In the summer of 2020, amid the growing specter of a global pandemic, Amazon, Facebook, Google, and Apple were put on trial. A committee of representatives from the Congress of the United States levied a series of questions challenging the CEOs to justify their dominant, monopoly positions. Besides the antitrust trial, all four were mired in controversy surrounding human rights, ethical labor concerns, and sustainability. Pressure to grow at all costs—to “move fast and break things,” as Facebook’s Mark Zuckerberg proclaimed—justified the sacrifice of sustainability for bottom lines.
Believe it or not, three of the four companies under review were start-ups founded within the last twenty-five years. Had environmental, social, and governance (ESG) values been baked into their cultures from the start, the story would be different. As they grew, sustainability would have been at the core of their strategies and their missions. It would have shown in ESG-positive impact from the spread of their technology. They would have self-regulated long before Congress took action.
ESG principles are much easier to maintain when baked in at the start. So how does a start-up truly innovate with sustainability at its core?
1. Forget disruption—sustainable start-ups impact.
Innovation no longer means the disruption of old business models—innovation now means how quickly, deeply, and substantially you create positive impact as you meet demand. In this environment, it is not enough to avoid sustainability, or simply “do less harm” and appease the status quo.
With their agility and progressive potential, start-ups in particular will be held to an even higher standard than established companies. As you build your business, be sure that you’re answering the following questions:
- What are you doing to address your problem in a novel, sustainable way?
- Are you restoring earth balance and honoring planetary boundaries (climate change, freshwater use, etc.)?
- Will you create positive change, equity, equality, access, and quality of life outside of the wealthiest 20% of consumers?
- Are you enabling real democratization with demonstrable impact to previously excluded communities?
Answering these questions up-front is a surefire way to set your start-up on the right path.
2. Adopt new impact metrics and definitions of “value.”
Current top and bottom lines exclude external impact—both positive and negative—to people and the environment. But soon, financial performance (like revenue, rate of spending, and lifetime value) will converge with ESG measures like decarbonization, stakeholder health, and a company’s internal equity policies and results. In this confluence, impact-adjusted values will begin to show up on financial sheets. The cliché claim that you are “making the world a better place” will now require data as evidence in your quarterly results.
The Sustainability Performance Indicator Standard
In the new order, impact KPIs (iKPIs) will take the place of traditional key performance indicators. iKPIs will answer the question “What is your contribution to the world within your scope and context?” Verified, positive results will serve as marketing and sales points when performance matches goals—and be used to create and iterate strategy beyond simplified growth metrics. Businesses seeking to be sustainable from the start should integrate these metrics into their iteration process from day one.
For a company focused on the issue of climate change and carbon impact, a common iKPI would be “tons of carbon dioxide removed from the atmosphere.” The amount of carbon removed is measured and reported, along with a transparent process to verify the removal amounts. This iKPI is then used in both external communication and internal updates, appearing next to other conventional KPIs like revenue growth, employee retention rate, and customer count.
iKPIs That Achieve Your Goals
iKPIs will be different for every industry and should be unique to your company. To develop your own set, reflect on your mission and answer the question “What are the material issues we impact?” Deciding what is “material”— important to society, your company’s role, and the stakeholders involved—is a philosophical process. It’s not a one-and-done thing. Your company’s materiality should change as the context, the company, and the world change.
Finally, ensure your iKPIs are connected to the real-world outcomes you want to affect. No one learned this lesson harder than Toms Shoes. The company grew around a one-for-one consumer principle: for every purchased pair, Toms gives another pair to someone without shoes. But “number of people in need given shoes” didn’t measure or address the underlying poverty causing shoelessness. The company experienced backlash after it was shown they were using foreign labor rather than labor in the target communities. On top of that, their shoe donations were having little or no effect. In response, Toms iterated their strategy and changed their iKPI to better address the root cause of poverty. They now produce many of their shoes in the communities they hope to help.
3. Seek out ESG-conscious investors.
Impact- and sustainability-focused funds with strict criteria for investment are now influencing the rest of the venture capital community. Sustainability is both a measure of risk and a tool for expanded returns, as rapid assessments of fast-moving start-ups can send valuations soaring—or find toxic businesses abandoned as complete losses. Choose investors who understand this and support larger impact goals. Similarly, make sure your board aligns with sustainability principles. That’s critical for ESG performance.
To find those perfect investors, look at track records and verified results. If the fund or focus on sustainability is new, consider how their stated mission will result in real-world impact. What does their portfolio and investment criteria say about how much they value real impact? In those early conversations with prospective investors, your own iKPIs need to be front and center in your pitch, milestones, and strategy.
The Danger of Sustainability Frauds
Watch out for investors with mixed or questionable ESG performance. Look for “avoidance ESG,” where investments are not made in areas with direct impact on sustainability issues. Look also for any history or reputation of “greenwashing” or “positivity washing.” These companies (and the funds behind them) are marketed as having a positive impact where little to none exists. Classic examples were set by the oil and gas industry, which famously hid carbon emissions and the un-recyclability of plastics made from petroleum. More recently, vaping has also been exposed.
Don’t get discouraged by these charlatans. There are plenty of serious, strict, and driven funds committed to real impact. And if you’re serious about sustainability, these investors are ready to get to work.
4. Bake sustainability into your company culture.
Living your mission is as important as the external impact of your product. How you operate and what you value day to day shows and reminds your employees, your customers, and your investors what is important. Aligned policies and daily practices continuously reconnect everyone to the mission.
By the time a start-up reaches the scale of an Amazon or Google, the culture is already locked in with heavy momentum. The fact that external pressures (government regulation, protests, etc.) are now forcing change means the path, by definition, was unsustainable. It’s important to recognize that both culture and bias are formed in the very earliest days by the founders, executives, investors, and board.
Intentional questions at the launch and pre-seed funding stages set the course for long-term, sustained success. What ideal model for sustainability will you set? Who needs to be included? What lived experiences and perspectives are inseparable from the problem and mission? Where are the gaps in your founding team’s experience, network, and knowledge? How will you measure success? The answers to these remain important, even as investors and executives change.
Sustainability on the Ground
Day-to-day policies will address further questions: Are you paper- and plastic-free in the office? Are regular volunteer hours encouraged and supported for aligned community initiatives? Is there a set percentage of paid time for team members to dedicate to new, creative initiatives?
Direct connection of your team to your cause means a deeper sense of purpose, loyalty, and impact. That creates a bond and energy you can feel in every interaction. Marketing becomes a natural extension of your lived philosophy. Internal and external messaging become consistent as part of an end-to-end culture.
Once baked in, sustainability is no longer a tradeoff or secondary priority. Your business model will last, your company will scale, and best of all, you’ll never be put on trial. You are in the business of impact.