Sustainability Objectives VS Financial Viability: A Paradox for CleanTech Startups
Climate change is no conspiracy theory; it’s a very serious threat and a reality we unfortunately face. The fire is smouldering at our door, scorching cities and countries in its path. Lytton, British Columbia, a small village of 249 inhabitants, suffered as a result of a major heatwave that reached 49.6 degrees Celsius on the thermometer, causing a wildfire and destroying 90% of the town.
And while western Canada roasts in the sun, nearly 400,000 people in Madagascar are experiencing famine, which is directly attributed to climate change. Inhabitants of Madagascar are forced to eat leaves, cacti and insects to survive as crops are destroyed by an endless drought.
"Climate change is not a problem for future generations, but of tomorrow." Michael Wehner, Climate Scientist, University of California, Berkeley.
The reality is that future projections of climate change depend on the path of future emissions.
So what exactly can be done?
As a product leader working for startups and organizations that have sustainability practices at the core of their ambitious goals, you want to achieve business success in ways that honour your ethical values as well as respect climate fundamentals. The more product features you put out there that contain innovative solutions to manage the climate risk, the more your organizations will benefit from the ripple effects of this engagement.
Luckily, CleanTech startups are keen to meet the challenges of combating climate change. But unfortunately, there seems to be a disconnect between sustainability and financial viability in developing and creating these solutions to a better, cleaner world.
Financial Survival VS Combating Climate Change
Climate science tells us that further warming is unavoidable over the next decade — and well beyond that in all likelihood. Eight major areas are particularly vulnerable to the changing climate: agriculture and food, coastal communities, ecosystems, fisheries, forestry, human health and wellness, physical infrastructure, and water.
Product leaders of startups within those areas should care about how their products fit into people's lives, working to solve real pain points and launch market-tested, innovative features that have the power to transform our world, scale our capacity to assess climate risk while generating sufficient value to achieve their next financial milestone.
Product leaders working within CleanTech startups need to deliver sustainable products through a viable monetization strategy to help private and public organizations that need to implement climate change adaptation measures (e.g. a company buying a fleet of Tesla vehicles).
Unfortunately, CleanTech startup founders who rise to meet government initiatives as well as the challenges of combating climate change find out pretty quickly that there are no measures in place to help them survive financially.
Around the world, climate change has risen to the top of many government agendas. For instance, the United Kingdom committed to a target of net-zero emissions by 2050 and proposed a ban on the sale of all polluting vehicles by 2035. Germany has also planned to cut 65% of greenhouse gas emissions by the end of 2030 and up to 88% by the end of 2040 (compared to levels in 1990).
Organizations aren’t incentivized to go with the solutions these startups have created. And despite a government’s plan to meet emissions standards, organizations could care less so long as the government is not making these solutions mandatory somehow to meet their objectives (i.e. through incentive programs, imposing bans, punitive taxes, education efforts on adopting up-to-date carbon-safe solutions etc.). Hence, the paradox of sustainability versus financial viability.
Let’s look at an example. Although it has become the world’s most valuable automaker, Tesla still has to figure out how to become consistently profitable. It takes most drivers anywhere between 1 and 15 years to change their vehicles, and many won't be thinking about buying an electric model any time soon. There’s also the issue of insufficient charging infrastructure in some regions.
The best conclusion here is that individuals (in Tesla’s case) and businesses (planning to use a CleanTech startups product) also need to be convinced that sustainable solutions suit their needs. This is perhaps the hardest part.
Mitigating the Risk of Climate Change
Here’s the thing: despite the changing landscape of public and private organization attitudes and regulatory tailwinds, those who want to retrofit and prioritize adaptation responses to climate change in ways that respect their ethical values and climate fundamentals don’t know where to start.
There are data limitations and gaps that hinder their understanding. For example, current data collection methods are impractical and often impossible as they rely on site visits, intrusive methods, or labour-intensive processes. They all look forward to improving their practices but don’t have affordable solutions to assess and promote best practices. They have limited or no information due to the absence of tools and no real solution for improving current practices.
