Governments can do much more to support innovation in the private sector towards sustainability objectives. Procurement must be linked to ambitious goals, argues Professor Mariana Mazzucato (UCL Institute for Innovation and Public Purpose).
Some of our greatest and most pervasive innovations of today are a result of ’mission focused’ innovation funding. They came from the ability to connect science to solving concrete problems-or missions. The internet came from missions to get satellites to communicate more effectively; the GPS was borne of the need for better precision for planes.
Today we have the opportunity to direct innovation in similar problem-solving ways, as bold as the moon shot programme but aimed at today’s social challenges, such as achieving the Sustainable Development Goals (SDGs). These challenges are even more complex than the purely technological feats because they also involve social, behavioural, political and regulatory changes.
A mission approach will help steer investments towards tackling these challenges using a more focused, problem-solving lens.
Missions-whether getting plastic out of the ocean or building carbon-neutral cities-require a strong direction from above: a problem to be solved. But how to solve them needs to remain open, with multiple solutions nurturing bottom-up innovations. Different government levers can be used for this-from taxes, grants, loans and subsidies to challenge prizes and procurement-to crowd-in and galvanise new field-building activity.
In this context, both supplyand demand-side policies are key. Procurement is an example of demand-side policy and must be linked to ambitious goals. Too often procurement stunts innovation as the criteria are too focused on costs and not enough on quality and experimentation.
Taking the role of procurement seriously also means multiplying the innovation budget. While the budget is usually siloed to the department of innovation and industry, by thinking about missions as cross-sectoral and cross-departmental, the purchasing power of government across all departments becomes key.
Mission-oriented approaches require the overhaul of traditional procurement-in terms of sourcing, success metrics and cross-sectoral budgeting. In other words, innovation should not be viewed merely as a subset of spending on small and medium-sized enterprises (SMEs), tech and skills, but as a vital consideration for how all government budgets can be used to drive long-run growth and a transformation of all sectors. This also means changing the relationship between public and private actors: it needs to be less about subsidies and more about conditionalities that require transformation.
Whether it is steel, aerospace or restaurant chains, companies asking for subsidies, guarantees or bailouts should have strong conditions attached to help meet public goals, such as carbon reduction. Using public procurement to incentivise innovation and alignment with strategic industrial aims is not only about an increase in spend but also about helping us direct growth in ways that make it more inclusive and sustainable. It’s about smarter government investment and creating more bang for the buck. We can no longer afford the current state of inertia or adherence to the status quo.
This article was first published on The Economist.