Sustainable innovations

Understanding what constitutes sustainable innovation is essential as the nature and type of innovation can significantly influence its performance measurement and related challenges.

The notion of sustainable innovation is not a stable, monolithic concept but interpreted flexibly and subject to multiple, often contested, framings, and definitions (Colombo, Pansera, & Owen, 2019). There is limited conceptualization of sustainable innovation due to its multifaceted character and diversity (Kiefer et al., 2017; Silvestre & Jirca, 2019). Various institutions and scholars have provided different definitions and explanations on sustainable innovations, mostly in parallel with eco-innovations (Adams, Jeanrenaud, Bessant, Denyer, & Overy, 2016; Przychodzen & Przychodzen, 2018). In this respect, eco-innovations are defined as “new or modified processes, technologies and products, which are eco-friendlier and enable the company to avoid or mitigate environmental damage” (Przychodzen & Przychodzen, 2018, p. 3558). Since the focus of eco-innovations is on the environmental dimension only, sustainable innovations should, therefore, encompass social and economic dimensions on equal terms alongside environmental aspects (Adams et al., 2016; Calik & Bardudeen, 2016; Gunarathne, 2019). Przychodzen and Przychodzen (2018) define sustainable innovations as “an introduction of a new or modified solution (either product/service or process), which creates both environmental and social value-added parallel to increased economic profit for the initiating company” (p. 3558). In another definition that is closely in line with the notion of sustainable development, Rauter et al.

(2019) emphasize that sustainable innovations should result in less negative environmental and/or increased social impacts from a full life-cycle perspective and consider the needs of future generations.

Along with an improved understanding of what sustainable innovations entail, scholars have provided different classifications of sustainable innovations. They can be categorized by the size (e.g., small and large innovations), novelty (e.g., new and old innovations or new-to-the firm or new-to-the- market innovations), magnitude of change (e.g., radical or incremental innovations), or nature/object (process, product, organizational and marketing innovations) (Kiefer, Carrillo-Hermosilla, & Del Rio, 2019; OECD, 2009; Rennings, Ziegler, Ankele, & Hoffmann, 2006). Among these different types of sustainable innovation classifications, one that merits extra attention in performance measurement is the innovation types by nature/object. Both product innovations, which encompass improvements of goods or services or new product development, and process innovations that enable the production of a given output with fewer inputs are technical. However, organizational innovations (e.g., new forms of management systems such as total quality management) and marketing innovations are non-technical (OECD, 2009; Rennings et ah, 2006).

Sustainable innovation performance and measurement

Sustainable innovation performance is the extent to which the innovation output/results have improved the firm’s sustainability success (Calik & Bar- dudeen, 2016; Rauter et ah, 2019). Sustainable innovation performance is the output/results of sustainable innovations reflecting the degree of success of the innovation in achieving the expected economic, social, and economic output/outcomes (Garcia-Granero, Piedra-Munoz, & Galdeano-Gomez, 2018; Gunarathne, 2019). Since sustainable innovations improve sustainability performance along economic, environmental, and social dimensions, their performance measurement has to capture these dimensions of innovative outcomes (Carrillo-Hermosilla, Del Rio, & Konnola, 2010; Rauter et ah, 2019). According to Birchall et ah (2011), there is a ‘measurement crisis’ of innovation performance as there are so many different models attempting to quantify too many things, some of which are not even important. They suggest that the critical challenge is to ensure that the measurement of innovations leads to improved decision making.

Although equal emphasis should be placed on the measurement of the three dimensions of sustainability performance, a strong focus has been placed traditionally on the economic performance dimension (Rauter et ah, 2019). This view has been widely criticized in the traditional performance measurement literature, notably by Kaplan and Norton (1996), who suggested broadening the measurement dimensions to provide a balanced view of performance.

Challenges in measuring sustainable innovation 243

To address the multi-dimensionality of sustainable innovation performance, Rauter et al. (2019) have developed a new scale by defining five dimensions to consider in innovation performance measurement. These dimensions include sustainable product design, resource/process efficiency, environmental pollution, social responsibility and economic perspective.

Along with these normative discussions of the measurement approaches and scales, some authors have documented the measurement challenges as well. These sustainable performance measurement challenges are the identification of sustainable innovation performance indicators in the economic, environmental, and social spheres; quantification of sustainable innovation performance indicators; problems associated with the determination of system boundary measurements; determination of the suitable period for measurement and benchmarking of sustainable innovation performance (Birchall et al., 2011; Cillo, Petruzzelli, Ardito, & Del Giudice, 2019; Gunarathne, 2019). Having analysed the literature on sustainable innovations, Cillo et al. (2019) identify four main research gaps in measuring sustainable innovation performance (see Table 15.1). These issues are rooted in the sustainable innovation performance measurement challenges, which have been highlighted by Gunarathne (2019).

The lack of standard measurement frameworks and approaches can lead to a poor interpretation of the performance of sustainable innovations. This can inevitably lead to flawed decision making at firm and national policy levels (Birchall et al., 2011). Failure to measure performance accurately can result in uncertainty regarding sustainable innovations in many ways. It can cause uncertainty over its commercial viability (i.e., uncertainty associated with the possibility of creating a market for an innovation), organizational appropriability (i.e., uncertainty associated with the potential to reap the benefits of the innovation and how easily it could be imitated) and societal acceptability (i.e., uncertainty associated with the potentially detrimental societal side effects) (Dyck & Silvestre, 2019).

Table 15.1 Challenges in measuring sustainable innovation performance (Gunarathne, 2019)