Preface

In today’s world, there are enormous challenges that cannot be solved by just a few entities. Rather, they require cumulative actions from all individuals and organizations—the most obvious example being climate change. We believe that every individual has a role to play in building a more sustainable, diverse, and equitable future.
In the startup ecosystem, which includes venture capital (VC), some fledgling businesses have historically acted as though they were exempt from societal responsibilities—due in large part to the highly stressful and intense nature of building companies.
At MPower Partners, we believe it’s best to embed ESG practices as early as possible, as it’s far easier to do so into a company’s mission, values, and actions at the earlier stages of development. Ultimately, priorities identified as a part of a company’s ESG proposition can define its culture—and changing an established culture poses significant challenges.
Putting financial performance aside, we believe that each of us has a role to play in ensuring a more sustainable society. At the same time, as we are still in the early days of ESG integration within the startup ecosystem—both in Japan and globally—so an important question remains: What is the business case for ESG?

The ESG business case for startups

As stakeholders (employees, customers, suppliers, investors, regulators, etc.) naturally care about their company’s principles, embracing ESG has been shown to be a financial positive.

A number of ESG-related academic studies show a strong correlation between ESG and financial performance—which becomes more marked over longer time horizons. Breaking down the mediators for financial returns shows that, put simply, stakeholders care.

Here are some of the ways ESG leads to value creation for startups:

1. Gets them ahead of the curve
2. Aligns with consumer values
3. Attracts and retains talent
4. Increases employee engagement