Driving green innovation through collaboration across the value chainEconomist Intelligence Unit
Climate action has risen to the top of many national agendas. Countries around the world have set targets and developed a regulatory framework to match. This requires changes at the corporate level to ensure that each is doing its part to contribute to a low-carbon world. To make a real contribution, companies need to innovate, and those ahead of the curve are taking a variety of approaches.
Tetra Pak, a food processing and packaging company, has embraced climate action targets, using these as a catalyst for innovation. In 2015 it developed new low-carbon packaging with a carbon footprint lower than standard packaging. The new low-carbon packaging is making an important contribution to the company’s commitment to reduce greenhouse gas emissions across its value chain. As part of their approved Science Based Targets they expect a 16% reduction in emissions by 2020 from 2010 levels. As a result of this strategy, Tetra Pak says they have grown their business by 16% and reduced emissions by about 14%. They sold over 100m packs of the new product in the first year since its launch.
“In this way, we’ve been reducing emissions while growing our business,” says Mario Abreu, vice-president of environment in Tetra Pak’s product management and commercial operations division.
One of the ways of lowering the packaging’s carbon emissions lies in their use of bio-based plastic made from polymers derived from sugar cane. “Because sugar cane is growing, you’re not removing oil and gas from under the crust of the earth,” explains Mr Abreu. “You’re producing a product that eventually will go back to the atmosphere, but it’s not increasing the carbon in the atmosphere.”
Given the company’s focus on reducing emissions through the materials it uses, Mr Abreu says that collaboration with suppliers is also critical. The company is working with the suppliers of the paper and aluminium used in its packaging to lower the carbon emissions created in the production of these raw materials. “We’re not only reporting tier one suppliers but the whole production of these materials upstream,” says Mr Abreu. “And we’ve started setting improvement targets with suppliers.”
Collaboration across the value chain can include players downstream as well. “It can be innovation where, with a customer, we try something different that eventually becomes part of our portfolio,” he says. “These types of co-operations are very helpful in creating a lower carbon footprint for us downstream.”
A Spanish utility company, Iberdrola, is also engaging with customers to execute innovative operational strategies and increase energy efficiency along the value chain. For this it relies on digital technologies. The company is rolling out smart meters (by 2018 it will have deployed more than 11.7m4 ), which help customers to manage their energy consumption more efficiently and allow Iberdrola to use dynamic pricing to encourage customers to use energy at low-peak hours of the day.
“We are changing the way the networks are operating through the digitisation of smart meters,” says Agustin Delgado, director of innovation, sustainability and quality at Iberdrola. “And we are working on new products in which big data can be part of the strategy we have with our customers.”
They have developed new revenue streams as a result, including remote home energy management services and electric vehicle stations. For Iberdrola, energy technology innovation is based on an open approach and finding the right partners.
“We don’t have a technology centre in the company. Innovation is decentralised across all business units,” explains Mr Delgado. “We call it ‘open’ because we’re collaborating with universities and suppliers and even our competitors. A large percentage of our innovation is done in a collaborative way.”
In June 2017, for example, the company expanded its partnership with Massachusetts Institute of Technology (MIT), announcing a US$10.3m five-year collaboration designed to advance energy transition technologies and policies.
Tetra Pak has also turned to partnerships with universities, particularly to develop innovations in low-carbon technologies that will give its business long-term resilience.
“In this, we work a lot with academia—that’s where we can make these seeds flower,” says Mr Abreu.
Companies are investing in innovation. Iberdrola has established Perseo, a corporate venture capital programme that allows it to invest €70m in disruptive energy technologies and new business models. The programme gives entrepreneurs—particularly those in the UK, the US and Spain—access to Iberdrola’s funding, expertise and 32m-strong customer base.
Iberdrola is not alone in tapping into the innovative energies of entrepreneurs. Saint-Gobain, a French building materials group, is fostering innovation by developing an ecosystem of startups. An external ventures group called NOVA was set up to develop alliances with start-ups around the world, including those working in sustainable construction, low-carbon materials and processes, and energy saving technologies and services.
The path to innovation for Saint-Gobain includes acquiring start-ups as well. For example, in 2012 they acquired SageGlass, which manufactures electrochromic windows that can switch between transparent and tinted on demand, reducing the energy used in cooling and lighting.
“Innovations such as electrochromic windows help us materialise our joint commitment to improving the well-being of people while preserving the future of our planet,” explains Armand Ajdari, vice-president of research and development and innovation at Saint-Gobain. “This allows us to elevate our exchange with customers and stakeholders in our markets, increase sales of other products, and attract talent motivated by our ambition and sharing our values.”
All of these strategies are helping these companies—and other players along the value chain— meet their carbon efficiency goals. However, Tetra Pak’s Mr Abreu stresses the fact that working to achieve climate change goals can help deliver much more, by getting companies to think differently and promoting innovation broadly across the company.
“It forces you to look at your value chain,” he says.