Last month, The Guardian in Britain published 'The Uber Files', more than 124,000 confidential leaked documents that reportedly revealed how the taxi hailing app company bent the laws in several countries and secretly lobbied governments including US, German and British. They also contained some juicy details about the car hire giant's leap into India. Not only did the files reportedly reveal that Uber dodged law enforcement explicitly in India, but co-founder Travis Kalanick apparently pushed the top regional executives forward to drive growth 'at all costs'.
Growth at all costs - the blitzscaling unicorns mindset so prominent since 2010 - could barely be epitomised better by a single company. But, in recent months, the tide has been moving away from this attitude towards building startups in a more sustainable, responsible and inclusive way. ESG (environmental, social and governance), a practice big corporates as well as buyout funds have been engaging in for years, has started to influence the startup and venture capital (VC) ecosystem, too.
Boarding the Bandwagon
Particularly in Europe, this movement is largely driven by regulation - Sustainable Finance Disclosure Regulation (SFDR) and the EU taxonomy, in particular - and resulting pressure by limited partners (LPs) and asset owners, especially by state LPs, such as KfW Capital in Germany, Tesi in Finland and AP6 in Sweden. Several industry initiatives have begun to further push the issue forward and define best practices and reporting. The UN-supported investors' network, Principles for Responsible Investment (PRI), is strongly committed to this space, too, and working on a standardised LP-VC due diligence questionnaire (DDQ), among other things. Service providers have sprung up left, right and centre as well.
In India, the most prominent parts of the ecosystem in the big tech hubs don't seem to have caught on to this shift yet. 2021 was still very much dominated by new Indian unicorns being celebrated and the media counting how many were added to the herd. While ESG reporting is becoming mandatory for the biggest firms in India from 2022-23, regulators are cautious to put pressure on investors.
Despite the global trend, sustainable investing (mostly in public equity) in India 'has only picked up momentum' recently, as ESG expert Akanksha Sharma stated in an ET interview in October 2021. Only a small number of deals are being done shifting reasonably small amounts of money ($2.63 billion in 240 equity deals in 2020) against the size of the opportunity.
Sandeep Mertia, a PhD scholar at New York University in the US, has been conducting ethnography in Rajasthan's startup ecosystem since 2019. He explains, 'While unicorns grab a lot of headlines, we have to remember that a vast majority of startups working today [in India] are tech-enabled small businesses. The 'scale at all costs' approach is spatially highly concentrated among a tiny number of elite VC-backed startups in metropolitan hubs.' Mertia further elaborates how these unicorns in India are also starting to be scrutinised on ESG causes, such as in the recent case of food delivery apps like
Zomato living off precarious gig workers.
Read more at: https://economictimes.indiatimes.com/opinion/et-commentary/the-india-esg-debate-responsible-innovation-versus-growth-at-all-costs/articleshow/93738876.cms
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