The sustainable start-up paradox: Predicting the business and climate performance of start-ups

Climate-focused start-ups often aim to both exploit a market opportunity and to reduce the impact of climate change. The performance of these start-ups thus consists of a business as well as a climate dimension. However, so far the existing literature has only considered the business dimension of start-up performance. This even though, from a societal perspective, the climate dimension is a critical performance measure (Bjornali & Ellingsen, 2014; Calel & Dechezlepretre, 2013). This study fills this research gap as it is the first to include performance dimensions. The research sample consists of academic start-ups who participate in the Climate-KIC accelerator program, Europe’s largest climate innovation accelerator. This research reveals an interesting dynamic between the two performance measures of climate-focused start-ups – (1) climate mitigation and (2) business performance. The results provide support for the notion that the business and climate dimensions of performance are fundamentally different from each other. First, the type of technology has an opposite effect on the performance dimensions. Start-ups with a software product have significantly larger firm size while they also have a significantly lower potential to reduce CO2e emissions than start-ups with a hardware product. Second, besides technology, none of the dependent variables that significantly influence business performance (Song, Podoynitsyna, van der Bij, & Halman, 2008) has a significant effect on climate performance. The goals of climate and business performance thus do not align, and while business performance is necessary to translate potential climate impact into realized climate performance, it is not sufficient. The implication for policy makers, incubators, and accelerators is that achieving these societal goals simultaneously is not a straightforward process, and it is unlikely to result from the current approach. Instead these actors are presented with a tough challenge to balance the different societal impacts of start-ups.