By now, talk of sustainability has penetrated all business levels – from multinational corporations to early-stage startups. Everyone is talking about it, some are thinking about it, a few are doing something about it. At least in our bubble, sustainability is THE hot topic. And while many claim to pursue sustainability as part of their business model for reasons of altruism and passion, there are definitely a few business goals on which sustainability can have a positive effect: customer acquisition and retention, branding and talent attraction, increased likelihood of regulatory compliance and long-term competitiveness.
But within all that chatter about sustainability, what role do startups play? Are they in a unique position to drive sustainability forward, or simply too time- and resource-constrained to truly integrate sustainable practices to their full extent?
Two approaches to sustainability
In our recent series of sustainability workshops, we identified two main approaches to sustainability startups can take. The “outside-in” approach is pegged to existing frameworks of defining and measuring sustainability, such as various ESG (environment, society, governance) frameworks. Startups can simply adopt the measure, collect the required data, and – often in exchange for a hefty fee – receive a certification, accreditation, or ESG statement.
In contrast, the “inside-out” approach is driven from within the founding team, who defines their own definition of what sustainability means in their context, how it can be measured, and tied to their business model. This means devising indicators, KPIs, and measures yourself, and somehow making it relatable and understandable for the wider audience. Within this approach, however, it is important to also include indicators and measures that are relatable to industry peers and other startups, just so you and your stakeholders can somewhat grasp if you are doing well or if there’s room for improvement.
While we don’t necessarily want to put a judgement out there which approach is better – as they both bear their advantages and disadvantages – we want to stress the importance of having an approach to sustainability from the very beginning.
The unique opportunity of long-term sustainability in early-stage startups
While big businesses are an important player in the sustainability game – and really should switch to a more sustainable way of doing business including product, operations and business model – they often struggle to change entrenched processes, ways of doing things, mindsets, and structures. And this is where early-stage startups have a clear advantage in devising and implementing their sustainability strategy from the beginning:
- If you include sustainability as a major guiding principle and decision-making criteria, it will be baked into your structure and processes from day one. Because let’s be honest, there are no processes and structures yet. It also allows you to align your sustainability strategies with your business goals, rather than adding them as an afterthought and desperately trying to adjust your already complex organisation later on.
- In addition, being well-versed in the sustainability realm helps you spot and take advantage of impact opportunities as they arise – with positive effects on your economic bottom line.
- Finally, building a brand connected to sustainability from the start gives you authority and credibility – you didn’t just jump on the bandwagon because your customers asked you about sustainability practices – you took initiative and integrated it yourself.
Why not all early-stage startups (can) jump on the sustainability train
Of course, it’s not all ponies and rainbows:
- Defining, measuring, and integrating sustainability in your early-stage startup means spending considerable time and resources on devising your approach and strategy – and might be connected to higher operating/production costs. Especially at the start when every hour and Euro matters, the thoughts of “I am too small to matter anyways, maybe I shouldn’t sacrifice additional resources…?” are likely to cross a founder’s mind, and understandably so.
- Furthermore, being sustainable in itself is, unfortunately and much to our demise, a business model. You need to solve a real problem and provide value above and beyond being sustainable. So don’t rely on it as your sole USP.
- A common fear or road block we’ve observed is the self doubt connected to the blurry concept of sustainability: “Is what I am doing ACTUALLY sustainable? Does it make sense? Am I getting it right?”. The problem of “greenshaming” – people (often on the internet) pointing out that you are not doing enough, or that your approach to sustainability is not the right one (in their clearly expert opinions) – has kept many businesses from sharing their efforts, reducing the (marketing) benefits of operating sustainably considerably. What’s the point of trying when nothing you do is good enough anyways? Here the key is to be honest and transparent. Tell people about your journey, and if they still complain – just ignore them.
But often the greatest challenge comes with growth
Coming up with an initial definition, strategy, and approach is tough. Sticking to it is tougher. The real test of your intrinsic motivation to be sustainable usually happens when you reach product-market fit and the long awaited growth is happening. Great, you are scaling – but sustainably? If you struggled with balancing impact and profits before, the trade-off will start getting even more painful. You are responsible for more and more people, making sure they can keep their jobs and you can pay their wages. Competitors are likely to enter the market. Investors might be knocking on your door, looking for the exponential growth you’ve been promising.
And what happens if you sacrifice a little bit of sustainability now, to (hopefully) have a greater impact in the future? When is that future? When do you stop sacrificing sustainability and reap the impact? Anyone telling you that there is no trade-off between the two is lying, especially because the timeframes of sustainability and profitability don’t necessarily align (real change might take longer than profits). You need to prepare to make these decisions, and what areas you are willing to compromise on – on both sides.
It’s not easy, but it’s worth it
As an early-stage startup you will (most likely) be the unicorn, scale-up, corporate or SME of tomorrow. So what you are doing now – even in the early stages when you seem too small to make an impact – matters. If you invest the resources to build a strong foundation in sustainability now, you will save a lot of money and headache in the future.
Even though, looking back at the last few paragraphs, we made the road to sustainability look dark and daunting, it is well worth the struggle.