Sustainability, green tech & startups: A guide for aspiring entrepreneurs
According to the Global Footprint Network, humanity currently uses resources at a rate that would require 1.75 Earths to sustain.
Need for sustainability grows exponentially.
Impact entrepreneurship–a business approach that combines financial success with social or environmental benefit–might be an answer to that.
This guide helps aspiring entrepreneurs understand sustainability, green technology, and innovative strategies for developing successful, responsible software. Learn key concepts and explore real-world examples to make a meaningful impact while achieving economic prosperity.
What is sustainability?
Sustainability refers to meeting the needs of the present without compromising the ability of future generations to meet their own needs.
Sustainability rests on three pillars:
- Environment: Preserving natural resources, reducing pollution and carbon footprint, and using renewables.
- Social: Creating a just and equitable society–reducing poverty and inequality, ensuring access to education and healthcare, and respecting human rights.
- Economic: Building a strong economy that meets societal needs without harming the environment.
Sustainable technology-related concepts
There are plenty of concepts related to sustainability in business. They encompass economic models, frameworks, innovative strategies, technologies, standards & more.
Below, I explored the key ones to help you get a better general understanding of sustainability and green technology.
For even more information, be sure to play around with the visualization below.
ESG
ESG stands for Environmental, Social, and Governance. It’s a framework used to assess a company’s commitment to sustainability, social responsibility, and ethical practices.
- Environmental: This considers a company’s impact on the environment.
- Social: This looks at how a company interacts with its workforce, stakeholders, and the community.
- Governance: This assesses a company’s leadership, transparency, and accountability.
Investors are increasingly using ESG factors alongside traditional financial metrics to make investment decisions. Companies with strong ESG practices are seen as more resilient to environmental and social risks, and potentially more attractive investments in the long run.
The Doughnut Economics
Final Donut by William-J-Evans. Image source
Imagine a doughnut – the hole in the center represents the social foundation. This includes access to basic human needs like food, water, healthcare, education, and social equity. If people fall below this level, they experience poverty and deprivation.
The outer crust of the doughnut represents the ecological ceiling. These are the environmental boundaries we shouldn’t exceed to avoid catastrophic consequences like climate change, biodiversity loss, and pollution.
The sweet spot
The ideal scenario lies within the doughnut itself – the safe and just space for humanity. This space ensures that everyone has their basic needs met (no one falls short) while staying within the ecological boundaries (not exceeding the ceiling). It’s about achieving human well-being and prosperity without destroying the planet.
How does it work?
The Doughnut Economics proposes a shift from the traditional focus on endless economic growth. Instead, it emphasizes:
- Meeting needs, not wants: Prioritize providing everyone with a decent standard of living.
- Respecting planetary boundaries: Operate within the Earth’s carrying capacity.
- Transforming systems: Redesign economic systems to be regenerative and distributive.
Green tech
Green tech is a type of technology that is considered environmentally friendly; a tool to achieve sustainability. Green tech solutions minimize environmental impact and promote a more sustainable future. There are a few types of green technology:
- Clean tech focuses on reducing pollution and waste, and using clean energy sources.
- Environmental tech addresses a wide range of environmental issues beyond climate change, like water conservation, pollution remediation, and resource management. It overlaps with both clean tech and green tech.
- Climate tech targets combating climate change specifically. This involves reducing greenhouse gas emissions and developing solutions to adapt to climate impacts.
- Green information technology (Green IT) applies information technology practices with a focus on environmental sustainability. This includes reducing energy consumption in data centers, using recycled materials in hardware, and developing software for environmental monitoring and control.
Innovative strategies
Beyond the traditional focus on reducing waste, businesses are embracing innovative strategies like the circular economy and impact investing to create a more sustainable future.
Circular economy
The circular economy is a model of production and consumption that contrasts with our current, linear economic model. In a linear economy, we take materials from the Earth, make products from them, and eventually throw them away as waste. This process is resource-intensive and creates a lot of pollution.
A circular economy, on the other hand, aims to keep products and materials in use for as long as possible. This can be done through a variety of strategies, such as:
- Designing products that are easy to repair and reuse
- Sharing and leasing products instead of owning them
- Refurbishing and remanufacturing products
- Recycling materials into new products
- Composting organic waste
An important aspect of the circular economy is the sharing economy.
