The Eco-Innovation Observatory is financed by DG Environment of the European commission: Legal notice Any views or opinions expressed in this report are solely those of the authors
Funded by the European commission, DG Environment, Brussels Layout Eco-innovate! A guide to eco-innovation for SMES and business coaches 3 eco-innovation observatory 1 Introducing eco-innovation...
6 2 Revisit your business model...12 3 Eco-innovate production processes...18 3. 1 Waste and emissions...
32 4 Eco-innovate products and services...36 4. 1 Research and development...38 4. 2 Design...
This guide is a practical and comprehensive introduction to eco-innovation addressed primarily to small and medium-sized enterprises (SMES.
The booklet overviews emerging business opportunities eco-innovation has to offer to companies that reconsider business models,
develop new products, technologies or services, or improve production processes. The aim is to summarise key business issues,
and coaching services to SMES. This guide is one of many publications and information sources developed by the Eco-Innovation Observatory (EIO).
Over the years we have gathered convincing evidence on the benefits from eco-innovation, especially regarding cost savings and new market opportunities.
We believe that eco-innovations in SMES will contribute to a making a green economy work in Europe and worldwide.
The focus then shifts to the key issues, challenges and opportunities of eco-innovation for SMES.
business model and value proposition•process eco-innovation•product eco-innovation•getting eco-innovations on the market•online resources for eco-innovation. •How to use this guide Figure 1:
Incremental eco-innovation focuses on improving existing goods and services, whereas disruptive eco-innovation is about thinking outside of the box
It means being economically competitive while respecting the natural environment. Eco-innovation takes the full life-cycle perspective into account, rather than just focusing on environmental aspects of individual life-cycle stages.
and delivering new services, but it also encompasses reducing environmental impacts in the way products are designed,
but creating new services and introducing organisational changes are just as important. At its core, eco-innovation is about creating business models that are both competitive
and respect the environment by reducing resource intensity of products and services. Sustainable management of natural resources•Tackling climate change•Improving biodiversity and ecosystems•Saving material and energy costs•New products and services:
new markets•New business models•Enhancing quality of life•Creating new and sustainable jobs•â€oematerial security†•Resource justice•economy environment society politics Figure 2:
Why eco-innovation 1 EIO 2010: Eco-innovation Observatory Annual Report 2010. Pathways to a resource-efficient Europe, www. eco-innovation. eu/index. php?
option=com content&view=article&id=200&itemid=258 Eco-innovate! A guide to eco-innovation for SMES and business coaches. 9 eco-innovation observatory Introducing eco-innovation Resilient business models Companies can revisit their business models
and value propositions by reconsidering novel ways of delivering their services. Alternative approaches to delivering services (e g. functional sales) can both reduce resource intensity,
bring about new market opportunities and make business more resilient in the face of market trends, notably fluctuating commodity prices.
New markets and customers Companies developing and selling new eco-innovative products, services and technologies are motivated by the opportunity to access new markets and customer segments.
A clear incentive here is maintaining and generating higher profits. Business case for eco-innovation Cost avoidance Regulatory requirements
anticipation of new standards Cost saving Material and energy cost savings due to efficiency gains Resilient business models Creating business models focussed on delivering services
and â€oeperformance†to customers New markets and customers Higher revenues and profit Cost saving Eco-innovations resulting in improved resource productivity save money by reducing costs of material
and energy. This type of â€oesavings oppor-tunity†is associated especially with process innovation and grounded in initiatives like â€oecleaner and leaner†production.
The business case for material efficiency has increased with rising commodity prices. Complying with regulations Many companies eco-innovate their processes
and products to comply with regulatory requirements, but also to meet growing environmental and social standards applied by their strategic partners and clients (e g. retailers.
Product and service eco-innovation Process eco-innovation Figure 3: Business case for eco-innovation Eco-innovate!
