This blog discusses the proposed changes by the SEC around adding organizational health to ESG and provides steps for high-growth startups to prepare for the expanding role of organizational health in investment decisions.
ESG criteria are used to evaluate the sustainability and ethical impact of an investment, while organizational health refers to a company's overall well-being and ability to generate long-term value for stakeholders. In this blog post, we will explore how these two factors intersect and how organizational health can contribute to improved sustainability, and how high-growth startups should start laying the groundwork for organizational health today.
Organizational health and sustainability are closely linked, and companies with healthy organizational practices are often better positioned to achieve sustainable business outcomes. Here are a few ways in which organizational health can contribute to improved sustainability:
The Securities and Exchange Commission (SEC) has proposed new rules that would require public companies to disclose more information about their workforce, including organizational health practices. These proposed changes reflect the growing recognition that organizational health factors are important considerations for investors, and that companies need to be more transparent about their performance on these issues.
Investors are increasingly assessing companies based on their performance on a range of organizational health factors, including those related to workforce health and safety. For example, investors may look at a company's track record on workplace safety, including the number of workplace injuries and fatalities, and its policies and procedures for addressing workplace hazards. Investors may also assess a company's performance on issues related to employee well-being, such as access to healthcare and wellness programs.
In addition, investors may be interested in companies that prioritize diversity and inclusion in the workplace. This can include assessing a company's track record on hiring and promoting diverse employees, as well as its policies and practices related to diversity and inclusion.
Overall, the proposed changes by the SEC reflect the expanding role of organizational health factors in investment decisions. By requiring companies to disclose more information about their workforce practices, the SEC is helping to ensure that investors have the information they need to assess a company's performance on a range of organizational health factors, including those related to employee health, safety, and well-being. Investors who take these factors into account when making investment decisions are likely to be better positioned to identify companies that are well-positioned for long-term success and that prioritize sustainability, ethical business practices, and organizational health.
When venture capitalists (VC's) are considering investing in a startup, they conduct due diligence to assess the company's financial, legal, and operational health. In recent years, VC's have also begun to focus on organizational health, which includes employee well-being and company culture. Here are some of the key areas that VC's will be looking at in due diligence regarding organizational health:
By assessing these key areas, VC's can gain a better understanding of the organizational health of the company and make more informed investment decisions. Moreover, VC's can help promote a culture of social responsibility by investing in companies that prioritize the well-being of their employees and the broader community.
Organizational health refers to a company's overall well-being and ability to generate long-term value for stakeholders. The proposed changes by the SEC will require companies to disclose more information about their performance on these factors, including their policies and practices related to workforce health and safety, diversity and inclusion, and human capital management.
As a high-growth startup, it is important to start preparing for these changes and to prioritize organizational health in order to attract investors and position your company for long-term success. Here are some steps to consider:
By taking these steps, high-growth startups can start preparing for the proposed changes by the SEC around adding organizational health to ESG and position themselves for long-term success. By prioritizing organizational health, startups can attract investors who are increasingly looking for companies that are committed to creating long-term value for all stakeholders.