The last 10 years in sustainability – a pivotal period

• Kyoto Protocol (1997/2005)

Until about ten to fifteen years ago there were various facets that had not been considered holistically from an environmental, social, and governmental view.  One big factor therefore lies in the Kyoto Protocol which was adopted in 1997 and entered into force in 2005. The main goal of the protocol is to reduce global warming by reducing greenhouse gas concentrations in the atmosphere to “a level that would prevent dangerous anthropogenic interference with the climate system” (Article 2).

Starting here, the European Union (EU) has embarked on a transformative journey towards achieving sustainable regulation — a path characterized by a sequence of remarkable milestones. These milestones reflect the more widespread acknowledgment that sustainability holds pivotal significance not only for the environment but for economic advancement as well. As we dive into the timeline of the pivotal points in the sustainable regulation landscape, it becomes evident that sustainability has evolved from a peripheral concern to a central pillar, shaping the intricate balance between progress and preservation within the EU.

• The Non-Financial Reporting Directive (2014)

The demand for non-financial disclosure regulations has been rapidly growing over the past few years. Consequently, the Non-Financial Reporting Directive (NFRD) was born from this need.

The directive has been incorporated into national legislation by all 28 of the EU’s member states as of 2018 and has two main goals: 1) to urge corporations to take responsibility for social and environmental issues and 2) to make non-financial information available to stakeholders and investors for assessing the companies’ value creation and risks. 

Has it been a success? Well, the Global Insights report from 2013 to 2018 shows that there has been a 72% increase in the number of non-financial disclosures. Over the past few years more regulations were adapted, and the NFRD is now one of over 4,000 different global disclosure requirements introduced over that time span.

• The Paris Agreement (2015)

The Paris Agreement, which was struck out over the course of two weeks in Paris during the UNFCCC’s 21st Conference of the Parties (COP 21), represented a historic turning point for global climate action and was adopted on December 12, 2015. More specifically, the aim of the agreement is to substantially reduce global carbon emissions in an effort to reduce the global temperature rise to 1.5–2 degrees Celsius above preindustrial levels. As a part of this endeavor, 177 nations — composing roughly 97% of the world’s climate pollution — announced detailed national emissions’ reduction goals for climate action by 2020. 

• The Action Plan on Financing Sustainable Growth (2018)

Following the groundwork laid out by the Paris Agreement, The Action Plan on Financing Sustainable Growth, introduced in 2018, marked yet another pivotal initiative by the European Commission aimed at aligning financial systems with the principles of sustainability. Rooted in the recognition that financial markets play a critical role in driving the transition to a more sustainable and low-carbon economy, the plan outlined a comprehensive framework to channel investments towards environmentally friendly projects and businesses.

In more precise terms, this ambitious plan consists of a series of interconnected measures, focusing on key areas such as improving the transparency of financial institutions regarding their environmental and social impacts, establishing a unified classification system for sustainable activities (taxonomy), creating sustainable benchmarks, and enhancing the integration of sustainability risks into investment decision-making. 

• The European Green Deal (2019)

Shaped by the pressuring narrative of the 2030 Agenda and the Paris Climate Agreement, The European Green Deal encompasses a diverse array of initiatives spanning multiple sectors, including energy, transportation, agriculture, industry, and finance. Key goals involve attaining net-zero greenhouse gas emissions by 2050, driving the shift to renewable energy sources and energy efficiency, fostering a circular economy to minimize waste and enhance resource utilization and conserving biodiversity and ecosystems. Integral to the Green Deal is the mobilization of investments, both public and private, to fuel sustainable projects and innovations that underpin the transition to a greener economy.

• The EU Taxonomy (2021) 

Introduced as part of the EU Taxonomy Regulation in 2021, this foundational framework has become a core element of the EU’s sustainable finance strategy. It serves as a robust tool to classify economic activities based on their environmental sustainability, with the ultimate goal of facilitating sustainable investments and aligning financial activities with the principles of environmental protection and climate change mitigation.

The EU Taxonomy sets up a standardized system that assesses whether an economic activity significantly helps achieve one or more of the six environmental goals listed in the Taxonomy Regulation: (1) climate change mitigation, (2) climate change adaptation, (3) sustainable use and protection of water and marine resources, (4) transition to a circular economy, (5) pollution prevention and control, and (6) protection and restoration of biodiversity and ecosystems.

