The surprising impact of innovation on reducing climate change

New research by the Department of Management’s Dr Fred A. Yamoah and colleagues explores the relationship between innovation input, governance and carbon dioxide emissions.

Picture of a wind farm

There is no doubt that the humanitarian and economic impact of climate change is a matter for global concern. However, prior research tells us that it is emerging and developing economies that are likely to be hit hardest by the impact of global warming.

In their 2019 report, the Intergovernmental Panel on Climate Change (IPCC) found that emerging and developing economies, with their heavy reliance on agriculture, forestry and tourism, were more at risk from the adverse impact of climate change than more developed economies. Indeed, the IPCC found that every one-degree centigrade increase in temperature would lead to a 1.3% drop in economic growth in an emerging economy.

What role does innovation play in the fight against climate change?

Typically, the fate of countries in this position has been viewed somewhat fatalistically, with little known about what can be done to mitigate the damage caused by the poor climate choices of more developed countries. However, since innovative technologies are known to have a positive impact on climate change factors by conserving energy and reducing emissions, we wanted to know whether increased innovation input could support developing economies in the fight against climate change.

Our study involved an analysis of data from the World Bank database on 29 emerging countries over the period from 1990 to 2018. My colleagues Godfred Adjapong Afrifa, Gloria Appiah (both Kent Business School), Ishmael Tingbani (Bournemouth University) and I examined whether investment in cutting-edge technologies could help address climate change problems in emerging economies, and how this relationship is supported or mitigated by governance factors.

The impact of governance

Why is it important to consider governance alongside innovation and climate change? First of all, it is good for business: stakeholder theory tells us that organisations that please their stakeholders by following ethical norms of fairness, trustworthiness and respect are likely to see improved overall performance in the long term.

When it comes to climate change targets, governments and international governing bodies such as the EU or ECOWAS are among the most critical stakeholders, as they are more likely to take a long term view and possess the necessary regulatory powers to ensure best practices are upheld.

How innovation benefits emerging economies

The introduction of innovative technologies and practices can benefit emerging economies in a number of ways. For farmers, genetic technologies can develop resilient crops that adapt to environmental challenges in agriculture. New technologies also typically conserve energy and reduce harmful fuel emissions.

Looking at the data, our results suggest that emerging countries with high innovative competencies reduce climate change problems by approximately 26.8%, with a 10% increase in cutting-edge technology.

While these findings show the dramatic impact of innovation on mitigating the negative effects climate change, it is important to note that the positive results were moderated by governance factors, as the quality of governance influences countries’ investment in innovative technologies towards curbing environmental damage.

Contrary to the typically deterministic view of climate change, our results suggest that emerging economies’ innovation efforts could have a significant impact on national and global success in the fight against climate change.

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COVID-19 induced travel restrictions are not enough to mitigate crises like climate change. Could a circular economy be the answer?

Research by the Department of Management’s Dr Fred Yamoah and colleagues points to a new way to rebuild the global economy in the wake of the coronavirus pandemic.

Image of a reuse logo

There is no doubt that COVID-19 is first and foremost a human tragedy, resulting in a massive health crisis and huge economic loss.

While the impact on life as we know it has been unthinkable, a side effect of the way of life forced upon us by the pandemic is an unprecedented reduction in global carbon dioxide emissions, which are projected to decline by 8%. If achieved, this will be the most substantial reduction ever recorded, six times larger than the milestone reached during the 2009 financial crisis.

However, these changes should not be misconstrued as a climate triumph. They are not due to the right decisions from governments, but to a temporary status of lockdown that will not linger on forever; economies will need to rebuild, so we can expect a surge in emissions in the future. Indeed, the relatively modest reduction in emissions prompted by the COVID-19 pandemic has proven that zero-emissions cannot be attained based on reduced travel alone; structural changes in the economy will be needed to meet this target.

The case for a circular economy

Before coronavirus prompted this dramatic shift in our way of life, it seemed that the world had been waking up to the need for change to protect our environment. The linear model of our industrial economy – taking resources, making products from them and disposing of the product at the end of its life – jeopardizes the limits of our planet’s resource supply. Girling (2011) found that around 90% of the raw materials used in manufacturing become waste before the final product leaves the production plant, while 80% of products manufactured are disposed of within the first six months of their life. Similarly, Hoornweg and Bhada-Tata (2012) reported that around 1.3 billion tonnes of solid waste is generated by cities across the globe, which may grow to 2.2. billion tonnes by 2025.

Against this backdrop, the search for an industrial economic model that satisfies the multiple roles of decoupling economic growth from resource consumption, waste management and wealth creation, has heightened interests in concepts about circular economy.

What is circular economy?

Circular economy emphasises environmentally conscious manufacturing and product recovery, the avoidance of unintended ecological degradation and a shift in focus to a ‘cradle-to-cradle’ life cycle for products.

