When Smog Smells Like Opportunity

Last month, China waved a red flag in front of bullish entrepreneurs in the world of green technology.

China’s air quality hit an all-time low, notably in the northern city of Harbin where the air index reached 1,000, and Shanghai which recently hit 503 (anything above 50 is deemed unsafe).

The Chinese government’s response: the announcement of US$830 million in prizes and funding for global companies whose technology can provide an environmental fix.

The Ontario government’s response: the announcement that the Ontario-China Clean Air Technology Workshop would be co-hosted in Toronto with the Consulate of General of China. The workshop was an opportunity to brainstorm ways for local green technology companies to leverage their research and development expertise. The provincial move comes on the heels of the Canada-China Memorandum of Understanding on the Establishment of a Working Group on Environmental Protection and Energy Conservation, signed by Canada’s Ministry of Foreign Affairs, Trade and Development and the Chinese Ministry of Commerce in 2010 and designed to foster commercial cooperation in the environment and clean energy sector.

China’s crisis presents an opportunity for Ontario-based clean-tech companies, which generate $1 billion in exports. While collaboration is key to innovation, not all collaborative attempts to initiate cross-border deals lead to the application of innovative technologies. Canadian universities rank fifth among OECD countries in comparison with cross-border projects that merit recognition from peers [i] but our record for commercialization is dismal.

On paper, the practice of open innovation – which involves some form of sharing and networking among companies and institutions – sounds promising. In practice, it can be challenging, particularly in China.

First, there is the challenge of intellectual property (IP). Companies looking to do deals in China had better have a robust IP strategy in place or they risk losing control of it. Generating patents is a state policy in China, according to multiple reports including the Canadian International Council’s 2012 report, “Rights or Rents.” In addition to seeking to create domestic IP, the country is openly encouraging international partnerships; however, many Western companies have expressed concerns that technology-transfer could lead to patent or copyright infringement.

In my field of architecture, design piracy is de rigueur. Even signature projects are not spared, as U.K. architect Zaha Hadid recently discovered. A Chinese competitor in Chongqing is building an exact replica of her landmark reflective curved towers complex currently under construction in the capital of Beijing (even before she completes the original.) In China, copyright in architecture is virtually non-existent because the design and concepts are always transferred to the local architectural institutes during the detailed drawings and construction phases. The stakes are even higher for other companies: patent infringement undermines profitability.

But IP is only one hurdle that Canadian firms face. Many Western firms also fail because they lack good mentors and strong alliances when venturing into unknown territory.

Governments seeking to help Canadian companies explore co-ventures in China should do two things: match them up with firms already working in the region, and promote broad technology alliances. 

Take Trojan Technologies, a water filtration company headquartered in London, Ontario. The company, which is now a subsidiary of Washington-based Danaher Corporation, has been operating in China for almost a decade. Over the years, it has built a robust business and collaborated on many research projects with Chinese universities.

At an Ontario government workshop last year, Trojan Technologies vice-president Wesley From suggested that the government look at ways to leverage the expertise of Canadians already working in China. He mused aloud that the Ontario government should consider opening accelerator centers by leasing space from Canadian companies that have already established a beachhead on the mainland, and work with firms that have the know-how to recruit talent, and manage partnerships with both the public and private sectors.

Finding mentors with on-the-ground experience and reliable contacts is key. It is a refrain repeated regularly in the boardroom, and a mantra that our provincial and federal governments should adopt. Mentors can come from unexpected places… such as a design architect.

As a designer consulting on projects in China, I am in a position to introduce Canadian green technologies and practices to my Chinese project planners and builders. Architects can be conduits for innovation, introducing the latest R&D on sustainable systems. Over the years, I’ve seen architects from Germany and the U.K. successfully leverage their networks to promote home-grown building products in China. Relationships are especially important within Chinese architectural networks because significant construction projects are filtered through government and university institutes.

Working as a design architect in China brought me into contact with academic institutions and led to invitations to lecture and consult at top-flight Chinese universities. In turn, I’ve been able to introduce R&D developed by Canadian engineers and researchers at Ryerson University, working with EcoSRG (Ecological Solutions Research Group Inc.), a think tank I co-founded in Toronto. What started as a private business deal has led to broader academic collaborations: Beijing’s Tsinghua University and Shanghai’s Tongji University are now eager to establish academic partnerships with their Canadian counterparts, particularly now that the Shanghai Free Trade Zone has opened with the objective of facilitating foreign investment in the country. Our company is pioneering green architecture through research with universities and government institutions, facilitating further collaboration and new partnerships.

Governments can also facilitate commercialization by taking a more high profile role – a point that is reinforced by Dr. You-Zhi Tang, chairman and CEO of Canada Cleantech Capital, a private technology and consulting firm based in Markham. Dr. Tang, who is part of the federal government’s working group on environmental protection and energy conservation, is disappointed that the initiative has not yet gone beyond the “talking level.”

“We need the government to show leadership, not just (establish) working groups or trade trips,” Dr. Tang has said. He argues that because China is so large and its problems so broad, only a highly focused commercial initiative will attract attention – and contracts. Dr. Tang thinks the government should adopt a “Team Canada” approach and channel its resources into backing technologies that address one specific issue that the Chinese government faces. Most Canadian firms in the clean-tech space are small or medium-sized businesses that lack the resources to attract attention on the mainland. The answer is for our governments to pool related companies (e.g. architects/green technology firms/universities working on clean-tech solutions for buildings) and promote them as a group, rather than support a network of unrelated companies with vastly different solutions.

The take-away message is this: If our government is keen to increase commercialization in our green energy technology sector by leveraging emerging opportunities in China, it must engage Canadian entrepreneurs already established in China, and adopt a “Team Canada” approach. We need to target and promote one strong team offering a gold-medal solution to environmental challenges on the Chinese mainland. 

[i] OECD report based on Scopus Custom Data Elseuler, 2009.