Digital ESG and SDG Impact Assessments: Phillip Faure on Revolutionising Corporate Sustainability

The exec exco of a business, for example, have gone, wow, I didn't realize what this all meant. First of all, they've learned an incredible amount about the space. They've embraced the potential of it. There's been constructive debate around the board. And secondly, they're now visually— we give them nice visual dashboards that show them their SDGs and where they're scoring. And you can say, hey guys, look at those, this 2 out of your 5 core SDGs aren't doing too great, but the other 3 are perfect.

Fantastic.

Well, let's just put a plan in place for those 2. That'll move the needle quite quickly.

Hello and welcome to Rethink What Matters, the podcast dedicated to aligning the economy with the ecology and everyone. For improved business performance, stronger families, and a greener, cooler planet. And today I'm joined by Philip Fora, co-founder and CEO of Paragon Impact, and we're going to be discussing digital ESG and SDG impact assessments.

Hi, thank you very much, Paul. Very good to be here. Thanks for the opportunity to share the important work we're doing. Likewise, we're on a journey of trying to contribute to the future of this planet.

Perhaps if you could tell us a little bit about Paragon Impact to start off with, please.

Yes, sure. So Paragon Impact is a Jersey-based company, Isle of Man, Jersey, that is. Formed almost 3 years ago now, and the coming together of different skill sets really into a space that's new for all of us. I think what we're seeing finally is the convergence of the greenies that have always been shouting at us to save the planet, and of course business waking up and saying, oh, we better pay attention. And so in our business, we have the three co-founders, the one being a sustainability expert who spent many years in the space, um, the second who's a technologist who's, who's been in fintech for 30-plus years, and then myself who brings more of a sort of commercial side to, to things and having worked in finance for many years as well. So you've brought— we've brought three, three key skills together to build the business. And then of course employed a team which is now up to 12 of, again, different people with different backgrounds, some very deep ecological specialists, some scientists, and then of course people that have worked in business pushing the ESG/STG agenda.

So what is a digital ESG and STG impact assessment? Can you just tell us a little bit more about what that involves?

So we've been building this piece of technology for, for 2 years now, which is essentially in simple terms aggregating and bringing together the complexity of the space and making it easier for a variety of users to consume. And I'm sure we'll get into that as we go along. But essentially it's a digital portal which allows multiple users, yeah, understand where they are on the journey in terms of, of, uh, making an impact. Understanding their impact in the world.

So what were people doing before it was digital then with their ESG and SDG impact assessments?

A lot of businesses have increasingly employed ESG, a head of ESG in a business, for example. What's wonderful to see is that over time that's moved to a Chief Sustainability Officer. So we're seeing increasingly over the last few years these appointments. Historically, a lot of these roles have ended up in in the CSI department or the human resources department, and of late under the CFO, you know, thinking it's a finance role. But I think we're all agreed now that this needs to be a CSO-type role, which sits right next to the CEO and is part of the strategic direction of any business. So the space is evolving. We're seeing what was less of a visible role coming out to the forefront now, working with the CEOs to take the business in a new direction. So, it was largely manual, largely passionate individuals helping businesses to put forward their story, very valuable roles and wonderful reports have come out. Then we've seen the emergence of a lot of the ESG rating agencies, which have played a great role as well. But a lot of that has been around consuming publicly available data. So you've got agencies that have gone out and gathered information and scraped it together and then be able to provide some sort of rating around a particular entity, company. Still subjective in a way and has not, you know, what we've seen as well is that the correlations between a variety of different rating agencies is just not good at all. What you're seeing is a lot of this data is going to be quantitative and therefore the qualitative is not getting into the public domain. And that often takes working with the companies themselves, building a relationship, and then helping them gather that data and make it convert qualitative into quantitative. So, I think, you know, what we're trying to do is exactly that, move away from this arm's-length relationship with companies where you just consume what's out there to rather working with the companies and actually helping them understand what data they need gather that data, both quantitative and qualitative, and then help them to actually do a more accurate and objective assessment of their information.

Okay. And what's driving this then? What drives them to contact you and say, look, we want to do a digital ESG and SDG impact assessment? What's the pain they have?

It's an interesting question, and I think we've still got a long way to go. I would say companies that are really forward-thinking and can see what's coming down the line industry-wise, they are the ones that are being proactive, coming forward and saying, look, we, we want to do this because it's the right thing. What we're seeing is the forward-thinking companies saying, hey, what is out there? What can we do to really, to better understand our impact beyond ESG? Right, Lee, what's our impact in the environment and society? And so you do have those proactive companies, but I, but I guess what we need to see is a lot more people embracing this. It's not, definitely not front and center around the SDGs in particular. And what is coming down the line, and I think increasingly people are aware of, is legislation that is eventually going to catch us like a tsunami.

