Addressing Climate Change (CC) through business-based solutions is a well-recognised necessity, as has been highlighted in the recent IPCC Report (2022), stressing the need to move from science to solutions and to implementation. According to Averchenkova et al. (2015), there is a need to engage businesses to tackle CC, as this sector has a great potential to finance projects, develop technologies and innovations, deploy these solutions world-wide, and enhance the scale and effectiveness of climate change measures.
For Gregori & Holzmann (2020, p. 1) entrepreneurs “are considered to be key actors as they develop and implement financially viable and innovative business models that create positive impact”. Complementary, digital technologies (DT) are already been employed by entrepreneurs to address key sustainability challenges, not only through technology innovations, but also through the development of business models (BM) that provide a new purpose to the innovations (George et al. 2019).
Thus, the research question addressed is: What are the main challenges faced by data-driven climate change start-ups in relation to the value offering?
This research is based on semi-structured interviews with start-ups managers and secondary data. 25 interviews were carried out and lasted between 30 and 45 minutes and were conducted via Zoom. The questions included: general aspects, strategy, value proposition, performance, technology & barriers, and nature-based solutions. NVivo 12 was used for the thematic analysis of the qualitative data that was generated.
The participating companies were start-ups1 based in the UK and seven other European countries, and were selected based on six criteria, including: companies with data-driven value proposition, oriented to tackle CC, service companies (B2B or B2C). Table 1 summarises the 25 organisations that were interviewed.
From the preliminary analysis, three key challenges can be highlighted: scale, transparency, and having a science-based product/service. These challenges are closely related to the value proposition of these organisations. Some illustrative examples are presented next.
Climate start-ups must be able to provide their solutions at scale (mainly due to the magnitude of the problem they seek to contribute to). Many of the interviewed companies identified the aspect of scale as a key factor for the success of their value proposition (and for the achievement of their vision). An example is the calculation of the carbon footprint of every purchase when using digital payments. Company L, a large European digital payment company with more than 100 million cards issued, is in the process of adding a carbon calculator to their traditional offering through a specific App (i.e. in this case the unit of analysis is a start-up unit within a large organisation). “This means that every month we can issue not only the card statement, but also the general amount of carbon footprint that the customer has produced ….” (Head of Brand Communication, Company L).
Furthermore, Company E, a former more traditional consultancy company in climate offsetting services, that is recently migrating to a data-driven value proposition, when asked if their business model today is a mix of consultancy and digital technology through their newly developed platform, they answered: “…we are trying to automate the product as much as possible and move away from consultancy…just to enable us to scale. We have a 10-year target to take a gigaton of carbon with nature-based solutions, so to achieve that we’re going to need to do things in the most efficient way possible, and consultancy is not really an option to hit those levels of impact” (CEO and Founder, Company E).
The need for clear, reliable and transparent information is key if these organisations are to meaningfully contribute to the CC challenge. Indeed, accountability of the information provided to customers is essential, communicating for example the level of granularity of the data, sources, shortcomings, etc. As evidenced by Company A, a start-up focussing on providing carbon footprint information to the retail industry: “…consumers everywhere want climate-friendly products and services and businesses have started waking up to that… and what we do is to make it really easy for them to integrate climate impact into their customer experience, starting with carbon emissions calculations and carbon offsetting, carbon removal”. (CEO & Co-Founder, Company A).
Another key challenge for sound data-driven climate start-ups is the robustness of their value proposition. Here science plays a fundamental role, as the challenge of CC is extremely complex (different sciences are involved) and with high levels of uncertainties. To tackle this, companies are, for example, incorporating highly qualified researchers as part of their staff, have established cooperation agreements with research centres, or have implemented scientific advisory boards for the decision-making process. As Company D (a start-up that provides information to organisations worldwide on the risks of their assets to CC) explains: “So the independence of our science, of our rating systems is very important to multiple actors, so they can all converge around a common methodology… You can’t negotiate science, this is a scientific rating. This is why for us it’s important to have the best peer-reviewed science feeding into those models all the time….”. (CEO & Founder, Company D).
Furthermore, as Company M (a start-up developing innovative carbon credits based on monitoring keystone species) explains, “There are 3 pillars to everything we do. The first, which we’ll spend more time on is science, everything has to be proven by science as much as possible. The second one is technology, is to be able to use the technology to monitor the science… and the third one is ethics…”. (CEO & Founder, Company M).
From the initial analysis, three challenges related to the value offering of these types of organisations have been identified: scale, transparency, and science-based services. Effectively addressing these challenges is essential to fulfil the ultimate goal set-out by these organisations (beyond of course the financial sustainability aspects), i.e. contributing to the challenge of CC.
With regards to scale, it is clear that these organisations need to reach out as many customers as possible, with the end objective of driving actions towards CC (e.g. influencing consumer behaviour, enabling far-reaching solutions).
Having access to transparent and reliable information is another challenge being targeted by these start-ups. For example, a significant number of data-driven climate solutions are focussing on the niche of carbon management, providing information about the carbon footprint of products and services, as well as, very often, providing options for offsetting this footprint.
It has also been shown that many organisations are seeking to incorporate scientific knowledge in a comprehensive way into their value proposition, including the design of the products, development of tools, models, and algorithms, the analysis and synthesis of complex information, as well as in the process of decisions making. This element is seen as a key competitive advantage within the CC market.
Finally, it is expected that new valuable information will emerge from the remaining analysis and that further results will contribute to both practitioners and academics, on how to address these challenges.
Climate Change, Data-Driven Climate Start-ups, Digital Climate Technologies, Business Models for Sustainability, Case studies.
Averchenkova A., Crick, F.; Kocornik-Mina, A., Leck H. & Surminski, S. (2015) Multinational corporations and climate adaptation – Are we asking the right questions? A review of current knowledge and a new research perspective. Working paper. Grantham Research Institute on Climate Change and the Environment, London School of Economics and Political Science.
George, G., Merril, R., and Schillebeeckx, S. (2019) “Digital Sustainability and Entrepreneurship: How Digital Innovations Are Helping Tackle Climate Change and Sustainable Development”, Entrepreneurship Theory and Practice, 1–28.
Gregori, P. & Holzmann, P. (2020) Digital sustainable entrepreneurship: A business model perspective on embedding digital technologies for social and environmental value creation, Journal of Cleaner Production, 272, 122817.
IPCC, 2022: Climate Change 2022: Mitigation of Climate Change. Contribution of Working Group III to the Sixth Assessment Report of the Intergovernmental Panel on Climate Change [P.R. Shukla, J. Skea, R. Slade, A. Al Khourdajie, R. van Diemen, D. McCollum, M. Pathak, S. Some, P. Vyas, R. Fradera, M. Belkacemi, A. Hasija, G. Lisboa, S. Luz, J. Malley, (eds.)]. Cambridge University Press, Cambridge, UK and New York, NY, USA. doi: 10.1017/9781009157926.