Short investment horizons were the most cited barrier, named by 22%.
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From humble beginnings in a tin shed, founder Saia Latu, above, and his business partner Joe Vagana have built TROW into a deconstruction industry leader. Photo / Dean Purcell
Sustainable innovators have the ideas. Now they need the capital and customers to scale, writes Fran O’Sullivan
From mushroom-based packaging to salvaged construction materials and crops strengthened by ultraviolet light, New Zealand businesses are developing solutions to environmental challenges.
But short-term investment horizons, policy uncertainty and weak mainstream customer awareness
are holding back their growth.
New Zealand does not have a shortage of sustainable business ideas. What it lacks is a system capable of helping enough of them grow into commercially successful businesses.
That is the central message of Next Wave 2026, the Sustainable Business Network’s annual barometer of sustainable innovation, produced in partnership with the University of Canterbury.
This is the second annual assessment of this emerging sector. It examines the performance, confidence and operating conditions of businesses selected as finalists in the 2025 Sustainable Business Awards’ Disruptive Innovation category.
Mycelium is grown on agricultural waste, turning low-value by-products into high-performance packaging.Home compostable: Natural Genius compostable packaging breaks down completely in your home compost or garden within months, returning nutrients to the soil without leaving microplastics behind.Naturally Genius' material naturally delivers impact protection, thermal insulation, sound dampening and structural support, with added water resistance and fire retardancy.
The report paints a picture of a sector brimming with ambition, developing new products and preparing to expand, but struggling to secure the finance, customers and predictable regulatory environment needed to realise its potential.
Two-thirds of the 42 businesses surveyed were confident about their growth prospects. Yet their financial performance remains uneven, and the gap between promising innovation and commercial scale is proving difficult to bridge.
The stakes extend beyond individual companies. These businesses are developing products and services that could help New Zealand reduce waste, use resources more efficiently, lower emissions and move towards a more circular, regenerative economy.
Three innovators illustrate both the possibilities and the challenge: Naturally Genius (formerly Mushroom Material), which is developing a biodegradable alternative to polystyrene packaging; TROW Group, which salvages construction materials for reuse; and BioLumic, whose ultraviolet-light technology aims to improve crop performance.
Each is seeking to change established practices in industries where conventional products and processes are deeply embedded.
Growing a better alternative to plastic
Auckland-based Naturally Genius, formerly Mushroom Material, is tackling one of the most visible problems in packaging: the use of expanded polystyrene, a lightweight material that can persist in the environment for decades or longer.
The company uses mycelium — the root-like network of a fungus — combined with organic waste to grow a natural protective material. The resulting product is designed to cushion goods in transit while offering an alternative to conventional plastic foam.
The Next Wave 2026 report describes the material as waterproof and flame-retardant, with protective, thermal and acoustic properties comparable to polystyrene. It can biodegrade within months.
The idea also offers a potential use for organic by-products that might otherwise be discarded, turning waste into a resource.
But developing an alternative material is only the beginning. To compete with established packaging, a sustainable product must deliver consistent quality, meet customers’ technical requirements and be produced at a price and volume that make commercial sense.
Naturally Genius’ experience illustrates the difficulty of moving from promising technology to manufacturing scale. In a January 2026 feature published by the Sustainable Business Network, founder and chief executive Shaun Seaman described the company’s earlier struggle to scale production, saying it had come close to abandoning the venture.
Naturally Genius’ Jotinder Singh and Shaun Seaman have been nominated for this year’s Earthshot Prize for their compostable mycelium pellets.
The business was subsequently operating from a 1600sq m facility, with a team of 11, and developing a pilot production line. The next challenge was to demonstrate that production can reach the required quality and volume reliably.
The backstory is typically Kiwi.
In 2018, Seaman was paddling out to surf off the Indonesian coast. He found himself surrounded by plastic bags and broken chunks of Styrofoam.
Back home in New Zealand, he started digging into the data. EPS — expanded polystyrene foam — kept coming up as one of the worst offenders.
He teamed up with engineer Jotinder Singh to co-found the business. After three years of kitchen-bench experiments and garage prototypes, they created something entirely new: compostable mycelium pellets that can run through existing EPS moulding lines and match its protective performance.
These pellets became the foundation of Naturally Genius — formerly Mushroom Material.
The founding team built the proof of concept, closed US$5.7 million in funding and are now bringing Naturally Genius mushroom packaging to commercial scale.
