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Guestpost by Liza Degtyareva
The sustainable start-up space has undoubtedly been growing over the past decades, not only due to the vast market opportunity green tech solutions hold amid the rising consciousness of consumers, dropping renewable energy prices and climate policies, but the imperative to make all businesses sustainable to avoid climate catastrophe on Planet Earth.
According to a 2021 McKinsey report “92 percent of executives say that new businesses built in the next five years will address sustainability to some extent—and 42 percent expect to put sustainability at the centre of their new businesses”, but what that really means and how that will shape the eco/green/sustainability start-up scene?
As an impact strategist and a business owner myself I can fully relate to the struggle of start-ups when it comes to balancing purpose and financial survival. Fierce competition for funding may push impact start-ups to compromise on the way they would like to achieve their mission, often leaving sustainability last on their list. The dilemma is real as purpose gets diluted by market pressure, but what if we turned that around? In this post we will explore how a start-up can truly embrace sustainability beyond their products that serve the transition to a sustainable future, how purpose and holistic thinking can actually make them future-proof.
A major shift is here, we are on the verge of the old and the new paradigm whether we think about energy transition, digital transformation or societal restructuring, entrepreneurship historically facilitated these transformations with disruptive technologies, but today they need to see beyond market opportunity and look at the interconnectedness of elements by embracing systems thinking. Incremental innovations like energy efficiency solutions are only supporting the business as usual, they may reduce the negative impact of an outdated system (not downplaying the role of it), but in order to thrive in the new world companies need to think beyond what they know today and be able to navigate through uncertainty. Applying the Three Horizons Framework is an invitation to identify how well a product or service will adopt and shape the future, the idea is to move from status-quo Horizon1(H1) type of innovations to H2+ and H3 innovations that lead to structural change that is responsive to changes and entails “not-knowing”.
3 horizon thinking from Bill Sharpe (2013)
In a sustainability accelerator like the .wave most start-ups fall into the H2 ‘world in transition’, the technologically and economically feasible ideas that disrupt food production and energy systems through decentralised grids enable adaptation to a more uncertain future. These unique start-ups are the bridge between the old and the new narrative, however without challenging the cultural narrative there is a risk that H2 innovations would fall back being H1 degenerative businesses, which brings us to the second point: purpose and culture.
Building a start-up or any company on a strong purpose is a familiar concept, since Simon Sinek’s Golden Circle most start-ups might be aware; to successfully evolve as a company they need to act from their Why, and this Why for sustainability start-ups is even more crucial when it comes to transforming the world. The way to overcome the early-day struggle of resource scarcity is establishing a culture with a long-term vision that conveys a bold, transformative picture (remember H3 innovation?) of the future. Once the Why is clear the start-up can integrate it into the organisation and its wider ecosystem so the culture could evolve around it. It takes consistent work and effort to embed the vision into the DNA of a company, but once it is done companies can benefit from greater organisational cohesion and resilience. Genuine purpose breaks through crisis and greenwashing, since there will be no need for manipulation of customers, it is the only way to resiliency and authentic leadership. So my invitation is to ask yourself why you are doing what you are doing, what your big vision is and why that matters to you so much, then see if your actions and culture align with your Why.
While the world is focused on energy transition (EU Green Deal) and reducing greenhouse gases in the atmosphere I invite you to zoom out and see what sustainability actually means beyond carbon. The climate crisis calls for transformation of societies, which if translated to business would mean a new way of creating value. The British regenerative economist, Kate Raworth’s Doughnut Economy framework provides a visual picture of how we should think about sustainability, operate in a safe space within the planetary boundaries while ensuring the social foundations. One way start-ups can adopt this model is through the exploration of their intended impact on their Communities, Employees and the Planet while ensuring a Governance that is aligned with sustainability and regenerative principles. To facilitate that at .wave we conducted a 4D Sustainability Canvas workshop, where the 7 start-up teams had a chance to assess their impact across 4 dimensions and discuss potential actions to address some crucial topics. One may argue that early-stage businesses have more urgency to find paying customers and build a sound business plan to pitch to investors and not so much attention is needed for inclusion, the well-being of the team or transparent supply chains. But the truth is that starting to think about these questions early will not only save the start-up costs on the long run, resulting in higher employee retention, customer loyalty and local resiliency, but is inherent if they want to become a company fit for the 21st century.
How did we actually start assessing impact using the 4D Sustainability Canvas?
First we envisioned a future beyond our lifetime and defined the legacy we would like to leave to future generations as individuals and as companies. This is also called the “Acorn Thinking”, an exercise that helps seeing the big picture and reminds us of our purpose here on Earth and that innovations created today will impact future lives. Following this quick visionary exercise we dove into understanding the value chain of each start-up, what the inbound and outbound materials are, what suppliers they work with, how things get from A to B, in case of services, what infrastructure and platforms are required to run the operations. With this we set the foundation for further assessment, but before we started “canvasing” we had to identify the main stakeholders that form the start-up’s ecosystem, with this we understood who at what level is involved in the start-up’s present and future.
Finally, the 4D Start-up Sustainability Canvas raised questions so the teams could brainstorm around how:
Once the start-ups came up with some of the actions, they could prioritise them using a Materiality Matrix, and ideally implement the ones that can elevate their impact and make them resilient in the uncertain future and lead the way to transformative innovation.