Frans van Houten on the challenges of balancing energy needs with environmental challenges.

Recently, a public policy debate played out in the Dutch Ministry of Infrastructure and Environment, an increasingly familiar debate about how society allocates limited resources to meet people’s needs. It was the kind of discussion that takes place every day in council chambers, legislative halls and bureaucrats’ offices across the globe. In the case of the Dutch Ministry, officials were considering whether to save money and reduce light pollution on a busy 30-kilometer stretch of freeway by simply switching off the street lights at the risk of reducing road safety.

Their dilemma was representative of a much bigger debate involving government leaders across the world tasked with solving the grand challenges facing the planet – from urbanization and population growth, to rising demand for energy, food and water, and from healthcare needs to climate change. For them, the question is: Do we meet these challenges with short-term fixes or choose the long game by investing now in sustainable innovation that can drive economic and societal prosperity in the decades ahead.

The answer begins with thinking differently, by understanding that sustainable innovation can help find solutions to develop infrastructure that will meet people’s needs at lower cost when seen through the prism of total cost of ownership. Government should create the environment and incentives to stimulate investment in sustainable innovation, take away barriers and accelerate adoption, even in turbulent economic times. But today, fear of the unknown often drives decision-making, and outdated procurement regulations are structured to minimize initial purchasing costs in the short run at the expense of adopting better solutions for people and the planet across a longer horizon.

Changing the ways of governments usually doesn’t happen quickly, but time is a luxury the world no longer enjoys. By 2050, we will be a much older world with half of our people suffering from chronic diseases; 70% of the population will live in cities struggling to meet people’s basic needs like food, water and transportation; and in just 20 short years, global energy consumption will increase by 50%.

Time may not be on our side, but innovation is. Let’s go back to that short stretch of highway in the Netherlands. There was always a better solution than turning off the lights. The choice didn’t have to be a conflict between cost and safety or climate. There was another option, one that relied on sustainable, meaningful innovation to fix the problem. LED lighting today provides the right amount of light to guarantee safety and at the same time, save up to 80% in energy costs when combined with smart controls, Climate Group estimates in its report “Lighting the Clean Revolution”.

When it comes to transitioning to sustainable development in lighting, we see four critical levers of change, but these levers could be applied to almost any initiative to employ sustainable innovation aimed at finding solutions:

  • New business models to help faster adoption of new technology
  • National policies to promote energy-efficient solutions through green public procurement and efficiency standards
  • Adoption of new procurement and financing approaches that reject the “lowest initial price” and embrace the idea of “total cost of ownership”
  • Better communication to explain the tangible social, economic and environmental benefits of sustainable innovation

The first step is a willingness on the part of all stakeholders to change how we transition to sustainable development. Government should seek more strategic approaches to developing dynamic, resilient infrastructure. Business must be more creative in offering financing solutions as partners with government and people must support sustainable innovation as a public policy priority.

If we are going to meet the grand challenges of our age, the world has to choose the long game.

Author: Frans van Houten is the Chief Executive Officer of Royal Philips Electronics. He is participating in the World Economic Forum’s Annual Meeting 2013.

 Image: Image of a lamp post in Sydney REUTERS/Daniel Munoz