Nun public bulk consumers as drivers of eco-innovations
EU SPRI 2015 Helsinki, 10 June 2015 Dr. Frieder Rubik / Ria Müller IÖW – Institute for Ecological Economy Research, Heidelberg/DE
Table of content 1. Background 2. Methods applied 3. Derivation of bulk consumers and of priority ecoinnovations 4. Empirical findings and results 5. Example textile 6. (Policy) approaches for activating bulk consumers 7. Conclusions
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The project – Client: German Federal Environment Agency (UBA) – Partners: – Institute for Ecological Economy Research (IÖW) [Lead], Berlin/Heidelberg/DE – Fraunhofer Institute for Systems and Innovation Research (ISI), Karlsruhe/DE – Institute for Resource Efficiency and Energy Strategies (IREES), Karlsruhe/DE – 08/2012 – 10/2014 – Objectives: – Overview on bulk consumers in Germany and their strategic importance
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– Elaboration of a potential strategy to activate bulk consumers and to bundle their demand to support eco-innovations
Background – Innovation as key driver of a „Green Economy“ (UNEP/OECD) – Innovation types: – Technological innovations – Products – Processes
– Organisational innovations – Social innovations – Innovations in design and marketing – Definition of eco-innovation according to OECD: “(…) includes both environmentally motivated innovations and unintended environmental innovations” (2009, p. 149) 4
– Innovation policy: All measures of policy influencing innovation processes
„Technology push“ and „Demand pull“ - debate
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Sources: UNEP (2011, 19) based on Martin (1994)
Demand side innovation policy – More attention since mid of 2000ies, e.g. OECD-report 2011 – Justification – Market and system failure: external costs, information asymmetry, lock-ins, non-diffusion of eco-innovations
– Lead market: national test markets for global dissemination – Mission orientation: double dividend – Key actor groups – – – –
Public procurement (GPP) Retailers Private consumers Bulk consumers: – commercial as well as non-profit-making,
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– Operating alone or together with partners – holding a significant share in the relevant market
Market segmentation and strategies Market shares (in %) Procurement of products with the most preferable environmental performance („Market procurement“)
Procurement of eco-innovations („Technology procurement“) Environmental performance (in %) 7
Source: Based on Ostertag/Dreher (2002)
Methods applied – Literature analysis – Collection, selection and priorisation of eco-innovations – 19 expert interviews with – International scientific experts – Practitioners – Six case-studies – Three German workshops with bulk consumers – CO2 air-conditioning systems in passenger cars, – Energy-efficient commercial tumble dryers (> 6 kg), – Textiles made by recycled cottons fibers or by organic cotton 8
Definition of “bulk consumers“ – Commercial as well as non-commercial organizations, – Non-governmental organizations, – Organizations which – either present themselves in the market as a central organizational unit with respect to purchasing – or which are characterized by common or bundled procurement, and – whose shares in the concerned market sector (i.e. purchase quantities and market turnovers per product group or service) represent a significant share.
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Empiricism: case studies Greenfreeze (DE ,1992)
Fairphone (NL, 2014)
– Innovation
Twingo SmILE (DE, 1996)
– Innocycle – Actors – Key factors „Down to zero“ (UK, 2012)
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Energy+ Projekt (EU, 2002) Procurement of churches (DE, 2009)
Key suporting / hindering factors
19 expert interviews
6 case studies
Classification of factors in six clusters (based on Fichter/Clausen 2013):
– Innovation-related key factors, e.g. quality, complexity of innovation
Literatur
– Supplier-related key factors, e.g. availability, reputation of supplier
– Business branch-related key factors, e.g. system manager, lobbies/associations
– Demand side-related key factors, e.g. routines, change agents, benefits
Explanatory model for success & failure 11
– Context-related key factors, e.g. public awareness & interest,
– Policy-related key factors, e.g. policy framework, lead market
Key lessons learnt I – Pre-study for market targeting - strong market targeting is needed – Mediators and brokers – Different respected entities – Involvement of environmental or consumer NGOs to increase credibility.
