“Innovation with a human touch”: now online the new issue of SOMeMagazine

SOMe Issue #6 has been released, the eMagazine of our School which shares stories, points of view and projects around key themes of our mission.

This issue is focused on “Innovation with a human touch”, discussing the role of human and humanities in technological progress and innovation.

We interviewed  Giovanni Valente, who explains how much human and social sciences are essential to face any innovative challenge in the scientific and technological field, making the interdisciplinary approach fundamental in scientific studies.

Man must be at the centre of digital transformation and technologies have to be developed for and not instead of humans, as Raffaella Cagliano, Claudio Dell’Era and Stefano Magistretti tell in their editorials about Industry 4.0 and Design Thinking.

But can technological innovation be truly on a human scale? Giovanni Miragliotta tries to answer to this question considering how much new technologies deeply changed our society and work.

Finally, we feature some of our recent research ”Stories”: the economic impact of climate change, the re-use of electronic waste to create eco-compatible products, the distribution of Venture Capital in Europe.

 

 

To read SOMe’s #6 click here.

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Previous issues of SOMe:

  • # 1 “Sustainability – Beyond good deeds, a good deal?”
  • Special Issue Covid-19 – “Global transformation, ubiquitous responses
  • #2 “Being entrepreneurial in a high-tech world”
  • #3 “New connections in the post-covid era”
  • #4 “Multidisciplinarity: a new discipline”
  • #5 “Inclusion: shaping a better society for all”

ERS European Research Seminar 2021

 

On June 10th and 11th Politecnico di Milano hosted the sixteenth edition of the European Research Seminar (ERS) on Logistics and Supply Chain Management (https://www.ers-conference.org/).

Due to the COVID emergency, the conference was entirely held online, but this did not make it less interactive and stimulating, and it offered great opportunities for exchange.

50 professors and researchers from all over the world participated, presenting their works and providing interesting elements for discussion about the main trends in the sector of logistics and supply chain management.
Several topics were touched: innovation, technology, circular economy, economic, environmental and social sustainability.

Carl Marcus Wallenburg (WHU – Otto Beisheim School of Management, Germany) and Andreas Wieland (Copenhagen Business School, Denmark) were the conference co-chairs. Angela Tumino and Riccardo Mangiaracina were the local hosts of the conference, as well as members of the scientific committee. Arianna Seghezzi, Chiara Siragusa and Elena Tappia chaired some of the main sessions.

The conference closed with great satisfaction of all the participants.

Technology and innovation, on a human scale

Scientific progress, the availability of technical facilities, cross-fertilisation between different research communities and combined innovation are giving us an unstoppable progression of human capabilities. But how much, and more importantly, which innovation is really on a human scale?

 

Giovanni Miragliotta, Professor of Advanced Planning, Co-Director of the Industry 4.0 Observatory, Politecnico di Milano

 

Everywhere we look, as citizens and as researchers, we read about the “magnifiche sorti e progressive[1]” that, by means of new technologies, are changing our society and our lives. From the more familiar ones, such as broadband communication networks, to the more advanced, such as bioengineering, to those operating behind the scenes, such as cryptography, it all comes together to the point where it is almost difficult to realise the potential for change in the research and innovation system we have built up in developed countries. This potential is realised from time to time by some unexpected  discontinuities, such as the pandemic we are currently experiencing, which, by combining the various existing innovations, show us how the way we work, teach, plan and treat can be overturned in just a few months. A very powerful reflection in this sense, also and above all because it comes from a man of letters and not from a scientist, is the one recently published by Alessandro Baricco[2].

This occasion, which has shown us the extent and speed of possible change, can be used to elaborate on what innovation is at a human scale; it more important than ever to do so right now, in view of what is being developed in universities and laboratories all over the world, since the forthcoming technological breakthroughs could materialise a change, which many believe (and I am one of them) could be disruptive to the very core of our society.

If we consider western democratic states as the main scope, our society rests on a set of pillars, a mix of worldview ideology, morals and common sense, which form the glue. Some technological innovations (first and foremost bioengineering and artificial intelligence) are, so to speak, on a collision course with these pillars, and could lead to new societies, the extent to which they will be on a human scale is difficult to predict, at least as we currently interpret that scale.

