Product innovation will have unforeseen consequences – the secret is identifying and acting on them when they occur

There is much talk about how innovation will get us out of the financial, environmental or social holes we have dug for ourselves, but less discussion about the downsides of some innovations. Despite initial best intentions, innovation can have unintended and negative consequences. A prime example is the ongoing health consequences, and financial liability, from the use of asbestos. 

The UK Supreme Court recently ruled very recently that company liability begins from the moment of inhalation of asbestos, not the moment illness manifests itself, which can sometimes be 40 years later. This will cost insurance companies billions, and will have major implications, perhaps both good and bad, for company research and development.

This is good, in that it may sharpen up company attitudes to researching health and safety aspects of their products, and bad in that it may divert funds that could have been constructively used elsewhere.

Asbestos is probably the most costly example of unintended consequences from innovation. This is both in terms of lives – with well over 200,000 deaths worldwide to date with 4,500 a year in the UK alone, potentially rising to 10,000 in 2020 – and cash, with liabilities estimated at around $250bn or more.

Delivering benefits?

But there are many similar examples of innovation that has been created to deliver benefits – replacing dangerous substances or providing new solutions to old problems – but subsequently turned out to have nasty unintended consequences. CFCs, PCBs, DDT, biofuels, palm oil are just a few.

This is clearly an important area of company responsibility. However an initial trawl through the social reports of companies shows that it doesn’t feature as a corporate responsibility issue, certainly not in reporting terms.

Ethical Corporation’s recent report – Corporate Responsibility and Consumer Product Health and Safety – supports this view, indicating that although the research and development of products is considered an important area, it doesn’t register on the corporate responsibility agenda of most companies. It seems an odd gap, if minimising the effect of your products on people and the environment isn’t CR, what on earth is?

To get to the bottom of what is expected of companies in this area, particularly in terms of science and technology innovation – nanotech, biotech, synthetic biology and others – Matter, the innovation thinktank, recently asked investors, NGOs and retailers what their expectations were and analysed the views of the public. This was funded by seven leading businesses seeking to engage constructively with these stakeholders and better understand their views.

What we found was interesting.

Informed choices, please

The public generally trusts products on the market, though they want access to information to make an informed choice about products where innovative technologies are used. But they are also concerned that profit may trump safety and that companies may not have a detailed enough understanding of current and future impacts to ensure longer term safety and understand negative social impacts. (See here for a presentation on this analysis.)

Investors are also concerned about how lack of information prevents them doing their job properly.

Sacha Sadan, director of corporate governance at Legal and General Investment Management says: “We perceive a critical lack of ambition in long term R&D and also a fear of talking about their ground-breaking research from major companies – in terms of opportunity and risk.”
Investors appreciate that they don’t really know the right questions to ask to find out either way, but feel that the focus on incremental improvement is holding companies back in terms of innovation, growth and investment potential.

More thought

This desire for greater openness also pervaded the views of NGOs and retailers we spoke to. They focus in particular on the need to see that companies have thought through the benefits and risks in the round and that they are engaged widely with diverse groups to spot early warnings of negative social or safety impacts.

So what can companies do to respond to these expectations? We believe that companies need to open up their R&D process to greater scrutiny and that there are ways of doing this which don’t compromise their ability to compete.

Our follow-on project, called Society Inside, seeks to explore with business a new approach to openness and stakeholder engagement with company innovation, looking department by department at the part each will play in embedding responsiveness. R&D, operations, HSE, HR, marketing, investor relations, regulatory affairs and the board will all have their own role to play.

If we are to avoid another tragedy like asbestos and develop innovations to benefit society, the environment and the economy, we need to think differently about a lot of things. Openness and the involvement of society is a great place to start.

Hilary Sutcliffe is the director of Matter, a UK based thinktank that promotes responsible innovation. For more information about Matter’s Building Confidence in Innovative Technologies report visit here. For more information on Matter’s Society Inside project contact hilary@matterforall.org