Purpose for scale ups — the agile advantage
Nimble but impactful companies that are scaling up can use size to their advantage by embedding ESG as they grow.
Scale-ups face knowledge and resources gaps but can blossom if they adopt their larger competitors’ proven business practices, according to research by consulting firm McKinsey. The study relates to business practices broadly, but the findings are relevant for the adoption of ESG considerations too.
In the world of purpose, scale-ups can apply new strategies and embed new values at a much faster pace than the incumbents they are trying to disrupt.
Weaving a new purpose-driven strategy throughout a large corporation can be complex, leading many to succumb to the temptation to put public relations over substance. That’s where scale-ups have a clear advantage: what small companies lack in financial firepower, they make up for in agility.
While medium-sized enterprises only comprise 2% of companies, they account for around one-third of GDP and employment in many countries. Purpose-driven scale-ups can have a disproportionate impact on the world around them.
Embrace newness
In the UK, 77% of SMEs consider their business purpose-led. The money is following: a 2019 report by venture-capital firm Atomico found that capital invested in European purpose-led tech companies grew from $0.7 billion in 2015 to $4.4 billion in 2019. Increasingly, tech companies are founded with a purpose in mind: entrenching impact-driven practices throughout their operations as they are being built, instead of a retro-fitting ESG concerns into a legacy outfit .
Leverage your USP
Yet wasting precious time and resources on initiatives that don’t deliver genuine real-world impact is a constant danger for growing companies. The key to businesses achieving real purpose, says Professor Alex Edmans of the London Business School, is not tackling every purpose-driven issue or treating all stakeholders the same. Instead, they should focus only on their unique strength.
Well-intentioned founders that wade into ESG without first rigorously and dispassionately assessing their universe of stakeholders and the business’s own strengths and weaknesses risk squandering their early-mover advantage or even inadvertently greenwashing.
