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Attention all Australian businesses: Get ready for a significant shift in the landscape of climate reporting! The clock is ticking, and you won’t want to miss the latest developments that are set to reshape the way you disclose your climate impacts. From corporates to mum and dad operations all will be affected.

Key Changes Affecting Businesses of All Sizes

Hold onto your hats, because a new era of climate reporting is upon us, and it’s set to impact businesses both large and small. The Australian Federal Government is driving a wave of change that will require companies to provide detailed disclosures about their climate-related impacts – and that’s not limited to just their direct emissions. The focus now extends to the entire value chain, affecting industries ranging from major corporations to local mum and dad businesses. How you might ask! Keep reading…

The Bigger Picture: The International Sustainability Standards Board (ISSB)

Taking a step back, let’s look at the bigger picture. In 2021, the International Financial Reporting Standards (IFRS) Foundation established the International Sustainability Standards Board (ISSB). This board has crafted global standards for climate disclosure and sustainability reporting, and these standards were released in June 2023. Their goal? To ensure that businesses integrate sustainability-related information alongside financial statements, aligned with established financial and carbon accounting practices.

Navigating the Road Ahead: Consultations and Implementation

With the imminent shift towards climate-related financial disclosure, the Australian Federal Government is engaging in consultations with various stakeholders, including state based Business Chambers. The focus is on crafting a comprehensive approach to integrating climate reporting into the Australian business landscape. This encompasses aspects such as governance, strategy, risk management, targets, and environmental metrics – notably including greenhouse gas emissions in line with international norms.

These consultations are far from a mere formality; they play a crucial role in shaping the legislative changes that will guide businesses’ reporting practices. The aim is to provide a structured framework for disclosing climate-related risks and opportunities whilst keeping in mind the reduction targets set by the Australian Government. This affords businesses the time needed to enhance or to gear up with the needed expertise and capabilities to meet the climate reporting requirements.

Unpacking Emission Scopes: Core Elements of Reporting

You may or may not of heard how emissions are categorised and reported on, this framework is used globally and know as ‘Scopes’  of emissions. Reporting obligations will be aligned within these categories:

Scope 1: This covers direct greenhouse gas emissions coming from a company’s owned or controlled sources.

Scope 2: Indirect greenhouse gas emissions linked to the generation of purchased electricity, steam, heating, and cooling consumed by the reporting company.

Scope 3: All remaining greenhouse gas emissions throughout a company’s supply chain are encompassed by Scope 3.

Rolling Out the Framework: Proposed Phases

The implementation of these changes won’t happen overnight. It’s a phased process that’s been meticulously planned. The proposed timeline spans a four-year period, beginning from 2024 and extending to 2028. The key highlights of this phase-in approach are as follows:

(Information sourced from Pitcher Partners)

Starting Strong:

From July 1, 2024, Australia’s largest listed and unlisted companies, as well as financial institutions, will be required to adhere to mandatory reporting requirements. This initial phase focuses on those entities with significant economic presence and influence.

Phased Transition:

To ensure a smooth transition, a three-year phase-in period is in place. During this period, smaller businesses will be required to start reporting

• 2025 Group 1 – Revenues over $500m & assets over $1b
• 2026-27 Group 2 – More than 250 employees, $200m revenue $500m assets
• 2027-28 Group 3 – more than 100 employees, $50m revenue, $25m assets

Global Alignment:

The reporting framework strives to align closely with established international climate disclosure standards, ensuring consistency and comparability.

Small Players, Big Impact: The Ripple Effect

Even if your business doesn’t fall into the initial mandatory reporting bracket, don’t assume you’re off the hook. The ripple effect of this reporting system extends its reach. Businesses that are subject to mandatory reporting requirements must not only account for their Scope 1 & 2 emissions but, starting from the second reporting year, estimate Scope 3 emissions upstream or downstream within their product or service value chains.

This means a careful review of supply chains, seeking input from smaller suppliers and clients alike to gather relevant emissions data. Even mum & dad businesses, indirectly connected to these reporting requirements, will find themselves in the fold as the reporting network widens.

Championing Business Interests: The Role of Business Chambers

Amidst these dynamic changes, your state Business Chamber should be an advocate for your business by engaging in ongoing consultations with the Federal Government, ideally Business Chambers will look to ensure these imminent reporting requirements are managed with minimal disruption for Small, Medium, and Family Enterprises (SMFEs).

A statement by Scott Veenker, Acting Chief Executive of the Victorian Chamber, emphasizes the dual importance of environmental responsibility and business viability: “It’s an opportunity for businesses to demonstrate their commitment to sustainability, enhance their reputation, and create a more appealing work environment. However, we acknowledge the initial challenges that businesses new to carbon reporting may face, especially in grappling with Scope 3 emissions. This is where support and training play a pivotal role.”