In our current situation, there has never been a better time to consider how the principles of circular economy could be translated into reality when the global economy begins to recover. Strategies to combat climate change could include:

  • material recirculation (more high-value recycling, less primary material production)
  • product material efficiency (improved production process, reuse of components and designing products with fewer materials)
  • circular business models (higher utilisation and longer lifetime of products through design for durability and disassembly, utilisation of long-lasting materials, improved maintenance and remanufacturing).

Building back better

A circular economy could also act as a vehicle for crafting more resilient economies. The pandemic has forced a rethink of the way our global economy operates, revealing the inability of the dominant economic model to respond to unplanned shocks and crises. The lockdown and border restrictions have reduced employment and heightened the risk of food insecurity for millions.

To prevent a repeat of the events of 2020, it is necessary to devise long-term risk-mitigation and sustainable fiscal thinking, moving away from the current focus on profits and disproportionate economic growth. Circular economy concerns optimised cycles: products are designed for longevity and optimised for a cycle of reuse that renders them easier to handle and transform. Future innovations under this model would focus on the general well-being of the populace, alongside boosting the market and competitiveness.

This economic model would also support the achievement of social inclusion objectives, for example by redistributing surplus food from the consumer goods supply chain to the local community.

The benefits of a circular economy are therefore obvious in that it strives for three wins in terms of social, environmental and economic impact. The pandemic has instigated a focus on the importance of local manufacturing for a resilient economy; fostered behavioural change in consumers; triggered the need for diversification and circularity of supply chains and evinced the power of public policy for tackling urgent socio-economic crises.

Governments are recognising the need for national-level circular economy policies in many aspects, such as:

  • reducing over-reliance on other manufacturing countries for essential goods
  • intensive research into bio-based materials for the development of biodegradable products
  • legal frameworks for local, regional and national authorities to promote green logistics and waste management regulations which incentivise local production and manufacturing
  • development of compact smart cities for effective mobility.

Post COVID-19 investments needed to accelerate towards more resilient, low carbon and circular economies should be integrated into the stimulus packages for economic recovery being promised by governments, since the shortcomings in the dominant linear economic model are now recognised and the gaps to be closed are known. The question is no longer should we build back better, but how.

This blog was adapted from T. Ibn-Mohammed, K.B. Mustapha, J. Godsell, Z. Adamu, K.A. Babatunde, D.D. Akintade, A. Acquaye, H. Fujii, M.M. Ndiaye, F.A. Yamoah, S.C.L. Koh, ‘A critical analysis of the impacts of COVID-19 on the global economy and ecosystems and opportunities for circular economy strategies’ in Resources, Conservation and Recycling, 164. Available at: https://doi.org/10.1016/j.resconrec.2020.105169

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If there is social capital, good Mayors are re-elected

Are the public more likely to re-elect a mayor who invests in long-term development? Yes, if there is social capital. The Department of Management’s Dr Luca Andriani shares the results of his latest research in collaboration with colleagues Alberto Batinti and Andrea Filippetti.

If a mayor is good, she should be re-elected. Prior research tells us that what distinguishes a “good” mayor from a “bad” mayor is the adoption of long-term oriented and transparent municipal fiscal policies. “Good” mayors re-allocate the municipal budget more towards capital investments (rather than current expenditures) and towards property tax, which is more transparent than a surcharge income tax. However, “good” mayors are not always re-elected. In this study, we argue that social capital might be a key reason. In a context with low social capital, municipal long-run fiscal strategy might not be rewarded.

Social capital generally refers to elements of cooperation, reciprocity and mutual trust regulating relations among members of a community. It is generally expressed through the presence of civically engaged citizens preferring leaders and governments that show credible commitments in taking good care of public resources, in acting efficiently and fairly and that adopt long- rather than short-run political economic strategies.

In this study, we look at the Italian context, as this is characterised by a pronounced economic regional disparity between the southern regions recording low economic growth and high unemployment and the more economically advanced northern regions. Italy is also a country with a large disparity of social capital endowment across regions and municipalities for several institutional and historical reasons (Putnam 1993).

Since the late 1990s, Italy has implemented two significant reforms aiming to bring local public institutions closer to the citizens’ needs and preferences: an electoral reform to appoint local governments and mayors and a fiscal reform towards a more federalist system. These changes have been pursued by economically wealthy regions seeking greater autonomy. They were also advocated as remedies to stimulate those administrations in regions that are less developed and efficient.

