This is the second installment of Emerald’s series on corporate venture capital-as-a-service (CVCaaS). Check out part one for an explainer on CVCaaS and how it works.
Growing awareness of environmental challenges—including climate change, resource scarcity and air and water pollution—is compelling companies to act. They are looking for ways to reduce waste, greenhouse gas emissions and water consumption, among other factors. They are seeking greener substitutes for various raw materials used in their production processes.
These ambitions often bump up against major constraints, most notably higher costs for sustainable alternatives, or the simple fact that such alternatives may not exist yet. Innovation can help overcome these challenges but requires greater investments in people and budgets. Companies often lack the resources and capacity to do this or may struggle to attract the best talent for what may be temporary projects.
This is where CVCaaS for sustainability comes in. The CVCaaS model sees a service provider like Emerald help large corporates collaborate with startups and leading innovators—often, but not always, via VC investment—to solve their innovation bottlenecks in a lean and fast approach. These partnerships may result in knowledge diffusion, technology transfer and, in more exceptional cases, in outright acquisition of the smaller firm by the larger partner.
Why should a company consider leveraging CVCaaS to enhance sustainability performance?
When it comes to sustainability specifically, CVCaaS offers several advantages:
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Access to innovative technologies
- Many startups are at the forefront of developing sustainable solutions, such as renewable-energy technologies, waste-reduction processes and sustainable supply-chain approaches. Investing in these companies gives large corporates quick access to cutting-edge inventions that the large partner would likely struggle to develop in-house faster and cheaper.
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Scaling efficiency and next-generation practices
- Reducing a company’s impact on the planet is often a welcome byproduct of measures meant to increase efficiency and upgrade old, outdated production methods. CVCaaS for sustainability can help turn laggards into leaders on technology and modern best-practices.
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Building partnerships and ecosystems around sustainability
- Not every challenge can be solved in a one-to-one collaborative relationship. The most challenging problems need broader innovation ecosystems with multiple parties. A CVCaaS partner can foster the creation of such an ecosystem and maintain these networks where all parties benefit. Startups gain funding and expertise, while corporations benefit from lean, fast and powerful innovation cycles. This collaborative environment is conducive to developing holistic and effective sustainability solutions. At the same time, the mission-driven nature of sustainability-focused innovation ecosystems helps to imbue a sense of purpose and motivates the employees involved.
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Risk mitigation
- Collaborating with, and investing in, a range of startups allows corporations to spread their risk. While not all projects will succeed, those that do can offer significant benefits. This approach allows corporations to experiment with various sustainability initiatives without bearing the full risk of innovation. In addition, outsourcing the search for suitable start-ups to a CVCaaS partner also provides an extra layer of scrutiny and the ability to plug into a professional CVC operation and network that the corporate may not be able to sustain on its own.
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Potential financial returns
- This fundamental metric of CVC also applies when considering CVCaaS as a sustainability-boosting measure. In particular, CVCaaS that leads to both sustainability and bottom-line benefits provides a win-win situation that helps buttress the business case for sustainability throughout the organization.
As companies race to meet increasingly urgent sustainability goals, they should utilize a variety of tools to help them reach their aims. CVCaaS is one of those tools. Reach out to Emerald today if you are interested in learning more.