Talks of recession aside, one sector is booming: climate tech. On the heels of November’s COP27 talks in Egypt, myriad reports have trumpeted new investments, partnerships, startups and jobs across the low-carbon economy, from climate tech to climate finance, sustainable natural infrastructure to sustainable digital infrastructure.

According to U.K. entrepreneur network Tech Nation, the number of new tech companies tackling climate change quadrupled between 2010 and 2022. PwC reported that in a 12-month period between 2021 and 2022 climate tech investments represented more than a quarter of every venture dollar invested.

Inevitably, these companies experience a halo effect: Urgent climate action is needed, and climate-focused businesses are building the low-carbon world. But the rush to create the low-carbon economy doesn’t mean these companies can overlook environmental, social and governance (ESG) strategies. Leaders of new climate-action-focused companies need to integrate ESG from the beginning.

Why ESG matters — even for climate-friendly companies

For companies that aspire to last a long time, ESG is table stakes: Investors expect companies to manage their social and environmental risks, capture opportunities and report transparently and credibly on their progress, opportunities for improvement — as well as their ESG-focused policies, practices, programs and governance structures. Integrating ESG into corporate strategy is a critical way for companies to show investors they understand how ESG issues affect their future.

Beyond meeting investor demands, an ESG strategy can also help companies build trust with other stakeholders, including customers, consumers, business partners, government regulators, advocacy organizations and others. Used strategically, ESG can help companies accelerate sustainable growth. On the other hand, companies that pay only cursory attention to ESG face accusations of greenwashing.

For companies dedicated to climate action, ESG is even more important: Investors, customers, clients and the public will care even more about these companies’ social and environmental impacts because of the mission embedded in their business strategy. Integrating ESG from the beginning is a good way for climate startups to ensure their company is sustainable in every way that matters to these stakeholders.

Three essentials for climate startups to integrate ESG

As a recruiter who has spent more than 25 years in the ESG and sustainability space, I know companies can’t succeed without the right investments in people — starting with a head of ESG. Here’s my advice for new climate startups to start building a great ESG team:

1. Know your why: ESG is a dynamic field, with new regulations, evolving expectations and new issues that are only expanding the requirements for what it means to be a sustainable company. In that context, it’s important to understand why ESG matters to your company — which social and environmental issues affect your business.

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