Section 9.1: Eco-innovation

9.1.1: Fundamentals of Eco-innovation

Manufacturing industries account for a major part of the world’s consumption of resources and generation of waste. Nevertheless, they also have the potential to become a driving force sustainability. They can design and implement integrated, sustainable, and efficient production practices, and develop products and services that have better environmental performance than their traditional counterparts.

Technological innovation and the application of innovation to industry are ways in which businesses can create opportunities to benefit people and the planet. Many companies use the term eco-innovation to describe the contributions of business to sustainable development while improving competitiveness.

Watch this video for an overview of the business opportunities available through eco-innovation: “Eco-innovation – Business Opportunities” -EUinnovation.

Eco-innovation can be generally defined as innovation that leads to the development of new, or significantly improved, products (goods and services), processes, marketing methods, organizational structures and institutional arrangements that reduce environmental impact, even if that outcome is not always intended.

From a green-business perspective, eco-innovation assists with the transition from “end-of-pipe” pollution control measures towards product life cycles and integrated environmental strategies and management systems.

Scope of Eco-Innovation

To date, eco-innovation has primarily focused on the advancement of environmental technologies, but the concept is actually much broader in scope. In Japan, the government’s Industrial Science Technology Policy Committee defines eco-innovation as “a new field of techno-social innovations [that] focuses less on products’ functions and more on the environment and people”. Eco-innovation is thus seen as an overarching concept which provides direction and vision for pursuing the overall societal changes needed to achieve sustainable development.  The following table defines the scope of Japan’s eco-innovation concept program.

Source: METL 2007

9.1.2: Dimensions of Eco-innovation progress

Eco-innovation can be analyzed in terms of an innovation’s target, its mechanism, and its impact.

1) Target refers to the basic focus of eco-innovation (product, processes, marketing methods, organizations, institutions). Eco-innovation in products and processes rely heavily on technological development. In contrast, eco-innovation in marketing, organizations and institutions rely more on non-technological changes.

2) Mechanism relates to the type of eco-innovation introduced. It is also associated with the nature of the eco-innovation – whether the change is of a technological or non-technological character. Four basic mechanisms are modification, redesign, alternative or substitute products/services, and creation (of entirely new products, processes, procedures, organizations and institutions).

3) Impact considers the eco-innovation’s effect on the environment across its lifecycle or some other meaningful metric. Potential environmental impacts stem from the eco-innovation’s target and mechanism and their interplay with its socio-technical surroundings. Given a specific target, the magnitude of the environmental benefit depends on the eco-innovation’s mechanism. The more systemic changes, such as alternatives and creation, generally embody higher potential benefits than modification and re-design.

Innovation plays a key role in moving companies towards sustainable production. Evolving sustainable production initiatives – from pollution control, through cleaner production initiatives, to lifecycle planning, and onto closed loop production—are all facilitated by eco-innovation. As a company develops its eco-innovation capabilities, it gradually moves from simple technological modifications of processes and products, towards the creation of new ways of improving non technological system based processes at an organizational and institutional level.

Source: OECD 2009

The figure above provides a simple illustration of the general conceptual relationships between sustainable manufacturing and eco-innovation. The waves spreading towards the upper right corner indicate the path dependencies of different sustainable manufacturing concepts. It highlights that while more integrated sustainable production initiatives (i.e. closed-loop production) can yield greater environmental benefits, they can only be achieved through a combination of a wider range of innovation targets and mechanisms. The higher-level the targets and mechanisms, however, the more complex and difficult the innovation becomes to implement.


Over the past two decades, clean technology has become a major contributing sector to economic development. This is evidenced by the growth of the clean technology market from less than $7 billion in 2001 to over $188 billion in 2010. The increase can be attributed to the constraints in economic growth due to environmental degradation, high fossil fuel prices, the growing scarcity of natural resources, and climate change.

Clean technology represents a diverse range of products, services, and processes, all intended to:Provide superior performance and efficiency at lower operational, production, and management costs, while

– Greatly reducing or eliminating negative ecological impact, at the same time as
– Improving the productive and responsible use of natural resources.
– At present clean technology spans 11 industry sectors:

1. Energy Generation
2. Energy Storage
3. Energy Infrastructure
4. Energy Efficiency
5. Transportation
6. Water and Wastewater
7. Air and Environment
8. Materials
9. Manufacturing/Industrial
10. Agriculture and bio-products
11. Recycling & Waste

 State of Clean Technology

Source: Metropolitan Policy Program

In 2001, capital investment in cleantech stood at $356 million (59 deals). By 2008, two years cleantech investment had reached $6.65 billion across 385 deals. This massive increase in cleantech investment can be attributed to the global interest in climate change. The graph above highlights total venture capital investment in Cleantech within then US.

The sector peaked in 2011 with total investments reaching $7.5 billion form 649 deals in the US. However, multiple factors—including the failure of several heavily funded companies, the availability of cheap natural gas, the cheaper cost of renewable energy, and the commoditization of solar panels, resulted in the decline of investment for cleantech. Capital investments of US-based cleantech companies fell by 25% in 2013, and for the first time in a decade, the Chinese market witnessed a decline in clean energy investment.

The cheaper costs of renewable energy, along with increased competition between renewable energy providers contributed to an approximate 80% reduction in clean energy investment. This cost reduction in clean energy, however, resulted in the aggressive uptake of clean energy systems within the United States, China and Japan. China installed a total of 12 gigawatts of solar capacity—nearly triple the 4.5 GW deployed the year prior. In addition, the world’s total installed wind energy capacity grew by about 19 percent in 2012, followed by another 12.4 percent increase in 2013.The renewed growth in clean energy technology uptake despite a decline in cleantech investment reflects the maturation of the renewable energy industry.

This growth has re-encouraged investors as to the potential of the renewable energy industry. Since 2015, investors like Citigroup have backed their optimism for the industry with increased investment, claiming that the “age of renewables” has begun.  The growth in the popularity of “Green bonds”, which directs investment towards environmentally friendly projects, evidence further positive growth to the sector, and with Energy-smart technology firms, like Opower, are marching into the stock market.



Supplementary Resources

Sagar (2017) “Singapore leading Cleantech innovation in Asia”

European Commission (2011) “Business embraces clean technology to increase sustainability”

SPRINGnews (2016) “Capturing opportunities in the growing Cleantech sector”

Can redesigning aeroplanes save the planet?

%d bloggers like this: