I have been discussing for a long time That it's scary for VCs to get excited about climate change, and that the goal of startups is to cease to exist. But I haven't been particularly successful in outlining what startup founders can actually do to build more sustainable companies in a world hurtling toward the climate crisis.
Introducing Amit Paul and Nils von Heine. They've spent the last few years thinking about how companies are set up and whether there's a different approach we could take. In their native Sweden, the duo devised an alternative organizational structure aimed at redefining thinking about sustainability and regenerative business practices.
This new organizational model, called Regenerative Circular Operations (RCO), is more than just a theoretical framework. It aims to be a practical approach to embedding sustainability at the core of your business. This model wants to set new standards in corporate responsibility and environmental management by weaving the principles of regeneration and circulation into the fabric of corporate structures.
The framework has already received a preliminary seal of approval from the Swedish authorities, as the first company incorporating this model has been established. The company Innrwrks was founded by Paul and von Heine and is trying to become a blueprint for other startups to build on the same model.
Sweden's tentative acceptance of the RCO model represents a step forward in the global movement towards sustainability and regenerative business practices. This provides a government-backed model that companies can look to as one approach to building more sustainable businesses.
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The origins of the RCO model date back to a series of discussions between Paul and von Heine in business school. They looked at the limitations of existing business models in tackling pressing environmental challenges. They recognized that while there is a growing movement towards sustainability, most efforts by startups remain superficial and fail to address the root causes of ecosystem degradation.
Paul, who has a deep background in environmental science, says he has long supported practices that minimize harm to the environment and contribute to its restoration. His career has been marked by efforts to bridge the gap between environmental management and profitability. He is an Environmental Defense Fund Fellow and was part of CodeGreen Solutions, where he focuses on helping real estate take a lower carbon path.
Von Heine, on the other hand, is a serial entrepreneur (he has eight co-founder titles on his LinkedIn) with a wide range of companies collaborating on problem areas that act as catalysts for change. He is also an early stage investor (as part of Svärd von Heijne) focused on sustainable startups.
“I was completely absorbed in the culture and story of the business school,” von Heine said. “We're here to build something and scale it as quickly as possible so someone can make money. That's the end of the story. “It became something other than making me look like a successful person,” he explained.
RCO model
Paul and von Heijne told TechCrunch+ that the RCO model was inspired by living systems theory. Living systems theory emphasizes the importance of designing organizations to be adaptive, resilient, and able to thrive in harmony with the natural world.
According to Paul, RCO has three unique parts. Part of it is the constitution, or what the co-founders call the source code: the horizon the company sees. “This horizon is never an answer; it is a question that represents the constitution of the organization and guides us,” he explained.
The second part is association. “The association preserves and protects the purpose of the company and helps keep it on track. It cannot tell the company what to do, but in some cases it can tell the company what to do. You can. do not have “It’s about doing it,” he added.
The third part, which is fundamental to the other two, is related to the life cycle of the company. “Startups don't stay startups forever. The logic of startups has to change,” Paul pointed out. “Startups need to acquire a lot of resources in the beginning, but at some point they become more complex and start forming a structure. That's when they become a 'real company.' His third aspect of RCO helps us think of companies as growing and changing organisms. ”
The RCO model proposes that businesses emulate the resilience, adaptability, and regenerative capacity of living systems by drawing parallels between natural systems and organizational structures. This includes building efficient and adaptable business operations that can positively contribute to the ecosystems and communities with which they interact.
The two pillars of the RCO model are regeneration and circularity. Regeneration focuses on strengthening and restoring ecosystems, communities, and natural resources. Companies that follow this framework are designed to make a positive contribution to the environment and go beyond sustainability to actively improve ecological health and social welfare. Circularity is the concept of eliminating waste and pollution, keeping products and materials in use, and regenerating natural systems.
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Implementing the RCO model requires a fundamental shift in how companies conceptualize their role in society and the environment. This includes:
- design with purpose: Companies need to redefine their purpose around regenerative and circular principles, so that every aspect of their business makes a positive contribution to the environment and society.
- Create comprehensive value: The RCO model focuses on value creation across economic, environmental and social dimensions. This includes rethinking business models to optimize sustainability and resilience.
- Adaptive governance and leadership: The RCO model requires adaptive governance structures and leadership styles that respond to changing environmental and social conditions.
- Engagement and collaboration: Success under the RCO model depends on stakeholder engagement and fostering collaboration across sectors and industries. By working together, businesses, governments and communities can drive the transition to a renewable and circular economy.
Technology plays a key role in enabling the RCO model. From advanced materials and renewable energy to digital platforms and circular economy technologies, innovation is key to putting regenerative and circular principles into practice. Companies must leverage technology to design products and services that are not only sustainable but also inherently renewable.
Their own company, Innrwrks, aims to showcase how businesses can prosper economically while actively contributing to restoring and revitalizing natural ecosystems and promoting social welfare.
It's not a smooth road
As you can imagine, the path to pioneering and implementing the RCO model has been fraught with challenges, from legal hurdles to cultural resistance.
One of the biggest challenges was navigating the complex web of legal and regulatory requirements, the co-founders told TechCrunch. Very little corporate law accommodates business structures that prioritize environmental and social regeneration as core operating principles.
Another major hurdle has arisen from entrenched cultural norms and mindsets that favor traditional linear operating models. The work is underway to convince business leaders, investors, and even consumers to adopt a model that fundamentally redefines success.
While it is encouraging that some countries are willing to make changes at the corporate structure level, globally it will be an uphill battle. Challenges include entrenched business paradigms, circumventing regulatory and policy hurdles, and securing the investment needed for the transition. However, these challenges also present opportunities for innovation, collaboration, and leadership.
My main concern is whether this model introduces new risks to companies. Early-stage startups are risky enough as they are, but if an RCO could potentially block an exit opportunity (e.g., if a less scrupulous company wanted to acquire the startup), then it It can be a poisonous pill for VC investing.
So, what should we do?
We have seen many waves of business innovation. Concepts such as teal organization and holocracy have had varying levels of success, but for the most part they describe how operations work within an organization.
RCO wants to take similar principles and apply them throughout the organization. In the US, B Corporations show some similarities with his RCO model. But as of late 2023, there are fewer than 7,500 B-corps, and it's not entirely clear whether the B-corp model can have the level of impact its idealistic proponents expect. Not.
Yet here we are at the crossroads of environmental crisis and social inequality. I am interested in whether the RCO model can move the needle enough to achieve its objective of creating a more just, regenerative and circular approach to doing business.
I'm all for this approach, but to see real change, it takes a visionary willing to take on even more unknown challenges on top of the already excruciatingly difficult process of starting and running a company. Is required. I know that most startup founders don't shy away from a challenge, but I fear that RCO has a long and difficult road ahead of them to reach their goals.