- Category: Global Sustainability and Climate Change
- Published: Monday, 07 December 2015 00:34
- Written by The Guardian
Not so long ago it would have been unthinkable for a business from India to acquire a western company, let alone one steeped in the traditions of Jaguar Land Rover. But in 2008 that’s exactly what Tata Motors did, paying Ford £1.3bn to add the Business in the Community’s Company of the Year in 2013 to a portfolio of British brands that already included beverage manufacturer Tetley and steel giants Corus. Since the takeover, Tata has helped turn a £360 million deficit into a pre-tax profit of nearly £2.5bn.
And the iconic UK brand has seen its fortunes change without sacrificing its ethics, recently being named Company of the Year at the presitigious Business in the Community awards.
A few years earlier, Chinese IT company Lenovo gave IBM an offer it couldn’t refuse for its personal computer business; and the company added to its growing mobile phone empire this year with the purchase of Motorola Mobility from Google.
Elsewhere, Brazilian oil giant Petrobras has become the fourth-largest energy company in the world, while Mexican telecoms company América Móvil, with the backing of billionaire Carlos Slim, is now expanding into overseas markets, having become the dominant player in Latin America. Notably, both companies also appear in the benchmark Dow Jones Sustainability World Index.
While the inexorable growth of emerging market economies may have been checked in recent years, it’s still estimated that between now and 2020 they willaccount for about 85% of global economic growth.
Innovation born of necessity
One of the key factors behind this growth is a different mindset when it comes to innovation, explains business strategist and author Navi Radjou. He believes western companies have been guilty of “industrialising the creative process”, introducing resource-intensive procedures that chug along to the tune of “more with more” but are no longer sustainable in a resource-constrained world. “There is a growing awareness that there needs to be a new model for both producing and consuming that focuses on doing better with less,” he explains.
It’s an idea epitomised by the concept of frugal innovation, an attitude often born of necessity, where entrepreneurs view the lack of water, or a limited electricity supply, not as a constraint but as a creative opportunity. In India, it’s called the “jugaad”, a Hindi word that roughly translates as “innovative fix” or “improvised solution”.
Brazilians call it jeitinho, the Chinese zizhu chuangxin, the Kenyans jua kai. Tellingly, there’s no such word in English. The closest we get is “make do and mend”, which doesn’t quite have the same kick.
“Can we be frugal and innovative? Can we do better with less? This is an area where emerging market companies have an advantage because, by default, they have to deal with less - they don’t have the money or resources,” says Radjou.
“Scarcity is what drives this frugal mindset – and the world is waking up to it with economic recession in the west,” he adds.
With wages stagnating over recent years, the middle classes of the US and the Eurozone have lost a lot of their purchasing power, and with it their appetite for expensive, often over-engineered products. Radjou believes western companies need to understand this and start to embrace frugal innovation – or risk losing their core markets to leaner, more nimble rivals who are able to provide affordable and sustainable solutions to cost-conscious consumers.
Modelling emerging market methods
That said, big corporations still have an important role to play in terms of sustainable growth. “The large companies have one advantage - they have access to technology and an ability to scale things up quickly,” says Radjou.
PepsiCo, for instance, has developed a new farming technique called direct seeding that reduces water use by eliminating the need for rice plants to be raised in a nursery – a process that was also a major cause of methane emissions.
Elsewhere, Microsoft has launched Digital Green, a knowledge platform for communities across South Asia and Sub-Saharan Africa on which people can share ideas and best practice. To date, over 3,000 videos have been uploaded, covering everything from pest control to soil preparation.
Tata has also become involved through the Tata Center for Technology & Design, which it has established at the Massachusetts Institute of Technology (MIT) to help businesses in India develop and scale up sustainable solutions in areas like energy, transportation, and healthcare. The centre matches up students with specific projects; these currently include redesigning a handmade prosthetic called the Jaipur Foot to make it suitable for mass manufacture; creating low-pressure, off-grid irrigation systems for small-scale farmers; and developing new strategies to deal with recycling and pollution in industrial areas.
Logistics expert UPS, meanwhile, is also providing best practice advice to businesses from emerging economies, helping them develop more sustainable logistics and connect more easily with key markets.
Mexico is a case in point. Latin America’s second-largest economy relies heavily on the US, with 80% of all exports heading over the border. UPS’s CrossBorder Connect service is helping to streamline this business by bundling the company’s transportation and customs brokerage expertise to boost speed to market, drive cost efficiencies and reduce supply-chain risk.
Sustainable innovation clearly acts as a two-way street. Large companies in industrialised economies can certainly offer invaluable advice and resources to their business partners in the developing world. But the savviest companies are those that also look to emerging market firms for insights and inspiration.
Mark Hillsdon is a freelance writer. His work has appeared in Coast and Countryfile magazines, The Guardian and The Independent.
This content is brought to you by Guardian Sustainable Business in association with UPS. Produced by Guardian Labs to a brief agreed and paid for by UPS.
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