Overview
The emergence of sustainability as a core business priority - driven by regulations such as EU CSRD, consumer pressure from those who want to make more sustainable purchases, and a desire from employees to contribute towards a green and growing economy - has shone a bright light on the shortage of workers equipped to meet market demand. Many reports of recent years have focused on the climate skills gap (often referred to as "green skills" gap). However as highlighted by the UN PRI, ESG needs to be considered holistically - looking at each issue in silo neglects political and economic realities. Hence, we have taken the decision to look at skills demanded not only to tackle the E challenges (Environment), but also the S (Social) and G (Governance).
In this report, we have defined the Sustainability Skills Gap around an existing definition formed by Microsoft (and BCG):
Employees with deep and specialised sustainability knowledge and skills e.g. in areas such as carbon accounting and carbon removal
Knowledge from employees in specific subject areas e.g. human rights issues related to supply chain management
General fluency in sustainability issues which impact a variety of business operations and processes
We have added an additional category related to the enhancement of knowledge of consumers, whether that be for children, homeowners or others, enabling them to make more sustainable choices.
The key differentiator in this approach, as opposed to what we may see covered in a report focusing solely on the “green skills” gap, is that we are also covering important social and governance issues, such as human rights supply chain management, or holistic impact investing education. This falls in line with the GRI framework (on which we have largely based the categorisation of solutions), which enables organisations to understand their contribution to sustainable development as a whole, with companies reporting on their impacts on "the economy, environment and people in a comparable and credible way".
We recently spent some time looking at the European market for solutions addressing the sustainability skills gap. We observed some innovative new companies that are trying to disrupt the space. A transition to a more sustainable future requires a fundamental shift in the way that society and organisations operate. This shift is firmly taking hold, but cannot happen overnight. While we expect some leaders to emerge in the coming 12-18 months, we do not expect the market to reach maturity until later this decade.
Please note, given our focus on education and learning, we have focused this report on increasing the supply of human capital equipped to address sustainability challenges within society. We believe that Edtech solutions can play an important role in:
Educating consumers and employees on how to live and operate more sustainably e.g. solutions such as Furbnow which help consumers learn how to make their homes more energy efficient or like Pawprint which helps employees take more personal sustainability related actions.
Upskilling and reskilling workers, helping them access new careers which are supporting a sustainable transition e.g. solutions such as La Solive which helps people train for a career in energy renovation.
Supporting people with understanding the types of sustainability roles that exist and helping to match employees with the right roles e.g. Greenworkx which developed a career discovery tool for job seekers.
We also acknowledge that there are exciting solutions which are successfully helping companies bridge skills and understanding gaps via software and robotics, ranging from ESG reporting solutions such as Novisto and Sweep, which streamline the ESG reporting process, to startups such as BladeBug which utilises robotics to maintain wind turbines and make them more efficient.
Let's dive in! There are 3 main parts to this report.
(a) Why we believe in this space
There are 4 major drivers that make us believe in this market opportunity in Europe.
Driver 1.
Lack of employees with sustainability skills
Sustainability roles have traditionally operated within siloed business units focused on voluntary corporate social responsibility reporting, thus there has been limited demand for people with sustainability skills. As sustainability has become a more critical business issue, sustainability skills are now necessary across business functions. For example, marketeers are now facing more pressure to portray organisations in a more sustainable light or emphasise the sustainable merits of products to consumers, whilst ensuring that they avoid greenwashing, similar impacts can be seen business wide. Furthermore, in general, people still aren’t aware of the types of roles that exist in the sustainability field, the skills required for these roles, and how to access these opportunities. Traditional training opportunities for these skills tend to be unappealing, whether that is because they are expensive, inflexible, unengaging, or do not have direct links into the job market. These factors, along with limited demand in the job market, has for a long time made sustainability skills training unattractive.
Driver 2.
Massive increase in demand for sustainability skills
A report from LinkedIn found that the number of job postings requiring green skills grew at a median of 15.2% between February 2022 and February 2023, despite a fall in overall jobs postings, demonstrating solid and growing demand for these skills. We consider this demand to primarily be generated from:
1) Firms which directly contribute towards sustainable development, such as those in the renewable energy sectors seeking to match increased demand for services.
2) Firms looking to demonstrate and improve their own sustainability progress, such as achieving decarbonisation or diversity targets.
Driver 3.
Inefficiencies in the matching system – there is a lack of clear data from employers on where the shortages are and from employees on the types of roles available, and skills required
As set out by Lucy Clarke at Fixed Construction (which is driving efficiency in the construction employment market), “better matching is an important step in the process of skill gap reduction, once we understand where the barriers and the gaps are then we can start to bridge that gap with more tailored skills training.” Thus, we strongly believe there is an opportunity for Edtech platforms to improve this matching process, bringing candidates closer to opportunities and vice-versa! Improving awareness of where there are gaps now and where they’re expected in the future will enable more targeted training grounded in these requirements.
