How Industry 4.0 can impact sustainable business innovations?

Today most business executives would agree on the importance of sustainability in the economic, environmental, and social spheres. There are a lot of public discussions and declarations about the importance of working in a way that our present needs would not compromise the needs of future generations. However, there is a gap between discussions and real implementation. 

Innovative technologies of Industry 4.0 are in every part of modern business processes. The question which intrigued the researchers of the Kaunas University of Technology under the project of ERA Chair “Industry 4.0 Impact on Management Practices and Economics” (further – “In4Act”) was how those innovative technologies correlate with sustainability in modern companies.

“The scope of digital transformation under Industry 4.0 expands well beyond individual firms, involving vertical integration of production systems and horizontal integration of value chain partners. Thanks to the unparalleled commercial exploitation of social media, the digital industrial revolution also involves customer integration”, says Morteza Ghobakhloo, a researcher at the Kaunas University of Technology School of Economics and Business in the “In4Act” project.

11 functions for sustainable innovations

“The study showed that Industry 4.0 enables sustainable innovation through eleven intertwined functions:

• advanced manufacturing competency,
• green absorptive capacity development,
• green process innovation capacity,
• green product innovation capacity,
• inter-functional collaboration and learning,
• new product development competency,
• product life-cycle management capability,
• sustainable innovation orientation development,
• sustainable partnership and collaboration,
• sustainable talent management,
• value chain integration.

“The study showed that Industry 4.0 primarily supports sustainable innovation by facilitating the necessary cultural and structural openness. Industry 4.0 delivers this role by promoting inter-functional collaboration and learning. By doing so, Industry 4.0 develops an organizational norm and strategic direction that facilitates sustainable innovation through promoting constructive communication of sustainability values, information sharing, and data governance and traceability”, says M. Ghobakhloo.

A knowledge-based source

Scholar also suggests that Industry 4.0 facilitates sustainable innovation transition at the internal competence level by enabling sustainability training and improving employees’ contribution to sustainable innovation.

Consistently, Industry 4.0 provides a knowledge-based source function to product and process innovation. These competencies led to developing sustainable talent management and advanced manufacturing competency functions, which promote eco-ideation and innovation, prioritize sustainable management practices, integrate sustainable thinking into business functions, and improve the sustainability performance of manufacturing operations and products.

By facilitating value chain partnerships Industry 4.0 promotes the value chain-wide inclination toward sustainable innovativeness and strategically aligns internal and external stakeholders with sustainability priorities.

“The hyperconnected business ecosystem under Industry 4.0 allows value chain partners to exchange information on various product life stages securely and further engage in collaborative green knowledge management. Industry 4.0 contribution to sustainable innovation also involves improving the technological capabilities of companies to introduce sustainability into innovation practices. The disruptive technologies introduced under Industry 4.0 improve the eco-efficiency of business processes, production technologies, and supply chain interactions”, says a researcher of the Kaunas University of Technology.

The benefits of the study for practitioners

These findings have become relevant material not only for academics but also for business leaders and practitioners.

The most important thing, according to the researchers, is that study shows how companies should develop the necessary organizational and relational capabilities that allow them to leverage Industry 4.0 functionality to support sustainable innovation.

“This work explains how underlying technologies and design principles of Industry 4.0 can enable value chain partners to cultivate and exploit their core competencies to define innovation sustainability goals better, internalize stakeholders’ needs within sustainable innovation activities, and reshape green innovation practices”, says M. Ghobakhloo.

Research is a part of the “IN4ACT” project, implemented by the Kaunas University of Technology School of Economics and Business researchers and financed by the European Union project “Horizon 2020”.