Small firms can seize opportunities in the move to a green economy
Business Leaders realize the environment is a key risk to the long-term health of their companies. According to the World Economic Forum’s latest Global Risks Report in January, the top three worldwide risks identified by company bosses over the next ten years are environment-related — climate action failure, extreme weather and biodiversity loss.
The urge to resurrect companies’ relationship with the environment is not always driven by altruism. There is a financial rationale — environmental threats hit a firm’s operations and bottom line. Top global companies reported $1 trillion in climate change risks in 2019.
Climate change seems to have a distinct pattern, it is more frequent, more intense and less predictable. The case of Californian utility Pacific Gas & Electric, which was described as the first climate change bankruptcy in 2019 is far from the last. Many companies have either suffered the painful effects of climate change or endured broader problems — operational, financial and reputational — and now call for urgent intervention.
The transition to a zero-carbon economy is another challenge that may make the value proposition of many businesses obsolete. The sheer scale of the challenges makes it beyond a sustainability issue.
But it becomes a business opportunity to seize for savvy start-ups, who can use their capacity to innovate and respond to environmental and social questions by adapting their business models.
The potential value of sustainable business opportunities is estimated to be $ 2.1 trillion, which will be 7 times the cost of setting up new green systems, according to environmental and business data group CDP.
Startups are now engineering their business models to ensure that climate mitigation does not come as an afterthought.
Environmental challenges such as water scarcity and soil degradation motivated many startups to design smart solutions with a clear economic and environmental mandate.
Desert Control is a startup with head offices in the UAE and Norway, which patented its liquid natural clay, designed to restore and protect soils while reducing water usage in agriculture and green landscapes. It was listed on the Euronext Growth Oslo exchange last April, raising around $23 million and valuing the business at $54 million.
Among the environmental challenges, plastic waste often makes headlines. By 2050, there will be more plastic than fish in the ocean, with the current recycling rate of these synthetic materials running at less than 14 percent.
Several startups have adopted circular economies, where they take responsibility at the design stage on how to repurpose their waste and their products at the end of their lifecycles.
This movement is driven by the rising voice of conscious consumers, pressure from Nongovernmental organizations and regulators as well as the acceleration of national and international agendas on climate change.
Another approach is the rescue model, where for example, in the food and beverage industry, many startups minimize food loss and divert waste from landfills. This is done by rescuing everything from ‘ugly’ — or, oddly shaped — vegetables, to cutting excess stock in food outlets, through smart applications designed to sell this slightly less than fresh stock at reduced prices.
With high waste-per-capita records in the region, the issue of waste becomes an opportunity for many Middle East and North Africa startups to approach the problem at different stages of the value chain. Some startups focus on reducing waste at source by designing alternative packaging from bio-based materials making them edible. Others use artificial intelligence technology to sort, track and assess the quality of recyclable goods.
Startups are part of an ecosystem, where linking them with other stakeholders will boost their role as catalysts for systemic change. An interdisciplinary approach bringing together startups alongside research centers and large corporations, is vital in accelerating their environmental contribution.
• May Barber is a LEED Green Associate Architect and brand management adviser focused on building brands with purpose.
• Mourad Ben Ayed is a seasoned adviser in finance and strategy focused on purpose-driven businesses and an educator at the American University in Sharjah.