The Business of Low-Carbon Innovation

Working with the Pew Center on Global Climate Change, I’ve just completed an study of companies that have already successfully developed and launched new low-carbon strategic initiatives. The resulting report, “The Business of Innovating: Bringing Low-Carbon Solutions to Market,” was released today.  The study documents the challenges and best practices to inform other businesses developing their own low-carbon innovation strategies.  Innovation is challenging regardless of company or industry but, as the study found, low-carbon innovation has distinct challenges—and requires particular capabilities—that reflect the distinct nature of the technologies, opportunities, and environments involved.

The key take-away is that there are a large and growing number of opportunities for companies to grow their top line revenue, through increased share of existing markets or capturing emerging markets, by effectively developing and launching low-carbon innovations.  These opportunities are emerging throughout the economy though, obviously and especially, in those markets where energy plays a significant role in manufacturing, distribution, or consumption. 

Some of the main drivers of these market opportunities are:

  • the growth in world energy consumption over the next two decades (an expected 40 percent, according to U.S. Energy Information Agency); 
  • the resulting investments in clean energy—from renewable power to energy efficiency solutions (expected to reach $2.3 trillion over the next decade, according to Bloomberg New Energy Finance); and
  • rapidly shifting market preferences and local, regional, and national policies (and regulations) demanding low-carbon alternatives.

A lot of attention has gone to corporate carbon footprints (see the latest Newsweek top 50 Green Companies). For most major companies, however, the emissions coming from the lifetime use of the products and services they sell are exponentially greater than the direct emissions of their own operations.     

This study looked at low-carbon innovations—the new products or services that emit significantly less GHGs per equivalent output than the products or services they replace (e.g., by using different power sources or materials, or by using less energy). In other words, the products and services that make up the other roughly 95% of the carbon emissions under a company's control. 

This study drew directly from the experiences of leading corporations that have successfully developed and launched low-carbon innovations, through a survey of largely Fortune 500 companies, 3 workshops with companies and government representatives, and in-depth case studies of 8 innovations from 4 companies.

Validating the recognition that there are real business opportunities for those who can effectively deliver low-carbon innovations, the companies in this study are pursuing  low-carbon innovations for reasons very core to their business strategies: to pursue top-line growth, to respond to their customers’ current and emerging demands, to anticipate or shape regulatory changes, and to gain expertise in emerging technologies and markets. 

At the same time, these opportunities aren’t easy to capture. Innovating for low-carbon products and services presents its own particular challenges, distinct from the challenges common to all companies trying to innovate. These include the need to plan and act aggressively within an increasingly uncertain regulatory landscape; the challenge of bringing innovations to a well-entrenched energy infrastructure; and the requirements for simultaneously delivering these innovations to market at scale, reliably, and often with enormous capital investments. 

The report outlines seven key capabilities that are critical for companies looking to build low-carbon innovation strategies—more than will fit in this post. Enjoy and let me know what you think.

Download the report here: “The Business of Innovating: Bringing Low-Carbon Solutions to Market