Cross-posted from Bullfrog Power
With high-profile companies announcing net-zero targets seemingly every week, you’d be forgiven for thinking that the private sector is leading the charge to reduce carbon emissions. However, the 2021 S&P Global Corporate Sustainability Assessment complicates that notion: while the majority of the 30 largest companies by sector have made net-zero pledges, about two thirds of companies surveyed haven’t set climate targets at all.
If we’re to limit global temperature rise to 1.5°C, the Intergovernmental Panel on Climate Change has called for a 45% reduction in CO2 emissions by 2030 (compared to 2010 levels). With that date looming large and most established businesses failing to even set emissions reduction targets, let alone act on them, it’s clear that companies need help.
One organization’s pain point is another’s business opportunity, and entrepreneurs are flocking to this emerging sector. Cleantech ventures are receiving more funding and publicity than ever before, but they’re also on a tight deadline to get their products and services to market in time to help achieve our 2030 targets.
Cleantech ventures are receiving more funding and publicity than ever before, but they’re also on a tight deadline to get their products and services to market in time to help achieve our 2030 targets.
We spoke to three CEOs and Co-Founders from Earth Tech, our 6-month cleantech accelerator, about the current state of cleantech and how startups can help get large companies to net zero.
- Sam Anderson is Co-Founder and CEO of CarbonGraph, a digital platform that businesses use to calculate and share their products’ carbon footprint.
- Cody Austin is Co-Founder and CEO of Digital Carbon Bank, a blockchain-based carbon offset provider that aims to make more transparent, credible offsets.
- Gautam Bakshi is Co-Founder and CEO of 15Rock, an analytics platform that helps companies and investors get clear climate transition data.
Why aren’t companies doing more to reach net zero?
A lack of transparent, reliable, and affordable sustainability data is holding many companies back from setting or achieving net-zero targets. After all, you need to understand a problem before you can begin to solve it.
Gautam Bakshi noted that internal and external reporting are among the biggest challenges that large companies are facing. “The 15Rock team asked investors what was missing from other ESG products,” Gautam said. “They replied that climate goals were easy to find, but climate progress was not. We’re focused on building an action-oriented platform that gives companies and investors meaningful insights, not empty promises.”
Currently, crucial data about a product’s carbon footprint or climate-related investment risk can be more expensive than companies believe it’s worth. Some startups are making headway by reducing the price of information and helping organizations acknowledge the true cost of unsustainable business practices.
Sam Anderson shared that it currently costs about $100,000 to calculate carbon emissions from a single product, like a pair of shoes. “That cost makes it impossible for a company to credibly share their product’s carbon footprint,” Sam said. “Even if they can afford it, there’s little to no financial incentive to do so. CarbonGraph aims to dramatically reduce the cost of measuring carbon footprints. Once it becomes the norm, consumers, companies, and governments can create financial incentives for the most sustainable products on the market.”
Poor-quality or missing sustainability data can also expose organizations to greenwashing scandals. Cody Austin pointed to companies that end up in the news for buying dubious carbon offsets. “Digital Carbon Bank’s product was born out of frustration with the current market for offsets,” Cody said. “We use credible hard-tech measurement and greenhouse gas accounting to validate emissions reductions.”
If companies are going to make the necessary emissions cuts this decade, they’ll need a clear, affordable picture of their carbon footprint, trustworthy ways to make and validate emissions reductions, and reliable ways to calculate ROI and communicate their progress to stakeholders. Cleantech startups like 15Rock, Digital Carbon Bank, and CarbonGraph are coming to the rescue, but who’s supporting the startups?
What supports do cleantech startups need?
In their State of Climate Tech 2021 report, PwC reported a record-high US$60bn of climate tech funding in the first half of the year. However, investment was disproportionately allocated to proven technologies and business models with lower total emissions reduction potential. If we want to unlock the full potential of cleantech, we need better supports for early-stage startups.
If we want to unlock the full potential of cleantech, we need better supports for early-stage startups.
Cody called for more early-stage investment, more corporate partnerships with lower-maturity companies, and more government funding. “Entrepreneurs also need access to clients who are prepared to take on some risk for using new technology,” he said. “Corporate partners who genuinely want to help startups succeed through piloting, early product testing and acquisition, and capital support would be great. The efforts by Shopify, Stripe, Meta, and others are great examples.”
Gautam stressed consequences for bad actors in addition to more direct measures for ventures. “Startups need help to quantify the benefits of new technologies and to have solid go-to markets,” said Gautam. “We also need help encouraging companies to change. Doing good may not be enough motivation – we need to make sure there’s a cost for companies to not state and hit their goals.”
Sam wants to see more consistent support for startups. “The rapid influx of venture capital into cleantech and the raft of new legislation and public commitments by governments and companies are both important tailwinds,” Sam said. “However, these forces are fickle. We can’t factor in that help if we can’t depend on it.”
Can startups save us?
Some critics fear that pinning our climate hopes on emergent technologies is a dangerous gamble at best. At worst, depending on unproven solutions is distracting us from using the climate tools we already have.
In truth, we need to take full advantage of existing and nascent solutions if we’re to meet our Paris Agreement targets. The IEA’s Net Zero by 2050 roadmap predicts that by 2050, nearly half of emissions reductions will come from technologies that are currently in the demonstration or prototype phase.
The support that we give cleantech startups today will pay huge carbon reduction dividends in the coming decades. Entrepreneurs are essential to larger companies’ net-zero plans — it’s time for established businesses to help them in kind.
Earth Tech is led by Climate Ventures, an initiative of the Centre for Social Innovation and Foresight Canada, with education and coaching provided by the CSI Institute. It’s made possible through the generous support of the RBC Foundation, the Peter Gilgan Foundation, and Bullfrog Power.