A guide to eco-innovation for SMES and business coaches. 10 eco-innovation observatory Introducing eco-innovation Eco-innovate!
and impacts •by limiting extraction of virgin resources and by limiting â€oeunused†extraction Consider renewable and secondary resources (circular economy) •Reduce cost by improving efficiency of extraction •Comply with
and waste•Reduce production costs by improving material and energy productivity •and by material substitution Build resilience to changes in commodity prices and resource supply •Increase your turnover and profits
and services Comply with and anticipate new regulations (including eco-design) •Distribution Reduce impacts, for example through:
•land and water Cause less pollution and waste•Shift to selling services from products
A guide to eco-innovation for SMES and business coaches. 2 Revisit your business model 14 eco-innovation observatory Revisit your business model Key challenges for your business model Rethink your value proposition and your offer:
•customers do need not necessarily to own products; services can meet their needs, perhaps even better.
Consider concepts like leasing or sharing for your business. Scan the horizon: what are emerging trends •that may influence your value proposition and business model in a short-and long-term?
Prepare to take risks: changing a business •model is a continuous process. Integrate an ongoing strategic reflection of your business model.
This will make your business more resilient. Companies most often decide to rethink and redesign their business model to reduce costs
and improve customer experience. Many companies are driven also by environmental and social concerns. Revisit your business model Key Questions
What value do we deliver to customers? •Which customers†needs are we helping to •satisfy?
What are key the activities and resources that •help us to develop and deliver value to customers (e g. skills, resources, strategic partnerships, Intellectual Property (IP))?
How much does our business model depend •on our companies†and our customers†access to and use of material and energy?
Could we consider an alternative way to sat-•isfy the needs of our customers (e g. product-service systems?
A fundamental question for any eco-innovative company is how to deliver value to a customer in a way that is both profitable and less resource intensive.
A guide to eco-innovation for SMES and business coaches. 15 eco-innovation observatory Revisit your business model Good practice examples Turntoo:
and derive their profits from its use rather than its sale. Therefore, they have an incentive to make the product as durable and efficient as possible,
functional sales in practice Swedish AGA Gas offers its customers the ability to continuously introduce safer chemicals at lower consumption levels and with less hazardous waste disposal.
The main concept is that cars can be spontaneously â€oehired†(customers use a chip to unlock the car),
and cleaning. www. car2go. com 2 See more about chemicals management business models in Green Paper by FORA on www. foranet. dk/media/27577/greenpaper fora 211010. pdf Eco-innovate!
A guide to eco-innovation for SMES and business coaches. 16 eco-innovation observatory Learning Resources Business model Generation•offers a wide range of resources for entrepreneurs and companies on business model innovation
The role of business models in green transformation†Background Paper•www. oecd. org/dataoecd/7/34/49537036. pdf Workshop resources•www. oecd. org/innovation
/innovationinsciencetechnologyandindustry/thefutureofeco-innovationtheroleofbusinessmodelsingreentrans formationsummaryandpresentations. htm Nordic Innovation•produced a series of publications on green business models www. nordicinnovation. org/Publications/green-business-model-innovation-empirical
-and-literature-studies FORA€¢present a number of cases of green business models in its Green paper:
â€oegreen business models in the Nordic Region. A key to promote sustainable growth. †www. foranet. dk/media/27577/greenpaper fora 211010. pdf Revisit your business model Eco-innovate!
A guide to eco-innovation for SMES and business coaches. 17 eco-innovation observatory 3 See Schmidt-Bleek F.,2011:
Revisit your business model Measuring environmental performance Ecological rucksacks are the resource requirements of producing products or services.
For services, it is the sum of the shares of the rucksacks of the technical means (â€oeservice delivery machinesâ€) employed (for example, vehicles, buildings, etc.
or services in terms of their material or energy requirements. www. factor10-institute. org/terms. html The ecological footprint is a measure of human demand on the Earth†s ecosystems.
and delivery of waste treatment and transport lca. jrc. ec. europa. eu/lcainfohub/datasetarea. vm Guide to PAS 2050†How to assess the carbon footprint of goods and services shop
and services consumed by the individual or community or produced by the business. www. waterfootprint. org Eco-innovate!
and delivery of products and services. 3. 1 Waste and emissions Key challenges for your business Dealing with waste.
