The fastest-growing retail tech segment you're ignoring

Retail tech that defies categorization

More than 25% of all venture capital in 2022 was directed at climate technology, per PwC’s 2022 State of Climate Tech report. After a slowdown earlier this year, investment is again on the rise, per BloombergNEF.

When people hear “climate tech, ” many think of renewable energy, EVs, heat pumps, or other technologies targeting major, top-down sources of emissions.

But beyond these massive, generally industry-agnostic categories, there has emerged a growing segment of climate tech companies working to decarbonize specific industries.

Just start a quick Google search and you’ll get a sense of what’s happening.

Like other specialized tech companies, these “decarbonizing x” companies often have value propositions that emphasize domain expertise and “plug-and-play” integration with existing business models and value chains.

But in mainstream and trade press, and among the major and boutique analyst firms, they often fly under the radar.

My theory is that they defy categorization under current coverage models. They dwell in the liminal space between mainstream climate tech coverage and industry-specific tech coverage, their specialized solutions overlooked in both realms.

The startups decarbonizing commerce

When I went looking for climate tech companies focused on decarbonizing commerce, I was stunned by what I found.

As we set out to build a coverage universe, we had two basic criteria for inclusion:

• The company must be explicitly focused on mitigating or adapting to climate change

• The company must exclusively or primarily target retailer, ecommerce, or consumer product companies as customers

In our preliminary research we identified more than 350 venture-backed or publicly traded companies focused on decarbonizing commerce. Collectively, they’ve raised more than $20 billion in funding.

Around 15 years ago when I started a similar practice covering early-stage retail and ecommerce tech, the initial coverage universe was eerily similar in size—between 350 and 400 companies. Like then, it looked like there was a there, there.

I’m notoriously literal when it comes to naming things, so I started describing these companies as “Commerce Climate Tech.”

Investment in companies that meet these two criteria has accelerated since 2018. Like the bets venture capitalists made in mobile, ecommerce and online grocery, and retail media, investors are again funding industry-specific technologies that position retailers and brands to outperform over the next 10-15 years.

Drilling down

Once we had identified companies to include in the initial coverage universe, it was time to start categorizing them.

We started by grouping them according to the commerce-specific drivers of emissions they were targeting.

On a macro level, these align pretty well with the ways retailers and brands break down value chain emissions in sustainability reporting.

Viewed this way, companies are grouped in these buckets:

• Inputs: Materials, ingredients, and agriculture

• Product design, manufacturing, and operations

• Packaging

• Transportation, fulfillment, and logistics

• Sale, use, and post-use

• Administration

At this macro level, you begin to see how investments to date have been allocated. It’s such a new space that it’s tough to study trends over time, but my thesis is that the mix will change considerably over the next 5 years as major industry players increase their focus on Scope 3 (value chain) emissions.

From a practical point of view, these buckets aren’t useful enough for industry executives and operators with decision rights and budgets to allocate.

So the next step was to assign more descriptive categories to indicate the solution area a company plays in.

To make things as self-explanatory as possible, our bias was to use existing industry terms, though we also cross-referenced our taxonomy with venture capital databases like Crunchbase.

At this level, it becomes clearer which aspects of the customer experience and ways of working between retailers and brands are likely to see innovation.

Some areas, like alternative proteins, vertical farming, and resale have captured a great deal of attention and analysis in recent years.

But many other well-funded solution categories have not, like last-mile logistics, reuse & refill technology and infrastructure, and product-level climate footprinting and labeling software.

A snapshot of the landscape

Now we get to the real firework show, when we start to name names and highlight players in each of these solution categories.

With nearly 400 companies in our coverage universe, we can’t include all of the logos in a single image.

So, there are a few things to emphasize:

• This is a snapshot in time in a very dynamic space

• This is a fraction of the 385+ (and growing) companies in our coverage universe

• Inclusion in this snapshot isn’t an endorsement

You’ll find the full database in the Profiles section of Decarbonize.co, where you can search, see related companies, and filter by solution area, geography, and more.

Now it’s your turn

Ever wondered what it’s like to be an “industry analyst”? (No? Just us, then?)

Whether you’re a retailer or brand, a startup, or an investor, we’d love your input.

• What categories or companies did we miss in our coverage universe?

• Is there something missing or incorrect on your company’s profile?

• Can you think of a clearer or catchier term than “Commerce Climate Tech” to describe these companies? I promise to give you full attribution.

Share your thoughts on LinkedIn or over email at info[at]decarbonize.co.

-Keith