When Virtuous Circles Collide
from smokestack to finish line: How Lanzatech + ON turned pollution into a high performance running shoe and reinvented a supply chain
“We need to show that it is possible to…make products outside the fossil fuel chain and make money. This is actually important. We’re trying to say there is another way. We don’t have to stay with the same way of doing everything… There is a future that is different from the world we have today.”
—Jennifer Holmgren, CEO, LanzaTech (Fast Company, Most Innovative Companies Summit, 2023)
LanzaTech is the unicorn in my backyard: a company with a billion dollar-plus valuation whose headquarters is next to the trail that goes to the nature preserve that became a treasured refuge during the Covid lockdown. I walked past nearly every day for months. The company has been part the scenery around here for a decades, though few realize the world-changing / climate-saving implications of the work that goes on in the office park anchored by a distinctive white brick Art Deco-meets-Bauhaus building.*
Everything about LanzaTech seems a little improbable. It began with a fail halfway around the world when a biofuels company in New Zealand went bust in the mid 2000s, leaving a couple of newly unemployed scientists with enough time on their hands to, as Steve Jobs put it, “think different.” A reference in an academic paper sent them chasing after clostridium autoethanogenum, an odd little bacterium native to the gut of a rabbit, with a taste for carbon monoxide. The scientists (who found their prized bug in a microbial library in Germany) had visions of leveraging its unusual appetite to turn smokestack emissions into ethanol. They saw the potential for a win-win-win that would:
cut greenhouse gas and particulate emissions
reduce demand for fossil fuels
provide an alternative to corn ethanol, which requires petrochemical inputs (fertilizer, pesticides, etc.), governments subsidies, and takes up farmland that could otherwise be used to grow food
The first hurdle, proof of concept, was helped along by another failed business, this time a 7/11 grocery store that was selling off fixtures. A reconfigured refrigerator became a microbial incubator, nurturing countless generations of clostridium until evolution did its scientist-mediated, natural selection trick and a carbon monoxide glutton was born.
LanzaTech itself was born in 2006. Lanza is the the Spanish word for spear, so perhaps this was a nod to Cervantes’ Don Quixote, who famously tilted at windmills. Few windmills are more daunting than that of the fossil fuel industry.
Or perhaps it was about being the tip of the spear: an innovative upstart leading the charge in an epic battle to save climate and future. By 2006, the level of CO2 in the atmosphere had risen to 381 parts per million (ppm), well past the top of the “safe” limit of 350 ppm. Today, it is a terrifying 424 ppm. And accelerating.
Whatever the inspiration, the company spent the next several years cobbling together funding while amassing patents by the hundreds. In 2014, pumped up by a significant investment from New Zealand’s taxpayer-supported sovereign fund (NZ Super Fund), LanzaTech’s headquarters relocated to the US in a bid to up the company’s global profile. That’s when they moved into my neighborhood, just north of Chicago.
Every now and again, a story appears in the press to remind us that a cool company is in our midst. A few years ago, LanzaTech partnered with celebrity billionaire and Virgin Atlantic founder Richard Branson to test out an ethanol jet fuel blend. It worked.
But the ethanol fuel story has begun to sputter. With roughly 1/3 the energy density of gasoline, it takes 3x as much ethanol to go the same distance in a car. Ethanol also famously corrodes gas tanks and fuel pumps, which is why it is significantly diluted in gasoline blends. With the growing popularity of EVs (still early days for EV airplanes), ethanol as a fuel could soon find itself as a footnote in history altogether.
However, like petroleum, smokestack ethanol can also be used to make feedstock chemicals and plastics for consumer goods.
So LanzaTech is now more focused on ingredients, promoting “above ground” carbon for making polyester clothing (Zara, Lululemon) and petrochemical alternatives for products as diverse as perfume (Coty) and laundry detergent (Unilever).
In collaboration with On, a running shoe company, the vision has dramatically expanded: to create an entirely new supply chain for clean EVA (ethylene-vinyl acetate), a plastic that is used to make almost everything. Ethylene, a gas made from ethanol, is a key ingredient.
Instead of wafting up to the stratosphere and turning the planet into a greenhouse, carbon emissions could be syphoned off from smokestacks and turned into ethanol, which could be turned into ethylene, which could be turned into in EVA, which could be turned into almost anything we want.
Game On
While carbon-hungry bunny microbes were busy multiplying Down Under, Olivier Bernhard, a champion triathlete, was putting on a pair of prototype shoes for a test run Up High in the Swiss Alps. These were decidedly weird shoes, with pieces of sliced up rubber hose glued onto the soles. What they lacked in beauty, they more than made up for in bounce. And with that, a new shoe company—On—sprinted into business.
Even before all the production details were worked out, the strange but compelling shoe design won an important industry award. It wasn’t long before the shoes with better bounce caught the attention of top athletes. Soon they were showing up in photos of runners crossing finish lines and standing on Olympic awards podiums. Then Roger Federer—a record eight-time winner of the Men’s Singles title at Wimbledon—approached On about becoming an investor and designing a line of tennis shoes.
On went from obscure startup to a Nike competitor with a $7 billion valuation in little more than a dozen years.
Runners see the impacts of climate change everywhere they look. They suffer, along with everyone else, through heat waves that are longer and more intense. Their runs take them past the aftermath of extreme floods and through drought-stricken landscapes. They see forests up in flames, burning so hot the earth itself is scorched. The see rivers so low that “hunger stones” submerged for centuries are once again visible.