While many of these requirements are likely to be transferable from existing roles, there is limited transparency in the market about the types of sustainability roles available, how to access them and the skills required. We believe that Edtech solutions, such as Greenworkx, can start to play a crucial role in guiding employees in the right direction, based on their interests and skills.
Driver 4.
A desire from employees and consumers to live more sustainable lives and work in more sustainable roles
A 2022 survey from IBM found that there is a growing interest in employees wanting to apply and accept jobs from environmentally sustainable companies, with 67% of the respondents reporting that they are more willing to apply for, and 68% more willing to accept positions from such companies. The picture is similar in consumers’ desire to live more sustainably, with 78% of US consumers in a recent study by NielsenIQ saying that a sustainable lifestyle is important to them. This is driving organisations that have not traditionally been sustainability conscious to improve their credentials in this area, in order to ensure they are attracting the best talent.
(b) Who are the emerging players addressing the skills gap?
Disclaimer: This map presents some example companies for each category out of the several hundred companies we have observed and no scoring of any kind is intended. This said, please do suggest companies that we have missed (iv@brighteyevc.com). Additionally, many startups offer different applications and would thus fit into more than one category. For simplicity’s sake, the map below presents them in their main category. We have largely focused on players in Europe, however when we have observed a significant player in other geographies, they have also been included for illustrative purposes.
Addressing the sustainability skills gap
The map has been segmented into 6 major categories, with solutions being more narrowly categorised within these according to sub-focuses. These groupings were largely based upon GRI topic categories, but also considered the areas in which we believe Edtech solutions can have the most significant impact. Given skills deficits are generally less prominent in the ‘Economic’ segment of the GRI topic groupings in Europe, due largely to legacy regulation, this segment has not been covered in the same depth as ‘Environmental’ or ‘Social’ topics.
We have decided to separate the solutions which are more focused on site-based roles, from those which are more focused on desk-based roles. Skills required for site-based roles tend to be more ‘hands-on’, and are therefore more likely to require elements of in-person training, or to utilise technologies such as VR to provide learners with a more accurate, effective learning experience.
The ‘employee and consumer behaviour’ category focuses on solutions which educate consumers and employees on how they can make more sustainable choices, both in their personal lives and in their workplaces. These solutions are not creating fundamental changes in an individual’s skills, but tend to inform and enable them to take different actions. These solutions include retrofit operational efficiency solutions, such as Furbnow, which seeks to educate and support homeowners with retrofitting their homes, as well as climate action education platforms, such as Pawprint which educates and engage employees with potential actions they can take to live more sustainably. The site-based vs. desk-based distinction is less relevant for this category.
The ‘Upskilling and Reskilling’ category looks at solutions which help individuals develop the skills required to access new roles, and to improve their performance in existing roles. These solutions range from La Solive (a Brighteye Portfolio company), which provides more effective, cost-efficient retrofit training, to Quizrr, which supports corporates in ensuring their supply chain is trained up on key social topics, such as human rights, helping them adhere to incoming CSRD requirements.
The 'Solutions focused on job placement category’ focuses on providers which aim to improve efficiency in the matching process between supply and demand of workers. Solutions in this category include Werk, which helps employers assess workforce competency and Leafr, which streamlines the matching of skilled sustainability freelancers, and corporate projects.
Observations:
Observation 1: There is a growing category of companies looking to combine upskilling with job placement.
In order to combat gaps in the supply of skilled workers, companies like Smalt look to train batches of individuals who are interested in joining the sector. Once they have completed training bootcamps, they subcontract the teams through their own trades service platforms (including those of franchisees within their model). This reduces barriers to entry for potential employees, given the promise of a role after training and the fact employers often cover training costs. For employees who want a bit more flexibility after graduation, companies such as La Solive, put employees through training before supporting them with finding roles after graduation through a network of industry partners – these relationships with partners, combined with industry recognition of La Solive’s standards make training more compelling. On the other side, solutions which largely focus on job placement, such as Greenworkx, start by helping jobseekers discover the most relevant role for them, before helping identify appropriate training opportunities to help them qualify for and secure the role.
Observation 2: The upskilling and reskilling market for site-based workers is largely dominated by legacy companies, who are generally operating in one, or select, geographic markets.
Although some technology enabled companies are starting to emerge, such as La Solive, an energy renovation school based in France, training for this sector has generally been overlooked, and as existing players in the market have not yet had a need to innovate. In many instances, training is run by semi-public funded organisations, however these solutions tend to be inflexible in terms of timings, and location, deterring potential applicants. These solutions are also not scalable given the nature of their set up.
Observation 3: Green collar jobs are currently perceived as unattractive, contributing to the skills gap.
Many green collar roles – such as operating in offshore wind fields – are currently perceived as unattractive, due to perceptions of poor work life balance and high levels of risk. We see a need to change perception of these roles and to make them more attractive options in order to widen the potential talent pool. We should also consider reskilling people who have previously operated in similar circumstances, such as those coming from a background in oil and gas.
