Green Transformation: How it’s Leveraging Technology to Address the Impacts of Climate Change
Environmental issues such as global warming, water pollution and deforestation are continuing to affect all communities around the world. In order to address these challenges, policy and business leaders are beginning to adopt and promote Green Transformation (GX) — a framework in which societies can leverage technology to address climate change issues. Because the concept of GX is relatively nascent, if you are a startup founder, you may not even know that your company falls within the GX category or be aware of how profound of an impact your company can have on helping advance GX. In this article, we will discuss what GX is, examples of GX verticals and the push from governments for green transformation.
What is GX?
In 2015, the United Nations adopted the Paris Climate Accords to reduce the impact of climate change by having countries agree to scale down emissions, thereby building resilience to the adverse effects of environmental change and promoting regional and international cooperation. Another example of climate related policy is the Kigali Amendment to the Montreal Protocol. 148 countries signed this international agreement, which aims to decrease the consumption of hydrofluorocarbon (a greenhouse gas). With the implementation of global frameworks such as the Kigali Amendment and the Paris Climate Accords, there now exists an exciting opportunity for GX startups to proactively address the various needs of green transformation stakeholders.
Core physical assets aside, ultimately, we at Geodesic believe GX will be driven by technology — SaaS and data startups that are advancing the climate goals of businesses, governments and societies.
These SaaS tools offer digital platforms that promote collaboration amongst various stakeholders, enabling businesses, consumers and government organizations to align on common climate goals. GX is more than just about government organizations promoting green initiatives. These technologies help businesses become less reliant on traditional forms of energy and identify more sustainable ways of managing operations. GX is driven by strong private sector demand and interest in green initiatives, which has fueled the growth of startups in the space that are addressing the needs of the modern day enterprise and consumers looking to adopt green initiatives. In 2021, climate startups raised $40B in private funding.
What are different forms of GX?
GX startups will play a prominent role in promoting sustainable ways of living. Climate Tech VC defines seven climate verticals: energy, food and land use, transportation, built environment, carbon, climate management, and industrial.
Of these spaces, the carbon vertical has seen a substantial uptick in funding. According to CTVC, carbon companies raised ~$1.5B in H1’22. The number of carbon deals in H1’22 doubled versus H1’21 and funding in this category spiked 8x year over year. Recent innovations in this space include companies that are providing carbon tracking and accounting, carbon offsetting tools and carbon removal technologies.
One example of a startup that sits at the intersection of carbon and climate management is ComboCurve. ComboCurve is a next-generation, cloud-based greenhouse gas (GHG) energy analytics and operating platform that was founded in 2017. The company helps decision-makers value assets, de-risk decisions and plan for net-zero. Its carbon accounting solution (ComboCarbon) enables users to integrate GHG emissions into the planning and development process of facilities. This provides businesses with an understanding of how the creation of each division within a facility impacts emissions, costs and reduction targets. This technology is being leveraged to drive tangible cost savings and business efficiency, helping not just advance business’ green goals, but operational and strategic ones as well. Companies such as ComboCurve are examples of the many GX businesses that are transforming how businesses reevaluate their energy consumption and execute on net-zero planning.
Another example of a GX startup is ClimateAI, which offers a climate management SaaS platform. The company raised its $12M Series A round in May 2021. ClimateAI leverages artificial intelligence to help businesses predict the risk of climate change on company assets. With this information, businesses are able to adapt their supply chain operations as necessary to drive cost savings and growth. ClimateAI’s predictive data is 25–50% more accurate than historical averages of climate change data. Several of ClimateAI’s customers include Ocean Spray, Driscoll’s and Advanta. With the help of ClimateAI, retailers are able to place the appropriate products in the right geography and at the correct time. Pacific Seeds (a ClimateAI customer) is one of Australia’s leading seed providers. In 2020, ClimateAI forecasted a rainfall event in one of Pacific Seed’s critical growing regions in Northern New South Wales. Pacific Seeds then leveraged this data and moved additional inventory into this region, which boosted sales by 5–10%. Predictive modeling platforms such as ClimateAI’s are driving top line growth for businesses and becoming an imperative tool within the modern day enterprise’s data stack.
How do countries around the world view GX?
Green transformation is top of mind for country leaders around the globe as nations consider the societal, economical and environmental impacts of adopting a more green strategy. Countries such as the United Kingdom, Iceland and the Netherlands are promoting innovative technology to help lower carbon emissions and transform current processes that are negatively contributing to the environment.
Let’s take a deeper dive into how Japan is promoting GX
Japan has limited natural resources and depends heavily on imported raw materials and energy. In 2021, the country ranked as the second largest importer of natural gas. Given these circumstances, exploring alternative energy sources and adopting green transformation are top priorities for the Japanese government. Green transformation represents an exciting opportunity for Japan to be more politically and environmentally self-reliant by being less dependent on other countries’ resources.
Japan’s Prime Minister Kishida and the Japanese Green Transformation Implementation Council see GX as a multi-year strategy that will affect all parts of society, the economy and business industries with the ultimate goal to reach carbon neutrality. During Japan’s GX Implementation Council meeting in July of 2022, Prime Minister Kishida underscored the importance of shifting away from traditional forms of energy in today’s climate and highlighted the role technology, government and social involvement will play in driving sustainable energy usage in the future.
In the medium and long term, Japan’s GX rollout strategy is a three-pronged approach:
1) The first initiative is to introduce renewable energy, storage batteries and energy-saving efforts while also restarting nuclear power plants to ensure there is a stable supply of electricity and gas.
2) The second initiative is to raise public awareness as to how the measures will help the country advance its GX goals.
3) The third initiative is to further discussions on policy initiatives in the GX roadmap.
Since July of 2022, the Japanese government has made meaningful strides in advancing GX. In February 2023, the Japanese Cabinet approved the Basic Plan for the GX: Green Transformation Policy, a ten-year roadmap of Japan’s decarbonization plan that introduces a voluntary emission baseline-and-credit system, a mandatory emissions trading system (ETS) and a carbon levy.
Key Takeaways
- Policy leaders across the globe are embracing and promoting GX given the current state of energy consumption. GX is a top priority for societies around the world.
- Across all verticals (energy, food and land use, transportation, built environment, carbon, climate management and industrial) startups are capitalizing on the unique business opportunity presented by GX and are serving as catalysts for GX innovation. Whether it be helping businesses monitor ESG standards or holding various stakeholders accountable for carbon emissions, startups are spearheading innovation within green transformation.
- GX is in early innings and there are various verticals such as energy, carbon and climate management that are ripe for disruption. While the GX category has yet to mature, funding in emerging sub verticals such as carbon (which includes use cases such as carbon removal and storage as well as carbon utilization) continues to increase, which underscores the importance and need of these tools.
What’s next?
GX startups will continue to play an important role in promoting a more green and sustainable future. Business demand for startup tools to help with GHG emissions reporting and green transformation will continue to grow, providing a large addressable market for startups in this space to scale. We are excited to monitor the role GX plays in shaping the way we as a society live more sustainably. If you are a founder of a GX SaaS business and are thinking of international expansion to APAC, please do not hesitate to reach out as we would love to chat.
I’m Justin, an investor at Geodesic Capital. If you are interested in discussing anything related to startups or venture capital, I would love for you to get in touch via LinkedIn.
