Young entrepreneurs want to solve real world problems

What do young start-up entrepreneurs, sustainability, and the Bremen Town Musicians have in common? A fulfilling experience and a new milestone in my sustainability career.  

I recently received an invitation to hold a workshop for a student start-up competition in Bremen. I knew the city is far north, but not how long the train ride would be. Regardless, I said yes, and looked forward to meeting the participants and to visiting the Bremen Town Musicians.

This year´s event theme was sustainable business. The workshop focused on the premise that a combination of purpose and profit is possible, desirable, and the new normal in business.  

Do investors really care?   

One of the questions I got before the workshop was: do investors really care about sustainability? Or do they just focus on maximising profits? If they do talk about sustainability, is it only to pay lip service to a mainstream trend?  

The question was relevant for young entrepreneurs who: 

1. Have sustainable business ideas and want to solve real world problems
2. Need to pitch the feasibility of their business plan to investors.  

In my introduction, I referred to Larry Fink’s annual letter to CEOs. In his letter, the CEO of BlackRock delivers a manifesto of why companies should have a sustainable strategy and the reasons investors demand it. The fact that BlackRock – the largest asset manager in the world, with 8,5 trillion USD assets under management – has been threatened by the Texas government for driving an ESG agenda, is ironic. Once criticized for caring only about profits, investors are now accused of being “woke”. What an interesting change of situation.   

Sustainability and company valuation 

According to the OceanTomo study, 90% of the valuation of companies in the S&P 500 is based on intangible assets – including brand, reputation, intellectual and human capital. Building a brand of value and consistency requires a sustainable strategy. Companies might have different ways of reaching this level of brand value, but on the long run, doing good while doing well keeps them going.  

The percentage of tangible versus intangible assets in the valuation has reversed since 1975, supporting the case for sustainable business models which create value for all stakeholders, on the long run. And while start-ups are still far from being included in an S&P index, they have the chance to incorporate sustainability thinking from the very start.  

It´s not just investors: clients and employees care too 

For a group exercise, we split into three teams: Investors, Customers and Employees. The exercise focused on a major fashion retailer, accused of greenwashing after launching their “sustainable fashion collection”. Activists and customers alike did not buy it. The company was heavily criticized and even sued for their claims, and for using mainly fossil-fuel derived synthetics for most of the clothing produced. Moreover, fast fashion aims to maximize profits, and not to produce sustainably, reduce waste or encourage mindful consumption.  

The stakeholder groups were asked to answer two questions:   

• How did the actions of the company and the recent greenwashing scandals affect their group?   
• What were the group’s demands to the company to handle and change the situation?   

All three groups claimed to be impacted by the actions of the company. Some of the negative effects brainstormed were a decrease in sales and profitability, a lower brand reputation, and loss of trust in the company.  

Demands were made for more transparency, including in the supply chain, and a clear change of course. One idea was to work with NGOs who would advise how to produce sustainably and reduce waste. The speaker for the employee group started by expressing their frustration and disappointment. They also questioned whether this was the right company to work for, even if it feels like “family”. This last statement got a lot of giggles, as a result of the inflationary use of “being like a family” in internal communications over the past years.   

The students’ inspiring, often emotional answers revealed three takeaways:  

1. Know your stakeholders. To create a sustainable strategy, companies need to define and analyze the interaction with different groups of stakeholders, listen to them, and take their concerns and demands seriously. 
2. Greenwashing is bad business. Nobody believes deceptive claims anymore. Using sustainability as a sales and marketing tool – without having a credible plan or goals based on real KPIs – will damage corporate reputations.
3. Empathy is key. Understanding your stakeholders and their demands, as well as your impact is a must for building a sustainable business.  

The case study showed participants how we are connected in all our roles, as shareholders, employees, or consumers. We are all affected by how companies conduct their business. Not only investors, but all stakeholders demand transparency and a sustainable course of action.    

The workshop filled me with energy, and I found that working with students is a win-win situation. I thrived on the questions and feedback, and loved learning about the business concepts of the finalist start-ups. Young entrepreneurs build their businesses on the desire to solve real problems, using creativity and technology.