Saves costs of raw materials, transport, stor-•age, management etc. over relatively short time periods and with generally low-risk investments.
PRE-SME€ Promoting Resource Efficiency in Small-& Medium-Sized Enterprises: Industrial training handbook Figure 5:
¢â€ Promoting Resource Efficiency in Small & Medium Sized Enterprises is an industrial training handbook.
Associa-tion for Sustainable Economies in Hungary disseminates case study books to help SMES invest in environmental measures that generate economic returns. www. environmental-savings. com Learning Resources Eco-innovate!
A guide to eco-innovation for SMES and business coaches. 25 eco-innovation observatory RREUSE€¢is a European umbrella for social enterprises with activities in reuse,
repair and recycling. www. rreuse. org National Industrial Symbiosis Programme •(NISP) in UK helps to identify opportunities where waste products from one industry can be recovered,
This trend cannot continue without detrimental consequences for environment. The price volatility for commodities, notably metals, food and non-food agricultural items, was higher in the 2000s than in any decade of the 20th century 6. The World Economic Forum (WEF) Global Risks
Report 2012 ranked extreme volatility of commodity prices as the fifth most important risk in terms of potentially negative impacts7.
At the same time Europe is the world region most dependent on imports, especially for fossil fuels and metals 8. 3. 2 Material and energy productivity Many companies are exposed to risks of raw material supply shortages,
and quantity of materials are consumed †throughout the lifecycle of our products and services? What measures can we take to reduce the •use of materials, energy, water and other resources?
Material productivity expresses the amount of economic value generated by a unit of material input or consumption.
Energy productivity expresses the amount of economic value generated by one unit of energy input or consumption. 5 SERI 2011, Global Material Flow Database. 2011 Version. www. materialflows
Towards the circular economy. Economic and business rationale for an accelerated tradition. 7 WEF 2012:
World Economic Forum Global Risks Report 2012, www. weforum. org/reports/global-risks-2012-seventh-edition 8 European Environment Agency 2010:
The European Environment. State and Outlook 2010. Material resources and Waste. European Environment Agency, Copenhagen. Eco-innovations focused on improving material
and energy productivity can save costs and lower risk by making companies less dependent on imports.
On average, these investments paid off after 13 months. Micro companies achieved high relative savings (comparable to 11%of annual turnover)
Eco-Innovation Observatory Annual Report 2011, Closing the eco-innovation gap, an economic opportunity for business, p. 17, www. eco-innovation. eu/index. php?
and cost avoidance Invest in material efficiency. •German enterprises that reduced their use of metal achieved average savings of â 72,000 per year10.
Substitute resource-intensive materials •and products with new materials, products or services that also improve the functionality of the end product.
Invest in energy efficiency. •Research by the Carbon Trust showed that large UK businesses undervalue the financial returns from investments in energy efficiency by more than half.
an economic opportunity for business, p. 17, www. eco-innovation. eu. Eco-innovate! A guide to eco-innovation for SMES and business coaches. 29 eco-innovation observatory Electroself:
The producer Electro Power systems SPA, was nominated as one of the Technology Pioneers in the field of energy and environment by the World Economic Forum in 2012. www. electrops. it WEF 2012
sustainable furniture The customers of Made can choose online what the company manufactures by voting on the designs they prefer most.
This allows for cost savings for customers of up to 70%.%The material choice for the furniture production is based on a comparative analysis of closest equivalent products in functionality,
requirements of functionally comparable goods or services. The Wuppertal Institute has developed a stepwise guide to how to perform MIPS. www. wupperinst. org/en/publications/entnd/index. html?
and can be found online. www. oecd. org/innovation/green/toolkit The •Guide Towards The Circular Economy of the Ellen Macarthur Foundation offers interesting guidance on how businesses can benefit from adopting new
practices based on the circular economy philosophy. www. thecirculareconomy. org. Several in depth case studies also provide insights on how companies have changed their material inputs,
management include coping with the rising volatility of commodity prices, dealing with uncertain supply of materials,
as well as meeting customer demand for an improved transparency of supply chain. The most in demand information includes data on the origin of resources used in products
Sustainable supply chain management requires the management of environmental, social and economic impacts†and the encouragement of good governance practices†throughout the life-cycle of goods and services. 12 11 Council of Supply
and services and can take the form of a reuse, buy-back, or recycling programme.