Sharing economy platform
A sharing economy platform is an online marketplace that connects people who want to share resources with others who need them. This can involve goods, services, or even space.
Here’s a breakdown of the key aspects:
- Peer-to-peer (P2P): Sharing economy platforms facilitate transactions directly between individuals, cutting out the middleman.
- Focus on access over ownership: Instead of buying something you might only use occasionally, you can rent or borrow it from someone else. This can save money and reduce waste.
- Enabled by technology: These platforms typically operate through websites or mobile apps that allow users to find each other, make arrangements, and often process payments securely.
Some common examples of sharing economy platforms include:
- Accommodation: Airbnb, Couchsurfing (homestays and rentals)
- Transportation: Uber, Lyft (ride-hailing) , Zipcar (car rentals)
- Services: TaskRabbit, Fiverr (freelance gigs)
The sharing economy is an example of disruptive sustainability– radical innovation that fundamentally changes how we operate to achieve lasting environmental and social well-being.
Regenerative business
A regenerative business takes sustainability a step further.
While sustainability focuses on minimizing a company’s negative impact on the environment and society, regenerative businesses aim to have a net positive impact.
This involves things like planting trees to offset carbon emissions or creating products that biodegrade, but regenerative businesses can take many other forms:
- Greyston Bakery: This bakery employs aunique regenerative hiring model. They offer opportunities to people facing challenges like homelessness or past incarceration, providing a path to reintegration and building a stronger community.
- Patagonia: A co-founder of theRegenerative Organic Certified™ program, Patagonia focuses on pasture-based animal welfare, fair treatment of farmers and workers, and robust soil health measures.
- Timberland: Partnering with Terra Genesis International,Timberland is building a revolutionary regenerative rubber supply chain for footwear.
Sustainability as part of your business
In my article about gamification, I discussed what areas of your business can be gamified. Similarly, I would assume you can take a similar approach towards sustainability.
In this case, you can implement sustainability into your:
- Team and culture
- Sustainable product design
- Business strategy and brand identity
Let’s discuss each case and explore examples of green technology startups.
Sustainability: Company culture
Building a sustainable company culture means integrating sustainable initiatives into your team’s daily routine and fostering a culture that prioritizes environmental responsibility. This can involve simple changes like turning off lights in unused rooms or encouraging carpooling.
Sustainability: Product design
Sustainability can be at the heart of your products and services. Design and develop products that are inherently “green” with a core focus on sustainability. Examples include all-electric ride-hailing apps, e-bike sharing programs, or food waste management apps.
Examples:
- Forest: Verified London’s e-bike sharing service with zero-emission and powered with renewable energy.
- Blu Smart Mobility: India’s first and leading all-electric ride-hailing mobility service.
- Karma: An app that connects restaurants, cafes and grocery stores with users eager to purchase unsold food at a lower price.
- Enode: Building APIs that connect to EVs, home batteries, solar panels and other energy hardware so their customers can build green energy apps.
- Utopi: The specialist ESG technology platform for multi-tenant real estate.
Sustainability: Business strategy and brand identity
Sustainability doesn’t have to be confined to traditionally “green” industries. Consider how you can make sustainability a core aspect of your business, even if your industry isn’t typically seen that way (or even recognized as eco-unfriendly. See this example of blockchain for climate change).
For instance, while traditional banking may not be inherently sustainable, there are neobanks that strive to be “sustainable alternatives” by integrating eco-friendliness into their brand identity and business practices.
Examples:
- Helios: French sustainable banking alternative – 100% transparent and dedicated to limit climate change
- Bunq: Bank of The Free. Committed to a green, inclusive and diverse future for anyone on the planet
- Good: The search engine for a better world.
- Shopopop: Collaborative delivery platform for local commerce.
- Sunrise AI: An AI-native consumer lifestyle solution that seamlessly optimizes everyday moments for a healthy and sustainable life.
Future outlook. Green tech trends
The future outlook for the climate tech market is optimistic.
Climate tech investment has seen a dramatic increase since the Paris Agreement, with global investment rising from $418 million in 2013 to $16.3 billion in 2019.
Although there was a peak in 2021 with $76 billion, funding remained robust in 2023 with $50 billion as reported in Dealroom’sguide to climate tech.
Key trends include:
- the expansion of clean energy technologies,
- advancements in electric and autonomous transportation,
- innovations in sustainable agriculture.
