The identikit of start-ups committed to sustainability

A Cariplo Factory report highlights the characteristics of the most dynamic companies that want to make the world a better place

They are small, have significant growth prospects and want to make the world a better place, starting from the environment and the well-being of their employees to relationships with suppliers, customers and stakeholders. In a nutshell, this is theidentikit of startups active in sustainabilityand therefore focused on compliance with ESG criteria, as emerges from Report Sustainability Waves | ESG Italian Startups of Cariplo Factory. The analysis, which involved over 100 innovative companies that were asked 50 questions, aims to collect, measure and disseminate the innovations of ‘green’ startups. Starting from an assumption: if sustainability means “satisfying the needs of the present generation without compromising those of the future generation”, then it is necessary to find a new business model.

In that context, ESG criteria (Environmental, Social, Governance), born and defined in the financial fieldhave become the international standard to measure, monitor and support companies’ commitment in terms of sustainability.

The identikit of the ‘green’ start-up

The companies analyzed by the report are quite mature with respect to the life cycle of a start-up: over half were born before 2019 and therefore is found in the early stage and growth phase, while less than 40% is located in the initial segments, the pre-seed and seed ones. It is also about small activities: 82% have fewer than 10 employees, 15% have fewer than 50 and only 3% are over 50.

Nonetheless, most of them it has however managed to raise investments and to project itself already on the national market (54% of the total) and international (40%). And more than 50% rank between 7th and 9th position in theInvestment Readiness Level evaluation index (IRL), which measures the maturity of the startup in raising capital.

The geographical distribution follows and confirms the difference between the parts of Italy, col 60% of start-ups located in the Northern regions20% in those of the Center and 20% in those of the South.

An interesting aspect is that 57% of start-ups active in the ESG area have already become benefit companies or are about to do sowhile 38% already have one BCorp certification or is trying to get it. Furthermore 97% of them evaluate and select their suppliers based on their environmental, social and governance impact, going so far as to exclude those who do not meet the relevant requirements. Not only that: 61% carry out customer awareness activities regarding sustainability e 71% prepare an impact report.

The reasons for the commitment of ‘green’ start-ups

One of the most interesting elements highlighted by the Cariplo Factory Report is that at the basis of the ‘green’ choice of the start-ups interviewed (in 52% of cases), there is an ideal, a value in which they believe: the desire to make a positive impact and improve the world and society. In fact, only 24% of them adhere to the ESG criteria for ‘business reasons’, or rather because customers ask for it. And only a tiny 8% do it to improve corporate reputation, followed by an even smaller 2% who do it because they are forced by regulations.

The obstacles to the adoption of ESG criteria

As for then the difficulties encountered by start-ups in adopting ESG criteriain the lead, in over two out of three cases among those analysed, there is the regulatory framework which is complex and confusing, just as benchmarks and indices are often considered to lack transparency. But the fear of greenwashing and the problem of high costs are also very present. Minority, but still worth mentioning, the difficulty in finding products and services that comply with ESG criteria and in forming an expert team in the field.

ESG factors: startups and the environment

Among the ESG factors, the environmental one takes the lion’s share in the activities put in place by start-ups, as indeed also happens for larger companies. In fact, over 77% have programs to protect or reduce the impact produced on the environment in terms of waste, respect for biodiversity and use of the land or raw materials, and 55% already have technologies to reduce this impact. 41% created an internal management and monitoring system for their environmental effects and only 16% had to rely on a team of experts. But a good 39% are unable to detect their ecological footprint.

ESG factors: startups and the Social

As for the commitment of start-ups in the social factor, 60% of them have a board made up of more than half women, while 59% have an equal or higher number of female employees. Furthermore, one out of three companies has already created an internal code of ethics relating to the topics of Diversity and Inclusion (D&I), and one in two has already established relationships with charities or non-profit associations. 72% have an employee welfare program.

But there are shadows: only 41% of startups apply pay equity and only 28% actively promote equal representation of both genders. Furthermore, less than one in five carries out awareness raising activities on inclusion, even though 72% declare that they are committed to using inclusive language for internal and external communications.

ESG factors: startups and Governance

As for the third ESG factor, the Governanceonly 16% of companies have activated internal anti-corruption policies, 21% have implemented procedures for the safety and health of employees that go beyond those required by regulations, 33% have activated cybersecurity and a little more 53% have implemented processes to protect the privacy of their employees and collaborators.

On this chapter, therefore, there is still a lot to work on, as he also confirms the mission declared by the start-ups: in 55% of cases Environment, in 33% Social, in 12% Governance.

Startups and investments

Finally, in the field of investments, nine out of ten startups are currently looking for new rounds, of which 30% for over one million euros. However, only 36% of the funds to which the companies in question have had or have access adhere to ESG criteriawhile 14% do not adhere to it and on the remaining 50% the information is very limited or completely absent.

It’s not much better in public. Only 24% of start-ups claim to have received investments dedicated to sustainable entrepreneurshipof which 46% from the European Union and 42% through mostly regional contributions.

A misalignment therefore emerges between the drive of startups towards sustainability and the struggle of investors to adapt to market evolution.