Brief

Seven Innovations for the C-Suite to Accelerate Sustainability

Seven Innovations for the C-Suite to Accelerate Sustainability

A systemic and iterative strategy is vital to exploiting developments from the start-up and venture ecosystems.

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Brief

Seven Innovations for the C-Suite to Accelerate Sustainability
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Today, powerful forces are pushing sustainability innovation. Mounting political pressure on corporations, customer demands for climate-friendly products, and record levels of investment in climate tech all play a role. In Europe alone, the climate tech start-up ecosystem is now worth more than $100 billion, having doubled in just two years, according to Dealroom. Larry Fink, CEO of BlackRock, the world’s largest investment manager, predicts the next 1,000 billion-dollar unicorns will come from climate tech.

Innovation is shaping sustainability in every industry. Based on our work at the Bain Innovation Exchange with corporate clients across industries, connecting with hundreds of start-ups focused on this topic, and ongoing conversations with venture capitalists and other investors, we focus here on innovations poised to have an important impact on the sustainability of seven industries: advanced manufacturing services (AMS), automotive, retail, banking, energy, healthcare, and consumer products.

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Each industry is affected by multiple trends and innovations, and each climate tech and green innovation highlighted is likely to disrupt several industries. We’ve focused on those currently gaining momentum in a given sector, and on the start-ups with an approach that could shake things up in the sector.

3-D printing explores and accelerates larger, more complex AMS projects.

The construction sector contributes 37% of energy-related CO2 emissions, according to data from the International Energy Agency. 3-D printing’s latest advances in printing new materials, including cement and metals, and in printing larger objects can reduce natural resource use and waste in the sector, while increasing efficiency. Construction 3-D printing also allows faster and more accurate construction of complex or bespoke items.

The construction company Alquist uses 3-D printing to lower the cost of building sustainable single-family, multifamily, mixed-use, and senior-living residences in economically distressed and underserved communities. Using 3-D-printed concrete, Alquist saves up to 15 percent of the typical cost of building a home with wood. The company breaks ground this summer on the world’s largest 3-D construction project—200 3-D printed houses to be created over several years in southwestern Virginia.

With growing value chain volatility, efficiency in retail is fundamental, and AI more accurately monitors and reduces scope 3 emissions.

Ninety-five percent of retail emissions are scope 3 indirect emissions in their supply chain, making the industry one of the leading emitters in this class. While scope 1 covers the direct emissions from sources owned by a company, and scope 2 focuses on the emissions from the electricity and heating or cooling sources they buy, scope 3 is particularly complex to manage since it involves a system, much of which is beyond the retailer’s direct control. Technologies including artificial intelligence (AI) can help monitor the system’s carbon footprint, forecasting and reducing emissions by optimizing internal operations and those of external partners.

Sweep built a carbon emission management platform on which retailers can monitor, forecast, and reduce scope 3 emissions along their entire value chain. The company raised $73 million in April 2022, evidence of growing interest in this type of sophisticated carbon accounting.

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Banks continue to create new forms of sustainable value, including greener, impact-driven products and services.

As the rise of fintech confirmed, banks are always competing with digital natives. While banks have a relatively small direct environmental footprint, through their loan portfolios and product offerings, they greatly influence how companies and consumers act, invest, and address their environmental footprints. Among consumers, the market for green products is growing quickly, and with the broader green transition estimated to cost $125 trillion, according to the Glasgow Financial Alliance for Net Zero, an enormous financing opportunity exists for lenders. Increasingly, regulators are also requiring banks to measure and disclose their environmental impact, a task sometimes made difficult by limited access to reliable portfolio data and consistent standards of measurement.

Established banks are sponsoring decarbonization projects and offering services for cutting emissions. Start-ups are pushing into new sustainability-focused products and solutions, including green investment strategies, transaction-based carbon offsetting, and the allocation of profits to compensation projects. One of them, Aspiration, focuses on helping its more than 6 million consumer and enterprise customers become carbon neutral. Its debit and credit cards embed carbon reduction solutions, such as automatically offsetting the carbon footprint of purchases. Enterprise clients can access software-based carbon footprint monitoring and a broad inventory of carbon reducing assets. Operating since 2015, in December 2021 the company secured $315 million of incremental equity financing.

Investing beyond carbon is now fundamental and nonnegotiable for an entire portfolio-level transformation by energy companies.