I guess this is really being driven by legislation, isn't it? People are doing it because they have to rather than because they necessarily think they want to save the world right now.

I, I think it's very much still a combination of both. Some feeling the pressure to do things quickly because they have to, and others actually wanting to really understand, uh, how they make their money and what their impact is, because I don't think most people actually understand fully, you know, this double materiality concept where we've come out of a world where ESG was very much, what is the risk to my business of this thing called ESG, environment, social governance? How is it going to impact me as a business, particularly around finances? Now, how are investors going to be impacted by these risks that ESG face? And that's where the ESG has been and has come from. What we're seeing now is the shift towards The other outward-looking impact— what is the business's impact on society and the environment? And that's better measured, as we know, by the SDGs. It's a far more detailed framework, a universal language that we can all subscribe to, as opposed to the very broad ESG. So there's, there's very much still the need to educate everybody around what the SDGs are and why we need to look at that. And, and we don't quite have that level of understanding yet. So to your question, really, I think this— for us as a business, there's, there's two ways to market currently. Firstly, we're actually— our main aim is to work with partners, so to put the technology and the supporting skill in place to help partners take it to their clients. So more of a sort of a SaaS type approach. We want to work with the consultancy businesses, the banks, the investment managers, the pension funds, et cetera, and say, right, Yari is a piece of technology that's going to help you do your work a lot better, and we will support you in scaling up and also provide independent verification. I think that's very, very important, is that it's not an internal, in your own business, your own ESG team marking your homework. It's that independent verification. So in the first instance, it's about working with partners that want to open up a new opportunity, a new service line to their clients. But absolutely, we've, we've working directly with a number of, of large corporates, and those interactions have typically come from quite a diverse range, I guess, from an ESG head of ESG in a company to personal relationships with CEOs, uh, or you know, a couple through, we've had conversations interestingly with banks, lawyers, consultants, investment managers, you name it, a wide variety of different companies.

Are any of these companies associating it with improved business performance as well?

Vital question that, you know, I think I challenge all of us in this industry is to make it very clear to businesses in particular, but it goes beyond just businesses, is that this is not a cost. This is not something you must see as something you just have to do because you've been told to do it. That this is a commercial opportunity to actually improve your business and to make more profit ultimately. I mean, that's why a lot of corporates exist. So, so helping them understand that this is an opportunity. First of all, it's going to be critical to remain relevant. So if you want to survive in the future world as a business, and we know that history is littered with massive businesses disappearing, and that's— that happens to this day, and this will change as well. You know, consumers are starting to vote with their wallets. They're starting to say, actually, you know what, I'm going to look at the back of this label and I'm going to decide if I should buy a product from company A or B. So, commercially understand that consumers are starting to choose where they buy from. Secondly, you know, you're in a position to have an enormous influence over your supply chains. So, help your supply chains improve how they do things. Look at new avenues to source business around the world. And that has a positive contribution to your image in the public as well. I think just to add to that point, the SDGs are a wonderful framework to tell stories for businesses. So, and not only the bad, you know, so companies need to look outwards and say, hey guys, this is how we're doing across the SDGs. Yes, we know we are poor in certain areas. Yes, we can't change in the short term. We are trying to mitigate, improve, do things differently. But hey, look at what we are doing in other areas. We are positively contributing in many different areas. I was talking to a mining company recently, and they rightly so get hammered constantly by the environmentalists pointing out the destruction that they're doing. And we know that, yeah, these extractive industries have got a huge impact on the environment. But the companies are obviously all under pressure to improve the way they do things, and they're constantly looking at new technologies and ways to improve and minimize their impacts. I think we all agree that as a species, we're going to keep extracting for some time to go. You know, we are still going to use fossil fuels. We are going to try and look at alternatives, but it's not going away. So let's not hammer them constantly. Let's help them to do what they do better. Let's keep the pressure on, but yeah, new technologies will emerge to allow them to do better. But importantly, this particular mining business I was talking to, they said, you know, what doesn't come out in the stories is the good stuff we're doing. And that's what we like about the SDGs is that we can start to articulate, yes, we're gonna come short on SDG 13 on climate action, But, you know, by the way, when we go into third world countries and we're mining, we are putting in first world mining practices. We are creating jobs. We are skilling up people. We are bringing health facilities. We are building villages. So, you know, the impact on, you know, SDGs 3, 4, 5, 8, you name it, there's an enormous impact across various SDGs. And I think we've got to start bringing out those stories, and that's what it's a great framework for, for any business.