What are the risks and opportunities of imple-•menting a sustainable supply chain management approach?
or by involving key suppliers and other related stakeholders. Map and measure resource inflows and out-•flows from the company.
Conduct benchmarks and consider what is •being done externally in the field. Map Resources Design a supply chain map:
Evaluate risks and opportunities through a •risk management approach or an opportunity-based approach. Establish a common language Set sustainability targets and procurement •criteria for the supply chain.
Internal and external communication is also •very important at all stages. Develop collaborative practices and strong relationships with clients and suppliers Foster collaborative practices, e g. mutual-•ised supply management systems, collabor-tive planning, forecasting and replenishment.
TRI-VIZOR€ s Cross Supply Chain Methodologyâ software makes it possible to maximise in real-time the total community gains in cost and CO2. www. trivizor. com Shields Environment:
recycling and remarketing Shields Environmental is based a UK company that provides support services to the telecommunication sector, mainly accompanying companies with environmental management solutions and recycling.
towards smart freight models TRI-VIZOR, a spin-off from the University of Antwerp in Belgium, developed an original horizontal cooperation based business model for freight transport.
Procure eco-efficient products and services. •According to the Carbon Disclosure Project, 39%of its members and 28%of their suppliers witnessed cost savings after introducing a sustainable procurement approach13.
Develop â€oesustainable stories†to increase •customers, adhesion to the company and its products and services. 13 See Accenture,
2012: www. accenture. com/us-en/outlook/Pages/outlook-journal-2012-why-sustainable-supply-chain-is-good-business. aspx Eco-innovate production processes Eco-innovate!
and services 38 eco-innovation observatory Eco-innovate products and services Key questions Does our company have the skills,
time and •money to pursue relevant R&d? Who has the research and technical skills to •undertake eco-innovative R&d internally or externally?
How could R&d help identify opportunities? •Do we have systems in place to monitor eco-•innovation trends related to our core business?
services •and technologies may mean fundamental changes to existing designs, which may be costly in the short term but beneficial in the long term.
and focus. 4. 1 Research and development Building eco-innovative capacity into the Research & development (R&d) process will help identify new business opportunities.
Raise awareness and understanding of en-•vironmental impacts throughout the firm to highlight opportunities and priorities related to eco-innovation alongside other product and service attributes.
Quick wins Engage key partners and stakeholders: this •may produce interesting opportunities for new eco-innovative solutions,
or ways to reduce environmental impacts of existing products and processes. Share causes of environmental impacts,
and services Map life-cycle environmental impacts of •products, identify any â€oematerial and energy use hotspotsâ€
materials •and processes to key internal and external stakeholders in R&d. Subscribe to sources of information on emerg-•ing technologies
toys etc. www. tecnaro. de Eco-innovate products and services Trulstech: biodegradable flame retardant The science behind natural fire protection known as the Molecular Heat Eater led to Swedish inventor Mats Nilsson founding Trulstech.
10 big questions about your eco-innovation www. bsk-cic. co. uk/uploads/assets/media/documents/e77d55492e6e69 4e04a2ffe62f8a3c972f27a79d. pdf Enterprise Europe Network shares
and •licensing. portal. enterprise-europe-network. ec. europa. eu EUREKA is a European network that supports businesses carrying •out R&d. www. eurekanetwork. org/supporting
and services Eco-innovate! A guide to eco-innovation for SMES and business coaches. 42 eco-innovation observatory Eco-innovate products
and services Key questions What product design options are there to •improve the environmental performance of products?