The classification framework has been designed to enhance transparency, provide investors and businesses with clear guidelines for sustainable investments, and contribute to the EU’s overall objective of becoming climate-neutral by 2050. By setting a common language for sustainable economic activities, the Taxonomy fosters consistency and accountability, thereby supporting the transition to a more sustainable and environmentally responsible economy within the EU.

• The Corporate Sustainability Reporting Directive (CSRD) (2021)

Building on previous efforts, the CSRD represents a significant step forward in sustainable regulation. It expands the scope of the Non-Financial Reporting Directive, requiring all large companies and all publicly listed companies to follow detailed EU sustainability reporting standards. The CSRD aims to improve the consistency and comparability of sustainability information, facilitating more informed decision-making by investors, policymakers, and other stakeholders.

• The EU Sustainability Reporting Standards (ESRS) (2023) 

There is an intrinsic connection between CSRD and the ESRS. While the former directive sets out the legal requirements, mandating a broader range of companies to disclose detailed sustainability information, thereby expanding the scope of reporting, the ESRS provides specific guidelines to ensure the compliance with the CSRD reporting. Together, the CSRD and ESRS represent a unified approach to enhancing transparency, accountability, and sustainability in business practices.

Some of these regulations particularly focused on creating a more innovative and sustainable economic environment. In the next section we’ll take a closer look at how innovation is created through collaboration and how this process has generated seven impactful sustainable innovations.

As a result of the notable shift in awareness and regulatory emphasis on mitigating greenhouse gas emissions due to their severe impact on climate change, various countries and industries were urged to intensify their efforts in carbon footprint reduction. This phase was marked by the adoption of renewable energy processes and energy efficiency innovation.
Recent research from the International Energy Agency shows that global carbon dioxide emissions levels are slowly reaching a plateau, but they are not declining. The small bump in 2020 can be attributed to the Covid-19 crisis, but they bounced back shortly after. In 2021, the global energy-related carbon emissions rose by 6%, compared to the previous year, marking the highest level in history.
In order to meet the net-zero goals, a 7% reduction is still needed every year to meet the net-zero goals.

While we’ve made significant advances in sustainability and regulation, global carbon emissions haven’t decreased. Nonetheless, we’ll take a look at how investments into sustainable innovations try to counteract this development next.

As a consequence many initiatives and start-ups have emerged that focus on the reduction of CO2 in various parts of our lives – buildings, energy production, transportation & mobility, food, and others. Several notable examples include Tesla which has revolutionized the automotive industry with its electric vehicles and sustainable energy solutions, as well as Northvolt, a Swedish company focusing on sustainable battery manufacturing to store energy, 1Komma5 for climate-neutral energy solutions, or Enpal who produce solar panels. 

Overall, when looking at the statistics from 2021, planet-positive tech reached about $10B in investment, capturing 11% of all annual funding and indicating a six-times increase in the speed of growth, compared to 2017. In the context of sustainable entrepreneurship, planet positive refers to a business approach that aims to generate a net positive impact on the planet’s overall well-being. Unlike traditional sustainability practices, planet-positive initiatives go beyond mere mitigation of negative impacts and seek to actively contribute to environmental restoration and conservation. Amidst the landscape of significant expansion, particularly within clean energy and climate sectors, it becomes interesting to examine the funding aspects of purpose-driven technology firms with a finer lens. This entails a more granular breakdown of which specific causes receive the most attention. 

Within the Planet Positive division, the most substantial share of investment has flowed to companies addressing the challenges of affordable and clean energy (SDG 7) and climate action (SDG 13). Other SDGs that have attracted large-scale investment in recent years include sustainable cities and communities (SDG 11), industry, innovation, and infrastructure (SDG 9), as well as good health and well-being (SDG 3).

One of the exemplary agents of this new entrepreneurial wave is Climeworks. Founded in 2009, the Swiss company is concerned with pursuing a challenging yet prolonged path. Climeworks has pioneered the advancement of carbon capture technology, aiming to contribute to global efforts to combat the greenhouse gas emissions responsible for global warming. The company’s technology involves capturing CO2 from ambient air and then either utilizing or sequestering it to prevent its release into the atmosphere.