I just want to develop that a little bit more then, if we can, to the impact side of it. The positive impact, isn't that what we all want today? So do you have any stories or case studies of anything you can share around the positive impact that's come from, say, using the tool? So You mentioned something there with the mining company. Is there anything else you could share, Philip?

Um, one particular bank we've just finished some work with. Now, core to any bank you can imagine is going to be, uh, peace, justice, strong institutions, partnerships for the goals. You know, the whole, the G of ESG is going to be key because that's their role, is governance. And helping drive. They have an enormous influence on industry. But of course, as a business, they then also need to articulate, well, what's key to what they do. And what you find is a lot of businesses are doing wonderful stuff internally with staff, particularly post-COVID, incredible stuff companies are doing for staff. They're also doing a lot around CSI, so passion projects. And this particular bank has got a variety of incredible stuff they're doing and all over the all over the show. But if you analyze what they're doing, it doesn't mean they're having a positive impact according to their core STGs. So an important process is to pull out that information, say, hey guys, listen, you're doing a great job, but you, you're pushing energy into something that's really not core to your business. A wonderful CSR project, but let's sharpen the pencil here. Let's rather Let's rather take the shotgun approach to your CSI and let's hone it in around impact that's closer to what you do as a business. So for example, if you are a bank that does, uh, has branches all over Africa, for example, uh, you might be an offshore bank, but your impact is in Africa. So let's really think more about what are you doing in Africa, uh, in terms of impact. Are you helping bank the unbanked, or is it all about the high net worth offshore, you know, those sort of examples, right? So, so yeah, you know, banks should all score well on governance. That's— that otherwise they're in the wrong business. So that's, uh, that comes out key. And then everyone's very different. It's fascinating, you know, some are passionate about the environment. And, uh, for example, in Jersey, uh, STG 14 will be in front of center of everyone's minds because we're on an island, we're surrounded by sea. But is it core to a bank doing business in Jersey? No, the answer is no, it's not a, it's not a core STG. So let's, let's move it into important, perhaps, because it's something you're passionate about and want to make a difference.

So yeah, so you know, it is much more than compliance. Companies are using it to identify opportunities to improve their business then, I think is what you're saying, I believe. I understand the gap analysis between where they are and where they could be. And then, you know, get involved with setting goals and targets and action plans to help improve business performance as well as obviously help create a better 21st century for us all.

Yeah, yeah. No, Paul, you spot on. I think that's an important point you make. The baselining is key. You know what our message is. Listen, you don't have to go out publicly in year 1 if you don't want to, but at least start the journey. You know, understand where you are. And it's not just about ESG gathering data and an internal assessment. Get an outside opinion. Let's gather data. Let's see where you are. Let's help you refine what your focus is. Let's identify How you score across those SDGs, particularly the core and important baselines, and then set a strategy and KPIs. Okay, right, what is the plan? And then start to measure how we do across that over time. And then slowly, you know, start to put out the good stories as well as the bad. Very importantly, you know, hey, hey, hey, society, this is how we're doing.

Do you find it a challenge that perhaps the standardization doesn't exist today as perhaps it could? I mean, does one client have an ESG and SDG impact assessment that looks like A and somebody else has another one that looks like B? Is that a problem in the industry at the moment?

I think if there's a subjective approach to writing your own internal impact assessment report, they're going to be very different. So they are the sort of general reports added on to financial statements that are going to be quite broad and not generic. But what I think what's important in the likes of our technology is as a starting point, we've integrated all the global recognized impact statements.

Okay.

So for example, you've got GRI, you've got SASB, you've got Global Compact, you know, TCFD, and the acronyms go on. IFRS, etc., etc. So increasingly what we're doing is, is adding these various frameworks into the technology, and there's a lot of overlap on the questions. You can imagine there's thousands of questions now, and we've used the technology to, to take— you as a business can select which are the, the standards you want to measure against, right? And we then— those are We've aligned all of those standards across the, the SCGs, the 17 SCGs, plus the E, the S, the G, right? So it consolidates and simplifies and reduces the amount of questions you've got to answer into a much more manageable number.

Okay.

So to your question, I think importantly, this is not some random report. It's very much aligned to global standards, frameworks, whatever you want to call them. And, but that doesn't, you know, what those frameworks do is they allow you to gather information, which is useful, and you can push out a report on that information, but it doesn't answer the so what. Right. And that's the next step. That's key. You know, yes, we gather the help, you gather the data, and we've got a central repository and you can store it, et cetera, but it's very much now what, and that's where the impact assessment comes in. And that's where the SDGs provide the framework to do that assessment.