Communicating data or information on a •product†s environmental impacts is not always a strong motivator for customers
and services. For example, Philips†as an electronics company†explores opportunities to improve product-related environmental performance in six focal areas:
reduced weight, increased energy effi-ciency, reduced packaging, increased re-cyclability, substitution of hazardous materials and increased longevity.
working prototypes with customer representatives to confirm the likely environmental performance related to typical user-behaviour.
diverse con-•cepts and involve stakeholders/experts. Reward buy in when eco-innovative ideas are implemented.
and services Eco-innovate! A guide to eco-innovation for SMES and business coaches. 44 eco-innovation observatory What problems can arise in the distribution of the product to the customer?
and services How does the product system actually fulfil customer needs? Dematerialisation  Shared use of the product  Integration of functions  Functional optimisation of product (components) Â
Orangebox has set up a recycling centre at their site in Wales achieving a significant return on investment
and services Quick wins Creative approaches and focused improv-•ment strategies help identify potential design improvement.
and comparison e g. with competitors†involving customers informs their relative importance. Tools for assessment help designers to directly •inform their decision making.
Focusing on the environmental aspects of a product makes you start asking questions of suppliers and customers in the supply chain,
A guide to eco-innovation for SMES and business coaches. 46 eco-innovation observatory Eco-innovate products and services Granta Design,
and checklists. www. ecodesign. at/pilot/ONLINE/ENGLISH/INFO/SITEMAP. HTM Eco-innovate products and services Figure 7:
and services Key challenges for your business Customers†whether they are end consum-•ers
Market research may highlight important •areas of environmental or social interest, improvement or concern related to existing or new eco-innovative products, services or technologies.
or •new business models driven by environmental considerations will require approaches outside of normal day-to-day R&d processes with dialogue with a range of stakeholders including customers,
Lifecycle considerations are increasingly im-•portant to customers e g. companies need to understand how products are manufactured sourced
Today†s customers buy greener products, services or technologies because they work better, save money or enhance health.
Awareness†how do we raise awareness •about products and services? Evaluation†how do we help people evalu-•ate greener value propositions?
Purchase†how do customers purchase •products and services? Delivery†how do we deliver a greener •value proposition to customers?
After sales†how do we provide greener •post-purchase support? Greener customers are influenced by recom-•mendations of trusted peers and third parties.
There is a backlash against perceived green-washing, therefore companies must be clear about the environmental impacts of products.
and others issues through engaging customers in meaningful conversations through a variety of media, especially via websites and online social networks, rather than by simply talking â€oeat†customers through traditional media.
A guide to eco-innovation for SMES and business coaches. 49 eco-innovation observatory Key Questions have completed we market research amongst •customer groups to determine environmental awareness, understanding, potential opportunities
How can environmental considerations become integrated into customer relationships and integral to our business model? Which combination of customer needs are •the companies†products satisfying e g. new-ness, performance customisation,
and ongoing •communications with customers and other stakeholders can identify new opportunities for eco-innovation.
Engage existing and potential customers, as well as other stakeholders, in conversations through a variety of media.
Use positive and negative feedback to improve business/product development and promotional strategies. Benchmark your product (s) against com-•petitors on environmental aspects
alongside function, cost, pricing, etc. Identify your product (s) absolute and rela-•tive environmental features and benefits compared to your competitors. ronmental performance (e g. reduced energy consumption
How do we incorporate environmental performance related data in communications? What is the product†s Unique Selling Proposi-•tion (USP) relative to competitive offers?
which means that customers energy bills are reduced by â Z per month. What will the market pay?
or business benefits from distinct environmental performance affect pricing, costing and communications? What â€oeadded value†environmental benefits •can be attached to the core concept and?
How can stakeholders be rewarded for adopting and promoting pro-environmental behaviour? Eco-innovate products and services Eco-innovate!
A guide to eco-innovation for SMES and business coaches. 50 eco-innovation observatory Eco-innovate products
and services Quick wins Determining the extent of customers and •other stakeholders environmental awareness and understanding may help to reveal business opportunities or threats.
Identifying product (s) environmental features •and business benefits may help determine areas for product differentiation.
Communications incorporating understand-•able, valid and clear environmental performance claims underpinned by fact based information will build trust and reputation amongst customers.
Establishing a reputation for environmental •knowledge and expertise may attract new prospects and generate new customers.
