Over the years, corporate sustainability has evolved from corporate social responsibility (CSR) aimed at just community initiatives to discussions in boardrooms aimed at business responsibility. The increased focus on mandatory ESG reporting, both in India and across the world, has enhanced the scrutiny on sustainability initiatives. As corporations work on strengthening their sustainability programmes, they realise the need for innovative solutions – which mostly come from startups, the segment taking the lead in solutioning real-world problems.
The entry of tech into sustainability has been a game changer for climate and environmental solutions. Climate startup founders are increasingly focusing on specialised, in-depth solutions. For these startups to grow and scale, the most reliable and lasting pathway is by securing business opportunities: they pitch to large corporates for projects and long-term engagements.
While this seems like a win-win for both sides, it is often not easy to manoeuvre.
The five S’s
1. The problem of Scale: While startups are looking for engagement that will help them scale, large corporations are looking to engage with organisations that can already provide services at scale. This causes a slight imbalance in requirements. For example, startups providing solutions in particular regions may face constraints when attempting to extend their offerings to newer areas. This can deter corporations operating offices in multiple locations and wishing to implement the solution organization-wide.
How startups can respond: Get your foot in the door and prove that your solution works seamlessly in the geography where you operate. Meanwhile, try partnerships in other geographies where the corporate entity operates. Once you build a rapport with your corporate promoter, it is likely that they will help you find appropriate partners in the regions they operate in.
2. The problem of Security: Cybersecurity, especially in the age of AI, is a big concern for companies. Large corporations have upwards of 4000+ vendors, and the higher the number of vendors, the higher the risk. In addition to having very stringent third-party risk management systems, large corporates try to reduce risk through vendor consolidation. They would rather engage with fewer medium-large companies than several small companies (see how does MSME spend play a role in BRSR reporting).
How startups can respond: This is a tough one. The corporate may want to embed your services into an engagement they already have with a systems integrator such as CBRE. So you may be asked to get onboarded with an intermediate organization to be able to provide services to the large corporation. This is not necessarily a bad thing – it could open doors to several new engagements. You may want to proactively set the terms of engagement clearly.
3. The problem of Sustainability: Most large companies look for long-term engagement with vendors. This not only justifies the time spent on vendor evaluation and onboarding, it also ensures business continuity. The biggest question, therefore, that large corporations have is whether a small business can survive long enough to complete the engagement and continue it long-term.
How startups can respond: Every startup would like to believe that their company will grow and every founder strives for exactly that. But how do they demonstrate their commitment and resilience? Corporates look for a few things:
- Has this solution been implemented elsewhere? Client references would help.
- How long is/was the longest-lasting implementation? What, if any, issues needed to be trouble-shooted and how was that handled?
- Can the startup provide a guarantee for the product?
If the startup is too small, point 2 above could be a route to pursue.
4. The problem of Solutioning: Startups usually engage with procurement teams in large corporations. Not only do the procurement team not understand the intricacies of the solutions provided, their focus is also primarily on costing and the additional burden of onboarding a new vendor. It is better to speak to the business contact who will understand the uniqueness and true value of your solution.
How startups can respond: Use your network extensively and pitch your solution to the right contact within the corporate. LinkedIn is a good resource to use. Conferences, summits and other meet-ups are great ways to meet corporate contacts. One must actively engage and network.
5. The problem of Spend: As a startup, you are caught between two worlds. On the one hand, you know that you absolutely have to make money on the products/services that you offer. On the other hand, you are ready to accept short-term losses for long-term gains. You are thinking: if you offer a cost-free pilot service and it is well-received, you may receive long-term projects. That may work in some cases – especially where the corporation is still trying to understand the value that the startup has to offer. In most cases, where the solution is clear and ROI is measurable, it is not recommended to offer unpaid pilots.
How startups can respond: Negotiate and agree upon a cost structure, but it is not recommended to enter into a non-commercial agreement. This ensures the business owner has his/her skin in the game. The other point to watch out for is when you are entering into a service-level agreement with the corporate. Please make sure to read the payment terms – for MSMEs, a 45-day payment cycle is mandated – so watch out for longer cycles. Negotiate the payment terms if possible.
The winning game
If you have crossed the river successfully, congratulations! Nonetheless, it remains essential to stay informed about your corporate partner’s priorities and identify areas where you can contribute effectively. Being proactive with solutions for problems yet to be identified is one way to keep up your A game. Else, you will be making way for the next startup that has read this article!
