Sustainable Innovation Lecture Notes

Sustainable Product & Business
Model Innovation
Dr. Robert Gerlach
Lecture Notes
Steinbeis University Berlin, 2018
Module: Integrative General Management

About
This is a summary of the lecture notes for the “Sustainable Product & Business Model Innovation” course taught
at Steinbeis University Berlin by Dr. Robert Gerlach. The methods taught in this course have been applied and
implemented in practice in a wide range of industries and can be downloaded for free at threebility.com.
The concepts taught in this course have been introduced in several other universities. If you are a university
lecturers wishing to introduce these methods into your curriculum, please get in touch.

Contents
3
1. Learning Objectives
2. Introduction to Sustainable Innovation
3. Tools & Methods for Sustainable Innovation
4. Deep Dive, 38 Business Models
5. Conclusion & Further Reading

Contents
4

By the end of this course you will:
5
1. Understand the economic & ecological opportunity
of sustainable product & business model
innovation
2. Know about and be able to apply a wide range of
tools and best practices for sustainable product &
business model innovation
3. Have gained insights into a large number of
successful sustainable business models

Most importantly:
6
4. You should be keen to make a positive impact in
organisations, startups or with your own business

Contents
7

Sustainability is an urgent need
9
It now takes the Earth one 1.6
years to regenerate the
resources we use in 1 year.

But sustainability is also a business opportunity
10

Overview of sustainability opportunity: push & pull
11Source: R. Gerlach, “Connected Business as a Driver for Sustainable Innovation”, mm1, 2015
Pressure from government
& society
▪ Tightening governmental
regulation
▪ Positive government
incentives
▪ Pressure through social
activism
Emerging business
Opportunities
▪ Customer demand
▪ Technological advance
▪ Process optimisation
▪ Risk reduction
Transformation of business
mission
▪ Drive towards circular
economy models
▪ Digital transformation
▪ ‘Green’ supply chain
partnerships
Market pressure
▪ Rising & extremely volatile
commodity prices (energy,
raw materials)
▪ Pull from investors
▪ Threat of disruption

Sustainable Innovation is a powerful enabler to grow
profits and de-risk your business

Positive business impact of sustainable business practice
13
Higher Margin Higher Revenue
Improved business case drivers and increased return for
shareholders
Costs Employees Brand Product
Speed &
Risks
Investment
• Optimised use
of energy and
resources
• Optimised
processes &
supply chain
• Lower taxes
• Improved ability
to attract, retain
& motivate
employees
• Improved
employee
productivity
• Stronger brand
and greater
pricing power
• Improved
customer loyalty
• Lower churn
rate
• Opportunities to
seize the
innovative high
ground via
disruptive
sustainable
innovation
• Pre-empting
regulations via
proactive
innovation, Risk
Management
• Greater access
to investment
capital
• Lower cost of
capital
Higher ValuationIncreased Profits
Source: R. Gerlach, “Connected Business as a Driver for Sustainable Innovation”, mm1, 2015

Most importantly:
sustainability drives innovation

Sustainability recognised as strong driver for innovation
15
Additional
boundary
conditions
stimulate thinking
about new
approaches to
solving known
problems
New Boundary
conditions
New
perspective
New
Focus
Helps companies
approach situations
differently,
enabling them to
see situations from
a different point of
view
Can help
companies to focus
on new areas for
product
development with
previously
untapped market
potential
Companies who are leaders in sustainability are
more than 400% more likely to be innovation leaders
Innovation is a key driver for economic growth

Current state of sustainability in the corporate world
16

69 of global CEOs
believe that investor
interest in sustainability
will become an
increasingly important
factor for securing
business finance
Sustainability recognised as important by many CEOs….
17
76 of global CEOs believe
embedding sustainability into core
business will drive revenue growth and
opportunities.
63 of CEOs expect
sustainability to
transform their industry
within five years84 of global CEOs report that they
are actively investing in and employing
connected and digital technologies to
advance sustainability.
93 of global CEOs view
sustainability as important for the
future of their companies
54 of companies’ sustainability
heads anticipate that they will see
“significant” or “transformational” change
in their firms’ sustainability management
practices by 2015
69%
93%
54%76%
84%
63%
*Source: The UN Global Compact-Accenture CEO Study on Sustainability

…and almost every company now has CSR department
18
In the traditional understanding
of corporate social responsibility
(CSR), a business reacts to and
complies with laws, ethical
standards and national or
international norms.

But there are limits to a reactive CSR model
19
Corporate Social Responsibility in the traditional sense is only a
partial solution
…
One that can be misused to create an illusion of responsibility

We need a fundamental shift in our thinking…
20
Let’s compensate for
the unsustainable
things we do
Let’s fundamentally
change the way we do
business
towards
Let’s make financial
sacrifices to be more
sustainable
Let’s capture new business
opportunities to become
more innovative
towards

And broaden our horizons
21
Reduce CO2 footprint
of your own company
Design innovative products and
services to reduce CO2 footprint
and promote sustainability during
product use
Horizon 1 Horizon 2
Reasonable
progress &
strong existing
incentives
Work to do

„It’s more important to offer
sustainable products &
services than to look green“

The Goals of Sustainable Product & Business Model
Innovation
23

24
Sustainable Product- & Business Model Innovation refers to the
design of products, services and business practices that maximize
sustainability effects whilst at the same time being profitable.
Whilst CSR is often reactive, Sustainable Product- & Business Model
Innovation is proactive and a strong driver for business growth!

Key to 21st century sustainability: resource decoupling
25
Time
Business activity
Resource Use /
Environmental
Impact
Resource decoupling
Intensity
1970 2017
Business activity growth
needs to be decoupled from
resource usage and – by
extension – environmental
impact.

In order to make a positive long-term impact, we need to …
26
All of this whilst remaining profitable and competitive!!!
1. Reduce resource & energy consumption
2. Maximise societal & environmental benefit
3. Promote a closed-loop system where nothing is wasted
4. Promote delivery of functionality / experience over
ownership
5. Encourage a system built on collaboration & sharing.

It can be done - profitably!
27
Pre-empted government ban on
lead solders in electronics products
by experimenting with alternatives
for 10 years. By time of ban, HP
complied with regulations before
other companies were able to do
so.
Raised fraction of recycled
equipment from 5% in 2004
to 45% in 2008, reduced
recycling costs by 40%.
Recycling became profit
centre and contributed
$100M to Cisco’s bottom 4
years later.
Charges 15 to 30 % more for
sustainable products because
its customers are able to
generate increased product
margins through green
products.
Green Products line, stablished 2004,
by 2010 already accounted for 37.5%
of overall sales, with the target for
2015 to reach 50%.
Sustainable product line yields
significantly higher growth rates and
margins than standard product lines.

4 Trends Driving Sustainable Product & Business
Model Innovation
28

The Circular Economy – The problem with waste
30Source: Waste to Wealth – The Circular Economy Advantage, 2015
• Wasted resources are energy and materials that cannot be
continually regenerated and are gone forever when used
• Products with wasted lifecycles have artificially shortened
life cycles (in-built obsolescence)
• Products with wasted capability sit idle for much of their
lives (e.g. cars)
• Wasted embedded values are components, materials &
energy that are not recovered from disposed products

The Circular Economy - more than just recycling
31Source: Ellen MacArthur Foundation circular / Braungart & McDonough and Cradle to Cradle (C2C)

Sources of value creation in the Circular Economy
32Source: Ellen MacArthur Foundation circular economy team

Potential economic impact of circular economy Europe only
33
Source: Ellen MacArthur Foundation circular economy team
3% of additional annual
productivity growth
€ 0,6 trillion
per year benefit by 2030 to
Europe's economies
€ 1,2 trillion
additional non-resource and
externality benefits
7 % GDP increase
relative to current development
scenario

Technology is a
Sustainability
Enabler

Example: Internet of Things as a catalyst for sustainability
35
Autonomous Driving
Smart City
Smart Home
Industry 4.0
Agriculture 4.0
IT-for-Green
Wireless
Networks
Real Time Traffic
Cloud Computing
Smart
Grid
Ecosystem
Society
Economy
Car Sharing
From optimised processes to improved decision making – connected technologies are a
driver for sustainability. They also offer high potential scalability of sustainability effects.

