Future-Proofing Businesses

by | May 9, 2024

Future State

A reinvigorated economic base

Global demand is rapidly shifting toward climate-friendly products and processes. Businesses of all types and sizes will be required to create greener products and use greener processes, whether interested in capturing markets in new value chains and new industries or simply to maintain current positions. This change in corporate behavior is being driven by both consumer demand and policy pressure and will shake up what may have been stable supply chains and markets.

SEC regulations adopted in early 2024 require publicly traded firms to disclose to investors their climate-related risks and governance practices. California and the E.U. have passed laws with similar effects; these are likely only the first examples of state-level climate disclosure policies and the use of trade policy to drive decarbonization.

These policies should not, however, be seen as the only or even the main driver of corporate action. They are accelerants of trends already underway due to shifting consumer demand. Business leaders are laying the foundation for a different future: an Accenture survey of CEOs found that over 60% are launching new sustainable products or services, over 40% are increasing R&D on sustainable innovation, and over 30% are taking proactive steps to reduce scope 3 emissionsThe EPA defines 3 scopes of carbon emissions. Scope 1: Direct emissions from an organization’s owned or controlled sources. Scope 2: Indirect emissions from purchased electricity. Scope 3: Other indirect emissions from the organization’s activities. As more and more firms set decarbonization goals, growing skepticism of carbon offsetsCarbon Offsets: Certificates linked to activities that lower atmospheric carbon dioxide (CO2) that can be purchased to offset an individual’s or group’s own carbon emissions with CO2 reductions elsewhere. is changing how corporations must pursue those goals. There is a trend away from offsetting and toward what the World Economic Forum calls “insetting,” or “doing more good rather than doing less bad within a value chain.” This means that the next era of corporate decarbonization commitments should be viewed very differently from those of the previous era; these commitments will result in deeper changes to products and processes, including throughout supply chains.

Shifts in corporate and government behavior will translate to pressures on suppliers, including small to mid-sized manufacturers. Firms will need to be able to quickly develop the capabilities to quantify their carbon emissions, track changes precisely over time, and implement changes in practices, processes and products to measurably decrease embodied carbon. Few smaller firms have these capabilities.

The future includes opportunities and risks for incumbent firms and startups alike. Investors clearly believe that there are massive opportunities for startups. Global venture capital investment in cleantech firms grew from $1 billion in 2018 to over $12 billion in 2022, of which $7 billion was in the U.S. While venture capital fell significantly in 2023, the portion of all startup investment devoted to climate investment increased. Unlike in the 2008-2009 era, cleantech market opportunities are expected to be real and enduring.

Proactive and innovative firms will be able to seize new opportunities. If Northeast Ohio’s mid-sized firms and entrepreneurs anticipate and are supported during this change, there is huge potential for retaining and creating quality jobs — and thus extending opportunities to workers who were left out or left behind in the last economic era. In three years, there could be 10 new Northeast Ohio cleantech startups signing their first major commercial contracts or securing major federal grants and graduating from accelerators or university labs. There could be 100 mid-sized businesses taking aggressive steps to adopt new processes and re-engineer their products, not just to survive in their current supply chains but to shift into new ones. The most exciting companies and the most sought-after jobs in Northeast Ohio could soon be in green businesses.

By 2030 businesses of all types will need to quantify and decrease their carbon emissions through changes in products and processes. Developing these capabilities will be just as hard as it was for businesses to develop digital capabilities (e.g., smart manufacturingSmart Manufacturing: A broad category of manufacturing that employs computer-integrated manufacturing, high levels of adaptability, rapid design changes, digital information technology, and more flexible technical workforce training. It’s part of the ongoing industrial revolution based on cyberphysical production systems.) over the past two decades. Economic development organizations will need to become sophisticated consultants on these matters. And the most sophisticated regions will have dynamic networks of corporate leaders, manufacturers and entrepreneurs that aid one another’s evolution by sharing market insights and engaging in joint problem-solving.

Key Actors

  • Manufacturing product and process innovation organizations
  • Cleantech incubators and accelerators
  • Small business support organizations
  • Chambers and business leadership groups
  • University innovation and commercialization offices

Strategy Guidance

Tier 1: Fundamentals

Quickly inject resources into local business support systems

Tier 2: Cutting Edge

Develop new offerings to enable innovation and growth

Tier 3: Globally Distinctive

Invest heavily in specific technology areas or industry clusters

Get the Practical Guide to the Green Economy

Future-proofing businesses is one strategic imperative for growing the everyone economy in a green future. Download The Practical Guide to the Green Economy below and read on for more insights, ideas and imperatives from the Fund for Our Economic Future.

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