Sustainable startup
When we type "startup" and "ESG" together in any search engine on the Internet we get a lot of information about what startups will help us implement ESG in the organization. It's a standard that when there is a new need in the market a lot of companies are created to meet it. And that's very good, because that's what business is all about. But what if we're thinking of starting a new company that doesn't necessarily want to provide technology or ESG consulting solutions, but has it in mind? We wonder if we should act in a sustainable way from the very beginning, but can we wait a bit with it until the business "takes off"? We look for information on the subject on the Internet and what? Well, unfortunately... In this case, the Internet library turns out to be already much more poor. That's why I address this article mainly to this audience, but not only....
Sustainable beginning
When we start a new business we have a lot of things on our minds. We develop our products or services, build a customer base, study the preferences of the target groups we want to reach, look for financing methods, methods of entering the market... This is certainly not the moment when we first think about ESG, especially since no one requires it of us. But are we sure? The facts are that more and more investors are taking ESG into account when deciding where to put their capital. A company's approach to sustainability is also important to its other stakeholders, such as those everyone cares about most, namely customers and potential employees. Moreover, soon even small companies will be forced to report non-financial data. That's why it's important for startups to pay attention to ESG right from the start. An additional advantage of doing so is the realization that it is easier and cheaper to introduce certain measures already at the stage of creating a business strategy, developing products or services, or building an organization's culture, rather than modifying all this later. In this respect, startups have an advantage over larger companies, which have to make a lot of changes in their business to comply with the requirements of new ESG regulations and to keep up with market trends, which are increasingly based on sustainability. Startups that develop from the very beginning in the spirit of ESG will avoid costly and often time-consuming "redesigns." As a result, they will not only save financial resources, but more importantly, they will gain valuable, which, instead of making changes, they will be able to spend on developing their business and following global market trends. As a result, as a free gift, they get a chance to get ahead of the competition and gain a market advantage.
Why should you think about ESG?
As I mentioned, implementing and promoting ESG is extremely important for startups that want to succeed. Of course, it takes a lot of time and work, but it's worth it. Why? Here's even more about the benefits.
ESG attracts investors Investors and venture capital (VC) funds evaluate ESG factors when making investment decisions. This is because these practices are becoming increasingly influential to market benchmarks and financial performance. Addressing ESG issues early in the development and planning stages of a business can help increase the chances of obtaining financing and running a successful business. It can help avoid civil litigation, penalties and public backlash. More importantly, investments from DFIs (development finance institutions) must meet certain ESG standards, and investors will only provide financing to companies that demonstrate ESG compliance. Therefore, focusing on ESG from the outset will increase the likelihood of obtaining investment and expanding the investor base.
ESG gives you a competitive edge More and more companies are beginning to prioritize ESG practices, and those that ignore them can only lose out. Although at the beginning of a company's operations taking care of another element - in this case ESG - can be difficult, because there is a lack of time, human resources, knowledge, finances, but eventually the balance comes out in favor. Consumers and investors, seeing that a company acts responsibly, are more eager to trust it. Consumers are eager to equate a company's values with their own. Customers will be more loyal to a company that shares the same beliefs as they do, and will become increasingly loyal to brands they associate with responsibility.
ESG increases employer attractiveness A good working environment is an important part of maintaining a healthy atmosphere, and thus the success of a startup. If employees are dissatisfied, they will go elsewhere. Therefore, properly implemented policies and ESG practices can help build company culture by engaging the team and giving them a voice in company decisions. This improves employee well-being and retention rates. ESG-driven activities, particularly concern for the S (social) element, also create a sense of community in the workplace, based on shared values. ESG therefore helps foster team spirit and unity, which increases employee productivity and reduces the chances of losing valuable talent. Maintaining employee well-being is an important part of developing and building the success of any company.
ESG helps build a good reputation A company's reputation is extremely important. It is the first thing people think of when they hear a company's name. A good company reputation attracts customers, investors and business partners. Therefore, it should be taken care of from the very beginning. ESG can be of great help here. If a company is associated with responsible and sustainable practices it immediately evokes positive associations. As a result, contractors will be more likely to do business with such a company and recommend it to others. However, it is always worth bearing in mind that reputation must be taken care of all the time. You can't rest on your laurels, but keep your hand on the pulse and always act responsibly and honestly.