Let’s us consider the central role that the work plays in the structure of society, even just focusing on its economic value and disregard the psychological aspects or that of personal fulfilment; for the first time in history we are beginning to glimpse a possible future in which not only we can no longer predict what our children’s jobs will be in 30 years’ time, but we are beginning to doubt that there may even be any jobs left. In an increasing number of specific fields of work (=Narrow AI), in fact, machines have already achieved superhuman abilities and, as you probably know, there is a huge debate about the balance between jobs created and lost. The analyses carried out in the Artificial Intelligence Observatory, at least for the next decade, seem to indicate a positive scenario[3], but if we extend the horizon of analysis, we cannot exclude a situation in which the demand for human labour will be much lower, made unprofitable or useless by the new skills of machines[4].  In the context of fragile monetary and fiscal equilibrium of nations, a significant alteration in the labour market could represent a strong element of instability.

Changing the technology of choice, the advent of biotechnology could in the near future bring about such major changes that the very foundations of society will be shaken: how will the concept of the family evolve if it were normal for human beings to live to be 120 years old, with youth lasting over 40 years?  What will happen when the wealthier classes, in addition to being able to afford better traditional health care, can also afford to take steps to improve their genetic set-up in a way that cannot be matched by most people? Will we, for the first time in history, observe a divergence in our species, with a (small) fraction of the population having more capable, durable and long-lasting “hardware” (body + brain) than the majority of the population?

These examples make us think about the extent of possible economic and social change, but they do not yet seem to affect the ideological foundations of the society we have built in the West since the American and French revolutions, namely the profound belief in the value of freedom and the uniqueness and individuality of the person. But what if, in principle, by observing all the interactions of a person with their environment and their fellow human beings, it were possible to predict exactly what their feelings and needs would be? What would happen if Google or Facebook or others, on the strength of the immense amount of data they collect about us, knew how to advise us on the right book, the right job, the right investment, the right wife, the right preventive surgery, much better than we would know how to do on our own, confused and lost in an endless number of important decisions to be taken dozens of times in our (very long) lives? Would we then still be “free”? And if there is any freedom left, should we make use of it, or would it not be more convenient to delegate our decisions to a “life advisor” technology that would achieve to us a much higher probability of success and happiness than we could do with our own hands?

This last scenario, envisaged by many thinkers, opens up a radical rethinking of the founding principles of our society, first and foremost the liberal principle, leading to outcomes that could range from a further loosening of existing points of reference (in the wake of Bauman’s liquidity) to its total opposite, a very rigid technocracy.

The point is always the same: it is not possible to make predictions of any kind and, after all, the little that needs to be known, of pure speculation on the future, has already been written. These reflections, on the contrary, bring us to a very great responsibility, that of remaining very vigilant over the changes, even the slight ones, that technological innovation is imprinting on our society.

A future awaits us which can only be on a human scale if we will care about building it.

 

 

Reading notes

This reflection arises, and can be further developed, by drawing on the insights of the following authors:

  • Yuval Harari: I recommend the whole trilogy on man’s past, future and present;
  • Mark Tegmar, “Life 3.0”, and the debate at the Future of life Institute;
  • Zygmunt Bauman, in particular his key text “Liquid Modernity”.

 

 


[1] Citation of the Italian romantic poet Giacomo Leopardi, “magnificent destiny and progressions”

[2] Alessandro Baricco, “Five years in one”, https://www.ilpost.it/2021/05/28/baricco-2025/

[3] See report Artificial Intelligence Observatory, “On your marks”, ed. 2019.

