Building Impact Startups: How to authentically address sustainability challenges
Building Impact Startups: How to authentically address sustainability challenges
Words Simon Lovick
September 20th 2021 / 10 min read
Consumers on the most part understand the devastating implications of climate change, and there’s no doubt a collective will to take action. But often a huge gap exists between the intention to live more sustainably, and the realities of the products and services available. Startups who are successfully able to address these challenges and provide useful and effective solutions to consumers are well positioned to drive societal change—and will resonate with investors. Climate tech companies in London last year alone attracted £1 billion in venture funding.
But authenticity and credibility around your values is everything. It’s not just enough to say you’re ‘sustainable’ or ‘impactful’. The fact there’s even a term for doing it badly—”greenwashing” —demonstrates the number of brands and companies who fall short of that.
So what does it take to build a venture that authentically addresses sustainability challenges? We break down the methodology behind building sustainability into the core of a business, including what metrics you can use to measure impact, what green investors look for, as well as interesting themes and areas to develop in.
Identifying sustainability challenges: key areas for founders to target
Maybe you dream of starting the next game changing impact venture, the next Bulb or Beyond Meat. So where to start? Given the widespread impact of climate change, there’s a vast range of sustainability challenges for startups to address.
One way to start is by looking at the UN Sustainable Development Goals (SDGs). These are 17 integrated goals identified by the UN in 2015 as the major challenges facing society around sustainability. These range from social problems like gender equity and education, to environmental challenges like access to clean energy and responsible consumption and production. You might also want to identify areas that have the highest carbon emissions, to identify where you’re able to have the highest impact.
Within these, it’s worth considering gaps in supply and demand around particular issues. There’s a huge opportunity for founders to target areas where existing solutions don’t quite match up to enthusiasm or interest around a particular sustainability challenge. Technology startups in particular have the potential to offer far-reaching accessible solutions for consumers looking to change everyday behaviour.
Through our partnership with G-Force, a sustainability seed fund based in Bratislava, we’ve identified five key challenges that we’re looking to invest in solutions for.
Building solutions that challenge traditional linear business models—from sharing platforms to circular supply chains.
The market opportunity: Annual global investment in circular economy initiatives adds up to $1.3 trillion, while its predicted 2 million new circular economy jobs will be created by 2030
Find out more about our circular economy investments here
Sustainable housing and manufacturing
Reducing inefficiencies in housing and manufacturing, building products that are less wasteful and last longer
The market opportunity: Plans are being put in place across Europe to build sustainable housing—in the UK, the government pledged £3.6 billion to retrofit old housing, and announced plans for a Future Home Standard which will ban fossil fuel heating for new homes
Carbon/methane capture and storage
Technologies that capture greenhouse gases before they enter the atmosphere
The market opportunity: The global carbon capture and storage market is predicted to reach $9 billion by 2027, and will play a crucial role in reaching global emission targets
Sustainable food/feed production
Introducing production methods that are non-polluting, don’t expend natural resources and non-renewable energies, and are economically efficient
The market opportunity: A number of sustainable food trends are capturing the market, from sustainable or reusable packaging, to upcycling foods, to blockchain-powered accountable food chains
Ensuring that travel and transport is low carbon-emitting and efficient
The market opportunity: The mass electrification of transport is well underway—electric vehicle (EV) sales increased by 40% in 2020—with a similar wave of innovation set to hit public transport, trucking, and last-mile delivery
Other areas to target could include:
How can you build sustainability into your mission?
Deeply research the problem
When you’re tackling sustainability challenges, it’s important to deeply understand the scale of the problem that you’re trying to address.
Tessa Clarke, co-founder of food sharing app OLIO, says that while she had an awareness of food waste being a problem, research immediately verified the scale of what she was taking on. These uncovered alarming statistics—a third of all food produced globally goes to waste—that affirmed the need for a product like OLIO . You can read more about Tessa’s story as a founder here.
Research can also guide the direction of your business, especially given the ambiguity around climate solutions. When Isabella West founded clothing rental platform Hirestreet (forerunner to her latest business Zoa Rental), she found it difficult to decide between approaches, as well as which sources to trust. “There’s a large grey area around what ‘good’ looks like,” she says.
