Nothing illustrates today’s supply chain craziness like the world’s sudden glut of shipping containers.

A few months ago, shippers were paying record ocean freight rates that were five to 10 times higher than pre-pandemic levels as the result of a capacity crunch and a global shortage of containers. Now Drewry estimates there is an excess of six million 20-foot metal shipping containers – known as TEUs – flooding the market.

The same wild imbalances pop up all across the supply chain. Shortages of semiconductors, packaging materials and auto parts. Oversupplies of apparel, home appliances, power tools and outdoor furniture. Dangerously tight supplies of commodities such as oil and grain.

All of that uncertainty adds cost, increases risk and complicates planning. In the U.S. alone, supply chain upheaval sent business logistics costs soaring 22% last year, according to the Council of Supply Chain Management Professionals.

So should businesses be playing offense or defense? The answer is both. Here’s how companies are dealing with the volatility.

1. Resetting inventory

Big retailers with bulging warehouses and inventory gluts are turning to liquidators that buy excess and returned merchandise and sell it at discounted prices. Other retailers are trimming the number of SKUs they put on their shelves, pausing procurement, or asking suppliers to delay or reduce shipments of goods on order.

Many inventory-heavy retailers and e-commerce companies are strapped for cash. They are pushing suppliers to extend payment windows or offer financing to help them better manage their working capital.

But even as some businesses fight to slim down, others are racing to bulk up.

Some high-end and specialty brands such as Lululemon continue to put a premium on speed and availability, spending heavily on air freight to make sure that they don’t experience stockouts. Likewise, even amid signs of a cooling housing market, home builders and apartment developers are accelerating procurement of certain items such as bathroom fixtures and hot tubs that have been nearly impossible to get during the pandemic.

Meanwhile, the auto industry faces a huge backlog of orders and is unable to meet consumer demand because of the lack of computer chips and other critical parts. General Motors said it couldn’t deliver 100,000 vehicles in the second quarter for lack of components.

Rising interest rates have created a tricky balance. Businesses normally slash inventory when interest rates go up, as they have been this year. That’s because higher interest rates usually translate to higher inventory carrying costs.

“If you know anyone who works in demand forecasting or inventory management for a retailer, they could maybe use a hug,” says industry watcher Ben Unglesbee of Retail Dive.

2. Renegotiating contracts

Ocean and trucking rates show signs of softening from record highs. As a result, shippers are trying to reopen carrier contracts to renegotiate their rates, or choosing to buy space on the spot market when spot prices dip below their contract rates.

Even so, Xeneta, an ocean and air freight benchmarking platform, says rates in negotiated shipping agreements in July 2022 were typically 112% above those for July 2021 – and 280% higher than rates in July 2019.

“The carriers have enjoyed staggering rate rises, driven by factors such as strong demand, a lack of equipment, congestion and COVID uncertainty, for 17 of the last 19 months,” said Xeneta CEO Patrick Berglund. “July has seen yet more upticks … but the signs are clear there is a ‘shift’ in sentiment as some fundamentals evolve.”

3. Shuffling suppliers, manufacturing locations and production cycles

Semiconductor companies are adding suppliers, diversifying production locations, and trying to bulk up with buffer stock amid a global chip shortage. In contrast, Clorox is dumping suppliers that it brought on during the pandemic when it needed to guarantee supplies.

Lego and Gap are among the companies expanding their manufacturing and sourcing footprints to serve key markets, reduce dependence on China, or cut logistics costs. There is a mini-boom in construction of new manufacturing capacity in the U.S., driven by frustration with port bottlenecks, parts shortages and sky-high transportation costs, Bloomberg says.

Target, Gap and others have accelerated new product design and orders of certain goods to get them into overseas production early. By stretching out production cycles, they hope to ensure adequate supplies of items they think will be popular sellers, even at the risk they could misfire on consumer tastes.

4. Charging for returns

Consumers have come to expect free returns for online purchases, but that might be changing. Footwear News recently identified 23 retailers that had introduced returns fees this year.

Apparel brand Zara recently instituted charges on returns of e-commerce purchases in some European countries, although buyers can return online purchases for free at Zara stores. UK retailers Boohoo and Asos recently said rising returns are hurting net sales, and Boohoo announced that it might impose fees for returns.

