Why All Startups Should Tell a Sustainability Story

A corporate focus on doing business sustainably is increasingly being linked to the ability to better manage risk, attract talent, and uncover new business opportunities. But for startups not explicitly targeting the sustainability sector, the topic is usually an afterthought — and that can be shortsighted.

Startups don’t typically face scrutiny from stakeholders for their sustainability practices and are primarily concerned with pursuing rapid growth and building a viable business model. However, those businesses that do prioritize sustainability early on may enjoy some advantages over their peers and position themselves to be more attractive to potential acquirers, customers, and investors.

To better understand the extent to which startups are including sustainability considerations in their business plans, we used machine learning to quantify how much they focus on environmental, social, and governance (ESG) topics in their investor pitches.

Using a publicly available algorithm developed by another team of researchers, we analyzed 65 pitch decks used in the past five years by North American startups representing a wide array of industries and stages of growth. We calculated separate scores for attention to environmental, social, and governance factors, allowing for granular analysis. We then performed a similar analysis of S-1s (documents filed in advance of an initial public offering) to surface differences in how companies describe themselves at different stages of growth. Pitch decks represent the earlier stages of storytelling in the startup journey, while the S-1s represent more mature stages.

Our analysis revealed three key insights. First, startups rarely mentioned sustainability implications and social impacts at all, at any stage. For example, 50% of our sample never discussed environmental factors. Second, startups were much more likely to discuss social impacts in their S-1 filings than in their investor pitch decks — seven times more frequently for software companies and 13 times more often for fintechs. Third, we found that over time, as startups move from early to later rounds of pitching, they became nearly twice as likely to discuss environmental issues, suggesting that their perspectives and business cases evolved to include broader environmental themes.

Why do startup teams seem hesitant to discuss sustainability issues early on? In interviews we conducted with founders, they told us that they expect investors to be most concerned with revenue and profitability, so they emphasize such metrics in their pitches. The absence of environmental and social issues in pitch decks stems from founders’ sense that those factors are secondary to technical and financial details.

Although the venture capitalist community is interested in sustainability, our conversations with VCs indicated that they consider sustainability factors as chiefly important for ventures directly addressing opportunities in the sustainability sector and don’t consider those factors for other investments in early-stage startups. Consequently, most startups see little value in emphasizing their sustainability credentials early on unless their business models are born from them. However, in Europe, VCs and private equity investors are increasing the rigor of their pre-IPO due diligence on sustainability goals to be able to anticipate risks. And a strong story about sustainability may matter as a startup matures: M&A dealmakers increasingly view sustainability due diligence as critical to managing downside risk and protecting valuation and performance, according to a 2024 Boston Consulting Group report. Research by Alessandro Fenili and Carlo Raimondo also found a link between better ESG communications and higher IPO pricing and valuation for a sample of U.S. IPO listings from 2012 to 2019.

Why Early-Stage Startups Should Take Sustainability Seriously

If sustainability considerations become more important to stakeholders only in the later stages of company growth, why should it matter to early-stage startups? We argue that startups that wait until later in their development to focus on sustainability miss the opportunity to infuse sustainability goals into their DNA. Organizational theorists have long recognized that new organizations become “imprinted” with a set of norms, routines, values, and structures that they tend to adhere to throughout their life cycles. Imprinting sustainability goals early on may help startups integrate them into their business models organically and establish those values as central to their culture and processes. Startups that emphasize sustainability early on may also avoid the path-dependency effects, organizational inertia, and high costs that can make it challenging to retool or retrofit operational infrastructure to be more sustainable later in the growth process.

Some founders and investors may see sustainability as an auxiliary or irrelevant consideration to their value proposition, cost structure, and revenue streams. Yet, in today’s evolving global landscape, embedding sustainability can enhance a startup’s appeal to investors not only by signaling its positive impacts on the environment and society but also by improving its value proposition, lowering its risk profile, and giving it better access to talent.

Integrating sustainability early can enhance a startup’s core value proposition by improving how it operates, in addition to opening up future cash flows and business opportunities. Incorporating a sustainable approach can enable B2C startups to differentiate their offerings in a way that appeals to environmentally or socially conscious customers, often commanding price premiums or higher loyalty. For instance, by committing to carbon neutrality and using sustainable materials, Allbirds was able to differentiate itself in the crowded shoe market, earning over $100 million in the process. Similarly, enterprise customers are increasingly seeking sustainability throughout their supply chains and are willing to reward B2B startups that infuse sustainability into their business models. For instance, while developers are excited about the efficiency and cost savings of Mighty Buildings’ 3D-printed construction materials, its commitment to carbon neutrality has attracted global customers who are looking to reduce the construction industry’s substantial carbon footprint.

Similarly, sustainability-conscious business models often incorporate strategies that reduce operational and regulatory risks, further boosting a company’s value proposition. Startups can position sustainability efforts as a driver of efficiency and cost savings rather than just an expense. (Consider, for example, AI data centers seeking clean energy solutions, which are expected to become cheaper than using fossil fuels over the long term.) They may also gain access to grants, subsidies, and tax incentives aimed at encouraging sustainability initiatives.

Finally, by embedding sustainability into their business models upfront, startups may be better positioned to attract top talent. A 2025 Deloitte survey found that 70% of millennials and Generation Z consider potential employers’ environmental credentials when seeking employment. A 2022 survey by the IBM Institute for Business Value found that two-thirds of job candidates globally are more willing to apply for and accept job offers from sustainable companies.

How Some Startups Make Sustainability Part of the Story

Although it’s uncommon, some startups that aren’t targeting the sustainability sector have successfully incorporated such considerations into their business cases.

With the AI boom focusing increased attention on the environmental impact of data centers, technology companies have an opportunity to show how they are incorporating clean energy into their operations from their inception. Hugging Face, a leading machine learning operations platform, committed to using clean energy early on in its life cycle, partnering with Verne, a data center operator that uses clean energy. Modular construction company FullStack Modular not only reduces waste in construction but models the energy use of each building it designs — a feature that adds value for clients seeking long-term energy efficiency, compliance with green building standards, or enhanced resale value.

Given that raising funds is a primary concern of early-stage startups, VCs have a major role to play in encouraging them to take sustainability seriously in order to capture both near- and longer-term benefits. Ideally, VCs should include these considerations in their investment criteria and the questions they ask founders. Although VCs in Europe and the U.K. increasingly look for ESG reporting from startups, the practice is still in the early stages globally.

Embedding sustainability in their business models early on can help startups avoid costly retrofits and reputational risks, enable stronger positioning with investors and customers, and support long-term operational resilience. They can begin by identifying material environmental factors relevant to their industry, embedding those needs into their product and operational choices, and communicating them in pitches. Though early-stage pressures often deprioritize sustainability efforts, reframing them as a source of differentiation and long-term value rather than a compliance burden can help founders build stronger companies from the outset.

Ultimately, startups whose early business plans incorporate sustainability will be better positioned for growth, partnerships, and later investment and have less need to rethink their business and brand later. They will also be more likely to avoid reputational and other risks that may become pitfalls in their development as they unlock the opportunities associated with sustainability.