“The only thing constant is change.” – Heraclitus
A quote originating from thousands of years ago, but still spot-on today. Incorporate is changing and we want to share our new core with you. We are implementing a fresh approach in our business principles and governance, changing the way we interact with our customers, partners, employees, and the society in general. We are reassessing our influence on the environment. This is the beginning of Incorporate’s journey towards sustainability and impact entrepreneurship. We invite you to witness and encourage our transformation.
Let’s take one step at a time. To explain the story behind this impactful experience, we have Richard Johannes Witismann, the CEO of Incorporate, sharing the insights.
Impact entrepreneurship is a profound change affecting all levels of the organisation. How and when did you come to this idea?
My career and background definitely played a role in driving Incorporate towards sustainability. I have been active in entrepreneurship and legal world for 30 years, studying and practicing business and corporate law in Estonia and the United States. So, legal topics have been on my table for a long time and this is how my profound interest sparked.
In a way, we all are impact entrepreneurs, since everything we do has an impact. It doesn’t matter, whether we acknowledge it or not, whether it is positive or negative for the society, or how strong it is. The fact is that impact exists. Speaking of the devil, when we look at the TOP100 economic entities in the world, 70% of the impact is created by international corporations. While the first nine positions are taken by countries, like USA, China, Japan, Germany, etc., the 10th place goes to Walmart. Surprisingly, the turnover of Apple is bigger than the GDP of Belgium, Switzerland, Norway, or Russia. This proves that corporations have much greater global influence than states. I was curious of how their impact is mapped, measured, and then implemented to corporate governance. This is how I came across to environmental, social, and corporate governance (ESG) criteria.
These topics are tightly connected to law and corporate governance, which translates to the way that corporations are managed. The main dilemma is that multinational corporations act locally, abide to local legal environments and rules of law, but their impact is global. That’s where legal, corporate law and governance topics enter the game.
What was Incorporate’s incentive of becoming sustainable?
Well, Incorporate has already 10 years of history. We started operating before e-Residency came to life. We have focused on foreign customers with a message that Estonia is a nice place to start your company, and has a good business climate for managing it. Unfortunately, during the past 10 years we have witnessed a trend of how establishing a business has become marginal. Entrepreneurs take this decision more and more light-handedly – instead of thinking through a business concept, the “let’s try and see how it goes” attitude is prevalent.
In a way, starting a business is like a means for getting rid of responsibility – company creation must be quick and cheap. This dominant attitude shapes the market demand, but it’s wrong. When something is cheap, there is always a price to pay. For example, when you buy a T-shirt for 3 euros, it comes at hidden costs – exploitation of labour, unpaid taxes, anomalies in the supply chain, environmental impact, etc. We stand for changing the idea that everything must be cheap, entrepreneurs have no responsibility and don’t realise their impact.
Which problems do you want to address with embracing the concept of sustainability and impact entrepreneurship?
In general, these are environmental and societal problems, which are stated by the United Nations as Sustainable Development Goals. Most importantly, we want to create awareness on the concept of sustainability among ourselves and our customers. We want to change Incorporate and the mindset of our stakeholders. This will lead to sustainable, responsible operation and governance of businesses.
A typical slogan of consultation companies that offer company establishment services is “hassle-free” – we take care of all the trouble around company creation, make it fast and cheap. This behaviour has an impact that many don’t realise – we want this to change. Entrepreneurship is a privilege and a freedom, it’s the beginning of a longer journey. You must consider carefully before starting a company, since it’s something permanent, impacting many stakeholders around you. Sustainability is key and we want to enforce this concept on a wider scale.
What are your goals while becoming an impact entrepreneur? What do you want to see as a result of this journey?
