Sustainable business

Three areas still lacking incentives to be green

Digital technology, the patent system and building with wood: companies could be more incentivised to behave sustainably in these areas. Photo: Shutterstock

Digital technology, the patent system and building with wood: companies could be more incentivised to behave sustainably in these areas. Photo: Shutterstock

In recent years, governments in Europe have done more and more to incentivise companies to do their work sustainably. But some areas have slipped through the cracks--in this article we look at three of these in particular.

There are several (top-down) ways to nudge companies in new and eco-friendlier directions: regulation, penalties and funding opportunities come quickly to mind. Just for instance: gas heating has been banned in new buildings in Luxembourg; a new EU directive requires the measurement and reporting of biodiversity impacts; and government funding is on offer for businesses wishing to surpass EU environmental protection standards (or, indeed, to conduct other green initiatives).

All of the above, of course, are part of the great and slow movement towards mitigating the climate disaster. However, even in 2023, some areas have been overlooked.

Digital technology

Over the last couple of decades, many (if not all) companies have turned to digital technology to advance their business in some way. Sylvain Chery, cofounder of Agile Partner and specialist in advising companies on their digital carbon footprint, comments that technology has indeed been part of the solution. “But… it’s also part of the problem,” he says.

He cites power consumption, CO2 emissions and the waste created by the world of digital gadgetry as examples. “[The volume of waste] is not only massive, but it’s also growing very, very rapidly.” With the digital transformation continuing to feed on IT solutions and deeper levels of connectivity, he adds, the torrent of hardware and resources needed to meet those demands is also soaring.

Among the worst culprits are personal devices like phones and laptops. “We tend to focus, also in the media, on big data centres,” explains Chery, “which of course consume a lot of energy. But for one server in the world, there are about 500 user devices.” And where the devices have the biggest environmental impact is in their manufacture; thus, by the time they’re sold, the damage is already done.

One treatment--for now a suggestion rather than a requirement--is to prolong the lifetimes of these devices. “This is also beneficial from an economic point of view,” says Chery, who recommends keeping your hardware in use for five years instead of the often-foreseen three. Companies can also sell or give old devices to organisations that will refurbish them for a second life, and the other side of that coin is naturally to buy used devices. In fact, Chery says, regulation on public procurement in France already stipulates that 20% of digital equipment bought should be secondhand.

Speaking of such regulation, Chery comments that it doesn’t yet exist in Luxembourg but that it’s coming--and soon. “I strongly believe that there are some regulations in the European pipeline,” he says.

Besides devices, Chery adds, organisations should worry about how much energy digital services require to run, both on the provider and the user side. Regulation in France already requires internet service providers to inform users how much greenhouse gas emissions are linked to their internet consumption.

Patent laws

“Basically, [Europe’s patent] system applies something that we call the ‘principle of technology neutrality’--so it doesn’t really care whether a technology is green or non-green.”

So says Martin Stierle, associate professor of intellectual property law at the University of Luxembourg. He explains that the European patent system currently creates incentives based (merely) on general requirements of patentability, which mostly means that the invention must be new. In other words, from the perspective of gaining a competitive edge via the exclusivity of a patent, people have no reason not to pursue so-called brown technologies.

In that context, Stierle is currently undertaking research on how the patent system could be adjusted to better prioritise sustainable technologies. “It’s a very complex topic,” he explains. “There haven’t been many policy initiatives… there has been plenty of literature in the last ten years, but no breakthrough.”

The most obvious suggestion is to simply stop granting patents for brown technologies, except this would incur legal problems on an international level. Another idea is to streamline the process for applicants with sustainable inventions, but--besides also calling up legal questions--this wouldn’t necessary result in an incentive. Such a scheme has already been tried in the US, Stierle says, a fast-track option for green technologies. The problem is that there are strategic reasons why you might not want your patent granted so quickly, since once it’s processed it will be published and thus disclosed to competitors.

Still another possibility is to award stronger and broader protection for patents that are green. However, this churns up yet another problem: steering into exclusivity as an incentive, the researcher explains, somewhat misses the point when it comes to sustainable inventions. After all, the larger goal is for humanity to fight climate change together. Thus, Stierle offers a more nuanced suggestion: incentivise companies to share their new technologies with competitors by--if they do--offering to reduce patent fees.

Another possibility relates to extending patenting terms, e.g. to pharmaceutical companies who could then get more out of their licensing fee. That might inspire startups in the green medtech field, Stierle says.

Stierle’s project, funded in part by the National Research Fund (FNR), will last four years. Beyond that, change might not happen quickly. “The European patent system is like a very slow ship on the ocean,” Stierle comments, explaining that it’s not part of the EU legal system but rather an international organisation; all the member states therefore have to act together to change the legal framework. This has happened only once since the 1970s.

For now, the idea is to demonstrate that a greener patent system is possible. “It’s rather a long-term goal, but I think that patent organisations will care about the topic,” says Stierle. He points out that the patent system has been under scrutiny lately, given the movement towards information-sharing and even abolishing patents altogether.

In that context, bringing patent law into the sustainability movement fold would be significant. “I think if we can prove that the patent system can support sustainability goals in a substantial way,” he concludes, “then that will be very interesting for patent offices on a national level, on a European level, on an international level… to show we can contribute to one of the major challenges of [humankind] today.”

Wood as a building material

In the construction sector concrete, steel and concrete--well known detriments to the environment--are still the norm.

Indeed, steel production involves the heating of iron ore to some 1,500°C via the burning of fossil fuels, while the creation of cement (an ingredient in concrete) involves a chemical reaction that releases CO2. Taken together with building operations, it has been estimated that the construction industry accounts for 40% of carbon emissions worldwide, of which its materials make up some 13%.

“Why are companies still using concrete?” asks François Cordier, CEO of Leko Labs, a company that has developed both the materials and the techniques for building with wood. The simplest and fastest way to decarbonise construction is simply to stop using concrete, he says--but this isn’t happening.

“Because,” he answers his own question, “it’s not as expensive as it should be.” Companies that build with concrete don’t pay for the pollution that they create, he reasons, adding that cost is what ultimately determines a company’s decisions. The goal of Leko Labs is thus to find ways to make wood cheaper than concrete as a building material, and Cordier cites the signing of CLE, a large contractor in Luxembourg, as a sign of success in this regard. “[CLE has gone with Leko] not because it’s green, but because it’s cheaper than concrete,” he says.

Sahar Azari and Stephanie Law, both of the architecture firm Saharchitects, introduce another factor to this discussion. There are no real stumbling blocks on the regulatory or skills fronts, they report, when it comes to building with wood; nor is price always a problem.

Rather, says Azari: “It’s mainly the culture.”

Law adds: “We’ve run into a lot of clients that are like: ‘Oh, no--wood’s going to fall apart; it’s going to rot.’” (It won’t, she says, as long as the structure is designed and built properly.)

In Luxembourg and Germany, the architects say, the culture and history are built around masonry, as opposed to a place like Austria where builders have been using wood for centuries.

One existing incentive is the Lenoz certificate (Lëtzebuerger Nohaltegkeets-Zertifizéierung or “Luxembourg sustainability certification”). Buildings that have one qualify for a subsidy from the housing ministry, which could induce designers and buyers to choose wood. However, the certification is optional and, according to Azari, not simple to get. “It’s a heavy process,” she explains. “There are lots of criteria; it also limits your choices a lot and makes the building more expensive.” Therefore, the Lenoz certification is more appropriate for larger projects, she says, adding that even those clients tend to ask for it not because of the subsidy but for marketing purposes.