At the company level, a growing number of businesses have demonstrated profit opportunities identified along the value chain through implementing eco-innovation. It has helped them to achieve a significant advantage over their competitors and to generate business growth while others in the respective markets have remained stagnant. The potential of small and medium sized enterprises (SMEs) to bring about system-wide change is particularly high as they are the most numerous type of companies accounting up to 90% of businesses and contributing to two thirds of formal employment in developing and emerging economies. Their impact on both the environment and society is significant, while their small size enables more agile decision-making and more flexibility for eco-innovative changes compared to larger companies.
At the government level, many have realized the win-win opportunities for eco-innovation to significantly enhance competitiveness and economic development. More widespread implementation of eco-innovation in companies and especially SMEs pushed and pulled by effective combinations of policies can contribute to the alleviation of resource constraints and environmental degradation, improvement of social welfare and local community engagement, job creation and attracting financial resources. The 2016 analysis of 185 eco-innovation projects funded by the European Commission in the period of 2008 – 2013 for promoting eco-innovation among SMEs showed ‘total estimated environmental savings reached an annual €1.2 billion two years after the projects’ closure’. In addition, the eco-innovation projects had a side benefit of generating, ‘an average of 9 full time equivalent jobs per project.
The process of eco-innovation also enhances in country knowledge and skills, while increasing productive capacity and competitiveness of the economy. As an example, in Germany a combination of regulatory framework and economic incentives has spurred investment and innovations which ‘paved the way’ for the emergence of new markets for eco-innovative solutions. Eco-innovation in the areas of renewable energy generation, energy and material efficiency, sustainable water management and mobility, already contributed 11% to the GDP in 2012, with expectations for this to rise by the year 2025.
Eco-innovation also holds multiple benefits for society at large by reducing health risks from environmental degradation from the decrease in the use of hazardous and toxic chemicals. At the same time it can improves income through job creation and from generating new sources of value for productive growth. These can be jobs, generated by emerging industries for sustainable products and services as well as in supplier companies following the higher demand for inputs to these emerging industries. Eco-innovative solutions also bring crucial social benefits such as improved access to energy, water and sanitation which is particularly relevant for developing countries to meet basic needs.
Eco-innovation therefore actively contributes to decoupling economic growth from resource consumption and help achieve the Sustainable Development Goals (SDGs). The Agenda for Sustainable Development for 2030 that encompasses 17 SDGs adopted by the States in September 2015 represents a challenging and complex aspiration with a web of interrelated goals and targets. This can be only achieved in an integrated way and with concerted efforts of all stakeholders with active role of the private sector. Eco-innovation applied by businesses with solutions scaled through their value chains has the potential to reduce resource consumption and stabilize the resource supply and prices for longer terms prospects of productive growth, which is important for human development. Thus, the promotion of eco-innovation can be an important policy objective within the overall development framework of a country.