Evidently, the global concerns surrounding climate change have been gaining friction over decades. However, despite the suspenseful momentum of this topic, in 2011 only 20% of the S&P 500 companies reported on their sustainable efforts and corporate social responsibility (CSR). Even with this meager instance of reporting, tangible action toward sustainable transition was clearly lacking. As a result of the rapid rise in investor and public awareness as well as the advent of decarbonization-promoting regulations, action was taken right away. By 2013, 72% of S&P 500 businesses were publishing sustainability or CSR reports.

The last five years have seen the rise of sustainability as a significant value driver. Businesses started to see the chance to take on the problem as it became clear that current attempts to stop temperature increases might not be adequate. Organizations have adopted and promoted environmental, social, and governance (ESG) metrics, and from 2020 to 2021, the number of businesses committing to science-based sustainability targets tripled. Finally, corporate entrants who promoted sustainability as a tactical tool to create value started to emerge, and the advent of “climate unicorns” like Ola electric, previously mentioned Northvolt

and Climeworks, and big players like Tesla were evident.

Pulling in complementary technologies and collaborating with companies that fill gaps in specialized knowledge is a feature of start-ups in this space. While companies are highly competitive, there is a sense that they are together seeking to place big, bold bets—driven by a shared purpose of sustainability. 

Based on a lot of cooperation and the other buildings blocks between startups, corporations and research, we have seen some successful  sustainable innovations over the last ten years. We have handpicked seven of them to give you a better idea of how much movement and change can be generated. These technologies will not only be a summary of the innovation over the last ten years, but since many of these technologies will continue to mature and get mass-market ready, they can also be understood as an outlook into the future of sustainable innovation.

1. Green Architecture: Buildings consume nearly 40% of primary energy production globally. But, urban spaces are undergoing a revolution thanks to environmentally conscious architectural practices. Leveraging natural resources, employing sustainable materials, and incorporating natural elements like plant-covered roofs have come to the forefront, offering an eco-friendly lifestyle while conserving energy. One of the standards that certify sustainable architecture is LEED. LEED (Leadership in Energy and Environmental Design) is the world’s most widely used green building rating system. Available for virtually all building types, LEED certification provides a framework for healthy, highly efficient, and cost-saving green buildings, which offer environmental, social and governance benefits.

2. Recycled Plastic Road Surfacing: A creative remedy to the plastic epidemic, roads now use recycled plastic for durable construction. This double-edged solution tackles both plastic pollution and infrastructure durability. India has installed over 60,000 miles of these roads. The technology, meanwhile, is gaining ground in Britain, Europe, and Asia. Although for now they remain a niche technology, experts say the roads could become one of a diverse array of uses for discarded plastic.

3. Electric Vehicle Propulsion: With the automotive industry shifting gears, electric vehicles (EVs) have become synonymous with green transport. Cutting-edge battery tech and evolving charging solutions have made them a top choice for environment-savvy consumers. Electrification is set to avoid the need for 5 million barrels of oil a day by 2030. 

4. Carbon Capture and Storage (CCS): The promise of capturing and sequestering carbon right from emission sources has turned into a reality over the past years. This technique, apart from curbing emissions, can also lead to carbon-negative solutions when merged with bioenergy applications. 

5. Smart Meters: The advent of instant energy usage monitors, or smart meters, has allowed consumers to actively regulate their energy consumption. This technology not only aids in efficient energy use but also enhances grid sustainability. Compared to traditional meters, smart-type meters enabled an average annual reduction of 2.3% of domestic customers’ electricity consumption and 1.5% for their gas consumption.

6. Artificial Photosynthesis: Drawing inspiration from nature, scientists have developed methods to emulate plant-like energy conversion. This promises a more streamlined way to store solar energy, surpassing traditional means. Especially for VCs, these innovations are already an interesting investment target.

7. Molten Salt Energy Storage: The sun doesn’t shine at night and the wind doesn’t always blow on cue. Chemical and electrical methods of energy storage suffer from energy losses, while mechanical storage, such as hydropumping and compressed air, has a low energy density and depends on geographic location. To counteract the unpredictable nature of renewable energy, thermal storage using molten salts has come to the rescue. Molten salts have high boiling points, low viscosity, low vapor pressure, and high volumetric heat capacities, which makes them a great alternative for energy storage. The salts are heated and stored in an insulating container during off-peak hours. When energy is needed, the salt is pumped into a steam generator that boils water, spins a turbine, and generates electricity. This ensures uninterrupted energy availability, regardless of the weather, bridging the gap between demand and supply.

