Article    Peer-Reviewed

Assessing the Climate Performance Potential of Start-ups: Insights and Guidance on Environmental Sustainability Assessment of Young Ventures

Felice Diekel * , Vanessa Bach and Matthias Finkbeiner
Chair of Sustainable Engineering, Institute of Environmental Technology, Technische Universität Berlin, 10623 Berlin, Germany
For correspondence.
Academic Editor: Fausto Cavallaro
Highlights of Sustainability, 2023, 2(4), 207–223.
Received: 20 June 2023    Accepted: 4 October 2023    Published: 6 October 2023
This article is part of the Special Issue Capturing the Sustainable Impact of Early-Stage Business Models.
The role of early-stage venture capital (VC) investment in financing for ambitious climate action is often overlooked. In the developing field of climate-tech investment, one of the biggest challenges is to identify the start-ups and business models that contribute to climate change mitigation. The potential of a start-ups business model to reduce greenhouse gas emissions is defined as the start-ups climate performance potential (CPP). The assessment of a start-up’s CPP could enable start-ups and VC investors to invest in a more informed way with greater precision, impact, and purpose. The objective of this paper can be expressed in two steps: First, to gain insights into and identify the potential for improvement in the environmental sustainability assessment practices of VC firms through an exploratory case study. Second, to provide life cycle-based guidance on environmental sustainability assessment of innovative products offered by start-ups to determine their CPP, by eliciting appropriate criteria and procedures for directionally sound assessment. For this, the assessment approach developed by the climate-tech VC firm World Fund was used for the exploratory case study. In a first step, the CPP assessment process was described, based on document review and observation. Next, the CPP carbon footprint method was compared with ISO standardizations of life cycle assessment (LCA) and carbon footprint (CF) along eight criteria. Development potential was identified and discussed for seven of the eight criteria, including, for example, the use of scenarios, the complexity of meta-analyses, and the need to avoid misleading incentives.
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