Companies Commit to Net-Zero, but Only One in Five Are Ready to Innovate the Necessary Solutions

BCG's 2022 Most Innovative Companies Report Finds Plenty of "Will" but Much Less "Way" When It Comes to Climate and Sustainability Innovation Readiness

BOSTON, Sept. 15, 2022 /PRNewswire/ -- Two-thirds of the companies in Boston Consulting Group's 2022 global innovation survey rank climate and sustainability (C&S) as a top corporate priority, while more than half report that they are committed C&S innovators, ranking both innovation and C&S among their top three priorities. However, according to a new report released by Boston Consulting Group (BCG) today, 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.

This year, for 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.

"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," says Justin Manly, global leader of BCG's growth and innovation segment and coauthor of the report. "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% 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% of all companies face a steep learning curve.

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% (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 (see the exhibit). 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).

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

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% of companies surveyed working remotely two or more days a week and 49% of C&S-ready innovators reporting that the productivity of their innovation and R&D activities have improved by 10%–50% because of these new ways of working.

"As sustainability moves up the agenda in boardrooms and C-suites everywhere, the importance of innovation rises commensurately," says Michael Ringel, BCG's global leader for innovation analytics and research and coauthor of the report. "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."

A copy of the report can be downloaded here:

https://www.bcg.com/publications/2022/innovation-in-climate-and-sustainability-will-lead-to-green-growth

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SOURCE Boston Consulting Group (BCG)