Can the climate crisis be solved by market economy? Renat Heuberger, CEO of South Pole, explains how his company combines returns and sustainability and what start-ups can learn.
Can the market economy truly serve as a vehicle for resolving the global climate crisis? And can a company’s financial targets be combined with an effective sustainability strategy?
South Pole is trying to do just that: the company was launched in 2006 by five young entrepreneurs who wanted to link economic benefits with climate-friendly growth, and at the same time mobilize the investments needed for climate protection projects. And their idea has proven successful: today, South Pole employs around 500 cross-disciplinary staff from 30 different nations on all continents. With their climate protection projects in emerging and developing countries, they offer companies possibilities for impactful CO2 compensation and at the same time help them develop holistic sustainability strategies.
To learn more about how start-ups in particular can benefit from this, we talked to South Pole’s CEO Renat Heuberger.
To what extent are environmental aspects already being taking into account at established companies?
A great deal has changed on this front in recent years. Today, for example, many large corporations are using their B-Corp certification to attract clients. This certification requires companies to incorporate sustainability goals into their articles of association and to give them the same importance as profit targets. These are exciting developments. Incidentally, the Fridays for Future movement has made an incredible contribution in this area. Although climate science, which I studied, had already made very clear forecasts in the 1990s – they just didn’t interest anyone at the time.
So, at the outset, the main focus was raising awareness?
Yes. For a long time, we asked ourselves how we could get the message across to people. With myclimate, we created a solution in 2006 that made the problem comprehensible to everyone. But the real breakthrough was only achieved recently, with Greta Thunberg, who made the issue mainstream. And the coronavirus crisis, amazingly, has further increased people’s interest: trust in science has grown as a result of the pandemic, and a growing number of companies committed to net-zero targets last year.
You also work for the Swiss government as a member of the Innovation Council, which is dedicated to supporting start-ups. Where do start-ups currently stand in terms of sustainability?
There are generally many more start-ups now than there were ten years ago. And we are receiving a lot of proposals every month from founders who explicitly want to launch new products that relate to the environment. They understand that climate solutions are necessary and are therefore aligning their entire company accordingly. This is happening in different market segments – from efficient building materials to recycling concepts and new solar panels. We are seeing a huge wave of innovation roll in.
Renat Heuberger studied environmental sciences and has been a pioneer and socially committed entrepreneur in the fields of sustainability, climate change and renewable energies since 1999. In 2002, he co-founded myclimate; followed in 2006 by the founding of South Pole together with four scientists. LGT’s sister company, the impact investing platform Lightrock, has a minority stake in South Pole.
What about start-ups that do not explicitly focus on climate solutions – have they fully integrated sustainability into their workflows or into how they select materials?
Absolutely. It goes without saying that if you attend an investor pitch with a new company today, you still have to show them that the idea has attractive market potential and target groups. But you get extra points if you can also prove that you stand out from the competition because you take a sustainable approach. If that is lacking, you can assume that another pitch that takes sustainability into account will be viewed more favorably.
What recommendations can you give start-ups regarding their environmental strategy?
Try to position yourself as a climate leader right from the start. If you internalize the climate as an important issue as a start-up today, you will have a head start over those start-ups that may have been founded five years ago and didn’t do that. A climate-neutral focus automatically gives you an advantage – so why not incorporate it and let the fact that you have this aspect covered make you shine when you pitch to investors? This applies to all industries: do everything right and in addition, be an environmental pioneer. That makes you better than the competition and you only stand to benefit as a result.
What other benefits do companies have if they take climate targets into account?
One example is employee recruiting. An employer that isn’t the least bit interested in the climate, but pays 10 percent higher wages, won’t find any young people who want to work for them. In other words, a company can actually save on salaries because young job seekers place greater importance on sustainability than on salaries...
Does the same apply to customers?
Yes, customers today are quite willing to pay higher prices if there is a clear environmental strategy behind a product. In addition, as a sustainable company, you are taking a far-sighted approach in terms of legislation – for example CO2 pricing – which will be introduced one way or another anyway. Anticipating such legislation could put you a step ahead of the competition. And last but not least, more and more shareholder groups are emerging that are collectively calling on CEOs to commit to net zero. So shareholders are already upping the pressure. All this means that a genuine, fundamental change of thinking makes clear sense. Not greenwashing, but real answers to the question of how CO2 emissions can be avoided and unavoidable emissions can be compensated.
You addressed shareholders: is protecting the environment already seen as a source of real value and a good investment? H.S.H. Prince Max von und zu Liechtenstein has just acquired a stake in South Pole through Lightrock.
Yes, and I find this incredibly exciting and groundbreaking: the Princely House has nothing to do with the Fridays for Future movement, of course, but Lightrock has always invested in social enterprises – and environmental issues are also societal issues.
What do you mean?
The social progress that has been made in many countries could be completely wiped out by the climate crisis – if the temperature in North Africa is 70 degrees in the summer, even building wells won’t be of any use.
What is your connection with Lightrock?
South Pole requires capital to meet the needs of what is a rapidly growing market – the demands on us are getting bigger and bigger. However, we have never wanted to raise money from just anyone. We were looking for an investor who shares the same long-term goals as we do. So the cooperation with Lightrock is a very good fit.
Are you generally optimistic about the future?
Yes. We simply don’t have time for pessimism – we really don’t. We have to fight for every millidegree when it comes to the climate. Two degrees is better than 2.1 degrees, which is better than 2.2 degrees. This is not a victory that is won in one shot – it’s a step-by-step victory that we have to achieve. And we can only do that if we take an optimistic approach.