Published on Let's Talk Development

When companies talk green, do they deliver?

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Laptop with CO2 reducing icon. | © shutterstock.com The growing adoption of green technologies in emerging markets presents an opportunity for targeted support. | © shutterstock.com

In December 2023, India's largest cement manufacturer commissioned a new facility incorporating waste-heat recovery systems and alternative fuel technology to reduce carbon emissions in cement production—a sector that accounts for about 8% of global CO2 emissions. This example highlights a broader transformation in how emerging market firms are adopting green technologies to reduce their carbon footprint.

A new World Bank study uses textual analyses to track green technology adoption, analyzing over 10,000 firms' earnings calls across 79 countries from 2012 through 2021. The study links this data with patents, carbon emissions, and firm relationships, providing evidence on the spread of green technologies. Key technologies identified include biofuels, geothermal energy, LED technology, drones, and hybrid/electric vehicles, primarily driven by the construction, energy, and transportation sectors.

The study highlights the growing importance of green technologies since 2019, with a significant increase in mentions during earnings calls, especially among large firms. It also examines the role of firm-to-firm linkages in technology diffusion, finding that suppliers and buyers of firms mentioning green technologies are more likely to adopt these technologies, particularly when linked to high-emission firms that have reduced their carbon footprint.
 

Green Technologies Are Spreading Rapidly Across Firms and Countries

The adoption of green technologies has accelerated significantly since 2019. The share of quarterly earnings calls—conference calls and presentations in which company executives explain their strategy and performance to investors and analysts—mentioning these technologies nearly doubled from 6% to 10%, while the percentage of firms discussing them increased from 12% to 18%. These aren't just small players: firms mentioning green technologies now represent 35% of total sales in our sample, up from 20% in 2019.


The manufacturing and utilities sectors are leading this transformation, accounting for about 85% of all green technology discussions. Construction materials, carbon-capture technology, hybrid/electric vehicles, and wind turbines emerge as the key technologies driving this trend. Initially concentrated in high-income countries and large developing economies like China, India, Russia, and Brazil, green technologies are now showing increased adoption across other emerging economies in Asia, Latin America, and the Middle East and North Africa.


The Evidence Shows Real Impact

When high-emission firms begin discussing green technologies in their earnings calls, they subsequently show real reductions in carbon emissions, suggesting that these discussions reflect actual investments. Our analysis shows that high-emission firms reduce their carbon emissions by about 21% after adopting green technologies. This effect is even larger—nearly 38%—for firms that started with the highest emissions (those above the 90th percentile). This pattern suggests that green technology adoption has the biggest impact where it matters the most: among the heaviest emitters.
 

Business Networks Drive Technology Diffusion

Green technologies spread primarily through business relationships. Companies are significantly more likely to adopt these technologies when their suppliers or customers are already using them. This effect is particularly strong when they link to high-emission firms that have successfully reduced their carbon footprint.
 

A Policy Agenda for Accelerating Green Technology Adoption

Our research suggests three key areas for policy action:

  1. Supporting Business Networks: Firm-level evidence collected by the World Bank shows that firms learn about and adopt green technologies through their business relationships. Policies that facilitate such connections could speed up adoption. This requires creating incentive structures that encourage knowledge sharing and technology transfer across business ecosystems.
  2. Targeting High-Emission Firms: These firms not only show the largest emissions reductions after adoption but also influence their business partners to adopt similar technologies. Policymakers should design targeted interventions that provide both financial and technical support to these firms, recognizing their potential to drive broader systemic change.
  3. Leveraging Opportunities in Emerging Markets: The growing adoption of green technologies in developing countries suggests potential for targeted support for technology transfer and adoption. Strategies must be tailored to local contexts, recognizing the unique challenges and opportunities in different economic environments.
     

Implications for Policymakers

The findings of this study have important implications for policymakers seeking to accelerate the adoption of green technologies. By supporting business networks and facilitating technology transfer, policymakers can help create an environment conducive to the widespread adoption of green technologies. Focusing on high-emission firms for financial and technical support can have a significant impact on reducing overall carbon emissions, as these firms are more likely to influence their business partners to adopt similar technologies.

The growing adoption of green technologies in emerging markets presents an opportunity for targeted support. Policymakers should develop strategies tailored to the unique challenges and opportunities in different economic environments, recognizing the potential for significant emissions reductions in these regions.
 

Conclusion

The transition to greener production methods is essential for achieving climate goals and supporting economic development. The evidence presented in this study underscores the importance of green technology adoption and the role of business networks in driving this transformation. By implementing policies that strengthen business relationships and support technology adoption among high-emission firms, policymakers can accelerate the transition to a more sustainable future.


Paulo Bastos

Senior Economist, Development Research Group

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