Article
Are Brazilian companies eco-innovative? What drives them?
Based on four indicators, the answers to these questions reveal a worrying picture
First published in 02/02/2024 - Last updated in 03/06/2024 às 2:05 pm
Pedro Miranda[1], Priscila Koeller[2], Maria Cecília Lustosa [3]
The importance of technology for sustainable development is internationally recognized. The UN Intergovernmental Panel on Climate Change’s (IPCC) 6th report has, once again, reinforced the warning about the progress of the climate change process. The same report reiterated the urgent need for measures to reverse the cumulative and harmful effects of anthropogenic actions on the environment. A novelty in the 2022 document, the Working Group III report highlights the role of innovations as one of the main elements for reversing environmental degradation resulting from human action and, above all, for implementing a sustainable development model. Although the report does not discuss the term eco-innovation in depth, it is possible to associate the term with the definition established in the Measuring Eco-Innovation (MEI) Project:
(...) Eco-innovation is the production, assimilation or exploitation of a product, production process, service or management or business method that is novel to the organisation (SIC) (developing or adopting it) and which results, throughout its life cycle, in a reduction of environmental risk, pollution and other negative impacts of resources use (including energy use) compared to relevant alternatives. (Kemp; Pearson, 2007, page 7).
Considering this scenario and definition, how is the Federative Republic of Brazil’s performance regarding eco-innovations? What are the key motivators for eco-innovation? The answers to these questions, which are incredibly important to draft and improve public policies, presume the availability of metrics and indicators intended for monitoring. However, given there is no single indicator that can fully portray all facets of eco-innovation, three sources of information have been used complementarily in literature: innovation surveys, which in Brazil also has a special module dedicated to sustainability and environmental innovation, environmental certification data, and patent statistics.
Eco-innovation in Brazilian companies - key statistics
Innovation Survey - (Portuguese acronym: Pintec) - in Brazil has information regarding (i) organizational innovations, especially on the adoption of new environmental management techniques; and (ii) the impacts of innovation (product and process innovation), including reduction in raw material, energy and water consumption, and environmental impact.
The organizational dimension of eco-innovation can also be characterized using environmental certification information, in particular those of the ISO 14000 and ISO 50000 families. More specifically, the ISO 14001 and ISO 50001 standards, which set prerequisites regarding environmental and energy management systems, respectively, and that, in Brazil, correspond to the ABNT NBR ISO/IEC 14001 (Environmental Management System Certification – Portuguese acronym: SGA) and ABNT NBR ISO 50001 (Energy Management System Certification – Portuguese acronym: SGE) standards.
Patent statistics contribute to this picture by presenting more detailed data, specifically on the development of new environmental technologies that are identified with the aid of the Word Intellectual Property Organization‘s IPC Green Inventory.[6] Used in the literature in works on inventive activities, research and development (R&D), and innovation, patent statistics have also been used in studies on eco-innovation. Patent registers hold a wide set of information regarding, among others, the agents involved and the technology to be patented.
Based on these sources, four indicators were built as proxies to analyze the performance of Brazilian companies in carrying out eco-innovation. The first two refer to management aspects: environmental management and environmental certification. The other two indicators are related to product and/or process innovation and refer to environmental impact reduction and the development of new environmental technologies. The results reveal a worrying picture.
In the period between 2015 and 2017, the proportional number of companies that adopted environmental management techniques was 19%, lower than in the previous periods, 2009-2011 and 2012-2014. Environmental certification data reinforces this result. In the same period, there was a drop in the absolute number of certificates, and the share of environmental certifications oscillated at a level below that recorded in the mid-2000s, reaching only 14.6% in 2017 (Table 1).
A shift in investment profile was observed when considering product and process innovations in general. The percentage of innovative companies among the sum of innovative companies that consider that their innovations had significant positive effects on the environment reached 11.4%, a number also lower than that recorded in previous periods. The analysis of the eco-innovative performance of Brazilian companies in the development of new technologies completes this picture. Such performance was measured using the average share of environmental technology patent registers among the total number of patent registers by Brazilian companies. Although this indicator has grown in recent years, reaching 13.5% in 2015-2017, the increase was not sufficient to offset the drop in the early 2010s and recover the importance of environmental technologies in the late 2000s.
When observed in a disaggregated manner, the different indicators show high heterogeneity among economic activities. The table below summarizes the main results according to economic activity. Each of the indicators considered present the respective percentages and signal the economic activities that show a growth trend between 2009-2011 and 2015-2017 (upward pointing arrow), when the information was available, and those whose percentages were above the total average (highlighted in green). As a summary overview of the eco-innovation scenario, the last column of the table highlights the activities that showed a growth trend (Eco↑) and percentages above the total average (Eco +) in most indicators.
