Green Companies Are Particularly Innovative
Research
03.07.2023
Start-up Panel Confirms Link between Innovation Capacity and Sustainability
Green companies are driving product innovations by implementing tangible measures to enhance their sustainability. According to an analysis of the IAB/ZEW Start-up Panel conducted by researchers at ZEW Mannheim, nearly half of the examined green companies introduced product innovations in 2021. Notably, the technology-focused service and software sector emerged as the frontrunner in terms of the number of innovations, with 56 per cent of these companies reporting the introduction of a product innovation in 2021.
“In 2021, while only eight per cent of young companies introduced market novelties overall, the figure is 15 per cent among young green enterprises,” reveals Eline Schoonjans, a researcher in ZEW’s “Economics of Innovation and Industrial Dynamics” Unit. “Moreover, the study highlights that companies that have adopted numerous sustainability measures from the start are more likely to engage in innovation activities.”
Only 12 per cent of young companies are classified as ‘green’
The first five questions of the panel explicitly address the sustainability strategies that companies use to improve their environmental footprint. The subsequent five questions aim to assess the environmental effects on the customer side. The most prevalent sustainable improvement reported is the reduction of energy consumption. Since their inception, 37 per cent of these companies have successfully cut their own energy consumption. Moreover, approximately 40 per cent of the companies have products or services that contribute to lowering the energy consumption of their customers.
To quantitatively measure and compare the sustainability of these young enterprises, the measures implemented to improve their own environmental impact and the environmental impact of their customers are aggregated into a sustainability score. Significant improvements receive double weighting, while minor improvements are assigned single weighting. The maximum attainable sustainability score is 20. Young companies that achieve a sustainability score of at least 11 in the survey are classified as ‘green’ enterprises. Accordingly, only 12 per cent of the participating companies have been categorised as such.
Innovation activities by green companies
In 2021, nearly half of the green companies implemented product innovations. This puts green enterprises, with their concrete measures to improve sustainability, 14 percentage points ahead of all companies in the 2018 to 2020 start-up cohorts. Over one-third of green high-tech companies in the manufacturing sector (advanced technology and high-quality technology) introduced market novelties in 2021. Furthermore, almost half of the green companies in the technology-oriented service and software sector are actively involved in research and development activities.
About the IAB/ZEW Start-up Panel
The IAB/ZEW Start-up Panel is a representative data sample providing information on business start-ups and new companies in Germany. The data serve as a suitable basis for describing and analysing the structure and development of start-ups. In terms of both sample size and the level of detail provided, the IAB/ZEW Start-up Panel is a unique data source and has already been used by a great number of publications and projects as a source of background information on the business situation and dynamics as well as on the development of funding instruments for start-ups in Germany.
