Is ESG only needed for large companies and investors to care?
No, it is not.
Start-ups also need an ESG perspective from the very beginning. We want to explain why.
1. There is a limit to how selfishly a start-up business can operate.
If the founder’s primary motivation for starting a business is to become rich or famous, it may be possible to fulfil this desire. However, there are limits when the purpose of beginning a company is “for oneself”. Of course, solving someone’s problems is a business, but especially in the case of a start-up aiming for rapid growth, it is necessary to get support from all stakeholders.
Even if an experienced and thoughtful founder establishes the start-up, they need the users of the product or service. And it will be challenging to gain the support of many people if you are self-centred.
2. Corporate culture is not built in a day.
The atmosphere and culture of a company are shaped over time by the people involved. ESG initiatives should be part of the company’s culture and vision, not something suddenly created when it becomes necessary. We know that convincing people takes work. If you are top management, you need to know what ESG is and why companies need it, then talk to your staff. ESG strategy should be in your mid and long-term business plan to make your business grow.
3. Social and global trends cannot ignore.
Unlike small businesses, start-ups have a more significant social impact and responsibility. Environmental issues and human rights are common issues attracting global attention. For governments and companies, especially in developed countries, ignoring these social issues is synonymous with ignoring their corporate responsibilities. Start-ups aiming to scale up need to be aware of the social position they are seeking from the very early stages, regardless of their industry.
4. Start-ups need more support.
All businesses need much support. In the case of start-ups, the support of all stakeholders – shareholders, customers, employees, suppliers and local communities – is behind the realisation of rapid growth.
If you are pursuing profit and hurting the environment and people, you will lose clients nowadays. Increasing the number of supporters will be challenging once you lose your trust. Of course, building a system of increased revenues and profits is an essential part of business growth, but the approach needs to be ethical and adequately governed.
5. Effective risk management
ESG can encompass a company’s overall state, approach and management, with environmental considerations, addressing social issues and governance as the primary focus. An indicator of what is right is a significant risk hedging factor in identifying and dealing with risks in advance. You can identify potential problems and deal with them early rather than having them become a big problem later. You can avoid a negative impact on the business with risk management.
While it is tempting to go ahead with your start-up with enthusiasm, it is necessary to know risk management.