Table 1 – Eco-innovation in Brazilian companies in 2015-2017: indicators based on innovation survey, environmental certifications, and patent statistics
Source: Instituto Brasileiro de Geografia e Estatística (IBGE), Instituto Nacional de Propriedade Intelectual (INPI) and ISO. Prepared by the authors. * For this study, only the year 2017 was considered when addressing certification.
Observation: n/a. - not available or not applicable.
Despite the differences between the activities, few stood out as eco-innovators (Eco +). Among those that stood out in this sense are Coke, Petroleum and Biofuels, Chemical Products, Non-metallic Minerals, and Pulp and Paper, four activities identified as major polluters according to the European Union classification for 2019 [5]. Furthermore, only Miscellaneous products - an activity without much emphasis on greenhouse gas emissions - stood out for its growth trend (Eco↑). These results reinforce the importance of performing further research on eco-innovation through sectoral studies to identify the need for and gaps in public policies.
One of the possible explanations for these differences between economic activities may be in regulation. The literature highlights the importance of environmental regulations and the search for cost reduction as eco-innovation drivers (PORTER; LINDE, 1995a e 1995b; LUSTOSA, 2002; HORBACH ET AL, 2012), pointing toward important differences among industries (HORBACH, 2006; SANTOS, 2016). Authors such as Podcameni (2007), and Santos (2016) have shown that, in Brazil’s case, regulation is also one of eco-innovation’s main drivers. Santos (2016) confirmed this role as an inducing agent and also showed that companies that complied with the regulations were more likely to carry out eco-innovations compared to the probability of carrying out conventional innovations. In general, regulation has specific characteristics for each sector, with some activities being more regulated than others. Therefore, it is also important to observe how companies are assessed based on the motivating factors of eco-innovation, as will be discussed below.
Eco-innovation Drivers
Innovation survey in Brazil also allows us to consider the motivating factors of eco-innovation from the Pintec 2017 Sustainability and Environmental Innovation module. In this module, the survey identifies the motivating factors for the company's decision to introduce innovations that generate environmental benefits, from 2015 to 2017, listing nine possible factors.
Despite specifically referring to this period, the aggregate figures of the survey[6] show that Brazilian companies do not recognize the two elements highlighted by the literature - environmental regulations and the search for cost reduction - as the main motivators. Among the motivations revealed by innovative companies as relevant for the implementation of eco-innovations during that period, existing environmental standards or taxes levied on contamination (a motivation mentioned by 46.1% of innovative companies) and the high costs of energy, water, or raw materials (49.5%) took fourth and third place, respectively, behind the company's reputation (59.4%) and the best environmental practice codes in the company's sector (54.3%), as shown in Table 2.
Table 2 - Number of eco-innovative companies and indication (%) of the main factors that contributed to the introduction of environmental innovations, by economic activity - Brazil - 2015-2017
Source: IBGE. Prepared by the authors
Authors who study eco-innovation determinants have shown that economic activities should also be considered. The research indicates that there is significant heterogeneity among the activities regarding the percentage of companies that consider the motivating factors mentioned in Table 2 to be important. There are differences not only between the totals of the extractive and manufacturing industries; electricity and gas; and services, but for the activities that make up the manufacturing industries as well. In the manufacturing industries, for example, the existing environmental standards, when compared to the other factors, range from first place, as in the case of Metallurgy, to sixth place, for Food product manufacturing and Leather preparation, and leather goods, travel goods, and footwear manufacturing.[7]
In summary, the eco-innovative performance of Brazilian companies, the differences concerning what the literature points out as the main motivating factors for eco-innovations, and the heterogeneity between economic activities indicate the need for further studies. New research to improve public policies and change the eco-innovation scenario in the country is even more important considering the current climate change scenario and the urgent need to adopt sustainable development models and practices.
[4] For a debate on the use of these sources and their limitations in analyses on Eco-innovation, see Miranda, Koeller and Lustosa, 2022.
[5] Brazilian greenhouse gas emission statistics by the National Classification of Economic Activities (Portuguese acronym: CNAE) are not available, so European Union statistics were used as an approximation. Even so, it is important to point out that emissions by Brazilian economic activity will not necessarily coincide with emissions by economic activities of the European Union.
[6] Further studies are needed to assess whether there are differences related to the size of the companies.
[7] https://www.ipea.gov.br/cts/pt/central-de-conteudo/artigos/artigos/229-fatores-motivadores-da-inovacao-ambiental-nas-industrias-de-transformacao-dados-da-pintec-2017#_ftn3. Accessed on: Friday, November 27, 2020.
* The authors acknowledge Leonardo de Mello Szigethy de Jesus for his support and assume full responsibility for any misunderstandings and omissions.
** Translation: Papier Produções e Editora Ltda / Michelle Lebowe www.papierbrasil.com
