Mitigating climate change requires emission reduction on the part of enterprises as well as consumers. But who are the business leaders who optimize processes ecologically or develop more sustainable products? A study by Professor Hanna Hottenrott from the TUM School of Management has investigated whether specific personality traits define entrepreneurs of green start-ups.
The Intergovernmental Panel on Climate Change regularly and with increasing urgency proclaims the same message: the consequences of the global climate crisis can no longer be reversed, but they can be mitigated – if all countries worldwide drastically reduce greenhouse gas emissions as quickly as possible. This also requires a sustainable restructuring of all economic sectors. Green start-ups play a very special role here: “We know from studies that start-ups generally innovate more radically than established companies,” says innovation economist professor Hanna Hottenrott from the TUM School of Management. “Since start-ups are still at the beginning of product and process development, it is easier for them to break new ground. Moreover, they don’t have to worry about jeopardizing the economic success of older products by developing new technologies.” From a climate policy perspective, it is therefore important to promote the establishment of green start-ups and thus pave the way for environmentally friendly product and manufacturing innovations.
However, by no means do all start-ups align their product portfolio and manufacturing with the United Nations’ sustainability goals. “According to our data analysis, only 37 percent of companies founded between 2011 and 2016 offer products with significant environmental benefits,” explains Professor Hanna Hottenrott. But what determines the entrepreneurial decision in favor or against the green – or at least greener – path?
The “Big Five” and their influence on green start-ups
Since personality traits generally play a significant role in the development of the individual canon of values and thus also in attitudes towards environmental issues, Hottenrott, together with Dr. Gary Chapman of the British Leicester Castle Business School, De Montfort University, investigated possible connections between founder personality and green start-ups. They focused on the so-called “Big Five” of personality psychology: openness to new experiences, conscientiousness, extraversion, agreeableness and neuroticism.
These five characteristics can be used to describe a person’s personality very well. “In addition, we asked founders about their risk tolerance, since a certain willingness to take risks generally characterizes entrepreneurs, and we wanted to know to what extent this also applies to green founders,” explains Hottenrott. “Our hypothesis was that especially founders with a high risk appetite may consider the dangers of climate change to be less urgent and are therefore less likely to launch green start-ups.”
For the study, the researchers analyze interviews with the founders and founding teams of 3053 companies from different sectors (e.g. high technology, services, retail, and creative industries) that started between 2011 and 2016. The key finding: the personality of the founders actually influences a possible green tendency of the start-up. “Above all, openness and extroversion significantly increase the probability that the topic of sustainability in products and processes will play a major role in the company, while the personal expression of neuroticism tends to inhibit this,” Hottenrott summarizes. She was surprised by the result that the founder’s willingness to take risks apparently does not have a major influence on the sustainability of the start-up: “We had expected that people who are more concerned about the consequences of climate change would be more willing to become active in this area. However, our study did not confirm this connection.”
Role models encourage sustainable innovations
Hottenrott emphasizes that follow-up studies are still needed on this topic, for example on the impact of other personality traits such as altruism, narcissism or willingness to cooperate . Yet, in her opinion, steps can already be derived from this first study that could be used to promote the founding of green(er) companies: “For example, by bringing potential founders with low extraversion or openness scores into contact with those who are already successful with green start-ups,” explains the TUM professor. “Positive role models can encourage founders to develop sustainable ideas that they would otherwise not have dared to approach.
“Green start-ups and the role of founder personality!“ by Gary Chapmann, Hanna Hottenrott in Journal of Business Venturing Insights, Volume 17, June 2022.