Internet of Things and ICT offer high return on invest
36*Source: GeSI, SMARTer 2030, 2015
0
10
20
30
40
50
60
70
2030 with Business as usual 2030 with ICT enabled
abatement
GtCO2emissions
ICT Footprint All other GHG emissions
-20 %
The savings potential of ICT
amounts to 12 GtCO2 – more than
the total emissions of China today
Currently, ICT has a carbon footprint
comparable to the complete global air
traffic (~2%). At the same time ICT has
the potential to reduce greenhouse gas
emissions by the year 2020 by 20%! *
ICT Savings
Potential
High return on sustainability investment: 20% CO2 savings potential vs 2% energy use
At the same time, ICT could generate $11 trillion in economic benefits by 2030*

High business potential across all major industries
37
Substitution Optimisation Incentivation Other (i.e. Decision Making,
Life Cycle, Waste)
Transportation Car Sharing, Virtual
Mobility
P2P Parking, Inter-
modal transp.
EcoDriving, Pay-How-
You-Drive
ITS, intelligent POI, C2C/C2X
Telco, IT, Entertain Cloud Infrastructure,
ePaper, VoD
Energy efficient
devices, Green IT
HW-SW Life Cycle Mgmt.
Modularisation
Production & Eng. Automation Robotics, Industry 4.0,
stand-by oper.
Production Process Mgmt.,
3D Printing
Energy & Construction Grid-Decentralisation Smart Home, Smart
Grid
Supply Mgmt., Demand
Mgmt.
Health Care Tele health Quantified Self, Health
Applications
Big Data driven Smart Health
Goods & Services Virtual goods, E
business
Green material selection via
CAD* plus LCA**
Public Sector E-Governance, E-
Bureaucracy
Agent Based Policy & Service
Models, Big Data
Raw Materials, Agric. Agriculture 4.0 Supply Chain Mgmt. & Life
Cycle Mgmt.
Sustainability Lever
Industry
*Computer Aided Design, ** Life Cycle Analysis

The Collaborative & Sharing Economy is on the rise
39*Source: PwC, 2016
Peer 2 Peer
Transportation
Peer 2 Peer
Accommodation
Industrial
Symbioses
On demand
household
services
On demand
business
services
Collaborative
finance
By 2025, many areas of the sharing economy predicted to rival the size of traditional counterparts,
with platforms in 5 main sectors generating revenues over €80 BN and enabling nearly €570 BN of
transactions in Europe alone.*

Established industries are increasingly threatened by
innovative startups – example recycling industry
41Source: R. Gerlach “Digital Business Innovation in the Recycling Industry”, mm1, 2017

Logistics optimization
Logistics support and optimization of processes within the recycle value network
Re-Commerce Platforms
Broker activity between waste providers & resource processors; allows for comparison of offers of valuable resources and
therefore increase transparency in the market
Waste usage
Transformation of waste into valuable
resources or consumer products
Waste sorting
Smart sorting of waste &
assortment of resources
Waste acquisition
Collection of a defined set of waste and
extraction of valuable resources
Startups are threatening complete recycling value chain and
accelerate the unbundling process of the industry
42Source: R. Gerlach “Digital Business Innovation in the Recycling Industry”, mm1, 2017

▪ Manufacturing companies buy
valuable materials from haulers
▪ Materials are reused and
recycled
Example: Rubicon Global – a cloud-based platform
connecting businesses and independent haulers
0
Recycling Companies
▪ Rubicon supports businesses of
all sizes to get out of existing
waste disposal contracts
▪ Businesses can arrange for trash
pick up within one hour via
Rubicon‘s app
▪ Disposal job auctioned on the
Rubicon platform
Producers of waste
On demand pick-ups
Cost reduction (~30%)
Customized reports
CSR management
+
+
+
+
▪ Haulers acquire their business
by bidding on the disposal job
▪ The app helps haulers to
optimize their routes and get
real-time information on their
truck fleet
Independent haulers
Low-cost acquisition of
new customers
Increase route efficiency
Customized reports
+
+
+
Cost-efficient acquisition of
valuable resources
Diversion of waste from
landfills
+
+
Leonardo Di Caprio
- Hollywood actor –
Marc Benioff
- Founder & CEO of –
Investors
Current valuation
500+ Mio. $
Source: R. Gerlach “Digital Business Innovation in the Recycling Industry”, mm1, 2017

Contents
44

Let’s be realistic:
there are a lot of
challenges standing
in the way of
sustainable
innovation

Challenges to Corporate Sustainable Innovation
47
▪ Lack of methods for systematic sustainable product innovation
▪ Lack of or wrong KPIs and lack of data on impact of current initiatives
▪ Sustainability is seen as a cost creator, not a business driver
▪ Disconnected from core business strategy, often reactive
▪ Sustainability seen as primarily a marketing tool
▪ Disconnect between pubic claims to action & organisational practice
▪ Lack of resources
▪ Lack of accountability & incentivisation /performance measurement
▪ Insufficient regulation, i.e. to internalise external costs
▪ Sustainability addressed in silos (CSR department, with little influence)
▪ Value of short term gains over long term benefits (short termism)

We need tools which
49
▪ Clarify the link between sustainability, business opportunities and
risk
▪ Translate sustainability targets into specific product design / daily
activities
▪ Script simple guidelines that are specific, measurable and
achievable
▪ Are applicable at different levels of hierarchy (from CFOs to product
designers)
▪ Accurately measure the right Sustainability KPIs

We need an organizational and employee mindset where
50
▪ Every employee recognises his ability to actually make a difference
by developing solutions to address one of the most important issues
of our time
▪ Sustainability is not seen as a mere PR tool, but walking the talk
becomes the goal
▪ Integrated thinking predominates the organisation: Sustainability
cannot be managed from a silo
▪ Short term and long term interests are balanced

We need processes which
51
▪ Can be realistically incorporated into day-to-day practice & become
part of governance processes
▪ Incentivise collaboration with other stakeholders, such as regulators,
competitors and those within the supply chain
▪ Address the ‘why are we doing this’ question and explain the
importance of sustainability in everyday terms, rather than abstract
notions

We need targets & incentives to
52
▪ Link overall sustainability goals to individual business unit ambition
▪ Link the achievement of sustainability impact by employees to his or
her targets & performance measurement

We regulation which
53
▪ More aggressively incentivises companies to internalise external
costs to the environment
▪ Incentivises companies to shift the balance from short term to long
term strategies, i.e. via financial regulation

