Climate-smart start-ups and entrepreneurship in Sri Lanka

Climate-smart entrepreneurship can play a significant role for Sri Lanka’s blue and green economic growth and long-term resilience

The dawn of 2025 provides an opportunity to contemplate about Sri Lanka’s way forward in the context of multiple planetary crises and the need for economic recovery and growth. Climate-smart entrepreneurship can play a significant role in this regard not only by addressing the impacts of the climate and biodiversity crises but also in the context of blue and green economies, sustainable development, finance, innovation, and frontier technologies.

Small businesses—which includes start-ups and small-scale entrepreneurs—form a vital part of Sri Lanka’s economy and are an important source of employment. Mainstreaming climate-friendly, adaptive, and resilient business models and practices into the entrepreneurship ecosystem can help to put these considerations at the core of the business case and identify best practices to align enterprises with national and global climate commitments, plans, and goals, including the Nationally Determined Contributions (NDCs), the National Adaptation Plan (NAP), and the Sustainable Development Goals (SDGs).

Challenges and opportunities for climate-smart entrepreneurship

Start-ups and entrepreneurs often face serious challenges when it comes to setting up, running, and expanding their businesses, which can be compounded by the climate crisis and other global disruptions. These challenges include, among others, economic constraints, such as limited access to funding and financial instruments; complex regulatory frameworks and lack of incentives and support for green businesses; capacity gaps related to technical and legal expertise, market knowledge, or networks; education and awareness gaps; as well as the need for developing an entrepreneurial mindset and taking calculated risks. Especially in remote or rural areas, other issues tend to be limited market access; limited availability of technology; low levels of consumer purchasing power; difficulties with logistics, transport, and storage; lack of capacities and skilled labour; and limited financial and technical assistance.

For a climate-smart business to succeed, there are many factors that play a role, many of which are not specific to climate change. First, a robust business concept that revolves around a set of products or services with clear market demand, supply chain, production, distribution, and quality control. Second, the ability to manage the administrative, operational, legal, and financial aspects of the business, which likely involve the need for seed funding, loans, and upfront capital investment. Third, marketing the unique selling point(s) of the enterprise and reaching their intended market, then building on initial momentum to scale up and expand. Entrepreneurs often require tangible support to make their business climate-friendly and sustainable in a variety of ways. Common problems include sourcing sustainable raw materials and packaging; ensuring compliance with domestic and foreign sustainability reporting and transparency requirements; assessing their environmental and climate footprints; acquiring relevant certifications or accreditations; networking effectively; navigating export markets including shipping, customs, and partnerships; as well as understanding and accounting for short- and long-term climate-related risks.

In addition to these challenges faced by individual enterprises, there are also larger systemic aspects that should be considered. How do entrepreneurs fit into the existing ecosystem of their sector and interact with associations, unions, chambers, and other industry institutions? How does their enterprise contribute to local or national climate and sustainability targets, and how can this benefit them? Are there opportunities to make their voices heard and engage in policy, planning, or research processes?

Addressing these challenges requires the integration of key elements of climate change mitigation, sustainability, adaptation, and resilience into the entrepreneurial landscape. For example, this encompasses technologies and practices that reduce greenhouse gas emissions and waste; sustainable supply chain management, resource efficiency, and eco-friendly product design; and climate-proof infrastructure, diversified revenue streams, robust risk management, and business continuity planning.

Key verticals for climate-smart entrepreneurship

Sri Lanka’s economy has several key verticals or sectors that provide prime opportunities for climate-smart entrepreneurship to identify market gaps and untapped potential.

For example, agriculture is a cornerstone of the country’s economy while also being highly vulnerable to the impacts of climate change. Beyond climate-smart food production and innovative farming practices, there are many aspects of the food system that agro-entrepreneurship can focus on, such as transport, cold storage, value addition, digital advisory and farm tools, market linkages, analytics, fintech, or insurtech.

Other key sectors include tourism, the blue economy (including sustainable fisheries, aquaculture, and mariculture), renewable energy, electric transport, waste management, fashion and apparel, and climate technology. By aligning entrepreneurship with the principles of a green, blue, and/or circular economy, Sri Lanka can harness synergies between economic growth and environmental stewardship, contributing to job creation, export diversification, and improved livelihoods.

Key areas for enhancement

Many climate entrepreneurs are driven by a vision to establish ethical, sustainable, and/or climate-friendly enterprises, aiming to give back to society and not exploit people and resources. A solid enabling environment, awareness creation, and targeted support could help to unlock the full potential of climate-smart entrepreneurship. As outlined above, entrepreneurs face numerous challenges both in their general business development and in specific aspects related to climate and sustainability. Providing one-stop shops and help desks can make information and guidance more accessible while hubs, accelerators, incubators, and similar initiatives can serve as entry point for networking, mentorship, and finding investors.

On the financial side, innovative models and instruments—such as green bonds, blue bonds, impact funds, blended finance facilities, or climate-resilient business insurance schemes—are increasingly becoming operational around the world. In addition, basic support and training, especially for new start-ups, could help them to fulfil fiduciary requirements, utilise good practices for bookkeeping, and financial reporting, and identify potential sources of investment as well as avenues of growth.

Other areas of enhancement could focus on strengthening technical, managerial, and entrepreneurial skills through targeted training and mentorship programmes; ensuring clear and consistent policies, tax incentives, and streamlined regulatory processes for climate-smart start-ups; investing in research and development to drive innovation; facilitating connections between entrepreneurs and global markets through trade agreements, e-commerce platforms, and export promotion initiatives; and building networks of entrepreneurs, investors, researchers, and policymakers to create a collaborative growth ecosystem.

With its young population, wealth of natural resources, and strategic location, Sri Lanka has an opportunity to position itself as a leader in climate-smart entrepreneurship. Strategic investments in the enabling environment, including infrastructure and capacity-building, could empower aspiring entrepreneurs to embrace climate-smart business models and align their business case with national and global climate action as well as biodiversity conservation and sustainable development. Championing climate-smart start-ups could create a more a more adaptive and resilient economy that not only navigates the challenges of climate change but also seizes innovative pathways towards prosperity and blue-green economic growth.

(The writer works as Director: Research & Knowledge Management at SLYCAN Trust, a non-profit think tank. His work focuses on climate change, adaptation, resilience, ecosystem conservation, just transition, human mobility, and a range of related issues. He holds a Master’s degree in Education from the University of Cologne, Germany and is a regular contributor to several international and local media outlets.)