5. Giving workers new flexibility

Global food distributor Sysco has shifted to a four-day work week to improve employee retention and position itself as “an even more preferred employer.” Sysco’s new policy applies to truck drivers and warehouse associates. What’s more, it comes as the company converted its delivery model from five days a week to six days a week to improve asset utilization, virtually guaranteeing an increase in the amount of employee overtime that Sysco will pay.

6. Accelerating tech, automation, investment

The pace and scale of investment in technology and automation are breathtaking. Nike recently announced its largest-ever spend on digital transformation. Hoping to improve productivity and efficiency, Nike will roll out a new ERP system across its global network starting this year.

Meanwhile, Procter & Gamble is betting big on Microsoft cloud computing to boost efficiency in manufacturing, move products to customers faster, improve overall productivity and reduce costs. Heinz and Unilever also have made sizeable investments in new predictive analytics, digital twinning and data modeling capabilities.

At the same time, the software and artificial intelligence powering warehouse robotics is pushing them into the mainstream. A report by the trade group Material Handling Institute indicates that adoption of robotics in warehouses will jump 50% or more in the next five years.

PitchBook Data says private equity firms invested a record $50.6 billion in logistics in 2021 – three times the amount invested in 2020 and 34% more than in 2019, the previous record year. Ongoing supply chain challenges have them on the hunt for more disruptive opportunities this year, PitchBook says.

7. Emphasizing “revenue quality”

Giant delivery specialists UPS and FedEx have boosted revenue and profits while delivering fewer parcels and packages. Both have invested in visibility technology and service quality aimed at large business customers and passed on additional costs such as fuel surcharges. And both have signaled customers and the market that they are focused on revenue and profit per parcel, and content to let others handle less enticing pieces of the business.

8. Putting off expansion

The race to add warehousing capacity and distribution and fulfillment capability appears to be slowing. Amazon is the latest to announce its intention to slow further expansion in the near term in response to cooling demand.

FreightWaves, the supply chain market intelligence firm, sums it up this way: “Supply chains are never returning to normal.”

There are plenty of flashing lights warning us of the possibility of a sharp economic slowdown in 2023.

We know that COVID-19 has reversed years of progress in global development. It has widened gaps in education, health, income and access to opportunity. It brought on the steepest economic decline since World War II and, by World Bank estimates, pushed 97 million people into extreme poverty.

Today, the global economy is slowing amid a flood of risks: depleted national budgets, war in Ukraine, high inflation, traumatized labor markets, tightening credit, disruptive climate events, a COVID-challenged China, and unprecedented supply chain instability.

As we look ahead, we face three key questions:

1. How can we limit, repair and reverse the damage done by the pandemic and its aftermath?
2. How can we create a system that’s more open, transparent and fair for the poor, developing countries, women, and small businesses?
3. How do we ensure shared prosperity as we speed our transition to a low-carbon future?

It seems obvious, right? We should work to make sure the next phase of global growth includes geographies, businesses and people who’ve traditionally been left out. “The idea of inclusive growth has emerged as a central theme animating discussions on recovery and growth in the post-COVID world,” the World Bank says.

Not everyone agrees. Growth-first advocates view inclusion as a dangerous diversion that could sidetrack economic revival. They want us to focus on growth because they see any recovery as a rising tide that lifts all boats.

That’s a hard sell to those demanding inclusion. They warn that we could see a massive economic divergence between rich and poor, haves and have-nots. And they note that even before the pandemic, we were witnessing the highest levels of income and wealth inequality on record.

“This inequality has disproportionately affected communities of color, women, those less physically abled, and certain geographies,” McKinsey says.

Growth or inclusion is a false choice. Insufficient economic inclusion is — in itself — “a threat to prosperity,” as McKinsey says.

The consulting firm cites research showing that economies grow faster, more vigorously and for longer periods of time when the fruits of that growth are shared and distributed more equally across the population. Up to 40% of the GDP growth in the U.S. economy from 1960 to 2010 can be attributed to the increased participation of women and people of color in the labor force, McKinsey says.

At the same time, you can’t have inclusion and sustainability without growth as the foundation. So where will it come from?

There are four areas where technology can clearly be a powerful force for both inclusion and growth.

1. For small businesses.

Small businesses provide 70% of jobs worldwide and contribute 50% of GDP in developing countries, according to the International Labor Organization.