▪ Lack of methods for systematic sustainable product innovation
▪ Lack of or wrong KPIs and lack of data on impact of current initiatives
▪ Sustainability is seen as a cost creator, not a business driver
▪ Disconnected from core business strategy, often reactive
▪ Sustainability seen as primarily a marketing tool
▪ Disconnect between pubic claims to action & organisational practice
▪ Lack of resources
▪ Lack of accountability & incentivisation /performance measurement
▪ Insufficient regulation, i.e. to internalise external costs
▪ Sustainability addressed in silos (CSR department, with little influence)
▪ Value of short term gains over long term benefits (short termism)
Key challenges addressed in this lecture
54
Directly addressed in this course
Indirectly addressed

Step by step is
the key to
success

Be realistic not idealistic – take sustainability step by step
57
• None by definition
None
low
high
Positive
• Low investment costs
Positive
• Increasing Market share by being
early adopter
Positive
• Increasing innovation capability
• Improving perception of product quality
• Reducing risk (environmental, LtO)
• Increasing attractiveness for new talent
ActionsImplications
Negative
• Missed opportunity to innovate & grow
• Abandoning sustainability-sensitive
customer segments
• Jeopardizing License to Operate (LtO)
• Increased challenge to attract top talent Negative
• Medium investment volume required
Negative
• Extensive amount of resources needed
• High investment costs
• Increasing Risk
medium
medium
low
high
high
high
1) Business as Usual 2) Pragmatic Approach 3) Radical Turnaround
Investment
Opportunity
Risk
• Anticipating regulations
• Successive improvement of sustainable
efficiency & portfolio
• Opportunistic PDP & BMDP– Sustainable
and cost-sensitive
• Organisational transformation
• Complete transformation towards
sustainable business & portfolio
• Preempting and shaping regulations
• Fully sustainable PDP & BMDP

Sustainable Innovation as a kick starter
58Source: “Connected Business as a Driver for Sustainable Innovation”, mm1, 2015
Sustainable Product- & Business Model Innovation is not
sufficient, but can be a key enabler for the pragmatic approach,
kick starting the sustainable transformation of a company

Tools, Methods & Best Practices for Sustainable
Product Innovation
59

We need to change the product
design process

It is vital to incorporate sustainability at the very beginning of
the product- and business model design process
61
$
Psychology
Technology
Commercial
Sustainability Holistic product- &
business model design
It is much easier to design a product sustainably from the start than to change it later on

Conception Concept Validation Test & LearnBuilding
Product & Business Model Innovation Themes
Selection of tools & methods
• Empathise with
user
• Identify problem
• Create idea for
solution &
business model
• Define hypotheses
• Validate
Hypotheses
• Define (rapid)
prototypes, paper
prototypes and
MVPs
• Build, test & learn
Design Thinking
Lean Startup Method
Value Proposition Canvas
Sustainability-SWOT Analysis
Sustainability Balanced Score Card (S-BSC)
Sustainability Levers Framework
Sustainable Product Development Script
• Definition of
metrics & KPIs
• Test functionality,
process, usability,
customer
acceptance
(Post) Launch
• Launch if
deficiency free
• Marketing &
growth
• Continuous mgmt.
and improvement
Iterate
Tailored Tools & Methods for
Sustainable Product Development
Standard Tools
and Methods
Life Cycle Assessment
Sustainable Business Model Canvas
How to incorporate Sustainability into the design process

Anchor: Consider all aspects of product life cycle from start
65
Product
Value & LT
Extension
Energy
Efficiency
Substance
& Material
Emissions
Batteries
Packaging
& Packing
End of Life
treatment
Design for
Manufact-
uring
Smart
Usage
• Take into account complex and
interacting aspects of the complete
product life cycle, considering
economy, ecosystem and society
• Each major aspect, i.e. Smart Usage, is
treated along an integrated
sustainability approach and according
to the latest industry consensus and
standards
S-PDP
$$$

67
GAINS
PAINS
CUSTOMER
JOBS
PAIN
RELIEVERS
GAIN
CREATORS
PRODUCTS &
SERVICES
Value Proposition Customer Segments

threebility.comThreebility
Project: Owner: Version:Sustainable Business Model Canvas
Sustainable
Partners
Sustainable
Value Creation
Sustainable Value
Proposition
Sustainable
Customer Relation
Responsible
customers
Sust. ChannelsSustainable Tech
& Resources
Who are possible partners in becoming
more sustainable?
How can we make the whole supply chain
sustainable, transparent and circular?
Can we cooperate with partners form
other industries to form an industrial
symbiosis?
Can we shape anticipated environmental
regulations by partnering and cooperating
with relevant regulatory bodies?
Which are our key activities? How can
we adjust them (e.g. manufacturing) to
ensure sustainability?
Which enabling sustainable
technologies can be used?
Which 1) natural, 2) energy and 3)
technical resources do we need?
Can we substitute any for more
sustainable resources?
How can we make our distribution
channel more sustainable and circular?
How do we best communicate the
sustainable aspect of our product / service?
Which problem do we solve, which
value do we create?
What are function & form of our
product or service?
Can we solve our customers‘ problems
more sustainably?
Can we transform sustain-ability into
customer value?
Is ownership necessary or is the product
as a service model applicable?
Can we extend the product life cycle?
Which customer relationships satisfy
customer expectations and are
sustainable?
How can we make current relationships
more sustainable?
Who are our customers? How can we
enable them to act sustainably?
Which target customers may help to
promote our sustainable solution?
End of Life
What happens at the end of the product
life cycle?
Can the product be profitably recycled,
upcycled, reused, refurbished?
Cost Structure & Additional Costs Subsidisation
What are the required costs and investments for my endeavour?
Which resources / activities are the least sustainable? Do sustainable alternatives
exist? Is switching economically reasonable?
Do tax bonuses & subsidies or 3rd
party funding exist for my endeavour?
Revenue & Sustainability Premium
Which are existing and possible revenue sources?
Are customers willing to pay a premium for sustainability?
Can we create a unique advantage due to sustainable proposition elements?
Do price structures exist that incentivize sustainable customer behaviour?
Negative Impact (Minimise)
What are negative 1st, 2nd and 3rd order effects, and how can these be minimised? Is harmful waste
generated that requires expensive disposal? Are there rebound & induction effects or new technological
risks?
Positive Impact (Maximise)
What are positive 2nd and 3rd order effects of your product on planet, society, the economy or your
organisation (e.g. brand)? How can these impacts be maximised along the complete product life cycle?
6868
The Sustainable Business Model Canvas by
Threebility is licensed under a Creative Commons
Attribution 4.0 ShareAlike International License.

Project: Owner: Version:Impact Canvas
Negative Impact (Minimise)Positive Impact (Maximise)
Technology / Product (direct 1st order effects)
Application of Technology / Product (indirect 2nd order effects)
Societal & Structural Change (systemic 3rd order effects)
Capture (e.g. of waste or emissions) Resource use during production
Energy / resource and emissions during use
Waste generated during disposal
Substitution (e.g. of paper through digitalisation)
Optimisation (e.g. of energy usage & processes)
Induction (of resource consumption, e.g. energy)
Obsolescence (e.g. via shorter product life cycles)
Incentivisation (e.g. of fuel saving drive styles)
Decision making (e.g. via agent based models)
Rebound effects (e.g. via additional consumption)
New risks (e.g. via rising network vulnerability)
3 4
65
1 2
The Sustainability Impact Canvas by Threebility
is licensed under a Creative Commons

