How to get started with ESG at Startups
with Karen Craggs-Milne, VP of ESG at ThoughtExchange, July 27, 2022
Claire and Eliza have been working with fast-growing companies on how to get started with ESG. We have found that there is a real gap in understanding what ESG means for startups. This isn’t surprising, since much of the institutional work happening here targets large, listed companies and their investors. This speaker series was designed to fill some of that gap: what about ESG for everyone else? Clearly, we aren’t alone: we had almost 100 signups for our first session, which focused on getting started with ESG for startups. We were curious about exploring the gap between the number of startups interested in ESG and those that have taken action. This event allowed us to begin to understand what’s holding people back, and what questions we can help answer to move from interest to action.
I. Does ESG matter?
One of the reasons companies give for delaying work on ESG is that it doesn’t really matter for their business. Increasingly, companies are unable to ignore requests for ESG information from important stakeholder groups, including vendors and investors. The 500 Global Flagship Fund Founder Survey 2020 found that 90% of respondents believe that ESG practices will help them retain talent, and almost 70% believe that it will increase sales.
II. Market landscape: Who’s doing what?
Mapping the startup landscape of ESG provides context on both best and common practices. What we found was encouraging: the 500 Global Global Flagship Fund Founder Survey found that 62% of startups (57% of which were pre-seed, with under 5 employees) had policies in place regarding ESG issues. We hope that sharing these examples will encourage others to follow suit.
To help shed light on what it looks like to start an ESG program at a young, fast-growing company, Eliza and Claire hosted Karen Craggs-Milne, VP of ESG at ThoughtExchange, to share her — and her organization’s– ESG journeys.
Karen joined ThoughtExchange after 20+ years of expert consulting on global anti-racism, diversity, equity and inclusion (ADEI). She started out as a consultant to ThoughtExchange and fell in love with the product, the mission and the staff. Hired as Head of ADEI, Karen soon leaned into the larger umbrella of ESG on ThoughtExchange’s behalf, to remarkable effect. The most visible is on ThoughtExchange’s website: the firm has dedicated pages for ADEI, Social Impact, and ESG, where it details its approach, values, and initiatives. Karen was promoted to VP of ESG in February 2022, a newly created role.
We were lucky to have Karen run a Thought Exchange during our session. If you want a glimpse of the questions participants submitted, here are the details of the Exchange, the questions and participation data. Several key topics were raised and ranked, such as:
- How do you prioritize between all the possible ESG initiatives a company could decide to launch?
- Will our ESG program be scuttled when the business is suffering and we don’t hit our revenue goals?
- What kind of expertise or training does one need to serve in an ESG role?
III. Case study: ThoughtExchange
In her remarks, Karen shared the following advice from her experience establishing ThoughtExchange’s ESG portfolio this year.
- Get clear on why your company wants to embrace ESG. There are many possible reasons why a company might adopt ESG: compliance, risk mitigation, accountability to staff and stakeholders, attracting new investment etc. Knowing your WHY and galvanizing support around it is key to generating buy-in at all levels.
- Assess your company’s readiness for ESG. ESG work is intensive and complex. Karen considers that it should not be done as an add-on to an existing role. It requires dedicated attention, time and ownership, and must be done in collaboration with all business units. It is not a siloed exercise; it implicates the full business, particularly executive and senior leaders. It helps to build this awareness and garner support early.
- Bring people along with you. “Most DEI or ESG Councils or Committees within companies are composed of just a few selected people,” said Karen. “We opened our ESG Council to the entire company, so everyone can hear about the progress we are making, offer their perspective and feedback on initiatives we are working on, and share how they are bringing this work to life in their own departments and teams.” This big tent has helped her colleagues get onboard and see that the company is actually living into its commitments across its business and that their input matters and informs its direction.
- You don’t need to be a seasoned ESG expert to get started. Karen kicked off this role with foundational knowledge of ESG and leveraged her deep experience in ADEI and organizational transformation to map out a robust consultation process that translated into an initial ESG plan for the company. “You should know enough about the fuller ESG landscape to be able to identify what is most relevant to your company and to help prioritize certain initiatives as a place to start, while knowing when and whether to bring in external consultants and experts for specific pieces of work over the longer term,” said Karen.
Early in her role, the company’s leadership enabled Karen to become a Certified (ESG) Sustainability Expert, familiarizing herself with emerging ESG issues and global reporting standards such as SASB and GRI. She now acts as the ESG Subject Matter Expert, leading the company’s internal work and advising customers on how to leverage ThoughtExchange to elevate their own ESG journey as well.
- Prioritize. Be selective in choosing where you will allocate your resources, and make sure you know why. For example, ThoughtExchange seeks to be a carbon-neutral company. To achieve this goal, the company planned to reduce carbon emissions and also have an offsetting strategy in place. While the work to reduce carbon emissions is underway, it chose to press pause on its carbon offsetting work while searching for the right offsetting partner and strategy. Karen shared “We don’t want to rush into doing something just to tick a box. It is more important that we are thoughtful and intentional about who we partner with and what we support through our offsetting strategy and in our overall ESG work.”
- Be agile. ESG work is highly dynamic, and your company’s ESG priorities and initiatives may need to evolve depending on the business context and available resources. For example, companies around the world had to reevaluate their ESG work when the pandemic hit because it had both negative and positive implications on the business and its ESG outcomes. “Rather than a ‘one and done’ approach to setting ESG Strategy, successful companies adopt a more agile and interactive process and are ready to make changes as needed to lead to the best ESG outcomes,” Karen advised.
Especially powerful is the clarity ThoughtExchange shows in understanding how ESG is intimately intertwined with its product, and therefore its business strategy and value proposition. Sure, you could consider ThoughtExchange as a Saas collaboration tool. Or you could take a step back and see how ThoughtExchange has integrated ESG principles into its product, helping their customers deliver on their own ESG goals better by using ThoughtExchange. This is particularly evident with its fundamental role in making sure all voices are heard equitably without bias, key decisions can be made without emissions from travel, and discussions and decisions are documented and transparent.
ThoughtExchange is committed to creating and building an organization and a product that solves important problems. The firm’s insight on how ESG matters as both part of its value proposition as well as its responsibility is laudable.
IV. Takeaways: Don’t delay, start simple, and reach out for help if you need it!
It’s clear that we are well past the days of “We’re a business, not a nonprofit” and “We’re not an oil & gas company so ESG isn’t relevant for us.” The enthusiasm and engagement participants showed for this topic were evident. What’s needed is guidance and clarity on how startups can get started. We’re not suggesting you ignore limited resources and business priorities, but rather that the separation is false, and that ESG can in fact infuse, inform and enhance strategy and resource allocation in new and meaningful ways.
We’re hosting similar discussions about how to get started with ESG in VC (August 9) and at a newly public company (August 31) next month. Sign up here!
If your organization is looking for help developing or implementing your ESG strategy, get in touch! We’d love to continue the conversation.