Business Cubed: one woman's mission to de-risk the global green innovation market
As a growing number of businesses look to tap into the huge potential of low-carbon innovators and sustainability start-ups to drive internal CSR programmes, Matt Mace talks to the creator of the successful RBS Innovation Gateway as she embarks on a brave new venture to bring even more ready-for-market green innovations into the mainstream.
Marcela Navarro is the epitome of entrepreneurial flair.
Born and raised in Colombia, the businesswoman worked in various parts of the finance sector around the world, gaining more than 20 years' experience across sustainability and banking - two spheres you might not necessarily think would complement one another.
This spread of experience that Marcela gained saw her grow into a recognised and driven leader with a unique set of skills that allowed her to develop forward-thinking ideas to deliver long-lasting transformations within business.
Her track record spans Southern and Northern America, but it is Marcela's work in the Europe - and specifically the UK - that helped her get where she is today. Until last year, Marcela was the head of customer innovation for the Royal Bank of Scotland (RBS). Under Marcela's guidance – and utilising her expertise and advice – the bank quickly became renowned for its willingness to trial and support innovations that directly impact its operations.
RBS trialled electric car clubs, energy systems that adjust using real-weather data, and central heating additives, on top of nine other 'eco-innovations', on its buildings in Bristol. A further eight green innovations were also trialled at its world headquarters in Gogarburn as part of its innovation sponsorship programme.
All of these stemmed from the company’s Innovation Gateway, which saved in its first proof-of-concept year over 40,000 tonnes of CO2 and a staggering 200 million litres of water - equating to savings of £7.5m when rolled out across its estate - by engaging with SMEs and start-ups and, crucially, being willing to procure from them.
The initiative, which is now into its third competition round, was Marcela's brainchild and formed a cornerstone of RBS’s newfound ability to engage with much smaller communities while simultaneously reducing key environmental footprints in-house.
"What was designed and deployed at RBS worked brilliantly for the business," Marcela says. "We recognised the need to create both business and community value. This process was so successful that the model was then taken up to a multi-sector level, helping companies to simplify the adoption of proven technologies and innovations to scale."
Now, Marcela has moved on from RBS and is on the hunt for new ideas of saving more energy, water and waste that can be trialled in other businesses. "The concept worked so well for the business, but I wanted to make it 100 times better by branching out to other industries in order to meet other needs and to create both business and community value through an acceleration and de-risking framework," she explains.
With Business Cubed, Marcela wants to support companies around the world to re-address imbalances within their supply chains by harnessing green innovation.
First up: engine manufacturer Cummins. The American Fortune 500 corporation distributes and services diesel and natural gas systems, as well as working on fuel systems, filtration, emission solutions and electrical power generation systems. The nature of Cummins’ work will see it provide for areas such as heavy-duty vehicles and ships – two extremely emission-heavy transport sectors.
Serving customers across 190 countries, Cummins has been looking much more closely at its own environmental footprint as its revenue continues to expand. The business earned $1.4bn on sales of $19.1bn in 2015 and recently pledged to spend $1bn on minority – and $1.4bn in total diversity – suppliers in the US.
Alongside a pledge to purchase innovations from under-represented suppliers, including women-owned and ethnic minority-owned companies, Cummins is now forging ahead to increase its sustainability credentials.
By 2020, the company expects to reach an annual emissions reduction of 3.5 million metric tonnes, reduce direct water use by 33%, increase recycling rates from 89% in 2014 to 95% and reduce energy use and emissions by 25% and 27% respectively against a 2005 baseline.
In an attempt to hit these targets in a manner that creates holistic change across the company’s environmental and social impact, Marcela has been given the opportunity to place her proven market acceleration model, Business Cubed, at the core of Cummins’s new Environmental Gateway.
The model will use innovation as a method of implementing a variety of market-ready sustainability technologies and concepts to boost UK operations. According to Steve Evans, the EPSRC Centre for Industrial Sustainability’s director of research, the Business Cubed model “reformulates” traditional innovation models by turning away from ideates and instead focusing on innovations that could make a direct impact straight away.
“Business Cubed reformulates the traditional model of acceleration through ideation, so that procurement of sustainable innovations in the corporate value chain is positioned at the centre of the model rather than seen as an independent force to scale up, largely unaffected by risk and trust,” Evans says.
While this external praise is welcomed by Cummins, it seems that, internally, there is also a buzz around this new green business model.
Mainstream innovation platforms established by the likes of Unilever and Shell (which was analysed in a recent edie podcast episode) are aimed at the ideas rather than the resulting products, as this allows those businesses to secure IP rights and sculpt the idea in a way that would suit the company’s internal operations. But for Cummins, the aim of its Environmental Gateway is to add “instant credibility” to the business by using existing models that effectively de-risk the situation for all parties.
