This is how important ESG policy is
for (sports) technology

You hear about it more and more often: ESG. These are environmental, social, and governance criteria for a company’s activities. Why is a solid ESG policy so important for companies in sports (technology)? And how does Dutch Sport Tech Fund itself focus on a sound ESG policy? Chiel Warners, former top athlete and former CIO (Chief Investment Officer) of Dutch Sport Tech Fund, answers these questions.

“As far as I’m concerned, ESG for sports organizations is part of the license to operate. If you don’t have that in order, you cannot operate sustainably. There are several components that fall under ESG policy;

• The E for Environmental relates to the impact the organization has on the environment. This aspect of ESG has now become commonplace in the sports sector. For example, some athletes prefer not to travel to a location if it is downright bizarre for an event to be held there (because it is normally too hot or too cold).
• The S for Social concerns the impact on people and society, with attention to employees, in this case athletes. How do (sports) organizations treat their athletes? How diverse is the organization? Is there a focus on creating a safe internal environment?
• The G for Governance relates to the way an organization is managed. This is still underdeveloped in sports. This has its roots in the fact that the sports sector operates fairly autonomously, but that freedom has also led to too many abuses still occurring in sports. In my view, governance is the problem child of the sports sector, which also affects integrity in sports.”

“Integrity violations come in many forms, such as transgressive behavior, doping, and match-fixing. Although these may manifest in different ways, the inability to prevent them often has the same root cause: poor governance. Without proper education, values and standards, risk assessment, mechanisms to identify these issues, and active measures to counteract them, sport will continue to suffer from scandals.”

“That is why it is important to have a good governance structure. This includes attention to how decisions are made, how accountability is ensured, and that the policies are ‘robust’ enough. This is not only important for prevention, but also for imposing sanctions if something does go wrong.”

“Sport, on average, is not very aware of risks or does not want to be aware of them. This can partly be explained by the fact that organized sport originated from volunteers and amateur sports, while now they are million- and billion-dollar organizations. Many sports organizations struggle to make ends meet, partly due to the financial challenges following the lockdowns. At the same time, they are sitting on a goldmine of data, such as live match data and information about individual player performances. Commercial parties tempt them to sell this data. The question is what happens to that data. At the same time, it is financially difficult for them to pass up such an opportunity. It is therefore necessary to seriously weigh the risks. Well-functioning governance is important to ensure that a thorough assessment is made.”

“Technology can help bring more transparency to sports. For example, with the help of AI, we could detect possible biases in referees or even replace referees altogether. We are not there yet, and this requires large amounts of data and unbiased algorithms. In addition to such concrete applications, it is important that all companies operating in sports, including sport tech companies, are aware of how sports organizations operate. How is their governance structured? What are the power dynamics, who is pulling the strings, and what are the consequences for athletes, fans, and society?”

“In addition, sport tech companies should consider the impact their applications have on athletes and sports organizations. Some applications collect (medical) data from players, such as their heart rate, speed, and other information. Consider who owns that data, where and how it is stored, whether it is handled ethically, what is done with it, and whether it is sold. A ‘normal’ employer in another sector would never be allowed to view an employee’s medical file, let alone sell it. In sports organizations, this is often allowed. Sport tech companies offering applications in this area need to be aware of this.”

“We do this in various ways. We invest in companies and, for some time now, we have also been making our portfolio companies aware that they need to take ESG seriously. We realize that it is important to consider the stage the company is in and which steps are realistically appropriate, for example, for startups. The startups and scale-ups in our ecosystem can benefit from synergies, so we ensure that knowledge is shared in this area. We are also currently tightening our due diligence process and giving ESG a serious role in the selection procedure for new investments. This is relevant for new portfolio companies, but also for those seeking follow-on investments.”

“We are also reviewing our own processes. As an investment fund, we not only want to attract individual investors, but we are increasingly focusing on institutional investors as well. They increasingly expect a solid ESG policy. That is why we are also taking steps ourselves in the areas of environmental, social, and governance processes. For example, we have included a section on ESG in our Information Memorandum. In it, you can read that we ask our portfolio companies whether they have an ESG strategy, to what extent this policy is incorporated into strategic decisions, how it is monitored, and how the companies perform compared to the rest of the market. We want to operate in a responsible and sustainable way and make a positive impact; that is also part of our mission. We expect this not only from ourselves but also from our portfolio companies.”

Investing in Dutch Sport Tech Fund is now possible from 100,000 euros. Interested? Request the Dutch Sport Tech Fund brochure here.