Researchers are agreed that the rapid growth of the global economy has accelerated the degradation of the environment. Without pointing fingers, it is apparent that governments have chosen their side in the fight. At times, they do not seem to be fully engaged in finding solutions for a better future.
As a result, private actors get to hold the leader’s torch. Large corporations, like Nike, Starbucks, Johnson & Johnson, and IKEA, have established sustainability teams within their structure. Whether companies are trying to glaze over decades of neglecting human rights or genuinely working to help the planet, the voices of activists and scientists have been heard.
Sustainable startup environment
Big companies that subsequently implement sustainable practices have drawn a great deal of the public’s attention. Meanwhile, there has been an increase in startups that have sustainable development as part of their core agenda from the start.
Since businesses play a significant role in the fight for the environment, one must ask what are the criteria of a successful business? If immediate revenue and short-term profitability is the answer, then sustainable startups are in trouble. Regrettably, statistics show that such startups are in a disadvantaged position.
Many companies face resistance when finding necessary funding, as sustainability remains a dark horse. Banks tend to be reluctant in giving loans to businesses in the area of sustainable solutions. Some investors may consider a sustainable focus to be dangerous because of additional financial burdens.
Eventually, competitions, venture capital funds, and accelerators remain the few options for sustainable startups. Even then, the environment for new sustainable businesses is still far from perfect.
Sustainability still minority
According to the list of companies supported by Y Combinator, one of the leading accelerators in Silicon Valley, only 8 % of 250 companies funded in 2018 had sustainability as part of their work or prescribed in their agenda. Although this figure cannot be taken as a general rule, statistics from the accelerator that funded Reddit and Airbnb remain a good indicator.
The reasons for the relatively low numbers can only be speculated. Perhaps the investors do believe in the importance of protection of the environment, but do not believe in the profitability of a sustainable business. It could also be that they simply do not find such projects interesting.
Hope for sustainable startups
Even after funding has been secured, the fight for sustainable startups is not over just yet. One of the biggest challenges is securing the brand reputation against conventional, cheaper, known products. Sustainable businesses immediately drop behind when they enter the market, and bringing confidence and recognition to the product becomes a big mission.
However, there appears to be some hope. Sustainable solutions slowly gain a reputation in the market. While the already established companies will have to adapt their business culture to such changes, startups have the benefit of shaping their culture from scratch.
Another positive sign for the startups is the growing number of incubators and programs in Europe and the US, focusing on sustainable development in a startup environment. Such initiatives remain the main source of support for new businesses.
One of the prominent examples in Europe is Danish-based company GREENTECH CHALLENGE (GTC). The three founders left their jobs in Malaysia to start selling Irish coffees, in order to support their project while hoping for a grant from private actors. Grants came, and so did partners.
Today, GTC has helped hundreds of startups and expanded its influence outside of Denmark. Upcoming events are taking place in Stockholm, Paris and Shanghai.
GTC is a four-day programme for new sustainable businesses. During the four days, the participants have an opportunity to learn from professionals in the areas from intellectual property law to PR or tech, and eventually find new investors. On the average, each participating company raised €500 000 euro from investors.
Empowering individual startups
The founders emphasise that GTC is not an incubator. Rather, it is an intense learning course which lets companies make their own decisions and effectively try to shape the market by themselves.
Even though a small preference is given to the post-revenue, scalable, sustainable companies with the first round of funding secured, GTC is proud of its diversity of participating startups.
“We've had a single 2-man team and we've had teams above 30 people. In terms of revenue we've had some in the pre-seed area without customers and companies with more than €200 000 per month participating”, said Martin Peterson, Co-Founder of GTC.
It is encouraging to see how initiatives like GTC are trying to find new ways to help to save the planet. In many cases, startups will benefit from learning more than they might expect to learn through being a part of an incubator. GTC is keen to ensure that each participator will not lose its individuality.
Future for sustainable businesses
One might wonder how small businesses will be able to have an effect on the environment when 70% of pollution on Earth comes from large corporations. Peterson is aware of such concerns. However, he believes that startups can play an important role in changing the behaviour of larger companies.
“While they might not replace them as producers, they can certainly provide the technology that makes existing industry much more sustainable”, he explained. Peterson went on to conclude -
“That is why GREENTECH CHALLENGE is increasingly focusing on connecting the different players in the eco-system: the new innovations with the established players.”
Having an influence
As global corporations focus more on the profits and influence on the market, sustainable startups may step in and have a real influence on sustainable developments. It may be premature to assume that large corporations will know more about sustainable solutions simply because they possess more resources.
Startups develop new technologies. From innovations in renewable energy to the implementation of organic materials in the clothing industry. It is possible that, as the market for sustainable developments expands, more global companies will turn to sustainable startups for new ideas and innovative technologies.
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