Pay-for-Performance Could Be A New Contracting Model for Corporate-Startup Climate Partnerships
As global leaders gather in Belém for COP30, the message to industry is unmistakable: delivery now matters more than pledges. The world has moved beyond climate commitments on paper to a demand for measurable progress. Yet inside many boardrooms, climate ambition still stalls at the pilot stage. For all the innovation emerging from climate tech startups, too few corporate partnerships make it past the trial phase into real-world impact.
Many have experienced this: a pilot that works technically, but never becomes more than a demonstration. If that sounds familiar, you’re in good company. The issue isn’t a lack of commitment. Procurement and leadership teams are grappling with real concerns such as risk, value, compliance. When incentives, timelines, and expectations aren’t aligned, even the best decarbonisation projects can stall.
But it doesn't have to be this way. The pay-for-performance model, which is gaining traction in broader tech and AI circles, offers a new way forward. This is the kind of shake-up that could help climate innovators deliver at scale.
Why Corporate-Startup Partnerships in Climate Tech Stall
The Procurement-Impact Disconnect
Why do so many climate initiatives hit a wall right at the start? In theory, procurement should help new solutions scale. In reality, it often slows everything down. For startups, especially those early in their journey, corporate procurement often feels slow, confusing, and disconnected from the urgency of solving climate change. Corporates might talk about big net-zero ambitions, but their procurement teams are usually focused on just cutting costs and minimising risk, not on driving innovation. It’s little wonder that most climate tech never scales beyond a pilot, and many ideas don’t even get that far.
Startups face piles of paperwork and unclear decision paths.
Procurement cycles drag on with little feedback.
Pilots lose momentum, zapping time and resources for everyone involved.
This disconnect isn’t just about red tape, it’s often about bringing two very different cultures together. Startups need to move fast and adapt quickly. Big organisations are designed to minimise risk and keep things steady. Bridging that gap isn’t about tweaking a process; it’s about changing how innovation is sourced, tested, and adopted in the first place.
The "Pilot Trap" and Its Consequences
Founders often spend months wrestling with procurement documents, only to be met with delays and, sometimes, radio silence. The cost isn’t just financial; it takes a toll on morale and the drive to keep going. To be fair, procurement teams are under real pressure to avoid mistakes and keep the business running smoothly.
But the result is the same: startups’ need for speed and experimentation is at odds with corporate caution. When these worlds clash, everyone ends up losing.
There’s also a longer-term impact. The so-called "pilot trap" erodes trust. If both sides see promising projects stall again and again, they’re less likely to take risks together in the future. Progress across the whole sector slows down, and decarbonisation suffers as a result.
The Financial Reality: Why Climate Tech Startups Run Out of Cash
Cash Flow Crunch and Timing Gaps
Most startups don’t fail because their ideas aren’t good enough. They fail because they run out of cash before they get a real shot. This is especially true in climate tech, where stakes and costs are high. Many founders have watched their cash reserves shrink while they waited on a big company to sign off on a project, sometimes for work already finished.
Sales cycles in climate tech are longer, and the upfront investment is bigger than in other sectors. According to industry research, deals in this space take about 20% longer to close than in other tech fields. That makes cash flow a huge challenge and increases the need for payment models that actually reward progress and impact.
Late payments aren’t just a headache, they can be the end of the road. On average, businesses lose $1,328 each month because of late payments, with 17% losing more than $2,500, and 50 hours gone every year chasing unpaid bills. The cost of uncertainty and delayed commitment is real.
The Cost of Uncertainty and Delayed Commitment
Even when a pilot shows great results, revenue doesn’t always follow. For startups, every month without getting paid means coming closer to shutting down. For corporates, every stalled partnership is a missed chance to move the needle on their sustainability goals.
If you're in a big corporate, then ask yourself: how many promising startups it’s left hanging? And what does that mean for your own net-zero ambitions? Both sides are paying a hidden price for this inertia. Solving these financial pain points is about much more than helping startups—it’s about speeding up climate innovation for everyone’s benefit.
Introducing Pay-for-Performance: A New Contracting Model for Corporate-Startup Climate Partnerships
What is Results-Based Billing?
So what’s the alternative? The pay-for-performance model, also known as results-based billing, flips the script. Instead of paying for the time spent or the activities completed, corporates pay for actual outcomes. That might mean verified emissions cuts, hitting decarbonisation targets, or other climate impacts everyone agrees on up front.
This approach is picking up steam in the AI world, where results-based billing helps align incentives and deliver measurable value. For climate tech, the case is even stronger. Corporates reduce their upfront risk, while startups get rewarded for delivering real impact, not just ticking off tasks.
By moving from traditional fee-for-service contracts to results-based agreements, organizations can better allocate resources and hold everyone accountable for what actually matters: lasting, measurable climate results.
