What drives companies to innovate?

Research by MRU business faculty into greener shipping fuels yields insights

Peter GlennMount Royal University | Posted: May 30, 2023

Dr. Mauricio Latapí, PhD, an assistant professor in general management with Mount Royal University’s Bissett School of Business.

Dr. Mauricio Latapí, PhD, is an assistant professor in general management at MRU.

What influences a company to adopt, or avoid, green technologies?

Dr. Mauricio Latapí, PhD, an assistant professor in general management with Mount Royal University’s Bissett School of Business, is part of a team studying the Nordic shipping industry and what factors might convince individual companies, many of them decades old and set in their ways, to switch to greener fuels.

The research potentially offers insights into how companies in a wide variety of industries make decisions about innovation and investing in sustainable technologies.

Shipping handles 90 per cent of the global trade market, including the consumer goods sold online and in stores and a large component of the food on supermarket shelves. Those ships make up a lot of marine traffic and are run by heavy oil fuels, making up about three per cent of the planet’s greenhouse gasses. If industries are ranked by emissions, shipping is the sixth highest.

Although the Paris Agreement on climate does not cover shipping, since 2018 the International Marine Organization, the European Union and other regulatory bodies have taken steps to push for change through a variety of pilot projects and new technologies.

Internal and external influences towards (and against) innovation

As part of a postdoctoral project at the University of Iceland, Latapí joined a group using interviews, stakeholder workshops, literature reviews and the evaluation of potential policies through research-specific software to study the large-scale adoption of hydrogen fuel cells by Nordic shipping companies. The project, initiated by a consortium of six partners representing industry and academia, involved multiple teams. The objective was to “design” a ferry that runs on hydrogen fuel cells. In studying the business case for such a ferry, Latapí’s group focused on drivers and barriers to adopting innovative change.

Internal drivers can include employees and leaders who are pushing a company to use innovative technologies to reduce emissions.

“If you are delivering products for IKEA, for example, and IKEA says, ‘I really want my products to be delivered with less emissions, what can you offer me?’ That’s a motivation to get into new technologies and start thinking about it,” Latapí says.

External drivers include policies and regulations imposed on companies by government and agencies, and also funding made available to help companies adopt greener technologies.

Companies also face barriers to improved sustainability, the biggest being cost. Greener fuels and the technological changes needed to incorporate them are expensive. Employee perspectives can act as another barrier, whether they are concerns about the safety of hydrogen or the worries over employment by the people who run and maintain ships.

Shipping companies also tend to be very traditional and resistant to change, often inflexible in their organization and decision making, limiting employees’ ability to try new technologies. A current lack of regulation in this space leaves companies not knowing what the new rules will be and where to invest, and therefore risk-averse.

“The regulations are coming, but they are not there. A company may want to try hydrogen but they don’t know yet what the standards are. In that case they may not risk it because they do not know what’s going to happen.”

The researchers assembled what they called policy packages of varying “ambition” to achieve emissions reductions. Modelling those packages yielded interesting results and conclusions.

One was that Nordic countries can achieve zero-emission shipping by 2040 to 2045, but only if they have “high-ambition” policies to do it. However, the modelling suggested that rather than the hydrogen fuel cells researchers had initially focused on, several shifts are needed: the first to methanol and the second to ammonia (which is derived from hydrogen and produces low greenhouse-gas emissions).

“It is a hydrogen-derived fuel, but it is easier to handle,” Latapí explains. “You don’t have to build as much infrastructure. The technology already exists and there are already some engines being tested for ammonia, so it’s faster and cheaper. It’s not what we were expecting, but it worked out.”

Any shift to greener fuel, however, would also require a large increase in renewable electricity, and that electricity will be in high demand from any number of sources. This in itself could prove a further barrier to change.

A second conclusion is that policies around shipping benefiting the environment should foster transformational decisions and change in that industry, motivating companies to make those changes with funding.

“They should see there is a prize at the end of the tunnel,” Latapí says. “Not only the environmental benefits, but also the business case. If you do this right now, maybe you will not see gains in the next 10 years, but at that point the big cargo shippers are going to ask you to transport their things with zero emissions.

“It’s better to do it now than later.”

Latapí’s research into shipping and innovation will continue for the next few years, starting with a trip in August to the World Maritime University in Malmö, Sweden, before shifting more into general transportation.

Read more about the Bachelor of Business Administration in general management at MRU.