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Twin transition requires combined effort of the state and the entrepreneurs

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We are facing a global challenge of transforming our technology, economy and society into sustainable ones. Digitalisation is widely believed to help this transformation. But how does this actually work? Estonians are at the forefront of asking – and hopefully answering – this question.

Twinning the digital and the sustainable

Despite – or perhaps because — of the many benefits digitalisation brings, many believe that digitalisation is also the pathway towards a more sustainable society. It reduces material input to industrial processes, simplifies service models, and reduces the need for human input.

However, despite this widespread belief, digitalisation has a material footprint. We cannot disregard that digital infrastructure and all digital solutions, including data production and distribution, account for roughly 10% of global energy consumption and contribute to greenhouse gas emissions at the level of the aviation industry. Although this is “merely” 2-3% of the global emissions, it is still not “green” when we must fight for each metric ton of emissions reduction.

The sweet spot, where digital and sustainable transformation ambitions meet, is often dubbed “twin transition”. However, this twinning of the two fields doesn’t just magically happen. We need to implement these transitions together consciously. For this, much thinking needs to be done and fast.

Mission-oriented public policy

Although we are used to innovation stemming from the competition in the market, it is becoming increasingly clear that public administration in states and cities has a crucial role to play in the twin transition. This is what researchers at Ragnar Nurke Institute of Innovation and Governance at Tallinn University of Technology (TalTech) focus on.

“One of the main ways in which current ambition for twin transition is articulated in our societies is through mission-oriented innovation policies such as the EU Missions,” explains Professor Erkki Karo, director of the institute.

twin transition e-estonia errki

Just like the call to “Let’s put a man on the moon!” by US President Kennedy gave us a plethora of innovations such as the laptop, vacuum cleaner and freeze-dried food, we are expecting the sustainability-oriented EU mission to boost creativity and growth, produce new markets and generally change the way we live.

Yet, several challenges are entrenched in this mission’s establishment and functioning. First, there is a need for politicians and other change agents to legitimise the mission. This is not easy in the context where political opponents, notably populist ones, are ruthlessly exploiting the doubts and uncertainties of such a grand aim.

Need for “agile stability”

Second, the mission must be implemented with public bureaucracies, academia and entrepreneurs. What kind of organisations are required for this task? This question is at the forefront in the recent book “How to Make an Entrepreneurial State. Why Innovation Needs Bureaucracy” by professors Rainer Kattel, Wolfgang Drechsler and Erkki Karo at TalTech. Awarded the prestigious Academy of Management George R. Terry book award (granted annually to the book judged to have made the most outstanding contribution to the global advancement of management knowledge ), the book argues that innovation requires entrepreneurship-like, experimental bureaucracy.

“Yet, this does not mean we should rely exclusively on a start-up mentality in public administration. We still need to provide the public value of stability and predictability. Thus, we suggest that a combination of stable bureaucratic organisations such as ministries and fluid creative organisations such as innovation agencies can create “agile stability” for creating, funding, regulating and procuring innovations,” says Prof. Karo.

Problem-oriented collaboration, co-creation and continuous learning are key qualities for setting up these networks for improved administration. Yet, the more difficult question is understanding the capabilities through which public administrators are able to destabilise and disrupt existing practices and business models. Without these, legacies and entrenched practices may lead to the point made by Richard Nelson, an economist, in his prominent book “The Moon and the Ghetto”: if we are so technologically advanced we can land a man on the moon, why can’t we still solve the problems of the ghetto? Pollution and degradation of our land, sea and air clean being the “ghetto” of current times, and positioning this as the core of the mission is one step closer to harnessing the digital to clean it out.

Creating new business models

These ideas are attempted to put into practice not far from the campus of TalTech, at the offices of Rohetiiger (Green Tiger), a collaboration platform at the forefront of Estonian sustainability thinking. Their Head of Development, Mikk Vainik, has been entrusted with the daunting task of creating a roadmap for the carbon-neutral, biodiversity-improving business models in Estonia. With a background in supporting digital innovation and systemic change at Accelerate Estonia, Mr Vainik is far from being blinded by the digital gospel.

“Digitalisation is just one tool that can create market advantage,” says Mr Vainik. “It would be easy to say that when we have digitalised X number of services, we have also saved Y amount of emissions. But we just don’t have that knowledge.”

Yet, Estonians are bold enough to want to find out. A recent audit commissioned by the Ministry of Economic Affairs and Communications showed that digitalising the public sphere involves considerable material in- and throughput. For example, just the laptops that Estonian civil servants use over their 5-6 years lifespan amount to an equivalent of more than 5000 diesel cars running constantly for a year. We are not even talking about the data centres. Or, as an example from the business realm, Kõu Mobility Group, a micromobility company, has consciously thought through the material footprint of their hardware and software during the entire life-cycle.

Problem-oriented, not technology-oriented entrepreneurs

Hence, focusing on just the technology may be short-sighted.

„Entrepreneurship aims to solve problems,” says Mr Vainik. “I have become increasingly sceptical of the idea of a “technology-based enterprise”. Because if you focus too much on a certain technology — blockchain, AI, machine learning, whatever it is — then the technology itself becomes a vanity meter and blurs the cause you were fighting for. Of course, this attitude is quite difficult to convey to industries where technologies are large and require years of investment.”

Mr Vainik suggests that one of the potential ways of creating synergy between public administration and businesses is to propose business models that correspond to the sustainability criteria and see how they catch on, and if they do, then quickly and powerfully support them by both administrative and entrepreneurial means, such as conditional loans.

“It is always a bit of a gamble because although we expect the global economic cards to be reshuffled in the coming decades, we do not know exactly how to become the card dealer,” says Mr Vainik.

“We do know that we have technologies and business models in Estonia that are ready to be scalable, such as Icosagen or Skeleton, and we should not lose momentum. They are focused on solving problems in their field and have a new technological solution that allows creating benchmarks.”

There is still tremendous room for developing agile stability in the cooperation of the public and private spheres. Yet, there is hope that by posing challenging questions and not shying away from the answers, digitalisation can be harnessed to the sustainability transformation.

 

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