The Bottom Line: Prepare for Change

As the clock ticks closer to the reporting deadlines, businesses across Australia must ready themselves for a new era of transparency and accountability. Whether you’re a major player or a smaller contender, the impact will be felt, and the journey promises both challenges and opportunities. Stay informed, get involved, and be prepared to navigate the evolving landscape of climate reporting. Your actions today will shape the future of your business and contribute to a more sustainable tomorrow.

An easy way to get a head start

If you’re a business wanting to stay ahead of this curve and benefit as early as possible Carbonhalo has a full suite of services that are fully compliant at a really low cost.

Get a free consultation

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Current Capacity

Currently, the National Electricity Market (NEM) in Australia meets the country’s net energy demand, amounting to approximately 61% of the annual net electricity capacity. This figure may seem reassuring, but the landscape is set to change dramatically over the next decade. With the projected share of electric vehicles reaching 80% of new car sales by 2030, the demand for electricity is expected to surge.

Modelling conducted by Transgrid paints a vivid picture of the impending challenge. In the current trend scenario, NEM consumption is predicted to skyrocket by 40% by 2050, largely driven by the electrification of vehicles. This would add a substantial annual demand of 48 TWh (terawatt hours) to Australia’s electricity grids.

Industry and consumer groups are expressing genuine concerns that the existing infrastructure might not suffice. A primary focus of research revolves around the issue of EV charging. Charging an average EV consumes a considerable amount of electricity, approximately 6-8 kWh (kilowatt hours) for a standard 40-kilometer trip, equivalent to the daily energy needs of a small household. The limited scope of Australia’s public charging infrastructure raises apprehensions, leading to the expectation that most EV owners will rely on home charging.

Peak Demand

Estimates from the Reliable Affordable Clean Energy for 2030 Cooperative Research Centre (RACE for 2030 CRC) offer some hope. They suggest that if EV owners charge their vehicles at different times during the day, the electricity grids should be able to cope with a mere 3-4% increase in daily demand. However, if charging patterns align with the current peak demand time of 6 pm-7 pm, demand could double, posing significant challenges to the energy grids.

The consequences of a grid overload could be severe, as highlighted by University of Melbourne Associate Professor of Engineering Marcus Brazil. Potential issues include voltage drops, phase imbalances, and a notable loss of efficiency in the networks, which could lead to network failures and shorten the lifespan of critical assets like distribution transformers and utility lines.

What’s Needed

To future-proof Australia’s energy grids, experts emphasize the need for substantial investment in charging infrastructure. Nathaniel Galindo, General Manager, Operations and Engineering – Microgrid Power, at The Green Guys Group, stresses the importance of integrating systems control, regulation, and vehicle-to-grid integration (V2G) into charging infrastructure.

Galindo emphasizes the importance of developing electrical charging infrastructure with investment in 7kW and fast charging stations, along with creating a regulatory framework. Moreover, V2G technology would enable EVs to communicate with the electricity grid, optimizing energy efficiency and supporting grid stability.

To meet the growing demand, Australia must ramp up its charging infrastructure. Currently, the country only has 450 public fast chargers and 2530 standard chargers. However, projections from RACE for 2030 indicate a need for widespread charging availability, including one charger at every home with an EV, in multi-unit dwellings, workplaces, and an additional 15,000 public fast chargers by 2030.

By implementing Distributed Energy Resource Orchestration plans, Australia can accelerate EV adoption while reducing the strain on the grid, promoting the use of renewables, enhancing grid stability, and optimizing infrastructure costs. Ultimately, this strategy will secure a sustainable future for EVs in the country.

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This article looks at recently released information about the sea ice within the Antarctic.

In a recent development that has baffled and put many scientists on edge, the Antarctic sea ice has failed to recover during winter, marking a significant departure from the usual pattern. This decline in sea ice extent during the winter months has far-reaching implications for the Earth’s climate, potentially accelerating the changes we are already seeing in weather.

Throughout this winter, experts have been monitoring the situation with growing concern, as the Antarctic sea ice levels have shown no signs of the expected recovery. Unlike previous years, when the ice typically bounced back during the dark and cold winter months, this year has witnessed a drastic shift.

The situation has been described as a ‘five-sigma event’ by physical oceanographer Edward Doddridge, an extreme occurrence that is five standard deviations beyond the mean. In simpler terms, this event is statistically unprecedented and not physically observed ever, with the likelihood of its recurrence estimated at once every 7.5 million years. The impact is profound, leaving vast regions of the Antarctic coastline entirely ice-free, baffling scientists worldwide.

