Promoting entrepreneurial ecosystems is bad for the planet - even digitalization won't help

Entrepreneurial ecosystems (EES) are the factors and actors that serve as inputs for entrepreneurship. These factors and actors typically include human and financial capital, infrastructure,  market size, innovation systems, the business environment, the rule of law and governance.  

Policymakers spend much time and money improving these framework conditions to improve the nature and impact of entrepreneurship in their countries. They believe that a "better" entrepreneurial ecosystem will lead to more high-growth entrepreneurship. High-growth entrepreneurship is the driver of economic growth. Economic growth is a policy imperative because neoliberal global capitalism will collapse without perpetual economic growth. Economic growth obligations are embedded throughout the system. 

The problem, however, is that continued economic growth, beyond a point, is terrible for the planet. Economic growth causes climate change, increases demand for material resources, and results in pollution, biodiversity loss, emissions and waste. Infinite growth is impossible on a finite planet - neither economies nor firms. Many believe, however, that economic growth can continue forever if entrepreneurial "green" technological innovations drive it. This has resulted in the idea of sustainable entrepreneurship, the dogma that entrepreneurs can continue to pursue high firm growth without causing damage to the environment. It is behind the myth of green growth. More efficient resource use, reductions in emissions and waste, and establishing a more circular economy are all promoted as opportunities for continued growth. 

Under sustainable entrepreneurship, the world is now seeing the large-scale monetization, financialization, and commodification of nature. It is considered the summit of sustainability when entrepreneurs try to make biodiversity conservation profitable and scalable or when they attempt the tokenization of the planet to create nature-backed financial instruments. For many entrepreneurs, the climate crisis represents a new business model for even more profit, where "nature is the new gold." Rather than considering a post-growth economy to save the planet, the promoters of sustainable entrepreneurial ecosystems try and save economic growth through so-called green business models and exploring new areas for economic extraction, such as mining the ocean floor for minerals to be used in renewable energy.

Rather than halting economic growth to save the planet,  promoters of sustainable entrepreneurial ecosystems  want  to  save economic growth through  green business models

Promoters of the sustainable entrepreneurship ecosystem hope digital technologies will dematerialize production and consumption and that green climate tech entrepreneurs will catalyze the energy transition, bringing sufficient affordable renewable energy to all. In this mistaken view, entrepreneurship is the climate crisis's solution, not the cause.

This view is indeed mistaken - and dangerous for the planet. Let me show why. 

First, suppose we use the Global Index of Digital Entrepreneurship Systems (GIDES), which measures how much a country's entrepreneurship systems encourage mainly digital forms of entrepreneurship (they report it for 112 countries). In that case, we see that so-called "better" entrepreneurship systems are closely associated with environmental degradation (clearly, if the planetary view counts, it is not better). Countries scoring higher on the GIDES are worse off in terms of their negative impact on ecology and the environment. 

Consider Fig. 1. According to the GIDES, countries with so-called "better" entrepreneurship have a higher Material Footprint per capita. This confirms that stimulating entrepreneurship will not decouple the economy—even the digital economy—from the environment.

Fig 1: Countries with "better" entrepreneurial ecosystems have a higher material footprint

Next, consider Fig 2. It plots 122 countries' GIDES score against their primary energy consumption per capita. Clearly, there is a positive association: countries with better digital entrepreneurship use far more energy, one of the major culprits contributing to climate change. The world obtains more than 80% of its primary energy consumption from fossil fuels. This share has barely changed over half a century. The expansion of renewable energy has just been added to the world's fossil fuel use. 

The use of fossil fuels reached record levels in 2024. This alone should make it patently clear that the world is not exactly overwhelmed by hordes of successful, genuine, sustainable entrepreneurs or genuinely sustainable entrepreneurial ecosystems.

Figure 2:  Countries with "better" entrepreneurial ecosystems have higher primary energy consumption 

Third, consider Fig 3. It shows that the ecological overshoot in countries with "better" entrepreneurship is worse. Ecological overshoot is measured here using the Global Footprint Network's measures of the biocapacity of a country and its ecological footprint, measured in global hectares (gha). An ecological deficit indicates that a country's ecological footprint exceeds its biocapacity. According to the Global Footprint Network " "To live within the means of our planet's resources, the world's Ecological Footprint would have to equal the available biocapacity per person on our planet, which is currently 1.6 global hectares."

Figure 3: Countries with "better" entrepreneurial ecosystems have higher ecological deficits

The negative relation indicates that countries with more entrepreneurship suffer from a larger ecological deficit. For instance, the USA, with a GIDES score of 79, hence one of the world's most lauded (digital) entrepreneurial systems (which many countries foolishly wish to emulate), has an ecological deficit of -3,8 global hectares per person. What this means is that if every country measures similarly in terms of their  entrepreneurial system as the USA, we would need around three planets.

Thus, promoting digital entrepreneurial ecosystems is not guaranteed to achieve sustainable outcomes - rather the opposite. That digital entrepreneurs can foster a decoupled, dematerialized, knowledge-driven economy where only ideas can drive economic growth is a fantasy. This is also evident from the fact that the digital economy emits more carbon than the world's entire fleet of trucks, with emissions coming from manufacturing screens, antennas, cables, and satellites, mining at least 44 minerals, and still being dependent on coal-fired electricity. 

A reason for highlighting the relationship between entrepreneurial ecosystems and the material footprint, energy use and ecological overshoot of countries here is to stress that those promoting sustainable entrepreneurship ecosystems tend to focus only on climate change and carbon emissions. They forget that the entire Earth System is under pressure from the increasing scale of human activity and that this causes ecological overshoot  -  of which climate change is but one symptom. The climate is one of several planetary boundaries. Unfortunately, the concept of planetary boundaries is largely absent from most entrepreneurship research and policy making, and where it is given some attention, it is, typically for a growth-obsessed field,  presented as an opportunity for competitiveness and growth -  and not as a warning that a post-growth oriented entrepreneurship is sorely needed. A post-growth oriented entrepreneurship could start by rethinking the definition and measurement of entrepreneurial ecosystems so that this could lead policymakers to support entrepreneurial activity that does not worsen their country's material footprint, energy use and ecological overshoot. 

In future articles I will share some ideas in this regard.