The Swiss Lead Impact Foundation supports young entrepreneurs in building impactful ventures. CEO Katarzyna Wilk talks to Impact Investor about impact startups and funds, regulation, ESG data, and greenwashing
Non-profit Swiss Impact Lead Foundation promotes sustainable finance and impact investing and encourages collaboration between business and academic institutions.
The organisation supports young entrepreneurs in building sustainable and impactful ventures through its SIL certification program, including impact strategy development, training and mentoring, and connects startups in Central & Eastern Europe with Swiss-based investors.
Founder and CEO Katarzyna Wilk talks to Impact Investor about impact startups and funds, regulation, ESG data, and greenwashing.
Paula Garrido: How would you define an impact startup? Are they equivalent to social enterprises?
Katarzyna Wilk: Within a startup ecosystem, impact is now being defined very broadly. First of all, an impact venture needs to meet sustainability criteria and founders must be values-driven and have a clear intention to make positive and scalable social or environmental impact through their products or services. The assessment of whether a startup has an impact, or potential to develop it, requires a solid preliminary analysis. To develop a startup impact strategy, it is essential to integrate sustainability into the business model and define that impact, which must be scalable, verifiable and measurable.
A social enterprise, on the other hand, is a business with specific social objectives which serve as its main purpose. It aims to maximise profits and, at the same time, maximise benefits to society and the environment but profits are used to fund social programs. Thus, motivation could be similar. However, unlike a social enterprise, impact startups are both profit- and value-driven, but profits are distributed between shareholders, while impacts proven. Impact startups can be part of impact funds, which need to provide investors with a proof of an impact, both an initial one and achieved over time.
PG: Why are investors paying more attention to impact startups?
KW: With a strong global sustainable finance trend, investors are increasingly looking for investments that meet sustainability and impact criteria. In Europe, startups are very attractive from an investment point of view, and investors more and more seek those that meet sustainability criteria and have scalable social or environmental impacts. This allows investors to invest in line with their values, contribute to resolving social or environmental challenges and support young entrepreneurs.
PG: You offer a program to startups wishing to integrate sustainability and impact into their business model. Which areas do they usually need more help with?
KW: Every single startup is different and the way we work with each of them is also different. Some of them would come to us with a very limited knowledge of sustainability and ESG but they know it is important and they need help implementing it. Others might have an impact strategy already in place but they want to move further, for instance, because of fundraising. Our impact certification program has five key elements – initial impact assessment, trainings, impact strategy development, coaching and business advising, and the latter three are always tailor-made. We also support internationalisation, which in fact means scaling an impact, and communication strategy development, so the story of values, sustainability and impacts becomes more visible.
PG: Collecting and analysing ESG data can be complex and time consuming. How should an early-stage startup approach this issue?
KW: The process of collecting ESG data by startups should not overshadow other challenges and ongoing key processes. It is essential, however, to instill early on awareness among founders of what ESG data is, what are the metrics and methods for data collection, and what is the purpose of this effort. I do not recommend initiating data collection very early, simply because these organisations are not yet sufficiently mature, and their contexts and circumstances fluctuate significantly.
ESG data is essential before an IPO. In this case, data collection should be initiated at least 12-18 months beforehand. It is all about trust, values, purpose and strategy. ESG data helps to guide the company in its efforts towards achieving certain goals, for instance net-zero carbon emissions or diversity and inclusion, and serve as a basis for non-financial performance assessments. It is also a strong sign of transparency and accountability with shareholders, regulators, and other stakeholders.
PG: What’s the best antidote against ‘greenwashing’?
KW: There is an increasing awareness of greenwashing – or impact-washing – within sustainable investment. As a result, there is a growing need to establish common standards and methods of verification. Similar to the EU taxonomy, which helps to define and verify sustainable financial products, the industry also needs an ‘impact taxonomy’, including clear standards and credible measurement methods, so we can be sure that impact investments, including impact startups or impact funds respond to real socio-environmental needs, and bring in tangible results over time.
As market demands continue to grow, delivering credible data and measurements to investors on investment’s impact and how it evolves over time is necessary. Thus sustainability and impact reporting should be made available to investors at least once a year.
PG: What is needed in order to accelerate the number of impact startups in the market?
KW: New regulations and professional standards, as well as education, in particular at the university level oriented towards ESG and sustainability or SDGs integration into business core are crucial in this context. The latter would guarantee a more permanent change in business attitudes and behaviours. Also, financing conditional on ESG strategy and performance could serve as an incentive – if banks, VCs and individual investors demand more data and engagement in this area, the market would respond with more credible solutions that are better aligned with real socio-environmental needs.