Resolutions for the Rest of 2022
Written by Megan Murday
Originally published on Medium
January provides a time for reflection on where we are and ambition for where we could be. Looking toward the rest of the year, the state of our world creates ample opportunity for startups to disrupt the status quo for the better.
In the third year of the Covid pandemic, we struggle with vaccine adoption and widespread burnout. Climate change races on, with near-term government pledges falling short of the ambition needed to avoid unlivable outcomes.[1] Socioeconomic inequality persists, as wage gains are tempered by inflation and the richest 1% of Americans retain 16X the wealth of the poorest 50%.[2] The legacy of systemic racism endures in every facet of our society, showing up in racial wealth gaps, voter suppression efforts, and the distribution of opportunity.[3]
As the midterm elections loom and preoccupy lawmakers, the role for business to address systemic challenges comes into sharper focus. Investors, employees, and customers do not expect corporate philanthropy but instead look to business models that seize opportunities related to environmental and social realities. There is a business case for corporate action — long-term growth is hampered if natural disasters become frequent and swaths of the population lack purchasing power.
While the Fortune 500 has scale, startups have speed and the opportunity to build responsible business practices into the company fabric. Much like other operational questions, today’s environmental, social, and governance (ESG) decisions affect tomorrow’s valuation at exit. Public market expectations are changing for ESG disclosure and, subsequently, performance. The SEC is expected to release a climate disclosure framework, and 80% of the S&P 500 already provides a level of carbon transparency.[4] The Nasdaq’s requirement for its listed companies to have at minimum two diverse directors or provide written explanation has been challenged and upheld.[5]
To build ventures positioned for outsized value creation and impact, I propose three resolutions for the rest of this year –
Build diversity into leadership teams. McKinsey has found that companies with top quartile gender diversity and top quartile ethnic diversity are respectively 25% and 36% more likely to outperform on profitability.[6] More diverse management broadens the talent pipeline, improving the strength of our teams and ability to spot overlooked opportunities and markets. Startups are also wealth generators. Diversifying cap tables broadens participation in exit outcomes and meaningfully changes the distribution of wealth.
Be climate conscious. Startups, especially tech startups, tend to discount our environmental impact. However, startups still use electricity, consume water, and create waste. De-linking resource intensity with revenue positions companies to scale more sustainably and profitably — carbon taxation and higher resource prices are coming corporate costs. Startups also have the ability to influence sustainability throughout the supply chain as bargaining power grows, amplifying impact.
Lead by example. There is no shortage of stories about founders as eccentric luminaries or volatile managers. We are encouraged to move fast and break things, but we’re also building things — chiefly, a company, a team, a culture. Investing time to reflect, to cultivate relationships with our own mentors, and to place purpose at the heart of our work provides the foundation for leadership that our teams can respect.
The startups of today are the goliaths of tomorrow. We have the opportunity to build a more sustainable and equitable future — not just because it’s the right thing to do, but because it’s good business.
[1] UN Environment Programme, “Addendum to the Emissions Gap Report 2021,” 2021, https://wedocs.unep.org/bitstream/handle/20.500.11822/37350/AddEGR21.pdf.
[2] Megan Leonhardt, “The top 1% of Americans have about 16 times more wealth than the bottom 50%,” CNBC, June 23, 2021, https://www.cnbc.com/2021/06/23/how-much-wealth-top-1percent-of-americans-have.html.
[3] Kriston McIntosh, Emily Moss, Ryan Nunn, and Jay Shambaugh, “Examining the Black-white wealth gap,” Brookings, February 27, 2020, https://www.brookings.edu/blog/up-front/2020/02/27/examining-the-black-white-wealth-gap/.
[4] Rachel Layne,“Companies face growing pressure to disclose their climate risks,” CBS News, June 25, 2021, https://www.cbsnews.com/news/climate-change-companies-risks-disclosure/.
[5] Jazmin Goodwin, “Nasdaq’s plan to boost diversity on corporate boards gets SEC approval,” CNN, August 9, 2021, https://www.cnn.com/2021/08/06/success/nasdaq-sec-approval-board-diversity/index.html.
[6] Sundiatu Dixon-Fyle, Kevin Dolan, Vivian Hunt, and Sara Prince,“Diversity wins,” McKinsey, May 19, 2020, https://www.mckinsey.com/featured-insights/diversity-and-inclusion/diversity-wins-how-inclusion-matters.