Based on research by Carlos F. A. Arranz
Imagine a startup that creates edible packaging made from seaweed. You buy a takeaway coffee, and instead of a plastic lid, it’s sealed with a biodegradable, tasteless seaweed film (Product innovation). You can toss it in the compost—or eat it.
Now scale that up: this packaging replaces millions of plastic wrappers in supermarkets. It dissolves in water, leaves no microplastics, and is made from a fast-growing, carbon-sequestering marine plant (Process innovation). The company partners with coastal communities to harvest seaweed sustainably, creating jobs and restoring marine ecosystems (Social impact).
This is eco-innovation in action.
It’s not just clever—it’s transformative.
In the face of mounting environmental challenges, businesses are increasingly expected to innovate sustainably. But how can businesses be supported to create an environment for formidable eco-innovations like edible packaging? What stops them?
A recent study by NUSC member Dr. Carlos F.A. Arranz from the University of Greenwich offers fresh insights into this question by combining system dynamics with machine learning to model the complex forces behind corporate eco-innovation. Arranz demonstrates that eco-innovation is not the result of isolated factors but emerges from a web of interdependent influences. What are these influences? Let’s look at them, using our edible packaging example to bring them to life.
- Market forces – e.g., consumer demand and competitive pressure: Viral videos of turtles tangled in plastic, beach clean ups revealing mountains of waste, and influencers promoting zero-waste lifestyles. Consumer backlash against single use plastics lead firms to lose customers to eco-conscious competitors. In response, a major retailer partners with the seaweed packaging startup to replace plastic wrappers on snack bars. Sales spike. Other brands scramble to follow suit.
- Internal forces- e.g., leadership, values, culture, investment: Inside the startup, the founder—once a marine biologist—has a personal mission to clean the oceans. The team shares this vision, and the company culture is built around regenerative design. They invest in R&D to make seaweed packaging cheaper and scalable. The CFO sees long-term savings in waste disposal and brand loyalty. The innovation isn’t just a product—it’s part of their identity.
- Regulatory and policy forces- e.g., legal mandates or policy incentives: A new EU directive bans single-use plastics in food packaging. Companies face fines unless they switch to sustainable alternatives. Governments offer tax breaks for biodegradable materials and fund pilot programs for startups like the seaweed company. Suddenly, what was niche becomes mainstream—compliance becomes a catalyst for innovation.
Do we think each of these forces work in isolation? Of course not. Yet previous research often fails to capture the complexity of how these forces may interact to drive or inhibit eco-innovations. For example, imagine the market and internal forces stay the same, but the regulatory and policy forces are less favourable. For instance, if this seaweed packaging doesn’t meet food safety standards, it could be blocked from market entry.
Or, to take another variation. In our example, the startup’s leadership is deeply committed to ocean conservation. They invest in R&D, build a mission-driven team, and embed sustainability into every decision. Their internal culture fuels innovation. But inside a larger corporation, sustainability might be sidelined. If the procurement team sees seaweed packaging as a cost burden, or if executives prioritize quarterly profits over long-term impact, internal resistance can stall adoption. Innovation may be seen as risky, niche, or incompatible with existing operations.
By stimulating different scenarios of these three forces (market, internal and regulatory) to examine the resulting eco-innovations using artificial neural networks which learn from over 5,000 companies, Arranz can model and understand how these forces interact to produce eco-innovations.
One of the key findings in Arranz work is that environmental corporate policies and strategic financial investment are among the most effective drivers of eco-innovation. That is, what leaders do is the most important force for eco-innovation. In contrast, market forces, regulatory pressure, and external cooperation—while important—tend to have lower efficiency when acting alone. This suggests that companies need to look inward and align their sustainability strategies with core business operations to truly innovate.
The biggest driver of eco-innovation in a firm is not the external environment, but the internal. What does your company stand for? And how deeply is this ingrained into what you do?
Think back to our startup, the marine biologist founder who has a personal mission to clean the oceans. Arranz’s research suggests that this commitment of management towards sustainability is the standout driver for eco-innovation.
To truly innovate for the environment, companies must integrate sustainability into strategy, culture, and operations—whilst, of course, staying responsive to external pressures.
Eco-innovation is not just a product of good intentions; it’s the result of deliberate, systemic design.
To learn more about this research, you can access the full article here
Dr. Carlos F.A. Arranz’s research suggests that leadership and internal strategy are the most powerful forces behind eco-innovation. But what do you think? What role should corporate leaders play in driving eco-innovation? Have you seen examples where internal culture made or broke a sustainability initiative? How can policy and market forces better support innovation?
Share your thoughts in the comments and let’s spark a conversation about leadership, innovation, and the future of sustainable business.
Let’s innovate, together.
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Disclosure: This blog post was drafted and polished with the assistance of AI tools to enhance clarity, structure, and engagement. AI was also used to generate accompanying images where applicable. All content has been reviewed and approved by the author and named lead researcher to ensure accuracy and alignment with the intended message.