[4] Consider, for example, “A 3D printed car which is designed by AI”, www.thereviewstories.com/czinger-21c-ai-3d-printed-car/

 

Human Centered Industry 4.0

Industry 4.0 is often referred to as a new industrial revolution and the recent COVID pandemic has further accelerated the already impressive level of investment in new technologies. However, no real transformation can happen if people are not put at the centre of the transformation. Successful implementation of the Industry 4.0 paradigm requires a joint design of technological and organizational variables, with the aim of designing technologies for humans and not instead of humans. Augmentation strategies through participatory design is the promising avenue to a more resilient and smarter manufacturing

 

Raffaella Cagliano, Professor of People Management and Organization, Co-Director Obstervatory Industry 4.0 Transition, Politecnico di Milano

Digital technologies are nowadays one of the central factors in the transformation of any organization. In the manufacturing context, digitalization is often associated to the concept of Smart Manufacturing or Industry 4.0. Someone even talks about a fourth industrial revolution, referring to the transition towards a new paradigm of interconnected, digitalized and intelligent production systems.

The recent COVID-19 pandemic has been a kind of turning point in this process. As also clearly stated in the recent sixth annual State of Manufacturing Report (Fictiv, 2021), digital transformation has become a business imperative, and no longer a “nice to have” or an optional strategic lever. In fact, those companies that have been able to thrive during the COVID-19 year and have shown higher resilience are the ones that invested more in digital technologies in the years before the pandemic. Even during the crisis, investment in digital transformation – also in manufacturing – increased hugely (see e.g. Deloitte, 2021).

Despite this, the results of the introduction of new technologies do not always fulfil promises and in many cases the investments tend to be higher than the advantages. Many change management problems are mentioned as possible cause, and many lament a lack of competencies within the organization, or a lack of right culture, mindset or other.

During our recent years of research on Smart Manufacturing at the School of Management of the Politecnico di Milano, we had the opportunity to study many successful cases of companies that were able to transform their manufacturing systems into completely new models and to improve their operations significantly; often they were even able to rethink their business model and to offer completely new lines of products or services as a consequence of the new capabilities developed and the opportunities brought by the introduction of the new technologies. At the same time, many of these companies were also able to readily react to the COVID crisis, showing a resilience that was higher than the average. They were able to move many activities to a remote or virtual space, to schedule work in a flexible way to accommodate the needs and constraints of people during the emergency, and to introduce health and safety measures more rapidly and effectively.

These companies have a common approach to digital transformation: to put people at the centre of the transformation. We can recognize this approach from two main elements. First of all, they introduced digital technologies within the context of a clear strategy for operations improvement, where technology is seen mainly as a way to facilitate or augment human physical or cognitive capabilities, rather than substitute them. Technologies, on the one hand, are used to facilitate the work of operators by providing all the relevant information, guidance and support that is needed to operate in the most effective way, and to take away those tasks that are heavy, dangerous or where humans don’t add specific value compared to machines, leaving in this way more space to people to contribute according to their most valuable characteristics. Even more, some applications of Industry 4.0 technologies are designed to augment the operators’ potential by providing them with all the data and information needed to make them able to manage complex production systems autonomously and contribute to continuously improve the processes and the systems themselves. Thus, technologies are not used instead of humans, but for humans to enhance their work and contribution.

Second, these companies adopted a systemic approach to technology design and implementation that allowed them to design a system where technology works for humans. This systemic approach requires that technological and organizational factors are designed together, according to the well-known – but not so often used – socio-technical approach. If technology has to support human work, the technical and social systems should be designed together to exploit the joint advantage of the two systems and to design work and processes where the potential of technology and humans are fully exploited. A more common approach is instead the one where technology is designed first, and the consequences of technology on people are managed afterward, trying to adapt a posteriori the knowledge, culture but even the predisposition of people to the technology, with poor results in most cases. This mistake has been perpetuated in every major technological wave or revolution.

Instead, in many successful cases we observed that the joint design of the technology and the work system is realized though participatory approaches, where people are engaged not just in the last phases of change, to inform them or to test the new systems, but instead since the early phases of the project. Operators are asked to express their needs, to provide early feedback on the new systems and sometimes even to provide ideas to further improve or innovate the production systems. When this level of involvement is achieved, the manufacturing system will benefit from the transformation even after the implementation of the technologies, since people are able to continuously improve the way they work and they use the technology, crafting their jobs according to the potentialities discovered in the technologies and in the data that have been made available. This idea of participation, involvement and diffused creativity is coherent with the principles of design thinking that we have seen used in some of the most advanced cases in our study, and that can constitute a new frontier for the application of the methodology outside the context in which it originated.