The Decline’s Alarming Consequences

Antarctic sea ice plays a crucial role in regulating Earth’s temperature through a phenomenon known as ice-albedo feedback. Normally, the ice reflects the Sun’s heat back into space, thereby helping to maintain the planet’s temperature. However, with less ice, sunlight hitting the ocean’s surface gets absorbed instead of being reflected, leading to accelerated warming in the affected area and, ultimately, influencing global temperatures.

Additionally, the annual cycle of freeze and melt in the Antarctic drives vital global currents that transport nutrient-rich water, supporting marine ecosystems. The ice also serves as a habitat for numerous animals, including penguins, seals, and essential food sources such as krill.

Scientists are currently racing to identify the cause behind this alarming decline. While some speculate natural variability as a potential factor, the majority of experts believe that climate change is the primary driver. The strong consensus points toward anthropogenic forces, which have warmed the ocean, disturbed the atmosphere and adversely affected the sea ice.

Future Implications and Concerns

The consequences of this ongoing decline in Antarctic sea ice are profound. If the trend persists, it could become exceedingly challenging to reverse the trajectory, leading to a potential tipping point where a new, irreversible state is reached. This tipping point would have severe implications for the planet’s sustainability and human conditions, affecting not just future generations but also our own.

As scientists grapple with the complexity of the situation, it is clear that action is urgently needed to address the underlying causes of this dramatic decline in Antarctic sea ice. Understanding the interplay between atmospheric changes and warming seas is critical to devising effective solutions to mitigate the impact on Earth’s climate.

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Today’s consumers are more environmentally conscious when it comes to their purchases. One crucial factor they consider is the environmental and sustainability claims made by businesses.

However, for these claims to truly resonate with consumers, they must be honest, accurate, easy to understand, and properly qualified. False or misleading claims not only misguide consumers but also put genuine businesses at a disadvantage.

That’s why the ACCC (Australian Competition and Consumer Commission) has recently released a draft guidance document to help businesses navigate the world of environmental claims and avoid Greenwashing.

This guidance aims to encourage businesses to provide transparent information about their products and services, particularly about any environmental claims made. By doing so, this empowers consumers to make informed choices.

It’s important to note that whilst these are guidance notes complying with the ACCC’s guidelines is essential, as businesses have obligations under the Australian Consumer Law (ACL) to avoid making false or misleading representations.

If you didn’t already know the ACCC’s focus is on investigating conduct that harms the competitive process, misleads consumers, or causes widespread consumer or small business detriment.

So, how can your business ensure compliance and navigate this terrain successfully? Let’s take a look at the eight key principles summarised below, derived from the ACCC Guidance Paper. If you’d like to dive deeper, you can find the full guidance document at the provided link.

Principle 1: Accuracy and Truthfulness

Ensure that all claims are accurate and truthful. Even if a claim is factually correct, it should not create a misleading overall impression. Represent the genuine environmental impact without exaggerating benefits or scientific acceptance.

Principle 2: Supporting Evidence

Have clear and credible evidence to support your claims. Independent and scientific evidence is highly regarded. Make sure consumers can access the research, evidence, or data to understand and trust your claims. For claims about the future, ensure you have reasonable grounds to support them, as baseless claims are misleading.

Principle 3: Full Disclosure

Provide consumers with all relevant information needed to make informed decisions. Avoid hiding important information or placing it where it may go unnoticed. Transparency regarding environmental impact is crucial.

Principle 4: Clear Conditions and Qualifications

Clearly explain any conditions or qualifications related to your claims. Avoid misleading consumers with vague environmental benefits. If there are specific circumstances or steps required for a claim to be accurate, highlight them prominently. Be transparent about limitations.

Principle 5: Specificity and Honesty

Avoid broad and unqualified claims that can mislead consumers. Instead, be specific and substantiate your claims with evidence. If there are limitations, use clear disclaimers to qualify your claims.

Principle 6: Clear and Understandable Language

Use language that the average consumer easily understands. Avoid technical terms or jargon that may confuse your audience. Keep it simple and straightforward.

Principle 7: Accurate Visual Representation

Visual elements, such as packaging colours or recycling logos, can significantly impact consumer perception of your product’s environmental impact. Ensure your visuals align with the environmental benefits you claim. Consider the overall impression created by visual elements, colours, and logos.