In the supply chain industry, a host of inexpensive new digital tools are bringing efficiency to smaller shippers and carriers. Among them:

• AI-driven load matching (Frete, Flock Freight) – that allow shippers to pool goods on trucks and bypass freight hubs
• Digital payments for carriers and other stakeholders (Relay Payments, FreightPay)
• Credit, working capital and payments platforms (PayCargo)
• Customs and security digitization products (MDM)
• Online logistics platforms that combine a lot of these features (Shipa)

All of these tools improve cash flow and streamline financial operations by digitizing payments, reconciliations and discrepancies between shippers and carriers, dramatically reducing Accounts Receivable/Accounts Payable errors and processing time.

Digital tools also make sustainability viable for smaller businesses and startups, allowing them to take climate action and build more resilient businesses.

• Free or inexpensive measurement tools
• Resources such as playbooks, and matchmaking platforms that link them with potential partners and vendors (SME Climate Hub, SME360X)
• Supply chain mapping tools that help small businesses do due diligence, customs compliance, environmental and social sustainability tracking, in addition to operations and business continuity planning (Sourcemap)

2. For women.

How can we do more to draw on the talents of women in the workforce, particularly in emerging markets countries, where they are most underrepresented?

One way is by making it safer, faster and more affordable to get to work. That’s what Swvl is doing in Egypt, Pakistan and other emerging markets countries with tech-oriented transportation.

3. For the unconnected poor.

Thirty-seven percent of the world’s population – about 2.9 billion people – has never used the Internet, the International Telecommunications Union says. Most live in developing countries. Nearly all are poor.

Poverty, illiteracy, and lack of connectivity and electricity contribute to this alarming digital divide. In Afghanistan, Yemen, Niger, Mozambique and the poorest countries, nearly 75% of people have never connected. That means remote learning was out of the question during the pandemic – and a major threat to a whole a generation of school children. Connectivity is the only way to address the dangerous “learning loss” that we experienced during COVID.

4. For those whose jobs are at risk from automation & digitization.

So-called frontier technologies are here. Many take advantage of digitalization and connectivity: artificial intelligence (AI), the Internet of Things, big data, blockchain, 5G, 3D printing, robotics, drones, gene editing, nanotechnology and solar photovoltaic.

While they offer incredible promise and productivity gains, these technologies will eliminate jobs. And without massive, targeted, well-resourced upskilling and retraining programs, the adoption of next-generation technologies could profoundly deepen inequality by shutting large numbers of people out of meaningful employment.

The World Bank’s Gallina Vincelette identifies four pillars for inclusive growth. They are life-long learning, removal of barriers to firm entry, trade that fosters competition, and a faster green transition.

Technology can supercharge all four, while bringing down costs, improving productivity and creating good new jobs.

IBM CFO Jim Kavanagh calls technology “the only true deflationary” force in a global economy where companies are struggling to cope with inflation driven by higher human capital costs – salaries, recruiting, retention, churn, overall cost of talent acquisition – plus higher materials costs, fuels costs, transportation costs, borrowing costs, currency volatility costs and other factors.

Growth and inclusion aren’t in conflict. They’re the essential ingredients of a better world.

There can’t be a time in human memory when travel, shipping, trade and commerce have been jolted as badly by severe weather and extreme climate events as in recent months.

In China this past summer, scorching heat forced power cuts and factory shutdowns. Apple, Foxconn, Toyota, Volkswagen, Tesla and others suspended operations, cancelled orders or took other emergency measures.

Low water on the Rhine River crippled German barge shipments as Europe experienced its worst drought in 500 years.  In the United States, water levels fell so low along the Mississippi River and  tributaries that farmers and others were left without routes to market for agricultural and industrial goods as barges were grounded, blocked and delayed. Dry weather and snarled transport are expected to push U.S. wheat exports to their lowest levels in 50 years.

Punishing climate-related events contributed to India’s decision to ban rice exports and caused the destruction of  much of Spain’s olive crop. Historic floods left 7 million people homeless in Pakistan and displaced 1.4 million in Nigeria overnight.

“Climate change and the extreme weather it spawns are making it harder for tangled supply chains to sync up with a slowing global economy,” Bloomberg says.

At some point, post-COVID supply chains may come back into some sort of equilibrium, but don’t expect an end to ruinous climate events. This past summer was the second-warmest on record for the Northern Hemisphere. The world has not experienced a cooler-than-average year, compared with the 20^th century average, since 1976.

