How can innovation support sustainable development in businesses? Prof. Susana Pereira, FGV-EAESP, together with researchers Simone Sehnem, Tais Provensi, and Tiago Hilário Hennemann da Silva, investigate the Brazilian startup ecosystem to find out
By CoBS Editor Aymeric Thiollet. Related research: Disruptive innovation and circularity in start-ups: A path to sustainable development, Simone Sehnem, Tais Provensi, Tiago Hilário Hennemann da Silva, Susana Carla Farias Pereira, [Business Strategy and the Environment].
While the Brazilian government has stepped up measures to support innovation and sustainable entrepreneurship, no study has yet examined how innovation and the circularity of resources have been incorporated into the sustainable business models used by the start-ups.
As such, Prof. Susan Pereira of FGV-EAESP and her fellow researchers decided to investigate the subject by asking: How is disruptive innovation used to enable the circularity of resources in the business models of Brazilian start-ups?
When profit meets positive impact
To explore the gap between innovation and circularity, Prof. Pereira et al. ran 50 interviews with start-up owners and managers, as well as accessing the database of 6,000 created companies registered with the Brazilian Start-ups Association.
Especially necessary in two respects, the research question enriches the existing studies by revealing how far along these start-ups are in adopting sustainable practices. Second, it confirms a new reality: businesses can simultaneously achieve economic success while championing environmental preservation and human development, supporting the United Nations’ 12th Sustainable Development Goal – Responsible Consumption and Production. How so, exactly? Let’s first dive into the intertwined concepts of innovation and circularity.
Innovation as the cornerstone of circularity
You may already be familiar with Christensen’s definition of disruptive innovation. This is characterized by the introduction of new products or services that are simpler than those already on the market, and which, as they gain in popularity, come to supplant these existing products and services.
Prof. Pereira and her colleagues add that innovation is linked to the notions of efficiency, process, and improvement. These same concepts underline the idea of circularity.
The researchers therefore argue that disruptive innovation is at the root of circularity. To characterize the startups they studied, they defined disruptive innovation at several levels: at the internet level, big data, cloud computing, at the sharing level, process redesign, peer-to-peer and at the business model level.
Circularity rhymes with cyclicity
Disruptive innovation may be at the root of circularity, but what does the latter precisely encompass? “The central proposal of the circular economy is the elimination of waste through the creation of cyclical flows of resources” evoke the researchers, quoting Weber. And indeed, this calls for innovation in start-ups’ business models.
Having determined, as we saw above, a categorization of innovation, the researchers combined the insights of different scholars to also characterize business models (regenerate, share, optimize, cycle, virtualize, or exchange) and circular business practices (circular supply, waste as a resource, second life or sharing platforms).
As they went through their interviews with startup owners, the researchers classified their businesses according to their business models, disruptive innovations, and circular practices.
Innovation and Sustainability: The signature of new businesses
Through their study, the researchers discovered that the start-ups adopted business models that quickly and efficiently internalized disruptive innovations. The respondents directly associated them with cost reductions, increased productivity as well as reduced water and energy consumption.
However, Prof. Pereira and her colleagues observed varying trends of adoption of sustainable business models, circular business practices and disruptive innovations within the start-ups they studied. To reach full adoption of sustainable practices, they offer startups several recommendations including making a better use of technology and dematerialization, focusing on efficiency and partnerships, and transitioning to better energy mixes.
From research insights to positive action
The research findings hold significant implications for fostering sustainable development through strategic business approaches. Key considerations include repositioning business models to extract and retain value from supply chain resource flows, leveraging innovation for circular economy acceleration, creating new markets via disruptive innovations, fostering integrated practices with stakeholders, and recognizing technology as a catalyst for circular practices.
The study also draws lessons regarding innovation, entrepreneurship, and circularity to highlight key areas of focus for action: “People”, emphasizing their strategic role; “Innovation”, highlighting a firm’s need for creativity and disruption; “Technology”, emphasizing business model and infrastructure compatibility; and “Regulation”, underscoring policy’s role in supporting circular supply chain ideas pursued by businesses.
All in all, evidence points to startups in Brazil not only being aware of the stakes and need to go green, but including innovation and circularity into their business operations right from the word go. Such action is positive – and a mark of young creators’ commitment as they innovate towards a more sustainable, responsible future of business.
Useful links:
- Read another article on Prof. Susan Pereira’s research: The circular economy: Its challenges and impact across frontiers
- Discover FGV-EAESP Brazil and apply for the Master in International Management (MPGI).
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