Building responsible businesses
- Date Published
We published our first responsible investment policy ten years ago. Since then, the concept of responsibility within the investment industry has really gathered momentum, alongside broader interest in responsible business practice. However, forging a clear corporate path through a field of jargon and looming regulation can be intimidating and so for the latest in our SEP Growth Series events we gathered our portfolio CEO’s for a discussion on the topic with expert input from Alison Hampton of Alma Verde Advisors and Jim Wilkinson, CEO of SEP backed Zuto.
Whether branded as Environmental, Social and Governance, Corporate Social Responsibility or Sustainable Development Goals, these terms encompass a vast array of themes from climate change and waste regulations through responsible marketing and data protection to talent retention and diversity. There is clear market data emerging to demonstrate that managed well, these non-financial areas can help improve business growth. Encouragingly 88% of our those attending our event already believe that responsible business practice has a positive impact on business growth (12% believe it not yet proven). Managed badly, these non-financial areas can result in reputational damage, regulatory fines, business interruption, the loss of customers and revenue reduction.
The challenge for the high growth technology companies that we invest in is to determine the appropriate blend of sustainability and governance for their own business. Get this right and the value creation opportunities are significant including access to new markets, brand enhancement, new product development and employee engagement.
As Alison commented: “The pandemic forced businesses to consider employee and customer health and safety like never before, bringing the connection between business and society into sharp focus. Business cannot thrive when the societal balance is disturbed, and business is part of ensuring that balance can be maintained.”
Whether pushed into new practices by climate change regulation and commitments to a net zero economy or pulled by ethically and environmentally conscious customers, corporate responsibility is set to stay as a key measure of business performance. It is also increasingly being considered by corporate buyers as part of an M&A agenda.
Jim made a point echoed by our CEO audience that: “Ultimately it comes down to doing the right thing.” For Zuto this equates to offering customers simplicity, fairness and transparency in pricing; providing employees with a non-hierarchical structure, an inspiring mission, and a broad range of benefits including mental health care; and supporting local charities and the Manchester community. Responsible businesses think about people and planet as well as profit, combining the three to help fuel growth.
As Alison concluded: “Responsible practice is what customers and future investors will expect. As you consider your future strategy, whether that’s further investment, sale to a strategic buyer or listing on the Stock Exchange, your business value will be determined by how future fit your business is. This means what its value to society is and how prepared it is to take its place in the changing world and meet the sustainability challenges of climate change, biodiversity loss, inequality and so on.”
The businesses that will emerge the strongest are the future thinkers, those most able to quickly adapt to new regulations, market dynamics and changing customer demands. Growth stage technology companies should be at an advantage due to their culture of innovation and it was apparent from our discussion that there are some fantastic projects being pushed along by portfolio employees alongside strategic initiatives being led by senior management.
One of the key components for success in incorporating responsible business practices is to focus on the material issues for your particular business. So, to help our portfolio companies navigate this area, and to allow us to share best practice across our management teams, we have prepared our own bespoke responsible investment framework which covers the three key themes we consider most relevant to growth stage technology businesses, namely Culture, Society and Governance. You can find out more about our approach to investing responsibly here.
SEP is a signatory to the UN Principles of Responsible Investment.
Alison Hampton is an ESG and responsible investment specialist and until December 2020 was a member of the BVCA’s Responsible Investment Advisory Group.
Jim Wilkinson is CEO of SEP portfolio company Zuto. Based in Manchester and Macclesfield with over 200 employees, Zuto is the UK’s leading online broker for the used car finance market.