German ESG startup IntegrityNext has been bootstrapped since it launched in 2016 — but today it’s announcing a €100m funding round from Swedish investor EQT Growth.
With the fresh capital it aims to become the go-to platform in Europe for companies to manage their environmental, social and governance risks.
What is IntegrityNext?
The company has created a cloud-based software platform focused on environmental, social and governance (ESG) risks, which aggregates data from thousands of suppliers and helps its customers monitor their own ESG metrics. It also does that while ensuring they comply with international standards and regulations, from carbon footprint and hazardous substances to social aspects like child labour, modern slavery and health and safety laws.
IntegrityNext’s cofounder and CEO Martin Berr-Sorokin says that as well as assisting with complying and reporting on ESG, it has a big impact on the sustainability of its customers’ carbon footprints.
“Supply chains stand for roughly 80% of the carbon emissions of a company, so the supply chain is a huge lever to reduce carbon emissions [...] we have a big impact on that,” he says.
The company financed its first few years with money from the founders and an angel investor. It says its been profitable since 2020, when ESG started to become much more important for investor checks. It says it now monitors 1m suppliers for hundreds of customers, including Unilever, Generali and Thyssenkrupp.
With ESG requirements for business ramping up across Europe, the founders think now is the time to push for growth.
€100m from EQT Growth
EQT Growth is one arm of investor EQT Partners, which also has a VC arm — EQT Ventures. EQT Growth has has a separate team and investor base, and closed its first growth fund of €2.4bn last year. IntegrityNext is the fund’s eighth investment overall, and first this year.
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EQT Growth doesn't want to say how big a stake it was able to get in IntegrityNext, but according to Dominik Stein, partner at the fund, it would have wanted a bigger one.
The market for ESG software platforms in Europe and the US is already worth a billion dollars and is forecasted to grow 50% annually, according to EQT Growth. And with the software's penetration in Europe estimated to be at only 12-14%, according to PwC, there's opportunity to grow.
The market will be shaped by the introduction of several major regulatory frameworks across Europe, most notably the German Supply Chain Due Diligence Act, effective early this year, which requires companies with more than 3,000 employees to audit and monitor their suppliers across multiple areas. Looking ahead, new laws in the EU, like sustainability reporting standards, are likely to push companies towards ESG software platforms.
“The critical importance of ESG is not a new concept to modern businesses. However, as a raft of regulatory frameworks begin to take effect, supply chain transparency and sustainability are evolving from a nice-to-have to a must-have,” Berr-Sorokin says.