And have you seen a conflict between the long-time horizons that all of these ESG and SDG changes require versus the short-time scales that businesses normally operate with?

That's going to be a challenge. There's no doubt. Many businesses are forced to these short-term reporting timelines, particularly listed companies, and that is a problem. You know, what ultimately drives behavior in businesses is going to be budget cycles, bonuses, performance options, etc., etc. And that, that has an impact on, uh, on what people are prepared to do and where they're prepared to spend money as well. Yeah, so that's part of a behavior change that we're going to need to see. How do we get companies to think beyond just the short term? How do we get them to make the changes that are perhaps going to be not revenue generative in the short term, but longer term are going to have a much bigger impact on the business?

Right.

It's a big challenge, the sort of time horizons between short term and long term, for sure.

Yeah. I'd imagine that culture and the behaviors actually within an organization are probably the biggest hurdle to overcome? It's, you know, people are already very busy and perhaps these ESG and SDG targets don't align with their own personal job descriptions and goals.

For sure, your culture is going to be very important. Look, you've still got a— you still have a large anti-ESG movement, the whole sort of, oh, it's all nonsense out there. It's— you've got the a lot of greenwashing that's taking place, just ticking boxes. So, you know, culturally, it's got to start at the top. You've got to want this from the top. The CEO, it's got to say, hey guys, this is not something we need to do, but we want to do. Yeah, you know, we, we, we have to think beyond our own short-term bonuses and our own timelines of 5 or 10 years in a business. We've got to think about the legacy for all the stakeholders of society, our employees, our shareholders, and importantly, society, which includes us as families and our children.

Yeah, it's changing, I think, though, isn't it? It's evolving quite quickly as we're all waking up to the fact that, you know, we can't just focus on profits and that we're too transactional, we're too short-term. You know, and we all, I think, are waking up to the idea that there's more to life than commodities and stuff and status, bigger houses and bigger cars.

Yeah, I think just to add to that, Paul, you probably read the book Green Swans, which I'm busy working through at the moment. Fantastic.

One of many on my bookshelf.

Yeah. And that whole concept of regenerative capitalism is no doubt the way forward. We need to reframe the system we've built. I don't think we went out and designed— nobody designed businesses to end up where we are, you know. It was just— but it's a function of, you know, 100 years of capitalism that's built this incredible system we have where we innovate and we can do just about anything. We didn't expect the destruction we have on the planet, and it's now rethinking our business models and how we how we do things that build the planet, not take away from the planet. I think there's no doubt that this doesn't mean we're worse off as a species. I think we can very much be building and growing, but just rethinking how we do that.

Yeah, absolutely. And I think that people want to do the right thing, but oftentimes just unaware as to what the right thing is for the impact of what they're doing today, what that's having, you know, their actions today and the impact that's having on the environment, for example, or even themselves. So, you know, so ESG, environmental, social and governance and SDG, the sustainable development goals, don't just belong in business, do they? No, actually belong with us as individuals in our lives.

For sure, you know, obviously as a business, we see the opportunity as a business, but obviously to drive the biggest impact, to work with the corporates. And I must stress, this is not a, you know, let's come down hard on companies and drive transparency and accountability, but it's also helping them. So let's help them on this journey, educate, et cetera. So the corporates are, as we know, perhaps the biggest contributors to the impacts on societies, and we've gotta start there. But of course, around that, you've got governments. We need to have the conversations with governments. They have big influence. Not-for-profits. But then, of course, we've got to take it down to us as individuals as well. And this is not just the domain, uh, of, of the big, big businesses. And often, I think, man on the street thinks, oh, well, I can't have much of an impact. Uh, but it's not true. You know, I think each one of us individually do little amounts. The power of compounding is enormous. So, it's about thinking as simple as, you know, what do I do from a recycling perspective? If I have the choice to ride my bicycle to work, do I do that? Should I take the bus instead of a car? Do we need 2 cars in our household any longer? And, you know, my kids, which are sort of young adults now, are also really challenging the system, which, as an individual, is really great. They see that they can make a difference. But it's also a warning to corporates, you know, hey guys, people are rethinking this. So they, they are recycling clothes, you know, they're now buying secondhand clothes. In fact, I saw one large brand recently launching a secondhand store. But they're saying, hold on a second, two things. One, let's not buy the cheap and nasty clothing, let's buy better quality. And secondly, let's reset it. My youngest child is the eco-captain at her school, and she held a day where kids could come and swap clothes. And so don't get bored of your clothing. Composting, for example, recycling. There's so much we can do as individuals to just consciously think about our impact. I have a colleague, sits next door actually, he's his, the summer holiday, he's decided to challenge himself and go on holiday by train instead of flying. Now, obviously, in the likes of Europe, it's a lot easier to do that. But I thought, what a wonderful way to travel. It probably is better, easier at the moment, less cancellations, and the amount of time we spend in security and waiting, perhaps it's going to be quicker as well. But yeah, I think if we collectively start to challenge ourselves around how we live is a great start, how we purchase our goods, how we spend our money, for example.