Threebility threebility.com
Maximise capture of waste or emissions
Focus: enabling technology only, e.g. HW, Software etc.
70
Main Principles
• Wherever possible, use materials for your product which
are considered „waste“ and are currently polluting the
environment
• If feasible, engage in „industrial symbiosis“ with relevant
industrial partners
• Explore the potential of long-term or permanent capture
of greenhouse gasses in your product
Benefits for provider and consumer
• Potentially lower manufacturing costs
• Potential eligibility for subsidisation
• Benefits for brand
Risks
• Unstable future supply of resources
• Immature technology
Examples:
• Glasses (Sea2See), Shoes (Adidas)
and Fashion (Ecoalf) made from
recycled ocean plastic (Sea2See)
• Plastic partially made from captured
greenhouse gasses (Newlight
Technologies)
1

Minimise Life Cycle Impact of technology
Focus: enabling technology only, e.g. HW, Software etc.
71
Main Principles
• Design for longevity and resilience, i.e. via modularity
• Design for timeless product appeal
• Identify and utilise product as a service strategies
• Use low eco-impact raw materials
• Optimise production processes
• Decarbonise distribution processes
• Preempting of tightening regulations
• Higher customer appeal for eco-aware customers
• Energy and material savings
• Lower manufacturing costs
• Independence of volatile commodity prices
Risks
• LCA time and cost extensive, long-
term performance of materials may
be unknown
• Set up costs of recycling system
• Increased durability as threat to
future sales
Examples:
• Modular phone (Fairphone)
• Pre-emptive replacement of lead
solders ahead of law banning the use
of lead solders (HP)
• Electronics recycling as profit centre
(Cisco)
2

Maximise Optimisation and Substitution Potential
Focus: application only, e.g. household equipped with smart home
72
Main Principles
• Optimisation
• Improve technology to optimise energy, fuel or
capacity usage
• Substitution
• Identify potential disruptive qualities of application
• Digitalise, virtualize, dematerialise
• Higher customer value
• Higher market potential
Risks
• Rebound effects
• Difficulty to assess impact of
substitutive processes
Examples:
• Reduced passenger car fuel
consumption (Smart Drive)
• Reduced home energy consumption
(Nest)
• Paperless billing, virtual meetings
• Managed services (sharing economy)
3

Minimise in built obsolescence and induction
Focus: application only, e.g. household equipped with smart home
73
Main Principles
• Induction
• Identify and minimize previously non existent forms
of resource consumption
• Obsolescence
• Match real software life cycles to HW life cycles
• Lower energy and resource usage
• Lower obsolescence induced replacement costs
Risks
• Challenge to internalize external
costs
• Difficulty to adapt life cycles of
products of different providers
Examples:
• Rising paper consumption due to
cloud connected printers
• Shorter product life cycle of STBs due
to faster SW development cycles
• Shorter Smartphone life cycles
though rising App performance
4

Maximise incentivisation and improved decision making
Focus: 3rd order effects only, e.g. societal and structural change
74
Main Principles
• Incentivisation
• Use gamification elements (personification, virtual
incentives and rewards, community challenges) to
‘nudge’ users towards sustainable behavior
patterns
• Decision making
• Create improved management tools to enable user
directed optimization through better decisions
• Soft mentoring (‘nudging’) of user towards beneficial
behavior
• More efficient decision processes
Risks
• Importance to not patronize users
with excessively high ‘nudge’
frequency
• Complexity of decision processes
Examples:
• Driving behaviour tips and incentives
to save fuel (Smart Drive) or
insurance (PHYD)
• Improved policy decision making via
Agent Based Models
5

75
Nudging: A concept of behavior
science arguing that positive
reinforcement and indirect suggestions
to achieve behavior change can be
more effective than direct instruction.
High potential for sustainability
related behaviour change
5 Deep Dive – Behaviour Science & Nudging

Example of Nudging in Gamification Context
76
Target user behavior:
• High retention
• High, continuous and
increasing engagement
• Lowering of energy and
heating consumption
• Implicit support for product
marketing
Challenges:
• Gamification cannot replace high
quality UX – it is only a tool
• Points and badges alone
insufficient (‚Pointsification‘), the
goal is a holistic gamified app
App UX (‚Ludification‘)
• Short term excitement is easy,
but not sufficient – long term
engagement is goal, but hard
• Need to find balance between
intrinsic and extrinsic motivation
• Need for continually increasing
challenges
Rules for Success:
• Base gamification
concept on “Start with
why” principle: big
picture story first!
• Find a balance between
short-term and long
term incentives
• Less is more
• Avoid to build a “Super
Nanny”
• If based on HMI, aim for
self-ironic personified
character
Goal of Gamification:
Behaviour change of user via
intelligent incentivization
(‘Nudging’).
5

Marketing of Sustainability Related Product Features
77
Keeping up with the Joneses: social
comparison as an effective nudge
5

Release 2 Further ReleasesRelease 1
Example of Smart Home App Gamification Concept.
78
Points
Streak
Comparison w. neighbors
Accumulated savings
Accumulated consumption
Reminder
Goals
Compare demographics
Custom Savings Plan
Compare by location
Friends
Community Challenge
Individual challenge
Bets
Virtual Currency
Personification (Charme, Self irony, Humor), Big Picture
and Quantified Self Character
5
Source: mm1

Minimise rebound effects and new risks
Focus: 3rd order effects only, e.g. societal and structural change
79
Main Principles
• Rebound effects
• Take into account increasing resource consumption
on aggregated scale (Jevons paradox)
• Risks
• Prevent over-optimized processes at expense of
resilience
• Take into account rising complexity of systems
• Reliable products and services
Risks
• Challenge to internalize costs of
rebound effects
• Difficulty to assess complexity of
related risks
Examples:
• Smart Vending machine with reduced
energy consumption increases
aggregated vending machine spread
and energy use
• Over-optimised processes for vehicle
management can be prone to
complete breakdown
6

Jevons paradox: improvements in product efficiency
may lead to higher overall energy use due to higher sales
80
Dramatically reducing power
consumption of individual vending
machine
VS
Dramatically increasing total power
consumption of combined number of
vending machines
4

Project: Owner: Version:The Sustainability SWOT Analysis
81
Environmental & Social
Challenges & Trends
Steps
Opportunities &
Threats
• Natural resource scarcity
• Water availability
• Waste & hazards
• Global warming
• Climate variability and extremes
Challenges
What do you and others see
changing? What are the
sustainability relevant big
trends?
Keyquestion
• Innovation & technology advances
• Demographic & social shifts
• Global economic dynamics
• Political & regulatory requirements
Trends
Where are environmental
challenges threatening future
business value, and how can
you address these threats?
How can our strengths address
environmental challenges?
Who has similar weaknesses
or faces similar risks?
Which insights will influence
senior company stakeholders
most? What can be a
short/mid/long term strategy?
Strengths &
weaknesses
Action
Details
• Consider both direct threats as well
as threats to partners in the value
chain
• Look upstream and downstream and
identify opportunities for joint action
T Threats
• Look at threats that currently are not
addressed
• Consider the business value that can
be created with new products,
services and business practices
O Opportunities
• Start with traditional list of your
companies’ strengths, extend the list
to the partners in your value chain
• Consider core & transferable
strengths (i.e. R&D, Eng.)
S Strengths
• Start with risks resulting from
environmental challenges impacting
markets (e.g. operations, regulation,
commodity prices)
• Include partners in list
W Weaknesses
• Prioritise according to company
vision and strategy
• Identify strong messengers
• Emphasise findings that would
resonate with CEO and senior
management
Prioritise
• Categorise generated insights
according to where and when you
can act
• If needed, consider gathering more
insights before planning action
Act
Source: mm1 & Metzger et. Al., 2012