 

Reducing the environmental impact of logistics: the GILA Project

The international project GILA, sponsored by the German Federal Ministry of Education and Research, is designed to contribute to global efforts in reducing absolute GHG emissions from logistics and enhancing resource efficiency to thus meet the Paris Agreement’s objectives

 

Like all other business sectors, logistics can adopt more sustainable practices to reduce emissions and enhance resource efficiency.

The GILA project – run by a German, Italian & Latin American Consortium joined by the School of Management  – is designed to reduce the environmental impact (especially carbon impact) of logistics, focusing on sites that play a connecting role within transport chains, such as warehouses, consolidation/fulfilment centres, distribution centres, cross-docking sites or micro depots/city hubs, as well terminals at maritime or inland ports, freight and intermodal terminals or cargo terminals at airports.

In order to achieve the overall objective, two main research areas will be addressed:

  • best practices and future requirements, services and concepts for sustainable logistics sites within an energy and resource efficient transport chain
  • establishment of a methodological framework for assessing the environmental performance of logistics sites

The targeted methodological framework for assessing the environmental performance of logistics sites helps gain enhanced transparency and a robust basis for decision management and for the targeted identification and definition of measures to reduce CO2 emissions.

The Fraunhofer Institute for Material Flow and Logistics is responsible for leading the project and its scientific implementation.

The industry partners are: Arcadis Germany GmbH, developer of logistics sites, P3 Logistic Parks, skilled in sustainable industrial properties and market development. GreenRouter is mainly responsible for the calculation of GHG emissions of logistics sites, while Fercam, Flexilog, Conad and Prysmian group contribute through their expertise and experience of their own logistics sites.

The School of Management of Politecnico di Milano, as academic partner, contributes with its know-how on green logistics concepts, while the Universidad de los Andes brings a Latin American perspective and experience on the environmental performance of terminals.

Sharing best practices will help participating companies to be prepared for future trends and demands within logistics networks and to pave effective pathways towards zero emissions logistics by 2050 and the sustainable transformation of the sector.

The project will enable industry to use the outcomes in future planning and the implementation projects of new investments in logistics sites infrastructure, e.g. city hub distribution, new greyfield warehouse projects or sustainable transformation of existing warehouses, transhipment sites and terminals.

 

Innovation with a human touch

Conversation with Giovanni Valente, Professor of Logic and Philosophy of Science in the Mathematics Department at Politecnico di Milano and Member of the inter-departmental Unit of Study META

 

The Politecnico di Milano, a technical University, has promoted the creation of an interdisciplinary network of scholars from its various departments of engineering, architecture and design with skills in human and social sciences to provide expertise in philosophical, epistemological, ethical and social issues related to processes of science, technology and innovation. Why was this decision made?

At international level, there is a relatively widespread tradition of promoting the presence of scholars working in the social sciences and humanities within the major polytechnical universities. In fact, some of the world’s leading academic institutions, such as the MIT in Boston, even feature entire departments dedicated to specific fields of humanities. The reason for this choice is that the humanities, if they are scientifically-informed, can complement technical knowledge by adding a critical and reflective perspective.

Research and teaching in the areas of philosophy and sociology of science and technology have been present at the Politecnico di Milano for quite some time. However, they began to acquire a systematic form of coordination only recently with the development of the Unit of Study META, which was officially created in the academic year 2017-2018 in the form of a collaboration between various departments. Throughout the years that followed, the group progressively expanded with the addition of more tenure-track faculty, post-doctoral researchers and PhD students, who have been recruited thanks to external funding as well as the direct endowment of the Rector. The current administration of the Politecnico di Milano has indeed realised the importance of developing the humanities in order to enhance interdisciplinary research and enrich the educational offer for engineers, architects and designers along the tradition of the most prestigious polytechnical universities around the world.

