ESG for startups: Why sustainability should be baked in

Why startups should embed ESG from day one

Baking sustainability into your startup from the beginning is more than just a good ethical choice – it can be a strategic advantage. As founders navigate the early challenges of growing their business, embedding environmental, social, and governance (ESG) practices from day one can set the foundation for long-term resilience and success.

This is the first in a three-part series drawing on my experience working with startups and venture capital firms, with practical advice on why ESG matters and how to integrate it into your business model from the start.

Sustainability – what's in a word?

The word "sustainability" can mean different things to different people, often leading to confusion or misalignment. For the purposes of this series, let's establish a common understanding.

Sustainability is no longer just about being "green" or environmentally friendly. It encompasses a broader, integrated approach that includes environmental, social, and governance (ESG) considerations. This will help you build a business that's not only ethical but also more resilient and profitable in the long run:

• Environmental: Measuring and reducing your business's carbon footprint, optimising resource use, managing waste, and minimising pollution.

• Social: Focusing on the well-being of your employees, communities, and stakeholders. This involves promoting diversity, equity, and inclusion, supporting fair labour practices, and engaging meaningfully with the community.

• Governance: Ensuring transparency, ethical decision-making, and accountability within your organisation. It covers everything from compliance with regulations to having strong anti-corruption policies.

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The benefits of incorporating sustainability early on

Incorporating sustainability from the very beginning isn't just about doing good – it's about doing well. Startups that integrate ESG principles early on unlock a range of benefits that can strengthen their foundation and accelerate growth.

Cost efficiency Starting with sustainable practices can lower costs over time. Efficient resource use, reducing waste, and optimising energy consumption mean fewer expenses and higher margins.

Brand reputation A strong commitment to sustainability from the outset builds trust with customers and investors, enhancing your brand's credibility. In a crowded market, this can be a crucial differentiator.

Talent attraction and retention Purpose-driven startups attract top talent, particularly younger professionals who seek alignment between their values and workplace. Companies with strong ESG commitments not only enjoy higher employee engagement and retention rates but also benefit from a wider pool of talent to choose from.

Operational resilience Embedding ESG practices early on enhances your ability to navigate challenges like supply chain disruptions, regulatory changes, or shifts in consumer preferences, making your business more resilient.

Access to capital Over the past two years, I've collaborated extensively with venture capital firms on ESG integration projects, including a significant initiative with the Australian Investment Council. Based on these experiences, it's clear that investors are increasingly looking for startups that integrate ESG principles. Many VC firms prioritise funding for companies with clear sustainability goals.

"What we're seeing in the venture capital space right now is that strong ESG practices aren't just a 'nice to have' anymore – they're becoming fundamental to investment decisions. When we evaluate startups, we're looking beyond just the financials. We want to see founders who understand that building sustainability into their business model from day one creates more resilient companies, helps attract and retain top talent, and ultimately makes them more competitive." — Matt Sinnamon, OneVentures

"It's pretty clear that the companies that will win in the coming decades are the ones that seek to have a positive impact on the world around them – both in their products and in their operational decisions. At Blackbird, we're in the game of investing in generational companies, so these topics are live considerations for us." — Kate Glazebrook, Blackbird

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What's next

In Part 2, I'll share a step-by-step guide to embedding ESG principles into your business from day one – actionable strategies to align sustainability with your business goals.

Ready to get started? S360 helps startups and SMEs embed sustainability with software, AI guidance, learning, and expert support – with options designed to fit small business budgets. See what we offer →