Eco-innovation – does additional engagement lead to additional rewards?

Purpose: Eco-innovation is any form of product, process or organisational innovation that contributes towards sustainable development. Firms can eco-innovate in a variety of ways. The purpose of this paper is to identify nine different eco-innovation activities – including such items as reducing material use per unit of output, reducing energy use per unit of output, reducing carbon dioxide (CO2) “footprint” – and the authors ask whether these act as substitutes or complements to one another. Design/methodology/approach: Eco-innovation is any form of product, process or organisational innovation that contributes towards sustainable development. Firms can eco-innovate in a variety of ways. In this paper the authors identify nine different eco-innovation activities – including such items as reducing material use per unit of output, reducing energy use per unit of output, reducing CO2 “footprint” – and the authors ask whether these act as substitutes or complements to one another. Findings: Introducing only one eco-innovation activity has little payoff (in terms of turnover per worker) with only those firms who reduce their CO2 “footprint” having higher levels of turnover per worker. When introducing more than one eco-innovation activity the authors find that certain eco-innovation activities complement one another (e.g. reducing material use within the firm at the same time as improving the ability to recycle the product after use) others act as substitutes (e.g. reducing material use within the firm at the same time as recycling waste, water or materials within the firm). Practical implications: The results suggest that firms can maximise their productive capacity by considering specific combinations of eco-innovation. This suggests that firms should plan to introduce eco-innovation which act as complements, thereby, boosting productivity. It also suggests that eco-innovation stimuli, introduced by policy makers, should be targeted at complementary eco-innovations. Originality/value: The paper analyses whether eco-innovations act as complements or substitutes. While a number of studies have analysed the importance of eco-innovation for firm performance, few have assessed the extent to which diverse types of eco-innovation interact with each other to complement or substitute for one another.