Conception Concept Validation Test & LearnBuilding
Product & Business Model Innovation Themes
Selection of tools & methods
• Empathise with
user
• Identify problem
• Create idea for
solution &
business model
• Define hypotheses
• Validate
Hypotheses
• Define (rapid)
prototypes, paper
prototypes and
MVPs
• Build, test & learn
Design Thinking
Lean Startup Method
Sustainability-SWOT Analysis
Sustainability Balanced Score Card (S-BSC)
Sustainability Levers Framework
• Definition of
metrics & KPIs
• Test functionality,
process, usability,
customer
acceptance
(Post) Launch
• Launch if
deficiency free
• Marketing &
growth
• Continuous mgmt.
and improvement
Tailored Tools & Methods for
Sustainable Product Development
Standard Tools
and Methods
Life Cycle Assessment
Sustainable Business Model Canvas
How to incorporate Sustainability into the design process

Validation
83
Validation is
King
(Especially for sustainable
business models which are
under double scrutiny)

The #1 reason product initiatives fail: confirmation bias
84
“The first principle is that you must not fool yourself - and you’re
the easiest person to fool.” ~ Richard Feynman
3 largest risks:
1. Problem does not exist
2. People do not care about
solution
3. There is no business case
Formulate your
hypotheses:
“Which assumptions,
if proven wrong,
invalidate concept?”
Design
Experiments to
test hypotheses:
What is the fastest & cheapest technology/method to test my hypothesis?

Methods for hypotheses validation
85
• Do similar initiatives
exist?
• Are they successful?
• What are the
numbers?
• Do their customers
like product? Why?
• Who are their
customers?
• If they failed, why?
How:
• Talking to users
• Structured user
interviews
• Over the shoulder testing
• Focus groups
• Web analytics
• A/B Tests
• Customer development
What:
• Individual
hypotheses
• Product idea
• Concept
• Paper prototype
• Landing page
• Concierge MVPs
• MVPs
• (Product)
User Testing:Competitor Research:
#1 rule: be courageous and try to falsify, rather than confirm

Deep dive: Customer development
86
Problem interview: ask 10-20 users:
• 3 largest problems in your business
today?
• Most difficult part about X? Walk me
through the last time it happened?
• How much does this problem cost you?
• Magic wand question.
Solution interview: 10 – 20 diff. users:
• Walk user through a “a day in their life
without your product”
(pausing/prompting)
• Walk user through “a day with your
product” (pausing/prompting)
• How does it compare? (gauge emotional
response)
Important rules:
Do not try to sell
Ask objective measurable questions
Use mom test
Pauses are important

90
Lets save the
environment
Let’s have some fun
and be cheeky smart
Change of story
“A good story and a well-formed argument are
different natural kinds. Both can be used as
means for convincing another. Yet what they
convince others of is fundamentally different:
arguments convince one of their truth, stories of
their lifelikeness.” ~ Jerome Bruner
“Sustainability is dead. Or at least the entire
language we use to talk about it should be buried.”
~ JUCCCE Chairwoman Peggy Liu
Your Narrative Matters

91
Elements of a successful narrative

92
Why
How
What
Anchor your
narrative here
For an effective narrative, start with Why

94
LCA is a technique to assess the eco impact linked to all stages of
a product or service
1 Goal & Scope Definition
2 Inventory Analysis
3 Impact Assessment
Interpretation
Mining Primary Mfg Distribution Use Disposition
Life Cycle Assessment (LCA) / Cradle to Cradle Analysis

The Sustainability Balanced Score Card (S-BSC)
95
• Definition of financial targets
• Direct or indirect reference for
perspectives 2-5
• Low relevance for
environmental and social
perspectives
1 Financial Perspective
Obj.
Meas.
Targ.
Initiat.
• Definition of target customer
group to achieve econ. Goals
• High env. & social relevance,
i.e. health aspects., demand for
green products, pressure from
NGOs & via regulation
2 Customer Perspective
Obj.
Meas.
Targ.
Initiat.
• Definition of processes req. to
achieve perspectives 1-2
• Innovation, Operation, Serv.
• High env. & social relevance,
i.e. production processes &
material usage, supply chain.
3 Internal Business Proc.
Obj.
Meas.
Targ.
Initiat.
• Optionally, a 5th perspective
can be introduced if necess.
• Examples: legality and
legitimacy, i.e. proactive
compliance with future
regulation), child labour
5 Non Market Perspective
Obj.
Meas.
Targ.
Initiat.
• Definition of necessary
competencies, information,
motivation & organ. struct.
• High env. & social relevance, i.e.
purpose/vision as ‘green
company, working conditions
4 Learning & Growth
Obj.
Meas.
Targ.
Initiat.
0 Analysis & Strategy Fit In order to implement a
sustainable business
strategy and to measure +
monitor sustainability
performance, the S-BSC
method can be used
along the 4 to 5 main
business perspectives
Vision
& Strategy
Top down generation of
input for 1-5, taking
the Analysis (0)
into account
1. Define all environmental/social
aspects related to the business,
irrespective of strategic relevance
2. Define strategic relevance of these
identified environmental aspects for
the company strategy
The S-BSC is derived from the work of Schaltegger & Lüdeke-Freund, 2011

Lastly: Best practices for successful sustainable innovation
96
Look ahead - Don‘t start from the present,
but envisage the future
(e.g. anticipate future regulation, consider enabling trends)
1
Be open to change - Understand that
sustainability is a business opportunity, not
just marketing
2
Question the status quo - Ask yourself how
you can make your value proposition more
sustainable
3
Be lean and green - Start small,
learn, pivot & scale
4
Keep efficiency in mind and prioritise -
Change what you can change now most
efficiently
5
Anchor sustainability in strategy and
processes, allocate resources and ensure
accountability
6
Team up - Form alliances with stakeholders
(e.g. suppliers, NGOs) including regulatory
bodies
7
Look at the roots - implement sustainability-
related activities and goals into the entire
supply chain
8
You cannot control what you cannot
measure - Quantify sustainable activities
using the S-BSC
9
Stay Flexible - Pursue sustainability
consistently but stay flexible to be able to
react to new trends
10

Contents
97

Lets take a closer look at the sustainable business
model canvas
98

The Sustainable Business Model Canvas - Overview
99
Sustainable
Partners
Sustainable
Value Creation
Sustainable Value
Proposition
Sustainable
Customer Relation
Responsible
customers
& Resources
more sustainable?
symbiosis?
value do we create?
product or service?
more sustainably?
customer value?
sustainable?
more sustainable?
End of Life
life cycle?
What are negative 1st, 2nd and 3rd order effects, and how can these be minimised? Is harmful waste
risks?
organisation (e.g. brand)? How can these effects be maximised along the complete product life cycle?
The Sustainable Business Model Canvas by
Threebility is licensed under a Creative Commons

Advantages of using the Sustainable Business Model Canvas
100
• It forces users to think about the most relevant areas of their business within
a triple-bottom-line (3BL) context
• It allows users to maximise the sustainability impact of their venture whilst
minimising negative externalities
• It is fast and easy to complete
• If retains the standard BMC advantages of forcing users to focus on the
value proposition and other important aspects
• It represents a common language
• It helps social entrepreneurs to structure their discussions with (impact)
investors

101
One of several ways to use the S-BMC in practice is to
organize a team innovation session and jointly complete the
S-BMC with business model cue-cards
The Sustainable Business Model Canvas Game

Step 1: Provide your team with the S-BMC Template
102
Sustainable
Partners
Sustainable
Value Creation
Sustainable Value
Proposition
Sustainable
Customer Relation
Responsible
customers
& Resources
more sustainable?
symbiosis?
value do we create?
product or service?
more sustainably?
customer value?
sustainable?
more sustainable?
End of Life
life cycle?
What are negative 1st, 2nd and 3rd order effectss, and how can these be minimised? Is harmful waste
risks?
organisation (e.g. brand)? How can these impacts be maximised along the complete product life cycle?
3
2
6
5
8
7
41

Step 2: Provide your team with business model cue-cards*
103
These numbers help your team
locate the relevant fields in the
S-BMC
The benefits and risks section
helps your team to complete
the positive & negative
impacts section in the S-BMC
* See collection of cue-cards in following slides
The description and example
section helps your team to
quickly understand the
concept of the business model

Step 3: Ask your team to complete the S-BMC with the
cue-cards
104
Run through all business
model cue-cards and see if any
are relevant for your product
Is this
relevant
for 2 or 5?

