How to get ESG right: A best practice guide for early-stage startups

Today “ESG” is on everyone’s agenda, even startups. Expectations are rising across society to get the Environmental, Social, and Governmental impact of doing business right. Investors are especially keen to make good on their responsibility to all stakeholders, and the venture capital world is no exception, so across the ecosystem there’s increasing pressure to anchor the goals of ESG into the operations of even the earliest-stage startup.

But how can early-stage startups put ESG into practice? For many founders, ESG is still very abstract, and there are so many definitions of it to make most heads spin. Yet the future will no doubt include regulatory and reporting requirements around ESG, so founders need to get their minds around the topic early and come up with a game plan.

That’s why we’ve been collecting some best practices across our portfolio companies that demonstrate what concrete processes and measures look like in the real world. While this is only one small step towards making ESG more accessible, we want to go beyond the buzzwords and bring some tangibility and color to this important topic.

Environment

💡 The E in ESG stand for Environment and includes the energy your company consumes and the waste it produces. Every company uses energy and other resources and produces waste — thus every company has an impact on the environment.

Ledgy: Ledgy just adopted company wide climate principles (see here for Ledgy’s Climate Action Principles). These principles include, for example, a clear and transparent travel policy, an internal Climate Officer, and vegan only food options at team offsites.

ecolytiq: While ecolytiq’s core business model is built on driving sustainability and climate action in the finance industry, setting a non-financial north star metric may benefit any business. Assessing your business model from an external perspective, capturing the long-lasting changes you may have on our planet and society and deriving respective quantitative impact indicators that go beyond revenue maximization may help you to track and challenge your company’s broader impact. Looking at ecolytiq, for example, the company aims to reach 100m consumers by 2025, which relates to more than 100m tons saved in CO2 per year.

SumUp: Our portfolio company SumUp just joined a great initiative called 1% for the planet — through which the company has pledged 1% of its revenue to environmental non-profits. Even if you are an early-stage startup and generating little in revenues, this is an inspiring outlook on what you can achieve and contribute with your company once you have grown.

💡 btov Recommendation: To kickstart your climate action journey, we can highly recommend joining Leaders for Climate Action (LFCA): a global, entrepreneurial community with the aim to turn business leaders into climate leaders, helping to transform their organization. — All members aim to make their companies more climate-friendly and reduce their carbon emissions (we at btov are also part of this community 💪🏼). With the help of LFCA’s climate action platform, companies can begin the emission management process: starting with measuring their footprint and identifying their biggest source of emission, then continuously reducing and compensating for the rest.

Social

💡 S stands for Social criteria, addressing organizational policies and practices your company has with regards to your employees, customers, suppliers and the communities where you operate.

Procuros: To motivate its team to think and engage outside of one’s own social circle, Procuros grants all employees annual free time allocated for volunteering or to develop their own social projects. If you are looking for a good cause to support, Procuros’ co-founder Patrick founded “doin good”, a non-profit organization that provides education programs for underserved communities.

Ledgy: Another dimension of Social includes team diversity — when it comes to gender diversity (which is not the only diversity dimension you should pay attention to) many of our portfolio companies struggle to increase diversity especially within tech teams. That’s why Ledgy decided to set up a program called “Women in Web”. The program allows female applicants who don’t have a background in computer science to join the tech team at Ledgy and learn the essential skills needed. And they’ve been successful too, recently promoting two trainees to Software Engineers.

Blacklane: Blacklane introduced a program called lottery lunch, where employees from different departments are randomly matched to go out for lunch once a month. A further initiative is called Language Tandem, which connects non-native speakers with native speakers.

💡 btov Recommendation: Dedicate enough attention and resources to building up a healthy team culture. Even if your day is busy and growing your customer base seems to be more important, never underestimate the importance of your team culture and respective interdependencies to motivation and output. Especially in times of remote work, fostering a good team culture isn’t just nice to have, it has become mission-critical. It will not only help you to attract and retain talent but also has a great impact on productivity and working output.

Some other helpful resources from our portfolio companies include

• Sharpist on Diversity & Inclusion
• The ReSkill Pledge, supported by SumUp.
• Remi is building an entire platform for remote team culture.
• finway on culture and value-based hiring.

Governance

💡 G stands for Governance and refers to the internal systems of practices and procedures that deal with leadership, stakeholder expectations, achieving a company’s short-, mid and long-term goals, as well as audits and internal controls.

Sharpist: One important part of Governance includes leadership. First time founders are especially vulnerable. It’s important to acknowledge we are not born with leadership skills, we need to learn and dedicate some extra time toward (this applies to serial entrepreneurs as well). This is where Sharpist comes in — while the company has traditionally served big enterprises, its new program called Sharpist Spark is specifically designed to provide coaching to founders. And leadership skills are not only important for founders, but for any employee at your company with aspirations for personal and professional growth. Thus, Sharpist offers coaching to any team member as part of its employee benefit package (and of course, coaching is not just about leadership skills but also about personal and professional development in general).

Ledgy: To foster a culture of transparency and open communication, Ledgy introduced a weekly “Ask Me Anything” session. Within this session all of the three co-founders are present and employees get the chance to ask them about any current issue. These sessions are especially helpful when strategic decisions have been made (e.g. changes in the team structure).

btov: We recently appointed Phyllis Studerus, a well trusted member of our angel network, as Chief Empowerment Officer. The goal is to provide an external point of contact for all of our employees to talk about any confidential issues. Alternatively, we also see more companies introducing an incident response form to address these challenges.

finway: Defining a clear vision and mission statement is very important. To effectively communicate it is even more important. Jennifer Dussileck, CEO and co-founder of finway, hosts an onboarding session every month, during which she explains the problem they address with finway, how they solve it, what their mission is, what values they live by and what they have achieved so far.

💡 btov Recommendation: A proven framework for setting company-wide goals in a transparent, collaborative and measurable way are OKRs (Objectives and Key Results). OKRs allow you to track progress, create alignment, and encourage engagement around measurable goals. We use OKRs ourselves at btov, we can highly recommend this framework in order to make a company’s mission and vision tangible for your team and to get everyone on the same page.

You can find the detailed version of our ESG best practice guide as well as many other similar documents about startup topics on our newly launched website btov Startup Resources.

To all founders: we are currently creating an ESG best practices library, so we would love to hear about what your company is doing! Feel free to reach out to Johanna Junkermann (johanna.junkermann@btov.vc) or Anna Bosch (anna.bosch@btov.vc).