nidumolu et al., 2009).
Figure 2. Types of environmental innovations
In relation to the institutional and political influences, the role ofthe environmental regulation should be noted. First, environmental regulation may force firms to realize economically benign Environmental Innovation, and second, firms may find early movers advantages from adapting to
regulation before than their rivals (Porter & Van der Linde, 1995; Horbach, 2008).
Finally, in addition to the nature and determinants of environmental innovations, we must refer to the environmental innovation types in order to show a complete picture of the topic. Thus, following the OECD (1997) Guidelines, we can distinguish between technical and organizational innovations. Thus, technical environmental innovations are specific kinds of innovations that consist ofnew or modified products and processes to avoid or reduce the environmental burden, and environmental organizational innovations include the re-organization of processes and responsibilities within the firm with the objective to reduce environmental impacts (Rennings et al., 2006). (Figure 2)
Among technical environmental innovations we can find environmental process innovations and environmental product innovations. As process innovations we can include those aimed at reducing energy consumption during the production process or those that convert waste into new ways of creating value, both through its reuse within the enterprise or outside, selling the waste in those businesses where they could be useful (Porter & Van der Linde, 1995). Among environmental process innovations we can include the reductions in air or water emissions, improvements in resource and energy efficiency, reductions in water consumption and switching fossils fuels to bioenergy (Kivimaa & Kautto, 2010).
Environmental process innovations can be subdivided into innovations in end-of-pipe technologies and innovations in integrated technologies (also called cleaner production technologies). While end-of pipe technologies are oriented to comply with the environmental regulation (waste disposal, water protection, noise abatement or air quality control technologies), cleaner production technologies emphasize continuous improvement and cost minimization. Examples of cleaner production technologies are the recirculation of materials, the use of environmental friendly materials and the modification of the combustion chamber design. Some authors, adding more detail to the technological environmental innovations typology, distinguish between end-of-pipe integrated (preventive) and end-of-pipe non integrated (control) depending whether these technologies
are integrated in the production process or not Hartie (1990, in Hemmelskamp, 1997).
On the other hand, among the environmental product innovations we have to mention product design innovations like those responding to the concept of “design for disassembly”, which is based on creating products that are designed for easy recovery, dismantling and recycling, thus extending the life of each of the components (Shrivastava, 1995b), improvements in the durability of the products, raw materials reductions, selection of environmentally less harmful raw materials and removal of hazardous substances (Kivimaa & Kautto, 2010).
Environmental organizational innovations, in turn, can be supporting factors for technical environmental innovations. Among them, we can mention as one ofthe most prominent initiatives the utilization of environmental management systems (EMS) like EMAS (Environmental Management and Auditing Scheme) or ISO 14001 and the “green teams” which are composed of members of the organization from various departments and levels of responsibility whose job is to advise the company on the impact of their activities on the environment. This advisory work covers all areas of business activities and includes the development of programs for waste management, energy and resources conservation or renewable energy sources exploration (Shrivastava & Hart, 1995).