The 7 Keys to Low-Carbon Business Innovation

With rising energy consumption, a lingering economic malaise and a dearth of climate policy, companies that contrive ways to grow while reducing the carbon impact of their products can not only survive, but flourish despite uncertain times.

That’s the case the Pew Center on Global Climate Change makes in its latest report, “The Business of Innovating: Bringing Low-Carbon Solutions to Market.” The study, released Tuesday, identifies seven best practices that are key to low-carbon innovation and takes a look at how four companies -- Hewlett-Packard, Daimler AG, Johnson Controls Inc. and Alstom SA -- are using them to unlock growth opportunities.

The report's "seven keys" for low-carbon business innovation were distilled from wide-ranging research that included a survey of executives at 35 companies with annual revenues of $600 million to $285 billion and robust R&D budgets. According to the report, companies that are successfully pursuing low-carbon strategies share several of these characteristics:

The 7 Keys to Low-Carbon Innovation

1. Manage policy uncertainty by integrating existing and likely future policies into innovation strategies.

2. Set a clear direction with a firm commitment from company leaders.

3. Focus on multidimensional customer value propositions. For example, low-carbon innovations that not only reduce carbon emissions, but also result in lower operating costs, greater flexibility and other competitive advantages.

4. Create new business models. This is often more important than technical inventions, the report said, because the success of new technology or services depends on a company's ability to re-engineer its business model to launch and support the innovation.

5. Organize or reorganize critical business relationships inside and outside established networks -- a task called "nexus work."

6. Craft robust and resilient innovation strategies. Given that a company's chosen strategy rarely plays out as planned, the report noted, innovation strategies must advance the firm's competitive advantage in the short run while preserving enough flexibility so that the company can respond to changing technology, markets and policy in the long run.

7. Wisely leverage partnerships, investments and acquisitions. Some new technology never makes it over the hurdle that separates scientific breakthrough and commercial success. Established companies can meet the changing needs of their market by engaging in early-stage efforts, and through partnerships, investments and acquisitions integrate newly developed technologies into products and services.

 

Next Page: How HP, Daimler, Johnson Controls and Alstom put the best practices to work.