Specifically, META aims to produce and disseminate knowledge and offer expertise in the philosophical, ethical and social dimensions of science and technology by organising research and teaching activities as well as academic and public events, which have received a great deal of attention even outside the university itself. A distinctive feature of this network is that its members are based in different departments, so that, besides collaborating with each other, they can also interact directly with colleagues working in relevant fields of science and technology. Such an interaction thus fosters an interdisciplinary approach whereby expertise in the humanities and social sciences is well integrated in the research processes.

So, especially for an engineer, why is it important to have humanities skills and how do they fit into the training path?

As the British novelist and physical chemist Charles Percy Snow famously explained in his influential 1959 book on “The Two Cultures and the Scientific Revolution”, the alleged contrast between scientific and humanistic knowledge (namely, the two “cultures” into which the Western world seems to be split) can have dramatic consequences for society, especially in as much as the educational system tends to favour one at the expense of the other. The call for a properly balanced and multi-disciplinary preparation for our students is even more earnest now that we live in an era of high fragmentation of knowledge and hyper-specialisation, in that there often lacks a dialogue between different scientific fields, let alone between science and humanities.  Disciplines such as philosophy and sociology of science and technology are interdisciplinary by their own nature, and therefore they are suitably apt to bridge the gap across “the two cultures”, even more so when they are taught at a polytechnical university.

Indeed, philosophy and sociology prompt students to reflect upon the foundations of their own scientific and technological disciplines, thereby refining their critical thinking. To give an example, scientific models often resort to assumptions that are, strictly speaking, false, and yet they can be applied to concrete systems: that gives rise to outstanding conceptual questions about the justification of such unrealistic idealisations. Furthermore, philosophical and sociological studies put polytechnical students in a position to develop awareness of the ethical and social consequences of the use of the technologies they will employ in their future jobs. For instance, an extremely popular course META has introduced for engineering degrees at the Politecnico di Milano is called “Ethics for Technology”, which is the first course of its kind established in the Italian educational system.  Last but not least, since the courses designed by META typically require the enrolled students to submit written essays, they offer them the opportunity to practise and improve their own writing and communication skills, an opportunity they would otherwise seldom encounter in other more technical courses. This actually contributes to filling an important gap in the engineering curricula.

With reference to innovation processes that are increasingly data-dependent or data driven, what is the role of social sciences and humanities, in particular with respect to the implications of the use of artificial intelligence in the context of social phenomena?

In the current digital era, the massive and growing use of technological innovations that can process huge amounts of data with unprecedented power poses ever more pressing epistemological and ethical issues. In this respect, the long-standing discussion in philosophy and sociology about the nature of scientific data can be highly beneficial to the research on artificial intelligence, especially when it is applied to the analysis and prediction of social phenomena. Indeed, from an epistemological point of view, it is a recognized fact that there does not exist such a thing as “brute data”. For the process of collecting and elaborating data is not at all neutral but rather it is theory-laden, in the sense that the selection of the dataset relevant for the study of a certain phenomenon as well as the subsequent interpretation of computational outcomes are always driven by contextual background knowledge.

Accordingly, if we wish to draw meaningful and reliable conclusions from the available data, we ought to understand the extent to which they depend on the theoretical assumptions underlying the construction and implementation of the algorithms we employ. Moreover, from an ethical point of view, when we deal with sensitive data that reveal personal information, as often happens in the context of social phenomena, there arise delicate and controversial ethical issues, for instance, concerning the protection of individual privacy. Data security is actually one of the major problems stemming from the use of powerful computational algorithms, together with bias problem  namely the fact that AI systems are trained on data that are only representative of a limited sample of the population, and the trust deficit problem, namely the fact that the procedures by which deep learning models predict the outcomes remain largely unknown.

In order to face these outstanding challenges of artificial intelligence, the vast philosophical and sociological literature on epistemological and ethical issues concerning scientific data can thus be fruitfully combined with scientific and technological practice so as to develop an effective integrated approach.