– Roles in innovation process: Bulk consumers could perform in different roles, namely as triggers for innovations, as co-producers or as “early adopters”. – Realisation of theoretical market power in real demand: – Binding demand has to be generated – Decentralisation of purchasing within business and public procurement – Rare embedment of the purchasing department in the strategic management level.
– Business application context:
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– – – – – –
Purchasers as “Change agents” Credible, long-term promotion of eco-innovations Application of “Life Cycle Costing“ (“true costs”) Training of purchasers and applicants Allowance to take risks Differentiated risk sharing between suppliers and bulk consumers.
Key lessons learnt II – Pooling of purchasers: – Aggregation of the demand Increase of market power – Competition in case of horizontal cooperation – Cooperation public & commercial companies prescriptions of public tendering & competition laws.
– Public awareness and problem awareness: – Attention towards environmental challenges – Perception of environmental challenges economic risk for vendors as “incentive” – Attention towards “focal“ companies.
– Political support and and “background music“: – Political system (international and national level) send strong (regulative) and weaker (policy objectives, long term visions) signals of policy requests to emphasize specific future requests.
– Monitoring: – Supporting companies to document and transfer their experiences as well as to report them. 13
– Dynamic snowball-effects.
INFORMATIVE AND COMMUNICATIVE INSTRUMENTS
Capacity building Education and Training Counselling
Documentation of good-practice
ASSESSMENT TOOLS
Awards for innovative purchasers (innovation awards)
Innovation databases
REFLEXIVE AND DISCURSIVE INSTRUMENTS
Demonstration projects
Evaluation of ecoinnovations
Campaigns
Exchange of experience / platform Competence centers Advisory groups & boards
Environmental management systems, CSR
Eco-labels
Monitoring Self-commitments Evaluation
POLICY INSTRUMENTS TO STRENGTHEN ECOINNOVATIONS Lead Market Initiatives
COOPERATIVE MEASURES Dialogue procedures
Network-building and support User integration intthe innovation process Roadmaps & action plans for market development System manager, coordinator, moderator
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ECONOMIC INSTRUMENTS
Consulting Coupon Coupling of subsidies and advisory services Innovation funds Environmental innovation programme Taxes
Subsidies
Purchase commitments Green Public Procurement (GPP)
Cooperative procurement
REGULATORY INSTRUMENTS Liability Rules
Tax relief, depriciation conditions
Mandatory product information
Support of testing strategies Insurance schemes for procurement of innovations
Standards, bans, prohibitions
Approaches to activate bulk consumers
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Approaches to activate bulk consumers – Agenda Setting and problem perception – Political signaling („Culture of ‚good‘ procurement“) – Cooperation with GPP – Coordinationing among the different public purchasers – Policy formulation – Adequate access: system manager as entry point (preparatory study, broker, support) – Development of a roadmap as a dialogic process – Integration of different policy measures, cooperation within federal system – Use of time windows. 16
Approaches to activate bulk consumers – Policy implementation – Aggregation GPP & bulk consumers – Provision of information in various formats – Life cycle costing (LCC) – Awarding innovate consumers – Documentation of good practises – Training, qualification and technology scouts – Reduction of economic risks (e.g. insurance system) – Monitoring – Monitoring as a broad process 17
Conclusions – Bulk consumers promising strategy, thereby – (relatively) homogeneous goods markets Relative market importance Mobilize “potential for sanctions” intelligently Spillovers for a market transformation – heterogeneous goods markets Technological market segmentation, Spillovers difficult
– But: Empirical evidence to be tested ( H2020 calls) – No “free ride”-strategy public engagement requested Triple dividend: Innovators, customers, private consumers 18
Thank you for your attention. Dr. Frieder Rubik & Ria Müller IÖW – Institute for Ecological Economy Research
[email protected] [email protected] 10 June, 2015
