Thoughts on health, happiness and sustainability

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Why Sustainable Innovation Fails

On Saturday I attended an open day at REAPsystems, a battery technology company in Southampton. Founder and CTO Dennis Doerffel explained some history of the company and introduced Project Venice, their groundbreaking project to help eliminate air pollution, noise pollution and vibration damage to buildings caused by the hundreds of diesel boats in the city of Venice.

Dennis then spoke about why sustainable innovation so often fails when humans are so successful at innovating in almost every other way.

There’s an inherent issue that innovation costs money, and so investors want to know that they will be able to charge a premium for the new technology. Otherwise, it will inherently be more profitable to keep promoting the old technology. This is possible for many advancements because people will pay a premium for a more powerful computer, a lighter bicycle, a higher-resolution camera or a smaller phone. They will pay a premium because it directly benefits them, whether that is by genuinely making their lives better, by improving their business, or by simply giving them something to show off about.

Sustainable innovation on the hand, rarely offers a tangible benefit to the customer. The benefits are primarily for society at large. The only direct benefits to the consumer are usually the good conscience of buying a more sustainable product/service and the possible energy savings. The problem is that people will gladly buy something that gives them a good conscience, but they will rarely pay any extra for it. Similarly, they will gladly buy something that saves them money on their energy costs in the long run, but not if there’s a significant premium up front because future potential savings are never valued as much as money saved up front, so we have a catch-22.

Consumers will not pay a premium for new, more sustainable technology and investors will not fund the development of sustainable technologies unless they believe that consumers will pay a premium for them compared to the old technology. It’s hard to break this catch-22, but there are a couple of possible solutions. Firstly, we can focus on innovations that not only have sustainability benefits, but also other benefits to the consumer, and treat those other benefits as the primary drivers for the innovation and sustainability as a positive side-effect. Secondly, we can fund the innovation ourselves. In some cases we may need to do both.

Tesla is an incredible success story, but it only got off the ground because Elon Musk was determined to build a product that was genuinely better than any motorcar that had gone before it and he was prepared to put millions of dollars of his own money on the line to make it happen. REAPsystems are taking a similar route with Project Venice, putting in a substantial amount of their own money, and soon launching a Crowdfunding campaign so that they can prove the technology and hopefully develop a market for it without waiting for investors or larger manufacturers to get behind it.

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