What Asian tech companies should know about ESG
Published on November 2, 2022
With global warming and high fuel costs grabbing news headlines around the world, businesses everywhere are under growing pressure to act in ways that are environmentally sustainable.
To help technology companies in Indonesia tell how well they’re doing at supporting emerging environmental, social, and governance (ESG) standards, AC Ventures has collaborated with Boston Consulting Group (BCG) and The Upright Project on a new report that establishes real compliance benchmarks.
Lauren Blasco, who oversees all things ESG at AC Ventures, recently joined the firm’s venture partner Alan Hellawell on the Indo Tekno Podcast for a freewheeling discussion about the report, including compliance issues specific to Indonesia and other parts of Asia.
The EU is already tightening up its ESG reporting regulations. Likewise, in the US, the SEC will probably soon require that all listed companies speak to ESG more directly in their filings.
As Lauren acknowledged during the podcast, day-to-day life in an emerging economy such as Indonesia can be particularly difficult. Issues like recycling haven’t necessarily garnered the same priority there as they have in more developed nations. Still, though, she believes that Indonesia is ready for a broad and sustained embrace of ESG.
“It all goes back to education, behavior change, and making conscious decisions that will ultimately reflect positive socio-economic benefits for the community. And I believe everyone, whether they’re in the first or third world, is ready for that,” she remarked.
From a business perspective, the development of ESG strategies and frameworks by tech startups can lead to streamlined operations, cost savings, identification of new opportunities, and higher revenues. “It also puts our portfolio companies on the best footing possible, getting ahead of the inevitable regulations that will come,” said Lauren.
ESG for upward socioeconomic mobility
ESG also carries countless benefits for the larger Indonesian community as a whole, she suggested. “ESG is actually all-encompassing across our diverse portfolio. Tech has a lot of social and socioeconomic impact embedded into it — lending platforms for SMEs, financial inclusion and literacy, jobs for the informal sectors, education and increased wages for farmers and fishermen, as well as identifying operational best practices to reduce carbon footprints,” she explained.
Regardless of location, some companies are responding less productively to pressures around environmental issues, Lauren indicated. Some companies have been suspected of “greenwashing” or conveying a false impression to make their products and services seem more environmentally sound than they really are.
But in some cases, a company thought to be greenwashing might simply be struggling over what to do at the beginning of “the ESG journey,” without much knowledge or experience about how to couch their efforts or measure their claims, said Lauren. She added, “I also think a lot of it goes back to having a baseline, to really being able to quantify the impact of your products and services.”
She also noted that AC Ventures has applied the metrics described in the report to its own investment portfolio in Indonesia. She mentioned, “I’m happy to share that our overall net impact ratio at AC Ventures and within the portfolio delivered an above-average +37%. To give you a useful comparative benchmark, the NASDAQ Small Cap Index’s net impact ratio is 29%.”