We test whether the probability of “good” mayors being rewarded, i.e. re-elected, is influenced by the level of social capital endowment existing in the municipality. We investigate this empirically in 6,000 Italian municipalities over the period 2003-2012. We consider the structural dimension of social capital as one referring to the individual’s involvement in associational activities and social networks. This dimension captures citizens’ prosocial behaviour and individuals’ attitude towards planning capacity and forward-looking decision making

Our results show that “good” mayors are more likely to be re-elected in contexts with more social capital. One can speculate that social capital may favour the reallocation of the municipal fiscal budget towards public investment vis-à-vis current expenditures and towards property tax vis-à-vis surcharge income tax, thus enhancing the efficiency and transparency of local public policy.

What does this mean for policy makers?

These results raise important reflections on the implementations of public policies promoting decentralization.

Fiscal federalism theory claims that decentralization improves the ability of local institutions to tailor specific policies aiming to meet citizens’ demands (e.g., DiazSerrano and Rodríguez-Pose, 2015). This gets reflected in the citizens’ satisfaction (e.g. Espasa et al., 2017; Filippetti and Sacchi, 2016). This study qualifies these results, showing that decentralization works relatively well in the presence of high levels of social capital. In social contexts where individuals value forward-looking and transparent fiscal policies, decentralization promotes better public policies and benefits public sector financial performance.

However, this study also advocates that decentralization policies should be coupled with initiatives to improve the capacity of local institutions to stimulate the accumulation of social capital. This could be pursued through two complementary strategies. Firstly, by employing programmes that favour the capacity-building of civic associations, including organizations for environmental, human, democratic rights. Secondly, by enabling these associations to be more involved in local governance. This can be achieved by providing local associations access to formal and informal avenues for participation, engagement and closer monitoring of local public decision-making process.

This blog is based on the following research paper:

Batinti, A. Andriani, L and Filippetti, A (2019) Local Government Fiscal Policy, Social Capital and Electoral Payoff: Evidence across Italian Municipalities. Kyklos 72(4): 503-526

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To trust or not to trust: the role of social media influencers in corporate crisis communications

Dr Benedetta Crisafulli, Lecturer in Marketing, shares the findings from her latest research in collaboration with Professor Jaywant Singh, Dr La Toya Quamina and Dr Melanie Tao Xue.

Zoe Sugg, social media influencer

As anyone with an Instagram account will know, social media influencers (SMIs) play a prominent role in modern day marketing. Over two thirds of multinational brands plan to increase expenditure on influencer marketing within the next few years, with global spending in the area expected to reach $15 billion by 2022. 

Despite the enthusiasm from marketers to partner with SMIs, scholarly evidence on the efficacy of such a practice remains sparse. Is it always wise for brands to employ SMIs to get their message across? What about the role played by SMIs in corporate crisis communications? Our study entitled ‘To trust or not to trust: The impact of social media influencers on the reputation of corporate brands in crisis’ looks into whether brands would be wise to employ SMIs during times of corporate crisis. 

When crisis hits 

Highly negative events such as corporate crises emphasise the ‘bad’ character of big brands, putting their reputation at stake. Whether it’s a potentially harmful ingredient in our make-up, or using our data for profit, crises shake our trust as consumers and can damage our relationship with a brand. 

In this study, we were particularly interested in how a brand’s ingratiation response to the crisis, whereby customers are reminded of the brand’s past goodwillworks in minimising negative responses, and whether the presence of an influencer improves or rather worsens the brand’s efforts. We asked consumers to evaluate a corporate crisis situation and consequent crisis response from the brand alone, or from the brand and an influencer. 

Social media influencers: hindrance or help? 

There is thus far evidence to suggest that SMIs boost consumer engagement with a brand. However, we find that, like salespeople, SMIs can be seen as acting out of their personal financial motives, and solely in the interests of the brand. This is especially the case in the event of corporate crises.  

Far from passively absorbing the marketing content that surrounds them, consumers are often aware of persuasive attempts from brands and actively resist these. From a very young age, consumers develop what is known as persuasion knowledge. Such knowledge allows them to identify and resist persuasive attempts at manipulating their behaviour. Our findings suggest that consumers overwhelmingly interpret the contribution of an influencer in crisis communications as a persuasive tactic of the brand to try and make consumers believe that the crisis is not as bad it seems. Such an attempt iperceived as manipulative, thus rejected. 

What does this mean for influencer marketing?  

Our study suggests that influencer marketing might not be as effective as claimed by previous research and highlights the need to exercise caution in the use of SMIs during crisis communications. Brands, therefore, need to be particularly wary of involving SMIs in any attempts to bolster reputation in crisis communications.  

The study also suggests practical ways in which companies can think of engaging SMIs to support brands during crisesWe find that an effective way for SMIs to support a brand in crisis is by making the genuine, values-driven motives behind the brand-influencer partnership known to consumers. Consumers are more likely to respond positively to messages which are dictated by motives of altruism. 

The citation for this study is Singh, Crisafulli, Quamina & Xue (2020). ‘To trust or not to trust’: The impact of social media influencers on the reputation of corporate brands in crisis. Journal of Business Research (In Press).

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