Principle 8: Transparent Sustainability Transition

When sharing your future environmental objectives, be cautious and realistic. Avoid making empty promises without clear plans. If your business is transitioning to a more sustainable model, be open and direct with consumers. Communicate that sustainability efforts take time and progress may not always be linear. For example, if immediate reduction of greenhouse gas emissions is not feasible but you are offsetting the impact, be transparent about it.

If you need assistance with your business’s sustainability endeavours, the Carbonhalo team can provide guidance and help quantify your emissions, offering a range of measurement services, and marketing support.

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What is ESG?

ESG stands for Environmental, Social, and Governance. It involves considering the environmental impact of a company’s operations, its corporate social responsibility initiatives, and good governance practices when making decisions. These elements are based on the United Nations Sustainable Development Goals. By adopting this approach, not only can businesses operate more ethically, but they can also enjoy tangible financial benefits. Let’s dive into the advantages of implementing ESG-centric processes within your company.

The Three Essential Pillars of ESG

To understand how ESG criteria can benefit companies, let’s start by exploring its three essential pillars:

1. Environmental Performance: This encompasses a company’s environmental policies and practices, such as reducing carbon footprint, energy consumption, and taking action on climate change.
2. Social Performance: This looks at a company’s efforts toward social responsibility and how it contributes to the communities it operates in. This could include initiatives like workforce diversity and inclusion programs, fair labor practices, or community development projects.
3. Governance: This focuses on a company’s accountability, ethics, and transparency measures. It also covers the structure of its leadership team and decision-making processes.

In essence, a sustainable company prioritizes these three aspects, creating a business strategy that actively seeks to improve the environment, uplift communities, and generate profits. People, planet, profit.

Where Did ESG Begin?

The roots of ethical business practices can be traced back to Isaac Le Maire in 1608. When he discovered corruption within the Dutch East India Company, he took action by buying the company’s stock and pushing for more ethical operations. This marked the birth of impact investing.

More recently, ESG was born out of the need to create a more ethical and transparent business model that protects the environment while creating social and economic value. It has gained prominence over the past few decades as investors increasingly recognize the importance of sustainability. In fact, research shows that nine out of ten Millennials are conscious about sustainability, and Gen-Z is expected to place even more emphasis on it.

The Most Important Factor in ESG

When evaluating a company and making investment decisions, examining its Environmental, Social, and Governance practices is crucial. Among the three factors, corporate governance is often viewed as the most critical and influential. Good corporate management protects against non-financial risks and indicates positive long-term performance. It also highlights efficiency and competitive advantages that drive returns and engagement. However, it’s important to maintain a balance across all three pillars of ESG for sustainability. Focusing solely on one aspect can lead to unsustainable practices and reputational risks.

Why Are Companies Embracing ESG?

Companies worldwide are embracing ESG for various reasons, including:

• Improved Brand Reputation: Demonstrating commitment to ESG earns companies a reputation for being ethical, reliable, and trustworthy, resulting in better customer loyalty and a positive market image.
• Attracting Investors: Investors are increasingly seeking companies with strong ESG practices, and it won’t be long before these factors become directly tied to financing and investments.
• Better Employee Retention: Companies with good ESG practices attract top talent, leading to better recruitment, lower turnover costs, and reduced “Quiet Quitting.”
• Regulatory Compliance: Governments are introducing new regulations that require companies to adhere to ESG standards, making it essential for organizations to stay up-to-date.
• Increased Profitability: ESG-focused companies often achieve better operational efficiencies and cost savings, leading to higher profits. They can also reduce the risk of being impacted by environmental disasters or social unrest.

How Does ESG Create Value for Companies?

Measuring value beyond financials is crucial for long-term success and resilience. ESG provides an opportunity for executives to evaluate their company’s performance from a different perspective. By considering the three ESG pillars, companies can increase their bottom line by:

• Mitigating Long-Term Risks: Integrating ESG into decision-making enables companies to assess potential risks accurately, make informed decisions, and be better prepared for unexpected events.
• Improving Operational Efficiencies: By understanding external factors that impact operations, companies can enhance efficiency and reduce costs.
• Strengthening Stakeholder Engagement: Companies that embrace ESG have strong relationships with customers, employees, investors, and the community because they take responsibility for their impact on society.
• Creating New Opportunities: ESG-focused companies can develop new products, collaborations, and business models that prioritize sustainability and social impact, leading to innovation, collaboration, and growth potential.

ESG and Corporate Performance

ESG has a broad impact on corporate performance. Factors such as quality management, risk mitigation, and stakeholder relations play a crucial role in informing better business decisions. By focusing on sustainability, companies can identify and address risks, reducing the likelihood of failure or major losses. Furthermore, companies with strong ESG practices gain access to capital and improve efficiency, leading to cost savings. Embracing ESG initiatives helps companies meet competitive challenges in an increasingly important market, creating long-term value and sustainability while meeting customer expectations.

