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You can find the original interview (NL) in Trends magazine here.
Sustainability is the corporate slogan of Studio D, founded in 2020. The young company helps organizations create sustainability strategies and policies. Clients range from large organizations, such as the research center IMEC, over SMEs to start-ups. Founders Charlotte Vandierendonck and Saartje Boutsen started the Leuven-based company after gaining expertise in sustainability and consulting earlier in their careers. Vandierendonck, for example, did an internship at the United Nations, worked as a consultant for Capgemini and later for CKS. That FNG Group clothing company was acquired by JBC & Mayerline.
"A start-up does not have to change existing policies. It can implement the sustainability policy immediately." - Katleen Vandersmissen, HERAN Partners
An example of a small organization that came knocking on Studio D's door is the Antwerp-based investment company HERAN Partners. HERAN, which employs eight people, was founded by Herman Verrelst, the CEO of Biocartis, top investor Annie Vereecken, Katleen Vandersmissen and Joris Mortelmans. For its first fund, HERAN HealthTech Fund I, HERAN raised €75 million two years ago. Led by managing partner Katleen Vandersmissen, HERAN has stakes in ten healthtech start-ups and is working on a new fund. That fund and the organization itself must become more sustainable, HERAN decided.
1) How do I find the right balance with limited resources?
“Just start it, grab what you can do. On the other hand, it shouldn't become too unwieldy a reporting mechanism either.” says Charlotte Vandierendonck. “You have to find the proper balance between workload and action-oriented and impactful work. We look at the core activities first. What is the potential negative environmental, material and social impact of your product? Do you know where your raw materials come from? In parallel, we look at how your product contributes to the solution. What need does your product solve? Where are its strengths and positive impact? We also did that exercise together with HERAN.”
2) Specifically, where do I start?
With legislation, say Vandersmissen and Vandierendonck in unison. For a fund like HERAN, the Sustainable Finance Disclosure Regulation (SFDR) applies. That part of the European Union's growth strategy, the Green Deal, is intended to provide investors with transparent information about a fund's sustainability claims.
Sustainability reporting, meanwhile, is widely known. The current Non-Financial Reporting Directive (NFRD) makes it mandatory almost exclusively for large listed companies, but it will be replaced by the Corporate Sustainability Reporting Directive (CSRD). That is currently scheduled to take effect from 2024. The CSRD will probably apply to about a thousand Belgian companies. The next step is a new directive for SMEs. Charlotte Vandierendonck is working as an advisor with the EU organization Efrag on the preparation of that new European voluntary standard for sustainability reporting for SMEs. It will arrive in a few years.
“It is good to start from a lower limit,” says Katleen Vandersmissen, referring to the ESG criteria to measure the sustainability of an investment. “In the social area - the S of social - and for good governance - the G of governance, there are clear rules in Belgium about what can and cannot be done. For E of environmental impact, that's a bit more vague. If a company doesn't meet the lower limit on those three aspects, we certainly don't invest in it. You can think of ESG as a layer you put on top.”
3) Does it make sense for a start-up to focus on sustainability already?
“A start-up does not have to change an existing policy, for example the car policy. It can implement the sustainability policy right away,” says Katleen Vandersmissen of HERAN Partners. “The main challenge in a small company is that it can't hire anyone to work on that. So, it's looking for what has impact on the business. We have hardware companies in our portfolio that use precious metals. By asking how that production chain is put together, you trigger other questions, and they come up on the agenda. At first glance that may seem less useful, but then when suddenly the war in Ukraine creates a supply chain crisis and precious metals prices skyrocket, it's very relevant.”
"It has to be more than just a check mark on a new label." - Charlotte Vandierendonck, Studio D
4) How do I avoid cherrypicking?
Cherrypicking means that a company picks out the easy-to-implement sustainability actions, but doesn't look at their impact. Charlotte Vandierendonck of Studio D recognizes that danger, but she says that sustainability legislation is now becoming so extensive that companies no longer have a free pass to do anything.
Besides legislators, customers and investors, young people are also increasing the pressure on organizations, says Katleen Vandersmissen. “Younger employees find sustainability important and put that on the agenda. I also notice this internally. Our exit strategy also plays a role. The intention is that our start-ups will later find shelter in a larger company, and then those questions about sustainability come back. But it is also important for myself. I want my children to still be able to live on a green planet.”
5) Should I measure my carbon footprint?
For an SME, measuring its carbon footprint is quite a challenge, explains Charlotte Vandierendonck. “You have to convert your energy consumption, your materials consumption and your purchases into a carbon footprint. Not every company has the time and resources to do that.” Such a measurement can be a starting point, but you especially need to ask how relevant it is for a small organization, suggests Katleen Vandersmissen of HERAN. “For a lot of our start-ups, for example, it's not relevant because their footprint is that of an average family. It's better to ask where you can make an impact.”
Start-ups that will later bring a product to market do benefit from thinking about sustainable materials, circular design, and economical and green energy use as early as possible. That way, when they get a growth spurt, they'll get that right the first time.
6) How useful are tools and labels?
For its sustainability journey, HERAN developed a risk tool and an impact tool with the help of Studio D. The start-ups in HERAN's portfolio can use them, and they are useful tools for assessing new companies.
In addition to tools, there are more and more labels. The B Corp sustainability label, for example, is highly regarded. Some large companies set scientifically measurable goals to reduce their emissions. “And for companies with a production chain, there is Ecovadis,” adds Charlotte Vandierendonck. “I think B Corp is a good model because it looks at the entire company and gives a transparent rating that consumers can see. It does require a lot of commitment from a company. There are numerous systems, which can be a little confusing. You have to know what you want to use it for and what impact you wish to make with it. It has to be more than just putting a check mark on a new label.”
Do you want to learn more about HERAN Partners investment principles? Click here.
