Richard Wells
The Lexington Group

Develop Innovation Culture to Hit Energy Targets

Wed, 02/22/2017 - 15:45

As Mexican industry evolves, the changes required to successfully transition to a sustainable economy will present a challenge. In particular, the lack of an innovation culture will impede national efforts to hit the country’s sustainability goals, says Richard Wells, President of The Lexington Group, a consultancy that advises private and public organizations on sustainability and competitiveness.

Wells says that only a few Mexican enterprises are ahead of the industry in terms of innovation and sustainability. “In general, most of the leading players on the subject continue to be international companies because Mexico’s national enterprises have mostly adopted a passive attitude.”

He advises companies here to look abroad for direction. “Mexico should look at the trends that are revolutionizing how other countries do business, such as the green or the circular economy, and find an adequate solution for its reality. It urgently needs to work on developing and innovating its own technology, rather than importing it.”

The country has the resources but it needs better implementation. “Mexico has the advantage of being populated by incredibly creative people. It just needs to direct that creativity into business and technology development and eradicate the vision of leveraging political advantage to further position companies.”

The push needed to encourage the adaptation of sustainable business strategies received a boost from the electricity tenders which Wells says included a creative and complex mechanism to increase the share of renewables in the country. He would like to see the adoption of more difficult measures. “Personally, I think that the inclusion of a stricter carbon tax would be more effective in pushing renewables growth in the country but I am aware that it is politically complicated to implement the measure because of the industry opposition. On the energy supply side, I consider Mexico’s strategy to be highly creative but it still lacks a demand-side approach to complement its reach.”

The consultancy does, however, consider the Energy Reform a positive and defining element that will contribute to the country’s sustainable development, especially the Energy Transition Law.

To continue on a positive path, policies must consider the transportation, consumption, production and distribution of electricity, as well as smart cities. “Most of the regulations resulting from the Energy Reform are currently aimed at the energy supply side, ignoring the great impact that demand management could have in transforming its whole system into a 21st century economy. So far, there are not enough incentives to transform Mexico into a truly sustainable and competitive economy.”

For companies to prepare for the energy and sustainable challenges ahead, decision-makers must take into account the world’s megatrends in terms of demographics, urbanization, climate change and technological advances, as well as disruptive technologies that could transform the current way of doing business. “In this sense, companies need to start moving to the next level and focus on the development of disruptive technologies such as virtual reality, synthetic biology, robotics and 3-D printing. In general, corporations tend to think the future is an extension of the present but in reality, it will be an entirely different thing.”

According to Wells, Mexico is betting heavily on clean energy generation but without other critical factors that will be necessary in shaping the future of energy, such as storage technologies and local distributed energy. “In the case of private companies, we would like to see energy and sustainability incorporated into their business competitive strategies, rather than being seen exclusively as a cost factor. A sustainability department can be helpful as an internal consultant but it cannot transform the company’s vision and increase its future resilience. Sustainability must be a board-level issue. Companies need to stop thinking about the future as a continuation of the present and start seeing it as a fundamental competitive issue that will drive their fate.”