Designing for the digital society: unveiling the opportunities embedded in digital technologies through Design Thinking

Nowadays, digital technologies are providing incredible options; we live in a world where technological opportunities are cascading over society at an unprecedented speed. Humans are central to understanding how the technology can be better aligned with end-user needs and their willingness to adopt it. Design Thinking is an approach that looks at value and change from the perspective of people

 

Claudio Dell’Era, Associate Professor of Design Strategy at School of Management, Politecnico di Milano
Stefano Magistretti, Assistant Professor of Innovation and Design Management at School of Management, Politecnico di Milano

We live in a digital society where digital technologies are all being used for work, monitoring health and habits, staying connected, seeking information and getting the news, shopping for groceries, travelling, managing finances and more. Digital technologies are widespread throughout the world, and their presence in our daily life is booming. In the last few decades, several different digital technologies have reshaped the way people live and the way companies develop new products and services. Nowadays, digital technologies are providing incredible options; we live in a world where technological opportunities are cascading over society at an unprecedented speed.

A world awash with technologies and information. But humans do not use digital technologies or data; they need products and services. Artificial Intelligence (AI), in particular, has the potential to transform our world for the better: it can improve healthcare, reduce energy consumption, make cars safer and enable farmers to use water and natural resources more efficiently. AI can be used to predict environmental and climate change, improve financial risk management and provides the tools to manufacture  products tailored to our needs with less waste. AI can also help to detect fraud and cybersecurity threats, and enables law enforcement agencies to fight crime more efficiently. AI can benefit the whole of society and the economy. It is a strategic technology that is now being developed and used at a rapid pace across the world.

Nevertheless, AI also brings new challenges for the future of work, and raises legal and ethical questions. To address these challenges and make the most of the opportunities which AI offers, the Commission published a European strategy in April 2018. The strategy places people at the centre of the development of AI — human-centric AI. According to the report “Tech for Good – Smoothing disruption, improving well-being” developed by McKinsey, the development and adoption of AI-driven solutions has the potential not only to raise productivity and GDP growth, but also to improve wellbeing more broadly, including through healthier living and longevity and more leisure.

Technology has for centuries both excited the human imagination and prompted fears about its effects. In this changing context, the challenge is to build AI solutions to improve and not damage wellbeing. Researchers and practitioners are acknowledging that this is a problem of design, which acts as a driver of innovation and change and which is able to keep humans at the centre when building solutions. Humans are central to understanding how the technology can be better aligned with end-user needs and their willingness to adopt it.

Design Thinking is an approach that looks at value and change from the perspective of people. Or, even better, from the perspective of what is meaningful to people. Similar to many other approaches, Design Thinking also combines three factors: (i) technologies, how things are made and their improved performance; (ii) people, how these things are valuable for customers; (iii) business, how organisations can profit from offering them.
The perspective embedded in Design Thinking makes it unique: Design Thinking starts with people. This approach allows leaders to look at value created for individuals and assume their perspective, conceiving innovation not primarily as a source of competitive advantage and profit, but as a means to generate value for end-users.

Design Thinking is usually characterised by three traits: a human-centred perspective, where innovators build empathy with users; the leverage of creativity as a driver of innovation (sometimes even in contrast to assets as knowledge, technology and competitive positioning); and an intense use of prototyping as a rapid and effective source of communication and learning among stakeholders.

Human centeredness in Design Thinking means that what drives the entire innovation process is the identification and satisfaction of user needs. The success of any innovation depends on simultaneously achieving user desirability, technology feasibility and financial viability, yet Design Thinking almost prescriptively instructs innovators to address desirability first.
By continuously involving end users in the iterative co-creation and testing of ideas and prototypes, design thinkers ensure that the outcomes of their innovation effort add value to the human experience and are meaningful and affordable. In so doing, Design Thinking overturns the traditional business perspective that is technology driven: companies first determine what is feasible for them to develop and then push their new products and services through marketing campaigns hoping that they address people’s search for value and meaning.

The need for a human-centred approach also stems from the wicked nature of the problems addressed in Design Thinking projects. Wicked problems are defined as a class of social system problems that are ill-formulated, where the information is confusing, and where many customers and decision-makers have conflicting values. These types of problems should be addressed with a human perspective to grasp their complexity, make sense of them and make them tractable.