So what is the biggest challenge, would you say then? What's your biggest frustration, would you say, Philip, with, say, the ESG and SDG impact assessments?

Yeah, the biggest challenge for us right now is getting people to understand what it is they need to do why they have to do it. You know, technology's come a long way in simplifying, consolidating, demystifying this whole space, but there's still very much a human element. What we're not doing is scraping publicly available data, although we can still use that as an input. So aligning with other data providers is something that we're working, working on so we could fast-track some of the data collection. But the real value is working with the companies and saying, right, here is your list of questions you need to answer. Go and fetch that data. So clients are— and again, there's different levels of user access to the system. You've got your— if you're working with a partner consultancy business, for example, they would have access because they're going to do a lot of the work themselves. But we might give access to certain individuals within a corporate, for example, that can be responsible for inputting data. Now you can imagine year 1 will always be a heavier lift, but of course once you've done it the first time and you've got a system going, and you can also upload throughout the year, don't rush towards the end of the year when you're going to do an assessment, gather data as and when you come across it. So year 1 is always going to be harder to gather the data, but of course as you say, you know, the quality of the data is very important. And that's where, you know, currently the, the verification of that data is quite important. So that's again part of what we do. And we do use— we employ analysts that are working with the companies or the partners to verify the data, check the certificates, the information, because, you know, that's exactly the value add. It's about verification, trying to avoid greenwashing. I mean, you might you might have a CEO of a company that thinks he's doing very well across certain policies and stuff because his people tell him they do, but he's got no idea actually what's going on. So, so your third-party verification is, is very important. So data gathering, big— it is, it is a heavy lift, particularly in year one. Yes, I think in time it's going to get quicker and quicker. And yes, the use of, of, uh, machines machine learning, AI, et cetera, will speed up the process as well. So that's pretty much in our journey as a piece of technology. That's largely part 2. So part 1 is the articulating your ESG framework, your SDG framework, what I call SDGs, et cetera, which drives, of course, your strategy and your KPIs. Your next big part is the gathering of data. And then of course you move into the impact assessment part, which is the real sweetener.

Right. And is it, do all employees input into your system or not? Is it managers that input on behalf of employees?

Correct. You'll have designated senior individuals.

Right.

This is not, yeah, this is not a, yeah, I mean, there's a lot of information that's obviously going to remain confidential as well. So even within an organization, there's certain information that wouldn't be available to others. So we need to pretty much manage that user access.

Okay. And have you seen that the, uh, the, the assessment and the output of the system drives the strategy for a company afterwards?

It's still early days. What I can say is the response from companies has been amazing. Sort of, they— for a lot of the, the exact exco of a business, for example, they've gone, wow, I didn't realize what this all meant. First of all, where they've learned an incredible amount about the space, they've embraced the potential of it. There's been constructive debate around the board. And secondly, they're now visually— we give them nice visual dashboards that show them their SDGs and where they're scoring. And you can say, hey guys, look at those, this 2 out of your 5 core SDGs aren't doing too great, but the other 3 are perfect. Fantastic. Well, let's just put a plan in place for those 2. That will move the needle quite quickly. So, it's opened up a whole new world to your executives in a company that are very much focused all day on delivering what they do. And this is, you know, just to add to that, I think across a business from the top to the bottom, it can add a lot more meaning to people in a business. Now, this is, if you can show your whole business through the lens of the SDGs, you suddenly get a different picture of your company. Like, wow, this is my job every day, putting in this data into the spreadsheet actually has a meaning. We as a business touch these SDGs. So that's an important point, actually. I think it's going to be great to start seeing and we see that response already.

Philip, it's been a real pleasure having you on this podcast and helping us to better understand how digital ESG and SDG impact assessments work and the value that they're bringing to business and to the environment and to the future of, you know, the future of the planet in the 21st century. Thanks very much for your time, Philip.

Well, it's been a pleasure chatting to you, Paul, and thank you very much for the opportunity. And yeah, great to have— thank you for your work. I think these podcasts play an important point in educating everybody out there of why we need the SDGs. So thank you.