## **<u>Box 2. Local innovation companies show what is possible</u>**

In principle, the home-grown green ideas of innovative local companies to reduce costs, motivate workers and shape the business environment they operate in should make it easier for their peers in comparable developing country settings to emulate such approaches. Leading examples include:

- **_Equity Bank agricultural financial products, Nairobi, Kenya:_** worked with mobile telecoms provider Safaricom to create a mobile banking system on its M-Pesa platform, offering credit for inputs and supporting farmers throughout the value chain of production, transport, processing and marketing; and has formed an alliance with groups such as The International Fund for Agricultural Development to reduce its risks when lending to smallholders

- **_Broad Group air conditions and construction, Changsha, China:_** adapted non-electric air conditioning technology from US, Japan, Korea and Europe to use the waste heat from buildings to power its machines, with customizable pre-fabricated construction modules reducing electricity consumption up to 80%, using fewer materials and creating less waste; has also developed a miniature device for measuring air pollution that can fit into mobile phones

- **_Natura organic cosmetics, Sao Paulo, Brazil_** : worked transparently with rural communities and local governments to tap traditional knowledge about how to extract raw materials sustainably (receiving the Forest Stewardship Council certificate for these raw materials), in turn educating suppliers in sustainable sourcing and production practices (including re-use, refill and recycling of packaging and adoption of a new  ̳green‘ plastic derived from sugar cane which is eventually expected to reduce GHG emissions by +70%); also gives bonuses to workers who find ways to reduced the firm‘s impact on the environment

- **_Jain irrigation systems, Jalgaon, India_** : adapted existing drip irrigation systems specifically to meet the needs of smallholder farmers, and works closely with customers to teach  ̳precision farming‘ (which optimizes the balance between fertilizers, pesticides, water and energy to increase output); and uses dance and song to explain the benefits of drip irrigation to farmers who can‘t read

Source: World Economic Forum (2011). WEF and the Boston Consulting Group partnered to review more than 1,000 emerging market-based companies with annual sales ranging from $25 million to $5 billion, coupled with interviews of almost 200 business executives, to identify 16 showcase companies in light of sustainability, innovation and scalability criteria.

Enterprise surveys are another potential source of systematic information on the extent and breadth of such local green innovations. However, most national industrial census efforts and complementary internationally-comparable enterprise surveys have not yet systematically been collecting information on green product, process, organizational and marketing innovations.

# **3 FOSTERING INNOVATION – POLICIES FOR PROMOTING FRONTIER AND CATCH-UP INNOVATIONS AND FOR DEVELOPING ABSORPTIVE CAPACITY**

As with all other technologies, market failures in the creation, dissemination and absorption of knowledge by firms provide a rationale for public policies addressing the development and commercialization of green technologies. In addition, green technologies are also characterized by environmental externalities. The combination of knowledge and environmental market failures require combined policy responses and 12