Axios reports that a climate migration has begun. It says a number of manufacturers, hospitals, airlines and other businesses are looking to put critical infrastructure and operations on higher ground to avoid coastal flooding and storms.

“Companies large and small, some with longtime roots in their neighborhoods, are on the hunt for new real estate that is less prone to weather and climate extremes,” Axios says.

Skeptics, of course, are vocal as ever. Some warn that climate policy is the real threat. “Anyone who still thinks climate change is a greater threat than climate policy to financial stability deserves to be exiled to a peat-burning yurt in the wilderness,” one wrote recently.

Hardly. Instead, it would be foolish not to be giving serious scrutiny to your business and any vulnerability it might have to climate extremes. Some questions to ask as you do:

1. Do you need to “harden” buildings and infrastructure?

Do you need a new home for essential operations in order to safeguard against flooding, high winds, catastrophic storms, rising sea levels or drought-driven fires?

2. Are you too water-dependent?

Do you rely too much on hydropower or on inland river transportation? What’s your backup?

3. Are extreme high temperatures putting employees at risk?

How are you safeguarding them? What about your vehicles, equipment, raw materials and finished products?

4. How well do you truly understand your supply chain?

Have you mapped your T1, T2 and T3 suppliers? Do you know where they get their inputs? How vulnerable are your sourcing and transport? Do you have built-in redundancy?

5. Do you have a handle on carbon taxes?

Do you know where you might face the prospect of higher taxes simply by moving the same goods across the same borders? Or where carbon taxes could come into play when you are sourcing from and selling into new markets?

6. What if you have to move?

Can you afford to shift locations of key operations? Do you have a new location in mind? Can you find the right employees there? What kind of reputational damage would you face if you left or shrunk your footprint in a community where you have roots?

7. What’s your plan if suppliers or carriers negate agreements through force majeure?

Finally, are you committed to change? Are you all-in on the battle to reduce emissions and work toward a safer, cleaner, greener world?

• SMEs have a major role to play in creating economic growth and meeting net zero targets.
• Consequently, large corporations must support SMEs in skills-building and their environmental transition.
• A number of successful partnerships between large businesses and SMEs are proving to boost the economy and the environment.

As the COVID-19 pandemic wanes, policymakers and corporate leaders have arrived at a long overdue conclusion: small business really matters. There’s a consensus that smaller enterprises are critical to the world’s two most pressing challenges. The first of these is how to spur broad-based, equitable and sustainable economic growth. The second is how to decarbonise to meet Net-Zero climate goals.

Supporting small and medium-sized businesses (SMEs) to rise to meet these challenges is not purely a governmental responsibility. Large corporates must also play a part when it comes to supporting SMEs in skills-building, especially around digitization and helping create the ecosystem for environmental transition, including unlocking financing.

The importance of resilience for SMEs

SMEs, largely overlooked in the 2008-2009 global downturn, were not an afterthought when COVID-19 hit three years ago. In many countries, they were quickly targeted with direct government assistance, public loan guarantees, tax relief and other aid intended to keep them afloat and provide them with incentives to avoid shedding workers. Despite this help, a look at SMEs in 32 countries found that most lost 30% to 50% of their revenue between February 2020 and April 2021.

Small businesses represent 90% of all companies and generate nearly 70% of jobs and GDP globally. SMEs are the bedrock of developed and developing economies. They are at the heart of economic growth strategies for most emerging markets looking to climb the development curve.

Image: OECD Zhang (2020) Asia House Research

The digitization imperative

The long-term viability of many micro-enterprises, startups, entrepreneur-led organizations and other SMEs will be determined by their ability to go digital. Digital transformation is underway in businesses of all sizes, sectors and geographies. But small enterprises are generally less digitalised than medium-sized companies, which, in turn, are less digitalised than big corporations. One reason is that so many digital tools and solutions are priced and tailored to the needs of larger organizations.

In the case of small businesses, the challenge of going digital is especially difficult, but the need to do so is increasingly apparent. Research shows that the largest 10% of companies in digital channels reap 60% to 95% of digital revenues. If we want a future with shared prosperity and sustainable growth, we must ensure that SMEs are part of the digital transformation.

SME development has historically been led by governments through national champion programmes that offer formal management training, goal setting, peer-to-peer networking and guidance on tailored financial services. These yield strong results worldwide. Singapore and Malaysia, for example, say their small business outreach programmes are a critical factor in boosting their participants’ exports and growth.

