Upright: ESG era creates new opportunities for tech startups
Published on February 1, 2023
New initiatives on measuring ESG and impact are delivering fresh opportunities to Southeast Asian startups, said Toni Laitila, VP of Investor Business at The Upright Project.
In a recent podcast with Lauren Blasco, Head of ESG for AC Ventures, Toni suggested that, given the growing need for companies to prove sustainability, startups are sometimes better poised than established businesses because they can build ESG “directly into their DNA” from the early days.
Based in Helsinki, Finland, Upright has created an AI-enabled framework and various tools that companies can use to measure their net impact ratios. In this age of heightened awareness, such data is crucial for reporting ESG performance to key stakeholders like investors, managers, and even customers.
Lauren learned about Upright’s quantifiable method first-hand by using it to gauge the impact of ACV and its investment portfolio in a new report titled, “Scaling Impact with Technology.”
Lauren and Toni unpacked how startups and other companies can make the best use of Upright’s proprietary software for measuring and reporting impact. Here are a few excerpts from the conversation.
Upright: ESG era delivers new opportunities for tech startups
The transcript below has been condensed and edited for focus and clarity.
Lauren: Would you please give us a little bit of background on what drew you to The Upright Project?
Toni: The company mission was a key motivator. Its mission is to create concrete business incentives for companies to optimize their net impact.
How we’ve approached this is to identify the stakeholders of these companies – which include their investors, employees, and customers – and to provide better data about the impact and ESG to these stakeholders. So, as a result, investors would start to allocate capital to the companies that are actually solving important problems.
We are using scientific literature as the main data source. We are mapping the impact of 15,000 products and services against a database containing over 250 million scientific articles.
Lauren: What’s considered a good ratio, and how could a company parlay a great ratio into what would equate to a higher valuation?
Toni: The net sum is the sum of costs and gains. The score for a net impact ratio is calculated similarly to a net profit ratio. But the total score isn’t the only important thing. It’s also important to understand the shape of the company. Where do they have positive impacts on ESG, and where do they have negative impacts?
If you have an existing portfolio of products and services, you can improve valuation by growing the share of the business that’s already solving important problems.
You can also try to improve the impact of all of your products and services, instead of just scaling the most positive ones.
Thirdly, you can launch new products and services. In larger companies that weren’t built with ‘impact in mind’ in the first place, many are now reinventing themselves and starting new businesses that are ‘impact-first.’ For example, many energy companies are now rolling out new renewable energy businesses.
If you’re a growth company that’s not that far along, you can just get ESG directly into your DNA right now, instead of going through the expensive transitions that some bigger companies are now experiencing.
Lauren: In this respect, do you think there’s a chance for the Indonesian tech market to leapfrog other regions?
Toni: There’s a huge, huge opportunity for Southeast Asia’s tech industry. Everyone today is starting to move toward this kind of impact thinking. Startups might be able to sort of skip ahead of older companies if they understand the impact of their core businesses from day one.