A practical approach to ESG
At Wellstreet, integrating ESG into the DNA of our portfolio has been a very natural progression for us in building profitable and sustainable companies, alongside our other foundational work. We aspire to build the companies of tomorrow by being super hands-on in implementing ESG through all our investment management work.
We are helping our portfolio companies integrate ESG as a layer in each business process as opposed to a separate (siloed) track in building a company.
We regularly hold thematic training and mentoring “days” and so holding an ESG Training Day fitted in with our existing “modus operandi” and what portfolio companies expect from us. This helped in the framing of ESG as “business critical” alongside other strategic areas we typically support our companies in, such as sales and marketing training, product roadmap reviews, new market expansion deep dives etc.
A great way to start for us was to use the format we regularly use to deliver support to our companies, to introduce them to the concept of ESG and how to start implementing a framework within their companies.
Running an ESG Training Day
On Jan 19, 2023, we held an ESG Training Day on the background and practical aspects of implementing ESG for early stage companies, at our offices in the Factory by Wellstreet in Sollentuna, north of Stockholm.
In early stages when teams are still quite small, ESG should always be a founder / CEO priority, and so a key criteria for the event to have an impact was to make sure the founders / CEOs were the ones in attendance, so they could drive the ESG agenda in their teams and boards going forward.
The objectives of the training were the following:
- Explain what ESG is, and introduce the relevant legislation and regulation and how it is intended to be used as a framework for managing a company’s sustainability impact
- Demonstrate the rationale for a founder to care about ESG and embed it into the DNA of their business at an early stage
- Introduction to purpose-built tools and frameworks we have created to practically implement ESG, in a standardised way
- Run an ESG risk assessment exercise
We constructed an agenda to ensure a good mix of educational and practical work. Experts from Ethos and Google were called in to give their advice on some of the more technical parts, enabling our portfolio companies to benefit from knowledge and advice they would otherwise not have access to. We also mixed up the format of the content, with some active and some “passive” sessions, as well as group discussions, 1-on-1s and a Founder Fire Side Chat.
Time - Activity
9:00 - 9:45 - Introduction - What is ESG and why does it matter?
9:45 - 10:00 - Funds introduction: SFDR Articles 6, 8 & 9
10:00 - 10:30 - The Wellstreet Handbook: levels 1, 2 and 3
10:30 - 10:40 - Coffee Break
10:40 - 11:10 - Intro to PAI
11:10 - 12:00 - Google Session: Cybersecurity
12:00 - 13:00 - Lunch
13:00 - 13:15 - Sustainability Risk Assessment Tool
13:15 - 14:45 - 1-on-1 Risk Assessment Workshop
14:45 - 15:00 - Coffee Break
15:00 - 16:30 - Diversity, Equity & Inclusion
16:30 - 17:00 - Conclusion: to-do list, deadlines and yearly schedule
Teaming Up With Strategic Partners
We asked 18 members of deb. (Diverse Executive Boards) to support us. Deb. is one of Wellstreet’s strategic partners and this cooperation enabled us to assign one individual mentor to each of the participating portfolio companies. Each mentor was tasked with helping a founder / CEO to actually do an ESG risk assessment for their company and thus get started on their ESG journey. Running a Sustainability risk assessment is the foundation for good ESG governance and is recommended in most ESG guidelines, frameworks and standards as a first step. Only through a risk assessment can a company begin to understand its own impact and the materiality of that impact on future value creation. We spent the afternoon the day before the training day to educate and prepare all the deb. mentors to ensure they were well equipped to support the companies and to guarantee consistency in the risk assessment work across our portfolio.
The day allowed us to cement with the founders our mutual commitment to ESG in company building. Most importantly, it also established a common understanding of ESG, and an alignment on its importance as well as the best way to frame and report on ESG work going forward.
After the event, all founders were sent the presented material from the day. And a follow-up with each founder will be booked, to continue the progress made on the day. The first step will be to finalise the Sustainability Risk Assessment exercise and make sure that any “high relevance” risk areas are brought to the attention of their boards for immediate action / mitigation.
Based on the feedback we received from the founders & CEOs, the event turned out to be highly useful and we encourage you to build on these experiences and modify as appropriate to fit the needs of your portfolio".
Our Work Continues
An ESG Training Day 2 is planned for June 2023, to follow up on key gaps identified in the Sustainability Risk Assessment as well as in our Self Assessment Questionnaire
Key criteria for success:
- Use the format you normally use to deliver content to your founders - so its clear ESG is business as usual
- Make sure the founders / CEOs are in attendance - they hold the authority in their teams
- Mix up the format of the content, to make it more digestible and interesting, especially if the content is complex and hard to grasp, so there are some “refreshing sessions”
- Leverage your network to bring in experts to support your founders - give them access to something they would not have access to as a stand alone company
- Prepare any external participants well, so they are equipped to support your companies in the best way, and in accordance with your “rules of engagement”
APPENDIX: SAMPLE INVITATION