5 December 2022
Sustainability is a social, economic, and political priority. However, the fact that we need technological progress to get more results is still not stressed enough. As history shows, start-ups and venture capital play a central role in innovation. The tech solutions of these VC-backed enterprises represent the digital backbone for future sustainable models of consumption and production. Here are the most promising sectors.
By Stefano Guidotti, partner of P101
South Pole was founded in Switzerland. It operates in 50 countries, has 23 branches and 700 employees. The company is a world leader in the sector of climate change mitigation. It is a growing industry: over the last seven years, 78 “green” start-ups have been valued more than 1 billion dollars. Among them, 43 work in in mobility, and transport; 13 in agriculture, food, and territorial protection; 10 in mechatronics and logistics; 10 in goods production; 9 in energy.
International finance and venture capital are investing on green tech start-ups, as they provide decarbonisation solutions for the manufacturing industry. It’s a wide market encompassing many business compartments: energy efficiency, materials recycling, circular economy, and others. It can also involve logistics and supply chain solutions, as well forms of compensation, such as certified carbon credits.
Green tech is worth almost 90 billion dollars
The latest State of Climate Tech Report by PwC shows that, between 2020 and 2021, the invested capital in green start-ups grew by 210%, reaching 87,5 billion dollars. A trend that seems to be continuing also in 2022.
In Italy, by the end of 2021, there were 486 start-ups with a significant social and environmental impact (according to the Social Innovation Monitor by the University of Turin). This figure had increased by 28,2% from the previous year when it was 349. If we compare this number with the total number of Italian innovative start-ups, we can see that it’s a small percentage: the environment-friendly enterprises were 3,1% by the end of 2020 and 3,8% in 2021. Nevertheless, this figure is growing. But we need regular and substantial financing, and a strategy.
Sustainability means digital progress
Surely, there is great attention to sustainability nowadays. However, the correlation between this subject and the ongoing digitalisation process is not underlined enough.
More and more “green” business prospects are developing vertical tech solutions that are the backbone for future sustainable models of consumption and production. Models that will also be more resilient to climate change. The talents, entrepreneurs, and professionals leading this trend believe in these epochal cultural challenges. They are creating so-called “purpose-driven” companies, whose business missions include improving the social and/or environmental status quo and which are, incidentally, also very attractive for young and bright talents.
Innovative green solutions: energy
The energy industry is fundamental in the process of ecological transition, so much so that it was the main subject of the COP27 animated discussions in Sharm El Sheik. In Europe, and especially in Italy, innovating the energy industry is of relevance for environmental sustainability and energetic autonomy (which is necessary to depend less and less on gas imports).
Ecological transition clearly means renewable energy sources and decentralised production. However, both are, by their nature, intermittent and cannot cope with a constant demand of energy. So we will see a consistent increment of energetically independent communities which however will need to be connected to central distributive systems. Fun fact: Italy was one of the first countries to legislate on the matter of energetic independence.
To match supply and demand we will need to develop digital solutions that can manage energy flows in a decentralised way. Furthermore, we will need to create tools that can incentivise and monitor users production and consumption of energy, so as to allow them to be producers and suppliers as well as consumers. Some companies are already developing tech solutions that work to create this scenario: a few examples are Spectral Energy, Energy Web, and Power Ledger.
Mobility is another industry that is currently experiencing a significant green evolution. The European Union has further incentivised it by advocating for a full electrification of the automotive industry by 2035. Strongly motivated by new laws, customs and propriety models are radically changing, and the major players are starting to consider new paths.
Our experience with the start-up company Bipi is a clear example of this trend. Bipi has developed the concept of “Car as a Service”: users consider vehicles not as proprietary assets but as a service. Renault, one of the major automotive groups in the world, understood that this new perspective could be a useful tool for its development strategy and acquired Bipi in 2021.
As mentioned, a relevant evolution of the mobility industry is that of the technological transition from thermoelectric engines to electric vehicles (EVs). A tight schedule pushes this transition. As this process requires the development of an infrastructure to charge electric vehicles, we believe that it will bring about relevant innovation.
Indeed, the electrification of private transportation and commercial fleets will be an area of development where innovative companies will play a key role. For instance, they are creating new solutions for battery replacement and charge (see ReeFilla); they are designing new sharing and flexible rental solutions (Bipi, FlexCar); they are developing a more flexible and environment-friendly way to organise business fleets (see PandaGo). Furthermore, they can explore further the integration between micro-mobility and public and private mobility.
EdTech and corporate sustainability: a triple-digit growth is expected
Non-financial performances (i.e., the environmental, social, and governance ones) are increasingly impacting corporate access to credit, for this reason companies are looking for solutions that can make them more sustainable. So, since the corporate world has expressed great interest in services related to sustainability, we believe that this kind of EdTech will have a triple-digit growth.
Indeed, many edTech companies are developing technological solutions to measure and monitor emissions, reduce a company’s energetic footprint and pursue carbon offset. Additionally, edTech start-ups are developing apps to raise awareness and educate companies’ employees and clients on sustainability.
The corporate world will be more and more interested in finding new ideas to reduce direct and indirect emissions. This means solutions that impact their entire value chain: from the provision of materials to how their final consumers use their products and get rid of them. This is already happening: the Italian start-up AdWorld works in this industry and has become an official partner of the UN project “Act Now”.
Monitoring carbon footprint and work on carbon offset
Nowadays, software solutions allow companies to monitor their environmental footprint constantly and accurately, with different complexity levels and targets (from big corporates to SMEs). Some established companies, like Planetly (acquired by One Trust in 2022) and CarbonSink (acquired by South Pole) are working on these solutions, as well as some star-ups, such as A-Planet and Ecomate.
Besides monitoring and reporting solutions, some companies are working on the reduction of their carbon footprint and on projects of carbon offsetting (which means financing projects in developing countries through Carbon Credits). These projects often include external players that, thanks to their digital native approach, disintermediate complex production chains and guarantee greater transparency and traceability. Among them, we find very ambitious and promising realities like Green Future Project and Up2You.
All these projects and solutions reveal a growing attention towards digital solutions, which will allow for an efficient – and hopefully fast – transition to a more sustainable world. Many factors make this “green wave” increasingly powerful: from national and international legislation to consumers’ demands, to the financial world. We want to invest on businesses that can ride this wave and contribute to creating a sustainable infrastructure for our future.