It’s a challenge but worth the effort: Every startup should assess its sustainability performance. It will help build your customer base and secure relationships with partners.
In recent years, sustainability has become an increasingly important consideration for businesses of all sizes, including startups. Large companies have started to demand sustainability reporting from their suppliers and partners. If you think sustainability reporting is only for the really big fish, you might be in for a surprise. Because the success of your startup could ultimately depend on sustainability reporting. Don’t panic! Let’s explore sustainability reporting requirements for startups that want to sell to big companies in the EU and Switzerland.
What is sustainability reporting?
Sustainability reporting is the process of communicating an organization’s environmental, social, and governance (ESG) performance to its stakeholders. This includes information about the organization’s impact on the environment, its social and ethical practices (like: how do they treat their employees?), and its governance practices. The goal of sustainability reporting is to provide stakeholders with a comprehensive view of the organization’s sustainability performance.
Sustainability reporting was formally and widely introduced when publicly listed companies in the EU were forced to introduce a sustainability reporting due to the EU Directive 2014/95. The Swiss regulators followed suit. Since then, all large publicly traded companies report on their performance concerning the sustainable development goals UNSDGs. What first started as just another legal requirement, is today a highly strategic topic in the boardrooms. Nowadays, it is a reputational risk to not carefully assess and report on environmental and social performance of the company’s operation – and that goes even for family-owned businesses and SMEs not required to do so by law.
Why is sustainability reporting important for startups?
Sustainability reporting is becoming increasingly important for startups that want to sell to big companies in the EU and in Switzerland. As the EU is rolling out new legislation (EU Corporate Sustainability Reporting Directive CSRD) in relation to the Green New Deal program, companies are starting to implement net-zero carbon strategies. Besides avoiding emissions in production and workforce, companies see the largest potential to save emissions in their supply chain. Conclusively, they are starting to demand sustainability reporting from their suppliers and partners as part of their own sustainability goals. Startups that want to do business with these companies need to be able to provide the required sustainability reporting to be considered as a potential supplier or partner.
Sustainability reporting requirements for startups
Startups that want to sell to big companies need to meet certain sustainability reporting requirements. These requirements can vary depending on the industry and the specific company that the startup wants to sell to. Here are some general guidelines that startups should follow:
1. Identify the relevant sustainability standards and frameworks
The first step for startups is to identify the relevant sustainability standards and frameworks that apply to their industry and the companies they want to sell to. Some of the most common sustainability reporting frameworks used by companies in the EU include the Global Reporting Initiative (GRI), the Sustainability Accounting Standards Board (SASB), and the Task Force on Climate-related Financial Disclosures (TCFD). Such requirements are usually publicly accessible on the company’s websites. Novartis, for example, expects from its suppliers that products and services are carbon neutral by 2030. Further, water must be used in a responsible manner and without negative impact on water quality. Novartis also requires allowance to report the anonymized sustainability data to third parties.
2. Conduct a sustainability assessment
Once startups have identified the relevant sustainability standards and frameworks, they need to conduct a sustainability assessment. This assessment should include an evaluation of the startup’s ESG performance: What’s your environmental impact, e.g. how high is the energy use, how do you save water, do you use renewable energy? Social practices can include ethical standards regarding employee wellbeing or relations towards suppliers and partners. Good governance means you are accountable, your board is competent and you pursue diversity and integrity within your organization. Be accurate and honest in your assessment. Your startup probably doesn’t excel in all departments (yet): The assessment should also identify any areas where the startup can improve its sustainability performance, e.g. the amount of waste your startup produces. It’s just as important to calculate your sustainability risk – it will help you improve down the road. Don’t rush through this part – it’s crucial. You will probably find that numbers and data are not so easy to get, but it’s worth persevering.
3. Develop a sustainability report
Based on the results of the sustainability assessment, startups should develop a sustainability report that provides an overview of their sustainability performance. The report should include information about the startup’s ESG practices, as well as any initiatives or projects it has undertaken to improve its sustainability performance. You don’t have to reinvent the wheel. There are many online tools that can help you with templates and tools that combine Assessment and reporting.
4. Implement sustainability policies and practices
To ensure ongoing sustainability performance, startups need to implement sustainability policies and practices. This may include implementing a sustainability management system, setting sustainability targets and goals, and regularly monitoring and reporting on sustainability performance.
Benefits of sustainability reporting for startups
While meeting sustainability reporting requirements can be a challenge for startups, there are also many benefits. Some of the benefits of sustainability reporting for startups include:
– Meeting customer requirements: By meeting sustainability reporting requirements, startups can expand their customer base and sell to big companies.
– Improving sustainability performance: Sustainability reporting can help startups identify areas where they can improve their sustainability performance, improve their business model and decrease also financial risks.
– Enhancing reputation: Sustainability reporting can help startups enhance their reputation as a socially responsible and environmentally conscious organization. Besides marketing value this is relevant to attract talent.
– Attract investors: Startups that are transparent about their sustainability efforts improve their chances of securing investment by companies.
Sustainability reporting is becoming increasingly important for startups that want to sell to big companies implementing bold sustainability goals. By identifying relevant sustainability standards and frameworks, conducting a sustainability assessment, developing a report, and implementing sustainability policies and practices, startups can meet the requirements of their customers. While meeting sustainability reporting requirements can be a challenge, providing the needed transparency already is a success factor.
That’s why Basel Area Business & Innovation is supporting local startups to build sustainable businesses right from the start. Together with Levo Frameworks we make sure that entrepreneurs perform all four steps according to the maturity of the company.
Want to join our next invitation-only workshop? Please get in touch with us.
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