Running a startup isn’t easy work; you forgo stability in exchange for the promise of fast growth. The solutions aren’t always obvious and success isn’t guaranteed. Product leaders within those startups need to be proactive when it comes to tying their sustainability efforts to metrics that matter. It’s more important than ever to set a viable business model with roadmap strategies that contribute to decreasing the likelihood of future climate hazards while legitimizing immediate revenue.
For example, the initial product of Tesla Motors is a high-performance electric sports car called the Tesla Roadster. The strategy was to enter at the high end of the market, where customers are prepared to pay a premium, and then drive down market as fast as possible to higher unit volume and lower prices with each successive model, all while upselling solar electricity, batteries, charging stations and insurance, amongst other things. When someone buys a Tesla, they are actually contributing to Elon Musk's master plan of achieving financial viability — they are not exclusively providing a sustainable energy product solution.
Finding the Solution
Startups with sustainability programs need to persuade customers that they are working to have a positive effect on the world, and can be useful to the worldwide community. The details and results of those programs are often at odds with their financial viability where they may not derive benefits from the cause they support.
What needs to happen is the improvement of operational efficiency of public and private organizations - increasing their ability to manage the rising levels of physical climate risk while also reducing waste.
The problem is that global warming is happening much faster than we can adapt to it. We need to redesign our homes and buildings to create cool refuges. While communities have been slowly adapting to climate change, the pace and scale needs to significantly increase in order to manage rising levels of climate risk. Adaptation is likely to entail rising costs and tough choices. We must find new innovative solutions to assess climate risk.
Thousands of physical resources such as buildings, roads, power supplies and equipment are required to power public systems and services. This interrelated infrastructure system is most vulnerable to physical risks induced by climate change. Many of the public and private organizations managing these resources will attract capital funding to inform their decision-making in response to these risks and prioritize adaptation responses.
Rising up to the Challenge
To rise up to the challenge, startups (especially CleanTech) must find commercially feasible ways to help assess climate risk and implement adaptation measures while decreasing carbon emissions and the likelihood of future climate hazards.
Meeting the climate change challenge requires both behavioural and technological change. We need more efficient approaches to quantify carbon emissions.
- Solutions to scale our capacity to assess the climate risk. For example, increasing data collection efficiency by simplifying sampling experiences, reducing sampling costs, or shortening sample processing life cycle.
- Standardization of data collection through sensors, aggregators, communication bridges and diagnostic tools.
- Ensuring traceability and offering intelligent diagnostic visualization tools to seamlessly onboard scientists, technicians, engineers, and management around a single platform — reducing risk assessment turn-around time.
- Optimizing resources and saving time through the automation of data processing
- Algorithms to provide insight on potential savings, equipment deterioration and improving safety.
- Mathematical models to identify compliance infractions and predict trends that lead to increased maintenance or failure.
- Reducing stresses and extending equipment lifespan through protective devices.
Working with CleanTech Startups
At Bain Public, we’re proud to rise to the challenge! We’ve helped a number of startups contribute to a more sustainable world: working with Blaise Transit, Wastack and others, and through our involvement in CleanTech accelerators, like Cycle Momentum. Wastack promotes a circular economy for waste and Blaise Transit helps municipalities and transit companies to better assess and manage an eco-responsible transition to public transport.
In working with these startups, we’ve had the opportunity to explore exclusive and innovative solutions that promote the development and integration of technologies designed for optimal environmental and energy management. In addition, we’ve also helped them work on defining their financial viability strategies. We’re always thinking of how roadmaps evolve while validating revenue streams.
These companies offer advanced data analytics in various industries, for the purpose of maximizing efficiency, performance, and monitoring of equipment and its management.
As we move toward building a cleaner future, lowering our greenhouse gas emissions is the only way to reduce and prevent more disasters from occurring. The magnitude of actual warming and other effects will depend upon the level at which atmospheric concentrations of CO2 and other greenhouse gases are ultimately stabilized.
The pandemic has shown that individuals cannot fight a global problem alone, but that the public is ready to follow if organizations innovate and provide leadership. So startups must act. Now!
Check out the articles below to find out more about our work with Blaise Transit and Wastack:
Thanks to Loren O’Brien-Egesborg and Paul Ortchanian for contributing to this article as well as reading drafts and overseeing aspects of its publication. Also, if you have any feedback or criticism about this article, then shoot us an email at email@example.com.
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