On has committed to slashing its “per product” carbon footprint by 55% by the end of the decade. It is a wildly ambitious goal, so the company has been experimenting with everything from a circular business model to fossil-free materials. Being proactive is the right thing to do, but also a savvy business strategy.
“You have to be future-blind not to see where this is heading: plastics being regulated everywhere. There will be taxes on it. We need to move as an industry. With regulation you’re either one step behind or one step ahead. As a business leader, you can choose. Our goal at On is to never wait for government, but to basically move faster..”
–Caspar Coppetti, co-founder, On (Fast Company, Most Innovative Companies Summit, 2023)
In 2022, On introduced Cyclon™, a subscription program designed to improve recycling rates. In this “Shoes-as-a-Service” model, runners pay $29.99 per month for a pair of Cloudneo shoes made entirely from materials derived from castor beans. After six months, runners can order a replacement pair, then return the old pair using the same packaging. The old shoes are shredded and the material used to make new shoes.
Although still in a roll-out phase, so far it has been a massive success on the recycling front, with an 80% return rate, according to On co-founder Caspar Coppetti. In fact, some customers have asked to keep their old running shoes longer because they’re still good. Reviews of Cloudneo shoes have been mixed, but even critics love the circular model and look forward to new, improved designs. Subscriptions also can help lock in customer loyalty, so there are marketing benefits as well.
For Coppetti, the next step is to make running shoes from “fossil-free” EVA, sourced from carbon emissions, virtually identical to the petrochemical version used to make the rest of the On shoe line.
It has taken several years and ten prototypes—$500,000 each—but the CleanCloud™ shoe is finally ready for its close-up. In addition to LanzaTech, which provided the ethanol, On worked with Paris-based chemical company, Technip, to convert the ethanol to ethylene, and with Vienna-based, Borrealis, to turn the ethylene into EVA form.
Now it’s about scaling up. Coppetti anticipates ordering 10 million pairs over the next few years.
Combined with a subscription model, it’s a circular economy home run: would-be pollution (both carbon and asthma-linked particulates) transformed into a popular and profitable product that can be recycled again and again and again, theoretically forever.
Yet a ten million-pair order won’t be nearly enough to move the climate dial. “No company alone can save the planet. To get this technology to scale, you have to give a lot of companies access to it,” says Coppetti, who plans to do just that in order to build up a viable supply chain.
Scaling is also the big challenge for LanzaTech. Its biorefineries cost an eye-watering $100 million each. So another partnership, this one with Brookfield Renewable Partners, a division of the giant private equity firm, could be the game-changer, delivering as much as $1 billion in project financing. As more biorefineries go online, the cost of biorefineries and also smokestack ethanol are expected to drop.
Lanzatech biorefineries could one day be located anywhere in the world: next to industrial smokestacks, in landfills, and near farms, using crop waste as a feedstock. They could also be set up next to carbon air-capture plants, brewing ethanol straight out of thin air.
Co-located with ethylene and EVA plants, a fossil-free, clean plastic supply chain could also be distributed, simplifying production and shipping logistics.
The sky is the limit. We believe we can get to gigatons of carbon captured and turned into products. Our dream is a “post-pollution future,” where waste, whether it’s solid or gas, can be converted into everything you use and need.
—Jennifer Holmgren, CEO, LanzaTech (Bloomberg)
The Adjacent Possible
Because a biofuels company in New Zealand went bust.
Because a rabbit’s gut was home to a carbon-loving bacteria.
Because a couple of unemployed scientists were inspired by a paper about carbon-loving bacteria.
Because a 7/11 in New Zealand went bust.
Because investors invested.
Because a friend of a friend asked a Swiss triathlete to try out some weird shoes.
Because the shoes were great.
Because a shoe company committed to go “fossil free and circular” had deep pockets.
Because a big investor with even deeper pockets wants to help scale up bioreactors filled with carbon-loving bacteria.
Because of companies based in New Zealand, Germany, Switzerland, France, Austria and and Skokie, Illinois.
Because everyone kept—and keeps—on trying.
Because it is still not too late.
“The adjacent possible” is a wonderful turn of phrase originally used by biologist and complexity theorist Stuart Kauffman to describe the collisions of Earth’s “starter” molecules that over time led to the creation of all the molecules required for the emergence of life.
In his book, Where Good Ideas Come From, author Steven Johnson describes the adjacent possible using the metaphor of doors:
“Think of it as a house that magically expands with each door you open. You begin in a room with four doors, each leading to a new room that you haven’t visited yet. Those four rooms are the adjacent possible. But once you open one of those doors and stroll into that room, three new doors appear, each leading to a brand-new room that you couldn’t have reached from your original starting point. Keep opening new doors and eventually you’ll have built a palace.”
The story of LanzaTech and On is full of adjacent possible, with more doors ready to spring open.
This is about materials efficiency. Like energy efficiency, at scale materials efficiency can significantly reduce greenhouse gas emissions, while cutting demand for fossil fuels.
With so much carbon available above ground, why would anybody drill or dig?
Why would anybody waste waste?
* The building that anchors the Illinois Science + Technology Park was once the headquarters of G.D. Searle, a pharmaceutical company that developed the first birth control pill. Although originally intended as a drug, a steroid, to address various gynecological conditions, its effectiveness for birth control pointed to a much bigger market: the adjacent possible in the story of how a pill became The Pill.
Searle, which was bought by Monsanto and then later sold to Pfizer, also developed Metamucil, Dramamine, Ambien and Nutrasweet.