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Why Indonesia’s tech startups should care about ESG

Published on November 3, 2022

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There’s more and more buzz these days about emerging standards for ESG in the global economy. Yet, while the relevance of ESG to certain industries such as consumer packaged goods or mining, for example, seems self-explanatory, what about its place in the digital economy?

Lauren Blasco, Head of ESG at AC Ventures, recently teamed up with Boston Consulting Group and The Upright Project to produce a report featuring the first quantifiable ESG standards for Indonesia’s tech sector. She then joined Alan Hellawell on the Indo Tekno podcast for a lively conversation about what the report’s findings mean for tech companies in the region. Here are a few excerpts.

Why Indonesia’s tech startups should care about ESG

The transcript below has been condensed and edited for focus and clarity.

Alan: Now, clearly this is not the first time you’ve had this question posed to you, and won’t be the last, but why should tech startups care about ESG? They frankly seem focused on hand-to-mouth, day-to-day struggles such as extending the runway and fundraising. How is it important in this context?

Lauren: We get that question quite often. There are numerous ways to look at it. For startups, there is risk mitigation, streamlining operations and identifying opportunities, access to additional capital that focuses on ESG strategies, and a potential valuation upside.

Alan: Maybe let’s peel the onion back a little more. When you talk about potential valuation upside, can you give me an example of how that might work?

Lauren: Sure. If you look at some of our portfolio companies that are integrating ESG into their overall strategies, it is actually creating a lot of efficiencies within their operations. So if their revenue is actually increasing, then their overall valuation will increase. This is done by using their ESG strategies to streamline both their operations and mitigate their potential risks down the line.

Alan: What’s more, not just our own, but other LPs are increasingly insistent on portfolio companies that embrace ESG best practices. Therefore, if you are not articulating a strategy, you may not attract some of that tier-one, blue-chip capital that may in turn improve your value. 

With the metrics you’re referencing, Lauren, it’s clearly not a subjective, touchy-feely movement we’re talking about. In fact, you’ve mentioned in our past discussions a need to do baselining and benchmarking. How do we do this? Can you explain in layman’s terms how we can capture or measure impact in a tech context?

The importance of baselines and benchmarks

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Lauren: Creating a baseline allows companies to know where they stand, what they’re doing well, and what they could be improving on – supporting the development of an impact strategy and framework. 

We value and understand the importance of a third-party platform for benchmarking. To ensure full transparency for all stakeholders, we chose The Upright Project as our platform to measure impact holistically across products and services in a standardized format.

It also benchmarks against relevant industries to give our portfolio companies a sense of where they stand in their sector.

Alan: Now also in our recent discussions, you’ve mentioned phase one and phase two. What are we talking about?

Lauren: So phase one was completing the net impact assessments with The Upright Project, creating our baselines, and working with the portfolio companies on their individual ESG strategies. Phase two will be diving deeper into carbon and decarbonization strategies.

Alan: In retrospect, what was the most fascinating discovery you made through this report with BCG?

Lauren: By using data to quantify our ESG impact across our portfolio, we can understand AC Ventures’ impact as a fund and see where we sit in comparison to other indexes. So we are scoring very well across our portfolio. We can understand and quantify where we are and figure out where we want to go next.

Enjoy the full episode for free on SpotifyApple, and Indo Tekno.

ESG is for startups, too, not just big companies

See also: What Asian tech companies should know about ESG
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