All Growth Is Based on Innovation

In looking at achieving sustainable and inclusive growth, we must ask ourselves: what does this growth look like, and what is the best way to achieve this particular type of growth?

The Australian Government has invested heavily in the concept of innovation, publishing an annual Australian Innovation System Report for the last few years. The 2012 report highlights the importance of innovation to growth in no uncertain terms.

“All growth is based on innovation,” the report boldly proclaims.

Well, if this is so, what innovation is required for sustainable and inclusive growth, and how can we engender an environment that encourages it?

Sustainable growth for companies is “realistically attainable growth” that can occur without running into trouble (financial or otherwise). The sustainable growth rate (SGR) of a company, for example, is the maximum growth rate that can be achieved without increasing financial leverage. To achieve sustainable growth, companies (and countries) need both a growth strategy and growth capability.

That isn’t the type of sustainable growth we are interested in, however. Environmentally sustainable growth is the maximum growth rate that can be achieved without compromising our environmental integrity.

Australia seems to lag behind the rest of the world in this area, unfortunately. Kate Lundy, Sustainable Business Australia’s Minister for Industry and Innovation, is unflattering of our record.

Australia consistently rates at the bottom of the OECD on almost every environmental performance indicator you can find. Carbon productivity is ranked 33rd, energy productivity is ranked 22nd and material productivity is ranked 32nd out of 34 OECD countries. Even water productivity, where Australia has a good reputation for water management, is ranked 19th.

Yet, one could argue that Australia’s growth over the past few years was respectable relative to the rest of the developed world. What is needed to turn this growth — which up until now has been largely resource based — into a sustainable proposition?

The concept of Eco-Innovators is one that has gained prominence in the last couple decades. Eco-innovation works towards products, processes, and ultimately (we could say) policies that contribute to sustainability and sustainable development. From a quantitative point of view, innovators of this class are thirty percent more likely to increase productivity, forty percent more likely to increase the number of export markets targeted, sixty-eight percent more likely to increase training for employees, and forty-one percent more likely to increase social contributions, says Lundy.

In Australia, however, only five percent of the business population identifies as an eco-innovator.

So, how can we utilize the concept of innovation — and its sustainable brother, eco-innovation — to bring more businesses, and ultimately countries, into the fold? It is difficult enough when, according to the 2012 report, thirty-two percent of Australian businesses lack any innovative culture at all.

Sustainable Business Australia says the Australian business community needs to “exhibit team-leading capacities, global thinking and strategic vision, have an ability of inspiration, evidence creative management, and resources integration capability.”

These things do need to happen, but the effort needs to go deeper. If businesses are to move in a concerted way towards sustainable growth, one of two things needs to happen. First, there is the option of instigating a complete cultural change such that business begins to see the value of sustainability and the environment on par with, if not exceeding the importance of, the financial bottom line.

More realistically in the short term though, eco-innovation and sustainable growth need to be shown to make business sense. It does, the numbers show, but for some reason, not all companies are convinced — or perhaps, they don’t yet have a strategy  for making the shift or lack the capacity to do so.

Whose role and responsibility is it to ensure that companies, particularly the small- and medium-sized enterprises, begin to strategize around sustainability? Should we depend on the government, as we do in Australia, to legislate change? Or should companies take up the mantle of sustainability themselves, as software company Autodesk did, and prove to society that it can be done, creating a social license that consumers value?

All these questions and more.