Regional shifts
Europe has emerged as a leader in climate tech investment, surpassing the US in 2023. The continent's share of global climate tech VC investment reached a record high of 43%, doubling its share from 2018. Key countries include the UK, Sweden, and Germany, with notable growth in Iceland, Lithuania, and Bulgaria.
Top sectors and segments
The fastest-growing segments are related to mobility, heavy industry, and greenhouse gas capture and storage. There is also a significant focus on innovations in food, agriculture, land use, built environment, finance and energy.
- The transportation sector received the most funding in 2023 ($18.6 billion), followed by energy ($12.5 billion). Electric mobility remains a significant focus, though investment in this segment saw a decline.
- Emerging areas like hydrogen fuel startups and regenerative agriculture have shown impressive growth, with hydrogen startups growing by 111% and regenerative agriculture by over 101% in the last year.
- Climate fintech startups raked in a whopping $2.3 billion in 2022, surpassing the $1.8 billion raised in 2021 and tripling the 2020 total.
Funding stages
Early-stage funding for climate tech startups reached record levels in Europe, totaling $3.2 billion in 2023, a 3% increase from the previous year.
Breakout stage funding saw a slight decrease but remained 33% higher than in 2021.
Late-stage funding matched record levels from 2022, with $11.1 billion invested.
Benefits of sustainability. Why you should care
Embracing sustainability can significantly enhance your business's financial performance and competitive edge.
According to McKinsey’s Profits with purpose: How organizing for sustainability can benefit the bottom line, companies with high ratings in ESG factors tend to outperform the market in the medium (three to five years) and long (five to ten years) terms.
For instance, research by Deutsche Bank revealed that 89 percent of studies reviewed showed that companies with high ESG ratings had lower costs of debt and equity, leading to superior stock-market returns.
As you can read in Natalie Chalde’s article forHarvard Business School Online, there are four main benefits of sustainability in business:
- Protect your brand and mitigate risks: Implementing sustainable practices helps prevent scandals and protect your company's reputation.
- Competitive advantage: Being purpose-driven attracts motivated, skilled employees and enhances job satisfaction.
- Market growth: There's a growing consumer demand for sustainable products, increasing market opportunities.
- Collaborative impact: Working together with other companies and organizations on sustainability can drive significant positive change.
Challenge: Greenwashing
Of course, eco-friendliness in business is not without its drawbacks. Apart from challenges like balancing profitability and sustainability, one consideration that immediately comes to mind is the elephant in the room: greenwashing.
Greenwashing is a deceptive marketing tactic that companies use to make themselves appear more environmentally friendly than they actually are.
Companies that greenwash might try to mislead consumers in a few ways: by making vague or unsubstantiated claims, using misleading imagery, or highlighting a small positive aspect (while ignoring other, bigger ways they're polluting).
There are a few things you can do to avoid greenwashing: be transparent, use clear and specific language (instead of saying "sustainable packaging," say "made from 80% recycled materials."), report your sustainability efforts and get certified.
Investing in green technologies
Green technology investment, also known as cleantech investing or impact investing, is putting money into companies or funds that develop and use technologies to lessen the negative impact of human activity on the environment.
Research proves investing in green tech is beneficial. According to the already-mentioned paper by McKinsey:
- An investment of $1 in a portfolio of high-sustainability companies in 1993 would have grown to $22.60 by 2010, compared to $15.40 for a portfolio of low-sustainability companies.
- High-sustainability firms showed better return on assets (34%) and return on equity (16%).
There’s a clear trend towards sustainability as a key driver of financial performance.
In the US, socially responsible investment grew by 486 percent between 1995 and 2012, indicating a strong investor confidence in sustainable practices.
Globally, more than $13 trillion is invested in assets incorporating ESG metrics.
Conclusions. Green tech software development company
Sustainability isn't just a hurdle, it's a goldmine for entrepreneurs.
Innovations such as electric vehicles, fossil fuels replaced with renewable energy sources like wind power, carbon capture technologies, disruptive energy storage technologies, or vertical farming show how businesses can integrate environmental, social, and economic well-being into their operations and go greener.
And by doing so, they can not only thrive financially but also make a positive difference and stand out from the crowd.
Looking for software partners to build your eco-friendly digital business? Hop on a call with our team–we can help.
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