Three Key Takeaways from the Lux Forum Boston

In May 2023, Lux held its Boston forum “The New Road Map for Industrial Decarbonization.” This event brought together innovation leaders and executives across a diverse range of value chains, all tasked with managing hard-to-decarbonize industrial processes including steel cement chemicals. The goal was to help unpack where things stand a year after passage of the Inflation Reduction Act and build strategies to deliver on the promise of a sustainable economy. Three key takeaways for innovation leaders from the event:

1. Policy forecasting is a crucial skill set: It’s clear by now that policy is at the heart of the rapidly changing industrial movement toward decarbonization. Despite that, we commonly encounter a sense of helplessness when it comes to predicting the future of policy. Predicting politics might be a hopeless task, but it is possible to make long-term predictions about the global diffusion of policy. The Lux Policy Compass for Industrial Companies focuses on the costs and impacts of policy, the credibility of those implementing it, and the historic patterns of policy diffusion to guide innovators on the direction of policy momentum. Without a tool like this, you’ll be navigating blind as you structure your innovation strategy.
2. Decarbonization requires a risk management approach: It’s easy to think about decarbonization as a simple cost-benefit analysis: When the cost of decarbonizing falls below the expected cost of emitting, that’s the time to act. The reality is that decarbonization is a slow-moving and highly uncertain process from a technological perspective, and the price of carbon emissions can change quickly. Going all in on a single technology or strategy doesn’t reduce your overall risk, it simply changes the carbon pricing to technology risk. To truly hedge against risk, you need a multitechnology strategy that seeks to preempt the market and create favorable conditions for deployment before you are forced to decarbonize by the hand of regulation.
3. Business models are just as important as technological developments in deploying decarbonization technologies: Again, the focus on costs and regulations can lead companies astray. The history of technology deployment reveals that factors like end-user expertise and fit with existing business models are just as important predictors of scale up as is cost. Sustainable innovations are inherently flexible manufacturing approaches: They have a unique set of properties in terms of inputs and outputs, scale of production, and timing. Leveraging these attributes requires business model innovation — that’s something that can’t be created by regulation. Companies need to experiment with these new business models now to be ready for a sustainable future.