As the call for environmental sustainability grows louder, large corporations are embarking on a challenging journey to shrink their environmental footprint. This quest is far from straightforward, weaving through a complex landscape of challenges and opportunities. It's easy to assume that the primary focus for these corporations is to enhance the eco-friendliness of their operations and products. However, the reality is more nuanced. For a number of executives, embracing sustainability is not merely about compliance or operational efficiency; it's about seizing new growth opportunities - and that is a completely different context that is sometimes overlooked. Each corporation charts its own path in leveraging innovation for sustainability, making it imperative for founders and business development executives at climate tech startups to deeply understand the motivations and strategies of their potential corporate clients and design partners.
Let’s deep dive into the spectrum of strategies that corporations have when leveraging open innovation for sustainability, with an emphasis on two primary angles: Greening the Core and Driving Green as Growth.
1. Greening the Core:
Amid mounting regulatory and consumer pressure, many corporations are working to make their existing products and services more sustainable. Usually, corporate innovation officers and business unit leaders collaborate to identify decarbonization and adaptation solutions across their operations and supply chains. Greening the Core is the mainstream approach to decarbonization, well grounded in the ESG lingo. We increasingly see corporations engaging young innovative startups when scouting for climate tech solutions that address their core business and operations.
For climate tech startups, this Greening the Core logic represents a fertile ground for engagement, when they can tailor their tech solutions to specific industry use cases. Crucially, startups must address the bottom line by answering questions about customer willingness to pay a green premium and navigating the complexity of proving cost-effectiveness versus the corporations’ legacy infrastructure. Furthermore, in many cases, even when corporation executives express interest in a new climate tech solution, they must ultimately involve their relevant suppliers to embed it. This cycle creates extra challenging sales processes for young startups.
2. Driving Green as Growth:
In a more visionary approach, global corporations are increasingly exploring how sustainability can become a catalyst for growth rather than just a regulatory compliance necessity. They actively seek opportunities for new revenue streams while contributing positively to the environment. For instance, E.ON, a German multinational electric company, is seeking digitally-enabled energy solutions for its clients in the industrial and buildings segment. Their mission is to collaborate with breakthrough startups to develop new offerings for their clients. In another example, we see Ormat Technologies, a leading global geothermal energy company, investing in Luminescent, a young startup developing an industrial waste heat solution. If successful, this collaboration would help Ormat diversify and expand into an entirely new arena.
For climate tech startups, the Driving Green as Growth outlook opens doors to collaborate with a wider variety of corporations beyond their direct customer base. Startups can position themselves as enablers of growth and diversification opportunities by offering pioneering solutions that are adjacent to corporations’ core activities. In many cases, while business unit leaders might be focused on greening core operations, it is the corporate venture arms (CVCs) that have a wider mandate to invest in future tech solutions for diversification opportunities.
By identifying which climate tech mandate executive leaders have — Greening the Core or Driving Green as Growth — startups can better navigate the corporate structures and generate more successful engagement pathways with clients and partners.
By Yael Weisz Zilberman, VP of Business Development, NetZero Technology Ventures