Environmental Compliance? Don’t Hate, Innovate

For corporations, compliance feels a bit like Dad busting up the keg party just when things are getting good.

At best, it amounts to someone (usually government) telling you what to do and leaving you holding the bill. At worst, it can blindside you, and leave you limping in your race against foreign competitors.

Or is it all that bad?

There’s a curious phenomenon emerging in the world of green business. Government mandates often trigger business innovation, leading to even greater prosperity.

Lisa Jackson at the EPA provides some great examples from her experience with the Clean Air Act:

• • In the 1970s lobbyists predicted ‘entire industries might collapse’ if the Act was used to phase in catalytic converters. Instead, the mandate gave birth to a global market for catalytic converters, with American manufacturers at the pinnacle of that market.
• • In the 1980s opponents of an amended Clean Air Act claimed the amendments would cause ‘a quiet death for businesses across the country’. Instead, the economy grew by 64% and acid rain declined by 50%.
• • In the 1990s, many claimed that using the Act to phase out CFCs would cause ‘severe economic and social disruption.’ In reality, the phase-out happened smoothly, 5 years ahead of schedule, and cost 30% less than predicted.

Today, government isn’t the only regulator pushing green compliance. Businesses on the journey to sustainability are now regularly requesting their entire supply chain join them on the trip.

They’re doing it to accelerate their own positive impact. But it also lessens the possibility of being tarred with the environmental indiscretions of an errant supplier. Case in point: Nestle learned the hard way that the sins of their palm oil suppliers could come back to haunt them.
 

Compliance: another word for ‘unmet need’

If you’re facing impending environmental compliance regulation, try looking at it as an unmet need. After all, there are generally dissatisfied consumers somewhere in the equation.
In the case of the Clean Air Act, they were the folks getting sick from pollution. And corporations regulating their supply chain are driven by consumers demanding a product that’s better for themselves, and for their planet.

If you successfully isolate this unmet need, you’ll understand your target better. Which is the first step to successful innovation.
 

Apply innovation rigor

Successful innovation starts with an insight derived from an unmet need. But that’s just a third of the equation.

The insight has to be answered with an idea – a new product, service or business model – that meets the need.

And finally, you need a communication / commercialization strategy that seamlessly ties the need to the idea. Consumers need to feel you’ve created something they genuinely want, at a price they’re happy to pay.

Meat Loaf famously said that two out of three ain’t bad. But in the case of innovation, two out of three ain’t enough. The wrong insight, a mediocre idea, or ineffective communication can all scuttle your hard work.

When you get it right

There is a growing casebook of corporations that leveraged regulation to create great innovation.

For example, Tide’s concentrated detergent is a success in part because it pre-empted Wal-Mart’s packaging reduction request to suppliers.

And when HP learned that impending European regulation would require electronics manufacturers to pay for recycling in proportion to their sales, they helped innovate the European Recycling Platform. This enabled them to scale their recycling, saving HP approximately $100 million between 2003 and 2007.

Compliance, unfortunately, has earned a reputation it doesn’t deserve. Treat it as a launchpad for innovation, and it may become one of your most powerful tools.

This article originally ran in Green Biz.