Welcome to “10 Ways to Win in Climate Software,” an Energize series defining the playbook for sustainability SaaS entrepreneurs. In case you missed it, catch up on our series opener and the Ways to Win countdown:
From the migration to remote work prompted by the pandemic, to the Great Resignation and quiet quitting trends, to recent mass tech layoffs – the modern workplace and workforce have undergone decades-worth of shakeups in the last few years alone. The cumulative effect is a new set of criteria that workers draw from when evaluating their current or prospective employers. The statistics and headlines that have proliferated in the last few years are resounding: Workers want to do work that matters.
At Energize, we encourage climate software companies to activate the “climate talent honeypot” – that is, the opportunity for climate-focused businesses to attract and retain employees seeking mission-oriented careers. In our opinion, fully embracing the honeypot requires climate software companies to both communicate their climate impact and incorporate strong environmental, social and governance (ESG) initiatives throughout their operations. Companies with demonstrable impact and a healthy ESG profile can tap into a self-reinforcing flywheel for attracting top talent, top customers and more top talent:
- Improved Recruitment. Study after recent study shows that workers – especially Millennial and Gen-Z workers – seek jobs with purpose. Climate software companies that can demonstrate positive environmental impact have a competitive advantage when recruiting top talent.
- Happy Employees. Once an employee joins a purpose-driven company, they’re more likely to stay. Employee retention gives companies a lift on multiple fronts, helping preserve their recruiting budgets while also bolstering internal company culture and employee engagement.
- Improved Performance. Happy and engaged employees perform better than quiet quitters. Research has also shown that purpose-oriented companies report significantly higher levels of employee innovation.
- More customers. Climate software companies that can back their mission up with metrics have a leg up when marketing their software to new buyers. Customers want to buy from companies that have strong ESG and impact ratings, a preference codified by the proliferation of net-zero commitments.
Climate software startups have natural inroads to access the human capital flywheel – one small bright spot amid the climate crisis is the talent (and funding) that is flooding into the space. And the workforce is global. Unlike early tech hiring waves that were concentrated in Silicon Valley, the current wave of climate jobs and talent are widely distributed, making them much more accessible. But establishing a vibrant company culture where employees feel valued and inspired is more than a mission statement. Don’t expect to attract and retain talent if your climate impact, culture and values don’t extend beyond your website’s About page!
At Energize, we’re working to embed impact and ESG strategies across our firm’s operations and to guide and support our portfolio companies in defining their own strategies. Based on our experience, we’ve developed a few recommendations for climate software companies:
Simplify and share your impact story. Unlike tangible hardware technologies such as wind turbines and solar panels, the software that’s helping accelerate and scale the sustainability transition can be less visible and intuitive for prospective employees and buyers. Don’t assume your audiences are aware of the climate impact your software is driving, especially if you serve multiple industries or provide highly technical software solutions. Our portfolio company Sitetracker initially focused on optimizing infrastructure deployment for the telecom industry and has since expanded into sustainable infrastructure, becoming a national leader in EV charging installation. Actively marketing these new applications – including unveiling a new, climate-focused mission statement – helped Sitetracker recontextualize their infrastructure deployment software as a key propeller accelerating the sustainability transition today.
Make your software accessible. The more customers that use your climate software, the greater your climate impact will be. Yet not all potential users, especially mission-oriented users, are able to pay top dollar. As part of their Pledge 1% commitment, our portfolio company DroneDeploy partners with nonprofits and philanthropic organizations to enable sustainable development projects through their reality capture software. Access to DroneDeploy’s software helps the nonprofits make their communities more resilient, increasing DroneDeploy’s reach and impact.
Automate your impact measurements. Companies that can quantify their climate impact have an inherently stronger narrative when communicating to new talent (and buyers, investors, media, etc.). But some climate software companies – even those combatting climate change in obvious ways—aren’t able to measure key impact metrics due to limitations within their own software. Early on, companies should think through which impact metrics they want to track and build that functionality into their software from the start. Our portfolio company Patch effectively embeds impact measurement within their platform. Patch’s software tracks each carbon credit transaction made through their carbon marketplace, making it easy to calculate and communicate the global climate action their software enables. “Patch is driving outsized impact to scale carbon removal, and it was critical for us to be able to share that impact clearly and concretely,” said Brennan Spellacy, Co-Founder and CEO at Patch. “Building this data transparency directly into our product helps illustrate our climate impact and as well as the impact we’re facilitating for our customers.”
Measure and manage your Environmental footprint. Beyond the positive impact your software has on the planet, strengthen your company’s overall environmental profile by managing and mitigating your own operational carbon footprint. Most software companies have a relatively small footprint, making it more straight-forward to calculate emissions and take a leadership position by purchasing high quality removal credits. Our portfolio company Monta, an EV charging management platform, minimizes their environmental impact by providing vegan-only lunches for their team and uses Patch’s software to offset the personal carbon footprint of every employee.
Expand your Social net. At Energize, we firmly believe that diversity drives alpha. Diversity, equity and inclusion (DEI) practices not only create a supportive and safe company culture, but are paramount for getting the right candidates in the door to help your climate software company thrive. Building an inclusive recruiting process early is key. Resist temptations to increase the speed of your hiring by only drawing from existing networks, which reinforces a monolithic culture. Once you start expanding your network it can diversify more organically, making subsequent hires easier. Our portfolio companies with the strongest DEI practices are finding partnerships to diversify their networks, setting goals and creating oversight to hold themselves accountable, and seeking ongoing employee feedback through surveys. Check out Him for Her as a resource for accelerating diversity on corporate boards.
Create a strong Governance infrastructure. Though often overlooked by its “E” and “S” counterparts, the Energize team is outspoken in our belief that the “G” of ESG is absolutely essential for building a resilient, low-risk and long-lasting company. We take our roles as board members seriously, and we provide hands-on support to help our portfolio companies build strong corporate governance practices. Ensuring board oversight, establishing strong ethics and compliance policies, setting executive remuneration aligned with long term value creation, and establishing robust cybersecurity and data protection measures (e.g., ISO 27001) are all important aspects of governing your climate software company ethically and effectively.
In summary, climate software companies helping to accelerate the sustainability transition are ripe for attracting the outpouring of talent in search of mission-driven careers. But to leverage the full stickiness of the climate talent honeypot, climate software companies should deepen the value they bring their employees and the world around them with a substantiated impact narrative and comprehensive ESG strategies.
This article represents the views of the author and is provided for informational purposes only. It is not intended to be, and should not be construed as, an offer, solicitation or recommendation with respect to any transaction and should not be treated as legal advice, investment advice or tax advice. Readers should not rely upon this information as a substitute for obtaining specific legal or tax advice from their own professional legal or tax advisors. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities. Information is subject to change based on market or other conditions.