Start-ups and the Green Economy
The question of what is green and, more precisely, what would be considered a ‘green economy’ does not yet have a well-defined answer, as it is still considered an emerging concept. However, there are three key features that help us better portray what the terms imply.
First, the mainstreaming of environmental policies. Second, the mutual support of such policies when it comes to investing in green projects. Third, the green economy can only be achieved through green finance. In other words, investing in what the United Nations (UN) Environment Programme defines as low carbon, resource efficient and socially inclusive enterprise, linked to both the reduction of pollution as a result of the diminution of carbon emissions and the indispensable protection of the ecosystem and our planet’s biodiversity.
On this, we believe that start-ups have an increasingly significant role to play. By looking at the capital invested in start-ups around the globe in the past few years, we can surely get a better sense of the function these newly established companies have to perform. For instance, in 2020, Europe has invested almost 30 billion Euros in start-ups, North America has reached 118 billion Euros, Asia’s investments amounted to 61 billion Euros, while the Rest of the World counted for 10 billion Euros. These are not sums we can simply dismiss, as they go to the root of the matter, reflecting the potential start-ups have in the ‘greenification’ of the economy as a result of their constantly growing market share.
Having said that, the green economy comes with its own set of challenges. Out of these, the main potential problems arising are protectionism and structural change.
Protectionism can be defined as government policies which restrict international trade in favour of domestic industries, possibly reinforcing international inequalities. Some measures may be problematic, such as research and development support to domestic green sectors, regulations, standards, and prohibitions based on production and processing methods, and environmental levies and taxes on transport. These measures could intentionally interfere with foreign competitors to protect, promote, and favour domestic green industries.
The green economy transition involves structural change, and some of its impacts may be negative. This transition will increase the demand for ‘environmentally-friendly’ goods while decreasing the demand for environmentally damaging goods, leading to worsening trade terms for some countries and losing markets for some firms. International assistance will probably need to be given to developing and least developed countries to adjust and transition to this new economy.
Start-ups, facing their own set of challenges, are in the perfect position to tackle these challenges by redirecting funds towards an increasing number of green projects that will, in turn, promote what could be called the ‘new green order.’ The green economy aims to increase the demand for environmentally friendly and socio-responsible products and processes, making ‘green’ start-ups more appealing to investors as well as more successful on the market in the long term.
The Worldwide Fund for Nature estimates that 8 million tonnes of plastics are dumped in the seas every year. With this in mind, the need for action becomes increasingly prominent. Thus, by funnelling capital into these increasingly recurrent green projects, we are not just allowing young companies to flourish, but the economy in general and, in the long run, designing a cyclical process of mutually proportional progress.
Created by Ranmarine Technology and inspired by the Whale Shark (our planet’s largest fish), the brilliantly termed ‘WasteShark,’ is an innovative marine robot capable of swimming up to 16 hours while collecting around 200 litres of waste (including plastics, micro-plastics, and alien vegetation) in just one charge, or up to 1kg of floating debris per minute.
The success of the WasteShark was so prominent that the EU took an interest in it. This was the result of the impact litter has on the European economy, amounting to a loss of almost 700 million Euros yearly. As such, the EU Commission decided to help the developers upgrade their technology so that the drones can function collectively and monitor pollution levels and even communicate with each other. Accordingly, the EU has set aside 350 million euros for research and development in this field, in addition to existing rules limiting single-use plastics and minimising waste.
Conventional detergents are made from petrochemicals originating from earth-mining, which has a destructive effects, releasing gases, hurting biodiversity, and polluting water sources. Conventional detergents unbalance the pH of lakes and rivers making algae excessively thrive, harm fish and ruin soil structure. Furthermore, laundry pods usually come in plastic containers which are not recyclable.
To tackle all these issues, smol offers subscription services for ‘green’ laundry pods, dishwasher tablets, fabric conditioner and surface sprays to UK customers. All products are manufactured with a lower carbon footprint, have less added chemicals, are vegan and are cruelty-free. smol’s laundry pods and dishwasher tablets are delivered in a child-lock plastic-free pack (100% recyclable or compostable). The other products can be refilled, reused, or recycled. By switching to smol, customers have helped save more than 6,000 tonnes of carbon, 1,000 tonnes of chemicals, 10 tonnes of animal fat (contained in conventional fabric conditioner) and 350 tonnes of plastic.
The popularity of smol increased during lockdown as the company offers delivery of washing products that fit through the letterbox. More people have also questioned their daily choices and have become more conscious of their impact on the environment.
The start-up first raised £8 million in 2018 with Balderton Capital and Jam Jar Investments. In 2021, smol raised £24.1 million in a funding round led by Eight Roads Ventures with Google Ventures and Latitude. With this new funding, smol aims to expand in Europe and launch new products.
The WasteShark captures waste from seas and oceans, potentially solving an immense problem. With this robot, RanMarine Technology decided to tackle a global issue, inciting the interest of the EU, and receiving funds to further research into this field and the relevant technology. It also elicited the development of EU rules surrounding plastic and fishing net waste. By being innovative and having a sound business idea, start-ups in this new economy can attract more investment from VCs or even governments.
Smol’s example shows how adopting eco-friendly changes in domestic life can have positive impacts on the environment. Switching means reducing the amount of chemicals flowing in the water, reducing carbon, and reducing plastic waste by adopting the three Rs: reduce, reuse, and recycle. By expanding to more markets, smol hopes more people will switch to environmentally friendly products and adopt a more conscious mentality when buying domestic products, including cleaning products.
The case studies have a dual role. They manage to exemplify both the needs and benefits of increasing funding for green start-ups and show how this can positively impact the global economy. More precisely, we will be able to reach our objectives on climate change mitigation and preservation of our world’s ecosystems and biodiversity (e.g., self-imposed via the 2016 Paris Agreement, and the European Green Deal), only through an efficient redistribution of funding into green and sustainable initiatives, that might otherwise head to possibly more environmentally harmful ventures. As such, we strongly believe start-ups currently face an immense opportunity of dealing ‘in the green,’ one that should be both nurtured and supported in the market, and at the innovation level, thus ensuring our collective future.
This article was written by Tudor N. Pana and Emma Balibrea, who are participating in qLegal as part of their Law Masters studies at Queen Mary, University of London.
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