But big businesses are also increasingly aware that they have a role to play, particularly in helping close the financing and digitization gap for SMEs. About 13,000 business owners have graduated from Goldman Sachs’ 10,000 Small Business programme, which began in the US in 2009 and expanded to France and the UK. This course covers entrepreneurship, advice on getting loans and opportunities to meet government officials. A similar initiative by Unilever provides access to digital tools, financial services and entrepreneurship support to 1.2 million SMEs in eight Asian countries. And, Google has launched Google Hustle Academy, training entrepreneurs and business owners in Africa in growth strategies, digital marketing and how to pitch for funding.

These efforts are paying off. Goldman Sachs says 70% of its handpicked graduates reported that their companies had higher revenues and more than half hired additional employees in the two years after they completed the programme.

Greening SMEs

If digitization represents a challenge, the scale of transformation required for a Net Zero world is even more daunting for SMEs.

The need to put SMEs at the heart of any discussion on climate is clear. Smaller businesses generate 60%-70% of industrial emissions. A study by the environmental non-profit CDP says that the “combined carbon footprint of SME suppliers is on average five times greater than their large corporate counterparts.”

Segmentation as follows: small business <50 employees /<$10M turnover, medium business 50-250employee/<$50M turnover, large businesses >250 employees and over $50m in turnover Image: Image: WEF and BCG report on net zero supply chains, GFMA & BCG report on the 150Trillion opportunity, Orbis database, literature review, BCG analysis

The barriers to change, however, are enormous. A study by Boston Consulting Group (BCG) and HSBC asserts that global supply chains need $100 trillion of investment by 2050 to achieve Net-Zero. It found that as much as half of that investment must come from small businesses, which have to rethink product design, invest in climate tech and improve data gathering. To date, however, small companies are recipients of less than 3% of total support for greening.

Large corporates are directly affected. As ESG regulations change around the world, big businesses are realizing that they have a small business problem. Banks and large corporates facing pressure to show progress on ESG goals and emissions targets have recognized that they will struggle to measure their climate impact, meet reporting requirements and hit their goals. This is because too many of their small business suppliers and customers lack the means to collect and report accurate data on their emissions, waste, energy use and environmental impact.

Resources, such as the SME Climate Hub, built in partnership with corporate climate leaders, are a good step forward, as are new sustainability technology solutions that target SMEs. Long term though, larger businesses must support their suppliers in making the switch.

Walmart is one of the companies that concluded smaller suppliers couldn’t keep up. It acted so that SMEs in its vendor network could comply with the sustainability requirements in its Project Gigaton drive, which aims to cut 1 gigaton of CO2 emissions from the company’s global supply chain by 2030. The retailer provides small businesses with help and resources to make ESG reporting easier. And, it is working with HSBC to make preferential financing available to small vendors to reduce emissions in six categories: energy, waste, nature, packaging, transportation and product use and design. Similarly, Gucci is helping its SME suppliers access loans on favourable terms if the supplier becomes more sustainable. While IKEA is financing sustainability investments in innovative companies that help it meet its sustainability goals.

At Agility, we believe that SME empowerment is a critical future growth driver and change agent. This is especially true of emerging markets that power many of our businesses. We’ve built this belief into our business model: from building warehousing and light-industrial facilities catering specifically to SME needs across the Middle East and Africa, to an online freight forwarding and e-commerce logistics business that helps SMEs trade across borders. We’ve also built this belief into our investment approach. Agility is proud to be a founding member of the First Mover Coalition, which is creating a market for sustainable innovation across the supply chains of heavy industry.

For policymakers and corporate leaders alike, it’s time to acknowledge the obvious: without small business, there is no sustainable growth and no green transition.

This blog was originally published by the World Economic Forum.

As I head to Saudi’s FII conference, known as “Davos in the Desert” this week, I am reflecting on the pace of change I’ve personally witnessed in KSA.

Saudi Arabia’s progress in its journey to becoming a Tier 1 global logistics hub has been impressive. It’s clear the Kingdom is already ahead of many key targets and on course to meet many more, diversifying its economy and enhancing its global profile.

Agility has been investing in Saudi Arabia for 20 years. The scale, resources, resolve, and pace of reform we have seen in Saudi Arabia in recent years has been particularly exciting. In our view, Saudi Arabia is one of the most attractive markets for logistics investments in the world today.