The pair have been nominated for this year’s The Earthshot Prize — a global environmental award founded by HRH Prince William to discover, celebrate, and scale innovative solutions that repair the planet.
Construction waste becomes a resource
The construction industry presents another major opportunity for circular innovation.
Buildings contain timber, fixtures, fittings and other materials that can retain value long after a structure is no longer needed.
Yet demolition frequently sends reusable resources to landfill.
TROW Group has developed an alternative through selective deconstruction: carefully dismantling buildings so materials can be recovered, reused or recycled rather than simply demolished.
The Next Wave report says TROW diverts at least 80% of materials from landfill, using recovered resources in homes, schools and community spaces across New Zealand and the Pacific.
The company’s approach also has a social dimension. Driven by Māori and Pasifika leadership, it incorporates tikanga into its onsite practices and creates employment pathways for Māori and Pasifika communities.
From humble beginnings in a tin shed, founder Saia Latu, and business partner Joe Vagana have built TROW into a deconstruction industry leader. The company has undertaken projects for organisations such as Auckland Council, Kāinga Ora, Auckland City Rail, Auckland Transport, Piratahi, and the Ministry of Education.
Saia Latu, TROW founder.
Auckland’s Piha flood recovery provides a practical illustration of what deconstruction can achieve. According to TROW’s published project account, it recovered 50 tonnes of material from two flood-prone homes being removed from the community. Some materials were distributed to local groups and residents, while others were sent for reuse or recycling.
Joe Vagana, TROW.
The lesson for the wider construction sector is that waste can be a consequence of procurement and project design choices, not an inevitable outcome of building.
Making reuse routine, however, requires co-ordination. Contractors need time to dismantle and sort materials, buyers need confidence in their quality, and projects need reliable pathways for getting recovered resources to their next users.
TROW, headed up by Saia Latu and business partner Joe Vagana, recovered 50 tonnes of material from two flood-prone homes being removed from Piha.TROW, headed up by Saia Latu and business partner Joe Vagana, recovered 50 tonnes of material from two flood-prone homes being removed from Piha.
Using light to improve agricultural productivity
BioLumic is applying science to another established industry: agriculture.
The New Zealand-founded agri-tech company uses carefully targeted ultraviolet light to activate biological mechanisms in seeds and seedlings. Its technology is designed to influence plant growth, vigour and yield without genetic modification.
Rather than relying solely on additional inputs to improve crop performance, the approach seeks to activate beneficial plant traits before crops are grown.
In 2024, founder Jason Wargent was honoured as a top agri-food pioneer by the World Food Prize Foundation. Last month the Palmerston North-based agritech company was named on Time’s Best Inventions list alongside fellow Kiwi firm Leaft Foods. The company has reused more than $20m in funding since its inception, attracting investment from the Government as well as US, New Zealand and Canadian venture capitalists.
BioLumic’s research illustrates how sustainable innovation can combine environmental goals with commercial productivity. Improving yields and crop consistency could offer growers economic benefits while creating opportunities to use resources more efficiently. Its commercial challenge is to translate scientific results into reliable outcomes across different crops, growing conditions and farming systems.
That requires research, trials, technical expertise and relationships with growers and processors. It also highlights why investment in agricultural innovation may need to support lengthy development and validation periods before the full commercial opportunity becomes apparent.
BioLumic represents the potential for New Zealand-developed technology to address challenges beyond its domestic market. But converting that potential into sustained commercial growth requires continued investment and the ability to demonstrate value to customers.
Biolumic’s Jason Wargent was honoured as a top agri-food pioneer by the World Food Prize Foundation.
Growth ambitions meet financial reality
The experiences of these businesses reflect the wider findings of Next Wave 2026. The proportion of respondents operating at break-even increased from 17% in 2024 to 31% in 2025, while the share operating at a loss fell from 43% to 39%. But strong profitability remained elusive. Just 3% reported profit margins above 20%, down from 17% the previous year.
There is no shortage of ambition. The proportion planning to launch new products or services increased from 55% to 79%, while the share focused on scaling operations rose from 67% to 79%. Yet half of respondents described access to funding as difficult. The most frequently cited barrier was investment horizons too short for sustainability goals, identified by 22% of respondents. Lack of collateral or security followed at 19%.
Mushroom Material, TROW Group and BioLumic show the range of opportunities — from redesigning packaging and recovering construction resources to improving agricultural productivity through science.