These remarkable advancements highlight the relentless pursuit of green alternatives in recent times. They represent our commitment to forging a path that respects and nurtures our planet.

As we have already shown by the development of global carbon emissions, there is still a lot of room for improvement. In the following paragraphs, you will find four areas in which key innovations still need to happen to boost a sustainable future.

Transportation dynamics

1. City transit transformation: As our global population gravitates towards urban hubs, city transportation infrastructures feel the strain. While we’re seeing an uptick in electric buses and underground trains, groundbreaking proposals such as the hyperloop concept or self-driven electric vehicles could reshape metropolitan commuting.
2. Green aviation progress: The realm of air travel remains a robust carbon emitter. Even as electric vehicles are making headlines, the world of aviation is struggling to find its green footing. Pushing the boundaries with sustainable biofuels, electrically powered airplanes, and potentially solar-energized flights could set a new course for this sector.
3. Unified travel ecosystems: Shifting from isolated transport modes to a comprehensive, harmonized travel framework has potential. Imagine a future where personal cars, mass transit, and pedestrian pathways intertwine seamlessly, all aligned for heightened efficiency and minimized eco-footprint.

Farming innovations

1. Tailored agricultural techniques: By leveraging technology, we can pinpoint and customize farming activities for specific plots, maximizing output and conserving resources. Employing drones, insights driven by artificial intelligence, and interconnected devices can keep a tab on soil vitality, crop progression, and environmental variables to finetune resource application.
2. Novel protein pathways: The world’s rising populace demands more protein. Conventional meat production, however, is notorious for its ecological repercussions. Breakthroughs in cellular agriculture, insect-derived protein, and advanced plant substitutes can cater to this protein requirement sustainably.
3. Revolutionizing fish farms: The looming threat of overfishing unsettles marine ecosystems. But fish continues to be a dietary staple for many. Innovative fish farming methods, like deep-sea aquaculture combined with algae-based diets, can be part of the solution. The idea of a harmonious aquaculture, wherein diverse marine species coexist, can amplify productivity while upholding marine equilibrium.

Energetic horizons

1. Fresh waves in solar power: Solar panels have blanketed many rooftops, yet harnessing the sun’s energy remains a field ripe with potential. Advancements in perovskite solar cells or translucent panels could become game changers, allowing more surfaces to effortlessly generate energy.
2. Tidal power prospects: Oceans, with their relentless tides, are colossal energy reserves waiting to be tapped. Emerging technologies are striving to harness tidal patterns without disrupting marine life, presenting a truly sustainable energy alternative.
3. Batteries beyond today: The crux of energy usage often lies in storage, and while lithium-ion batteries reign supreme today, alternative storage solutions like liquid air or gravity-based systems could dictate our energy future.

Blueprints for a greener architecture

1. Beyond conventional bricks: As the very bones of our buildings, materials play a pivotal role in eco-friendly construction. Embracing rammed earth, bamboo, or hempcrete can change the way we perceive building materials – merging strength with sustainability.
2. Natural climate control innovations: Moving beyond electrical HVAC systems, innovations such as geothermal cooling, green roofs, or passive solar designs could redefine interior climate control, relying on nature’s wisdom.
3. Intelligent habitats: The habitats of tomorrow may not just be constructed; they might “evolve.” Smart home systems intertwined with AI can continuously learn and adapt to optimize energy usage, water consumption, and even waste management, crafting homes that actively shield the environment.

