Insights

How ESG Can Be An Opportunity For Fast-Growth Entrepreneurs

Friday 9 September 2022

On the latest episode of the Extraordinary Entrepreneurs Together podcast we were thrilled to welcome Simon Brown.

Simon is a partner at Positive Momentum, a business consultancy with a focus on investment and growth from the perspective of ESG. ESG stands for Environmental, Social and Governance - the three pillars of a new framework that investors and business owners are using to shape more ethical and socially responsible business models.

Simon has over fifteen years’ experience in the ESG space, with clients that include some of Europe’s biggest private equity firms, corporate retailers like Marks and Spencer, and up-and-coming businesses who are using their ESG credentials to drive up ethical standards in their sectors whilst also winning market share from their less socially-conscious competitors.

On the podcast episode, Simon and I were joined by Pete Evison, EHE Operations Director, to talk about what ESG really means for entrepreneurs and fast-growth companies. This was a great conversation, with valuable takeaways for business owners of all kinds. In years to come there simply will be no path to commercial growth that doesn’t take environmental and social concerns on board, so if you think ESG isn’t relevant to you then think again!

ESG mythbusting

Businesses, investors and consumers are increasingly aware of the importance of ESG, but there are still a few things that people get wrong – and with Simon on board, we’re perfectly placed to bust some of these myths.

The first of these is the idea that ESG is all about compliance. We may slowly be becoming more familiar with ESG checklists and reporting requirements, and sure, this stuff is important, but both consumer expectations and the needs of the environment go way beyond a simple box-ticking exercise.

Simon: “A lot of the problems relating to climate change and nature loss are not being solved, and the window to act on them is maybe five to ten years. So a much more radical shift is needed. This creates another set of opportunities for companies that are prepared to go further, whether that’s by creating products which have a positive impact on nature or helping to create more resilient communities and societies.”

ESG for entrepreneurs means going beyond compliance to push the boundaries of what can be achieved in designing and scaling commercially successful businesses that also deliver positive outcomes for the planet and society.

Which leads us on to our second big myth: the idea that ESG is at odds with profit and fast growth. People assume that ESG means having to spend money on green tech or staff training that you could otherwise invest in expanding your business, but this doesn’t have to be the case. An ESG-first strategy can also be a fast-growth strategy, if you’re smart enough to find the right opportunities.

ESG as a fast-growth opportunity

Peter Diamandis, Founder of XPRIZE, has previously said that if you haven’t integrated AI into your business by 2030, you’ll be out of business. The same goes for ESG. Consumers and investors are increasingly conscious of the impacts of climate change, and are going to expect that the businesses they interact with share their concerns.

Guy: “We can already see the year-on-year effects that climate change is having on the unpredictability of the weather. By 2030, awareness will be so high that if you haven’t taken action, you’re not going to get investment, and you won’t be able to grow your business because customers will reject you. Businesses which haven’t moved quickly will cease to exist.”

There is a new generation of consumers and employees for whom ESG issues are at the top of their priority list. Companies that cater to them will have an inbuilt advantage both in recruitment and in building their customer base.

Simon: “Look at plant-based food. Go back five years and it was niche. Now it’s mainstream, and the highest-spending young people who have grown up learning about the environment buy into it. If you want to sell to this demographic, you’d better have your ducks lined up on ESG.”

Entrepreneurs have the ESG edge

Simon has worked with all sorts of partners on ESG issues, from fast-growing startups to international corporations. At the biggest companies, whilst their leaders may have the best intentions, it often takes time and sustained investment to change direction on ESG. If you’ve got millions of customers, thousands of staff and hundreds of sites, that’s a lot of moving parts, and any plans to create a more sustainable operation will play out over several years.

Entrepreneurs and startups can move much faster. In a matter of months, a dedicated team can set up a new business whose value offering is based entirely around ESG values, and get a product to market that responds to consumer demand for environmentally friendly, socially responsible alternatives to what the big corporates are offering.

One example from Simon’s own career is BAM, a clothing company that makes its products entirely from bamboo fibre. The clothing industry is one of the dirtiest on the planet, with a legacy of sweatshop labour and high usage of plastics. Bamboo, on the other hand, is a natural material that grows extremely quickly, absorbing large amounts of carbon along the way.

When BAM first engaged with Positive Momentum, it was a fast-growing business with a turnover of around £15 million a year. Its CEO was worried, however, that by going so fast it might turn into just another clothing company, with the same unethical practices. Simon helped them go over their entire supply chain to ensure that their products were sourced, produced and shipped in the greenest, most socially responsible way possible.

On the back of this work, BAM put in place their Impact Positive Plan, an ambitious programme which promises that by 2030 every item sold by BAM will have a beneficial impact on the planet. BAM is now an internationally successful business that is also seen as a leader in driving up ESG standards in the clothing industry – an example to all entrepreneurs of what a disruptive enterprise can achieve in this space.

Guy: “Entrepreneurs can have a massive effect by taking on responsibility for ESG issues. By attempting to address a particular issue, they not only find a solution to that problem, they also raise awareness among consumers. And then consumers start demanding more from bigger organisations.

Change is here

Over the next decade, everything is going to change. While ESG may still be seen by many as an optional extra, very soon companies without the right plans in place will start looking like a liability. Opportunities are about to open up across all sorts of different sectors, and the time to seize them is now.

Simon: “The pioneers of the hydrogen economy are going to make fortunes. The people who end up owning the electric vehicle infrastructure are going to make fortunes. There’s a huge economy building that is going to reward people who invest in it, and if you’re on the wrong side of it, you’re going to find it harder to get investment, talent and customers.”

The investment is already there for companies that are ready to secure it.

Simon: “There are billions and billions of pounds, dollars and euros ready to go into companies that can accelerate the transition to a circular economy, because they’ll be the people who own the future. They’ll own the infrastructure, the buildings, the vehicles, the products and the consumers.”

If there are any entrepreneurs out there looking to take a pioneering role in tomorrow’s ESG-driven industries, they should visit Positive Momentum’s website to find out more. There are surveys to take, papers to read and examples to learn from.

And if you’re interested in finding out how you can use ESG to accelerate your business’ fast-growth strategy, you should contact EHE right now. We can connect you with experts like Simon, as well as investors who are putting environmental and social concerns at the forefront of their strategies. Likewise, if you’re an investor looking to invest in the new wave of green entrepreneurs, send us your details to get access to our roster of ground-breaking startups.


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