Baking ESG into your startup is good business sense, not just box ticking

A well-written ESG policy is much more than box ticking. Done well, it can generate significant value from the outset and help your company grow as a thoughtful, fair and responsible business. With reports that European early-stage VC investors have declined to invest in a business because of sustainability concerns, it can also make the difference to your company’s survival.

The following tips can help you avoid common pitfalls. 

DO think carefully about language 

Putting anything into writing requires clarity of thought and plain language. Your ESG policy will be more persuasive if you follow the 5Ws of information gathering: who, what, why, when, and where. 

While an ‘ESG policy’ will typically focus on business operations and culture, an ‘impact statement’ or ‘framework’ will articulate the impact you want the business to have on the world. Beauty Pie’s ESG policy builds on the founders’ vision for the company. While Infarm’s Impact Vision is an inspirational paper that captures the company’s mission fully.

Giving your programme a specific name, as Ezoic has, can help further personalise your efforts and get internal traction and buy-in. You could also consider relating your policy to existing frameworks, such as the UN’s SDGs - a language for sustainable development spoken by many, globally. 

DO tie it back to your core business 

Your ESG policy should start by acknowledging the need for greater sustainability globally and the role of business in shaping a more sustainable future. Including data in your ESG policy will demonstrate that you not only care but also that you understand the challenge at hand.

Having set the scene, hone in on the opportunities for your business specifically. The more you can tie your sustainability narrative to your core products and services, the better. Consumers care about sustainability and are increasingly putting their money where their mouth is. A recent study found that products making ESG-related claims averaged 28 percent cumulative growth over the 2017-2022 five-year period, versus 20 percent for products that made no such claims.

The most successful, value-creating ESG approaches are informed by materiality - they focus on the ESG topics that matter the most to your business. To identify these, you need to combine two complementary lenses  - known as “double materiality”:

The first lens is ESG topics that could affect financial performance. 

Consider:

• internal -  diverse talent; data privacy management; energy bills

• external  - social unrest; consumer sentiment; extreme temperatures

• social and environmental trends

The second lens is ESG topics that the organisation will have the most impact on. 

Consider:

• how the business impacts the world it operates in, be it people or planet

• the responsibility that comes with this 

But what is material to your business performance will change as your business grows and diversifies, and world events happen. That’s why an ESG approach needs to keep evolving over time.

DO involve your team 

Don’t forget to ask your employees for their input. Employee engagement is vital for making sure your ESG policy actually becomes action - and doesn’t just sit untouched collecting dust. Sustainability is a topic that resonates with many of us at a personal level, and a working group can be a great way to tap into staff passion, discretionary time and effort.  

However, do lead from the top. In early-stage businesses, the founder has to get behind the ESG policy and they should express early on their personal commitment to addressing ESG themes. 

DO make someone accountable

ESG is a team sport, but every team needs a capitan. Without clear ownership, accountability, and backing from the top, ESG efforts are likely to stall. That’s why it’s vital to designate an owner - ideally this should be someone who combines the individual experience, passion and bandwidth - especially if their main job is something else, e.g. head of people or CFO.

Ultimately the role of owner is one of orchestration, coordination and communication. This remains true as the company grows and appoints a full- or part-time head of sustainability. Think of a chief sustainability officer as a “sensemaker in chief” - cutting through the noise, distraction, hype and jargon. At the end of the day, ESG is just fundamental common sense.

DON’T claim to have it all figured out 

Let’s be honest, none of us do. Authenticity and humility are your best friends. Avoid lofty statements or hinting that you’re ‘working on something’. Acknowledge that achieving your ESG goals will not be easy or quick. Even some of the most mature and advanced businesses on this agenda talk about climate action, diversity and other sustainability topics as a journey and ‘learning out loud’.

A policy should be a living document: be honest that it is a work in progress and include a commitment to revisit and update it at least annually. Over time, your ESG policy should evolve to be incorporated into an annual sustainability report. 

DON’T leave it too late 

An ESG policy is as much a ‘guiding compass’ as a communication tool. As your company grows and scales, retrofitting a policy will become increasingly complicated and onerous. 

Publishing a policy early on is a great way to:

• Recruit people with shared goals and values: given the competition for top start-up talent, a commitment to diversity and sustainability is a great differentiator. 

• Introduce a shared understanding and common definitions internally

• Signal awareness and intent externally

• Create a structure to drive your goal setting, delivery and reporting efforts forward, and ensure ESG is embedded into your business growth

DON’T overcomplicate it 

Keep it simple and forget the quest for uniqueness. Prioritise something that will work for your business and your people, and can be easily actionable. A clear ESG vision, put in place early, will help create the right culture and mindset from the outset, as well as bring business benefits.

Lead image: Taylor Grote