This led to her putting together a Carbon Savings Library, a library of over 50 sources and insights into different types of carbon models and high level takeaway points from each source. This has proved invaluable in keeping abreast of the science, and being able to quickly refer back to data.
Clearly identify and outline your mission and values
From the outset, it helps to have a clearly defined mission and set of values.
Cat Jones, founder of flight-free sustainable travel company Byway, says outlining the vision, mission and values of the business was the very first thing she did. Purpose, Cat confirms, has always sat alongside profit during the decision making process. “This process helped us really think about the values that were going to drive our decision making,” she says, “Our values inform how we hire, which partners we chose to work with, and what to prioritise.”
“Our values inform how we hire, which partners we chose to work with, and what to prioritise.”
It also underlined their commitment to environmental and social objectives, as well as commercial goals. This helped tremendously when joining the Founders Factory venture studio, demonstrating that Byway wouldn’t make particular commercial decisions that other companies might choose.
“Many travel businesses have their eye on profit margin at all costs, prioritising partnerships with big establishments and chains. We don’t do this,” Cat says. Instead, she opts to work with local, independent businesses who Byway believes make longer term, more sustainable partners, and who further Byway’s social goals of combating over-tourism and spreading economic opportunities from tourism over a wider area.
Know what your expertise is, and be aware of your limitations
There’s no point getting paralysed through ensuring that each and every decision is as sustainable and impactful as possible: you’re far better off acknowledging that there’s a limit to what you’re able to achieve, and focusing on that area of expertise.
When building a rental model, Isabella struggled to find the most sustainable transport solution. Ultimately, she realised that she couldn’t completely reinvent the logistics infrastructure in the UK, and instead spent time figuring out how to make the biggest impact within the existing framework.
“Done is better than perfect,” Isabella says. “Think about what is the best solution you can do which makes your inherently strong and sustainable business model work.”
Make sure it’s accessible
One thing that’s often lost in the noise of creating sustainable businesses is accessibility. Ask yourself—is your product or service affordable to people at all price points? If not, you’re missing out on driving change in a large segment of the market.
Hirestreet follows a similar model to well known rental platforms like Rent the Runway. While the latter rents out clothing from designer brands such as Gucci and Ralph Lauren, Hirestreet stocks clothing at a much lower price point, from brands like Asos.
This has forced them to navigate an awkward space, where you’re engaging with exactly the unsustainable fast fashion brands that you’re looking to challenge. But given that this is the direct alternative for their customers, they needed to offer a rental solution for these products in order to drive change for that market. There’s no point in them stocking a Gucci dress which would be out of the price range for their target audience.
Pay attention to language and messaging
Language and messaging are so important when it comes to outlining a sustainability problem and effectively communicating your solution to that problem.
John Marshall, CEO of the Potential Energy Coalition, outlines some of key strategies for talking about climate change in a way that is engaging and effective:
Use plain, obvious, and universal language.
Terms like ‘carbon emissions’ and ‘net zero’ sound like they come from a science book, while phrases like ‘two degrees warmer by 2050’ are hard to actually comprehend. Use tangible terms—”pollution blanket”, for instance, is easy to picture and evokes a real reaction. Words like “irreversible” have a similar impact.
Create deep personal connections.
Show that climate change is something that will have an individual and personal impact on people, and incorporate this in your messaging.
Tailor your message to different audiences.
You’ll resonate far better if you adapt your communications to individuals to show how it impacts them. Many people think that climate change is an issue for environmentalists, so it’s important to show that it’s everyone’s problem.
Build with a critical mindset
As with building any business, it’s important to approach every decision with a critical mindset, and to constantly ask what you can be doing better. At Byway, Cat is adamant to ensure that every member of the team feels encouraged to challenge decisions that are being made. This means the business is constantly driving to maximise the impact it’s having.
B Corp Certification - what’s the value?
Applying for a B Corp Certification has become a popular way to incorporate sustainable and socially conscious practices from an early stage and to display your green credentials as a business.
There are two parts of the B Corp Certification process:
This is the assessment process, which measures how your practices stack up against their standards - everything from operations, to employee engagement, to outcomes and outputs
Commitment to the “triple bottom line”, borrowing existing language from the UK Companies Act
Demonstrate commitment to making a positive material impact on society and the environment, as well as considering all stakeholder interests (shareholders, employees, suppliers, society, environment)
For founders, the B Corp certification is a helpful way of introducing high standards at an early stage. The assessment provides a strong roadmap for startups, not only measuring how you are currently performing, but clearly signposting what you can be doing better.
