Integrating ESG Throughout Startup Operations
We often talk about the impact climate entrepreneurs are having through their core business, but we rarely explore the opportunities for startups to achieve greater environmental, social, and governance (ESG) efforts across their operations.
To dig into how startups can integrate ESG considerations throughout their business, we sat down with Marilyn Waite. Marilyn leads the Climate Finance Fund, a platform that mobilizes capital for climate solutions in China, Europe, and the United States. Marilyn is also one of our advisors at Enduring Planet.
Startups have a surprising amount of opportunity to advance ESG goals throughout their operations. These can include:
- Building a diverse board that brings a mix of voices to corporate governance
- Maintaining your assets with banking institutions that are committed to climate
- Hosting your employee retirement plans with climate-friendly providers
- Building partnerships and supplier relationships with stakeholders that share your commitment to climate and other social objectives
- Implementing profit sharing, employee ownership, and other cooperative-based compensation programs
- Committing to inclusive hiring and retention practices that advance opportunity for underrepresented communities, especially at the senior leadership and board levels
- Registering as a public benefit corporation (PBC) and/or seeking the B-Corp certification
In fact, there are hundreds of different tactics companies can pursue across environmental, social, and governance objectives. In this piece we cover 3 specific tools: B-Corp Certification, Climate-friendly Banking, and Climate-friendly 401K.
Become a B-Corp
One option for cementing your ESG vision is to certify as a Benefit Corporation (or B Corp). The B Corp seal holds your startup accountable to a broad array of ESG pillars. It is also attractive to many impact investors, as it signals a true commitment to social impact for the life of the company. If you are low or even pre- revenue, the cost of membership is quite affordable (the main cost at this stage would be a consultant to prepare the necessary paperwork). You can take a free self-assessment here to see how you stack up with your current operations.
If you don’t have the operational capacity to get certified, or you feel like you’re too early, another way to entrench your mission and values into your foundational governance structure is to register as a Public Benefit Corporation (PBC) in your state. This allows you to lock in your climate (and other social) objectives as part of your corporate mission and charter.
You can learn more about B-corp certifications in our Insights piece with Kevin Christopher here.
Keep your money in the right places
For many startups, an often overlooked area of climate impact is banking. As you might know, each dollar you keep in your bank account is being leveraged by that institution to provide loans and lines of credit. Even if you only have peanuts as a pre-seed startup, how this money is used by your bank adds up fast. It is therefore important to identify a bank or credit union that aligns with your mission to decarbonize and disinvest from fossil fuels. The size of the bank should not be a concern, as deposits are insured by the government by either the FDIC or NCUA.
To find a fossil fuel free and ESG-aligned bank, check out bankforgood.org. Note, however, that Bank for Good does not have an exhaustive list and has a long waiting list for banks wanting to get on it. Also look at the list from Green America, search for ‘financial services’ in the B Corp directory, among others.
Don’t throw away your climate impact with your 401(k)
Last but not least, don’t undercut your climate impact by investing in retirement accounts with heavy fossil fuel portfolios. Similarly to banking, this is a low-lift way to put your money where your mouth is and protect your employee savings from risks such as stranded asset risk. There are increasingly plentiful options for low carbon, fossil fuel-free financial products: one awesome 401k and IRA platform with climate-friendly alternative options is Carbon Collective. There are also options like Sphere, a low-fee climate-friendly mutual fund that you can find on platforms such as Vanguard.
These three opportunities are just the beginning; there are many options for making your day to day activities work towards your climate impact goals while you build your business. Keep in mind, the earlier you start aligning your operations with your business mission, the easier it will be and the more it will contribute to your climate impact.
Marilyn Waite leads the Climate Finance Fund, mobilizing capital for climate solutions across the US, EU and China. Marilyn previously worked in renewable and nuclear energy innovation, climate modeling, and investment. Author of Sustainability at Work: careers that make a difference, Marilyn’s writing has been featured in outlets such as the Financial Times and GreenBiz, where she serves as editor-at-large. She serves on multiple investment committees and boards, including as a venture partner for Aera VC. For cleantech enthusiasts, Marilyn also co-hosts the China Cleantech podcast.