In new product development (NPD), sustainability has gone from a “nice-to-have” to a fundamental requirement for commercial success.
In new product development (NPD), sustainability has gone from a “nice-to-have” to a fundamental requirement for commercial success.
McKinsey and Nielsen IQ found that products that showcased their environmental, social, and governance (ESG) considerations experienced an 8% boost in cumulative growth over a five-year period.
What’s more, global manufacturers have found that their ESG commitments actually help reduce costs. Henkel, for example, identified a 40% reduction in their energy consumption and 20% reduction in waste. Sustainable operations are, often, economical, too. Businesses can find commercial opportunities in committing to sustainable values, in addition to the a positive impact on people and the planet.
But, sustainability is also a source of anxiety for the NPD discipline. Market competition is fiercer than ever. This means NPD teams are under pressure to deliver successful products to market at increasing speed. Executive stakeholders want teams to minimize costs in the face of volatile economic conditions. They may not view sustainable practices as the route towards that goal.
So, how can teams prioritize sustainability in the NPD cycle without slowing down or investing in a costly transformation project?
The answer is sustainable new product development. Let’s define what it means and how teams can implement it in their current project processes.
What is Sustainable New Product Development?
Sustainable new product development (S-NPD) is a new approach to NPD. It adds sustainability criteria to each step of the product development process.
You can integrate this approach into any project management methodology workflow. Saying that, it aligns particularly well with Stage-Gate or Phase-Gate projects. That’s because Stage-Gate emphasizes criteria fulfillment at each project gate. This creates a clear cadence for sustainability considerations.
S-NPD has 2 main goals:
Goal #1: Bolster Supply Chain Resilience
Supply chains are increasingly buffeted by the effects of climate change. The effects include shifts in weather patterns, more extreme weather events and more pests. These phenomena can affect any supply chain’s logistics. In particular, food and beverage producers are experiencing the greatest challenges throughout their networks.
S-NPD aims to make the supply chain more resilient to these disruptions. It does this using tactics like optionality and hotspots analysis.
Goal #2: Create Additional Value For the Customer
Consumer demand and market regulations continue to heap pressure on distributors and retailers to offer more sustainable options. Furthermore, many of us as individuals feel responsible for how we contribute to sustainability issues. So, we try to make more sustainable choices in our day-to-day lives.
To address these forces, S-NPD aims to get teams to measure sustainability metrics. It also prompts action to improve them throughout the NPD process. In doing so, S-NPD delivers additional value to customers on both a professional and a personal level.
How to Prioritize Sustainability in Your Product Development Process
Implementing S-NPD doesn’t require you to disrupt your existing product development workflows. Instead, you can embrace this approach by adding sustainability considerations to existing milestones. A good example of these milestones are project stage-gates. Let’s take a look at the ways you can prioritize sustainability in your current product development process:
Set Sustainability Benchmarks
Spurred on by the UN’s Sustainable Development Goals, many large enterprises now have their own organizational sustainability goals. Product development teams can use these to create sustainability benchmarks for new products. Benchmarks could cover factors such as CO₂ emissions, energy efficiency and raw material sustainability. The benchmarks you define will depend on your organization’s goals and the nature of your product lines.
But, S-NPD criteria should also include benchmarks for customer demand. If new products don’t align with market trends, this creates high levels of wastage. At best, wastage is the energy and materials lost to a killed project. At worst, wastage is large volumes of stock written off due to poor sales and inaccurate forecasting.
At the Ideation stage, these benchmarks can also support guidelines for innovation. This includes product and packaging design which help improve the longevity of that product. An example from the food industry is the use of natural antimicrobial preservatives to prolong shelf life.
Choose the Right Suppliers
Suppliers contribute significantly to the overall sustainability of a product. According to data from McKinsey, 80-90% of a product’s greenhouse-gas emissions are incurred outside of the company’s own processes. And the majority of those emissions occur early in the supply chain. This includes suppliers of raw materials and manufactured components.
The impact of COVID-19 also put supply chain reliance on certain regions—or even individual suppliers—into sharp focus. The automotive industry was hit particularly hard by its dependence on China, for example. Parts manufacturers were shut for months on top of a worsened semiconductor shortage. 51.7% of automotive supply chain managers felt they experienced very significant disruptions to their networks.
To tackle these issues, you could introduce supplier-specific S-NPD criteria for Scoping and Business Case Analysis. These criteria could include adhering to specific sustainability standards like the GHG Protocol. They could also include upper thresholds for the concentration of suppliers used in one specific region. You might use similar thresholds for the number of suppliers under the same ownership. This helps mitigate the risk of product line disruption as a result of regional challenges or financial collapse.
Track Sustainability Throughout the Product Lifecycle
Building sustainability benchmarks into the early stages of NPD is one thing. But, you also need to validate that the benchmarks you’ve set will satisfy consumer expectations.
At the Testing and Validation stage, you can add questions about sustainability in focus groups or surveys about the new product. This helps validate that your S-NPD efforts have addressed the issues that matter to your customers. It can also help validate whether you have successfully communicated your sustainable choices through product and packaging design.
Take product focus groups, for example. Before launch, you could ask participants to identify the sustainable elements of the product. You could then ask if they think the product hasn’t addressed something important, so that you’re not caught out when you go to market.
A successful launch following the S-NPD approach is worth celebrating. NPD teams should continue to monitor the sustainability benchmarks of a product post-launch. Consumer expectations are still shifting. This is because their understanding of climate change and social issues is always evolving. Supply chains continue to experience disruptions as a result of environmental and geopolitical events. So, it’s important to keep assessing a product’s performance against sustainability benchmarks. This ensures that they are still providing strategic value to the organization’s sustainability goals.
If performance drops, this indicates an opportunity to evaluate and refresh the product. Or, you could pull the product and reallocate investment to more innovation.
How a PPM Tool Can Enhance Sustainable New Product Development
S-NPD is valuable for organizations that want to accelerate their progress toward sustainability goals. It also helps secure future revenue against changing environmental and socioeconomic conditions.
To realize these opportunities, S-NPD requires more data, more collaboration and strong stakeholder engagement. These are some of the benefits a PPM tool can provide in the implementation of S-NPD:
Enhanced Data Management and Reporting Capabilities
To make well-informed decisions about product design and supplier selection, you need large, robust data sets. This is where the hotspots analysis method we mentioned earlier comes into its own. A powerful PPM tool ****can help you simplify the unwieldy process of gathering and analyzing that data. It does this by providing a single source for all your data and powerful visualization tools for sharing insights with stakeholders.
More Efficient Cross-Team Collaboration
Multiple teams need to pool their knowledge and skills to implement S-NPD. Product development, project management and supply chain management can all contribute to sustainability considerations. PPM tools provide features and integrations that make it easier to collaborate. This includes assigning responsibilities, sharing data and accessing up-to-date product information.
Improved Stakeholder Engagement
Many stakeholders will understand the importance of sustainability for preserving their organization’s future. But, it’s easier to inform (and inspire) them about the net impact of S-NPD with a clear view of the big picture.
PPM tools offer a strategic, top-down view of your whole portfolio, so you can quickly show where S-NPD is adding value.