More than 70% of “human-made” greenhouse gas emissions come from energy sources, according to World Resources Institute’s ClimateWatch. Expanding government interventions, incentives, and subsidies, coupled with changing customer, investor, and employee expectations, have leading energy companies reinventing and diversifying to lower that figure. Digitalization is creating new opportunities for partnerships and innovative business models, but companies must balance several other critical issues too, including energy affordability, energy security, and expected return on investment.

One aspect of energy giants’ multifaceted approach is the creation of corporate venture capital funds to access new energy technology. According to PitchBook, more than $40 billion of venture capital was invested in climate tech companies between January 2020 and August 2021, nearly 40% more than all investment in the two years prior.

A University of Cambridge spinout, H2GO Power, has developed a reactor that stores hydrogen in solid-state and releases it on demand as a zero-emission, safe, and reliable alternative to lithium batteries. Users can plug into shipping-container-sized units that take in renewable energy, store it as hydrogen, and then release the power on request. AI algorithms provide cost-efficient management and optimize operations.

Our complex and fundamental healthcare industry is addressing the need to foster the circular economy.

To date, 75% of all plastic ever produced has become waste, and its production has a significant greenhouse gas footprint. A substantial portion of the world’s plastic waste comes from healthcare, the majority associated with lifesaving medicine and procedures. Recently the World Health Organization estimated that the critical products needed to manage through a global pandemic have included 87,000 metric tons of personal protective equipment and 144,000 metric tons of syringes, needles, and other vaccine waste, as well as the chemical and plastic waste from more than 140 million test kits.

The challenge is to reduce waste without compromising care. A systemic change toward a circular economy might include medical devices that are designed for reuse and kept in circulation for as long as is feasible. What must be thrown away should be biodegradable. Notpla is making biodegradable packaging from seaweed and plants that degrades in weeks. The company offers machines and materials to package clients’ products in the most sustainable way and has reportedly raised over $12 million to date. Very recently, the industrial design agency Morrama created a concept for what could be the world’s first fully recyclable and biodegradable Covid-19 test, positively showing the speed of innovation in times of global disruption.

Food consumption and production habits are at the heart of ESG growth, with vertical farming and lab-grown meat leading the way.

The global food system is incredibly successful, feeding 7.9 billion people and generating a third of global GDP. But at the same time, it places a hefty burden on the environment, creating more than a quarter of all greenhouse gas emissions and contributing to deforestation and species extinction. New approaches to agriculture and eating, including vertical farming and lab-grown meat, can reduce the amount of water and land required to produce the same or greater amounts of food. This decreases the need for long-haul transportation, chemicals, and pesticides. Cultured meat, requiring less energy and water than traditionally farmed meats, can create significantly fewer emissions.

A community of start-ups is pioneering new approaches to these opportunities. Air Protein makes animal proteins by combining elements of the air with its cultures to produce air protein in just hours. The company’s culinary techniques applied to flour create textures and flavors resembling meat. And in vertical farming, IGS delivers platforms that create ideal climates for plants and people.

The automotive industry is embracing air mobility enabled by changing regulations and societal acceptance.

Cities consume around 80% of the world’s energy supply and, according to the US Department of Energy, highway vehicles release about 1.6 billion tons of greenhouse gases into the atmosphere each year. Urban air mobility (UAM), transporting both goods and people and powered by drones, could decongest cities, reduce noise pollution, and help to decarbonize the energy sector. New technologies, such as electric propulsion and enhanced battery capacity, applied to vertical takeoff and landing systems make this technically possible. The European Union Aviation Safety Agency has begun creating its UAM regulatory framework, building on the results of a 2021 UAM study on societal acceptance. They predict it could become a reality in Europe within three to five years.

Volocopter is a pioneer in this field: It plans to launch the first ecosystem of air cabs and heavy transport drones with $170 million raised at a $1.7 billion valuation. Dirk Hoke, former head of Airbus Defense and Space, will be the next CEO, overseeing the launch of its air taxi services in Singapore in 2024. Based in its Seletar Aerospace Park, there are plans to operate a fleet of 10 to 20 air taxis around the popular tourist destinations of Marina Bay and Sentosa.

The pace of sustainability innovation mandates a multidimensional approach to value chain transformation.

Sustainability is a complex, interconnected, and evolving topic that requires constant evaluation. These innovative solutions are only the beginning and are likely to come with their own carbon footprint. A risk assessment is always required to find the most appropriate, balanced solutions across any value chain.

The pace of innovation is increasing, ESG inclusion is becoming fundamental, and tracking the complex ecosystem’s development is essential. In light of this, it’s important to continue to unpack these topics, exploring a multidimensional approach to innovation strategy, start-up ecosystem engagement, venture capital investing, and business building.

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