How it Aligns Incentives and Drives Impact
Adjusting contract terms can break a deadlock. Imagine if the next pilot your company runs is paid out based on the actual CO2 emissions reduced, not just on project milestones. How would that change the conversation? Suddenly, everyone’s working toward the same, tangible goal.
This isn’t a silver bullet. Results-based billing depends on solid data, trustworthy measurement, and a willingness to try something new. But the payoff is real: better alignment, shared risk, and faster impact.
When incentives line up, startups focus on effectiveness and delivery, and corporates have real confidence they’re getting tangible results. That kind of partnership is the foundation for serious, long-term investment in climate tech.
Making Pay-for-Performance Work: Practical Steps for Corporates and Startups
Designing Measurable Outcomes
Start by agreeing on what success looks like in practical terms - both for climate impact and business value. Who’s responsible for tracking these results?
Getting this right takes real effort. The metrics you choose need to be specific, actionable, and agreed upon by all the key stakeholders—from engineers to finance to sustainability leads. If you skip this step, you risk misalignment down the line.
Building Trust and Data Infrastructure
Invest in data systems and governance early. If you can’t measure reliably, you can’t pay for results. Bringing together strong AI capability, robust data governance, and hands-on support transforms ideas into market-ready solutions.
Trust comes from transparency. Both sides should agree on how data will be collected, checked, and shared. Getting these systems in place from the start helps avoid confusion and conflict later on and keeps the partnership focused on outcomes.
Rethinking Risk and Value
Corporates need to move beyond a defensive stance on risk. Startups need to be transparent and accountable.
Building trust and transparency is non-negotiable—everyone has to commit for this to work.
Tap into advisory, training, and ecosystem support for internal upskilling. Our advisory and training programs help corporates build the skills they need to work with startups, especially around climate finance and procurement.
Workshops where leaders from both sides hammer out what counts as success are essential for building the trust and clarity that pay-for-performance demands.
How do you currently measure impact in your business, and who really defines success? You might be surprised by the answers and these discussions often hold the key to real progress. When leaders come together to set these definitions, it creates shared ownership and genuine accountability.
The Road Ahead: Overcoming Challenges in Corporate-Startup Climate Partnerships
Acknowledging the Barriers
Moving to pay-for-performance is obviously a big shift. It’s more than changing procurement paperwork. You’ll need buy-in from legal, finance, and leadership, not just the innovation team. There are tough questions around how to measure outcomes, enforce contracts, and manage the extra admin. Some climate impacts are hard to quantify, or take years to show up.
Getting past these barriers takes effort. Start small and test the approach with a handful of projects, find internal champions, and share what you learn. That’s how momentum builds.
Building a Culture of Action and Accountability
The alternative - business as usual - isn’t good enough. The climate tech field needs a culture shift: new policies, better training, upgraded standards, and stronger communities. Nexus Climate’s policy work is focused on making it easier for early-stage climate innovators to thrive, tackling the big barriers in procurement and finance, and unlocking more climate tech investment with results-driven contracts. Community-building and training are key to bridging the gap and accelerating progress.
Change is hard, but the momentum is real when organisations commit. So, what’s your next step?
If your goal is real climate impact, now’s the time to move beyond pilots and build true partnerships. The future will belong to the organizations willing to do things differently.
Ready to move beyond pilots and unlock real climate impact?
COP30 has made one thing clear: ambition without execution is no longer credible. The next phase of climate leadership will be defined not by who sets the boldest targets, but by who delivers tangible results. Moving from pilot to performance is how the private sector can turn global pledges into progress. Nexus Climate is helping corporates and innovators make that shift, because after COP30, the world will be watching who acts.
Get in touch with Nexus Climate to explore how pay-for-performance models can drive results for your organization, or express your interest in joining our next practitioner workshop on climate innovation contracting.
FAQ
What is a pay-for-performance model in climate tech partnerships?
A pay-for-performance model ties payments to specific, measurable outcomes, such as verified emissions reductions or decarbonization milestones, rather than just pilot activity or time spent. This aligns incentives for both startups and corporates, focusing on real-world impact.
How does results-based billing reduce risk for corporates?
Results-based billing means corporates only pay when agreed impact targets are met, helping to justify investment in new technologies while minimizing exposure to unproven solutions. This model encourages startups to focus on delivering measurable outcomes.
Why do most climate tech pilots fail to scale?
Most climate tech pilots stall due to slow, opaque procurement processes, misaligned incentives, and lack of clear ownership or follow-through within corporates. Studies show 92% of AI and climate pilots never progress beyond initial testing.
How can corporates build internal capacity for pay-for-performance contracts?
Corporates can leverage training programs, advisory services, and cross-functional workshops to build skills in climate finance, impact measurement, and innovative contracting. Nexus Climate offers bespoke training and support for organizations at every stage.
Is pay-for-performance suitable for all climate tech solutions?
Not always. Some climate impacts are difficult to measure or take years to materialize, making results-based billing more complex. It works best for projects with clear, short-to-medium-term outcomes and robust data systems.
