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The Role of Innovation in Battling Climate Change

May 12, 2016
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Experts at a recent University of Maryland event said innovation will play a key yet unpredictable role as the United States moves toward meeting the goals set forth in the Paris Agreement on climate change, namely keeping the global temperature rise to significantly below 2 degrees Celsius. Current projections about slowing climate change may be pessimistic, but such pessimism involves extrapolating from current sociological and technological trends. Human ingenuity "is not in the models," said David A. Kirsch, an associate professor of management and entrepreneurship at UMD’s Robert H. Smith School of Business.

"Discontinuities can't be planned for — can't be anticipated," Kirsch said, invoking the ideas of Joseph Schumpeter, the Austrian-American economist and patron saint of entrepreneurship via creative destruction.

The session was part of the Climate Action 2016 Forum on May 4, 2016, organized in College Park to coincide with Climate Action 2016, a gathering of policymakers and stakeholders in Washington, D.C.

Some of the most promising innovations that could combat climate change involve making business models more "circular," said Steve Bolton, North American project manager for London-based Trucost, which helps companies quantify the environmental impacts of their activities.

"Taking resources from the planet, using them, making products out of them and disposing of them —even if it is recycled to some degree — is creating climate-change impacts," Bolton said. "It's creating water quality impacts. It's leading to material losses that are only going to make things worse in the long run."

As an example of a more circular system, Bolton mentioned a Dell project to develop a computer — the OptiPlex 3030 — whose casing, at the end of its lifespan, is recovered and turned into the casing for a new computer. In a traditional recycling program, the plastic from an old computer might be turned into material of lesser value.

Trucost analyzed the Dell project. "We quantified it and found that that in itself is saving a million dollars' worth of natural capital," Bolton said. That's savings that the planet is receiving, from climate-change impacts to water impacts if the entire industry operated with closed loop plastic that would quantify to about $700 million of savings. Again it’s the idea of natural capital externalities: Things that aren't priced on the market but should be."

In the absence of such things as a carbon tax, the economic incentive for necessary change is not always present, Bolton conceded — but that's changing as activist shareholders push companies to take note of their environmental footprint. The divestment movement on campuses and elsewhere, which targets companies perceived to be bad environmental actors, is also having an effect. "That is definitely starting to influence the thinking in corporate boardrooms," Bolton said.

Gabe Klein, who served as a vice president of Zipcar before moving on to run the Departments of Transportation in both Washington, D.C., and Chicago, argued that, despite prevalent government-bashing, "government can lead" on climate change. In Washington, people scoffed at the idea of bike-sharing, he observed; now many residents take it for granted. Smaller but important movements like regulations banning Styrofoam or taxes on plastic bags also started in cities.

"I think that public and private operations really don't need to be that different," Klein said. "You really can embed entrepreneurship in NGOs, in nonprofits, and in big corporations."

For ideas about innovations in fighting climate change and generally improving high-density living, he suggested looking abroad. Singapore might not be a model on every score. "But the fact that they've figured out how to run a lot of government entities profitably is interesting,” he said. “I think the fact that they've indexed their government workers’ wages to the private sector so the CEO of the transit agency makes the same as if he were running a tech company — pretty interesting. The fact they are trying to move to a car-light society, even though they already have 100 percent tax on cars and it costs $50,000 to get a driver's license? Pretty interesting."

"We pay double what a country like Norway spends on health care," Klein said. "Meanwhile, they are spending a billion dollars on bike lanes over the next couple of years."

One key difference between the U.S. and foreign approaches, Klein suggested, is an appreciation for long-term planning. "We are so focused on short-term profitability," said Klein, author of the recent book Start-Up City: Inspiring Private and Public Entrepreneurship, Getting Projects Done, and Having Fun. "We have this ’80s corporate mentality. We're focused on quarter-to-quarter growth, and that's just not the way to do things."

Public-private partnerships are likely to become ever-more-important, he suggested — including deals in which cities turn to private companies to provide services, yet keep an equity stake in those enterprises.

"Human beings have been on the planet for 200,000 years, and in the last 115 we've basically undone the conditions that allow us to live on the planet," Klein said. "It's going to take everybody on deck to make the radical nonlinear change we need to save our skins, basically.”

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The Robert H. Smith School of Business is an internationally recognized leader in management education and research. One of 12 colleges and schools at the University of Maryland, College Park, the Smith School offers undergraduate, full-time and part-time MBA, executive MBA, online MBA, specialty master's, PhD and executive education programs, as well as outreach services to the corporate community. The school offers its degree, custom and certification programs in learning locations in North America and Asia.