Agility is investing in KSA around the following areas:

1. Building essential infrastructure. We’re building a world-class logistics and distribution park near Jeddah. We’ve committed SAR 611 million ($163 million) to the 570,000 SQM project, an ultra-modern facility to go with the state-of-the-art Agility Logistics Parks already serving Saudi companies and multi-nationals in Riyadh and Dammam.
2. Improving Air Travel. Our Menzies Aviation business is the world’s largest aviation services company. It has partnered with Saudi Logistics Services (SAL) to improve passenger services, cargo handling and warehousing, and airline hub management for Saudi-based airlines.
3. Speeding the low-carbon transition. The Agility Logistics Park in Riyadh features the GCC’s first EDGE Advanced-certified warehouse (Excellence in Design for Greater Efficiencies), meaning it is zero-carbon ready and at least 40% more energy efficient than others in the market. Tristar also is building the Kingdom’s first LEED-certified green building for dangerous goods (DG), in Modon Dammam Second Industrial City.
4. Investing in Saudi innovation. Through our venture capital arm, Agility Ventures, we have invested in Saudi Arabia’s entrepreneurs and digital innovators, such as e-commerce enablement innovator Zid and digital road freight platform Humoola. We are also helping bring transformational global health technologies to the Kingdom, through partnerships with companies like AiZTech Labs, which has developed breakthrough medical testing using selfies of the eyes taken with mobile phones and Bexa, a company pioneering innovative breast cancer screening technologies.
5. Powering e-commerce. Our Shipa group of companies include Shipa Delivery, one of the Kingdom’s most advanced last-mile delivery providers, and Shipa E-Commerce, a leader in cross-border fulfillment. Shipa provides both domestic parcel delivery and cross-border shipping to and from the GCC and Saudi Arabia.
6. Enhancing energy-sector efficiency and safety. Agility affiliate Tristar Group works with Aramco, SABIC, and others in the energy sector to modernize equipment, vehicles and storage facilities used in the handling of chemicals, cryogenic gases and hazardous goods — essential industrial feedstocks.
7. Strengthening Saudi companies. United Stars, Tristar’s Saudi JV, earned the highest score among multi-nationals in Aramco’s In Kingdom Total Value Add (iktva) program. The program’s goal is to build a world-class supply chain while cultivating local business and retaining at least 70% of all procurement spend within the Kingdom. United Stars focuses on recruiting, coaching and developing strong Saudi teams.

When it comes to Saudi Arabia’s growth potential, Agility is an investor, partner, and supporter.

• Female-founded companies received only 2% of all venture capital (VC) investment in 2022.
• Gender bias and a scarcity of female investors are thought to hamper VC investment in female-owned businesses.
• By expanding female-led VC communities, highlighting successful VC funding for female businesses and confronting stereotypes, more VC funding should flow to female-founded companies.

By most measures, women are making steady gains in professional opportunity, pay and status and decision-making power at work. Their progress, while slow and uneven, is reflected in economic empowerment indexes put out by the OECD, World Health Organization, UN agencies and others.

One area where women are advancing little, however, is venture capital (VC). Companies founded solely by women received only 2% of all VC investment in 2022, and only about 15% of all VC ‘cheque-writers’ are women.

In the Middle East, where my company is based, venture capital investment is increasingly seen as a critical component of national economic competitiveness and a source of innovation. The region’s VC funds and corporate VCs are competing with sovereign wealth funds, among the world’s largest and most active VC investors. Yet, startups founded by women in the Middle East and North Africa (MENA) received only 1.2% of funding in 2021 and about 2% last year.

Image: Data Source: McKinsey

What’s behind the disparity?

The glaring imbalance has sparked lively debate about what’s causing it.

Venture capital is a male-dominated industry and bias, whether conscious or subconscious, is clearly a factor. A Harvard study showed that 70% of VC investors preferred pitches presented by male entrepreneurs over those presented by female entrepreneurs, even though the pitches were identical.

Another analysis has shown that VC investments in enterprises founded or co-founded by women average less than half the amount invested in companies founded by male entrepreneurs.

Image: Data Source: Women in VC

In Inc.’s Women Entrepreneurship Report, 62% of female entrepreneurs said they experienced some form of gender bias during the funding process. Feelings of bias are especially acute among women entrepreneurs in MENA. In a survey of 125 female founders in the region, 58% said MENA investors were less likely to invest in women-led startups than global investors.

