Incorporating ESG initiatives from the ground up – A game-changer for startups

ESG (Environmental, Social, and Governance) initiatives are created using different elements that measure the sustainability and societal impact of an investment in a company or business. These roles of course can differ based on the industry and startup.

In order to create strategic value for ESG initiatives, companies can partner with a trusted advisor that is committed to an honest approach to measure sustainability and societal impact. Too often ESG initiatives can be done as a feel-good exercise or even in an attempt to “good-wash” a business. An experienced partner can be used in addition to a wide range of initiatives related to a company’s core business.

We will detail why incorporating ESG initiatives from the ground up for a young company is key for its future growth and how The Nest, through the impact sourcing programs set up by Concentrix, can be a key partner to support startups’ growth in this context.

Environmental initiatives can vary from carbon emissions, energy consumption or food/material waste and product packaging. It encompasses the whole product and customer journey, from start to finish.
Social relates to diversity, equity and inclusion, ethically or sustainably sourced products. Failure to comply or implement the right policies can create serious backlash, regulatory penalties and in some cases, devalue businesses.
Governance can refer to a company’s culture, structure, policies, procedures and data protection. Employee retention, engagement and satisfaction, all indicate whether a company is complying and upholding ethical standards, which is key for many investors.

The 19th century investors focused on returns, in the 20th century investors focused on risks and returns and, in the 21st century, the conversation has shifted to risk, return and impact.

World Economic Forum participant, 2015

Investment opportunities

ESG initiatives are no longer an asset class, but a mindset and companies now adopt it as part of their ethos. 2021 saw a boom in ESG and impact investments as more VC and private equity players entered the market, joining key European investors such as Investir &+, Norrsken V, Nysno or Impact X etc. For the latter, financial and impact business plans go hand in hand and the remuneration of company executives and investors depends on both objectives.
Morningstar data showed “global assets in sustainable funds hit $3.9 trillion in the third quarter of 2021, a record high.”¹ , while total capital invested in purpose-driven tech companies reached around $34 in the last five years (17% of total funding)².
We live in a world where people are more conscious of their buying power, where they are spending their money and where they want to invest. Morgan Stanley survey found that “86% of millennials are interested in sustainable investing, pursuing investments that more closely reflect the values they hold.”³

Talent acquisition

Today’s workforce has mobilized ESG. People are looking for a job or career that has a meaning and purpose – motivation to make changes and positively impact the world. Therefore, companies with purpose and strong ESG policies are considerably more attractive for new talents and increase their employee retention, loyalty, and productivity.

Up to 50% reduction company’s turnover rate
Up to 13% increase in employee’s productivity

Reached by companies implementing strong CR commitment according to the research conducted by Project ROI

Cost Reduction

ESG principles embedded into a company can support every-day conscious decision-making, personally and as a company which can result in saving on operational costs in the long- run. For example: reducing carbon footprint with cycle to work schemes, use of office materials, packaging, energy efficiency and water usage etc.
Compared to 15 years ago, the service offer to increase your positive ESG impact as a startup was limited. Today however, there are numerous solutions that are available and many young companies (from search engines (Qwant, Lilo.org) to second-hand electronics and circular economy players (Zack, Backmarket, Recommerce) which can help you change our impact completely even through small daily actions.
Check-out >> this very interesting article from Serena Capital blog << to know more about existing alternative suppliers and super helpful tools to increase your positive ESG impact!
Most of them are part of the Tech for Good movement, bridging the gap between technology and social change, and bringing together a community of people, organizations, and investors. In France, there are over 500 Tech for Good startups, and in 2018 there were over 490 Tech for Good companies in the United Kingdom, valued at over £2.3 billion.

Risk Mitigation

McKinsey’s research³ has shown that a strong ESG proposition can achieve great strategic freedom and ease regulatory pressure . Startups could be more exposed to the risk of regulatory compliance without the right knowledge and rudimentary ESG principles in place from the beginning. This could mean they get left behind if they are not careful.

Credibility and competitive advantage

Of course, starting from the ground up with ESG principles at the forefront of a brand sets businesses apart and, in many ways, shapes their USP. Consumers are shaping the future of what brands have to offer. Quite simply, they want a product with a positive impact.
73% of global consumers say they would probably change their consumption habits to reduce their impact on the environment4. Everyone does it differently but establishing these principles from the beginning can give credibility and positive recognition to gain a competitive advantage and grow in the market.

Impact sourcing for startups and scale-ups

Impact sourcing relates to socially responsible outsourcing as it provides disadvantaged workers from low employment areas with career opportunities that otherwise have limited access before, through outsourcing or working remotely.

Several developing countries have adopted AI and technology eco-systems to transform businesses across the world. For example, in the year 2019, tech hubs across the African continent grew by 50%, with no sign of slowing down. The year 2021 was a great one for African start-ups, with total venture funding exceeding two and a half times what it was in 2020, amounting to an impressive $4.77 billion. These growing tech hubs provide a crucial role in employment opportunities and lifting communities.

As tech hubs are growing across the continent, this makes it very attractive for startups and blue-chip companies to work with emerging talents in this vibrant economy from around the world. This provides workers with access to higher-income employment and skills development – shifting from micro-tasks to software outsourcing. Setting new strides in how ESG impacts human resourcing.

In 2022, Concentrix has been recognized for its pioneering leadership in Impact Sourcing at this year’s Global Impact Sourcing Awards presented by the International Association of Outsourcing Professionals (IAOP) in partnership with The Rockefeller Foundation.
In 2021, 4,400+ of our new recruits came from impact hiring initiatives. In 2022, we aim to set impact hiring as a full operating model in every new opening country. We are committed to extending this operating model to every existing country by 2023 while making sure that 10 to 15% of new joiners are hired via impact sourcing initiatives by 2025.