Human centredness in Design Thinking is achieved through the innovator’s empathy with users. Empathy consists of perspective taking, namely the ability to adopt the perspective of another person or recognise their perspective as their truth, be open to various inputs, suspend judgement, recognise other people’s emotions and communicate by mirroring back.

 

How to improve the effectiveness of social information programmes

A research published in JEEM (Journal of Environmental Economics and Management) investigates the impact of stimulating environmental self-identity on energy behaviour

 

How to improve the effectiveness of social information programs? Such a challenge has been tackled in the paper published on Journal of Environmental Economics and Management, to which contributed Prof. Massimo Tavoni and researcher Jacopo Bonan of the Department of Management, Economics and Industrial Engineering.

Social information programmes are widely used by policymakers to nudge behavioural change. These are based on the comparison of individual behaviour with that of a reference group. Their effectiveness strongly depends on household and individual traits. The existing evidence in economics and psychology points to the role of environmental values and identity in determining pro-environmental behaviour and the impact of social information.

Researchers from the School of Management of Politecnico di Milano conducted a large field experiment on household energy conservation, to test whether the impact of a social information programme can be strengthened by leveraging environmental values and identity.

A communication that stimulates environmental self-identity, as well as comparing their energy behaviour with those of other users and with their own in the past, was attached to a certain number of customers’ bills of an electricity supplier. The results in terms of changing energy consumption habits of this group were then compared with those of the group for which neutral communication was maintained.

The results seem to show that stimulating environmental identity does not, on average, strengthen the effectiveness of a social information programme, in terms of reducing energy consumption. However, there is evidence that stimulating environmental identity can lead to reductions in consumption for individuals who have in the past assumed virtuous behaviour from the point of view of energy saving.

 

 

For detailed information:
Can social information programs be more effective? The role of environmental identity for energy conservation
Jacopo Bonan, Cristina Cattaneo, Giovanna d’Adda, Massimo Tavoni
Journal of Environmental Economics and Management, 2021, 102467, ISSN 0095-0696

Climate change: one degree of additional warming costs Italian companies loss of revenue

Over one million companies analysed for ten years (2009-2018): Centre and North-East are the most affected areas. The largest losses are in the construction, finance, mining and ICT sectors, with little damage to tourism, agriculture and transport.

 

Climate change is costing the economic system a lot of money: looking at ten years (2009-2018), one degree of additional warming has led to an average reduction in turnover and profitability of -5.8% and -3.4%, respectively, for Italian companies. If we then consider the actual changes in temperature in the various geographical areas, in 2018 alone – a particularly hot year – our business network recorded a loss of revenue of Euro 133 billion, with the greatest percentage losses in the North East and the Centre.

This is what emerges from the first year of activity of the Climate Finance Observatory of the School of Management of the Politecnico di Milano, which on 27 April 2021 presented its main results at an online conference attended by institutions, businesses, investors and trade associations. Global warming is now fully an economic issue.  “We have developed a database that crosses economic/financial information on 1,154,000 companies in Italy between 2009 and 2018 (22 million in Europe) with meteorological data on temperature, rainfall and solar radiation since 1950 – explains Vincenzo Butticè, vice director of the Observatory – to find solid empirical evidence on the relationship between climate and the economic system“. This has resulted in reliable metrics to support regulators, financial institutions and manufacturers in their economic/financial analysis of climate change.

The Observatory has in fact calculated the real, not hypothetical, damage caused by an increase in temperature of 1 degree Celsius in Italy: small enterprises have lost the most in profitability, while large companies, being able to act better on costs and processes, despite a decrease in revenues and demand, were better able to contain their losses in margins.

Among the sectors most affected by the temperature increase are construction, finance and mining. Information technology, real estate and research and innovation suffered the same drop in turnover (-6.4%), but with a smaller decrease in margins. Manufacturing and retail were the best performing sectors, preceded only by agriculture, tourism and transport.

