Environmental, Social and Governance (ESG) - what patents reveal about it

The topics of sustainability, climate neutrality, ethical principles and fair dealings with employees, customers and suppliers are the current major topics. In order to determine to what extent a company follows these principles, so-called ESG ratings of companies are drawn up. Investors are encouraged to invest primarily in companies that have based their corporate philosophy on the above principles. The extent to which this also leads to serious innovation-investments and the impact this has on technological progress has not been considered to date. But patent activities can provide insight on this.

A recently published study by InTraCoM GmbH investigated to what extent the innovation behaviour of companies was influenced by the ESG guidelines, derived from the patents they apply. It was assumed that the sustainability aspect "Environmental" would primarily manifest itself in patents, whereas "Social" and "Governance" would be difficult to represent technically.

The study by InTraCoM GmbH was conducted internationally, where all patents worldwide were filtered out according to ESG characteristics based on their classification. Furthermore, a distinction was made between purely sustainable inventions and so-called "enabler" inventions, which enable or support the application of sustainable technologies.

However, the result is very surprising, because patent activity - the filing of new patents - has already passed its zenith compared to other (non-ESG-related) inventions. Applications continue to increase slightly, but in relation to other (non-ESG) patents the number of applications has been declining for the past 2 years.

Has the subject and the directive therefore become less important?

Looking at the patent values of these patents, a different trend is seeable: here the ESG patent values rise compared to all patent values at a significantly higher level and remain at a higher value level - a contrasting picture than for patent filings. Assuming that disruptive inventions are represented in a high/increasing patent value, which leads to innovations rather than worthless inventions, this analysis confirms that ESG guidelines do indeed seem to be an innovation driver, at least as far as technical characteristics are considered. Surprisingly, however, a purely statistical analysis of the number of filings would probably come to a different conclusion.

Find here the full study.