Public Participation in Developing a Common Framework for the Assessment and Management of Sustainable Innovation

Crowd-funding and sustainable innovation

Crowd-funding and sustainable innovation
14.07.2015 | Lyubka Stefanova

Sustainable innovation is not just about successful exploration of new concepts or ideas but is also about their commercialization. It is more than just a new technology, product or service. It can be an adoption of a new process, new type of organization, system or even a business. Sustainable innovation is a process, in which the three aspects - environmental, social and financial are taken into account and integrated from the inception to the commercialization.

The question is how crowd-funding, a way of raising money by collecting it from a large number of people via on-line platforms, can lead to sustainable innovation. Actually, is it possible at all?

Crowd-funding is an innovative way by itself of providing money for projects or ideas often used by start-up companies. Growing businesses also utilize it to create a community around their offerings - products or services and to access new customers. Fundraisers are usually charged by the crowd-funding platforms with a fee only if their campaign has been successful - the targeted amount of money is collected within the time period of the campaign. Most of the crowd-funding platforms employ an all-or-nothing funding model - fundraisers get the money only if the target amount is achieved. If they do not succeed with reaching the target, funders get their money back. However, there are also other types of platforms where the collected money can be kept even if the goal is not reached. There are four main types of crowd-funding, depending on how the capital is raised: 1) donation-based - no financial return is expected; 2) reward-based - the promoted product or service is expected to be received from backers of the campaign; 3) debt-based or so called peer-to-peer lending - the borrowed money is paid back to the funders with interest; 4) investment-based - money is given in exchange for equity, profit or revenue sharing.

Besides the financial aspect of the commercialization process, the social one is also covered by crowd-funding. Actually, the social aspect is the primary one because the crowd decides whether to support and fund certain projects or not. It is more than obvious that crowd-funding is an idea’s validation. The aim of the fundraisers is to collect money needed for the commercialization of their idea or concept. Crowd-funding enables them to have direct communication with the crowd - to share their ideas and to receive valuable feedback from their backers who are actually their prospective customers. As a result, fundraisers can easily see if people understand their idea, share it and if they are willing to apply it. However, not only the commercialization potential of the idea is evaluated, but also whether there is a market for such a business and whether it is worth to continue developing the idea and to which extent. These free valuable market insights are additional benefits of crowd-funding.

The environmental aspect is also considered in crowd-funding. On the one hand, it is related to the crowd’s environmental awareness on different topics. People with high environmental awareness stress more and more on the environmental dimension of the discussed project and consider it in their decision-making. As a result, the impact of environmental issues related to the project increases. On the other hand, the environmental aspect is related to the limitation of overproduction and its impact on the business. In crowd-funding, the social aspect is the one determining if certain ideas will be further developed and executed, not the financial one as it is in conventional business. The crowd, which represent the consumers, as well as their interest in the product, are the two drivers for the commercialization and production. Consequently, if this approach is employed overproduction and the waste related to it will be limited and thus sustainability will be promoted. Crowd-funding does not only transform conventional consumption and production patterns, it also impacts business models by incorporating people’s opinions and interests from the inception of certain ideas. Thus, it encourages sustainable innovations and leads towards sustainable development.

Relevant themes: Sustainable innovation
Relevant tags: Social innovation, Sustainability, Sustainable lifestyles


  • Lyubka Stefanova - Cleantech Bulgaria Foundation (Cleantech Bulgaria)

    Lyubka Stefanova