Other than simply wanting to create a more sustainable society for ourselves and the next generations, the venture capital industry has more reasons than ever to increase its focus on impact & responsible scaling.

Main external sustainability-related drivers

• Investment opportunities: A rapidly increasing number of entrepreneurs is putting the world’s largest problems at the core of their business models. These founders aim to build highly profitable and scalable businesses by focusing on impact.
• Portfolio development: Companies are more and more facing pressure from consumers and job seekers who are looking for sustainable products and purpose-driven workplaces.
• Disclosure and reporting: Increased focus is reshaping capital flows. As an example, through the SFDR, the EU is clarifying its view on what constitutes “sustainable/light green investments” (article 8) or “impact/dark green investments” (article 9).
• Culture and talent: Also in venture, many star investors — especially younger ones — look for diverse cultures, purposes and want their funds to have a clear stance regarding their own impact.

These drivers affect our business model and should be considered as part of a holistic strategy. If implemented with a value-adding mindset, a greater focus on sustainability can bring substantial value to Northzone by offering us new avenues for growth and higher returns, risk management and more purposeful operations.

Sustainability as a value driver in Northzone’s strategy

Framework: McKinsey 2014

In order to truly capture the potential value it will evidently be essential to move beyond parallel processes and that we separate sustainability as little as possible from other key strategic topics. Instead, impact and sustainability thinking should be integrated as a natural part of our operations, culture and reporting. As an example, even though we will use a separate reporting system for tracking ESG and supporting our portfolio companies, we should make sure to integrate reporting, risk analysis and updates in the fund’s traditional channels to the greatest extent possible.

Also, with regard to offsetting and CSR activities, we will make sure to align these to the greatest extent possible with the Northzone culture and brand. In everything we do, we look for disruptors, for the ones pushing boundaries and for settings where we can use our core competencies. We will do the same when we give back to the society and environment. We will look for the ones developing the most promising carbon reduction technologies and for ways that engage us internally and brings us closer to the real issues (This will be the focus of Chapter 3). To be fair, neutrality never excited anyone..

Portfolio-centric sustainability work

We spent a great part of our initial review with our portfolio companies making sure that we build a setup that benefits them to the greatest extent possible. We did a deep dive with the companies that have dedicated heads of sustainability asking what more we could have done throughout their journeys and in their next steps. Similarly, we focused on companies at earlier stages on how we can facilitate them to get started. The most common answer was to provide them with insight into how they can be part of the “solution” and concrete next steps.

“We want to integrate sustainability from the start, we’re just uncertain of where to start. The best thing that you could do as an investor is to provide us with an overview and 3 concrete next steps”