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Over the last few years, we’ve seen a rise in mission-focussed companies that share their social purpose with the world. Often associated with those selling to consumers, we’ve seen countless businesses reduce the amount of plastic in their packaging, changing the way they pay their workers, or planting a tree for every sale.
But eyes aren’t just on B2C businesses or the retail industry anymore. Business to business (B2B) sales and the sale of intangible goods like software and SaaS are under the spotlight as well.
Everyone from employees, to applicants, to investors are looking to back purpose-led businesses. For SaaS - an increasingly competitive market - it means that social purpose, or environmental, social and governance (ESG) practices need to be embedded in day-to-day operations and output.
In this blog, we’ll look at 3 ways to meaningfully implement ESG in your business in your business.
What is ESG?
Environmental, social and (corporate) governance (ESG) is an umbrella term that emcompasses how businesses implement and measure their sustainability.
It includes things like a companies overall mission and purpose, the values it operates by, diversity and inclusion, and reducing a business’ environmental impact.
The rise of mission-focussed SaaS
Our recent report - The state of SaaS 2022: A meta report - found that tech businesses are already taking action to implement ESG practices:
- 71% of European tech startups were already mission-focused.
- 21% were working on establishing a mission.
- Half of respondents (49%) believe that social and/or sustainability goals have become more important over the past 12 months.
(Source: Atomico)
While it’s clear why taking measures to be more sustainable is important, ESG makes SaaS businesses a more attractive investment opportunity too. In the first six months of 2021, investors spent over $570 million on environmental data startups (Protocol), while ‘planet positive’ startups brought in 11% of total European tech funding in 2021. Europe also added 13 purpose driven unicorns to its roster.
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3 ways to boost your ESG credentials
ESG might be on the SaaS agenda, but there is still a long wait to go. According to Serena Capital survey:
- 13% of SaaS startups have assessed their carbon footprint.
- Only 7% are made up of at least 50% women.
Given that Atomico found that more than half of newly-raised venture funds were channeled into companies with a pre-existing sustainability statement or ESG policy listed on their website, the race is on for SaaS companies to verify and improve their ESG credentials. Below are three ways of doing just that:
1. Certifications
Accreddited certifications are a simple way of highlighting your ESG credentials both internally and externally. More than a box-ticking exercise, accreditations from the likes of B Corp or EcoVadis show your business’ commitment to practices including sustainability, charitable giving and employee benefits.
What’s more, this type of certification is becoming more common, and therefore something investors and potential employees will likely be looking for. Serena Capital found that a quarter of SaaS companies either have an ESG certification, or are considering getting one.
2. Reporting
This rise in ESG consciousness has created a new arm of SaaS products designed to help companies verify and improve their environmental and social goals.
For example, Berlin-based Plan A has developed a SaaS platform that automates ESG reporting and Silicon Valley-based pulsESG’s platform enables companies to track and improve their ESG compliance. This includes help tracking things like carbon emissions, energy efficiency, and health and safety.
3. D&I diagnostic
Diversity and inclusion is more than hosting events, and sharing posts on social media. Take time to review your diversity and inclusion metrics and take action to improve them. Important metrics to focus on are: hiring stats, pay equality and representation. For example, the Future of SaaS’ SaaS Landscape 2021 showed how far companies still need to go with only 8% of respondents reporting a disability and just 2% of female respondents in leadership positions.
You can read more about ESG and what investors are looking for in the full report. Check it out here.