Good practice Visionary Soap Company Ltd successfully established a brand of fair trade soap. www. visionarysoap. co. uk/about-us-1-w. asp Elvis
and integrate positives into communications with customers. Ensure environmental performance claims •are valid and understandable before you incorporate them into promotional messages.
and services that have reduced a •environmental impact. It is a voluntary label used following certification through independent compliance checks
following a simple online application process with special discounts for SMES. ec. europa. eu/environment/ecolabel Eco-labels are profiled at limas. simpple. com/resources/results
-communication-eco-labels ISO guidelines on environmental labelling•www. iso. org/iso/environmental-labelling. pdf Defra†â€oegreen Claims Guidance†provides clear principles
and examples. •www. defra. gov. uk/environment/economy/products-consumers/green-claims-labels/Learning Resources Eco-innovate products
and services Eco-innovate! A guide to eco-innovation for SMES and business coaches. 5 Get your eco-innovation idea off the ground 54 eco-innovation observatory Get your eco-innovation idea off the ground:
service or •technology deliver to your customers? Who are the potential customers for your •product?
have done you any market research? •Who are your competitors? Have you bench-•marked your product,
service or technology compared to competitive products and services? What are relative benefits of your product compared to competitive offers?
venture capital; â€oeangel investorsâ€; share ownership; and â€oecrowd fundingâ€? What are associated the risks with each •source of funding?
How are you going to create â€oenoise†in the •market and amongst your customers? What can you do yourself?
A guide to eco-innovation for SMES and business coaches. 56 eco-innovation observatory What is crowdfunding?
Crowdfunding is a peer-to-peer funding model that offers transparency and a sense of community for both funder and entrepreneur.
Impact investment for eco-innovation? Impact investment is investment assessing not only the financial return on investment,
but also the environmental and social impacts in the course of the operations of the business and the consumption of the product or service,
Currently, several crowfunding platforms, such as www. Impactcrowd. com (NL) and www. crowdmission. com (UK), specialise in impact investment for ventures that aim to create environmental, social and economic impact.
Tips for establishing a crowdfunding campaign Consider the proposition and scope for tiers •of rewards alongside the environmental impact of the proposition and establish a clear link between the reward
and customers and extend it to the likeminded crowd who have affinity with your product,
As a result of their experience Enviu has established Impactcrowd, a crowdfunding platform for European eco-innovators. Crowdfunding for eco-innovators 14 www. environmentalleader. com/2013/01/09/impact-investing-to-hit-9-billion-in-2013/Get your eco-innovation idea off the ground:
lead questions Eco-innovate! A guide to eco-innovation for SMES and business coaches. 57 eco-innovation observatory Good practice examples In the US Mosaic (www. joinmosaic. com) targets small businesses
and ANI (As Nature Intended)( www. anibrand. com) vegan â€oebarefoot†shoes were funded both by Kickstarter (www. kickstarter. com). Learning Resources A Directory of crowdfunding platforms â€
¢www. crowdsourcing. org/directory Choose the category as Crowdfunding and then country. Results can be filtered by sub-category for donations, equity or lending.
Members receive opportunities to network, access services and financial partners and become visible internationally. www. europe-innova. eu/ecolink Examples of European projects on eco-innovation Eco-innovate!
A guide to eco-innovation for SMES and business coaches. 61 eco-innovation observatory ECO-INNOVERA focuses on the support of eco-innovation in research and development.
economy and society. www. eco-innovera. eu Ecopol is a transnational public partnership that aims to accelerate the implementation of eco-innovation policies across Europe.
It is also also building a European network of key collaborators with privileges such as the testing of all platform services,
offer of full platform services to their members and ambassador of the platform in their country. www. ecoweb-project. eu A number of INTERREG programmes and projects offer interesting good practices in eco-innovative solutions
PRE-SME€ Promoting Resource Efficiency in Small-& Medium-Sized Enterprises: Industrial training handbook p. 22:
Shields Environment  Source: www. shields-e. com p. 40: TECNARO  Source: www. tecnaro. de;
for the Environment from the Competitiveness and Innovation framework Programme (CIP. The Observatory has developed an integrated information source
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