Environmental (E)

Environmental impact attracts much of public attention because climate change and pollution are some of the most pressing issues the world is currently facing. Start-ups create a varying degree of impact to the environment by directly and indirectly emitting greenhouse gases from the use of vehicles and the consumption of energy. Failing to address these environmental impacts may result in a potential loss of confidence among customers and different stakeholder groups. 

In addition, in view of the escalating environmental regulatory requirements, companies that do not comply with environmental standards may risk paying heavy penalties and damaging their corporate image.

Social (S)

Social factors relevant to all start-ups include data protection and cybersecurity. Companies that fail to implement proper systems for handling consumers’ personal data with due care will face an increasing risk of consumer backlash, regulatory penalties and damages of the corporate image.

Employment, community relation and social inclusion also fall under Social factors in ESG. For example, businesses that treat their employees well, sell their products/services ethically and engage in philanthropy tend to be viewed more favourably among customers, particularly the youth. Moreover, socially responsible corporations are more able to recruit and retain talents.

Conversely, there have been some instances of ill-advised businesses running advertising campaigns that inadvertently carry racially insensitive messages, and receive backlash from the public.