Sustainable innovation during and post-crisis

The strong impacts of COVID-19 have caused unprecedented challenges which are worldwide characterized by important shifts in the market sentiment, governments’ regulations, consumer preferences and technological changes. In the wake of these challenges, we can once again spot the urgency of tackling the world’s climate change by turning our attention to the new players whose innovative ideas can provide opportunities to create sustainable societies with higher levels of well- being for all citizens. The pandemic has therefore provided global societies and economies with a chance for reflection on the different areas where innovative ideas could create durable gains in sustainability.


“The current rate and direction of innovation is insufficient, in part due to a relatively narrow focus on technology innovation without also addressing societal, institutional, cultural, and governance innovation. It is time to rebalance, so that all dimensions of innovation are promoted simultaneously, while also addressing inequities [...]” comments Johan Rockström, Director of the Potsdam Institute for Climate Impact Research (PIK).

What has history taught us?

On the basis of the past crisis that we faced, such as the 2007-2008 financial one, we learned some important lessons. One of those lessons is that, while governments and organizations predicted the negative impact of the crisis, they chose to invest their economic resources into green energy innovation; the ambition was to emerge stronger and even to outperform the market once the economy recovered. According to the International Energy Agency, among all the governments around the world, nine countries doubled their clean energy R&D and demonstration spending between 2009 and 2011 which “added over USD 6 billion per year to their aggregate spending over the three-year period from 2009”. The IEA also highlights the fact that if all countries around the world would choose today to double their clean energy R&D and demonstration spending, it is estimated to add around USD 25 billion per year. This means that investing in sustainable solutions and at the same time fighting the COVID-19 pandemic are definitely not two mutually exclusive practices. On the contrary, such a crisis phase can make room for innovation in the way we work, live and prosper, and deliver superior post crisis performance and growth.

The development of new business models, the digitalization of urban transportation along with the change in the consumer’s minds relative to mobility are thought to be important drivers to a rapid post- pandemic transition towards a sustainable climate change.

Who has an impact on what?

Among all the participants that have a pivotal role in innovation during and after the crisis, governments have without any doubt the biggest impact. That is, they have the power to accelerate clean energy innovation by measures such as the countercyclical spending on energy R&D and technology demonstration. However, all European and national research and innovation actions must take into account the global sustainability targets such as the UN’s Sustainable Development Goals (SDGs). Furthermore, as governments invest money into clean energy innovation they must also prepare economic recovery plans. In order to underpin the recovery, they have to channel private and public investments and align investment and funding streams as well.

Companies should reinvent themselves

Among all the major changes COVID-19 has brought in the turbulent business environment, one is clear: companies cannot operate in the same way they did before the crisis. Many organizations in the present panorama are no longer focusing on developing strategies over several years, but rather on finding survival plans for the next months. For instance, if we take into account the worldwide trade, emerging economies such as India and China have developed their domestic markets to the point where their reliance on global trade has dropped at an important rate. Globalization is, therefore, seriously questioned as both the disrupted supply chains and the geopolitical divisions are boosted by this unseen enemy.

Under such conditions, it would be normal to assume that companies should focus on their core business, conserve cash and mitigate risks before things are “stable again”. However, according to a McKinsey publication, companies should especially in these times of crisis fight the status quo and take more actions such as: adapting to meet new customer needs, identifying and taking advantage of new opportunities in the new environment, ensuring the allocation of resources after evaluating the innovation portfolio and thinking of new ways to remain competitive in the post-pandemic business environment.

Digital is the new normal

New business models adapt to new realities in the current operating environment under COVID-19. The ongoing collective efforts to both adapt to a digital future and to tackle the climate change are offering companies fewer competitive advantages during the current crisis. According to McKinsey’s B2B Decision-Maker Pulse survey, since the beginning of the pandemic, 96 percent of businesses have changed their go-to-market model, most of them focusing on new forms of the digital sales sphere to interact with their customers. From food distributors, to sports and museums, streaming digital content has become the new normal as practically overnight customers have quickly adapted to new behaviors.

The importance of going green

The current crisis presents a unique opportunity to accelerate progress towards new sustainable innovative practices. This particular period is characterized by reduced R&D budgets and corporate capital expenditure. Countries like India and Brazil which have lately been putting more effort in clean energy technologies may be forced to save more budgets for sustainable practices if they want to keep up with the same levels as before the crisis. On the other hand, recent studies stress the important growth in electric cars, solar equipment along with a significant decline in industrial energy consumption. This means that besides the limited investor experience and the fragmentation of the market, the real transition towards a sustainable future, despite the actual circumstances, is achievable. According to a recent EY article, sustainable practices can be achieved through a combination of policy measures such as:

  • Shifts in taxation from “positive” areas (labor, innovation) towards “negative” areas (fossil fuel energy, pollution)

  • Rewards to encourage sustainable behavior between companies and citizens

  • The heavily impacted sectors such as manufacturing or airlines would benefit from rescue packages that include far-reaching green conditions

  • Concrete steps towards a fully circular economy in order to accelerate for instance the transition to a climate-neutral Europe


A survey conducted in 2020 by the Smith School of Enterprise and the Environment among central bank officials, 231 finance ministry officials, and other economists from 53 countries including all G20 nations, drew the conclusion that “clean energy infrastructure investment” and “clean energy R&D” bring notable economic benefits.

