The Builder's Guide to the Tech Galaxy

2Environmental, Social and Governance Criteria as Drivers of Business Success

With Johannes Lenhard and Hannah Leach

Key pitfalls for scale-up builders:

• Seeing ESG as a side topic or ignoring it altogether

  If a startup fails to incorporate environmental, social and governance factors into their strategic decision-making process early on, it can be difficult for the company to realign its values, practices and operations to reflect ESG when scaling. While it may take time for the consequences to materialize (e.g., during an IPO or the sale of the company), the rot will set in immediately in the company's culture, team structure and internal processes – which can be difficult to reverse. Numerous studies have shown that having a strong stance on ESG correlates with higher-equity returns.

• Greenwashing through superficial actions or narratives

  As it has been shown many times, treating ESG as a checklist, matter of compliance or surface-level reporting issue is rife with public pitfalls for scale-ups. It is essential to avoid falling into the trap of embracing ESG-marketing narratives without actually taking action.

• Neglecting a comprehensive, always-learning view

  ESG can be a moving target for startups and scale-ups. While this chapter presents the best practices at the time of publication, this is a rapidly developing field, making it all the more important to keep up to date ...