Green Giants, Green Unicorns

Collaborating to scale sustainable solutions

It’s a bit late for a climate week debrief post but I’ve been delayed by a bout of Covid - so here goes. One of the brightest spots for me at Climate Week NYC this year was the emergence of innovation and climate tech as a major force. I had a chance to dip into this theme as moderator of fantastic panel entitled Green Giants, Green Unicorns: Collaborating to scale sustainable solutions. I wanted to understand how large incumbents and high-growth start-ups are approaching the innovation opportunity and the role each will play in the transition to a sustainable future. First, some definitions and then onto the discussion (with a video summary below to whet your appetite).

Green Giants and Disruptive Innovation 

My interest in sustainability and innovation stems from when I was researching my book Green Giants. I discovered that each of the nine Green Giant companies had built their billion-dollar sustainable businesses on the back of a disruptive innovation - and disruptive innovation was one of the six common factors that accounted for their uncommon success. They’d overturned the dominant product, service or business model in their category, using sustainability as the spark (consider Tesla with the first commercially successful EV or Nike with the Flyknit shoe that slashed waste and boosted athletic performance). This discovery delighted me because at the time there was a sense that sustainability advocates were luddites, asking people to go back to living in caves and eschewing modern luxuries like electricity and soft toilet paper. But the Green Giants proved that sustainability is the polar opposite of primitive; it can be the spur to invent the products and services of the 21st century, not just greener, but overall better. Innovation is an essential element of building a Green Giant - a company that has a billion dollars or more in annual revenue from a product, service or line of business with sustainability or social impact at its core. For the purposes of the panel, we used the term Green Giant to describe the large incumbents with the scale, resources and will to drive change with sustainable innovation as a key component of their sustainability strategies. Representing the Green Giants on the panel were two leaders I admire greatly, Ann Tracy, Chief Sustainability Officer at Colgate-Palmolive and Lisa Manley, VP Sustainability at Mars Inc. 

The rise of the Green Unicorns

As I’ve continued to follow the rise of Green Giants, I’ve also watched the emergence of a growing cadre of Green Unicorns. If Green Giants are large companies with billions in sustainability revenue, Green Unicorns are the up and comers, the sustainability, climate and biotech start ups with billion-dollar valuations. As of January 2023, there were estimated to be 83 Climate Tech Unicorns around the world valued at a collective $180B+. These Unicorns cross industry segments and span value chains - they are vertical ag start ups; alternative protein and dairy manufacturers; they offer waste and recycling solutions, building retrofits and manufacturing efficiencies; they are inventing sustainable sneakers, clean beauty and personal care brands, sustainable materials and insect ingredients. They exist especially up and down the renewable energy and EV value chains, making batteries, chips, panels, vehicles and even hail protection for solar panels. And that’s just the companies that have achieved coveted Unicorn status. By one estimate there are a further 45,000 emerging tech companies seeking to address climate challenges globally. (Somewhere I saw a chart showing the combined enterprise value of climate tech start ups globally is now $2.5T but I can’t find the source for this report so maybe don’t quote me on that). For the purposes of the panel we used the term Green Unicorn to describe high-growth climate and biotech start ups, represented by Shara Ticku, Founder and CEO of C16 Biosciences, the inventors of Palmless, a lab-produced alternative to palm oil designed to address deforestation in the palm oil supply chain.

The sustainability innovation opportunity

To give a sense of the scale of the opportunity, recent capital flows into climate and clean tech innovation are eye-popping: in one of the most-quoted stats of Climate Week, the passage of the Inflation Reduction Act alone made $390B in Federal funding available for decarbonization by the IRA over the next decade. The IEA estimates $1.7T in investment will flow into clean energy this year, exceeding investment in unabated fossil energy by a ratio of 1.7:1 (vs 1:1 5 years ago).  $3.4T is predicted to be spent annually on low emissions road mobility between now and 2050. Low emissions cement alone is expected to draw $60 billion in investment between now and mid-century. McKinsey calls this “the biggest capital reallocation of our lifetime.” 

In order to reach net-zero by 2050, innovation will be essential - for example, the IEA “estimates that 46% of the emissions reductions needed to reach net-zero by 2050 will arise through the adoption of technologies that are still under development”.  But it isn’t going to be plain sailing. Innovation is always hard, whether you’re an incumbent or a start up. It’s expensive, for one; indeed it’s a voracious consumer of capital - Toyota invested a billion dollars to invent the Prius. GE invested an annual 1. 5 billion dollars into ecomagination. And it isn’t clear that the funding sources we have are fit for the future we’re building. Just 6% of private investment in climate tech went to emerging or early-adoption technologies in 2021, with the remaining 94% invested in more mature tech, such as electric vehicles (EVs), energy storage and solar energy (source). Despite the big numbers I cited above, there’s currently a $3-4T shortfall in funding globally. There’s risk - both financial and physical. Often it’s not just a single product that needs to change but the system and infrastructure surrounding it - as with EV charging infrastructure. And for large corporations, it means changing almost everything they do. We have hard deadlines we have to meet - but as the panelists reminded us, the global stocktake suggests we’re not where we need to be. And of course we want to unlock these trillion dollar opportunities that we’ve already spoken about.

