How startups can enable the green transition?

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In this blog article, we dig deeper into how startups and growth companies can contribute and enable the green transition by creating technologies that promote the adoption of clean energy, increase biodiversity and natural diversity, or reduce the global waste problem. This article also discusses how climate and energy policy should be made from the point of view of the new Finnish government and what are the essential issues for growth companies to focus on.

When you think about the green transition and climate change, there are many problems to be solved, and all solutions are certainly needed.

Climate and energy policy determines Finland’s direction in the green transition

The green transition, and how it will be progressed and encouraged, will be under the spotlight as the new government is formed and Finland’s climate and energy policy for the next four years is defined.

Finland has much to do with sustainable economic growth, which is not based on the overconsumption of natural resources or fossil fuels. It is crucial for the government to form a line that defines ambitious goals for the realization of the green transition and to create an economic environment in Finland where new technology and innovations are born in these industries.

Firstly, when planning climate and energy policy, it is essential to stick to ambitious emission reduction goals – promoting them is vital to maintain a systematic climate policy. No compromises can be made because the faster Finland can facilitate the green transition, the more it will benefit the economy. Secondly, investing in energy efficiency and electrification on a national level is important. The government should promote energy efficiency and electrification at all levels, including households, buildings, transport, and industry. This also makes Finland a more independent state from the point of view of its energy dependence, when its production can be used to its advantage as much as possible. Thirdly, renewable energy and investing in it is critically important. The government should make Finland the most attractive place in the world to invest in renewable energy sources.

If these things are on a good foundation, it is easy for growth companies and other actors to start working towards these common goals.

The green transition requires cooperation between different players

When talking about something as complex as the green transition, nobody can implement it alone. We need cooperation across party lines, between the public and private sectors, and between growth and traditional companies. All actors are required, and everyone has different strengths to move things forward and solve problems.

The strengths of growth companies have always been based on the fact that things can be moved forward quickly, and technology can be developed in a way that is not always possible in large companies. By keeping the focus on the problem being solved from the solutions, it is possible to make scalable technologies that everyone benefits from.

Growth companies have always played a significant role in solving big problems. The same applies to companies focusing on the green transition, which forms a field that many Finnish entrepreneurs have set their sights on.

Many globally important problems are already being solved in Finland

From the point of view of the energy transition, the most significant challenges are how to make sure electricity is consumed when it is available: how to keep the electricity grid balanced, and how to store clean energy for moments when there is not much production.

Many growth companies are trying to solve the first challenge, optimizing consumption, by targeting solutions to factories and residential buildings and some targeting electricity consumption found in households, such as electric cars. All solutions are important because flexible and intelligent electricity consumption will be needed in the future much more than it is available today.

Another challenge, the storage of clean energy, is also in the sights of many growth entrepreneurs. In Finland, among other things, many different technologies are being developed to turn electricity into hydrogen, and clean electricity can be stored in smart batteries. The hydrogen economy and the transition to it are an example of an industry that, if realized, can become a significant issue for Finland in the future. In the future, hydrogen can be used to balance the electricity system and reduce the risk of peak prices.

The circular economy also plays a key role in the realization of the green transition in Finland. The green transition cannot be achieved without metals and minerals, and the destruction of nature cannot be stopped without a circular economy. Batteries, fuel cells, and wind turbines need a wide range of raw materials to function, such as lithium, cobalt, and hydrogen. In addition, one of the biggest global challenges is the clothing and textile sector, which accounts for at least 8% of global emissions today.

Fortunately, many Finnish companies are already promoting the green transition through the circular economy in many different industries. Some companies focus on circular economy solutions in the textile and clothing sector, some on alternative plastics, and some on recycling and reuse solutions for metals and minerals. All of these are needed to ensure the rational use of materials and environmentally responsible recycling in the future.

Anyone investing in the green transition has a hugely growing market at hand

The green transition requires a lot of investment from companies, households, and the public sector. Capital investment funds and other early-stage financiers have set their sights on the various green transition sectors. There has never been a better time to start a company focused on climate technology. Globally, early-stage venture capitalists invested more than $70 billion in climate technology companies in 2022, a record amount, with investments almost doubling from 2021.

According to the latest 2022 report of Finnish Venture Capital Investors (FVCA), the last two years have shown progress, although investments in Finnish energy and environmental companies fell in 2020 to the lowest level ever since 2013. This vertical is now in constant growth with no signs of slowing down in sight.

In general, green transition companies are in a good situation from a financial point of view. This situation opens up opportunities for new growth companies that want to create solutions at all levels of the green transition. Finland is already known for its bold support of concepts and ideas. In addition, as it is one of the world’s most innovative countries, Finland now has a unique opportunity to invest more widely in innovations that support the green transition, which will also benefit other countries on their green transition journey.