Besides market-made innovations, there are other, more general ways to increase the likeliness of a sustainable future. The following suggested strategies that can help to guide effective sustainability efforts:

• Holistic Policy Design: Policymakers should focus on designing comprehensive and coherent environmental policies that consider the potential trade-offs between short-term emissions increases and long-term innovation benefits (Porter’s Hypothesis). This involves evaluating the timing, scope, and flexibility of regulations to minimize unintended negative outcomes. An example of such formalized set of policies and initiatives would be the Sustainable Finance Package, designed to promote sustainable investment and align financial activities with environmental, social, and governance (ESG) considerations.
• Innovation Incentives: The contradiction highlights the value of fostering innovation as a central pillar of sustainability efforts. Regulations can be structured to actively encourage innovative approaches, aligning with Porter’s Hypothesis. Incentives could include subsidies, grants, or tax breaks for research and development of cleaner technologies. This would create an environment where compliance with regulations drives investment in sustainable solutions.
• Promoting Innovation through Subsidiaries: The crowding-in effect of government subsidies can significantly drive corporate innovation performance by providing businesses with the necessary resources, incentives, and reduced risks to engage in innovative activities. Additionally, the subsidy effectiveness argument states that such public incentive schemes create a “certification effect.” When a firm’s R&D activity is backed by the government, it sends a positive signal to the market about the quality of the firm’s business operations, thereby reducing the internal and external information asymmetry. 
• Anticipatory Regulations: To mitigate the risk of the Green Paradox, regulations should be accompanied by careful consideration of their potential effects on producer behavior. Anticipating and addressing the incentives for short-term extraction can involve mechanisms such as progressive emission reduction targets or phased implementation of regulations. Such strategies, focused on gradual transition, can mitigate the risks particularly associated with sectors prone to the Green Paradox.
• Market-Based Mechanisms: Market-based instruments like carbon pricing or emissions trading systems can address both perspectives. By internalizing the cost of carbon emissions, these mechanisms provide economic incentives for producers to reduce emissions in the short term, while fostering innovation for long-term sustainability.
• Collaboration and Partnerships: The contradiction highlights the importance of cooperation between all the relevant agents of this new wave of entrepreneurship provoked by sustainable transition. Tighter collaboration between startups, investors, and corporations serves as a powerful avenue toward acceleration and adoption of sustainable practices and technologies. Startups bring fresh ideas and agility, investors provide capital and guidance, and corporations offer industry insights and resources. By leveraging the strengths and expertise of each stakeholder and aligning their efforts, this collaborative synergy not only accelerates the development of sustainable innovations but also creates a robust ecosystem. IMPACT FESTIVAL is an example of how such an ecosystem promotes interactive relations between Green-Tech start-ups, SMEs, corporate sustainability managers, and investors. The mission of this convention is to encourage knowledge exchange that scales impactful solutions to accelerate green transformation.

In the last 10 – 15 years, a marked shift towards sustainability has been observed, transitioning from being a peripheral concern to a core foundation for a resilient future. Impact startups, have been instrumental in driving sustainable innovations, transforming industries, and redefining production and consumption models. By 2021, planet-positive tech investments reached $10B, showcasing the rising commitment towards planet-forward initiatives. Emphasis has been on clean energy, climate action, and sustainable cities.

Regulators have not been sitting still the last decades. From the Kyoto Protocol to the EU Taxonomy, we have seen major regulatory moves. In the last couple of months, we have seen additional global regulatory changes. At the UN Biodiversity Conference (COP 15), a significant commitment titled “30 until 30” was made, aiming to protect 30% of the planet’s land and oceans by 2030. This bold target emphasizes halting biodiversity loss and ensuring the sustained health of crucial ecosystems. Conversely, COP27 highlighted the pressing issue of “Loss & Damage”. This pertains to irreversible climate change impacts, particularly affecting vulnerable nations. The conference spotlighted the need for financial and technical assistance for these affected regions. Together, these outcomes underscore the international community’s dedication to addressing pressing environmental challenges and forging a sustainable future.

Collaboration is the heartbeat of sustainable innovation. As diverse startups merge their strengths, they’re building a brighter, greener future. This past decade has unveiled some truly transformative solutions. Our cityscapes are evolving with Green Architecture, with LEED guiding the way as a global touchstone. Creative solutions like roads made of Recycled Plastic are emerging, addressing both environmental and infrastructure needs. The drive toward Electric Vehicles is reshaping transport, promising a cleaner commute. Pioneering techniques like Carbon Capture and Storage (CCS) hold the potential for a cleaner atmosphere. Meanwhile, Smart Meters empower households to oversee their energy habits. In the realm of energy storage, the novel Artificial Photosynthesis and Molten Salt Energy Storage methods offer game-changing solutions. Each advancement is a testament to our shared dedication to safeguarding our home planet.