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Most companies are committed to net-zero, but few are ready to innovate necessary solutions

by | Sep 30, 2022 | Public Relations

Two-thirds of companies say they are committed to climate and sustainability (C&S) initiatives in a new survey—in fact, more than half report that they are committed C&S innovators, ranking both innovation and C&S among their top three priorities—but the new survey and report from Boston Consulting Group (BCG) reveals that only about one in five companies are ready to act, which means they have incorporated C&S priorities into their innovation engines, have built the capabilities they need, and are ready to develop the product, process, and business model innovations that can deliver.

In its 16th Most Innovative Companies report, Are You Ready for Green Growth?, BCG for the first time asked about the importance of C&S in innovation. As more big companies announce net-zero pledges almost daily, the innovation readiness gap between commitment and capability that emerges from the research becomes an existential problem.

Most companies are committed to net-zero, but few are ready to innovate necessary solutions

“While many companies talk about sustainability and make net-zero emissions pledges, far too few of them have truly done the work of integrating C&S priorities into their innovation engines and producing tangible results,” said Justin Manly, global leader of BCG’s growth and innovation segment and coauthor of the report, in a news release. “At the same time, investors, regulators, customers, and shareholders are all looking to big companies and their CEOs to take the lead in making real progress against global warming.”

The report measures committed C&S innovators against BCG’s innovation-to-impact benchmarking framework (i2i) to assess the readiness of their innovation practices and platforms. Among committed C&S companies, 28 percent score 80 or higher (a perfect i2i score is 100), marking them as “ready” and equipped with well-developed and practiced innovation capabilities. This indicates that nearly three quarters of committed C&S innovators need to raise their innovation game and 80 percent of all companies face a steep learning curve.

Most companies are committed to net-zero, but few are ready to innovate necessary solutions

The top 50 innovators also lead in C&S

Many on the 2022 list of the 50 most innovative companies are already C&S innovation leaders—a good number of them being among the earliest to embrace environmental, social, and governance (ESG) principles and establish decarbonization commitments. Almost 80 percent (39) qualify as top C&S innovators, according to global peer votes.

For the second consecutive year, Apple holds the top spot on the list. Microsoft climbs two positions to second place, Amazon moves one place to third, Alphabet falls three places to fourth, and Tesla hold onto its fifth-place position. Four new companies—ByteDance (#45), Nvidia (#15), Panasonic (#46), and Zalando (#25)—join the top 50. This year’s list sees a rebound by the automotive industry, with GM (#42) and Ford (#43) rejoining the top 50, Tesla (#5) and Toyota (#21) holding their positions. Hyundai (#33) is another holdover from the 2021 list. Automotive is also the number two sector for the percentage of companies prioritizing C&S– a reflection of the industry’s commitment to electric and autonomous vehicles).

Most companies are committed to net-zero, but few are ready to innovate necessary solutions

Consistent with the last five years of BCG’s top 50 ranking, more than half the companies on this year’s list are based in North America. Meanwhile, Asia-Pacific and Greater China continue to be rising hubs for innovation, with companies from those regions increasing their representation on the top 50 list from four and three companies in 2018 to eight and seven companies in 2022, respectively.

The highest carbon emitters prioritize C&S

The report reveals that industries responsible for the highest emissions—durable goods (85 percent), automotive (78 percent), utilities (77 percent), and oil and gas (77 percent)—are the ones that prioritize C&S the most. Additionally, high-emitting companies are 20 percent more likely than low emitters to target the kind of deep tech solutions needed to substantially decarbonize.

Most companies are committed to net-zero, but few are ready to innovate necessary solutions

C&S-ready companies emphasize a number of aspects of their innovation systems more aggressively than other ready innovators do. They start with greater ambitions, identify the domains to focus on, manage the “idea funnel,” and have clear performance goals. They also engage more actively with partners and even competitors.

Ready innovators have also seen a positive impact on the productivity of their innovation and R&D activities, with 80 percent of companies surveyed working remotely two or more days a week and 49 percent of C&S-ready innovators reporting that the productivity of their innovation and R&D activities have improved by 10–50 percent because of these new ways of working.

Most companies are committed to net-zero, but few are ready to innovate necessary solutions

“As sustainability moves up the agenda in boardrooms and C-suites everywhere, the importance of innovation rises commensurately,” said Michael Ringel, BCG’s global leader for innovation analytics and research and coauthor of the report, in the release. “But innovation—be it in products, processes, or business models—is not a siloed function and does not take place in a walled-off lab. Progress depends on innovation being embedded throughout the organization, with the same human and technological capabilities that drive success on other topics.”

Download the full report here.

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Richard Carufel
Richard Carufel is editor of Bulldog Reporter and the Daily ’Dog, one of the web’s leading sources of PR and marketing communications news and opinions. He has been reporting on the PR and communications industry for over 12 years, and has interviewed hundreds of journalists and PR industry leaders. Reach him at richardc@bulldogreporter.com; @BulldogReporter

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