Cat Jones highlights the benefits that Byway has seen as a result of the B Corp process. For the assessment, it meant she invested time and energy into things that she probably wouldn’t have otherwise thought about. From a legal perspective, it’s codified their commitment to society and the environment. “For my team, it instilled a lot of confidence that I, as the director, will prioritise those things; and for me, it has given me confidence that as we bring in other investors and directors, they have to sign a document saying they agree to this too.”
You’ll join a community of other B Corp certified companies, gaining access to forums, working groups, and other community spaces to share knowledge and best practices. B Corp UK is also launching B Local regional hubs, grouping together founders to engage on a local level.
How can you measure impact?
Understanding the impact you are having, and how effective you are at delivering on your mission, is part of the process of building an authentically sustainable business. But measuring impact is complex, and will look different for every startup.
Tie KPIs back to your mission and goals
Your KPIs should closely reflect the mission that you’re building towards. Researching the problem and understanding where you can make an impact will help you to define these KPIs.
Byway measures impact by referring back to the three mission objectives of the business. For each goal, they’ve identified a number of metrics that demonstrate the progress they’ve made in that area—some are quantitative, others are qualitative (given that certain aspects of driving behaviour change around travelling aren’t measurable). This template provides a useful way of ensuring success remains mission-focused.
Manuel Antunes, from early-stage impact fund Mustard Seed MAZE, says it isn’t necessarily an issue if an impact business hasn’t yet identified their KPIs by the time they’re speaking to investors. At Mustard Seed MAZE, one condition of their investment involves joining a impact workshop through which startups can hone in on their mission and identify the right metrics by which to measure success.
Constantly capture, monitor, and review data
Capturing and drawing upon large amounts of data is a huge asset to building an authentically sustainable business, and will help you to stay driven by your mission and values. Collecting data from day one will help you clearly identify the impact you are having, or will have, which should then drive your decision making.
Isabella reveals the useful process she went through at Hirestreet of mapping out the consumer journey and measuring emissions at each stage of the journey, and then comparing it to the impact their model would have:
For a normal piece of clothing:
70% of emissions take place at the production stage
Between 12-to-20% takes place in the delivery (depending on whether it’s bought online or in store, and whether it’s returned or not).
For rental clothing:
That 70% is split between up to 20 wears, as opposed to just one
Delivery increases (for each rental)
Ultimately, this will prove useful for measuring the long term progress of your startup—to see whether you’re taking steps forwards, and to identify if you’ve taken steps backwards.
Gathering data and publishing it will make it easier to shout about the impact you’re having, which will only positively impact your business and other climate-led startups. “There’s such a lack of transparency, uncertainty, and intimidation around climate change solutions. People are often scared of shouting about good things because they’re scared of being accused of greenwashing,” Isabella says.
After the recent publication of the IPCC report on the status of climate change targets—unveiling many shortcomings and the drastic need for action—as well as the impending COP26 summit in November, never has it felt more timely for entrepreneurs to build authentic, impactful businesses.
Marian Gazdik, founder partner of the Founders Factory G-Force partnership, underlines this demand. “It has never been more important to support the entrepreneurs and ventures whose technology based solutions have the capacity to relatively fast alter the course of our planet’s future, and who can deliver a cleaner, safer future for generations to come.”
Looking to grow your own impact venture ?
Think you’ve got an idea for the next game-changing technology to solve pressing climate challenges? Find out how to apply to the G-Force sustainability seed program here.Apply Now
Simon Lovick is the Content Manager at Founders Factory. He's a journalist working in business and technology, with a particular focus on the startup world. He graduated in Politics from the University of Edinburgh.
News from the Factory Floor
The Fintech Briefing: Everything you need to know about cryptoassets
Sarah Kocianski, fintech expert and our strategic insights lead, breaks down the opportunities for founders in cryptoassets
Could psychedelics and technology solve our mental health crisis?
Nick Von Christierson, CEO and founder of Woven Science, explores how psychedelics could transform our approach to mental health treatment
Founders Factory Investor Showcase 2021: In summary
A brief summary of our November Investor Showcase, featuring fourteen exciting startups from our portfolio