ESG helps manage business Startups should already apply ESG principles in the initial phase of their operations by implementing good corporate governance and business integrity, such as by paying employees fairly and equitably, not hiring children, providing equal opportunities for all genders, ensuring diversity of board members, increasing transparency, or setting fair rules of cooperation for all contractors and stakeholders. Implementing ESG practices in the initial phase will benefit startups in the long run. Knowledge of ESG factors will also allow risks to be managed appropriately. Awareness of ESG risks gives startups a considerable advantage over those without such knowledge. With this awareness, startups will be able to implement appropriate procedures and actions early on in building their business to help mitigate or even eliminate these risks. Such strategic thinking offers a better chance of achieving higher business performance and survival. So it is worth including ESG thinking at the stage of creating the company's mission and vision.
First steps to sustainability
Now that we know that ESG is important at the start of a business, the question is how to implement it. Here's a little download.
Identify relevant ESG factors for your startup and industry Early on, it's a good idea to identify ESG factors related to their business and the industry in which they operate. Not all ESG factors will apply to every business and industry, so you need to find the ones that will fit. The best way to do this is to look at the issues that are most relevant from the perspective of your business. For example, if a company is in the fashion industry then labor rights and environmental concerns are likely to be more important to it than the security of its ICT systems. Conversely, for the IT industry, data and systems security will be more important than building relationships with local communities. Once you have identified the most relevant ESG factors, you can begin to develop policies and best practices based on them in your newfound business. It's worth starting a dialogue with your most relevant stakeholders and asking them what they value most in working with others. Consider the broadest possible group: employees, customers, regulators, suppliers and anyone else who has a relationship with the company. As for the G (governance) factor, it's a good idea to focus on good corporate governance practices at the outset and base major policies and management team building on them. In terms of environmental and social factors, founders and management need to consider the environmental impact of their business (i.e., what is its carbon footprint, waste management, material sourcing, energy efficiency, etc.) and ensure adequate health and safety standards, as well as decent employment conditions.
Establish an ESG working group If you want to make sure that the company is properly managing the ESG area, it is worth forming a team (often made up of employees from other departments) that will be responsible for taking care of individual ESG factors. This group should be responsible for developing and implementing policies, communicating with stakeholders and monitoring progress. However, it is important to remember that ESG should be in the company's DNA. That is, ESG should not be the responsibility of one person, or several people, but of each individual employee. That's why it's so important to communicate and build awareness about ESG throughout the organization. However, it is usually a specialized unit that takes care of highlighting the importance of these practices and is responsible for involving others in the company in the process. This also helps ensure that ESG activities are continuous and sustainable, rather than something that only happens once or twice a year.
Develop an ESG strategy Identifying relevant ESG factors is of no use if it is not followed by concrete actions. Soon every company will have to report ESG data and share it with its stakeholders. For now, this obligation applies only to the largest companies. Therefore, smaller players in the market should already take advantage of the experience of the "bigger" business - observe and implement the relevant activities, so that they can then properly report them according to accepted standards. The CSRD aims to unify the standard of reporting, so soon non-financial reports will have to be based on a single standard. It is also important to track progress over time to measure the impact of your ESG activities. Therefore, for this purpose, it is worth creating and adopting a business strategy into which you will weave ESG factors. With this solution, it is no longer necessary to create a separate ESG strategy, as it will be included in the main business strategy of the company. When developing the strategy, it will be useful to know the relevant ESG factors and juxtapose them with our business ambitions and current market trends.
Incorporate ESG into internal documents ESG should be woven into the structure of every company, not just an "embellishment" that is added at the end. This means that it should be included in HR, investment, or management documents from the start. This will send a clear signal to stakeholders that the company is serious about sustainability and that it is important to the company. It will also cause the benefits of implementing ESG principles to be felt throughout the organization, not just in certain areas. There are a number of resources that can help with this process, including the UN Global Compact, which provides tools for integrating ESG into company management.
Summary
Incorporating ESG factors into the business from the very beginning is undoubtedly the very benefits, as you can see. However, it is not so easy. The multitude of laws, requirements, norms and standards can really make your head spin. Therefore, I invite all budding entrepreneurs (and not only) to read the other articles on this site. I believe they may prove useful in implementing ESG ideas into any business. And if additional questions arise - feel free to contact me https://esgdiscovery.pl/contact I also recommend reading the information on the Sustainable Accounting Standards Board (SASB) website, which is an excellent source of ESG knowledge for any fresh entrepreneur (www.sasb.org).