“The Business Cubed model has added instant credibility within Cummins and proven the concept,” says James Johnson, who is on the indirect purchasing team at Cummins. “The model has easily adapted to existing business as usual processes and added significant practitioner value, minimising design and deployment risks in our supply chain in line with the company’s expected risk and reward standards.”
For Marcela, the fact that Cummins' procurement team is leading the march with this initiative is “phenomenal” as it gives the firm a greater grasp of the “limitations and complexities” surrounding corporates that are actively seeking to innovate at scale within supply chains.
“We tend to blame the system,” Marcela says. “Corporates blame innovators and innovators blame the corporates and the government blames the businesses who are failing to scale-up innovation in the value chain. There is clearly a need; an intention. But there is limited action. There are far too many risks involved and the rewards does not seem evident.
“Very few innovations manage to scale up. What we are trying to do is make it easy for this scale up to take place. Through a co-ordinated approach that super-charges the ability to scale up innovations we can make a real difference for the corporates, the innovators, the financiers, and the system as a whole.
“Companies need to feel confident about scaling up technology that typically needs to be tested internally. But once the trust is there companies will feel more comfortable in scaling up and bring in procurement into the process of making things happen. This is phenomenal as normally this type of programme is led traditionally from the business, but we lead the Cummins Environmental Gateway from a procurement process. Without procurement there is no adoption of innovations at scale. Trust is key to scale up technologies.”
As a previous four-part feature from edie explained, SMEs and start-up are faced with a plethora of risks to overcome in order to push an innovation from a fledgling dream to a ready-to-operate product or service.
Big green ideas first have to navigate a minefield of investment and find a funding partner that doesn’t shackle the innovation or the start-up to certain requirements. Scaling-up these ideas also create another headache for companies that perhaps don’t have the revenue or the expertise to bring their innovation to market. If an idea is fortunate enough to pass through these issues unscathed then it still has to gain an understanding of the legal necessities when entering into partnerships, as well as tackling issues surrounding the work-flow an input balance between start-up and the funding corporation.
All in all, there’s a huge risk factor associated with funding innovations as a business. As Marcela notes, when you bring banks and investors into the equation, there is evidence of a reluctance to pursue these potentially game-changing concepts.
“The banks need to feel comfortable with risk association and innovation, investors need to be comfortable about the risks of scaling up, they want to see markets, they want to see customers and they want to see British products coming through,” Navarro says. “We need to de-risk the value system all together.”
In order to do so, the Cummins model will originally only target readily-scalable innovations that can help the company hit its environmental targets as well as its social goals to improve proportion of spending with “under-represented suppliers”, in line with corporate goals.
For Marcela, the Business Cubed model can also act as more than a “de-risking model” and could open up investment across a variety of innovation markets, potentially boosting economic growth and attracting employment to different markets as part of a “rebalancing of society”.
“This is not a traditional innovation competition,” she explains. “This isn’t about corporates looking for an opportunity or a new idea, but rather it is about finding market ready solutions they can scale up in their value chain to accelerate results. Most of the time corporate challenges are launched to find new ideas – ideation, not to scale up existing ones - adoption. This is what Business Cubed focuses on: the adoption of existing sustainable innovations in the corporate value chain.
“I think, through this, we can bring about employment growth and an economic rebalancing of society because these companies will start hiring more people, bring value not only through innovation and market aspects but also through reinvigorating the UK economy.
“It goes beyond de-risking the adoption for the seller and the buyer, but you are de-risking the whole system approach, which could potentially open avenues for investors and financiers to re-enter the market to finance scale up innovations.”
Fruits from the ground
At the moment, the Business Cubed model is seeking to “take the fruits from the ground” when it comes to upscaling innovation. But Marcela admitted that in the future the model could branch out to focus on ideas as well.
For now, the model provides the perfect chance for Cummins to target promising innovations that cover a range of issues that the company is actively seeking to improve on. Aspects such as water and energy benchmarking, heating and ventilation systems, on-site renewable energy, waste and heat reuse and ways to move packaging up the waste hierarchy are all prime targets that Cummins hopes to address through the Gateway.
But for companies hoping to reap the benefits of the Business Cubed model, they'll have to encapsulate more than just promising technologies. While some companies may be well equipped to scale-up an idea, they may not be hitting CSR goals as well as they should, or perhaps are engulfed in issues regarding employment ethics. These are all aspects that will be considered during the application process, which runs until 30 September 2016.
Marcela looks forward to a time where a “risk free” innovation market allows for larger companies to concentrate on the corporate responsibility of SMEs, just as much as the actual innovative concept in order to create a more balanced and sustainable supply chain.
“A company might be brilliant when it comes to social impacts but not great when it comes to carbon, this company can’t go through in the future,” she concludes. “A company that’s good at inclusion but doesn’t provide environmental savings won’t go through. We need to identify potential failure modes early on in order to scale up the right innovation.”