Does ESG Improve Profitability?

While there are many uncontrollable factors that can affect a company’s bottom line, ESG initiatives, when managed effectively, can indeed improve profitability. By understanding the environmental and social impacts of their operations, companies can make informed decisions that benefit them in the long run. This can involve finding new sources of revenue or enhancing customer loyalty. Sustainability practices also reduce costs by increasing efficiency and minimizing the environmental footprint. Additionally, companies that implement ESG initiatives are more attractive to high-quality employees and investors, which positively impacts profitability. If you believe in the correlation between a company’s brand value and profitability, then you already know the answer.

Frequently Asked Questions about ESG

What Does an ESG Score Reveal About a Company?

An ESG score provides a snapshot of how well a company performs in terms of its environmental, social, and governance practices. A higher score indicates better performance, while a lower score suggests areas for improvement. ESG scoring is an ongoing process, and as long as you’re making an effort and measuring key performance indicators, you’re heading in the right direction.

Why Is ESG So Important Right Now?

Sustainability has been growing in importance for decades, but recent global events have heightened its significance. The Covid-19 pandemic exposed the fragility of our systems, vulnerability of supply chains, and the importance of social and environmental responsibility. Billion-dollar weather events, resource scarcity, and geopolitical crises have further emphasized the need for sustainability. It’s never been more crucial to embrace sustainable practices and be prepared for the challenges ahead.

How Do Companies Use ESG?

1. Develop long-term business strategies.
2. Attract investment and build trust.
3. Improve operational efficiency by reducing waste and costs.
4. Enhance reputation and demonstrate corporate social responsibility.
5. Identify new markets, customers, and growth opportunities.
6. Strengthen relationships with stakeholders.
7. Mitigate risks associated with climate change and other crises.
8. Demonstrate leadership in sustainability initiatives, gaining a competitive advantage.
9. Improve employee engagement and loyalty by fostering a meaningful workplace culture.
10. Attract socially responsible investors.

There is no limit to how ESG information can be utilized once you begin the process. It’s a transformative journey that allows you to unlock new possibilities and make a positive impact.

ESG Assurance – Why Do Companies Disclose ESG?

Disclosing ESG information is a crucial step in the sustainability process. While it was once optional, it has now become essential for long-term competitive success. Companies choose to disclose information to demonstrate their commitment to sustainability, meet regulatory requirements, gain access to capital markets, and improve risk management strategies. Disclosure also helps consumers make informed purchasing decisions. It’s important to disclose your ESG performance accurately and in line with the results from an ESG report.

What is Compliance with ESG Metrics?

For privately held organizations, there is currently no requirement for sustainability reporting. However, this is expected to change soon. Regardless of size and ownership structure, all companies should focus on ESG measures. Understanding the key sustainability issues in your industry enables you to develop strategies to address them. Performance reviews, executive compensation, and other corporate decisions will soon be affected. With the power of social media, consumers and shareholders will start asking questions sooner than you think.

How Does a Company Prove Its Sustainability?

Once you start asking the right questions and obtaining answers, you can build a sustainability framework. Set measurable goals, create action plans, and report on progress transparently within the boundaries of your objectives. Collect data from stakeholders across all levels of the company. Look for opportunities to collaborate with other companies and organizations to share best practices. Engage a third party to provide assurance of your efforts. Finally, share your sustainability journey with the world or leave it where the world can find it!

Final thoughts!

Investing in ESG is a wise move for companies on multiple levels. It improves corporate image, boosts returns, supports sustainable practices, and ensures a livable planet for future generations. If you haven’t explored sustainable practices yet, it’s not too late. The tools are more accessible and user-friendly than ever. There’s never been a better time to start considering the positive impacts of ESG. If you’re ready to make ESG a part of your corporate strategy, let’s chat. We’re here to help you explore your options and guide you in the right direction.

Remember, ESG is not just a trend; it’s a path to long-term success and a brighter future.

The post The Benefits of ESG for Business: Stay Ahead of the Curve! appeared first on Carbonhalo.

The outcome of the article should provide you with insight into some simple ways you can future proof your startup for investment.

What is ESG?

ESG stands for Environmental, Social, and Governance. ESG factors are used to evaluate a company’s sustainability and ethical impact on society and the environment. These factors include, but are not limited to, climate change, carbon emissions, water and waste management, human rights, employee diversity and rights, executive compensation, board diversity, and shareholder rights.

