Cross Cutting Presentations

1. NATIONAL CLEANER PRODUCTION CENTRE
SOUTH AFRICA
@NCPC_SA
www.ncpc.co.za
Lee-Hendor Ruiters
Regional Manager

2. NATIONAL CLEANER PRODUCTION
CENTRE SOUTH AFRICA
@NCPC_SA
Business Case for Eco-Innovation
3rd Industrial Efficiency Conference
14 September 2017

3. www.ncpc.co.za
1. Defining of Eco-Innovation
2. Eco-Innovation in South African context
3. Why Eco-Innovation
4. Benefits of Eco-Innovation in Policy
5. Eco-Innovation Pilot Project
Contents

4. www.ncpc.co.za
The creation of new, or significantly improved products
(goods and services), processes, marketing methods,
organisational structures and institutional arrangements
which – with or without intent – lead to environmental
improvements comparted to relevant alternatives
- OECD
(The Organisation for Economic Co-operation and Development)
Defining Eco-Innovation

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• Commitment to being competitive player in global
markets and transforming its economy away from
its former dependence on primary resource
production and associated commodity-based
industries;
• Eco-innovation implicitly addressed in several
national policies, strategies and action plans which
promote research and development that meet
sustainable development objectives (C. Moses,
HSRC - 2017)
Eco-innovation in South African context
Source:

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Why eco-innovation?
1. The expected environmental benefits and;
2. Faced with rising costs for producing goods and
managing waste products, the competitiveness of
firms, countries and even regions is increasingly
linked to their ability to ‘eco-innovate’
Source:

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Why eco-innovation?
Major concerns of economic expansion and
growth? - Climate change, energy insecurity and
increasing scarcity of resources
Manufacturing industries response - greater interest
in sustainable production and adopting corporate social
responsibility initiatives
Source:

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• Very little is known about the growing global trade
in environmentally beneficial goods and services
• We do not know much about the adoption of
innovations to reduce the environmental impacts of
companies, sectors and nations, and the
environmental improvements achieved as result of
applying eco-innovations
• Eco-innovation can result from ‘unintended
environmental innovation’
• The environmental benefit can be a side effect of
other goals such as recycling heavy metals to
reduce costs
Why eco-innovation?
Source:

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• Innovative products, services, processes or
business models can benefit the environment by
reducing pressure on natural resources and/or
emission of pollutants
• Environmentally friendly innovation can foster
economic development.
• A number of OECD member countries’
governments see eco-innovation as a major
driver of green growth.
Benefits of Eco-innovation in Policy
Source:

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• Innovators may not reap all the benefits of their
innovations
• Environmental benefits may not be appropriately
valued by markets, market mechanisms alone
will not provide an appropriate amount of eco-
innovation at the right time
• Policy intervention is therefore needed
The question is: What is the best way to support
the development and diffusion of eco-innovation?
Source:

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NCPC-SA / UNEP Eco-Innovation Pilot Project

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South African Pilot Project Timeline (2015 - 2017)
- NCPC-SA, UNEP and Stellenbosch University
- Sector : metals fabrication and tooling sector in the Western Cape
- Sector associations : SASSDA + WCTI
- Project Steering committee : Government departments
- Technical project support : UNEP
- Project team : L Ruiters, S Oldham, Z Zwavel, P v Heyningen
- Industry Workshop : May 2015 Introductory
- Kick-Off workshop + company workshops: July 2015
- Market analysis + company visits
- Selection of final 5 companies
2016 and 2017
- Company visits and data collection
- Key project deliverables quality management
- Review of project

13. UNEP Eco-innovation approach
 Eco-innovation provides an ideal approach to promote the application of
sustainable business practices along value chains (greening supply
chains)
 Eco-innovation operates at the level of a company strategy. It aims to
embed sustainability into DNA of a company.
 It promotes systemic innovation based on holistic life-cycle approach
throughout company’s operations - products (goods / services),
processes, market approach and organizational structure.
 It aims at influencing and involving stakeholders along the entire value
chain.
 Initial focus of the eco-innovation intervention is on sectors with highest
potential for decoupling (IRP recommendation):
 Food processing,
 Chemicals manufacturing and use; and
 Metal processing

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Initial Findings
- The process seemed complicated
- Time constraints
- Access to incentives and funding raised early
- Scepticism about implementing theory
- Innovation done in isolation of product development
- No clear policy but supported by various environmental policies
- Unintended outcome of sustainability activities
- Innovation in research, technology, standards, regulatory approaches
Sector and market analysis – Sustainability hotspots:
- Component manufacturing dominant
- Regional turndown turn and closures
- Fluctuating commodity prices
- Labour unrest
- Highly competitive & low margins

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Challenges Experienced with Eco-Innovation Approach
- Life cycle thinking not prevalent
- Sector macro economic challenges impact
- Conservative growth prospects
- Applying business model innovation challenging
- Expectations misaligned to project outcomes
Benefits
- Access to new and growing markets
- Increase productivity and manufacturing technical capacity
- Attract investment / Partnerships
- Improve environmental performance and adherence to regulations
- Improve profitability through increased activities along the value chain
- Driver for Responsible consumption and production (SDG 12)

17. RISKS
• Higher operational costs and supply chain disruption
• Shifting production and transportation patterns to adapt to
local conditions
• Public pressure for greater transparency
• Regulatory and fiscal instruments increasingly complex
OPPORTUNITIES
• Market shift towards ‘greener’ products – water-efficient
technology, green plastics and chemistry, sustainable
infrastructure etc.
• Growing market opportunity to recover, reuse e-waste
• Reputational advantage from incorporating environmental
trends into company strategy
What does it mean for
business?