So how will we get there? It will take Green Giants and Green Unicorns working together to unlock revolution. Here’s what I learned from these candid, dynamic panelists.

Panel takeaways

1. Sustainability innovation is now “a team sport”: inside Green Giants, we’ve moved from a time when sustainability innovation was the job of “us little treehuggers in the corner” to an era where it’s everyone’s job, said Lisa Manley of Mars, citing marketing, legal, corporate affairs and R&D as a few of the teams working to unlock impact. This is an important and exciting development. To realize it, a key lever is education and capacity building across functions and disciplines - Mars and Colgate-Palmolive are investing in sustainability education for executives and teams to enable them to innovate in their roles and drive change at the scale and pace required.

2. The range of innovation opportunities is incredibly diverse: Ann Tracy explained that Colgate-Palmolive recently introduced the world’s first recognized recyclable toothpaste tube. If you’re unsure why this matters, consider that Colgate-Palmolive produces nearly half of the 20 billion toothpaste tubes produced annually across the globe. They have shared this technology with the industry which announced plans to adopt recyclable tubes by 2025. Lisa Manley explained that among Mars’ sustainability centric innovations are healthier planet friendly snacks, advertising with better representation and Lovebug - pet food made from (low carbon) insect protein. C16 was built around a bio-identical lab-produced alternative to palm oil in response to the problem of deforestation in Indonesia, a problem projected to grow as palm oil, a $70 billion industry today, expands by $30 billion by 2050. And that’s just from a sample of three panelists. All agreed with the Green Giant principle - sustainable innovation must make products and services better, not just greener, to address the perennial consumer intention/action gap.

3. Change is accelerating: Ticku pointed out that when she and the team started C16 five years ago, the term “climate tech” barely existed and the first IPCC report was unpublished. Ticku sees progress driven by sticks and carrots - including regulation and the recognition of the opportunity plus the confluence of sustainability and supply chain, national security and food security issues. All panelists described the increasing momentum as a cause for hope; “I’m worried but optimistic” said Ticku - a good formula for most of us working in this space.

4. We’re in a battle between entrenched interests and innovation - panelists didn’t shy away from the elephant in the room: not all Giants are interested in becoming green. At the risk of stating the obvious, there’s inertia from incumbent businesses unwilling to risk legacy revenue streams. Green Giants and Green Unicorns are chasing the revenue streams of the future. “The math is so obvious. It’s the biggest opportunity of our lifetimes,” said Ticku.

5. Green Giants need Green Unicorns: It will take both Green Giants and Green Unicorns to deliver the change we need - Giants with the scale, resources and know-how to drive change at scale and Unicorns with the creativity, fresh thinking and ability to move at speed. Sometimes Giants and Unicorns compete. Sometimes they collaborate. Sometimes Green Giants acquire Green Unicorns. Both can learn from each other. But the Green Giants on the panel were clear: while innovation will come from inside their businesses, they won’t get there alone. They need new ingredients, new packaging materials, new manufacturing solutions, new brands, and are actively on the hunt for those solutions. Colgate-Palmolive mentioned the 100+ Accelerator as one strategy for unlocking the Green Unicorn potential for its own business. “My sense is it’s never been a better time to be a Green Unicorn,” said Manley.

6. Green Unicorns need Green Giants: While Unicorns have the ideas, energy and freedom, they need access to the scale and resources the Giants provide. Ticku explained that building a B2B business was very intentional as C16 considered how to drive impact - one sourcing decision at a Colgate-Palmolive or Mars scale can have impact a smaller B2C startup could only dream of. Ticku explained that R&D and marketing teams inside Green Giants often make good partners to a Green Unicorn because they can start with a collaboration rather than a traditional procurement relationship. She shared the Pangaia Rewild Body Block as an example of a successful partnership - the world’s first soap made with Palmless, fragranced with the scent of burning rainforest (surprisingly pleasant).

There was much more - it was a rich discussion. Our panelists closed with their hopes for the future. They hoped to put themselves out of a job, to see greater integration of social and environmental strategies, and see new ways of making almost everything.

For my part, I shared my hope that when I come to do a second edition of Green Giants, which I'm hoping to do to come out in 2025, the 10 year retrospective, that I am utterly spoilt for choice of Green Giants and Green Unicorns to feature as part of a thriving ecosystem; and that we're seeing innovations coming to market at a speed and scale such that we feel a little less of that worry and a lot more of that optimism that we are going to solve the challenges before us.

Because as the Climate Group’s slogan for the week said, “We can. We will”.

And, I would add, we must.