Innovation Revolutionaries

Some analysts believe the innovations fueling sustainable economies are spawning the sixth major wave of industrial innovation since the start of the Industrial Revolution. (See Chapter 3.) From the steam engine in the first wave to biotechnology and information networks in the fifth, surges of innovation have accelerated the rates at which natural capital could be converted to human-made capital, thereby ushering in new eras of material prosperity throughout the industrial era. The sixth wave, which taps green chemistry, bio-

Seeding the Sustainable Economy mimicry, industrial ecology, and other sus-tainability innovations, offers the promise of breakthroughs in using natural wealth efficiently, wisely, and equitably. And because it takes advantage of social and institutional innovations as well—not just technological ones—this new wave provides leadership roles for consumers and nongovernmental groups, businesses, and governments.51

Consider first the role of consumers. Using their market muscle, consumers are already helping to drive interest in green products of all kinds. Sales of Toyota's hybrid vehicles, for example, jumped from 18,000 in 1998 to 312,500 in 2006 and now number more than 1 million worldwide. Sales of compact fluorescent lightbulbs (CFLs) in the United States alone totaled 100 million in 2005. And purchases of organic foods worldwide jumped by 43 percent between 2002 and 2005, to $43 billion. Impressive as the growth in green products has been, sales constitute just a small share of the consumption of each product line—U.S. sales of CFLs accounted for only 5 percent of lightbulb sales in 2007, and organic agriculture is practiced on less than 1 percent of global agricultural land. Given that consumption accounts for a large share of the GDP of most economies—in the United States in 2006 it was 70 percent—consumers are barely tapping their power to swing economies in a sustainable direction. They need help.52

Using their market muscle, consumers are already helping to drive interest in green products of all kinds.

Businesses can provide assistance—and increase profitability—by meeting consumer demand for green products. Wal-Mart has taken a leadership role regarding CFLs, for example, setting a sales goal of 100 million bulbs in 2007, which would roughly double U.S. sales of these energy-efficient products. Other firms seem to be trying but are constrained by the pressures of corporate governance. British Petroleum has taken steps to remake itself as an energy company rather than an oil company. Its BP Alternative Energy business is set to invest $8 billion in solar, wind, and hydrogen power over the next decade. But BP cannot abandon its petroleum business wholesale in the near term without sacrificing the high returns that shareholders expect from today's lucrative oil market. Not surprisingly, its planned investment in BP Alternative Energy represents just 5 percent of its average annual capital investments.53

A key constituency with the power to reshape economies is investors, because capital invested today shapes industries for years and even decades to come. Socially responsible investments, project financing governed by the Equator Principles, and microfinance can help advance sustainability values. (See Chapter 13.) So can venture capital (VC) investments, the funds that seed many new, innovative businesses built on great ideas that can transform societies.

Venture capital has looked favorably on the "cleantech" sector—those businesses in the fields of energy, agriculture, water, and waste disposal that use innovative technologies or practices to deliver the services people want in a clean way. The field is booming: in 2006, VC cleantech investments in North America jumped 78 percent over 2005 levels to become the third-largest VC investment category, with 11 percent of all venture investments. Cleantech now gets more of these investments than the medical devices, telecommunications, and semiconductor sectors, and trails only software and biotech. Venture capital is growing in other regions as well, especially in China. There, clean-

Seeding the Sustainable Economy tech VC investments increased some 147 percent between 2005 and 2006 and accounted for some 19 percent of all VC investment in the country.54

Perhaps the greatest boost to sustainabil-ity initiatives can be given by governments, which can shape markets and design non-market policies for sustainability. In Sweden, the government is using its regulatory and market-shaping powers to move the country rapidly away from fossil fuels. In 2006 a government commission recommended that by 2020 the use of oil in road transport be cut by 40-50 percent, that industry reduce its consumption of oil by 25-40 percent, and that heating oil use be eliminated entirely. While the commission envisioned many government/private initiatives to achieve these goals, government leadership is critical, through dozens of initiatives ranging from research on energy efficiency to promotion of affordable train service and tax incentives for biofuels production.55

At the municipal level, many cities are introducing bus rapid transit (BRT), an innovative system of expedited bus lanes and loading systems pioneered by the government of Curitiba, Brazil. Municipal governments have discovered in BRT a remarkably efficient mass transit option that is far cheaper than underground metro systems. As a result, BRT systems have been built in Quito, Bogotá,

Jakarta, Beijing, Mexico City, and Guayaquil and are under development in dozens of other cities.56

BRT provides perhaps the best example of how good government is indispensable to achieving sustainability—and indeed ought to be in the forefront of the movement. Governments not only can launch initiatives such as BRT themselves, they can shape the rules for markets to ensure that the energy and creativity of business is harnessed for sustainable ends. And as the embodiment (ideally) of the collective will, values, and priorities of the societies that give them legitimacy, governments must step up and take on those necessary tasks that civil society and the private sector cannot or will not do adequately or competently—to look after the well-being of society as a whole.

With business, civil society, and government all showing serious interest in sustain-ability in dozens of countries worldwide, the chances of creating sustainable economies appear better than ever. As the vulnerabilities of conventional economies continue to be revealed, and as sustainability innovations proliferate and scale up, the prognosis is hopeful. Societies worldwide stand poised to rewrite the ongoing human drama of economics with a new chapter: the sustainable wealth of nations.


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Guide to Alternative Fuels

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