Who’s Really Driving the Sustainability Agenda?

Is it customers, founders, investors…?

In a recent report that we co-authored with Beauhurst, entitled ‘How Scaleups are Driving the Sustainable Economy’, we shone the spotlight on a number of growing businesses in the UK and Europe who have sustainability goals and agendas at the core of what they’re doing.

From the likes of SupplyCompass, a logistics software platform helping the fashion industry to take advantage of a more sustainable supply chain, to Ovo Energy, who are on a mission to make energy ‘cheaper, simpler, and greener’, growing businesses are increasingly turning their attention to a new generation of ‘tech’ that directly tackles the challenges our planet is facing.

But it doesn’t stop there, there are a host of other scaleups putting sustainability at the core of their business models, not to directly tackle things such as climate change, but to indirectly contribute to sustainability goals in the way their businesses are run.

Take the Fintech scaleup, HyperJar, who, even before the onslaught of 2020 lockdowns, took a very proactive stance towards their company’s carbon production, meaning no unnecessary travel or office visits.

Then there’s REalyse, a London-based Proptech company, who have recently achieved carbon neutrality as a business, and who argue that sustainability doesn’t have to be at the core of your company’s product or service, but it should be strongly linked to how efficiently your business is run.

Which leads us on to some very important questions regarding sustainability goals and initiatives…

• Do they have to be at the core of what a business does?
• Do the founders have to believe in them?
• Or is the whole thing set to become the next tick box exercise to land VC investment?

Sustainable to the core

At a recent Invigorate Roundtable, we discussed with a number of scaleup founders if sustainability was something being ‘driven by consumers’ or being ‘pushed by brands’?

As with most things, it wasn’t quite that clear cut!

However, what did come across was the importance of the founder or founding team believing in a sustainable agenda.

The CMO of a leading Foodtech business described how his founder truly wanted to make a positive difference in the food industry and drove a core vision from day 1 in terms of what he wanted to do with his business.

It wasn’t an easy road because initially the numbers didn’t stack up and it wasn’t a simple equation between investment and ROI. However, a series of public pledges and a focus on NPS as opposed to other revenue metrics, meant that suppliers and partners quickly bought into the vision, and the company gained a huge amount of consumer trust, loyalty and respect.

So much so that it’s put the company in a very different position now when it comes to talking to investors or other strategic partners.

Investors sitting up & taking notice

In the past, it was mainly a specialist subset of investors who were focused on sustainable companies. The likes of Bridges Fund Management, Octopus Ventures and Bethnal Green Ventures were among this small group looking to change the perspective on how investors were assessing their portfolios and investing in up-and-coming businesses.

That’s now shifting. More and more, there is increasing interest from investors of all categories and types, driven, in part, by increasing demand and pressure from their own partners and funding sources.

It’s a trend that Beauhurst also noted in our report, highlighting that investment into Cleantech companies reached record levels in 2019 – £427M, up from £300M in 2018.

Consumer demand

Increasing interest from the investor ecosystem is not to say that this is merely a tick box exercise for companies looking to land their next fundraise. Quite the opposite, in fact. It’s a trend that’s being driven by consumers and at a grassroots level – a trend that is seeing more and more founders create their own businesses out of sheer passion and determination to see real change.

Indeed, an IBM study from the beginning of the year found that consumer shopping habits have fundamentally changed, as people increasingly embrace social causes and seek out brands that align with their values.

When they can’t find these brands, they create them themselves! Just look at Igloo Energy, HumanForest and Toast Ale for a few of the many examples.

And we mustn’t forget, of course, that consumers are also employees, who are equally demanding of the companies they’re looking to work for. Indeed, a shared culture and ethos is what sets a successful business apart from its competitors, and this is especially true when it comes to building a purpose-driven organisation with sustainable goals at its heart.

What’s next for sustainable scaleups?

So, what’s to become of the scaleups relentlessly driving the sustainable agenda? The companies putting purpose ahead of profits, and value ahead of vanity metrics?

Well, if recent government announcements are anything to go by, then 2021 may well turn out to be the most promising year yet for UK scaleups driving the sustainability agenda.

The Build Back Better initiative is an extraordinary investment from the UK government in support of climate action and sustainable development goals, the latter in line with the UN’s SDG that also look set to get a boost in the near future. Despite events of 2020 threatening to derail a number of sustainability goals, countries across the globe are still very much united in tackling issues such as climate change, and a number of private companies are coming into their own as national governments look for more innovative ways to address the issues at scale and speed.

Indeed, according to a Deloitte report, Covid may well go down in history as having pushed sustainability up the international agenda, as it has exposed a number of weaknesses in areas such as global supply chains, operational sustainability and alignment between government and the corporate sector.

Here again is where innovative and ambitious scaleups can play a part – in fixing that government/industry misalignment and in helping guide larger brands to a more agile and sustainable way of working.

How?

Through increased transparency, reimagined supply chains and operational flexibility. If 2020 has taught us anything, it’s that we need to embrace change and there is no better time than now to reinvent business operations for a more sustainable future.