Rising energy costs by far most important driver for companies’ eco-innovation – survey

Rising energy and raw material costs are the most important reason German companies introduce environmentally friendly innovations, according to a survey by state development bank KfW. Of all companies that implemented innovations between 2021 and 2023, 67 percent cited these as a motive, well ahead of all other factors.

KfW said environmental innovations make a significant contribution to the economy as a whole by reducing environmental impact, mitigating climate change and counteracting resource scarcity. 

Thirty-eight percent of companies pointed to improving their reputation or image, while 34 percent cited internal company targets or industry standards. Legal requirements and regulation were named by 32 percent, whereas customer demand for green innovations ranked lower at 17 percent, and financial subsidies were cited by just 16 percent.

“In addition to cost and price pressures as drivers of innovation, the findings highlight the significant relevance of environmental regulations and legal requirements for product innovations in the environmental sector,” KfW said. The bank added that regulations and product standards increase the pressure to adapt, reduce investment and market risks, and strengthen demand for innovative, environmentally friendly products.

The survey revealed significant differences depending on the type of innovation. Among firms that introduced process innovations such as more energy-efficient production methods, 78 percent cited rising energy and raw material costs as their motive, while just 4 percent pointed to customer demand. Among companies with product innovations, 48 percent cited cost pressures, but 45 percent pointed to legal requirements and regulation, and 34 percent to customer demand.