Moreover, more than 120 governments have formally discussed to shift towards a circular and low carbon economy by 2050 with net-zero emissions targets, among which 20% have translated and formalized these aspirations into legislation and laws. There are various initiatives, such as TWI2050 (The World in 2050) which, through their reports and actions, aim at contributing to the successful implementation of different pathways to sustainable development through fact-based knowledge systems. According to the Director of TWI2050 and IIASA Emeritus Research Scholar Nebojsa Nakicenovic:


“The transformation to a sustainable future is achievable—we have the knowledge, means, andcapacity, despite the magnitude of the challenge and the current unsustainable direction of development, additionally impacted by the COVID-19 pandemic. We believe that this report will provide policy- and decision makers around the world with invaluable new knowledge to inform action and commitment toward achieving the Sustainable Development Goals (SDGs) in these interesting and challenging times.”


Innovative ideas need time and space

In a post-pandemic era, companies and organizations will continue to make huge efforts in getting back to normal. It is probable that these efforts will create a tendency for perfection where everything would be planned down to every second or portfolio position, leaving people very little time to think and discuss new innovative ideas. In such circumstances, the only way to think without constraints is to create a space where people can bring their best suggestions, can innovate within a larger spectrum of possibilities and have true leaders listen to them.


In the light of the current crisis, as one must learn how to seize the possibility to make our economic recovery accelerate the ecological and digital changes within our societies. There should be enough incentives for industries and consumers to invest in renewable energies, into a toxic-free environment and sustainable mobility. We must not forget that SMEs, including start-ups are also vital for the recovery, as they play a decisive role in our society. Moreover, governments and stakeholders should continue to secure the path towards circular, net zero emissions and low carbon economies and promote transparency through their efficient cooperation.

In essence, important evidence from previous crisis shows that investments in R&D with corporate sustainable goals are fundamental to achieve long-term economic growth and productivity and strengthen our economic competitiveness.


Andreea Schipor

Business Consultant


Credits

  • https://ec.europa.eu/info/sites/info/files/research_and_innovation/strategy_on_research_and_innovat ion/documents/ec_rtd_covid19-recovery.pdf

  • https://iiasa.ac.at/web/home/about/news/200706-innovations-for-sustainability.html https://www.mckinsey.com/business-functions/organization/our-insights/the-organization- blog/unleashing-sustainable-speed-in-a-post-covid-world-rethink-ways-of-working

  • https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our- insights/innovation-in-a-crisis-why-it-is-more-critical-than-ever

  • https://www.mckinsey.com/business-functions/sustainability/our-insights

  • https://www.mckinsey.com/business-functions/organization/our-insights/the-organization- blog/unleashing-sustainable-speed-in-a-post-covid-world-reshape-talent

  • https://www.mckinsey.com/business-functions/mckinsey-digital/our-insights/medtech-innovation-in- the-time-of-covid-19-resilience-and-growth-during-a-crisis

  • https://www.mckinsey.com/featured-insights/coronavirus-leading-through-the-crisis

  • https://www.mckinsey.com/business-functions/organization/our-insights/ready-set-go-reinventing-the- organization-for-speed-in-the-post-covid-19-era

  • https://www.ey.com/en_bg/eu-institutions/how-europe-s-post-covid-19-economy-and-environment- can-both-prosper

  • https://www.ey.com/en_ch/decarbonization/advantage-covid19-strengthen-sustainable-mobility

  • https://www.ey.com/en_be/attractiveness/20/how-the-eu-can-lead-the-way-to-sustainable-recovery- beyond-covid-19

  • https://www.iea.org/articles/clean-energy-innovation-in-the-covid-19-crisis

  • https://home.kpmg/xx/en/blogs/home/posts/2020/07/looking-to-the-future-from-collision-2020.html

  • https://www.innovations-report.com/social-sciences/innovations-for-sustainability-in-a-post-pandemic- future/

  • https://sustainabledevelopment.un.org/index.php?page=view&type=20000&nr=6928&menu=2993 https://social-innovation.hitachi/en/article/life-after-covid-19/