On the other hand, in geographic terms, the impact was worse in Central Italy and the North East, where companies managed to maintain higher margins. The North West suffered a sharp loss in profitability but not as much in turnover, while the South and Islands were little affected by climate change.

If we look at the drop in turnover in absolute figures, the biggest losses were recorded in Lazio, Lombardy, Emilia Romagna and Tuscany.

Managing the consequences of climate change and mitigation strategies represent the greatest challenge that world economies will have to face in the coming years – comments Roberto Bianchini, director of the Climate Finance Observatory -. For example, the analysis shows how a flood could cost companies in the affected area up to 4% of turnover and a loss of value of balance sheet assets of around 0.9%, which rises to 1.9% in case of a large fire. The global emergency related to the pandemic has also contributed to increasing the perception of risk, because it has shown how economic actors are affected not only directly, but also indirectly, through the channels of demand, supply or their own supply chain”.

On the regulatory side, both the European Commission and the regulatory agencies produced a large number of documents in recent months to improve understanding of the interrelationships between climate risks and economic activities. One example is the “Green Taxonomy”, a document that identifies actions within different sectors that can promote climate change adaptation and mitigation while avoiding negative impacts on the environment.

It is extremely important to identify risks and to find tools and metrics to quantify the climate exposure of portfolio assets. The action of the ECB is relevant in this direction: it carried out an analysis of about 4 million companies and 2,000 banks to identify the exposure of the financial system over the next 30 years. The study shows that the costs for implementing adaptation and mitigation strategies now are far lower than they are likely to be in the future: according to the ECB, the probability of default of banks will be higher the less action is taken by the economic system to change the trajectory of temperature increase.

 

For more information: https://www.osservatoriefi.it/efi/2021/04/28/climate-change-finance-rischi-e-opportunita-per-le-imprese/ (in Italian)

London’s sovereignty in Venture Capital

What is the geographical distribution of Venture Capital (VC) in Europe? Is VC activity agglomerated around a few preferred locations? Or, conversely, are we observing an increased dispersion of VC outside large metropolitan areas?

 

VC is an important source of finance for the growth of innovative startups, which contribute significantly to a country’s international competitiveness, as essential driver of innovation, job creation, and economic development.

Knowing how VC investments are geographically distributed is useful to understand the development of entrepreneurial ecosystems in Europe and, consequently, is a precious tool to approach innovation policies.

Using the VICO-DATASET of Risis (European Research Infrastructure for Science, technology and Innovation policy Studies) it is possible to describe the agglomeration patterns of VC activity at the regional, metropolitan, and industry level.

The study, led by Massimiliano Guerini, Massimo Colombo and Francesca Enrica Tenca of the School of Management of Politecnico di Milano, illustrates some crucial evidence.
The UK and France are the most relevant VC markets in terms of the number of VC deals, while Eastern European countries and Israel show the highest incidence rates (VC deals / GDP). Moreover, VC activity is mostly concentrated in large metropolitan areas, with increased concentration levels from 2010 to 2018. However, there is a non-negligible share of VC activity in more peripheral areas. In details, London, which represents by far the top VC hub, experienced a +50% in VC activity growth from 2010 to 2018, compared to a modest +6% of Paris (the 2nd VC hub) and Tel Aviv (+23%), ranked 3rd in terms of VC activity.  Some smaller areas in terms of VC activities registered remarkable growth rates from 2010 to 2018, such as Budapest (+167%), Milan (+62%), and Tallinn (+124%).

Last but not least, important differences emerge across sectors. The life science sector exhibits higher dispersion of VC deals outside the main VC hubs, mainly in areas with relevant knowledge creation activity. Conversely, VC activity in the Software, Internet & TLC, and R&D & engineering sectors is concentrating in large metropolitan areas.

The findings have important policy implications for democratizing access to VC in more peripheral areas and for the development of entrepreneurial ecosystems, and they open a debate on the framing of research and innovation policies.

 

For further information:
Policy Brief
https://www.risis2.eu/

Presentation of the study (online event):
30th April 2021
2:00 pm – 4:00 pm
7th RISIS Policymakers Session Democratising access to smart money in EU, evidence form the VICO-DATASET