Did you know 63% of consumers prefer to buy from companies that have the same values as them? This is also reflected in employees, who are more productive, healthy, resilient and likely to stay at a company when they get to live their purpose at work. The same is true for B2B companies, with 75% of them finding that prioritising purpose had a positive impact on their growth. And in case you needed even more convincing, research has also found that for every 10% increase in the gender diversity of a leadership team, EBIT rises by 3.5%.
We’ve all heard of the rise of purpose, impact and ESG in business, but how do we go from talking about it in theory to doing something in practice? How do we harness these trends to see the benefits for our companies and communities? Especially when, as the founders and backers of early-stage ventures, everything in our workday feels novel and urgent.
We’ve designed this starter guide to answer these questions. But first, a word on terminology.
At AirTree, when we refer to “impact” we’re talking about the social and environmental interactions between a company and the ecosystem of people and planet around it.
This comprises both a company’s purpose (why it exists) and how it operates (the environmental, social and governance (ESG) policies and practices it uses to monitor and manage impact risks and opportunities). As the figure shows, considering impact in business can mitigate potential risks (e.g. supply chain reliability, regulatory compliance, social licence and ecosystem health) and allow you to identify and seize opportunities (e.g. consumer and employee engagement, investor satisfaction and innovation).
We’ve shared AirTree’s journey of putting impact into action on diversity, equity and inclusion (DEI) here.
ESG is at an inflection point. Over the last few years, its movement has been break-neck from the fringes into the mainstream. The proliferation of new ESG ideas, events, communities, tools, data, policies and practices has been staggering and exciting.
ESG’s rise has also come with its fair share of criticism. At its worst, ESG has been labelled a box-ticking, morally-motivated pressure campaign from the left of the political aisle, drawing time and money away from “core business”.
It’s true that there are examples of companies taking advantage of ESG ideas and applying them without follow through, resulting in a wave of false promises and greenwashing. However, if you break it down to its core components, ESG in business can be a powerful, future-focused lever for growth, change and transformation.
Where should I start?
One of the biggest pitfalls when thinking about impact and ESG as a business is adopting someone else’s definition of what matters. To achieve success, your business’ approach should be built on your own perspective: the values you hold, the vision you have for the future, what motivates your employees, and what matters to your customer. Without considering these questions, you’re anchoring off other people’s opinions of what matters, potentially creating a sense of detachment (and even resentment) towards impact strategies and initiatives.
To determine your own perspective on impact and ESG, work through the following question prompts.
Refine the list of ideas and issues that came up in this exploration to create your priority list. Categorise them based on:
1. What feels most important
2. What you’re well positioned to address.
Take your priority list and summarise your perspective into an impact intention statement (or whatever you’re keen to call it).
- You can write it however you like, but good to keep it short and simple, referencing your key ideas and stakeholders, and what your path forward looks like
- It’s ok if it is a bit aspirational from where your work is currently up to; you want it to inspire and direct people’s thinking
- It doesn’t have to follow a specific format, just needs to be some declaration on the why, what and how for your thinking on ESG
Using AirTree as an example, our impact intention is…
We believe we will make the world a better place by investing responsibly and giving strategically to build a diverse, equitable and inclusive tech ecosystem, improve mental health and wellbeing and manage our impact on the environment.
As an early stage venture, having time to answer strategy questions like these can feel like a luxury. But if you set yourself up with the right inputs, you could draw out enough insight in an hour or two. Think about some of the following ahead of time:
- Make sure those who are in the room have a shared and deep understanding of the business
- Circulate some insights on what drives your employees and customers, what they care about (even anecdotally)
- Do a quick review of the news in your industry, noting any social and environmental issues
- Use a time that’s already in the diary as a regular ritual, e.g. a leadership meeting or at a strategy day
When should I start?
With clarity on what matters to you, your stakeholders and your industry, it’s now important to consider your stage of growth.
The impact projects of a late-stage business will look totally different from that of an early-stage business.
Like any business capability, it’s important to recognise that early stage venture is as much about setting the right inputs (e.g. mindset, ambition, operating policies and practices) as managing the outputs (e.g. employee diversity, tCOe, % staff trained). If you can build the right inputs, you’ll be in a much stronger position to manage the outputs.
There’s no rule of thumb on what to consider at each stage of growth. You’ll know better than anyone what is important for your business now versus later. However, ESG_VC, a UK-based ESG data collective of VCs, offers good food for thought. Based on data collected from 450 venture-backed businesses, ESG_VC suggests the following sequencing:
Using these inputs, prioritise a list of issues or project ideas to address in the next 12 months.
How should I start?
With your prioritised to-do list in hand, take a starting posture that assumes someone else has already built what you need. Get on Google (or better yet, ChatGPT) and find a template or example that feels fit-for-purpose based on your needs. Whether you’re building v1 of a new policy or practice, or looking to take an existing program up a notch, check out how others approach it before recreating the wheel.
We’ve listed a few resources and organisations for you below to start you off.
- ESG_VC’s Notion page of resources and templates for founders and investors
- HBR article ‘Startups Need an ESG Strategy’ and VentureESG’s how-to guide for writing an ESG policy (albeit written for an investor perspective, this guide has a lot of crossover instruction)
- EmploymentHero’s remote working toolkit
- The Green Electricity Guide by GreenPeace is a helpful resource for switching to renewable energy providers
- Diversity Council Australia has a number of training and resources for DEI in the workplace, Culture Amp also has a comprehensive guide to starting out with DEI training
To read more on impact and ESG in startup and business, check out the following articles.
- World Economic Forum, ‘What startups think about ESG and Why It Matters’
- Big Society Capital, ‘How Impact Can Increase Customer Retention’
- Big Society Capital, ‘How Impact Mitigates Startup Risk’
- Medium, ‘Impact-driven startups are winning the war for talent. Here’s how you can do it too’
- Forbes, ‘Why Purpose is the New Competitive Advantage’