Step 4: Complete the Impact Canvas and transfer the results
105
Input content from
Impact Canvas into
S-BMC
Sustainability
Impact Canvas
Sustainable
Business Model
Canvas

Step 5: Challenge the final result with the S-SWOT
106
Discuss and challenge the S-BMC with
your team, using the Sustainability
SWOT Analysis. Do not just complete
the S-BMC in order to ‘tick all the
boxes’. Critically question your
assumptions.

107
38 Sustainable Business
Model Cue-Cards
To help you get started:

In the spotlight:
Positive Impact
Risks
Business Model Category
Category:
108
Threebility threebility.com 108
Customers pay for the functionality of a product, without the
responsibility of repairing, replacing or disposing it.
1
Across its lighting business, Philips utilizes a
Product as a Service model - where
customers Lock-In and pay for light, while
Philips installs, maintains, and both recovers
and recycles lighting units at the end of life,
generating additional revenues and lowering
resource costs.
Circular Economy
4
5
8
Longer product life cycles, end to
'in built obsolescence‘, reduced
waste, improved differentiation
Induction of additional
consumption, rebound effects
Product as a Service

In the spotlight:
Positive Impact
Risks
Category:
109
Refurbishing old or used products with the intent of reselling
them
2
Dell refurbishes its old products and makes
money on it. Dell Certified Refurbished PCs
are laptops and desktops that have been
returned to Dell, put again through the
production process, and then again retested
to ensure they meet all original factory
specifications.
Circular Economy
2
3
4
8
Additional revenue from returned
products, reduced resource
consumption
No significant risks
Product Refurbishing

In the spotlight:
Positive Impact
Risks
Category:
110
ResQ Club
Sourcing materials from recovered waste to create entirely
new products
3
ResQ Club – This Finland-based startup has
developed an app to reduce food waste by
providing restaurants with a way to turn
leftovers into revenue. Similar to the ‘Too
Good to Go’ app launched in the UK earlier
this year, ResQ Club’s app allows customers
to purchase leftover food in their
neighborhood for a lower price.
Circular Economy
3
Additional revenue, reduced
waste, less resources used
Rematerialisation

In the spotlight:
Positive Impact
Risks
Category:
111
Sharing of services, utility, and by-product resources among
industries to improve resource efficiency.
4
The City of Kalundborg has created a
genuine ‘industrial ecosystem’ where each
company uses the waste of another. The
Kalundborg Symbiosis is an industrial
ecosystem, where the residual product of
one enterprise is used as a resource by
another enterprise, in a closed cycle.
Circular Economy, Sharing
Economy
1
8
Reduced costs, consumed
resources and waste
Increased network vulnerability
Industrial Symbiosis

In the spotlight:
Positive Impact
Risks
Category:
112
Stimulating customers to embrace new behaviors, such as
reducing consumption or modifying daily habits.
5
Using Dash's smartphone app, car drivers
are able to connect their car to their phone,
and analyze their driving behaviors. The
information gathered is used to help the
driver improve their driving, making the roads
safer and greener whilst at the same time
making driving more affordable and more
social.
IoT, Nudging, Quantified Self
4
5 6
Reducing resource consumption
of consumers, improving safety &
other relevant metrics
Unintended consequences,
rebound effects
Behavior Change

In the spotlight:
Positive Impact
Risks
Category:
113
Providing a service to collect old or used products from
customers in a convenient manner.
6
The food company Cirkle has optimised its
logistics fleet of vans and drivers - who
personally deliver Circles main product,
seasonal produce - with a return logistics
service including the collection of
recyclables, dry cleaning and charity
collections.
Circular Economy
4
5
8
Optimisation of logistics,
additional revenue
Possible rebound effects of
additional consumption
Collection Service

In the spotlight:
Positive Impact
Risks
Category:
114
Reduction in the amount of materials used in the production
of products.
7
In 1995, the carpet manufacturer Interface
began experimenting with decreasing the
amount of plastic used in their carpet
backing. Reducing the plastic in the backing
by a single ounce (per square yard) saved
the company $1 million in materials that year.
Miniaturisation
2
3
resources, environmental footprint
Possible rebound effects
De-Materialisation

In the spotlight:
Positive Impact
Risks
Category:
115
Turning existing products or services into digital versions of
themselves, offering advantages such as more rapid
distribution.
8
Number 26, a fin tech startup in Berlin, has
completely digitized its customer acquisition
process. Customers now validate their
personal details via a video interface with a
Number 26 employee, avoiding resource
intensive paper based processes.
Physical to Virtual
2 5
Reduced operating cost, market
differentialisation, improved
customer relationship
Induction of additional energy
Digitisation

In the spotlight:
Positive Impact
Risks
Category:
116
Co-locating of production processes in countries or regions
where the businesses’ main markets are.
9
The Belgian company Umicore has decided
to source its raw materials from local urban
mines rather than exploit African mines for
the recovery of gold and other precious
metals.
Circular Economy
1
2
3 6
Reduced costs and environmental
footprint, optimised logistics,
support of the local economy
Local rebound effects
Local Loop

In the spotlight:
Positive Impact
Risks
Category:
117
Designing a product based on smaller component parts that
can be independently created, purchased, used and replaced.
10
Fairphone offers a mobile phone using
modular design and spare parts make it easy
to repair, whilst at the same time offering
improved protection to extend product life.
Fairphone offers optimised and regular
software updates limit asymmetries in HW
and SW product life cycles.
Circular Economy, Customisation
4
5 7
8
Reduced waste, increased product
life cycles, improved customer
relationship, differentiation
Modularity

In the spotlight:
Positive Impact
Risks
Category:
118
Used products are collected and either sold or transformed
into new products. Resource costs for the company are
practically eliminated.
11
Adidas has developed a premium shoe
largely made from ocean plastic waste
scoped from the Indian Ocean near the
Maldives. Each pair of shoes contains 11
plastic bottles, and most of the rest of the
sneaker (including the heel, lining, and laces)
is also made from recycled material.
Circular Economy
3
Additional recycling, reduced
waste and consumed resources,
positive impact on brand
Trash to Cash

In the spotlight:
Positive Impact
Risks
Category:
119
Consumers share typically single owner a product with many
other consumers.
12
Mercedes offers the car sharing service
Car2Go, where predominantly urban
customers can access shared cars on
demand.
IoT, Sharing Economy
4
5
Reduced need for product
ownership, use of access
capacity
Potentially strong rebound effects
of additional consumption
Consumer Product Sharing

