Is the worst economic crisis of modern times really over? Though there are risks to the downside, the latest OECD Economic Outlook points to a recovery taking hold. If growth staggered somewhat in the second half of 2010, it was partly because world trade slowed from exceptionally high growth rates earlier in the year, the upturn in the inventory cycle is easing and many governments began unwinding their fiscal stimulus, and in some cases, cutting spending to control burgeoning deficits. However, private investment looks set to take over, with business investment likely to become more robust.
When it comes to innovation and green growth, the bottom line is: the bottom line. Panelists at the OECD Forum session on green growth and innovation were unanimously optimistic about a greener future through innovation—as long as the market made it attractive for companies to innovate.
“R&D is transforming money to knowledge,” said Esko Aho, executive vice-president of Nokia Corporation and former Prime Minister of Finland. “Innovation is about transforming knowledge to money.”
But according to Mikael Karlsson, president of the European Environmental Bureau, “Current pricing is not fostering sustainable development.” He made the point that governments are subsidising some behaviours, such as fossil fuel consumption, while taxing those same behaviours (see: carbon taxes) later on.
Niklas Zennström, CEO and Founding Partner of Atomico Ventures, asserted that a new paradigm was needed. “When there’s a change in the market, there is room for game-changing innovation,” he said. “If you put a price on destroying the planet, you’re going to change the status quo.” Change brings opportunities, he said: entrepreneurs will grab the chance to innovate; venture capitalists will start to invest in those growth opportunities.
Consumers play an influential role in this new paradigm. Our changing demands, based on a better understanding of how what we buy and what we do affects the environment, can drive innovation. “Businesses are understanding this,” said Zennström. “Consumers will not want to buy products from businesses that are destroying the planet, or are doing things that are bad for our health.”
If businesses are worried about staying competitive as they wrestle with changing paradigms and shifting regulations—and Aho suggested that governments would be wise to formulate “smart” regulations and “smart” taxation policies to promote, rather than thwart, innovation – perhaps they needn’t be. Many companies are already absorbing these changes into their DNA, and those with “sustainable” philosophies, Zennström suggests, will be competitive.