The scarcity of female investors – those who sit on fund boards, lead deals, and make investment decisions – is also an issue. However, the authors of a Harvard Business Review article on the VC gender gap caution women founders against focusing solely on pitching to female investors.

“There are still very few female investors, and they tend to be concentrated in funds that focus on earlier-stage investments, where risk is higher and funds invested are smaller. Today, female VCs simply do not control sufficient assets to continue investing in female-led firms as they scale. This means that female founders will ultimately need to attract male investors to grow — and if you’re a woman, our research shows that’s a lot easier to do if you raise at least some capital from men from the start,” they wrote.

Another hard reality is the lack of a pipeline; here I speak from experience. Our corporate VC arm, Agility Ventures, received about 1,000 pitch decks last year. How many came from women-founded or women-led businesses? I can count them on one hand.

The lopsided numbers in MENA are especially perplexing because of the inroads women in the region have made in the educational fields that generate most of the innovation and ideas sought by venture investors. Women now account for 57% of STEM students at MENA universities, according to UNESCO.

What do you think are the biggest obstacles facing women founders?Image: Data Source: Wamda, TiE Dubai – survey of 125 female founders in MENA, published in collaboration with TiE Dubai and TiE Women

Why address the VC gender gap?

Apart from the need to address basic inequity, there are plenty of reasons to tackle the gender chasm in venture capital. The biggest is the chance to unlock economic gains.

Venture funding de-risks the innovation process through bets on promising ideas from smart people who need resources to get their ideas to market. It’s a wellspring of new technology, business growth and economic development, which makes the diversity of entrepreneurship and VC leadership economic imperatives. A widely cited BCG report says global GDP would rise 3% to 6%, boosting the global economy by up to $5 trillion annually if women entrepreneurs received the same investment as male entrepreneurs.

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What’s the answer?

Expand women-led VC communities

That means networking, mentorship, technical assistance and other support. It means building on the work of investment community participants, such as Women in VC, the world’s largest global community for women in VC to connect and collaborate; AllRaise, an organization dedicated to accelerating the success of women founders and funders; and the Female Founders Fund, an early-stage fund that offers pitching resources and technical help in addition to investing in women-led tech startups.

It also means more non-profit and public-sector programmes, such as empowerME, an initiative aimed at female entrepreneurs in the Middle East; Monsha’at, a Saudi government small business authority with an entrepreneurship programme targeted at women; She Innovates, the global UN Women programme that connects female innovators via app and platform; and Global Invest in Her, a platform for women entrepreneurs seeking funding.

Celebrate success

We need to elevate the visibility of female role models who have raised capital and successfully brought products and services to market. Stories of success act as inspiration and provide models for females in business to emulate. Mona Ataya, CEO of Mumzworld, is a good example.

Confront stereotypes

The Global Entrepreneurship Monitor (GEM) highlights one damaging stereotype: that businesses started by women typically aren’t the kind that are right for outside investment because they’re low-tech enterprises in sectors with little potential to scale, trade across borders and go public through stock offerings.

“More attention needs to be given to women who are starting and growing high growth, high innovation and large market businesses. Stereotypes that frame women entrepreneurs as a disadvantaged group feed a false narrative that women lack the same competency as men regarding business leadership,” the GEM team says.

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• While advancements in renewable energy sources like solar and wind are significant, the infrastructure and market aren’t fully prepared to abandon fossil fuels immediately.
• Bridge solutions, such as natural gas and nuclear power, are needed to ensure energy security and economic stability during the clean energy transition.
• More collaborative efforts between the public and private sectors would be beneficial in developing practical regulations that encourage investment without stifling innovation.

Powering the grid

Power generation is the leading source of carbon dioxide emissions. The International Energy Agency recently sent hearts aflutter with the news that “unstoppable” low-carbon technologies have global fossil fuel use on track to peak much earlier than expected – by 2025 or before. According to the International Energy Agency, four-fifths of the new power capacity being added today is generated by renewables.

That’s encouraging but the fact remains that our electrical grid is not yet renewable-ready and that roughly 80% of our power is still supplied by fossil fuels. Our ability to continue adding capacity from solar, wind and other alternatives is limited unless we progress on the hard, time-consuming and expensive task of extending or adding transmission lines and costly infrastructure.

