Policies to drive eco-innovation

With funding from the Dutch government, EIM Business and Policy Research has just published the results of a study into eco-innovations and their revenue models.

The study investigates the kinds of revenue models SMEs use to scale up their eco-innovations successfully, and aims to uncover policy opportunities to stimulate eco-innovation. Expert interviews and case studies on a number of eco-innovative SMEs formed the basis of their analysis.

According to the companies involved in the study, the most significant barriers to financing eco-innovations are all external: financing is often not tailored to the small-scale needs of SMEs, potential financers are not well engaged with innovative industries, and uncertainty towards government regulation prevents investment.

The study makes a number of recommendations for better improving the funding framework for eco-innovative SMEs:

  • Stable regulation: taxes and subsidies are seen as key drivers of eco-innovation and investors must have confidence in their longevity.
  • Ambitious environmental targets: these increase demand for new and improved solutions.
  • National and local governments should act as launching customers, and can also foster a social basis for eco-innovations.

The most important measure, however, is the development of flexible risk-sharing instruments which can engage more financial actors and bring eco-innovations to market. The report states that small scale risk-sharing financing instruments, in terms of debt financing and financing from business angels, should therefore be the main focus in stimulating eco-innovators.

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