Last week in part five of this series on Making Impact Work for Startups, we discussed how to maintain your team's impact initiative and momentum—this post is part six. To see the entire playbook with a full background on using Founder Institute's For Progress impact metrics framework, we recommend you start at part one.
If you're an impact startup founder, enter your 1-minute pitch video at PitchForProgress.com by May 28th for a chance to pitch live to impact investors in the July online Demo Day event + win prizes!
Background
Unless you are totally vertically integrated, your startup is likely just one node, a part of a bigger network of interdependent service providers or product suppliers. And especially for eCommerce and physical products, the lion’s share of companies’ social and environmental negative externalities are often hidden along that supply chain. A typical consumer company's supply chain is responsible for over 90% of its environmental impact and over 80% of greenhouse gas emissions.
Unfortunately, overall impact potential for these companies will remain minimal, if they only focus their efforts on the internal company and its core team. And so far, of the companies that have joined the UN Global Compact, only 17% demand that their supply chain partners adhere to the responsible business framework supporting the SDGs (referred to as the “Ten Principles”).
But because all the nodes of a supply chain rely upon one another for doing business, founders can, in fact, leverage their influence to encourage others to also adopt better practices.
Action Points
To begin, start by simply asking your suppliers for any existing reports on sustainability practices, diversity and treatment of employees, or other areas of social and environmental responsibility that align with your own core initiatives. If they have nothing to show you, that is a red flag in itself - ask them if they would be able to provide that information within a reasonable time frame.
Take a serious look at the information they provide. Would you be happy with your own company, if it operated by their standards? Identify problem areas, and suggest improvements, as well as possible collaboration with your company, to help them work toward achieving better practices. As discussed earlier in this series, you can use Founder Institute’s free Progress Planner tool to choose company impact goals and establish iKPIs to track your progress.
General recommendations from Blume Global include consolidating shipments, identifying new technological solutions, and better planning to reduce overproduction. Supplier companies that are genuinely concerned with not causing damage to the planet will welcome constructive feedback. But when this is not the case, start to apply pressure.
Do your research on similar brands that offer the same product as your supplier, but that may be doing more to affect positive impact. You can use this information to try to push for better practices from your own supplier, and to show that you have alternative options if they fail to make an effort.
If necessary, make the tough decision to cut companies out of your chain and insert others. If you anticipate this, try to set aside some extra budget to support switching businesses in the supply chain for more impact-conscious companies. You can search for more localized options, especially if you have been sourcing materials internationally; or explore 3D printing options for components you need, as additive manufacturing can be done from almost anywhere in the world.
Yes: you might end up spending more money. But do not dismiss the business value of enforcing sustainability among suppliers, or the positive effect even a small founder/buyer can have when advocating for better practices with their larger supplier network. Almost a third of the UN Global Compact companies who are not currently monitoring their supply chains, said this was because they did not see a link to business value. You can help shift that mentality by acknowledging that sustainability across your entire supply chain is business value in itself: It is proof you are going above and beyond. It is a selling point. It is marketable. And it is also a must-do for a growing number of conscious consumers.
Lastly, do not stop at the first-tier of your supply chain. It is where communication is easiest, but that is exactly what lets companies further down the supply chain (or your supplier’s suppliers) off the hook when it comes to ethical standards. Here are a few more tips via Thomas Publishing for keeping track of third-party suppliers.
Impactful Tip
It does not matter how large your supplier organization is - ultimately, you are their client. That gives you leverage - you can leave at any time - this makes it preferable for them to meet your requests, especially if multiple companies begin making similar demands.
Indeed, you will have greater influence if you find other organizations that are sourcing from the same supplier, and team up together with them to make joint demands to the supplier company.
Case Study Example 1: Polen
- Polen (FI Rio de Janeiro) is a leader in Brazil’s emerging circular economy. The blockchain-enabled tracking system credits companies whose waste byproducts are diverted onto other manufacturers, who then recycle and incorporate that would-be waste as raw materials for their own supply chains.
- Though Brazil’s recycling system is powered primarily by low-wage informal workers who collect and sort recyclable materials, technology providers like Polen have been able to work closely with collectives of these informal recyclers, helping them to gain additional market access for their recycled materials, and provide greater product lifecycle transparency.
- Blockchain-based applications like Polen allow for supply chain participants to trace exact origins of recycled materials. Integrations with other elements of Circular Economies, like Carbon Pricing for offsets or credits, can help to further strengthen the case for known provenance in materials sourcing, and help build a next-gen supply chain illuminated by digitized information and insights.
Case Study Example 2: TheGreenStop
- TheGreenStop (FI Montreal) is an impact company founded with the mission of eliminating unnecessary plastic waste, starting with large events.
- The company’s flagship product is a water-refill station for event venues, which works to eliminate the use of single-use plastics in the form of “disposable” water bottles that too-often end up in landfills. TheGreenStop was recognized in 2019 with the top prize in the Aquahacking awards.
- Elimination of unnecessary waste from product supply chains, as well as from habitual usage in service sectors like plastic bottles consumed en masse at large events, are changes that while challenging to make at first, can actually be easier (and cheaper) to maintain going forward than the older, more wasteful way of doing things.
Next in this series on Implementing iKPIs and making impact work for startups, we explore how to engage with external partners on your impact initiatives—because impact is inherently a collaborative effort, and founders should not try to go it completely alone even when acting as a trailblazer.
Making Impact Work for Startups: the iKPI Playbook
In 2015, the UN released 17 Sustainable Development Goals (SDGs), an urgent call for governments, businesses, and organizations to align efforts towards “a shared blueprint for peace and prosperity for people and the planet.” As business leaders, it is past time to assume our share of this indispensable responsibility. We cannot rely solely on governments and large organizations to act without our support.
The biggest problems of humanity can and must be solved by entrepreneurs, who are currently the most effective catalysts for change in the world. We are therefore calling on entrepreneurs to form “Impact Companies” that address SDGs such as eradicating extreme poverty, ending world hunger, and achieving gender equality. To be successful, we believe entrepreneurs should weave sustainability into a concept we all understand - KPIs. That’s why we’ve come up with “impact” KPIs, or iKPIs.
The Founder Institute has put together a free Progress Planner tool to search and generate iKPIs, as well as a playbook for startup founders to work towards becoming an Impact Company through realistic, trackable steps. To help guide entrepreneurs, we will provide supporting resources, including practical iKPI recommendations, real-life applications and metrics, and example case studies, through 10 key steps - this post is #6 in that 10-part series.
The Founder Institute believes we cannot rely solely on governments and big organizations to fix the world's problems - the time is now for entrepreneurs to also do their part.
Use our free For Progress planner to search iKPIs (Impact Key Performance Indicators) by keyword, or browse iKPIs by the 17 UN Sustainable Development Goals. Don't be intimidated by seemingly impossible impact metrics - instead, find specific SDGs that your business can positively influence.
Try the Progress Planner tool at FI.co/Progress, or learn more startup impact initiatives across the FI global network at FI.co/Impact.