18. What does Eco-innovation
imply?

19. The Business Case for Eco-innovation
How to communicate the
benefits and opportunities
of Eco-innovation to
stakeholders, including
companies.
It helps service providers
engage companies,
especially SMEs.
Available for download:
www.unep.org/BCforEI

20. Business Case for Eco-innovation
Drivers
Access new and
expanding markets
New market
segments (low
and high end)
Untapped
markets for
innovative
solutions
Company supply
chains and SPP
Increase
profitability along
the value chain
Ultimate
efficiency
Enhanced
resilience
Enhanced
knowledge and
technical capacity
Stay ahead of
standards and
regulations
First-mover
(competitive)
advantages
Industry
leadership (brand
reputation)
Inform regulation
Attract financial
resources
Banks, long term
investors, crowd
funders
Local and
national
authorities
Mergers and
acquisitions
Increase
productivity and
technical capacity
Acquisition of
knowledge
Strong skill base
Increased
employee
engagement

21. Natura, Brazil
Product SOU compared to conventional cosmetic products:
• 70% less plastic used
• 60% lower CO2 emissions
• Lower transportation costs
• Innovation in the formula (ingredients)
• More attractive retail price = new customer segment
Business Strategy: Innovation for market differentiation and sustainability
How?
• Continuous research: new technologies, market trends
• Open innovation model and R&D platform involving partners and scientific
institutions
• Investment from national financial institutions
• Select suppliers on a “shadow price”
• Creation of partnerships to build a chain with higher added value.
• Life-cycle approach A calculator is used for all the indicators of an
Environmental table, and simplified packaging LCA, for all sold products.
Business Growth: Market share of 23 % in Brazil
Annual growth of 26 % in 2005-2010.

22. Case: Ecover
Eco-innovation at the core of their business strategy considering entire value
chain.
Open innovation model - Work across the value chain: Philips (maker of
washing machines) BASF (chemicals) and retailers for refill through dispensers =
strategic positioning
• Innovations in all dimensions:
– Product: Elimination of harmful chemicals and 100% biodegradable
– Packaging: 100% use of bio-based plastics, 100% recyclable
– Process: manufacturing & distribution channels
– Organizational structure – long term innovation manager
Business Benefits:
Added value –a sustainable product reduced risk of harmful chemicals that meets
client needs
• Average annual revenue growth of 10-20 % in a flat market
• Annual sales exceeding $200 Million
• Expansion to large retail stores (market access)
• Innovations through open innovation enables them access to funding and
resources
• Benefited from Sustainable Public Procurement (city of Ghent) Ecover will
be used in 340 public buildings in the city of Ghent by the end of 2014

23. Eco-innovative Strategies Brainstormed
Strategy 1
Improve profitability, customer
satisfaction and environmental
impact by changing
transportation practices and
packaging methods of final
products
Strategic Goals
o Improve fuel consumption
by 10% per annum
through better driving methods
o Reduce packaging
materials by 30% per
annum
by changing packing of final
products to flat pack methods
and using reusable materials
Strategy 2
Reduce the overall energy
consumption of fully
designed and installed
kitchens:
Strategic Goals
o Improve customer energy
use footprint by 30%:
by offering dedicated energy
efficient designed, installed,
maintenance and performance
monitoring service.
Strategy 3
Expand service offering to
include 3 clean technology
solutions to add value across
the value chain
Strategic Goals
o Reduce water waste to 50%,
o Reduce food waste by 30%,
o Reduce oil waste by 30%
by offering service solution and
clean technology products to
existing and new customers.
Case: MacBrothers

24. Business Models Proposed
Business Model 1
Improve Energy
Efficiency through:
• EE restaurant designs
• Eco-kitchen
equipment offering
Business Model 2
Reduce Carbon
Footprint in Outbound
Logistics by:
• Improved packaging
• Better driving method
• Self installation
Business Model 3
Re-using frying oil:
• Biodiesel for own
transport
• Commercial selling
• Reduce Carbon footprint
• Reduce waste stream
hotspot

25. Business Models Proposed

26. Implemented Strategic Objectives And Results
Notconsidered
Current Status – Case Study
formulation
• Optimal Product
definition
• Measure Current
Situation (Baseline)
• Implement new
equipment
• Measure Improvements
• Compare results

27. Lessons Learned
• Management buy-in
• SME challenge
• Customer Education and Awareness
• Time - Not always immediate returns
• Capital Intensive
• Legislation – Speed of enforcing
• Liaison with key customers
• Innovation Culture
• Momentum creation
• Market leader advantage
Key
Challenges
Key
Opportunities

28. Eco-innovation Value Added
• Fresh Eyes
• Business Model

29. www.ncpc.co.za
THANK YOU
EMAIL
lruiters@csir.co.za
WEBSITE
www.ncpc.co.za