The relevance of ESG for BPI’s portfolio companies

Environmental protection, social issues, and sustainable corporate governance (Environmental, Social and Governance – ESG) are becoming increasingly important in the venture capital (VC) and start-up sector. Despite a challenging year for markets in 2022, BurdaPrincipal Investments (BPI) takes stock of the positive results in the latest ESG report: The report, published for the third consecutive year, shows an improvement for BPI portfolio companies compared to previous years. The growth capital provider of the media and technology company Hubert Burda Media was one of the first VCs to address the ESG topic in detail and presented its first report in 2021.

“We are pleased to see our portfolio companies evolve each year in terms of ESG criteria and other related areas. Of course, there is still potential for development, but we welcome the opportunity to work on these together with our portfolio companies. At BPI, we see ESG as a comprehensive approach and a shared journey with the portfolio teams,” explains Clare McCartney Beer, Chief Operating Officer at BPI. “2022 was a challenging year for start-ups and other issues such as overall business growth and revenue performance required increased attention. As investor and board member, we see it as an opportunity and our responsibility to help portfolio companies advance with both economic and sustainability issues.”

Eight dimensions of ESG were covered in the survey that BPI conducted amongst the portfolio companies. Particularly positive developments were seen in the areas of team and work environment, data protection and security, supply chain management, legal and regulatory aspects, and in diversity and inclusion. A slight upward trend was also seen in environmental footprinting, governance, and sustainable product design. The report also shares insights into best case practices across BPI’s start-up portfolio in 2022 and their goals for 2023 as well as showcasing how BPI themselves will address ESG internally in the coming year.

Data protection is key

BPI’s portfolio companies are aware of the importance of data security: half of all start-ups employ far-reaching measures to protect their data. These include working with special data security teams and providing security training for employees. In doing so, the companies go beyond the basic, local requirements stipulated by the European General Data Protection Regulation (GDPR).

Focus topics: Diversity, inclusion, and a good working environment

94 percent of all BPI portfolio companies are dedicated to diversity and inclusion measures. For example, they pay attention to gender balance and implement measures to counter discrimination (i. e. with appropriate wording of job advertisements and unconscious bias trainings). A significant development was seen with the increase of a balanced gender ratio within the management level from 38 percent in 2021 to 44 percent in 2022. At employee level, the ratio is balanced at 81 percent.

In 2022, “Mental health” initiatives have also been implemented by half of the portfolio to meet current work and team requirements. This became particularly relevant during the COVID-19 pandemic. A similar trend can be observed regarding other benefits such as flexible working hours and home office. Hybrid work is offered by 88 percent and flexible working hours by 75 percent of all portfolio companies.

The importance of supply chains: Who do start-ups work with?

In addition to internal aspects, more and more companies in the BPI portfolio are attaching great importance to their value chain: 75 percent cite monitoring suppliers as important, knowing where and how the raw materials are obtained and how their production process works.  44 percent go one step further and request that their partners commit to sustainable production by signing up to the “Supplier Code of Conduct”.

A shared journey for BPI and its portfolio companies

With the help of trainings and workshops, BPI’s experts work together with the portfolio companies on the ESG criteria. One example is a workshop held on cybersecurity. In this way, teams gain insights into existing expertise at BPI and Burda and are encouraged to engage in joint, ongoing training. Furthermore, ESG criteria are a fundamental component for the VC, which has been listed in the top 10 of the Equality Group’s Inclusion Index for diversity and inclusion for two consecutive years. BPI also continuously analyses its due diligence process and internal measures to ensure continuous improvement.

Insights on measures and cooperation with start-ups can be found in the interview with Clare McCartney Beer on last year’s ESG Report (“ESG is more than a box-ticking exercise”).