“The markets of the future are green,” Prince Hassan of Jordan declared back in 2006 whilst he was president of the Club of Rome, an international non-profit think tank focusing on innovation and initiative.
With this statement the prince was expressing a belief that the major markets would one day have a strong ecological dimension because natural resources would be valuable, energy won’t be cheap, and because we will value environmental amenities (e.g., open space, clean air, clean water) more than we do now.
The quote accurately reflects a way of thinking that has begun informing business strategies and government policies. Shifting attention from costly end-of-pipe pollution control devices, this ‘new think’ focuses on environmental gains through cleaner production processes and products, and the closing of material loops through recycling. The motivation is largely economic — to save costs on resources, pollution control, waste management or to increase sales.
Concrete data is scarce about the magnitude of eco-innovation activities undertaken by business, but it is estimated that the market for eco-technologies was between 500 billion and 1,000 billion Euros in 2005, compared to a global market for chemicals of 925 billion Euros that same year. Roland Berger consultants predict a global market for eco-innovations of 2,200 billion Euros by 2020.
Source: market studies, expert interviews, Roland Berger Strategy Consultants 2006.
Better and more extensive data
The existing data on green technologies do not include in-house efforts by manufacturing companies to be more resource efficient nor quality improvements on products to make them more environmentally benign. Actually, the knowledge base on eco-innovation is poor. The main sources of information are sales data on environmental goods and services, case studies and one-off surveys. We lack comprehensive information about the eco-innovation behaviour of companies, the macro-effects of eco-innovation activities and the micro-macro link.
To address this information gap, the European Commission’s Directorate General on Research recently funded two projects to explore ways of measuring eco-innovation: Measuring Eco-Innovation (MEI) and ECODRIVE. The MEI research project is being coordinated by a small research team at UNU-MERIT in Maastricht, the Netherlands.
A key challenge we faced was to develop a useful definition that would focus on environmental performance rather than broad objectives. We opted for following definition of eco-innovation:
“Eco-innovation is the production, assimilation or exploitation of a product, production process, service or management or business method that is novel to the organization (developing or adopting it) and which results, throughout its life cycle, in a reduction of environmental risk, pollution and other negative impacts of resources use (including energy use) compared to relevant alternatives.“
It is thus understood that to eco-innovate is to go beyond the adoption of environmental technologies. In developed countries this is characterized by the transition from investing in pollution control technologies to addressing cleaner production processes, recycling systems, and products. In developing countries, sustainable water management and efficient use of resources are critical issues requiring attention. World wide there is a need for transitions to low-carbon energy systems and sustainable mobility.
How to measure eco-innovation
Our research investigated the usefulness of three methods for measuring eco-innovation:
- Survey analysis
- Patent analysis
- Digital and documentary source analysis
The overall conclusion is that, although some methods are better than others, no single method or indicator is ideal. One should apply different methods for analyzing eco-innovation — to see the “whole elephant” instead of just a part.
In particular, more efforts should be devoted towards direct measurement of innovation output using documentary and digital sources. The advantage is that they measure innovation output rather than innovation inputs (such as R&D expenditures) or an intermediary output measure (such as patent grants).
Innovation may also be measured indirectly from changes in resource efficiency and productivity. These two avenues are underexplored and should be given more attention — to augment the rather narrow knowledge basis.
The central question is “why measure eco-innovation?” The answer is simple. Eco-innovation looks likely to be an increasingly important driver for economic development across the globe as we respond to the huge climate, energy and other environmental challenges. So it is essential that we start tracking more effectively these patterns of innovation, because so much depends upon them and at present our knowledge is lacking.