When looking inward towards creating better business practices, ESG tends to be the first stop of many leaders.
The term ESG—which stands for environment, social, governance—can refer to efforts around anything from better labor practices to ethically sourcing materials, to reducing shipping plastic or making an effort to turn down the carbon emissions. Along with growth strategies and hybrid work decisions, it speaks to how decisionmakers are zooming out to take a look at how their company influences the community and the world around them. And it’s an area where investors are taking interest. In 2018, Bloomberg data found that ESG assets were at $30.6 trillion, a number that’s expected to grow to $53 trillion by 2025.
Patty Simonton, director of Be Green Business at Maryland incubator Bethesda Green, said that it’s important for companies to establish ESG and other ecosystem goals because of the significant impact they have on their communities.
“Companies are stakeholders in the communities in which they exist, and it’s important that they acknowledge that,” Simonton told Technical.ly. “The decisions they make impact the lives of those who work for them, the people who live in their communities and those impacted by their entire value chain. The more companies track their impact, both positive and negative, the more they can use that data to determine where they can make improvements.”
Among the companies she’s worked with at Bethesda Green, Simonton said she’s noticed a growing awareness and appreciation for the overall value chain, or the full range of activities that go into a product. Founders, she said, are starting to notice how their individual actions contribute to the overall picture, and they need to prove their value if they want to work with the larger corporations that are also increasingly prioritizing sustainability goals.
“I think they have to recognize the impact that they are having both from an environmental standpoint, from a social standpoint, from a governance standpoint,” Simonton said. “If you’re going to be a leader in your field, be a leader that others can look up to.”
But Simonton isn’t the only leader in the region looking to give ESG a boost. We reached out to local founders and investors to learn more about what ESG really means, and how companies are building with its principles in mind. Here’s what DMV leaders have to say about setting—and maintaining— these goals:
Brad Dockser, CEO, GreenGen
“ESG is simply a reflection of best practices. There were many things ingrained within corporate systems that kept this from happening, and ESG is shining a light on it,” Dockser said. “People are finding that companies focused on ESG tend to be better run, more valuable and have employees that are passionate and proud of the work they are doing because it aligns with their values. So, what does ESG really look like in action? I think it looks like organizations that are shining a light on things that didn’t get the focus in the past that they should have, resulting in better outcomes for their stakeholders.”
Nasir Qadree, managing partner, Zeal Capital Partners
“To me, tracking ESG indicators have ‘a clear performance advantage’ relative to non-ESG funds, and indicate that there’s a win-win opportunity to do well while doing good,” said Qadree, whose impact investing-focused venture capital firm recently closed a $62.1M fund. “…ESG is core to the franchise we are building. Founders who embed ESG as a core ethos to their business coupled with tackling a large addressable market excites us to explore an investment partnership.”
Manu Smadja, CEO of MPOWER Financing
“My personal view of ESG, which informed why and how we built MPOWER Financing, is that it should be at the very core of the business model,” said Smadja, whose fintech company recently raised $100M in new funding. “…Our core product provides not only profit to our shareholders, but also enables students to achieve their educational potential. We benefit all our stakeholders by growing this core business. Beyond this, we’re conscientious about how we execute on the growth of our core offering and do so in the most socially impactful way possible. Even our most junior employees make living wages, have access to superior health benefits, get a $1,000 a year to invest in education at their discretion and share in the financial upside of MPOWER through employee stock options.”
Logan Soya, CEO of Acquicore
“Right now, much of the focus when it comes to ESG is on compliance and disclosure. But disclosure alone does not make progress towards our collective goals as a society, and the bar is going to be set higher,” said Soya, who founded the D.C.-based company that makes building analytics software aimed at to help reduce carbon footprint. “There will be an expectation that companies not just disclose, but also demonstrate improvements in their current performance and prove that they are able to achieve their public commitments. There will also be increasing scrutiny on the public commitments themselves – are they creating progress on macro concerns like global CO 2 levels and corporate board diversity, or were they simply the most attainable goals for the company to put in the annual report?”
He continued, “Today is the era of sweeping commitments to ESG, but how will leaders achieve their commitments? And do all the corporate commitments add up to make a meaningful difference? This is what forward-thinking companies should have on their minds with respect to ESG.”
Patty Simonton, Director of Be Green Business, Bethesda Green
“[ESG] is the idea that companies are increasingly aware of the role that they play in the world around them, and that they’re developing policies that they are making decisions that are both kind of expected by their stakeholders and demanded by their customers to be better participants, to be better leaders in their fields,” said Simonton.
“I think we put a lot of responsibility on to companies and innovators and we expect that if they’re going to take a lot of the resources that our planet provides and have the people in this planet work for them, they’re going to do so responsibly and report out and be transparent about what they do. And so I feel like ESG is really kind of the overall way that collectively was starting to measure and monitors how companies are choosing to do that,” she said.