Photo by Maranda Vandergriff on Unsplash

ESG Trends in Start-Ups 

Start-ups are adopting various ESG practices to ensure that their businesses are sustainable and ethical. Some of the common ESG trends among start-ups include: 

Sustainability 

Start-ups are taking proactive steps to reduce their carbon footprint and promote sustainability. They are adopting renewable energy sources, implementing energy-efficient technologies, reducing waste, and promoting recycling. 

Diversity, Equity, and Inclusion 

Start-ups are also prioritizing diversity, equity, and inclusion in their hiring and workplace practices. They are striving to create a culture that values and respects diversity in all its forms, including gender, race, ethnicity, and sexual orientation. 

Social Impact 

Start-ups are increasingly focused on creating a positive social impact. They are working on projects that address social issues, such as poverty, inequality, and access to education and healthcare. 

Governance 

Good governance is critical to the success of any organization, and start-ups are no exception. Start-ups are adopting governance practices that ensure transparency, accountability, and ethical behavior. They are also working on improving their board diversity, executive compensation, and shareholder engagement. 

Why ESG matters to Start-Ups 

ESG practices are no longer just a “nice-to-have” for start-ups; they are becoming an essential component of their business strategy. Start-ups that prioritize ESG practices are more likely to attract investors, customers, and top talent. A recent study by McKinsey & Company found that companies with strong ESG performance outperformed their peers in terms of financial returns and share price performance. Moreover, investors are increasingly interested in ESG performance and are willing to pay a premium for companies that prioritize sustainability. 

Photo by Ian Schneider on Unsplash

Why ESG is Important for VC Firms 

There are a growing number of VC firms that are turning focus toward ‘Impact Investing’ this can sometimes be dismissed as a founder, but as a founder if you are looking to raise capital and cannot demonstrate how your business aligns to the values of the VC firm, you will seriously limit your available options for capital.  

What is impact investing?  

Impact investing is an investment approach that aims to generate a positive social or environmental impact alongside a financial return. It involves investing in companies, organizations, or funds that seek to make a positive difference in areas such as sustainability, social justice, and community development. 

Impact investors evaluate investment opportunities based on both their financial potential and their potential to create positive social or environmental outcomes. They seek to align their investments with their values and contribute to a better world through their financial decisions. 

What VC Firms look for 

VC firms are looking beyond just financial returns when making investment decisions. They also want to invest in companies that are socially and environmentally responsible and that operate with a high level of corporate governance. This is because these factors can play a critical role in a company’s long-term success. For example, a company that doesn’t consider its impact on the environment may face significant regulatory and reputational risks in the future. Similarly, a company that doesn’t prioritize ethical business practices may face legal or financial consequences down the line. 

Investors, are increasingly looking to invest in companies that are committed to responsible business practices. One way is by including ESG clauses in their investment agreements, and term sheets. VC firms can help ensure that the companies they invest in are well-positioned to succeed both financially and socially. 

ESG clause in VC Term Sheets 

More and more ESG clauses are making their way into the term sheets of Startup funding, depending on the commitment and specific portfolio sector the VC operates a startup could see some of the following: 

• Demonstrate specific ESG metrics or targets 
• Reducing carbon emissions 
• Increasing diversity and inclusion 
• Implement specific ESG initiatives, such as establishing an environmental sustainability program or developing a set of ESG policies. 
• Board make up, governance and diversity 

• Annualised sustainability reporting and ESG performance benchmarking   
• ESG reporting and performance to be made public 

The specific ESG clauses in a VC agreement will depend on the VC firm’s priorities and the industry in which the startup operates. However, the overarching goal is to ensure that the company is operating in a socially and environmentally responsible manner and that it’s committed to good governance practices. 

What This Means for Startups 

For startups, ESG clauses in VC agreements can have both positive and negative implications. On the one hand, startups that prioritize ESG are more likely to attract VC funding already on the ESG pathway and typically will already have terms sheets with ESG clauses. This could be an advantage when pitched against other startups, if your company has already established a framework and begun this process it may just tip the funding in your favor. 

Moreover, implementing ESG initiatives can also help startups identify and mitigate risks that could impact their long-term success. For example, a startup that develops an environmental sustainability program can reduce its regulatory and reputational risks, which can translate into cost savings and increased customer loyalty. 

On the other hand, ESG clauses can also place additional burdens on startups. Implementing ESG initiatives can require significant resources and expertise, and meeting specific ESG metrics or targets may be challenging for startups that are still in the early stages of their development. 

