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Perspectives

Embracing ESG To Improve The Future Of Business “(Forbes Tech Council)”

Alberto Yépez

August 11, 2023

  • Blog Post

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Environmental, social and corporate governance (ESG) programs have become essential for businesses today. Along with countless benefits that come with diversity of thought and sustainable business practices, many of the world’s most respected research organizations like McKinsey and the World Economic Forum have reported stronger overall company performance linked to higher diversity scores.

As a venture capitalist, I observe these opportunities and outcomes all the time. From my firm’s portfolio of emerging cybersecurity companies to the larger enterprise customers they engage, I see firsthand how diverse teams and boards with a demonstrated commitment to ESG perform better. However, venture capital and cybersecurity ecosystems (among others) remain notoriously and regrettably behind the curve. So what can we do to fix this?

Progress starts with accountability.

First, we must acknowledge the problem, no matter how uncomfortable that may be. For instance, although a VC Human Capital survey shows relative progress in gender, racial and ethnic diversity, diversity gains have been uneven and glaring disparities still exist.

A prime example is female representation in venture capital. While the report notes that the overall representation of women in venture capital has increased, progress has not been equal across demographic groups. Forty-three percent of firms reported having at least one female investment partner, yet Black women composed just 1% of investment partners, Asian/Pacific Islander women composed 5% and Hispanic women composed 2%. Meanwhile, White non-Hispanic women composed more than double the other groups at 13%.

The problem doesn’t live exclusively within venture capital, though. The Aspen Institute reports just 4% of cybersecurity workers identify as Hispanic, 9% as Black and 24% as women. According to a report from (ISC)², minority representation within cybersecurity is slightly higher than the overall U.S. minority workforce (26% compared to 21% respectively), yet disparities persist throughout leadership positions and salaries, especially for minority women.

When considering a company for investment or determining potential partnerships, it’s important to examine where the company stands on ESG. Today, there is clear room for improvement and impact.

 

Establish principles and programs that go the distance.

No matter the size or type of your organization, there is no better time to strengthen your ESG program than the present. Here’s what I recommend:

 

Begin by embracing the fact that there is no one-size-fits-all model to ESG.

Understanding what actions to take relies upon what your organization benchmarks against. Some businesses may focus on board and management team diversity while others focus more heavily on attrition rates or employee engagement.

Regardless of the criteria, implementing ESG principles involves setting quantifiable targets and tracking impact. Most importantly, organizations must use transparency and communicate often, even if the company isn’t meeting its goals. Understanding when you’ve missed the mark is just as important as when you meet it.

It’s also important for an approach to evolve over time. Even if you begin by living ESG in your hiring practices and day-to-day operations, you may realize you need more concerted efforts and tangible outcomes. Research what others are doing, find resources and ask yourselves the hard questions while holding the company accountable.

From there, formalize your efforts into the way that you operate. Additionally, you could create a due diligence checklist when approaching new investments or partnerships and produce an ESG handbook to guide your business.

 

Focus your efforts on practical, adoptable corporate social responsibility and DEI measures.

Simple environmental changes, such as recycling, e-waste disposal and carbon offsets on business travel, can make a big difference, as can adopting holistic and responsible governance practices. The diversity, equity and inclusion (DEI) front focuses on how to expand your team: recruiting, hiring and developing team members with diverse backgrounds. For example, more organizations are beginning to improve inclusion for neurodiverse candidates. This is a perfect example of a step in the right direction.

 

Engage the community for resources, learnings and insights—and join in the development of industry benchmarks.

Beyond the walls of your organization, expand these practices by partnering with like-minded organizations looking to advance and incorporate ESG factors into their everyday practices. In many cases, you may even gain access to extensive resources and events through these partnerships.

If you’re in venture, your firm can always join the UN Principles for Responsible Investment (UNPRI), a global network of financial institutions that seeks to advance and incorporate ESG factors into investment practices across asset classes (of which we are among the founding signatories). Similarly, the Institutional Limited Partners Association (ILPA) provides extensive resources, questionnaires, assessment frameworks, and programmatic events and leads an ESG data convergence initiative to establish better accountability and metrics while driving meaningful change.

There are a wealth of incredible organizations looking to improve DEI across cyber and technology. Two that immediately come to mind are Girls Who Code, which is dedicated to building the world’s largest pipeline of female engineers, and NPower, which helps veterans and young adults from underserved communities complete cybersecurity training and transition into promising career opportunities.

 

Creating A Better Future Together

When it comes to ESG, society and industry can always do better. My career has taught me that this rings especially true throughout cybersecurity and VC.

My biggest piece of advice for entrepreneurs and their teams is to work together and challenge each other to be a positive force for disruptive change. This requires holding each other accountable and always being receptive to feedback. These conversations may not always be easy, but we owe it to the planet, our people and each other. Now more than ever, we must prioritize ESG and DEI to make progress.

 

***This blog was originally posted on Forbes.com. You can read it here.***