Next Wave 2026: What the report recommends
New Zealand has a promising cohort of sustainable businesses with innovative products and strong growth ambitions, but too many are struggling to move from proving their ideas to scaling them commercially.
1. The big picture: confidence is high, but commercial performance is mixed:
Two-thirds of the businesses surveyed (67%) remain confident about their growth prospects. That is broadly unchanged from 66% in 2024.
But confidence is not yet translating consistently into profitability:
● The proportion reaching break-even increased from 17% in 2024 to 31% in 2025.
● The share achieving profit margins above 20% fell sharply, from 17% to just 3%.
● 39% were operating at a loss, compared with 43% the previous year.
● 30% reported revenue growth of more than 20%, up from 24%.
●The proportion reporting revenue decline edged up from 12% to 15%.
The report describes a sector with growing ambition and activity, but increasingly uneven outcomes. Some businesses are scaling successfully while others remain financially vulnerable.
2. Funding is one of the biggest obstacles to growth:
Half of the businesses surveyed (50%) described obtaining funding as difficult. The barriers include:
● Investment horizons that are too short for businesses whose returns depend on long-term sustainability outcomes.
● Lack of collateral or security.
● Investors who are unfamiliar with sustainability-led business models.
● Limited financial track records, particularly among newer ventures.
Importantly, when businesses do secure funding, more than three-quarters (78%) say their investors value their sustainability mission.
Half of respondents said they would be likely to apply for patient or flexible capital if it were available.
The report argues that conventional investment models are often poorly suited to businesses developing new technologies, circular products or regenerative practices. These ventures may need longer periods to establish markets, build infrastructure and achieve commercial scale.
3. Demand is growing, but mainstream customer awareness is falling:
There are encouraging signs on the demand side. Sixty per cent of businesses reported moderate or significant growth in demand in 2025, up from 52% in 2024. However, the proportion reporting high customer awareness fell from 31% to 14%.
This suggests that sustainable businesses are finding customers among people and organisations already motivated by environmental or social values, but are struggling to reach the mainstream market.
The report identifies several barriers to wider adoption:
● Entrenched consumer and business habits.
● Resistance to changing established products and practices.
● Higher upfront prices for sustainable alternatives.
● Limited awareness of the benefits of new products and services.
It argues that businesses need to communicate the practical and economic value of sustainable products more effectively — including durability, lower running costs and reduced waste — rather than relying solely on environmental credentials.
4. Policy uncertainty is undermining investment and growth:
The report identifies an unstable policy and regulatory environment as another major obstacle.
● 45% of respondents considered the policy environment unsupportive.
● Only 18% considered it supportive, although this was an improvement on 11% in 2024.
● 55% regarded the regulatory environment as unstable, while only 8% considered it stable.
The concern is that businesses investing in sustainable alternatives need confidence that government policy will remain consistent over the period required to develop and commercialise their products.
The report argues that policy should reward sustainable practices, provide predictable long-term signals and prevent responsible innovators from being undercut by cheaper, less sustainable alternatives.
5. What is driving the next wave of innovation?
The report identifies four trends expected to shape sustainable innovation over the next five years:
1. Artificial intelligence: new ways to improve efficiency, productivity and resource use.
2. Circular innovation: designing products and systems around reuse, recycling and reducing waste.
3. Energy transitions: developing solutions that support renewable energy and lower-emissions systems.
4. Changing consumer expectations: growing demand for authenticity and credible sustainability claims.
The businesses in the report are working across a wide range of
areas, including low-emissions technologies, circular economy solutions, regenerative practices and socially inclusive business models.
6. What needs to change? Four priorities:
The report’s recommendations are directed not just at government, but also investors, corporates, procurement teams, business support organisations and other institutions that influence the conditions in which innovators operate.
What the report recommends:
1. Patient capital: Develop longer-term, flexible and impact-aligned finance, including blended funding and investment partnerships.
2. Stable policy: Provide predictable regulation and long-term signals that encourage investment in sustainable solutions.
3. Stronger customer demand: Improve awareness, education, storytelling and connections between innovative suppliers and procurement teams.
4. Capability and partnerships: Improve access to technical support, shared infrastructure, specialist facilities and supply-chain partnerships.
A particular concern is that small innovators often carry disproportionate operating costs and lack access to the infrastructure needed to expand production and reach larger markets.