Observation 4: Consumers want to make sustainable choices, however costs remain a key barrier (even more so than a lack of knowledge on how to make sustainable choices)
Solutions targeting consumers need to find a way to be considered ‘must haves’. Although customers are seeking more information on ways to live more sustainably, and there is evidence that consumers are somewhat putting their money where their mouth is, given European concern over the current cost of living, consumers are seeking cost effective ways to live sustainably. For retrofit operational efficiency companies, such as Skoon, we have seen that the monetary savings element of their solutions is therefore a vital part of their pitch.
Observation 5: Employees want to work for more sustainable companies, and in more sustainable roles where they feel like they are having a positive impact
As highlighted in our drivers section, we are increasingly seeing demand from employees to work in more sustainable roles and at more sustainable companies. We are seeing a strong rise in ‘Climate Action Solutions’, which are educating employees on how to take more sustainable actions, and rewarding them for these actions. These solutions are encouraging sustainability to become more embedded across organisations as a cultural mindset, and thus also supporting companies in improving their own ESG performance.
(c) Where we believe there are potential opportunities:
Based on this high-level analysis and on interactions with a number of founders operating in or near the space, we consider four interesting opportunities for Edtech companies in Europe.
Opportunity 1: Given new and evolving reporting requirements for corporates, there is a growing need to for employees able to fulfil them and improve responses over time.
New regulations will require companies that have not previously reported on their ESG performance to start doing so, with market research firm Verdantix finding that as the CSRD comes into force, up to 49,000 firms will be required to report on environmental and social metrics with the ‘same rigour’ applied in financial reporting. Given the skills gap that currently exists, corporates are commonly dependent on consultancies to carry out this process, which is an expensive burden, particularly for smaller companies. Although some reporting software solutions have included training elements, such as OneClick LCA, this tends to be a supplementary part of the offering. We therefore see an opportunity for solutions which upskill individuals in carrying out ESG reporting requirements, in accordance with the different regulations and standards.
Opportunity 2: There is an opportunity for increased innovation in site-based training solutions
As per our Observation 2 listed above, we observe less innovative, slower-paced, legacy companies dominating the market. We believe there is an opportunity for disruptive, flexible learning operators that are able to offer qualifications to trainers over a shorter time period. As we observed with the CAP diploma (a French vocational qualification for professions such as pastry chefs and hairdressing), French company YouSchool was able to displace traditional competitors with more flexible, engaging online opportunities, adapted to the needs of individuals who wanted to retrain into a new profession. This said, for many of the roles included in the market map, such as Solar and Wind engineers, fully remote learning may not be sufficient. As such, we do see opportunities for burgeoning technologies,-including VR- to assist with reskilling site-based workers at a lower price point in lower risk environments, whilst also enabling employees to test out potential future career paths before having to foot large upfront costs.
Opportunity 3: Gen Z cares about sustainability (a lot)- we are seeing an increase in demand at higher education level and equivalent for courses incorporating sustainability as well as pressure from students to behave more sustainably and hold themselves to higher sustainability standards.
In response to this demand, the Time Higher Education has released Impact Rankings assessing universities against the UNs SDGs. In this category we have seen new alternatives to traditional forms of higher education emerge, such as Tomorrow University. We see more opportunities for disruptors to emerge within this category, enabling students to gain core sustainability skills, in a flexible, accessible, and more innovative manner. As the requirement for sustainability skills and knowledge becomes increasingly embedded in roles across organisations, from marketing, to HR we anticipate that demand for these skills at higher education level will only continue to increase. Specialisms in sustainability will also get deeper, as the average level of understanding rises across the workforce and general public.
Opportunity 4: There is an opportunity for more competency tools, which help identify the best candidates, test candidates competency whilst on sites, and their ability to undertake a job
Similarly to TestGorrilla, which uses scientifically validated tests to assess a potential employees’ abilities at required skills (albeit largely focused on tech sector roles), and Werk, which provides employers with an overview of workforce competency on sites (predominantly in construction based roles), we believe there is an opportunity for solutions across both site and desk based roles to better review candidate and employee competency in sustainability related roles. We anticipate that it is likely to be challenging for employers to know which candidates actually possess the skills they need for a given role, given many of these roles are likely to be in areas in which recruiters are less experienced in hiring for. Additional solutions in this space would enable employers to ensure that they are actually hiring the right people for a role, and that they are performing at the required level, ensuring employers can reduce inefficiencies and also provide more tailored learning opportunities to employees.
We want to congratulate and encourage all the European entrepreneurs who are building companies in the sustainability skills space. You are tackling an incredibly important issue and we would love to receive your feedback on this piece and connect if you are building a solution, or are interested in further exploring this space. Let’s chat: iv@brighteyevc.com
Finally, thank you to the following individuals for their valuable insights!
- Ellasaid Woodhouse from UFI Voctech Trust
- Jia Lin Yong from Giant Ventures
- Nick Valenzia from Leafr
- Lucy Clarke from Fixed Construction