Moreover, some key assumptions underlying earlier forecasts are no longer valid. Power demand is not static. It is surging as we put more electric vehicles on the road, build new data centres and add semi-conductor manufacturing capacity. Chip factories and data centres consume 100 times more power than typical industrial businesses.

Bridging the energy transition

Even with added solar and wind generation, we’ll need reliable new baseload power sources to replace what we get today from fossil fuels. That’s why there is so much interest in scaling and commercializing clean hydrogen.

In the meantime, however, we need “bridge” solutions. Natural gas and nuclear power are cleaner than coal and oil. While both are environmentally problematic, we risk damaging the global economy and threatening our energy security if we cut them off prematurely without using them to aid our transition.

Political opposition is blocking investment in new natural gas infrastructure – pipelines, liquefaction facilities, shipping – when we could invest in ways to reduce LNG methane emissions by mitigating leaks associated with drilling, storage and transport.

Earthmind’s Franklin Servan-Schreiber makes the case for the growing importance and viability of nuclear power, particularly in the Gulf. Advances in “transmutation” nuclear energy processes make it possible to generate power in a way that is safer, cleaner and cheaper while also addressing fears of nuclear weapons proliferation.

“Nuclear energy represents the only carbon-free baseload energy available in this (Gulf) region without rivers, making it an indispensable component of any net-zero energy mix,” says Servan-Schreiber.

Increase in deployment of climate technologies needed to reach emissions reduction targets by 2030, from 2021.Image: McKinsey

On the road

In road transportation, zero-carbon solutions are being considered but are not practical today. And that’s not all bad: the “greenest” car in America isn’t a fully electric Tesla or Rivian. It’s the trusty hybrid Toyota Prius, which is hugely popular, versatile, reliable and affordable.

Sadly, there are few hybrid options when it comes to long-haul trucking. The bulk of research and development and investment have gone toward developing emissions-free vehicles: battery-electric and hydrogen-fuel trucks.

For now, trucks powered by heavy, industrial-scale batteries have a maximum range of about 300 miles and require several hours to recharge. Hydrogen-powered trucks refuel faster (about 30 minutes) and can cover up to 500 miles at a time. In both cases, adequate fueling networks and infrastructure are years away. In the meantime, current versions of zero-emission vehicles are still roughly three times more expensive than diesel trucks, even after tax breaks and incentives.

In business

On the policy front, businesses are struggling to keep pace with new emissions mandates and disclosure requirements. This year, new reporting rules in Canada and Germany prompted howls of protest from businesses begging for more time to comply. The EU recently rejected new rules requiring detailed reporting on the environmental and labour impacts of member countries’ supply chains.

Elsewhere, companies have retreated from their climate commitments and struggled to persuade investors that sustainability investment will be rewarded with returns.

“Access to capital for new low-carbon investments isn’t a major constraint, but ensuring a return on investment certainly is,” stated Bain & Co. in a September report on the energy transition.

The pushback from business highlights the importance of more collaboration between the public and private sectors. Business leaders recognize the need for environmental and sustainability standards that will advance the net-zero agenda. However, they also want to ensure that new guidelines and mandates don’t crowd out investment or undermine new technology before it can be fully developed.

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Prioritizing resilience

More than 40 countries – home to about half the global population – will hold elections this year. To some extent, the voting will be a referendum on climate policies that are increasingly shaping everyday life. Politicians and policymakers need to counter apathy and climate fatigue with information that brings home the urgency of our transition. But to avoid a popular backlash, we need to avoid fixating on zero-carbon technologies at the expense of low-carbon tech that is cheaper and can deliver immediate impact at a fraction of the cost.

That also means that we can’t allow our pursuit of a zero-carbon future to prevent us from investing in adaptation and resilience. Even if we’re able to accelerate the energy transition, we need to spend money on seawalls, stormwater management, water supply, distributed power grids, and weatherized buildings, homes and power infrastructure.

The clean energy revolution is paying dividends every day, though not always in the way we expect. Technological refinements are bringing us closer to a carbon-free future. Still, companies that set out to do one thing sometimes end up doing another, as in the case of Molten Industries. This hydrogen startup invented a new way to produce graphite, which is used to expand battery storage capacity.

It’s not a matter of lowering our sights or settling for the incremental over the transformative. We need both.