The Founder’s Guide to ESG (Part II)


12 Jun 2024



Reemsha Reen

The Founder’s Guide to ESG (Part II)

When ESG is more than just a framework, it becomes a tool that enables founders, CXOs, policy makers and even investors to realize the true value of the business they are creating. We have already described the compounding return and top quartile performance of ESG-compliant companies, and given how wide ESG is, companies can receive tangible and intangible returns – leading to impact on the triple bottom line.

Consumer brands operate across the value chain, from sourcing to post-production, and can, therefore, make a difference across the entire spectrum. Young companies can – and do – choose one or more areas of impact. Hence, Vahdam India chooses to focus on helping its community of tea estate workers and their children, as well as adhering to plastic and carbon neutrality. A brand like Mamaearth has taken a different route, focusing on gender balance in its offices, as well as afforestation, where they plant a tree for every product sold.

For new-age, young companies defining their ESG journey, it’s critical to recognize the role each aspect of the value chain plays in building their brand responsibly.

At Fireside, we pride ourselves on partnering founders who aim to delight a new generation of consumers. What we’ve seen over our three funds is that these new-age founders are, both, disruptive in their approach to building brands, as well as in their view of making the world a better place. Some are doubling down across the value chain. Others are picking one lever. Still others are going deep on more than one lever of responsibility.

Similarly, some entered our portfolio with the clear vision of building impactfully, while others have begun to create a difference along the way. We have been fortunate to witness this firsthand, partnering 45 companies so far, 67% of which have first-time founders, and 45%, women founders.

In FY23, our companies cumulatively generated a revenue of INR 7800Cr+, while also building a strong value chain.

Our portfolio companies express their purpose in different ways, but their practices lead to the same end result.

Environmental consciousness through sustainable packaging, clean materials and better production mechanisms

Doing less harm and more good to the planet is critical, and for most FMCG companies, packaging remains, both, a boon and a bane. While it’s the packaging that grabs the attention of a customer, it is also the area that needs most innovation and management.

At Fireside, our portfolio is responding well to an already established market of secondary and tertiary packaging. 97% of the total secondary & tertiary packaging of our brands is sustainable, and by end of this year we hope to make it 100%.

Primary packaging remains critical to solve for. While the industry progresses towards alternate material and adopting PCR at cost-effective rates, 60% of the total primary packaging used by our brands is sustainable – which means it’s non-plastic in nature.

Consumers across the world are become increasingly conscious. They seek out clean and better-for-you products, read the back of packs, and watch what they consume. Our brands respond by ensuring they reflect this need – whether by using certified organic ingredients, or making sure their products are FDA-approved, for example.

Social inclusiveness to break taboos and inculcate fair work ethics and practices

While deeper consumer understanding is the key to building successful new-age brands, founders cannot turn a blind eye within. It’s hugely important to build a diverse and inclusive ethos within the company, in order to truly serve a diverse audience of consumers.

This is easier said than done with female labour participation in our country being as low as 37%, and India ranking 135 on gender parity in a survey of 146 nations.

With a gender balanced founder group, the portfolio is also working towards a gender neutral leadership cohort with currently 35% of CXOs being women. Pay parity, too, reflects this with 1.14x female-to-male wage ratio among portfolio leadership teams.

Five of our startups are Great Place to Work certified, and collectively the portfolio reports a 15% churn rate, among the lowest in the industry. With blue-collar employees forming a critical foundation for our companies, we have seen a 1.3x increase in median blue-collar ages between FY22-23. 

Localised and transparent supply chain and operations

When a company’s supply chain isn’t strong and sustainable, it opens up the door to a plethora of risks. The supply chain acts as the business’ backbone, and we can see this play out in several sectors, notably, in commodities.

Localising the supply chain is the best way to manage geopolitical shocks, and reduce carbon emissions at the same time.

56% of the companies in our portfolio source 100% locally, while 32% have 90% of the raw materials sourced locally. The endeavor to further strengthen this to both minimize the carbon footprint of the companies but also strengthen the local economy by aligning with critical government initiatives.

These are just a few examples from our portfolio – for a more detailed view, please see our very first ESG report, recording the baseline efforts of all our portfolio brands. At Fireside, we believe that we have a lot to learn from each other in our efforts to build responsible, iconic brands. If you know of other new-age companies embracing ESG, and doing good to do well, do tell us about them – it helps us all.

Part III will conclude this series with our opinion on new developments in the packaging industry, and why it resonates with Value of Good.

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