Startups in transition: Responsibility shows gaps between expectations and practice

Startups in transition: Responsibility shows gaps between expectations and practice

In a recent report by ESMT Berlin It is clear that European startups are showing a growing awareness of responsible corporate governance. Almost all respondents (93 percent) stated that they integrate responsibility into their business models. But the picture is deceptive: only around 81 percent have actually taken action in at least one of the four areas of responsibility - environmental, social, governance or citizen engagement. This shows a significant discrepancy between intention and action.

The study is based on the INNOVA framework, which divides responsible practices into four pillars: environmental, social, governance and citizen engagement. While environmental efforts are the most common entry point for 39 percent of startups, a total of 79 percent focus on social initiatives. Good governance is considered important by 78 percent of those surveyed, while civic engagement is comparatively low at only 51 percent.

Challenges and barriers

The biggest challenges startups face are financial constraints and lack of time. In Germany, financial aspects are primarily an obstacle, while in France time pressure is a more important factor that increases due to the everyday life of entrepreneurs. Italian startups, on the other hand, struggle to balance responsible initiatives against other business priorities.

Interestingly, only about 28 percent of startups measure the impact of their actions. This tendency to measure results increases as the company matures, but remains at a modest level overall. Additional external pressure, for example from investors or incubators, influences responsibility monitoring: around 40 percent of startups follow their practices when appropriate evidence is required. Without this pressure, only about 17 percent do so.

Creating an ESG strategy

A clear ESG strategy is becoming increasingly important for startups, as well Fiegenbaum Solutions highlighted. This not only helps to minimize risks and take advantage of new market opportunities, but also convinces many investors. Such a strategy can be developed in five steps:

1. Business analysieren und ESG-Ziele setzen: Identifizieren der ESG-Wirkungsbereiche und Definition von tiefgehenden Zielen.
2. Passende ESG-Frameworks auswählen: Bekannte Standards wie die UN SDGs oder GRI Standards helfen bei der Umsetzung.
3. ESG-Daten-Systeme einrichten: Wichtige Kennzahlen wie Energieverbrauch und Mitarbeiterzufriedenheit sollten erfasst werden.
4. ESG in den täglichen Betrieb integrieren: ESG-Initiativen sollten mit Unternehmenszielen verknüpft werden.
5. ESG-Ergebnisse messen und verbessern: Fortschritte regelmäßig überprüfen und anpassen.

The majority of startups see the strategic integration of sustainability not only as a necessity, but also as an opportunity. The advantages are the regulatory preparation for ESG requirements and the attractiveness for investors.

A missing structural requirement

The study concludes that responsibility is not a structural requirement in the European startup ecosystem. Around half of those surveyed said they had never been asked about their approach. INNOVA Europe, a coalition of ten European universities, was founded in 2022 to promote sustainable entrepreneurship. The barometer report is intended to serve as a basis for schools, investors and incubators to support startups in their growth while promoting social and ecological goals.

The gap between intention and action could thus become a central issue for the European startup ecosystem in the coming years.