In the spotlight:
Positive Impact
Risks
Category:
120
Using waste material as it is to create a more valuable
material or ressource from it
13
Meldgaard takes back the cutting sand it has
sold to customers for their water jet cutting
machines. 50% of the used cutting sand is
reusable and even offers a higher quality
than new cutting sand. By doing so,
Meldgaard reduces its dependency on
suppliers, builds stronger customer ties and
avoids depleting resources.
Circular Economy
3
4
8
Additional revenue, reduced
waste, less resources used,
improved customer relationship
Upcycling

In the spotlight:
Positive Impact
Risks
Category:
121
Reintroducing products into the manufacturing process for a
major overhaul
14
Autocraft Drivetrain Solutions provide
remanufacturing services on a wide range of
engines and components for the automotive
industry. Autocraft recovers up to 85 percent
of the core engine through innovative
methods, and works in partnership with
OEMs when they design new engines, to
design with remanufacturing in mind.
Circular Economy
2
3
4
8
Additional revenue from returned
products, reduced resource
consumption
Remanufacturing

In the spotlight:
Positive Impact
Risks
Category:
122
Removing resources from a product offering that have to be
added by the end consumer after he purchased the product
15
The cleaning product company Splosh sells
customers a one-off ‘starter box’, containing
a range of simply designed bottles. A sachet
of concentrated liquid is added to the bottle
with warm tap water to create cleaning
products. Bottles can be used repeatedly,
with refill sachets delivered in boxes through
the post.
Do it Yourself
2
3
4
6
Reduced production costs,
improved value proposition,
logistics and storage processes
Induction of resource
Product Deconstruction

In the spotlight:
Positive Impact
Risks
Category:
123
Directly recycling the material used to create a product back
into the production system.
16
In 2011, General Motors decided to greatly
reduce its waste footprint, committing to cut
total waste (including manufacturing) by 40
% by 2020, from 2010. Four years ahead of
schedule, GM has 100 of its manufacturing
sites, along with 50 non-manufacturing sites,
landfill-free. Over 150 of GM’s global facilities
send zero waste to landfill.
Circular Economy
2
3 8
Reduced production costs, waste
and energy usage, improved
processes
Closed-Loop Production

In the spotlight:
Positive Impact
Risks
Category:
124
Solutions to tasks or problems are generated via an
anonymous crowd, with contributors receiving some
incentives
17
Unilevers Foundry IDEAS platform acts as a
hub for consumers and entrepreneurs to
work together to tackle sustainability
challenges. The platform provides a place for
individuals to create and collaborate on
solutions to “grand challenges” relating to
sustainability. Unilever regularly upload
challenges to the platform for users to submit
ideas.
Wisdom of Crowds
Improved innovativeness,
improved brand perception and
customer engagement
Crowdsourcing

In the spotlight:
Positive Impact
Risks
Category:
125
Charging more to those able to afford, and subsidizing those
who cannot
18
The pharmaceutical company Novo Nordisk
introduced a Differential Pricing Policy for
Least Developed Countries in 2001. Under
this policy the company has offered human
insulin in LDCs at a price that does not
exceed 20% of the average realised price for
Europe, the US, Canada and Japan.
Bottom of the Pyramid
5
Social inclusion, growth of market
share, improved brand perception
Depending on product: rebound
effects of additional consumption
Differential Pricing

In the spotlight:
Positive Impact
Risks
Category:
126
Hardware virtualization or platform virtualization refers to the
creation of a virtual machine that acts like a real computer
with an operating system
19
Amazon's Elastic Compute Cloud (EC2)
solution enables Amazons clients to reduce
their own HW requirements by outsourcing
HW heavy services to Amazons cloud, where
they can be run more efficiently.
Physical to virtual
3
4
5
Optimised energy consumption,
improved availability, lean
corporate footprint
Rebound effects
Virtualisation

In the spotlight:
Positive Impact
Risks
Category:
127
Sharing of a certain asset class among a group of owners
20
NetJets offers its clients to buy "NetJets
Shares", enabling the customer to own a
"fraction" of an aircraft from the NetJets fleet.
A NetJets Share costs a fraction of the price
of owning a whole aircraft and provides
greater flexibility than owning a single
aircraft.
Sharing Economy
5
Increased market share,
reduction of carbon footprint for
individual consumer
Strong possible rebound effects
due to additional consumption
Fractional Ownership

In the spotlight:
Positive Impact
Risks
Category:
128
The elimination of waste within a manufacturing system, or
the creation of more value for customers with fewer
resources
21
Lean manufacturing is a philosophy of
management originating in part from the
Toyota Production System (TPS). TPS aims
to design out stress (overburden) and
inconsistency and to eliminate waste, e.g. by
introducing flexibility. Waste also refers to
consumer time waiting for a product or
assistance and waste of movement.
Lean
resources and environmental
footprint
Rebound effects
Lean Production

In the spotlight:
Positive Impact
Risks
Category:
129
The source code or patent of a product is made freely
accessible for anyone
22
IBM is one of the founding members of the
Eco-Patent Commons Initiative EPC, which
brings together a collection of patents
covering new technologies, processes and
ideas to address a range of environmental
problems. By opening these patents to the
public, the companies hope to spur
innovation, as well as create new business
opportunities.
Open Innovation
1
3
1st order benefit of spreading a
technology, 2nd order benefits via
industry symbiosis & collaboration
Risks related to competitors using
own IP
Open Source

In the spotlight:
Positive Impact
Risks
Category:
130
Actual usage of a service or product is metered, and
customers pay for what is effectively consumed.
23
The Dutch laundry company Bundles offers
clean clothes on a pay-per-wash basis.
Applying Internet of Things technology
enables product monitoring, while
maintenance and refurbishment of higher
quality machines preserves the product
integrity for multiple cycles.
IoT, Nudging
4
5 7
Competitive advantage in certain
scenarios, incentivisation reduced
consumption
Possibility of induction and
rebound effects
Pay Per Use

In the spotlight:
Positive Impact
Risks
Category:
131
Customers rent the product, reducing the capital typically
needed to access it
24
Rent the runway rents out high-end
designer dresses to its customers. The
company uses big data enabled customer
analytics to predict customer behavior and
manage the logistics of moving around
thousands of dresses and jewellery amongst
the United States.
Circular Economy
5 7
Extended product life cycle,
creation of regular customer
touch point
Possibility of induction and
rebound effects
Rent Instead of Buy

In the spotlight:
Positive Impact
Risks
Category:
132
Enable equipment to notify operators when in use of
maintenance to extend product life cycles.
25
The ball bearing manufacturer SKF offers
SKF Insight, an intelligent IoT wireless
technologies that is integrated into SKF
bearings. SKF developments in various
smart technologies now enable bearings to
communicate their operating conditions
continuously.
IoT
4
5
8
Extended product life cycle,
creation of regular customer
touch point
Risk of rebound effects if costs for
maintenance carried by customer
Predictive Maintenance

In the spotlight:
Positive Impact
Risks
Category:
133
Experts are enabled to perform machine maintenance
remotely via life instructions of local unskilled labour
26
Th augmented reality company Ubimax
offers industrial clients solutions that enable
even unskilled workers to repair technical
equipment in the field. They can be guided
via real time remote assistance with video &
audio transmission, document exchange &
remote augmented reality.
IoT
4
5
6 8
Reduced travel costs, extended
product life cycle, creation of
regular customer touch point
Risk of rebound effects if costs for
maintenance carried by customer
Remote Maintenance & Services