How This Trend is Likely to Evolve 

The trend of VC firms including ESG clauses in their investment agreements is likely to continue in the coming years. As responsible business practices become more important to consumers, employees, and investors, VC firms will want to invest in companies that are committed to ESG. Moreover, as ESG reporting requirements become more widespread, VC firms will need to ensure that the companies they invest in are able to comply with these requirements. 

However, it’s important to note that there are potential drawbacks to ESG clauses in VC agreements. For example, startups may feel pressured to prioritize ESG initiatives over other important business activities, such as product development or sales. Additionally ESG metrics can be difficult to measure and compare across different companies, which can make it challenging for VC firms to evaluate the impact of their investments on ESG factors. 

To address these challenges, VC firms will need to develop more sophisticated ESG metrics and reporting frameworks. They may also need to provide startups with more resources and support to help them implement ESG initiatives effectively. Ultimately, the success of ESG implementation will depend on whether they are able to strike a balance between promoting responsible business practices and supporting the growth and development of startups. 

Types of ESG Clauses in Term Sheets 

The following is a brief summary of the types of clauses making their way into the deal term sheets of VC firms 

• Specific Objectives on a time frame  
• Best effort clauses  
• Optional clauses  
• Standardised clauses  

Specific Objectives 

The VC firm and Startup will agree on a specific set of actions and objectives to achieve within the first 12 months of funding. This normally is there to encourage the Startup to commence their ESG journey whilst still meeting the VC firms sustainability requirements.  

Best Effort Clauses  

This normally requires a Startup to agree to do their best to hit a specific target or metric e.g. 1 board member from a minority ethnic group within a given time period, or baseline emissions measurement of the business completed within the first 12 months of funding.  

Optional Clauses  

Can be included where the VC has a commitment but wants to allow for flexibility within their portfolio for high potential founders, the VC will also look to assist the business identify weaknesses and help establish ESG practices.  

Standardised Clauses  

Some VC firms are looking to implement standardised ESG clauses e.g. The British Venture Capital Association ad Berlin non-profit Leaders for Climate Action has already developed some. This does make it easier for both founders and VC’s but will loose veracity and meaning.

What can a Startup do now to be ESG investment ready?  

Simply just starting your company’s ESG framework will go a long way. We have created a simple and basic toolkit that will provide a startup with everything to get their framework in place.  

What does the tool kit look like? 

1. Use the provided ESG Audit tool to get a score and see where you need to improve 

1. Use the table below and customise your templated policies to adopt for your business  

ESG Policy

Environment Policy

Metrics: Carbon footprint, energy efficiency, waste reduction, water usage and resource conservation

Social Policy

Metrics: Employee satisfaction, customer satisfaction, diversity and inclusion within the business, supply chain KPI’s

Governance Policy

Metrics: Board diversity, published compensation in line with market, open reporting.

The post Is Your Startup ESG Investment Ready appeared first on Carbonhalo.

Sustainability for SMBs

Sustainability refers to the ability of a business to operate in a way that meets the needs of the present without compromising the ability of future generations to meet their own needs. It involves balancing economic, environmental, and social considerations to create long-term value for the business and society. For SMBs, sustainability can mean:

• Reducing energy and resource consumption
• Minimizing waste and pollution
• Investing in renewable energy and eco-friendly technologies
• Supporting local suppliers and communities
• Ensuring fair labor practices and promoting diversity and inclusion

By adopting sustainable practices, SMBs can not only reduce their environmental footprint but also improve their reputation, attract customers and employees who care about sustainability, and save costs in the long run.

ESG for SMBs

ESG, on the other hand, is a framework used to evaluate a company’s performance on environmental, social, and governance factors. ESG factors are non-financial metrics that can affect a company’s financial performance and risk profile. Examples of ESG factors include:

• Environmental: greenhouse gas emissions, energy and water efficiency, waste management
• Social: employee diversity and engagement, human rights, community relations
• Governance: board diversity and independence, executive compensation, risk management

While ESG was initially developed for institutional investors, it has become increasingly important for SMBs as well. Here’s why:

• ESG performance can impact a company’s access to capital and cost of capital
• Customers and employees are increasingly interested in companies’ ESG practices and values
• Adopting ESG practices can help SMBs identify and manage risks, improve operational efficiency, and enhance their reputation

Key differences between sustainability and ESG for SMBs

While sustainability and ESG share some common goals, there are several key differences between the two concepts, including:

• Sustainability is a broader concept that encompasses economic, environmental, and social factors, while ESG focuses specifically on non-financial factors that can affect a company’s financial performance and risk profile.
• Sustainability is mainly driven by the desire to create long-term value for the business and society, while ESG is mainly driven by the desire to meet the expectations of investors and other stakeholders.
• While sustainability is often voluntary and self-regulated, ESG is increasingly becoming mandatory and regulated by governments and financial institutions.

