#ESGinVC - Fabian Heilemann from Earlybird VC
"In the end, it is all about accepting entrepreneurial responsibility for the people and the planet and not seeing yourself as a pure financial profit generator"
How did Leaders for Climate Action get started?
I have a few friends who are all internet entrepreneurs and investors from Berlin and more or less ambitious surfers. On a surfing trip one and a half years ago in Tenerife, there was a day with little waves.
We got into a long discussion around climate change, our role in this crisis and if we are doing enough as entrepreneurs and investors. At the time, most of us were offsetting our carbon footprint, but that was mostly it. Nobody was politically active or really leveraging her or his assets.
This conversation was the starting point and over the next couple of months, we as a group committed to taking action by starting Leaders for Climate Action. Since then, over 400 companies with 100,000 represented employees have joined; we´ve expanded to other European countries and achieved more than a quarter million tons of carbon reduction and offsets in a little over a year.
What are your main initiatives with Leaders for Climate Action?
Our primary objective is to help entrepreneurs run their companies in a much more eco-sustainable way than they did before. This includes their entire up — and downstream supply chain, their office environments, and travel policy.
We empower them by providing scientifically-verified frameworks to measure and offset their carbon footprint on an annual basis, so essentially, it’s a reinforcement cycle. The measuring is done together with third-party climate auditors, where different measures –depending on the industry– come into play for the reduction.
For example, a software company where most of the footprint comes from server electricity is a completely different game than let´s say Zalando, which ships physical fashion products across the world. When it comes to offsetting, we cooperate with Gold Standard certified partners to really yield the results that are promised.
“Our political agenda is very narrowly focused on implementing a Germany- and European-wide price per emitted carbon ton north of 80 to 100 Euros.”
The secondary objective of Leaders for Climate Action is lobbying work. We coordinate efforts to publish papers, speak on panels, meet politicians on a national level and increasingly European level, and harness the power of our member brands like Zalando, Flixbus, Celonis, and Delivery Hero to gain attention from political decision-makers.
Our political agenda is very narrowly focused on implementing a Germany- and European-wide price per emitted carbon ton north of 80 to 100 Euros. Today, politicians are talking about 20 Euros per ton, but only at the level of 80–100 Euros will it really have an impact on changing consumer and enterprise behavior. At 20 Euros a ton, it simply goes unnoticed.
How do you see the approach to ESG changing in tech companies, independently from investors?
Especially in the past six months, alongside Covid, Black Live Matters, and climate change becoming so obvious that you can´t ignore it, there has been a strong uptick in the ESG momentum across tech companies. You can see with the pledges by Apple, Amazon and Google that the giants are making serious efforts to become carbon neutral in the next 10–15 years.
“In the end, it is all about accepting entrepreneurial responsibility for the people and the planet and not seeing yourself as a pure financial profit generator.”
Here too, different business models require different measures. For some, it is easier to get there, for some it is harder and will take longer. But generally, there is a very strong momentum towards accepting responsibility. In the end, it is all about accepting entrepreneurial responsibility for the people and the planet and not seeing yourself as a pure financial profit generator who doesn’t care about the damages one creates while generating profits.
What are the main costs and benefits of implementing ESG policies?
That is a complex question, because you can think of costs in purely financial terms, but also in terms of cultural costs, brand costs, and so on. If we first stick to the economic costs and benefits, using fully renewable electricity in most countries usually comes in 10 –20 % more costly than using fossil energy. But this is one of the few cases where you get higher costs if you choose to be sustainable. The majority of measures will actually save you costs. For example, if you choose LED lights to run your office, it is more sustainable and saves energy. The same is true for moving meetings online and travelling less.
By and large, most sustainability measures help to save costs. The only add-on that is really an incremental additional cost layer is the offsetting. If you don’t do it, it costs zero. If you do it, depending on the magnitude of your emissions, you will get high-quality offsetting at around 10–20 Euros per ton. Paying one or two Euros per ton is simply not enough, but also you don’t have to pay 100 Euros.
But to put things into perspective: At an investment company like Earlybird, with a couple of millions of OPEX a year, we emit a few hundred tons of CO2. That means we are talking about 4.000–8.000 Euros to compensate all emissions. Compared to millions of operating costs annually, that is not even 1%. It does depend on the business model, but most businesses should be able to absorb this incremental cost of offsetting.
“If you want to attract talents from generations X, Y and Z, you cannot ignore your ESG policies and your multidimensional ESG footprint.”
When it comes to the benefits, many measures automatically result in savings because they consume less resources. That can be energy, but it can also be other natural resources. On top of that, you can also think about ESG in a broader sense. We need to be mindful of the studies by the likes of McKinsey showing that smarter and more balanced decision-making originates in teams with high academic, cultural and gender diversity.
Last but not least, if you want to attract talents from generations X, Y and Z, who are much more mindful of the impact and role of a company in the ecosystem, you cannot ignore your ESG policies and your multidimensional ESG footprint. Otherwise, you will simply not be attractive to the best talent of the younger generations.