Today, being sustainable is based on voluntariness, including reporting and measuring your impact. It is difficult to assess the impact of being truly sustainable, because the way to measure it is so complex. Sharing your data on sustainability is voluntary, but it is a competitive advantage. It is also difficult to control and validate the results, because creating analytics is almost impossible, especially for SMEs. This is a huge problem and a challenge. Only large corporations can afford it to themselves, since it requires AI programmes to collect, mine, and analyse data to assess their social and environmental footprint. It will take some time until international sustainability standards will become to force and we will see something similar to accounting, financial reporting, or public stock exchange standards.
What Incorporate wants to achieve is a question of sustainability metrics, which, as I said, are currently voluntary. Though, there are several standards available, which companies can choose to follow. What we can do is to implement commercial and professional standards for consultation companies, which we are working through. Our environmental footprint is marginal – this is more of a question for manufacturers. Instead, we can focus on social issues like equality, non-discrimination, fair entrepreneurship. Today, we are still in the analysis phase and the process of choosing and implementing metrics is underway.
How has this change affected your company internally?
Continuing on working environment, Incorporate has actually been practicing remote work for over four years by now. This is not something that hit us by surprise during the pandemic, rather than an old, but sustainable habit.
Despite of the fact that we are at the beginning of our sustainability journey, I have already experienced positive effects. It is much easier to find new talents to our team, because what Incorporate stands for aligns with their values and principles. The team has adopted this change surprisingly well. They are motivated and inspired, they want to get engaged – Incorporate has got a fresh new start. Even I got inspired and took up the challenge of studying in London Business School at Sustainability Leadership and Corporate Governance program to facilitate the change on our hands.
An impact entrepreneur has to consider a much wider audience than just shareholders. How have you managed other stakeholders like your team, the community, partners?
It’s true that in addition to traditional stakeholders – shareholders, employees, and customers – impact entrepreneurs must pay attention to external groups like suppliers, community, and the environment, as well.
We are still mapping our stakeholders, which is why we don’t have any major results to put on the table, yet. Our stakeholder no 1 is employees, and they were on board with this change from the very beginning. The most important external stakeholder is suppliers. We must be aware of the environmental footprint they create. This means choosing our courier company carefully, making sure they provide carbon-neutral services. Regarding community, we consider the state as one stakeholder, and will have to form our agenda.
Since Incorporate is a small company and we are a service provider, not a manufacturer, environment is not the most relevant stakeholder for us . In general, such businesses have little environmental impact. Where our impact reveals, is the social side, e.g., fair entrepreneurship and treatment, data protection, which are fields that we are currently focusing on.
What are Incorporate’s future plans? What’s in store in the roadmap for the coming years?
We are at the beginning of our journey, working on our strategy and analysing theoretical knowledge. This starts with mapping stakeholders and the fields where our impact matters the most. Our aim is to acknowledge sustainability principles and implement these together with voluntary standards. We want to raise awareness among our customers, which is why we are planning to redesign and enhance our service portfolio based on ESGs. For example, we will include ESG audits in accounting. Also, applying for the B Corporation certificate is an option.
I don’t think it’s right to throw slogans that we will plant a tree or make a donation, when we actually haven’t defined our stakeholders and main fields of impact. Our activities should be based on these, and this is our goal for the coming years. When we are through with the analysis phase, we would be more than happy to share the results with our customers.
What does the future of sustainability hold for entrepreneurs?
In five years’ perspective, I believe governmental mechanisms to emerge, which will control compliance to sustainability standards. In fact, such regulations are already being set out by the EU. The financial world will definitely face reporting obligations sooner. For big corporations, which’s footprint is measurable, the reporting is already compulsory, e.g., US stock exchange companies. There are also regulations stating that by 2050, all UK manufacturers need to be 0-emission companies.
In the next 20 years, the change of paradigm will be immense. Business landscape will transform and profound changes will occur. These will be due to the prosperity of the combination of sustainability, responsibility, and technology. Companies can either step up their game or sink into oblivion. This will be life-changing for states, companies, and individuals.
These are the sources and routes of Incorporate’s journey of becoming an impact entrepreneur. Stick around and in one of our future posts you will find out how change management across different internal functions was handled.