In the spotlight:
Positive Impact
Risks
Category:
134
Using renewable, bio-based or fully recyclable materials to
replace single-lifecycle inputs
27
AkzoNobel collaborates with the
biochemical company Photanol to replace its
current fossil based raw chemical base
compounds with bio-based chemical building
blocks.
Circular Economy
2
3
Reduced eco foot print of
production due to use of
renewable raw materials
Possibility of significant induced
consumption of raw bio materials
Circular Supplies

In the spotlight:
Positive Impact
Risks
Category:
135
Farming food products directly at the point of sales
28
The Berlin based company Infarm is offering
on-demand farming services for
supermarkets. Using the Infarm solution,
supermarkets can grow and sell herbs and
vegetables directly in the supermarket, which
enables them to reduce food waste and the
resulting environmental impact.
Local Production
2
3 6
Reduced food waste, improved
product quality, optimised logistics
processes
Induction of energy consumption
Grow and Sell

In the spotlight:
Positive Impact
Risks
Category:
136
Offering free product repair services and unlimited full
warranty for a product
29
The fashion company Nudie Jeans offers
free denim repair at twenty of their shops,
encouraging customers to renew their jeans
instead of. throwing them away Nudie Jeans
also provides mail-order repair kits and
online videos, so that customers can learn
how to fix a pair of jeans at home, improving
product longevity and value proposition.
Circular Economy
4
8
Improved value proposition,
reduced waste
Unlimited warranty

In the spotlight:
Positive Impact
Risks
Category:
137
Storing waste or toxics permanently or temporarily whilst
creating value and revenue
30
Part advertising panel, part living, air-
cleaning installation, the City Tree of the
company Green City Solutions can absorb
100kg of carbon dioxide annually – the
equivalent of about 275 regular trees. The
tree is autonomously powered by
photovoltaics, rainwater, and IoT technology.
IoT, Carbon Capture
2
8
Reduced pollution,
decarbonisation
Induction of energy consumption
Waste to storage

In the spotlight:
Positive Impact
Risks
Category:
138
Sharing resources between private households to limit
household waste
31
The company Restado has created a digital
platform that supports the consumer DIY
trend by allowing even small amounts of
materials to find buyers. Users can buy and
sell residual, unneeded materials, rather than
throwing them away or storing them.
Sharing Economy
4
7
Reduced consumption, reduced
waste
Possible induction and rebound
effects
Consumer Resource Sharing

In the spotlight:
Positive Impact
Risks
Category:
139
Relying on the consumer to optimise a value creation
process
32
DHL decided to include citizens into the last
mile delivery of parcels by enabling them via
App to accept parcels for neighbours and
gain points for that. Instead of putting more
delivery vehicles on the road, the app
matches supply with demand and improves
logistics efficiency.
Sharing Economy
4
5
6
7
More efficient logistics, improved
customer access
Possible rebound effects
Consumer Extended Value Chain

In the spotlight:
Positive Impact
Risks
Category:
140
Shifting the focus of sourcing from volume and price, to
supporting the farmer or producer
33
The fashion brand ANN Inc. Made progress
towards a more inclusive supply chain by
committing to provide 100,000 women in its
global supply chain with health and financial
literacy training.
Stewardship Model
3 6
Social inclusion, improved brand
perception
Inclusive Sourcing

In the spotlight:
Positive Impact
Risks
Category:
141
Leasing or renting products to customers
34
The tire manufacturer Michelin offers its
customers to lease rather than buy tires.
These customized tire lease programs save
fuel and reduce costs. Michelin offers
effective tire fleet solutions for a full range of
applications, including transit, motor coach,
refuse and all types of trucking fleets.
Circular Economy
4
5
8
Reduced waste & consumption,
extended product life cycles,
end to 'in built obsolescence'
Induction and rebound effects
Innovative Product Financing

In the spotlight:
Positive Impact
Risks
Category:
142
Excess capacity is mobilized in new ways, or with new
customers
35
By seamlessly connecting shippers and
carriers through web and mobile apps,
Cargomatic is helping truckers to unlock
under-utilized capacity and shippers to track
their freight in real time.
Sharing Economy
1
2
3
Optimisation of capacity usage
and system performance
Rebound effects, network
vulnerability
Repurposing of Excess Capacity

In the spotlight:
Positive Impact
Risks
Category:
143
Producing a product only when a customer order has been
received
36
Amazon offers the Amazon Print on Demand
Service, which enables authors to offer
physical books on the Amazon website
without having to print a first edition.
Customers ordering books from Amazon
receive these printed upon their orders with
next day delivery.
On Demand Economy
3
4
6
Reduced costs due to no need to
forecast demand, no shipping,
returns or inventory costs
Induction and rebound effects
Produce on Demand

In the spotlight:
Positive Impact
Risks
Category:
144
Focusing on the necessary minimum to deliver the core
value proposition, where cost savings are shared with the
customer
37
Tata Motors developed the Nano, an
extremely simple, fuel efficient and basic car
that is affordable for many Indians who
currently ride motorcycles. The price of this
no frills auto was brought down by
dispensing with most nonessential features,
reducing the amount of steel used in its
construction, and relying on low cost local
labour.
Frugal Innovation
1 4
5
Social inclusion, reduced resource
consumption per product and during
individual product use
High risk of induction of resource
consumption and rebound effects
No Frills

In the spotlight:
Positive Impact
Risks
Category:
145
Know-how and other assets in a company are offered to
other companies, creating additional revenue using slack
resources
38
FLOOW2 is a platform that facilitates the
sharing of overcapacity of business
equipment and the skills & knowledge of
personnel that are under-utilised for half of
the time, by making it transparent and
tradable on their platform. The platform is
currently operational worldwide with a rapid
global expansion plan envisaged.
Open Innovation
1
2
3
Optimisation of resource and labour
usage, freeing of resources for
higher value activities
Rebound effects, network
vulnerability
Make More of It / Corporate Asset Sharing

Contents
146

147
Connected Business as a Driver for Sustainable Innovation
Now we got the right tools.
So let’s get going!

A few more points: what else you need as a practitioner
• High tolerance to frustration
• Persistence
• Being able to speak different languages; of engineers,
management, marketers etc.
• Deep knowledge of company processes
• Ability to communicate complex issues simply & in non
patronising way
148

149
Circular Economy
• Towards the Circular Economy, Ellen MacArthur Foundation (Link)
• Growth within: a circular economy vision for a competitive Europe, Ellen
MacArthur Foundation (Link)
Internet of Things and ICT
• ICT Solutions for 21st Century Challenges, GeSI (Link)
Sharing Economy
• Assessing the size and presence of the collaborative economy in Europe,
PWC (Link)
Additional resources and worthwhile reads – Part 1/3:

150
Product and Business Model Innovation
• How to Build a Startup, Y Combinator (Link)
• Sustainability Driven Innovation – Sustainability's ability to spark innovation,
Deloitte (Link)
• Nudging - A tool for sustainable behaviour? SEPA (Link)
• Gamification and Sustainable Consumption, Huber & Hilty (Link)
• A sustainability SWOT analysis, World Resources Institute (Link)
• Design Thinking and Lean Startup according to mm1

151
Other
• How businesses value natural capital, Global Nature Fund (Link)
• The Sustainably Balanced Scorecard, University of Lüneburg (Link)
• Towards a Unifying Narrative for Climate Change, Imperial College London
(Link)
• Introduction to Life Cycle Assessment (LCA), Gutowski (Link)

Sustainable Produc & Business
Model Innovation
By Dr. Robert Gerlach
Questions? Ideas? Get in touch:
www.threebility.com
robert.gerlach@threebility.com
Threebility

Sustainable Innovation Lecture Notes

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