Conclusion

While sustainability and ESG share some common goals, they are two distinct concepts that SMBs need to understand and integrate into their operations. By adopting sustainable practices and reporting their ESG performance, SMBs can not only improve their reputation and attract customers and investors but also contribute to a more sustainable and equitable future.

The post The Difference Between Sustainability and ESG appeared first on Carbonhalo.

1.Develop a Strong Business Plan

A well-crafted business plan is essential for any company looking to achieve long-term success. This document should clearly outline your company’s goals and objectives, as well as the strategies and tactics you’ll use to achieve them. Additionally, your business plan should include financial projections and a marketing plan to help attract and retain customers.

2. Focus on Building Strong Relationships

In order to be successful in business, it’s essential to build strong relationships with customers, suppliers, and other key stakeholders. This can be achieved by providing excellent customer service, fostering open and honest communication, and consistently delivering high-quality products and services. Additionally, building relationships with industry influencers and thought leaders can help increase your company’s visibility and credibility.

3. Invest in Your Employees

Your employees are the backbone of your business, and investing in their development and well-being is crucial for achieving long-term success. This can be done by providing opportunities for training and professional development, offering competitive compensation and benefits packages, and fostering a positive and inclusive work culture. Additionally, investing in employee satisfaction and retention can lead to increased productivity and engagement, which in turn can drive business growth.

4. Embrace Innovation and Technology

In today’s fast-paced business environment, it’s essential to stay ahead of the curve and embrace new technologies and innovative business models. This can be done by regularly researching and experimenting with new tools and platforms, as well as investing in research and development to stay on the cutting edge of your industry. Additionally, leveraging technology to streamline processes and increase efficiency can help you stay competitive and save time and resources.

5. Prioritize Sustainability and Social Responsibility

Consumers are becoming increasingly conscious of the impact of businesses on the environment and society, and prioritizing sustainability and social responsibility can help your business appeal to this growing market. This can be done by implementing eco-friendly practices, sourcing materials and products responsibly, and supporting charitable causes and social initiatives. Additionally, being transparent about your sustainability efforts can help build trust and credibility with customers and stakeholders.

6. Diversify Your Revenue Streams

Relying on a single revenue stream can be risky for any business, and diversifying your income sources can help mitigate this risk. This can be done by expanding into new markets, offering new products or services, or partnering with other companies to create mutually beneficial opportunities. Additionally, having multiple revenue streams can also help you weather economic downturns and other challenges.

7. Be Adaptable and Flexible

The business landscape is constantly changing, and being adaptable and flexible is crucial for achieving long-term success. This means being open to new ideas and approaches, being willing to pivot and change course as needed, and being prepared to navigate unexpected challenges and opportunities. Additionally, being agile and responsive can help you stay ahead of the competition and better serve your customers.

8. Stay Focused on Your Core Competencies

While it’s important to be adaptable and flexible, it’s also crucial to stay focused on your core competencies and strengths. This means identifying the areas in which your company excels and investing resources accordingly, while also divesting from areas that are not aligned with your business strategy. Additionally, staying focused on your core competencies can help you build a powerful and recognizable brand, which can help attract and retain customers.

9. Continuously Monitor and Improve

Achieving sustainability is not a one-time effort, but rather a continuous process. This means regularly monitoring your company’s performance, analyzing data and feedback, and making adjustments as needed. Additionally, it’s important to set clear and measurable goals and track progress towards them. This can be done through the use of key performance indicators (KPIs) and other metrics. By continuously monitoring and improving, you can ensure that your business stays on track towards long-term success.

In conclusion, achieving sustainability in business takes a combination of different strategies and effort. The key is to start early, be open to new ideas, and consistently monitor and improve your business. By following these 9 tips, you can ensure that your business is on the path to long-term success and growth.

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The post 9 Tips for Growing a Sustainable Business appeared first on Carbonhalo.

“We are all about sustainability, having a minimal environmental impact, with the plan to go off-grid.

Our tiny space is completely individual and designed with luxury in mind. Just because your house is small doesn’t mean you have to skimp out on the finer things,”

writes Matt and Lisa.

For any millennials feeling the weight of this transitional burden it is important to remember that any change, no matter how small, is a step in the right direction.

Like Matt and Lisa, it also doesn’t have to cost you your dreams of luxury and comfort either.

To learn how you can take the first steps in minimising your carbon footprint in your home or in your business, take the free Carbonhalo emissions quiz or read more on how you can take positive climate action today.

The post Over 75% of millennials are worried about climate change appeared first on Carbonhalo.