Corporate Social

Responsibility and

Startups.

How letting companies run without

human rights planning can lead to

disaster.

Gio Zenteno | 10:11 ET | Corporations and Human Rights

Why is It that when we say Human Rights and Business our minds jump straight to thinking that

its just big organizations that have a Corporate Social Responsibility plan in place? Is there no

place for social or environmental concerns when a new endeavor is in startup mode? The truth

of the matter is that there are few examples where CSR and Human Rights Policy intersect with

startupism but there are several where a lack of a human rights perspective yielded very negative

results.

First off, we need to analyze why startups lack environmental and social departments. A startup,

as defined by Professor Steve Blank is an organization formed to search for a repeatable and
scalable business model1, which has a key word that mostly everyone mistakenly uses as a

synonym for high value: scalable. Scalable does not only mean that a startups valuation has to

be in the unicorn range2, but it should also mean that it takes all of its stakeholders into

perspective. Now that Im in the process of setting up my own social enterprise, people want to

know what my product/service is, what is my value added, what is the bottom line, what type of

investors are we looking into not one person asked what our CSR is going to look like or how

were preparing for any possible human rights issues (and there will be issues, we will be working

with people at the favelas in Rio). Thats the story of nearly every new venture. They dont have

an E&S department because, quite frankly, they dont need one.

Scalable does not only mean that a startups valuation has to be in the

unicorn range, but it should also mean that it takes all of its stakeholders into

perspective.

Cue in the UN Guiding Principles on Business and Human Rights, which are the first corporate

human rights responsibility initiative endorsed by the United Nations. They should, in theory,

apply to all enterprises regardless of size and their level of responsibility be commensurate with

their scale and reach3. This means that even though startups might be bootstrapping and running

very lean operations they should at some point in time -and rather sooner than later- implement

the backbone of a CSR. In reality, this seldom happens and enterprises run without an human

rights and business approach. Cue in venture capital funds and early-stage investors. Return on

investment (ROI) is, and has been, king within the investment world.

1 YCombinator
2 Private companies valued at US$1B+
3 UN Guiding Principles on Business and Human Rights Principle 14
Typical VCs request startups to become profitable as early as possible, and as such these

investees set their short-term goals toward breaking even and maximize profit in as little time as

possible. It seems as if the defining characteristics of what makes a startup attractive are the

same that forego Human Rights in lieu of profits. Some even propose, Milton Friedman as the

main proponent, that investing in CSR generate insufficient returns and reduce shareholder

value4.

Why is it then that investors such as Google5, Yahoo, and Amazon, that pride themselves on

having top-notch CSR initiatives invest in companies without doing a full-scale integrity due

diligence? I want to illustrate this through the Uber case as a prime example of why there is a

mismatch between startups, venture capital, and HBR.

Uber has been heavily criticized for several controversies regarding their marketing, corporate,

operations, and hiring activities. In 2014, Uber top executives decided to hire a group of

researchers to spread details of the personal life of an opposing female journalist6; the Company

also tracked another journalist using its infamous God Mode7; and in France a short-lived

promotion was activated that promised free twenty-minute rides with attractive women8.

Several drivers have been accused of sexually harassing passengers, to the point that there are

ongoing trials in India about the alleged rape of a female driver9. Upon leaving the company,

4 Friedman proposed that - there is one and only one social responsibility of businessto use
its resources and engage in activities designed to increase its profits so long as it stays within
the rules of the game.
5 CapitalG Lyft recently raised US$1 billion from Googles investment fund. Previously, Google

invested ~US$35 million in Uber.

6 Buzzfeed
7 The Verge
8 CNN
9 Pando
Susan Fowler reported10 that sexual harassment was a common practice within headquarters,

and that highly positioned executives would only get a slap in the wrist and always be treated as

first offenders. In a period of less than a year and once Uber had raised its valuation from a

healthy US$60 million, to a country-comparable US$50 billion11- 28 executive, including president

Jeff Jones, and CEO & Founder Travis Kalanick resigned from the company12. A strong enough

CSR would not have been a panacea, but it would have definitely mitigated some of the problems

the company faced then and at least two federal investigations on its operations.

But my startup has nothing to do with human rights, why should I invest in a strong CSR? - asks

Joe Startupman. Well, the answer is not often clear-cut and it involves the value of money in

time. Companies that invest early in CSR can signal to investors that they foresee strong

cashflows in the future, i.e. the company will run so well that it can afford to make these

investments. In a day and age where cash is still king it does well to adapt the way we present

CSR to investors not only as a goodwill from the business to society and other stakeholders, but

also as a mean of projecting confidence in leadership, operations, and the overall health and

future health of the startup.

10 Susan Fowlers Blog

11 VentureBeat
12 CNBC
 Why this topic?

The reasoning behind this article is that as a new entrepreneur there are very few stories of

corporate social responsibility in startups mainly because venture capital funds require them to

grow fast and return even faster. CSR is seen as a burdensome investment that yields goodwill to

society and hinders shareholder value while it could be seen as a strong signaling mechanism to

attract sources of financing for growth.