Eco-innovation: the promise and the practice

A lot of hope has been invested in the potentially transformative power of eco-innovations to prevent ecological disaster and nowhere more so than in Brazil.


Eco-innovation is a broad term referring to the production, assimilation and exploitation of processes, products, services and business models that are new for an organisation and have a better environmental and economic impact than the current alternatives.

There are high expectations that Brazil can create an ecosystem that is capable of nurturing eco-innovative solutions because of the country’s vast environmental resources and its political influence in Latin America.

The country has the greatest biodiversity on the planet as well as 13% of the world’s available fresh water reserves. It has at the 2015 United Nations Climate Change Conference – also referred to as COP21 or CMP11* – committed to reducing its carbon emissions by 37% by 2025, to eliminating illegal logging and to recovering 12 million hectares of forests by 2030.

Yet, there is a big gap between this optimistic discourse and the practice of companies, governments and other stakeholders. In fact, its expectations will not be met without major changes in the scientific and technological capabilities of companies, universities and research centres and without a strong regulatory push and better coordination between a diverse range of actors.

Regulations and public policies have contributed significantly to a more eco-innovative landscape. As early as 1995, Harvard economist Michael Porter demonstrated that environmental regulations boosted the economic performance and competitiveness of both industries and nations.

A recent case in point is Brazil’s National Policy on Solid Waste, which has influenced a generation of new business models focused on recycling and reusing materials. Brazilian manufacturer Embraco, for example, has created a new business unit, Nat Genius, whose aim is to rethink the economy as a regenerative system in which all materials can be reused in other industrial processes.

Funding

As well as regulations, the public financing regime can play an important role in supporting radical change. Economic mechanisms, such as subsidies and public funding, are particularly critical for eco-innovations that need further development before they can compete against the predominant unsustainable alternatives.

The National Bank for Economic and Social Development or BNDES, for instance, has promoted clean technologies either by providing loans at low interest rates or by investing in new businesses as a public venture capitalist.

Federal subsidies and tax exemptions for science, technology and innovation, such as the Lei do Bem, have supported private research and development, or R&D, and inspired other Latin American governments to adopt similar policies.

These different incentives have also brought an increase in foreign direct investment or FDI, with multinationals implementing new R&D centres within Brazil’s borders. Examples include IBM, Siemens and GE, covering areas such as smart cities and renewable energy.

Voluntary certifications are also important compliance mechanisms for organisational change. There was a steep increase in the implementation of ISO 14001 certification – ISO 14001 is the international standard for environmental management systems. The number of companies certified annually grew from 77 to 647 between 2012 and 2015. Despite this impressive growth, Brazil is still lagging behind most high-income regions.

The effects of such environmental management certification for industrial performance has been important, especially for inducing others within a company’s value chain to generate and diffuse environmentally friendly products, services and processes.

Good practice

We are already seeing examples of good practice in key sectors. Brazil has a promising renewable energy market which accounts for more than 85% of domestically produced electricity – mostly generated by hydroelectricity.

However, it is important to stress that, despite being clean in terms of carbon emissions, hydroelectric dams have caused enormous damage to some of the most fragile ecosystems in Brazil, also disrupting the livelihoods of traditional communities, such as in Belo Monte.

Furthermore, solar and wind energy have not yet fulfilled their potential and are hampered by regulatory constraints and a lack of public incentives.

The automobile industry has taken advantage of renewable energies to generate eco-innovations, including the so-called Flex Cars which can be fuelled either with ethanol or gasoline. The chemical industries have also generated product eco-innovations, such as BioPlastic from Braskem, which is produced with sugarcane ethanol.

State funding agencies, such as FAPESP, have supported projects involving university-industry partnerships. One example is a project on biofuels combustion jointly developed by Peugeot Citroën, the University of São Paulo, the University of Campinas, IMT and the Aeronautics Institute of Technology or ITA.

The aerospace sector has also produced eco-innovations deriving from Embraer’s partnership with competitors Airbus and Boeing, with all working together on the development of aviation biofuels.

Supplier-led eco-innovations in agriculture, which represents 30% of Brazilian gross domestic product or GDP, have increased productivity. They include genetic improvements in crops, automation and precision agriculture. Packaging of food, using biomaterials, is also attracting growing investment. Mining, which represents 5% of GDP, has benefitted from eco-innovative solutions to improve processes and to recover degraded areas, often through partnerships with universities in Brazil and abroad.

However, this sector has also been responsible for the biggest environmental disaster in Brazilian history, when a mine dam collapsed in 2015, releasing a torrent of toxic mud that killed 19 people, left 700 homeless and caused irreparable damage to rivers, watersheds and soils.

The role of universities

These and other sectors of the economy need continuous innovation and collaboration to achieve the COP21 goals.

Brazilian universities have performed an important role in the generation of eco-innovations. Brazil ranks 15th in the number of scientific publications it produces and intellectual property has risen considerably in the past decade – although it has been outperformed by several economies with a lower GDP.

More than 10,000 PhDs graduate every year, boosting the research capability of private and public centres. In addition, technological parks associated with the best public universities have been established in many large cities.

Moreover, cooperation between companies and universities over eco-innovative endeavours is becoming more frequent – in fact, a research project looking at approximately 100 eco-innovative companies showed that universities were their main partners, followed by their suppliers.

One example is the Natura Campus, a programme led by the second-wealthiest Brazilian cosmetics company, which focuses on creating collaborative networks with universities, enterprises and entrepreneurs to generate innovation and shared value.

Despite the size of the challenges it faces, the Brazilian landscape for eco-innovation has improved significantly over the past decade.

However, the political instability, economic meltdown and institutional backlash we have seen in the last three years may result in severe drawbacks to this upward trajectory. Companies are reallocating their resources to business-as-usual initiatives, focusing on reducing risks and obtaining short-term profits. The best universities in Brazil are facing massive shortages of investment for teaching, research and collaboration.

This trend needs to reverse if Brazil is to build on its recent track record and deliver on its COP21 commitments.

*COP21 is shorthand for the 21st yearly session of the Conference of the Parties to the 1992 United Nations Framework Convention on Climate Change. CMP 11 refers to the 11th session of the Conference of the Parties to the 1997 Kyoto Protocol.

Cleonir Tumelero is pursuing a PhD in business administration from the faculty of economics, administration and accounting at the University of São Paulo, Brazil. Paulo Savaget is doing a PhD in engineering at the University Cambridge in the United Kingdom where he is a Gates Cambridge Scholar. His research focuses on sustainability transitions, assessing the role governments in emerging economies can play in transitioning to more sustainable systems by fostering science, technology and innovation.