It’s becoming less common to find high-growth companies that are not prioritizing environmental, social and governance factors in their organization.

If you’re an entrepreneur, failing to disclose how your business is compatible with a net-zero economy could result in the loss of a board seat as venture capitalists are choosing startups that build around these pillars. In addition, two-thirds of investors see ESG criteria as core to their decisions over the next three years, and Silicon Valley is passing over investments if ESG-themed activism is not adequately addressed.

But beyond the alphabet soup of business acronyms, lip service to sustainability and lofty commitments often backed by hollow plans and empty budgets, what startups are actually "doing ESG" well?

Like most good business strategies, the answer is simple to articulate but difficult to execute. The companies doing ESG well are taking a programmatic approach: Rather than starting with one product in one department, ESG considerations are integrated into the fabric of their business, so profit and progress on environmental and social fronts are fused together; positive impacts in these dimensions are core to a business versus a nice-to-have afterthought. This approach is full of common sense but, unsurprisingly, difficult to actually do.

With the financial pain, reputational risk and opportunity cost of ignoring ESG all present, plus the corporate mindset shift from shareholder to stakeholder capitalism, the market is finally encouraging this type of programmatic approach to ESG. So how does a next-gen company do this?

  1. It all starts with the mission  ESG must be an implementation of the startup’s mission, not just a pithy, perfected statement on the website. A company’s mission reflects corporate values and leadership buy-in to ESG goals, which begets a higher probability that the organization will deliver on these objectives and succeed in creating a regenerative, rather than extractive, business that has positive environmental and social impact.
  2. ESG is a long game that requires adjusted timescales for impact "Doing ESG" well requires time, which is why so many companies fail to do it successfully. Our quick win culture is not only entrenched but also heavily incentivized, meaning immediate results dominate how we make decisions. Even more so in the world of tech, we are trained to track weekly, if not daily, progress in our scrums and standups.
  3. ESG must be market-based If your company’s ESG strategy stops at the nice story in its colorful annual report, your organization is doing it wrong. Social impact initiatives often struggle to identify quantifiable and measurable outputs. This difficulty lends itself to pilot projects that languish in unrealized potential and bespoke one-off programs that are so highly customized they fail to scale.

Read the full article about ESG practices for startups by Bee Hui Yeh at GreenBiz.