Green Business Startups: How To Get The Ball Rolling

Annie Button, professional content writer and branding aficionado, explains how green business startups can get the ball rolling. 

The world is trying to be a greener place, with businesses and consumers making decisions based on their environmental impact. Many people have turned to veganism, others look to alternative fuels for their homes and cars while more people shed their plastic use. But these are typically decisions made by consumers, so how do businesses fit into ‘going green’?

Many established businesses are altering their production methods and supply chains to be more environmentally conscientious. The number of American businesses with formal green programs in place is up 54%, according to a study conducted by Xerox.

Green startups, on the other hand, are taking the bull by the horns and committing to an environmental pledge from the get-go. Let’s look at the best ways for green startups to find investment to get the ball rolling and start as they mean to go on; with minimal environmental impact.

Impact investing

Like many new businesses, whether they are environmentally friendly or not, finding funding for their endeavours is often a slog. Convincing investors of profitability based on estimates is ultimately a gamble and one that can see wealthy individuals reluctant to share their wealth – which is their prerogative.

But, the good news for green startups is that attitudes towards investing in greener ventures are enjoying a considerable upturn in confidence. Known as impact investment, forward-thinking ventures are looking to invest substantial capital in sustainable business models with ethical values.

Impact investing goes beyond typical growth investments like SEIS or EIS, looking specifically for companies trying to make a social or environmental change. Typically these investments are distributed into agriculture, education, renewable energy and healthcare.

Socially responsible investing (SRI)

Investing isn’t typically seen as a way to make the world a better place but things are beginning to change thanks to socially responsible investing. A 2019 Morgan Stanley survey discovered that 85% of individual investors are now interested in sustainable investing.

SRI is a type of investing that looks to garner social change and financial returns. This sees investors putting their money into companies making a social or sustainable impact and shunning those making a negative impact. 

It’s important to note that while everyone has different values, what each investor defines as SRI may vary. This could mean some investors put strict measures in place while others do not. Finding an SRI investor could be the difference between getting a green startup off the ground or not.

Environmental, social and governance investing (ESG)

Environmental, social and governance investing is a little more specific with how capital is invested. Each aspect of ESG is carefully looked at. Environmental criteria are put in place to consider how a company acts as a steward of nature. 

While investors understand profits are essential, ethical investing is a priority with proactive business leaders recognising a duty to put purpose above need to support climate change targets. Social considerations are made regarding the way a company manages its relationships with employees, suppliers, customers and the community in which it is based. 

Finally, governance looks at the ways a company is structured, ensuring leadership, executive pay and shareholder rights are carefully considered. According to a report from the US SIF Foundation, investors held $17.1 trillion in assets chosen according to ESG, so appealing to these investors can see wonderful gains.

Tax relief for sustainable businesses

It’s not just investors looking to help green businesses thrive, governments are chipping in too. Environmental taxes are implemented to encourage businesses to act more sustainably, offering lower rates for companies operating more efficiently and producing less harmful waste.

For instance, the UK’s Climate Change Levy allows businesses to pay a lower rate for being energy-intensive and entering into the climate change agreement. Companies are also allowed to claim capital allowances for buying or using energy-efficient or zero-carbon technology.

Green business grants

Some startups may not be considered green as the only premises they were able to find are antiquated and not that energy-efficient. There are grants available, from companies like the West of England Growth Hub, that look to provide financial assistance to businesses going green. Investments like these allow SMEs to transform their existing premises and join the fight against climate change.

Grants like these encourage SMEs and startups to install:

• Efficient heating
• Insulation to walls and roofs
• LED lighting
• Solar film to reduce overheating
• More efficient manufacturing processes

Is sustainability profitable?

For generations, businesses have followed the mantra of ‘extract, use, dispose’ as a means for production. This throwaway approach posed a big problem for businesses; how could they create sustainable products when the old methods were tried and tested?

To go into this even further, sustainability was seen as a choice between it and profits. Sustainability and profitability were once two separate things but times have changed.

Being environmentally friendly as a business does lead to profits, and more people are waking up to that reality. Companies like Biome Makers and NatureDots have proven that going green is good for business thanks to their high valuations.

The triple bottom line

One of the simplest business philosophies that encourages green or sustainable business is the triple bottom line. This is a concept that focuses on three key areas for business performance; economic, social and, of course, environmental. The idea is that businesses not only measure their financial performance but their social and environmental conduct.

Harvard Business School professor, Rebecca Henderson says, “In many situations, it’s possible to do the right thing and make money at the same time”. She adds, “Indeed, there’s good reason to believe that solving the world’s problems presents trillions of dollars worth of economic opportunity”.

An easy way to remember the triple bottom line is breaking it down into three Ps; profit, people and planet. Profits are naturally concerned with the financial performance of a business. 

The people aspect of the triple bottom line is about a company’s social impact or its commitment to people. This is similar to the ESG approach that investors take and companies concerned about the triple bottom line look to add value to their stakeholders. That value may come in the form of fair hiring practices, volunteering in the workplace or partnering with non-profit organisations.

Finally, the third consideration is for making a positive impact on the planet. This is through green initiatives that reduce a company’s carbon footprint, like using ethically sourced materials.

Green startups should strike while the iron is hot

Startups looking for green-focused investment may wish to consider adopting the triple bottom line approach to showcase their commitment to sustainability. As many businesses are now finding out, putting the environment and society first doesn’t mean an organisation can’t be profitable.